Cracker Barrel Old Country Store, Inc.

Good morning, and welcome to the Cracker Barrel Second Quarter Fiscal 2025 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one. Please note, this event is being recorded. I would now like to turn the conference over to Adam Hannon, Director of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's second quarter fiscal 2025 conference call and webcast. This morning, we issued a press release announcing our second quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the second quarter into January 31st, 2025. Please refer to the footnotes in our press release for further details about these metrics. The company believes these measures provide 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's President and CEO, Julie Massino, and Senior Vice President and CFO, Craig Pimels. Julie and Craig will provide a review of the business, financials, and outlook. We will then open up the call for questions. On this call, statements may be made by 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 shared on this call is valid as of today's date, and the company undertakes no obligation to update it except it may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Messino.

Good morning and thank you for joining us. This morning we reported second quarter total revenue of $949.4 million, which included comparable store restaurant sales growth of 4.7% and adjusted EBITDA of $74.6 million. As many of you know, Q2 is an especially important quarter for Cracker Barrel because of seasonally higher volumes, and I want to thank our teams who did an exceptional job executing during this period. Their operational focus, coupled with our actions to support improved profitability, especially in our catering and heat and serve channels, helped us deliver EBITDA that exceeded our expectations. This strong Q2 performance, coupled with our confidence in our trajectory, resulted in us increasing our fiscal 25 EBITDA guidance. Let's review some highlights from the quarter. We delivered positive comparable store restaurant sales for the third consecutive quarter and positive comparable store retail sales for the first time since the second quarter of fiscal 23. We maintained a favorable trend in the important dinner day part as our dinner traffic trend sequentially improved for the fifth consecutive quarter. As I mentioned, we meaningfully grew the profitability of our seasonal heat and serve and catering channels. And finally, We saw notable year-over-year improvements in key operational and guest metrics. Collectively, these highlights provide further evidence of the progress we're making executing our transformation strategy, and we remain confident in each of the five pillars. Let's dig in. The first pillar is refining the brand, which is about evolving the way we interact with guests across all touch points. As part of these efforts, we conducted a comprehensive analytical restaurant and retail guest journey mapping and audit, and these insights are informing the work across our strategic initiatives. Additionally, we finalized our new brand strategy. While there is still work to be done to fully bring this to life in early fiscal 26, we're already incorporating elements from our updated positioning. For example, our TV and billboard campaigns that debut next week will reflect our evolved tone of voice and select visual components. And our spring menu that launched on February 11th also features an evolved look and feel. Our goal, as we've stated, is to evolve the brand while remaining authentically Cracker Barrel and staying rooted in our country hospitality. We will do this in a way that resonates with our current guests while also inviting new guests into the brand. Our second pillar is enhancing the menu. which revolves around making it more craveable for guests and easier to execute for our team members while also strengthening our value proposition. Our menu strategy continues to focus on the important dinner day part while protecting our leadership in breakfast. Our current menu promotion features two craveable and delicious shrimp dishes, a Louisiana-style shrimp skillet and a shrimp grits skillet. Additionally, we've introduced several new pancake offerings as we continue to bolster this platform, both from an innovation and barbell pricing standpoint. An important part of enhancing the menu is also maintaining a strong value proposition. And as we've discussed, we're doing this in a number of ways. We continue to highlight exceptional and compelling value offerings and continue to focus on strong execution and the guest experience, which is also crucial to the overall value equation. We believe these tactics are working as evidenced by improvements in several key metrics. For example, compared to the prior year, value scores increased 7%, food taste scores grew 7%, and menu choice scores improved 8%. Another way we're enhancing the menu is through our back of house optimization initiative to improve quality and profitability while also making jobs easier and more enjoyable. As a reminder, this is a multi-year initiative that will be completed in several phases. This first phase is focused on process improvement. We tested phase one in a full region in Q2 and recently rolled it out system-wide. Importantly, our consumer research shows that the new processes result in items that score at parity or better than the existing items, and the test confirmed this is a significant cost savings opportunity. One of our key learnings is that it takes a little longer than we initially anticipated for team members, especially more tenured ones, to master these new processes. However, a consistent theme has been that once they gain proficiency, they love them. And new team members also find the revised processes easier, which reduces the time they need to gain mastery. Based on our learnings, we have updated our assumptions for the timing of the cost savings. and we now anticipate the labor savings benefit of the initiative to be minimal in Q3 before ramping in Q4. Pillar 3 is evolving the store and guest experience, which includes operational execution, store design and atmosphere, and retail. From an operational execution perspective, we remain focused on the metrics that matter. We're encouraged by our trends across the key metrics most correlated with same-store sales growth. In particular, we were pleased that turnover improved by another 19 percentage points. This is an especially important metric due to its strong relationship with execution and therefore the guest experience. And lower turnover also translates to reduced training expense. Additionally, overall experience scores improved 7% and service scores improved 5%. As part of our efforts to drive further enhancements to the guest experience, In Q3, we introduced new guest-focused service standards that are better aligned with the customer journey. In terms of our remodel program, we want to remind you that fiscal 25 is a test and learn year. We remain on track for completing 25 to 30 full remodels and 25 to 30 refreshes. We remain optimistic about the program and plan to provide a deep dive on our Q4 call in September after the full year test has concluded. In retail, despite ongoing industry headwinds, we generated positive comparable store sales for the first time in two years. We saw particular strength in our apparel category and our Christmas themes performed well despite a shorter selling season. Our fourth pillar is winning in digital and off-premise. As I mentioned earlier, Q2 is an especially important quarter due to the seasonally high volumes for our catering and occasion channels. As we shared on our Q2 earnings call last year, although we set a record for Thanksgiving week sales, we identified opportunities to improve the guest experience, the employee experience, and profitability. This was one of the first areas that we tackled as part of our transformation, and this year we took several actions based on our learning. For example, we prioritized the more profitable dine-in and individual to-go channels and deprioritized and throttled our lower profitability channels such as seasonal heat and serve and catering. We streamlined the offerings to reduce complexity and improve in-store execution. We refined allocation and capacity rules to prioritize stores that are more profitable and that deliver a better guest experience. And finally, we increased pricing. These changes were hugely impactful and were the primary driver of our Q2 EBITDA performance exceeding expectations. We also delivered improvements to both the guest and employee experience. We expect to continue to see the benefits from these tactics in Q2 in future years as well. In closing, we were pleased with our Q2 results and the first half of the fiscal year has demonstrated the progress we are making, as evidenced by our ability to raise guidance. Our transformation remains on track and we are focused on sustaining this momentum in the second half of the year. I'll now turn it over to Craig to review our financials and provide our updated outlook.