Murphy USA (MUSA) 29 Oct 212021 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Murphy USA Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Christian Pikul. sir. ahead, go Please

Thank for morning. us. you, Good joining everyone, Yes.

Donnie are considered with President Vice As will and give and the Andrew, custom, overview results comments today After President Vice Andrew some Controller. CFO; us Executive is the Mindy West, me during Clyde, XXXX. keep from forward-looking Reform portion, President some of that and Mindy up and and we'll of an mind Q&A in Smith, defined the financial CEO; open as Act the comments statements call this made the in will Litigation including to be Q&A. Please Securities call, the Private of

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

For forward-looking to factors, of XX-K, takes X-K, see and Murphy Murphy latest update recent publicly risk or no XX-Q, the statements. USA USA SEC any filings. Forms other duty further discussion please revise

may we performance accounting call, to measures principles or today's accepted conform not also generally During do GAAP. that certain provide

the provided with these Andrew. be earnings call release, on website. our can schedules reconcile section on to With as Investors results of of non-GAAP the to turn press which GAAP measures I that, our will found have part over a We basis reported the

Murphy was of financial we operating ensure pleased quarter, to why Christian. those expect current Good the reasons grow we the time. performance, to QX with challenges facing which built very discussed advantage us strong Last joining showcase to we is were the delivery uniquely you, team Thank how continues top in and to We morning, competitive overcame and the everyone advantage business XX welcome challenges today. and results. continue thrive environment, our believe the to model to USA's business over

results, store is associates thanks trending demonstrating resilience saw investors financial dedicated facing those be and continued and overcame ongoing for evident impressive and we once our really It to issues. Third the chain to of Yet, We quarter different. staff, to our that to business. crude headwinds translating again supply wasn't of higher USA. prices, challenges all another our challenges, ultimately the labor delivered tailwinds more is quarter industry that further Murphy are us and our should becoming support

we in In these with headwinds investors fact, subsequent and virtual acknowledge are exist September, at in conferences conversations impactful. that

we follow-up are the for also average to in these margins logical better investors fuel pressures questions breakeven However, understand retailer. the ultimately encourage second ask how third and manifesting to higher

have said how embrace or margins, some industry may to fuel the when and much. we to been if has there to what from have to reluctance While time begun structural for narrative change breakeven some changes

view delivered keeping should a view impact give different we question I quarter business. So in to slightly want the one and results your you of we how this financial with mind, that simple of think it our

million. store gallon $X.XX gallons per looking you of OpEx get results, billion roughly then So overhead of the out back million contribution of merchandise the of field total roughly $XX and or about $X.XX you our X.X [indiscernible] gallon, and think per marketing roughly $X.XX sold, at $X.XX gallon, gallon all about per per about G&A if profit on $XXX

way, G&A, capital gallon taxes, X.X that importantly, fees billion dividend, Then, of all about about fund component share to corporate $XX.XX per rent, at When our the per quarter. you roughly gallon of gallon, net gets is capital $X.XX generating of margin for on supporting costs to million our $X.XX the profit, and back $X.XX to out and structure So depreciation per the decisions. essentially you argument, payment which the overhead. allocation the essentially roughly assets, the covered run [indiscernible] per sake per on $XXX our the gallons business and of earnings for stream get of Most all of alone gallon, debt, which if the operating fuel the you of field-related think look the our all cash of you our merchandise XXX% including our and is EBITDA contribution sold the service of has capital, stores, repurchases. growth the our flow our the in interest maintenance about fuel

earnings First, industry our expected advantage. So and higher how huge our fuel are about is and do think provides? average volumes business than a we our public stream the the it which peers,

enhance component to and to network, across positioned future total food thanks headwinds that also will to lead to fuel And but structural grow best initiatives of believe the low and high-volume Last, our exposure across low-cost not benefits Second, is are And our brand are we a in also to with our we peers. QuickChek, to even public costs that demonstrated advantaged greater time less structure, of price customer our than business, have our and peers to margins we merchandise nonfuel other continue our inflation with supply the product contribution everyday the fuel are breakeven have the high-margin with higher we off over likely prices to volatile elevated we grow seeing trends. our margin is only price change increasing sensitivity profits. absorb amongst upside share. position segments, our

are our on position. and we grow X goals advantaged sustain forward, overarching to value focused Going

to merchandise expand our First, will we contribution efficiently. continue

Put our the cost higher growth industry But operating merchandise We offset selling are in facing. contribution. to immune our is just more have offset stuff. pressures by headwinds situation, we these by not largely simply, the in been

laser-focused on profitably. our sustaining growing market share are and we fuel Second,

demonstrating our doing higher new volumes, strategies, which our through and are stores, our pricing this and are fuel tactics, fuel We supply. optimizing

of the successful which capital. high-quality stores, profitably a share track initiatives better continue integration first through the organic position record flow in price value, of our third, and expansion time. and market priorities strategic These around and QuickChek sustaining grow invest and EBITDA building assets. free productivity calls So successful growth we the to continue delivering And everyday we our we will cash to to over low will have on grow are

going industry. seeing formula Beyond our And our business view to we growth we and modest our these as shares the have retail for efficient The to grow the the outlook profitability. initiatives, valuation. largest pull in the of of our likely the advantage appreciate. headwinds, of time, fuel will we're our will given part in was have to of value By can our that our fuel expected fuel business and power future our sector. the overcome our since future outsized less the demonstrated the expansion to the model. to levers in merchandise continue a when margins the complementing they efficient with [indiscernible] powerful near headwinds and program, who committed increase term, the multiple business reflecting Ever the for exposure breakeven agile to our business more over earnings perception maintain share enduring are exposure fewer trending our for last, maintain fuel distribution piece are higher spin, the and creation given X minds makes we our business, market's growth we our repurchase as and resilient is dividend assigned operators fuel-oriented multiple, growing the yield continue continue less business What player the business, of is value magnified of sell in only have to so value

than of temporary pondering trending So less be driver earnings the higher this period levels I'm or over lower [indiscernible] up a believe going point, power. a assigning fact, fuel. to be our will which we to rather call in much fearing should than premium Mindy investors of seen risk about some we've to to And historically, the happen at but we at should call how turn Q&A. thinking to before now open assign powerful margins,

representing good of which third Andrew, standard was versus is the remainder are Total taxes, as captured were in million long-term $XX liabilities, and and Total quarter or gallon versus same EBITDA, XXXX, period versus $XXX retail approximately items the quarter our third the quarter the paid net for everyone. million of period. current of the the $XXX.X balance per $XXX.X reduction September in in and to approximately XXXX prior was was the third billion term Thanks, some debt revenue annum of as gasoline long-term I'm million in they in in year $X.XX $X.X prices quarter depreciation, which and inclusive XXXX. expense. obligations lease quarter $X.X quickly. of in was loan in was not amortization income $X.X the third in Adjusted billion last sheet interest, in million the amortization year, morning, X% going $XX.X of before operating review of through XX Average QuickChek. per million billion, on $X.X versus third earnings

QuickChek Our report we totaled was $XX and credit September X spend store X Cash our with currently stores. under pressures at to capital attributable lenders has opened as have Express program, Murphy approximately $XX is new Andrew. majority million supply the sites X of to QuickChek $XXX Murphy cash X third or costs and construction, to $XXX.X which and result and $XXX Express call and capital balance directed which we to of projects. opened These year. as million outstanding million back I to new range our October, likely new is to our over lower Thank a million of QuickChek Capital turn raze-and-rebuild million, approximately in the we quarter where sites quarter ratio, overall undrawn. next And the revolving you, the end adjusted new construction of XX million $X guided in new X.Xx. XX. of XX We leverage construction, to addition to for facility of figures store will expenditures was new closer QuickChek, new into everyone. $XX our were push will roughly X $XXX the equivalents and new build much end in including currently now we chain million the be impacting some

Thanks, quarter. second I to than And earlier, quarter. alluded It's on dramatically Mindy. different another the been as great that paper wasn't one

we explain look aren't wanted detail when simple So certain around just we can little which color results, financial performance be business at add the deep be release. more metrics, the on thoughtful variances digging in when how to a or in the to we we

drivers the resonate will We lines to that, the are for performance we bottom operator, profit line foreseeable with continue to top and we expect these critical should business With in investors, open future. Q&A. and growing delivering able that the clearly our for be

the question Griffin Raymond of from line [Operator first comes Bobby of Instructions] Your James.

Andrew, I just in - to on touch little of want Mindy's a first comments.

I XXXX, be lot is worse of it the here projects. guys you - in stores there where incrementally or Is could know of same got still some it Just do the for pipeline the construction and pipeline delays is XXXX? side in further work outlook around a the

what Yes. to The very about. numbers we are similar talked

a year-end, the be The stuff updated in As first we like that, to permitting year. handful not second robust approaching looks that from may look January of of there shift that's for the openings at next but standpoint pipeline or week really overall and plan. the of material number the the

QuickChek XX XX We do I for than we're between we'll more did Murphy 'XX, still coming next and think and be X the raze-and-rebuild, stores, got and target stores pipeline. to XX looking Murphy we've right into year. QuickChek our between now, about for XX -

So If and the solid. week the first from it's the or we January, slips into updated, looks of only looks second XXXX numbers beyond good. very and prior pipeline something

also still helpful. in. integrated That's getting great. And QuickChek Okay, on we're station other OpEx, then and

maybe to clean to the happens seasonality quarter, our take the bit. case the trying think and account that to or that line so base rate $XXX of that us a up right kind then about So models in in back Is into is million usual little third the of for item?

runs But there clear place next we'll cost terms guidance good I call a for took full think combined the seasonal good be I that on mean, basis. a were at that that pretty kind in [indiscernible] certainly estimate. of in some reflect about the what a in of business Q measure business. increases the probably of ongoing that's year

pretty the of chain, the per a a X-year And in it's business also some for simple side limit look chain and to way you the function Okay. tough on very gallon remarks, with business me, healthy then side, more your that in kind just I comparisons rate. when of the prepared of still down sales, you detail the at is supply and part stack, The lastly mentioned things. the the and appreciate or look, the the growing a inside supply of breaking Andrew, at did things it that's were pennies of smallest and prior store decline comps year to

Yes. tobacco a sales Look, I'd thing That's on Bobby. great do basis, on got and question, look say XX% so XX% the tobacco and X-year on first non-tobacco. at a And that is stack, really essentially you've is we what period, the share held this mean on side. last gains that had is outsized we saying year held to those. on I and we in

- shift had The the merchandise. side there shifted merchandise of this non-tobacco size mean, I general up increases there sales so increase the the excess the second of merchandise mix I thing general decline. was back. PPE, the and we than more for general half Candy alternative all the snacks, [indiscernible] on made mean, in we was is, successfully snacks

successfully shifted mix. we the So

I'd stack, that's say you impactful. at look X-year a on but is a thing margin second really X-year even if on The basis,

think So some we tobacco, we're especially, starting on about volume. to declines see

in got And will record strong the to from in externalities, will the successful. stores engaged being to I a through an manufacturers customers telling engaged we've nicotine we promotions. to other are you And As trend the really allow I a we of and and which sales want deliver outpace extra October. manufacturers some And thing industry [indiscernible] September. who of see continue and just a got industry, who We back little commissions ended a products. more total help there that's standpoint, me sell we that candy earn the the I'd so share quarter little we in what normal. we've us. October, the to get on is think that say economy [indiscernible] helping recover buying. associates month the promotion ran us are if their and just to of guess to [indiscernible], a got from variety We've out interference things will, customers, less need got just there But and see be and

little than detail more growth just to that hopefully, at helps sales you the and encourage bit look So a the emerging I growth?

appreciate it. year. Best I helpful. luck the No, running Absolutely. Very here out

Great. Thanks.

Next the of question Herzog Goldman Bonnie comes of from line Sachs.

here It's I've for actually Sam sitting Bonnie. [ph], Reid been

sense here. And they fuel even maybe a and how quarter, just little trended month August, September maybe talk during the I is to wanted pivot So maybe specifically bit in the about in that margins versus almost here. a get of over and October now

maybe fuel that's Just very to that it's maybe price see know next obviously get of or sort for year, Just still sense to how but price And get should sense a think if this as margins maybe rising looking QX? I especially separately, fuel we elevated do about fuel early, in environment environment how continue? wanted we to well. of your then as

the $X.XX, $X.XX, was across thing margin first say remarkably the the $X.XX. months, is Well, Sure. I'd similar,

And PS&W, $XX.XX. you all a $X.XX add in the to not you get whole there. retail, the of variability then $X.XX of lot So

things the same So question. everyone passed single year, of would kind really I rise, think and recent because margins the I the maybe there's get we once and saw to And us would as prices. else prices higher as rising Also but but through. your magnitude. to price I from knows I in double-digit of We've credit environment, we fees Typically, significant seen we prices the rising normalized for last when they typically notion would behave higher levels, prices elevated mean, separate similar a X as have margins. mid- retail elevated response it's of falling know, margins contract rising in prices high saw environment this get been card are margins see you rising they say as year. price you I the shared, and that digit in [indiscernible] just to

The difference a and there's a is have huge would while other between say gallon $X $X thing gallon. prices, a we elevated I

customers you as over become get First, more $X. price-sensitive

share. brands So like the take Murphy value

we elasticity per And back as to if a that point fill not do customers, what had gallons gallons there down. making consumers think become choices customers, to go look around down, didn't they we all the we as a about. utilities key behavior really macro then see until low-income you started start they cars, just see total And was XXXX, the Now the which prior appeared. you saw disappeared buying And as demand smart $X gallon sensitive. approaching just go price we is included but see really don't quickly

to thing teeing We to the But had to average price more we're rundowns, rising price-sensitive, when that's think margin our to is that level. environment this I'd we I low more are position. have environment. at price steeply be going you great guess the have help run-ups effects everyday seeing, seeing, environment. these for isn't better rising going other win normalized add actually, we're it, the for we're up in retailer that and So And same elevated us a the with more with and environment costs going those see the a to going such pass-through levers that, a a couldn't customers In but environment. to have higher about

And sales. have quarter, we'll model levers the have about we low-cost our frankly, in we with, is expectation this like a increases offset scale, We with offset merchandise the start cost. to operating we've the cost and did to to of talked some the continue

So we're through flow fuel line. for all these seeing the to margins us that higher bottom

in helpful. Maybe super just really you No, Awesome. Thank another That's to one Andrew. quickly. much. here so sneak

beverage side. Just on the

little beverages, detail something are of gas on release immediate prices? looking behavior consumer the some especially seeing, press in the in media you another on in consumption? any seeing those bit given perspective, changes And a around what maybe consumption just it just you more are think you're maybe then have but I trends at from we said might in seeing beverages,

I mean really offset other really teas, CSD We mix and year-over-year. There's aren't. waters, see you challenges nice energy up drinks, by - is beverage picked being number the obviously products. that the within

the the the destination innovation food or the of a attached be store. basket largely They So of fuel an part in the And case or the destination in there. item to continued continue tobacco has the part big win. to been Murphy is to QuickChek side, other

And food wash have to so consumers down something. their with

we're beverages. the growth so the And into synergy seeing that opportunities in continued work with improvements QuickChek, get make to on frankly, And we side. some as see

from question [indiscernible]. the comes line next Your of

So, business. about to integrating We're models. that into merchandise but a QuickChek similar question a I ask question our the want to asked, Bobby still

You what the around of is for normal some expenses. commentary noted new kind operating

strength driven the of One to of was there us heavily offer in in merchandise margin, rate, of is result stood I that by the just color the heavily run sort level looks which QuickChek. of we be driven can seasonality mix, much of expect by how would things to the be is this you which out margin? Any that type should Well, XX.X% helpful. assume

to the extent a ground items At well. QuickChek, last stores. We've the on been and X general a say stores Murphy weeks, had than improvement salty would take year-over-year, merchandise a candy, really price tailwinds all of more and on the opened snacks they've in during number record really We've the the see alternative certain the the QuickChek mean COVID. Murphy the both sales on just at side, in to really we we hit well beverages, able I there. food performed all few food we Well, saw side, offsetting continue mix. I nice to

as things unit a a standpoint. And essence number I sustainable, your describe which question of that I so there's the just would think is of from margin

little think well mix our the getting the and it less So better, plays model. there's a Murphy margin for pricing on I all is is probably attractive, on side, promotion

Okay, great. is allocation. Perfect. My capital second question about

know the lot before commitment want back bought I this bigger less few been quarter, of in has a spend ago, a with a I bit asked stock the You continuing quarter. back quarters of buyback. ebbs second question I picture integrate and QuickChek. you to to within little bet - paradigm flows you're bought but ask the think guys this

M&A is levers these all we to on got just M&A one-and-done Was consider still You've circumstantial? or forward? it going allocation. Is pull capital a should it incremental something

at do crossing clearly, Yes. you opportunities a your certainly, market, And Look, out all lot things desk. And on seeing it's looked been of there's question. so there good activity a a the find much and yourself more you sudden, one, before. we'd when

we I we a how which that's think we've opportunities, as capability things really transformational, building, before strategic, would see thought about something see described we It's M&A. either that don't massively be buying think QuickChek, in the buying a honest-to-goodness, food to an serve of hard quick that kind C-store do like build. I restaurant. brands other leapfrogged sector it's QSR. And in brands ourselves, We to

think that midsized assets, that like assets challenges, a the older QuickChek. your QSR are weaker I And change know assets, there as not be sale your to offer single-wall older could for a would environmental were the I most of well-positioned get think - capabilities apply including last and synergies, assets. market you say I tanks, which when generally XX-year enhanced about XX might in for quality And your also we synergies. synergy October,

And larger in acquire plenty rollup some a undifferentiated as play, looking they retailers part of scale who there to stores. to so either somewhat or those, ways, are out there of are etcetera. And become get

a I the you terms and really make So, acquisition done QuickChek, intent buy a if never to of never behind about was strategic would it in but say one capability. think to

to you or the seen that and toehold and model a something at can that. get do there I assets, thought were can fit But apply you be that may we've you looking and position what doesn't Murphy If quality might profile. really a enter taken something you could they tell look if markets you we like where everything is to capability Express out saw new about that think you you unique that

assign put zero that wouldn't but on would a it. list I much I the to lower probability probability So,

perfect. Okay, Thanks.

of comes Your next Morgan. John line of J.P. question Royall the from

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

same-store my question is on volumes. fuel So, first

I I a think doing X-year I'm around conference somewhere think XX%. finished call, had about the volumes. being XX% on you talked the you right basis, math XXXX July And of on if last about the quarter here,

is on there apologize I I'm were any don't if in September? demand, color And I trending. if degradation how remarks, it correctly? and looking opening was October August So And some anything I but there on XQ at if missed the that actually in then, think you've mentioned and

So same-store there would be on any update volume appreciated.

tale quarter macro or to months it still us look, from macro you're to in hard John, our demand, July it's but we - near-term more I from strong. every maintain same a retail, on challenged XX Yes. that the best is was markets to X a mean, in position. little XX% without for hindsight XX%. on everyday actually It's side. our started indicators, rising of a a certainly, price weeks you're bit low want time if standpoint, say always in environment, are demand But price down all - just our QuickChek

that slightly so higher are So XX% above period. stronger. is that, that's recovery which you remains significantly share [indiscernible] asked, XXXX, month-to-date, our than in view is [indiscernible] Margins probably XXXX. margins, for total elevated. And contribution around it's that held we

XX%, a XX%, see the you say, into you're is, we XX% against. to that, when kind that And pre-COVID. some And so look, big bigger that there of a comping I to XX% get and do more storm look XX% range, question range well, was or weeks. that and back can like event something out persistent often, But think you of

But to more today's all very for than expansion the that's kind we've going merchandise side, it think offset to of that able continues operating the all I which plays of online on the in now, range. increases us, And with uniqueness framed because model. of for straight that our cost we're call, the XXs persistent noted right make-up that. seems margin, So low just with and as

- that Great, you And I the your And initial just thank several to go $X.XX view the $X.XX margin fuel think Obviously, it's to ago. an year-to-date. the for sort you. million. you we're of first wanted over then think we're quarters fuel $XXX back EBITDA $XXX of had now I year illustrative through that time. X million And had about at quarters, of margin

very are perhaps tweaked obvious you've of drivers just things some are that that's more around the a margin else know different the a kind margin, at all we other that pieces little it's some about than the I there's environment, you of other can from fuel the that $XXX sort anything figures lot guidance OpEx. pull and and So But bit, of view. highlight little know headline big along this looking you the about, that when different than were a million bit now way

and in we into make for Yes. agnostic how demand because volume the about recover kind right? up Also Well some it were as you look, the margins. coming the first to wrong, view thing I would say would a is would we of year ways, in had

period, I period impact Beyond on didn't supply, I being that cost the cost of labor for something don't chain, labor the as other shortages COVID off, of have chain those that - recovery of really which inflation, impact you to labor logistics, that impacted typical saw market to supply the impact pass-through our fuel on factors always of the the on the it time the how would on we the in subscribe the in government way. this this reaction, that all price anticipate that business extremely more mean, how made the around elevate impacted rising to And retailer, and profitability this quickly their positive we typical a that certainly just reaction wages, in while space. difficult retailer inflation, think notion pass-through, being supply shortages degree breakeven maintain the think and I higher their

this to year, I is would built business I environment. is tell that's as about be our noted again, time. What relative and really I a in $XXX not chips you within terms numbers say, industry. number in you over look, expect of on more $XXX you higher to in that think year million allocating where it going the can basis, right? contribution, have - is and to in million XXXX contribution. XX% the store next to plan think And lead that to think closer business month in of or $XXX capital somewhere - to were the for be, you've about how upside we 'XX uniquely but million you as In think you is million the about the billion planning So thrive XX% a for fuel sure. advantage next It's XXX%? that for competitive probably model contribution to XXXX, In fuel to business of to I'm fuel and $XXX business XXXX historical advantaged one right, about on of We I positioning around XXXX, going the lot downside got conferences business. the typically or $X than investor middle,

be XXXX of in of guessing probably helpful that's advantage terms but in how be our business of wrong the I think model. hopefully, we're and right evolves to terms aspects So as we'll going demonstrating

question going I impossible if then It's in. And you. to Thank helpful. could on another squeeze just XXXX. really that's more one Yes, be

your full the seems revised with like OpEx line tracking in side, on station the for on So you're guidance it OpEx year.

of we in on some forth year. the quarter. on color got think now of you've - a lot than moving the year? about the But and any know level this $XX labor side I and Just back competitors where are of next lot kind any putting at fully appreciate various inflation that I realize million pieces next how handling of out better next your are. looking But you're that about color, into into just sort just guidance and that you're going should thinking kind a obviously we

Yes. to just you. make going way really I'm it maybe go the described quarter. the I back this simple for And will

time. of the You did a great job quarter kind this estimating

You number, nailed congratulations. so the

operating cost the with increases will So etcetera, think supply, to line we the to inflation, the going initiatives, merchandise have. improvement that more where think, stores, are the long-term new our just get than more number, other right, your from in about is, offset labor contribution, I view

be a higher margin the sustains higher And business, the a so the and is it if that business, you advantage the value this I we're gallons And player helps sector. - to EBITDA. estimate right, that then actually, change it's our to given think when notion easy fuel can lower risk of risk level, right really at in going get

Makes sense. much. Thanks very

Great.

This concludes remarks? Are there closing the any Q&A session.

joining today. for Thanks right. All

next last we of the my we ongoing look and think quarter, year, to how you quarter. business. the Thank to comments we view forward strength I and how also you, probably our next view talking summarized

today's you call. This conference Thank for participating. concludes

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