Good day, and welcome to the Cracker Barrel Fiscal 2021, fourth-quarter earnings call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jessica Haze, Senior Director Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's fourth-quarter fiscal 2021 conference call and webcast. This morning, we issued a press release announcing our fourth quarter and full-year results. In this press release, and on this call, we will refer to non-GAAP measures for the fourth quarter and 12 months ended July 30th, 2021. The fourth quarter non-GAAP financial measures are adjusted to exclude the non-cash amortization of the asset recognized from the gains on our sale and leaseback transactions, interest expense related to the termination of interest rate swaps, and the convertible senior notes offering carried out in the fourth quarter, and the related tax impacts. The full fiscal year non-GAAP financial measures are adjusted for the items listed above, as well as the gain on sale of assets from the sale and leaseback transaction that closed in the first quarter. Expenses related to the proxy contest in connection with the company's 2020 annual meeting of shareholders and the related tax impacts of these items. The company believes that excluding these impacts from its financial results provides investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for Net Income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials. On the call with me, this morning are Cracker Barrel President and CEO, Sandy Cochran, Senior Vice President, and Interim CFO, Doug Couvillion, and Senior Vice President and CMO, Jen Tate. Sandy will begin with a review of the business, and Doug will review the financials and outlook. We will then open up the call for questions for Sandy, Doug, and Jen. On this call, statements may be made by the management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control, and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnish to the SEC. Finally, the information on this call is valid as of today's date, and the company undertakes no obligation to update it, except as may be required under applicable law. I will now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran.

Thank you, Jessica. And good morning, everyone. We accomplished a lot in 2021, and I'm proud of how our teams navigated one of the most difficult years in the history of our company and the industry as a whole. We entered the quarter on an upswing as the country cautiously reemerged from the pandemic. And we are poised to see sales and profitability continue to accelerate across our system through the end of our year. We were pleased that profitability continued to trend positively from the third quarter, but were disappointed that the pace of sales recovery slowed below our expectations. As we shared on our previous earnings call, we're encouraged by the pace of sales recovery and our sequential monthly restaurant sales improvements through April. However, May sales were softer than we expected, and unfortunately, this softness persisted through most of the fourth quarter. We are pleased, however, that both retail and Maple Street revenues exceeded our expectations and helped to offset some of the restaurant declines. We believe there are a number of factors that contributed to our softer fourth quarter restaurant sales results, including a summer travel season that did not follow traditional patterns or our own robust expectations, the COVID resurgence, particularly in the areas where our stores are more heavily located, impacting guest visitation patterns and our employees' ability to consistently work. A general consumer preference coming out of the pandemic for more celebratory, higher check occasions than we're known for, as well as industry-wide staffing challenges to fully satisfy guest demand. I'll comment more about staffing shortly. Despite our softer than expected Dine-in sales, fourth quarter retail sales once again exceeded our expectations with comparable retail sales 18.2% above fiscal '19. Our merchants and our operations teams consistently managed our inventory and produced outstanding results, delivering a gross margin greater than 51%. Our assortments continue to resonate with guests, and we saw particular strength from our toys, apparel, and home decor categories during the quarter. Additionally, we've been pleased with the performance of our fall and Halloween seasonal merchandise sales. And while it's still early, our Christmas sales are off to a strong start. The success of our seasonal merchandise, along with the ongoing strength of our everyday assortments, have helped us continue to drive solid retail sales growth during the first quarter. Also, during the fourth quarter, Maple Street again delivered significant sales growth, with sequential improvements in average weekly sales for each month. Throughout the fiscal year, Maple Street's business and financial performance further reinforced our confidence in the acquisition and the brand. In the first quarter, store AUVs were at an average annualized run rate of over $1.2 million. Additionally, Maple Street has achieved a store-level EBITDA margin of approximately 18% for the full fiscal year. We plan to open 15 new Maple Street locations in fiscal '22 and believe new unit development can accelerate meaningfully in the years to come. As everyone listening well knows, the industry continues to face uncertainty with respect to COVID, inflation, which Doug will speak to, and staffing challenges. While staffing remains an important area of focus for us, we've made significant progress since we last spoke, particularly with respect to our back-of-house staffing. Our primary focus has shifted to hiring more servers, training the new employees we have hired, retaining existing employees, and building our staffing levels in anticipation of our seasonally higher second-quarter volumes. This past year was one of the most challenging in our more than 50-year history. For years leading up to the pandemic, Cracker Barrel outperformed the industry by leaning into our core competitive advantages, including our authentic experiential brand, our culture of hospitality, and our home-style food and retail assortments. We remain focused on these core strengths and we believe they'll continue to drive long-term success and outperformance of our brand. As we head into fiscal '22, we plan to leverage our key competitive brand managers to drive additional frequency from our core guests and attract new customers through new occasions and revenue sources. I'll now briefly speak to a few of the initiatives that we expect to help us achieve these goals. We continue to evolve our menu to reinforce our core strength of craveable homestyle food. We completed the final phase of our dinner menu evolution in the fourth quarter, and in fiscal '22, our focus will shift to the breakfast menu. Similar to dinner, we found that the structure of our breakfast menu is familiar to our core guests, but maybe confusing to new or infrequent users of the brand. Through our two-phase rollout process, the first phase of which is currently in test, we'll streamline our categories of breakfast offerings to alleviate confusion, enable guest customization with a build-your-own homestyle breakfast, better highlight our value proposition, while also driving efficiencies in our back-of-house processes, and adding new craveable menu items to help drive additional frequency in check growth. With our homestyle food and strong everyday value proposition, we remain confident that we can retain at least 60% of the growth in off-premise sales that we experienced during the pandemic. In fiscal '22, we plan to drive off-premise customer acquisition through awareness-building advertising and partnerships with third-party delivery companies. Additionally, our goal is to further enhance the customer experience through ordering and fulfillment improvements and expanding our guest engagement as part of our evolving digital strategy. Furthermore, we expect to attract new customers and drive sustained growth in our off-premise business through our virtual brand, Chicken and Biscuits, which we rolled out to an additional 100 stores at the end of August. We've been pleased with the early performance of the brand, and we now expect to expand Chicken and Biscuits to around 500 stores in total by the end of the first quarter. We also plan to launch a second breakfast-focused virtual brand called the Pancake Kitchen in approximately 100 stores at the same time. We believe the work we did to enhance our digital systems and launch our digital store was foundational not only to our continued growth in our premise, but also to improving the frequency of visits from the core users of the brand. This work provides us with the technological infrastructure and rich guest data to drive additional frequency in fiscal '22, including increased personalization and customization in our digital marketing and the introduction of a loyalty program. We recently selected a loyalty program implementation partner and anticipate developing the program over the coming months with a pilot test plan for the second half of the fiscal year. Finally, to support ongoing growth in retail sales versus pre-pandemic volumes, we are learning from the last year and have applied these lessons to our product purchasing and visual merchandising plans for fiscal '22. We found during the pandemic that as we scaled back inventory levels out of necessity, our guests responded positively to our more curated collections and our everyday retail assortments such as food and toys. We plan to lean into these changes by tightly managing our inventory and evolving our floor space to improve the depth of the presentation with fewer units. I'm confident that these plans will enhance our core competitive advantages and improve our performance in the current fiscal year and beyond. Before handing the call over to Doug, I'd like to speak briefly about capital allocation. Despite the impact of the pandemic, we generated strong cash flow in fiscal '21, with cash from operations at approximately 85% of our pre-pandemic levels. Reflecting confidence in the strength of our brand and in our future, the board approved a dividend of $1.30 per share this quarter, which is a 30% increase over our third-quarter dividend. And the same amount is the dividend we last declared prior to the onset of the pandemic. Our board remains committed to a prudent and balanced approach to capital allocation by investing to profitably grow the brand, while also returning capital to our shareholders through dividends and share repurchases. Today's announcement of a quarterly dividend at pre-pandemic levels and a modest share repurchase authorization demonstrate that commitment. And with that, I'll hand the call over to Doug.

Thank you, Sandy. And good morning, everyone. For the fourth quarter, we reported total revenue of $784.4 million. Our restaurant revenue increased 54.8%, and our retail revenue increased 74.3% versus the prior year's fourth quarter. In comparison to the fourth quarter of fiscal 2019, comparable store restaurant sales decreased 6.8%, which was mostly offset by our stronger retail and our Maple Street Biscuit Company sales. We saw a return in guest demand during the fourth quarter, and our average weekly Dine-in sales increased from approximately $54,000 in April to $59,000 in July. Our off-premise sales remain elevated in the fourth quarter and are more than double our sales from the fourth quarter of 2019. We retained approximately 75% of the peak off-premise growth from pre-COVID levels. As expected, we experienced modest declines in sales from our individual to-go channel compared to the third quarter as our core guests shifted back to in-store dining after being limited to off-premise during the pandemic. Meanwhile, our third-party delivery and catering channels continue to grow sales throughout the quarter. As Sandy shared, our lower-than-anticipated store restaurant sales were the result of several factors, including disrupted travel patterns, consumer preference for more celebratory higher check options, the resurgence of the pandemic, and staffing headwinds. We felt these staffing challenges most acutely on the weekends, where we occasionally didn't have enough staff to service elevated guest counts, particularly in the breakfast and lunch dayparts. Happily, our sales during the week were stronger, and weekday breakfast sales were positive compared to 2019, which was a favorable trend change compared to the pressured weekday breakfast results we experienced throughout the pandemic. Comparable store retail sales were above our expectations in the fourth quarter, increasing 18.2% over 2019. Supporting these sales results were improvements in virtually all retail operational metrics versus 2019. Moving to expenses, our total cost of goods sold in the quarter was 30.1% of total revenue, which was favorable to the prior year, but unfavorable compared to fiscal 2019. Fourth-quarter restaurant cost of goods sold was pressured by commodity inflation of 5.1%, running ahead of fourth-quarter pricing of 3.1%. The retail cost of goods sold was 48.8%, which is approximately flat as a percentage of sales compared to 2019. Fourth-quarter labor and related expenses at 34.2% of revenue were also favorable to both the prior year and fiscal 2019. Our labor expenses for the quarter compared to 2019 were pressured by wage inflation on a constant mix basis of 6.8% and increased overtime usage. These pressures were more than offset by higher productivity, decreases in incentives, and other compensation, and the $7.5 million in labor-related cost savings associated with the actions we took in the third quarter of fiscal 2020. Adjusted other operating expenses were 22.6% of revenue, which was favorable to the prior year, but unfavorable compared to 2019. Primary drivers of this unfavorability continued to be higher supplies expense, third-party fees associated with our elevated off-premise sales, along with incremental rent expense as a result of the sale-leaseback we completed in the first quarter of fiscal 2021. Next, moving beyond store-level margins, our general and administrative expenses in the fourth quarter were $36.9 million, which is favorable to the fourth quarter of 2019 by $3.6 million, primarily as a result of the cost savings actions we took in the third quarter of fiscal 2020. Our interest expense for the quarter was $25 million, which includes $18.9 million in non-recurring expenses related to the termination of our interest rate swaps and other charges associated with our convertible debt offering during the fourth quarter. On an adjusted basis, net interest expense was $6.1 million compared to $3.9 million in the fourth quarter of 2019. Our effective tax rate for the fourth quarter was 3.6%, primarily as the result of the termination of our interest rate swaps. As a reminder, the change in our quarterly effective tax rates during fiscal '21 was a result of the gain in the sale-leaseback in the first quarter and the impact of the loss carrybacks from the prior year. Despite the variability in our tax rates from quarter-to-quarter driven by these events, our overall tax rate for the entire year came in at the expected level of approximately 18%. These fourth-quarter results culminated in GAAP earnings per diluted share of $1.53 per share, and adjusted earnings per diluted share of $2.25 when adjusting for the non-cash amortization of the asset recognized from the gain on the sale-leaseback transactions, and the non-recurring interest expense previously noted. In the fourth quarter, EBITDA was $93.5 million, a 12.9% increase over our third-quarter EBITDA results. Lastly, during the quarter, we raised approximately $300 million through the offering of convertible senior notes with a 0.6 to 5% coupon rate, which we primarily used to pay down our revolving credit facility. As a result of this move to further optimize our capital structure, we expect to realize annual interest rate savings of nearly $10 million compared to our pre-COVID capital structure. Due to our strong balance sheet and improving cash flows, we are well-positioned to continue to invest in the growth of our business while returning capital to shareholders. The dividend increases to $1.30 per share, bringing our quarterly dividend back up to pre-COVID levels, and our board approved a modest $100 million share repurchase authorization to allow us another avenue to return capital to shareholders and optimize our capital allocations over the course of the year. Turning to our expectations for the next fiscal year. With respect to our fiscal '22 outlook, everyone should be mindful of the risks and uncertainties associated with this outlook, as described in today's earnings release and in our reports filed with the SEC. Given the continued uncertainty around the COVID-19 pandemic and the current operating and staffing environment, we will not be providing our customary annual guidance at this time, but we do expect the following full-year results: Body and wage inflation in the mid-to-high single digits, capital expenditures of approximately $120 million, an effective tax rate of approximately 18%, the opening of 3 new Cracker Barrel locations, and 15 Maple Street Biscuit locations. For the first quarter, we believe that our sales continue to be negatively impacted by rising COVID cases, particularly in our core markets, which has had an impact on both guest visitation patterns and the availability of our employees. Despite this headwind, and despite the impact of several episodes of severe weather, our sales have improved from the fourth quarter. Comparable store restaurant sales are currently approximately flat versus the first quarter of fiscal 2019, and comparable retail sales are up in the mid-teens. We currently expect these sales levels to continue through the end of the quarter. For the first full quarter, we expect our adjusted operating margin to be 5.5 to 6% of revenue. And with that, I will turn the call over to the operator for questions.

We will now begin the question-and-answer session. Our first question will come from Jake Bartlett with Truist Securities. Please go ahead.

Great. Thanks for taking my questions. On what you mentioned about the quarter-to-date same-store sales at the restaurant and retail. But restaurant in particular, it looks like a pretty significant improvement from what you're running in the fourth quarter. Yet, you've also described the COVID cases as being a pressure. Maybe if you could help us understand the cadence of same-store sales throughout the quarter, and then confirm whether you're seeing seasonally improved trends more recently versus as you exited the fourth quarter? That'd be helpful.

Sure. Thanks. Glad to help there, Jake. In terms of the cadence during the quarter, we saw slight improvement as we moved over the course of the summer. And coming out of the quarter into this year, we have seen the trend turn positive—not positive, but improved from a same-store sales perspective. We expect these trends to continue through the end of the quarter.

Great. And do you have any sense of what's driving that improvement? Perhaps you are moving past this summer driving season, which had been a drag for you. Are you seeing any incremental improvement in those markets where the COVID cases have been, you've discerned it, an impact? What do you think is driving the improvement in quarter-to-date?

Jake, it's Sandy, I'll take that. I think the biggest single thing is we've made a lot of progress on getting staffed, and in those restaurants where we've been able to both get staffed and have had an opportunity to train new staff, we're seeing that we are better able to take care of the guest demand when it comes. I do think that we're seeing in some communities some normalization of routines, as we've now gone back to the back-to-school session and so on. We're pleased that we've seen the improvement and are hopeful that we will see continued recovery as we head into the second quarter.

Great. And then you've described the cost pressures that you were expecting in inflation. Can you go into some of the potential offsets, for instance, what kind of pricing you expect to take in 2022? And also, touch on any cost-savings efforts. I think you've run through your last round of cost-cutting and cost savings. Is there any current program going on? Do you expect X million dollars of savings in 2022, for instance?

I'll ask Jen to jump in on pricing, and Doug can add some more color. First of all, we always have a program. We've had a very consistent focus over the years on improving profitability and productivity through a variety of savings initiatives. We have not announced our most current objectives specifically on this. But in addition to what we believe there's some pricing power, I think there are a number of tech-enabled initiatives that we've been talking about and continue to feel good about how they will improve our productivity and profitability. We've recently installed POS in all but about 160 stores in the chain. Those that are not installed, it's because we weren't able to get the hardware with the shortages going on. And as you know from listening over the years, Jake, that POS system we believe has been foundational to allowing us to implement tablets in the hands of our servers, our food initiative, PC and food which we actually just installed a few days ago in about half of our chain, as well as in the second half of the year, we hope to begin piloting a labor initiative, all of which will be supported with this new POS system,. The Pay on app has been another initiative, which we've been excited about the impact that that could have on the labor demands in the store, as well as the work on the digital store and how that helps to streamline the experience, both for our customers and for our employees. There's a lot of cost of goods sold work being done on both the restaurant side and the retail side to offset the commodity pressures and the inflationary pressures on the retail side. So, I'm really pleased that we've got a lot of work going on to offset these and to improve the business model. In terms of specifically pricing, I'll let Jen speak to how we're looking at that subject now.

Great. Historically our approach to pricing has been pretty conservative as we've steadfastly guarded our strong competitive advantage as an everyday value leader. But right now, I think, both the consumer data and trends, and also what's happening in our category indicate to us that we have some considerable pricing power, both in recent months, but also we think that's going to continue throughout this fiscal year. So, in the second half of FY '21, our pricing actions resulted in pricing of 3.1% in Q4. And this August, based on our continuing inflationary pressures that Sandy and Doug spoke about and also industry dynamics, we took a more aggressive increase than we typically do in Q1. So that results in Q1 carried pricing of approximately 5.5%, which is more than we normally take, but we think is very appropriate given the current environment. We think that we're going to be watching how that flows through, and we think we may have an opportunity to take additional pricing in January.

Great. So, 5.5% pricing in the first quarter of '22, just to be clear.

Yes.

Great. Thank you very much. I appreciate it.

Our next question will come from Brett Levy with MKM Partners. Please go ahead.

Great. Thank you. Appreciate taking the call. Going back to labor, you talked about your productivity and the challenges you're having in terms of finding and retaining people. Where are you right now in terms of staffing levels? How many stores do you think are what you would call pressured on that front? Where are you in terms of turnover? And then just on the supply chain, on the cog side, how are you looking at the ability to contract? What are you seeing on the supply chain side? Where are you seeing the greatest pressure points within both retail and restaurants?

All right. Brett, I'll start on staffing, and then I'll let Doug take the commodities. First of all, our operators have made very impressive progress over the last couple of months, in particular, addressing the staffing challenges broadly, and in particular, those locations that we had identified as the most critical and as a result of a lot of grassroots efforts, we've reduced the number of critical or concerning stores to half of what it was as we entered into the fourth quarter. What we're really focused on now is onboarding all new employees that we have and getting them trained so that we get the productivity that we both need and are looking for, and can deliver the guest experience we need, to be sure we're focused on retention. To your point on turnover, it is elevated compared to what it's been historically at really both the hourly and the manager level, but it is still, we believe, below what the industry is, and I think we will be able to get that under control as we focus on that in the first and second quarter this year. Finally, just ensuring that we're staffed up to the volume that we're expecting and hoping to get as we head into the second quarter. In particular, we feel really good about the back of the house, in terms of the grill cooks and positions like that. What we are very focused on is ensuring we have the servers that we need.

Okay. On the supply chain front, I'll start with letting you know that, similar to the restaurant industry, a lot of those we do business with are having labor challenges as well, which largely affects processing costs, which in turn causes some problems in terms of securing our proteins. So, we're seeing cost pressures there and disruptions from time to time related to some of our proteins. Nothing major that we're not able to deal with, but it's causing there to be just a lot more interaction between our teams and our suppliers. In terms of the areas where we're seeing the pressure, one of the largest areas that we're experiencing cost inflation is in the area of fry oil, particularly the soybean markets are trading at rates that we haven't seen in many years, as well as within our pork category, bacon has been running quite high as well. On the retail side, we have similar pressures there. Those are more in terms of some of the shipping costs and container costs. As many of you probably have seen in a lot of articles, you see ocean freight containers are up at times from 200% to 300% over contracted rates. Our teams are doing a really good job of managing our costs. We've been able to secure the majority of our containers so far at our contracted rates, which were slightly elevated over the prior year, but we're having to turn to the spot market to move some products, and that is putting a little bit of pressure on us. We believe that we can largely offset that through some pricing actions and through some of the success we've had with seeing rapid movement through our products and our new themes that are moving really well.

And just on the sales front, would you care to go into any more detail in terms of where you're seeing the greatest successes and challenges on a regional basis? And if—I know you talked about impacted by COVID, and traffic, and transportation, visitations, and things like that—and staffing levels, but could you be a little bit more specific in terms of regions that you've seen strengths or weaknesses in the fourth quarter and the first quarter? Thank you.

I don't know that it's a regional story. We've got a number of our regions that are making really great progress in the recovery. Just probably a few communities in particular, as they deal with COVID resurgence or a store that may be particularly tied to travel, maybe international travel or a destination that might be disproportionately impacted. One of the things that you heard about; we're pleased with the performance we've seen at the breakfast daypart. And in the weekday breakfast in particular, which says we've got a lot of our guests who want to get back to normal. So, it really is a state where many of our customers are just anxious to recover and get back to their routines. On the other hand, we've got increased concern with the Delta variant, and we're just going to have to deal with that as it moves through in the next few months.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Sandy Cochran for any closing remarks.

Right. Thank you for joining us today. Cracker Barrel continues to be one of the strongest and most differentiated brands in the industry. Looking forward to the new fiscal year, we remain confident in our strategy and initiatives. I believe we're well-positioned to drive strong performance when the industry normalizes. We appreciate your support and look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.