Cracker Barrel Old Country Store, Inc.

Good day and welcome to the Cracker Barrel Fiscal 2026 Third Quarter 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 on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Adam Hammond, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Cracker Barrel's third quarter of fiscal 2026 conference call and webcast. This afternoon, we issued a press release announcing our third quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter ended May 1, 2026. 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 are Cracker Barrel's President and CEO, Julie Massino, and Senior Vice President and CFO, Craig Bemels. 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 as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Messina. Julie?

Good afternoon, and thank you for joining us. Q3 results exceeded our expectations. Sales were $797 million, and adjusted EBITDA came in at $40 million. This performance was driven by strong cost management across the P&L. as well as improve traffic and check. Our dedicated teams have positioned us for success, and they continue to execute at a high level. They are key to implementing our strategic initiatives, which are grouped into three areas. Improved operations, deeper connections with guests through our menu, marketing, and value proposition, and increased profitability. I'll now discuss each one. First, operationally, we remained focused on consistent execution and delivering an exceptional guest experience. This resulted in strong improvements across important guest metrics for the third consecutive quarter. Year over year, our Google Star rating increased 4%, reaching its highest quarterly score since 2018, while our food taste and service scores rose 5% and food temperature scores increased 7%. Managerial turnover improved by 6%, outperforming the industry, and we continue to see positive trends in hourly turnover. We are pleased with the favorable trends in these metrics, which are important leading indicators, and are confident these gains will translate into improved traffic over time. Turning to our menu, our multi-pronged strategy combines bringing back guest favorites, introducing new offerings, enhancing quality, and leaning into value. We are incorporating these elements into each of our seasonal menus in an effort to improve guest satisfaction and drive traffic. Our spring menu featured the return of our sugar-cured and country ham dinners to the core menu and our very popular carrot cake as an LTO. We also introduced our garden and farmhouse scrambles to address a menu gap and respond to a long-standing guest request. our spring menu featured our new smoky southern salmon, which provided a more premium, lighter fish option. Our summer menu is centered on our campfire promotion. As a reminder, last year marked the return of the campfire platform, one of our strongest nostalgia anchors and a clear celebration of Americana travel and gathering. This year, we made enhancements to our campfire chicken and beef offerings to improve flavor and consistency. We also extended the platform into the morning day part with a new campfire breakfast skillet. This hearty meal consists of bacon, smoked sausage, roasted peppers, onions, and cheese served over three eggs with crispy campfire seasoned potatoes. Value is incredibly important in today's environment. For Cracker Barrel, it's not a response to the moment. It's part of who we are, delivering meaningful abundance and everyday value for our guests. our value remains strong, as evidenced by the fact that our Q3 value scores increased 5% year over year. There are a number of reasons we are confident that our proposition will continue to resonate. First, our absolute check remains well below the industry. In Q3, our average check was $15.85, compared to over $27 in casual dining and over $19 in family dining. underscoring our lower prices versus competitors. In fact, guests can order add-ons with us and their check will still be lower than an entree at many of our peers. In addition to lower relative prices, our overall value proposition is strengthened by the high-quality ingredients, delicious food, and genuine hospitality we are known for. Second, we've maintained a strong everyday foundation, further enhanced through our barbell pricing strategy that includes compelling entry price points, such as our sunrise pancake special for $7.99 and early dinner deals starting at $8.99. Third, we've implemented targeted menu changes to reinforce our value proposition and expand guest choice while also building margin. This includes bundled shareable duos and trios, as well as options for guests to upgrade to three sides or add an extra breakfast protein to select entrees for a modest surcharge. Transitioning to loyalty, Cracker Barrel Rewards remains a meaningful traffic and value driver for the business. The program has grown to nearly 12 million members with continued strong engagement. In Q3, member-tracked sales remained above 40%. we saw strong retention among our most valuable loyalty guests that was consistent with historical norms. Overall loyalty member visits increased year over year, reinforcing the program's role as an important traffic tailwind. Beyond points and rewards, we are using the loyalty platform to create more meaningful reasons for guests to engage with the brand. A good example of this is our Fuel Your Summer Road Trip sweepstakes. As part of this sweepstakes, which launched May 19th and will run through July 26th, loyalty members who purchase an entree will have a chance to win Cracker Barrel and Fuel gift cards. Each week, 25 winners will receive a $500 Cracker Barrel gift card and a $500 gas card, with $250,000 in total prizes awarded. These loyalty-exclusive engagement opportunities are expected to support member acquisition and encourage repeat visits while reinforcing Cracker Barrel's role as a trusted destination for gathering, comfort, and hospitality during the summer travel season. From a marketing perspective, our best connection strategy remains centered on food, value, and Cracker Barrel's distinct heritage. We continue to leverage key partnerships and cultural moments to deepen emotional connection, expand reach, and drive visitation. For example, our partnership with Speedway Motorsports continues to be an important platform, and we're using it, along with our broader summer marketing efforts, to generate excitement around campfire and drive traffic. Building on last year's successful partnership, we have expanded this year's program through broader national awareness, deeper local store engagement in key race markets, and enhanced on-site activations across the season. This year, Cracker Barrel Fan Zones will be present at every Speedway Motorsports race, giving us a larger physical presence with fans and extending the brand beyond the track itself. We were especially proud to have once again served as a title sponsor of the Cracker Barrel 400. This year's sold-out race on May 31st was action-packed and included 31 lead changes among 15 different drivers, with Denny Hamlin ultimately winning in an exciting finish. Moving to retail, this business continues to gain momentum under the leadership of Heather Hager, who joined us in September 2024 and was promoted to Senior Vice President this past February. We are pleased with the improvement in our retail performance and are seeing good results from key initiatives such as SKU rationalization, optimized markdowns, and improved merchandising. In fact, retail comps outperformed restaurant comps for the first time in over four years. Additionally, we saw year-over-year improvements in important metrics such as units per transaction and average unit retail. Most importantly, our product is resonating with our guests. I'll provide a few examples. First, the toys category has been a particular strength, in part because we successfully capitalized on social media-driven trends related to sensory play and fidget toys. Second, our salt and pepper shakers remain a hit. These unique collectibles are an incredible value as well as a great expression of the brand. And third, our American Heritage theme remains a beloved summer assortment full of merchandise proudly celebrating America and patriotism. This year, we're featuring merchandise commemorating America's 250th birthday, and the guest response has been strong. Our last strategic initiative is improving profitability. Our team, from the operators at our stores to team members at the support center, have done an outstanding job managing costs. As a reminder, we executed a corporate restructuring completed in Q2 that is expected to deliver $20 to $25 million in annualized G&A savings. We also reduced our advertising expense in the second half of the year compared to the prior year. Collectively, these efforts and cost savings actions were a significant driver of our Q3 adjusted EBITDA results, and we will continue to diligently manage our expenses going forward. As our team continues to execute our strategic initiatives to improve operations, make deeper connections with guests, and increase profitability, we are also taking other steps to advance the business and position us for the future, particularly through the use of technology. I'll provide a couple of examples. First, in the coming weeks, we are upgrading our website to create a more frictionless and intuitive digital journey. The new platform will better support online ordering, rewards, and targeted content. Importantly, this also serves as the foundation for expanding personalization across more channels over time, allowing us to deliver more effective messaging and reasons to visit wherever guests are engaging with Cracker Barrel. We're excited about these enhancements, which will improve the guest experience while simultaneously driving our off-premise business, which, as a reminder, accounts for approximately 20% of restaurant sales. Second, we're using AI across the company to enhance our team's capabilities and to support the guest experience. We've deployed enterprise-wide tools, built foundational data infrastructure, and established governance to ensure responsible use and scaling. In building these capabilities, we're also investing in our people, upskilling teams and ensuring leadership adoption. We are leveraging AI as a force multiplier that allows us to be more productive while making our team's jobs more efficient. For example, our machine learning traffic forecasting model has improved our projection accuracy, which supports better labor deployment and execution. Additionally, we are using AI and guest relations to more efficiently resolve tickets and, where appropriate, to more quickly connect guests with live support. Finally, as part of our focus on the guest experience, we developed an internal agent that can quickly mine data across all guest feedback channels and provide actionable insights. In closing, we are executing at a high level and gaining traction across the business, as evidenced by our Q3 results. We are focused on sustaining this momentum over the coming quarters. I'll now turn it over to Craig to walk through the financials.