Murphy USA (MUSA) 30 Jan 202019 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Murphy USA Fourth Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator instructions]

I would now like to hand the conference over to Christian Pikul, Senior Director of Investor Relations. Please go ahead, sir.

you. thank Great, everyone. Good morning, joining us. for Thanks and Andrew With Officer; and and President Executive President West, me Donnie Executive Vice Officer; are Mindy Financial Vice Chief Chief Clyde, President Controller. Smith, and

from After some of financial results. Mindy provide an the Andrew, opening overview will comments coming

Q&A. then to will the XXXX review metrics our and We up open guidance call

Securities of Please keep including of as Q&A will portion some in the forward-looking defined made statements Act comments in the mind Litigation the Private be XXXX. that call, during Reform considered this

no attained. such, given that these of As to can assurances that the exist results events be that or differ. projections will may factors A occur cause actual will be variety

SEC see For latest X-K, forms Murphy filings. further USA recent XX-Q, of discussion factors, please the XX-K, other risk and

to or statements. update takes Murphy revise duty USA no forward-looking any publicly

During may we not to Generally measures provide GAAP. Accounting performance conform certain today’s call, or Principles Accepted that do also

these on press as with schedules of We measures the non-GAAP our provided can website. which release, of results reported the part found be to investors have in section basis, GAAP our reconcile a earnings

over turn With to it Andrew. that, I’ll

Thanks, we XXXX and expect earnings an XXXX. share execution lot public to and lot year that Christian. the a in lot sustainability everyone drivers Murphy you thank our other work planning a results, how important for what chance, as control. in tenure in and the hard plan relatively and of enter the as shapes to happen was of XXXX ahead USA’s growth it’s of short with by This company. XXXX took exceptional we momentum, deliver us team it joining more and years the we price by And Good didn’t a and on underpin for morning today. to a reflect and

deferrals. discounts so initiative, with of go very you Drive executing, and unprecedented and excellence in not And an our Rewards but the grow some per started that margins, effects opportunity there net fuel a mindset, customer so grew Murphy highlights. year position especially pricing In attractive our with expectations We guidance So, and did for increase volume, store at only our prices, tools did XXXX fuel let’s data more through when fuel our grew highlights, our profitably. reestablished very low-price we to contribution. is as reset leadership, retail better and volumes

As a buoyed quarter and fourth fourth were margin rising in environment, which XXXX drop volume quarter XXXX results steep a by price short fell results, quarter. the price expected, throughout of

uncharacteristically bonus prices seeing which in us have off again, volume is as grow positions year, a and sharply, now margins are higher January once we to fallen a However, for profitably. starting new

by and X.X% the Murphy Merchandise contribution provided manufacturer $XXX X.X% new programs. volume gain foundation perfect as in tobacco our million, a store to platform per best-in-class a record execution take Rewards Drive to grew driven of advantage

an more we almost partner vendor XXXX with the as was will fully have did, deliver three support to take cost share Rewards, From MDR carrying expect our is into standpoint, and to TXX restrictions engaging we all we about MDR our are into about as be as and of greater guidance built continue customer, XXXX. significant and discounts Headwinds We monetizing vaping momentum million the and Drive from members. XXXX Murphy enrolled regulations value, effectively. now and deferrals. are efficiently

to in around have The providing stores now going our in than before, raze-and-rebuild new led we kiosk NTA conviction store metrics foot as new to up program a portfolio as we us XX% the marked the merchandise format less potential, activity development. our their and to X,XXX as discussed better increase larger forward. square this the in higher ramp shifts have mix. store in successful Thanks to also fuel XXXX our shift store

credit which we Importantly, up year store points a from at as fees more just expenses, we this for on card the higher in X% with of attributable fell into SG&A OpEx stores. of leased rents Murphy focus per basis important delivering guidance in XXXX achieved cost operating pushed end We came on USA, a the X.X%, low quarter ended focused XX continued growth most future. the and the few Fourth was others leadership. to before initiatives on

fuel basis record points to new XXXX. in metric gallon another a fell per Our XX breakeven $X.XX

million center in the and in with X.X XXXX Disciplined shares quarter. as we capital fourth allocation repurchased XXX,XXX shares remain front repurchased

towards about these Looking EBITDA drivers earning in XXXX our four-year we million price. turn early significant of back $XXX another through a the to five-year buying towards made shares on share and our provided multiple, a to of investors progress million, we growing lens year

After some back key I in and goals towards go XXXX creating meaningful guidance, financial over these provides Mindy cover come which will direction long-term shareholder value. the metrics. Mindy? step right another of

$X.XX fourth $XX to gallon offset quarter, per by was and and and year prices sold, year gasoline gallons And was partially in quarter billion prices Thank billion $X.XX higher for volumes retail Average XXXX period. respectively. fourth year-ago billion morning. $X.XX quarter and gallon $XX.X the the you, sales. fuel retail prices during higher gasoline the for gallon decrease full In were The lower versus XXXX per to per in was the This in prices full attributable gasoline attributable billion, good sales. versus full higher retail $X.X to decrease and and the year, $X.XX averaged offset merchandise gasoline lower Andrew, this compares by merchandise XXXX. $X.X Revenue sold retail lower partially

dollars, Adjusted $XXX.X EBITDA $XXX.X versus XXXX. prior the or and adjusted year, by million than in quarter year earnings full million EBITDA $XXX.X amortization million to lower EBITDA offset quarter the margin. depreciation XXXX, fourth the by period and contribution above was interest, period the year was million higher $XXX.X fourth retail partially adjusted was higher margins lower offset the EBITDA for for And in to and the merchandise in for lower in partially all due versus volumes prior taxes, was before Adjusted due volumes, higher merchandise year, full contribution.

the effective fourth rate XX.X% year. and the full XX.X% The for for was tax quarter

to forward, of planning federal and continue income the between Going XX% tax for purposes. XX% we use rate

As XXXX the receipt stated million million $XX.X full oil combined XXXX than partially of year factors. was in in lower of pretax with early extinguishment the debt net XXXX. connection due the for with income spill loss XXXX $XX.X a XXXX, release, on press Deepwater Horizon to two The pretax in

carrying as X.XX% $XXX [ph]notes XXXX debt. out $XXX $XXX X.XX% of due value notes million on sheet of of due debt broken of Total our December term follows: the million, value long-term carrying our XXXX, $XXX.X XXXX, million as of debt consisting $X.XXX of million billion, balance was and XX, new primarily

we report leverage in carrying figures lenders of approximately ratio are In in we an expected $XX.X of under the term amortization that times. loan result that current liabilities average addition, to million sheet. These balance X.X on our

borrowing Our us the the which approximately ABL currently facility remains as to $XXX in December continues limiting to place of XX. million with base undrawn. be $XXX time, present determinations, to subject at million facility are periodic cap And

fourth resulting shares million cash $XXX totaled and There million. the quarter. million $XXX.X outstanding of end debt common of approximately Cash as XX.X in of year-end, net the were at equivalents

was of XX that outside on maintenance; by fourth for $XXX stores, was growth million million $XX million $XXX some CapEx of remaining to spend on approximately spent lastly, capital, are spent projects, EMV the million including million on of million and corporate October the compliance million remaining then dispensers $XX technology compliance Of with comprised for $XX us million and this largely million in capital, was year. about $XXX XXXX our and XX to raze-and-rebuild $XX the reach $XX XXXX, in the to terminals. leaving year. new spent upgrades quarter $XX And projects full

concludes That update. financial the

I Andrew. back now it So over will turn to

metrics, Thank square in our rebuilding you, and a to to kiosk stores, XX foot foot In we’ll X,XXX with addition and larger turning like into up of stores. up high-performing growth. intend to I’d to organic guidance XXXX, with them up format, we and start review razing build square X,XXX XX the wrap Mindy. XXXX

As our almost offer. building larger forward, square of as both we we X,XXX optimize exclusively will merchandise a NTI stores our and locations reminder, going be foot store

up XXXX beyond. We’re and targeting to in developing XX NTIs pipeline our

contribution, an average on XXXX, and to a expect we to month establishing grow at XXX,XXX continue store to on fuel are volumes in gallons building XXX,XXX per our success guidance Looking basis. range of

to and in aggregate our in in We low-price will capabilities team’s dynamic responsible continue manner. an environment refine position market our to tactics improve customers retail execution and the the price-sensitive ever-changing and economically maintain a

our $XXX between are metric, Looking breakeven merchandise growth $XXX are establishing the continued fuel primary and and two from components expecting at million. the contribution margin guidance comprising category million we

and initiatives category. reflects recently the regulatory about $X a this from guidance headwind restrictions million TXX the impacting vapor enacted Importantly,

first help can Leadership given part from just this tell store in overcome On partners operating supported you, our we excited business I important of in returned store higher transitory National supplier coming We our expenses. deliver in in equally is very to these XXXX. the breakeven are us within the out at them had impact per for XXXX elements half overcome hard range, OpEx will in order anticipate a store of to per X% the X% to a to XXXX results X% I point increase. OpEx the per our increase worked XXXX. of in our metric An headwinds, and Conference, and guided front, organization

cost around the business, since lead landscape declining are our OpEx As forward to performance flat demonstrated historical we about there store versus to cost. factors will in higher that that going think guidance the several slightly per spend

levels network average. are we staffing that fact larger necessitate the is the stores versus higher that First building

persist these to in pressure we and Second, wage including the have although headwinds the continue to in in benefit near mitigated minimum and continued we areas expect insurance past, cost higher, creep, term. trend such

Last, accommodate to preference, higher. continue which our will store more the to sites purchasing lease footprint rent versus larger is land, as move expense we our

operating constituted reminder, XXXX. X% the a expenses in increase basis we As points rent incurred in of expense XX

operating Importantly, expenses card XXXX, reporting fees will and per in credit forward. begin store before going we rent

U.S.A. and costs for limiting and From a other corporate stated of to higher $XXX below near or initiatives, of in carried we a the to remains achieve XXXX, or Cost at at IT in our focus SG&A XX%. million corporate cost some our perspective, low projects remain operating growth tax the – $XXX million, in of expense of in leadership Murphy of over came resulting remain the and an rate range guidance G&A at will area end all XXXX should guided inflation. for for as rate slightly priority goals XXXX

certain plan over range of into as budgeted projects XXXX XXXX. capital million to Our for $XXX million remains $XXX in will the carry

carryover retail $XX million capital, $XXX maintenance million EMV million and capital spend earmarks growth, XXXX and network corporate for dispenser $XX million certification roughly complete million of $XX we to process. program $XX Our capital upgrade to our as million $XXX million to to $XX million $XX for of

average million longer XXXX. While year, million a critical we EBITDA midpoint Clearly, will of million habit for of that spirit, in articulated $XXX margins generate no a guidance And performed offer we around three-year not their of forecast be in year. use of gallon this EBITDA provide variety to of business margin all-in of we fuel several into per adjusted fuel updating basis. the while did of last guided business expect of guidance specific $X.XXX regular of about adjusted for same the above $XXX the guidance, on elements $XXX we other XXXX, In an our the range, the you when midpoint our models. XXXX would segments reported EBITDA all using for we guidance reasons and a resulting

the potential January math in to I the coming will plays encourage that non-GAAP you it’s information of planned. reconciliation contribution upside better reasonable the for on and GAAP expected, than add I of fuel the conclude, earnings all dollars to event back the this as interest also rest will expense. to review the depreciation is of there in in with release out to year

forecast and rest or In in could closing, the year we recognize the our result below dramatically the that corresponding above month, performance guidance or coming financial metrics. tomorrow, of internal anything in can happen

on our maintaining how can business any and internally are to our price or commodity single optimize what We do in We not, quarter the year’s given even should control performance. environment. nor a focus investors, on we single a performance value

and we to over high-quality believe our to deliver $XXX adjusted focus next have growth on years that our growing the EBITDA improvement. goal track goal and stated clearly We few million are relentless on through organic of continuous

our commitment appreciation. of to seek programs, Coupled our to allocation disciplined share capital with our maintain long-term we and share repurchase price trajectory

pleased and XXXX, our excited the with we rev As about Murphy we put USA are for outlook mirror investors. the and rearview engine in our the in performance XXXX and very for

Q&A. can note, And the open up operator, we on call that to

Mandeville first from [Operator with Chris comes question Instructions] The Jefferies.

Andrew. morning, good Hey

Good Chris. morning,

Can turning with might dynamics then to just for we on general competitive and on a just comps Maybe you more environment? have start-up the both a side, and quarter some elaborate Speak bit gallon the at negative, play on two-year on to respect fuel the been as can the pricing anything basis? the one-year else well? results that unfavorable little incorporate

Sure.

year, So, if latter of quarter. different. you and opportunity the fall we was This of year throughout an in saw with in part didn’t aggressive QX and run-up generated periods the prices remember gallon, off, that opportunity very actually a quarter. we the per side had margins steep throughout for the on We have $X.XX of last fell north to be and us sharply the volume very prices

we’ve in the to prices you quarter-on-quarter think we momentum but unprecedented So where had increase. running been started XXXX, lot the than then – simple falling then we case. it’s dynamic. that that’s in from And comparisons XXXX and And from up that of had XXXX, prices about to some past, the a seen if entering coming

seeing second We’re pretty year something falling different of the this January. in with prices now significantly half

we’re the margin So, and the with, a terms anything run-up didn’t of we attribute street on the continue the we in I And environment, just of play gain the didn’t sorts see of nature that all putting this say, optimal price in trends, to from in have kind opportunities almost fact, of amount to we in I have to of interest note competitive what’s of particular the dynamic, those volume. to those market of prices. or would opposite margin year, then more you would this to with going QX had

that XXXX. per look store did you’ll higher the to at we comp, contribution. a you fourth delivered Chris, and that same generating see in I you on quarter as would higher use, average actually if all- volume at better it use at margin, encourage to a retail of an That’s and month, comp the a $XXX,XXX actually a

the a but better with more due quarter fourth is really And flat environment XXXX of was in even what comp, environment. in So XXXX favorable a saw to so, XXXX to that a volatility quarter. still the then actually we rising

optimal to have the prices that thing sharp said, been it would As of dollars grow to gain the end. just to period at in volumes contribution which Andrew If just would that the because was had have an rise in materially lower not we not taken fuel resulted discount approach do. responsible share, and to

Okay.

be territory thus that a just reversion term, So, should fair on it comps the think the to say, far, we based we to some go-forward fuel on near gallon as is pricing dynamics, about expecting basis? of positive a back for

you for would per year, the And would. XXX,XXX expect guidance month absolutely to We gallons XXX,XXX with of store that.

to non I how margins, post comps help to the really see while tobacco guess, can turning a strategy on results continue then you tobacco anything And strong some front? in versus us to of MDR of understand is great. you why very of pressure and reflection the use else? much the Okay, continuing this the And merchandise.

Yes.

have merchandise into up fourth year, from the number contribution to was mentioned caused that up reclassification the non-tobacco some quarter of year contribution for OpEx items So, the in about be X.X%. margin We full margin X.X%. would

weighed to merchandising would theft were high in some And we performance. year the items around declines I practices that year-to-date also in say there as that so that led probably And adjustments full some made in QX. some

single approach XXXX to a or have. promotional going as return high a of MDR. for out store of That in probably we the digits. choice our That’s strategy non that candy, targets time more tobacco XXXX intensive reflect focus rolling to promotionally product in Our a more merchandise most elastic on associates’ we was

we associates had the on contest that mentioned And contest I October. of the in water. out call, As last blew a the

we comps of more positive that in there. of So, performance so to see type expect XXXX,

our complete our format different We the formats, stores. including larger continue of resets to

so and time. full hope tobacco it. of strategy mix little the comping And XXXX. we in changes then associates’ of a But XXXX we’ll store that. in some contribution. the that year A around probably the XXXX execution the some I be adjustments over and for that weighed bit some expect lot overall around of it those mix in growing started is that heavily to addresses was we by of Certainly, the merchandise component positive. It be

know of terms been a from it’s for tobacco? to to as same-store that one that’s there in was different bans contribution contribution a something don’t talk the ensure to vaping. just as sales XXXX I name the the what but All million seeing we about formal flavor just headwind any I the called right. from And then understand that little but if a in timeframe if talk then – you I can if I final we leap there $X the itself, in being January flavor finally, exactly related approach the can assuming, necessarily had out to I’m that just – somewhat about been QX? that you Or in apologize, year And forward regulation a similar you want itself, think bit pull ban? has you

Yes.

really enacted restriction. bans as is well the as XX been age that this So, flavor the

to our than of the in age we due believe XX average restriction look which estimate average, results. compliance that, we to if part higher program purchases industry than at XX-year-old industry in significantly So, our lower is

really that’s it so is. And what

Certainly, in that scenarios our midpoint And came the best was year. the throughout we probably the out bans earlier that in and worst-case rolled flavor year than we of planned. of outlined. kind probably the the age just originally we’ve So, restrictions

maybe And then year? leap

year, is Leap an extra Yes, always sorry. great. day

So isn’t day, I highest into the make which that but traffic account It’s the as Sunday, just to those well. for the been models. all sure a in built you believe, guidance on numbers have

Okay. Thanks guys.

with Bobby James. comes Your next question Raymond from Griffin

you This Griffin. Thank is for taking Good morning. Jimenez questions. for Alessandra Bobby on our

Good morning.

First, the in And into that margin MDR start drag heading if the see we start to quarter? line with we merchandise with should drag was expectations start could dissipate? your merchandise when to margin, from

consistent to it’s to – forward estimated, million amount $XXX the with $XXX the XX what we’ve going we’ve into is terms consistent XX of the contribution. is the of what basis So, guidance million with in points seen built

So uplift volumes, lot of if with for higher you’re contribution example, and to membership And MDR and get programs looking at tobacco, continue and higher participation then relative performance, share to require those associated that. deferrals the you’ll the discounts to the see continue a from that around going that, to you’re see the categories.

So, pretty numbers you the much built are see. as in, would

we’re significant impact ways looking cetera, customers, Murphy contribution then in might improvements liability but related Core-Mark And if you contract about seeing points the to margin negotiation a, the you kind So, think saw programs to efficiently, want down reset This of those years find to return, you that more to through. reset one-time the et there a giving the in by result the XX be balance contribution if a sweepstake-type which five drive like one-time as we’re and it margin. been flow programs, rewards basis ago, execute programs. we’ll to will, a has of

may adjustments those there as numbers that so be And well. some impact

that should program line the but a points, the be times of value kind of few total a top the you to expect but going derived having those, a adjustments should numbers like year, margin and this. to and from expect reevaluate some these is have also the to forward, been you same we there expect continue contribution We

tobacco? the that of do Okay. in the contribution Or from did business? other comps impacted you you And lift then mostly see a think areas

Yes.

So is the the from two also we’ve now, big side. on MDR areas but comp right fuel tobacco, seen performance clearly

program XXXX. for and up a signing year, knew we biggest us, that and uplift tobacco, to focus be smaller the But being two you demonstrate point in we be category, able will very in your had in fuel other in bigger the customers, to and did. The categories categories first

then programs, and have et And those base to so cetera, us as vendor across those gives that partner other findings offers, opportunity we customers. the leverage for our our results

leadership? potentially the business the maintain That’s current impacting the where Do operate see And above from range with fuel and Okay. could margins environment the pressures given industry an then smaller you helpful. still dynamics $X.XX cost lastly, to me, cost and $X.XXX operators. you your

do. What years using $X.XXX that is think, $X.XX that, of range We would ago. I stopped a we say couple to I

average. generated think there’s a I now three-year $X.XXX we’ve

you’d if certainly sort we’ve comfortable working the seen And haven’t movements the more back type can pressure around a reflect such We you than at you $X.XX believe look so there’s that to smaller commodity certainly either that type just that number, the experience well. go wide we’re would would what that the the operators, of to a average to competitive nor seen range. for Yes, data. as dynamics and NEX have

metrics. look at fourth retailers breakeven the can third, You quartile second,

for their as putting these headwinds into food, they’re up, pressures the get so on of is to them having to to investment. have achieve of EMV, the to by a go raise pressure And amount investment practices going not to investments. that get the they’re a many lot on but financial of them return into the their They put There need impacted prices offer, to investment a return maybe significant performance. continue to cost

volume and as results. we’ve margins, that environment, think our grow with guidance And mind. that to I perspective both in XXXX we’re same demonstrated our so XXXX able has in And

best Okay. you. in of detail and the Thank luck XXXX. appreciate I

you. Thank

question next comes from Your Royall JPMorgan. with John

Hey, taking guys. good for morning my questions. Thanks

comments, XQ year-over-year the XXXX store a appreciate drivers decline just I in I in color XQ. the could you better? strength if was wondering big the there. through of metric understand the talk had the the on to you on in OpEx, So, guys station little a guide the per just but some wanted

Sure.

needed that these categories and we’re be and some area up in supplies items showing was other and good had so were to merchandise cost that margin some in of driver. we that one the the So, reclass,

caught was there. the less Our on where had play out something and where maintenance year’s really That we just out we year; projects, was a the win. QX, and significant saw planned we up in got for quarter deferred break-fix earlier prior in significantly that maintenance

think two – probably I items. probably of so some were the biggest the those And

Great, thank you. get said healthy remaining And assume through program, ultimate you if was for XX% I kiosk you’re then I zero. you’re raze-and-rebuild talk much could you how What’s room is it’s the under can now, percentage you the and wondering there? running to? pace there think in kiosk conversions. just pretty I maintaining a not these

the No. talked things raze-and-rebuild that identify three we to before, use We’ve I mean, about candidates. criteria it there’s are

First, how larger a our mix XXXXs, to XX years. given got in And late XXXX, these part stores that building approaching And of started old in we the are they? XXXXs. we’ve XX early

we building So, stores were year. partner, over with Walmart; XXX a our

window up consideration. that of in number for are that a of kind there’s stores So,

the have do available to to have You land it.

acre. of And we a so the parcels that to over an quarter acre we land had an took possession well from when anywhere of ultimately ranged

be a square You that existing of have cooperation in rebuild raze-and-rebuild if an can’t to to distinguishes strong able economics the of I formats, on very, it those. to to and then it to and down, USA to one that’s economics. do kind – investment the very well at end returns of And tear our store, X,XXX you things it small need the get partner so as useful be really reinvestment do require Murphy with reinvestment, store the you that think and acre, the return could that. a really get And what do we the a foot life still – would the on on able take of an call quarter

so a And year. with stores XX

to long a to of north be got able XX years do that. runway, We’ve

think with capital get from investors stores accelerate than I questions would more XX we allocation that. to greater something to from is, the of that time one you than ever time

repurchases, think issues to a could NTA and terms economics or I about ability XX we greater. between And stores and stores cost into so aren’t perhaps discipline if that a our start in maintaining running in be a repurchase of growth maintenance lever return we and we up, And we we And the number if consider. year deem ramping share certainly seeing as that new and share have program a competitive, to the allocation pivot think can of if that growth capital us use hey, a of, on our cause then higher rethink we’re and balance capital. those degradation the to higher something the better that’s

helpful. Very Thank you.

we from have ahead. [Operator Instructions] question And with a Bienvenu Benjamin Stephens. Go

Hey, thanks. Good morning.

Good morning, Ben.

I your for to surprised I start XXXX. D&A. with a think, question It’s, for on wanted most today outlook

expense material next could you talk what’s such about If that driving D&A year, just a increase in line item?

Are you G&A? asking DD&A, or about

and amortization. depreciation Sorry, the

really, ramp-up to with up, build new in program, depreciation similar what it year, building The our last the did is sites. more going

written adding that’s that activities, balances And overall the to bottom off. incremental increase also so also in within And those we have be have raze-and-rebuild line. G&A unamortized the with to

depreciation into So, we have too. that some built number, accelerated

when fuel midpoint metrics about wanted kind particular, I surprised line you’ve of about general. that provided in it you to And upside? you – guidance, in XXXX obviously enough. a you to to And guys proved look you think guidance I’m be ask fair in on at items. the Okay, number downside curious to the environment of drive XXXX variables the when what conservative prices that around we fuel, for of market changes impact and upside to outside just in be how XXXX, of about thinking XXXX? or should what are the could

to initiatives. certain ahead too in far not practice our of usually get of it’s Ben, Well, Sure. terms ourselves

the and the be XXXX, think it I a volume turned delivered initiative, throughout environment and we guess, our we was say year. the our were in the I able line our massive fuel refined and to volume I of retail product over ability prices pricing the surprise if grow in Certainly, and what surprise, that. course that expectation run-up grow Colonial about was in tightened to kind space the but the year the year. the and margins wouldn’t it there So to we positive. accomplishments that of up and able market in was do QX through whole would

haven’t We end me talked and on delightful two is for team. three about RINs calls, or in which our this

And so lot product stabilization of refined there’s the market a think from in standpoint. I that just

see play got And of impact you initiatives so the strategic to our out.

I members times per tobacco shouldn’t think our surprise, density five other you Reward into public the for number customers an we a guess, times have three when value have the then of of was about translate versus the six ability it the times to our that when store I have. attractive industry Murphy up. into our seeing started a doing think volume, we surprise signing industry seeing Drive But for platform to manufacturing comps customers. some translate partners, and that been that fuel

partners. tobacco significant aggressive facing. would per betting all the but in been against in the certainly industry headwinds have as didn’t it that on the And We guidance the pretty uplift the in the deliver about out, all better rest store was of delivering come, volumes return seeing value-conscious that think our a makes investment build ability into customer, of I our on doing to when a their kind sense it value supplier through our played unique that for capability of marketing you focus, so, think

you both conviction, stores, we’re raze-and-rebuild So, us I stores. stores, our of together two and out And and came I our and components foot new-to-industry raze-and-rebuild said, those stores seeing the gives nicely. which those just performance square with that the X,XXX to higher add just as when continue all think

of areas as two years, the very to higher deliver of XXXX, so you guidance some continue to to XXXX, even And when and continue and on in now profitably, with we volume those, on part So, merchandise those that that and them, we talking about think and of the doing out expand really the actually beginning a delivered that think planning parts business well. much again, back recap, where contribution right? were are we’ve a initiatives continue to and there can headwinds at script grow that highlighted we’ve about I kind operate level, was, that for they just my were of going around intentional the been

risks think and the about to markets are to We it. the our fuel do XXXX. in want right some growth volume what maintain of I As certainly have

be XXXX, we we run we IMO it going I these was factor, seen haven’t to see that. a probably bigger think and think, big and two ago, ups, thought I lot years

So, what we have especially when higher sort this of et commodity environment cetera. driving might year, the the volumes, of second season, we year, half have the in

further attractive. regulations, falling see to et regulations those period, seen tobacco. prices that going We’ve there are be Are going cetera, on could generally impact which that that differentially. Or We’re done? category to restrictions, more some in

only good concerned got any would so a the I think treatment sight stores, have not too wages line of very we’ve built new there. FLSA that on impact certainly, in, number benefits, our minimum the and of small

merchandise merchandise margin ask, thinking That’s the sales growth, helpful. to I to it similar and but What, you of kind something have XXXX, want merchandise for for be sounded negatively compression. relates to strong growth we of mix contribution continued tobacco. you like should that if that, given non anything, it merchandise? in and margin margins the really the obviously, as obviously, Because tobacco impacted Because of sales lower is had relative merchandise? XXXX to strong considered XXXX

that what opine to be on extent, that, we the about you to should for can expect think in So, helpful us would XXXX?

Yes.

associated the unit of we will the But But what lot would tobacco the within do so fairly remain can’t day, don’t walk I is described the cigarettes impact vapor higher-margin But with relatively be margin. and expect detailed take impact would probably take – on I not a margin. we headwinds So, be be that category, MDR That the say of with a end unit the to on I the the to contribution margin an dollars. bank, that, at consistent, unit the we will there. to product. the which is the unfavorable strong.

versus overall generally look grow margin said, we high around single should well. the to contribution, X%. non-tobacco we as That As contribution digits improve as

so helpful. Okay. Thanks That’s helpful. That’s much.

Hunt Bryan Fargo And with Instructions] from [Operator Securities. a have Wells we question

for time. flow. – I for thank you Yes. think when cash about at I framework your your look When your

or if the the Is interest, CapEx would et a dramatically the free prices direction one believe share reason cash talked million and any flow, at other? you’ve fact of it’ll share EBITDA current the other, to you one looks about fluctuate repurchase, there be Given where level. direction move like $XXX on or in cetera. shares beyond roughly to that if that marginally million were buying taxes, It

share last a authorized program to deviate million from don’t we repurchase So, $XXX expect year, and we that.

So in period. million two-year I year question. a repurchase We’ll think to do achieve more of shares that $XXX a probably a answers your million than

about is, cigarette last the every on question on but early there inflation, the Andrew, mix? front, Sodas, on there, minimum Very the when at wage, good. My cetera, When you’re across second lot merchandising either your inflation et talked right. just coffee, look a getting of get year you year, you you we and within merchandising risk surprises you look are that touched any question. All

really that, it’s really, standpoint. dramatic but that too It’s from tell No. early there’s or nothing see to

increases with on history trends ratable, And there cost that. I that. long pretty and of tobacco offsetting were that industry think seen the there’s associated some volume we’ve a are

and we in we last drinks, year but to shift our anything the And from the anticipate soft think products there. products think what carbonated the first some year year of don’t impact from I increases other saw price before, rest saw continued to as for do I CSD of in seen that. XX the year days views the I on we’ve the well,

Thanks me. time. for from it That’s your

you. Thank

the call time, the presenters. And I to at this over turn will

the call you for joining thank Great. Well, today.

plans we’re in about – as that our guidance. we performance we’ve XXXX really XXXX. a laid executed performance. against great forward exceptional And As to laid delivered we’re out The in our said, excited looking out,

support. appreciate we your you. Thank So,

today’s gentlemen, call. this conference Ladies participating. you concludes and for Thank

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