Q3 2024 Casey's General Stores Inc Earnings Call

Darren M. Rebelez: Diluted EPS finished at $2.33 per share, a 13% decrease from the prior year. The company generated $87 million in net income, a 13% decrease from the prior year, and $218 million in EBITDA, a decrease of 2% from the prior year. As we mentioned in the last quarter's call and the press, All of these metrics were compared against a prior year and included a one-time operating expense reduction due to the resolution of a legal matter. This resolution benefited the prior year by approximately $15 million, or $0.31 per share. I'm proud of our team members for producing solid third-quarter results. But does the team navigate a less favorable fuel cost environment than in the past year, as well as challenging weather in most of our footprint? I'd now like to go over our results and share some of the details in each of the categories.

Diluted EPS finished at $2 33 per share 13% decrease from the prior year.

The company generated $87 million and net income a decrease of 13%.

$218 billion in EBITDA, a decrease of 2% from the prior year.

As we mentioned in last quarter's call and the press release all of these metrics were comparing against the prior year included a one time operating expense reduction due to the resolution of a legal matter.

This resolution benefited the prior year by approximately $15 million or <unk> 31 per share.

I'm proud of our team members for producing solid third quarter results as the team navigated a less favorable fuel cost environment than in the past year as well as challenging weather in most of our footprint Jamie.

I'd now like to go over our results and share some of the details in each of the categories.

Darren M. Rebelez: Inside, same-store sales were up 4.1% for the third quarter, or 9.9% on a two-year stack basis, with an average margin of 41.3%. Same-store prepared food and dispensed beverage was particularly strong, as sales were up 7.5 percent or 12.9 percent on a two-year stack basis with an average margin of 59.6 percent, up approximately 230 basis points from the prior year. Whole pies performed well in the quarter, but we also saw strong performances with hot sandwiches and dispensed beverages. Margin was favorably impacted by softening commodity costs, notably cheese, as well as modest menu pricing adjustments during the period. Prepared food continues to be a key differentiator for Casey's. I'm very pleased with the sales growth in March; things were grocery general merchandise sales were up 2.8% or 8.8% on a two-year stack basis.

Inside same store sales were up four 1% for the third quarter or nine 9% on two year stack basis with average margin of 41, 3%.

Same store prepared food and dispense beverage was particularly strong.

Sales were up seven 5% or 12, 9% on a two year stack basis with an average margin of 59, 6% up approximately 230 basis points from the prior year.

<unk> performed well in the quarter. We also saw a strong performance with hot sandwiches and dispense beverages.

Margin was favorably impacted by softening commodity costs, notably cheese as.

As well as modest menu pricing adjustments during the quarter.

Prepared food continues to be a key differentiator for cases.

Very pleased with the sales growth and margin.

Same store grocery and general merchandise sales were up two 8% or eight 8% on a two year stack basis with an average margin of 33, 9% a decrease of approximately 10 basis points from the prior year.

Darren M. Rebelez: With an average margin of 33.9%, a decrease of approximately 10 basis points on the prior year, we saw positive momentum in the category, notably in both alcoholic and non-alcoholic beverages. And our Private Label Program continues to be a great value option for our guests, with Casey's Chips and Bottled Water performing well enough. For fuel, same store gallons sold are nearly flat with a fuel margin of 37.3 cents per gallon. This marked the 11th consecutive quarter with fuel margins above 34.5 cents per gallon.

We saw positive momentum in the category, notably in both alcoholic and non alcoholic beverages and our <unk>.

Private label program continues to be a great value option for our guests with cases chips and bottled water performing well in the quarter.

Yeah.

For fuel same store gallons sold were nearly flat with a fuel margin of 37 three per gallon.

This marked the 11th consecutive quarter with fuel margins above $34 five per gallon.

Darren M. Rebelez: Our volume continues to outperform our geographic market as well as Opus Fuel Gallon sold data shows the mid-continent region down approximately 5% in the quarter. Our fuel team is doing an exceptional job balancing volume, growth, and margin, and the results continue to show it. Operating expenses were up 10.3% versus the prior year, but only 2.5% on the same store basis, excluding credit card fee basis.

Our volume continues to outperform our geographic market as well as opus fuel gallons sold data shows the mid continent region down approximately 5% in the quarter.

Our fuel team is doing an exceptional job balancing volume growth and margin and the results continue to show it.

Operating expenses were up 10, 3% versus the prior year, but only two 5% on a same store excluding credit card fee basis.

Darren M. Rebelez: Our team continues to get more and more efficient at operating stores while at the same time integrating multiple acquisitions. This is a testament to the outstanding work and maturity of our integration. Now, I'd like to turn the call over to Steve to discuss the financial results for the third quarter. Thank you, Darren, and good morning.

Our team continues to get more and more efficient operating stores, while at the same time integrating multiple acquisitions.

This is a testament to the outstanding work and maturity of our integration.

Now I'd like to turn the call over to Steve to discuss financial results from the third quarter Steve.

Steve: Thank you Darren and good morning, I'd also like to thank the team for their great work during the quarter. Our results were solid, especially inside of the store, where we continue to grow sales and expand margin. This was accomplished during a quarter of heavy integration of acquired stores across our footprint.

Steve: I'd also like to thank the team for their great work during the quarter. Our results were solid, especially inside the store, where we continued to grow sales and expand margins. This was accomplished during a quarter of heavy integration of acquired stores across our footprint. Overall, this was another quarter of effective operational execution in what is shaping up to be a great fiscal 2024. Total revenue for the quarter was $3.3 billion, a decrease of $3 million, or 0.1% from the prior year, due primarily to the lower retail price of fuel.

Steve: Overall this was another quarter of effective operational execution in what is shaping up to be a great fiscal 2024.

Steve: Total revenue for the quarter was $3 3 billion, a decrease of $3 million or 0.1% from the prior year due primarily to the lower retail price of fuel.

Steve: Total inside sales for the quarter were $1.2 billion, an increase of $106 million, or 9.5% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $36 million to $349 million, an increase of 11.4 percent. Grocery and general merchandise sales increased by $70 million to $866 million, an increase of 8.8%. Results were also favorably impacted by operating approximately 7% more stores on a year-over-year basis. Retail fuel sales were down $106 million in the third quarter as an 11% decline in the average retail price of fuel was partially offset by a 6.9% increase in fuel gallons sold. The average retail price of fuel during this period was $2.98 a gallon, compared to $3.34 a gallon a year ago.

Total inside sales for the quarter were $1 2 billion, an increase of $106 million or nine 5% from the prior year for.

Steve: For the quarter prepared food and dispense beverage sales rose by $36 million to $349 million, an increase of 11, 4%.

Steve: Grocery and general merchandise sales increased by $70 million to $866 million, an increase of eight 8%.

Results were also favorably impacted by operating approximately 7% more stores on a year over year basis.

Steve: Retail fuel sales were down $106 million in the third quarter and an 11% decline in the average retail price of fuel was partially offset by a six 9% increase in fuel gallons sold.

Steve: The average retail price of fuel during this period was $2 98 per gallon compared to $3.34 a gallon a year ago.

Steve: We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization. Caseys had a gross profit of $787 million in 30 years, an increase of 49 million or 6.7% from the prior year. This is primarily driven by higher inside gross profit of $50.9 million, or 11.3%, offset by lower fuel gross profit of $5.3 million, or 2%. The Inside Gross Profit Margin was 41.3%, and that's up 70 basis points from a year ago. The prepared food and dispensed beverage margin was 59.6%, up 230 basis points from the prior year. The category margin benefited from lower commodity costs, specifically cheese, which was $2.06 per pound for the quarter, compared to $2.30 per pound last year, a decrease of 10%, or approximately 80 basis points.

Steve: We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization K.

Steve: Casey's had gross profit of $787 million in the third.

Steve: An increase of 49 million or six 7% from the prior year.

Steve: This is primarily driven by higher inside gross profit of $50 $9 million or 11, 3%.

Steve: Offset by lower fuel gross profit of $5 $3 million or 2%.

Steve: Inside gross profit margin was 41, 3% and that's up 70 basis points from a year ago.

Steve: Prepared food and dispense beverage margin was 59, 6% up 230 basis points from prior year.

Steve: Category margin benefited from lower commodity costs, specifically cheese, which was $2.06 per pound for the quarter compared to $2 30 per pound last year, a decrease of 10% or approximately 80 basis points.

Steve: Margin also benefited from a lower LIFO charge in the prior year as our broader input cost softened benefiting margin by over 40 basis points modest menu pricing adjustments also helps.

The grocery and general merchandize margin was 33, 9% a decrease of 10 basis points from the prior year. The change was primarily due to lapping favorable vendor funded promotions in the prior year, partially offset by lower LIFO charge and private label continuing to increase the share of our mix.

Steve: Margin also benefited from a lower LIFO charge than in the prior year, as our broader input costs softened, benefiting margin by over 40 basis points. Modest menu pricing adjustments also helped. The grocery and general merchandise margin was 33.9%, a decrease of 10 basis points from the prior year.

Steve: Fuel margin for the quarter was 37 three per gallon stacks down $3.04 per gallon from the prior year.

Steve: The change was primarily due to lapping favorable vendor funded promotions in the prior year, partially offset by a lower LIFO charge and private label continuing to increase the share of our mix. Fuel margin for the quarter was $0.373 per gallon, down $0.034 per gallon from the prior year. Fuel gross profit benefited by $3.4 million from the sale of RENs, and that's up half a million dollars from the same quarter in the prior year. Total operating expenses were up 10.3% or $53.2 million in the third quarter.

Steve: Fuel gross profit benefited by $3 $4 million from the sale of Rins and Thats up half a million dollars from the same quarter in the prior year.

Steve: Total operating expenses were up 10, 3% or $53 $2 million in the third quarter.

Steve: Proximately, 3% of the increase is due to lapping a one time benefit to operating expense last year from the resolution of a $15 million legal matter.

Steve: Approximately 6% of the total operating expense increase is due to unit growth and integration spending as we operated 167 more stores than the prior year.

Steve: Same store employee expense accounted for approximately 1% of the increase as modest increases in wage rates were partially offset by the reduction in same store hours.

Steve: Approximately 3% of the increase is due to lapping a one-time benefit to operating expense last year from the resolution of a $15 million legal matter. Additionally, approximately 6% of the total operating expense increase is due to unit growth and integration spending as we operated 167 more stores than the prior year. Same store employee expense accounted for approximately 1% of the increase, as modest increases in wage rates were partially offset by reductions in same store hours. Depreciation in the quarter was $89 million. That's up 10.9 million versus the prior year, and that's primarily due to operating more stores. Net interest expense was $14.1 million in the quarter.

Steve: Depreciation in the quarter was $89 million, that's up $10 9 million versus the prior year and that's primarily due to operating more stores.

Steve: Net interest expense was $14 $1 million in the quarter, that's up $2 4 million versus the prior year, primarily due to less interest income as we funded several acquisitions in the quarter out of cash on hand.

Steve: The effective tax rate for the quarter was 24, 1% consistent with the prior year.

Steve: Net income was down versus the prior year to $86 $9 million a decrease of 13, 2%.

Steve: EBITDA for the quarter was $217 6 million compared to $221 7 million a year ago, that's a decrease of one 9%.

Steve: That's up $2.4 million versus the prior year, primarily due to less interest income as we funded several acquisitions in the quarter out of cash. The effective tax rate for the quarter was 24.1%, consistent with the prior year. However, net income was down versus the prior year to $86.9 million, a decrease of 13.2%.

Our balance sheet remains in excellent condition.

Steve: We have significant financial flexibility.

Steve: January 31, we had total.

Steve: The available liquidity of $1 $1 billion. Furthermore, we have no significant maturities coming due until our fiscal 2026.

Steve: Our leverage ratio calculated in accordance with our senior notes is one six times.

Steve: The third quarter tends to be our seasonal trough for cash flow generation.

Steve: EBITDA for the quarter was $217.6 million compared to $221.7 million a year ago. That's a decrease of 1.9%. Our balance sheet remains in excellent condition.

Steve: For that quarter net cash generated by operating activities of $123 million less purchases of property plant and equipment of $150 million resulted in the company using $27 million in free cash flow and that compares to a generation of $27 million in the prior year.

Steve: And we have significant financial flexibility. On January 31st, we had total available liquidity of $1.1 billion. Furthermore, we have no significant maturities coming due until our fiscal 2026. Our leverage ratio, calculated in accordance with our senior notes, is 1.6 times.

Steve: At the March meeting the board of directors voted to maintain the quarterly dividend of <unk> 43.

Speaker Change: Sure drew.

Speaker Change: During the quarter, we repurchased approximately $30 million of stock and we have $310 million remaining on our existing share repurchase authorization.

Speaker Change: Investing in EBITDA and ROIC accretive growth investments remains our primary capital allocation priority.

Steve: The third quarter tends to be our seasonal trough for cash flow generation. For that quarter, net cash generated by operating activities of $123 million plus purchases of property, plant, and equipment of $150 million resulted in the company using $27 million in free cash flows, and that compares to a generation of $27 million in the prior year. At the March meeting, the Board of Directors voted to maintain the quarterly dividend at 43 cents per share.

Speaker Change: But currently given our low leverage levels and strong cash flow, we are repurchasing more shares than in the past.

Speaker Change: We have had an excellent unit growth year, so far, especially with M&A.

Speaker Change: During the third quarter, we closed on a transaction to enter our 17th state in Texas and through the end of the quarter, we built or acquired over 125 stores.

Speaker Change: As we prepare to finish fiscal year 'twenty four we are reaffirming all of our fiscal year guidance as outlined in the third quarter press release.

Speaker Change: And before we get into our fourth quarter experienced to date. Just a reminder, that February had an extra day due to leap year.

Steve: During the quarter, we repurchased approximately $30 million of stock, and we have $310 million remaining on our existing share repurchase authorization. Investing in EBITDA and ROIC Agreed Growth Investments remains our primary capital allocation priority. But currently, given our low leverage levels and strong cash flow, we are repurchasing more shares than in the past. We have had an excellent unit growth year so far, especially with M&A. During the third quarter, we closed on a transaction to enter our 17th state intact.

Speaker Change: And that will equate to an approximate 100 basis point increase to both same store results and total opex for the fourth quarter.

Our results for February excluding the impact of the weak day, whereas follows.

Speaker Change: Inside same store sales are near the top end of our annual outlook range.

Speaker Change: Fuel gallons were near the low end of the annual outlook range.

Speaker Change: CPG was a touch below the mid thirties. Please.

Speaker Change: Please note that February tends to be seasonally low in terms of fuel profitability and that this February is resolved is a couple of cents per gallon higher than the same period last year.

Speaker Change: Current cheese costs are modestly favorable versus the prior year.

Steve: And through the end of the quarter, we have built or acquired over 125 stores. As we prepare to finish fiscal year 24, we are reaffirming all of our fiscal year guidance as outlined in the third quarter press release. And before we get into our fourth quarter experience to date, just a reminder that February had an extra day due to the leap year, and that will equate to an approximate 100 basis point increase in both same store results and total OPEX for the fourth quarter. Our results for February, excluding the impact of the leap day, were as follows. Inside, same-store sales are near the top end of our annual outlook range, fuel gallons were near the low end of the annual outlook range, and CPG was a touch below the mid-30s.

Speaker Change: And one last comment on total operating expenses, we expect to finish the year at the high end of our annual outlook range and that will be driven by some discretionary fourth quarter yearend charitable contributions as well as incremental incentive compensation expense due to the company's strong performance I'd now like to.

Speaker Change: Talked to turn the call back over to Derek.

Derek: Thanks, Steve.

Derek: I'd like to thank the entire <unk> team for another strong quarter.

Derek: You may have seen we recently added a new team member, our new Chief Pizza, and Beer Officer, Nebraska Native Joe crews.

Derek: Joe was selected from over 500 applicants and we're thrilled to have.

Derek: Now the hard work begins.

Derek: Tasting, our handmade delicious pizza and a refreshing ice cold beer pairings. Once you can follow along with our social media channels.

Steve: Please note that February tends to be seasonally low in terms of fuel profitability and that this February's result is a couple of cents per gallon higher than the same period last year. However, current cheese costs are modestly favorable versus the prior year. And one last comment on total operating expense. We expect to finish the year at the high end of our annual Outlook range, and that will be driven by some discretionary fourth quarter and year-end charitable contributions, as well as incremental incentive compensation expense due to the company's strong performance. I'd now like to turn the call back over to Darren.

Derek: Our team members across the organization continued to execute our strategic plan extremely well and the results are proving that the hard work is paying off.

Derek: We continue to rollout programs that make the stores run more efficiently, including the launch of our digital production planner.

Derek: This tool allows us to use our robust data and analytics capabilities to give team members that technology to manage food production more effectively in order to reduce waste and save team members time.

Derek: The Casey's brand also private label and our prepared food offering continues to prove to be our strength in the industry as evidenced by our robust inside same store sales.

Derek: In the quarter and on a two year stack basis.

Derek: This allows for strong guest support for food innovation and in January we rolled out a refreshed chicken sandwich and cheeseburger that guests are already gravitating towards just another example of guests trusting the Casey's will deliver.

Darren M. Rebelez: Thanks, Dave. I'd like to thank the entire Cases team for another strong quarter. You may have seen we've recently added a new team member, our new chief pizza and beer officer, Nebraska native Joe Cruz. Jill was selected from over 500 applicants, and we're thrilled to have her.

Derek: Our prepared food program continues to drive strong results and gives us a unique competitive advantage in the industry.

Derek: The commitment of our team members in stores to serve guests with high quality products at a great value has translated to results.

Derek: Our private label program continues to shine.

Derek: Saw positive growth in units and gross profit versus the prior year.

More and more guests continue to join Casey's rewards as we have over $7 7 million members today as growth in the third quarter was accelerated by our 24 days of cases campaign.

Darren M. Rebelez: Now the hard work begins as he's busy tasting our homemade delicious pizza and our refreshing ice-cold beer pairings, which you can follow along with on our social media channels. Our team members across the organization continue to execute our strategic plan extremely well, and the results are proving that the hard work is paying off. We continue to roll out programs to make the stores run more efficiently, including the launch of our digital production plan. This tool allows us to use our robust data and analytics capabilities to give team members the technology to manage food production more effectively in order to reduce waste and save team members time.

Derek: With help from the continuous improvement team our store operations team continues to operate the stores more effectively and efficiently.

Derek: Their efforts, we had another quarter, reducing same store labor hours, marking the seventh consecutive quarter of same store labor hour reduction, while increasing both guest satisfaction and team member engagement scores.

Derek: There's more to come as we're excited about what's in the pipeline for the next 12 months to 18 months regarding store simplification.

Derek: We look forward to getting our team members, even more tools to make a great guest experience.

Derek: On the fuel side of the business.

Derek: Formed well, despite lapping a highly profitable quarter last year.

Derek: Wholesale price movement was less favorable, but we still posted a 37 three per gallon margin, while outpacing our geography on fuel gallons sold.

Darren M. Rebelez: The Casey's brand, both with a private label and our prepared food offering, continues to prove to be our strength in the industry, as evidenced by our robust inside same-store sales, both in the quarter and on a two-year stack. This allows for strong guest support for food innovation, and in January, we rolled out a refreshed chicken sandwich and cheeseburger that guests are already gravitating toward. Just another example of guests trusting that Casey's will deliver. Our Prepared Food Program continues to drive strong results and gives us a unique competitive advantage in, All right. Thank you. Thank you.

Derek: We're positioned to thrive in this environment with our team and the capabilities that we've stood up.

Derek: Regarding store growth, we're off to a great start on our commitment to add 350 stores by the end of fiscal 2026.

Derek: Our two pronged approach of new store construction as well as M&A allows the company to ratably grow without reaching for acquisitions.

Derek: As we approach the end of fiscal 2024, I'm proud of how we started our three year strategic plan I am extremely excited about the outlook of the business now.

Derek: Now that the world and our industry has evolved to a more normalized post pandemic environment. Our unique business model is proving to be both highly differentiated and resilient.

Darren M. Rebelez: The commitment of our team members and stores to serve guests with high-quality products at a great value has translated to results. Our Private Label Program continues to shine, as we saw positive growth in units and gross profit versus the prior year. More and more guests continue to join Casey's rewards as we have over 7.7 million members today. Growth in the third quarter was accelerated by our 24 days of Casey's campaign, with help from Continuous Improvement. Our store operations team continues to operate the stores more effectively and efficiently.

Derek: We have abundant growth opportunities on the horizon, and the team and balance sheet to capitalize on.

Derek: This gives me great confidence in our team and our ability to execute the strategic plan.

Speaker Change: We will now take your questions.

Thank you.

Speaker Change: As a reminder to ask a question you will need to press star one wondering your telephone to withdraw.

Speaker Change: Your question. Please press Star one again, please wait for your name to be announced we ask that you. Please limit yourself to one question and one follow up please standby, while we compile the Q&A roster one moment for your first question.

Speaker Change: Our first question will come from the line of Ben <unk> with Stephens. Your line is now open.

Ben: Hey, good morning, everybody.

Darren M. Rebelez: With their efforts, we had another quarter reducing same-store labor hours, marking the seventh consecutive quarter of same-store labor hour reduction while increasing both guest satisfaction and team member engagement. There's more to come, as we're excited about what's in the pipeline for the next 12 to 18 months regarding store simplification. We look forward to giving our team members even more tools to deliver a great guest experience.

Ben: Good morning, Ben.

Ben: I wanted to ask first about the results from the prepared food business very strong same store sales results very strong margins.

Ben: Would love to hear a little bit about the composition of the same store sales growth that you saw during the quarter, how much is ticket versus traffic and as you look forward to some of the new product innovations that you have in store.

Ben: And the store simplification, what impact you think that might have on the prepared food business versus the rest of the business more broadly.

Darren M. Rebelez: On the fuel side of the business, we performed well despite lapping a highly profitable quarter last year. Wholesale price movement was less favorable, but we still posted a 37.3 cents per gallon margin while outpacing our geography on fuel gallon sold. We're positioned to thrive in this environment with our team and the capabilities that we've built. Regarding store growth, we're off to a great start on our commitment to add 350 stores by the end of fiscal 2022. Our two-pronged approach of new store construction, as well as M&A, allows the company to rateably grow without reaching for acquisition.

Ben: Yes, Ben this is Darren.

Darren: Yes. The sales sales are driven by a few things we had real strength in all ties all ties are up about 11% in the quarter, our bakery products as well were up about 11% and then we saw fast and side items up around 9% sounds pretty good overall.

Darren: When you look at the inside sales makes sense.

Darren: I was really happy with how.

Darren: Inside work out this quarter it struck a really nice balance were up about two 2% in transactions and about one 9% in check so.

Darren: Really you see some a little bit of modest inflation, but you're also seeing the strengths coming from driving traffic to the stores and that's really a good spot to be in from that perspective.

Darren M. Rebelez: As we approach the end of fiscal 2024, I'm proud of how we started our three-year strategic plan. I'm extremely excited about the outlook for the company now that the world and our industry have evolved to a more normalized post-pandemic environment. Our unique business model is proving to be both highly differentiated and resilient. We have abundant growth opportunities on the horizon and the team and balance sheet to capitalize on them. This gives me great confidence in our team and our ability to execute the strategic plan. We'll now take your questions. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced.

Darren: With respect to innovation.

Darren: I think we're really starting to hit our stride and this quarter had some impact of that.

Darren: With our chicken chicken sandwich, and our Burger platforms.

The culinary team did a fantastic job.

Darren: Basically rebuilding those products.

Darren: And up leveling the quality of all of the ingredients changing the bills, making those more compelling and adding a new crispy spicy chicken sandwich was really resonating well.

And in doing that up leveling that quality and also negotiating better cost of goods, we were able to raise price by about 50, a unit and the velocity has accelerated almost tripled it.

Unknown Executive: We ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. One moment for our first question, www.TheBusinessProfessor.com. Our first question will come from the line of Ben Bienvenu with Stevens. Your line is now open. Hey, good morning, everybody.

Darren: So we're really seeing some nice results there and so that innovation can really not only have a impact on the velocity, but also have an impact on the margin at the same time.

Speaker Change: That's great.

Speaker Change: My second question is also on the prepared food segment, but more as it relates to the margins and in particular the cost of cheese, Steve I think I think the last update that we got is that you are 80% locked for the balance of the year, so that would be the fourth quarter.

Darren M. Rebelez: Good morning, Ben. I want to ask first about the results in the prepared food business. Very strong same-source sales results, very strong margins. I'd love to hear a little bit about the composition of the same-store sales growth that you saw during the quarter. How much is ticket versus traffic?

Speaker Change: <unk> costs are down considerably.

Speaker Change: Is there anything that you can share with respect to how youre thinking about forward buying youre achieves needs for fiscal 'twenty, five and what potential benefit that might afford for casey's.

Speaker Change: Sure.

Darren M. Rebelez: And as you look forward to some of the new product innovations that you have in store and the store simplification, what impact do you think that might have on the prepared food business versus the rest of the business more broadly? Yeah, and this is Darren. Yeah, sales bills are driven by a few things. We had real strength and whole pies; whole pies are up about 11% in the quarter. Our bakery products as well were up about 11%. And then we saw caps and side items up around 9%. So that was pretty good.

Speaker Change: Ben Good morning, So you know as it relates to the fourth quarter first.

Ben: We're now about 90% locked for our fourth quarter by and so I think we've got a lot of visibility into that I would expect us to be something like five or 6% to the good on a year over year basis for the all in cost of cheese, thats that would compare to about a 10% or so.

So benefit that we had in the third quarter, so favorable but modestly less favorable as we enter.

Ben: Into FY 'twenty five we will continue to be opportunistic as we think about how we can move forward by cheese on a favorable basis, if we get an opportunity to forward buy it so that we can lock in deflation.

Darren M. Rebelez: Overall, when you look at the inside sales mix, I was really happy with how Inside worked out this quarter. It struck a really nice balance. We're up about 2.2% in transactions and about 1.9% in checks. So really, you see a little bit of modest inflation, but you also see the strength coming from driving traffic to the stores. And that's really a good spot to be in from that perspective.

Ben: On a year over year basis, we take advantage of that and that's what our sourcing team is focused on and so we certainly are not locked in to the level that we are for FY 'twenty four but we will continue to take advantage of that opportunity going forward and when we get to the end of the.

Ben: Fiscal year. This year, we will give some more forward visibility as to exactly what those positions are entering FY 'twenty five.

Speaker Change: Thank you one moment for our next question. Please.

Darren M. Rebelez: With respect to innovation, I tell you, I think we're really starting to hit our stride, and this quarter had some impact of that with our chicken sandwich and our burger platform. The culinary team did a fantastic job of basically rebuilding those products and up-leveling the quality of all the ingredients, changing the builds, making those more compelling, and adding a new crispy spicy chicken sandwich really resonated well.

Speaker Change: Our next question comes from the line of Anthony Bonadio with Wells Fargo. Your line is now open.

Anthony Bonadio: Yeah, Hey, good morning, guys. So it looks like Opex growth in Q3 came in quite a bit below what you guys had guided to last quarter can you just talk a little bit more about what drove the upside versus what you guys are planning.

Anthony Bonadio: And then maybe more broadly what youre doing on the cost side.

Speaker Change: All right.

Yeah, Anthony I'd say.

Speaker Change: We had another really strong quarter on an opex and that was.

Anthony Bonadio: The favorability was really driven into stores with labor management and.

Darren M. Rebelez: And in doing that, upgrading that quality and also negotiating a better cost of goods, we were able to raise prices by about 50 cents a unit, and the velocity has accelerated almost triple digits. And so we're really seeing some nice results there. And so innovation can really not only have an impact on the velocity but also have an impact on the margin at the same time. That's great.

Anthony Bonadio: And the stores continue to perform exceptionally well and in taking unproductive labor hours out and Thats.

Anthony Bonadio: It's somewhat of a virtuous cycle as.

Anthony Bonadio: We make the job in the stores more simple for people to execute.

Anthony Bonadio: It takes less hours to do the jobs, but it also reduces turnover.

Anthony Bonadio: When you reduce turnover you reduce over time to reduce training hours and people get more productive in their jobs, because they are staying on longer and so.

Steve: My second question is also about the prepared food segment, but more as it relates to the margins and, in particular, the cost of cheese. Steve, I think the last update that we got is that you're 80% lost for the balance of the year. So that would be the fourth quarter.

Anthony Bonadio: We're seeing all of those things happen and then.

Great side benefit of all of that is key.

Anthony Bonadio: Team member engagement scores go up overall satisfaction scores go up both of which are the highest we've ever seen in our company. So everything is working pretty well on that but the primary driver was.

Anthony Bonadio: Most labor hour reduction.

Speaker Change: Got it that's helpful. And then I just wanted to dig in on fuel margins, a little bit I realize.

Steve: Spot cheese costs are down considerably. Is there anything that you can share with respect to how you're thinking about Ford buying your cheese needs for fiscal 25? And what potential benefits that might afford Casey? Sir, Ben, good morning.

Speaker Change: There is sort of a price element to the softness we're seeing of late but I. Also know you guys are have a uniquely good read on the health of the marginal operator given.

Speaker Change: Given youre looking at a lot of these changes potential tuck in deal can.

Speaker Change: Can you just maybe talk a little bit more about what youre seeing there.

Speaker Change: And as we sort of look to assess the impact on fuel margin breakeven for those players.

Speaker Change: Oh.

Steve: So, you know, as it relates to the fourth quarter first, we're now about 90% locked for our fourth quarter buy. And so I think we have a lot of visibility into that, I would expect as, so that we can lock in deflation. On a year-over-year basis, we take advantage of that, and that's what our sourcing team is focused on. And so we certainly are not locked into the level that we are for FY24, but we will continue to take advantage of that opportunity going forward. When we get to the end of the fiscal year this year, we'll give some more forward visibility as to exactly what those positions will be entering FY25. Thank you.

Speaker Change: With respect to fuel margin.

Speaker Change: Other operators I mean, we are seeing.

Speaker Change: Other operators as we look at stores that we're acquiring we'll see operators are taking more fuel margin fuel margin will be higher than it was prior year.

Speaker Change: In many cases their EBITDA is lower than it was in the prior year and so.

Speaker Change: Where they're having to do is is raised price on fuel will take more margin.

Speaker Change: They are chasing off gallons in the short term and that math works in the short term it doesn't work over a sustained period of time and that's still not enough to cover the losses that they're experiencing in the cigarette category or the inflation that they're experiencing in opex.

Speaker Change: Because typically these smaller operators that are over indexed to tobacco.

Speaker Change: And they don't have any scale to negotiate better.

Unknown Executive: One moment for our next question, please. Our next question comes from the line of Anthony Bonadio with Wells Fargo. Your line is now open.

Speaker Change: Better.

Speaker Change: So services agreements.

Speaker Change: With.

Speaker Change: With service.

Speaker Change: Service providers that did it.

Speaker Change: Ultimately impacts our opex so.

Speaker Change: That's kind of what we're seeing on that front.

Darren M. Rebelez: Yeah, hey, good morning, guys. So it looks like OPEX growth in Q3 came in quite a bit below what you guys had expected it to last quarter. Can you just talk a little bit more about what drove that upside versus what you guys were planning? And then, maybe more broadly, what you're doing on the cost side? Yeah, Anthony, I'd say we had another really strong quarter on OPEX, and that was because favorability was really driven into stores with labor management. And the stores continue to perform exceptionally well in taking unproductive labor hours out. And that's, it's somewhat of a virtuous cycle.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is now open.

Bonnie Lee Herzog: Alright, Thank you good morning.

Bonnie Lee Herzog: Good morning Auto question.

Bonnie Lee Herzog: Your inside sales were really quite strong which is great.

Bonnie Lee Herzog: Executing very well, but I guess I was wondering.

Bonnie Lee Herzog: You're changing your strategy a bit in terms of what you earn it.

Bonnie Lee Herzog: Versus maybe driving traffic in the store I guess I'm asking because you kill margins were strong, but they have decelerated sequentially. This year. So is this more a function of the shape and strong.

Darren M. Rebelez: We, we make the job in the stores more simple for people to do. It takes fewer hours to do the jobs, but it also reduces turnover. When you reduce turnover, you reduce overtime, you reduce training hours, and people get more productive in their jobs because they stay in them longer. And so we're seeing all of those things happen. And then the great side benefit of all this is that team member engagement scores go up, and overall satisfaction scores go up, both of which are the highest we've ever seen in our company, so everything's working pretty well on that, but the primary driver was labor hour reduction. I got it.

Bonnie Lee Herzog: <unk> on your end or maybe just some industry pressures.

Bonnie Lee Herzog: Can you give us a sense.

Bonnie Lee Herzog: Maybe why industry margins have been declining over the last few months.

Speaker Change: Yeah Bonnie.

Bonnie Lee Herzog: I'd say first there is no change in strategy for us on <unk> and we've been very consistent.

Bonnie Lee Herzog: We always tried to maintain a balance between volume and margin.

Bonnie Lee Herzog: And try to optimize gross profit dollars in that equation and if you look over this past fiscal year.

Bonnie Lee Herzog: Every quarter has been either favorable or positive by <unk>.

Bonnie Lee Herzog: 30, 40 basis points from negative about 30, 40 basis points, it really toggles within a pretty tight range around flat.

Bonnie Lee Herzog: And we've had good margin.

Darren M. Rebelez: That's helpful. And then I just wanted to dig in on fuel margins a little bit. I realize there's sort of a price element to the softness we're seeing of late, but I also know you guys have a uniquely good read on the health of the marginal operator, given you're looking at a lot of these chains as potential tuck-in deals. Can you just maybe talk a little bit more about what you're seeing there, as we sort of look to assess the impact on fuel margin break-even for the players? Yeah, with respect to fuel margin and other operators, I mean, we are seeing other operators, as we look at stores that we're acquiring, we'll see operators that are taking more fuel margin.

Bonnie Lee Herzog: This quarter, obviously, the margin was lower than prior year prior year margin was over <unk> 40, a gallon.

Bonnie Lee Herzog: We've never really.

Bonnie Lee Herzog: We had a goal to achieve any sort of margin frankly is really to maximize those gross profit dollars. So no change of strategy, where we're actually really pleased with the fact that when you look at the mid continent.

Bonnie Lee Herzog: Data from Opus that.

Bonnie Lee Herzog: We're about 500 basis points better than the industry from a volume standpoint, we're still north of 35 cents a gallon.

Bonnie Lee Herzog: Fuel margins, so we like that math, especially when it maintains traffic into the store we had positive traffic in the store, which is where all the real margin is and that's our true strength and differentiator. So.

Darren M. Rebelez: Their fuel margin will be higher than it was the prior year, but in many cases, their EBITDA is lower than it was in the prior year. And so what they're having to do is raise the price on fuel, take more margin. They're chafing off gallons in the short term, and while that math works in the short term, it doesn't work over a sustained period of time. And that's still not enough to cover the losses that they're experiencing in the cigarette category or the inflation that they're experiencing in OPEC. Because typically, these smaller operators are over-indexed to tobacco, and they don't have any scale to negotiate better.

Bonnie Lee Herzog: The model is working exactly as we would describe it to work.

Speaker Change: Okay definitely incremental maybe a quick follow up on that.

Speaker Change: Thank you you mentioned made some modest price adjustments so.

Speaker Change: I would like to deploy a little bit more color around that.

Speaker Change: You know what I'm talking about a pause and then Bobby.

Bobby: Let me take even more pricing in the future.

Bobby: In the context of sort of like Egypt.

Bobby: Yeah.

Bobby: Yes.

Bobby: Sure.

Bobby: We took some modest pricing in grocery and general merchandise.

Bobby: The tobacco pricing set aside and you know how that works Bonnie it's the quarterly cadence we pass on those cost increases to the guests outside of that.

Darren M. Rebelez: Services Agreement with service providers that ultimately impacts our OPEX. That's kind of what we're seeing on that front. Thank you.

Bobby: Turning the page on the calendar year, we had some some cost of goods increases primarily in some of the non alcohol beverage categories. We were able to pass those on but by and large this was not a real inflationary year compared to the last several that we've experienced and like I mentioned before.

Darren M. Rebelez: One moment for our next question. Our next question comes from the line of Bonnie Herzog with Goldman Sachs. The line is now open. All right. Thank you. Good morning.

Bobby: We had a really good balance in the quarter.

Bobby: Driving traffic to the stores and throwing that check just a little bit.

Darren M. Rebelez: I had a question about, you know, your inside sales were really quite strong, which is great. And you're executing very well. But I guess I was wondering if you're changing your strategy a bit in terms of what you earn at the pump versus maybe driving traffic in the store. I guess I'm asking because your fuel margins were strong, but they have decelerated sequentially this year. So is this more a function of a shift in strategy on your end, or maybe just some industry pressures? And then if it's the latter, can you give us a sense, maybe, of why industry margins have been declining over the last few months? Yeah, Bonnie, um, I would say first, there is no change in strategy for us in terms of fuel. And we've been very consistent in that we always try to maintain a balance between volume and margin and try to optimize gross profit dollars in that equation.

Bobby: These will be inflation or mix to get to a pretty good outcome at a little over 4%.

Bobby: <unk>.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Bobby Griffin with Raymond James Your line is now open.

Robert Kenneth Griffin: Good morning, everybody. Thanks for taking my questions and congrats on a good quarter in a tough wholesale environment.

Robert Kenneth Griffin: Guess first up for me I want to maybe switch gears and talk a little bit about the recent M&A. I think you guys have acquired about 145 stores over the last 12 months more of the tuck in side versus the bigger larger acquisitions like you did with buggies.

Robert Kenneth Griffin: A couple of years ago can you, maybe just talk a little bit about how the integration is going on some of those any interesting learnings from these recent ones versus kind of times in the past and then maybe I know, it's early but just touch on how the expansion in Texas is growing.

Robert Kenneth Griffin: Yes, Bobby.

Robert Kenneth Griffin: Yes, it's been a real active M&A environment recently, and our M&A team has done a fantastic job with.

Robert Kenneth Griffin: With a lot of these tuck in acquisitions.

Darren M. Rebelez: And if you look over this past fiscal year, every quarter has been either favorable or positive by 30-40 basis points or negative by 30-40 basis points. It really toggles within a pretty tight range around flat. And we've had a good margin. This, this quarter, obviously, the margin was lower than last year. Last year's margin was over 40 cents a gallon. We've never really, I have a goal to achieve any sort of margin, frankly; it's really to maximize those gross profit dollars. So no change in strategy. We're actually really pleased with the fact that when you look at the midcontinent data from Opus,

Robert Kenneth Griffin: That being said, we're also having discussions on larger potential.

Robert Kenneth Griffin: Potential deals, but we just haven't got anything over the finish line yet so.

Robert Kenneth Griffin: More to come on that but.

Speaker Change: Yes, I would say.

Speaker Change: We've done so many of these now these I call them under 100 store size acquisitions. Our integration team has really got a good process down and that really efficient and effective at doing that I think we learned.

Speaker Change: How to get our prepared foods into these acquisitions more quickly.

Speaker Change: Historically this has taken us a long time to do and to the extent that some of these stores that we acquire have some level of kitchen space available we've got our <unk>.

Darren M. Rebelez: We're about 500 basis points better than the industry. From a volume standpoint, we're still, you know, north of 35 cents a gallon on fuel margins. So we like that math, especially when it maintains traffic in the store. We have positive traffic in the store, which is where all the real margin is. And that's our true strength and differentiator. So the model is working exactly as we would describe.

Speaker Change: <unk> gotten really effective at getting equipment in early and getting the food into the stores quicker, which obviously accelerates the same store sales capture in the synergy capture.

Speaker Change: And those acquisitions so.

Speaker Change: Yes, I think we have we get a little bit smarter and a little bit better on everyone that we do.

Speaker Change: And then Darren just on the whole pie growth I mean, 11% just curious can you unpack a little or do you have any details on what is driving that is that the carryover from just obviously, adding in cross as part of like we haven't fully lapped that yet I believe or.

Darren M. Rebelez: Okay, it definitely makes sense. And then, just maybe, a quick follow up on that. Because Darren, you think you mentioned that you've made some modest retail price adjustments. So, I would love to just hear a little bit more color around this and you know what I'm talking about is at the pump and then your ability to maybe take even more pricing in the future in the context of sort of what you just said. Thank you.

Speaker Change: Is it casey's pricing versus peers in the core market is becoming more compelling on a whole basis. Given your size is getting bigger or anything else there to maybe talk about what's driving that growth.

Darren: Yes, but I think it's a combination of things. So certainly the thin crust has helped it.

Darren: It's about hanging in there at about 12% of the mix now and.

Darren M. Rebelez: Yeah, we took some modest pricing in grocery and general merchandise, the tobacco pricing I'd set aside. And you know how that works, Bonnie, it's a quarterly cycle; we pass on those cost increases to the guest. Outside of that, you know, as we turn the page on the calendar year, we had some cost of goods increases, primarily in some of the non-alcoholic beverage categories; we were able to pass those on. But by and large, this was not a real inflationary year compared to the last several that we've experienced.

Darren: And a good portion of that was incremental and we won't lap that until June.

Darren: So we definitely have some favorability there. We've also seen really strong growth in single topping pizza and that tends to be more of a value play and one of the interesting things, we're seeing as we dig into our guest insights we're finding that.

Darren: We're not really overly exposed to the lower income consumer about three quarters of our guests make over $50000 a year.

Darren: Other cohort that makes less than 50000.

Darren: Spending more money on prepared foods in there and they are finding that value proposition really compelling and so.

Darren M. Rebelez: And like I mentioned before, we had a really good balance in the quarter of driving traffic to the stores and throwing that check just a little bit vis-a-vis inflation or mix to get to a pretty good outcome at a little over 4%. Thank you. One moment for our next question. Our next question comes from the line of Bobby Griffin with Raymond James. The line is now open. Good morning, buddy.

Darren: Been an interesting dynamic come into the other income cohorts are also going to prepare foods, but the fastest growth is coming from the lower income demographic.

Darren: I think they try not.

Darren: To find that right value and quality equation and frankly, when you look at a lot of the other pizza players a lot of them are franchised and a lot of those franchisees have taken a lot of price.

Darren: When we compare our numbers to any of the other publicly.

Darren M. Rebelez: Thanks for taking my questions and congratulations on a good quarter in a tough wholesale environment. Um, I guess, first up for me, I want to maybe switch gears and talk a little bit about the recent M&A. I think you guys have acquired about 145 stores over the last 12 months, more of the tuck-in side versus the bigger, larger acquisitions like you did with Buc-ee's a couple years ago. Can you maybe just talk a little bit about how the integration is going on some of those? Any interesting learnings from these recent ones versus kind of times in the past? And then maybe, I know, it's early, but just touch on how the expansion tech works. Yeah, Bobby.

Darren: Traded pizza competitors.

Darren: Back up really well.

Darren: In relation to them I think that's because of our ability to maintain that right value equation.

Darren: And that in that space and we're seeing the growth as a result of it.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Michael on Tommy with Evercore ISI. Your line is now open.

Michael: Hey, guys good morning, and thanks for taking the question.

Michael: Good morning, Mike wanted to ask if I could to discuss a little bit the inside margin outlook into the fourth quarter. So.

Michael: If we went to the midpoint of the full year guide. It suggests that there could be some pressure coming up there.

Mike: In terms of less expansion for sure. So I just wanted to kind of get a sense.

Mike: How to think about that and then secondly, I guess to the extent you have visibility on input costs and pricing do you think we're seeing kind of a bottoming of this inflation at this point and potentially there could be some uptick there how should we think about that.

Darren M. Rebelez: Um, yeah, it's been a really active M&A environment recently, and our M&A teams do a fantastic job with a lot of these tuck-in acquisitions. That being said, we're also having discussions on larger potential deals, but we just haven't gotten anything over the finish line yet. More to come on that.

Mike: Yeah, Hey, good morning, Mike This is Steve I'll try to start with that.

Steve: You know I think as we sit here today halfway through the halfway through the fourth quarter I don't think there is a radical change in the experience we've had around input costs broadly.

Steve: Vis vis what's happened here in the last couple of quarters as we mentioned on an earlier question of cheese cheese.

Darren M. Rebelez: But yeah, I say, We've done so many of these now, these, I call them, under 100 store size acquisitions. Our integration team has really got a good process down, and they're really efficient and effective at doing that. And I think we've learned how to get our prepared foods into these acquisitions more quickly. You know, historically, this has taken us a long time to do.

Steve: Keith maybe a touch less favorable for us in the fourth quarter on the prepared food side of the business than it was but it'll still be favorable year over year broadly speaking in prepared food.

Steve: We continue to have year over year.

Steve: Deflation.

Steve: Usually disinflation at worst.

Darren M. Rebelez: And to the extent that some of these stores that we acquire have some level of kitchen, We've got our teams gotten really effective at getting equipment in early and getting the food into the stores quicker, which obviously accelerates the same store sales capture and the synergy capture in those acquisitions. So yeah, I think we get a little bit smarter a little bit better on everyone. And then Darren, just on the whole pie growth, I mean, 11%, just curious; can you unpack a little or do you have any details on what is driving that? Is that the carryover from just obviously adding thin crusts as part of, we haven't fully mastered that yet, I believe? Or is Casey's pricing versus peers in the core markets just becoming more compelling on a whole pie basis, given your size is getting bigger, or anything else there to maybe talk about what's driving that growth? Yeah, I think it's a combination of things.

Steve: On most of the commodity categories with the exception of Beach and then so I do think we continue to have a tailwind that's likely to stick with us here for a little while on those categories and then on the grocery side yeah. That's contractual.

Steve: Contractual business for us and so as Darren had mentioned earlier you know most.

Steve: Most of those prices reset for most of those input costs reset for us.

Steve: At the beginning of the calendar year, and we were able to make retail price adjustments accordingly, and so I would expect us.

Steve: To be in a position to preserve the grocery category margins pretty consistent with what we've seen here for for most of the year as we finish out this year.

Speaker Change: Got it and then if I could sneak one more in just on the LIFO front, how should we think about that into the fourth quarter.

Speaker Change: LIFO is.

Speaker Change: It's just reflective of what our input costs ultimately are and the way the accounting rules have us make adjustments to inventory balances and so generally the direction of LIFO charges will follow what's happening with with input costs and so.

Darren M. Rebelez: Certainly, the thin crust has helped. It's about hanging in there at about 12% of the mix now, and a good portion of that was incremental, and we won't see that until June. So we definitely have some favorability there. We've also seen really strong growth in single topping pizza.

Speaker Change: With the exception of tobacco, where we consistently are are going to be taking LIFO charges.

Speaker Change: Because we are consistently getting price increases generally speaking.

Speaker Change: LIFO will be less of a headwind on a year over year basis for us as we continue to C. Diff.

Speaker Change: Deflation on the prepared foods side, and so I would expect LIFO as we sit here today, probably to consistently be modestly favorable on a year over year basis for us as we finish out in the fourth quarter.

Darren M. Rebelez: And so that tends to be more of a value play. And one of the interesting things we're seeing is as we dig into our guest insights, we're finding that although we're not really overly exposed to the lower income consumer, about three-quarters of our guests make over $50,000 a year. And that other cohort that makes less than $50,000, they're spending more money on prepared foods.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Kelly Bania with BMO capital markets. Your line is now open.

Kelly Ann Bania: Good morning, I was wondering if we could just talk about gallon.

Kelly Ann Bania: You're talking flattish.

Darren M. Rebelez: And they're finding that value proposition really compelling. And so it's been an interesting dynamic. I mean, the other income cohorts are also going to prepare foods, but the fastest growth is coming from the lower income demographic, as I think they try to find that right value and quality equation. And frankly, when you look at a lot of the other pizza players, a lot of them are franchised, and a lot of those franchisees have taken a lot of prices. And when we compare our numbers to any of the other publicly-traded pizza competitors, we stack up really well in relation to them.

Kelly Ann Bania: Sounds like a pretty pretty pretty significant market share gains in your region.

Kelly Ann Bania: Just wondering if you could talk about maybe what's driving the broader decline in gallons.

Kelly Ann Bania: Four corners in a row now and do you anticipate that that's kind of the new normal wear.

Kelly Ann Bania: Gallon or kind of.

Kelly Ann Bania: Weaker across the industry and is your strategy to maintain flattish stones, there going forward.

Speaker Change: Yes Kelly.

Kelly Ann Bania: I think this goes back to what I was saying before if you look at.

Speaker Change: Some of the smaller operators.

Kelly Ann Bania: Yes, I'll look at the composition of their business. So.

Gasoline side for a second and the inside of the business, they're heavily leveraged to tobacco.

Kelly Ann Bania: 30% or more of their inside mixes tobacco ours is about 18%.

Darren M. Rebelez: I think that's because of our ability to maintain that right value equation in that space, and we're seeing growth as a result. Thank you. And our next question comes from the line of Michael Montani with Evercore ISI. Your line is now open.

Kelly Ann Bania: <unk>.

Kelly Ann Bania: And that category is declining.

Kelly Ann Bania: Call it 8% to 10% a year.

Kelly Ann Bania: They don't typically are prepared foods. They don't have rewards. They don't have a lot of scale to leverage. So they don't have a lot of levers to pull to try to offset the inflationary pressures and the decline in the tobacco category inside overall.

Steve: Hey, guys. Good morning, and thanks for taking the question. I just wanted to ask if I could discuss a little bit the inside margin outlook into the fourth quarter. So if we went to the midpoint of the full-year guide, it suggests that there could be some pressure coming up there in terms of less expansion for sure. So just wanted to kind of get a sense of how to think about that.

Kelly Ann Bania: So they are raising price on fuel to try to offset that but the consequence of raising that price on fuel is just chasing away some of those gallons.

Kelly Ann Bania: We're able to have a more balanced approach to that because we have such a strong insight offering and we do have scale and we do have rewards and we do have prepared foods and we have a lot of those other things that they see.

Steve: And then secondly, I guess, to the extent you have visibility on input costs and pricing, you know, do you think we're seeing kind of a bottoming of disinflation at this point? And potentially, there could be some uptick there. How should we think about that? Yeah, good morning, Mike. This is Steve.

Kelly Ann Bania: Simply do so we can make money in other way if you remember for us.

Kelly Ann Bania: About 70% of our transactions are non fuel anyway.

Kelly Ann Bania: We've got a lot of business coming to the stores that helps us offset.

Kelly Ann Bania: Some of those other areas of softness in some of the other categories. So we're able to afford to have a better balance of fuel volume and margin.

Steve: I'll try to start with that. You know, I think as we sit here today, halfway through the fourth quarter, I don't think there's a radical change in the experience we've had around input costs broadly, vis-a-vis what's happened here in the last couple of quarters, as we mentioned on an earlier question, you know, cheese, She's maybe a touch less favorable for us in the fourth quarter on prepared food. I'm a little bit more on the health side of the business than I was, but it'll still be favorable year over year, broadly speaking, in prepared food. We continue to have year over year. Deflation, usually disinflation at worst, on most of the commodity categories with the exception of B.

Kelly Ann Bania: At the same time.

Kelly Ann Bania: There are some structural things that are going on with fuel that.

Kelly Ann Bania: But it.

Kelly Ann Bania: Put some pressure on gallons overall, if you just think about fuel efficiency and vehicles overall.

Kelly Ann Bania: With an average car age of about 12 years every year do drop off the oldest.

Kelly Ann Bania: At least efficient vehicles in the fleet and replace them with the newest and most efficient vehicles have been made and so theres always going to be some pressure on.

Kelly Ann Bania: Gallons consumed in the industry and so we kind of feel that in that type of environment.

Kelly Ann Bania: We're flat to slightly up on gallons and we have strong margin. That's a really good balance for us and we can convert that.

Steve: And so I do think we continue to have a tailwind that's likely to stick with us here for a little while in those categories. And then on the grocery side, you know, that's a contractual business for us. And so, as Darren had mentioned earlier, most of those prices reset for most of those input costs reset for us at the beginning of the calendar year, and we were able to make retail price adjustments accordingly, and so I would expect us to be in a position to preserve grocery category margins pretty consistent with what we've seen here for most of the year as we finish out this year. And then if I could sneak one more, and just on the LIFO front, how should we think about that in the fourth quarter?

Kelly Ann Bania: Fueled traffic in the store traffic, which is where we have the.

Kelly Ann Bania: The strongest margins in the most profitability.

Speaker Change: Thank you.

Speaker Change: Okay. Just wanted to ask with store simplification I think you mentioned seven quarters in a row.

Speaker Change: Same store hours declining just <unk>.

Speaker Change: Curious if you can talk about how much more opportunity is there it sounds like it sounds like there's more to come but maybe you can just give us some color.

Speaker Change: Where the opportunity is.

Speaker Change: Yes, we do think there is some more to come.

Speaker Change: Frankly.

Speaker Change: Whenever you start off on the initiative like this you go out to the low hanging fruit first so I think some of the big chunks.

Speaker Change: They were available to us we've taken so it gets a little a little more challenging and we have to get a little more sophisticated but we've got some some good initiatives in the pipeline from workforce management tools to some process changes.

Steve: You know, LIFO is just reflective of what our input costs ultimately are and the way the accounting rules, you know, have us make adjustments to inventory balances. And so generally, the direction of LIFO charges will follow what's happening with input costs. And so, you know, with the exception of tobacco, where we consistently are going to be taking LIFO charges because we're consistently getting price increases, generally speaking, LIFO will be less of a headwind on a year over year basis for us, as we continue to see deflation on the prepared food side. And so I would expect LIFO, as we sit here today, probably to be modestly favorable on a year over year basis for us as we Thank you. Our next question comes from the line of Kelly Bania with BMO Capital Markets. Your line is now open. Good morning.

Speaker Change: That.

Speaker Change: But really we think will make a difference, but I think overall, we're well see the real benefit.

Is just simplifying the work in the store, giving the store back some slack hours of what we call it where we don't necessarily take hours out, but we've eliminated work, which makes the job of the team members in the stores easier that as a positive impact on turnover.

Speaker Change: Less turnover, you spend less and training you spend less and overtime.

Speaker Change: You have more productive in your job all of that helps to reduce labor. So we haven't given any guidance on what that is going to look like over the next couple of years, we'll probably get a little sharper on that in our next quarter. When you gave guidance for fiscal 'twenty five but.

Speaker Change: Suffice it to say, we still think we have more opportunity there and.

Speaker Change: And we will continue to go after that.

Thank you.

Speaker Change: And our next question will come from the line of Irene <unk> with RBC capital markets. Your line is now open.

Irene: And good morning, everyone, just coming back to fuel margins I think that you know sort of investors I'm, just struggling a little bit to understand.

Unknown Executive: I was wondering if we could just talk about gallons. You're tracking sladdish, which sounds like pretty, pretty, some pretty significant market share gains in your region. Just wondering if you could talk about maybe what's driving the broader decline in gallons, it seems, several quarters in a row now. And do you anticipate that that's kind of the new normal where gallons are kind of weaker across the industry? And is your strategy to maintain sladdish gallons there going forward? Yeah, Kelly, I think this goes back to what I was saying before, if you look at some of the smaller operators. You have to look at the composition of their business. So if you set gasoline aside for a second, inside the business, they're heavily leveraged to tobacco, typically 30% or more of their internal mix is tobacco. Ours is about 18%, and in that category, it's declining, you know, call it eight to 10% a year. They don't typically have prepared foods, they don't have rewards, and they don't have a lot of scale to leverage.

Irene: While we have seen Mr. More recent compression in recent weeks relative to prior weeks. So I guess my question for you is are you seeing anything fundamentally different in the competitive set.

Irene: They are asking that would play into that was that true slightly lower <unk> margins or do you think it's just more of a seasonal shift.

Speaker Change: Yeah, I mean, we're not seeing anything dramatic.

Speaker Change: Competitors ebb.

Speaker Change: In flow and their behavior, and we always react to that and they do the same with us so.

Speaker Change: I'm not seeing any wholesale changes in anybody of any scale that would make a difference I would just remind everybody that.

Yeah, our margins were a little bit thinner than they have and we're talking off of 40 cents a gallon though.

Nobody.

Speaker Change: Lisa.

Speaker Change: Banking on 40, <unk> fuel margins being the new normal and so the fact that we ended up at 37, I think is a pretty good outcome.

Lisa: No its not 40, but it's definitely a pretty good outcome and I think this time of year in general.

Darren M. Rebelez: So they don't have a lot of levers to pull to try to offset the inflationary pressures and the decline in the tobacco category and insight overall. So they're raising the price on fuel to try to offset that. But the consequence of raising that price on fuel is chasing away some of those gallons, and we're able to have a more balanced approach to that because we have such a strong internal offering. And we do have scale, and we do have rewards, and we do have prepared foods, and we have a lot of those other things that they simply don't. So we can make money another way.

Lisa: As we start to go into a refinery turnaround.

Lisa: That supply starts to get a little bit tighter.

Lisa: The cost curve goes up I mean.

Lisa: Since the beginning of the calendar year wholesale costs have risen 50 cents per gallon.

Lisa: Now, while we do know.

Lisa: Is that at some point that curve is going to inflect in the cost curve will come down as refineries come back online and.

Lisa: As that cost curve comes down margins tend to widen out what we don't know is when that curve is going to inflect.

Lisa: It could inflect next week and we will have a 96 week run before the end of the quarter of widening fuel margins that can inflect in four weeks from now and we will only have two weeks in.

Lisa: In the quarter.

Darren M. Rebelez: And remember, for us... About 70% of our transactions are non-fuel anyway. So we've got a lot of business coming into the stores that helps us offset some of those other areas of softness in some of the other categories. So we're able to afford to have a better balance of fuel volume and margin at the same time.

Lisa: At the end of the day, it's not going to matter.

Lisa: The curve will run its course, and we will make the margin that we're supposed to make.

Lisa: Timing of it and when it lands neatly into a quarter or not.

Lisa: Is really anybody's guess at this point, but.

Lisa: To get back to your original point, we're not we're not seeing anything structurally different.

Darren M. Rebelez: There are some structural things that are going on with fuel that would put some pressure on gallons overall. If you just think about fuel efficiency in vehicles overall, you know, with an average car age of about 12 years, every year, you drop off the oldest gallons consumed in the industry. So we kind of feel that in that type of environment, if we're flat to slightly up on gallons and we have strong margin, that's a really good balance for us. And we convert that fuel traffic into store traffic, which is where we have it. The Strongest Margins and the Most Profitable Thank you.

Lisa: With fuel margins at this point.

Speaker Change: That's really helpful. Thank you very much for that and then just kind of a.

Speaker Change: Back to sort of the consumer behavior.

Speaker Change: Does that sort of your LOE was 25%.

Speaker Change: So you are seeing better results on prepared foods, but just wondering sort of more broadly speaking, what youre seeing around consumer behavior, and any heightened sensitivity around promotional spending or anything like that thank you.

Speaker Change: [laughter].

Irene: Yes, Irene really overall.

I'd have to say that the consumer's proven to be pretty resilient.

Speaker Change: We're not seeing.

Speaker Change: A lot of real changes.

Speaker Change: We tend to see changes in fuel when.

Darren M. Rebelez: Also, just wanted to ask about store simplification. I think you mentioned seven quarters in a row where same store hours declined. I'd just like to know how much more opportunity there is. It sounds like there's more to come. But maybe you can just give us some color where the opportunity is. Yeah, there we do think there is some more to come. You know, frankly.

Speaker Change: When times get tight they'll switch to more heavier ethanol blends they'll buy less premium we're not seeing any of that right now.

Speaker Change: We've seen good growth in private and our private brands is up 555%.

Speaker Change: Same store in the quarter, but not a huge shift like I mentioned, the lower income cohorts are doing.

Speaker Change: Doing what you would expect lower income cohorts to do which is gravitate a little more towards value, our prepared foods and our private label satisfy that need but with the other income cohorts, they're continuing to spend.

Darren M. Rebelez: Whenever you start off on an initiative like this, you go after the low hanging fruit first. So I think some of the big chunks that were available to us have been taken, so it gets a little a little more challenging, and we have to get a little more sophisticated, but we've got some good initiatives in the pipeline, from workforce management tools to some process changes that really will make a difference. But I think overall, where we'll see the real benefit is just simplifying the work in the store, giving the store back some slack hours, as we call it, where we don't necessarily take hours out, but we've eliminated work, which makes the job of the team members in the stores easier. That has a positive impact on turnover. With less turnover, you spend less on training, you spend less on overtime, you get more productive in your job, and all of that helps to reduce labor.

Speaker Change: Like they have been and.

Speaker Change: So we're not really seeing anything different at this point.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Cristina <unk> with Deutsche Bank. Your line is now open.

Hi, good morning, and I'll add my congratulations on a good quarter. So.

Cristina: Follow up question on prepared foods and some of the recent launches. Thank you.

Cristina: But then cross the four new sandwiches. So if you could just talk about the value that you'd see JC, providing relative to broader competition.

Cristina: So competition you could make any comments about what they're doing from a pricing perspective that could give you an opportunity to gain further market share and if you could also contextualize for us where you see cases market share today in the various day parts compared to maybe a year or two ago.

Speaker Change: Yeah, Kristina I think.

Kristina: With some of the recent innovation like I mentioned in the Sandwich category in particular, we were able to take some price, but but our price points are still significantly below what you would find in <unk> and <unk> for a comparable quality standards.

Darren M. Rebelez: So we haven't given any guidance on what that's going to look like over the next couple of years. We'll probably get a little sharper on that in our next quarter when we give guidance for fiscal 25. But suffice it to say we still think we have more opportunities there, and we'll continue to go after that. Thank you. And our next question will come from the line of Irene Nattel with RBC Capital Markets. Your line is now open.

Speaker Change: A couple of dollars.

Speaker Change: Cheaper so.

Speaker Change: We think it is.

Speaker Change: Poses a unique value and look the guest the guest is going to buy on quality first.

Speaker Change: Hopefully try to maximize on price and I think our culinary team like I mentioned before did a really nice job of taking some products, we already had and turning them down to the studs improving the quality of every ingredient and those bills and making them a better product and then layer in some innovation along with that with some of the new <unk>.

Darren M. Rebelez: Thanks and good morning, everyone. I'm just coming back to the recent fuel margins. I think that investors are just struggling a little bit to understand why we've seen this sort of recent compression in recent weeks relative to prior weeks. So I guess my question for you is, are you seeing anything fundamentally different in the competitive set and in the way they're acting that would play into that sort of slightly lower trend for fuel margins? Or do you think it's just more of a seasonal issue? Yeah, I mean, we're not seeing anything dramatic.

Speaker Change: Bill.

Speaker Change: And yes, it's a good recipe and very much a value.

Speaker Change: Don't have good market share data.

Speaker Change: And those subcategories.

Speaker Change: Right here as we speak today, but yes.

Speaker Change: Historically, when when we do something like this we tend to take some share from the largest players so.

Speaker Change: The last time, when we did a similar exercise on breakfast, we saw the most share actually come from Mcdonalds believe it or not.

Speaker Change: That's primarily because they have the most presence so thats the biggest player.

Speaker Change: So I would imagine that.

Darren M. Rebelez: I mean, competitors, But I'm not seeing any wholesale changes in anybody of any scale that would make a difference. And I would just remind everybody that, Yeah, our margins were a little bit thinner than they are. And we're talking off of 40 cents a gallon, though.

Speaker Change: Once we get the data in on on the Sandwich platform in May look something similar to that but I just don't have the data.

Speaker Change: Artists right now.

Speaker Change: Got it that's helpful. And then just a quick follow up on.

Speaker Change: On private label I think Dan you said that volumes were a positive but did you provide where penetration ended in the quarter and then just broadly how are you thinking about new product launches and the number of SKU launches that you're planning over the next six to 12 months.

Darren M. Rebelez: Nobody, at least I know of, is really banking on 40 cent fuel margins being the new normal. And so the fact that we ended up at 37 cents is, I think, a pretty good outcome. No, it's not 40 cents, but it's definitely a pretty good outcome.

Speaker Change: Yes.

Speaker Change: Penetration in the quarter was about about where it had been is right around 10% in units and gross profit dollars.

Speaker Change: Just to remind you that third quarter.

Darren M. Rebelez: And I think this time of year, in general, as we start to go into refinery turnaround, supply starts to get a little bit tighter, and the cost curve goes up. I mean, since the beginning of the calendar year, costs have risen 50 cents a gallon. Now, what we do know is that at some point, that curve is going to inflect, and the cost curve will come down as refineries come back online, and as that cost curve comes down, margins tend to widen out. What we don't know is when that curve is going to inflect.

Speaker Change: Is seasonally the softest quarter for for private label, because its a soft first quarter for beverages and we have a.

Speaker Change: Big beverage presence with our private label products. So it's always going to be a little bit less penetrated this time of year than than it would be here.

Speaker Change: The next few quarters.

Speaker Change: I'm sorry, Christine what was the other part of your question all of the new products.

Christine: Yeah, we've got a pipeline of about 40 or 50 new products.

Christine: We're planning to enter into the assortment.

Speaker Change: Youll kind of phased in over the next several months some are being the biggest part of it not prepared to really discuss the details of any of those.

Darren M. Rebelez: It could inflect next week, and we'll have a nice six-week run before the end of the quarter of widening fuel margins. It can inflect in four weeks from now, and we'll only have two weeks in the quarter. At the end of the day, it's not going to matter because the curve will run its course and we'll make the margin that we're supposed to make. The timing of it and when it lands neatly into a quarter or not is really anybody's guess at this point.

Christine: <unk>.

Christine: We're pretty excited about what we've got coming this summer.

Speaker Change: Thank you.

Speaker Change: And our next question comes from the line of Charles Cerankosky with Northcoast Research. Your line is now open.

Charles Edward Cerankosky: Good morning, everyone great quarter.

Charles Edward Cerankosky: And looking at your prepared foods margins, they've been trending upward and would you care to comment can you get back into the sixties and I'm curious about.

Charles Edward Cerankosky: What the role of the of redeeming private label rewards is on the prepared foods part of your business and will that hold it back.

Darren M. Rebelez: But to get back to your original point, we're not seeing anything structurally different with fuel margins at this point. That's really helpful. Thank you very much for that. And then just coming back to sort of the consumer behavior, you called out that sort of your lowest 25% is sort of you're seeing better results on prepared food, but just wondering, sort of more broadly speaking, what you're seeing around consumer behavior and any sort of heightened sensitivity around promotional or spending or anything like that. Thank you. Yeah, I mean, really overall, I think I'd have to say that the consumer has proven to be pretty resilient. So we're not seeing a lot of real changes, and we tend to see changes in fuel when times get tight. They switch to more heavier ethanol blends, and they buy less premium. We're not seeing any of that right now.

Charles Edward Cerankosky: Margin back.

Charles Edward Cerankosky: Sure. Good morning, Chuck This is Steve I'll, maybe start with that.

Steve: I think first of all we're pleased with the progress of <unk>.

Steve: Kind of margin recovery broadly in prepared foods as you know we consciously is.

Speaker Change: Taken a position of trying to.

Speaker Change: Improve margins in that category by kind of pricing through the commodity cycle and so unlike the grocery business.

Speaker Change: Which is contractual we've got a lot of commodities and so when all the commodities went up at the same time.

Speaker Change: A couple of years ago, we chose not to chase.

Speaker Change: Dollar for dollar with price increases at that point, so we raised prices, but not as much as the input costs went up in.

Speaker Change: We expect over time commodities will inflect and ultimately on the downside as we hold retail prices steady, we'll recapture that margin over the course of the cycle and that's exactly what's happening right now and our experience and I think we've got further to go in that.

Darren M. Rebelez: Um, you know, we've seen good growth in our private brands; our private brands are up five, five and a half percent compared to the same store in the quarter, but not a huge shift. Like I mentioned, the lower income cohorts are doing what you would expect lower income cohorts to do, which is gravitate a little more towards value. Our prepared foods and our private label satisfy that need. But with the other income cohorts, they're continuing to spend like they have been.

Speaker Change: Direction, so the 60% number for prepared foods, we're close to it now.

Speaker Change: High watermark of couple of years ago.

Speaker Change: It's a little bit higher than 60% I would remind you a couple of things structurally changed that you kind of hinted at that rate. We did not have a rewards program.

Speaker Change: At that particular point in time and the cost of the rewards program in terms of points that are accrued as a.

Darren M. Rebelez: And so we're not really seeing anything different. Thank you. One moment for our next question. Our next question comes from the line of Krisztina Katai with Deutsche Bank. Your line is now open.

Speaker Change: The reduction in margin, it's about a 50 basis point reduction in margin on prepared foods as we sit here today. We also did not have third party aggregator delivery of any significance at the time and so that previously was in operating expense, where we delivered out of the stores and now it's a cost of product.

Darren M. Rebelez: And my congratulations on a good quarter. So I had a follow-up question on prepared foods and some of the recent launches, thinking about thin crust and the four new sandwiches. So if you could just talk about the value that you see KC providing relative to just your broader competition, looking also at QSR competition, you could make any comments about what they're doing from a pricing perspective, that could give you an opportunity to gain further market share. And if you could also contextualize for us where you see KC's market share today in the various states compared to maybe a year or two ago. Um, yeah, Kristina, I think with some of the recent innovation, like I mentioned, in the sandwich category in particular, we were able to take some prices, but our price points are still significantly below what you would find in a QSR for a comparable quality sandwich. I mean, a couple of dollars cheaper. So we think it offers unique value.

Speaker Change: And the fees and so those things structurally had changed and so the high watermark.

Speaker Change: <unk> has been reset accordingly, but I think we feel good about.

Speaker Change: A glide path to 60, we're on it right now.

Speaker Change: Input costs remains favorable and I think we feel good that the.

Speaker Change: Approach, we've taken is allowed us to maximize gross profit dollars.

Speaker Change: Inside the store and maintain the value proposition and I would expect we will continue to run.

The play in that regard.

Speaker Change: Got it thank you.

Speaker Change: Thank you one moment for our next question. Please.

Speaker Change: And our next question will come from the line of.

Speaker Change: Clearly Carlo with Jefferies. Your line is now open.

Carlo: Great. Thanks, I wanted to ask about growing organically versus through acquisition.

Carlo: It sounds as if the.

Carlo: The environment has become more conducive to growth through M&A, given it sounds like marginal player EBITDA has been a little bit pressured.

Darren M. Rebelez: And look, the guest is going to buy quality first and then, hopefully, try to maximize on price. And I think our culinary team, like I mentioned before, did a really nice job of taking some products we already had and tearing them down to the studs, improving the quality of every ingredient in those builds, making them a better product, and then layering in some innovation along with that with a new build. And it's a good recipe and very much worth it. I don't have good market share data for those subcategories.

Carlo: Elicited by.

Carlo: The cents per gallon in traffic headwinds that these peers.

Carlo: I'm curious to get your view on that and how that informs what your outlook is going forward as you think about growing through those two levers organic versus M&A.

Speaker Change: Got it.

Speaker Change: Yeah Cory this is Darren.

Darren: Yes, I'd first say that we like to strike the balance between organic growth and M&A, we don't ever want to put all our eggs in either one of those baskets.

Darren M. Rebelez: Right here as we speak today, but, you know, historically, when we do something like this, we tend to take some share from the largest players. So, um, the last time when we did a similar exercise on breakfast, we saw the most share actually come from McDonald's, believe it or not. And that's primarily because they have the most presence and they're the biggest player.

Darren: Because situations can change and so.

Darren: What we're seeing right now is that the M&A environment is pretty attractive.

Darren: Cost of construction has gone up and so and at the same time the challenges for the smaller operators have gone up as well and so what we're finding is we're able to buy some assets.

Darren M. Rebelez: So I would imagine that once we get the data in on the sandwich platform, it may look something similar to that, but I just don't have the data at my fingertips right now. That's helpful. And then just a quick follow up on private label. I think, Darren, you said that volumes were positive, but did you provide where penetration ended in the quarter? And then, just broadly, how are you thinking about new product launches or the number of Q launches that you're planning over the next six to 12 months? Yeah, the penetration in the quarter was about where it had been.

Darren: Pretty good quality assets.

Darren: Invest.

Darren: Close to $1 million and putting in kitchens in remodeling and fixing deferred maintenance and all those other things and essentially you have a brand new store for less than replacement cost.

Darren: It would cost us to build a brand new and so we like that math I mean, we look at a lot of things, we're assessing valuation on M&A, but one of those checks is replacement cost and can we build it cheaper than we can buy it and fix it up and so we stayed pretty disciplined on that so right now it's been very favorable we've been able to buy it.

Darren: A lot of stuff for below replacement cost.

Darren M. Rebelez: It was right around, you know, 10% in units and gross profit dollars. I just want to remind you that the third quarter is seasonally the softest quarter for private label because it's the softest quarter for beverages, and we have a big beverage presence with our private label products. So it's always going to be a little bit less penetrated this time of year than it would be here in the next few quarters. I'm sorry, Krisztina. What was the other part of your question?

Darren: All in.

Darren: That being said, we're still going to be.

Darren: Build in the neighborhood of 50, new stores this year.

Darren: And we have a pipeline of organic growth that continues to build and if we if we have a lot of M&A.

Darren: We always have the option to land bank or our real estate and <unk>.

And continue on M&A and then when.

Darren: If the M&A market turns a little bit soft we could just pivot back over to our land bank and continue to grow organically and maintain a steady ratable growth I think people are counting on from us.

Darren M. Rebelez: Oh, new products? Um, yeah, we've got a pipeline of about 40 or 50 new products that we're planning to enter into the assortment. You're kind of phased in over the next several months, summer being the biggest part of it. Not prepared to really discuss the details of any of those.

Darren: Thanks.

Speaker Change: And then just as a follow up.

Speaker Change: How are you thinking about leveraging technology.

To not only improve those same stores hours that you pointed out but oh.

Speaker Change: I wanted to ask about AI and your intention there and how you think that could benefit the business as well going forward.

Yes.

Speaker Change: So a couple of things there I think with technology.

Darren M. Rebelez: But we're pretty excited about what we got coming this. Thank you. And our next question comes from the line of Charles Cerankosky with North Coast Research. Your line is now open.

Speaker Change: We are using some technology to help on the on the labor side.

Speaker Change: More recently, we just launched our digital production planner, which enables us to take what was a manual paper based process and make that fully automated so that saves.

Steve: Good morning, everyone. Great quarter. In looking at your prepared food margins, they've been trending upward. And would you care to comment? Can you get back into the 60s?

Speaker Change: People store managers in particular time on having to manually do calculations and manually right.

Down to get to a production planner for the kitchens two to execute again. So just one example.

Steve: And I'm curious about what the role of redeeming private label rewards is on the prepared foods part of your business, and will that hold back the margin? Good morning, Chuck. This is Steve. I'll maybe start with that. I think, first of all, we're pleased with the progress of... I'm kind of margin recovery broadly and prepared foods. As you know, we consciously, taking a position of trying to http://TheBusinessProfessor.com understand that which is contractual, we've got a lot of commodities. And so when all the commodities went up at the same time a couple of years ago, we chose not to chase them, $1 for $1 with price increases at that point.

Speaker Change: So rolling out.

Speaker Change: Sure.

Speaker Change: Before the summertime of workforce management tool that will allow our store managers to get even more efficient and state labor scheduling and deployment.

Speaker Change: Give our team members flexibility from a scheduling standpoint so.

Speaker Change: That's on the labor side with respect to AI.

Speaker Change: We're looking at a couple of different things probably the Best example, we have is.

Speaker Change: Well, we just rolled out what we call our automated voice assistant or Eva as we color.

Speaker Change: Which essentially answers the phones in the stores.

Speaker Change: And even though about 80% of our food orders that come into our kitchens are digital is still leaves close to 10 million phone orders a year, where people would call a store and talk to a person in the store to place an order and as you can imagine.

Steve: So we raised prices, but not by as much as the input cost went up. And we expect, over time, commodities will inflect, and ultimately, on the downside, as we hold retail prices steady, we'll recapture that margin over the course of the cycle. And that's exactly what's happening right now in our experience.

Speaker Change: That becomes disruptive during peak periods when people are trying to get food out of the kitchen, and they're having to stop in.

Speaker Change: Take orders and its noisy.

Speaker Change: And disruptive so even.

Speaker Change: It takes care of all that it's it's AI driven.

Speaker Change: We've traded with.

Speaker Change: Natural language processing and machine learning so when a call comes in it can take the order. It can suggest the Sally can help build that order and it goes right into the order management system in the kitchen. So the phone calls are.

Steve: And I think we've got further to go in that direction. So the 60% number for prepared foods, you know, we're close to it now. The high water mark a couple of years ago was a little bit higher than 60%. I would remind you a couple of things structurally have changed. And you kind of hinted at that, right? We did not have a rewards program at that particular point in time.

Speaker Change: Drastically reduced in the kitchen, it makes it more efficient to get the food out and we're right now at about 11% of the orders that come in are being handled by a bar at this point.

Speaker Change: Thank you.

Speaker Change: And then next.

Speaker Change: <unk> comes from the line of John Royall with Jpmorgan. Your line is now open.

Steve: And, you know, the cost of the rewards program in terms of points that are accrued is a reduction in margin. It's about a 50 basis point reduction in margin on prepared foods as we sit here today. We also did not have third-party aggregator delivery of any significance at the time.

John Macalister Royall: Hi, good morning, Thanks for taking my question.

John Macalister Royall: I know, we're short of time, so I'll just ask one.

John Macalister Royall: Can you discuss any impact you had from weather in January I know the Midwest got.

John Macalister Royall: Pummelled with some winter weather.

John Macalister Royall: You saw a fuel comes off a little but very strong inside the store comp. So I guess it was a little surprised to not see much of a material impact. There can you just talk through any weather impact from the third quarter.

Steve: And so that previously was an operating expense where we delivered from the stores. And now it's the cost of the product and the fees. And so those things structurally have changed.

John Macalister Royall: Yeah.

Speaker Change: No it was really a tale.

Speaker Change: Two two parts.

Speaker Change: November December were pretty favorable and so we had good insight comps and we had positive fuel comps in November December and in January that turned on us.

Steve: And so the high water mark probably will have been reset accordingly. But I think we feel good about a glide path to 60. We're on it right now.

Speaker Change: Yes.

Speaker Change: I think we were on fuel we were up 9% in November 6% in December and down two 6% in January.

Steve: Input cost remains favorable, and I think we feel good that the approach we've taken has allowed us to maximize gross profit dollars inside the store and maintain the value proposition. And I would expect we'll continue to run the play in that regard.

Speaker Change: And so we ended up down a little bit on the inside we never turned negative. We were we were positive five ish and six ish in November December positive a little bit over 1% in January.

Darren M. Rebelez: Thank you. One moment for our next question, and our next question will come from the line of. Corey Tarlowe with Jeffries. Your line is now open.

Speaker Change: Net it out to the four 1% overall so.

Speaker Change: Again, I think whether it's certainly has an impact.

Speaker Change: This part of the geography, we added about 10 days or so where temperatures and get above zero in and the news was was telling everybody to stay home and don't go outdoors.

Darren M. Rebelez: Great, thanks. I wanted to ask about growing organically versus through acquisition. It sounds as if the environment has become more conducive to growth through M&A, given it sounds like marginal player EBITDA has been a little bit pressured, exacerbated by the cents per gallon and traffic headwinds that these peers are facing. I'm curious to get your view on that and how that informs. What your outlook is going forward as you think about growing through those two levers, organic versus eminent? Yeah, Corey, this is Darren. Um, yeah. I'll first say that we like to strike the balance between organic growth and M&A. We don't ever want to put all our eggs in either basket because situations can change.

Speaker Change: That's not great for business, but I think Oh.

Speaker Change: Raul I felt really good about how we came out of January considering how tough it was and ended up with a really strong quarter.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our final question.

Speaker Change: One moment please.

Yeah.

Speaker Change: Comes from the line of John Lawrence with the Benchmark Company. Your line is now open.

John Russell Lawrence: Yeah, great. Thanks for squeezing me in.

John Russell Lawrence: Darrin when you talk about obviously youre looking at some larger chains for acquisitions.

John Russell Lawrence: We've watched you and witnessed all the leverage points in years past.

Speaker Change: You talk a little bit about how this restructured gas margin in the thirties.

How does that affect the math as you looked at these larger chains and just does that give you another leverage point on.

Speaker Change: Scale.

Speaker Change: As you might as you look at making the train a lot larger.

Speaker Change:

Speaker Change: Well, if I, if I think I understand your question I mean, when we're looking at these these chains.

Darren M. Rebelez: And so, what we're seeing right now is that the M&A environment is pretty attractive. The cost of construction has gone up, and at the same time, the challenges for the smaller operators have gone up as well, so what we're finding is we're able to buy some assets, pretty good quality assets, invest close to a million dollars in putting in kitchens and remodeling and fixing deferred maintenance and all those other things. And essentially, they have a brand new store for less than replacement costs. It would cost us to build it brand new.

Speaker Change: Those dynamics I described earlier are still consistent.

Speaker Change: Most other operators are heavily reliant on fuel margin.

Speaker Change: Because the inside business isn't as resilient.

Speaker Change: For us when we look at these things.

Speaker Change: We try to model that.

Speaker Change: It was based on our experience not necessarily the experience.

Speaker Change: The previous owner, because we're going to have an.

Speaker Change: <unk> to how we price fuel how we procure future fuel typically these these assets are in our existing geographies or adjacent to it so we're pretty familiar with the.

Darren M. Rebelez: And so we like that math. I mean, we look at a lot of things when we're assessing valuation in M&A, but one of those checks is replacement costs. And can we build it cheaper than we can buy it and fix it up?

Speaker Change: With a fuel supply and pricing dynamics in these markets, so and we understand how our stores perform there. So we don't really put too much stock in and how they do it today, we take much more.

Speaker Change: How much more credence into how we're going to operate them moving forward and we model it accordingly.

Darren M. Rebelez: And so we stay pretty disciplined on that. So right now, it's been very favorable. We've been able to buy a lot of stuff for below replacement costs all in. That being said, we're still going to build in the neighborhood of 50 new stores this year. And we have a pipeline of organic growth that continues to build. And if we have a lot of M&A, we always have the option to land bank our real estate and continue with M&A. And then when the M&A market turns a little bit soft, we could just pivot back over to our land bank and continue to grow organically and maintain that steady rateable growth I think people are counting on from us. Thanks.

Speaker Change: John I would I would add on the fuel over the last two years we've.

Speaker Change: We've been talking a lot about sustainability of higher higher fuel margins in the industry I think broadly speaking in M&A.

Speaker Change: As a potential buyer, there's a general recognition.

Speaker Change: Yeah.

Speaker Change: Higher fuel margins and an LTM ebitdas are more reasonable than they might have seemed to years ago, just because of the dynamics.

Speaker Change: And the industry and people adjust.

Speaker Change: Accordingly, and then you know again fuel margin for the smaller players is often the only wherever they have to to drive EBITDA to wherever it's going to be and so I would I would say.

Darren M. Rebelez: And then, just as a follow-up, how are you thinking about leveraging technology to not only improve those same store hours that you pointed out, but I wanted to ask about AI and your intentions there and how you think that could benefit the business as well going forward. Yeah, um, so a couple of things there.

Speaker Change: It's a little bit more the tail on the dog in that.

Speaker Change: The small operator remains under pressure for all the reasons, we've talked about inside the store and with operating expense in there.

Darren M. Rebelez: I think the technology we're using some technology to help on the labor side. Um, more recently, we just launched our digital production planner, which enables us to take what was a manual paper-based process and make that fully automated, so that saves people, store managers in particular, time on having to manually do calculations and manually write things down to get to a production planner for the kitchens to execute again. So, it's just one example.

Speaker Change: Pulling a lever on fuel that's really.

Speaker Change: To try to help them right size, what's happening inside as opposed to having a strategic.

Speaker Change: Point of view on what Theyre doing with fuel within their own business.

Speaker Change: Great. Thanks, and just one follow up you mentioned.

Speaker Change: Chips and water on the private label side what.

Speaker Change: What can you say or how does the brand name.

Speaker Change: Those large categories the brand name provider respond and what have you seen as you've.

Darren M. Rebelez: We're also rolling out here before the summertime a workforce management tool that'll allow our store managers to get even more efficient in labor scheduling and deployment and give our team members flexibility from a scheduling standpoint. So that's on the labor side. With respect to AI, we're looking at a couple of different things. Probably the best example we have is, Well, we just rolled out what we call our automated voice assistant, or AVA, as we call her, which essentially answers the phones in the stores. And even though about 80% of our food orders that come into our kitchens are digital, that still leaves close to 10 million phone orders a year, where people will call a store and talk to a person in the store to place an order. And, as you can imagine, That becomes disruptive during peak periods when people are trying to get food out of the kitchen, and they're having to stop and take orders, and it's noisy and disruptive. So AVA takes care of all that. It's AI-driven.

Speaker Change: Grown those private label categories.

Speaker Change: No.

Speaker Change: Competitive response.

Speaker Change: Yeah.

Speaker Change: It's a little bit of a mixed bag in some cases, we have.

Speaker Change: National brand manufacturers are producing our private label products for us.

Speaker Change: And others like you mentioned with chips, that's not the case.

Speaker Change: Look I think we have pretty candid discussions with them our goal isn't.

Speaker Change: Two.

Speaker Change: Wayne with private label at the expense of National brands, our goal is to grow the categories.

And so what we do within those categories as we try to offer guests and alternative.

Speaker Change: For something that in some cases more affordable or maybe as a flavor profile that.

Speaker Change: The international brand doesn't offer our pack size that they don't offer and so theres a few different things that we do with private label that makes it complementary to the national brand assortment.

Speaker Change: And I would say in the case of snack chips in particular.

We've had really good growth in our private label snack chips.

Darren M. Rebelez: We trained it with natural language processing and machine learning. So when a call comes in, it can take the order, it can suggest a drink, it can help build that order, and it goes right into the order management system in the kitchen. So the phone calls are drastically reduced in the kitchen. It makes it more efficient to get the food out.

Speaker Change: Our National brand partner is also had really good growth in our stores with their chips and so.

Speaker Change: This doesn't have to be a win lose this can be a win win when we approach it from a category perspective, and that's that's what we tried to do and.

Speaker Change: So.

I think it's working pretty well so far.

Speaker Change: Thank you.

Speaker Change: This concludes our Q&A portion I would now turn the call back over to Dan Rebelling, Chairman, President and Chief Executive Officer for closing remarks.

Darren M. Rebelez: And we're right now at about 11% of the orders that come in are being handled by AVA at this point. Thank you. And then next question comes from the line of John Royall with J.P. Morgan. Your line is now open.

Darren M. Rebelez: Alright, Thank you and thanks again for taking the time today to join US on the call and before we sign off I just want to again, thank our team members for all the hard work this quarter.

Unknown Executive: Hi, good morning. Thanks for taking my question. I know we're short of time, so I'll just ask one.

Darren M. Rebelez: Can you discuss any impact you had from the weather in January? I know the Midwest got kind of pummeled with some winter weather. You saw fuel comps off a little bit, very strong inside the store comps. So I guess I was a little surprised to not see much of a material impact there. Can you just talk through any weather impacts in the third quarter? Yeah, um, you know, it was really a tale of, November and December were pretty favorable. So we had good inside comps, and we had positive fuel comps in November, December, and January that turned on us. Um, I think we were on fuel. We were up 0.9% in November, 0.6% in December, and down 2.6% in January.

Speaker Change: Fantastic job so.

Speaker Change: Hope everyone has a great week. Thank you.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

Speaker Change: Hum.

Speaker Change: [music].

Darren M. Rebelez: And so we ended up down a little bit. But on the inside, we never turned negative. We were positive five-ish and six-ish in November and December, positive a little bit over 1% in January, you know, netted out to 4.1% overall. So again, I think weather certainly has an impact. And, you know, in this part of the geography, we had about 10 days or so where temperatures didn't get above zero.

Darren M. Rebelez: And the news was telling everybody to stay home and not go outdoors. So it's not great for business. But I think overall, I felt really good about how we came out of January considering how tough it was and ended up with a really strong quarter. Thank you. Our final question, one moment please, comes from the line of John Lawrence with the Benchmark Company. Your line is now open.

Darren M. Rebelez: Yeah, great. Thanks for squeezing me in. Darren, when you talk about, obviously, you're looking at some larger chains for acquisitions. We've watched you and witnessed all the leverage points in years past. Can you talk a little bit about how this restructured gas margin in the 30s? How does that affect the mass as you look at these larger chains, and does that give you another leverage point on scale as you look at making the chain a lot larger?

Darren M. Rebelez: Well, if I think I understand your question, I mean, when we're looking at these, these chains, those dynamics that I described earlier are still consistent that most other operators are heavily relying on fuel margin because the inside business isn't as resilient. You know, for us, when we look at these things, we try to model those based on our experience, not necessarily the experience of the previous owner, because we're going to have an approach to how we price fuel, how we procure fuel. Typically, these assets are in our existing geographies or are adjacent to us. We're pretty familiar with the fuel supply and pricing dynamics in these markets, and we understand how our stores perform there. So we don't really put too much stock in how they do it today.

Speaker Change: [music].

Darren M. Rebelez: We put much more credence into how we're going to operate them moving forward, and we model it accordingly. Yeah, I think, John, I would add that on fuel. Over the last two years, you know, we've been talking a lot about the sustainability of higher fuel margins in the industry. I think, broadly speaking, in M&A, as a potential buyer, there's a general recognition that, you know, higher fuel margins and LTM EBITDAs are more reasonable than they might have seemed two years ago just because of the dynamics in the industry. People adjust accordingly. And then, you know, again, fuel margin for the smaller players is often the only lever they have to drive EBITDA to wherever it's going to be.

Darren M. Rebelez: And so I would say, you know, it's a little bit more the tail on the dog in that, you know, the small operator remains under pressure for all the reasons we've talked about inside the store and with operating expenses, and they're pulling a lever on fuel that's really trying to help them right-size what's happening inside, as opposed to having a strategic point of view on what they're doing with fuel within their own. Great, thanks.

Darren M. Rebelez: And just one follow-up. You mentioned Chips and Water on the Private Label side; what can you say about how a brand name in those large categories, the brand name provider responds, and what have you seen as you've grown those private label categories to the Competitive Response? Yeah, you know, a little bit of a mixed bag. In some cases, we have national brand manufacturers who are producing our private label products for us. And others, like you mentioned with chips, that's not the case.

Darren M. Rebelez: Um, look, I think we have pretty candid discussions with them. You know, our goal isn't to win with private label at the expense of national brands; our goal is to grow the category. So what we do within those categories is we try to offer guests an alternative to something that, in some cases, is more affordable or maybe has a flavor profile that... The National Brand doesn't offer or a pack size that they don't offer. And so there's a few different things that we do with Private Label that make it complementary to the National Brand assortment. And I would say, in the case of snack chips, in particular, We've had really Our national brand of partner has also had really good growth in our stores with their chips, and so this doesn't have to be a win-lose situation.

Speaker Change: Okay.

Speaker Change: [music].

Darren M. Rebelez: This can be a win-win when we approach it from a category perspective. And that's, that's what we try to do. So I think it's working pretty well so far. Thank you. I will now turn the call back over to Darren Rebelez, Chairman, President, and Chief Executive Officer, for a closing remark. All right.

Speaker Change: Yes.

Speaker Change: [music].

Darren M. Rebelez: Thank you. And thanks again for taking the time today to join us on the call. And before we sign off, I just want to, again, thank our team members for all the hard work this quarter. They did a fantastic job. Hope everyone has a great week.

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

Unknown Executive: Everyone have a wonderful day. Phone Ringing Phone Ringing Phone Ringing, Transcribed by https://otter.ai www.larryweaver.com transcript Emily Beynon, www.globalonenessproject.org www.thevenusproject.com www.thevenusproject.com Copyright 2020, New Thinking Allowed Foundation, www.larryweaver.com Thank you, www.thevenusproject. ......... The Bulletproof Exhibit All rights reserved.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Unknown Executive: The Ultimate Parody Site! Thanks for watching. BF-WATCH TV 2021, The Ultimate Parody Site!

Speaker Change: Yes.

Speaker Change: [music].

Brian Joseph Johnson: www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org, Thanks for watching! Thank you for watching! The Bulletproof Executive 2013, Good day, and thank you for standing by. Welcome to Casey's General Stores' third quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: Yes.

Speaker Change: [noise].

Unknown Executive: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Unknown Executive: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead, sir.

Brian Joseph Johnson: Good morning, and thank you for joining us to discuss the results for our third quarter ended January 31, 2024. I'm Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Board Chair, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I want to remind you that certain statements made by us during this investor call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs, the company's supply chain, business and integration strategies, plans, and synergies, growth opportunities, and performance at our stores.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Good day, and thank you for standing by and welcome to Casey's General stores third quarter fiscal year 2024 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need Crestar. One wondering your telephone he will then hand on.

Brian Joseph Johnson: There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including but not limited to the integration of the recent acquisition, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of the conflict in Ukraine and related governmental actions, as well as other risks, uncertainties, and factors which are described in our most Any forward-looking statements made during this call reflect our current views as of today with respect to future events. Caseys disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker Change: Emitted message advising your hands raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Brian Johnson Senior Vice President of Investor Relations and business development. Please go ahead Sir.

Speaker Change: Good morning, and thank you for joining us to discuss the results of our third quarter ended January 31, 2024, I'm, Brian Johnson Senior Vice President Investor Relations and business development with me today are Dan rebellious Board Chair, President and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer.

Speaker Change: Before we begin I'll remind you that certain statements made by us during this investor call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095. These forward looking statements include any statements relating to expectations for future periods possible or assumed future results of operations financial conditions liquidity and relate.

Speaker Change: Sources, our needs the company supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores there.

Speaker Change: There are a number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward looking statements, including but not limited to the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic strategic plan.

Darren M. Rebelez: Reconciliation of non-GAAP to GAAP financial measures referenced in this call, as well as a detailed breakdown of the operating expense increase for the third quarter, can be found on our website at www.casey.com under the Investor Relations link. With that said, I'd now like to turn the call over to Darren to discuss our third quarter results.

Speaker Change: The impact and duration of the conflict in Ukraine and related governmental actions as well as other risks uncertainties and factors, which are described in our most annual report on Form 10-K, and quarterly reports on Form 10-Q as filed with the SEC and available on our website any forward looking statements made during this call reflect our current views as of today.

Darren M. Rebelez: Thanks, Brian, and good morning, everyone. We're thrilled to discuss the third quarter as it once again demonstrated the strength of the Casey's team and the resilience of our business model. Now let's review the results. Diluted EPS finished at $2.33 per share, a 13% decrease from the prior year. The company generated $87 million in net income, a decrease of 13%, and $218 million in EBITDA, a decrease of 2% from the prior year. As we mentioned in the last quarter's call and the press, all of these metrics we're comparing against the prior year included a one-time operating expense reduction due to the resolution of a legal matter. This resolution benefited the prior year by approximately $15 million, or $0.31 per share. I'm proud of our team members for producing solid third quarter results. Does the team navigate a less favorable fuel cost environment than in the past year, as well as challenging weather and most of our footprint? I'd now like to go over our results and share some of the details in each of the categories.

Speaker Change: With respect to future events, and Casey's disclaims any intention or obligation to update or revise forward looking statements, whether as a result of new information future events or otherwise.

Speaker Change: A reconciliation of non-GAAP to GAAP financial measures.

Speaker Change: Referenced in this call as well as detailed breakdown on the operating expense increase for the third quarter can be found on our website at www Dot Casey Dot com under the Investor Relations link.

Speaker Change: With that said I would now like to turn the call over to Darren to discuss our third quarter results Darren.

Darren: Thanks, Brian and good morning, everyone.

Darren: We're thrilled to discuss third quarter once again demonstrated the strength of the <unk> team and the resilience of our business model pellets.

Darren: Now let's review the results.

Darren: Diluted EPS finished at $2 33 per share 13% decrease from the prior year.

Darren: The company generated $87 million and net income a decrease of 13% and $219 billion in EBITDA, a decrease of 2% from the prior year.

Darren: As we mentioned in last quarter's call and the press release all of these metrics were comparing against the prior year included a one time operating expense reduction due to the resolution of a legal matter.

Darren: Resolution benefited the prior year by approximately $15 million or <unk> 31 per share.

Darren: I'm proud of our team members for producing solid third quarter results as the team navigated a less favorable fuel cost environment than in the past year as well as challenging weather in most of our footprint Jamie.

Darren M. Rebelez: Inside, same-store sales were up 4.1% for the third quarter, or 9.9% on a two-year stack basis, with an average margin of 41.3%. The same store prepared food and dispensed beverage business was particularly strong, as sales were up 7.5% or 12.9% on a two-year stack basis, with an average margin of 59.6%, up approximately 230 basis points from the prior year. Whole pies performed well in the quarter, but we also saw strong performances with hot sandwiches and dispensed beverages.

Darren: I would now like to go over our results and share some of the details in each of the categories.

Darren: Inside same store sales were up four 1% for the third quarter or nine 9% on two year stack basis with average margin of 41, 3%.

Darren: Same store prepared food and dispense beverage was particularly strong as sales were up seven 5% or 12, 9% on a two year stack basis with an average margin of 59, 6% up approximately 230 basis points from the prior year.

Darren: <unk> performed well in the quarter. We also saw strong performance with hot sandwiches and dispense beverages.

Darren M. Rebelez: Margin was favorably impacted by softening commodity costs, notably cheese, as well as modest menu pricing adjustments during. Prepared food continues to be a key differentiator for Casey's. I'm very pleased with the sales growth in March. Grocery general merchandise sales were up 2.8% or 8.8% on a two-year stack basis, with an average margin of 33.9 percent, a decrease of approximately 10 basis points from the prior year We saw positive momentum in the category, notably in both alcoholic and non-alcoholic beverages. And our private label program continues to be a great value option for our guests, with Casey's Chips and Bottled Water performing well in the quarter.

Darren: Margin was favorably impacted by softening commodity costs, notably cheese.

Darren: As well as modest menu pricing adjustments during the quarter.

Darren: Prepared food continues to be a key differentiator for cases, I'm very pleased with the sales growth and margin.

Darren: Same store grocery and general merchandise sales were up two 8% or eight 8% on a two year stack basis.

Darren: Average margin of 33, 9% a decrease of approximately 10 basis points from the prior year.

Darren: We saw positive momentum in the category, notably in both alcoholic and non alcoholic beverages.

Darren: Private label program continues to be a great value option for our guests with cases chips and bottled water performing well in the quarter.

Darren M. Rebelez: For fuel, same-store gallons sold are nearly flat with a fuel margin of 37.3 cents per gallon. This marked the 11th consecutive quarter with fuel margins above 34.5 cents per gallon. Our volume continues to outperform our geographic market as well as Opus Fuel's gallon sold data shows the mid-continent region down approximately 5% in the quarter. Our fuel team is doing an exceptional job balancing volume, growth, and margin, and the results continue to show it. Operating expenses were up 10.3% versus the prior year, but only 2.5% on the same store basis, excluding credit card fees. Our team continues to get more and more efficient at operating stores, while at the same time integrating multiple acquisitions. This is a testament to the outstanding work and maturity of our integration. Now, I'd like to turn the call over to Steve to discuss financial results from the court. Thank you, Darren, and good morning.

Darren: For fuel same store gallons sold were nearly flat with a fuel margin of 37 three per gallon.

This marked the 11th consecutive quarter with fuel margins above $34 five per gallon.

Darren: Our volume continues to outperform our geographic market as well as office fuel gallon sold data shows the mid continent region down approximately 5% in the quarter.

Darren: Our field team is doing an exceptional job balancing volume growth and margin and the results continue to show it.

Darren: Operating expenses were up 10, 3% versus the prior year, but only two 5% on a same store excluding credit card fee basis.

Our team continues to get more and more efficient operating stores, while at the same time integrating multiple acquisitions.

Darren: This is a testament to the outstanding work and maturity of our integration.

Darren: I'd now like to turn the call over to Steve to discuss the financial results from the third quarter Steve.

Steve: I'd also like to thank the team for their great work during the quarter. Our results were solid, especially inside the store, where we continued to grow sales and expand margin. This was accomplished during a quarter of heavy integration of acquired stores across our footprint. Overall, this was another quarter of effective operational execution in what is shaping up to be a great fiscal 2024.

Stephen P. Bramlage: Thank you Darren and good morning, I'd also like to thank the team for their great work during the quarter. Our results were solid, especially inside of the store, where we continue to grow sales and expand margin. This was accomplished during a quarter of heavy integration of acquired stores across our footprint.

Stephen P. Bramlage: Overall this was another quarter of effective operational execution in what is shaping up to be a great fiscal 2024.

Steve: Total revenue for the quarter was $3.3 billion, a decrease of $3 million, or 0.1% from the prior year, due primarily to the lower retail price of fuel. Total inside sales for the quarter were $1.2 billion, an increase of $106 million, or 9.5% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $36 million to $349 million, an increase of 11.4 percent. Grocery and general merchandise sales increased by $70 million to $866 million, an increase of 8.8%. Results were also favorably impacted by operating approximately 7% more stores on a year-over-year basis. However, retail fuel sales were down $106 million in the third quarter, as an 11% decline in the average retail price of fuel was partially offset by a 6.9% increase in fuel gallons sold. The average retail price of fuel during this period was $2.98 a gallon, compared to $3.34 a gallon a year ago. We define gross profit as revenue less cost of goods sold but excluding depreciation and amortization.

Stephen P. Bramlage: Total revenue for the quarter was $3 3 billion, a decrease of $3 million or 0.1% from the prior year due primarily to the lower retail price of fuel.

Stephen P. Bramlage: Total inside sales for the quarter were $1 $2 billion, an increase of $106 million or nine 5% from the prior year for.

Stephen P. Bramlage: For the quarter prepared food and dispense beverage sales rose by $36 million to $349 million, an increase of 11, 4%.

Stephen P. Bramlage: Grocery and general merchandise sales increased by $70 million $866 million, an increase of eight 8%.

Stephen P. Bramlage: Results were also favorably impacted by operating approximately 7% our stores on a year over year basis.

Stephen P. Bramlage: Retail fuel sales were down $106 million in the third quarter and an 11% decline in the average retail price of fuel was partially offset by a six 9% increase in fuel gallons sold.

Stephen P. Bramlage: The average retail price of fuel during this period was $2.98 a gallon compared to $3.34 a gallon a year ago.

Stephen P. Bramlage: We define gross profit as revenue less cost of goods sold excluding depreciation and amortization.

Steve: Casey's had gross profit of $787 million in 30, an increase of 49 million, or 6.7% from the prior year. This was primarily driven by higher inside gross profit of $50.9 million, or 11.3%, offset by lower fuel gross profit of $5.3 million, or 2%. Inside gross profit margin was 41.3%, and that's up 70 basis points from a year ago. The prepared food and dispensed beverage margin was 59.6%, up 230 basis points from the prior year. The category margin benefited from lower commodity costs, specifically cheese, which was $2.06 per pound for the quarter, compared to $2.30 per pound last year, a decrease of 10%, or approximately 80 basis points. Margin also benefited from a lower LIFO charge than in the prior year, as our broader input costs softened, benefiting margin by over 40 basis points. Modest menu pricing adjustments also helped.

Stephen P. Bramlage: Casey's had gross profit of $787 million in the third.

Stephen P. Bramlage: An increase of 49 million or six 7% from the prior year.

Stephen P. Bramlage: This was primarily driven by higher inside gross profit of $50 $9 million or 11, 3%.

Stephen P. Bramlage: Offset by lower fuel gross profit of $5 $3 million or 2%.

Stephen P. Bramlage: <unk> gross profit margin was 41, 3% and that's up 70 basis points from a year ago.

Stephen P. Bramlage: Prepared food and dispense beverage margin was 59, 6% up 230 basis points from prior year.

Stephen P. Bramlage: Category margin benefited from lower commodity costs, specifically cheese, which was $2.06 per pound for the quarter compared to $2.30 per pound last year, a decrease of 10% or approximately 80 basis points.

Stephen P. Bramlage: Margin also benefited from a lower LIFO charge in the prior year as our broader input cost softened benefiting margin by over 40 basis points modest menu pricing adjustments also helps.

Steve: The grocery and general merchandise margin was 33.9%, a decrease of 10 basis points from the prior year. The change was primarily due to lapping favorable vendor-funded promotions in the prior year, partially offset by a lower LIFO charge and private label continuing to increase the share of our mix. Fuel margin for the quarter was $0.373 per gallon, down $0.034 per gallon from the prior year. Fuel gross profit benefited by $3.4 million from the sale of RENZ, and that's up half a million dollars from the same quarter in the prior year. Total operating expenses were up 10.3% or $53.2 million in the third quarter. Approximately 3% of the increase is due to lapping a one-time benefit to operating expense last year from the resolution of a $15 million legal matter. Additionally, approximately 6% of the total operating expense increase is due to unit growth and integration spending as we operated 167 more stores than the prior year. Same store employee expenses accounted for approximately 1% of the increase.

Stephen P. Bramlage: The grocery and general merchandize margin was 33, 9%.

Stephen P. Bramlage: Decrease of 10 basis points from the prior year. The change was primarily due to lapping favorable vendor front of promotions in the prior year, partially offset by lower LIFO charge and private label continuing to increase the share of our mix.

Stephen P. Bramlage: Fuel margin for the quarter was 37 three per gallon.

Stephen P. Bramlage: That's down $3.04 per gallon from the prior year.

Stephen P. Bramlage: <unk> gross profit benefited by $3 $4 million from the sale of brands and that's up half a million dollars from the same quarter in the prior year.

Stephen P. Bramlage: Total operating expenses were up 10, 3% or $53 $2 million in the third quarter.

Stephen P. Bramlage: Approximately 3% of the increase was due to lapping a one time benefit to operating expense last year.

Stephen P. Bramlage: The resolution of a $15 million legal matter.

Stephen P. Bramlage: Approximately 6% of the total operating expense increase is due to unit growth and integration spending as we operated 167 more stores than the prior year.

Stephen P. Bramlage: Same store employee expense accounted for approximately 1%.