Q2 2024 Murphy USA Inc Earnings Call

Bailey: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by.

Thank you for standing by my name is Barry and I will be your conference operator today at.

Bailey: My name is Bailey, and I will be your conference operator today.

Andrew Clyde: Great. Thank you, everyone, for joining us today. As we know, these are challenging times for many consumers, and I think, as we've illustrated, Murphy's long-term commitment to serving those customers with value, doing it in better ways with our new capabilities, and continuing to grow is not only wins for them, but wins for all of us as investors as well. Thanks for your time today.

Operator: At this time, I would like to welcome everyone to the Murphy USA second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

At this time I would like to welcome everyone to the Murphy USA second quarter 2024 earnings Conference call.

Bailey: This concludes today's conference call. You may now disconnect.

Operator: Please wait; the conference will begin shortly.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one.

Bailey: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and 1. I would now like to turn the call over to Christian Pikul, Vice President of Invested Relations. You may begin.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press Star and one.

Christian Pikul: I would now like to turn the call over to Christian Pikul, Vice President of a Vested Relations. You may begin.

I would now like to turn the call over to Christian Pikul, Vice President of Investor Relations you may begin.

Andrew Clyde: Hey, thank you, Bailey.

Christian Pikul: Hey, thank you, Bailey. Good morning, everybody, and thank you all for joining us today.

Christian Pikul: Hey, Thank you Bailey good morning, everybody and thank you all for joining US today with me are Andrew Clyde Chief Executive Officer, Mindy West Chief Operating Officer, Gallagher, Jeff Chief Financial Officer, and Donnie Smith, Chief Accounting Officer. After some opening comments from Andrew.

Andrew Clyde: Good morning, everybody. And thank you all for joining us today. With me are Andrew Clyde, Chief Executive Officer; Mindy West, Chief Operating Officer; Galagher Jeff, Chief Financial Officer; and Donnie Smith, Chief Accounting Officer. After some opening comments from Andrew, Galagher will provide an overview of the financial results. And then we will open up the call to Q&A.

Christian Pikul: With me are Andrew Clyde, Chief Executive Officer, Mindy West, Chief Operating Officer, Galagher Jeff, Chief Financial Officer, and Donny Smith, Chief Accounting Officer. After some opening comments from Andrew, Galagher will provide an overview of the financial results, and then we will open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion, may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Speaker Change: Andrew Gallagher will provide an overview of the financial results and then we will open up the call to Q&A.

Christian Pikul: Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors. Please see the latest Murphy USA forms 10-K, 10-Q, 8-K, and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements during today's call.

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

Christian Pikul: As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forums 10-K, 10-Q, 8-K, and other recent SEC filings. Murphy USA undertakes no duty to publicly update or revise any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP.

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

Christian Pikul: We may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile those non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the investor section of our website.

Conform to generally accepted accounting principles or GAAP.

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

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

Andrew Clyde: With that, I'll turn the call over to Andrew. Thank you, Christian, and thanks everyone for joining us today. We're very pleased with Murphy USA's second quarter results. We believe our flywheel is clearly in motion, delivering advantage results to our business and creating value for our investors. Let's start today's call by taking stock of how the business as a whole is performing. Our core fuel business is delivering excellent results in a low volatility environment, which is historically when it is more difficult to grow volume. The structural dynamics that support higher breakeven economics in the industry persist, as evidenced by all-in margins of 31.7 cents, 2.2 cents per gallon higher than the prior year period.

Andrew Clyde: Thank you, Christian, and thanks to everyone for joining us today. We're very pleased with Murphy USA's second quarter results. We believe our flywheel is clearly in motion, delivering advantage results to our business and creating value for our investors. Let's start today's call by taking stock of how the business as a whole is performing. Our core fuel business is delivering excellent results in a low volatility environment, which is historically when it is more difficult to grow volume.

Andrew: Thank you Kristian and thanks to everyone for joining US today, we're very pleased with Murphy USA second quarter results. We believe our flywheel is clearly in motion delivering advantage results to our business and creating value for our investors, let's start today's call by taking stock of how the business as a whole is performing.

Speaker Change: Our core fuel business is delivering excellent results in a low volatility environment, which is historically when it is more difficult to grow volume.

Andrew Clyde: The structural dynamics that support higher break-even economics in the industry persist, as evidenced by all-in margins of 31.7 cents, 2.2 cents per gallon higher than the prior year period. As a result, second quarter retail fuel margin contribution dollars were the highest Q2 in any history, underscoring the sustainable and enduring success of Murphy USA's ADDvantage model. Turning to merchandise performance, same-store sales and margin growth were strong, driven by exceptional performance across tobacco categories. However, while total merchandise margins were up nearly 5% in the second quarter, year-to-date results are falling short of our high expectations.

Speaker Change: The structural dynamics that support higher breakeven economics in the industry persist as evidenced by all in margins of 30 172.

Speaker Change: 2.2 cents per gallon higher than the prior year period as a result second quarter retail fuel margin contribution dollars, where the highest Q2 in company history underscoring the sustainable and enduring success of Murphy USA is advantaged model.

Andrew Clyde: As a result, second quarter retail fuel margin contribution dollars were the highest Q2 and company history, underscoring the sustainable and enduring success of Murphy USA's advantage model. Turning the merchandise performance, same store sales and margin growth were strong, driven by exceptional performance across tobacco categories. While total merchandise margins were up nearly 5% in the second quarter, year-to-date results are falling short of our high expectations. Given a slow starting Q1, softness in some discretionary center store categories, and lighter than expected traffic and quick check markets resulting in fewer transactions that were built into our internal plan, total fuel year, total full year merchandise margin growth will be around 4% as reflected in our adjusted guided range from $830 million to $840 million.

Speaker Change: Turning to merchandise performance same store sales and margin growth was strong driven by exceptional performance across tobacco categories. While total merchandise margins were up nearly 5% in the second quarter year to date results are falling short of our high expectations given the slow start in Q1 softness in some discretionary.

Andrew Clyde: Given a slow start in Q1, softness in some discretionary center store categories, and lighter than expected traffic in quick check markets resulting in fewer transactions that were built into our internal plan, total full-year merchandise margin growth will be around 4%, as reflected in our adjusted guided range from $830 million to $840 million. Our initiatives are on track, but the early results will not overcome the impact of these. Inflation is real and remains impactful to our customers. We have especially seen the effects in the Northeast, where we see lower inflation for food at home versus food away from home. And that still remains a challenge.

Speaker Change: And our store categories and lighter than expected traffic and quick check markets, resulting in fewer transactions that were built into our internal plan.

Speaker Change: Total fuel your total full year merchandise margin growth will be around 4% as reflected in our adjusted guided range from $830 million to $840 million. Our initiatives are on track, but the early results will not overcome the impact of these drivers.

Andrew Clyde: Our initiatives are on track, but the early results will not overcome the impact of these drives. Inflation is real and remains impactful to our customers. We have especially seen the effects in the Northeast markets where we see lower inflation for food at home versus food away from home, and that remains a challenge. We also note that QSR promotional intensity has increased, where many QSRs are pivoting back to value and competing for share and prepared food and beverages, which are core traffic driving categories a quick check. As a result, year-over-year sales cons remain down about 2% at Quick Check in the second quarter, with similar performance into July.

Speaker Change: Inflation is real and remains impactful to our customers, we have especially seen the effects in the northeast markets, where we see lower inflation for food at home versus food away from home and that remains a challenge. We also note that Q S. Our promotional intensity has increased for many <unk> are pivoting back to value and competing for.

Andrew Clyde: We also note that QSR promotional intensity has increased, with many QSRs pivoting back to value and competing for share in prepared food and beverages, which are core traffic-driving categories at QuickCheck. As a result, year-over-year sales comps remain down about 2% at QuickCheck in the second quarter with similar performance into July. This represents the largest variation to our total merchandise plan, where we anticipated more of a rebound in transactions year-over-year at QuickCheck.

Speaker Change: Sure and prepared food and beverages, which are core traffic driving categories, a quick check as.

Speaker Change: As a result year over year sales comps remain down about 2% a quick check in the second quarter with similar performance into July.

Andrew Clyde: This represents the largest variation to our total merchandise plan, where we anticipated more of a rebound in transactions year-over-year at Quick Check. Similar to MDR members, QC rewards members remain very active, shopping with greater frequency and with larger baskets; but with one less trip or a trade down, it adds up. With our commitment to value pricing, the new QC rewards rollout coming up, in other initiatives we are well positioned to get that incremental trip and trade up back. That said, there are some incredible bright spots on the merch side that highlight where we not only win in the current environment but sustain the wins thereafter.

Speaker Change: This represents the largest variation to our total merchandise plan, where we anticipated more of a rebound in transactions year over year, a quick check.

Andrew Clyde: Similar to MDR members, QC Rewards members remain very active, shopping with greater frequency and with larger baskets, but with one less trip or a trade down, it adds up. With our commitment to value pricing, the new QC Rewards rollout coming up, and other initiatives, we are well positioned to get that incremental trip and trade up back. That said, there are some incredible bright spots on the merchandise side that highlight where we not only win in the current environment but sustain the wins thereafter.

Speaker Change: Similar to M. D. Our members QC rewards members remained very active shopping with greater frequency and with larger baskets, but with one less trip or a trade down it adds up with our commitment to value pricing, the new QC rewards rollout coming up and other initiatives, we are well positioned to get that incremental trip and trade up back.

Speaker Change: That said there are some incredible bright spots on the merch side that highlight where we not only win in the current environment. The sustained the wins thereafter, we continue to invest and reinvest in the tobacco category from a price promotion and capability perspective, driving strong growth across all products within the broader nicotine ecosystem.

Andrew Clyde: We continue to invest and reinvest in the tobacco category from a price, promotion, and capability perspective, driving strong growth across all products within the broader nicotine ecosystem. Our leadership and combustible products has built a strong foundation upon which we continued to grow share, invade for oral nicotine and other non-combustible products that are not only growing sales in margins and the low double-digit range, but also come with higher margins. We intend to support our customers as they transition to non-combustible products, leveraging our advantage volume position and promotional strength to continue to drive growth in the nicotine category.

Andrew Clyde: We continue to invest and reinvest in the tobacco category from a price promotion and capability perspective, driving strong growth across all products within the broader nicotine ecosystem. Our leadership in combustible products has built a strong foundation upon which we continue to grow share in vapor, oral nicotine, and other non-combustible products that are not only growing sales and margins in the low double-digit range but also come with higher margins. We intend to support our customers as they transition to non-combustible products, leveraging our advantaged volume position and promotional strength to continue to drive growth in the nicotine category.

Speaker Change: Our leadership in combustible products has built a strong foundation upon which we continue to grow share in vapour oral nicotine and other noncombustible products that are not only growing sales and margins in the low double digit range, but also come with higher margins, we intend to support our customers as they transition to noncombustible products.

Speaker Change: Leveraging our advantaged volume position and promotional strength to continue to drive growth in the nicotine category.

Andrew Clyde: In the first state that is actually cracked down on illicit vapor products, we have already seen a strong resurgence in our volume to the products that the FDA has approved; hopefully, more to come on that front. In the center of the store, results are mixed between nondiscretionary and discretionary products, but one thing remains clear. The Murf USA customer spend on nondiscretionary products in our store remains very strong. To make no mistake, our customers are not immune to the inflationary pressures impacting household budgets of Americans living paycheck to paycheck, which we believe to be a growing customer segment.

Andrew Clyde: In the first state that has actually cracked down on illicit vapor products, we have already seen a strong resurgence in our volume for the products that the FDA has approved. Hopefully, more to come on that front.

Speaker Change: And the first state that is actually crack down on illicit vapor products, we have already seen a strong resurgence in our volume to the products that the FDA has approved hopefully more to come on that front.

Andrew Clyde: In the center of the store, results are mixed between non-discretionary and discretionary products, but one thing remains clear. The Murphy USA customer spend on non-discretionary products in our store remains very strong. Make no mistake, our customers are not immune to the inflationary pressures impacting household budgets of Americans living paycheck to paycheck, which we believe to be a growing customer segment.

Speaker Change: In the center of the store results were mixed between non discretionary and discretionary products, but one thing remains clear.

Speaker Change: USA customer spend on non discretionary products and our store remains very strong.

Speaker Change: Make no mistake, our customers are not immune to the inflationary pressures impacting household budgets of Americans living paycheck to paycheck, which we believe to be a growing customer segment.

Andrew Clyde: As such, they are making choices in their discretionary spend at our stores, yet their spend on what we consider categories that remain quarter our customers such as fuel, tobacco, beer, salty snacks, and package beverages remains strong. Thus, overall spend at Murphy's stores is not only stable and resilient; it's growing. In the Murphy footprint, traffic driving categories, including fuel and tobacco, are bringing people to the store and growing the basket in the center of store categories attached to the visit. Remarkably, total tobacco margin dollars were up 12%, and non tobacco margin dollars were up 4.8%. Material improvements against what was a very strong second quarter in 2023.

Andrew Clyde: As such, they are making choices in their discretionary spend at our stores, yet their spend on what we consider categories that remain core to our customers, such as fuel, tobacco, beer, salty snacks, and packaged beverages, remains strong. Thus, overall spend at Murphy's stores is not only stable and resilient, it's growing. In the Murphy footprint, traffic driving categories and fuel, including fuel and tobacco, are bringing people to the store and growing the basket in the center of store categories attached to the visit.

Andrew Clyde: They are making choices in their discretionary spend at our stores yet their spend on what we consider categories that remain core to our customers such as fuel tobacco beer salty snacks in packaged beverages remained strong.

Speaker Change: Overall spend at Murphy stores is dominantly stable and resilient it's growing.

Speaker Change: The Murphy footprint traffic driving categories, and fuel, including fuel and tobacco are bringing people to the store and growing the basket in the center of store categories attached to the visit.

Andrew Clyde: Remarkably, total tobacco margin dollars were up 12%, and non-tobacco margin dollars were up 4.8%, material improvements against what was a very strong second quarter in 2023. The two-year stacks are up 17.8% and 15%, respectively, in tobacco and non-tobacco margin growth, illustrating the powerful impact of Murphy's Advantage model and the resilience of our customer. Unpacking results at the category level, customer spend remains strong in beer and salty snacks, products that customers not only don't want to forego but are buying more of, compelled by our value offer.

Speaker Change: Remarkably total tobacco margin dollars were up 12% and non tobacco margin dollars were up four 8% material improvements against what was a very strong second quarter in 2023.

Andrew Clyde: The two-year stacks are up 17.8% and 15%, respectively, in tobacco and non-tobacco margin growth, illustrating the powerful impact of Murphy's advantage model and the resilience of our customer. Unpacking results at the category level, customer spin remains strong and beer and salty snacks, products that customers not only don't want to forgo but are buying more of, compelled by our value offer. Exhibiting seasonal momentum, up 2.4% in per store margins, outpacing the Nielsen data in gaining market share in our footprint, driven by higher promotional intensity and carbonated soft drinks. General merchandise margin growth, the second largest center store category, was more robust at 5.6%, reflecting improvements from our initiatives and cost of goods that are margin accretive.

Speaker Change: The two year stacks are up 17, 8% and 15% respectively in tobacco and non tobacco margin growth illustrating the powerful impact of Murphy's advantaged model and the resilience of our customer.

Andrew Clyde: Per store, margin growth in beer and salty snacks was up 11% and 9%, respectively, offsetting softness in candy and lottery, where customers are making different choices. Packaged Beverages, the largest center store category from the sales and margin perspective, has improved sequentially from the first quarter, exhibiting seasonal momentum up 2.4% in per store margins, outpacing the Nielsen data and gaining market share in our footprint, driven by higher promotional intensity in carbonated soft drinks.

Speaker Change: Unpacking results at the category level customer spend remains strong in beer in salty snacks product that customers not only don't want to forego, but are buying more of compelled by our value offer per store margin growth in beer in salty snacks were up 11% and 9%, respectively offsetting softness in candy and lottery, where customers are making dip.

Speaker Change: Current choices.

Speaker Change: <unk> beverage the largest center store category from a sales and margin perspective has improved sequentially from the first quarter exhibiting seasonal momentum up two 4% in per store margins outpacing the Nielsen data and gaining market share and our footprint driven by higher promotional intensity and carbonated soft drinks.

Andrew Clyde: General Merchandise margin growth, the second largest center store category, was more robust at 5.6%, reflecting improvements from our initiatives and cost of goods that are margin accretive. Of note, General Merchandise is one of the areas we reimagined with our in-store experience campaign, focused on enhancing performance at our larger format stores, adding 200 additional SKUs and 700 additional facings to optimize selling space. Early results are promising across center store categories, as we enhance the customer experience, improve sales velocity, and improve employee productivity.

Speaker Change: General merchandise margin growth the second largest center store category was more robust up five 6%, reflecting improvements from our initiatives in cost of goods that are margin accretive of note general merchandise is one of the areas. We re imagined with our in store experience campaign focused on enhancing perform.

Andrew Clyde: Of no general merchandise is one of the areas we reimagined with our in-store experience campaign focused on enhancing performance at our larger format stores, adding 200 additional SKUs and 700 additional facing stop to my selling space. Early results are promising across center store categories as we enhance the customer experience, improve sales, velocity, and improve employee productivity. Looking at operating expenses, second quarter off-ex on a per store basis was up 6.2% year over year, down sequentially from up 6.7% in the first quarter and remains on track to finish within our internal plan and the 2024 guided range.

Speaker Change: <unk> at our larger format stores, adding 200, additional skus and 700 additional facings to optimize selling space.

Speaker Change: Early results are promising across center store categories, as we enhance the customer experience improve sales velocity and improve employee productivity.

Andrew Clyde: Looking at operating expenses, second quarter OPEX on a per store basis was up 6.2% year over year, down sequentially from up 6.7% in the first quarter, and remains on track to finish within our internal plan and the 2024 guided range. The primary driver of OPEC's growth remains the larger stores we are building, including Raise and Rebuild, intentional wage investments we made in 2023, including elevating the assistant manager cohort, and higher maintenance costs, largely attributable to warranty expirations on dispensers we replaced for a large part of the network in 2018 and 2019 as part of our EMV compliance.

Speaker Change: Looking at operating expenses second quarter Opex on a per store basis was up six 2% year over year down sequentially from up six 7% in the first quarter and remains on track to finish within our internal plan and the 2024 guided range. The primary drivers of Opex growth remains the larger stores we were building.

Andrew Clyde: The primary drivers of off-ex growth remains the larger stores we are building, including race and rebuilds, intentional wage investments we made in 2023, including elevating the assistant manager cohort and higher maintenance costs, largely attributable to warranty expirations on dispensers we replace for a large part of the network in 2018 and 19 as part of our EMV compliance. Like the headwinds we are seeing in certain parts of the business, we are very confident in the future growth drivers that will create value, including maintaining a relentless focus on EDLP and value pricing, generating additional value and efficiency from our stores as part of our store productivity excellence campaign, leveraging the benefits of digital transformation to address and offset pockets of weakness in the discretionary categories, and ramping up new store additions in 2024 and 2025 and beyond.

Speaker Change: Including rates and rebuilds intentional wage investments, we made in 2023, including elevating the assistant manager cohort and higher maintenance costs largely attributable to warranty explorations on dispensers, we replaced for a large part of the network in 2018 to 19 as part of our <unk> compliance.

Andrew Clyde: Despite the headwinds we are seeing in certain parts of the business, we're very confident in the future growth drivers that will create value, including maintaining a relentless focus on EDLP and value pricing, generating additional value and efficiency from our stores as part of our store productivity excellence campaign, leveraging the benefits of digital transformation to address and offset pockets of weakness in discretionary categories, and ramping up new store additions in 2024 and 2025 and beyond. I'll now turn the call over to Galagher to give you more color on how we are allocating our cash flow to grow the business and create value for shareholders. Galagher?

Speaker Change: Despite the headwinds we are seeing in certain parts of the business. We're very confident in the future growth drivers that will create value, including maintaining a relentless focus on E. D. L P and value pricing generating additional value and efficiency from our stores as part of our store productivity excellence campaign, leveraging the benefits of digital transformation to.

Speaker Change: And offset pockets of weakness in discretionary categories and ramping up new store additions in 2024, and 2025 and beyond.

Andrew Clyde: These are the building blocks of sustainable growth that are the material drivers of our $1.3 billion EBITDA target in 2028 and the catalyst to our flywheel. Our core fuel and tobacco categories continue to outperform, and our customer remains resilient, giving us further assurance we can meet this goal and continue our track record of delivering top tier shareholder returns.

Speaker Change: These are the building blocks of sustainable growth that are the material drivers of our $1 3 billion EBITDA target in 2028, and the catalyst to our flywheel, our core fuel and tobacco categories continue to outperform and our customer remains resilient, giving us further assurance. We can meet this goal and continue our track.

Speaker Change: Of delivering top tier shareholder returns.

Galagher Jeff: I will now turn the call over to Gallagher to give you more color on how we are allocating our cash flow to grow the business and create value for shareholders. Gallagher?

Speaker Change: I'll now turn the call over to Gallagher to give you more color on how we are allocating our cash flow to grow the business and create value for shareholders Gallagher.

Galagher Jeff: Hello, everyone. Thanks for joining us today and, Andrew, for that set up. This morning, I am going to provide some color on our new store program, talk about our capital spending, and cover what we are doing with our free cash flow. Starting with store growth, we opened three new stores in the second quarter, bringing our year-to-date openings to six, including one QuickCheck store. We also reopened nine Raisin Rebuilds, transforming small kiosks into 1,400-square-foot stores, bringing us to 11 year-to-date.

Galagher Jeff: Hello everyone, thanks for joining today, and thank you, Andrew, for that setup. This morning, I am going to provide some color on our new store program, talk about our capital spending, and cover what we are doing with our free cash flow. Starting with store growth, we open three new stores in the second quarter, bringing our year-to-date openings to six, including one quick check store. We also reopen nine raising rebuilds, transforming small kiosk into 1,400 square foot stores, bring us to 11 year to date. Our current construction activity is robust, with 22 new stores under construction, including three Quick Check stores and 25 raising rebuilds also underway.

Gallagher: Hello, everyone. Thanks for joining today and thank you Andrew for that set up.

Gallagher: This morning, I'm going to provide some color on our new store program talk about our capital spending and cover what we're doing with our free cash flow.

Galagher Jeff: Our current construction activity is robust, with 22 new stores under construction, including three QuickCheck stores, and 25 Raise and Rebuilds also underway. We expect another slate of new store construction to begin in early September, and I want to emphasize we will achieve our guided range of 30 to 35 new stores this year, accelerating our pace of store growth from 28 openings in 2023. As I mentioned last quarter, the New Store pipeline is in great shape, and we remain highly confident that New Store growth will increase again in 2025, becoming a more sustainable and significant contributor to EBITDA going forward.

Gallagher: So starting with store growth, we opened three new stores in the second quarter, bringing our year to date openings to six including one quick check store.

Galagher Jeff: From a capital spending perspective, we spent $123 million in the second quarter, with about $96 million of that for new store growth and the rest largely going to maintenance capital and technology investment. As referenced in the press release, we are able to push through more Wraith and Rebuild products this year and are now targeting 47 stores, up from a range of 35 to 40 in our original guidance. Keep in mind, timing may impact the final in-service dates, but we are certain to get at least 40 over the finish line, open for business, and serving our customers in 2024. For perspective, the Raise & Rebuild projects are generally easier to permit and build versus a new store.

Speaker Change: We also reopened nine raze and rebuilds transforming small kiosks and the 1400 square foot stores, bringing us to a 11 year to date.

Speaker Change: Our current construction activity is robust with 22, new stores under construction, including three quick check stores and twenty-five raze and rebuilds also underway. We expect another slate of new store construction to begin in early September and I want to emphasize we will achieve our guided range of 30 to 35, new stores this year accelerating our pace of store.

Galagher Jeff: We expect another slate of new store construction to begin in early September, and I want to emphasize, we will achieve our guided range of 30 to 35 new stores this year, accelerating our pace of store growth from 28 openings in 2023. As I mentioned last quarter, the new store pipeline is in great shape, and we remain highly confident that new store growth will increase again in 2025, becoming a more sustainable and significant contributor to EBITDA going forward. From a capital spending perspective, we spent 123 million in the second quarter, with about 96 million of that for new store growth and the rest largely going to maintenance capital and technology investments.

Speaker Change: Growth from 28 openings in 2023.

Speaker Change: As I mentioned last quarter, the new store pipeline is in great shape, and we remain highly confident that new store growth will increase again in 2025, becoming a more sustainable and significant contributor to EBIT going forward.

Speaker Change: From a capital spending perspective, we spent 123 million in the second quarter was about 96 million of that for new store growth and the rest largely going to maintenance capital and technology investments.

Galagher Jeff: As referenced in the press release, we are able to push through more raising rebuild projects this year and are now targeting 47 stores, up from a range of 35 to 40 in our original guidance. Keep in mind, timing may impact the final in-service dates, but we are certain to get at least 40 over the finish line, open for business and serving our customers in 2024. For perspective, the raising rebuild projects are generally easier to permit and build versus the new store. We do like this program as the enhances customer offers, improves the appearance for our stores, and comes with high reinvestment returns.

Speaker Change: As referenced in the press release, we're able to push through more raze and rebuild projects this year.

Speaker Change: We're now targeting 47 stores up from a range of 35 to 40 in our original guidance keep in mind timing may impact. The final in service dates, but we are certain to get at least 40 over the finish line opened for business and serving our customers in 2024.

Speaker Change: For perspective, the raze and rebuild projects are generally easier to permit and build versus a new store we.

Galagher Jeff: We do like this program as it enhances customer offers, improves the appearance of our stores, and comes with high reinvestment returns, so along with share repurchase, this remains a highly effective way for us to deploy our free cash flow. Given the high level of construction activity this year and our ability to get a head start on the 25 new store build class, we expect our full year 2024 capital spending to be at the high end of our 400 to $450 million guided range. But this also means we can expect many more new store openings in the first quarter of 2025, which will add some balance to the new store pipeline and contribute more to 2025 EBITDA.

Speaker Change: We do like this program is enhances customer offers improves the appearance of our stores and comes with high reinvestment returns. So along with share repurchase. This remains a highly effective way for us to deploy our free cash flow.

Galagher Jeff: So, along with share repurchase, this remains a highly effective way for us to deploy our free cash flow. Given the high level of construction activity this year, and our ability to get a head start on the 25 new store build class, we expect our full year 2024 capital spending to be at the high end of our 400 to 450 million dollar guided range. But this also means we can expect many more new store openings in the first quarter of 2025, which will add some balance to the new store pipeline and contribute more to 2025 EBITDA.

Speaker Change: Given the high level of construction activity this year and our ability to get a head start on the 25, new store build class. We expect our full year 2020 for capital spending to be at the high end of our $400 million to $450 million guided range.

Speaker Change: But this also means we can expect many more new store openings in the first quarter of 2025, which will add some balance to the new store pipeline and contribute more to 2025 EBITDA.

Galagher Jeff: Turning the share repurchase, which remains a preferred use of free cash flow beyond growth capital, we continue to be active repurchaseers of our own shares. We bought back 238,000 shares in the second quarter and remain committed to ongoing share repurchase. We continue to execute against the existing board authorization to repurchase up to 1.5 billion of our stock, which extends through 2028. Year to date, we have bought back 454,000 shares for $193 million, leaving about 1.2 billion remaining under our board authorization. To summarize, as Andrew mentioned, Q2 was a good example of how, when we get more from our customers and more from our stores, it creates strong free cash flow we can invest in accelerating our flywheel.

Galagher Jeff: Turning to share repurchase, which remains the preferred use of free cash flow beyond growth capital, we continue to be active repurchasers of our own shares. We bought back 238,000 shares in the second quarter and remain committed to ongoing share repurchase. We continue to execute against the existing board authorization to repurchase up to $1.5 billion of our stock, which expires through 2028. Year to date, we have bought back 454,000 shares for $193 million, leaving about $1.2 billion remaining under our board authorization.

Speaker Change: Turning to share repurchase, which remains a preferred use of free cash flow beyond growth capital. We continued to be active repurchases of our own shares.

Speaker Change: We bought back 238000 shares in the second quarter and remain committed to ongoing share repurchase.

Speaker Change: We continue to execute against the existing board authorization to repurchase up to $1 5 billion of our stock which extends through 2028.

Speaker Change: Year to date, we bought back 454000 shares for $193 million, leaving about $1 2 billion remaining under our board authorization.

Galagher Jeff: To summarize, as Andrew mentioned, Q2 was a good example of how when we get more from our customers and more from our stores, it creates strong free cash flow we can invest in accelerating our flywheel. In Q2, we invested in our technology initiatives and store maintenance. We accelerated our new store growth. We allotted $107 million for share repurchase. We paid our dividend and closed the quarter with nearly $80 million of cash.

Speaker Change: To summarize as Andrew mentioned Q2 was a good example of how when we get more from our customers and more from our stores. It creates strong free cash flow, we can invest in accelerating our flywheel.

Galagher Jeff: In Q2, we invested in our technology initiatives and store maintenance. We accelerated our new store growth. We led to $107 million for share repurchase. We paid our dividend and closed the quarter with nearly $80 million of cash. This free cash flow enables us to invest in our advantage model and maintain a balanced capital allocation of accelerating new store growth and returning cash to shareholders. We expect to continue the strategy, which we believe maximizes long-term shareholder value for the foreseeable future.

Andrew Gallagher: In Q2, we invested in our technology initiatives and store maintenance, we accelerated our new store growth, we lost $107 million for share repurchase we paid our dividend and closed the quarter with nearly $80 million of cash.

Galagher Jeff: This free cash flow enables us to invest in our Advantage model and maintain a balanced capital allocation of accelerating new store growth and returning cash to shareholders. We expect to continue this strategy, which we believe maximizes long-term shareholder value, for the foreseeable future.

Speaker Change: This free cash flow enabled us to invest in our advantaged model and maintain a balanced capital allocation of accelerating new store growth and returning cash to shareholders. We expect to continue this strategy, which we believe maximizes long term shareholder value for the seeable future.

Andrew Clyde: With that, I'll turn the call back over to Andrew. Thanks, Gallagher.

Speaker Change: With that I will turn the call back over to Andrew.

Andrew Clyde: Thanks, Galagher. Let me close with a preliminary view of July's performance. Per-store fuel volumes are largely flat to prior year at retail-only margins of about $0.28 per gallon, several pennies above July of 2023. Whether or not we see a steep fall off in prices that will present a bigger opportunity for margin capture remains to be seen. Geopolitical uncertainty persists, oil prices remain range-bound, high refinery utilization following the turnaround season is boosting gasoline inventories, yet fewer imports are coming into New York Harbor, so line space values are high. There's a whole set of market dynamics playing out, as always, and the ultimate impact on the future direction of fuel prices remains unknown at this time. Will there be a significant fall-off in the third quarter?

Andrew Clyde: Thanks, Gallagher, let me close with a preliminary view of July performance per store fuel volumes are largely flat to prior year at retail only margins of about 28 cents per gallon several pennies above July of 2023.

Andrew Clyde: Let me close with a preliminary view of July performance. Per-store fuel volumes are largely flat to prior year at retail-only margins of about $0.28 per gallon. Several pennies above July of 2023. Whether or not we see a steep fall-off in prices that will present a bigger opportunity for margin capture remains to be seen. Will there be a significant fall-off in the third quarter? All we can say with certainty is that it hasn't happened today; yet we remain certain that the structural dynamics supporting higher retail margins are in place while volatility has been limited due to high inventories and lack of any material shocks to the market.

Speaker Change: Whether or not we see a steep falloff in prices that will present, a bigger opportunity for margin capture remains to be seen.

Speaker Change: Geopolitical uncertainty persist oil prices remain range bound high refinery utilization following turnaround season is boosting gasoline inventories fewer imports are coming into New York Harbor. So line space values are high there's a whole set of market dynamics, playing out as always and the ultimate impact on the future direction of fuel.

Speaker Change: Prices remains unknown at this time.

Speaker Change: Will there be a significant falloff in the third quarter. All we can say with certainty is that it hasn't happened to date, yet we remain certain that the structural dynamic supporting higher retail margins are in place while volatility has been limited due to high inventories and lack of any material shocks to the market.

Andrew Clyde: All we can say with certainty is that it hasn't happened to date, yet we remain certain that the structural dynamics supporting higher retail margins are in place, while volatility has been limited due to high inventories and a lack of any material shocks to the market. Merchandise trends largely reflect the same customer dynamics we have seen in the first half, with stronger performance and non-discretionary categories outpacing softness and discretionary choices. In quick check markets, traffic remains softer than planned, as we've seen in the first half. However, the core Murphy network continues to perform broadly in line with first half results. I'll end with this simple myth.

Andrew Clyde: Mergenized trends largely reflect the same cost of a dynamics we have seen in the first half with stronger performance and non-discretionary categories outpacing softness and discretionary choices. In Quick Check Markets, traffic remains softer than planned as we have seen in the first half.

Speaker Change: It's a nice trends largely reflect the same customer dynamics, we have seen in the first half with stronger performance in non discretionary categories outpacing softness in discretionary choices and quick check markets traffic remains softer than planned as we've seen in the first half. However, the core Murphy network continues to perform broadly in line with first half results.

Andrew Clyde: However, the core Murphy network continues to perform broadly in line with first-half results.

Andrew Clyde: I'll end with a simple message. In times of significant consumer distress, consumers change their purchase behavior, and more of them come to Murphy. When that stress subsides, we find that most stay loyal customers because of the incredible value we delivered on the same products and the empathetic service and smiles they receive from our associates who understand their pain points. For fuel, the severe distress of high prices witnessed in 2022 has subsided only to be replaced by persistent inflation and other categories. Looking at the three-year fuel volume stack to 2022, we've gained over 4% average per storm up gallons, demonstrating the sustainability of growth experience during that difficult period.

Andrew Clyde: I'll end with a simple message in times of significant consumer distress consumers change their purchase behavior and more of them come to Murphy.

Bailey: In times of significant consumer distress, consumers change their purchase behavior, and more of them come to Murphy. When that stress subsides, we find that most stay loyal customers because of the incredible value we deliver on the same products and the empathetic service and smiles they receive from our associates who understand their pain points. For fuel, the severe distress of high prices witnessed in 2022 has subsided only to be replaced by persistent inflation and other categories.

Bailey: That stress subsides, we find that most stay loyal customers because of the incredible value. We delivered on the same products and the empathetic service and smiles they receive from our associates, who understand their pain points for fuel the severe the severe distress of high prices witness in 2022 has subsided.

Bailey: Only to be replaced by persistent inflation in other categories.

Bailey: Looking at the three-year fuel volume stack to 2022, we've gained over 4% average per store month gallons, demonstrating the sustainability of growth experienced during that difficult period. On the other hand, continued price increases on tobacco and other in-store products have created distress that has not subsided. Looking at the multi-year stacks of the overall tobacco category highlights the ability to continue to grow and sustain margin dollars and share. Other categories fall in between as they are most often a part of the basket of a fuel or tobacco destination trip, or, in the case of QuickCheck, a food and beverage trip.

Bailey: Looking at the three year fuel volume start to 2022, we've gained over 4% average per store month gallons demonstrating the sustainability of growth experienced during that difficult period on.

Andrew Clyde: On the other hand, continued price increases on tobacco and other in-store products have created distress that is not subsided. Looking at the multi-year stacks of the overall tobacco category highlights the ability to continue to grow and sustain margin dollars and share. Other categories fall in between as they are most often a part of the basket of a fuel or tobacco destination trip, or in the case of Quick Check, a food and beverage trip. The point is we are well positioned to win in the current environment that challenges our core paycheck-to-paycheck consumer, and we are making the investments to keep them when conditions moderate.

Bailey: On the other hand continued price increases on tobacco and other.

Speaker Change: In store products have created distress that has not subsided looking.

Bailey: Looking at the multi year stacks of the overall tobacco category highlights the ability to continue to grow and sustain margin dollars and share other categories fall in between as they are most often a part of the basket of our fuel where tobacco destination trip or in the case of quick check of food and beverage trips.

Bailey: The point is, we are well positioned to win in the current environment that challenges our core paycheck-to-paycheck consumer, and we are making the investments to keep them when conditions moderate. Indeed, the way we make our flywheel spin faster is to make these investments in value, capabilities, and store growth across the economic cycles, especially in times of consumer distress, as we have the balance sheet and free cash flow to do so. Let us end this, and we'll turn the call back to the operator to open up for questions.

Bailey: Point is we are well positioned to win in the current environment that challenges our core paycheck to paycheck consumer and we're making the investments to keep them when conditions moderate indeed, the way we make our flywheel spin faster is to make these investments in value capabilities and store growth across the economic cycles.

Andrew Clyde: Indeed, the way we make our fly will spin faster is to make these investments in value, capabilities, and store growth across the economic cycles, especially in times of consumer distress, as we have the balance sheet and free cash flow to do so.

Bailey: Especially in times of consumer distress, and we are as we have the balance sheet and free cash flow to do so.

Operator: Let us send this, and we will turn the call back to the operator to open up for questions.

Bailey: Let us in this and we will turn the call back to the operator to open up for questions.

Anthony Bonadio: At this time, I would like to remind everyone that in order to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Anthony Bonadillo with Wells Fargo. Your line is open.

Bailey: At this time, I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Anthony Bonadio with Wells Fargo. Your line is open.

Bailey: Okay.

Speaker Change: At this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad.

Bailey: Your first question comes from the line of Anthony Bonadio with Wells Fargo. Your line is open.

Andrew Clyde: Hey, good morning, guys. Thanks for taking our questions. So I just wanted to start with the new insight guidance. By peeling that back, it seems to imply that your year over year contribution growth decelerates by close to 50 percent in the back half from what you just put up in Q2. So understanding the overall demand backdrop is pretty choppy right now. But on the flip side of that, you've got a pickup in both NTIs, and raise and rebuild, easier comparisons, and then all the self-help stuff you've been talking about. So can you just help us think about the different puts and takes in that forecast and, maybe, how you're thinking about the shape of consumer demand in the back half?

Anthony Bonadio: Good morning, guys. Thanks for taking our question. I just wanted to start with the new insight guidance. We are feeling that back. It seems to imply that your year of year contribution grows. with the 50 bits in the back half from what you just put up in Q2. So, understanding the overall demand backdrop is pretty choppy right now, but on the flip side of that you've got a pick up in both NTIs and raising rebuilds, easier compares, and then all of the self-help stuff you've been talking about.

Anthony Bonadio: Hey, good morning, guys.

Anthony Bonadio: Thanks for taking our questions. So I just wanted to start with the new inside guidance.

Andrew Clyde: We're peeling that back and it seems to imply that.

Andrew Clyde: Your year over year contribution growth Decelerates by close to 50 bps in the back half from what you just put up in Q2.

Andrew Clyde: Understanding the overall demand backdrop is pretty choppy right now, but on the flip side of that you've got a pickup in both ntis.

Andrew Clyde: And raze and rebuilds easier compares and then all of the self help stuff you've been talking about so can you just help us think about the different puts.

Andrew Clyde: So, can you just help us think about the different puts and takes in that forecast and just maybe how you're thinking about the shape of consumer demand in the back half?

Andrew Clyde: Puts and takes in that forecast and just maybe how youre thinking about the shape of consumer demand in the back half.

Andrew Clyde: Sure. So, as I mentioned in the prepared remarks, the merchandise contribution from QuickCheck is the single biggest driver of the adjusted guidance. In this largely reflects a view in our internal plan where we expected transactions to rebound year over year, where we've actually seen some continued softness with the persistent inflation, QSR competition, value mill pricing, etc. And so, we continue to see the same pattern for the rest of this year.

Andrew Clyde: Sure. So as I mentioned in the prepared remarks, the merchandise contribution from QuickCheck is the single biggest driver of the adjusted guidance. And this largely reflects a view in our internal plan where we expected transactions to rebound year over year, but we've actually seen some continued softness with persistent inflation, QSR competition, value mill pricing, etc. And so we continue to see the same pattern for the rest of this year.

Andrew Clyde: Sure.

Speaker Change: So as I mentioned in the prepared remarks, the merchandise contribution from quick check is the single biggest driver.

Andrew Clyde: The adjusted guidance and this largely reflects a view in our internal plan, where we expected transactions to rebound year over year.

Andrew Clyde: We've actually seen some continued softness with this persistent inflation <unk> competition value mill pricing.

Andrew Clyde: The initiatives that we have in place, some of which are driving improvements at QuickCheck, are therefore on a lower transaction base than what is planned as well, and most of those initiatives are second half weighted. You're right around the NTIs.

Andrew Clyde: Et cetera.

Andrew Clyde: So we continue to see the <unk>.

Andrew Clyde: Same pattern.

Andrew Clyde: For the rest of this year the initiatives that we have in place some of which that are.

Andrew Clyde: The initiatives that we have in place, some of which are driving improvements at QuickCheck, are therefore on a lower transaction base than what is planned as well, and most of those initiatives are second half weighted. You're right around the NTIs. In fact, we're about to start on a large launch of those, but those will be ramping up towards the very end of the year and not contributing as much; in the same with the extra raise and rebuilds. So, as I said, the biggest driver is what we've seen in terms of velocity of transactions in QuickCheck.

Andrew Clyde: Driving improvements at quick check are therefore on a lower transaction base.

Andrew Clyde: Then what is planned as well and most of those initiatives are second half weighted you are right around the ntis are in fact, we're about to start on a large tranche of those but those will be ramping up towards the very end of the year and not contributing as much and the same with the extra raze and rebuilds. So as I said the biggest drivers what we've seen in <unk>.

Andrew Clyde: In fact, we're about to start on a large tranche of those, but those will be ramping up towards the very end of the year and not contributing as much. And the same with the extra raises and rebuilds. So, as I said, the biggest driver is what we've seen in terms of velocity of transactions and QuickCheck, and it's more a function of the aggressive plan that we've built in that's causing the guidance change versus just the 2% decline that we witnessed this quarter.

Andrew Clyde: <unk>.

Andrew Clyde: Velocity.

Andrew Clyde: Of transactions and quick check and it's more a function of the aggressive plan that we had built in.

Anthony Bonadio: And it's more a function of the aggressive plan that we've built in that's causing the guidance chain versus just the 2% decline that we witness this quarter. Got it. That's really helpful.

Andrew Clyde: That's causing the guidance change versus just 2% decline that we witnessed this quarter.

Speaker Change: Got it that's really helpful.

Andrew Clyde: And then switching to the gas margins, I guess as we think about modeling that out in the back half, a lot of uncertainty, but maybe some thoughts on how much of Q2 was maybe a function of more temporary price dynamics versus strong underlying fundamentals, and just any updated thoughts on that 30 to 34 cents per gallon range you guys talked about starting the year. Sure, look, I mean every quarter is different and we always just got to remember, what are the biggest drivers of outside fuel margins? You know, the first one is, are you going to have a steep run-up and then a sharp fall-off in prices?

Speaker Change: Then just switching gears the gas margins I guess as we think about modeling that out in the back half a lot of uncertainty but.

Speaker Change: So maybe some thoughts on how much of Q2 was maybe a function of more temporary price dynamics versus.

Speaker Change: Strong underlying fundamentals and just any updated thoughts on that.

Speaker Change: 30 to 34 cents per gallon range, you guys talked about starting the year.

Andrew Clyde: [inaudible] Sure, look, I mean, every single one.

Andrew Clyde: Sure, look, I mean, every quarter is different. And we always just got to remember what are the biggest drivers of outsized fuel margins. You know, the first one is, are you going to have a steep run-up and then a sharp fall off in prices?

Speaker Change: Sure look I mean every quarter is different and we always just got to remember what are the biggest drivers of outsized fuel margins. The first one is are you going to have a steep run up and then a sharp falloff in prices and we haven't seen that yet we often see that in Q3.

Andrew Clyde: And we haven't seen that yet. We often see that in Q3. We've seen Q3s where there were exceptional fall-offs like 2022, but it took something pretty material for that run up. And I think going back to 2016, we saw a run-up in prices based on some OPEC changes in Q3, but then we saw the big fall-off in Q4. So, Anthony, I wish we had a crystal ball. It'd make all our lives a lot easier, but we don't.

Andrew Clyde: And we haven't seen that yet. We often see that in Q3. We've seen Q3s where it's been exceptional fall-offs like 2022, but it took something pretty material for that run-up. And I think going back to 2016, we seen a run-up in prices based on some OPEC changes in Q3, but then we saw the big fall-off in Q4.

Andrew Clyde: We've seen Q3s, where it's been exceptional fall off like 2022, but it took something pretty material for that run up and I think going back to 2016, we've seen a run up in prices.

Andrew Clyde: Based on some OPEC.

Andrew Clyde: Changes in Q3, but then we saw the big fall off in Q4, So Anthony I wish we had a crystal ball would make all of our lives a lot easier, but we don't.

Andrew Clyde: Anthony, I wish we had a crystal ball and make all our lives a lot easier, but we don't. What we can say is that, again, there was nothing really exceptional about Q2. There's a lot of inventory, a lot of inventories built up, but we are seeing stronger line space. And so those inventories work down, and we continue to see line space. We could see, you know, some strength there. There's nothing in what I would call the competitive dynamic that creates any concerns. So if you think about this quarter's margins, July's margins that we noted in a period of low volatility, that remains strong.

Andrew Clyde: What we can say is that, again, there was nothing really exceptional about Q2. There was a lot of inventory, a lot of inventories built up, but we are seeing stronger line space. And so, those inventories work down, and we continue to see line space. We could see, you know, some strength there. There's nothing in what I would call the competitive dynamic that creates any concern. So, if you think about this quarter's margins, July's margins that we noted in a period of low volatility, that remains strong.

Andrew Clyde: What we can say is that again, there was nothing really exceptional about Q2.

Andrew Clyde: There is a lot of inventory.

Andrew Clyde: Lot of inventories.

Andrew Clyde: Built up but we are seeing stronger line space and so those inventories worked down and we should continue to see line space, we could see.

Andrew Clyde: Some strength there there's nothing in what I would call the competitive dynamic.

Andrew Clyde: That creates any concerns. So if you think about this quarter's margins july's margins that we noted in a period of low volatility that remains strong. So I think the biggest driver of our 30.

Andrew Clyde: So I think the biggest driver of a 30 cent low end of the range, the 34 cent high end of the range, is are we going to see a sharp fall-off or not in prices and, you know, something geopolitically or logistically in the US infrastructure would have to happen for that to occur.

Andrew Clyde: So, I think the biggest driver of a $0.30 low end of the range to $0.34 high end of the range is, are we going to see a sharp fall off or not in prices? And, you know, something geopolitically or logistically in the U.S. infrastructure would have to happen for that to occur.

Andrew Clyde: Set low end of the range to 34% of the range, 34% high end of the range is are we going to see a sharp fall off.

Andrew Clyde: And prices in <unk>.

Andrew Clyde: Something jia politically or logistically and the U S infrastructure, what happened for that to occur.

Andrew Clyde: Okay.

Speaker Change: Thanks, guys.

Andrew Clyde: Okay.

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

Bailey: Your next question comes from the line of Bonnie Hergaz with Goldman Sachs. Your line is open.

Speaker Change: Your next question comes from the line of.

Bailey: Bonnie Herzog with Goldman Sachs. Your line is open.

Bailey: All right. Thank you.

Bonnie Herzog: All right. Thank you. Good morning.

Bonnie Hergaz: Alright, Thank you good morning.

Bonnie Herzog: Good morning, Bonnie. Good morning. I wanted to ask about the consumer, you know, in light of the pressures that we're seeing, and then certainly your comments on the environment.

Speaker Change: Good morning, Bonnie.

Andrew Clyde: Good morning. Good morning, Donnie. Good morning. I wanted to ask about the consumer, you know, in light of the pressures that we're seeing, and then certainly your comments on the environment, Andrew. I guess I'd be curious to hear what additional levers you can pull to drive improved traffic in the back half of the year, whether that, you know, is stepped up promotions, etc. And then curious, why do you think the Northeast is maybe, you know, the consumer there, I guess, having a more significant impact than maybe what we're seeing or you're seeing in other regions?

Bonnie Hergaz: I wanted to ask about the consumer you know in light of the pressures that we're seeing and then secondly your comments.

Andrew Clyde: Andrew, I guess I'll be curious to hear. You know, what additional levers you can pull to drive improved traffic in the back half of the year, whether that, you know, stepped-up promotions, etc. And then curious, why do you think the Northeast is maybe, you know, a consumer that I guess having a more significant impact and maybe what we're seeing or you're seeing in other regions. Sure. I mean, if you just start with the Northeast, I mean, the rate of inflation is higher there than some of the other regions. And the fact we had Goldman economists to present some information to us the other day that showed those exact same, same factors.

Andrew Clyde: On the environment, Andrew I guess I'd be curious to hear what additional levers you can pull to drive improved traffic in the back half of the year, whether that stepped up promotions et cetera, and I'm curious why do you think the northeast is maybe it isn't.

Andrew Clyde: And whether I guess, having a more significant impact than maybe what we're seeing or youre seeing in other regions.

Andrew Clyde: Sure. I mean, if you just start with the Northeast, the rate of inflation is higher there than some of the other regions. And, in fact, we had Goldman Economists present some information to us the other day that showed those exact same factors. So, you know, all the economic regions are faring a little differently. Murphy just happens to be in regions where inflation hasn't been as high.

Andrew Clyde: Sure I mean, if you just start with the northeast I mean, the rate of inflation is higher there than some of the other regions.

Andrew Clyde: In fact, we had to Goldman economist present, some information to us. The other day that showed those exact same same factors. So all of the economic regions are bearing a little differently Murphy just happens to be.

Andrew Clyde: So, you know, all the economic regions are faring a little differently. Murphy just happens to be in regions where the inflation hasn't been as high. You know, as I noted, the food-at-home inflation to date has been lower than the food-away-from-home. And so, you know, we see our QC Rewards members coming back. We are not losing guests, but they are making on the margin one less trip, for example, or they're trading down from a 12-inch sub to a six-inch sub, or they're taking value of something from our two-for-five made to stock warmer items. So, that's the behavior that we're seeing.

Andrew Clyde: In regions, where the inflation hasn't been as high.

Andrew Clyde: You know, as I noted, food inflation at home has been lower than food away from home. And so you know, we see our QC rewards members coming back; we are not losing guests, but they are making on the margin, one less trip, for example, or they're trading down from a 12 inch sub to a six inch sub, or they're taking value out of something from our two for five made to stock warmer items. So that's the behavior that we're seeing. And I think it's pretty normal, you know, trade down behavior on something they need to subsist on.

Andrew Clyde: As I noted the food at home inflation.

Andrew Clyde: To date has been lower than the food away from home and so.

Andrew Clyde: We see our QC rewards members coming back we are not losing guest but they are making on the margin.

Andrew Clyde: One last trip for example, or they're trading down from a 12 inch sub two of six sub or theyre taken value of something from our two for five.

Andrew Clyde: <unk> made the stock warmer items. So that's the behavior that we're seeing and I think it's pretty normal trade down behavior on something they need to subsist.

Andrew Clyde: And I think it's pretty normal, you know, trade-down behavior on something they need to subsist from a food standpoint. You know, I think on the Murphy side, you know, we're seeing the behavior that we've continued to see, right? Non-discretionary items. People are trading down to lower price retailers. We're getting more Murphy Driver Awards customers every month, every quarter, year over year. And they are ramping up and accelerating their growth, the newest customers faster than the prior year cohorts. So, I think that's a consumer behavior that benefits us. And we don't have to get super extra aggressive from a promotional standpoint, because the players and many of those products continue to raise their prices, sometimes with price increases where they keep more of the pennies.

Andrew Clyde: You know, from a food standpoint, you know, I think on the, you know, Murphy side, we're seeing the behavior that we've continued to see right, non-discretionary items, people are trading down to lower price retailers, we're getting more Murphy drive rewards customers every month, every quarter year over year, and they are ramping up and accelerating their growth, the newest customers faster than the prior year cohorts. So I think that's a consumer behavior that benefits us.

Andrew Clyde: From a food standpoint.

Andrew Clyde: Think on the.

Andrew Clyde: The Murphy side, we're seeing the behavior that we've continued to see right now on discretionary items people are trading down to lower price retailers were getting more Murphy drive rewards customers every month every quarter year over year, and they are ramping up and accelerating their growth the newest.

Andrew Clyde: Customers faster than the prior year cohorts so.

Andrew Clyde: I think that's a consumer behavior of that.

Andrew Clyde: Fits us and we don't have to get Super extra.

Andrew Clyde: And we don't have to get super extra aggressive from a promotional standpoint because the players and many of those products continue to raise their prices, sometimes with price increases, where they keep more of the pennies, and we share more of them with the consumer. So our just natural differential widens over time, and I think that's led to some of the outsized gains that we've had there. I think the center store categories are just another discretionary choice.

Andrew Clyde: Aggressive from a promotional standpoint.

Andrew Clyde: The players in many of those products continue to raise their prices, sometimes with price increases where they keep more of the pennies.

Andrew Clyde: And we share more of them with the consumer, so our natural differential widens over time. And I think that's led to some of the outside games that we've had there. I think the center store categories are just another discretionary choice. And on the margin, if someone's feeling a dollar short, they're just one less thing they're going to put in their basket on that trip. But I think the important message is, we are not losing guests. We are keeping our gaining guests because of the value proposition, but those guests are making some choice.

Andrew Clyde: And we share more than what the consumer so are just natural differential widens.

Andrew Clyde: Over time, and I think Thats led to some of the outsized gains that we've had there I think the center of store categories are just another discretionary choice.

Andrew Clyde: And on the margin, if someone's feeling a dollar short, it's just one less thing they're going to put in their basket on that trip. But I think the important message is we are not losing guests; we are keeping or gaining guests because of the value proposition, but those guests are making some choice.

Andrew Clyde: And on the margin of someone's feeling $1 short there just one less thing theyre going to put in their basket.

Andrew Clyde: On that trip.

Andrew Clyde: But I think the important message is we are not losing guest we are keeping are gaining gas because of the value proposition, but those guests are making some choices.

Unknown Executive: Could I add one thing, Andrew? Bonnie, thank you for spending time in our QuickCheck stores this quarter, and hopefully, you saw some of the technology that's really responding with customers. We are seeing a lot of good traction from our QuickCheck Rewards members. There's over a 10-point difference in their behavior versus non-members. And we're seeing mid- to high-single-digit growth in transactions and sales from our QuickCheck Rewards members. And as we grow that program and relaunch it in the second half, we really think we're going to make more of an impact on that business. So the trips, most of the transactions we're losing, are not from those that know us best. And as we expand that program and grow it, we expect the loyalty to be even stronger.

Speaker Change: Can I add one thing Andrew.

Andrew Clyde: Thank you for spending time in our quick check stores this quarter, and hopefully it's also on the technology that's really resonating with customers. We are seeing a lot of good traction from our Quick Check Rewards members. There's over a ten-point difference between their behavior versus the nonmembers. And we're seeing mid to high single-digit growth in transactions and sales from our quick check reward members. And as we grow that program and relaunch in the second half, we really think we're going to make more of an impact on that business. So the trips, most of the transactions we're losing are not from those that know us best.

Speaker Change: Thank you for spending time in a quick check stores this quarter and hopefully you saw some of the technology, that's really resonating with customers. We are seeing a lot of good traction from a quick check rewards members.

Unknown Executive: Over a 10 point difference between their behavior versus the non members and we're seeing mid to high single digit growth in transactions and sales from our quick check reward members and as we grow that program and re launched in the second half really think we're going to make more of an impact on that business. So the trips most of the transactions were losing or not from those that know us best.

Andrew Clyde: And as we expand that program and grow it, we expect a low of T to even be stronger.

Unknown Executive: And as we expand that program and grow it we expect the loyalty to even be stronger.

Bonnie Herzog: Okay, that's a good point, and I think that's an opportunity to just touch on that in terms of sharing best practices, right, as you have a lot of learnings that you can kind of implement throughout the broader store base, I guess.

Andrew Clyde: Okay, that's a good point. And I think that's an opportunity to just touch on that in terms of sharing best practices, right, as you have a lot of learnings that you can kind of implement throughout the broader store base. If I may, just one last question from me, different topic, you know, just sort of on capital allocation, M&A, you know, one of your peers announced a pretty large acquisition recently.

Andrew Clyde: Okay. That's a good point and I think thats an opportunity can you just touch on that in terms of sharing best practices right. As you have a lot of learnings that you can kind of implement throughout the broader Darby I guess.

Bonnie Herzog: Okay, if I may just one last question from me on different topics, you know, just sort of on capital allocation, M&A. You know, one of your peers announced a pretty large acquisition recently. So just curious, how active or not you've been in the M&A market and, you know, where are you seeing multiple trends, you know, versus last year and really maybe versus historical level.

Andrew Clyde: So just curious how active or not you've been in the M&A market. And, you know, where are you seeing the multiples trend, you know, versus last year and, really, maybe versus historical levels. And then, lastly, I guess, you know, where are you seeing the greatest returns right now? Is it, you know, buying back your stock, M&A? New store growth, rates, and rebuilds, etc. Thank

Andrew Clyde: Okay.

Andrew Clyde: Okay.

Andrew Clyde: I may just one last question for me on different topic, just sort of on capital allocation M&A. You know one of your peers announced a pretty large acquisition recently, so just curious how active or not you've been in the M&A market and where are you seeing multiple trends versus last year really maybe versus <unk>.

Andrew Clyde: So then lastly, lastly, I guess, you know, where are you seeing the greatest returns right now? Is it, you know, buying back your stock, M&A, new store growth, race and rebuilds, et cetera? Thank you.

Andrew Clyde: <unk> levels, and then lastly, lastly, I guess.

Andrew Clyde: Are you seeing the greatest returns right now is it buying back your stock M&A historic growth rates and rebuilds et cetera. Thank you.

Andrew Clyde: Sure. I mean, in terms of M&A context, you know, we see most of the, you know, transactions, you know, as they rise, and as we've talked about before, you know, many consist of, you know, a pretty varied mix of quality performance, age and investment that has to be put back into them. And I think one of the most fundamental things we look at is, one is, you know, how does the EBITDA store compare to the extremely high productivity of our stores where we do not have a tail of low performing stores like most commodity retailers do?

Andrew Clyde: Sure. I mean, in terms of the M&A context, you know, we see most of the, you know, transactions as they rise. And as we've talked about before, many consist of, you know, either portfolios that have a pretty varied mix of quality, performance, age, and investment that has to be put back into them. And I think one of the most fundamental things we look at is, you know, how does the EBITDA store compare to the extremely high productivity of our stores, where we do not have a tail of low-performing stores like most commodity retailers do?

Speaker Change: Sure I mean in terms of the M&A context, we see most of the.

Andrew Clyde: Transactions.

Andrew Clyde: As they rise and as we've talked about before.

Andrew Clyde: Any consist of.

Andrew Clyde: Either portfolios that have a pretty varied mix of.

Andrew Clyde: Our quality performance.

Andrew Clyde: Age and investment that has to be put back into them and I think one of the most fundamental things we look at is.

Andrew Clyde: One is how does the EBITA store.

Andrew Clyde: Compare to the extremely high productivity.

Andrew Clyde: Our stores, where we do not have a tail of low performing stores like most commodity retailers.

Andrew Clyde: And then secondly, would you be able to take that entire chain to an everyday low price position consistent with your value proposition? And so when you see chains that are highly concentrated in certain markets, you realize it just doesn't meet the criteria on many, many dimensions.

Andrew Clyde: And then secondly, would you be able to take that entire chain to an everyday low price position consistent with your value proposition? And so when you see chains that are highly concentrated in certain markets, you recognize it just doesn't meet the criteria on many, many dimensions.

Andrew Clyde: Do and then secondly would you be able to take that entire chain to an everyday low price position consistent with your value proposition and so when you see chains that are highly concentrated in certain markets you recognize it just doesn't meet the criteria.

Andrew Clyde: On many many dimensions when we look at our organic growth opportunity, we just see that as a better capital return because you're getting a new store design the way we want it the way our customers want it that works for our employees, where we don't have to then go in and take out 20.

Andrew Clyde: When we look at our organic growth opportunity, we just see that as a better capital return because you're getting a new store designed the way we want it, the way our customers want it that works for our employees, where we don't have to then go in and take out 20 to 30-year-old tanks that are sitting in the ground. You don't have to spend significant capital, you know, on rebranding the stores or getting out of unbranded or getting out of branded fuels contracts, etc. So, you know, our preferred approach is organic strategy.

Andrew Clyde: When we look at our organic growth opportunity, we just see that as a better capital return because you're getting a new store designed the way we want it, the way our customers want it, that works for our employees, where we don't have to then go in and take out 20 to 30-year-old tanks that are sitting in the ground. You don't have to spend significant capital on rebranding the stores or getting out of unbranded or getting out of branded fuel contracts, etc.

Andrew Clyde: To 30 year old tanks that are sitting in the ground you don't have to spend significant capital.

Andrew Clyde: On rebranding the stores are getting out of unbranded or getting out of branded fuels contracts et cetera. So.

Andrew Clyde: So our preferred approach is the organic strategy. With the share price improvement that we've had, it's pretty hard to say that it hasn't been our highest return investment. But the only reason it's a high-return investment is that we continue to grow our EBITDA, position that growth in front of investors so it shows up in the multiple, and buy back the shares. And so if I put into context where we expect to be in 2028, we'll have grown EBITDA by a billion dollars since the spin.

Andrew Clyde: Our preferred approach is.

Andrew Clyde: Our organic strategy with the share price improvement that we've had is pretty hard to say that hasnt been our highest.

Andrew Clyde: With the share price improvement that we've had, it is pretty hard to say that hasn't been our highest return investment, but the only reason it's a high return investment is we continue to grow, you know, our EBITDA position. That growth in front of investors, so it shows up in the multiple and buy back the shares. And so, if I put into context where we expect to be in 2028, we will have grown EBITDA by a billion dollars since the spin. We will have almost doubled our multiple, and we'll bought back over 60% of the flow.

Andrew Clyde: Our return.

Andrew Clyde: Investment, but the only reason it's a high return investment as we continue to grow.

Andrew Clyde: Our EBITDA position that growth in front of investors. So it shows up in the multiple and buyback the shares and so if I put into context, where we expect to be in 2028, we will have grown EBITDA by $1 billion. Since the spin we will have almost doubled our multiple and we will bought back over 60%.

Andrew Clyde: We have almost doubled our multiple, and we'll buy back over 60% of the float. And so it's really a combination. It's that balanced capital allocation. And as long as we see very high returns and improving enhanced returns in our new industry stores and rates and rebuild stores and the investments we're making in our capabilities, those are probably some of our highest return on investment capability building investments. It's really that combination. And so unless there's just something perfectly unique about the M&A opportunity, we're going to stay focused on our way to play and our way to win.

Andrew Clyde: And so, it's really a combination. It's that balance capital allocation, and as long as we see very high returns and improving enhanced returns in our new industry stores and rebuild stores and the investments we're making in our capabilities. Those are probably some of our highest return on investment capability building investments. It's really that combination.

Andrew Clyde: The float and so it's really a combination is that balanced capital allocation and as long as we see very high returns and improving enhanced returns and our new to industry stores, and raze and rebuild stores and the investments we're making in our capabilities. Those are probably some of our highest return on investment.

Andrew Clyde: Capability building investments, it's really that combination and so unless there is something perfectly unique unicorn about the.

Andrew Clyde: And so, unless there's just something perfectly unique unicorn about the M&A opportunity, we're going to stay focused on our way to play and our way to win. All right.

Andrew Clyde: M&A opportunity, we're going to stay focused on our way to play in our way to win.

Andrew Clyde: All right, thank you for that.

Bonnie Herzog: Thank you for that.

Speaker Change: Alright, thank you for that.

Corey Tarlowe: And your next question comes from the line of Corey Tarlowe with Jeffries. Your line is open.

Bailey: And your next question comes from the line of Corey Tarlowe with Jeffreys. Your line is open.

Andrew Clyde: And your next question comes from the line of Cory <unk> with Jefferies. Your line is open.

Bailey: Great. Thank you so much.

Andrew Clyde: I was wondering if you could talk a little bit about the promotional intensity that you're seeing in your stores. I think you highlighted some higher promotional intensity in carbonated soft drinks. I'm curious about your willingness and or need to pull that lever to potentially boost merchandise sales inside the store and how you think about the ability to do that to drive traffic and volume.

Corey Tarlowe: Great. Thank you so much.

Corey Tarlowe: Great. Thank you. So much I was wondering if you could talk a little bit about the promotional intensity that you're seeing in your stores I think you highlighted some higher promotional intensity in carbonated soft drinks and curious about your willingness <unk> need to pull that lever to potentially boost.

Andrew Clyde: I was wondering if you could talk a little bit about the promotional intensity that you're seeing in your stores. I think you highlighted some higher promotional intensity and carbonated soft drinks. I'm curious about your willingness and or need to pull that lever to potentially boost merchandise sales inside the store and how you think about the ability to do that to drive traffic and volumes. Look, we’re always going to be known for everyday low price, and across the various center store categories and package beverages, you’re always going to see some promotional activity going on in our store.

Speaker Change: <unk> sales inside the store and how you think about the ability to do that.

Speaker Change: Drive traffic and volumes.

Andrew Clyde: Look, we're always going to be known for the everyday low price. And across the various center store categories and packaged beverages, you're always going to see some promotional activity going on in our store. We represent such a significant baseload volume for so many providers that that type of promotional activity is just part of the value pricing that we do. So I would not say that there's anything unique or one-time or difficult to compete over, you know, in terms of our promotional activity.

Speaker Change: Look we're always going to be known for everyday low price and across the various center of store categories and packaged beverages, youre always going to see some promotional activity going on in our store, we represent such a significant base load volume for so many providers.

Andrew Clyde: We represent such a significant base load volume for so many providers that that type of promotional activity is just part of the value pricing that we do. So I would not say that there's anything unique or one time or difficult to comp over, you know, in terms of our promotional activity. Got it.

Andrew Clyde: That that type of promotional activity.

Andrew Clyde: It's just part of the value pricing that we do so I would not say that there's anything unique or one time or difficult to comp over.

Andrew Clyde: In terms of our promotional activity.

Andrew Clyde: Got it. And then just on OPEX per store, I mean, you mentioned that you're opening larger stores, and you've certainly been making some wage investments as well. How should we be thinking about the shape of the OPEX curve as you continue to open new stores and then again, make these investments in some of these larger stores and your people?

Andrew Clyde: And then just on the OPEX for store, I mean, you mentioned that you're opening larger stores, and you've certainly been making some wage investments as well.

Speaker Change: Got it and then just on the Opex per store I mean, you mentioned that you're opening larger stores and you've certainly been making some wage investments as well how should we be thinking about the shape of the opex curve as you continue to.

Andrew Clyde: How should we be thinking about the shape of the OPEX curve as you continue to open new stores and then again make these investments in some of these larger stores and in your people. Yeah, so the component that relates to new larger stores will increase because we're increasing the number of new larger stores that we're building. The numbers associated with raising rebuild will increase as we increase the raising rebuild. The amounts related to, you know, kind of one time catch up wage investments that we needed to do for some of our most important cohorts will normalize because we've made those investments, and they'll go back to a normal merit type increase.

Speaker Change: <unk> opened new stores and then again make these investments in some of these larger stores and your people.

Andrew Clyde: Yes, so the component that relates to new larger stores will increase because we're increasing the number of new larger stores that we're building. The numbers associated with raises and rebuilds will increase as we increase the raises and rebuilds. The amounts related to, you know, kind of one-time catch-up wage investments that we needed to do for some of our most important cohorts will normalize because we've made those investments, and they'll go back to a normal merit increase.

Speaker Change: Yes, so the component that relates to new larger stores will increase because we are increasing the number of new larger stores that we're building.

Andrew Clyde: The numbers associated with raze and rebuilds will increase as we increase the raze and rebuilds the amounts related to kind of a onetime catch up wage investments that we needed to do for some of our most important cohorts.

Andrew Clyde: Will normalize because we've made those investments and they will go back to a normal merit type increase and the increase attributable to dispenser maintenance coming off of warranty will normalize as those cycle over our E&E period. So those were the main drivers and the biggest part going forward we will.

Andrew Clyde: And the increase attributable to dispenser maintenance coming off a warranty will normalize as those cycle over our EMV period. So those were the main drivers, and the biggest part going forward will continue to be the new store. The important thing to always remember is the enhanced merchandise performance of those new stores, which largely outstrips the increase in, you know, wage rates. So that's why we look at our coverage ratio, our old fuel break-even metric, etc. It's really the expansion of the merchandise contribution and doing that efficiently that is the key metric that you want to be looking at, not just the pure op-ex by itself.

Andrew Clyde: And the increase attributable to dispenser maintenance coming off warranty will normalize as those cycle over our EMV period.

Andrew Clyde: So those were the main drivers, and the biggest part going forward will continuing to be the new store. The important thing to always remember is the enhanced merchandise performance of those new stores, which largely outstrips the increase in wage rates. So that's why we look at our coverage ratio or our old fuel breakeven metric, et cetera.

Andrew Clyde: <unk> to be the new store the important thing to always remember is the enhanced merchandise performance of those new stores, which largely outstrips the increase in.

Andrew Clyde: Wage rate. So that's why we look at our coverage ratio our old fuel breakeven metric.

Andrew Clyde: It's really the expansion of the merchandise contribution in doing that efficiently is the key metric that you want to be looking at, not just the pure off X by itself.

Andrew Clyde: Et cetera, it's really the expansion of the merchandise contribution and doing that efficiently is the key metric that you want to be looking at not just the pure opex by itself.

Corey Tarlowe: Great. Thank you very much, and best of luck.

Speaker Change: Great. Thank you very much and best of luck.

Speaker Change: Thank you.

Andrew Clyde: Yeah.

Operator: And there are no further questions at this time.

Andrew Clyde: And there are no further questions at this time I will now turn the call back over to Andrew for closing remarks.

Andrew Clyde: I will now turn the call back over to Andrew for closing remarks.

Andrew Clyde: Great.

Andrew Clyde: Thank you, everyone, for joining us today. As we know, these are challenging times for many consumers, and I think, as we've illustrated, Murphy's long-term commitment to serving those customers with value, doing it in better ways with our new capabilities and continuing to grow, not only wins for them, but wins for all of us as investors as well.

Speaker Change: Great. Thank you everyone for joining us today as we know these are challenging times for many consumers and I think as we've illustrated Murphy's long term commitment to serving those customers with value doing it in better ways with our new capabilities and continuing to grow not only wins for them, but wins for all of us as investors as well. Thanks.

Operator: Thanks for your time today.

Speaker Change: For your time today.

Operator: This concludes today's conference call. You may now disconnect. Please wait; the conference will begin shortly. You may now disconnect. Please wait; the conference will begin shortly.

Speaker Change: This concludes today's conference call you may now disconnect.

Andrew Clyde: Great. Thank you very much and best of luck.

Bailey: And there are no further questions at this time. I will now turn the call back over to Andrew for closing remarks.

Speaker Change: Please wait the conference will begin shortly.

Bailey: Sure.

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