Q4 2021 Murphy Usa Inc Earnings Call

Thank you for standing by my name is Cheryl and I will be your conference operator today at this time I would like to welcome everyone to the Murphy USA fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there.

Speaker 1: Thank you for standing by. My name is Cheryl and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

It will be a question and answer session.

I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Press Star one. Thank you Christian Pikul Vice President of Investor Relations you May begin your conference.

Speaker 1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. Thank you. This is Jen Pichal, Vice President of Investor Relations.

Great. Thank you Cheryl and good morning, everybody. Thanks for joining US with me as usual are Andrew Clyde, President and Chief Executive Officer, Mindy West Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and controller. After some opening comments from Andrew Mindy will provide an overview of the financial results. We will review our 2022.

Speaker 2: Great. Thank you, Cheryl, and good morning, everybody. Thanks for joining us. With me, as usual, are Andrew Clyde, President and Chief Executive Officer, Mindy West, Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and Controller. After some opening comments from Andrew, Mindy will provide an overview of the financial results. We will review our 2022 guidance, and then we will open up the call to Q&A.

Guidance and then we will open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion will be considered forward looking statements as defined in the private Securities Litigation Reform Act of 1995 as such no assurances can be given that these events will occur or that the projections will be attained a variety of factors exist.

Speaker 2: Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be obtained.

That may cause actual results to differ for further discussion of risk factors. Please see the latest Murphy USA forms 10-K, 10-Q, 8-K, and other recent SEC filings Murphy USA takes no duty to publicly update or revise any forward looking statements. During today's call. We may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP.

Speaker 2: A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K, and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP.

GAAP, we have provided schedules to reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press release, which can be found on the investors section of our website with that I will turn the call over to Andrew.

Speaker 2: We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the investor section of our website. With that, I will turn the call over to Andrew.

Thank you Christian good morning, and welcome to everyone joining us today.

Speaker 3: Thank you, Christian. Good morning and welcome to everyone joining us today. 2021 was a record year for Merke USA and our advantaged everyday low price business model continues to position us to win in this environment. Our performance is a direct reflection of intentional decisions to lean into our low price positions to benefit customers and drive volume to our stores to capture higher structural margins.

'twenty, one was a record year for Murphy, USA, and our advantaged everyday low price business model continues to position us to win in this environment our.

Our performance is a direct reflection of intentional decisions to lean into our low price position to benefit customers and drive volume to our stores to capture higher structural margins.

Which led to record fuel contribution of $1 1 billion and over $700 million of merchandise contribution.

Speaker 3: which led to record fuel contribution of $1.1 billion and over $700 million of merchandise contribution.

This was particularly evident in the month of December where Murphy volumes. Excluding quick check we're slightly ahead of 2019 and nearly twice the retail margin. We believe December and fourth quarter results are noteworthy as we transition from Covid and Covid recovery to a period of inflationary higher prices, which.

Speaker 3: This was particularly evident in the month of December , where Murphy volumes, excluding QuickCheck, were slightly ahead of 2019 and nearly twice the retail margin. We believe December and fourth quarter results are noteworthy as we transition from COVID and COVID recovery to a period of inflationary higher prices, which increasingly supports our ability to take share through our low-price model in competitive pricing tactics.

Increasingly supports our ability to take share through our low price model and competitive pricing tactics.

Our bottom of market price position and fuel tobacco and other categories remains central to our driving long term value.

Speaker 3: Our bottom of market price position in fuel, tobacco, and other categories remains central to our driving long-term value. First and foremost, the Murphy USA brand has been built on value. As stewards of our brand and reputation, we seek to responsibly over-deliver on our value proposition to customers and challenge our highly engaged store managers and associates to over-deliver versus customer expectations.

First and foremost the Murphy USA brand has been built on value as stewards of our brand and reputation we seek to responsibly over deliver on our value proposition to customers and challenge, our highly engaged store managers and associates to over deliver versus customer expectations second.

Are you conscious customers remain an underserved and growing demand segment in the marketplace and our real estate positions, especially in front of Walmart best position us to serve that customer.

Speaker 3: Second, value conscious customers remain and underserved in growing demand segment in the marketplace. In our real estate positions, especially in front of Walmart, best position us to serve that customer.

With rising inflation further pressure pressuring disposable income across most demographics are lower priced fuel and merchandise offer will help attract that incremental customer who are seeking value.

Speaker 3: With rising inflation further pressuring disposable income across most demographics, a lower-priced fuel and merchandise offer will help attract that incremental customer who is seeking value.

And last in an environment, where other retailers are facing increased cost pressure or low price model serves us as a highly efficient low cost method to acquire new customers and reward the loyalty of existing customers.

Speaker 3: And last, in an environment where other retailers are facing increased cost pressure, our low-price model serves us as a highly efficient, low-cost method to acquire new customers and reward the loyalty of existing customers.

Cost inflation will certainly evident across the supply chain and across a range of markets. We operate in where we are taking appropriate actions with our workforce to ensure we remain competitive and hiring new associates and keeping our stores well staff we have.

Expanded our sick pay an enhanced commission programs to keep store associates engaged in serving the customer and driving sales.

While we are carrying some of these costs with us into 2022, we remain as vigilant as ever in our cost disciplined mindset, which is critical in supporting our everyday low price model as we've said before our low cost model becomes further advantage during periods of wage inflation is more labor intensive formats are forced.

Speaker 3: While we are carrying some of these costs with us into 2022, we remain as vigilant as ever in our cost discipline mindset, which is critical in supporting our everyday low price model. As we've said before, our low cost model becomes further admanaged during periods of wage inflation as more labor intensive formats are forced to pass through proportionally higher costs through the fuel margin, where we are well positioned to disproportionately benefit from our lower cost and higher volume.

To pass through a proportionately higher costs through the fuel margin, where we are well positioned to disproportionately benefit from our lower cost and higher volumes versus.

Versus many competitors are company owned real estate model is also a big advantage for us in a period of inflation, because we do not pay cash rent and most of our locations. We are not subject to inflation adjustments on our occupancy cost.

Speaker 3: versus many competitors, our company-owned real estate model is also a big advantage for us in a period of inflation. Because we do not pay cash rent in most of our locations, we are not subject to inflation adjustments on our occupancy calls.

As a result of these trends the company is generating strong operating cash flows, enabling our capital allocation strategy that prioritizes, both new store growth and return of capital to shareholders. Additionally, our balance sheet is well positioned given the earnings power of the business in the current environment and create incremental.

Speaker 3: Additionally, our balance sheet is well positioned given the earnings power of the business in the current environment and creates incremental optionality around how to best deploy pre-cash flow. We remain committed to accelerating new store growth and the team is working hard to push through the pipeline through permitting and supply chain challenges and deliver up to 45 new stores and 35 raise and rebuilds in 2022.

<unk> around how to best deploy free cash flow.

We remain committed to accelerating new store growth and the team is working hard to push through the pipeline through permitting and supply chain challenges and deliver up to 45, new stores in 35, raze and rebuilds in 2022.

We are committed to increasing the dividend not just in 'twenty, two but in the years to come and to returning excess capital to shareholders through opportunistic share repurchases, which continued to be our highest return use of excess free cash flow.

Speaker 3: We have committed to increasing the dividend not just in 2022 but in the years to come and to returning excess capital to shareholders through opportunistic share repurchases which continue to be our highest return use of excess free cash flow.

We will remain flexible in our capital allocation strategy effectively utilizing the most accretive levers, which we are confident we will continue generating shareholder value going forward.

Speaker 3: We will remain flexible in our capital allocation strategy, effectively utilizing the most accretive levers, which we are confident will continue generating sureholder value going.

This call also marks the first anniversary of our quick check acquisition.

Speaker 3: This call also marks the first anniversary of our QuickCheck acquisition, and I'm very proud to report our synergy capture is ahead of schedule and our view of the long-term potential continues to increase.

And I am very proud to report our synergy capture is ahead of schedule and our view of the long term potential continues to increase.

As we have begun to incorporate Murphy scale and thoughtful approach to business transformation, our excitement regarding the future potentials for both the Murphy and quick check brands continues to grow. Moreover, our confidence that we made the right acquisition with quick check has been validated through our due diligence of other M&A opportunities.

Speaker 3: As we have begun to incorporate Murphy's scale and thoughtful approach to business transformation, our excitement regarding the future potentials for both the Murphy and QuickCheck brands continues to grow. Moreover, our confidence that we made the right acquisition with QuickCheck has been validated through our due diligence of other M&A opportunities.

None of which have the same quality of assets the existing earnings power or the future potential we see in quick check.

Speaker 3: none of which had the same quality of assets, the existing earnings power, or the future potential we see in QuickCheck.

From a synergy perspective, we're tracking ahead of our internal schedule targeting $28 million of synergies over a three year timeframe, having achieved over $8 million of synergies in 2021.

Speaker 3: From a synergy perspective, we are tracking ahead of our internal schedule targeting $28 million of synergies over a three-year timeframe. Having achieved over 8 million of synergies in 2021, most of which is embedded in our record 1.1 billion of total fuel contribution dollars.

Most of which is embedded in a record $1 1 billion of total fuel contribution dollars.

The fuel synergies have come primarily from implementing the same principles, we leveraged in our retail pricing excellence initiative within the Murphy network.

Speaker 3: The fuel synergies have come primarily from implementing the strain principles we leveraged in our retail pricing excellence initiative within the Murphy Net.

Better understanding store by store demand elasticity, and quick checks footprint and optimizing pricing tactics accordingly.

Speaker 3: Better understanding store-by-store demand elasticity and quick checks footprint and optimizing pricing tactics according.

Secondarily, we've been able to secure more favorable terms and renegotiating supply contracts, while leveraging inventory management technology with our fuel carriers. Additionally, through leveraging scale with back office processing and the elimination of quick check Executive Advisory Board costs, we have achieved $2 million of <unk>.

Speaker 3: Secondarily, we've been able to secure more favorable terms in renegotiating supply contracts while leveraging inventory management technology with our fuel carriers.

Speaker 3: Additionally, through leveraging scale with back office processing and the elimination of QuickCheck Executive and Advisory Board costs, we have achieved $2 million of G&A service costs from the Board of Regents.

<unk> synergies.

As we communicated early on in our integration messaging, our assessment of both direct and reverse merchandise and food and beverage synergies remained backend weighted but the opportunity set is growing we have undertaken some important strategic work to better understand market dynamics consumer preferences and demand segments. This work.

Speaker 3: As we communicated early on in our integration messaging, our assessment of both direct and reverse merchandise and food and beverage synergies remain back-end weighted. But the opportunity set is growing. We have undertaken some important strategic work to better understand market dynamics, consumer preferences, and demand sex.

It helps to inform what we can and should do with the Murphy brand and as importantly, what we should do as well as identifying the greatest opportunities that exist within the quick check brand. This body of work will help align our offer to customers within categories, where we have the right to win while leveraging the distinctive strengths of each.

Speaker 3: This work helps to inform what we can and should do with the Murphy brand, and as importantly, what we shouldn't do, as well as identifying the greatest opportunities that exist within the Quick Check brand. This body of work will help align our offer to customers within categories where we have the right to win while leveraging the distinctive strengths of each brand.

Brand.

These efforts will also inform our future NPI strategy and continue to generate in store productivity improvements.

Speaker 3: These efforts will also inform our future NTI strategy and continue to generate in-store productivity.

I'll now hand, it over to Mindy to review some financial items, after which I will review, our 2022 guidance Mindy.

Speaker 3: I'll now hand it over to Mindy to review some financial items after which I will review our 2022 guidance. Mindy

Thank you Andrew and good morning, everyone and then quickly review some standard items.

Speaker 4: Thank you, Andrew, and good morning, everyone. I'm going to quickly review some standard items. Revenue for the fourth quarter and four year of 2021 was 4.8 billion and 17.4 billion respectively compared to 2.9 billion and 11.2 billion in the year ago period.

Revenue for the fourth quarter and full year of 2021 was $4 8 billion and $17 4 billion, respectively compared to $2 9 billion and $11 2 billion in the year ago period.

Average retail gasoline prices per gallon during the quarter or $3 <unk>.

Speaker 4: Average retail gasoline prices per gallon during the quarter or $3.5 versus $1.87 in the prior year period and for the four year 2021. Retail gasoline prices average $2.77 per gallon versus $1.91 in 2020.

Versus $1 87 and the.

Prior year period and for the full year 2021.

Retail gasoline prices average.

77 cents per gallon versus $1 91 and 2020.

Adjusted earnings before interest taxes, depreciation and amortization or EBIT.

Speaker 4: Adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, was $216.2 million in the fourth quarter versus $136.3 million in the fourth quarter of 2020. And for the full year adjusted EBITDA was $828 million versus $723 million in the prior year.

$216 2 million in the fourth quarter versus $136 3 million in the fourth quarter of 2020.

For the full year, adjusted EBITDA was $828 million versus $723 million in the prior year.

Cash and cash equivalents totaled $256 4 million as of December 31.

Speaker 4: Cash and cash equivalents totaled $256.4 million as of December 31st. Total debt on the balance sheet as of December 31st, 2021 was approximately $1.8 billion, of which approximately $15 million is captured in current liabilities, representing the 1% per annum amortization of our term loans and the remainder a reduction in long-term lease obligations as they are paid through operating expense.

Total debt on the balance sheet as of December 31, 2021 was approximately $1 8 billion of which approximately $15 million is captured in current liability representing the 1% per annum amortization of our term loan and the remainder a reduction in long term lease obligations as they are paid.

Through operating expense.

Our $350 million revolving credit facility, how does the euro outstanding balance at quarter end and is currently undrawn.

Speaker 4: Our $350 million revolving credit facility had a zero outstanding balance at quarter end and is currently undrawn. These figures result in adjusted gross leverage ratio that we report to our lenders of approximately 2.2 times.

<unk> result in adjusted gross leverage ratio that we report to our lenders of approximately two two times.

Turning to Capex capital capital expenditures for the fourth quarter were approximately $59 million and totaled $278 million for the full year with quick check absorbing roughly $50 million of that annual spend.

Speaker 4: Turning to CAPEX, capital expenditures for the fourth quarter were approximately $59 million and totaled $278 million for the full year, with QuickCheck absorbing roughly $50 million of that annual spend.

Of the 278 million combined total spend approximately $225 million with growth capital, including 18, New Murphy Express stores, five new quick check stores, and 27, raze and rebuild projects.

Speaker 4: Of the 278 million combined total spend, approximately 225 million was growth capital, including 18 new Murphy Express stores, 5 new QuickCheck stores, and 27 raise and rebuild projects.

One 2 million was spent on maintenance across both networks and the remaining $33 million on corporate projects, including critical it infrastructure investments and other revenue driving capabilities, including MBR enhancements and other merchandising initiatives.

Speaker 4: 20 million was sent on maintenance across both networks and the remaining 33 million on corporate projects, including critical IT infrastructure investments and other revenue driving capabilities, including NDR enhancements and other merchandising initiatives.

Our total spend in 2021 was below our original and adjusted guidance range of $3 25 to $3 75, primarily stemming from delays in our Newbuild program.

Much of which has spilled over into 2022 as two new stores have been completed since year end and 13, new stores are currently under construction.

Slide this level of activity early in the year and as Andrew will address guidance the pipeline of opportunities that we can execute in 2022 does it remain temporarily impacted by supply chain another issue.

Speaker 4: Five this level of activity early in the year and as Andrew will address in guidance, the pipeline of opportunities that we can execute in 2022. That's remained temporarily impacted by supply chain and other.

So thank you everyone I will now turn the call back over to Andrew.

Speaker 4: So thank you, everyone. I will now turn the call back over to Andrew.

Thanks, Neely, let's close with the review of the 'twenty, one performance against our guidance metrics and then I'll provide some insight and context around our 'twenty two forecasts.

Speaker 3: Thanks Mindy. Less clothes with a review of 21 performance against our guidance metrics and then I'll provide some inside and context around our 22 forecast.

Starting with organic growth as Mindy noted, we added 23, new stores in 2021 and that included five quick check stores and the 27 raze and rebuilds. This level was below both our originally guided range and our adjusted guided range of between 34 and 38, new stores that we reported in July and 30.

Speaker 3: Starting with organic growth, as Mindy noted, we added 23 new stores in 2021, and that included five quick check stores in the 27 raised and rebuilds. This level was below both our originally guided range and our adjusted guided range of between 34 and 38 new stores that we reported in July and 31 raised and rebuild.

<unk> raze and rebuilds.

As noted the shortfall was largely attributable to delays in permitting and construction, but that has resulted in a higher than normal level of new store activity in January .

Speaker 3: noted the shortfall was largely a trivial to delays in permitting and construction, but that has resulted in a higher than normal level in new store activity in January . Since the beginning of the year, two stores have already been placed in service and 13 new Murphy Express and one new Quick Check Store are underway along with three race and rebuild projects.

Since the beginning of the year two stores have already been placed in service in 13, New Murphy Express and one new quick check store are underway, along with three raze and rebuild projects.

Given the strong start to our 2022 build program, we are targeting up to 45, new stores, including seven quick check locations.

Speaker 3: Given the strong start to our 2022 build program, we are targeting up to 45 new stores, including seven quick-check locations.

And up to 35, raze and rebuilds, which have already been prioritized to backfill ongoing permitting and supply chain hurdles in our NPI program, our real estate team and organization has the capacity to support and build class of between 50 to 60, new stores, along with up to 25 races.

Speaker 3: and up to 35 raising rebuilds, which have already been prioritized a backfill ongoing permitting and supply chain hurdles in our NTI program. Our real estate team and organization has the capacity to support and build class of between 50 to 60 new stores, along with up to 25 raising rebuild projects annually, and we expect to return to this activity level over the next few years.

Rebuild projects annually and we expect to return to this activity level over the next few years.

Moving onto fuel contribution 2021 fuel volumes of 229000 gallons average per store month fell short of our adjusted guidance range of 232 to 238000 gallons as Delta and Omicron variance continue to hold back to full recovery, although robust Maher.

Speaker 3: Moving on to fuel contribution, 2021 fuel volumes of 229,000 gallons average per storm month fell short of our adjusted guidance range of 232 to 238,000 gallons. As Delta and Omicron variants continue to hold back the full recovery, although robust margins contributed to stronger year-over-year fuel contribution dollar.

<unk> contributed to a stronger year over year fuel contribution dollars looking ahead in 2022, we currently expect fuel volumes to increase roughly 2% to 7% or between 235000 245000 on a per store month basis.

Speaker 3: Looking ahead in 2022, we currently expect fuel volumes to increase roughly 2% to 7%, or between 235,000 and 245,000 on a per-store month base.

Looking at our store profitability for merchandise contribution we delivered $702 million of merchandise margin in 2021, just above our guided range. We plan to continue growing that contribution in 2022 to a range of between $740 and $760 million.

Speaker 3: Looking at our store profitability, for merchandise contribution, we delivered $702 million of merchandise margin in 2021 just above our guided range.

Speaker 3: We plan to continue growing that contribution in 2022 to a range of between $740 and $760 million or an increase of between 5 and 8%. This growth is a trivial primarily to increase the non tobacco and food and beverage categories supplemented by continued growth in tobacco contribution.

Or an increase of between five and 8%. This growth is attributable primarily to increases in non tobacco and food and beverage categories supplemented by continued growth in tobacco contribution.

Operating expenses, excluding payment fees and rent came in at $28 $8000 average per store month in 2021 within our adjusted guided range of 28 to $29000 Aps in which due to onetime items and wage and inflationary pressures experienced in the <unk>.

Speaker 3: Operating expenses, excluding payment fees and rent, came in at $28,800 average per store month in 2021 within our adjusted guided range of $28,000 to $29,000 APSM, which due to one-time items and wage and inflationary pressures experienced in the second half of the year was above our original guided range of $27,000 to $28,000 APSM.

Half of the year was above our original guided range of 27 to $28000 Aps in.

Given these trends we feel like we're relatively well positioned heading into 2022, yet are prudently forecasting a wider range of between 29, five and $31000 on a per store month basis or up to a seven 7% increase.

Speaker 3: Given these trends, we feel like we are relatively well positioned heading into 2022. Yet are prudently forecasting a wider range of between $29.5 and $31,000 on a per-store month basis, or up to a 7.7% increase.

And ongoing labor market challenges and supply chain disruptions as well as the potential for future regulations that together could effectively imposed materially higher cost on businesses like Murphy USA.

Speaker 3: given ongoing labor market challenges and supply chain disruptions, as well as the potential for future regulations that together could effectively impose materially higher costs on businesses like Merck USA.

As a reminder, 2021 results included only 11 months of quick check.

Speaker 3: As a reminder, 2021 results included only 11 months of QuickCheck, whereas our 2022 guidance metrics reflect the expected full year impact. Just something to keep in mind when looking at year over year comparisons.

Our 2022 guidance metrics reflect the expected full year impact just something to keep in mind when looking at year over year comparisons.

For our corporate cost 2021 general and administrative expense was 194 million within our guided range of $190 million to $200 million.

Speaker 3: For a paper cost, 2021 General Administrative Expansion was $194 million within our guided range of $190-$200 million.

In 2022, we expect the range to move a bit higher to between 200 $210 million as we continue to make investments in people and processes that enable new capabilities and support critical strategic initiatives and.

Speaker 3: In 2022, we expect a range to move a bit higher to between $220, 210 million, as we continue to make investments in people and processes that enable new capabilities and support critical strategic conditions.

In 2022, we expect our effective tax rate to remain within a range of 24% to 26%.

Speaker 3: In 2022, we expect our effective tax rate to remain within a range of 24 to 26.

Last on capital allocation for 2021, our total spend of $278 million ended up below our guided range of $3 $25 million to $375 million.

Speaker 3: Last on capital allocation for 2021, our total spend of 278 million ended up below our guided range of $325 to $375 million.

Primarily due to delays already discussed given current new store and raze and rebuild activity. We expect total spending to be in a range of $350 million to $400 million.

Speaker 3: primarily due to delays already discussed. Given current new store and raise and rebuild activity, we expect total spending to be in a range of $350 to $400 million.

The majority of this capital is earmarked for growth approximately $300 million to $325 million as we accelerate our activity with up to 45, new stores, including 5% to seven quick check locations, we expect a range of $30 million to $40 million for maintenance capital and between 20% to $35 million for ongoing technology.

Speaker 3: The majority of this capital is earmarked for growth, approximately 300 to 325 million as we accelerate our activity with up to 45 new stores including 5 to 7 quick check locations.

Speaker 3: We expect a range of $30-40 million for maintenance capital and between $20-35 million for ongoing technology investments and other corporate strategic investments.

<unk> investments in other corporate strategic initiatives.

As we wrap up our prepared comments I just want to remind investors of our intentional decision to discontinue fuel margin guidance since 2019. This.

Speaker 3: As we wrap up our prepared comments, I just want to remind investors of our intentional decision to discontinue fuel margin guidance since 2019.

This choice was the outcome of our intent to focus investor conversations more on the long term potential of the business rather than having less productive discussions and conversations around quarterly moves in fuel margins, which can be volatile in the short term trends, but generally fell within our <unk> range in the year since our 2013 spinoff.

Speaker 3: This choice was the outcome of our intent to focus investor conversations more on the long-term potential of the business rather than having less productive discussions and conversations around quarterly moves and fuel margins, which can be volatile in the short-term trends but generally fell within a three-cent range in the year since our 2013 spinoff.

We believe shifting this conversation has helped our investors become better informed about the business and they have helped lay the groundwork for higher valuation.

Speaker 3: We believe shifting this conversation has helped our investors become better informed about the business and may have helped lay the groundwork for a higher valuation.

Benefits aside we have typically supplemented our guidance with an EBITDA marker for investors primarily to assist with buy side and sell side modeling, which suggests a single EBITDA outcome at a specific fuel margin assumption to.

Speaker 3: Those benefits aside, we have typically supplemented our guidance with an EBITDA marker for investors, primarily to assist with buy-side and sell-side modeling, which suggests a single EBITDA outcome at a specific fuel margin assumption.

To continue that practice using the midpoint of the ranges I just provided in a structurally higher yet prudently conservative margin of 21 cents per gallon, we would expect the business to generate EBITDA in the area of $630 million.

Speaker 3: To continue that practice, using the midpoint of the ranges I just provided in a structurally higher yet prudently conservative margin of $0.21 per gallon, we would expect a business to generate EBITDA in the area of $630 million.

From an internal planning perspective, this level of earnings fulfills our capital allocation objectives in terms of store growth a higher dividend and continued share repurchase in the past our internal planning estimate stress tested.

Speaker 3: From an internal planning perspective, this level of earnings fulfills our capital allocation objectives in terms of store growth, a higher dividend, and continued share repurchase.

Speaker 3: In the past, our internal planning estimates stress-tested a plus or minus one penny increase.

Plus or minus one penny of gallon assumption.

At this structurally higher but conservative level of 21 per gallon, we could certainly expect to see greater upside variability given 2020 and 2021 performance that continues in the current environment.

Speaker 3: At this structurally higher but conservative level of $0.21 per gallon, we could certainly expect to see greater upside variability given 2020 and 2021 performance that continues in the current environment.

If we do continue to see elevated margin trends, our recently announced $1 billion share repurchase program provides investors clear line of sight as we look to see how we would allocate incremental capital from upside earnings.

Speaker 3: If we do continue to see elevated margin trends, our recently announced $1 billion share repurchase program provides investors clear line of sight as we look to see how we would allocate incremental capital from upside earnings. And with that, Operator, we are ready.

And with that operator, we are ready to open up the call to Q&A.

Thank you to ask a question. Please press star one on your telephone keypad.

Speaker 1: Thank you. To ask a question, please press star one on your telephone keypad. The first question is from Ben Bevuneau of Stevens. Please go ahead, your line is open.

First question is from Matthew <unk> of Stephens. Please go ahead. Your line is open.

Hey, Thanks, good morning, good morning.

So my first question is related to your consumer I think theres a lot of focus on the.

Speaker 5: And so my first question is related to your consumer. I think there's a lot of focus on the lower end consumer this year as we cycle past some of the stimulus that we saw last year. And we've seen really across all elements of life here today fraud-based inflation. You talked about your relative positioning in the market as a share gainer in this environment. Can you think about

The lower end consumer this year as we cycle past some of the stimulus that we saw last year.

And we've seen really across.

All elements of life here today broad based inflation.

You talked about your relative positioning in the market as a share gainer in this environment.

When do you think about the potential trade down by existing consumers in your stores.

Speaker 5: the potential trade down by existing consumers in your stores.

Or reduced consumption by existing consumers in your stores versus the incremental market share you might take in an environment like this.

Speaker 5: or reduced consumption by existing consumers in your stores versus the incremental market share you might take in an environment like this? What do you think the net of that environment is? And then just as a finer point, what response are you seeing today from your consumers relative to these higher prices that we see in the market?

What do you think the net of that environment is and then just as a finer point. What response are you seeing today from your consumers relative to these higher prices that we see in the market.

Sure Ben there's a lot of things that if youre doing a variance analysis and try to pick apart new customers you gain versus existing customers, what you might expect the buying patterns.

Speaker 3: Sure, you know, Ben, there's a lot of things that if you're doing a variance analysis and try to pick apart, you know, new customers you gain versus existing customers, what you might expect, the buying pattern.

Et cetera, it's hard, but I think with our Murphy drive rewards data insights, we're able to get a deeper view than say when we experienced the same type of rising prices in 2007 and 2008 and.

Speaker 3: But I think with our Murphy Drive rewards data and insights, we're able to get a deeper view than say when we experienced the same type of rising prices in 2007 and 2008.

In that prior period, when we saw gas prices approached $3 50 to $4 a gallon. It was really only until you got to about $4 a gallon that we really saw.

Speaker 3: In that prior period, when we saw gas prices approach $3.50 to $4 a gallon, it was really only until you got to about $4 a gallon that we really saw macro demand elasticity fall off. The first point is, I still think there's room to go before the macro demand is impacted.

Macro demand elasticity.

Paul So first point is I still think there's room to go before.

The macro demand is impacted that said when you start getting above $3, a gallon or $3 25.

Speaker 3: That said, when you start getting above $3 a gallon, $3.25, you absolutely see a shift as customers become more and more price-thin.

You, absolutely see a shift as customers become more and more price sensitive.

Premium customers trade down to mid grade and regular customers that wouldn't go out of their way for a few cents spine that that few since really makes a difference and you start seeing those customers flock to low price brands like Murphy, but there's also other lower priced brands out there. So we expect to continue to take share.

Speaker 3: Premium customers trade down to mid-grade, and regular customers that wouldn't go out of their way for a few cents find that that few cents really makes a difference, and you start seeing those customers flock to low-priced brands like Murphy, but there's also other lower-priced brands out there. So we expect to continue to take share as part of that dynamic.

As part of that dynamic when.

When we look at our Murphy drive reward data, we see some interesting things certainly fill rates go down they.

Speaker 3: When we look at our Murphy driver word data, we see some interesting things. Certainly, fill rates go down. You know, they're down about 9% to 10%, they 11 gallons to 10 gallons.

They're down about 9% to 10% say 11 gallons to pin gallons and you think about our customer they are trying to see how far they can go on 20 or $40.

Speaker 3: And you think about our customer, they're trying to see how far they can go on $20 or $40. And what they're doing is they're buying fewer gallons, so they have the same amount of change left over, but they're making more trips. And I think that's one of the things that I hope people have noticed is that the non-tobacco recovery in the last quarter in the year was really nice. And a lot of that is attached to fuel transactions.

And what they're doing is they're buying fewer gallons. So they have the same amount of change leftover, but theyre, making more trips and I think thats one of the things that I hope people have noticed is that the non tobacco recovery in the last quarter.

And the year was really nice and a lot of that is attached to fuel.

Transactions.

And so I think when you take all of this together, we would expect to see a net benefit.

Speaker 3: And so I think when you take all of this together, we would expect to see a net benefit from it. Our customers still have to get to work. They're still buying the most essential products that they need to buy. They're going to go out of their way to find value. And we're going to be best positioned to give them that.

From it our customers still have to get to work Theyre still buying the most essential products that they need to buy theyre going to go out of their way to find value in.

We're going to be best positioned to give them that value.

Okay very helpful. My second question is revisiting.

Speaker 5: Okay, very helpful. My second question is revisiting in, I think, March of 21, you guys gave some outlook into 2024 around EBITDA guidance and kind of what the business might look like.

I think March of 'twenty. One you guys gave some outlook into 2024 around the EBITDA guidance and kind of what the business might look like.

Can you remind us what fuel margin all until margin was assumed in that $700 million EBITDA guidance.

Speaker 5: Can you remind us what fuel margin, all in fuel margin was assumed in that $700 million EBITDA guidance?

Certainly so back in 'twenty, one we still have one year of Covid and the.

Speaker 3: Certainly. So, you know, back in 21, we still, you know, we have one year of COVID and the, you know, expectation certainly was.

Our expectation certainly was that margins might return to some structurally.

Speaker 3: that margins might return to some structurally normal level, I will look to Christian to give us the exact margin figure that we used in that period, but the world has certainly changed. I mean, Ben, you remember before 2020, we were all talking about, well, can you sustain $0.16 per gallon?

Normal level I will look to Christian to give us the exact margin figured.

That we used in that period.

The World has certainly changed I mean venue remember before 2020, we're all talking about well can you sustain 16 per gallon.

And that seems like a stretch given where we were.

Speaker 3: And you know that seemed like a stretch given where we were since the spin. And so we've seen a higher structural margin at the lower volume levels. We're seeing the volume recover.

Since the spin and so we've seen a higher structural margin the lower volume levels, we're seeing the volume recover but we're seeing a much higher residual.

Speaker 3: But we're seeing a much higher residual level sustained by the past due pricing that we're seeing in the market and our ability to capture that. And so, I think as we noted in our marker,

Level sustained by the pass through pricing that we're seeing in the market and our ability to.

To capture that and so I think as we noted in our marker in the past we might have been looking at 16, plus or minus a penny for conservative planning purposes were at 21.

Speaker 3: In the past, we might have been looking at 16 cents plus or minus a penny.

Speaker 3: conservative planning purposes, we're at 21 cents plus or minus a penny, at 700 million in the past we probably would have been, you know, gradually getting that level but at higher volumes. You know, we're probably seeing more upside than downside, you know, in any stress testing that we're doing. But we can get back to the assumption on what that 2024 number was for that 700 million EBITDA marker then. So, yeah. It's a good question. It's a good question.

Plus or minus.

At $700 million in the past, we probably would have been gradually.

Getting that level, but at higher volumes.

We're probably seeing more upside than downside and any stress testing that we're doing what we can get back to the assumption on what that 2024 number.

Was for that 700 million EBITA marker then.

Okay, great. Thanks, so much.

Your next question is from Bonnie Herzog of Goldman Sachs. Please go ahead. Your line is open.

Speaker 1: Your next question is from Bonnie Herzog of Goldman Sachs. Please go ahead to your line is open.

Alright. Thank you hi, Andrew how are you. Good morning, good morning, I actually wanted to ask about the.

Speaker 6: All right, thank you. Hi, Andrew. How are you? Good morning, Donny.

Speaker 6: Good morning. I actually wanted to ask about, you know, the 21 cent per gallon, you know, for fuel margins that you called out. I know, you know, you're just sharing this for modeling purposes only, but, you know, I guess I'd be curious to hear from your perspective, you know, how realistic or maybe conservative you think that might be? I guess I'm thinking about in the context of what we're seeing, you know, with the rising fuel cost environment.

21 cents per gallon fuel margins that you've called out I know youre.

You're just showing us for modeling purposes.

Only but I guess I'd be curious to hear from your perspective, how realistic or maybe conservative you think that might be I guess I'm thinking about in the context of what we're seeing.

With the rising fuel cost environment.

Should we assume your margin step down I guess from the recent highs that we've seen but ultimately stay elevated versus your historical performance.

Speaker 6: You know, should we assume your margins step down, I guess, from the recent highs that we've seen, but, you know, ultimately stay elevated versus your historical performance?

Sure look if I was to do just a simple walk forward from our historic 16 stance, which we used to challenge ourselves on these calls a lot about how are we going to sustain.

Speaker 3: Sure, you know, look, if I was to do just a simple walk forward from our, you know, historic 16 cents, which, you know, we used to challenge ourselves on these calls a lot about, you know, how are we going to sustain that given where we came from and walk it up to the 21 cents.

That given where we came from and walk it up to the 21.

I mean, we've effectively scene.

Speaker 3: I mean, we've effectively seen, you know.

Some benefits from quip check being a higher margin market, especially with full serve we look at the structural margin that if you just said pay the higher breakeven cost using say the next third quartile.

Speaker 3: some benefits from QuickCheck being a higher margin market, especially with a full serve. You know, we look at the structural margin that if you just said, hey, the higher break-even cost using, say, the NAICS third quartile and the volume assumption.

And the volume assumptions.

You would think that that might give you opinion.

Speaker 3: You know, you would think that that might give you a pinning of half two cents a gallon in terms of what we should be able to retain.

Opinion, five <unk> <unk>, a gallon in terms of what we should be able to retain.

We're actually capturing a significantly larger.

Speaker 3: But we're actually capturing a significantly larger amount of that residual. And I think as we look forward, I think we've got to ask ourselves, what is going to happen structurally to the marginal...

The amount of that residual and I think as we look forward.

I think we got to ask ourselves what is going to happen structurally.

To the marginal player and their need to pass through higher prices and then given the competitive dynamics.

Speaker 3: player and their need to pass through higher prices and then given the competitive dynamic.

What are we able to do especially in a high and rising price environment, where credit card fees.

Speaker 3: You know, what are we able to do, especially in a high in rising price environment? We're predicate these...

One of the biggest headwinds to everybody.

Speaker 3: or one of the biggest headwinds to everybody.

And so I think as we get to that 21 marker.

Speaker 3: And so I think as we get to that $0.21 marker, if you look at the last two years, there's a lot of evidence that the market is passing through a much higher level because it needs to and has to, and we're able to retain another $0.04 to $0.05.

If you look at the last two years there is a lot of evidence that.

The market is passing through a much higher level because it needs to and has two and we're able to retain another four to five <unk>.

But thats, probably not a very prudent number to plan around we want to as a company as a board make sure that we've got line of sight to our capital allocation priorities are growth our dividend our share repurchase plans and so that's why we feel this is a very.

Speaker 3: But that's probably not a very prudent number to plan around. We want to, as a company, as a board, make sure that we've got lineify to our capital allocation priorities, our growth, our dividend, our share repurchase plans.

Speaker 3: And so that's why we feel this is a very prudent, conservative marker to use, but as I've noted in investor meetings over the last few months, that

Prudent conservative marker to use but as Ive noted in investor meetings over the last few months that.

There's probably more upside.

Speaker 3: You know, there's probably more upside to a number like that than downside. Where in the past we kind of always looked at a plus or minus.

Two a number like that than than downside in the past, we kind of always looked at a plus or minus a penny.

Okay, No that's helpful and it'll be interesting to see how the year.

Speaker 3: No, that's helpful and it'll be interesting to certainly see how the year plays out. And then I guess my second question. By the way, one of the things that we only saw in December , but we've seen rising prices. Right.

Plays out and then I guess my second question another way one of the things that we only saw in December but we've seen rising prices.

Alright throughout all of 2021 right.

So I think that's something else to keep in mind.

Speaker 3: And so I think that's something else to keep in mind, the level of margin we achieved in a primarily rising price environment.

The level of margin, we achieved in a primarily rising price environment.

Equal that of 2020, where we saw that steep falloff Bryan. So I don't know where oil prices are going to go right in if they keep going higher that means at some point they'll just have further to fall and so in this high price.

Speaker 3: Equal that of 2020 where we saw that steep fall off. All right, so I don't know where old prices...

Speaker 3: Right, and they keep going higher. That means that some point they'll just have further to fall. And so in this high price and future volatile environment, there's areas for more margin upside structurally in some period.

Future volatile environment.

There's areas for more margin upside structurally.

In some periods in the future yeah, that's a good point and volatility is the key there so.

Speaker 6: Yeah. No, it's a good point in volatility of the key there. So

It will be interesting and then I guess, Andrew My second question is thinking about the Capex guide, which is <unk>.

Speaker 6: It'll be interesting. And then I guess, Andrew, my second question is thinking about the CapEx guide, which is up, and then you're certainly focusing on growth, but at the same time, you've got this aggressive $1 billion buyback program. So how should we think about all of that in the context of your free cash flow and maybe appetite for future M&A or further M&A? Are you guys loving that?

You are certainly focusing on growth, but at the same time, you've got this aggressive $1 billion buyback program. So how should we think about all of that in the context of your free cash flow and maybe appetite for.

Future M&A or further M&A are you guys still open right now in exploring especially given the success. It seems that you've had with quick check or do you think it's still more focusing on continuing to integrate quick check.

Speaker 6: feel open right now and exploring especially given the success it seems that you've had with quick checker do you think it's

Speaker 6: still more focusing on continuing to integrate QuickCheck.

Yes.

We will go back to the messaging around quick check we made the acquisition. It was all about capability building, how do we acquire a food and beverage capability know how insights that we can leverage for the future and we felt that was such a unique assets such a strong brand.

Speaker 3: We'll go back to the messaging around QuickCheck, we made the acquisition. It was all about capability building. How do we acquire a food and beverage capability, know-how insights that we can leverage for the future? We felt that with such a unique asset, such a strong brand and positioning, it'd be better to buy that capability than try to build it.

And positioning it'd be better to buy that capability than try to build it in.

We've seen a lot of companies try and fail and we've seen others try and succeed but take a couple of decades.

Speaker 3: seeing a lot of companies try and fail, and we've seen others try and succeed, but take a couple of decades to do that. And so that was the real purpose of that act was.

To do that and so that was the real purpose of that acquisition.

Certainly we've been in the deal flow, but after you do something like that and catch people by surprise Youre absolutely in the deal flow and we saw a lot of transactions last year and as we noted in the prepared remarks nothing came close.

Speaker 3: You know, certainly we'd been in the deal flow, but after you do something like that and catch people by surprise, you're absolutely in the deal flow. We saw a lot of transactions last.

Speaker 3: And as we noted in the prepared remarks, nothing came close.

To the quality of assets the earnings the earnings potential of quick check nor did we see something that had a capability that we've said, while we can really leverage that and learn from that.

Speaker 3: to the quality of assets, the earnings, the earnings potential of QuickCheck. Nor did we see something that had a capability that would say, wow, we could really leverage that and learn from.

One of the other things, we noted was that well, maybe they're quality regional midsized change for which we could.

Speaker 3: One of the other things we noted was that, well, maybe there are quality, regional mid-size change for which we could, yeah.

Leveraged a quick check brand offering capability.

Speaker 3: You know, leverage the QuickCheck, you know, brand offering capability, some are all of you above, to those brands and formats. And we frankly didn't see anything where that it was. And so, while we're never going to say never, you know, I would just re-emphasize that, you know, QuickCheck was a...

Some or all of the above two.

Brands and formats, and we frankly didn't see anything.

Or that it was and so look we're never going to say never.

I would just reemphasize that quick check was a.

Strategic acquisition.

Speaker 3: strategic acquisition with a very focused purpose. And we've seen nothing else out there that looks anything close to that or comparable from a different capability standpoint. Or something we feel really good about trying to leverage that capability on from a quality of assets.

On a with a very focused purpose and we've seen nothing else out there that looks anything close to that or comparable from a different capability standpoint, or something we feel really good about trying to leverage that capability on from a quality of asset standpoint.

So M&A is not a target area for future capital allocation and so we're really focused on.

Speaker 3: So M&A is not a target area for future capital allocation. And so we're really focused on.

Our organic growth the permitting process has been frustrating you have got a lot of local and.

Speaker 3: you know, our organic growth. The permitting process has been frustrating. You've got a lot of local and even DOT offices that remain short staffed, close, prepuriate.

Even.

<unk> offices that remain short staffed.

Those for periods.

That just delays that process and so we look forward to getting up to that 50 to 60 MTI range that we had talked about Fortunately, we've got a great portfolio of future NPI candidates, I mean, sorry, raze and rebuild candidates.

Speaker 3: that just delays that process. So we look forward to getting up to that 50 to 60 NTI range that we have talked about. Fortunately, we've got a great portfolio of future NTI candidate, I mean, sorry, raise and rebuild candidates.

And in the current environment.

Speaker 3: In a current environment, they looked even more attractive than they did two or three years ago. So I think it...

They look even more attractive than they did two or three years ago. So I think it's.

Nice and I hope folks noticed the ability to just shift.

Speaker 3: Nice. And I hope folks notice the ability to just shift our capex focus to those raised and rebuilds and convert some good performing kiosk to even higher performing small formats.

Our capex focus to those raze and rebuilds.

And convert some.

Good performing kiosks to even higher performing <unk>.

Small format stores.

And we're going to be able to do that within that range of.

Speaker 3: And we're going to be able to do that within that range of EBITDA marker that we gave. And certainly if we see one to two pennies every year for the next few years, from a structurally higher margin, or four or five cents for one year, we've given investors a clear line of sight where that additional margin would go towards with our...

EBITDA marker that we gave and certainly if we see.

One to two pennies every year for the next few years from a structurally higher margin.

400, <unk> for one year.

We've given investors a clear line of sight.

Where that additional margin would go towards with our.

The newly announced share repurchase program and we do have a history of <unk>.

Speaker 3: newly announced share repurchase program. And we do have a history of completing those sooner than the timeframe that we typically announce.

Completing those sooner than the timeframe that we typically announce.

Okay I appreciate that Super helpful.

Thanks.

As a reminder, if you'd like to ask a question. Please press star. One. Your next question is from John Royall of Jpmorgan. Please go ahead. Your line is open.

Speaker 1: As a reminder, if you'd like to ask a question, please press star 1. Your next question is from John Royal of J.P. Morgan. Please go ahead, your line is open.

Hey, guys. Thanks for taking my question good morning, and congrats on an entire year of <unk>.

Speaker 7: Hey guys, thanks for taking my question. Good morning and congrats on an entire year of the four big quarter week beats. So really impressive. Thank you.

This quarter, we beat so.

So really impressive.

Yes.

So I appreciate the update on your quick check synergies and sound.

Speaker 7: So, I appreciate the update on the quick-check synergies and sounds, you know, really encouraging so far. I think you said you're at 8 million now. Is there a number of kind of where you expect to be by the end of the year, and then what would you need to see to bump up that 28 million target a little? I know a big chunk of it is back in wait, so I can understand why it may be a little early at this point. But just any thoughts there would be great. Thanks. Thanks.

Really encouraging so far I think.

You said, you're at 8 million now is there a number kind of where you expect the legend of the year and then.

What would you need to see to bump up that.

We target a little I know.

Chuck is backend weighted so I can understand why it would be too early at this point, but just any thoughts there.

Thanks sure.

We're not ready to announce the year two numbers that will be something that will be forthcoming in our investor conferences, which I think we have lined up beginning in March.

Speaker 3: Sure, we're not ready to announce the year two numbers. That'll be something that will be forthcoming in our investor conferences, which I think we have lined up beginning in March through June . So we'll have a more full sum update at that time. You know, look, I'm a 28 million, this is something we've talked about at what point?

Through June so we'll have a more fulsome update at that time.

Look on the $28 million this is something.

We've talked about at what point.

Does it help to raise that number versus just recognize that what we're effectively.

Speaker 3: Does it help to raise that number versus just recognize that what we're effectively doing for the quick check

Jim.

For the quick check business is largely what we are doing for the Murphy USA business, taking a a really good business and making it better go into the thoughtful business transformation approach identifying continuous improvement opportunities.

Speaker 3: It's largely what we are doing for the Murphy USA business, taking a really good business and making it better. Going through the thoughtful business transformation approach.

Speaker 3: Identifying continuous improvement opportunities, making that part impartial to the earnings growth cadence.

Making that part and parcel to the earnings growth cadence.

Every year and I think that's probably how we're thinking about it right now so rather than saying at the end of this year, Hey, we're going to bump. It from 28, two I'm, just making up a number of 40 I think what you'll start hearing us talk more about is hey, here's the nature and range of the additional <unk>.

Speaker 3: every year. And I think that's probably how we're thinking about it right now. So rather than saying at the end of this year, hey, we're gonna bump it from 28 to, I'm just making up a number of 40.

Speaker 3: I think what you'll start hearing us talk more about is, hey, here's the nature and range of the additional continuous improvement, productivity improvement, pricing, promotion, loyalty, delivery, opportunities that we get from combining two really...

<unk> improvement productivity improvement pricing promotion loyalty delivery.

Opportunity that we get from combining two really strong but different businesses.

Speaker 3: strong but different businesses together. So I hope that's helpful, but at the same time, I hope...

Together, so I hope that's helpful, but at the same time I hope.

You can think that hey, applying that same mindset that we did to our business after the spin.

Speaker 3: You know that you can think that, hey applying that same mindset that we did to our business at the spin.

Two a another business that share some of the same characteristics RF business did at the time of the spin that theyre just going to be a lot of additional opportunities that we didn't see and whether we call it synergy or just build it into the future year guidance I think at some point it becomes a little bit less relevant what you call. It is long.

Speaker 3: to another business that share some of the same characteristics our business did at the time of the spin. But there's just going to be a lot of additional opportunities that we didn't see. And what do we call it? Synergy. We're just building into the future your guidance. I think at some point it becomes a little bit less relevant what you call it as long as it's flowing through and dark.

As is flowing through into earnings growth.

Okay. Thank you that's really helpful and then.

Speaker 7: Okay, thank you. That's really helpful. And then you talk about this a little bit about the same store margin number for 4Q for non-tabacco merchandise. It was a pretty big number. And just wondering what categories are driving that? And did you see something mixed up from a margin perspective there? This is on the non-tabacco.

Can you talk a little bit about the same store margin number for <unk> for non tobacco merchandise.

It was a pretty big number Im just wondering what categories are driving that.

Did you see some mix up from a margin perspective there.

This is on the non tobacco growth.

Yes, I think you had like 11% same store.

Speaker 7: Yeah, I think you had like 11% claim store growth on an on-the-back on March.

On non tobacco margin.

Yes, so look packaged beverage.

Speaker 3: Yeah, so look, package beverage, the massive candy promotion that we over delivered on in October , and then just to come back in the snack category, really the big drivers there, John . And really, what we saw there is the attached-to-fuel component of it was really strong. And so, you know, that was the area that was weakest.

The massive candy promotion that we over delivered on in October and then just to come back and the snack category. We're really the big drivers there John and really what we saw there is the attached if fuel.

<unk> of it.

Was really strong and so that was the area that was weakest.

In 2020, and early 'twenty, one and Covid, but is the fuel recovery.

Speaker 3: in 2020 and early 21 in COVID, but as the fuel recovered in Q4 nicely, you saw those attached categories come back along with an increase in the promotional activity, which really engaged our staff, but also engaged our customer. I think one thing of note is, we were talking as a team, it's like, I can't remember when we've had a Q4, or both the only APSM number that was hot.

In Q4 nicely.

You saw those attach categories come back along with an increase in the promotional activity, which really engaged our staff, but also engaged our customer I think one thing of note is we're talking as a team it's like I can't remember when we had our Q4.

Murphy only Aps M number that was higher than the full year and a December number that was higher than October and November on a constant days basis. So we're seeing nice sequential acceleration through the quarter.

Speaker 3: the full year in a December number that was higher than a October November on a constant days basis. So, you know, we're seeing nice.

Speaker 3: sequential Acceleration through the quarter You know into the new year You know, I think there was a little lag you know burnout of holidays and so weather stuff that was being January versus we saw in February last year

Into the new year.

I think there was a little lag and burn out on the holidays and some weather stuff that we'll see in January versus we saw in February last year, but we feel really good about that and we feel really good about the patch to fuel categories.

Speaker 3: But we feel really good about that and we feel really good about the attached to fuel category.

That.

Speaker 3: that really shined in Q4.

Really shined in Q4.

Thanks very much.

Your next question comes from Bobby Griffin of Raymond James. Please go ahead. Your line is open.

Speaker 1: Your next question comes from Bobbie Griffin of Raymond James. Please go ahead. Your line is open.

Thank you and good morning, everybody.

I guess I guess, Andrew I wanted to first start back on the fuel a little bit and just a couple of different questions to kind of come out of it maybe a little bit of a different angle, but when you. When you look at your price gaps versus peers and smaller operators as they're having to raise their prices for this cost environment that is taking place.

Speaker 8: I guess, and I want to first start back on fuel a little bit. And just a couple of different questions to kind of come out of maybe a little bit of a different angle. But when you look at your price gaps first peers and the smaller operators, is there having to raise their prices for this cost environment that's taking place? Are you able, are you seeing your price gaps stay stable? Or your price gaps actually widening, which would highlight the even bigger structure or manage that you have in this environment?

Are you seeing your price gap stay stable or your price gaps actually widen the which would highlight even bigger structure advantage that you have in this environment.

Yes.

Yes look theres not theres not a one size fits all because we do our pricing.

Speaker 3: Yeah, look, there's not a one-size-fits-all because we do our pricing, whether it's fuel or tobacco, that are store-by-store market, buy market. But generally, we're going to become more differentiated in our pricing in this type of environment. So widening differentials on the average. And, you know,

Whether it's fuel or tobacco et cetera store by store market by market, but generally.

We're going to become.

More dip.

Differentiated in our pricing.

And this type of environment, so widening differentials on the average.

And.

A lot of that is going to be a function of which stores are more elastic.

Speaker 3: A lot of that's going to be a function of which doors are more elastic and that widening creates that additional value. But the key is absolutely staying everyday low price, right? Even the notion that in this environment you could close...

And that widening creates that additional value, but the key is absolutely staying everyday low price right, even the notion that in this environment you could.

Close the gap.

Or to reduce the differential and pick up that margin. That's the last signal we want to be sending.

Speaker 3: opinion or two and reduce the differential and pick up that margin. That's the last signal we want to be sending inflation pressed customers right now. So maintaining it or increasing it.

Inflation.

Pressed customers right now so maintaining it or increasing it.

Is going to be our focus.

Speaker 3: is going to be our focus to pass on some of that additional value to the customer. And it's really during these times, this is when our brand

On some of that additional value to the customer and it is truly during these times. This is when our brand.

Reputation gets cemented in the eyes of our customers.

Speaker 3: and reputation gets cemented in the eyes of our customers.

Absolutely that's helpful. And then when you look kind of over the last three quarters to fuel margins all in have been.

Speaker 8: Absolutely, that's helpful. And then when you look kind of over the last three quarters, the fuel margin all in have been incredibly stable, 27 to 28 cents basically in round numbers. When you look at your monthly margins versus historical levels or versus kind of historical performance, the monthly also a lot more stable today than has been historical when it terms like there's a bounce around a lot from month to month.

Credit was stable at 27% to 28 basically in round numbers.

When you look at your monthly margins versus historical levels versus kind of the historical performance as the monthly also a lot more stable today than it had been historical in terms of likely to bounce around a lot from month to month.

It's probably a little more stable.

But it's properly.

Speaker 3: but it's probably uh... bobby because we're just saying prices rise can

Bobby because we're just seeing prices rise continuously.

And so if you think about.

Speaker 3: And so if you think about, you know, the history.

The history.

We kind of got us to a low and rising price environment. In Q1, we're I mean, we're looking at less than 10% margins certainly less than 10 retail margins.

Speaker 3: You know, we kind of got used to a low and rising price environment Q1 where we're looking at less than 10 cent margins. Certainly less than 10 cent retail.

And then we would always have.

Speaker 3: And then we'd always have, you know, okay, our price is gonna fall in late April . Are they gonna fall in May? Are they gonna fall in?

Our price is going to fall in late April or are they going to fall in may are they going to fall in June .

And then you would see the higher volume in the summer driving season, and then typically with some of the changeover.

Speaker 3: Right, and then you would see the higher volume of the summer driving season and then typically with some of the change over prices fall off, but if you have an op-pack

This fall off but if you had an OPEC.

Announcements like we did one year, maybe I think 2016, maybe see prices rise and then fall off pretty good in the fourth quarter.

Speaker 3: announcement like we did in one year maybe I think 2016 maybe see prices rise and then fall off pretty good and forth

I mean look at what happened in 2021, I mean prices were rising most of the year, we got a little bit of a break in December and so I think the main reason we're seeing more.

Speaker 3: I mean, look at what happened in 2021. I mean, prices were rising most of the year. We got a little bit of a break in December . And so I think the main reason we're seeing more consistent margins, quarter to quarter and month to month, is we're in the same...

Consistent margins quarter to quarter and month to month as we're in the same structural price environment quarter to quarter and month to month.

Speaker 3: structural price environment quarter to quarter and month to month where historically we would see kind of a quarterly patterns that I described and it was anyone's guess, you know, when uh... you know prices would, you know, peak or uh... you know, hit the bottom.

Where historically, we would see kind of the quarterly patterns that I described and it was anyone's guess win.

Prices wood.

Peak or.

Hit the bottom in the past.

Thats helpful, but I think thats, a better way of characterizing and back to my comment that Bonnie is like.

Speaker 3: I don't know if that's helpful, but I think that's a better way of characterizing and you know back to my comment to Bonnie, it's like

At some point.

Speaker 3: At some point, you know, we're going to achieve a newly equilibrium around the supply and demand globally with crude. It's going to be more stable and yes, there'll be some geopolitical.

We're going to achieve a newly collaborating them around the supply and demand globally with crude is going to be more stable and yes, there'll be some geopolitical event.

And that will cause it to go up a little bit more in.

Speaker 3: The amps that will cause it to go up a little bit more and you know, but I'm I'm I'm sure at some point they're gonna be some

But.

Im sure at some point theyre going to be some.

Price signals for oil and gas companies to deploy capital.

Speaker 3: price signals for only gas companies to deploy capital. And at some point, you know, we'll see supply demand get back and check. We'll see a period of falling price environments. We'll have even higher margins and the ability to pick up more of all.

And at some point, we will see.

Supply demand get back in check.

See a period of falling price environment, we will have even higher margins and the ability to pick up more volume.

So I think it's even more impressive what we accomplished last year given the nature of the price structure.

Speaker 3: So I think it's even more impressive what we accomplished last year, given the nature of the price.

Yes, that's what I was getting that being a rising crude environment that we kind of ran for the whole year and the margins have been incredibly impressive and the performance has been rock solid so thats, yes, thats always.

Speaker 8: Yeah, that's where I was getting that, I mean, the right and crude environment that we kind of were in for the whole year and the margins have been incredibly impressive and the performance has been, you know, rock solid. So that's, yeah, that's what I was kind of digging into. And I guess...

Kind of digging into it and I guess, just lastly from me on the tobacco category, obviously very big comparisons so think about our two year basis as well, but are you starting to see some of the more normal behavior come back where he'd like during the pandemic and stuff people are buying more kind of car.

Speaker 8: You know, just lastly for me on the tobacco category, obviously very big comparison. So, you know, think about our two-year basis as well. But are you just start to see some of the more normal behavior come back where like during the pandemic and stuff, people were buying more kind of cartons, and then, you know, we're going back to maybe single packs and stuff like that and the categories starting to go back and behave.

And we're going back to maybe single packs and stuff like that in the category starting to go back and behave.

As the category was behaving pre COVID-19 in terms of units down pricing getting pass through that type of stuff from an industry perspective.

Speaker 8: as the category was behaving pre-COVID in terms of units down on pricing, getting past through that type of stuff from an industry perspective.

Yes, so here's what I would say we didn't see the pantry. So I think the two year stack is the right thing to look at and even with a more flattish.

Speaker 3: Yeah, so here's what I would say. We didn't see the pants, so I think the two-year stack is the right thing to look at. And even with the more flatish numbers in Q4, what that's really saying is, as certainly cigarette volume kind of starts going back to normal trends.

Numbers.

In Q4, what that's really saying is as you know.

Certainly cigarette volume kind of starts going back to normal trends.

We've been able to hold and gain share.

Speaker 3: we've been able to, you know, hold and gain share as a result. So I'd say that the two big differences are, you know, I've seen the pantry load.

As a result, so I would say the two big differences are.

Youre not seeing the pantry loading.

And youre not seeing the.

Speaker 3: and you're not seeing the, you know, probably the same level of

At the same level of.

Consumption that.

Speaker 3: that when you think about from a social standpoint, return to work standpoint, that you saw during the early COVID and lockdown.

When you think about from a social standpoint return to work standpoint.

That you saw during the.

Early COVID-19 and Lockdown period.

We're continuing to see elevated carton sales and I think what we demonstrated to consumers during the pantry loaded period was they get a better value at Murphy USA.

Speaker 3: We are continuing to see elevated carton sales and I think what we demonstrated to consumers

Speaker 3: During the pantry loaded period was they get a better value at Murphy USA, multi-pack discounts on cartons, Murphy Drive reward benefits, etc. And we've kept those customers and gained some of their other business. You know, we also noted Q4 smokeless was up nicely and so, you know, some of that probably reflects some of the poly-use.

Multi pack discounts on cartons Murphy drive reward benefits et cetera, and we've kept those customers.

<unk> some of their other business.

Also noted in Q4 smokeless was up nicely and so.

Some of that probably reflects some of the poly use.

Habits of consumers and a return to work environment.

Speaker 3: habits of consumers in a return to work environment where they may not smoke but they may you know choose a

Where they may not smoke, but they may.

She is.

In non combustible product to go to so we're still bullish on the category from a contribution margin growth standpoint.

Speaker 3: non-combustible product to go to. So, you know, we're still bullish on the category from a contribution margin growth standpoint, even as the industry kind of returns to normal levels, also bullish on the innovation, you know, across the board as well. Customers kind of migrate to lower risk products.

Even as the industry kind of returns to normal levels also bullish on the innovation.

Across the board as well.

Customers kind of migrate to a lower risk products.

Thank you.

<unk> again.

Thank you.

There are no further questions at this time I will turn the call over to Andrew Clyde for closing remarks.

Speaker 3: There are no further questions at this time. I will turn the call over to Andrew Clyde for closing remarks. Right. So just then just to get back to your question, in that kind of race of our...

So just Ben just to get back to your question.

In that.

Kind of raise the bar.

Slide that we've.

Speaker 3: slide that we've used in our investor debt. We started in 18 cents and ramped up to 19 cents over the period. And so the 700 million in that example would be...

Used in our Investor day, we started in 2018 and ramped up to 19.

Over the period and so the $700 million in that example.

Would be.

With a little over 19.

Speaker 3: with a little over 19 cents per gallon average. So you see that.

Since per gallon.

Average so you see that.

While it take place over that period. So look the next four to five year.

Speaker 3: walk take place over that period. So, look, the next four to five year outlook obviously can be quite a bit higher than that given the structural margin, given the contribution from organic growth, and the ability to capture the residual that we're currently doing. So, I hope that follow-up addressed.

Outlook.

Obviously, it can be quite a bit higher than that given the structural margin given the contribution from organic growth.

And the ability to capture the residual.

We're currently working.

Currently doing so I hope that follow up addresses.

That question so.

Speaker 3: that question. So, but again, everyone, thanks for your questions and comments today. You know, we're excited about the kind of business that we've built.

But again, everyone. Thanks for your questions and comments today.

We're excited about the kind of business that we built since our spin that has allowed us to achieve the results. We've achieved in 2020 in 2021.

Speaker 3: Since our spin that has allowed us to achieve the results we've achieved in 2020 and 2021, and are very confident that we're going to be able to continue to leverage those capabilities to continue to generate your older value in the future, regardless of the environment that we find ourselves off.

And are very confident that we're going to be able to continue.

To leverage those capabilities to continue to generate shareholder value.

The future regardless of the environment that we find ourselves operating in thank you and we'll look up look forward to any follow up questions and calls later this week and next take care.

Speaker 3: Thank you and we'll look forward to any follow-up questions and calls later this week and next.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker 1: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Please wait the conference will begin shortly.

Speaker 9: Please wait, the conference will begin shortly.

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Speaker 9: Please wait, the conference will begin shortly. The conference will begin shortly.

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