CASEYS GENERAL STORES INC — Call Transcript 2026

Good day, and thank you for standing by. Welcome to the Q3 FY 2026 Casey's General Stores Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead. Good morning, and thank you for joining us to discuss the results from our Q3 ended January 31, 2026. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores. There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including, but not limited to, the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. Any forward-looking statements made during this call reflect our current views as of today 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 the operating expense increase for the Q3, can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would now like to turn the call over to Darren to discuss our Q3 results. Darren? Thanks, Brian, and good morning, everyone. Before we go into further detail on our outstanding Q3 performance, I'd like to praise the entire Casey's team for their hard work serving our guests. The team's high level of execution across the board is reflected in the numbers I'll share with you shortly. Before I do that, I wanna highlight the positive impact Casey's is making throughout our geography. Supporting the community is core to who Casey's is, and right now we're activating our Feeding America campaign in partnership with DoorDash. The campaign will benefit over 60 local food banks in our footprint. Thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity. Now let's discuss the results from the quarter. Diluted earnings per share finished at $3.49 per share, up 50% from the prior year. Net income was $130 million, an increase of 49% from the prior year. The company generated $309 million in EBITDA, 27.5% higher than the prior year. Inside the store, prepared food and dispensed beverages remained strong, supported by a compelling value proposition and continued innovation, such as our two new specialty pizzas, Twisted Pepperoni and Ultimate Meat. Margin expansion was driven primarily by grocery and general merchandise. As a result of our joint business planning process, our guests have early access to Monster's Ultra Red White & Blue Razz flavor, celebrating 250 years of American independence. This product will be sold almost exclusively at Casey's locations up until Memorial Day weekend. In the forecourt, our team executed well as same-store gallons grew for the fifth consecutive quarter, while fuel margin exceeded $0.40 per gallon. I'd now like to go over our results and share some of the details in each of the categories. Inside same-store sales were up 4% for the Q3, or 7.9% on a two-year stack basis with an average margin of 42.2%. Same-store prepared food and dispensed beverage led the way as sales were up 4.3% or 9.2% on two-year stack basis with an average margin of 58.3%. Continuing the momentum from the prior quarter, whole pies and hot sandwiches and all-day breakfasts performed well during the Q3. Same-store grocery and general merchandise sales were up 4% or 7.4% on a two-year stack basis with an average margin of 35.7%. Energy drinks and nicotine alternatives continued to outperform the category with double-digit growth. On the fuel side, same-store gallons sold were up 0.4% with a fuel margin of $0.41 per gallon. The Midcontinent region saw an approximate 4% decline this quarter, according to OPIS fuel gallon sold data, indicating that we continue to take market share. In the Q3, same-store operating expense excluding credit card fees increased 4.6%. Same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction, where scores for the fiscal year are at an all-time high. I'd like to now turn the call over to Steve to discuss the financial results from the Q3. Steve? Thank you, Darren, and good morning. Before I begin, I also wanna share my appreciation for the hard work and the great results from our team members. Total revenue for the quarter was $3.91 billion. That's an increase of $12 million or 0.3% from the prior year, primarily due to higher inside sales as well as higher fuel gallons sold that was nearly offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis. Total inside sales for the quarter were $1.48 billion, an increase of $80 million or 5.7% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $26 million-$423 million, an increase of 6.5%. In grocery and general merchandise sales increased by $54 million-$1.06 billion, an increase of 5.4%. Retail fuel sales were down $57 million in the quarter as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price. The average retail price during the period was $2.72 a gallon, and that compares to $2.85 a year ago. We define gross profit as revenue less cost of goods sold, excluding depreciation and amortization. Casey's had gross profit of $1.01 billion in the quarter, an increase of $94 million or 10.3% from the prior year. This is driven by both higher inside gross profit of $51 million or 8.9%, as well as higher fuel gross profit of $46.2 million or 15.3%. Inside gross profit margin was 42.2%. That is up 130 basis points from a year ago. Prepared food and dispensed beverage margin was 58.3%, and that's up 50 basis points from prior year. Cheese was $2.05 per pound for the quarter compared to $2.12 per pound last year. That's a decrease of 3% or approximately a 20 basis point benefit to margin. Margin also benefited from improved waste, which was partially offset by promotional activity. The grocery and general merchandise margin was 35.7%. That's an increase of 150 basis points from the prior year. The change was impacted by strong cost of goods management as well as a favorable mix shift within the category. Fuel margin for the quarter was $0.41 per gallon. That's up $0.046 per gallon from prior year. Total operating expenses were up 4.1% or $27.4 million in the quarter. The total operating expense comparison benefited from $13 million in one-time deal and integration costs that we incurred in the prior year related to the closing of the acquisition of Fikes, which amounted to a roughly 2% year-over-year benefit. Approximately 1% of the total operating expense increase is due to unit growth, as we operated 31 more stores than the prior year. Same-store employee expense accounted for approximately 1.5% of the increase due to increases in labor rates, which were partially offset by reduced same-store labor hours. Snow removal due to unfavorable weather in the geography during the quarter contributed to approximately 1% of the increase. Finally, higher variable incentive compensation and charitable contributions contributed to approximately 1.5% of the increase. Net interest expense was $23.4 million in the quarter. That's down $6 million versus the prior year. That's primarily due to paying off debt associated with the Fikes transaction. Depreciation in the quarter was $114.1 million. That's up $8.9 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 24.1%. That compares to the prior year of 19.2%. The increase this year was driven by a one-time benefit in the prior year from revaluing state deferred tax liabilities following the closing of the Fikes transaction. Our financial flexibility remains excellent. On January 31, we had a total available liquidity of $1.4 billion, and our credit facility debt to EBITDA ratio ended the quarter at 1.6x. For the quarter, net cash generated by operating activities of $260 million, less purchases of PP&E of $184 million, resulted in the company generating $76 million in free cash flow, and that compares to generating $91 million in the prior year. At the March meeting, the board of directors voted to maintain the quarterly dividend at $0.57 per share. Also, during the Q3, we repurchased approximately $76 million in shares. We are updating our previously communicated FY 2026 guidance as follows: FY 2026 EBITDA is now expected to increase 18%-20%. The company now expects inside same-store sales to increase between 3.5%-4.5% and an inside margin of between 41.5%-42.5%. Total operating expenses are expected to increase approximately 10%, and the tax rate is now expected to be between 23.5%-24.5% for the fiscal year. The remainder of our annual guidance remains unchanged. Now, our results for the month of February were as follows: Same-store volumes, both inside and outside the store were strong, and they are reflected in the updated annual guidance. Fuel CPG was in the low $0.40 per gallon. Current cheese costs are slightly favorable versus the prior year. We expect Q4 operating expense to be up mid-single digits%. That's partially attributable to higher expected variable incentive compensation. I would now like to turn the call over to Darren. Thanks, Steve. About a year ago, we began a test for chicken wings in our Des Moines market at 225 stores. I'm happy to announce that we've expanded to over 550 stores as of the end of the Q3. Our culinary team has done a great job getting the flavor profile right with five sauces and three dry rubs that have resonated with our guests. Our goal with the wings has been to complement pizza and create an incremental occasion within our prepared foods business. While we do not have financial metrics to share on the wings yet, the platform has been largely incremental as our pizza units in the stores where we sold wings were up high single-digit percentage in the quarter. Within Casey's Rewards, we crossed a major milestone as we now have over 10 million members. This is a testament to the whole team, from marketing to store operations and everyone in between, providing real value for our guests to earn and use points throughout the store and at the pump. As we continue to grow, we're excited for more guests to join the Casey's Rewards platform. On the fuel side, our fuel team continues to grow our capabilities. They prioritize business-to-business relationships, growing our self-supply capabilities, and remaining focused on increasing our capacity to haul fuel on Casey's trucks. This, coupled with our strong inside offering, gives us a strategic advantage in the forecourt. Lastly, as we are now in the final quarter of our three-year strategic plan, I'd like to announce that we have set a date, June 24, for our next Investor Day. We'll hold the event in New York City and plan to release our next three-year strategic plan at that event. I'll let you in on a little secret, we plan to serve our famous pizza at the event. We will now take your questions. Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, or you wish to remove yourself from the queue, please press star one one again. We also ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Corey Tarlowe with Jefferies. Your line is open. Great. Thanks, and good morning. Darren, I was wondering if you could comment on the impact of volatility on your business and any comments on the recent events and some of the impacts that might have had on either fuel sales or profitability? Yeah, sure, Corey. As you well know, you know, volatility is kind of par for the course in this business, and so these events, like what's happening with Iran right now, happen from time to time. The most recent history we have on that is a few years ago when the Russia-Ukraine war began. You know, typically what happens in a situation like this is the cost runs up on gasoline and is driven by crude oil primarily and then flows through the system. Wholesale prices move up, retail prices move up, but tend to move a little bit more slowly, and so margins get a little bit compressed on the front side of that curve. When there's an ultimate inflection point and the costs start to come down, retail prices will come down as well, but also tend to come down more slowly and the margin expands. Over the course of the cycle, it historically has ended up being a net positive from a fuel margin standpoint. But it is a little bit of tightening on the front end, a little bit of expansion on the back end. When we look at the history from the most recent event with the Ukraine war, that's exactly what played out. Margins did get a little bit compressed, but not bad. I mean, the quarter, our quarter in 2022, where we had the first initial shock from the Ukraine war, we printed a $0.36 fuel margin that quarter. The subsequent three quarters were all over $0.40 a gallon. Again, there'll be a little bit of tightening, but this is not a huge deal from a margin perspective. On the volume side of things, with absolute retail prices, we really don't start to see any level of demand destruction until we're approaching $5 a gallon at retail. We, as we sit here today, we're right around $3 a gallon in our footprint. We have quite a ways to go before we would be concerned from a volume standpoint. That's very helpful. Thank you so much. Steve, I just wanted to follow up. As you think about the inside same-store sales up 3.5%-4.5%, some of your largest vendors have called out that they're investing in price. How do you think about pricing impacts within the full-year guide? And what do you expect to have from a pricing perspective? Because I do believe you also mentioned increased promotions. Thanks so much. Yeah. Corey, hey, good morning. Thank you. You know, we don't lean heavily into price as a general matter, as a constituent part of our in-store sales bridge. As you know, we had a little under 3% pricing reflected in our current quarter, and that's primarily on the nicotine category, where we tend to just pass through the manufacturer price increases that we have. I mean, the strength of our in-store offer is very much, especially in prepared food, predicated on the value proposition that we've worked very hard to maintain. We took almost no price. I think actually with the way commodities worked in the quarter, we had negative pricing net within the prepared food category. As our QSR competitive set broadly has continued to take price in the last couple of years, you know, that's really helped the velocity of units in that prepared food category. You know, we will continue to run that play. We like to be a value proposition on that side. I would not expect us to lean into price heavily going forward in prepared food. We always have that as an insurance policy if we would need to, but we simply have not needed to do that. On the grocery side, you know, we do use pricing to preserve margin. That's a contractual business for us annually. We will continue to take price in that category, commensurate with the inflation we take from our partners. The pricing we do receive, to your point on promotion in the grocery category especially, is often largely or completely offset by promotional support from our vendor partners. Thank you. One moment for our next question. Our next question comes from Mark Carden with UBS. Your line is open. Morning. Thanks so much for taking the question. To start, I guess, this particular sales performance in grocery and gen merch, could you provide a little more color on what drove the strength in non-alcoholic beverages? I would assume that Monster is more of a benefit next quarter, but if you saw a tailwind there, definitely let us know. Then do you think there was a stocking up benefit ahead of the severe winter weather that helped the segment? Thank you. Yeah, Mark, it's Darren. On the non-alc beverages, it was driven primarily by energy. Overall energy was up about 14% in the quarter. There's also we had strong growth in our flavor enhanced waters. Both of those two categories really contributed to the non-alc beverage performance. In terms of stocking up, I don't think we saw any real change in behavior from that perspective, you know, during the quarter. I'm not sure what the impetus would have been during the Q3 to, you know, for that to happen. No, we didn't see any of that behavior in the quarter. Thank you. One moment for our next question. Our next question comes from Chuck Grom with Gordon Haskett. Your line is open. Hey, thanks very much. Good morning. Great quarter. You noted that quarter to date sales are strong, yet your implied Q4 guide has a pretty big decel on the stack. I was just wondering if we could reconcile that and maybe just double click on the overall health of your customer based across income cohorts, any changes you've seen recently. Yeah, maybe, Chuck, I'll talk about the health of the customer. I'll let Steve talk about the guidance in that bridge. You know, from a consumer standpoint, health of the customer, we're still seeing customers shop at our stores across all income cohorts. For sure the upper income cohorts are stronger, but we're growing business across the low income cohorts as well. What we're seeing in terms of behavior difference, I'd say the middle and upper income cohorts are performing about the same. They're still shopping at our stores. They're shopping across all categories. Very little change in their behavior. The lower income cohorts are still growing with us. I think that's an important thing to call out. They are growing at a slower rate than the other cohorts, except in prepared foods, where they're actually growing as strong, if not stronger than the higher income cohorts. I think that's really a reflection of the value proposition that our prepared foods category offers relative to QSRs and other of our national brand pizza competitors. They're also leaning a little bit heavier on the dispense beverage side within prepared foods because that typically represents a better value than the bottle and can beverages on the grocery and general merchandise side. On grocery and general merchandise, lower income consumers are buying at a little bit slower rate, still growing again. That kinda holds together logically as they may have opportunities to go to a grocery store and buy in bulk at a lower unit cost than what we would be able to provide. That's really what we're seeing on the consumer side. I still feel very good about the overall health of consumer and their shopping habits. Steve, you wanna talk a little bit about the guidance? Yeah, sure. Good morning, Chuck. We, you know, we normally don't give quarterly specific numbers for much at all because we're probably not that precise. Coming into the Q4, we're trying to serve up some squeeze math for people as best we can. I think on the inside number, I think year to date, we're about 3.8% or so on the inside number. You know, the inside range, the midpoint of that range is right around where we are, maybe a touch higher. Ultimately, I think that squeeze math would indicate that, you know, Q4 should look pretty close to what the year to date inside experience has been. We're not expecting it to be significantly different. Okay, great. Thanks very much. Then just on the grocery margins up really, really healthy here, right up 150 basis points. Talked about cost of goods management and mix. Maybe dive into the cost of goods management, where you are with your vendors on some of that journey versus how much of it was mixed, just so we can think about the complexion, you know, in the next few quarters. Thanks. Yeah. This is Darren. You know, on the cost of goods management side, I think it's really just a reflection of our joint business planning process. Our merchants have done a really good job of partnering with our supplier partners in creating plans that allow us to manage that cost of goods a little bit more effectively, at the same time, grow the business for all of us. I'd say that's really what you see on the cost of goods management side. The mix is really a couple of different things. The fastest growing subcategory within grocery and general merchandise is non-alcoholic beverages, and that also carries the highest margin rate and adds margin expansion in the quarter. That's favorably mixing. The other thing I would call out is the nicotine category, and that's a combination of a couple of things. You know, the combustible cigarette mix has gone down, and that's the lowest margin part of that subcategory. The nicotine alternatives, so think the pouch business, is up 31% in the quarter. Vapor was up another 12% as enforcement actions against illicit vape have improved. Those both carry more than double the margin rate of combustible cigarettes. When you throw all that into the mix, that really does favorably impact the grocery and general merchandise category margin rates. Thank you. One moment for our next question. Our next question comes from Kelly Bania with BMO Capital Markets. Your line is open. Hi. Good morning. Thanks for taking our questions. Darren, you, I think, made the comment that you typically don't see demand destruction until the retail price of fuel hits closer to $5 per gallon, and obviously we're still far away from that. I was just curious if you have seen any, you know, impact to consumer behavior, traffic, ticket, inside sales, just in the past few weeks, and if you are making any contingency plans from a promotional perspective, you know, if this fuel margin environment remains elevated or continues to increase. Yeah, Kelly, we've seen no signs at this stage of the cycle in terms of any change in guest behavior. You know, certainly people don't like seeing gas prices go up. I'll again put this in perspective. Right now, after this last week or so's events, you know, retail's up, give or take, on average about $0.30 a gallon. At that $0.30 a gallon, now we're in the low $3-a-gallon range on average. That's still $0.30 below the starting point when the Ukraine war began. You know, fuel prices had run down quite a bit over the last year or so we were actually sitting in a really low position. The fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history. Again, we're still not seeing any sort of behavior change. In the event that we start to get up into that, you know, close to $5-a-gallon range, we certainly will do some things to encourage demand. But as it stands right now, our traffic to our stores has been positive, and that's a great credit to our merchandising, our food team, our store ops teams who are running great stores every day to get people to come in. That's worked across the board. That value proposition relative to other alternatives is still very strong. In a higher price environment for fuel, I think more consumers will be more discerning about where they spend their money, and they'll see the value proposition that we have every day in our stores. I think that ultimately accrues to our benefit. Thank you. Just wanted to also ask about the wings. Sounds like that's now at 550 stores. Can you talk a little bit more about the timing and cadence of additional rollout of that program to more stores? And also, can you tie in just how you think about the pricing of that item? I think what we're seeing is $7.99 for eight pieces. Just curious how you think about the value proposition of that category to, say, pizza or hot sandwiches or some of your other core prepared food offerings. Yeah. With respect to timing, we're going to have a more measured rollout over time. We'll do that essentially by distribution center to make sure the supply chain is running efficiently. Keep in mind, this just isn't selling a new product. We have equipment that we need to install in stores to enable that process. We have to do a lot of training. I would say over the next two years would be the case where we would roll out the rest of the chain. With respect to pricing, we intend to approach the pricing similar to how we've done with pizza in terms of keeping a gap relative to any sort of national brand competitor. We encourage trial and adoption and continue to grow the unit velocity on that business. You know, our ultimate goal with this platform is really to create an incremental occasion in addition to pizza. It certainly can be an add-on to the pizza, but it also has the quality and value proposition to stand alone on its own as an incremental occasion. The early indications are that we are selling the product to wing-only customers, and we're also seeing that when people are buying our wings, they are increasing their frequency of visit as a result of that. We feel very good about the progress so far. We still have a long way to go, but things are working well so far. Thank you. One moment for our next question. Our next question comes from Michael Montani with Evercore ISI. Your line is open. Yes. Hi, good morning. Thanks for taking the question and congrats on the results. Just wanted to ask if I could, I guess on two areas. One is, you know, if you could discuss a little bit, Steve, any synergies that you realized kinda in the quarter, and then what a realistic full year outlook is, for synergy from CEFCO. Just to follow up on the wings, you know, how should we think about potential CapEx investment, you know, if it's a light touch versus a heavier touch? How do you see that kind of split out over time? Similarly, on the OpEx side, you know, do you need to add kind of a full-time equivalent worker to be able to, you know, deliver the wing value prop? Yeah. Hi, good morning, Mike. This is Steve. I'll maybe start on the synergy one, turn it to Darren for the wings. You know, we are right where we expected to be as it relates to the integration of Fikes and CEFCO is probably the overarching comment I would make. You know, if you go back to the synergy capture that we expected and talked about at the time of the closing the deal, so a year ago this quarter, the early innings of those synergies were gonna be some G&A capture, which were right where we thought we'd be probably a little bit ahead of that. Certainly some fuel benefit capture, both from converging the supply agreements of the two entities together, which we just completed actually this quarter. Everybody is now on the same kinda timeline with the same volume benefit in those negotiations, as well as the pricing which we took over really on day one and centralized that pricing. Most of those synergies have all been realized. We have started to take some synergies inside the store slowly as we put some of our product into Some of the proof of concept stores that we converted a while ago, and we're also now in the process of converting another 50 stores that had previously had kitchens in them. We'll have 50 more converted by the end of the fiscal year. Those stores will also start to show prepared food synergies, which is the bulk. About 40% of the total synergies we expected to capture would ultimately be prepared food because we're putting pizza in. That will follow the conversion schedule. Long story short, you know, Fikes for sure is, as we had communicated at the beginning of the year, will be EBITDA accretive for us, this year comfortably so. The synergy capture is right where we expect. The bulk of the prepared food synergy capture will really start in the H1 of next fiscal year, and we'll ramp that up throughout the course of the year. Yeah, Michael, I'll go ahead and take the wings. You know, from a CapEx perspective, it's a pretty light lift. Really, it's just putting a commercial fryer into the stores. We have electrical, we have vent hoods already. There's a little bit of smallwares that are required to produce the product, but that's it. It's just we got, you know, thousands of stores we have to install them into, so it takes a little time. From a CapEx perspective, it's not a significant investment. On the labor side, it's not as. It's a little more scientific in terms of how we add the labor. It's not just adding an FTE. We have a pretty robust labor modeling process that we go through with time motion studies to understand what it actually takes to produce any product in our kitchens. Then the team forecasts the demand in those stores, and based on that, they'll get an incremental labor allocation to the stores. If the volume were high enough, it may warrant an incremental FTE. I would say for the most part, at this stage, it's warranting incremental hours, but not necessarily an FTE at this stage of the game. Every store has their own specific allocation based on that math, and then that ebbs and flows as the volume, the actual volume experience goes forward. That's how we approach the labor. Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. Thank you. Good morning. I was hoping you could touch on the durability of your new unit growth, I guess, over the long term. Curious to hear from you know, what is a sustainable pace of, you know, new unit growth and, you know, how many sites, you know, do you have in your pipeline? I guess, can you know, share with us if you're still on track to deliver on your guidance this year and to add, I guess, the 80 new stores, which implies about 60 new store openings in the Q4? Are you guys also sort of on track to add the 500 new stores by the end of this fiscal year? Thanks. Yeah. Bonnie, we are definitely on track to open 80 stores this year. I'm not sure what numbers you're looking at for the Q4, but we do not need to open up 60 stores in the Q4 to get to our 80 stores. Remember, that's a combination of new-store new-to-industry stores and M&A. On both fronts, we are well positioned to wrap up the Q4 and hit that 80 stores for this year. That 80 stores for this year will get us to 500 stores for the three-year planning horizon, which was originally 350 stores, and then we moved it up to 500 stores. Feel very good about that. On a sustainable basis, you know, we are well situated from a pipeline perspective on NTI. You know, we have stores right now. If we're buying real estate, we're really putting that in the FY 2028 or FY 2029 pipeline at this point because the pipeline's in good shape. In the M&A front, I'd say the team feels very good about the small deal M&A and the pipeline there as well. Remember, we like to have both NTI and M&A working at the same time. If multiples get a little bit too rich on the M&A side, we can lean heavier on the NTI side to keep that ratable store growth. Lastly, I'd say just in terms of the pace, you know, our algorithm, our growth algorithm at a high level is pretty straightforward. We get about 4% growth from organic, you know, running the mothership, so same store sales, fuel profitability, efficiency in our operations, and then 4% from new units. Give or take every year, we kind of approach that year with a goal of growing the units by 4% per year. We pulled back a little bit in this current fiscal year deliberately, so we had the opportunity to integrate the CEFCO acquisitions because there's a lot of work to be done there. We'll be back on that 4% unit growth rate. Thank you. One moment for our next question. Our next question comes from Jacob Aiken-Phillips with Melius Research. Your line is open. Hey, good morning. Thanks for the clarity on the unit expansion. I'm just curious, as we're approaching the new strategic plan, not gonna ask for numbers, but how should we be thinking about the biggest growth levers from here? You outlined unit expansion, and you recently talked about how maybe you're going back to adding some labor to the stores as opposed to the constant reduction in same-store hours. Just levers on top line and bottom line that we should be thinking about. Yeah, you know, Jacob, I think, first of all, I don't wanna share too much about the next three-year plan. I want you to come to New York City and have some pizza with us, and we'll tell you all about it in June. But yeah, you know, look, fundamentally, we're still gonna grow the business by growing new units, by running the business efficiently, by growing our inside sales. We'll have all kinds of details around that. But I mean, those are the things we're going to continue to do to grow our business. On the labor side, I've mentioned on the last few calls that when we entered into this three-year strategic planning cycle that we're wrapping up right now, we said we would reduce labor hours by 1% same store per year over the three-year period. We have actually exceeded that goal with great work done by our operations team and continuous improvement teams to make that happen. But that's not something that just goes on in perpetuity. As I've communicated before, I think we're close to the end of that. There'll always be efficiencies that we'll continue to work on, but you should not expect that we'll just continue on a cadence of reducing same-store labor hours. That being said, as the business grows and volumes increase, there will be a need to add some labor back to meet that need and keep the guest satisfaction scores at the all-time highs that they are currently at. That all comes with incremental sales, incremental margin, incremental gross profit. You know, we're happy to add those hours back when the business warrants those additional hours, and that also works the other way. If the business were to go backwards, we would pull back on those hours to right-size the labor allocation with the business demand. Got it. Just on cheese real quick. Can you update us on, like, what the annual amount of pounds you use in terms of cheese? You said cheese is slightly down in Q4, but can you update us on, like, how much exposure you have locked in over the next two quarters? We move about 45 million pounds. In the quarter, about 11.5 million pounds. For a full year, about 45 million pounds. We're 80% locked on cheese through this quarter and the next couple of quarters. Then, you know, that's about where we like to keep it when we can lock in favorability. It's slight favorability. It's not massive favorability. Then we have another 20% we can buy on spot when conditions are favorable. Thank you. One moment for our next question. Our next question comes from Edward Kelly with Wells Fargo. Your line is open. Hi. Good morning, guys. I wanted to first just follow up on wings. I was curious, I know you don't wanna give, you know, too many numbers, but curious as to how you think about the margin implication overall with wings. Taking a step back, you know, adding fryers, I don't wanna get ahead of ourselves, but how are you thinking about, you know, potential for other products, you know, as it pertains to this category? Yeah, on the margin, you know, we like the margin profile on wings. It is obviously a protein versus, you know, something like pizza that's a little more dough-based. So, it doesn't carry the same margin rate that, you know, that pizza would. So far there hasn't been any real margin implications because the mix hasn't been great enough to do that. Over time, if it became a big enough business, that could put a little bit of pressure on margin rate, but it would grow gross profit dollars and improve trips and everything else. So, we're okay with that. You know, our goal isn't margin rate, it's gross profit dollar growth. To the extent that that plays out, over time, we're comfortable with it. In terms of other products, you know, I guess the thing we haven't talked about, we rolled out fries in addition to wings. That was the most commonly requested side item to go with the wings. So we are selling wings or fries right now. We're cooking some of the other products that we already had in the store in the larger fryers. We'll have to see as time goes on whether we expand that. But for now, we have a long way to go in terms of growing the wing business, so we're more focused on doing that and doing that well and getting that velocity up and creating that incremental occasion per week in that business before we start tackling other products. Great. Then just a follow-up on the M&A question. I was curious as to, you know, where you feel like you are with the integration of Fikes and what that means in terms of your ability to execute on another large deal if something came about, and maybe just thoughts on what the market currently looks like there. Yeah, in terms of the integration cadence, by the end of this fiscal year, we will have 50 stores converted. We've got about 25 stores converted right now, and we're on a cadence of about three per week. By the end of the fiscal year, we'll have the first tranche of 50 stores done. The plan for next year will roughly be to wrap that up in the next fiscal year. There'll be some stragglers there, but the bulk of the work will occur next fiscal year. From a balance sheet perspective, we could do another deal right now. Obviously, our leverage ratio is low. We have ample liquidity. We have the ability to do that. Just practically speaking, with the timing it would take starting, you know, right now to do something of a similar size to a Fikes, it would take time. Yeah, we're in a position to be able to execute on a larger deal, if the opportunity were to present itself. As you can imagine, there is a finite number of chains of that size that just exist and then a smaller number than that that are actionable. We are definitely engaged with potential sellers and working through those processes all the time. You know, one of the things that kind of narrows the aperture a little bit for us is that we set a pretty high bar on asset quality. Because ultimately, the biggest synergy we bring to any acquisition is our prepared foods. The physical buildings need to be able to accommodate adding a kitchen or the real estate has to be large enough that we can bump out a building and add a kitchen. That has to be a high enough percentage of the total stores that we acquire to make it work for us. We're a little bit picky, but I think that pickiness is, you know, proven beneficial for us over time. We like how the market sets up for us. We just need to have the right combination of timing and willing sellers so that we can act on those opportunities. Thank you. One moment for our next question. Our next question comes from Brad Thomas with KeyBanc Capital Markets. Your line is open. Good morning. Thanks for taking my question, and let me add my congratulations on a nice quarter here. I wanted to ask about the competitive landscape, and I know that Casey's remains in an advantageous position relative to your rural footprint. Just curious there, and if you could comment any more on what you're seeing out of the other C-store players and restaurant competitors of yours. Yeah, you know, it's a competitive environment. I think when you look at either one. I guess I'll take restaurant first. You know, I think the restaurant industry at large and QSRs and pizza players in particular are under quite a bit of pressure. You know, the advantage that Casey's holds relative to those folks is that we're in three businesses. We're in the fuel business, the grocery business, and the prepared food business. The restaurants are in one business, and it's the food business. They have to absorb all of the increased costs that we've all experienced over the last several years, and absorb that within the prepared foods. That's translated into menu price increases. I think that's been well documented. That relative gap between restaurant pricing and our pricing has widened over the last couple of years. That value proposition for us just gets all the stronger. I feel very good about our position relative to national brand QSR chains. As a reminder, 1/2 of our stores don't even have a national brand pizza competitor. The other 1/2 that do, we have a very strong value proposition relative to them. By the same token, on the convenience store side, I think we have the same thing. We still have a lot of stores in the suburbs. We face some of the best competition in that our industry has to offer, and we perform very well there, largely because we have that differentiated food offer that really is unique and represents a great value proposition, and it's hard to execute. A bulk of the convenience store industry doesn't even have a prepared foods program, and those that do are largely in the sandwich business or fried chicken business, something not pizza, and certainly not pizza like we do it. We really have a unique niche within the industry and I think our results over the last several years would speak to the fact that that niche has really resonated with guests, and we perform very well across all environments. That's really helpful. Maybe if I could just ask a follow-up to try to tie together the question around where oil prices may be going and how that might influence your updated financial guidance in June. Is there a particular price for gas and oil where we could think about or should think about the algorithm changing? Is it that $4 gas number that you referenced earlier, Darren? Just curious about how you think about it from kind of a long-term standpoint. Yeah. Look, Brad, I would say long term, this doesn't change anything. You know, fortunately or unfortunately, I've been in this industry long enough now to go through a number of these cycles, and every one of them runs its course, like I described earlier, where margins get a little bit compressed on the front end of the curve and you know, expand on the back end. I think from a long-term algorithm, growth algorithm standpoint, you know, what's going on today is not changing anything. It'll run its course. Who knows how long that'll be? I'd say we ran a complete cycle in 24 hours yesterday, so it's kinda hard to tell how this will all shake out, but ultimately it will normalize. The long-term algorithm will be the same. In terms of the quarter, I would just go back to, you know, what Steve commented on our experience. We've had a strong start to the quarter. That's reflected in the guidance. You know, our February experience on margin was $0.40 a gallon, and we'll have to see how the rest of the quarter shakes out. I mean, I don't know how to handicap that. You know, we had a $0.30 cost swing from high to low yesterday. I haven't looked at the news in the last hour, so I'm not sure what's going on today. You know, we'll manage it appropriately and we'll see how the quarter shakes out. Thank you. One moment for our next question. Our next question comes from Jack Hardin with Stephens. Your line is open. Yes. Hi, this is Jack Hardin on for Pooran Sharma. Thanks for the question. I wanted to ask about labor. You've done a really strong job over the past several years at reducing same store labor hours. At this point, how should we think about the runway for further productivity gains? Are we closer to a state of a steady state labor model? And do you see incremental opportunity from here? Yeah, Jack, you know, I commented a few minutes ago about the fact that I think we're probably closer to steady state. Look, we have a continuous improvement team for a reason. We will always look to find ways to make the job in stores easier, and sometimes that ultimately results in less labor needed. By the same token, we're always focused on growing our business. As you sell more stuff, it requires more labor to produce that stuff, stock that stuff, sell that stuff. That will ebb and flow. I would not expect to see the types of labor decreases that we saw over the last three-year period. Again, we'll always focus on managing that expense line tightly and add where we need to and take away where we don't need it anymore. Thank you. One moment for our next question. Our next question comes from Scott Stringer with Wolfe Research. Your line is open. Hey, guys. Appreciate the time. You kept the fuel volume guidance unchanged, but performance has been nicely positive year to date as you're taking share. Is that at least fair to say that you're tracking at the high end of your range for the year? Yeah, Scott, I wouldn't say that we're tracking at the high end of the range. I'd say we're tracking in the range, and that's where we feel comfortable guiding everybody at this point. Yeah, I've been pleased with the performance so far. Okay, got it. Then there was also some positive commentary around tobacco sales. Specifically on the tobacco alternatives, is there a potential that these newer products can return the category as a whole back to positive growth? Yeah, I do think there is that potential. You know, what we've seen a little bit more recently is the decline in combustibles has slowed a bit. It's still from a unit perspective, it's still dropping, but not at the same rate as it was for the last several quarters. The combination of that decline slowing with the inflation that happens on the combustible side, in addition to the growth in alternatives and vapor, has actually netted that category out to positive. That hasn't been that case for quite a while. We'll have to see how it plays out. At this point, that is correct. It is actually starting to see some growth in the overall nicotine category. Thank you. Ladies and gentlemen, we're coming up on the end of our hour-long call. I would now like to turn the call back to Darren Rebelez for closing remarks. All right. Thank you, and thanks for taking time today to join us on the call. Before we go, I just wanna thank our team members once again for all their hard work this quarter. Have a great rest of the week. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker 13: Good day, and thank you for standing by. Welcome to the Q3 FY 2026 Casey's General Stores Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead. Good day, and thank you for standing by. good day and thank you for standing by Welcome to the Q3 FY 2026 Casey's General Stores Earnings Conference Call. welcome to the q3 fy 2026 casey's general stores earnings conference call At this time, all participants are on a listen-only mode. at this time all participants are on a listen-only mode After the speaker's presentation, there'll be a question-and-answer session. after the speaker's presentation there'll be a question-and-answer session To ask a question during the session, you'll need to press star one one on your telephone. to ask a question during the session you'll need to press star one one on your telephone You'll then hear an automated message advising your hand is raised. you'll then hear an automated message advising your hand is raised To withdraw your question, please press star one one again. to withdraw your question please press star one one again Please be advised today's conference is being recorded. please be advised today's conference is being recorded I would now like to turn the conference over to your speaker today, Brian Johnson, Senior Vice President, Investor Relations and Business Development. i would now like to turn the conference over to your speaker today brian johnson senior vice president investor relations and business development Please go ahead. please go ahead

Speaker 3: Good morning, and thank you for joining us to discuss the results from our Q3 ended January 31, 2026. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores. Good morning, and thank you for joining us to discuss the results from our Q3 ended January 31, 2026. good morning and thank you for joining us to discuss the results from our q3 ended january 31 2026 I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. i am brian johnson senior vice president investor relations and business development With me today are Darren Rebelez, Chairman, President, and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. with me today are darren rebelez chairman president and chief executive officer and steve bramlage chief financial officer Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. before we begin i'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the private securities litigation reform act of 1995 These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores. these forward-looking statements include any statements relating to the potential impact of the fikes transaction expectations for future periods possible or assumed future results of operations financial conditions liquidity and related sources or needs the company's supply chain business and integration strategies plans and synergies growth opportunities and performance at our stores There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including, but not limited to, the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including, but not limited to, the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. there are a number of known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements including but not limited to the integration of the recent acquisitions our ability to execute on our strategic plan or to realize benefits from the strategic plan the impact and duration of conflicts in oil-producing regions and related governmental actions as well as other risks uncertainties and factors which are described in our most recent annual report on form 10-k and quarterly reports on form 10-q as filed with the sec and available on our website Any forward-looking statements made during this call reflect our current views as of today 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 the operating expense increase for the Q3, can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would now like to turn the call over to Darren to discuss our Q3 results. Darren? 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. 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 the operating expense increase for the Q3 , can be found on our website at www.caseys.com under the Investor Relations link. a reconciliation of non-gaap to gaap financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the q3 can be found on our website at www.caseys.com under the investor relations link With that said, I would now like to turn the call over to Darren to discuss our Q3 results. with that said i would now like to turn the call over to darren to discuss our q3 results Darren? darren

Speaker 6: Thanks, Brian, and good morning, everyone. Before we go into further detail on our outstanding Q3 performance, I'd like to praise the entire Casey's team for their hard work serving our guests. The team's high level of execution across the board is reflected in the numbers I'll share with you shortly. Before I do that, I wanna highlight the positive impact Casey's is making throughout our geography. Supporting the community is core to who Casey's is, and right now we're activating our Feeding America campaign in partnership with DoorDash. The campaign will benefit over 60 local food banks in our footprint. Thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity. Now let's discuss the results from the quarter. Thanks, Brian, and good morning, everyone. thanks brian and good morning everyone Before we go into further detail on our outstanding Q3 performance, I'd like to praise the entire Casey's team for their hard work serving our guests. before we go into further detail on our outstanding q3 performance i'd like to praise the entire casey's team for their hard work serving our guests The team's high level of execution across the board is reflected in the numbers I'll share with you shortly. the team's high level of execution across the board is reflected in the numbers i'll share with you shortly Before I do that, I wanna highlight the positive impact Casey's is making throughout our geography. before i do that i wanna highlight the positive impact casey's is making throughout our geography Supporting the community is core to who Casey's is, and right now we're activating our Feeding America campaign in partnership with DoorDash. supporting the community is core to who casey's is and right now we're activating our feeding america campaign in partnership with doordash The campaign will benefit over 60 local food banks in our footprint. the campaign will benefit over 60 local food banks in our footprint Thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity. thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity Now let's discuss the results from the quarter. now let's discuss the results from the quarter Diluted earnings per share finished at $3.49 per share, up 50% from the prior year. Net income was $130 million, an increase of 49% from the prior year. The company generated $309 million in EBITDA, 27.5% higher than the prior year. Inside the store, prepared food and dispensed beverages remained strong, supported by a compelling value proposition and continued innovation, such as our two new specialty pizzas, Twisted Pepperoni and Ultimate Meat. Margin expansion was driven primarily by grocery and general merchandise. As a result of our joint business planning process, our guests have early access to Monster's Ultra Red White & Blue Razz flavor, celebrating 250 years of American independence. This product will be sold almost exclusively at Casey's locations up until Memorial Day weekend. Diluted earnings per share finished at $3.49 per share, up 50% from the prior year. diluted earnings per share finished at $3.49 per share up 50% from the prior year Net income was $130 million, an increase of 49% from the prior year. net income was $130 million an increase of 49% from the prior year The company generated $309 million in EBITDA, 27.5% higher than the prior year. the company generated $309 million in ebitda 27.5% higher than the prior year Inside the store, prepared food and dispensed beverages remained strong, supported by a compelling value proposition and continued innovation, such as our two new specialty pizzas, Twisted Pepperoni and Ultimate Meat. inside the store prepared food and dispensed beverages remained strong supported by a compelling value proposition and continued innovation such as our two new specialty pizzas twisted pepperoni and ultimate meat Margin expansion was driven primarily by grocery and general merchandise. margin expansion was driven primarily by grocery and general merchandise As a result of our joint business planning process, our guests have early access to Monster's Ultra Red White & Blue Razz flavor, celebrating 250 years of American independence. as a result of our joint business planning process our guests have early access to monster's ultra red white & blue razz flavor celebrating 250 years of american independence This product will be sold almost exclusively at Casey's locations up until Memorial Day weekend. this product will be sold almost exclusively at casey's locations up until memorial day weekend In the forecourt, our team executed well as same-store gallons grew for the fifth consecutive quarter, while fuel margin exceeded $0.40 per gallon. I'd now like to go over our results and share some of the details in each of the categories. Inside same-store sales were up 4% for the Q3, or 7.9% on a two-year stack basis with an average margin of 42.2%. Same-store prepared food and dispensed beverage led the way as sales were up 4.3% or 9.2% on two-year stack basis with an average margin of 58.3%. Continuing the momentum from the prior quarter, whole pies and hot sandwiches and all-day breakfasts performed well during the Q3. In the forecourt, our team executed well as same-store gallons grew for the fifth consecutive quarter, while fuel margin exceeded $0.40 per gallon. in the forecourt our team executed well as same-store gallons grew for the fifth consecutive quarter while fuel margin exceeded $0.40 per gallon I'd now like to go over our results and share some of the details in each of the categories. i'd now like to go over our results and share some of the details in each of the categories Inside same-store sales were up 4% for the Q3, or 7.9% on a two-year stack basis with an average margin of 42.2%. inside same-store sales were up 4% for the q3 or 7.9% on a two-year stack basis with an average margin of 42.2% Same-store prepared food and dispensed beverage led the way as sales were up 4.3% or 9.2% on two-year stack basis with an average margin of 58.3%. same-store prepared food and dispensed beverage led the way as sales were up 4.3% or 9.2% on two-year stack basis with an average margin of 58.3% Continuing the momentum from the prior quarter, whole pies and hot sandwiches and all-day breakfasts performed well during the Q3. continuing the momentum from the prior quarter whole pies and hot sandwiches and all-day breakfasts performed well during the q3 Same-store grocery and general merchandise sales were up 4% or 7.4% on a two-year stack basis with an average margin of 35.7%. Energy drinks and nicotine alternatives continued to outperform the category with double-digit growth. On the fuel side, same-store gallons sold were up 0.4% with a fuel margin of $0.41 per gallon. The Midcontinent region saw an approximate 4% decline this quarter, according to OPIS fuel gallon sold data, indicating that we continue to take market share. In the Q3, same-store operating expense excluding credit card fees increased 4.6%. Same-store grocery and general merchandise sales were up 4% or 7.4% on a two-year stack basis with an average margin of 35.7%. same-store grocery and general merchandise sales were up 4% or 7.4% on a two-year stack basis with an average margin of 35.7% Energy drinks and nicotine alternatives continued to outperform the category with double-digit growth. energy drinks and nicotine alternatives continued to outperform the category with double-digit growth On the fuel side, same-store gallons sold were up 0.4% with a fuel margin of $0.41 per gallon. on the fuel side same-store gallons sold were up 0.4% with a fuel margin of $0.41 per gallon The Midcontinent region saw an approximate 4% decline this quarter, according to OPIS fuel gallon sold data, indicating that we continue to take market share. the midcontinent region saw an approximate 4% decline this quarter according to opis fuel gallon sold data indicating that we continue to take market share In the Q3, same-store operating expense excluding credit card fees increased 4.6%. in the q3 same-store operating expense excluding credit card fees increased 4.6% Same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction, where scores for the fiscal year are at an all-time high. I'd like to now turn the call over to Steve to discuss the financial results from the Q3. Steve? Same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction, where scores for the fiscal year are at an all-time high. I'd like to now turn the call over to Steve to discuss the financial results from the Q3. same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction where scores for the fiscal year are at an all-time high. i'd like to now turn the call over to steve to discuss the financial results from the q3 Steve? steve

Speaker 15: Thank you, Darren, and good morning. Before I begin, I also wanna share my appreciation for the hard work and the great results from our team members. Total revenue for the quarter was $3.91 billion. That's an increase of $12 million or 0.3% from the prior year, primarily due to higher inside sales as well as higher fuel gallons sold that was nearly offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis. Total inside sales for the quarter were $1.48 billion, an increase of $80 million or 5.7% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $26 million-$423 million, an increase of 6.5%. Thank you, Darren, and good morning. thank you darren and good morning Before I begin, I also wanna share my appreciation for the hard work and the great results from our team members. before i begin i also wanna share my appreciation for the hard work and the great results from our team members Total revenue for the quarter was $3.91 billion. total revenue for the quarter was $3.91 billion That's an increase of $12 million or 0.3% from the prior year, primarily due to higher inside sales as well as higher fuel gallons sold that was nearly offset by a lower retail fuel price. that's an increase of $12 million or 0.3% from the prior year primarily due to higher inside sales as well as higher fuel gallons sold that was nearly offset by a lower retail fuel price Results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis. results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis Total inside sales for the quarter were $1.48 billion, an increase of $80 million or 5.7% from the prior year. total inside sales for the quarter were $1.48 billion an increase of $80 million or 5.7% from the prior year For the quarter, prepared food and dispensed beverage sales rose by $26 million- $423 million, an increase of 6.5%. for the quarter prepared food and dispensed beverage sales rose by $26 million- $423 million an increase of 6.5% In grocery and general merchandise sales increased by $54 million-$1.06 billion, an increase of 5.4%. Retail fuel sales were down $57 million in the quarter as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price. The average retail price during the period was $2.72 a gallon, and that compares to $2.85 a year ago. We define gross profit as revenue less cost of goods sold, excluding depreciation and amortization. Casey's had gross profit of $1.01 billion in the quarter, an increase of $94 million or 10.3% from the prior year. In grocery and general merchandise sales increased by $54 million- $1.06 billion, an increase of 5.4%. in grocery and general merchandise sales increased by $54 million- $1.06 billion an increase of 5.4% Retail fuel sales were down $57 million in the quarter as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price. retail fuel sales were down $57 million in the quarter as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price The average retail price during the period was $2.72 a gallon, and that compares to $2.85 a year ago. the average retail price during the period was $2.72 a gallon and that compares to $2.85 a year ago We define gross profit as revenue less cost of goods sold, excluding depreciation and amortization. we define gross profit as revenue less cost of goods sold excluding depreciation and amortization Casey's had gross profit of $1.01 billion in the quarter, an increase of $94 million or 10.3% from the prior year. casey's had gross profit of $1.01 billion in the quarter an increase of $94 million or 10.3% from the prior year This is driven by both higher inside gross profit of $51 million or 8.9%, as well as higher fuel gross profit of $46.2 million or 15.3%. Inside gross profit margin was 42.2%. That is up 130 basis points from a year ago. Prepared food and dispensed beverage margin was 58.3%, and that's up 50 basis points from prior year. Cheese was $2.05 per pound for the quarter compared to $2.12 per pound last year. That's a decrease of 3% or approximately a 20 basis point benefit to margin. Margin also benefited from improved waste, which was partially offset by promotional activity. The grocery and general merchandise margin was 35.7%. This is driven by both higher inside gross profit of $51 million or 8.9%, as well as higher fuel gross profit of $46.2 million or 15.3%. this is driven by both higher inside gross profit of $51 million or 8.9% as well as higher fuel gross profit of $46.2 million or 15.3% Inside gross profit margin was 42.2%. inside gross profit margin was 42.2% That is up 130 basis points from a year ago. that is up 130 basis points from a year ago Prepared food and dispensed beverage margin was 58.3%, and that's up 50 basis points from prior year. prepared food and dispensed beverage margin was 58.3% and that's up 50 basis points from prior year Cheese was $2.05 per pound for the quarter compared to $2.12 per pound last year. cheese was $2.05 per pound for the quarter compared to $2.12 per pound last year That's a decrease of 3% or approximately a 20 basis point benefit to margin. that's a decrease of 3% or approximately a 20 basis point benefit to margin Margin also benefited from improved waste, which was partially offset by promotional activity. margin also benefited from improved waste which was partially offset by promotional activity The grocery and general merchandise margin was 35.7%. the grocery and general merchandise margin was 35.7% That's an increase of 150 basis points from the prior year. The change was impacted by strong cost of goods management as well as a favorable mix shift within the category. Fuel margin for the quarter was $0.41 per gallon. That's up $0.046 per gallon from prior year. Total operating expenses were up 4.1% or $27.4 million in the quarter. The total operating expense comparison benefited from $13 million in one-time deal and integration costs that we incurred in the prior year related to the closing of the acquisition of Fikes, which amounted to a roughly 2% year-over-year benefit. Approximately 1% of the total operating expense increase is due to unit growth, as we operated 31 more stores than the prior year. That's an increase of 150 basis points from the prior year. that's an increase of 150 basis points from the prior year The change was impacted by strong cost of goods management as well as a favorable mix shift within the category. the change was impacted by strong cost of goods management as well as a favorable mix shift within the category Fuel margin for the quarter was $0.41 per gallon. fuel margin for the quarter was $0.41 per gallon That's up $0.046 per gallon from prior year. that's up $0.046 per gallon from prior year Total operating expenses were up 4.1% or $27.4 million in the quarter. total operating expenses were up 4.1% or $27.4 million in the quarter The total operating expense comparison benefited from $13 million in one-time deal and integration costs that we incurred in the prior year related to the closing of the acquisition of Fikes, which amounted to a roughly 2% year-over-year benefit. the total operating expense comparison benefited from $13 million in one-time deal and integration costs that we incurred in the prior year related to the closing of the acquisition of fikes which amounted to a roughly 2% year-over-year benefit Approximately 1% of the total operating expense increase is due to unit growth, as we operated 31 more stores than the prior year. approximately 1% of the total operating expense increase is due to unit growth as we operated 31 more stores than the prior year Same-store employee expense accounted for approximately 1.5% of the increase due to increases in labor rates, which were partially offset by reduced same-store labor hours. Snow removal due to unfavorable weather in the geography during the quarter contributed to approximately 1% of the increase. Finally, higher variable incentive compensation and charitable contributions contributed to approximately 1.5% of the increase. Net interest expense was $23.4 million in the quarter. That's down $6 million versus the prior year. That's primarily due to paying off debt associated with the Fikes transaction. Depreciation in the quarter was $114.1 million. That's up $8.9 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 24.1%. Same-store employee expense accounted for approximately 1.5% of the increase due to increases in labor rates, which were partially offset by reduced same-store labor hours. same-store employee expense accounted for approximately 1.5% of the increase due to increases in labor rates which were partially offset by reduced same-store labor hours Snow removal due to unfavorable weather in the geography during the quarter contributed to approximately 1% of the increase. snow removal due to unfavorable weather in the geography during the quarter contributed to approximately 1% of the increase Finally, higher variable incentive compensation and charitable contributions contributed to approximately 1.5% of the increase. finally higher variable incentive compensation and charitable contributions contributed to approximately 1.5% of the increase Net interest expense was $23.4 million in the quarter. net interest expense was $23.4 million in the quarter That's down $6 million versus the prior year. that's down $6 million versus the prior year That's primarily due to paying off debt associated with the Fikes transaction. that's primarily due to paying off debt associated with the fikes transaction Depreciation in the quarter was $114.1 million. depreciation in the quarter was $114.1 million That's up $8.9 million versus the prior year, primarily due to operating more stores. that's up $8.9 million versus the prior year primarily due to operating more stores The effective tax rate for the quarter was 24.1%. the effective tax rate for the quarter was 24.1% That compares to the prior year of 19.2%. The increase this year was driven by a one-time benefit in the prior year from revaluing state deferred tax liabilities following the closing of the Fikes transaction. Our financial flexibility remains excellent. On January 31, we had a total available liquidity of $1.4 billion, and our credit facility debt to EBITDA ratio ended the quarter at 1.6x. For the quarter, net cash generated by operating activities of $260 million, less purchases of PP&E of $184 million, resulted in the company generating $76 million in free cash flow, and that compares to generating $91 million in the prior year. At the March meeting, the board of directors voted to maintain the quarterly dividend at $0.57 per share. That compares to the prior year of 19.2%. that compares to the prior year of 19.2% The increase this year was driven by a one-time benefit in the prior year from revaluing state deferred tax liabilities following the closing of the Fikes transaction. the increase this year was driven by a one-time benefit in the prior year from revaluing state deferred tax liabilities following the closing of the fikes transaction Our financial flexibility remains excellent. our financial flexibility remains excellent On January 31, we had a total available liquidity of $1.4 billion, and our credit facility debt to EBITDA ratio ended the quarter at 1.6x . on january 31 we had a total available liquidity of $1.4 billion and our credit facility debt to ebitda ratio ended the quarter at 1.6x For the quarter, net cash generated by operating activities of $260 million, less purchases of PP&E of $184 million, resulted in the company generating $76 million in free cash flow, and that compares to generating $91 million in the prior year. At the March meeting, the board of directors voted to maintain the quarterly dividend at $0.57 per share. for the quarter net cash generated by operating activities of $260 million less purchases of pp&e of $184 million resulted in the company generating $76 million in free cash flow and that compares to generating $91 million in the prior year. at the march meeting the board of directors voted to maintain the quarterly dividend at $0.57 per share Also, during the Q3, we repurchased approximately $76 million in shares. We are updating our previously communicated FY 2026 guidance as follows: FY 2026 EBITDA is now expected to increase 18%-20%. The company now expects inside same-store sales to increase between 3.5%-4.5% and an inside margin of between 41.5%-42.5%. Total operating expenses are expected to increase approximately 10%, and the tax rate is now expected to be between 23.5%-24.5% for the fiscal year. The remainder of our annual guidance remains unchanged. Now, our results for the month of February were as follows: Same-store volumes, both inside and outside the store were strong, and they are reflected in the updated annual guidance. Also, during the Q3, we repurchased approximately $76 million in shares. also during the q3 we repurchased approximately $76 million in shares We are updating our previously communicated FY 2026 guidance as follows: FY 2026 EBITDA is now expected to increase 18%-20%. we are updating our previously communicated fy 2026 guidance as follows fy 2026 ebitda is now expected to increase 18%-20% The company now expects inside same-store sales to increase between 3.5%-4.5% and an inside margin of between 41.5%-42.5%. the company now expects inside same-store sales to increase between 3.5%-4.5% and an inside margin of between 41.5%-42.5% Total operating expenses are expected to increase approximately 10%, and the tax rate is now expected to be between 23.5%-24.5% for the fiscal year. total operating expenses are expected to increase approximately 10% and the tax rate is now expected to be between 23.5%-24.5% for the fiscal year The remainder of our annual guidance remains unchanged. the remainder of our annual guidance remains unchanged Now, our results for the month of February were as follows: Same-store volumes, both inside and outside the store were strong, and they are reflected in the updated annual guidance. now our results for the month of february were as follows same-store volumes both inside and outside the store were strong and they are reflected in the updated annual guidance Fuel CPG was in the low $0.40 per gallon. Current cheese costs are slightly favorable versus the prior year. We expect Q4 operating expense to be up mid-single digits%. That's partially attributable to higher expected variable incentive compensation. I would now like to turn the call over to Darren. Fuel CPG was in the low $0.40 per gallon. fuel cpg was in the low $0.40 per gallon Current cheese costs are slightly favorable versus the prior year. current cheese costs are slightly favorable versus the prior year We expect Q4 operating expense to be up mid-single digits%. we expect q4 operating expense to be up mid-single digits% That's partially attributable to higher expected variable incentive compensation. that's partially attributable to higher expected variable incentive compensation I would now like to turn the call over to Darren. i would now like to turn the call over to darren

Speaker 6: Thanks, Steve. About a year ago, we began a test for chicken wings in our Des Moines market at 225 stores. I'm happy to announce that we've expanded to over 550 stores as of the end of the Q3. Our culinary team has done a great job getting the flavor profile right with five sauces and three dry rubs that have resonated with our guests. Our goal with the wings has been to complement pizza and create an incremental occasion within our prepared foods business. While we do not have financial metrics to share on the wings yet, the platform has been largely incremental as our pizza units in the stores where we sold wings were up high single-digit percentage in the quarter. Within Casey's Rewards, we crossed a major milestone as we now have over 10 million members. Thanks, Steve. thanks steve About a year ago, we began a test for chicken wings in our Des Moines market at 225 stores. about a year ago we began a test for chicken wings in our des moines market at 225 stores I'm happy to announce that we've expanded to over 550 stores as of the end of the Q3. i'm happy to announce that we've expanded to over 550 stores as of the end of the q3 Our culinary team has done a great job getting the flavor profile right with five sauces and three dry rubs that have resonated with our guests. our culinary team has done a great job getting the flavor profile right with five sauces and three dry rubs that have resonated with our guests Our goal with the wings has been to complement pizza and create an incremental occasion within our prepared foods business. our goal with the wings has been to complement pizza and create an incremental occasion within our prepared foods business While we do not have financial metrics to share on the wings yet, the platform has been largely incremental as our pizza units in the stores where we sold wings were up high single-digit percentage in the quarter. while we do not have financial metrics to share on the wings yet the platform has been largely incremental as our pizza units in the stores where we sold wings were up high single-digit percentage in the quarter Within Casey's Rewards, we crossed a major milestone as we now have over 10 million members. within casey's rewards we crossed a major milestone as we now have over 10 million members This is a testament to the whole team, from marketing to store operations and everyone in between, providing real value for our guests to earn and use points throughout the store and at the pump. As we continue to grow, we're excited for more guests to join the Casey's Rewards platform. On the fuel side, our fuel team continues to grow our capabilities. They prioritize business-to-business relationships, growing our self-supply capabilities, and remaining focused on increasing our capacity to haul fuel on Casey's trucks. This, coupled with our strong inside offering, gives us a strategic advantage in the forecourt. Lastly, as we are now in the final quarter of our three-year strategic plan, I'd like to announce that we have set a date, June 24, for our next Investor Day. We'll hold the event in New York City and plan to release our next three-year strategic plan at that event. This is a testament to the whole team, from marketing to store operations and everyone in between, providing real value for our guests to earn and use points throughout the store and at the pump. this is a testament to the whole team from marketing to store operations and everyone in between providing real value for our guests to earn and use points throughout the store and at the pump As we continue to grow, we're excited for more guests to join the Casey's Rewards platform. as we continue to grow we're excited for more guests to join the casey's rewards platform On the fuel side, our fuel team continues to grow our capabilities. on the fuel side our fuel team continues to grow our capabilities They prioritize business-to-business relationships, growing our self-supply capabilities, and remaining focused on increasing our capacity to haul fuel on Casey's trucks. they prioritize business-to-business relationships growing our self-supply capabilities and remaining focused on increasing our capacity to haul fuel on casey's trucks This, coupled with our strong inside offering, gives us a strategic advantage in the forecourt. this coupled with our strong inside offering gives us a strategic advantage in the forecourt Lastly, as we are now in the final quarter of our three-year strategic plan, I'd like to announce that we have set a date, June 24, for our next Investor Day. lastly as we are now in the final quarter of our three-year strategic plan i'd like to announce that we have set a date june 24 for our next investor day We'll hold the event in New York City and plan to release our next three-year strategic plan at that event. we'll hold the event in new york city and plan to release our next three-year strategic plan at that event I'll let you in on a little secret, we plan to serve our famous pizza at the event. We will now take your questions. I'll let you in on a little secret, we plan to serve our famous pizza at the event. i'll let you in on a little secret we plan to serve our famous pizza at the event We will now take your questions. we will now take your questions

Speaker 13: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, or you wish to remove yourself from the queue, please press star one one again. We also ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Corey Tarlowe with Jefferies. Your line is open. Thank you. thank you Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. ladies and gentlemen if you have a question or a comment at this time please press star one one on your telephone If your question has been answered, or you wish to remove yourself from the queue, please press star one one again. if your question has been answered or you wish to remove yourself from the queue please press star one one again We also ask that you limit yourself to one question and one follow-up. we also ask that you limit yourself to one question and one follow-up We'll pause for a moment while we compile our Q&A roster. we'll pause for a moment while we compile our q&a roster Our first question comes from Corey Tarlowe with Jefferies. our first question comes from corey tarlowe with jefferies Your line is open. your line is open

Speaker 5: Great. Thanks, and good morning. Darren, I was wondering if you could comment on the impact of volatility on your business and any comments on the recent events and some of the impacts that might have had on either fuel sales or profitability? Great. great Thanks, and good morning. thanks and good morning Darren, I was wondering if you could comment on the impact of volatility on your business and any comments on the recent events and some of the impacts that might have had on either fuel sales or profitability? darren i was wondering if you could comment on the impact of volatility on your business and any comments on the recent events and some of the impacts that might have had on either fuel sales or profitability

Speaker 6: Yeah, sure, Corey. As you well know, you know, volatility is kind of par for the course in this business, and so these events, like what's happening with Iran right now, happen from time to time. The most recent history we have on that is a few years ago when the Russia-Ukraine war began. You know, typically what happens in a situation like this is the cost runs up on gasoline and is driven by crude oil primarily and then flows through the system. Wholesale prices move up, retail prices move up, but tend to move a little bit more slowly, and so margins get a little bit compressed on the front side of that curve. Yeah, sure, Corey. yeah sure corey As you well know, you know, volatility is kind of par for the course in this business, and so these events, like what's happening with Iran right now, happen from time to time. as you well know you know volatility is kind of par for the course in this business and so these events like what's happening with iran right now happen from time to time The most recent history we have on that is a few years ago when the Russia-Ukraine war began. the most recent history we have on that is a few years ago when the russia-ukraine war began You know, typically what happens in a situation like this is the cost runs up on gasoline and is driven by crude oil primarily and then flows through the system. you know typically what happens in a situation like this is the cost runs up on gasoline and is driven by crude oil primarily and then flows through the system Wholesale prices move up, retail prices move up, but tend to move a little bit more slowly, and so margins get a little bit compressed on the front side of that curve. wholesale prices move up retail prices move up but tend to move a little bit more slowly and so margins get a little bit compressed on the front side of that curve When there's an ultimate inflection point and the costs start to come down, retail prices will come down as well, but also tend to come down more slowly and the margin expands. Over the course of the cycle, it historically has ended up being a net positive from a fuel margin standpoint. But it is a little bit of tightening on the front end, a little bit of expansion on the back end. When we look at the history from the most recent event with the Ukraine war, that's exactly what played out. Margins did get a little bit compressed, but not bad. I mean, the quarter, our quarter in 2022, where we had the first initial shock from the Ukraine war, we printed a $0.36 fuel margin that quarter. When there's an ultimate inflection point and the costs start to come down, retail prices will come down as well, but also tend to come down more slowly and the margin expands. when there's an ultimate inflection point and the costs start to come down retail prices will come down as well but also tend to come down more slowly and the margin expands Over the course of the cycle, it historically has ended up being a net positive from a fuel margin standpoint. over the course of the cycle it historically has ended up being a net positive from a fuel margin standpoint But it is a little bit of tightening on the front end, a little bit of expansion on the back end. but it is a little bit of tightening on the front end a little bit of expansion on the back end When we look at the history from the most recent event with the Ukraine war, that's exactly what played out. when we look at the history from the most recent event with the ukraine war that's exactly what played out Margins did get a little bit compressed, but not bad. margins did get a little bit compressed but not bad I mean, the quarter, our quarter in 2022, where we had the first initial shock from the Ukraine war, we printed a $0.36 fuel margin that quarter. i mean the quarter, our quarter in 2022 where we had the first initial shock from the ukraine war we printed a $0.36 fuel margin that quarter The subsequent three quarters were all over $0.40 a gallon. Again, there'll be a little bit of tightening, but this is not a huge deal from a margin perspective. On the volume side of things, with absolute retail prices, we really don't start to see any level of demand destruction until we're approaching $5 a gallon at retail. We, as we sit here today, we're right around $3 a gallon in our footprint. We have quite a ways to go before we would be concerned from a volume standpoint. The subsequent three quarters were all over $0.40 a gallon. the subsequent three quarters were all over $0.40 a gallon Again, there'll be a little bit of tightening, but this is not a huge deal from a margin perspective. again there'll be a little bit of tightening but this is not a huge deal from a margin perspective On the volume side of things, with absolute retail prices, we really don't start to see any level of demand destruction until we're approaching $5 a gallon at retail. on the volume side of things with absolute retail prices we really don't start to see any level of demand destruction until we're approaching $5 a gallon at retail We, as we sit here today, we're right around $3 a gallon in our footprint. we as we sit here today we're right around $3 a gallon in our footprint We have quite a ways to go before we would be concerned from a volume standpoint. we have quite a ways to go before we would be concerned from a volume standpoint

Speaker 5: That's very helpful. Thank you so much. Steve, I just wanted to follow up. As you think about the inside same-store sales up 3.5%-4.5%, some of your largest vendors have called out that they're investing in price. How do you think about pricing impacts within the full-year guide? And what do you expect to have from a pricing perspective? Because I do believe you also mentioned increased promotions. Thanks so much. That's very helpful. that's very helpful Thank you so much. thank you so much Steve, I just wanted to follow up. steve i just wanted to follow up As you think about the inside same-store sales up 3.5%-4.5%, some of your largest vendors have called out that they're investing in price. as you think about the inside same-store sales up 3.5%-4.5% some of your largest vendors have called out that they're investing in price How do you think about pricing impacts within the full-year guide? how do you think about pricing impacts within the full-year guide And what do you expect to have from a pricing perspective? and what do you expect to have from a pricing perspective Because I do believe you also mentioned increased promotions. because i do believe you also mentioned increased promotions Thanks so much. thanks so much

Speaker 15: Yeah. Corey, hey, good morning. Thank you. You know, we don't lean heavily into price as a general matter, as a constituent part of our in-store sales bridge. As you know, we had a little under 3% pricing reflected in our current quarter, and that's primarily on the nicotine category, where we tend to just pass through the manufacturer price increases that we have. I mean, the strength of our in-store offer is very much, especially in prepared food, predicated on the value proposition that we've worked very hard to maintain. We took almost no price. I think actually with the way commodities worked in the quarter, we had negative pricing net within the prepared food category. Yeah. yeah Corey, hey, good morning. corey hey good morning Thank you. thank you You know, we don't lean heavily into price as a general matter, as a constituent part of our in-store sales bridge. you know we don't lean heavily into price as a general matter as a constituent part of our in-store sales bridge As you know, we had a little under 3% pricing reflected in our current quarter, and that's primarily on the nicotine category, where we tend to just pass through the manufacturer price increases that we have. as you know we had a little under 3% pricing reflected in our current quarter and that's primarily on the nicotine category where we tend to just pass through the manufacturer price increases that we have I mean, the strength of our in-store offer is very much, especially in prepared food, predicated on the value proposition that we've worked very hard to maintain. i mean the strength of our in-store offer is very much especially in prepared food predicated on the value proposition that we've worked very hard to maintain We took almost no price. we took almost no price I think actually with the way commodities worked in the quarter, we had negative pricing net within the prepared food category. i think actually with the way commodities worked in the quarter we had negative pricing net within the prepared food category As our QSR competitive set broadly has continued to take price in the last couple of years, you know, that's really helped the velocity of units in that prepared food category. You know, we will continue to run that play. We like to be a value proposition on that side. I would not expect us to lean into price heavily going forward in prepared food. We always have that as an insurance policy if we would need to, but we simply have not needed to do that. On the grocery side, you know, we do use pricing to preserve margin. That's a contractual business for us annually. We will continue to take price in that category, commensurate with the inflation we take from our partners. As our QSR competitive set broadly has continued to take price in the last couple of years, you know, that's really helped the velocity of units in that prepared food category. as our qsr competitive set broadly has continued to take price in the last couple of years you know that's really helped the velocity of units in that prepared food category You know, we will continue to run that play. you know we will continue to run that play We like to be a value proposition on that side. we like to be a value proposition on that side I would not expect us to lean into price heavily going forward in prepared food. i would not expect us to lean into price heavily going forward in prepared food We always have that as an insurance policy if we would need to, but we simply have not needed to do that. we always have that as an insurance policy if we would need to but we simply have not needed to do that On the grocery side, you know, we do use pricing to preserve margin. on the grocery side you know we do use pricing to preserve margin That's a contractual business for us annually. that's a contractual business for us annually We will continue to take price in that category, commensurate with the inflation we take from our partners. we will continue to take price in that category commensurate with the inflation we take from our partners The pricing we do receive, to your point on promotion in the grocery category especially, is often largely or completely offset by promotional support from our vendor partners. The pricing we do receive, to your point on promotion in the grocery category especially, is often largely or completely offset by promotional support from our vendor partners. the pricing we do receive to your point on promotion in the grocery category especially is often largely or completely offset by promotional support from our vendor partners

Speaker 13: Thank you. One moment for our next question. Our next question comes from Mark Carden with UBS. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Mark Carden with UBS. our next question comes from mark carden with ubs Your line is open. your line is open

Speaker 11: Morning. Thanks so much for taking the question. To start, I guess, this particular sales performance in grocery and gen merch, could you provide a little more color on what drove the strength in non-alcoholic beverages? I would assume that Monster is more of a benefit next quarter, but if you saw a tailwind there, definitely let us know. Then do you think there was a stocking up benefit ahead of the severe winter weather that helped the segment? Thank you. Morning. morning Thanks so much for taking the question. thanks so much for taking the question To start, I guess, this particular sales performance in grocery and gen merch, could you provide a little more color on what drove the strength in non-alcoholic beverages? I would assume that Monster is more of a benefit next quarter, but if you saw a tailwind there, definitely let us know. to start i guess this particular sales performance in grocery and gen merch could you provide a little more color on what drove the strength in non-alcoholic beverages? i would assume that monster is more of a benefit next quarter but if you saw a tailwind there definitely let us know Then do you think there was a stocking up benefit ahead of the severe winter weather that helped the segment? then do you think there was a stocking up benefit ahead of the severe winter weather that helped the segment Thank you. thank you

Speaker 6: Yeah, Mark, it's Darren. On the non-alc beverages, it was driven primarily by energy. Overall energy was up about 14% in the quarter. There's also we had strong growth in our flavor enhanced waters. Both of those two categories really contributed to the non-alc beverage performance. In terms of stocking up, I don't think we saw any real change in behavior from that perspective, you know, during the quarter. I'm not sure what the impetus would have been during the Q3 to, you know, for that to happen. No, we didn't see any of that behavior in the quarter. Yeah, Mark, it's Darren. yeah mark it's darren On the non-alc beverages, it was driven primarily by energy. on the non-alc beverages it was driven primarily by energy Overall energy was up about 14% in the quarter. overall energy was up about 14% in the quarter There's also we had strong growth in our flavor enhanced waters. there's also we had strong growth in our flavor enhanced waters Both of those two categories really contributed to the non-alc beverage performance. both of those two categories really contributed to the non-alc beverage performance In terms of stocking up, I don't think we saw any real change in behavior from that perspective, you know, during the quarter. in terms of stocking up i don't think we saw any real change in behavior from that perspective you know during the quarter I'm not sure what the impetus would have been during the Q3 to, you know, for that to happen. i'm not sure what the impetus would have been during the q3 to you know for that to happen No, we didn't see any of that behavior in the quarter. no we didn't see any of that behavior in the quarter

Speaker 13: Thank you. One moment for our next question. Our next question comes from Chuck Grom with Gordon Haskett. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Chuck Grom with Gordon Haskett. our next question comes from chuck grom with gordon haskett Your line is open. your line is open

Speaker 4: Hey, thanks very much. Good morning. Great quarter. You noted that quarter to date sales are strong, yet your implied Q4 guide has a pretty big decel on the stack. I was just wondering if we could reconcile that and maybe just double click on the overall health of your customer based across income cohorts, any changes you've seen recently. Hey, thanks very much. hey thanks very much Good morning. good morning Great quarter. great quarter You noted that quarter to date sales are strong, yet your implied Q4 guide has a pretty big decel on the stack. you noted that quarter to date sales are strong yet your implied q4 guide has a pretty big decel on the stack I was just wondering if we could reconcile that and maybe just double click on the overall health of your customer based across income cohorts, any changes you've seen recently. i was just wondering if we could reconcile that and maybe just double click on the overall health of your customer based across income cohorts any changes you've seen recently

Speaker 6: Yeah, maybe, Chuck, I'll talk about the health of the customer. I'll let Steve talk about the guidance in that bridge. You know, from a consumer standpoint, health of the customer, we're still seeing customers shop at our stores across all income cohorts. For sure the upper income cohorts are stronger, but we're growing business across the low income cohorts as well. What we're seeing in terms of behavior difference, I'd say the middle and upper income cohorts are performing about the same. They're still shopping at our stores. They're shopping across all categories. Very little change in their behavior. The lower income cohorts are still growing with us. I think that's an important thing to call out. Yeah, maybe, Chuck, I'll talk about the health of the customer. yeah maybe chuck i'll talk about the health of the customer I'll let Steve talk about the guidance in that bridge. i'll let steve talk about the guidance in that bridge You know, from a consumer standpoint, health of the customer, we're still seeing customers shop at our stores across all income cohorts. you know from a consumer standpoint health of the customer we're still seeing customers shop at our stores across all income cohorts For sure the upper income cohorts are stronger, but we're growing business across the low income cohorts as well. for sure the upper income cohorts are stronger but we're growing business across the low income cohorts as well What we're seeing in terms of behavior difference, I'd say the middle and upper income cohorts are performing about the same. what we're seeing in terms of behavior difference i'd say the middle and upper income cohorts are performing about the same They're still shopping at our stores. they're still shopping at our stores They're shopping across all categories. they're shopping across all categories Very little change in their behavior. very little change in their behavior The lower income cohorts are still growing with us. the lower income cohorts are still growing with us I think that's an important thing to call out. i think that's an important thing to call out They are growing at a slower rate than the other cohorts, except in prepared foods, where they're actually growing as strong, if not stronger than the higher income cohorts. I think that's really a reflection of the value proposition that our prepared foods category offers relative to QSRs and other of our national brand pizza competitors. They're also leaning a little bit heavier on the dispense beverage side within prepared foods because that typically represents a better value than the bottle and can beverages on the grocery and general merchandise side. On grocery and general merchandise, lower income consumers are buying at a little bit slower rate, still growing again. They are growing at a slower rate than the other cohorts, except in prepared foods, where they're actually growing as strong, if not stronger than the higher income cohorts. they are growing at a slower rate than the other cohorts except in prepared foods where they're actually growing as strong if not stronger than the higher income cohorts I think that's really a reflection of the value proposition that our prepared foods category offers relative to QSRs and other of our national brand pizza competitors. i think that's really a reflection of the value proposition that our prepared foods category offers relative to qsrs and other of our national brand pizza competitors They're also leaning a little bit heavier on the dispense beverage side within prepared foods because that typically represents a better value than the bottle and can beverages on the grocery and general merchandise side. they're also leaning a little bit heavier on the dispense beverage side within prepared foods because that typically represents a better value than the bottle and can beverages on the grocery and general merchandise side On grocery and general merchandise, lower income consumers are buying at a little bit slower rate, still growing again. on grocery and general merchandise lower income consumers are buying at a little bit slower rate still growing again That kinda holds together logically as they may have opportunities to go to a grocery store and buy in bulk at a lower unit cost than what we would be able to provide. That's really what we're seeing on the consumer side. I still feel very good about the overall health of consumer and their shopping habits. Steve, you wanna talk a little bit about the guidance? That kinda holds together logically as they may have opportunities to go to a grocery store and buy in bulk at a lower unit cost than what we would be able to provide. that kinda holds together logically as they may have opportunities to go to a grocery store and buy in bulk at a lower unit cost than what we would be able to provide That's really what we're seeing on the consumer side. that's really what we're seeing on the consumer side I still feel very good about the overall health of consumer and their shopping habits. i still feel very good about the overall health of consumer and their shopping habits Steve, you wanna talk a little bit about the guidance? steve you wanna talk a little bit about the guidance

Speaker 15: Yeah, sure. Good morning, Chuck. We, you know, we normally don't give quarterly specific numbers for much at all because we're probably not that precise. Coming into the Q4, we're trying to serve up some squeeze math for people as best we can. I think on the inside number, I think year to date, we're about 3.8% or so on the inside number. You know, the inside range, the midpoint of that range is right around where we are, maybe a touch higher. Ultimately, I think that squeeze math would indicate that, you know, Q4 should look pretty close to what the year to date inside experience has been. Yeah, sure. yeah sure Good morning, Chuck. good morning chuck We, you know, we normally don't give quarterly specific numbers for much at all because we're probably not that precise. we you know we normally don't give quarterly specific numbers for much at all because we're probably not that precise Coming into the Q4, we're trying to serve up some squeeze math for people as best we can. coming into the q4 we're trying to serve up some squeeze math for people as best we can I think on the inside number, I think year to date, we're about 3.8% or so on the inside number. i think on the inside number i think year to date we're about 3.8% or so on the inside number You know, the inside range, the midpoint of that range is right around where we are, maybe a touch higher. you know the inside range the midpoint of that range is right around where we are maybe a touch higher Ultimately, I think that squeeze math would indicate that, you know, Q4 should look pretty close to what the year to date inside experience has been. ultimately i think that squeeze math would indicate that you know q4 should look pretty close to what the year to date inside experience has been We're not expecting it to be significantly different. We're not expecting it to be significantly different. we're not expecting it to be significantly different

Speaker 4: Okay, great. Thanks very much. Then just on the grocery margins up really, really healthy here, right up 150 basis points. Talked about cost of goods management and mix. Maybe dive into the cost of goods management, where you are with your vendors on some of that journey versus how much of it was mixed, just so we can think about the complexion, you know, in the next few quarters. Thanks. Okay, great. okay great Thanks very much. thanks very much Then just on the grocery margins up really, really healthy here, right up 150 basis points. then just on the grocery margins up really really healthy here right up 150 basis points Talked about cost of goods management and mix. talked about cost of goods management and mix Maybe dive into the cost of goods management, where you are with your vendors on some of that journey versus how much of it was mixed, just so we can think about the complexion, you know, in the next few quarters. maybe dive into the cost of goods management where you are with your vendors on some of that journey versus how much of it was mixed just so we can think about the complexion you know in the next few quarters Thanks. thanks

Speaker 6: Yeah. This is Darren. You know, on the cost of goods management side, I think it's really just a reflection of our joint business planning process. Our merchants have done a really good job of partnering with our supplier partners in creating plans that allow us to manage that cost of goods a little bit more effectively, at the same time, grow the business for all of us. I'd say that's really what you see on the cost of goods management side. The mix is really a couple of different things. The fastest growing subcategory within grocery and general merchandise is non-alcoholic beverages, and that also carries the highest margin rate and adds margin expansion in the quarter. That's favorably mixing. Yeah. yeah This is Darren. this is darren You know, on the cost of goods management side, I think it's really just a reflection of our joint business planning process. you know on the cost of goods management side i think it's really just a reflection of our joint business planning process Our merchants have done a really good job of partnering with our supplier partners in creating plans that allow us to manage that cost of goods a little bit more effectively, at the same time, grow the business for all of us. our merchants have done a really good job of partnering with our supplier partners in creating plans that allow us to manage that cost of goods a little bit more effectively at the same time grow the business for all of us I'd say that's really what you see on the cost of goods management side. i'd say that's really what you see on the cost of goods management side The mix is really a couple of different things. the mix is really a couple of different things The fastest growing subcategory within grocery and general merchandise is non-alcoholic beverages, and that also carries the highest margin rate and adds margin expansion in the quarter. the fastest growing subcategory within grocery and general merchandise is non-alcoholic beverages and that also carries the highest margin rate and adds margin expansion in the quarter That's favorably mixing. that's favorably mixing The other thing I would call out is the nicotine category, and that's a combination of a couple of things. You know, the combustible cigarette mix has gone down, and that's the lowest margin part of that subcategory. The nicotine alternatives, so think the pouch business, is up 31% in the quarter. Vapor was up another 12% as enforcement actions against illicit vape have improved. Those both carry more than double the margin rate of combustible cigarettes. When you throw all that into the mix, that really does favorably impact the grocery and general merchandise category margin rates. The other thing I would call out is the nicotine category, and that's a combination of a couple of things. the other thing i would call out is the nicotine category and that's a combination of a couple of things You know, the combustible cigarette mix has gone down, and that's the lowest margin part of that subcategory. you know the combustible cigarette mix has gone down and that's the lowest margin part of that subcategory The nicotine alternatives, so think the pouch business, is up 31% in the quarter. the nicotine alternatives so think the pouch business is up 31% in the quarter Vapor was up another 12% as enforcement actions against illicit vape have improved. vapor was up another 12% as enforcement actions against illicit vape have improved Those both carry more than double the margin rate of combustible cigarettes. those both carry more than double the margin rate of combustible cigarettes When you throw all that into the mix, that really does favorably impact the grocery and general merchandise category margin rates. when you throw all that into the mix that really does favorably impact the grocery and general merchandise category margin rates

Speaker 13: Thank you. One moment for our next question. Our next question comes from Kelly Bania with BMO Capital Markets. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Kelly Bania with BMO Capital Markets. our next question comes from kelly bania with bmo capital markets Your line is open. your line is open

Speaker 10: Hi. Good morning. Thanks for taking our questions. Darren, you, I think, made the comment that you typically don't see demand destruction until the retail price of fuel hits closer to $5 per gallon, and obviously we're still far away from that. I was just curious if you have seen any, you know, impact to consumer behavior, traffic, ticket, inside sales, just in the past few weeks, and if you are making any contingency plans from a promotional perspective, you know, if this fuel margin environment remains elevated or continues to increase. Hi. hi Good morning. good morning Thanks for taking our questions. thanks for taking our questions Darren, you, I think, made the comment that you typically don't see demand destruction until the retail price of fuel hits closer to $5 per gallon, and obviously we're still far away from that. darren you i think made the comment that you typically don't see demand destruction until the retail price of fuel hits closer to $5 per gallon and obviously we're still far away from that I was just curious if you have seen any, you know, impact to consumer behavior, traffic, ticket, inside sales, just in the past few weeks, and if you are making any contingency plans from a promotional perspective, you know, if this fuel margin environment remains elevated or continues to increase. i was just curious if you have seen any you know impact to consumer behavior traffic ticket inside sales just in the past few weeks and if you are making any contingency plans from a promotional perspective you know if this fuel margin environment remains elevated or continues to increase

Speaker 6: Yeah, Kelly, we've seen no signs at this stage of the cycle in terms of any change in guest behavior. You know, certainly people don't like seeing gas prices go up. I'll again put this in perspective. Right now, after this last week or so's events, you know, retail's up, give or take, on average about $0.30 a gallon. At that $0.30 a gallon, now we're in the low $3-a-gallon range on average. That's still $0.30 below the starting point when the Ukraine war began. You know, fuel prices had run down quite a bit over the last year or so we were actually sitting in a really low position. Yeah, Kelly, we've seen no signs at this stage of the cycle in terms of any change in guest behavior. yeah kelly we've seen no signs at this stage of the cycle in terms of any change in guest behavior You know, certainly people don't like seeing gas prices go up. you know certainly people don't like seeing gas prices go up I'll again put this in perspective. i'll again put this in perspective Right now, after this last week or so's events, you know, retail's up, give or take, on average about $0.30 a gallon. right now after this last week or so's events you know retail's up give or take on average about $0.30 a gallon At that $0.30 a gallon, now we're in the low $3-a-gallon range on average. at that $0.30 a gallon now we're in the low $3-a-gallon range on average That's still $0.30 below the starting point when the Ukraine war began. that's still $0.30 below the starting point when the ukraine war began You know, fuel prices had run down quite a bit over the last year or so we were actually sitting in a really low position. you know fuel prices had run down quite a bit over the last year or so we were actually sitting in a really low position The fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history. Again, we're still not seeing any sort of behavior change. In the event that we start to get up into that, you know, close to $5-a-gallon range, we certainly will do some things to encourage demand. But as it stands right now, our traffic to our stores has been positive, and that's a great credit to our merchandising, our food team, our store ops teams who are running great stores every day to get people to come in. That's worked across the board. That value proposition relative to other alternatives is still very strong. The fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history. the fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history Again, we're still not seeing any sort of behavior change. again we're still not seeing any sort of behavior change In the event that we start to get up into that, you know, close to $5-a-gallon range, we certainly will do some things to encourage demand. in the event that we start to get up into that you know close to $5-a-gallon range we certainly will do some things to encourage demand But as it stands right now, our traffic to our stores has been positive, and that's a great credit to our merchandising, our food team, our store ops teams who are running great stores every day to get people to come in. but as it stands right now our traffic to our stores has been positive and that's a great credit to our merchandising our food team our store ops teams who are running great stores every day to get people to come in That's worked across the board. that's worked across the board That value proposition relative to other alternatives is still very strong. that value proposition relative to other alternatives is still very strong In a higher price environment for fuel, I think more consumers will be more discerning about where they spend their money, and they'll see the value proposition that we have every day in our stores. I think that ultimately accrues to our benefit. In a higher price environment for fuel, I think more consumers will be more discerning about where they spend their money, and they'll see the value proposition that we have every day in our stores. in a higher price environment for fuel i think more consumers will be more discerning about where they spend their money and they'll see the value proposition that we have every day in our stores I think that ultimately accrues to our benefit. i think that ultimately accrues to our benefit

Speaker 10: Thank you. Just wanted to also ask about the wings. Sounds like that's now at 550 stores. Can you talk a little bit more about the timing and cadence of additional rollout of that program to more stores? And also, can you tie in just how you think about the pricing of that item? I think what we're seeing is $7.99 for eight pieces. Just curious how you think about the value proposition of that category to, say, pizza or hot sandwiches or some of your other core prepared food offerings. Thank you. thank you Just wanted to also ask about the wings. just wanted to also ask about the wings Sounds like that's now at 550 stores. sounds like that's now at 550 stores Can you talk a little bit more about the timing and cadence of additional rollout of that program to more stores? can you talk a little bit more about the timing and cadence of additional rollout of that program to more stores And also, can you tie in just how you think about the pricing of that item? and also can you tie in just how you think about the pricing of that item I think what we're seeing is $7.99 for eight pieces. i think what we're seeing is $7.99 for eight pieces Just curious how you think about the value proposition of that category to, say, pizza or hot sandwiches or some of your other core prepared food offerings. just curious how you think about the value proposition of that category to say pizza or hot sandwiches or some of your other core prepared food offerings

Speaker 6: Yeah. With respect to timing, we're going to have a more measured rollout over time. We'll do that essentially by distribution center to make sure the supply chain is running efficiently. Keep in mind, this just isn't selling a new product. We have equipment that we need to install in stores to enable that process. We have to do a lot of training. I would say over the next two years would be the case where we would roll out the rest of the chain. With respect to pricing, we intend to approach the pricing similar to how we've done with pizza in terms of keeping a gap relative to any sort of national brand competitor. Yeah. yeah With respect to timing, we're going to have a more measured rollout over time. with respect to timing we're going to have a more measured rollout over time We'll do that essentially by distribution center to make sure the supply chain is running efficiently. we'll do that essentially by distribution center to make sure the supply chain is running efficiently Keep in mind, this just isn't selling a new product. keep in mind this just isn't selling a new product We have equipment that we need to install in stores to enable that process. we have equipment that we need to install in stores to enable that process We have to do a lot of training. we have to do a lot of training I would say over the next two years would be the case where we would roll out the rest of the chain. i would say over the next two years would be the case where we would roll out the rest of the chain With respect to pricing, we intend to approach the pricing similar to how we've done with pizza in terms of keeping a gap relative to any sort of national brand competitor. with respect to pricing we intend to approach the pricing similar to how we've done with pizza in terms of keeping a gap relative to any sort of national brand competitor We encourage trial and adoption and continue to grow the unit velocity on that business. You know, our ultimate goal with this platform is really to create an incremental occasion in addition to pizza. It certainly can be an add-on to the pizza, but it also has the quality and value proposition to stand alone on its own as an incremental occasion. The early indications are that we are selling the product to wing-only customers, and we're also seeing that when people are buying our wings, they are increasing their frequency of visit as a result of that. We feel very good about the progress so far. We still have a long way to go, but things are working well so far. We encourage trial and adoption and continue to grow the unit velocity on that business. we encourage trial and adoption and continue to grow the unit velocity on that business You know, our ultimate goal with this platform is really to create an incremental occasion in addition to pizza. you know our ultimate goal with this platform is really to create an incremental occasion in addition to pizza It certainly can be an add-on to the pizza, but it also has the quality and value proposition to stand alone on its own as an incremental occasion. it certainly can be an add-on to the pizza but it also has the quality and value proposition to stand alone on its own as an incremental occasion The early indications are that we are selling the product to wing-only customers, and we're also seeing that when people are buying our wings, they are increasing their frequency of visit as a result of that. the early indications are that we are selling the product to wing-only customers and we're also seeing that when people are buying our wings they are increasing their frequency of visit as a result of that We feel very good about the progress so far. we feel very good about the progress so far We still have a long way to go, but things are working well so far. we still have a long way to go but things are working well so far

Speaker 13: Thank you. One moment for our next question. Our next question comes from Michael Montani with Evercore ISI. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Michael Montani with Evercore ISI. our next question comes from michael montani with evercore isi Your line is open. your line is open

Speaker 12: Yes. Hi, good morning. Thanks for taking the question and congrats on the results. Just wanted to ask if I could, I guess on two areas. One is, you know, if you could discuss a little bit, Steve, any synergies that you realized kinda in the quarter, and then what a realistic full year outlook is, for synergy from CEFCO. Just to follow up on the wings, you know, how should we think about potential CapEx investment, you know, if it's a light touch versus a heavier touch? How do you see that kind of split out over time? Similarly, on the OpEx side, you know, do you need to add kind of a full-time equivalent worker to be able to, you know, deliver the wing value prop? Yes. yes Hi, good morning. hi good morning Thanks for taking the question and congrats on the results. thanks for taking the question and congrats on the results Just wanted to ask if I could, I guess on two areas. just wanted to ask if i could i guess on two areas One is, you know, if you could discuss a little bit, Steve, any synergies that you realized kinda in the quarter, and then what a realistic full year outlook is, for synergy from CEFCO. one is you know if you could discuss a little bit steve any synergies that you realized kinda in the quarter and then what a realistic full year outlook is for synergy from cefco Just to follow up on the wings, you know, how should we think about potential CapEx investment, you know, if it's a light touch versus a heavier touch? just to follow up on the wings you know how should we think about potential capex investment you know if it's a light touch versus a heavier touch How do you see that kind of split out over time? how do you see that kind of split out over time Similarly, on the OpEx side, you know, do you need to add kind of a full-time equivalent worker to be able to, you know, deliver the wing value prop? similarly on the opex side you know do you need to add kind of a full-time equivalent worker to be able to you know deliver the wing value prop

Speaker 15: Yeah. Hi, good morning, Mike. This is Steve. I'll maybe start on the synergy one, turn it to Darren for the wings. You know, we are right where we expected to be as it relates to the integration of Fikes and CEFCO is probably the overarching comment I would make. You know, if you go back to the synergy capture that we expected and talked about at the time of the closing the deal, so a year ago this quarter, the early innings of those synergies were gonna be some G&A capture, which were right where we thought we'd be probably a little bit ahead of that. Certainly some fuel benefit capture, both from converging the supply agreements of the two entities together, which we just completed actually this quarter. Yeah. yeah Hi, good morning, Mike. hi good morning mike This is Steve. this is steve I'll maybe start on the synergy one, turn it to Darren for the wings. i'll maybe start on the synergy one turn it to darren for the wings You know, we are right where we expected to be as it relates to the integration of Fikes and CEFCO is probably the overarching comment I would make. you know we are right where we expected to be as it relates to the integration of fikes and cefco is probably the overarching comment i would make You know, if you go back to the synergy capture that we expected and talked about at the time of the closing the deal, so a year ago this quarter, the early innings of those synergies were gonna be some G&A capture, which were right where we thought we'd be probably a little bit ahead of that. you know if you go back to the synergy capture that we expected and talked about at the time of the closing the deal so a year ago this quarter the early innings of those synergies were gonna be some g&a capture which were right where we thought we'd be probably a little bit ahead of that Certainly some fuel benefit capture, both from converging the supply agreements of the two entities together, which we just completed actually this quarter. certainly some fuel benefit capture both from converging the supply agreements of the two entities together which we just completed actually this quarter Everybody is now on the same kinda timeline with the same volume benefit in those negotiations, as well as the pricing which we took over really on day one and centralized that pricing. Most of those synergies have all been realized. We have started to take some synergies inside the store slowly as we put some of our product into Everybody is now on the same kinda timeline with the same volume benefit in those negotiations, as well as the pricing which we took over really on day one and centralized that pricing. everybody is now on the same kinda timeline with the same volume benefit in those negotiations as well as the pricing which we took over really on day one and centralized that pricing Most of those synergies have all been realized. most of those synergies have all been realized We have started to take some synergies inside the store slowly as we put some of our product into we have started to take some synergies inside the store slowly as we put some of our product into Some of the proof of concept stores that we converted a while ago, and we're also now in the process of converting another 50 stores that had previously had kitchens in them. We'll have 50 more converted by the end of the fiscal year. Those stores will also start to show prepared food synergies, which is the bulk. About 40% of the total synergies we expected to capture would ultimately be prepared food because we're putting pizza in. That will follow the conversion schedule. Long story short, you know, Fikes for sure is, as we had communicated at the beginning of the year, will be EBITDA accretive for us, this year comfortably so. The synergy capture is right where we expect. Some of the proof of concept stores that we converted a while ago, and we're also now in the process of converting another 50 stores that had previously had kitchens in them. some of the proof of concept stores that we converted a while ago and we're also now in the process of converting another 50 stores that had previously had kitchens in them We'll have 50 more converted by the end of the fiscal year. we'll have 50 more converted by the end of the fiscal year Those stores will also start to show prepared food synergies, which is the bulk. those stores will also start to show prepared food synergies which is the bulk About 40% of the total synergies we expected to capture would ultimately be prepared food because we're putting pizza in. about 40% of the total synergies we expected to capture would ultimately be prepared food because we're putting pizza in That will follow the conversion schedule. that will follow the conversion schedule Long story short, you know, Fikes for sure is, as we had communicated at the beginning of the year, will be EBITDA accretive for us, this year comfortably so. long story short you know fikes for sure is as we had communicated at the beginning of the year will be ebitda accretive for us this year comfortably so The synergy capture is right where we expect. the synergy capture is right where we expect The bulk of the prepared food synergy capture will really start in the H1 of next fiscal year, and we'll ramp that up throughout the course of the year. The bulk of the prepared food synergy capture will really start in the H1 of next fiscal year, and we'll ramp that up throughout the course of the year. the bulk of the prepared food synergy capture will really start in the h1 of next fiscal year and we'll ramp that up throughout the course of the year

Speaker 6: Yeah, Michael, I'll go ahead and take the wings. You know, from a CapEx perspective, it's a pretty light lift. Really, it's just putting a commercial fryer into the stores. We have electrical, we have vent hoods already. There's a little bit of smallwares that are required to produce the product, but that's it. It's just we got, you know, thousands of stores we have to install them into, so it takes a little time. From a CapEx perspective, it's not a significant investment. On the labor side, it's not as. It's a little more scientific in terms of how we add the labor. It's not just adding an FTE. Yeah, Michael, I'll go ahead and take the wings. yeah michael i'll go ahead and take the wings You know, from a CapEx perspective, it's a pretty light lift. you know from a capex perspective it's a pretty light lift Really, it's just putting a commercial fryer into the stores. really it's just putting a commercial fryer into the stores We have electrical, we have vent hoods already. we have electrical we have vent hoods already There's a little bit of smallwares that are required to produce the product, but that's it. there's a little bit of smallwares that are required to produce the product but that's it It's just we got, you know, thousands of stores we have to install them into, so it takes a little time. it's just we got you know thousands of stores we have to install them into so it takes a little time From a CapEx perspective, it's not a significant investment. from a capex perspective it's not a significant investment On the labor side, it's not as. on the labor side it's not as It's a little more scientific in terms of how we add the labor. it's a little more scientific in terms of how we add the labor It's not just adding an FTE. it's not just adding an fte We have a pretty robust labor modeling process that we go through with time motion studies to understand what it actually takes to produce any product in our kitchens. Then the team forecasts the demand in those stores, and based on that, they'll get an incremental labor allocation to the stores. If the volume were high enough, it may warrant an incremental FTE. I would say for the most part, at this stage, it's warranting incremental hours, but not necessarily an FTE at this stage of the game. Every store has their own specific allocation based on that math, and then that ebbs and flows as the volume, the actual volume experience goes forward. That's how we approach the labor. We have a pretty robust labor modeling process that we go through with time motion studies to understand what it actually takes to produce any product in our kitchens. we have a pretty robust labor modeling process that we go through with time motion studies to understand what it actually takes to produce any product in our kitchens Then the team forecasts the demand in those stores, and based on that, they'll get an incremental labor allocation to the stores. then the team forecasts the demand in those stores and based on that they'll get an incremental labor allocation to the stores If the volume were high enough, it may warrant an incremental FTE. if the volume were high enough it may warrant an incremental fte I would say for the most part, at this stage, it's warranting incremental hours, but not necessarily an FTE at this stage of the game. i would say for the most part at this stage it's warranting incremental hours but not necessarily an fte at this stage of the game Every store has their own specific allocation based on that math, and then that ebbs and flows as the volume, the actual volume experience goes forward. every store has their own specific allocation based on that math and then that ebbs and flows as the volume the actual volume experience goes forward That's how we approach the labor. that's how we approach the labor

Speaker 13: Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Bonnie Herzog with Goldman Sachs. our next question comes from bonnie herzog with goldman sachs Your line is open. your line is open

Speaker 1: Thank you. Good morning. I was hoping you could touch on the durability of your new unit growth, I guess, over the long term. Curious to hear from you know, what is a sustainable pace of, you know, new unit growth and, you know, how many sites, you know, do you have in your pipeline? I guess, can you know, share with us if you're still on track to deliver on your guidance this year and to add, I guess, the 80 new stores, which implies about 60 new store openings in the Q4? Are you guys also sort of on track to add the 500 new stores by the end of this fiscal year? Thanks. Thank you. thank you Good morning. good morning I was hoping you could touch on the durability of your new unit growth, I guess, over the long term. i was hoping you could touch on the durability of your new unit growth i guess over the long term Curious to hear from you know, what is a sustainable pace of, you know, new unit growth and, you know, how many sites, you know, do you have in your pipeline? curious to hear from you know what is a sustainable pace of you know new unit growth and you know how many sites you know do you have in your pipeline I guess, can you know, share with us if you're still on track to deliver on your guidance this year and to add, I guess, the 80 new stores, which implies about 60 new store openings in the Q4? i guess can you know share with us if you're still on track to deliver on your guidance this year and to add i guess the 80 new stores which implies about 60 new store openings in the q4 Are you guys also sort of on track to add the 500 new stores by the end of this fiscal year? are you guys also sort of on track to add the 500 new stores by the end of this fiscal year Thanks. thanks

Speaker 6: Yeah. Bonnie, we are definitely on track to open 80 stores this year. I'm not sure what numbers you're looking at for the Q4, but we do not need to open up 60 stores in the Q4 to get to our 80 stores. Remember, that's a combination of new-store new-to-industry stores and M&A. On both fronts, we are well positioned to wrap up the Q4 and hit that 80 stores for this year. That 80 stores for this year will get us to 500 stores for the three-year planning horizon, which was originally 350 stores, and then we moved it up to 500 stores. Feel very good about that. Yeah. yeah Bonnie, we are definitely on track to open 80 stores this year. bonnie we are definitely on track to open 80 stores this year I'm not sure what numbers you're looking at for the Q4, but we do not need to open up 60 stores in the Q4 to get to our 80 stores. i'm not sure what numbers you're looking at for the q4 but we do not need to open up 60 stores in the q4 to get to our 80 stores Remember, that's a combination of new-store new-to-industry stores and M&A. remember that's a combination of new-store new-to-industry stores and m&a On both fronts, we are well positioned to wrap up the Q4 and hit that 80 stores for this year. on both fronts we are well positioned to wrap up the q4 and hit that 80 stores for this year That 80 stores for this year will get us to 500 stores for the three-year planning horizon, which was originally 350 stores, and then we moved it up to 500 stores. that 80 stores for this year will get us to 500 stores for the three-year planning horizon which was originally 350 stores and then we moved it up to 500 stores Feel very good about that. feel very good about that On a sustainable basis, you know, we are well situated from a pipeline perspective on NTI. You know, we have stores right now. If we're buying real estate, we're really putting that in the FY 2028 or FY 2029 pipeline at this point because the pipeline's in good shape. In the M&A front, I'd say the team feels very good about the small deal M&A and the pipeline there as well. Remember, we like to have both NTI and M&A working at the same time. If multiples get a little bit too rich on the M&A side, we can lean heavier on the NTI side to keep that ratable store growth. On a sustainable basis, you know, we are well situated from a pipeline perspective on NTI. on a sustainable basis you know we are well situated from a pipeline perspective on nti You know, we have stores right now. you know we have stores right now If we're buying real estate, we're really putting that in the FY 2028 or FY 2029 pipeline at this point because the pipeline's in good shape. if we're buying real estate we're really putting that in the fy 2028 or fy 2029 pipeline at this point because the pipeline's in good shape In the M&A front, I'd say the team feels very good about the small deal M&A and the pipeline there as well. in the m&a front i'd say the team feels very good about the small deal m&a and the pipeline there as well Remember, we like to have both NTI and M&A working at the same time. remember we like to have both nti and m&a working at the same time If multiples get a little bit too rich on the M&A side, we can lean heavier on the NTI side to keep that ratable store growth. if multiples get a little bit too rich on the m&a side we can lean heavier on the nti side to keep that ratable store growth Lastly, I'd say just in terms of the pace, you know, our algorithm, our growth algorithm at a high level is pretty straightforward. We get about 4% growth from organic, you know, running the mothership, so same store sales, fuel profitability, efficiency in our operations, and then 4% from new units. Give or take every year, we kind of approach that year with a goal of growing the units by 4% per year. We pulled back a little bit in this current fiscal year deliberately, so we had the opportunity to integrate the CEFCO acquisitions because there's a lot of work to be done there. We'll be back on that 4% unit growth rate. Lastly, I'd say just in terms of the pace, you know, our algorithm, our growth algorithm at a high level is pretty straightforward. lastly i'd say just in terms of the pace you know our algorithm our growth algorithm at a high level is pretty straightforward We get about 4% growth from organic, you know, running the mothership, so same store sales, fuel profitability, efficiency in our operations, and then 4% from new units. we get about 4% growth from organic you know running the mothership so same store sales fuel profitability efficiency in our operations and then 4% from new units Give or take every year, we kind of approach that year with a goal of growing the units by 4% per year. give or take every year we kind of approach that year with a goal of growing the units by 4% per year We pulled back a little bit in this current fiscal year deliberately, so we had the opportunity to integrate the CEFCO acquisitions because there's a lot of work to be done there. we pulled back a little bit in this current fiscal year deliberately so we had the opportunity to integrate the cefco acquisitions because there's a lot of work to be done there We'll be back on that 4% unit growth rate. we'll be back on that 4% unit growth rate

Speaker 13: Thank you. One moment for our next question. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Jacob Aiken-Phillips with Melius Research. Your line is open. Our next question comes from Jacob Aiken-Phillips with Melius Research. our next question comes from jacob aiken-phillips with melius research Your line is open. your line is open

Speaker 9: Hey, good morning. Thanks for the clarity on the unit expansion. I'm just curious, as we're approaching the new strategic plan, not gonna ask for numbers, but how should we be thinking about the biggest growth levers from here? You outlined unit expansion, and you recently talked about how maybe you're going back to adding some labor to the stores as opposed to the constant reduction in same-store hours. Just levers on top line and bottom line that we should be thinking about. Hey, good morning. hey good morning Thanks for the clarity on the unit expansion. thanks for the clarity on the unit expansion I'm just curious, as we're approaching the new strategic plan, not gonna ask for numbers, but how should we be thinking about the biggest growth levers from here? i'm just curious as we're approaching the new strategic plan not gonna ask for numbers but how should we be thinking about the biggest growth levers from here You outlined unit expansion, and you recently talked about how maybe you're going back to adding some labor to the stores as opposed to the constant reduction in same-store hours. you outlined unit expansion and you recently talked about how maybe you're going back to adding some labor to the stores as opposed to the constant reduction in same-store hours Just levers on top line and bottom line that we should be thinking about. just levers on top line and bottom line that we should be thinking about

Speaker 6: Yeah, you know, Jacob, I think, first of all, I don't wanna share too much about the next three-year plan. I want you to come to New York City and have some pizza with us, and we'll tell you all about it in June. But yeah, you know, look, fundamentally, we're still gonna grow the business by growing new units, by running the business efficiently, by growing our inside sales. We'll have all kinds of details around that. But I mean, those are the things we're going to continue to do to grow our business. Yeah, you know, Jacob, I think, first of all, I don't wanna share too much about the next three-year plan. yeah you know jacob i think first of all i don't wanna share too much about the next three-year plan I want you to come to New York City and have some pizza with us, and we'll tell you all about it in June. i want you to come to new york city and have some pizza with us and we'll tell you all about it in june But yeah, you know, look, fundamentally, we're still gonna grow the business by growing new units, by running the business efficiently, by growing our inside sales. but yeah you know look fundamentally we're still gonna grow the business by growing new units by running the business efficiently by growing our inside sales We'll have all kinds of details around that. we'll have all kinds of details around that But I mean, those are the things we're going to continue to do to grow our business. but i mean those are the things we're going to continue to do to grow our business On the labor side, I've mentioned on the last few calls that when we entered into this three-year strategic planning cycle that we're wrapping up right now, we said we would reduce labor hours by 1% same store per year over the three-year period. We have actually exceeded that goal with great work done by our operations team and continuous improvement teams to make that happen. But that's not something that just goes on in perpetuity. As I've communicated before, I think we're close to the end of that. There'll always be efficiencies that we'll continue to work on, but you should not expect that we'll just continue on a cadence of reducing same-store labor hours. On the labor side, I've mentioned on the last few calls that when we entered into this three-year strategic planning cycle that we're wrapping up right now, we said we would reduce labor hours by 1% same store per year over the three-year period. on the labor side i've mentioned on the last few calls that when we entered into this three-year strategic planning cycle that we're wrapping up right now we said we would reduce labor hours by 1% same store per year over the three-year period We have actually exceeded that goal with great work done by our operations team and continuous improvement teams to make that happen. we have actually exceeded that goal with great work done by our operations team and continuous improvement teams to make that happen But that's not something that just goes on in perpetuity. but that's not something that just goes on in perpetuity As I've communicated before, I think we're close to the end of that. as i've communicated before i think we're close to the end of that There'll always be efficiencies that we'll continue to work on, but you should not expect that we'll just continue on a cadence of reducing same-store labor hours. there'll always be efficiencies that we'll continue to work on but you should not expect that we'll just continue on a cadence of reducing same-store labor hours That being said, as the business grows and volumes increase, there will be a need to add some labor back to meet that need and keep the guest satisfaction scores at the all-time highs that they are currently at. That all comes with incremental sales, incremental margin, incremental gross profit. You know, we're happy to add those hours back when the business warrants those additional hours, and that also works the other way. If the business were to go backwards, we would pull back on those hours to right-size the labor allocation with the business demand. That being said, as the business grows and volumes increase, there will be a need to add some labor back to meet that need and keep the guest satisfaction scores at the all-time highs that they are currently at. that being said as the business grows and volumes increase there will be a need to add some labor back to meet that need and keep the guest satisfaction scores at the all-time highs that they are currently at That all comes with incremental sales, incremental margin, incremental gross profit. that all comes with incremental sales incremental margin incremental gross profit You know, we're happy to add those hours back when the business warrants those additional hours, and that also works the other way. you know we're happy to add those hours back when the business warrants those additional hours and that also works the other way If the business were to go backwards, we would pull back on those hours to right-size the labor allocation with the business demand. if the business were to go backwards we would pull back on those hours to right-size the labor allocation with the business demand

Speaker 9: Got it. Just on cheese real quick. Can you update us on, like, what the annual amount of pounds you use in terms of cheese? You said cheese is slightly down in Q4, but can you update us on, like, how much exposure you have locked in over the next two quarters? Got it. got it Just on cheese real quick. just on cheese real quick Can you update us on, like, what the annual amount of pounds you use in terms of cheese? can you update us on like what the annual amount of pounds you use in terms of cheese You said cheese is slightly down in Q4, but can you update us on, like, how much exposure you have locked in over the next two quarters? you said cheese is slightly down in q4 but can you update us on like how much exposure you have locked in over the next two quarters

Speaker 6: We move about 45 million pounds. In the quarter, about 11.5 million pounds. For a full year, about 45 million pounds. We're 80% locked on cheese through this quarter and the next couple of quarters. Then, you know, that's about where we like to keep it when we can lock in favorability. It's slight favorability. It's not massive favorability. Then we have another 20% we can buy on spot when conditions are favorable. We move about 45 million pounds. we move about 45 million pounds In the quarter, about 11.5 million pounds. in the quarter about 11.5 million pounds For a full year, about 45 million pounds. for a full year about 45 million pounds We're 80% locked on cheese through this quarter and the next couple of quarters. we're 80% locked on cheese through this quarter and the next couple of quarters Then, you know, that's about where we like to keep it when we can lock in favorability. then you know that's about where we like to keep it when we can lock in favorability It's slight favorability. it's slight favorability It's not massive favorability. it's not massive favorability Then we have another 20% we can buy on spot when conditions are favorable. then we have another 20% we can buy on spot when conditions are favorable

Speaker 13: Thank you. One moment for our next question. Our next question comes from Edward Kelly with Wells Fargo. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Edward Kelly with Wells Fargo. our next question comes from edward kelly with wells fargo Your line is open. your line is open

Speaker 7: Hi. Good morning, guys. I wanted to first just follow up on wings. I was curious, I know you don't wanna give, you know, too many numbers, but curious as to how you think about the margin implication overall with wings. Taking a step back, you know, adding fryers, I don't wanna get ahead of ourselves, but how are you thinking about, you know, potential for other products, you know, as it pertains to this category? Hi. hi Good morning, guys. good morning guys I wanted to first just follow up on wings. i wanted to first just follow up on wings I was curious, I know you don't wanna give, you know, too many numbers, but curious as to how you think about the margin implication overall with wings. i was curious i know you don't wanna give you know too many numbers but curious as to how you think about the margin implication overall with wings Taking a step back, you know, adding fryers, I don't wanna get ahead of ourselves, but how are you thinking about, you know, potential for other products, you know, as it pertains to this category? taking a step back you know adding fryers i don't wanna get ahead of ourselves but how are you thinking about you know, potential for other products you know as it pertains to this category

Speaker 6: Yeah, on the margin, you know, we like the margin profile on wings. It is obviously a protein versus, you know, something like pizza that's a little more dough-based. So, it doesn't carry the same margin rate that, you know, that pizza would. So far there hasn't been any real margin implications because the mix hasn't been great enough to do that. Over time, if it became a big enough business, that could put a little bit of pressure on margin rate, but it would grow gross profit dollars and improve trips and everything else. So, we're okay with that. You know, our goal isn't margin rate, it's gross profit dollar growth. To the extent that that plays out, over time, we're comfortable with it. Yeah, on the margin, you know, we like the margin profile on wings. yeah on the margin you know we like the margin profile on wings It is obviously a protein versus, you know, something like pizza that's a little more dough-based. it is obviously a protein versus you know something like pizza that's a little more dough-based So, it doesn't carry the same margin rate that, you know, that pizza would. so it doesn't carry the same margin rate that you know that pizza would So far there hasn't been any real margin implications because the mix hasn't been great enough to do that. so far there hasn't been any real margin implications because the mix hasn't been great enough to do that Over time, if it became a big enough business, that could put a little bit of pressure on margin rate, but it would grow gross profit dollars and improve trips and everything else. over time if it became a big enough business that could put a little bit of pressure on margin rate but it would grow gross profit dollars and improve trips and everything else So, we're okay with that. so we're okay with that You know, our goal isn't margin rate, it's gross profit dollar growth. you know our goal isn't margin rate it's gross profit dollar growth To the extent that that plays out, over time, we're comfortable with it. to the extent that that plays out over time we're comfortable with it In terms of other products, you know, I guess the thing we haven't talked about, we rolled out fries in addition to wings. That was the most commonly requested side item to go with the wings. So we are selling wings or fries right now. We're cooking some of the other products that we already had in the store in the larger fryers. We'll have to see as time goes on whether we expand that. But for now, we have a long way to go in terms of growing the wing business, so we're more focused on doing that and doing that well and getting that velocity up and creating that incremental occasion per week in that business before we start tackling other products. In terms of other products, you know, I guess the thing we haven't talked about, we rolled out fries in addition to wings. in terms of other products you know i guess the thing we haven't talked about we rolled out fries in addition to wings That was the most commonly requested side item to go with the wings. that was the most commonly requested side item to go with the wings So we are selling wings or fries right now. so we are selling wings or fries right now We're cooking some of the other products that we already had in the store in the larger fryers. we're cooking some of the other products that we already had in the store in the larger fryers We'll have to see as time goes on whether we expand that. we'll have to see as time goes on whether we expand that But for now, we have a long way to go in terms of growing the wing business, so we're more focused on doing that and doing that well and getting that velocity up and creating that incremental occasion per week in that business before we start tackling other products. but for now we have a long way to go in terms of growing the wing business so we're more focused on doing that and doing that well and getting that velocity up and creating that incremental occasion per week in that business before we start tackling other products

Speaker 7: Great. Then just a follow-up on the M&A question. I was curious as to, you know, where you feel like you are with the integration of Fikes and what that means in terms of your ability to execute on another large deal if something came about, and maybe just thoughts on what the market currently looks like there. Great. great Then just a follow-up on the M&A question. then just a follow-up on the m&a question I was curious as to, you know, where you feel like you are with the integration of Fikes and what that means in terms of your ability to execute on another large deal if something came about, and maybe just thoughts on what the market currently looks like there. i was curious as to you know where you feel like you are with the integration of fikes and what that means in terms of your ability to execute on another large deal if something came about and maybe just thoughts on what the market currently looks like there

Speaker 6: Yeah, in terms of the integration cadence, by the end of this fiscal year, we will have 50 stores converted. We've got about 25 stores converted right now, and we're on a cadence of about three per week. By the end of the fiscal year, we'll have the first tranche of 50 stores done. The plan for next year will roughly be to wrap that up in the next fiscal year. There'll be some stragglers there, but the bulk of the work will occur next fiscal year. From a balance sheet perspective, we could do another deal right now. Obviously, our leverage ratio is low. We have ample liquidity. We have the ability to do that. Yeah, in terms of the integration cadence, by the end of this fiscal year, we will have 50 stores converted. yeah in terms of the integration cadence by the end of this fiscal year we will have 50 stores converted We've got about 25 stores converted right now, and we're on a cadence of about three per week. we've got about 25 stores converted right now and we're on a cadence of about three per week By the end of the fiscal year, we'll have the first tranche of 50 stores done. by the end of the fiscal year we'll have the first tranche of 50 stores done The plan for next year will roughly be to wrap that up in the next fiscal year. the plan for next year will roughly be to wrap that up in the next fiscal year There'll be some stragglers there, but the bulk of the work will occur next fiscal year. there'll be some stragglers there but the bulk of the work will occur next fiscal year From a balance sheet perspective, we could do another deal right now. from a balance sheet perspective we could do another deal right now Obviously, our leverage ratio is low. obviously our leverage ratio is low We have ample liquidity. we have ample liquidity We have the ability to do that. we have the ability to do that Just practically speaking, with the timing it would take starting, you know, right now to do something of a similar size to a Fikes, it would take time. Yeah, we're in a position to be able to execute on a larger deal, if the opportunity were to present itself. As you can imagine, there is a finite number of chains of that size that just exist and then a smaller number than that that are actionable. We are definitely engaged with potential sellers and working through those processes all the time. You know, one of the things that kind of narrows the aperture a little bit for us is that we set a pretty high bar on asset quality. Just practically speaking, with the timing it would take starting, you know, right now to do something of a similar size to a Fikes, it would take time. just practically speaking with the timing it would take starting you know right now to do something of a similar size to a fikes it would take time Yeah, we're in a position to be able to execute on a larger deal, if the opportunity were to present itself. yeah we're in a position to be able to execute on a larger deal if the opportunity were to present itself As you can imagine, there is a finite number of chains of that size that just exist and then a smaller number than that that are actionable. as you can imagine there is a finite number of chains of that size that just exist and then a smaller number than that that are actionable We are definitely engaged with potential sellers and working through those processes all the time. we are definitely engaged with potential sellers and working through those processes all the time You know, one of the things that kind of narrows the aperture a little bit for us is that we set a pretty high bar on asset quality. you know one of the things that kind of narrows the aperture a little bit for us is that we set a pretty high bar on asset quality Because ultimately, the biggest synergy we bring to any acquisition is our prepared foods. The physical buildings need to be able to accommodate adding a kitchen or the real estate has to be large enough that we can bump out a building and add a kitchen. That has to be a high enough percentage of the total stores that we acquire to make it work for us. We're a little bit picky, but I think that pickiness is, you know, proven beneficial for us over time. We like how the market sets up for us. We just need to have the right combination of timing and willing sellers so that we can act on those opportunities. Because ultimately, the biggest synergy we bring to any acquisition is our prepared foods. because ultimately the biggest synergy we bring to any acquisition is our prepared foods The physical buildings need to be able to accommodate adding a kitchen or the real estate has to be large enough that we can bump out a building and add a kitchen. the physical buildings need to be able to accommodate adding a kitchen or the real estate has to be large enough that we can bump out a building and add a kitchen That has to be a high enough percentage of the total stores that we acquire to make it work for us. that has to be a high enough percentage of the total stores that we acquire to make it work for us We're a little bit picky, but I think that pickiness is, you know, proven beneficial for us over time. we're a little bit picky but i think that pickiness is you know proven beneficial for us over time We like how the market sets up for us. we like how the market sets up for us We just need to have the right combination of timing and willing sellers so that we can act on those opportunities. we just need to have the right combination of timing and willing sellers so that we can act on those opportunities

Speaker 13: Thank you. One moment for our next question. Our next question comes from Brad Thomas with KeyBanc Capital Markets. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Brad Thomas with KeyBanc Capital Markets. our next question comes from brad thomas with keybanc capital markets Your line is open. your line is open

Speaker 2: Good morning. Thanks for taking my question, and let me add my congratulations on a nice quarter here. I wanted to ask about the competitive landscape, and I know that Casey's remains in an advantageous position relative to your rural footprint. Just curious there, and if you could comment any more on what you're seeing out of the other C-store players and restaurant competitors of yours. Good morning. good morning Thanks for taking my question, and let me add my congratulations on a nice quarter here. thanks for taking my question and let me add my congratulations on a nice quarter here I wanted to ask about the competitive landscape, and I know that Casey's remains in an advantageous position relative to your rural footprint. i wanted to ask about the competitive landscape and i know that casey's remains in an advantageous position relative to your rural footprint Just curious there, and if you could comment any more on what you're seeing out of the other C-store players and restaurant competitors of yours. just curious there and if you could comment any more on what you're seeing out of the other c-store players and restaurant competitors of yours

Speaker 6: Yeah, you know, it's a competitive environment. I think when you look at either one. I guess I'll take restaurant first. You know, I think the restaurant industry at large and QSRs and pizza players in particular are under quite a bit of pressure. You know, the advantage that Casey's holds relative to those folks is that we're in three businesses. We're in the fuel business, the grocery business, and the prepared food business. The restaurants are in one business, and it's the food business. They have to absorb all of the increased costs that we've all experienced over the last several years, and absorb that within the prepared foods. That's translated into menu price increases. I think that's been well documented. Yeah, you know, it's a competitive environment. yeah you know it's a competitive environment I think when you look at either one. i think when you look at either one I guess I'll take restaurant first. i guess i'll take restaurant first You know, I think the restaurant industry at large and QSRs and pizza players in particular are under quite a bit of pressure. you know i think the restaurant industry at large and qsrs and pizza players in particular are under quite a bit of pressure You know, the advantage that Casey's holds relative to those folks is that we're in three businesses. you know the advantage that casey's holds relative to those folks is that we're in three businesses We're in the fuel business, the grocery business, and the prepared food business. we're in the fuel business the grocery business and the prepared food business The restaurants are in one business, and it's the food business. the restaurants are in one business and it's the food business They have to absorb all of the increased costs that we've all experienced over the last several years, and absorb that within the prepared foods. they have to absorb all of the increased costs that we've all experienced over the last several years and absorb that within the prepared foods That's translated into menu price increases. that's translated into menu price increases I think that's been well documented. i think that's been well documented That relative gap between restaurant pricing and our pricing has widened over the last couple of years. That value proposition for us just gets all the stronger. I feel very good about our position relative to national brand QSR chains. As a reminder, 1/2 of our stores don't even have a national brand pizza competitor. The other 1/2 that do, we have a very strong value proposition relative to them. By the same token, on the convenience store side, I think we have the same thing. We still have a lot of stores in the suburbs. That relative gap between restaurant pricing and our pricing has widened over the last couple of years. that relative gap between restaurant pricing and our pricing has widened over the last couple of years That value proposition for us just gets all the stronger. that value proposition for us just gets all the stronger I feel very good about our position relative to national brand QSR chains. i feel very good about our position relative to national brand qsr chains As a reminder, 1/2 of our stores don't even have a national brand pizza competitor. as a reminder 1/2 of our stores don't even have a national brand pizza competitor The other 1/2 that do, we have a very strong value proposition relative to them. the other 1/2 that do we have a very strong value proposition relative to them By the same token, on the convenience store side, I think we have the same thing. by the same token on the convenience store side i think we have the same thing We still have a lot of stores in the suburbs. we still have a lot of stores in the suburbs We face some of the best competition in that our industry has to offer, and we perform very well there, largely because we have that differentiated food offer that really is unique and represents a great value proposition, and it's hard to execute. A bulk of the convenience store industry doesn't even have a prepared foods program, and those that do are largely in the sandwich business or fried chicken business, something not pizza, and certainly not pizza like we do it. We really have a unique niche within the industry and I think our results over the last several years would speak to the fact that that niche has really resonated with guests, and we perform very well across all environments. We face some of the best competition in that our industry has to offer, and we perform very well there, largely because we have that differentiated food offer that really is unique and represents a great value proposition, and it's hard to execute. we face some of the best competition in that our industry has to offer and we perform very well there largely because we have that differentiated food offer that really is unique and represents a great value proposition and it's hard to execute A bulk of the convenience store industry doesn't even have a prepared foods program, and those that do are largely in the sandwich business or fried chicken business, something not pizza, and certainly not pizza like we do it. a bulk of the convenience store industry doesn't even have a prepared foods program and those that do are largely in the sandwich business or fried chicken business something not pizza and certainly not pizza like we do it We really have a unique niche within the industry and I think our results over the last several years would speak to the fact that that niche has really resonated with guests, and we perform very well across all environments. we really have a unique niche within the industry and i think our results over the last several years would speak to the fact that that niche has really resonated with guests and we perform very well across all environments

Speaker 2: That's really helpful. Maybe if I could just ask a follow-up to try to tie together the question around where oil prices may be going and how that might influence your updated financial guidance in June. Is there a particular price for gas and oil where we could think about or should think about the algorithm changing? Is it that $4 gas number that you referenced earlier, Darren? Just curious about how you think about it from kind of a long-term standpoint. That's really helpful. that's really helpful Maybe if I could just ask a follow-up to try to tie together the question around where oil prices may be going and how that might influence your updated financial guidance in June. maybe if i could just ask a follow-up to try to tie together the question around where oil prices may be going and how that might influence your updated financial guidance in june Is there a particular price for gas and oil where we could think about or should think about the algorithm changing? is there a particular price for gas and oil where we could think about or should think about the algorithm changing Is it that $4 gas number that you referenced earlier, Darren? is it that $4 gas number that you referenced earlier darren Just curious about how you think about it from kind of a long-term standpoint. just curious about how you think about it from kind of a long-term standpoint

Speaker 6: Yeah. Look, Brad, I would say long term, this doesn't change anything. You know, fortunately or unfortunately, I've been in this industry long enough now to go through a number of these cycles, and every one of them runs its course, like I described earlier, where margins get a little bit compressed on the front end of the curve and you know, expand on the back end. I think from a long-term algorithm, growth algorithm standpoint, you know, what's going on today is not changing anything. It'll run its course. Who knows how long that'll be? I'd say we ran a complete cycle in 24 hours yesterday, so it's kinda hard to tell how this will all shake out, but ultimately it will normalize. The long-term algorithm will be the same. Yeah. yeah Look, Brad, I would say long term, this doesn't change anything. look brad i would say long term this doesn't change anything You know, fortunately or unfortunately, I've been in this industry long enough now to go through a number of these cycles, and every one of them runs its course, like I described earlier, where margins get a little bit compressed on the front end of the curve and you know, expand on the back end. you know fortunately or unfortunately i've been in this industry long enough now to go through a number of these cycles and every one of them runs its course like i described earlier where margins get a little bit compressed on the front end of the curve and you know expand on the back end I think from a long-term algorithm, growth algorithm standpoint, you know, what's going on today is not changing anything. i think from a long-term algorithm growth algorithm standpoint you know what's going on today is not changing anything It'll run its course. it'll run its course Who knows how long that'll be? who knows how long that'll be I'd say we ran a complete cycle in 24 hours yesterday, so it's kinda hard to tell how this will all shake out, but ultimately it will normalize. i'd say we ran a complete cycle in 24 hours yesterday so it's kinda hard to tell how this will all shake out but ultimately it will normalize The long-term algorithm will be the same. the long-term algorithm will be the same In terms of the quarter, I would just go back to, you know, what Steve commented on our experience. We've had a strong start to the quarter. That's reflected in the guidance. You know, our February experience on margin was $0.40 a gallon, and we'll have to see how the rest of the quarter shakes out. I mean, I don't know how to handicap that. You know, we had a $0.30 cost swing from high to low yesterday. I haven't looked at the news in the last hour, so I'm not sure what's going on today. You know, we'll manage it appropriately and we'll see how the quarter shakes out. In terms of the quarter, I would just go back to, you know, what Steve commented on our experience. in terms of the quarter i would just go back to you know what steve commented on our experience We've had a strong start to the quarter. we've had a strong start to the quarter That's reflected in the guidance. that's reflected in the guidance You know, our February experience on margin was $0.40 a gallon, and we'll have to see how the rest of the quarter shakes out. you know our february experience on margin was $0.40 a gallon and we'll have to see how the rest of the quarter shakes out I mean, I don't know how to handicap that. i mean i don't know how to handicap that You know, we had a $0.30 cost swing from high to low yesterday. you know we had a $0.30 cost swing from high to low yesterday I haven't looked at the news in the last hour, so I'm not sure what's going on today. i haven't looked at the news in the last hour so i'm not sure what's going on today You know, we'll manage it appropriately and we'll see how the quarter shakes out. you know we'll manage it appropriately and we'll see how the quarter shakes out

Speaker 13: Thank you. One moment for our next question. Our next question comes from Jack Hardin with Stephens. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Jack Hardin with Stephens. our next question comes from jack hardin with stephens Your line is open. your line is open

Speaker 8: Yes. Hi, this is Jack Hardin on for Pooran Sharma. Thanks for the question. I wanted to ask about labor. You've done a really strong job over the past several years at reducing same store labor hours. At this point, how should we think about the runway for further productivity gains? Are we closer to a state of a steady state labor model? And do you see incremental opportunity from here? Yes. yes Hi, this is Jack Hardin on for Pooran Sharma. hi this is jack hardin on for pooran sharma Thanks for the question. thanks for the question I wanted to ask about labor. i wanted to ask about labor You've done a really strong job over the past several years at reducing same store labor hours. you've done a really strong job over the past several years at reducing same store labor hours At this point, how should we think about the runway for further productivity gains? at this point how should we think about the runway for further productivity gains Are we closer to a state of a steady state labor model? are we closer to a state of a steady state labor model And do you see incremental opportunity from here? and do you see incremental opportunity from here

Speaker 6: Yeah, Jack, you know, I commented a few minutes ago about the fact that I think we're probably closer to steady state. Look, we have a continuous improvement team for a reason. We will always look to find ways to make the job in stores easier, and sometimes that ultimately results in less labor needed. By the same token, we're always focused on growing our business. As you sell more stuff, it requires more labor to produce that stuff, stock that stuff, sell that stuff. That will ebb and flow. I would not expect to see the types of labor decreases that we saw over the last three-year period. Yeah, Jack, you know, I commented a few minutes ago about the fact that I think we're probably closer to steady state. yeah jack you know i commented a few minutes ago about the fact that i think we're probably closer to steady state Look, we have a continuous improvement team for a reason. look we have a continuous improvement team for a reason We will always look to find ways to make the job in stores easier, and sometimes that ultimately results in less labor needed. we will always look to find ways to make the job in stores easier and sometimes that ultimately results in less labor needed By the same token, we're always focused on growing our business. by the same token we're always focused on growing our business As you sell more stuff, it requires more labor to produce that stuff, stock that stuff, sell that stuff. as you sell more stuff it requires more labor to produce that stuff stock that stuff sell that stuff That will ebb and flow. that will ebb and flow I would not expect to see the types of labor decreases that we saw over the last three-year period. i would not expect to see the types of labor decreases that we saw over the last three-year period Again, we'll always focus on managing that expense line tightly and add where we need to and take away where we don't need it anymore. Again, we'll always focus on managing that expense line tightly and add where we need to and take away where we don't need it anymore. again we'll always focus on managing that expense line tightly and add where we need to and take away where we don't need it anymore

Speaker 13: Thank you. One moment for our next question. Our next question comes from Scott Stringer with Wolfe Research. Your line is open. Thank you. thank you One moment for our next question. one moment for our next question Our next question comes from Scott Stringer with Wolfe Research. our next question comes from scott stringer with wolfe research Your line is open. your line is open

Speaker 14: Hey, guys. Appreciate the time. You kept the fuel volume guidance unchanged, but performance has been nicely positive year to date as you're taking share. Is that at least fair to say that you're tracking at the high end of your range for the year? Hey, guys. hey guys Appreciate the time. appreciate the time You kept the fuel volume guidance unchanged, but performance has been nicely positive year to date as you're taking share. you kept the fuel volume guidance unchanged but performance has been nicely positive year to date as you're taking share Is that at least fair to say that you're tracking at the high end of your range for the year? is that at least fair to say that you're tracking at the high end of your range for the year

Speaker 6: Yeah, Scott, I wouldn't say that we're tracking at the high end of the range. I'd say we're tracking in the range, and that's where we feel comfortable guiding everybody at this point. Yeah, I've been pleased with the performance so far. Yeah, Scott, I wouldn't say that we're tracking at the high end of the range. yeah scott i wouldn't say that we're tracking at the high end of the range I'd say we're tracking in the range, and that's where we feel comfortable guiding everybody at this point. i'd say we're tracking in the range and that's where we feel comfortable guiding everybody at this point Yeah, I've been pleased with the performance so far. yeah i've been pleased with the performance so far

Speaker 14: Okay, got it. Then there was also some positive commentary around tobacco sales. Specifically on the tobacco alternatives, is there a potential that these newer products can return the category as a whole back to positive growth? Okay, got it. okay got it Then there was also some positive commentary around tobacco sales. then there was also some positive commentary around tobacco sales Specifically on the tobacco alternatives, is there a potential that these newer products can return the category as a whole back to positive growth? specifically on the tobacco alternatives is there a potential that these newer products can return the category as a whole back to positive growth

Speaker 6: Yeah, I do think there is that potential. You know, what we've seen a little bit more recently is the decline in combustibles has slowed a bit. It's still from a unit perspective, it's still dropping, but not at the same rate as it was for the last several quarters. The combination of that decline slowing with the inflation that happens on the combustible side, in addition to the growth in alternatives and vapor, has actually netted that category out to positive. That hasn't been that case for quite a while. We'll have to see how it plays out. At this point, that is correct. It is actually starting to see some growth in the overall nicotine category. Yeah, I do think there is that potential. yeah i do think there is that potential You know, what we've seen a little bit more recently is the decline in combustibles has slowed a bit. you know what we've seen a little bit more recently is the decline in combustibles has slowed a bit It's still from a unit perspective, it's still dropping, but not at the same rate as it was for the last several quarters. it's still from a unit perspective it's still dropping but not at the same rate as it was for the last several quarters The combination of that decline slowing with the inflation that happens on the combustible side, in addition to the growth in alternatives and vapor, has actually netted that category out to positive. the combination of that decline slowing with the inflation that happens on the combustible side in addition to the growth in alternatives and vapor has actually netted that category out to positive That hasn't been that case for quite a while. that hasn't been that case for quite a while We'll have to see how it plays out. we'll have to see how it plays out At this point, that is correct. at this point that is correct It is actually starting to see some growth in the overall nicotine category. it is actually starting to see some growth in the overall nicotine category

Speaker 13: Thank you. Ladies and gentlemen, we're coming up on the end of our hour-long call. I would now like to turn the call back to Darren Rebelez for closing remarks. Thank you. thank you Ladies and gentlemen, we're coming up on the end of our hour-long call. ladies and gentlemen we're coming up on the end of our hour-long call I would now like to turn the call back to Darren Rebelez for closing remarks. i would now like to turn the call back to darren rebelez for closing remarks

Speaker 6: All right. Thank you, and thanks for taking time today to join us on the call. Before we go, I just wanna thank our team members once again for all their hard work this quarter. Have a great rest of the week. All right. all right Thank you, and thanks for taking time today to join us on the call. thank you and thanks for taking time today to join us on the call Before we go, I just wanna thank our team members once again for all their hard work this quarter. before we go i just wanna thank our team members once again for all their hard work this quarter Have a great rest of the week. have a great rest of the week

Speaker 13: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day. Ladies and gentlemen, this does conclude today's presentation. ladies and gentlemen this does conclude today's presentation You may now disconnect and have a wonderful day. you may now disconnect and have a wonderful day