Murphy USA (MUSA) 3 Aug 232023 Q2 Earnings call transcript

Good morning, and welcome to the Murphy USA Second Quarter 2023 Earnings Conference Call. My name is Brianna, and I will be your conference operator today. [Operator Instructions]

I will now turn the call over to Christian Pikul, Vice President of Investor Relations. Please go ahead.

Yes. Briana. Thanks, everyone. morning, Good joining today. for us you all Thank With Officer; and Mindy Andrew Clyde, and Chief Chief Executive President and Controller. President West, Vice Officer; Donnie me and are Financial Smith, Executive Vice President Andrew, from results to financial we Q&A. comments opening then some Mindy provide of and the an up open will will the overview call After

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

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

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

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

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

I'll that, turn over the Andrew. With to call

you, to us everyone and morning, today. Christian. joining Good Thank welcome

which excited enduring business our second are stakeholders. reaffirms sustainable our strategy to exceptional We value our the driving model quarter discuss of commitment performance, strength our to and and for all

OPUS achieved we in and Beginning including fuel, financial market May to QX QX, our gains last by underpinned in June, with across nearly volumes in survey major the quarter continued results we USA and reported geographies. another categories. of year held volumes outperform impressive Murphy continued strength flat share volume positive all as in achieved APSM

categories. broad strength total market our and sales continued sales share category affordability tobacco, saw momentum, units Tobacco our to we customers, led gains led volume non-tobacco XX% promote grew based contribution and built on energy in and growth XX%. all across up while as over in margin in non-tobacco We subcategories and merchandise and sales provide share by by to up

accelerated margins the with challenges across our of with in and and June. and beverage impact and the QX record in X%, enterprise record sales to posted margin and sales stores continued food X% Northeast, Food the that also QX months in beverage QuickChek respectively. Despite traffic some up May

the eases, cost On high less already customers of model increases as needs. QX on year. operating than as and reigns growth together wage targeted their cost to prior side, we overtime, X% associate in our leverage meet engagement to mission per affordably saw non-discretionary from low continued scale, the as we inflation expense focus reduce lap Notably, help our store our

about consider take the I back of results from high are think benign taking relatively exceptional. lapping quarter place If the extraordinary and environment a then as nothing external period, we even second bar prior the with our year the view step and operating I more

instability, The prices, supply way. retailers. been Turning fuel the own due past as one exogenous margins, margins rising curve its price specifically and offs. significantly in distinct fall industry including by marginal constant characterized can and was cost be volatility, pandemic-driven years quarter every for headwinds to has traffic to steeply precipitous X geopolitical demand destruction, and fuel Each the severe events, steepened higher

see Some period. sustainable, the are reticent and normal they in higher been and investors analysts margins more even that believe a to have results to wanted

remarkable onetime following in and environment of macro three the nothing was uncertainty events, years absolutely Well, QX. there about

more Murphy not. There USA. me, margins?" The answer, no, at the that In debate at My about thing may months, fuel find fact, $X.XXX really of of you are us is margins clear. investors on again we higher quarter no gallon. and high course, recent "Are is, In reporting to once end fuel we we range the analysts answer all-in debating remarkable the appears are only quite per have internal asked still our is

know ahead, the not quarter not as we Looking a while the remarkable rest dynamics QX, expect XXXX. of third the do quarter of market that as define we do will

we achieved significant gains, XXXX, over or and peers gallons while per of total XX% $X.XX margins QX reported During share growing flat volumes. declining gallon, all-in

we As prolonged we in every quarter, of only margins these gains to period eight years. six exceptional prices and not previously, of result have were high stated rapidly repeatable the a are but normal year instead falling prior a that witness

about accordingly. year we expectations and stack, but comparison be want that difficult don't I to talking particularly like a set two know QX will

As X%. an gallons year two to lead stack declines while result this likely traffic X% as of our still overall in-store peers would with stack of while year X%, we focused gains are year promotions last share two drive on Internally, in a stores as sustaining strategy. QX program, and flat our year loyalty to continuing in would a pricing through hypothetical, same-store industry leading high

two share where maintaining would strong fully be we long-term gains demonstrate fuel while do any environment, ambitious would the QX for stack believe execution against our greater an volumes from would help year X% some that need goal, I And strategy. macro than

Turning to merchandise.

performance for I As I continue speak into of strong at half believe second second beginning we themselves. year. the the and the results call, really seeing are that pleased this with the mentioned of quarter the momentum

and I time of little are manifesting enterprise. want a talking the integration synergies bit how exciting across QuickChek more the today about the other to spend benefits and aspects So

in and call. store some to recognizing material category. beverage coalescing performance drivers help companies are the into sustainable innovation business, performance, early this activities learnings benefits so are stages from and of the particularly examples menu as We of promotional combined of and both want and on The enhanced product food well to as in marketing the I significant improve and share

branded with and promotions. Starting products

improvements can store engage We are customers think which with in further significant to and upon fuel of tobacco. implement We a profitability. creating this outside our block and new opportunities traffic is building we

USA watermelon strong subsequently was were at QuickChek, quickly which cups dough time introduced stores. saw frozen reimagined QuickChek introduced edible a cookie Murphy stores. brownie we of at as Murphy branded smoothie example, Sour Similarly, followed up Patch in coolers and offer limited an time open first As bites slushy sales a the made-to-order limited from and product Kids

day promotional introduced grab-and-go of margins the successfully for breakfast grew in QC's level X multiple for the and X Having sandwiches, items XX% awareness categories of sales have by $X increased for where promotions quarter, we we both across in parts. Murphy similar

to time accelerate inside come across expect and even more promotions the the XXXX, customers stores. enterprise giving to in of offers We of the second reason half use limited our

identify test strong have environment USA these team is products to the format with that and QuickChek learn has high perfect potential QuickChek The innovation. innovation to Turning overlap Murphy leading and the been efforts. customers,

national QC creating including a frozen drink QC. traffic well-known and frozen exclusive with with products infusions, develop store iced we driving energy new and Prime and flavored building partnered exclusive instance, both sugar-free on brands, and a Bull to at with For basket Red in new category

QC, In Murphy introduction innovations beverage nitro new lead coffee to to expected at addition the are these to at branded of dispense stores. options

some to made-to-order continued signature with categories product to in This XXXX. is fresh where the the insights introduced be being menu consumer innovate -- QC lead We sandwiches at preferences. exciting of in and second to growing will realigned our core sandwiches half new also

into to to retention. come engagement, stores We a but customer to back. even customers encourage Maintaining give differentiated customer not vital need want reason to only reasons offer and to our to more is come more

and we performance. across to opportunities innovative As about store mindset increasingly incubate unleash excited we are this impact enterprise, the future the

improvements. to and marketing customer-facing other Turning

customers a retrofits featuring kicked and existing the products visual new right QuickChek. square on offer for to innovation, communicating the through right we improved learned of both foot a the perspective, With experience insights our campaign, and important clearly amount Murphy QuickChek From based series our layout marketing becoming and is learnings in-store increasingly stores, presenting from on and USA. distinctive of X,XXX a from recently off

Selling allowing optimized, that for traffic the been register. added flow. spaces promote and congestion Queuing lanes sales have around reduce impulse easier

designed enabling lighting more visually at of access is signage. driving relevant that grab-and-go, the food quality are to beverages assortment While dispense to This we our appealing more and and desirable and and time, same improved sales self-serve layout stores, at grab-and-reheat-and-go customers. Murphy beverage specifically high around accessible,

right the beyond right people, places, the a as selling position and we unique a food and targeted the sales low more our intentionally of the drive right products, prices. are company marketing beverage right and that benefits effective realize managed go by through in strategies assets tool With everyday fully to marketing most

to of and potential about stages leveraging and further assets store of digital the significant are our learning We tests, through value the the business. excited more machine more inside unlock are combined we the early in

wrap will to to going the Mindy the then hand review to up up we and now over I'm Q&A. financial to and call results, call briefly open the

income the per Average second ago or morning, EBITDA $X.XX gasoline the million in $X.XX Thanks, prior everyone. per of the ago $X.X $XXX.X versus share quarter the XXXX billion versus XXXX. the $XXX.X for Andrew, was was and in retail million share the per $X.XX And second $X.XX million of versus period. were billion gallon year second was net year in quarter $XXX period. per $XXX or period. in gallon million good quarter Adjusted prices versus for Revenue $X.X

term representing are million Total June X% approximately approximately current annum they as $X.X in billion, balance of paid expense. XXth operating is remainder obligations our of of was in reduction loan through and debt a long-term the $XX the sheet as liabilities, which amortization per on captured lease

had currently leverage, million adjusted $XXX approximately these at X a and quarter-end And Our we report undrawn. lenders, revolving credit X.Xx. in outstanding to balance figures result gross which our is of facility

spend up million and of repurchase, of of And positive free $XX clearly $XXX $XX the accretive as benefits of XX, net year-end, cash million million million flow equivalents business. demonstrating totaled cash about finally, since cash share our capital $XXX June of and

over will back I And that, hand it with Andrew. to

In some around I'd like July to Mindy. keeping recent Thanks, insights performance. tradition, with preliminary close with

performance very competitors create separation falling ability in take share. is conducive to we As versus remember, encounter. comparison, price prices, steeply our are elevated partially witnessed which we single environment XXXX, and margins, any dictated by In month the to price supporting

were up This and actually around a which July, more per challenging volume suggest $X.XX gallon, historically setup. prices margin

first margins that few price in that July, However, and expect PS&W August. $X.XX into despite say gallon rising north averaged around to month is that would $X.XX in the the of And in I'm we additional to retail-only before towards of a report end benefits environment. days the per move moving prices, of from the pleased

XX% XXXX, market X period. are the XXX% Per of store prior over of approximately share year gains year volumes and demonstrating sustained

we margins is on we're ago, year equilibrium July very realizing. it to margins XX% see shocking structural daily somewhat are many only with day reports comfortable in highlighting and that were days persistent a same during of the industry our While the internal the the

the term, As managers significant the while of exceptional higher invested comp, earnings we when XXXX the encouraged the and in highly and results the long cash for flow are and volatility environment challenging flow owners for truly business cash and power generation business earnings the by of are potential outsized a who upside a returns. stable present

operator, that, for With lines open we up questions. can the

Anthony [Operator Instructions] comes question first with from Fargo. Bonadio Our Wells

we quarters you from of think puts XXXX as benefit from next think the at I year? then given, anything talked a So $XXX takes couple to this be that look seems the but base sort the we're XXXX away that Is from EBITA algo into year. can million know guidance, case as to And to growth about other and would possible something well. midpoint X% helpful that targets investments? like still you growth compound strategic X% And about you've way add about imply right as I

break that really steps. X in That's Yes. we down Anthony, bridge great.

that rebuilds, new rate to have rebuilds those raise a a raise growth store We plus expectation and single merch there's going whether comps, algorithm cetera. see year-over-year. curve equilibrium capture of built go fuel forward. EBITDA largest we plus stores do we've to et breakeven it's of up higher with that industry XX stores, this per at fuel small And margins expect to volume, in, increases that's and component would cadence continue that expect incremental run And sales, for supply to the in growth. XX and and We and XX

campaigns specific it's the for are the it's the we've we're about, doing, around doing business, promotion, store digital and the whether our around transformation, talked that experience, in-store those whether food beverage component square things complete third the retrofits the the launched innovation that goal. and X,XXX reimagined then the walk $X.X we've that around machine learning And of we're towards billion together to the tests foot all come

volumes. April. on APSM then it. Got were helpful. just of gallons us from very modeling, down, than clearly a were improved And clearly less and That's lot quickly but some

So I peak? of hanging we've now talk you're to share gallons last about you You retention? the on lapped year's shared to path then in how year here what of think about from of should lot terms can seem guess price that And we last seeing be gains. a

that So frame be any way certainly in can helpful. would more you detail

just Sure. the to we certainly last And margins was of north got environment QX an share, market as year noted, gain latter QX, right? gallon. part $X.XX per of exceptional that were You've

As we're very to position high prices unique environment. in just very, come down, in a price a separate

represents, would fuel, they the say non-discretionary outstanding of share is also gains offer around buy customers we've mentioned iterating value their purchases. beverage of us brand non-discretionary our things with QuickChek and the and from as that and worth I is purchases. items view One of a it's set the And food tobacco many

you low still see at a high down retailers, other or and not -- prices. a environment We're below barrel to price gallon. higher high when price $XX relatively whether back so a crude in $X look, environments prices it's And we're at

we or tobacco consumers fuel in continue category. consumers, pressured and And whether remain add it's so, category to our

X And so XXXX, sharply, of fuel saw XXXX, course, for to elevated remain those offer but categories is oil crude we saw to you other saw if everyday QX fell as reinforce of remain prices we we win just low not the as year as when across well. in prices like every events each take And consumers away across long in categories once other. going price our XXXX pressured, in in and X gallons,

next Ben Our with question Bienvenu, from comes Stephens.

That's station if operating we I quarter bit, expenses. want X%. a moderation. on and the could, But growth, certainly going trend fees, It a sounds that look the up card to drill you help credit kind trend moderation like? of and line might forward. about in like think slope ex we Andrew, the noted other there where what maybe should continued of are expect the continued us opportunities of in

exceptional seeing expenses. associates, differences talked about some support faced, that we've in the around guidance reason that the years was we intentionally QX, over of we things doing we the of in the over to certainly, onetime our updating Yes, who call did last that world. And were two, three main the for years the to also or make things the out three some operating was challenges last all

the We expect lapping didn't we QX are or the still But there, that moderating. There indeed is wage pressures anything year challenges call this Staffing within improving. of those out update the in guidance some stay some least. to anything on year. are We're OpEx to for out comfortable say we of that feel full increases. because

OpEx we et is you trends the As basis, absolute QX greater expect, higher transactions, relative could seasons, continue. to a of these see But would because driver on expect cetera.

margins. tobacco margins function were year-over-year, know certainly merchandise in on mix is rate grow a continuing faster particular total I a question to at that of really down seems than but were and be we expecting. with merchandise second My to on merchandise

you about total the if line opportunities know and within growth versus merchandise the could the margin of on the total? specific bearing talk path Maybe top margin. expansion for Because bucket has growth each the I some

Sure.

tend industry versus total to declines strong categories continue Those at the as margin So across about more margins lower-risk share Within tobacco much improvement think unit come higher tobacco, down. we significant innovative, as drive as and out, to gains well. we the you point all performance rightly that products. see

transition are our towards share higher those we to position, in able products with And those margins. certainly, improvement at help market there's best with leading categories. the So

side, energy really sales quarter. about in the start in if you non-tobacco units, On XX% packaged drink up as performance beverage, is really, noted, thinking for strong, we XX% the up

And so to beverage of margins some the relative again, packaged at attractive historical items.

we of X,XXXs, the items of reset lot a see the impulse about there's to think expect we would think queuing that of the space items, we the that our retrofits lanes improve. in about and if high-margin With stores the as

grab-and-go, only posted our a made-to-order are at for items the we're cetera, for of versus strong there that's dispensed coffee, offer bean-to-cup well. or and not all and our results. grab-and-reheat-and-go, performance moving food items we the Murphy et as self-serve beverage, QuickChek where and the we've importantly, better higher QC, a position, that at I that And towards think got seeing beverage, condiments, setup margins better source the made-to-stock really turnaround, Murphy, on And a side, really

the continue the market leading the margin board to And If think I gains. we're efforts intentionality should the sales gains. gains, see tobacco to behind team across going to start merchandise share So gets see up the I'm same one. not a as non-tobacco competition margin as to going get mix middle a team going in that with in total are dollars the issue, and long we of then

Bobby comes Your James. from question with next Griffin Raymond

to just now I move plug-and-play the really it's kind merchandise things. maybe faster at kind is the seem in wanted Andrew, especially Is to further between something guess circle you a and of with working the learnings two there QuickChek? that other side to move guys back on speed of there any like see when concepts. need build very now between that of does starting fast kind the it things? side out to I you capabilities one It two cross can of accelerate, of you Or and area where concepts it the

so and Sunday, stages the retrofit, I week Dallas-Fort had offer question. that this highlighted, X,XXX we're grab-and-go Jack great. we store at in better new I the appealing. The a had looks Hammers that started mean the back the mean in much are past on. two a in visually got wall. queuing regions has better stores more we that lane positioned going pilot Worth Sunday. ago, it's place merchandise and The And the of good It's And dispensed beverage early fantastic, the on store items great. we've was And looks the that. we I other

on a same concept But identify for work positioned, in time, to our items be a the store, it At change, needs to that And will needs the done looking what the we've call how tomorrow. be X,XXX we're XXXX. new at need to we the of are that of and are it LTO Murphy be that store we're there the to mentioned the -- time of. things. lot marketing A that I whole slushies that offered limited But digitally otherwise the building at frozen behind call in there. learning concept, and having that, off all simple capabilities

do work of transformation digital Drive that's of we've digitized we the DNA advantage talked Murphy the redesigning loyalty Rewards. enhancing about, strands, now also our is in of QuickChek we've transactions. all that optimize And taking insights kind our digitally business customer identify unique the et the terms not cetera? only how fact promotions, program of The But from

that another in the tools, And that foundations, that a and to. stages, subcategories, the doing the have area we promotions we're capabilities so still machine variety data the categories, that the more the learning we're analytical is learning more point tests can there's products around And organizations. built but early just of inside

and go from growth I part billion to to think you from raise stores would $XX right? performance And and and billion the back the innovation now The tremendous rebuilds EBITDA billion, the say is on impact of other question, growth, merchandise of $XX on, the thing new of categories well. $X.X a come our Anthony's as have I back the they're is and when they if how just comping biggest

with model strong growing in that to But industry lack period passed business gets they of are these be marginal in team we same and to the time that players and to with, because in the scale do to of make such the expect the the margin the that. capabilities base types unable able to are industry because keep start through more investments because a and we improving do cost

all that things So few growth. as very together a to years of EBITDA over deliver kind next these I really of way think serendipitous the do coming in

months of response, first new part like store That's my the but was store question -- second to helpful. from your productivity -- And part of context in new that the going XX bigger the be well? the on is ramping it and seems XX to was up productivity, actually take

is. absolutely It

And all format. build so good. same when after very the And XX, completed all well classes look XX they're at at the performing periods look we above the XX-month the ramp you XX-month, XX-month to look months. that And that X have ramp,

So locations real it's the stores. identified those estate for to a that tribute better we've

Some are the stores in X new the the stores QuickChek top in of our already best QuickChek of network.

And type so similar we the there. see opportunities

question with Your [Operator next Sachs. Goldman comes Herzog from Bonnie Instructions]

bit All promotions made in was regarding you're a for hoping comment doing of on right. little I more the a tobacco. color some you

that's that Just bit just of role there. a trying which at and to looking think have a might margins, pressured through been little played if and kind wondering

So share maybe tobacco strategy you've the your you with could talk with through merchandise realizing? sort your within profitability been gains balancing of that

in let's Well, same X%. just would the say industry. year almost is last been QX. up thing look, think I industry declines And results relative the the to we and volume the recently thing X%, Sure. guess was has was reported I saw down exact have That at what? first look Total the

X% So on up is we're industry the where relative a basis, down XX%.

period. fuel. almost on X-year OPUS a the But that stack. down it's data, if you at like we same XX% -- We're And were over look X% noted that is a you lot down industry

continue it or are goal do the it's fuel and to share, to tobacco our on focusing take is So grow grow environment less categories, And others win. presents opportunity categories, volume these and profitably. for to an in us it share where whether

be and a designed different. be have a against share it market it's to function achieving comp accelerated. tobacco when performance introducing quarter are the could continuing in looks cigarette, that new example, where next And There we be margin that you smokeless, right, where year that. number is other promotions it could the of such between products, of things, that, way if grow The mix nicotine specific in margin rate then a pouch, may a for record

gains, mix other and the the overall rate. just cigarette smokeless margin can certainly, gains impact And between tobacco gains

So would I its in the is share transition, what grow along and participate invest continue taking profitable our category, way, is to goal do to way. that say in in the a

low we're elastic where, retailer to to or a is margin what similar, the market, price. and can't price saying, because be let's if either, lose or try volume fuel doing got have. then very highly category, $X.XX that X% It's another price you're We of not everyday that at the really the positioning. you've going to different everyday low would "Well, to bottom no go up rate," the get $X.XX in as afford low And everyday price of be impact X% the

That question, definitely guess a little bit allocation could hoping I second capital And just my priorities. about Okay. then sense. makes you your talk

split I back and and think into you've previously business. mentioned a your between reinvest XX-XX share repurchases

your definitely stock up you've So maybe bit. in stepped it you a back bought and quarter the

definitely we on think thoughts I in will, So and just to and And with to interest -- between you current buybacks check about hear wanted your potential future then your you M&A your reinvestments. in how the your should M&A. on if interest wanted environment outlook, the

to that will flow expect to of year. hasn't over and XX-XX remind capital that would algorithm would highly would A direct from that people And returning that generated say at cash comment for we're And period. XX-month excess vehicle our changed. see free look to I elevated of we margins, kind we you Our folks primary lot I would if allocation our any as of shareholders. repurchase maintaining XX- share broadly towards last

So really nothing there. changed has

we if and answer, oil $XX six look, prices repurchase. from a a cash fall to the two barrel eight in every free once years, every then to direct have sharply to year excess the and $XXX go we'll share flow $XXX event crude to And get we'll same

a are In at there with of a before. out we like a we lot low-priced formats terms selling are at deal chains M&A, not lot them They of would the We see say years. in peak more the old. every there's margins, tanks retailers. of the certainly I but replace did acquisition, We're day things highly flow that's that a than they're to are XX concentrated age look market. need and after that chain QuickChek

able those be stores our low-price wouldn't move to to You everyday model.

high highly Bonnie, value and value? standpoint. that Is be low roof Having you of enterprise at fit, going mindsets is under a delivering be the price to from we're deliver conscious, mission consumer focused price a of looking so around customer right, who on a the And how entire value with challenging. proposition a retailer the the would same have different things and would

And so very kind there's that not of a sell out just criteria. many to retailers are position there in that that meet

selling those privates In mindset and anytime best or they're run I fact, those respect soon. think organizations. I the some growing great don't -- that share that of retailers And they're and they're competitors, certainly and

further turn closing call back for time. Andrew will that, Clyde are no remarks. With at to this questions the There I

today. Great. Well, thanks, everyone, for their questions

flow X demonstrate the I the recognize is to is initiatives difficult where heading we a view that and we noted that the into to year, of that we're throughout comparison. create and generation and year cash proof us last earnings this this we've year to go, will there. positioned free to take business points continue going just folks to X around think I would a encourage as take noted of period

So continued joining today USA. in interest Murphy again, for thanks and your

will the today. for This conference us conclude Thank joining you call.

disconnect. You now may