Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to Natural Grocers' second quarter fiscal 2020 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. We would now like to turn the conference over to Mr. David Colson, Vice President and Treasurer for Natural Grocers. Mr. Colson, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage second quarter fiscal year 2020 earnings conference call. On the call with me today are Kemper Isley, co-president, and Todd Dissinger, chief financial officer. As a reminder, all statements made on this conference call other than statements of historical fact are forward-looking statements. All forward-looking statements are based on current expectations and assumptions that 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 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 recording of this call will be available on the website at investors.com. Thank you, David, and good afternoon, everyone.

Thank you for taking the time to join us today. We appreciate your ongoing support, and we hope that all of you are staying safe and healthy during these unprecedented times. I would like to walk you through some highlights of the quarter and give you an update on the current impact of the COVID-19 pandemic on natural grocers. and how we are responding to support our valued Good For You crew and customers and partners. I will then turn the call over to Todd to discuss our financial results in greater detail. During the second quarter, we saw a significant acceleration of daily average comparable store sales growth as the quarter progressed, peaking in mid-March as consumers responded to the growing pandemic. For the quarter, revenue was up 20.4% and comps increased 17%. We began to see a lift in comps in late February. This trend accelerated further in March as our customers prepared for and responded to the growing health crisis with increased purchases. We saw both a significant increase in average transaction size, which increased 13.1% during the second quarter, and an acceleration in transaction counts. which were up 3.5% during the quarter. This growth included a comp gain of approximately 40% for the month of March over the prior year period. We continued to see elevated comps in April, although the trend moderated from the peak mid-March levels. In April, we continued to see materially higher transaction size, partially offset by reduced transactions, both relative to the prior year as customers made fewer shopping trips but made larger purchases when they did shop. As Todd will discuss, the strong comps led to significant expense leverage, with gross margin improving 100 basis points as a result of improved occupancy leverage, and store expenses declining 130 basis points. This leverage materialized despite increased operating expenses and labor costs as we hired temporary staff to support, clean, and restock our stores. We produced net income growth of 151.8% and adjusted EBITDA growth of 57.7%. Turning to our response to the pandemic, first and foremost, our focus is on the safety of our Good4U crew and customers. We have gone to great lengths to protect the health and safety of each of our crew members who are heroes in masks and aprons, and our customers within our stores and operations. We have proactively implemented numerous measures in response to the pandemic to provide a safe shopping and working environment. We sourced and repackaged bulk hand sanitizer when none was available, produced more than 6,000 face masks with the help of our families, our crew in our communities and mandated that our crew wear them. We established customer capacity limits in our stores, adjusted store hours to provide extra time for cleaning and restocking, implemented early shopping hours for vulnerable populations, leveraged our packaged bulk offerings as we are one of the few retailers where consumers can continue to buy bulk products. provided immunity and stress support supplements for our crews, expanded leave and medical coverage, installed plexiglass shields at checkouts, and established social distancing measures in our stores. As noted, we enacted many of these measures proactively, thereby demonstrating our leadership and commitment to our community's health and safety. We also leveraged our relationship with Instacart to further support our customers, especially vulnerable populations, adjusting to the growing demand for online ordering and delivery. Our Instacart sales ramped up significantly during March. In addition to safety implementations, we have gone to great lengths to support our crews financially during this difficult time. We implemented Hero Pay, increasing wages for all hourly crew by $2 an hour through May 31st. Of this increase, $1 an hour will be permanent, as we are one of the few retailers that have made a permanent wage commitment to our crew. Additionally, we paid bonuses during this period in recognition of our crew's hard work. We have committed to investing an additional $7 million in our crew over the period beginning in March through September 30, 2020, our fiscal year-end. We are so proud of the natural grocers crew who wake up every day and come to work to help ensure that we can continue to deliver the highest quality natural and organic products to the communities that depend on us. I want to thank each and every one of our heroes in masks and aprons for their selfless contributions. With that, let me turn the call over to Todd to discuss our financial results and guidance.