Q1 2027 Caseys General Stores Inc Earnings Call

September 9, 2026

Operator: Good day, and thank you for standing by. Welcome to the Q1 FY 2027 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 this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam James, Senior Vice President of Finance and Investor Relations. Sir, please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to the first quarter FY 2027 CASEYS GENERAL STORE EARNINGS conference call. At this time, all participants are on a listen-only mode.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press *11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your speaker today, Sam James, Senior Vice President of Finance and Investor Relations. Sir, please go ahead.

Speaker #2: Good morning, and thank you for joining us to discuss the results of our first quarter-ended July 31, 2026. My name is Sam James, Senior Vice President of Finance and Investor Relations.

Sam James: Good morning, and thank you for joining us to discuss the results of our Q1 ended 31 July 2026. My name is Sam James, Senior Vice President, Finance and Investor Relations. With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I will 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 1995. These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations of future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores.

Speaker #2: With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer; and Steve Bramlage, Chief Financial Officer. Before we begin, I will 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 1995.

Speaker #2: These forward-looking statements include any statements relating to the potential impact of the FICE transaction, expectations of future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our source.

Speaker #2: There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results, expressed or implied by those forward-looking statements.

Sam James: There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any uncertainties or any future results expressed or implied by those forward-looking statements, including, but not limited to the integration of the recent Fikes acquisition, our ability to execute our strategic plan or realize the synergies from the strategic plan, the impact and duration of conflicts in oil-producing regions, and related governmental action, as well as other risks, uncertainties and factors which are described on our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, as filed with the SEC and available on our website.

Speaker #2: Including but not limited to the integration of the recent FICE acquisition, our ability to execute our strategic plan, or realize the synergies from the strategic plan, the impact and duration of conflicts in oil-producing regions, and related governmental action, as well as other risks, uncertainties, and factors which are described on our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, as filed with the SEC and available on our website.

Speaker #2: Any forward-looking statements made during this call reflect our current views as of today with respect to future events and CASEYS' disclaims, any attention, or obligation to update or revise forward-looking statements.

Sam James: 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, future events, or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced in this call, as well as a detailed breakdown of our operating expense increase for the Q1, can be found on our website at www.caseys.com under the Investor Relations link. With that said, I'd like to turn the call over to Darren to discuss our Q1 results. Darren?

Speaker #2: Whether as a result of new information, future events, or otherwise. A reconciliation of non-gap-to-gap financial measures referenced in this call, as well as a detailed breakdown of our operating expense increase for the first quarter, can be found on our website at www.caseys.com under the Investor Relations link.

Speaker #2: With that said, I'd like to turn the call over to Darren to discuss our first quarter results. Darren.

Speaker #3: Thanks, Sam, and good morning, everyone. Before we go into further detail on our outstanding first quarter performance, I'd like to thank the entire CASEYS team for their hard work during our 100 days of summer and for the excellent job they did serving our guests.

Darren Rebelez: Thanks, Sam, and good morning, everyone. Before we go into further detail on our outstanding Q1 performance, I would like to thank the entire Casey's team for their hard work during our 100 days of summer and for the excellent job they did serving our guests. I am also proud of the positive impact we are making on the communities we serve. As students head back to school, our annual Cash for Classrooms giving campaign raised funds for grants that will support schools, students, and teachers. This year, with the help of our guests, team members, and supplier partner, The Coca-Cola Company, we raised over $1.8 million. This sets a new record and reflects our shared commitment to invest in the future of the communities we call home.

Speaker #3: I'm also proud of the positive impact we're making on the communities we serve. As students head back to school, our annual Path for Classrooms giving campaign raised funds for grants that will support schools, students, and teachers.

Speaker #3: This year, with the help of our guests, key members, and supplier partner Coca-Cola, we raised over $1.8 million. But since a new record, it reflects our shared commitment to invest in the future of the communities we call home.

Speaker #3: We're through the first quarter of our fiscal 2027 to 2029 three-year strategic plan that we laid out in June, where we highlighted Casey's advantage in the convenience QSR flywheel, with our three lines of business under one operating cost structure.

Darren Rebelez: We are through the Q1 of our fiscal 2027 to 2029 three-year strategic plan that we laid out in June, where we highlighted Casey's advantaged convenience QSR flywheel with our three lines of business under one operating cost structure. Our strong Q1 result is yet another proof point that our advantage model is working as we continue to gain share both inside and outside the store. Now let us discuss the results from the quarter. Diluted EPS finished at $7.37 per share, up 28% from the prior year. Net income was $274 million, an increase of 27% from the prior year. The company generated $485 million in EBITDA, 17% higher than the prior year, and up 40% on a two-year stack basis. Inside the store, Prepared Food & Dispensed Beverage remained strong.

Speaker #3: Our strong first quarter result is yet another proof point that our advantage model is working, as we continue to gain share both inside and outside the store.

Speaker #3: Now let's discuss the results from the quarter. Diluted EPS finished at $7.37 per share, up 28% from the prior year. Net income was $274 million, an increase of 27% from the prior year.

Speaker #3: The company generated $485 million in EBITDA, 17% higher than the prior year, and up 40% on a two-year stacked basis. Inside the store, prepared food and dispensed beverages remain strong.

Speaker #3: PFMDB transactions were up over 100 basis points, driving PFMDB units up nearly 4% versus the same period in the prior year, as guests continue to gravitate toward our abundant offering compelling value and continued innovations such as our bacon cheeseburger pizza LTO.

Darren Rebelez: PF&DB transactions were up over 100 basis points, driving PF&DB units up nearly 4% versus the same period in the prior year, as guests continue to gravitate toward our abundant offering, compelling value, and continued innovation, such as our bacon cheeseburger pizza LTO. Inside margin expansion was driven primarily by Prepared Food & Dispensed Beverage mix. In the forecourt, the capabilities we developed over the past couple of years help us navigate a volatile environment. Fuel GM was nearly $0.48 per gallon, while same store gallons were roughly flat. One note on the quarter. As part of our integration of the Fikes acquisition, approximately 1% of our total store base had a planned disruption associated with remodeling legacy CEFCO stores to Casey's. As a result, same store sales, both inside and outside the store, faced a slight headwind.

Speaker #3: Inside margin expansion was driven primarily by prepared food and dispensed beverage mix. In the forecourt, the capabilities we developed over the past couple of years help us navigate a volatile environment.

Speaker #3: Fuel margin was nearly $0.48 per gallon, while same-store gallons were roughly flat. One note on the quarter: as part of our integration of the FICE acquisition, approximately 1% of our total store base had a planned disruption associated with remodeling legacy SESCO stores to Caseys.

Speaker #3: As a result, same-store sales, both inside and outside the store, faced a slight headwind. Despite this, we still posted strong same-store results for the quarter and remained ahead of schedule on our integration efforts.

Darren Rebelez: Despite this, we still posted strong same store results for the quarter and remained ahead of schedule on our integration efforts. The stores that have been already remodeled to Casey's in prior periods have performed exceptionally well, and we expect to remodel CEFCO stores throughout the fiscal year. Now with that disclaimer out of the way, I would like to now go over our results and share some of the details in each of the categories. Inside same store sales were up 3.2% for the quarter, or 7.7% on a two-year stack basis. Gross profit margin for the quarter was 42.2%, up 30 basis points from the prior year. Prepared Food & Dispensed Beverage led the way, as same store sales were up 4.8%, or 10.7% on a two-year stack basis, with a gross profit margin of 59.3%. The majority of same store sales growth was from traffic with minimal pricing.

Speaker #3: The stores that did already remodel to Casey's in prior periods performed exceptionally well, and we expect to remodel Sesco stores throughout the fiscal year.

Speaker #3: Now, with that disclaimer out of the way, I'd like to now go over our results and share some of the details in each of the categories.

Speaker #3: Inside same-store sales were up 3.2% for the quarter, or 7.7% on a two-year stacked basis. Gross profit margin for the quarter was 42.2%, up 30 basis points from the prior year.

Speaker #3: Prepared food and dispensed beverage led the way, as same-store sales were up 4.8%, or 10.7% on a two-year stacked basis, with a gross profit margin of 59.3%.

Speaker #3: The majority of same-store sales growth was from traffic, with minimal pricing. This was highlighted by great performance in whole pies, with units up nearly double digits in the quarter.

Darren Rebelez: The majority of same store sales growth was from traffic with minimal pricing. This was highlighted by great performance in whole pies, with units up nearly double digits in the quarter. Same store grocery and general merchandise sales were up 2.7%, or 6.5% on a two-year stack basis, with a gross profit margin of 35.6%. Energy drinks and nicotine alternatives continue to outperform the category with double-digit growth. The alcohol category, specifically beer, was a headwind during the quarter. On the fuel side, same store gallons sold were down slightly at 0.3%, but were positive 1.4% on a two-year stack basis, with a fuel margin of $0.478 per gallon. The Midcontinent region saw an approximate 6% decline this quarter, according to OPIS fuel gallons sold data, indicating that our play is working, and we continue to gain market share and drive guest traffic.

Darren Rebelez: This was highlighted by great performance in whole pies, with units up nearly double digits in the quarter. Same store grocery and general merchandise sales were up 2.7%, or 6.5% on a two-year stack basis, with a gross profit margin of 35.6%. Energy drinks and nicotine alternatives continue to outperform the category with double-digit growth. The alcohol category, specifically beer, was a headwind during the quarter. On the fuel side, same store gallons sold were down slightly at 0.3%, but were positive 1.4% on a two-year stack basis, with a fuel margin of $0.478 per gallon. The Midcontinent region saw an approximate 6% decline this quarter, according to OPIS fuel gallons sold data, indicating that our play is working, and we continue to gain market share and drive guest traffic. In the quarter, same store operating expense, excluding credit card fees, increased 5%.

Speaker #3: Same-store grocery and general merchandise sales were up 2.7%, or 6.5% on a two-year stacked basis, with a gross profit margin of 35.6%. Energy drinks and nicotine alternatives continued to outperform the category, with double-digit growth.

Speaker #3: The alcohol category, specifically beer, was a headwind during the quarter. On the fuel side, same-store gallons sold were down slightly at 0.3%, but were positive 1.4% on a two-year stacked basis, with a fuel margin of 47.8 cents per gallon.

Speaker #3: The Mid-Continent region saw an approximate 6% decline this quarter, according to OPIS fuel gallons sold data, indicating that our play is working and we continue to gain market share and drive guest traffic.

Speaker #3: In the quarter, same-store operating expense excluding credit card fees increased 5%. Steve will provide some of the specific puts and takes related to operating expense changes, but I'm extremely proud of our operations team for being able to meet the increased food demand without meaningfully increasing store labor hours, as same-store labor hours were roughly flat for the quarter.

Darren Rebelez: In the quarter, same store operating expense, excluding credit card fees, increased 5%. Steve will provide some of the specific puts and takes related to operating expense changes. I am extremely proud of our operations team to be able to meet the increased food demand without meaningfully increasing store labor hours, as same store labor hours were roughly flat for the quarter. I would now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve?

Darren Rebelez: Steve will provide some of the specific puts and takes related to operating expense changes. I am extremely proud of our operations team to be able to meet the increased food demand without meaningfully increasing store labor hours, as same store labor hours were roughly flat for the quarter. I would now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve?

Speaker #3: I would now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve.

Speaker #4: Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for our team members' hard work executing a plan during our busy summer months.

Steve Bramlage: Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for our team members' hard work executing a plan during our busy summer months. It takes the entire organization's buy-in to be able to generate such strong results, which are not easy to achieve. Our total revenue for the quarter was $5.68 billion. That is an increase of $1.11 billion, or 24.3%, from the prior year, due primarily to higher inside sales and a higher retail price of fuel. Higher fuel gallons sold also contributed. The results were favorably impacted by operating approximately 2% more stores on a year-over-year basis. Total inside sales for the quarter were $1.78 billion. That is an increase of $94 million, or 5.6%, from the prior year.

Speaker #4: It takes the entire organization’s buy-in to be able to generate such strong results, which are not easy to achieve. Our total revenue for the quarter was $5.68 billion—that’s an increase of $1.11 billion, or 24.3% from the prior year, due primarily to higher inside sales and a higher retail price of fuel.

Speaker #4: Higher fuel gallons sold also contributed. The results were favorably impacted by operating approximately 2% more stores on a year-over-year basis. Total inside sales for the quarter were $1.78 billion, and that's an increase of 94 million or 5.6% from the prior year.

Speaker #4: For the quarter, prepared food and dispensed beverage sales rose by 34 million dollars to $493 million, an increase of 7.4%, and grocery and general merchandise sales increased by 60 million dollars to $1.28 billion, an increase of 4.9%.

Steve Bramlage: For the quarter, Prepared Food & Dispensed Beverage sales rose by $34 million to $493 million, an increase of 7.4%, and grocery and general merchandise sales increased by $60 million to $1.28 billion, an increase of 4.9%. Inside same-store sales had an approximate 25 basis point headwind from the Fikes construction. Retail fuel sales were up $991 million in the quarter, as the average retail price of fuel rose 33% from $3 to $3.99 per gallon, and total gallons sold increased by 2.5%. Same-store gallons had an approximately 50 basis point headwind from the Fikes construction. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. Casey's had total gross profit of $1.24 billion in the quarter, an increase of $127 million, or 11.4% from the prior year, and up 29.7% on a two-year stack basis.

Speaker #4: Inside same-store sales had an approximate 25 basis point headwind from the FICE construction. Retail fuel sales were up 991 million dollars in the quarter, as the average retail price of fuel rose 33% from $3 to $3.99 per gallon and total gallons sold increased by 2.5%.

Speaker #4: Same-store gallons had an approximately 50 basis point headwind from the FICE construction. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization.

Speaker #4: CASEYS had total gross profit of $1.24 billion in the quarter, an increase of 127 million dollars or 11.4% from the prior year, and up 29.7% on a two-year stacked basis.

Speaker #4: This is driven by both higher inside gross profit of $44.3 million, or 6.3%, as well as higher fuel gross profit of $73.4 million, or 19.6%.

Steve Bramlage: This is driven by both higher inside gross profit of $44.3 million or 6.3%, as well as higher fuel gross profit of $73.4 million or 19.6%. Inside gross profit margin was 42.2%, and that is up 30 basis points from a year ago. The increase is primarily due to mix shift and solid cost of goods management. Also, during the Q1, we made a modest change in accounting for inside cost of goods sold related to internal distribution costs that had no net impact on inside margin in the aggregate. But it did create a slight tailwind to the PF&DB margin and a slight headwind to the grocery and GM margin. We believe this change better reflects the true cost of goods sold between the two categories. Prepared Food & Dispensed Beverage gross profit margin was 59.3%. That is up 130 basis points from prior year.

Speaker #4: Inside gross profit margin was 42.2%, and that's up 30 basis points from a year ago. The increase is primarily due to mixed shift and solid cost of goods management.

Speaker #4: Also, during the first quarter, we made a modest change in accounting for inside cost of goods sold related to internal distribution costs that had no net impact on inside margin and the aggregate, but it did create a slight tailwind to the PF and DB margin, and a slight headwind to the grocery and GM margin.

Speaker #4: We believe this change better reflects the true cost of goods sold between the two categories. Prepared food and dispensed beverage gross profit margin was 59.3%, that's up 130 basis points from prior year.

Speaker #4: Cheese was $1.93 per pound for the quarter, compared to $2.11 per pound last year. That's a decrease of 9%, or an approximate 45 basis point benefit to the margin.

Steve Bramlage: Cheese was $1.93 per pound for the quarter, compared to $2.11 per pound last year. It is a decrease of 9%, or an approximate 45 basis point benefit to the margin. Along with the aforementioned distribution cost reclass, these two items accounted for all of the margin change in the quarter. The grocery and general merchandise gross profit margin was 35.6%, a decrease of 30 basis points from the prior year, and that change is completely attributable to the distribution cost reclass. Fuel margin for the quarter was 47.8 cents per gallon, up 6.8 cents per gallon from the prior year, and sequentially about one penny stronger than the Q4 of fiscal 2026, which reflected the beginning of the Middle East conflict and the related volatility in global petroleum markets. Total operating expenses were up 8% for $55.9 million in the quarter.

Speaker #4: Along with the aforementioned distribution cost re-class, these two items accounted for all of the margin change in the quarter. The grocery and general merchandise gross profit margin was 35.6%, a decrease of 30 basis points from the prior year, and that change is completely attributable to the distribution cost re-class.

Speaker #4: Fuel margin for the quarter was 47.8 cents per gallon, up 6.8 cents per gallon from the prior year, and sequentially about 1 penny stronger than the fourth quarter of fiscal 2026, which reflected the beginning of the Middle East conflict and the related volatility in global petroleum markets.

Speaker #4: Total operating expenses were up 8% or 55.9 million dollars in the quarter. Approximately 2% of the total operating expense increase was due to unit growth, as we operated 64 more stores than the prior year.

Steve Bramlage: Approximately 2% of the total operating expense increase was due to unit growth, as we operated 64 more stores than the prior year. Same-store credit card fees added approximately 1.5% to the increase, primarily due to the previously mentioned higher retail prices per gallon. Same-store employee expenses accounted for approximately 1% of the increase, due primarily to increases in labor rates as same-store labor hours were roughly flat. Insurance, primarily same-store healthcare insurance, was responsible for approximately 1% of the increase. In addition, same-store repairs and maintenance and same-store utilities collectively made up approximately 1% of the increase. Net interest expense was $22.1 million in the quarter. That is down $4.8 million versus the prior year, which is primarily due to de-leveraging associated with the Fikes transaction. Depreciation in the quarter was $116 million. That is up $7 million versus the prior year, primarily due to operating more stores.

Speaker #4: Same-store credit card fees added approximately 1.5% to the increase, primarily due to the previously mentioned higher retail prices per gallon. Same-store employee expenses accounted for approximately 1% of the increase, due primarily to increases in labor rates, as same-store labor hours were roughly flat.

Speaker #4: Insurance primarily same-store healthcare insurance was responsible for approximately 1% of the increase. In addition, same-store repairs and maintenance and same-store utilities collectively made up approximately 1% of the increase.

Speaker #4: Net interest expense was 22.1 million dollars in the quarter, that's down 4.8 million versus the prior year, which is primarily due to deleveraging associated with the FICE transaction.

Speaker #4: Depreciation in the quarter was 116 million dollars, that's up 7 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 21.1%, compared to the prior year of 22.7%.

Steve Bramlage: The effective tax rate for the quarter was 21.1% compared to the prior year of 22.7%. That decrease was driven by an increase in tax benefits that were recognized on share-based awards. Our financial flexibility remains excellent. On 31 July, we had total available liquidity of $1.4 billion. Also, our credit facility debt to EBITDA ratio was 1.5 times. For the quarter, net cash generated by operating activities of $384 million, plus purchases of property and equipment of $194 million, resulted in the company generating $190 million in free cash flow, compared to generating $262 million in the prior year. The decrease in free cash flow is due in large part to the planned increase in capital expenditures from the CEFCO store remodels. At the September meeting, the board of directors voted to maintain the quarterly dividend at 65 cents per share.

Speaker #4: That decrease was driven by an increase in tax benefits that were recognized on share-based awards. Our financial flexibility remains excellent. On July 31st, we had total available liquidity of $1.4 billion.

Speaker #4: Also, our credit facility debt to EBITDA ratio was 1.5 times. For the quarter, net cash generated by operating activities of $384 million, plus purchases of property and equipment of $194 million, resulted in the company generating $190 million in free cash flow, compared to generating $262 million in the prior year.

Speaker #4: The decrease in free cash flow is due in large part to the planned increase in capital expenditures from the SEFCO store remodels. At the September meeting, the board of directors voted to maintain the quarterly dividend at 65 cents per share.

Speaker #4: During the first quarter, we repurchased approximately 46 million dollars in shares. While we're off to a great start to the year, consistent with our past practice, we plan to update annual guidance on our second quarter earnings call when we are through the seasonally largest time of the year.

Steve Bramlage: During the Q1, we repurchased approximately $46 million in shares. While we are off to a great start to the year, consistent with our past practice, we plan to update annual guidance on our Q2 earnings call when we are through the seasonally largest time of the year. Our results for August were as follows. Same-store volumes, both inside and outside the store, were consistent with our Q1 results and within our annual guidance ranges. Fuel CPG is in the low $0.40 per gallon. Current cheese costs are slightly favorable versus the prior year. We expect the Q2 operating expense increase to be similar to the Q1, and that is partially driven by the increase in resale fuel prices as compared to the Q2 of fiscal 2026. I will now turn the call back over to Darren.

Speaker #4: Our results for August were as follows. Same-store volumes, both inside and outside the store, were consistent with our first quarter results and within our annual guidance ranges.

Speaker #4: Fuel CPG is in the low 40 cents per gallon. Current cheese costs are slightly favorable versus the prior year. We expect the second quarter operating expense increase to be similar to the first quarter, and that's partially driven by the increase in retail fuel prices as compared to the second quarter of fiscal 2026.

Speaker #4: I'll now turn the call back over to Darren.

Speaker #1: Thanks, Steve. As we just wrapped up our first quarter into the new plan, I'm as excited as ever about our progress. Our food team is doing a tremendous job.

Darren Rebelez: Thanks, Steve. As we just wrapped up our Q1 into the new plan, I am as excited as ever about our progress. Our food team is doing a tremendous job. Whole pies have continued their strong momentum in the quarter. Guests are flocking to the Casey's Rewards platform as we are now over 11 million members. We believe our abundant and value-oriented food offering is not only a differentiator driving inside traffic, but is also driving traffic to the pump. This, coupled with our fuel team doing an excellent job balancing fuel margin and gallons during an uncertain environment, has yielded great results. This is our three-legged business model in action. During fiscal year 2026, we remodeled approximately 50 CEFCO stores to Casey's. In the Q1 of fiscal year 2027, we have remodeled 24 more stores.

Speaker #1: Whole Pies have continued their strong momentum in the quarter. Guests are flocking to the CASEYS Rewards platform as we're now over 11 million members.

Speaker #1: We believe our abundant and value-oriented food offering is not only a differentiator driving inside traffic, but is also driving traffic to the pump. This coupled with our fuel team doing an excellent job balancing fuel margin and gallons during an uncertain environment has yielded great results.

Speaker #1: This is our three-legged business model in action. During fiscal year 2026, we remodeled approximately 50 SEFCO stores to CASEYS. In the first quarter of fiscal year 27, we've remodeled 24 more stores.

Speaker #1: We're extremely excited about the results we're seeing, as the average PF and DB lift at the stores that were remodeled to Casey's has been approximately 30% versus the results of the same period prior to remodel.

Darren Rebelez: We are extremely excited about the results we are seeing, as the average PF&DB lift at the stores that were remodeled to Casey's has been approximately 30% versus the results of the same period prior to remodel. While we are busy with CEFCO conversions, that has not stopped us from continuing to grow the store base as we are on track to meet our 120-store unit goal for the fiscal year. Operational efficiency is another key pillar of the strategic plan. As we discussed at Investor Day, we expanded our continuous improvement efforts to include both the store and the enterprise as a whole. We are off to a great start, as the team has completed a number of initiatives with many more on track for completion during the fiscal year, both at the store and throughout the organization. Overall, I am very proud of the team's execution of the plan.

Speaker #1: While we're busy with SEFCO conversions, that has not stopped us from continuing to grow the store base, as we're on track to meet our 120-store unit goal for the fiscal year.

Speaker #1: Operational efficiency is another key pillar of the strategic plan. As we discussed at investor day, we expanded our continuous improvement efforts to include both the store and the enterprise as a whole.

Speaker #1: Rough to a great start as the team has completed a number of initiatives with many more on track for completion during the fiscal year, both at the store and throughout the organization.

Speaker #1: Overall, I'm very proud of the team's execution of the plan. We look forward to building on the momentum we have going throughout the fiscal year and beyond.

Darren Rebelez: Overall, I am very proud of the team's execution of the plan. We look forward to building on the momentum we have going throughout the fiscal year and beyond. We will now take your questions.

Darren Rebelez: We look forward to building on the momentum we have going throughout the fiscal year and beyond. We will now take your questions.

Speaker #1: We'll now take your questions.

Speaker #2: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. We ask that you please limit yourself to one question only. One moment while we compile our Q&A roster. Our first question comes from the line of Edward Kelly with Wells Fargo. Your line is open. Please go ahead.

Speaker #2: We ask that you please limit yourself to one question only. One moment while we compile our Q&A roster. Our first question comes from the line of Edward Kelly with Wells Fargo.

Speaker #2: Your line is open. Please go ahead.

Speaker #3: Yeah, hi. Good morning, everyone. I wanted to start just on a few margins. I was hoping that you could maybe talk about the trend in fuel margin that we're seeing in Q1.

Edward Kelly: Yeah. Hi, good morning, everyone. I wanted to start just on

Edward Kelly: Yeah. Hi, good morning, everyone. I wanted to start just on fuel margins. I was hoping that you can maybe talk about the trend in fuel margin during Q1. I think, you said you had a very strong start last quarter, which I think a lot of us kind of assumed that maybe that was in the 50s. Just curious what the rest of the quarter looked like. The underlying dynamics that drove that really robust Q4 performance and strong start, just curious as to the sustainability of those dynamics through the quarter. Lastly, related to all this, as you think about your mid-40s sort of margin guide, is anything you are seeing out there currently that sort of raises question about that at all? Maybe talk about breakevens as part of that. Thank you.

Darren Rebelez: Hi

Edward Kelly: fuel margins. I was hoping that you can maybe talk about the trend in fuel margin during Q1. I think, you said you had a very strong start last quarter, which I think a lot of us kind of assumed that maybe that was in the 50s. Just curious what the rest of the quarter looked like. The underlying dynamics that drove that really robust Q4 performance and strong start, just curious as to the sustainability of those dynamics through the quarter. Lastly, related to all this, as you think about your mid-40s sort of margin guide, is anything you are seeing out there currently that sort of raises question about that at all? Maybe talk about breakevens as part of that. Thank you.

Speaker #3: I think you said you had a very strong start last quarter, which I think a lot of us kind of assume that maybe that was in the 50s.

Speaker #3: Just curious what the rest of the quarter looked like. And then the underlying dynamics, that drove that really robust Q4 performance and strong start, just curious as to the sustainability of those dynamics through the quarter.

Speaker #3: And then just lastly, related to all of this, as you think about your mid-40s sort of margin guide, is anything you're seeing out there currently that sort of raises question about that at all?

Speaker #3: Maybe talk about break-evens as part of that. Thank you.

Speaker #4: Yeah, yeah. Good morning again. This is Steve. I'll address the first one on fuel margin during the course of the quarter. We certainly did enter the beginning of this fiscal year in a good position, certainly given the experience that we had in the fourth quarter.

Steve Bramlage: Hi. Good morning. This is Steve. I will address the first one on fuel margin during the course of the quarter. We did enter the beginning of this fiscal year in a good position, certainly given the experience that we had in the fourth quarter. I would say honestly, the quarter was volatile. That is always the word I would describe with fuel margins. There were days when it was in the 60s. There were days when it was in the 30s. Most days it was in the 40s. To some extent, depending on the headlines that you read about in the paper and social media, there would be a corresponding move in fuel margin over the next day or two. I do not think it is possible to really describe a solid trend during the course of the quarter.

Speaker #4: But I would say, honestly, the quarter was volatile is the word I would describe with fuel margins. There were days when it was in the 60s.

Speaker #4: There were days when it was in the 30s. Most days, it was in the 40s. And to some extent, as depending on the headlines that you read about, in the paper and social media, the there would be a corresponding move in fuel margin over the next day or two.

Speaker #4: So I don't think it's possible to really describe a solid trend during the course of the quarter. The floor for sure was higher which is what we saw in the fourth quarter of last year because of the conflict that was unchanged.

Steve Bramlage: The floor, for sure, was higher, which is what we saw in Q4 of last year because of the conflict that was unchanged. It really moved around quite a bit based on headlines as we went through the quarter.

Speaker #4: But it really moved around quite a bit based on headlines as we went through the quarter.

Speaker #2: Thank you. And one moment for our next question. Our next question comes from the line of Greg Millick with Evercore ISI. Your line is open.

Operator: Thank you, and one moment for our next question. Our next question comes from the line of Greg Melich with Evercore ISI. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #3: Hi, thanks, guys. I'd love to follow up on some of the trends you saw through the quarter, particularly with how much of the comp decel in grocery and prepared food might have been people getting squeezed in terms of cash they had, filling up the gas tank at the same time.

Greg Melich: Hi. Thanks, guys. I would love to follow up on the trends you saw through the quarter, particularly with how much of the comp de-sell in grocery and Prepared Food & Dispensed Beverage might have been people getting squeezed in terms of cash they had filling up the gas tank at the same time. Anything about that and the trends from and since the quarter as well? Thanks.

Speaker #3: Anything about that and the trends from since the quarter as well. Thanks.

Speaker #1: Yeah, Greg, this is Darren. I'll go ahead and take that one. Yeah, I would say that the trends that we saw in first quarter were similar to what we've seen over the last several quarters.

Darren Rebelez: Yeah, Greg, this is Darren. I will go ahead and take that one. I would say that the trends that we saw in Q1 were similar to what we have seen over the last several quarters. A couple of points. One is that the lower income consumers are being slightly more impacted than the other income cohorts. If you look at our business, all three income cohorts that we measure had positive growth in the quarter. I will caveat it with that. I would say that more of the impact we saw on the grocery and general merchandise side is really driven by category trends versus demographic trends. What I mean by that is, if you look at the three areas where we had some softness is beer, snacks, and cigarettes. Those categories have all been challenged for different reasons. That is an industry-wide phenomenon.

Speaker #1: A couple of points. One is that the lower income consumers are being slightly more impacted than the other income cohorts. If you look at our business, all three income cohorts that we measure had positive growth in the quarter.

Speaker #1: So, I'll caveat it with that. But I would say that more of the impact we saw on the grocery and general merchandise side is really driven by category trends versus demographic trends.

Speaker #1: And what I mean by that is, if you look at the three areas where we had some softness—beer, snacks, and cigarettes—those categories have all been challenged for different reasons.

Speaker #1: That's an industry-wide phenomenon. We're not immune to that. On the beer side, we were able to make up for a good part of that with our liquor business.

Darren Rebelez: We are not immune to that. On the beer side, we were able to make up for a good part of that with our liquor business. Ready-to-drink cocktails, in particular, were up over 30% in the quarter, so we saw some good strength there, not enough to overcome the drag in beer. Snacks, I think we talked about this before. We have seen a lot of price action taken from the national brands, which has put some pressure on there, and six has been a multi-decade trend. On the other side, on grocery and general merchandise, real strength in nic alternatives, up 47% in the quarter. Energy continues to perform well at 12%, and non-alcoholic beverages overall were a strong contributor. Overall, I would say the trends are what they are.

Speaker #1: Ready to drink cocktails in particular, we're up over 30% in the quarter. So we saw some good strength there. Not enough to overcome the drag and beer.

Speaker #1: Snacks, I think we've talked about this before. We've seen a lot of pricing price action taken from the national brands, which put some pressure on there and six has been a multi-decade trend.

Speaker #1: On the other side, on grocery and general merchandise, real strength in nick alternatives up 47% in the quarter. Energy continues to perform well at 12%.

Speaker #1: And non-alcoholic beverages overall were a strong contributor. So overall, I'd say the trends are what they are. And then lastly, when I look at a two-year stack basis, grocery and general merchandise up 6.5% in an environment like this, I think is pretty solid performance.

Darren Rebelez: Lastly, when I look at a 2-year stack basis, grocery and general merchandise up 6.5% in an environment like this, I think is pretty solid performance.

Speaker #2: Thank you. And one moment for our next question. Our next question will come from the line of Tom Palmer with JP Morgan. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Thomas Palmer with JP Morgan. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #5: Good morning, and thanks for the question. I wanted to maybe just follow up on the CEFCO commentary in terms of the remodels. You noted 25 basis points inside same-store sales headwind, and 50 on the fuel gallons.

Thomas Palmer: Good morning, and thanks for the question. I wanted to maybe just follow up on the CEFCO commentary in terms of the remodels. You noted 25 basis point inside same-store sales headwind and 50 on the fuel gallons. How did this compare to what you had seen on past remodels? Then as we look out here over the next couple of quarters, should we be thinking about a similar kind of headwind, or does the lift from the remodeled stores start to more than offset, let us say, any headwind from the disruption during the remodels?

Tom Palmer: Good morning, and thanks for the question. I wanted to maybe just follow up on the CEFCO commentary in terms of the remodels. You noted 25 basis point inside same-store sales headwind and 50 on the fuel gallons. How did this compare to what you had seen on past remodels? Then as we look out here over the next couple of quarters, should we be thinking about a similar kind of headwind, or does the lift from the remodeled stores start to more than offset, let us say, any headwind from the disruption during the remodels?

Speaker #5: How did this compare to what you’ve seen on past remodels? And then, as we look out over the next couple of quarters, should we be thinking about a similar kind of headwind, or does the lift from the remodeled stores start to more than offset, let’s say, any headwind from the disruption during the remodels?

Speaker #1: Yeah, this is Darren. On the remodels, this is to be expected when we do heavy lifting. Why you didn't see this in the first quarter or fourth quarter of last year was there was a cohort of stores that already had kitchens in them that we were able to convert in just a matter of days.

Darren Rebelez: Yeah. This is Darren. On the remodels, this is to be expected when we do heavy lifting. Where you didn't see this in the Q1 or Q4 of last year was there was a cohort of stores that already had kitchens in them that we were able to convert in just a matter of days. So there's really very minimal impact to the performance of the business while those were being remodeled. This next tranche of stores that we started this quarter, this past quarter, are impacted anywhere from 4 to 6 weeks, and so that puts a pretty significant drag. They're not closed the entire time, but they're closed for a good part of it and then partially under construction for part of it. So there's a lot of disruption that puts a drag.

Speaker #1: So, there's really very minimal impact to the performance of the business while those were being remodeled. This next tranche of stores that we've started this past quarter are impacted anywhere from four to six weeks.

Speaker #1: And so that puts a pretty significant drag. They're not closed the entire time, but they're closed for a good part of it. And then partially under construction for part of it.

Speaker #1: So there's a lot of disruption that puts a drag. It is not anything different than what we would normally see in a remodel of other acquisitions.

Darren Rebelez: It is not anything different than what we would normally see in a remodel of other acquisitions. Probably the biggest difference is the CEFCO stores tend to be higher volume stores versus others that we've acquired in the past, and so it has more of a disproportionate impact, and there's just more of them that we're remodeling. So all that said, we've been very happy with the results coming out of the remodels. So at some point, to your point, Tom, these numbers will inflect, but that's probably later in the fiscal year. So I wouldn't expect to see that in Q2, probably not anything meaningfully in Q3. It'd probably be more Q4 where you start to see that inflection point.

Speaker #1: Probably the biggest difference is the CEFCO stores tend to be higher volume stores versus others that we've acquired in the past. And so it has more of a disproportionate impact and there's just more of them that were remodeling.

Speaker #1: So that's all that said, we've been very happy with the results. I mean, out of the remodels. And so at some point, to your point, Tom, these numbers will inflect, but that's probably later in the fiscal year.

Speaker #1: And so I wouldn't expect to see that in second quarter, probably not anything meaningfully in third quarter. It'll probably be more fourth quarter where you start to see that inflection point.

Speaker #4: Yeah, and I would probably just add to that. All of this was countenanced in our annual guidance. We knew all this was going to happen.

Steve Bramlage: Yeah, and I would probably just add to that. All of this was countenanced in our annual guidance. We knew all this was going to happen, and so none of this is a surprise, and I think it's exactly the impact and the timing that we would've expected.

Speaker #4: And so, none of this is a surprise. I think it's exactly the kind of impact and timing that we would have expected.

Speaker #2: Thank you. And one moment for our next question. Our next question will be from the line of Bonnie Herzog with Goldman Sachs. Your line is open.

Operator: Thank you. And one moment for our next question. Our next question will be from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #6: All right, thank you. Good morning, everyone. I had a question on OpEx, which has remained elevated over the last several years. Excuse me. So, could you provide a little more color on the Q1 drivers and how you expect the cadence for OpEx to trend from here?

Bonnie Herzog: All right. Thank you. Good morning, everyone. I had a question on OpEx, which has remained elevated over the last several years. Excuse me. Could you provide a little more color on the FQ1 drivers and how you expect the cadence for OpEx to trend from here? Curious if you could touch on how much of the increase in the quarter was tied to the new stores or CEFCO, maybe labor, credit card fees or other inflationary pressures. Just really just trying to think about how we should think about normalized OpEx growth from here over the long term. Thank you.

Speaker #6: And then curious if you could touch on how much of the increase in the quarter was tied to the new stores or CEFCO, maybe labor, credit card fees, or other inflationary pressures?

Speaker #6: And just really just trying to think about how we should think about normalized OpEx growth from here over the long term. Thank you.

Steve Bramlage: Sure. Hi, Bonnie. Hey, good morning. This is Steve. In terms of the waterfall, that I think will end up on the webpage, as we've done in the past. To get to the total OpEx change of the 8% in the quarter, about 1.5 points of that was same-store employee expense. Think of 3% wage rate offset by flat hours gives you 1.5 points. About 2% would've been what we would broadly bucket as same-store operations. So that would be repairs and maintenance, utilities, insurance. We're self-insured for our healthcare. That would go into that 2% bucket. New units, to your point, is about 2% all by itself. Just the wrap of new units.

Speaker #4: Hi, Bonnie. Hey, good morning. This is Steve. In terms of the waterfall that I think will end up on the webpage, as we've done in the past, but to get to the total OpEx, change of the 8% in the quarter, about a point and a half of that was same-store employee expense.

Speaker #4: So think of kind of 3% wage rate offset by flat hours gets you kind of a point and a half. About 2% would have been what we would kind of broadly bucket as same-store operations.

Speaker #4: So that would be repairs and maintenance, utilities, insurance. We're self-insured for our healthcare; that would go into that 2% bucket. New units, to your point, is about 2% all by itself.

Speaker #4: Just the wrap of new units, credit card fees, same-store credit card fees would be another point and a half almost 2 points. And then you get kind of everything else in the 1% bucket, which would be technology and supplies and some miscellaneous things.

Steve Bramlage: Credit card fees, same-store credit card fees would be another 1.5 points, almost 2 points, and you've got everything else in the 1% bucket, which would be technology and supplies and some miscellaneous things. We continue to believe the best way to think about OpEx on a long-term basis is with the algorithm, we currently believe we can grow operating expense at a slower rate than we're going to grow EBITDA over the medium and long term. I think that's imminently achievable for us. For this year, I'd just probably point you back to, we obviously haven't updated the guide for the year, but the squeeze math for the rest of the year, if you go back to what we experienced in the Q4 of last year, you'll get less OpEx growth on a year-over-year basis this year to land the plane within that range.

Speaker #4: We continue to believe the best way to think about OpEx in a long-term basis is consistent with the algorithm, right? We'll grow, we firmly believe we can grow operating expense at a slower rate.

Speaker #4: And we're going to grow EBITDA over the medium and long term. I think that's eminently achievable for us. And for this year, I'd just probably point you back to—we obviously haven't updated the guide for the year, but the squeeze math for the rest of the year.

Speaker #4: If you go back to what we experienced in the fourth quarter of last year, you'll get less OpEx growth on a year-over-year basis this year.

Speaker #4: To land the plane within that range. And especially if you take the fact second quarter is going to look similar to first because of the credit card fee.

Steve Bramlage: Especially if you take the fact Q2's going to look similar to Q1 because of the credit card fee dynamic, you should be able to land H2 of the year pretty close.

Speaker #4: Dynamic, you should be able to land second half of the year pretty close.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Mark Cardin with UBS. Your line is open. Please go ahead.

Speaker #2: Thank you. And one moment for our next question. Our next question will come from the line of Mark Carden with UBS. Your line is open.

Speaker #2: Please go ahead.

Matthew Rothway: Hi, this is Matthew Rothway on for Mark. Thank you for taking our question. I was wondering if you could touch on the competitive landscape and promotional landscape. Are you seeing any impact from price investments from some of the mass merchants on your inside sales or grocery and gen merch, and any shift from your convenience store peers in competition and pricing?

Speaker #5: Hi, this is Matthew Rothway on for Mark. Thank you for taking our question. So I was wondering if you could touch on the competitive landscape and promotional landscape.

Speaker #5: Are you seeing any impact from price investments from some of the mass merchants on your inside sales or grocery and general merchandise? And any shift from your convenience store peers and competition in pricing?

Speaker #1: Hey, Matthew. This is Darren. Really, we haven't seen any unusual or different activity from the C-store competitive side. I think that's a reflection of the more challenged environment that they find themselves in relative to us with a big prepared foods business.

Steve Bramlage: Hey, Matthew. This is Darren. Really, we haven't seen any unusual or different activity from the C-store competitive set. I think that's a reflection of the more challenged environment that they find themselves in, relative to us with a big prepared foods business. But yeah, we really haven't seen much of that there. On the pizza side of the business, it's been a mixed bag. I think there's been some more promotional activity, but again, I'd remind you of how we approach the business. We have our own degree of promotional activity, but our starting point is far lower in price versus the national brands. We're close to, on average, about $3 for a single-topping pizza below what a national brand would be priced at, just line pricing. And then, also as a reminder, about half of our stores don't even have a national brand pizza competitor.

Darren Rebelez: Hey, Matthew. This is Darren. Really, we haven't seen any unusual or different activity from the C-store competitive set. I think that's a reflection of the more challenged environment that they find themselves in, relative to us with a big prepared foods business. But yeah, we really haven't seen much of that there. On the pizza side of the business, it's been a mixed bag. I think there's been some more promotional activity, but again, I'd remind you of how we approach the business. We have our own degree of promotional activity, but our starting point is far lower in price versus the national brands. We're close to, on average, about $3 for a single-topping pizza below what a national brand would be priced at, just line pricing. And then, also as a reminder, about half of our stores don't even have a national brand pizza competitor.

Speaker #1: But yeah, we really haven't seen much of that there. On the pizza side of the business, it's been a mixed bag. I think there's been some more promotional activity, but again, I'd remind you of how we approach the business.

Speaker #1: We have our own degree of promotional activity, but our starting point is far lower in price versus the national brands. We're close to, on average, about $3 for a single topping pizza below what a national brand would be priced at, just line pricing.

Speaker #1: And then also, as a reminder, about half of our stores don't even have a national brand pizza competitor. So we're really in a very good competitive spot.

Darren Rebelez: We're really in a very good competitive spot. And what we did see over the quarter was that, similar to the dynamic that we described in Investor Day, where we've taken minimal price while the pizza QSR set has taken more price. We saw that dynamic in Q1 continue, and that gap that we had from our pricing in prepared foods to theirs actually widened even further. We think we saw that in the numbers with the unit growth and the dollar growth as well in PF&DB.

Speaker #1: And what we did see over the quarter was that similar to the dynamic that we described in investor day where we've taken minimal price while the pizza QSR set has taken more price.

Speaker #1: We saw that dynamic in first quarter continue. And that gap that we had from our pricing and prepared foods to theirs actually widened even further.

Speaker #1: So we think we saw that in the numbers with the unit growth, and the dollar growth as well in PF and DB.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Your line is open. Please go ahead.

Speaker #2: Thank you. And one moment for our next question. Our next question comes from the line of Chuck Sarenkowski with North Coast Research. Your line is open.

Speaker #2: Please go ahead.

Speaker #3: Good morning, everyone. Greg Quarter. I'd like to return to the nicotine category. It's shrinking on the cigarette side. Can you talk a little bit about the I can't even think of the name right now, the artificial cigarettes and then what it means for the inside merchandising as you change space allocation or need to use other products to get that traffic back.

Chuck Cerankosky: Good morning, everyone. Great quarter. I would like to return to the nicotine category. It is shrinking on the cigarette side. Could you talk a little bit about the, I cannot even think of the name right now, the artificial cigarettes, and then what it means for the inside merchandising as you change space allocation or need to use other products to get that traffic back?

Speaker #1: Yeah. Chuck, this is Darren. And they're called nicotine alternatives. And so yeah, what we've seen over the course of the last couple of years is that secular decline in combustible cigarettes continues.

Steve Bramlage: Yeah, Chuck, this is Darren, and they are called nicotine alternatives. What we have seen over the course of the last couple of years is as that secular decline in combustible cigarettes continues, nicotine alternatives is starting to replace that lost volume. Now, it is not a one for one yet. It has not quite grown that fast. If you think about how the categories are trending, with cigarettes down 1% or 2% on sales basis and down, call it 5% or 6% on a unit basis, and nicotine alternatives up 47% in the quarter. You can see where that change is going to come here soon. From a space allocation standpoint, I think that is where our merchandising team has done a really good job, is getting ahead of this. We talked about this on previous calls.

Darren Rebelez: Yeah, Chuck, this is Darren, and they are called nicotine alternatives. What we have seen over the course of the last couple of years is as that secular decline in combustible cigarettes continues, nicotine alternatives is starting to replace that lost volume. Now, it is not a one for one yet. It has not quite grown that fast. If you think about how the categories are trending, with cigarettes down 1% or 2% on sales basis and down, call it 5% or 6% on a unit basis, and nicotine alternatives up 47% in the quarter. You can see where that change is going to come here soon. From a space allocation standpoint, I think that is where our merchandising team has done a really good job, is getting ahead of this. We talked about this on previous calls.

Speaker #1: Nicotine alternatives is starting to replace that loss volume. Now, it's not a one-for-one yet. It hasn't quite grown that fast, but if you think about how the categories are trending, with cigarettes down a percent or two on sales basis and down, call it, 5% or 6% on unit basis, and nicotine alternatives up 47% in the quarter, you can see where that change is going to come here soon.

Speaker #1: From a space allocation standpoint, I think that's where our merchandising team has done a really good job is getting ahead of this and we talked about this on previous calls.

Speaker #1: We've reset those nicotine backbars to reduce the combustible cigarette space to make more room for nicotine alternatives. And that move a couple of years ago was, I think we were one of the first in the industry to do that.

Steve Bramlage: We reset those nicotine back bars to reduce the combustible cigarette space to make more room for nicotine alternatives. That move a couple of years ago was, I think we were one of the first in the industry to do that, and it has really accrued to our benefit, and I think that is one of the reasons that you see the strength in that category today in our stores. We just did another adjustment this past fiscal year to give even more space to the nicotine alternative. The category overall is definitely shifting in favor of those alternatives, and we expect to be a leader in that space.

Darren Rebelez: We reset those nicotine back bars to reduce the combustible cigarette space to make more room for nicotine alternatives. That move a couple of years ago was, I think we were one of the first in the industry to do that, and it has really accrued to our benefit, and I think that is one of the reasons that you see the strength in that category today in our stores. We just did another adjustment this past fiscal year to give even more space to the nicotine alternative. The category overall is definitely shifting in favor of those alternatives, and we expect to be a leader in that space.

Speaker #1: And it was really a crude our benefit. And I think that's one of the reasons that you see the strength in that category today in our stores.

Speaker #1: And we just did another adjustment this past fiscal year to give even more space to the nicotine alternative. So the category overall is definitely shifting in favor of those alternatives.

Speaker #1: And we expect to be a leader in that space.

Speaker #2: Thank you. And one moment for our next question. Our next question comes from the line of Pooh Ransharma with Stevens. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Pooran Sharma with Stephens. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #6: Good morning and thanks for the question here. Just a quick one from me. I think you mentioned your cheese costs at about $1.93 per pound.

Pooran Sharma: Good morning, and thanks for the question here. Just a quick one from me. I think you mentioned your cheese cost at about $1.93 per pound. Was just wondering if you could give us, as you're looking out here, how much you're covered, and how many quarters you are covered out?

Speaker #6: Let's just wonder if you could give us how much you're covered as you're looking out here? How much you're covered and how many quarters you are covered out?

Speaker #4: Yeah, Farn. Hey, good morning, this is Steve. I'll address that. We are about 80%—80% covered through early into the first quarter of next fiscal year.

Steve Bramlage: Yeah, Horn. Hey, good morning, this is Steve. I'll address that. We are about 80% covered through early into the Q1 of next fiscal year. Generally, certainly for the remainder of this fiscal year, the three out quarters, we would be covered in a modest tailwind to margin each of those three quarters.

Speaker #4: And generally, certainly for the remainder of this fiscal year—the three out quarters—we would be covered, and there would be a modest tailwind to margin in each of those three quarters.

Speaker #2: Thank you. And one moment for our next question. Our next question will be from the line of Cory Torlow with Jefferies. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will be from the line of Corey Tarlowe with Jefferies. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #5: Great. Thanks. And good morning.

Corey Tarlowe: Great. Thanks, and good morning.

Steve Bramlage: Good morning.

Speaker #4: Good morning.

Speaker #5: Thanks. I have a two-parter. So the first, I would love an update on chicken wings. And then second is on M&A. I think you've placed recently a little bit more emphasis on Texas because you maybe talk a little bit about the strategy within that market, please.

Corey Tarlowe: Thanks. I have a two-parter. First, I would love an update on chicken wings. Second is on M&A. I think you've placed recently a little bit more emphasis on Texas. Could you maybe talk a little bit about the strategy within that market, please? Thank you very much.

Speaker #5: Thank you very much.

Speaker #1: Hey, Cory. This is Darren. Yeah, with respect to wings, wings are performing well. We've been really happy with the results so far. We're still in 850 stores.

Darren Rebelez: Hey, Corey, this is Darren Rebelez. With respect to wings are performing well. We've been really happy with the results so far. We're still in 850 stores, and we'll start rolling out the next tranche of stores here later this month. We didn't do any rollouts over the 100 days of summer just to give our stores a chance during their biggest peak period to execute at a high level. We'll start those now, and we'll start getting those open probably in early Q3. Wings, like I said, have performed well. One of the encouraging things is about 38% of guests that have purchased wings have had a wings-only order. If you recall when we talked about this strategically, we were looking to achieve another night of the week or another occasion in addition to pizza. Those wing-only orders really represent that incremental occasion.

Speaker #1: And we'll start rolling out the next tranche of stores here later this month. We didn't do any rollouts over the 100 days of summer just to give our stores a chance during their biggest peak period to execute at a high level.

Speaker #1: So we'll start those now, and we'll start getting those open probably in early third quarter. Wings, like I said, have performed well. One of the encouraging things is about 38% of guests that have purchased wings have had a wings-only order.

Speaker #1: And if you recall when we talked about the strategically, we were looking to achieve another night of the week or another occasion in addition to pizza.

Speaker #1: And so those wing-only orders really represent that incremental occasion. And so, the folks that have had a wing-only order have increased their frequency of prepared food purchases overall by about 30%.

Steve Bramlage: The folks that have had a wing-only order have increased their frequency of Prepared Food & Dispensed Beverage purchases overall by about 30%. It is a really good fact pattern for us. We are still early stages and still growing. As an example, in the Des Moines DMA, which we have had the wings in the longest, we were up 46% in the quarter over prior years. There is still a long runway for growth there and very bullish on that category.

Speaker #1: So it's a really good fact pattern for us. We're still early stages and still growing as an example in the Des Moines DMA, which we've had the wings in the longest.

Speaker #1: We were up 46% in the quarter over prior years. So there's still a long runway for growth there. And very bullish on that category.

Speaker #2: Thank you. And one moment for our next question. On our next question, I'll come from the line of Kelly Banya with BMO Capital Markets.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Kelly Bania with BMO Capital Markets. Your line is open. Please go ahead.

Speaker #2: Your line is open. Please go ahead.

Speaker #7: Hi, good morning. Thanks for taking our question. Steve and Darren, I wanted to just go back to the beer, snacks, and cigarette commentary and the impact on the grocery comps.

Kelly Bania: Hi. Good morning. Thanks for taking our question.

Kelly Bania: Hi. Good morning. Thanks for taking our question. Steve and Darren, I wanted to just go back to the beer, snacks, and cigarette commentary and the impact on the grocery comps. Just curious, a little bit more color there when that weaker trend started. Are you seeing just more of a unit slowdown, or is there a trade-down to lower price points or smaller pack sizes? Do you or some of the vendors have some plans to promote these categories through the rest of the year?

Steve Bramlage: Hi.

Kelly Bania: Steve and Darren, I wanted to just go back to the beer, snacks, and cigarette commentary and the impact on the grocery comps. Just curious, a little bit more color there when that weaker trend started. Are you seeing just more of a unit slowdown, or is there a trade-down to lower price points or smaller pack sizes? Do you or some of the vendors have some plans to promote these categories through the rest of the year?

Speaker #7: Just curious—could you add a little more color there? When did that kind of weaker trend start? And are you seeing just more of a unit slowdown, or is there a trade-down to lower price points or smaller pack sizes?

Speaker #7: And do you or some of the vendors have some plans to promote these categories through the rest of the year?

Speaker #1: Yeah, Kelly. I'll go ahead and take that. And you got something different going on in each of those. I'd say I'll just start with cigarettes because that's the easiest.

Darren Rebelez: Yeah, Kelly, I'll go ahead and take that. You got something different going on in each of those. I'd say I'll just start with cigarettes because that's the easiest. That's been for 30, 40 years, that trend. So nothing new to report in cigarettes other than it's just continuing to be under pressure. Like I said, I feel better about that category, the total nicotine category, now than I have in a long time because of nic alternatives and the growth rate we're seeing there and the margin profile. As a reminder, the margin in nic alternatives is double what it is in combustible cigarettes. So that math ends up working out pretty favorably on a gross profit dollar standpoint over the long term.

Speaker #1: That's been for 30, 40 years. That trend. So nothing new to report in cigarettes. Other than it's just continuing to be under pressure. And like I said, I feel better about that category than total nicotine category.

Speaker #1: Now than I have in a long time. Because of nick alternatives, and the growth rate we're seeing there, and the margin profile. As a reminder, the margin in nick alternatives is double what it is in combustible cigarettes.

Speaker #1: So, that math ends up working out pretty favorably on a gross profit dollar standpoint over the long term. Snacks is something that we've probably experienced for the last couple of years, where the national brand manufacturers have just taken a lot of price, primarily in chips.

Steve Bramlage: Snacks is something that we've probably experienced for the last couple of years, where the national brand manufacturers have just taken a lot of price, primarily in chips, so you see a lot of pressure in that category. While there's been some price action that they're taking on take-home packages, they're not taking that on immediate consumption packages, which is the bulk of what we sell. They've just priced themselves out of the market, frankly. Now what we're doing about that is we've leaned heavier into our private label offering, so we're seeing really good growth in those same categories in our private label products. So we think we're not losing traffic necessarily, but the retails are lower, so it doesn't have quite the impact on the sales line as it might otherwise have.

Darren Rebelez: Snacks is something that we've probably experienced for the last couple of years, where the national brand manufacturers have just taken a lot of price, primarily in chips, so you see a lot of pressure in that category. While there's been some price action that they're taking on take-home packages, they're not taking that on immediate consumption packages, which is the bulk of what we sell. They've just priced themselves out of the market, frankly. Now what we're doing about that is we've leaned heavier into our private label offering, so we're seeing really good growth in those same categories in our private label products. So we think we're not losing traffic necessarily, but the retails are lower, so it doesn't have quite the impact on the sales line as it might otherwise have.

Speaker #1: And so you see a lot of pressure in that category and while there's been some price action that they're taking on take-home packages, they're not taking that on immediate consumption.

Speaker #1: Packages, which is the bulk of what we sell. So there's just they've just priced themselves out of the market, frankly. Now, what we're doing about that is we've leaned heavier into our private label.

Speaker #1: Offering. And so we're seeing a really good growth in those same categories in our private label products. So we think we're not losing tracking necessarily, but the retails are lower.

Speaker #1: And so it doesn't have quite the impact on the sales line as it might otherwise have. And beer, beer has been a category that's really struggled for the last couple of years.

Steve Bramlage: Beer has been a category that's really struggled for the last couple of years. I think it started off with Budweiser and their social media snafu, and then it's just kind of hung in there like that. The one bright spot is super premium beer with Michelob Ultra, but outside of that, it's been soft. What we've really done is we have made sure that we're priced appropriately. We are looking at space allocation

Darren Rebelez: Beer has been a category that's really struggled for the last couple of years. I think it started off with Budweiser and their social media snafu, and then it's just kind of hung in there like that. The one bright spot is super premium beer with Michelob Ultra, but outside of that, it's been soft. What we've really done is we have made sure that we're priced appropriately. We are looking at space allocation in the category to make sure we're appropriately spaced and then leaning a little bit heavier on the liquor category. Like I mentioned earlier on the call, ready-to-drink cocktails up 30%+ So that's been a good offset, and that's a little bit more on trend with where the consumers are going.

Speaker #1: I think it started off with Budweiser and their social media snafu, and then it's just kind of hung in there like that. The one bright spot is super premium beer with nick ultra, but outside of that, it's been what we've really done is we have made sure that we're priced appropriately.

Speaker #1: We are looking at space allocation in the category to make sure we're appropriately spaced. And then leaning a little bit heavier on the liquor category.

Darren Rebelez: in the category to make sure we're appropriately spaced and then leaning a little bit heavier on the liquor category. Like I mentioned earlier on the call, ready-to-drink cocktails up 30%+ So that's been a good offset, and that's a little bit more on trend with where the consumers are going.

Speaker #1: And like I mentioned earlier on the call, ready to drink cocktails up 30-plus percent. So that's been a good offset. And that's a little bit more on trend with where the consumers are going.

Speaker #2: Thank you. And one moment for our next question. Our next question will be from the line of Brad Thomas with Key Bank Capital Markets.

Operator: Thank you. One moment for our next question. Our next question will be from the line of Brad Thomas with KeyBanc Capital Markets. Your line is open. Please go ahead.

Speaker #2: Your line is open. Please go ahead.

Speaker #3: Good morning. Thanks for taking the question. I wanted to ask about the same-store gallons. I know it's tracking within your annual guidance. This was the first quarter of being negative after about six quarters of being positive.

Brad Thomas: Good morning. Thanks for taking the question. I wanted to ask about the same-store gallons. I know it is tracking within your annual guidance. This was the first quarter of being negative after about six quarters of being positive. Just curious what you were seeing in the quarter. How much of the decline is it being a tougher comparison that you are up against? To what extent is fewer gas sales trickling through to the inside comp? Not sure if you have been able to look at that yet. Thanks.

Speaker #3: Just curious, what were you seeing in the quarter? How much did it decline? Is this a tougher comparison that you're up against? And then, to what extent is fewer gas sales trickling through to the inside comp?

Speaker #3: Not sure if you've been able to look at that yet. Thanks.

Darren Rebelez: Yeah, Brad, I will go ahead and take that. Just on the same-store gallons on the trend, a few things I would point out. One is down 30 basis points. Our annual guide was down 1% to +1%. We are talking about pretty nuanced numbers there, point number one. Point number two, as Steve described with the CEFCO remodels, that is about a 50 basis point drag on overall gallons. If you net that out, you are probably up 20 basis points. That, again, nuance, but probably right in the middle of the annual guide range. On the two-year stack basis, we were cycling a 1.7% same-store gallon number. To put that in perspective, on a two-year stack, we are up 1.4%. The OPIS Midcontinent region, which is where we operate primarily, over that same two-year period, is down 10%.

Speaker #1: Yeah, Brad, I'll go ahead and take that. Just on the same store gallons on the trend, a few things I'd point out. One is down 30 basis points.

Speaker #1: So our annual guide was down a percent to plus a percent. So we're talking about pretty nuanced numbers there. Point number one. Point number two, is Steve described with the CEFCO read models, that's about a 50 basis point drag on overall gallons.

Speaker #1: So you so if you net that out, you're probably up 20 basis points. So that, again, nuanced, but probably right in the middle of the annual guide range.

Speaker #1: And then on the two-year stack basis, we were cycling a 1.7% same store gallon number. And to put that in perspective, so we're on a two-year stack, we're up 1.4%.

Speaker #1: The Opus Mid-Continent region, which is where we operate primarily, over that same two-year period is down 10%. So we've taken significant share in fuel.

Darren Rebelez: We have taken significant share in fuel, and 20 basis points here, 30 basis points there does not concern me when the overall trend is where it is. I would just add, with a consumer behavior standpoint on fuel, with the higher fuel prices, we are seeing exactly the type of behavior that we would expect to see. Fewer gallons per trip, but more trips made, which ultimately accrues to our benefit if we have more people coming to the store. People are trading out of premium and mid-grade and opting for regular or higher ethanol blends of fuel. The higher ethanol blends of fuel carry a higher margin for us than clear gasoline. While these trends ebb and flow, it is very consistent with prior periods of higher gas prices and ultimately, it works out to our benefit.

Speaker #1: And 20 basis points here, 30 basis points there, doesn't concern me. When the overall trend is where it is. And from I would just add with a consumer behavior standpoint on fuel, with a higher fuel prices, we're seeing exactly the type of behavior that we would expect to see.

Speaker #1: Fewer gallons per trip, but more trips made, which ultimately accrues to our benefit if we have more people coming to the store. People are trading out of premium and mid-grade, and opting for regular or higher ethanol blends of fuel.

Speaker #1: The higher ethanol blends of fuel carry a higher margin for us than clear gasoline. So while these trends kind of ebb and flow, it's very consistent with prior periods of higher gas prices.

Speaker #1: And ultimately, it works out to our benefit.

Speaker #2: Thank you. And one moment for our next question. Our next question will come from the line of Christina Katai with Deutsche Bank. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Krisztina Katai with Deutsche Bank. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #4: Hi, good morning, and thanks for taking the question. I had a follow-up on grocery. So Darren, you've highlighted strong growth in energy, non-alcoholic beverages, and nicotine alternatives, but obviously snacks remain challenged.

Krisztina Katai: Hi, good morning, and thanks for taking the question. I had a follow-up to grocery. Darren, you've highlighted strong growth in energy, non-alcoholic beverages, and nicotine alternatives, but obviously snacks remain a challenge. Do you think the weakness in snacks is entirely a function of pricing and value perception? Are you starting to see evidence maybe of a more durable shift in consumer behavior? Obviously, there's a shift towards healthier consumption patterns or also any GLP-1 usage that you might be seeing, and if that is warranting any kind of a revision of how you're thinking about maybe what the inside of the box needs to look like maybe 2 to 3 years from now. Thank you.

Speaker #4: So do you think the weakness in snacks is entirely a function of pricing and value perception, and are you starting to see evidence maybe of a more durable shift in consumer behavior?

Speaker #4: Obviously, there is a shift towards healthier consumption patterns, or also any GLP-1 usage that you might be seeing? And if that is warranting any kind of a revision of how you're thinking about maybe what the inside of the box needs to look like, maybe two to three years from now.

Speaker #4: Thank you.

Speaker #1: Yeah. Thanks, Christina. And certainly, we keep an eye on that. But when I look at what's happening in the category, and as I mentioned before on snacks in particular, national brand chips down around 8%.

Darren Rebelez: Yeah, thanks, Krisztina. Certainly, we keep an eye on that. When I look at what's happening in the category, as I mentioned before on snacks in particular, national brand chips down around 8%, Casey's chips up 16% units. If it was a GLP-1 impact, I don't think we'd see the strength in our own private brand. We'd see overall negative trend in the category. I can't put my finger on the idea that it's a GLP-1 type issue. That being said, there's certainly a trend of people leaning more towards protein-heavy snacks and foods in general. We are seeing that, and our merchandising team's done a nice job of bringing in more protein-dense snacks and other foods to satisfy that need. We are seeing good growth in those.

Speaker #1: Casey's chips up 16% units. So if it was a GLP-1 impact, I don't think we'd see the strength in our own private brand. We'd see overall negative trend in the category.

Speaker #1: So I can't put my finger on the idea that it's a GLP-1 type issue. That being said, there are certainly a trend of people leaning more towards protein-heavy snacks and foods in general.

Speaker #1: And we are seeing that in our merchandising teams in a nice job of bringing in more protein-dense snacks and other foods to satisfy that need.

Speaker #1: And we are seeing good growth in those. They're just smaller categories. So they really don't move the needle as much. On the overall G&GM category, but they are growing well.

Darren Rebelez: They're just smaller categories, so they really don't move the needle as much on the overall GM category, but they are growing well, and we are staying attuned to that trend. I just don't see enough of it yet to make any more dramatic shifts at this point.

Speaker #1: And we are staying attuned to that trend. We're just I just don't see enough of it yet to make any more dramatic shifts at this point.

Speaker #2: Thank you. And one moment for our next question. Our next question will be from the line of Bobby Griffin with Raymond James. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will be from the line of Bobby Griffin with Raymond James. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #5: Hey, guys. Good morning. Thanks for taking the question. Darren, I wanted to touch on just the tax opportunity further. I think you called out on the remodeled stores for Q4, they're performing well, but can you dive a little bit more into what those stores are kind of showing versus maybe the corporate average once they get your Casey's pizza in there?

Bobby Griffin: Hey, guys. Good morning. Thanks for taking the question. Darren, I wanted to touch on just the Texas opportunity further. I think you called out on the remodeled stores for Fikes that is performing well. Can you dive into a little bit more about what those stores are kind of showing versus maybe corporate average once they get your Casey's Pizza in there? I think Fikes were higher performing stores, so is that translating into a larger pizza business, and is that indicative of what maybe the opportunity could be as you open up new to industry or you do tuck-ins. You guys completed a small tuck-in in Texas after the quarter end.

Speaker #5: I think fights were higher performing stores. So is that translating into a higher just a larger pizza business? And is that indicative of what maybe the opportunity could be as you open up new to industry or you do tuck-ins, you guys completed a small tuck-in in Texas, after the quarter end?

Speaker #1: Yeah, Bobby. Like we said, the performance of the CEFCO stores has been fantastic so far coming out of the remodels. And what I'd say is most encouraging is that these stores were high volume.

Darren Rebelez: Yeah, Bobby. Like we said, the performance of the CEFCO stores has been fantastic so far coming out of the remodels. What I would say is most encouraging is that these stores were high volume. They were generally higher volume than our average. Not in prepared foods, but their prepared foods business was probably the best that we have ever acquired. I do not think there has been anything that was even close to how CEFCO was performing in prepared foods prior to acquisition. When we can come in and take a store already doing well in prepared foods and layer our program on top of it and see the types of lifts that we are seeing, 30% plus year over year, it is really encouraging. Even in the proof of concept stores that had the full Casey's assortment for over a year, they are still comping positively.

Speaker #1: They were generally higher volume than our average. Now, not in prepared foods, but their prepared foods business was probably the best that we've ever acquired.

Speaker #1: I don't think there's been anything that was even close to how CEFCO is performing in prepared foods prior to acquisition. And so when we can come in and take a store already doing well in prepared foods and layer our program on top of it and see the types of lifts that we're seeing, 30-plus percent year over year, it's really encouraging.

Speaker #1: And even in the proof of concept stores that have had the full Casey's assortment for over a year, they're still comping positively. And so we feel really good about what we see.

Darren Rebelez: We feel really good about what we see. We have also had some new to industry stores that we built down in Texas over the last year since we have been down there, and those are performing very well. So we really like Texas overall. As you know, this has been a goal of ours to get into that state for a while now. The two acquisitions we have done and now a third coming, have been very good to us and the new to industries are doing well also. As I have looked at Texas, outside of the big four cities of Dallas, Austin, San Antonio, and Houston, the rest of that entire state is Casey's country. From our perspective, it has got a long runway for growth.

Speaker #1: We've also had some new-to-industry stores that we built down in Texas over the last year since we've been down there. And those are performing very well.

Speaker #1: So we really like we really like Texas overall. As you know, this has been a goal of ours to get into that state for a while now.

Speaker #1: The two acquisitions we've done and now a third coming have been very good to us. And the new-to-industries are doing well also. And as I have looked at Texas, outside of the big four cities of Dallas, Austin, San Antonio, and Houston, the rest of that entire state is Casey's country.

Speaker #1: And from our perspective, it's got a long, long runway for growth.

Speaker #2: Thank you. One moment for our next question. Our next question will be from the line of Daniel Guliomo with Capital One Securities. Your line is open.

Operator: Thank you. One moment for our next question. Our next question will be from the line of Daniel Guglielmo with Capital One Securities. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #6: Hi, everyone. Thank you for taking my question. Kind of a follow-up on state strength. You all have stores in 19 different states.

Daniel Guglielmo: Hi, everyone. Thank you for taking my question. Kind of a follow-up on kind of state strength. You all have stores in 19 different states. If you think about customers at the state level, are there certain states or areas of the country where you are seeing a stronger consumer or weaker ones?

Speaker #6: If you think about customers at the state level, are there certain states or areas of the country where you're seeing a stronger consumer or weaker ones?

Speaker #1: Daniel, I'd have to look—I'd probably have to look a little closer to try to answer that question. Nothing jumps out at me. Probably one example that we have seen is between Illinois and Indiana.

Darren Rebelez: Daniel, I would have to look a little closer to try to answer that question. Nothing jumps out at me. Probably one example that we have seen is between Illinois and Indiana on the border, where Indiana has suspended gas tax in that state, and Illinois has not done anything similar. We are seeing a little bit of weakness along the border in Illinois from a fuel perspective, but we are also seeing a corresponding strength on the other side of the border in our Indiana stores. I would say it is kind of a wash, just guests kind of playing an arbitrage game. But outside of that, I could not specifically point to any one state doing better or worse than the others there. They always perform a little bit differently, but nothing that really jumps out that concerns me.

Speaker #1: On the border where Indiana has suspended gas tax in that state. And Illinois hasn't done anything similar. And so we're seeing a little bit of weakness along the border in Illinois from a fuel perspective, but we're also seeing, of course, funding strength on the other side of the border in our Indiana store.

Speaker #1: So I'd say it's kind of a wash just guests kind of playing an arbitrage game. But outside of that, I couldn't specifically point to any one state doing better or worse than the others.

Speaker #1: I mean, they always perform a little bit differently, but nothing that really jumps out that concerns me.

Speaker #3: Yeah, I think it's worth reinforcing that if you just think about part of the strategic moat that Casey's has and that we tried to highlight at the investor day, right, the geographic footprint we have, remains in some of the lowest cost of living parts of the country.

Steve Bramlage: I think it is worth reinforcing that if you just think about part of the strategic moat that Casey's has and that we tried to highlight at the investor day. The geographic footprint we have remains in some of the lowest cost of living parts of the country. Broadly speaking, the money that our consumers earn goes further than it would certainly for consumers who are similarly situated on the coasts. We feel like that just accrues to our benefit for sure, and I think that is a very fair statement for the vast majority of the communities that we serve and continue to serve.

Speaker #3: And so broadly speaking, the money that our consumers earn goes further than it would certainly for consumers who are similarly situated on the coasts.

Speaker #3: And we feel like that just accrues to our benefit for sure. I think that is a very fair statement for the vast majority of the communities that we serve and continue to serve.

Speaker #2: Thank you. And as a reminder, if you wish to ask a question, please press star 11 on your telephone. Our next question comes from the line of Jacob Atkin-Phillips with Melius Research.

Operator: Thank you. As a reminder, if you wish to ask a question, please press *11 on your telephone. Our next question comes from the line of Jacob Atkins-Phillips with Melius Research. Your line is open. Please go ahead.

Speaker #2: Your line is open. Please go ahead.

Speaker #7: Good morning. Thanks so much for taking our question. This is Sam Barnon for Jacob. I just wonder if we could zoom out a little and touch on M&A as a whole.

Sam Bardon: Good morning. Thanks so much for taking our question. This is Sam Bardon for Jacob. I was just wondering if we could zoom out a little and touch on M&A as a whole. Have you seen the industry change at all in the last several quarters? Also, just wondering if you could remind us on philosophically just how you see M&A contributing to your 120 new unit growth target by the end of the fiscal year. Thank you.

Sam Barton: Good morning. Thanks so much for taking our question. This is Sam Bardon for Jacob. I was just wondering if we could zoom out a little and touch on M&A as a whole. Have you seen the industry change at all in the last several quarters? Also, just wondering if you could remind us on philosophically just how you see M&A contributing to your 120 new unit growth target by the end of the fiscal year. Thank you.

Speaker #7: Have you seen the industry change at all in the last several quarters? And then also, just wondering if you could remind us on philosophically just how you see M&A contributing to your 120 new unit growth target by the end of the fiscal year.

Speaker #7: Thank you.

Speaker #1: Yeah, Sam, I'd say the M&A environment is still really good. And that's a reflection of the challenging environment that the industry finds itself in, particularly for the small operators.

Darren Rebelez: Yeah, Sam. I'd say the M&A environment is still really good, and that's a reflection of the challenging environment that the industry finds itself in, particularly the small operators. I wouldn't say it's changed. I'd say it's still consistent, maybe even gotten a little better from a buyer's perspective. Multiples have stayed relatively flat, but the EBITDA that's multiplied by has not. The EBITDA, even with higher fuel margins, tends to go backwards for these smaller operators. So we find ourselves paying a lower absolute price for some of these assets, even though the multiples are about the same. Consistent with our guidance, every year we go into that giving a number of stores we'll add in the fiscal year. This year it's 120.

Speaker #1: And so I wouldn't say it's changed. I'd say it's still consistent. Maybe even gotten a little better from a buyer's perspective. And multiples have stayed relatively flat, but the EBITDA that that's multiplied by has not.

Speaker #1: And the EBITDA even with higher fuel margins, tends to go backwards for these smaller operators. So we find ourselves paying a lower absolute price for some of these assets, even though the multiples are about the same.

Speaker #1: And consistent with our guidance, every year we go into that giving a number of stores we'll add in the fiscal year. This year, it's 120.

Speaker #1: We go into that assuming half of that will come from new-to-industry bills and half of that will come from the small deal M&A. And that's exactly how we see it playing out this year, give or take a couple.

Darren Rebelez: We go into that assuming half of that will come from new to industry builds, half that will come from the small deal M&A, and that's exactly how we see it playing out this year, give or take.

Speaker #2: Thank you. And I would now like to end the conference back over to Darren Rebelez for closing remarks.

Operator: Thank you. I would now like to hand the conference back over to Darren Rebelez for closing remarks.

Speaker #1: All right. Thank you for taking time today to join us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter.

Darren Rebelez: All right. Thank you for taking time today to join us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter. Have a great day. Thank you.

Speaker #1: Have a great day. Thank you.

Operator: This concludes today's conference call. Thank you for participating and you may now disconnect. Everyone have a great day.