Natural Grocers by Vitamin Cottage, Inc.

Good day, ladies and gentlemen. Welcome to the Natural Grocers fourth quarter and fiscal year 2020 earnings conference call. At this time, all participants are in the listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, today's call is being recorded. I would now like to turn the conference over to Mr. David Coulson, Vice President and Treasurer for Natural Grocers. Mr. Coulson, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage fourth 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, 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, David, and good afternoon, everyone. Thank you for joining us today. We faced many challenges and opportunities in fiscal 2020. and our response resulted in a record performance, including achieving over $1 billion in net sales and $0.89 in diluted earnings per share. Fiscal 2020 was also our 17th consecutive year of positive daily average comparable store sales growth. Our fourth quarter comp was up 13.2%, and the full fiscal year comp was 12%. Our strong comp trends have continued through October. During fiscal year 2020, we also continued to enhance store performance with our margin expansion efforts. Supported by the strong sales momentum, we realized significant improvement to adjusted EBITDA during the year with 28.1% growth in the fourth quarter and 29.1% growth for the full fiscal year. We are pleased to announce that we are declaring a special cash dividend of $2 per common share in addition to our quarterly cash dividend of 7 cents per common share. The special dividend reflects our strong business performance, financial position, cash flow, and our commitment to return value to our shareholders. Fiscal 2020 was an unprecedented year presenting numerous challenges amid the global pandemic and related government mandates. We are very proud of our strong response and performance. Our entire Natural Grocers family adapted quickly and successfully to these challenges while staying true to our founding principles. We navigated through the toughest of operating environments while delivering the highest quality natural and organic foods to our valued customers. Our strong results in both the fourth quarter and full year reflect our ability to leverage our core competencies and values. Our longstanding focus on health is an important differentiator in the on-trend given the current environment where customers are focused on making informed health and nutrition choices, including an emphasis on strengthening the immune system. Our quality offerings coupled with our always affordable value proposition is very relevant in today's uncertain economic environment. Additionally, customer confidence in our products, store cleanliness, and safety measures are driving our growth. Our differentiated model includes industry-leading quality standards, a focus on providing free science-based nutrition education, strong alignment with our customers' and communities' shared values, only offering 100% organic produce, a prepackaged bulk offering that is more relevant today than ever, a focus on providing the ingredients and recipes for healthy cooking at home, and a convenient store layout supported by exceptional customer service. Let me highlight a few of our recent marketing initiatives, which continue to drive customer excitement and interest and contributed to our strong sales performances. In July, we promoted the art of burgering, focused on healthy grilling techniques and ingredients. In August, we celebrated our 65th anniversary with a highly successful anniversary event that featured a sweepstakes, free products, and exciting promotions. This sale was extended to a three-day event this year to facilitate social distancing. In September, which was National Organic Harvest Month, We highlighted our commitment to organic farming with our Organic Month event, utilizing special promotional offers, activities, and a fundraiser supporting Beyond Pesticides. Our NPower Customer Loyalty Program continues to contribute to growth, drive loyalty, and enhance our ability to market to our customer base. NPower membership has now reached 1.3 million customers and represented 68% of sales in the fourth quarter. Additionally, our ongoing Feed Your Family of Four initiative, which is a promotion aimed at feeding a family of four for under $10 to $16, has been timely and well-received. This promotion highlights and educates families so they can cook affordable, high-quality meals, even in challenging economic times. We offer both the ingredients and recipes for families to follow, many featuring our Natural Grocers brand products. We are seeing continued growth of our National Grocers brand products. We have grown our private brand offerings by 54 SKUs during 2020, bringing our total number of National Grocers SKUs, including both prepackaged products and supplements, to over 1,000 at fiscal year-end. In the fourth quarter, private brand sales represented 7.3% of total sales, compared to 6.8% in the same period of the prior year. Our private brand products have been developed and sourced consistent with our core values and are positioned as a premium quality brand at an always affordable price. We continue to be encouraged by the adoption of our branded products with strong category penetration rates. We believe our natural grocers brand has significant growth potential in the years to come. In 2020, we continue to support our communities in many ways. During the fourth quarter, natural grocers and our customers partnered to raise over $500,000 for charitable purposes. These efforts focused on many important causes and included raising approximately $250,000 for local food banks, in addition to our ongoing commitment to donating food. In September, we launched our Ladybug Love Your Neighborhoods partnership with Beyond Pesticides. in honor of National Organic Harvest Month and raised over 120,000 reduced pesticides in neighborhood parks. As we have discussed before, these recent efforts are just a small part of how Natural Grocers' brand is deeply rooted in a history of environmental and social leadership to benefit all stakeholders. At Natural Grocers, we believe the sustainable choices we make today directly impact the world tomorrow, and we work hard to ensure our stores, operations, and supply chain reflect these values. We are committed to building a healthy, sustainable future for our customers, our Good4U crew, and our broader communities. Lastly, I would like to highlight our commitment to our Good4U crew during 2020. We have been proactive throughout the pandemic, focused on implementing safety measures for our crew. We are supporting our crew through a permanent $1 per hour wage increase for our hourly crew, which was implemented in March 2020, and we have paid periodic discretionary bonuses throughout the pandemic. Our wage and bonus enhancements represented approximately $3.3 million of incremental expense in the fourth quarter, which was the equivalent of 87% of quarterly net income. For the full year, the pay enhancements were approximately $10.3 million, or 52% of fiscal 2020 net income. In closing, I want to thank each and every crew member for their commitment to helping us deliver the highest quality natural and organic products at always affordable prices. I am confident in our ability to continue to drive growth and value for all of our stakeholders. With that, let me turn the call over to Todd to discuss our financial results and guidance.