Q3 2025 Casey's General Stores Inc Earnings Call

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising that your hand is raised to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

Brian Johnson: Brian Johnson Senior Vice President of Investor Relations and business development. Please go ahead.

Brian Johnson: Good morning, and thank you for joining us to discuss the results from the third quarter ended January 31, 2025, I'm, Brian Johnson Senior Vice President Investor Relations and business development with me today are Denver rebellious Chairman, President and Chief Executive Officer, as well as Steve Bramlage, Chief Financial Officer before we begin I'll remind you that.

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Brian Johnson: Certain statements made by us during this investor call May constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095. These forward looking statements include any statements relating to the potential impact of the bikes transaction expectations for future periods possible or assumed future results of operations financial conditions.

Good day and thank you for standing by welcome to the Q3 fiscal year 2025, Casey's General stores earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear it.

Brian Johnson: Liquidity unrelated sources or needs the company supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores. There are a number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward.

And made it message advising that your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker today, Brian Johnson Senior Vice President of Investor Relations and business development. Please go ahead.

Brian Johnson: Good morning, and thank you for joining us to discuss the results of our third quarter ended January 31 2025.

Brian Johnson: Looking statements, including but not limited to the integration of the reach of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan the impact and duration of the conflict in Ukraine and related governmental actions as well as other risks uncertainties and factors, which are described in our most recent annual report on.

Brian Johnson: Brian Johnson Senior Vice President Investor Relations and business development with me today are Denver, rebellious Chairman, President and Chief Executive Officer, as well as Steve Bramlage, Chief Financial Officer.

Brian Johnson: Before we begin I'll remind you that certain statements made by us during this investor call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

Brian Johnson: Form 10-K, and corridor quarterly reports on Form 10-Q as filed with the SEC and available on our website any forward looking statements made during this call reflect our current views as of today with respect to future events and Casey's disclaims any intention or obligation to update or revise forward looking statements, whether as a result of new info.

Brian Johnson: These forward looking statements include any statements relating to the potential impact of the bikes transaction expectations for future periods possible or assumed future results of operations financial conditions.

Brian Johnson: Nation future events or otherwise.

Brian Johnson: <unk> and related sources or needs the company supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores. There are a number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward looking.

Brian Johnson: A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as detailed breakdown of the operating expense increase for the third quarter can be found at our website at www Dot Casey's dot com under the Investor Relations link, but that said I would now like to turn the call over to Darren to discuss our third quarter results there.

Brian Johnson: Including but not limited to the integration of the reach of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from our strategic plan the impact and duration of the conflict in Ukraine and related governmental actions as well as other risks uncertainties and factors, which are described in our most recent annual report on form 10.

Darren: Thanks, Brian and good morning, everyone. We're excited to discuss the excellent third quarter results in a moment.

Darren: Before I do I want to thank the entire cases team for delivering another outstanding quarter.

Darren: I'd also like to highlight our feeding America campaign kicked off in late February and partnership with Celsius.

Brian Johnson: Jay and Cardinal quarterly reports on Form 10-Q as filed with the SEC and available on our website any forward looking statements made during this call reflect our current views as of today with respect to future events and Casey's disclaims any intention or obligation to update or revise forward looking statements, whether as a result of new information.

Darren: Through April 1st we're excited to be able to help communities in need including rural areas increases country combat hunger and food insecurity.

Darren: Now, let's get into the results from our book.

Darren: Diluted EPS finished at $2 33 per share and net income was $87 million, both flat with the prior year EBIT.

Brian Johnson: Events or otherwise.

Brian Johnson: A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as detailed breakdown of the operating expense increase for the third quarter can be found at our website at www Dot <unk> dot com under the Investor Relations link.

Darren: EBITDA was up was $242 million up 11% from the prior year.

Darren: [noise] inside sales were up over 15% and fuel gallons sold were up over 20%, while our store count growth was up 10% versus the prior year, an encouraging sign that the economic impact of the stores, we were building and buying is greater than the company average.

Darren: I would now like to turn the call over to Darren to discuss our third quarter results Darren.

Darren: Thanks, Brian and good morning, everyone.

Darren: Thats excellent third quarter results in a moment.

Darren: Before I do I want to thank the entire cases team for delivering another outstanding quarter.

Darren: Inside the store prepared food innovation was also a key driver of strong performance.

Darren: I'd also like to highlight our feeding America campaign kicked off in late February and partnership with Celsius.

Darren: With regards to fuel the team mesh outperformed the geographic market and gross same store gallons with fuel margins over 36 cents per gallon.

Darren: Through April 1st we're excited to be able to help communities in need including rural areas increases country combat hunger and food insecurity.

Darren: The business continues to execute on our three year strategic plan as we are growing the food business accelerating unit growth all while operating the stores more efficiently.

Darren: Now, let's get into the results from the quarter.

Darren: Diluted EPS finished at $2 33 per share and net income was $87 million, both flat with the prior year EBIT.

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

Darren: Inside same store sales were up three 7% for the quarter or 8% on a two year stack basis.

Darren: EBITDA was up $242 million up 11% from the prior year.

Darren: Average margin of 49%.

Darren: Same store prepared food and dispense beverage led the way as sales were up four 7% or 12, 6% on a two year stack basis with an average.

Darren: Inside sales were up over 15% and fuel gallons sold were up over 20%, while our store count growth was up 10% versus the prior year, an encouraging sign that the economic impact of the stores, we were building and buying is greater than the company average.

Darren: Margin of 57, 8%.

On sandwiches continue their strong performance up over 50% and bakery also performed well up nearly 10%.

Darren: Inside the store prepared food innovation was also a key driver of strong performance.

Darren: Margin was down approximately 180 basis points from the prior year due primarily to the addition of the South coast stores.

Darren: With regards to fuel the team mash outperformed the geographic market and grow same store gallons of fuel margins over 36 cents per gallon.

Darren: Lower margin profile as well as the coffee promotion that featured our new flavor profiles.

Darren: The business continues to execute on our three year strategic plan.

Darren: Same store grocery and general merchandise sales were up three 3% or six 2% onto your stack basis with an average margin of 34, 2%.

Darren: The food business accelerating unit growth all while operating the stores more efficiently.

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

Darren: Non alcoholic beverages performed well in the quarter with energy drink is continuing its strong momentum up approximately 18%.

Darren: Inside same store sales were up three 7% for the quarter or 8% on a two year stack basis.

Darren: Margin increased approximately 40 basis points from the prior year, primarily due to a favorable product mix shift.

Darren: The average margin of 49%.

Darren: Same store prepared food and dispense beverage led the way as sales were up four 7% or 12, 6% on a two year stack basis.

Darren: For fuel same store gallons sold were up one 8% with a fuel margin of 36, 4%.

Darren: <unk> margin of 57, 8%.

Darren: No.

Darren: Opus fuel gallon sold data shows the mid continent region down approximately 4% in the quarter, indicating that we're taking market share.

Our sandwiches continue their strong performance up over 50% and bakery also performed well up nearly 10%.

Darren: We believe our high quality in store experience drives traffic to our sites and there is a significant competitive advantage.

Darren: Margin was down approximately 180 basis points from the prior year due primarily to the addition of the South coast stores. They have a lower margin profile as well as the coffee promotion that featured our new flavor profiles.

Darren: Operating expense management remains top of mind in the third quarter saw an increase of just three 2% on a same store excluding credit card fee basis.

Darren: Same store grocery and general merchandise sales were up three 3% or six 2% on two year stack basis with an average margin of 34, 2%.

Darren: Our continuous improvement team has identified processes can be simplified while still serving the guests at a high level.

Darren: The results are there is same store labor hours were down 2%.

Darren: Non alcoholic beverages performed well in the quarter with energy drinks continuing its strong momentum up approximately 18%.

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

Darren: Margin increased approximately 40 basis points from the prior year, primarily due to a favorable product mix shift.

Steve Bramlage: Thank you Darren and good morning, I'm very proud of the hard work of our team during the quarter as we integrated the largest transaction in the company's history.

Darren: For fuel same store gallons sold were up one 8% with a fuel margin of $36 four per ton.

Darren: I'll also producing outstanding results.

Darren: Total revenue for the quarter was $3 9 billion, an increase of $574 million or 17, 3% from the prior year due to outstanding results in both inside sales and fuel gallons sold.

Darren: Opus fuel gallon sold data shows the mid continent region down approximately 4% in the quarter, indicating that we're taking market share.

Darren: We believe our high quality in store experience drives traffic to our sites and is a significant competitive advantage.

Darren: Partially offset by a four 2% decline in the retail fuel price.

Darren: Operating expense management remains top of mind in the third quarter saw an increase of just three 2% on a same store excluding credit card fee basis.

Darren: <unk> were also favorably impacted by operating approximately 10% more stores on a year over year basis.

Total inside sales for the quarter were $1 4 billion, an increase of $185 million or 15, 3% from the prior year.

Darren: Continuous improvement team has identified processes that can be simplified while still serving the guests at a high level.

The results are there as same store labor hours were down 2%.

Darren: For the quarter over $100 million of the increase was attributable to the <unk> stores.

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

Darren: Prepared food and dispensed beverage sales rose by $48 million to $397 million or an increase of 13, 7%.

Darren: Thank you Darren and good morning, I'm very proud of the hard work of our team during the quarter as we integrated the largest transaction in the company's history.

Darren: In grocery and general merchandise sales increased by $138 million to $1 billion, an increase of 15, 9%.

Darren: I'll also producing outstanding results.

Darren: Total revenue for the quarter was $3 9 billion.

Darren: An increase of $574 million or 17, 3% from the prior year due to outstanding results in both inside sales and fuel gallon sold par.

Darren: Retail fuel sales were up $315 million in the quarter, driven primarily by a 24% increase in fuel gallons sold.

Darren: Partially offset by a four 2% decline in the retail fuel price.

Darren: The South coast stores contributed just over 100 million gallons in the quarter.

Alts were also favorably impacted by operating approximately 10% more stores on a year over year basis.

Darren: This was partially offset by 12 cent decline in the retail price of fuel.

$2 98 per gallon in the prior year to $2 85 per.

Darren: Total inside sales for the quarter were $1 4 billion.

Darren: An increase of $185 million or 15, 3% from the prior year.

Per gallon in the third quarter.

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

Darren: For the quarter over $100 million of the increase was attributable to the <unk> stores.

Darren: ACS had gross profit of $913 million in the quarter, that's an increase of $126 million or 16% from the prior year.

Darren: Prepared food and dispensed beverage sales rose by $48 million to $397 million or an increase of 13, 7%.

Darren: This is driven by both higher inside gross profit of $71 6 million or 14, 3% and higher fuel gross profit of $44 8 million or 17, 4%.

Darren: In grocery and general merchandise sales increased by $138 million to $1 billion, an increase of 15, 9%.

Darren: Retail fuel sales were up $315 million in the quarter, driven primarily by a 24% increase in fuel gallons sold.

Darren: Inside gross profit margin was 49% that's down 40 basis points from a year ago.

Darren: Prepared food and dispense beverage margin was 57, 8% that's down 180 basis points from the prior year.

Darren: <unk> stores contributed just over 100 million gallons in the quarter.

Darren: This was partially offset by a 12% decline in the retail price of fuel from $2 98 per gallon in the prior year to $2 85.

Darren: 150 basis points of the decrease was due to the consolidation of lower margin stuff to stores.

Darren: Coffee promotion Darren previously mentioned had an impact of approximately 20 basis points. Finally, we also had a very modest headwind on cheese, which was $2 12 per pound for the quarter and that compares to $2.06 per pound last year, an increase of 3%.

Darren: Per gallon in the third quarter.

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

Darren: ACS had gross profit of $913 million in the quarter, that's an increase of $126 million or 16% from the prior year.

Darren: The grocery and general merchandise margin was 34, 2%, that's an increase of 40 basis points from the prior year the.

Darren: This is driven by both higher inside gross profit of $71 6 million or 14, 3% and higher fuel gross profit of $44 8 million or 17, 4%.

Darren: The increase in margin is due to a favorable product mix shift of approximately 50 basis points and that was partially offset due to the addition of the <unk> stores.

Darren: Gross profit margin was 49% that's down 40 basis points from a year ago.

Darren: Fuel margin for the quarter was $36.04 per gallon that's down.

Darren: Prepared food and dispense beverage margin was 57, 8% that's down 180 basis points from the prior year.

Darren: Nine cents per gallon from the prior year and that's primarily due to the impact of the <unk> stores, which was nearly two cents per gallon.

Darren: 150 basis points of the decrease was due to the consolidation of lower margin <unk> stores.

Darren: Fuel gross profit includes $2 $6 million from the sale of brands down 0.8 million from the same quarter in the prior year.

Darren: Coffee promotion Darrin previously mentioned had an impact of approximately 20 basis points.

Darren: Total operating expenses were up 17, 8% or $101 3 million in the quarter approximately 14% of the total operating expense increase is due to unit growth.

Darren: Finally, we also had a very modest headwind on cheese, which was $2 12 per pound for the quarter and that compares to $2.06 per pound last year, an increase of 3%.

Darren: As we operated 254 more stores than in the prior year.

Darren: The grocery and general merchandise margin was 34, 2% Thats, an increase of 40 basis points from the prior year the.

Darren: Included in this increase was approximately $13 million in one time deal and integration costs associated with the type of transaction.

Darren: The increase in margin is due to a favorable product mix shift of approximately 50 basis points and that was partially offset due to the addition of <unk>.

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

Darren: Fuel margins for the quarter was $36.04 per gallon thats down <unk>.

Depreciation in the quarter was $105 $2 million Thats up $16 3 million versus the prior year versus the prior year and that's primarily due to operating more stores net interest.

Darren: Nine cents per gallon from the prior year and that's primarily due to the impact of the <unk> stores, which was nearly <unk> per gallon.

Fuel gross profit includes $2 $6 million from the sale of brands down 0.8 million from the same quarter in the prior year.

Darren: <unk> expense in the quarter was $29 4 million, that's up $15 3 million from the prior year and this is more reflective of our new quarterly run rate for interest expense in light of the financing associated with the Pfizer transaction.

Darren: Total operating expenses were up 17, 8% or $101 3 million in the quarter approximately 14% of the total operating expense increase is due to unit growth.

Darren: The effective tax rate for the quarter was 19, 2% and that compares to 24, 1% in the prior year.

Darren: As we operated 254 more stores than in the prior year.

Darren: The decrease was driven by a onetime benefit to state deferred tax liabilities following the <unk> transaction.

Darren: Included in this increase was approximately $13 million in one time deal and integration costs associated with the <unk> transaction.

Darren: Net income was flat versus the prior year at $87 million EBITDA for the quarter was $242 4 million compared to $217 6 million a year ago, an increase of 11, 4%.

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

Darren: Our balance sheet is in excellent condition and on January 31, we had total available liquidity of $1 $3 billion.

Darren: Depreciation in the quarter was $105 2 million Thats up $16 3 million versus the prior year versus the prior year and Thats, primarily due to operating more stores.

Darren: Quarter end leverage ratio of debt to EBITDA was approximately two one times per the covenants in the company's recent.

Darren: Net interest expense in the quarter was $29 4 million, that's up $15 3 million from the prior year and this is more reflective of our new quarterly run rate for interest expense in light of the financing associated with the <unk> transaction.

Darren: Recently amended credit facilities, and we now expect to achieve our target leverage ratio of approximately two times by the end of the fiscal year and that's a bit earlier than we had originally anticipated.

Darren: The effective tax rate for the quarter was 19, 2% and that compares to 24, 1% in the prior year.

Darren: For the quarter net cash generated by operating activities of $205 million less purchases of property and equipment of $114 million resulted in the company generating $91 million of free cash flow.

Darren: The decrease was driven by a onetime benefit to state deferred tax liabilities following the <unk> transaction.

Darren: Net income was flat versus the prior year at $87 million EBITDA for the quarter was $242 4 million compared to $217 6 million a year ago, an increase of 11, 4%.

Darren: This compares to using $27 million in the prior year.

Darren: At the March meeting the board of directors voted to maintain the quarterly dividend 50 cents per share.

Darren: We are updating our previously communicated fiscal year 2025 guidance as follows Casey's now expects EBITDA to increase approximately 11%.

Darren: Our balance sheet is in excellent condition and on January 31, we had total available liquidity of $1 $3 billion.

Darren: Quarter end leverage ratio debt to EBITDA was approximately two one times per the covenants in the company's recent.

Darren: And we now expect the purchase of property and equipment to be approximately $500 million.

Darren: We're not updating any other metrics that we have some further clarification as follows.

Darren: Recently amended credit facilities, and we now expect to achieve our target leverage ratio of approximately two times by the end of the fiscal year and Thats a bit earlier than we had originally anticipated.

Darren: But first while we know there is some modeling noise related to the <unk> acquisition in the quarter.

Darren: Outstanding financial results that we posted demonstrates team's ability to integrate a large acquisition, while still running the business at a very high level.

Darren: For the quarter net cash generated by operating activities of $205 million less purchases of property and equipment of $114 million resulted in a company generating $91 million of free cash flow.

Darren: Also as a reminder, the fourth quarter will obviously be impacted by the sites transaction on our total results, notably on our inside and fuel margins as well as total operating expenses they will not impact same store sales.

Darren: This compares to using $27 million in the prior year.

Darren: At the March meeting the board of directors voted to maintain the quarterly dividend 50 cents per share.

Darren: Additionally February 2024 included a leap day, which is not repeating this year the impact of the leap day to the fiscal 2020 for fourth quarter was a positive approximately 100 basis points.

Darren: We already are.

Darren: Our previously communicated.

Darren: Fiscal year 2025 guidance as follows.

Darren: <unk> now expects EBITDA to increase approximately 11% and.

Darren: And we now expect the purchase of property and equipment to be approximately $500 million.

Darren: We believe that February has not been reflected of the expected same store fourth quarter results due to unfavorable weather conditions and the lapping of lead time, but the company does expect to finish the year at the bottom of the inside same store sales range. It does imply that the fourth quarter will be below.

Darren: Not updating any other metrics, but we have some further clarification as follows.

Darren: First while we know there is some modeling noise related to the <unk> acquisition in the quarter. The outstanding financial results that we posted demonstrates team's ability to integrate a large acquisition, while still running the business at a very high level.

Darren: The annual range same store gallons are still expected to be near the middle of the range for the fiscal year.

Darren: Also as a reminder, the fourth quarter will obviously be impacted by the sites transaction on our total results, notably on our inside and fuel margins as well as total operating expenses they will not impact same store sales.

Darren: Fuel margin in February was in the mid <unk> on a cents per gallon basis and that includes Sykes and cheese costs are very modestly favorable versus the prior year.

Darren: Our total fourth quarter operating expense expectation.

Darren: Additionally February 2024 included a leap day, which is not repeating this year.

Darren: The increase again, primarily due to the <unk> acquisition.

Darren: In total as expected Fikes will be dilutive to our earnings per share in the fourth quarter, primarily due to incremental interest expense higher depreciation and amortization and several million additional dollars of anticipated integration costs I'll now turn the call back over to Darren.

Darren: The impact of the leap day to the fiscal 2020 for fourth quarter was a positive approximately 100 basis points.

Darren: We believe that February has not been reflected of the expected same store fourth quarter results.

Darren: Due to unfavorable weather conditions and the lapping of lead time, but the company does expect to finish the year at the bottom of the inside same store sales range. This does imply that the fourth quarter will be below the annual range.

Darren: Alright, Thanks, Steve I'd like to again, thank the entire Casey's team, including our new team members from <unk> for another excellent quarter.

Darren: I'm also very proud of the team's ability to integrate the largest transaction in the company's history, while also producing outstanding financial results.

Darren: Same store gallons are still expected to be near the middle of the range for the fiscal year.

Darren: The first pillar of our three year strategic plan is to accelerate the food business.

Darren: Fuel margin in February was in the mid Thirty's on a cents per gallon basis and that includes <unk> and cheese costs are very modestly favorable versus the prior year.

Darren: Our prepared food and dispense beverage team continues to do an excellent job innovating and finding the right quality products to serve to our guests.

Darren: The Hot sandwiches launched last year continued to perform very well.

Darren: Our total fourth quarter operating expense expectation.

Darren: We also added a limited release of new chicken wings, and fries, and our des Moines market with encouraging results so far.

Darren: The increase again, primarily due to the <unk> acquisition.

Darren: In total as expected fix will be dilutive to our earnings per share in the fourth quarter, primarily due to incremental interest expense higher depreciation and amortization and several million additional dollars in anticipated integration costs.

Darren: On the grocery and general merchandise side, we continue to see strength in the energy drink category as we mentioned earlier with 18% growth in the quarter.

Darren: Our store growth pillar was on full display this quarter integrating the <unk> transaction our.

Darren: I'll turn the call back over to Darren Alright.

Darren: Our dedicated integration team has done an excellent job getting our newest team members comfortable operating in the KC system.

Alright, Thanks, Steve I'd like to again, thank the entire Casey's team, including our new team members from <unk> for another excellent quarter.

Darren: To do this while maintaining a strong balance sheet as.

Darren: I'm also very proud of the team's ability to integrate the largest transaction in the company's history, while also producing outstanding financial results.

Darren: As of January 31, we set it at two one times leverage ratio and are quickly on our way to the targeted two times leverage ratio.

Darren: The first pillar of our three year strategic plan is to accelerate the food business.

Darren: Given our track record of executing and integrating meaningful acquisitions.

Darren: Well positioned to continue this strategy and enhance shareholder value.

Darren: Our prepared food and dispense beverage team continues to do an excellent job innovating and finding the right quality products to serve to our guests.

Darren: Yeah.

Darren: Enhancing operational efficiencies the third pillar of our strategic plan.

Darren: The Hot sandwiches launched last year continued to perform very well.

Darren: With strong work from our continuous improvement in operations teams. The organization achieved its 11th consecutive quarter of reduced same store labor hours.

Darren: We also had a limited release of new chicken wings, and fries, and our commodity market with encouraging results so far.

Darren: This work has been done without compromising the casey's experience and we continue to see guests and team member satisfaction scores rise.

Darren: On the grocery and general merchandise side, we continue to see strength in the energy drink category as we mentioned earlier with 18% growth in the quarter.

Darren: Overall this quarter was another great example of how our differentiated business model, coupled with a great team leads outstanding results with.

Darren: Our store growth pillar was on full display this quarter integrating the rice transaction our.

Darren: Our dedicated integration team has done an excellent job getting our newest team members comfortable operating in the KC system.

Darren: With a high level of execution on our strategic plan.

Darren: We are able to guide to EBITDA growth of approximately 11% outpacing our standard growth algorithm.

Darren: To do this while maintaining a strong balance sheet as of January 31, we set it at two one times leverage ratio and are quickly on our way to the targeted two times leverage ratio.

Darren: We will now take your questions.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and one follow up one of my first question.

Darren: Given our track record of executing and integrating meaningful acquisitions, we are well positioned to continue this strategy and enhance shareholder value.

Darren: Okay.

Darren: Enhancing operational efficiencies the third pillar of our strategic plan.

Darren: Our first question will be coming from Jacob.

Darren: With strong work from our continuous improvement in operations teams. The organization achieved its 11th consecutive quarter of reduced same store labor hours.

Hakan Phillips: Hakan Phillips.

Speaker Change: The latest research your line is open Jacob.

Speaker Change: Hi, everyone.

Speaker Change: First I wanted to ask I guess more broad strategic.

Darren: This work has been done without compromising the Casey's experience and we continue to see guest and team member satisfaction scores.

Speaker Change: Both of you joined in late 2000, 1920, and overseeing the company through some both alpine and inflation, but now we're up against kind of a boho.

Overall this quarter was another great example of how our differentiated business model, coupled with a great team leads outstanding results with.

Speaker Change: Cause the backdrop tariff maybe it from accelerating inflation. So just wondering if you could talk about like how Casey is set up things have changed over the past.

Darren: With a high level of execution on our strategic plan.

Darren: We are able to guide to EBITDA growth of approximately 11% outpacing our standard growth algorithm.

Speaker Change: Five years and why Youre confident in the case you can operate in this potentially volatile environment.

Darren: We will now take your questions.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and one follow up one moment part first question.

Speaker Change: Hey, Jacob this is Darren.

Speaker Change: Yes, Youre right I start in the middle of 2019 and.

Speaker Change: So and then you started a year later and so yeah, we've got to see quite a bit over the last few years.

Speaker Change: I guess, what I would tell you is.

Speaker Change: Our first question will be coming from Jacob.

Speaker Change: But.

Speaker Change: The company, we started in five or six years ago is very different than the company. We have today, we've added a lot of different capabilities, whether it's in.

Hakan Phillips: Hakan Phillips.

Speaker Change: Mileas Research your line is open Jacob.

Speaker Change: Hi, everyone.

Speaker Change: I wanted to ask I guess more broad strategic.

Speaker Change: And our procurement function data and analytics guest insights our culinary team continuous improvement.

Speaker Change: Both of you joined in late 2019, 2020, and overseeing the company through some both our time and they are making.

Speaker Change: Have a whole suite of capabilities that.

Speaker Change: Inflation, but now we are up against kind of our boto.

Speaker Change: We simply didn't have several years ago, and so as I look at this particular environment with some uncertainty in a bit of volatility I feel far more confident now than I ever was before and our ability to deal with those things just because we.

Speaker Change: The backdrop tariff maybe from accelerating inflation. So just wondering if you could talk about like how Casey is set up.

Speaker Change: We've changed over the past.

Speaker Change: For five years and why Youre confident the case it can operate in this potential.

Speaker Change: Always bought kind of environment.

Speaker Change: We have a more tenured team we have.

Speaker Change: Hey, Jacob this is Darren.

Speaker Change: More sophisticated capabilities, we have better technology, and so I just feel like we're better equipped to deal with whatever comes our way in and so far what we're seeing is there's a lot of uncertainty, but we haven't seen a lot of concrete impacts to the business either.

Jacob: Yes, Youre right I start in the middle of 2019 and.

Jacob: So and then you started a year later and so yes, we've got to see quite a bit over the last few years.

Jacob: I guess, what I would tell you is.

Jacob: The company, we started in five or six years ago is very different than the company. We have today and we've added a lot of different capabilities.

Speaker Change: Based on all the noise out there in the world. So I feel like we're in a much better position to deal with whatever comes I would I would probably add to that Jacob you put all of that on top of just the resiliency of our core business model like Casey's Casey's was successful for a long time before any of the.

Jacob: Whether it's in.

Jacob: Our procurement function data and analytics guest insights our culinary team continuous improvement, we just have a whole suite of capabilities.

Speaker Change: Current members of leadership team got here through all kinds of external environments and the beauty of our business model is we're not we're not dependent on a particular set of exogenous factors going our way, whether it's in petroleum or self with consumer we've got you know.

Jacob: <unk>.

Jacob: We simply didn't have several years ago, and so as I look at this particular environment with some uncertainty in a bit of volatility I feel far more confident now than I ever was before and our ability to deal with those things just because we have a more tenured team we have.

Differentiated value proposition inside the store when times are tough for our consumer.

Jacob: More sophisticated capabilities, we have better technology, and so I just feel like we're better equipped to deal with whatever comes our way in and so far what we're seeing is a lot of uncertainty, but we haven't seen a lot of concrete impacts to the business either.

Speaker Change: We've got outstanding fuel capabilities.

Speaker Change: Much more sophisticated than most of the people that we compete against with on a day to day basis and the merchandising offering that we have inside the store. We feel are second to none and so almost irrespective of what's happening outside of our four walls. We feel like we have something that differentiates us from anybody else in the space.

Speaker Change: Based on all the noise out there in the world side I feel like we're in a much better position to deal with whatever comes I would I would probably add to that Jacob you put all of that on top of just the resiliency of our core business model Casey's Casey's was successful for a long time before any of.

Speaker Change: Yes.

Speaker Change: And then I guess just as a Boe.

Speaker Change: Bye.

Speaker Change: It was known that is going to be dilutive to margin. So I guess, mainly from a prepared food what are the easy things to fix it is it just a factor of different product mix and what are the timelines to Ike.

Speaker Change: The current members of leadership team got here through all kinds of external environments and the beauty of our business model is we're not we're not dependent on a particular set of exogenous factors going our way, whether it's in petroleum or sulfur consumer we've got.

Speaker Change: Hoping those stores improve their margins.

Speaker Change: Yes.

Speaker Change: Well nothing is easy to fix.

Speaker Change: I guess, what I would say is.

Speaker Change: A differentiated value proposition inside the store when times are tough for our consumer.

You know what.

Speaker Change: If you look at the prepared foods side of their business, that's probably where the.

Speaker Change: We've got outstanding fuel capabilities.

Speaker Change: Most glaring difference in the margin profile between.

Speaker Change: More sophisticated than most of the people that we compete against with on a day to day basis and the merchandising offering that we have inside the store. We feel are second to none and so almost irrespective of what's happening outside of our four walls. We feel like we have something that differentiates us from anybody else in the space.

Speaker Change: Where they are today and where we are.

Speaker Change: Some of that is due simply to product mix and what they sell their what they sell.

Speaker Change: Our food business is a little more protein heavy which tends to come with a little bit lower margin profile.

Speaker Change: Where we sell a lot of pizza, which has a much higher margin profile. So some of the the <unk>.

Speaker Change: Yes.

Speaker Change: And then I guess just as a follow on.

Speaker Change: Fix so to speak will be when we ultimately get kitchens in those stores and we can get our assortment of products into complement theirs.

Speaker Change: Bye.

Speaker Change: It was known that we're going to be dilutive to margin. So I guess, mainly from prepared food what are the easy things to fix is it just a factor of different product mix and what are the timelines.

Speaker Change: So we will add pizza to their assortment.

Speaker Change: And what's really encouraging right now.

Speaker Change: We've converted three stores pretty quickly that already have kitchens in them.

Speaker Change: Kind of helping those stores improving their margins.

Yes.

Speaker Change: We've kind of taken the best of both approach.

Speaker Change: Well nothing is easy to fix.

Speaker Change: Two.

Speaker Change: To the assortment, where we've kept some of the things that really made them successful. We added some of the things that make US who we are primarily a pizza and we have the best of both and then we've eliminated some of the things that.

Speaker Change: I guess, what I would say is.

Speaker Change: You know what.

Speaker Change: If you look at the prepared foods side of their business, that's probably where the.

Most glaring difference in the margin profile between.

Speaker Change: Okay.

Speaker Change: They are today and where we are.

Speaker Change: Foreign is profitable for them and so what we're seeing is really good results so far.

Speaker Change: Some of that is due simply to product mix and what they sell what they sell in their food business is a little more protein heavy which tends to come with a little bit lower margin profile.

Speaker Change: Granted it's only three stores it's early days.

Speaker Change: But we really think that.

Speaker Change: As we get further into it and we're able to optimize that menu between what they did really well in what we do really well.

Where we sell a lot of pizza, which has a much higher margin profile. So some of the the fixed so to speak will be when we ultimately get kitchens in those stores and we can get our assortment of products into complement theirs.

Speaker Change: We'll see not only increased margins, but we will see increased velocities as well and then of course over time as their existing supplier contracts.

Speaker Change: Come to an end, we will be able to migrate them over onto our contracts with far more scale and so we'll be able to.

Speaker Change: So we'll add pizza to their assortment.

Speaker Change: And.

Speaker Change: What's really encouraging right now is as we've converted three stores pretty quickly that already have kitchens in them.

Speaker Change: That margin up as well.

Speaker Change: One moment for our next question.

Speaker Change: It's kind of taken the best of both approach.

Our next question will be coming from Anthony <unk> of Wells Fargo. Your line is open Anthony.

Speaker Change: Two.

Speaker Change: To the assortment, where we've kept some of the things that really made them successful. We added some of the things that make US who we are primarily a pizza and we have the best of both and then we eliminate some of the things that.

Anthony: Yeah, Hey, good morning, guys. Thanks for taking my questioning.

Anthony: So just digging in on flex a little bit more can you just maybe talk a little bit more about early performance from that asset how the integration is going.

Speaker Change: <unk> is profitable for them and so what we're seeing is really good results. So far yes granted it's only three stores. It's early days.

Anthony: And then any change to how you're thinking about the cadence and magnitude of synergies.

Anthony: Yes.

Speaker Change: But we really think that.

Anthony: Talk a little bit about performance.

Speaker Change: As we get further into it and we're able to optimize that menu between what they did really well in what we do really well.

Speaker Change: Thus far I'll, let Steve talk about cadence of synergies but.

Anthony: Performance overall I mean, we're.

You'll see not only increased margins, but we will see increased velocities as well and then of course over time as their existing supplier contracts.

Anthony: We're pretty happy I mean, we're only one quarter into it right.

Anthony: Unfortunately that first quarter.

Was in the wintertime and they've got a lot of snow in Texas and in the Panhandle of Florida, which doesn't happen all heck of a lot. So.

Speaker Change: Come to an end, we will be able to migrate them over onto our contracts with far more scale and so we will be able to.

Anthony: Probably not as representative of what what the normal business performs but aside from that.

Speaker Change: That margin up as well.

Speaker Change: One moment for our next question.

Anthony: It's exactly what we thought we bought we've got some really high quality high volume stores in attractive geographies.

Speaker Change: Our next question will be coming from Anthony <unk> of Wells Fargo. Your line is open Anthony.

Anthony: Yeah, Hey, good morning, guys. Thanks for taking my question.

Anthony: And like I mentioned before.

Anthony: Early indications are that when we combine our assortment and doing the things that we each do well.

Anthony: So just digging in on flex a little bit more can you just maybe talk a little bit more about early performance from that asset how the integration is going.

Anthony: We get some pretty good results. So we feel really good about.

Anthony: And then any change to how youre thinking about the cadence and magnitude of synergies.

Anthony: About the deal so far the team seems to be.

Anthony: Yes ill talk a little bit about performance.

Anthony: <unk> very nicely and we got a lot of work to do still but.

Speaker Change: Thus far I'll, let Steve talk about cadence of synergies but.

Anthony: Feel good about that so far and again.

Anthony: Performance overall.

Speaker Change: The real synergies for us start to happen as we convert sources, Steve I'll, let you just just to reiterate our expectations on synergy capture have not changed so over three to four years, we think we can achieve $45 million.

Anthony: We're pretty happy on where we're only one quarter into it right.

Anthony: Okay.

Anthony: Fortunately that first quarter.

Anthony: In the wintertime and they've got a lot of snow in Texas and in the Panhandle of Florida, which doesn't happen all heck of a lot so probably.

Anthony: Of synergies.

Speaker Change: 40% of that or so would be the the food synergy capture that Darren referenced and so that'll be on the back end of that three to four year time period, just because that's associated with.

Anthony: Probably not as representative of what what the normal business performs but aside from that.

Anthony: It's exactly what we thought we bought we've got some really high quality high volume stores in attractive geographies.

Speaker Change: With some construction and remodeling their lead times to get that to work and so certainly in the first 12 months you would expect us to capture some fuel pricing synergy where we've taken over the pricing of a few already and starting to convert that more to how the Casey's mothership will do that and then there'll be some some overhead synergies.

Anthony: And like I mentioned before.

Anthony: Early indications are that when we combine our assortment and doing the things that we each do well.

Anthony: We get some pretty good results. So we feel really good about.

Anthony: About the deal so far the team seems to be in it.

Speaker Change: Obviously as we work through the rationalization of some of the processes.

Anthony: Operating very nicely and we've got a lot of work to do still but.

Speaker Change: FX had been doing previously in the middle of that well get some merchandise synergies for our center of store mix.

Anthony: We feel good about that so far and again.

Speaker Change: The real synergies for us start to happen as we convert sources, Steve I'll, let you just just to reiterate our expectations on synergy capture have not changed so over three years to four years, we think we can achieve $45 million.

Speaker Change: But again most of what will happen in the next 12 months would be on the fuel and the overhead side.

Speaker Change: Got it that's really helpful.

Speaker Change: And then just on the gallon side, you guys put up a really strong fuel gallon quarter, what we've generally seen pretty choppy industry data and results from others. So can you just talk a little bit more about what you think's driving that outperformance and then just maybe your latest thinking on the right balance between gallon growth.

Of synergies.

Speaker Change: 40% of that or so would be the.

Speaker Change: Food synergy capture that Darren referenced and so that'll be on the back end of that three to four year time period, just because thats associated with.

Speaker Change: And margin as you look to optimize gross profit dollars.

Speaker Change: With some construction and remodeling their lead times to get that to work and so certainly in the first 12 months you would expect us to capture some fuel pricing synergy where we've taken over the pricing of fuel already and starting to convert that more to how the Casey's mothership would do that and then there'll be some some overhead synergy.

Speaker Change: Yeah, Anthony yet I would say that there are two two factors that really drove the gallon performance in this quarter. Some of it is some of the acquisition stores that we did in prior years, they're starting to ramp and so as we cycle over some softer numbers.

Speaker Change: He is obviously as we work through the.

Speaker Change: When we bought those stores now we're starting to see.

Speaker Change: The rationalization of some of the processes that <unk>.

Speaker Change: Our fuel capabilities come to bear on those stores and we're seeing some some strong gallon growth in those areas.

Speaker Change: <unk> had been doing previously in the middle of that we will get some merchandise synergies for our center of store mix.

Speaker Change: The other area that we started to see some traction and is on diesel and that's been.

Speaker Change: But again most of what will happen in the next 12 months would be on the fuel and the overhead side.

Speaker Change: That's a category that's been under some pressure for the last several quarters, but starting to gain some traction.

Speaker Change: Got it that's really helpful.

Speaker Change: And then just on the gallon side, you guys put up a really strong fuel gallon quarter.

Speaker Change: And the most recent quarter, both on the commercial side and through some of the.

Speaker Change: What we've generally seen pretty choppy industry data and results from others. So can you just talk a little bit more about what you think driving that outperformance and then just maybe your latest thinking on the right balance between gallon growth.

Speaker Change: Programs that we have to offer incremental value to that over the road diesel consumer so, but we saw saw strength in both of those areas in that that really contributed to the overall gallon performance.

Speaker Change: And margin as you look to optimize gross profit dollars.

Speaker Change: Yes, Anthony I would say that there are two factors that really drove the gallon performance in this quarter. Some of it is some of the acquisition stores that we did in prior years, they're starting to ramp and so as we cycle over some softer numbers.

Speaker Change: And one moment for our next question.

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

Bonnie Herzog: Alright. Thank you good morning all.

Good morning.

Speaker Change: Oh Wow.

Speaker Change: So great question right now seem to be gaining momentum recently, so just hoping you could touch on how your business model and value proposition right. You know possession, you hopefully well in the case of a recessionary environment and along those lines.

Speaker Change: When we bought those stores now we're starting to see.

Speaker Change: Our fuel capabilities come to bear on those stores and we're seeing some some strong gallon growth in those areas.

Speaker Change: The other area that we started to see some traction and is on diesel and that's been.

Speaker Change: Have you become more aggressive on your food and beverage promotions recently, given the increased promotional intensity with that particular part.

Speaker Change: Sub category has been under some pressure for the last several quarters, but starting to gain some traction.

Speaker Change: And the most recent quarter, both on the commercial side and through some of the.

Speaker Change: Broader commentary on the consumer area with questionnaires playbook and promotional levels that would be helpful.

Speaker Change: Programs that we have to offer incremental value to that over the road diesel consumer so but.

Speaker Change: Yeah.

Bonnie Herzog: Okay sure Bonnie I think that was five questions, but I'll try to tackle them.

Speaker Change: But we saw saw strength in both of those areas in that that really contributed to the overall gallon performance.

Speaker Change: Yes.

Speaker Change: Going into.

Speaker Change: Going into recession.

Speaker Change: We ended up in one.

Speaker Change: And one moment for our next question.

Casey's for a long time is.

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

Speaker Change: Performed very well during recessionary times.

Speaker Change: That's for a couple of reasons one is that we sell basic daily needs that people need that are low dollar denomination. So.

Bonnie Herzog: Alright, Thank you good morning.

Speaker Change: Good morning.

Bonnie Herzog: Now.

Speaker Change: It's a great question right now seem to be gaining momentum recently, so just hoping you could touch on how your business model and value proposition position you.

Speaker Change: In the Grand scheme of things when people have to pullback on discretionary spending.

Speaker Change: A lot of what we sell would be considered by our guests to be non discretionary and because that tends to be a lower price points.

Speaker Change: Hopefully well in the case of a recessionary environment and along those lines.

Speaker Change: Have you become more aggressive on your food and beverage promotions recently, given the increased promotional intensity with being up probably correct yes.

Speaker Change: It isn't the first thing to cut on the list because these are daily needs.

Speaker Change: Yes.

Speaker Change: That being point number one point number two is on our food proposition.

Speaker Change: Broader commentary on the consumer you're recessionary playbook and promotional levels that would be helpful.

Speaker Change: Generally speaking lower price than an equivalent USR alternative.

Bonnie Herzog: Okay sure Bonnie I think that was five questions, but I'll try to tackle.

Speaker Change: So as consumers start to look for value, where a great trade down opportunity from a price perspective, but not a trade down on quality. So think consumers feel really good about being able to stretch their dollars with us on the food side.

Speaker Change: Yes.

Speaker Change: Going into.

Speaker Change: Going into recession.

Speaker Change: If we end up in one.

Speaker Change: Casey's for a long time has performed very well during recessionary times.

Speaker Change: With.

Speaker Change: Expected being more promotional.

Speaker Change: That's for a couple of reasons one is that we sell basic daily needs that people need that are low dollar denomination. So.

Speaker Change: Have not increased our promotional activity, we have been more targeted with that we've got some new capabilities now where we're able to more efficiently look at different consumers and what they're purchasing habits have been and where we see that they may be lapsed, we can target them with.

Speaker Change: In the Grand scheme of things when people have to pullback on discretionary.

Speaker Change: Ordinary spending.

A lot of what we sell would be considered by our guests to be non discretionary and because that tends to be a lower price points.

Speaker Change: More specific offers so.

Speaker Change: It isn't the first thing to cut on the list because these are daily needs.

Speaker Change: We're not we're not spending more from a promotional standpoint, but we're being far more targeted in how we do that.

Speaker Change: Point number one point number two is on our food proposition.

Speaker Change: Yeah.

Speaker Change: Generally speaking lower price than an equivalent USR alternative.

Speaker Change: Alright, thank you.

Speaker Change: And one moment for our next question.

Speaker Change: Our next question will be coming from Mike Montana of Evercore ISI. Your line is open mic.

Speaker Change: So as consumers start to look for value, where a great trade down opportunity from a price perspective, but not a trade down on quality. So think consumers feel really good about being able to stretch their dollars with us on the food side.

Mike Montana: Hey, good morning, guys. Thanks for taking the question congrats on the quarter Bonnie Thanks.

Speaker Change: Yeah.

Speaker Change: So you said a two parter here.

Speaker Change: With respect to us being more promotional.

Speaker Change: First one was just in terms of high level.

Speaker Change: Have not increased our promotional activity, we have been more targeted with that we've got some new capabilities now where we're able to more efficiently look at different consumers and what they're purchasing habits have been and where we see that they may be lapsed, we can target them with.

Speaker Change: Maybe if you could talk a little bit about you know the state of the consumer through your eyes.

Speaker Change: And secondly, like the value gap positioning that you see versus peers, given some of the promotional activity from some of the other dining options that may exist out there.

Speaker Change: Yes sure Mike.

Speaker Change: From a consumer standpoint.

Speaker Change: More specific offers so.

Speaker Change: I think similar to others, we've seen a little bit of pressure on the lower income consumer, but what I would say is.

Speaker Change: We're not we're not spending more from a promotional standpoint, but we're being far more targeted in how we do that.

Speaker Change: That that consumer and I'll remind you that.

Speaker Change: Alright, thank you.

Speaker Change: For those we consider a low income consumers someone who makes less than $50000 a year, we only have about 25% of our our guests spaces in that category. So we're not overly exposed in base case. They are still purchasing we still see positive growth from those consumers. It's just not at the same rate.

Speaker Change: And one moment for our next question.

Speaker Change: Our next question will be coming from Mike Montana of Evercore ISI. Your line is open mic.

Mike Montana: Hey, good morning, guys. Thanks for taking the question congrats on the quarter. Thanks.

Mike Montana: Thanks, So you still had a two parter here.

Speaker Change: That we see in the other income cohorts so.

Mike Montana: First one was just in terms of high level.

Mike Montana: Maybe if you could talk a little bit about the state of the consumer through your eyes.

Bill buying.

Speaker Change: Just not as much as some of the other cohorts.

Mike Montana: And secondly, like the value gap positioning that you see versus peers, given some of the promotional activity from some of the other died.

Speaker Change: Typically about 1% to 300 basis points softer.

And it's more in some of those.

Speaker Change: I guess, maybe more discretionary items like.

Mike Montana: Dining options that may exist out there.

Speaker Change: Tobacco and alcohol, where we see a little bit of softness there.

Mike Montana: Yes sure Mike.

Speaker Change: From a consumer standpoint.

Speaker Change: But.

Speaker Change: I think similar to others, we have seen a little bit of pressure on the lower income consumer, but what I would say is.

Speaker Change: But that's really from the consumer side on.

With respect to to value.

Speaker Change: Like I said I think we're still in a good spot from a value proposition standpoint, when we look at our pizza business.

Speaker Change: That consumer I'll remind you that.

Speaker Change: For those we consider low income consumers someone who makes less than $50000 a year, we only have about 25% of our our guests spaces in that category. So we're not overly exposed in base case. They are still purchasing we still see positive growth from those consumers. It's just not at the same rate.

Speaker Change: On the one hand.

Speaker Change: Only about half of our stores, even have a national brand competitor in their trade area. So we don't really have to go head to head with with somebody that might be a little more promotional and about half of our stores and the other half where we do have a national brand competitor. We typically are a dollar or.

That we see in the other income cohorts so.

Speaker Change: They are still buying.

Speaker Change: More.

Speaker Change: Not as much as some of the other cohorts.

Speaker Change: Hello.

Typical menu price versus those competitors, so we already start off.

Speaker Change: Typically about 1% to 300 basis points softer.

Speaker Change: And a.

Speaker Change: And it's more in some of those.

Speaker Change: Competitive value relative to them and then we do some promotional activity. They do some so we feel like were always competitive in.

Speaker Change: I guess, maybe more discretionary items like.

Speaker Change: Tobacco and alcohol, where we see a little bit of softness there.

Speaker Change: Like I said before we're able to more get more specific and targeted with our rewards members.

Speaker Change: Yes.

Speaker Change: But that's really from the consumer side on with.

Speaker Change: And.

Speaker Change: With respect to to value.

Speaker Change: And really be more efficient with our promotional spend.

Speaker Change: So like I said I think we're still.

Speaker Change: Yeah.

Speaker Change: And one moment for our next question.

In a good spot from a value proposition standpoint, when we look at our pizza business.

Speaker Change: Our next question will be coming from Bobby Griffin of Raymond James Your line is open Bobby.

Speaker Change: On the one hand.

Only about half of our stores, even have a national brand competitor in their trade area. So we don't really have to go head to head with with somebody that might be a little more promotional and about half of our stores and the other half where we do have that national brand competitor. We typically are a dollar or more.

Bobby Griffin: Hey, guys. Good morning, Thanks for taking my questions and congrats on a good quarter.

Speaker Change: Dan I wanted to circle back on February <unk>.

Speaker Change: Asking the things obviously, there's a lot of anxiety on consumer spending from investors and different things like that but when you kind of ex out the weather or look into regions of your business that might not have been impacted quite as much on a year over year basis is there anything you can share to kind of give comfort that this really was a weather impact around February any data or anything like that.

Speaker Change: Sure.

Speaker Change: Below on a typical menu price versus those competitors. So we already start off at a <unk>.

Speaker Change: Competitive value relative to them and then we do some promotional activity. They do some so we feel like were always competitive in.

Bobby Griffin: Yes, Bobby I don't have specific numbers to share with you on that other than to say.

Bobby Griffin: February was a tough weather month and I can tell you when.

Speaker Change: Like I said before we're able to more get more specific and targeted with our rewards members.

Bobby Griffin: When the Tempur.

Bobby Griffin: Temperature difference is 50 or 60 degrees.

Speaker Change: And really be more efficient with our promotional spend.

Bobby Griffin: Ooh colder than the prior year I mean, you see it in the numbers and what gives me confidence.

Speaker Change: And one moment for our next question.

Speaker Change: Our next question will be coming from Bobby Griffin of Raymond James Your line is open Bobby.

Bobby Griffin: About this Bob is that when the weather starts to normalize when you can get back to parity. It doesn't have to be good weather just has to be comparable whether we see the business respond accordingly, and we see the growth again so.

Bobby Griffin: Hey, guys. Good morning, Thanks for taking my questions and congrats on a good quarter. So I guess I wanted to circle back on February and just kind of asking the things, obviously theres a lot of anxiety on consumer spending from investors and different things like that but when you kind of ex out the weather or looking into regions of your business that might not have been impacted quite as much.

Bobby Griffin: If if I wasn't seeing that I would I would have other concerns but it is it is strictly been tied to those weather events.

Bobby Griffin: Where we have.

Bobby Griffin: Our normal.

Bobby Griffin: On a year over year basis is there anything you can share to kind of give comfort that this really was a weather impact around February any data or anything like that.

Bobby Griffin: Usual amount of snow, where we got to shut down some stores or just like I mentioned before those extreme temperature variations.

I don't have any concern that there is.

Bobby Griffin: A more fundamental issue with the consumer because they bounce back as soon as the weather clears up.

Speaker Change: Yes, Bobby I don't have specific numbers to share with you on that other than to say.

Very helpful. And then maybe just on the coffee promotion as well as the wind tested anything more you can share on that in particular.

Bobby Griffin: February was a tough weather month and I can tell you when.

Speaker Change: When the.

Bobby Griffin: They win and it's something I know coffee has been a category you guys have talked about maybe being able to do a little better any in kind of pushing is that something that was successful and that might continue going forward.

Bobby Griffin: Temperature difference is $50 or 60 degrees.

Bobby Griffin: Colder than the prior year I mean, you see it in the numbers and what gives me confidence.

Bobby Griffin: Yes.

About this Bob is that when the weather starts to normalize when you can get back to parity. It doesn't have to be good weather just has to be comparable whether we see the business respond accordingly and.

Bobby Griffin: On the coffee side, it's still a little bit early but.

Bobby Griffin: We did see some good results we saw.

Bobby Griffin: A shift to having positive unit growth in that category for the first time in years.

Bobby Griffin: And we see the growth again so.

Bobby Griffin: If I wasn't seeing that I would I would have other concerns but it is it.

Bobby Griffin: Really that was assortment driven we've got a new supplier little more sophisticated on.

Bobby Griffin: It is strictly been tied to those weather events.

Bobby Griffin: Where we have.

Bobby Griffin: On the quality of the product we did a lot of.

Our normal unusual amount of snow, where you've got to shut down. Some stores are just like I mentioned before those extreme temperature variations. So I don't have any concern that there is.

Bobby Griffin: Development of testing on that one so we think we've got the assortment right.

Bobby Griffin: Coffee is a tough habit.

Bobby Griffin: To get people to change and so we got probably a little more aggressive on the promotional side than we normally would gave away about 2 million cups of coffee in January.

Bobby Griffin: A more fundamental issue with the consumer because they bounce back as soon as the weather clears up.

Speaker Change: Very helpful. And then maybe just on the coffee promotion as well as the wing test if anything more you can share on that in particular.

Bobby Griffin: Hence the impact.

Bobby Griffin: To the margin a little bit.

Bobby Griffin: <unk> foods, but overall this is we're playing the long game here with coffee. So we like the results so far but it's going to be workover.

Speaker Change: They win and it's something I know coffee has been a category you guys have talked about maybe being able to do a little better in kind of pushing is that something that was successful and that might continue going forward.

Protracted period of time.

Speaker Change: Yes.

Bobby Griffin: To really gain traction in that business.

Speaker Change: On the coffee side, it's still a little bit early but.

Bobby Griffin: On the wind side.

Speaker Change: We did see some good results we saw.

Bobby Griffin: Again early days, we just did.

Bobby Griffin: Did a soft launch in the des Moines market in January and then start to advertise in February we're very pleased with the results. So far really high satisfaction scores from our guests. So we feel confident that we've got the product right. We're still.

Speaker Change: A shift to having positive unit growth in that category for the first time in years.

Speaker Change: Really that was assortment driven we've got a new supplier little more sophisticated on.

Speaker Change: On the quality of the product we did a lot of.

Bobby Griffin: Working through some some operational Kinks as you would expect when you test things, but feel really good about this and what we're seeing so far is it this isn't really cannibalizing the pizza business is actually contributing an incremental.

Development of testing on that one so we think we've got the assortment right.

Speaker Change: Coffee is a tough habit.

To get people to change and so we got probably a little more aggressive on the promotional side than we normally would gave away about 2 million cups of coffee in January.

Bobby Griffin: Call it incremental night per week or an incremental visit from our guests which is exactly what the goal was so.

Speaker Change: Hence the impact.

Bobby Griffin: So far so good again more work to do but I feel good about it.

Speaker Change: To the margin a little bit.

Speaker Change: <unk> foods, but overall this is we're playing the long game here with coffee. So we like the results so far but it's going to be workover.

Bobby Griffin: Early stages.

Bobby Griffin: Thank you.

Bobby Griffin: One moment.

Bobby Griffin: <unk>.

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

Speaker Change: Protracted period of time.

Speaker Change: To really gain traction in that business.

Bobby Griffin: Hi, Good morning, guys congrats on the nice quarter.

Speaker Change: On the wind side.

Bobby Griffin: Good morning.

Speaker Change: Again early days, we just did.

Speaker Change: Yeah. Good morning so.

Speaker Change: We did a soft launch in the des Moines market in January and then start to advertise in February.

Speaker Change: A question on the prepared foods, there and you noted that innovation is driving the results. There. So I was wondering if you can help contextualize for us how innovation is indeed driving that market share as it relates to bakery hot sandwiches et cetera, where do you see the greatest untapped opportunity whether that is a broader wings rollout and we understand February <unk>.

Speaker Change: Very pleased with the results so far really high satisfaction scores from our guests.

Speaker Change: I feel confident that we've got the product right. We're still working through some some operational Kinks as you would expect when you test things, but feel really good about this and what we're seeing so far is it this isn't really cannibalizing the pizza business is actually contributing an incremental.

Speaker Change: Noise, but it sounds like March has bounce back is that a fair take thank you.

Speaker Change: Yes Kristina.

Speaker Change: Christina.

Speaker Change: The innovation really has been the bigger driver of our growth versus the promotional activity in.

Speaker Change: Call it incremental night per week or an incremental visit from our guests which is exactly what the goal was so.

Speaker Change: We do both but.

Speaker Change: So far so good again more work to do but feel good about it.

Speaker Change: Whenever we get that innovation right. That's when we really see the outsized growth and you mentioned it in.

Speaker Change: Early stages.

Speaker Change: Thank you.

Speaker Change: Hot sandwiches.

Speaker Change: Quick question.

Speaker Change: We launched our platform a year ago, and we're cycling over it was still double digit increases in it.

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

Christine: Hi, Good morning, guys congrats on the nice quarter.

Speaker Change: And so it really goes to show when you get the.

Speaker Change: Good morning.

Speaker Change: Level of the quality right.

Speaker Change: Yes, good morning.

And.

Speaker Change: A question on the prepared foods Darren you noted that innovation is driving the results. There. So I was wondering if you can help contextualize Flores, how innovation is indeed driving that market share as it relates to bakery hot sandwiches et cetera, where do you see the greatest untapped opportunity whether that is a broader wings rollout and we understand February <unk>.

Speaker Change: With.

Speaker Change: Some unique twist to it.

Speaker Change: We start to see some growth.

Speaker Change: Our specialty pizza business.

Speaker Change: This this last quarter, we have the Italian deli pizza.

Pizza and we saw really strong growth in that specialty pizza subcategories overall, so that that's always been the case for us when we innovate we win on the bakery side.

Speaker Change: Noise, but it sounds like March has bounce back is that a fair take thank you.

Speaker Change: Real strength in the desert subcategory, primarily cookies and the <unk>.

Speaker Change: Yes.

Speaker Change: Christina.

Speaker Change: Innovation really has been the bigger driver of our growth versus the promotional activity.

Speaker Change: Bakery team has done a great job in terms of innovating and coming up with limited time unique cookie skus that really resonate with our guests and so.

Speaker Change: We do both but.

Speaker Change: Whenever we get that innovation right. That's when we really see the outsized growth in <unk>.

Speaker Change: That innovation has really taken hold.

Speaker Change: I'm sorry, you had asked another part of that question.

Speaker Change: You mentioned it in and the hot sandwiches.

Speaker Change: Yes, just a it sounds like he said that as the weather essentially turned it started to bounce back so is that a.

Speaker Change: We launched that platform a year ago, and we're cycling over it was still double digit increases in it.

Speaker Change: Is it fair to say that March is.

Speaker Change: So it really goes to show when you get the.

Speaker Change: Sort of a normalized level of insight comp growth.

Speaker Change: Level of the quality right.

Speaker Change: And.

Speaker Change: I would say March is seeing that level of growth when the weather cooperates.

Speaker Change: With.

Speaker Change: Some unique twist to it.

Speaker Change: We start to see some growth.

Speaker Change: The probably the first week of March didn't look a heck of a lot different than the good in the last couple of weeks or two.

Speaker Change: Our specialty pizza business.

Speaker Change: This last quarter, we have the Italian deli pizza.

Speaker Change: Pizza and we saw really strong growth in that specialty pizza subcategory.

Speaker Change: Of February but now we're starting to see that weather turnaround and again like I mentioned.

Speaker Change: Overall, so that's always been the case for us when we innovate we win on the bakery side.

Speaker Change: When the weather turns the sales turnaround whether it so.

Speaker Change: We still have a little bit of room to go in the fourth quarter, but.

Speaker Change: We had real strength in the desert sub category, primarily cookies and the bakery team has done a great job in terms of innovating and coming up with limited time unique cookie skus that really resonate with our guests and so.

Speaker Change: If we can get back to normal weather comps I'm confident that the sales.

Speaker Change: <unk> will follow.

Speaker Change: Okay.

Speaker Change: And our next question.

Speaker Change: That innovation has really taken hold.

Speaker Change: Our next question will be coming from Kelly Bania of BMO capital markets Kelly.

Speaker Change: I'm sorry, you had asked another part of that question.

Speaker Change: Yes, just it sounds like you said that as the weather essentially.

Speaker Change: Good morning, Thanks for taking my question.

Speaker Change: Nope.

Speaker Change: And it started to bounce back so is that a is that a fair take to say that March is seeing.

Speaker Change: I wanted to just circle back on on site.

Speaker Change: Several of the figures I'm just curious how much EBITDA.

Speaker Change: Sort of a normalized level of insight comp growth.

Speaker Change: The acquisition of <unk>.

Speaker Change: I would say March is seeing that level of growth when the weather cooperates.

Speaker Change: Into the quarter and how much it.

Contributing to the 11% EBITDA growth.

Speaker Change: Yes.

Speaker Change: Probably the first week of March didn't look a heck of a lot different than the last couple of weeks or two of them.

Speaker Change: Forecast for the year and if anything has changed.

On that front, whether it.

Speaker Change: February but now we're starting to see that weather turnaround and again like I mentioned.

Speaker Change: The performance of the business or timing of.

Speaker Change: The integration activities.

Speaker Change: When the weather turns the sales turnaround whether it so yes.

Speaker Change: Data on that.

Speaker Change: Hey, good morning.

Speaker Change: We still have a little bit of.

Speaker Change: This is Steve in the quarter.

Speaker Change: Room to go in the fourth quarter, but yes.

Speaker Change: <unk> It was EBITDA dilutive to us it was a negative number and that was primarily because of the $13 million of <unk>.

Speaker Change: If we can get back to normal weather comps I'm confident that the sales performance will follow.

Speaker Change: Integration related expenses, so prior to those costs. They were it was positive EBITDA, but.

Speaker Change: Okay.

Speaker Change: And our next question.

Speaker Change: Yeah.

Speaker Change: Our next question will be coming from Kelly Bania of BMO capital markets Kelly.

Speaker Change: It was net negative.

Speaker Change: When you added it all of the integration and one time costs. It will be modestly positive EBITDA in the fourth quarter again, that's going to be influenced will still have a couple of million dollars of.

Kelly Bania: Good morning, Thanks for taking my question.

Speaker Change: Nope.

Speaker Change: Wanted to just circle back on.

Speaker Change: On site.

Speaker Change: Several of the figures just curious how much EBITDA.

Speaker Change: Integration related costs for sure.

Speaker Change: Some of it's fighting out from the third into the fourth some of it is just normal course spending but.

Speaker Change: The acquisition of <unk> added to the quarter and how much it.

Speaker Change: Contributing to the 11% EBITDA growth.

Speaker Change: So it'll it'll become EBITDA positive as we expected it to be in the fourth quarter, but it'll still be a relatively small number and so.

Speaker Change: Forecast for the year and if anything has changed.

Speaker Change: On that front whether.

Speaker Change: The performance of the business or timing of that.

At five <unk> per se.

Speaker Change: Not a large contributor at all.

Speaker Change: The integration activities.

Speaker Change: In the second half of the year to us increasing the total EBITDA expectation that that's our mothership phenomenon.

Speaker Change: Data on that.

Speaker Change: Good morning.

Speaker Change: This is Steve in the quarter.

Speaker Change: <unk> It was EBITDA dilutive to us it was a negative number and that was primarily because of the $13 million of <unk>.

Speaker Change: Okay, that's very helpful.

Speaker Change: On fuel can you talk a little bit about the factors driving the strong.

Speaker Change: Integration related expenses, so prior to those costs. They were it was positive EBITDA, but.

Speaker Change: But I was just wondering if you can talk about how PC market.

Speaker Change: It was net negative.

Speaker Change: When you added it all of the integration and one time costs. It will be modestly positive EBITDA in the fourth quarter again, thats going to be influenced we will still have a couple of million dollars of.

Speaker Change: What kind of legacy markets performed from a fuel margin standpoint than we were expecting maybe a little bit of dilution.

Speaker Change: From the fight.

Speaker Change: <unk> margins, just given their region, where they operate but just kind of curious what more of a C store.

Speaker Change: Integration related costs for sure.

Speaker Change: Some of it sliding out from a third ended before some of it is just normal course spending but.

Speaker Change: Thank you Martin looks like and just what what your take on just.

Speaker Change: So it will it will become EBITDA positive as we expected it to be in the fourth quarter, but it will still be a relatively small number and so.

Speaker Change: The performance of fuel margin.

Speaker Change: Is today, when we could maybe start to see those.

Speaker Change: Year over year.

Speaker Change: At five <unk> per se.

Speaker Change: Yeah, maybe maybe turn it I'll tag team that one I'll just start with clarifying on the on the margin standpoint, So the company.

Speaker Change: Not a large contributor at all.

Speaker Change: In the second half of the year to us increasing the total EBITDA expectation that that's another ship phenomenon.

Produced 36, almost 36 and a half cents CPG, that's a consolidated number.

Speaker Change: Okay, that's very helpful.

Speaker Change: On fuel can you talk a little bit about the factors driving the strong.

Speaker Change: And so mother ship Casey's would've been almost <unk> higher than that so call. It a little over 38 cents and then the fakes geography as you.

Speaker Change: Stuart Gatley, but I was just wondering if you can talk about how PC market.

Speaker Change: What kind of legacy markets performed from a fuel margin standpoint, because we were expecting maybe a little bit of dilution.

Speaker Change: And to that blends that number down by almost almost <unk> two cents a share and I'll, let I'll, let Darren talk about some of that volume stuff.

Speaker Change: From the site.

Speaker Change: <unk> margins, just given their regions and where they operate but just kind of curious what more of a C store.

Darren: On the volume side.

Speaker Change: Number that we gave the one 8% that's the same store numbers, so that would exclude bikes because they are obviously not in our same store panel. Yes. So that really is the performance of the base business.

Speaker Change: Ccs margin looks like and just what what your take on.

Speaker Change: Jet fuel margin.

Speaker Change: Is today, when we could start to see those.

Darren: And again.

Speaker Change: The factors driving that were cycling over some.

Per year.

Speaker Change: Yes, maybe more.

Speaker Change: Maybe to turn and I'll tag team that one I'll just start with clarifying on the on the margin standpoint, So the company.

Speaker Change: Some acquisition activity from the prior year. In addition to seeing some recovery in the diesel business.

Speaker Change: Yes.

Speaker Change: <unk> produced 36, almost 36 five cents CPG, that's a consolidated number.

Speaker Change: And one moment our next question.

Next question comes from Chuck Cerankosky Northcoast Research your line is open.

Speaker Change: And so mother ship Casey's would've been almost <unk> higher than that so call. It a little over 38 cents and then the fakes geography as you.

Speaker Change: Good morning, all great great quarter.

Speaker Change: Looking at the <unk>.

Speaker Change: <unk> business is that at this stage.

Speaker Change: Hence it at lens that number down by almost almost <unk> <unk>, a share and I'll, let I'll, let Darren talk about some of that volume stuff.

Speaker Change: You talked about launching it in des Moines, I think that was what he said is it is it at the decision point, where it will become.

Speaker Change: On the volume side.

Speaker Change: And offering throughout the Casey's footprint.

Speaker Change: Number that we gave the one 8% that's our same store numbers, so that would exclude fix because they are obviously not in our same store panel yes.

Speaker Change: Yes, Chuck we're still early stages there.

Speaker Change: The team is is.

Speaker Change: It really is the performance of the base business.

Speaker Change: Assessing and we're still making some tweaks and adjustments.

Speaker Change: We feel we feel good about what we see so far but we haven't made their final decision just yet.

Speaker Change: And again.

Speaker Change: The factors driving that were cycling over some.

Speaker Change: Some acquisition activity from the prior year. In addition to seeing some recovery in the diesel business.

Speaker Change: On that platform.

Speaker Change: Well you have any additional cities, where we tested.

Speaker Change: Yes.

Speaker Change: We don't have any more at this time that the test in the des Moines area. It's the broader DMA. So it's about 225 stores. So it's a pretty pretty.

Speaker Change: And one moment for our next question.

Speaker Change: Next question comes from Chuck Cerankosky Northcoast Research your line is open.

Speaker Change: Pretty fulsome test both in the Metro area and in some of the surrounding smaller towns. So we're getting a good look at how this performs both in the.

Speaker Change: Good morning, all great great quarter.

Speaker Change: Looking at the <unk>.

Speaker Change: <unk> business is that at this stage.

Speaker Change: In our urban environment.

Speaker Change: You talked about launching it in des Moines, and I think that was what he said is it at the decision point, where it will become.

Speaker Change: And a very much a rural environment.

Speaker Change: But more to come on that one chart.

Speaker Change: Thank you. Our next question will be coming from John Royall of Jpmorgan. John Your line is open.

Speaker Change: And offering throughout the Casey's footprint.

Speaker Change: Yeah, Chuck we're still early stages there.

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

Speaker Change: The team is as you know.

Speaker Change: So my first question is a strategic question.

Speaker Change: Assessing and we're still making some tweaks and adjustments.

Speaker Change: <unk> that you are very early days in the <unk> acquisition and the integration will take some time, but as you think through your next legs of growth longer term you do have this white space in Texas, where you're essentially a new entrant is it safe to assume that Thats your best opportunity to grow from here and if so how should we think about ntis.

We feel we feel good about what we see so far but we haven't made that final decision just yet.

Speaker Change: On that platform.

Speaker Change: Well do you have any additional cities.

Speaker Change: <unk> tested.

Speaker Change: We don't have any more at this time that the test in the des Moines area. It's the broader DMA. So it's about 225 stores. So it's a pretty pretty fulsome test both in the metro area and in some of the surrounding smaller towns. So we're getting a good look at how this performs both in the in our.

Speaker Change: Acquisitions.

Speaker Change: It pertains to that opportunity.

Speaker Change: Yes, John.

Speaker Change: Certainly.

Speaker Change: We have a lot of room to grow in Texas, We now have 170 stores there between.

Speaker Change: The 150, there in <unk> and then the 'twenty two we bought last year.

Speaker Change: Urban environment.

It's very much a rural environment.

Speaker Change: From Lone Star So.

Speaker Change: But more to come on that one chart.

Speaker Change: Yeah, we have tremendous space, there, but if I take a step back with.

Speaker Change: Thank you. Our next question will be coming from John Royall of J P. Morgan John Your line is open.

Speaker Change: With our 2900 stores now roughly.

Speaker Change: 2000 of those stores are in only six states. We operate in we still have a lot of white space.

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

John Royall: So my first question is a strategic question.

Speaker Change: The eastern edge of our of our footprint. So Michigan, we have three stores opened Ohio, Kentucky, Tennessee were just barely getting started so.

Speaker Change: Appreciating that you are very early days and the <unk> acquisition and the integration will take some time, but as you think through your next legs of growth longer term you do have this white space in Texas, where youre essentially a new entrant is it safe to assume that Thats your best opportunity to grow from here and if so how should we think about ntis.

Speaker Change: So, yes, Texas certainly does present.

Speaker Change: Great opportunity for for much more growth, but we also have that same type of opportunity in a number of states that we operate in because that would be point number one number two.

John Royall: Versus acquisitions.

John Royall: As it pertains to that opportunity.

John Royall: Yes, John.

We do.

John Royall: Certainly.

Speaker Change: We approach every fiscal year kind of going in with the assumption that our growth target is going to be half from MTI and half from acquisition being the small deal M&A type of stuff now over the last couple of years as deal flow.

Speaker Change: We have a lot of room to grow in Texas, We now have 170 stores there between.

Speaker Change: 150, <unk> Sykes and then the 'twenty two we bought last year.

Speaker Change: From Lone Star So.

Speaker Change: We have tremendous space, there, but if I take a step back.

Speaker Change: Has evolved it's skewed much heavier on the acquisition side versus the MTI side, but we continue to go out and find real estate and land bank those sites so that.

Speaker Change: Our 2900 stores now roughly.

Speaker Change: 2000 of those stores are in only six states we operate in.

Speaker Change: We'll have a lot of white space on the eastern edge of our of our footprint. So Michigan, we have three stores open.

Speaker Change: If that is the deal flow starts to slow a little bit on the M&A side, we have the pipeline to support it from an NII standpoint, and can continue continue on our growth algorithm. So that's really how we approach. It we don't have a bias one way or the other.

<unk>, Kentucky, Tennessee.

Speaker Change: Just barely getting started so.

Speaker Change: So, yes, Texas, certainly does present, a great opportunity for for much more growth, but we also have that same type of opportunity and a number of states that we operate in because that would be point number one number two.

Speaker Change: We just approach it as a balance and then as things evolve we shift and adjust to make sure. We can keep that ratable growth of people are looking for.

Speaker Change: Very helpful. Thank you and then just a quick follow up on labor hours.

Speaker Change: We do.

Speaker Change: We approach every fiscal year kind of going in with the assumption that our growth target is going to be half from MTI and half from acquisition being the small deal M&A type of stuff now over the last couple of years as deal flow.

Speaker Change: Can you talk about how much runway you think there is to continue to take out same store labor hours and just what inning, you think you're in in terms of getting those hours down to where you'd like to operate them.

Speaker Change: Yeah, when we started.

Speaker Change: A couple of years ago, almost when we started this current three year plan, we committed to take 1%.

Speaker Change: Has evolved it's skewed much heavier on the acquisition side versus the MTI side, but we continue to go out and find real estate and land bank those sites so that.

Speaker Change: Same store labors out per year over the three year period. So we're call. It two thirds of the way roughly.

Speaker Change: If that is the <unk>.

Through that process now.

Speaker Change: Deal flow starts to slow a little bit on the M&A side, we have the pipeline to support it from an NII standpoint, and can continue continue on our growth algorithm. So that's really how we approach it we don't have.

Speaker Change: We were a little bit ahead of schedule to we've taken out more than that.

Speaker Change: So we still have some runway for the next fiscal year, we haven't really guided to anything specific on that yet.

Speaker Change: We will do that in the next quarter, but.

Speaker Change: Our bias one way or the other.

Speaker Change: We just approach it as a balance and then as things evolve we shift into just to make sure. We keep that ratable growth and people are looking for.

Speaker Change: But yes, we still think theres some opportunity there at least for the balance of this three year strategic plan that we're in right now.

Yeah.

Speaker Change: Thank you.

Speaker Change: Very helpful. Thank you and then just a quick follow up on labor hours.

Speaker Change: And our next question will be coming from Chuck Grom of Gordon Haskett. Your line is open.

Speaker Change: Can you talk about how much runway you think there is to continue to take out same store labor hours and just what inning, you think youre in in terms of getting those hours down to where you'd like to operate them.

Chuck Grom: Hey, good morning, Thanks, very much on the <unk>.

Chuck Grom: The cents per gallon from flakes should we think about that wrapping over the next three quarters or.

Speaker Change: Yes, when we started.

Chuck Grom: Or is there something seasonal about this quarter that distorted it and then on the prepared foods mm 150 basis points of a drag I guess a similar question how do we think about that ramping over the next few quarters in other words I guess at what point do you think you can narrow it down too. So so it's been.

Speaker Change: A couple of years ago, almost when we started this current three year plan, we committed to take 1%.

Speaker Change: Our same store labors out per year over the three year period. So we're call. It two thirds of the way roughly.

Speaker Change: Through that process now frankly, we're a little bit ahead of schedule to we've taken out more than that.

Chuck Grom: Amendments.

Chuck Grom: Yes.

Steve: Good morning, Chuck This is Steve I'll start with that so.

Speaker Change: So we still have some runway for the next fiscal year, we haven't really guided to anything specific on that yet.

Speaker Change: On the CPG.

Speaker Change: So somewhere around two sensors is probably a good number for the assumption in terms of whatever you had modeled for a traditional casey's geography.

Speaker Change: We'll do that in the next quarter, but.

Speaker Change: But yes, we still think theres some opportunity there at least for the balance of this three year strategic plan that we're in right now.

Speaker Change: You know that the states that fix is active and is generally blends in at about two <unk> down.

Yeah.

Speaker Change: Thank you.

Speaker Change: And our next question will be coming from Chuck Grom of Gordon Haskett. Your line is open.

Speaker Change: We've only owned it for one quarter, so I'm going to be a little careful on the seasonality aspect of it I mean generally speaking the fikes units are larger volume units than an average kind of casey's in the mothership that they pump more gallons literally but I don't have any reason not to tell you <unk> is it.

Chuck Grom: Hey, good morning, Thanks, very much on the <unk> drag.

Chuck Grom: The cents per gallon from <unk> should we think about that ramping over the next three quarters or.

Chuck Grom: Or is there something seasonal about this quarter that distorted it and then on the prepared foods 150 basis points of a drag I guess a similar question how do we think about that ramping over the next few quarters in other words I guess at what point you think you can narrow it down too. So so it's been good.

Speaker Change: Pretty good number on a prospective basis.

Speaker Change: Some of our synergies that we expect to capture in that $45 million number will be fuel related synergies and so can we can we chip away.

Chuck Grom: <unk>.

Chuck Grom: Yes.

Speaker Change: That delta over time, Yeah, I think we can but we're not going to gain enough synergies to somehow right size those geographies back to what our average is that that's not what we're trying to do.

Chuck Grom: Good morning, Chuck This is Steve I'll start with that so.

Chuck Grom: On the CPG.

Chuck Grom: So somewhere around two sensors is probably a good number for the assumption in terms of whatever you had modeled for a traditional casey's geography.

Speaker Change: On the prepared food side, that's going to be but we do over time expect to bring a fikes stores. The majority 85% of the five stores that will be converted to a casey's two akc's like prepared food.

Chuck Grom: The states that fix is active and is generally blends in at about two <unk> down.

Chuck Grom: We've only owned it for one quarter, so I'm going to be a little careful on the seasonality aspect of it I mean generally speaking the fix units are larger volume unit spent an average kind of casey's in the mother ship they pump more gallons literally but I don't have any reason not to tell you <unk> is it.

Speaker Change: <unk> profile that will be.

Speaker Change: Pending on the construction timeline, where we get new kitchens, and so back to an earlier question, it's not going to happen in the next 12 months because of the permitting timeline required so that will be more in kind of year three and year four.

Speaker Change: But ultimately there is no reason for us not to assume that the fikes stores will come in line with the prepared food margins of the existing Casey's business.

Chuck Grom: A pretty good number on a prospective basis.

Chuck Grom: Some of our synergies.

Chuck Grom: We expect to capture in that $45 million number will be fuel related synergies and so can we can we chip away.

Speaker Change: Yeah.

Okay, great. Thanks, Steve and then my follow up just on the on the macro question here, but it seems to be focused on I guess, a different angle would be.

Chuck Grom: That delta over time, yes, I think we can but we're not going to gain enough synergies to somehow right size those geographies back to what our average is that that's not what we're trying to do.

Speaker Change: When you dissect your basket.

Speaker Change: Are you seeing trade down more and more people buying fountain drinks.

Speaker Change: Is there anything the unpack over the past four to six weeks given the environment. Thanks.

Chuck Grom: The prepared food side thats going to be but we do over time expect to bring a fikes stores. The majority 85% of the five stores that will be converted to a casey's casey's.

Yes.

Speaker Change: We have seen some strength in fountain drinks, so I will say that.

Casey's like prepared food.

Speaker Change: But you know its across the spectrum of income cohorts I can't I can't necessarily tell you that it's.

Chuck Grom: Margin profile that will be dependent on the construction timeline, where we get new kitchens, and so back to an earlier question, it's not going to happen in the next 12 months because of the permitting timeline required so that will be on more on kind of year three and year four.

Speaker Change: You have lower income consumer indexing higher on that actually.

Speaker Change: Higher income.

Speaker Change: <unk> are actually growing the fastest on our on.

Speaker Change: But our dispense beverages so.

Chuck Grom: But ultimately there is no reason for us not to assume that the.

Speaker Change: I'm not sure if I can draw any conclusions from that other than.

Chuck Grom: Fikes stores will come in line with prepared food margins of the existing Casey's business.

Speaker Change: They're liking our film business.

Speaker Change: We have seen.

Speaker Change: We continue to see some shifting around the store with candy prices being very high in our bakery programming really robust and some good innovation. There we are seeing people switch over from the candy category into the bakery category, which is a little more affordable and still allows people to get.

Speaker Change: Okay, great. Thanks, Steve and then my follow up just on the macro question here, but it seems to be focused on I guess, a different angle would be when you dissect your basket.

Are you seeing trade down more and more people buying fountain drinks.

Speaker Change: Anything on pack over the past four to six weeks given.

Speaker Change: That sweet indulgence that theyre looking for and we like that trade from a margin standpoint that will take that all day long that's a that's a good one for us.

Speaker Change: The environment. Thanks.

Yes.

Speaker Change: We have seen some strength in fountain drinks I will say that.

Speaker Change: But generally speaking.

Speaker Change: Yeah.

Speaker Change: But you know its across the spectrum of income cohorts I can't I can't necessarily tell you that it's.

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

Speaker Change: There's a lot of other mix.

Shifts going on and I don't think.

Speaker Change: Lower income consumer indexing higher on that actually it's a higher income.

Speaker Change: Really anything to do with the consumer.

Speaker Change: From a pressure standpoint, what.

Speaker Change: Consumers are actually growing the fastest.

Speaker Change: And you see this in our grocery and general merchandise margin and how thats been able to grow the cigarette category combustible cigarettes is under a lot of pressure and so that that sub category has been declining at the same time nicotine alternatives have been growing at.

Speaker Change: But our dispense beverages so.

Speaker Change: I'm not sure if I can draw any conclusions from that other than.

Speaker Change: They are they are liking our fountain business.

Speaker Change: We have seen.

Speaker Change: We continue to see some shifting around the store with candy prices being very high in our bakery programming really robust and some good innovation. There we are seeing people switch over from the candy category into the bakery category, which is a little more affordable and still allows people to get.

Really fast rate in the last quarter, our nicotine alternatives were up 74%.

Speaker Change: The combustible cigarettes were down right around four so.

<unk>.

Speaker Change: That that margin trade is a much better trade for us.

Speaker Change: So that blends that margin up and at the same time, the overall category as.

Speaker Change: That sweet indulgence, if theyre looking for and we like that trade from a margin standpoint, So we'll take that all day long that's that's a good one for us.

Speaker Change: Is less of the overall grocery general merchandise mix and more of that is going to.

Speaker Change: But generally speaking.

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

Speaker Change: Non alcoholic beverages, and grocery which carries about double the margin rate the tobacco category does.

Speaker Change: There's a lot of other mix.

Speaker Change: Shifts going on I don't think.

Speaker Change: Really anything to do with the consumer.

Speaker Change: You see those shifts going on and so that's what's allowing us to blend that margin rate up overall in grocery and general merchandise.

Speaker Change: From a pressure standpoint.

Speaker Change: Yes.

Speaker Change: And you see this in our grocery and general merchandise margin and how thats been able to grow the cigarette category combustible cigarettes is under a lot of pressure and so that debt.

Speaker Change: And we do have a follow up question from Mike Montana maintain excuse me Montana of Evercore ISI, Mike Your line is open.

Speaker Change: Sub category has been declining at the same time nicotine alternatives have been growing at a.

Mike Montana: Hey, Thanks for letting me squeeze this in just wanted to ask on the private label front. If you could talk about any of the tearing initiatives. How that's going and then secondly, there's got to be a lot of pressure out there on the independents. So.

Speaker Change: A really fast rate in the last quarter, our nicotine alternatives were up 74%.

Speaker Change: The combustible cigarettes were down right around four.

Speaker Change: No.

There are additional opportunities for acquisitions, especially in light of the.

Speaker Change: That margin trade is a much better trade for us.

Mike Montana: Our ability to deleverage you've shown so far.

Speaker Change: So that blends that margin up and at the same time the overall category.

Mike Montana: Yes, Mike.

Mike Montana: We are starting to make progress on that touring is weird.

Speaker Change: Is less of the overall grocery general merchandise mix and more of that is going to.

Mike Montana: Literally as we speak just getting some of those new products into the stores and we'll see that gradually bleed into into the assortment over the next call. It nine to 12 months says as we wind down some inventories on existing products and ramp up some of the production on the new <unk>.

Speaker Change: Non alcoholic beverages, and grocery which carries about double the margin rate the tobacco category does.

Speaker Change: So you see those shifts going on and so that's what's allowing us to blend that margin rate up overall in grocery and general merchandise.

Mike Montana: <unk> so.

Mike Montana: We like what we've seen so far but it's only a handful of skus to be honest and we have a lot more coming over the next.

Speaker Change: And we do have a follow up question from Mike Montana maintain excuse me Montana of Evercore ISI, Mike Your line is open.

Mike Montana: Several quarters.

Mike Montana: Hey, Thanks for letting me squeeze this in.

Mike Montana: And then.

Mike Montana: I'm, sorry, yes, the M&A environment, yes.

Speaker Change: I just wanted to ask.

On the private label front, if you could talk about any of the tearing initiatives. How that's going and then secondly, there's got to be a lot of pressure out there on the independent so.

Speaker Change: Look I think you see the same industry data that we do.

I think the smaller independent operators under a lot of pressure right now and those are the conversations that we.

Speaker Change: Or is there additional opportunities for acquisitions, especially in light of the.

Speaker Change: Continue to have.

Speaker Change: The ability to deleverage you've shown so far.

Speaker Change: That is impacting also some of the larger scale players. So we're optimistic that the environment will continue to be.

Mike Montana: Yes, Mike.

Speaker Change: We are starting to make progress on that hearing is we are.

Speaker Change: Favorable tube to buyers like us and.

Speaker Change: Literally as we speak just getting some of those new products into the stores.

Speaker Change: And then we're seeing some some pretty good deal flow, especially on the on the smaller stuff.

Speaker Change: And we will see that gradually bleed into <unk>.

Speaker Change: The bigger the bigger opportunities are a little more lumpy, but.

Speaker Change: The assortment over the next call it nine to 12 months says.

Speaker Change: We are whenever something comes to market, we are actively engaged in it and.

Speaker Change: We wind down some inventories on existing products and ramp up some of the production on the new products. So.

Speaker Change: So.

We like to and are holding right now.

Speaker Change: We like what we've seen so far but it's only a handful of skus to be honest, we have a lot more coming over the next.

Speaker Change: The balance sheet is in great shape. The team is very experienced at integrating these things. So it's really about finding the right opportunities.

Speaker Change: Several quarters.

Speaker Change: At the right price for us.

Speaker Change: And then.

Speaker Change: I'm, sorry, yes, the M&A environment.

Speaker Change: I would now like to turn the call back to Darrin rebellious for closing remarks.

Speaker Change: Look I think you see the same industry data that we do.

Speaker Change: So I think the smaller independent operators under a lot of pressure right now and those are the conversations that we continue to have.

Speaker Change: Alright, Thank you for taking the time to join US on the call today and hope everyone has a great day.

Speaker Change: And this concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: That is impacting also some of the larger scale players. So we're optimistic that the environment will continue to be.

Speaker Change: Favorable too to buyers like us and.

Speaker Change: And we're seeing some some pretty good deal flow, especially on the on the smaller stuff.

Speaker Change: The bigger the bigger opportunities are a little more lumpy, but.

Speaker Change: We are whenever something comes to market, we are actively engaged in it.

Speaker Change: So.

Speaker Change: We like to and are holding right now.

Speaker Change: Our balance sheet is in great shape. The team is very experienced at integrating these things. So it's really about finding the right opportunities.

Speaker Change: At the right price for us.

Speaker Change: I would now like to turn the call back to Darrin rebellious for closing remarks.

Darrin Rebellious: Alright, Thank you for taking the time to join US on the call today and hope everyone has a great day.

Darrin Rebellious: And this concludes today's conference call. Thank you for participating you may now disconnect.

Darrin Rebellious: Okay.

Darrin Rebellious: [music].

Darrin Rebellious: Okay.

Darrin Rebellious: [music].

Darrin Rebellious: Okay.

Darrin Rebellious: [music].

Yes.

Darrin Rebellious: [music].

Darrin Rebellious: Yes.

Darrin Rebellious: Okay.

Darrin Rebellious: Hum.

Darrin Rebellious: [music].

Darrin Rebellious: Yes.

Darrin Rebellious: [music].

Darrin Rebellious: Yes.

[music].

Darrin Rebellious: Okay.

Yes.

Darrin Rebellious: [music].

Darrin Rebellious: [music].

[music].

Darrin Rebellious: [music].

Speaker Change: Good day and thank you for standing by welcome to the Q3 fiscal year 2025, Casey's General stores earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising that you're.

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

Good morning, and thank you for joining us to discuss the results of our third quarter ended January 31 2025.

Speaker Change: Ryan Johnson Senior Vice President Investor Relations and business development with me today are Denver, rebellious Chairman, President and Chief Executive Officer, as well as Steve Bramlage, Chief Financial Officer before we begin I'll remind you that certain statements made by us. During this investor call may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1090.

Speaker Change: These forward looking statements include any statements relating to the potential impact of our bikes transaction expectations for future periods possible or assumed future results of operations financial conditions.

Speaker Change: Weighted in related sources, our needs the company supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores. There are a number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward looking.

<unk>, including but not limited to the integration of the reach of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from our strategic plan the impact and duration of the conflict in Ukraine and related governmental actions as well as other risks uncertainties and factors, which are described in our most recent annual report on form 10.

Speaker Change: Jay and Cardinal quarterly reports on Form 10-Q as filed with the SEC and available on our website any forward looking statements made during this call reflect our current views as of today with respect to future events and Casey's disclaims any intention or obligation to update or revise forward looking statements, whether as a result of new information and few.

Speaker Change: Events or otherwise.

Speaker Change: A reconciliation of non-GAAP to GAAP financial measures referenced on this call as well as detailed breakdown of the operating expense increase for the third quarter can be found at our website at www Dot <unk> dot com under the Investor Relations link, but that said I would now like to turn the call over to Darren to discuss our third quarter results Darren.

Darren Flores: Thanks, Brian and good morning, everyone. We're excited to discuss the excellent third quarter results in a moment.

Darren Flores: Before I do I want to thank the entire cases team for delivering another outstanding quarter.

Darren Flores: I'd also like to highlight our feeding America campaign kicked off in late February and partnership with Celsius.

Darren Flores: Through April 1st we're excited to be able to help communities in need.

Darren Flores: Including rural areas in case these countries come in.

Darren Flores: Hunger and food insecurity.

Darren Flores: Now, let's get into the results from the quarter.

Darren Flores: Diluted EPS finished at $2 33 per share and net income was $87 million.

Darren Flores: Both flat with the prior year.

Darren Flores: EBITDA was up $242 million up 11% from the prior year.

Darren Flores: Inside sales were up over 15% and fuel gallons sold were up over 20%, while our store count growth was up 10% versus the prior year, an encouraging sign that the economic impact of the stores, we were building and buying is greater than the company average.

Darren Flores: Inside the store prepared food innovation was also a key driver of strong performance.

Darren Flores: With regards to fuel the team mesh outperformed the geographic market and grow same store gallons of fuel margins over 36 cents per gallon.

Darren Flores: The business continues to execute on our three year strategic plan as we are growing the food business accelerating unit growth all while operating the stores more efficiently.

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

Inside same store sales were up three 7% for the quarter or 8% two year stack basis.

Darren Flores: Gross margin of 49%.

Darren Flores: Same store prepared food and dispense beverage led the way as sales were up four 7% or 12, 6% on a two year stack basis with an average margin of 57, 8%.

Darren Flores: Our sandwiches continue their strong performance up over 50% and bakery also performed well up nearly 10%.

Darren Flores: Margin was down approximately 180 basis points from the prior year due primarily to the addition of the South coast stores.

Darren Flores: Lower margin profile as well as the coffee promotion that featured our new flavor profiles.

Darren Flores: Same store grocery and general merchandise sales were up three 3% or six 2% on two year stack basis with an average margin of 34, 2%.

Darren Flores: Non alcoholic beverages performed well in the quarter with energy drinks continuing its strong momentum up approximately 18%.

Darren Flores: Margin increased approximately 40 basis points from the prior year, primarily due to a favorable product mix shift.

Darren Flores: For fuel same store gallons sold were up one 8% with a fuel margin of $36 four per tonne.

Darren Flores: <unk> fuel gallon sold data shows the mid continent region down approximately 4% in the quarter, indicating that we're taking market share.

Darren Flores: We believe our high quality in store experience drives traffic to our sites and is a significant competitive advantage.

Darren Flores: Okay.

Darren Flores: Operating expense management remains top of mind in the third quarter saw an increase of just three 2% on a same store excluding credit card fee basis.

Darren Flores: Our continuous improvement team has identified processes can be simplified while still serving the guests at a high level.

Darren Flores: The results are there as same store labor hours were down 2%.

Darren Flores: I would now like to turn the call back over to Steve to discuss the financial results from the third quarter Steve.

Steve: Thank you Darren and good morning, I'm very proud of the hard work of all.

Steve: Our team during the quarter as we integrated the largest transaction in the company's history, while also producing outstanding results.

Steve: Total revenue for the quarter was $3 9 billion.

Steve: An increase of $574 million or 17, 3% from the prior year due to outstanding results in both inside sales and fuel gallons sold.

Steve: Actually offset by a four 2% decline in the retail fuel price.

Steve: Results were also favorably impacted by operating approximately 10% more stores on a year over year basis.

Steve: Total inside sales for the quarter were $1 4 billion, an increase of $185 million or 15, 3% from the prior year.

Steve: For the quarter over $100 million of the increase was attributable to the <unk> stores.

Steve: Prepared food and dispense beverage sales rose by $48 million to $397 million or an increase of 13, 7%.

Steve: And grocery and general merchandise sales increased by $138 million to $1 billion, an increase of 15, 9%.

Steve: Retail fuel sales were up $315 million in the quarter, driven primarily by a 24% increase in fuel gallons sold.

Steve: <unk> stores contributed just over 100 million gallons in the quarter.

Steve: This was partially offset by a 12% decline in the retail price of fuel.

Steve: $2 98 per gallon in the prior year to $2 85 per gallon in the third quarter.

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

Steve: ACS had gross profit of $913 million in the quarter, that's an increase of $126 million or 16% from the prior year.

Steve: This is driven by both higher inside gross profit of $71 6 million or 14, 3% and higher fuel gross profit of $44 8 million or 17, 4%.

Steve: Inside gross profit margin was 49% that's down 40 basis points from a year ago.

Steve: Prepared food and.

Steve: Dispense beverage margin was 57, 8%.

Steve: It's down 180 basis points from the prior year.

Steve: 150 basis points of the decrease was due to the consolidation of lower margin <unk> stores.

Steve: The coffee promotion Darrin previously mentioned had an impact of approximately 20 basis points. Finally, we also had a very modest headwind on cheese, which was $2 12 per pound for the quarter and that compares to $2.06 per pound last year, an increase of 3%.

Steve: The grocery and general merchandize margin was 34, 2% Thats, an increase of 40 basis points from the prior year.

Steve: The increase in margin is due to a favorable product mix shift of approximately 50 basis points and that was partially offset due to the addition of this ESCO source.

Steve: Fuel margins for the quarter was $36.04 per gallon thats down <unk>.

Steve: Nine cents per gallon from the prior year and that's primarily due to the impact of the <unk> stores, which was nearly <unk> per gallon.

Steve: Fuel gross profit includes $2 6 million from the sale of brands down 0.8 million from the same quarter in the prior year.

Steve: Total operating expenses were up 17, 8% or $101 3 million in the quarter approximately 14% of the total operating expense increase is due to unit growth.

Steve: As we operated 254 more stores than in the prior year.

Steve: Included in this increase was approximately $13 million in one time deal and integration costs associated with the transaction.

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

Steve: Depreciation in the quarter was $105 $2 million thats up $16 $3 million versus the prior year versus the prior year and Thats, primarily due to operating more stores.

Net interest expense in the quarter was $29 4 million, that's up $15 3 million from the prior year and this is more reflective of our new quarterly run rate for interest expense in light of the financing associated with the <unk> transaction.

Steve: The effective tax rate for the quarter was 19, 2% and that compares to 24, 1% in the prior year.

Steve: The decrease was driven by a onetime benefit to state deferred tax liabilities following the <unk> transaction.

Steve: Net income was flat versus prior year at $87 million.

Steve: EBITDA for the quarter was $242 4 million compared to $217 6 million a year ago, an increase of 11, 4%.

Steve: Our balance sheet is in excellent condition and on January 31, we had total available liquidity of $1 $3 billion.

Steve: Quarter end leverage ratio debt to EBITDA was approximately two one times per the covenants in the company's recent.

Steve: Recently amended credit facilities, and we now expect to achieve our target leverage ratio of approximately two times by the end of the fiscal year and Thats been earlier than we had originally anticipated.

Steve: For the quarter net cash generated by operating activities of $205 million less purchases of property and equipment of $114 million resulted in the company generating $91 million in free cash flow.

Steve: This compares to using $27 million in the prior year.

At the March meeting the board of directors voted to maintain the quarterly dividend 50 cents per share.

Steve: We are updating our previously communicated fiscal year 2025 guidance as follows Casey's now expects EBITDA to increase approximately 11%.

Steve: And we now expect the purchase of property and equipment to be approximately $500 million.

Steve: Not updating any other metrics that we have some further clarification as follows.

Steve: First while we know there is some modeling noise related to the <unk> acquisition in the quarter. The outstanding financial results that we posted demonstrates our team's ability to integrate a large acquisition, while still running the business at a very high level.

Steve: Also as a reminder, the fourth quarter will obviously be impacted by the sites transaction on our total results, notably on our inside and fuel margins as well as total operating expenses they will not impact same store sales.

Steve: Additionally February 2024 included a leap day, which is not repeating this year the impact of the leap day to the fiscal 2020 for fourth quarter was a positive approximately 100 basis points.

Steve: We believe that February has not been reflected of the expected same store fourth quarter results.

Steve: Due to unfavorable weather conditions and the lapping of lead time, but the company does expect to finish the year at the bottom of the inside same store sales range and it does imply that the fourth quarter will be below the annual range.

Steve: Same store gallons are still expected to be near the middle of the range for the fiscal year.

Steve: Fuel margin in February was in the mid Thirty's on a cents per gallon basis and that includes <unk> and cheese costs are very modestly favorable versus the prior year.

Steve: Our total fourth quarter operating expense expectation.

Steve: The increase again, primarily due to the <unk> acquisition.

Steve: In total as expected fix will be dilutive to our earnings per share in the fourth quarter, primarily due to incremental interest expense higher depreciation and amortization and several million additional dollars of anticipated integration costs I'll now turn the call back over to Darren Alright.

Darren Flores: Alright, Thanks, Steve I'd like to again, thank the entire Casey's team, including our new team members from <unk> for another excellent quarter.

Darren Flores: I'm also very proud of the team's ability to integrate the largest transaction in our company's history, while also producing outstanding financial results.

Darren Flores: The first pillar of our three year strategic plan is to accelerate the food business.

Our prepared food and dispense beverage team continues to do an excellent job innovating and finding the right quality products to serve to our guests.

Darren Flores: The Hot sandwiches launched last year continued to perform very well.

Darren Flores: We also added a limited release of <unk> chicken wings, and fries, and our commodity market with encouraging results so far.

Darren Flores: On the grocery and general merchandise side, we continue to see strength in the energy drink category as we mentioned earlier with 18% growth in the quarter.

Darren Flores: Our store growth pillar was on full display this quarter integrating the science transaction.

Darren Flores: Our dedicated integration team has done an excellent job getting our newest team members comfortable operating in the cases system.

Darren Flores: We're able to do this while maintaining a strong balance sheet as of January 31, We said that two one times leverage ratio and are quickly on our way to the targeted two times leverage ratio.

Darren Flores: Given our track record of executing and integrating meaningful acquisitions, we are well positioned to continue this strategy and enhance shareholder value.

Darren Flores: Okay.

Darren Flores: Enhancing operational efficiencies the third pillar of our strategic plan with.

Darren Flores: With strong work from our continuous improvement in operations teams. The organization achieved its 11th consecutive quarter of reduced same store labor hours.

Darren Flores: This work has been done without compromising the Casey's experience and we continue to see guest and team member satisfaction scores rise.

Darren Flores: Overall this quarter was another great example of how our differentiated business model, coupled with a great team lays outstanding results with.

Darren Flores: With a high level of execution on our strategic plan.

Darren Flores: We are able to guide to EBITDA growth of approximately 11%.

Darren Flores: Pacing our standard growth algorithm.

Darren Flores: We will now take your questions.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question and one follow up one on the first question.

Speaker Change: Our first question will be coming from Jacob.

Speaker Change: Philips.

Speaker Change: Willingness research your line is open Jacob.

Speaker Change: Hi, everyone.

Speaker Change: First I wanted to ask I guess more broad strategic.

Speaker Change: Both of you joined in late 2019, 2020, and overseeing the company through wake within both our time pandemic inflation, but now we are up against kind of a boho.

Speaker Change: The backdrop taro, maybe from accelerating inflation. So just wondering if you could talk about like how Casey is setup things have changed over the past four five years and why Youre confident in the case that can operate in businesses, but it's always about how environment.

Darren Flores: Hey, Jacob this is Darren.

Jacob: Yes, Youre right I started in the middle of 2019 and.

Darren Flores: So and then you started a year later and so yes, we've got to see quite a bit over the last few years.

Darren Flores: I guess, what I would tell you is.

Darren Flores: The company, we started in five or six years ago is very different than the company. We have today and we've added a lot of different capabilities.

Darren Flores: Whether it's an and.

Darren Flores: And our procurement function data and analytics guests and size, our culinary team continuous improvement.

Darren Flores: Have a whole suite of capabilities that.

We simply didn't have several years ago, and so as I look at this particular environment with some uncertainty in a bit of volatility I feel far more confident now than I ever was before and our ability to deal with those things just because we have a more tenured team we have.

Darren Flores: More sophisticated capabilities, we have better technology, and so I just feel like we're better equipped to deal with whatever comes our way in and so far what we're seeing.

Darren Flores: There's a lot of uncertainty, but we haven't seen a lot.

Darren Flores: Lot of concrete impacts to the business either.

Speaker Change: Based on all the noise out there in the world side I feel like we're in a much better position to deal with whatever comes I would I would probably add to that Jacob you put all of that on top of just the resiliency of our core business model Casey's Casey's was successful for a long time before any.

Speaker Change: The current members of the leadership team got here through all kinds of external environments and the beauty of our business model is we're not we're not dependent on a particular set of exogenous factors going our way, whether it's in petroleum or sulfur consumer we've got deferred.

A differentiated value proposition inside the store when times are tough for our consumer.

Speaker Change: We've got outstanding fuel capabilities.

Speaker Change: Much more sophisticated than most of the people that we compete against with on a day to day basis and the merchandising offering that we have inside the store. We feel are second to none and so almost irrespective of what's happening outside of our four walls. We feel like we have something that differentiates us from anybody else in this.

Speaker Change: Space.

Speaker Change: Okay, and then I guess just as a Boe.

Speaker Change: Bye.

Speaker Change: No no we're going to be dilutive to margin. So I guess, mainly from prepared food what are the easy things to fix is it just a factor of different product mix and what are the timelines to like kind of helping those stores improving their margins.

Speaker Change: Yes.

Speaker Change: Well nothing is easy to fix.

Speaker Change: I guess, what I would say is.

Speaker Change: Yes.

Speaker Change: If you look at the prepared foods side of their business, that's probably where the most.

The most glaring difference in the margin profile between.

Where they are today and where we are.

Some of that is due simply to product mix and what they sell their what they sell in their food business is a little more protein heavy which tends to come with a little bit lower margin profile.

Speaker Change: Where we sell a lot of pizza, which has a much higher margin profile. So some of the the fix so to speak will be when we ultimately get kitchens in those stores and we can get our assortment of products into complement theirs.

Speaker Change: So we'll add pizza to their assortment.

Speaker Change: And what's.

Speaker Change: What's really encouraging right now as we've converted three stores pretty quickly that already have kitchens in them and we've been kind of taken the best of both approach.

Speaker Change: Two.

To the assortment, where we've kept some of the things that really made them successful. We added some of the things that make US who we are primarily a pizza and we have the best of both and then we eliminate some of the things that.

<unk> is profitable for them and so what we're seeing is really good results so far and granted it's only three stores. It's early days.

Speaker Change: But we really think that.

Speaker Change: As we get further into it and we're able to optimize that menu between what they did really well in what we do really well.

Speaker Change: We'll see not only increase margins, but we will see increased velocities as well and then of course over time, yes.

Speaker Change: Their existing supplier contracts.

Speaker Change: Come to an end, we will be able to migrate them over onto our contracts with far more scale and so we will be able to.

Speaker Change: That margin up as well.

Speaker Change: One moment for our next question.

Our next question will be coming from Anthony <unk> with Wells Fargo. Your line is open Anthony.

Anthony: Yeah, Hey, good morning, guys. Thanks for taking my question.

Speaker Change: So just digging in on flex a little bit more can you just maybe talk a little bit more about early performance from that asset how the integrations going.

Anthony: And then any change to how youre thinking about the cadence and magnitude of synergies.

Anthony: Yes ill talk a little bit of outperformance.

Anthony: Thus far I'll, let Steve talk about cadence of synergies but.

Anthony: Performance overall.

Anthony: We're pretty happy hour, we're only one quarter into it right.

Anthony: Okay.

Anthony: Fortunately that first quarter.

Anthony: In the wintertime and they've got a lot of snow in Texas and in the Panhandle of Florida, which doesn't happen all heck of a lot so probably.

Probably not as representative of what what the normal business performs.

Anthony: But aside from that.

Anthony: It's exactly what we thought we bought we've got some really high quality high volume stores in attractive geographies.

Anthony: And like I mentioned before.

Anthony: Early indications are that when we combine our assortment and doing the things that we each do well.

Anthony: We get some pretty good results. So we feel really good about.

Anthony: About the deal so far the team seems to be in it.

Anthony: <unk> very nicely and we've got a lot of work to do still but.

Anthony: Feel good about that so far and again.

Anthony: So the real synergies for us start to happen as we convert sources, Steve I'll, let you just just to reiterate our expectations on synergy capture have not changed so over three years to four years, we think we can achieve $45 million.

Anthony: Of synergies.

Anthony: 40% of that or so would be the the food synergy capture that Darren referenced and so that'll be on the back end of that three to four year time period, just because thats associated with <unk>.

Anthony: With some construction and remodeling our lead times to get that to work and so certainly in the first 12 months you would expect us to capture some fuel pricing synergy where we've taken over the pricing of a few already and starting to convert that more to how the Casey's mothership would do that and then there'll be some some overhead synergies.

Anthony: Obviously as we work through the rationalization of some of the processes.

Anthony: <unk> had been doing previously in the middle of that well get some merchandise synergies for our center of store mix.

Anthony: Again, most of what will happen in the next 12 months would be on the fuel and the overhead side.

Anthony: Got it that's really helpful.

Speaker Change: And then just on the gallon side, you guys put up a really strong fuel gallon quarter, what we've generally seen pretty choppy industry data and results from others. So can you just talk a little bit more about what you think's driving that outperformance and then just maybe your latest thinking on the right balance between gallon growth.

Anthony: And margin as you look to optimize gross profit dollars.

Anthony: Yes, Anthony yet I would say that.

Anthony: Due to two factors that really drove the gallon performance in this quarter. Some of it is some of the acquisition stores that we did in prior years, they're starting to ramp and so as we cycle over some softer numbers.

Anthony: When we bought those stores now we're starting to see.

Anthony: Fuel capabilities come to bear on those stores and we're seeing some some strong gallon growth in those areas.

Anthony: The other area that we started to see some traction and is on diesel and that's been up.

Anthony: In some categories, it's been under some pressure for the last several quarters, but starting to gain some traction.

Anthony: And the most recent quarter, both on the commercial side and through some of the.

Anthony: Programs that we have to offer incremental value to that over the road diesel consumer so, but we saw saw strength in both of those areas in that that really contributed to the overall gallon performance.

Anthony: And one moment for our next question.

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

Bonnie Herzog: Alright, Thank you good morning.

Speaker Change: Good morning.

Bonnie Herzog: Now just a few.

Speaker Change: So great question right now seem to be gaining momentum recently, so just hoping you could touch on how your business model and value proposition possession, you hopefully well in the case of a recessionary environment and along those lines.

Speaker Change: Have you become more aggressive on your food and beverage promotions recently, given the increased promotional intensity with being a permit.

Speaker Change: Yes.

Speaker Change: Broader commentary on the consumer you're recessionary playbook and promotional levels that would be helpful.

Speaker Change: Yes.

Bonnie Herzog: Okay sure Bonnie I think that was five questions, but I'll try to tackle.

Matt: Yes, hi, Matt going into going.

Bonnie Herzog: Going into recession.

Matt: If we end up in one.

Matt: Casey's for a long time has performed very well during recessionary times.

Matt: That's for a couple of reasons one is that we sell basic daily needs that people need to remote dollar denomination. So.

Matt: In the Grand scheme of things when people have to pullback on discretionary spending.

Matt: Lot of what we sell would be considered by our guests to be non discretionary and because that tends to be a lower price points.

Matt: It is in the first thing to cut on the list because these are daily needs.

Matt: Yes.

Matt: Point number one point number two is on our food proposition.

Matt: Generally speaking lower price than an equivalent USR alternative and so as consumers start to look for value, where a great trade down opportunity from a price perspective, but not a trade down on quality. So think consumers feel really good about being able to stretch their dollar.

Matt: With us on the food side.

Matt: With respect to us being more promotional.

Matt: Have not increased our promotional activity, we have been more targeted with that we've got some new capabilities now where we're able to more efficiently.

Matt: Look at different consumers and what they're purchasing habits have been and where we see that they may be lapsed, we can target them with more specific offers.

Matt: No.

Matt: We're not we're not spending more from a promotional standpoint, but we're being far more targeted in how we do that.

Matt: Alright, thank you.

And one moment for our next question.

Mike Montana: Our next question will be coming from Mike Montana of Evercore ISI. Your line is open mic.

Mike Montana: Hey, good morning, guys. Thanks for taking the question congrats on the quarter. Thanks.

Mike Montana: Thanks, So you still had a two parter here.

Mike Montana: One was just in terms of high level.

Mike Montana: Maybe if you could talk a little bit about the state of the consumer through your eyes.

Mike Montana: And secondly, like the value gap positioning that you see versus peers, given some of the promotional activity from some of the other dine.

Mike Montana: Dining options that may exist out there.

Mike Montana: Yes sure Mike.

Mike Montana: From a consumer standpoint.

Mike Montana: Yes, I think similar to others, we've seen a little bit of pressure on the lower income consumer, but what I would say is.

Mike Montana: That consumer and I'll remind you that.

Mike Montana: For those we consider low income consumers someone who makes less than $50000. A year, we only have about 25% of our guest base is in that category. So we're not overly exposed in base case. They are still purchasing we still see positive growth from those consumers. It's just not at the same rate.

Mike Montana: That we see in the other income cohorts so.

Mike Montana: They are still buying.

Mike Montana: Just not as much as some of the other cohorts.

Mike Montana: Typically about 1% to 300 basis points softer.

Mike Montana: And it's more in some of those.

Mike Montana: I guess, maybe more discretionary items like.

Mike Montana: Tobacco and alcohol, where we see a little bit of softness there.

Mike Montana: But.

Mike Montana: But that's really from the consumer side.

Mike Montana: With respect to to value.

Mike Montana: Like I said I think we're still in a good spot from a value proposition standpoint, when we look at our pizza business.

Mike Montana: On the one hand.

Mike Montana: Only about half of our stores, even have a national brand competitor in their trade area.

Mike Montana: We don't really have to go head to head with with somebody that might be a little more promotional and about half of our stores and the other half where we do have at National brand competitor, we typically are a dollar or more.

Mike Montana: Hello.

Mike Montana: Typical menu price versus those competitors. So we already start off at a.

Mike Montana: Competitive value relative to them and then we do some promotional activity. They do some so we feel like were always competitive.

Mike Montana: Like I said before we're able to more get more specific and targeted with our rewards members.

Mike Montana: <unk>.

Mike Montana: And really be more efficient with our promotional spend.

Mike Montana: And one moment for our next question.

Speaker Change: Our next question will be coming from Bobby Griffin of Raymond James Your line is open Bobby.

Speaker Change: Hey, guys. Good morning, Thanks for taking my questions and congrats on a good quarter.

Speaker Change: Yes, Gary I wanted to circle back on February <unk>.

Speaker Change: We are asking the things.

Speaker Change: Obviously, theres a lot of anxiety on consumer spending from investors and different things like that but when you kind of ex out the weather or looking into regions of your business that might not have been impacted quite as much on a year over year basis is there anything you can share to kind of give comfort that this really was a weather impact around February any data or anything like that.

Speaker Change: Yes, Bobby yet I don't have specific numbers to share with you on that other than to say.

Speaker Change: February was a tough weather month.

Speaker Change: I can tell you when.

Speaker Change: With the <unk>.

Speaker Change: Temperature difference is $50 or 60 degrees.

Speaker Change: Colder than the prior year I mean do you see it in the numbers and what gives me confidence.

Speaker Change: About this Bob is that when the weather starts to normalize when you can get back to parity. It doesn't have to be good weather just has to be comparable whether we see the business respond accordingly and.

Speaker Change: And we see the growth again so.

Speaker Change: If if I wasn't seeing that I would I would have other concerns but it is.

Speaker Change: It is strictly been tied to those weather events.

Speaker Change: Where we have.

Speaker Change: Our normal unusual amount of snow, where if you got to shut down some stores are just like I mentioned before those extreme temperature variations. So I don't have any concern that there is.

Speaker Change: A more fundamental issue with the consumer because they bounce back as soon as the weather clears up.

Speaker Change: Very helpful. And then maybe just on the coffee promotion as well as the wing tested anything more you can share on that in particular.

Speaker Change: They win and it's something I know coffee has been a category you guys have talked about maybe being able to do a little better in kind of pushing is that something that was successful and that might continue going forward.

Speaker Change: Yes.

Speaker Change: The coffee side, it's still a little bit early but.

Speaker Change: We did see some good results we saw.

A shift to having positive unit growth in that category for the first time in years.

Speaker Change: Really that was the assortment driven we've got a new supplier little more sophisticated on.

Speaker Change: Well on the quality of the product we did a lot of.

Speaker Change: Development of testing on that one so we think we've got the assortment right.

Speaker Change: Coffee is a tough habit.

Speaker Change: To get people to change and so we got probably a little more aggressive on the promotional side than we normally would gave away about 2 million cups of coffee in January.

Speaker Change: Hence the impact.

Speaker Change: To the margin a little bit.

Speaker Change: <unk> foods, but overall this is we're playing the long game here with coffee. So we like the results so far but it's going to be workover of pretty protracted period of time.

Speaker Change: To really gain traction in that business.

On the wind side.

Speaker Change: Again early days, we just did.

Speaker Change: We did a soft launch in the des Moines market in January and then start to advertise in February we're very pleased with the results so far really high satisfaction scores from our guests.

Speaker Change: We feel confident that we've got the product right we're still.

Speaker Change: Working through some some operational Kinks as you would expect when you test things, but feel really good about this and what we're seeing so far is it this isn't really cannibalizing the pizza business is actually contributing an incremental.

Speaker Change: Call it incremental night per week or an incremental visit from RBS, which is exactly what the goal was so.

Speaker Change: So far so good again more work to do but feel good about it.

Speaker Change: In the early stages.

Speaker Change: Thank you.

Speaker Change: And one moment. Please next question.

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

Christine: Hi, Good morning, guys. Congrats on the nice quarter. So I had a question.

Speaker Change: Yes, good morning.

Speaker Change: So question on prepared foods, Darren you noted that innovation is driving the results. There. So I was wondering if you can help contextualize Flores, how innovation is indeed driving that market share as it relates to bakery hot sandwiches et cetera, where do you see the greatest untapped opportunity whether that is a broader wings rollout and we understand February.

Speaker Change: Unique noise, but it sounds like March has bounce back is that a fair take thank you.

Speaker Change: Yes.

Speaker Change: Christina.

Speaker Change: And the innovation really has been the bigger driver of our growth versus the promotional activity in.

Speaker Change: We do both but.

Speaker Change: Whenever we get that innovation right. That's when we really see the outsized growth.

Speaker Change: <unk>.

Speaker Change: And the hot sandwiches.

Speaker Change: We launched that platform a year ago, and we're cycling over it was still double digit increases in it.

Speaker Change: So it really goes to show when you get the.

Level of the quality right.

Speaker Change: With some.

Speaker Change: <unk> unique twist to it.

Speaker Change: We start to see some growth in our specialty pizza business.

Speaker Change: This last quarter, we have the Italian deli.

Speaker Change: Pizza and we saw really strong growth in that specialty pizza subcategory.

Speaker Change: They're all so that's always been the case for us when we innovate we win on the bakery side.

Speaker Change: Real strength in the desert sub category, primarily cookies and the bakery team has done a great job in terms of innovating and coming up with limited time unique cookie skus that really resonate with our guests and so.

Speaker Change: That innovation has really taken hold.

Speaker Change: I'm sorry, you had asked another part of that question.

Speaker Change: Yes, just it sounds like you said that as the weather essentially turned it started to bounce back. So is that a is that a fair take to say that March is seeing.

Speaker Change: Sort of normalized level of insight comp growth.

Speaker Change: I would say March is seeing that level of growth when the weather cooperates.

Speaker Change: The probably the first week of March didn't look a heck of a lot different than the good in the last couple of weeks or two of February but now we're starting to see that weather turnaround and again like I mentioned.

Speaker Change: When the weather turns the sales turnaround whether it so.

Speaker Change: We still have a little bit of room to go in the fourth quarter, but yes.

Speaker Change: Yes, if we can get back to normal weather comps I'm confident that the sales performance will follow.

Speaker Change: And our next question.

Speaker Change: Our next question will be coming from Kelly Bania of BMO capital markets Kelly.

Kelly Bania: Good morning, Thanks for taking my question.

Speaker Change: Wanted to just.

Kelly Bania: Wanted to just circle back.

Speaker Change: On site.

Speaker Change: Several of the figures just curious how much EBITDA.

Speaker Change: The acquisition of <unk> added to the quarter and how much it.

Speaker Change: Contributing to the 11% EBITDA growth.

Speaker Change: Forecast for the year and if anything has changed.

Speaker Change: On that front whether.

The performance of the business or timing of the <unk>.

Great and activity data.

Speaker Change: On that.

Speaker Change: Hey, good morning, this is Steve.

Speaker Change: <unk>.

Speaker Change: Fix it was EBITDA dilutive to us it was a negative number and that was primarily because of the $13 million of integration related expenses. So prior to those costs.

Was positive EBITDA, but.

Speaker Change: It was net negative.

Speaker Change: When you added it all of the integration and one time costs. It will be modestly positive EBITDA in the fourth quarter again, thats going to be influenced will still have a couple of million dollars of.

Speaker Change: Integration related costs for sure.

Speaker Change: Some of it sliding out from a third ended before and some of it is just normal course spending but.

So it will it will become EBITDA positive as we expected it to be in the fourth quarter, but it'll still be a relatively small number and so.

Speaker Change: <unk> per se.

Speaker Change: Not a large contributor at all.

Speaker Change: In the second half of the year to us increasing the total EBITDA expectation that thats another ship phenomenon.

Speaker Change: Okay, that's very helpful.

Speaker Change: On fuel you talked a little bit about the factors driving the whole.

Speaker Change: For Darling.

Speaker Change: Just wondering if you could talk about how PC market.

Speaker Change: Kind of legacy markets performed from a fuel margin standpoint than we were expecting maybe a little bit of dilution.

Speaker Change: From the site.

Speaker Change: <unk> margins, just given their region, where they operate but just kind of curious what more of a C store.

Speaker Change: Fuel margin looks like and just what what your take on that.

Speaker Change: Jet fuel margin.

Speaker Change: Today, when we can.

Speaker Change: Hey, David.

Speaker Change: I think year over year.

Speaker Change: Yeah, maybe.

Speaker Change: Maybe turn it I'll tag team that one I'll just start with clarifying on the on the margin standpoint, So the company.

Speaker Change: Produced 36, almost 36 five cents CPG, that's a consolidated number.

Speaker Change: And so mother ship Casey's would've been almost <unk> higher than that so call. It a little over 38 cents and then the fakes geography as you.

Speaker Change: Hence it at lens that number down by almost almost <unk> <unk>, a share and I'll, let I'll, let Darren talk about some of that volume stuff.

Darren Flores: On the volume side.

Darren Flores: Number that we gave the one 8% that's the same store numbers, so that would exclude fix because they are obviously not in our same store panel. So that that really is the performance of both the base business.

Darren Flores: And again.

Darren Flores: The factors driving that were cycling over some.

Darren Flores: Some acquisition activity from the prior year. In addition to seeing some recovery in the diesel business.

Darren Flores: Yes.

Darren Flores: And one moment our next question.

Chuck Cerankosky: Next question comes from Chuck Cerankosky Northcoast Research your line is open.

Chuck Cerankosky: Good morning, all great great quarter.

Chuck Cerankosky: Looking at the.

Chuck Cerankosky: <unk> business is that at this stage.

Chuck Cerankosky: You talked about launching it in des Moines, I think that was what he said is it at the decision point, where it will become.

Chuck Cerankosky: And offering throughout the Casey's footprint.

Chuck Cerankosky: Yes, Chuck we're still early stages there.

Chuck Cerankosky: The team is is.

Chuck Cerankosky: Assessing and we're still making some tweaks and adjustments.

Chuck Cerankosky: We feel we feel good about what we see so far but we haven't made that final decision just yet.

Chuck Cerankosky: On that platform.

Chuck Cerankosky: Well do you have any additional cities.

<unk> tested.

Chuck Cerankosky: We don't have any more at this time that the test in the des Moines area. It's the broader DMA. So it's about 225 stores. So it's a pretty pretty fulsome test both in the metro area and in some of the surrounding smaller towns. So we're getting a good look at how this performs both in the.

Chuck Cerankosky: Urban environment.

Chuck Cerankosky: It's very much a rural environment.

Chuck Cerankosky: So more to come on that one chart.

Speaker Change: Thank you. Our next question will be coming from John Royall of J P. Morgan John Your line is open.

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

Speaker Change: So my first question is a strategic question.

Speaker Change: Appreciating that you are very early days and the <unk> acquisition and the integration will take some time, but as you think through your next legs of growth longer term you do have this white space in Texas, where youre essentially a new entrant is it safe to assume that Thats your best opportunity to grow from here and if so how should we think about ntis.

Speaker Change: Versus acquisitions.

Speaker Change: As it pertains to that opportunity.

Speaker Change: Yes, John.

Speaker Change: Certainly.

We have a lot of room to grow in Texas, We now have 170 stores there between.

Speaker Change: The 150, there at <unk> and then the 'twenty two we bought last year.

From Lone Star So.

Speaker Change: We have tremendous space, there, but if I take a step back.

Speaker Change: With our 2900 stores now roughly.

Speaker Change: 2000 of those stores are in only six states. We operate in we still have a lot of white space.

Speaker Change: The eastern edge of our of our footprint. So Michigan, we have three stores open.

Speaker Change: Kentucky, Tennessee were just barely getting started so.

Speaker Change: So, yes, Texas, certainly does present, a great opportunity for for much more growth, but we also have that same type of opportunity and a number of states that we operate in.

Speaker Change: Point number one number two.

Speaker Change: We don't.

Speaker Change: We approach every fiscal year kind of going in with the assumption that our growth target is going to be asked from MTI and half from acquisition being the small deal M&A type of stuff that over the last couple of years as deal flow.

Speaker Change: Evolve it skewed much heavier on the acquisition side versus the MTI side, but we continue to go out and find real estate and land bank. Those sites. So that if that is the deal flow starts to slow a little bit on the M&A side, we have the pipeline to support it from an NTR stands.

Speaker Change: And can continue continue on our growth algorithm.

Speaker Change: That's really how we approach it we don't have.

<unk>, one way or the other.

Speaker Change: We just approach it is a balance and then as things evolve we shift and adjust to make sure. We keep that ratable growth and people are looking for.

Speaker Change: Very helpful. Thank you and then just a quick follow up on labor hours.

Speaker Change: Can you talk about how much runway you think there is to continue to take out same store labor hours and just what inning, you think youre in in terms of getting those hours down to where you'd like to operate them.

Yes, when we started.

Speaker Change: A couple of years ago, almost when we started this current three year plan, we committed to take 1%.

Speaker Change: Our same store labors out per year over the three year period. So we're call. It two thirds of the way roughly.

Speaker Change: Through that process now.

Speaker Change: We were a little bit ahead of schedule to we've taken out more than that.

Speaker Change: So we still have some runway for the next fiscal year, we haven't really guided to anything specific on that yet.

Speaker Change: We will do that in the next quarter, but.

Speaker Change: But yes, we still think theres some opportunity there at least for the balance of this three year strategic plan that we're in right now.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: And our next question will be coming from the Chuck Grom.

Speaker Change: Your line is open.

Speaker Change: Hey, good morning, Thanks, very much on the <unk> drag.

Speaker Change: Per gallon from flakes should we think about that ramping over the next three quarters or.

Speaker Change: Or is there something seasonal about this quarter that distorted it and then on the prepared foods 150 basis points of a drag I guess a similar question how do we think about that ramping over the next few quarters in other words I guess at what point you think you can narrow it down so it so it has been.

Speaker Change: The amendment.

Speaker Change: Yes.

Steve: Good morning, Chuck This is Steve I'll start with that so.

Speaker Change: On the CPG.

Speaker Change: So somewhere around two sensors is probably a good number for the assumption in terms of whatever you had modeled for a traditional casey's geography.

Speaker Change: The states that fix is active and is generally blends in at about two <unk> down.

Speaker Change: We've only owned it for one quarter, so I'm going to be a little careful on the seasonality aspect of it I mean generally speaking the <unk> units.

Speaker Change: Our larger volume units than an average kind of casey's in the mother ship they pump more gallons literally but I don't have any reason not to tell you <unk> is a pretty good number on a prospective basis.

Speaker Change: Some of our synergies that we expect to capture in that $45 million number will be fuel related synergies and so can we can we chip away at.

That delta over time, yes, I think we can but we're not going to gain enough synergies to somehow right size those geographies back to what our averages.

Speaker Change: It's not what we're trying to do.

Speaker Change: The prepared food side thats going to be but we do over time expect to bring a fikes stores. The majority 85% of the five stores that will be converted to a casey's casey's like prepared food margin.

Speaker Change: <unk> that will be dependent on the construction timeline, where we get new kitchens, and so back to an earlier question, it's not going to happen in the next 12 months because of the permitting timeline required so that will be on more on kind of year three and year four.

Speaker Change: But ultimately there is no reason for us not to assume that.

Speaker Change: <unk> stores will come in line with prepared food margins of the existing Casey's business.

Speaker Change: Okay, great. Thanks, Steve and then my follow up just on the macro question everybody seems to be focused on I guess, a different angle would be when you dissect your basket.

Speaker Change: Are you seeing trade down more and more people buying fountain drinks.

Speaker Change: Is there anything to unpack over the past four to six weeks given the environment. Thanks.

Speaker Change: Yes.

Speaker Change: We have seen some strength in fountain drinks I'll say that.

But it's across the spectrum of income cohorts I can't I can't necessarily tell you that it's.

Speaker Change: Lower income consumer indexing higher on that actually it's the higher income.

Speaker Change: Consumers are actually growing the fastest are.

Speaker Change: But our dispense beverages so.

Speaker Change: I'm not sure if I can draw any conclusions from that other than.

Speaker Change: They are they are liking our film business.

Speaker Change: We have seen.

Speaker Change: Continue to see some shifting around the store with candy prices being very high in our bakery programming really robust and some good innovation. There we are seeing people switch over from the candy category into the bakery category, which is a little more affordable and still allows people to get.

Speaker Change: That sweet indulgence that theyre looking for and we like that trade from a margin standpoint, So we'll take that all day long that's a that's a good one for us.

Speaker Change: But generally speaking.

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

Speaker Change: There's a lot of other mix.

Speaker Change: Shifts going on I don't think really anything to do with the consumer.

Speaker Change: From a pressure standpoint, what.

Speaker Change: And you see this in our <unk>.

Speaker Change: Grocery and general merchandise margin and how thats been able to grow this.

Speaker Change: Cigarette category combustible cigarettes is under a lot of pressure and so that debt.

Speaker Change: Sub category has been declining at the same time nicotine alternatives have been growing at a really fast rate in the last quarter, our nicotine alternatives were up 74%.

Speaker Change: The combustible cigarettes were down right around four so.

Speaker Change: That margin trade is a much better trade for us.

Speaker Change: So that blends that margin up and at the same time the overall category.

Speaker Change: Is less of the overall grocery general merchandise mix and more of that is going to.

Speaker Change: Non alcoholic beverages, and grocery which carries about double the margin rate. The tobacco category does so you see those shifts going on and so that's what's allowing us to blend that margin rate up overall in grocery and general merchandise.

Speaker Change: And we do have a follow up question from Mike Montana maintain excuse me Montana of Evercore ISI, Mike Your line is open.

Mike Montana: Hey, Thanks for letting me squeeze this in.

Speaker Change: I just wanted to ask.

Speaker Change: On the private label front, if you could talk about any of the tearing initiatives. How that's going and then secondly, just got to be a lot of pressure out there on the independent so.

Speaker Change: Or is there additional opportunities for acquisitions, especially in light of the.

Speaker Change: The ability to deleverage you've shown so far.

Mike Montana: Yes, Mike.

Mike Montana: We are starting to make progress on that touring is.

Mike Montana: Literally as we speak just getting some of those new products into the stores.

Mike Montana: And we will see that gradually bleed into <unk>.

Mike Montana: The assortment over the next call it nine to 12 months says.

We wind down some inventories on existing products and ramp up some of the production on the new products. So.

Mike Montana: We like what we've seen so far but it's only a handful of skus to be honest, we have a lot more coming over the next.

Mike Montana: Several quarters.

Mike Montana: And then.

Mike Montana: I'm, sorry, yes, the M&A environment.

Mike Montana: Look I think you'll see the same industry data that we do.

Mike Montana: So I think the smaller independent operators are under a lot of pressure right now and those are the conversations that we continue to have.

Mike Montana: That is impacting also some of the larger scale players. So we're optimistic that the environment will continue to be.

Mike Montana: Favorable too to buyers like us and.

Mike Montana: And then we're seeing some some pretty good deal flow, especially on the on the smaller stuff.

Mike Montana: The bigger the bigger opportunities are a little more lumpy, but.

We are whenever something comes in March and we're actively engaged in it.

Mike Montana: So.

Mike Montana: We like to and are holding right now.

Mike Montana: The balance sheet is in great shape. The team is very experienced at integrating these things. So it's really about finding the right opportunities.

Mike Montana: At the right price for us.

Mike Montana: I would now like to turn the call back to Darrin rebellious for closing remarks.

Mike Montana: Alright, Thank you for taking the time to join US on the call today and hope everyone has a great day.

Mike Montana: And this concludes today's conference call. Thank you for participating you may now disconnect.