Good day, ladies and gentlemen. Welcome to the Natural Grocers Fourth Quarter and Full Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session, and instructions will be given at that time. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Ms. Jessica Thiessen, Vice President, Treasurer for Natural Grocers. Ms. Thiessen, you may begin.

Good afternoon. And thank you for joining us for the Natural Grocers by Vitamin Cottage fourth quarter and fiscal year 2022 earnings conference call. On the call with me today are Kemper Isely, Co-President; and Todd Dissinger, Chief Financial Officer. As a reminder, certain information provided during this conference call are forward-looking statements based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks and uncertainties detailed in the company's most recently filed Forms 10-Q and 10-K. The company undertakes no obligation to update forward-looking statements. Today's press release is available on the company's website, and a recording of this call will be available on the website at investors.naturalgrocers.com. Now I will turn the call over to Kemper.

Thank you, Jessica, and good afternoon, everyone. We are ecstatic to report that we had record earnings in fiscal year 2022, achieving our guidance for daily average comparable store sales growth and diluted earnings per share. We had net sales of $1.1 billion and diluted earnings per share of $0.94. Fiscal year 2022 marked our 19th consecutive year of positive daily average comparable store sales growth. We take great pride in all of the company's accomplishments this year. We have experienced sustained growth over the past several years. Since fiscal 2019 or pre-pandemic levels, our daily average comparable store sales have increased 15.7%, the basket is up over 20% and diluted earnings per share have grown 124%, demonstrating the relevance and the enduring strength of our business model. Three years ago, we instituted a cash dividend that has cumulatively returned $2.96 per common share of capital to our stockholders. The dividend reflects our strong operating performance and financial position, confidence in our business model and commitment to returning value to our stockholders. Fourth-quarter results were in line with our expectations as we cycled strong performance in the fourth quarter last year. Todd will cover the results in more detail after I highlight a few key company initiatives. Our {N}power loyalty program continues to be an effective tool for optimizing promotional activity and driving customer engagement. We ended the quarter with 1.8 million loyalty members, a year-over-year increase of 18%. The fourth-quarter net sales penetration for {N}power was 76%, up from 72% a year ago, evidencing our customers' appreciation of the benefits provided by this program. Our Natural Grocers brand products remain a key point of differentiation and a sales driver as today's consumers are increasingly focused on prioritizing value. In the fourth quarter, private label brands represented 7.6% of total sales, up from 7.1% in the fourth quarter last year. During the quarter, we launched 12 new branded products, including four varieties of wild-caught seafood that are pre-seasoned and ready to cook, and they are quite good tasting. In fiscal year 2022, we grew our private brand offerings by 41 SKUs. For the year, the sales growth of our Natural Grocers brand products exceeded the company's growth rate. We attribute this higher growth to our customers' awareness of the strong value proposition of our premium quality offerings at compelling prices. Turning now to new store development. During the fourth quarter, we opened our first South Dakota store in Sioux Falls, opened a new store in Brighton, Colorado and relocated our store in Cheyenne, Wyoming. In fiscal year 2022, we opened a total of three stores and relocated two stores. We are very pleased with the performance of these new stores and relocations. Our new store development was constrained in fiscal year 2021 and 2022 by delays in construction, permitting and the availability of materials and equipment. Over the next several years, we expect to return to opening between six and eight new stores per year, subject to improving construction and supply chain conditions. Natural Grocers has a legacy of being a values-driven company. Our commitment to building a healthy sustainable future for our customers, our good4u crew and our communities is longstanding and authentic. We work hard to ensure our product offerings, stores, operations, corporate practices and supply chain reflect these values. In fiscal year 2022, the combination of company donations and customer fundraisers resulted in more than $1 million in monetary donations and more than $4 million of in-kind food and product donations to local food banks. We are the only national grocery chain that offers the resources of a full-time nutritional health coach in each store, whose primary responsibility is providing free science-based nutrition education to our customers in the surrounding community. In fiscal year 2022, our investment to provide free nutrition education was more than $4 million. Earlier this month, we implemented another wage rate increase of $1 per hour for hourly store crew. This increase represents our third $1 per hour increase since the beginning of the pandemic. Our company-wide average hourly wage rate for full-time store crew now exceeds $20 per hour, including $1 per hour in Vitamin Bucks. This compares to the November 2019 average wage rate of approximately $15.50 per hour and reflects our longstanding commitment to investing in our crew. In closing, I want to recognize every member of our good4u crew for their continued hard work and commitment to our founding principles, including delivering the highest quality products at always affordable prices to the communities we serve. With that, let me turn the call over to Todd to discuss our financial results and guidance.

Thank you, Kemper, and good afternoon, everyone. The fourth quarter results were in line with our expectations as we cycled strong performance in the fourth quarter of last year, experienced a shift in consumer behavior and managed inflationary pressures impacting our business. Net sales increased 0.6% from the prior year period to $274.2 million. Our daily average comparable store sales were essentially flat, decreasing 0.2%. The fourth quarter three-year comp improved sequentially to 15.8% as compared to 14.1% in the third quarter and 13.5% in the second quarter. The 0.2% comp decline was comprised of a transaction count decrease of 2.6%, offset by a transaction size increase of 2.5%. The 2.6% decrease in transaction count reflected the moderation of pandemic trends, including more normalized levels of summer travel and food away from home consumption. Additionally, in the fourth quarter, approximately 20% of the transaction decline was attributed to fewer SNAP EBT purchases. SNAP EBT represents a low single-digit percentage of total sales. The 2.5% increase in transaction size was primarily driven by retail price inflation, partially offset by a reduction in the number of items per basket. We estimate that product cost inflation was approximately 7% for the fourth quarter and 5% for the fiscal year. Historically, our inflation rate has been more stable than conventional grocers due to our specialized supply chain. In the last year, our inflation rate was lower than our peers and did not contribute to our comparable store sales to the same magnitude as our peers. In the fourth quarter, we passed along the impact of product cost inflation through pricing and expect to continue to do so for the foreseeable future. The fourth quarter item count per basket was down by less than one item compared to the prior year. While difficult to quantify, there are many concurrent factors that could be influencing the decline in item count. These factors likely include consumers' response to price inflation within their food and non-food purchases, consumers' shift to food away from home and consumers' response to macroeconomic concerns. Note that our item count per basket was up more than 10% on a three-year basis. In line with our expectations, the fourth quarter supplement sales comp was lower than the company sales comp as we cycled a strong supplements comp last year. In general, supplements have experienced lower inflation than food. On a two-year basis, the supplements comp was a positive high single digit. In the fourth quarter, our strongest performing departments were dairy, meat and grocery. In the fourth quarter, we saw limited evidence of trade down. Some customers switched from branded products to private label equivalents. Our Natural Grocers brand offers customers premium quality at a compelling price. During the fourth quarter, our private brand products that had a higher unit growth than the comparable branded offering included bread, bulk grains and supplements. It is important to note that we continue to see accelerated growth in select premium offerings, such as pasture-raised eggs and grass-fed milk, suggesting that many of our customers are still prioritizing product attributes over price. In-stock levels in the fourth quarter returned to pre-pandemic levels. Turning now to the rest of the P&L. Fourth quarter gross margin decreased 20 basis points to 27.6%, driven by lower product margin attributed to higher freight, distribution and shrink expenses. Store expenses as a percentage of sales in the fourth quarter increased 150 basis points, driven by higher labor expense as a result of increased wage rates. Store expenses included long-lived asset impairment charges of $2.8 million in the fourth quarter of fiscal year 2022 related to two stores compared to $1.1 million in the fourth quarter of fiscal year 2021. Net income was $2.2 million with diluted earnings per share of $0.09 in the fourth quarter. This compares to net income of $7.2 million or $0.32 of diluted earnings per share in the fourth quarter of last year. Adjusted EBITDA was $13.6 million in the fourth quarter. Briefly touching on the full-year results. For fiscal year 2022, total revenue increased 3.2% to $1.1 billion. Our daily average comparable store sales growth was 2.6%, resulting in an increase of 15.7% on a three-year basis. Fiscal year 2022 gross margin was 30 basis points higher than the prior year, driven by improved product margin and store occupancy cost leverage. Store expenses as a percentage of sales were flat year-over-year as leverage from higher sales offset higher labor expense attributable to increased wage rates. Store expenses included long-lived asset impairment charges of $2.9 million in fiscal year 2022 and long-lived asset impairment charges and store closing costs of $1.5 million in fiscal year 2021. For fiscal year 2022, net income was $21.4 million with diluted earnings per share of $0.94. This compares to $20.6 million and $0.91 of diluted earnings per share in fiscal year 2021. Adjusted EBITDA in the fiscal year 2022 was $62.2 million. Turning to the balance sheet and cash flows. We finished the year in a strong liquidity position with $12 million in cash and cash equivalents, no outstanding borrowings under our $50 million revolving credit facility and a $15.7 million balance on our term loan. During the fiscal year, total inventory increased 13%, driven by product in-stock levels returning to pre-pandemic levels, product cost inflation and inventory additions for new and relocated stores. We feel our current inventory level is appropriate. For fiscal year 2022, we generated cash from operations of $39.7 million and invested $31.1 million in net capital expenditures. Capital expenditures included the opening of three new stores, two relocated stores and the purchase of a previously leased property. Free cash flow was $8.6 million. Today, the company announced the declaration of a quarterly cash dividend of $0.10 per common share. The dividend will be paid on December 14, 2022, to stockholders of record at the close of business on November 28, 2022. Now I would like to introduce the company's outlook for fiscal year 2023. Our guidance was developed based upon consideration of current operating trends, consumer trends and the uncertainty of the economic environment, including inflationary pressures and the risk of a recession. Our outlook includes the benefits of new store growth, marketing focused on our value proposition and store productivity initiatives. Our current expectation is that sales comps will be more challenging in the first half of the year as we cycle strong comps driven by Delta and Omicron. Lastly, our outlook anticipates that year-over-year gross margin will be flat, and store expenses as a percentage of sales will increase driven by higher labor rates. For fiscal year 2023, we expect to open four to six new stores, relocate one to two stores, achieve daily average comparable store sales growth between negative 2% and positive 1%, achieve diluted earnings per share between $0.70 and $0.90 and direct $28 million to $35 million towards capital expenditures to support our growth initiatives. In closing, we had another strong, record-setting year that we attribute to many factors, but foremost, our customers' appreciation for our commitment to our principles and values, our consistency and the dedication of our crew. We continue to strive to be the grocer of choice for the highest quality natural and organic products at always affordable prices. We believe that Natural Grocers continues to be very differentiated in the market and uniquely relevant to consumers. We look forward to the many opportunities in fiscal year 2023.

This is Johnny Baldwin on for Greg today. For the 2023 comp guide of negative 2% to 1%, can you just talk a little bit about your assumptions there, sort of for cost inflation, are you expecting mid-single digits going into 2023 and sort of what promotional activity you think you might see?

A couple of points. So we're anticipating inflation to be about steady, at least in the first half of the year. And then some drivers of sales would be, in addition to the benefit of the inflation, the marketing efforts on our value proposition and new store productivity. And then some risks and uncertainties that are built into our forecast would be some of the consumer trends that we're seeing with food away from home and travel continuing, and then economic uncertainty around inflation and probably in the back half of the year, the risk of recession. And then if you think about the first half versus the second half of the year, in the first half, we're up against good comps last year in Q1 and Q2 with some tailwinds last year from the pandemic that we're not seeing at this point in time.

And then going back on to the long-term store growth target of six to eight stores. How should we think about like the benefit to the comps once we get into the out years when you add these stores into the sort of existing mix? How should we think about the comp lift there?

Well, when we have new stores, they have higher comps in their first five years than our mature stores. So a good tailwind once we start getting our inventory of new stores up and running. And we're seeing pretty good clarity for this year, probably getting up probably six new stores and two relocations. Hopefully, we should end up with a lot of the issues we ended up with at the end of last year with the bureaucracies, et cetera, in getting our stores open.

[Operator Instructions] Our next question comes from Scott Mushkin with R5 Capital.

I just wanted to -- I think you mentioned consumer behavior shifting. We've heard from other retailers that as October progressed and we got into November, the consumer really seems to be changing its behavior or their behavior. And I was wondering if you have any thoughts around that and any more detail you could offer around what you referenced.

Well, one thing that we've noticed in particular is that the vacation cycles have really reemerged again. Before the pandemic, we always had a lull in October from -- the schools tend to go out for like two weeks of fall break in the end of October now and we noticed that lull, and then there was a pickup right after that lull of school breaks in October. So we've really noticed -- and during the summer months, we've really noticed the vacation trends have really had an impact on customer accounts in the stores when the vacations are really high. The other thing that we've noticed compared to last year, as Todd mentioned, we have the tailwinds of the end of the pandemic last year and our supplement sales really skyrocketed quite a bit. And this year, they've moderated substantially compared to that. So we've noticed that. And then, again, the eating out -- people eating out of restaurants has seemed to have taken a little bit away from our sales of food in the stores.

But as you think about the consumer in the last, say, a month or so, is it weakening up or you really don't have -- because I think you guys said that they seem still pretty strong. I just wonder if there's any flavor as we work through the quarter.

Well, the thing that we've really noticed is the weakening in the lower end -- the low end of our consumers that are on SNAP. We've seen a 20% decline in our SNAP purchases at our stores. I mean they're not a significant amount of our sales, but they definitely -- the lower end purchasing has definitely moderated substantially. Our regular customer -- our primary customers are still really staying pretty consistent in their purchases, except for, like I said, the vacation thing.

So kind of remind us a little bit. Obviously, your products are much better for you, but with that comes a little higher expense. How do you guys think about it? And I agree with what was said, we're probably headed into a recession at the end of '23. Remind us how the business performs when unemployment rates go up and things get a little tighter. And then assuming that, that makes it harder, but remind us how it performs. What can you guys do to mitigate some of that?

One of the things that you do is you definitely focus your promotions on staple items so that people understand that you have affordable items that you sell. I mean, for instance, we have our $1.99 free-range eggs that essentially is beating everybody's egg pricing in the market. And then we have organic avocados at $0.99 every day that essentially is beating everybody on that price also. And then one of our big marketing pushes right now are meal deals, where we bundle together several products and have a meal deal for -- feed a family of four for under $15 or feed a family of four for under $16 or something of that nature. So we really focus our marketing on those affordable offerings. As far as when a recession happens, it actually can be good for our business to an extent, because people tend to eat out less and tend to go on vacations less. And so that means that they're eating more at home, and so that helps us with food fills. They might pull back a little bit on the supplement end and a little bit on the body care end, but on the other two ends it can be very helpful. It just depends on if we can make sure that we get our -- the correct promotions out there and make them resonate with the consumers, which I think our marketing department is really good at doing. And also the fact that we have 80% of our sales now out with our {N}power customers who we are able to market to our core customers three or four times a week via our {N}power emails.

Yes, very powerful, big increase. So my last question is on new store performance. How are you guys feeling about that? And then I'll yield.

I'm really bullish on our new store performance. I think we've fixed some really good exciting sites coming up over the next year, and I think we'll have some good results from that.

This concludes our question-and-answer session. I'd like to turn the conference back over to Kemper Isely for any closing remarks.

In 2022, we marked the 10 year anniversary of our Initial Public Offering. During the last 10 years, we have nearly tripled our store base and created an increased sales and earnings at an even faster rate. Additionally, we have created over 2,500 jobs. More importantly, we have enabled our over 100 additional communities to have local access to the highest quality, healthy, nutritional products at affordable prices and free science-based nutrition education. We are very proud of our achievements over the last decade and equally excited about the opportunities that lie ahead. We look forward to speaking with you on our next call to review our first quarter 2023 results. Thank you and have a great day. Bye.

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