Good day and thank you for standing by. Welcome to the Q3 FY2026 Casey's Journal Stores Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message device and your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to turn the conference over to your speaker today. Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead.

Good morning, and thank you for joining us to discuss the results from our third quarter ended January 31, 2026. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebellas, Chairman, President, and Chief Executive Officer, and Steve Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company's supply chain, business and integration strategies, plans and synergies, growth opportunities, and performance at our stores. There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including but not limited to the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions, as well as other risks, uncertainties and factors which are described in our most recent annual report on form 10k and quarterly reports on form 10q as filed with the SEC and available on our website any forward-looking statements made during this call reflect our current views as of today with respect to future events and Casey's disclaims any attention or obligation to update or advise or looking statements whether as a result of new information future events or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the third quarter can be found on our website at www.caseys.com under the Investor Relations link. With that said, I would now like to turn the call over to Darren to discuss our third quarter results. Darren?

Thanks, Ryan, and good morning, everyone. Before we go into further detail on our outstanding third quarter performance, I'd like to praise the entire Casey's team for their hard work serving our guests. The team's high level of execution across the board is reflected in the numbers I'll share with you shortly. But before I do that, I want to highlight the positive impact Casey's is making throughout our geography. Supporting the community is core to who Casey's is, and right now we're activating our Feeding America campaign in partnership with DoorDash. The campaign will benefit over 60 local food banks in our footprint. Thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity. Now let's discuss the results from the quarter. Diluted earnings per share finished at $3.49 per share, up 50% from the prior year. Net income was $130 million and increased to 49% from the prior year. The company generated 309 million dollars in EBITDA 27.5% higher than the prior year inside the store prepared food dispensed beverages remain strong supported by a compelling value proposition and continued innovation such as a two new specialty pizzas twisted pepperoni and ultimate meat margin expansion was driven primarily by grocery and general merchandise as a result of our joint business planning process, our guests have early access to Monster's Ultra Red, White, and Blue Raz flavor, celebrating 250 years of American independence. This product will be sold almost exclusively at Casey's locations up until Memorial Day weekend. In the forecourt, our team executed well as same-store gallons grew for the fifth consecutive quarter, while fuel margin exceeded 40 cents per gallon and I like to go over our results and share some of the details in each of the categories inside same store sales were up 4% for the third quarter or 7.9% on to your stack basis with an average margin of 42.2 percent same store prepared food dispense beverage led the way the sales were up 4.3 percent or 9.2 percent on to your stack basis with an average margin of 58.3%. Continuing the momentum from the prior quarter, whole pies and hot sandwiches in all-day parts performed well during the third quarter. Same-store grocery and general merchandise sales were up 4%, or 7.4% on a two-year stack basis, with an average margin of 35.7%. Energy drinks and nicotine alternatives continued to outperform the category with double-digit growth. On the fuel side, same-store gallons sold were up 0.4 percent with a fuel margin of 41 cents per gallon. The mid-continent region saw an approximate 4 percent decline this quarter, according to Opus fuel gallon sold data, indicating that we continue to take market share. In the third quarter, same-store operating expense, excluding credit card fees, increased 4.6 percent. Same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction, where scores for the fiscal year are at an all-time high. I'd like to now turn the call over to Steve to discuss the financial results from the third quarter.

Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for the hard work and the great results from our team members. Total revenue for the quarter was $3.91 billion. That's an increase of $12 million, or 0.3% from the prior year, primarily due to higher inside sales, as well as higher fuel gallons sold, and that was nearly offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis. Total inside sales for the quarter were $1.48 billion, an increase of $80 million, or 5.7% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $26 million to $423 million, an increase of 6.5% in grocery and general merchandise sales increased by $54 million to $1.06 billion, an increase of 5.4%. Retail fuel sales were down $57 million in the quarter, as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price. The average retail price during the period was $2.72 a gallon and that compares to $2.85 a year ago. We define gross profit as revenue less cost of goods sold excluding depreciation and amortization. Casey's had gross profit of 1.01 billion dollars in the quarter, an increase of $94 million, or 10.3% from the prior year. This is driven by both higher inside gross profit of $51 million, or 8.9%, as well as higher fuel gross profit of $46.2 million, or 15.3%. Inside gross profit margin was 42.2%. That is up 130 basis points from a year ago. Prepared food and dispensed beverage margin was 58.3%, and that's up 50 basis points from prior year. Cheese was $2.05 per pound for the quarter, compared to $2.12 per pound last year. That's a decrease of 3%, or approximately a 20 basis point benefit to margin. Margin also benefited from improved waste, which was partially offset by promotional activity. The grocery and general merchandise margin was 35.7%. That's an increase of 150 basis points from the prior year. The change was impacted by strong cost of goods management, as well as a favorable mix shift within the category fuel margin for the quarter was 41 cents per gallon that's up 4.6 cents per gallon from prior year total operating expenses were up 4.1 percent or 27.4 million dollars in the quarter the total operating expense comparison benefited from 13 million dollars in one-time deal and integration costs that we incurred in the prior year related to the closing of the acquisition of Fikes which amounted to a roughly 2% year-over-year benefit approximately 1% of the total operating expense increases due to unit growth as we operated 31 more stores than the prior year same store employee expense accounted for approximately one and a half percent of the increase due to increases in labor rates which were partially offset by reduced same-store labor hours. Snow removal due to unfavorable weather in the geography during the quarter contributed to approximately one percent of the increase. And finally, higher variable incentive compensation and charitable contributions contributed to approximately one and a half percent of the increase. Net interest expense was $23.4 million in the quarter. That's down $6 million versus the prior year. That's primarily due to paying off debt associated with the Vikes transaction. Depreciation in the quarter was $114.1 million. That's up $8.9 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 24.1%. That compares to the prior year of 19.2%. The increase this year was driven by a one-time benefit in the prior year from revaluing state deferred tax liabilities following the closing of the FICS transaction. Our financial flexibility remains excellent. On January 31st, we had a total available liquidity of $1.4 billion. And our credit facility debt-to-EBITDA ratio ended the quarter at 1.6 times. For the quarter, net cash generated by operating activities of $260 million, less purchases of PP&E of $184 million, resulted in the company generating $76 million in free cash flow, and that compares to generating $91 million in the prior year. At the March meeting, the Board of Directors voted to maintain the quarterly dividend at 57 cents per share. Also during the third quarter, we repurchased approximately 76 million dollars in shares. We are updating our previously communicated fiscal 2026 guidance as follows. Fiscal 26 EBITDA is now expected to increase 18 to 20 percent the company now expects inside same-store sales to increase between three and a half to four and a half percent in an inside margin of a prop of between 41 and a half to 42 and a half percent total operating expenses are expected to increase approximately 10 percent and the tax rate is now expected to be between 23 and a half and 24 and a half percent for the fiscal year the remainder of our annual guidance remains unchanged now our results for the month of February were as follows same store volumes both inside and outside the store were strong and they are reflected in the updated annual guidance. Fuel CPG was in the low 40 cents per gallon. Current cheese costs are slightly favorable versus the prior year, and we expect fourth quarter operating expense to be up mid-single digits, and that's partially attributable to higher expected variable incentive compensation. I would now like to turn the call over to Darren.

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

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. We also ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Corey Tarlow with Jeffries. Your line is open.

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

Yeah, sure, Corey. As you well know, you know, volatility is kind of part for the course in this business. And so these events, like what's happening with Iran right now, happen from time to time. The most recent history we have on that is a few years ago when the Russia-Ukraine war began. And, you know, typically what happens in a situation like this is the cost runs up on gasoline and is driven by crude oil primarily and then flows through the system. Wholesale prices move up, retail prices move up, but tend to move a little bit more slowly. And so margins get a little bit compressed on the front side of that curve. When there's an ultimate inflection point and the costs start to come down, retail prices will come down as well, but also tend to come down more slowly and the margin expands. So over the course of the cycle, it historically has ended up being a net positive from a fuel margin standpoint, but it is a little bit of tightening on the front end, a little bit of expansion on the back end. When we look at the history from the most recent event with the Ukraine war, that's exactly what played out. Margins did get a little bit compressed, but not not bad i mean the quarter our quarter in 22 where we had the first initial shock from the ukraine war we printed a 36 cent fuel margin that quarter then the subsequent three quarters were all over 40 cents a gallon so um so again there'll be a little bit of tightening but this is this is not a huge huge deal from a margin perspective and then on the volume side of things with absolute retail prices, we really don't start to see any level of demand destruction until we're approaching $5 a gallon at retail. And as we sit here today, we're right around $3 a gallon in our footprint. So we have quite a ways to go before we would be concerned from a volume standpoint.

That's very helpful. Thank you so much. Steve, I just wanted to follow up. As you think about the inside same store sales up three and a half to four and a half. Some of your largest vendors have called out that they're investing in price. How do you think about pricing impacts within the full-year guide, and what do you expect ahead from a pricing perspective? Because I do believe you also mentioned increased promotions. Thanks so much. Yeah, Corey, hey, good morning. Thank you.

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

Thank you. One moment for our next question. Our next question comes from Mark Harding with UBS. Your line is open.

Good morning. Thanks so much for taking the questions. So to start, you guys put together a solid performance in grocery and gen merch. Could you provide a little more color on what drove the strength in non-alcoholic beverages? I would assume that Monster is more of a benefit next quarter, but if you saw a tailwind there, definitely let us know. And then, do you think there was a stocking up benefit ahead of the severe winter weather that helped the segment?

Yeah, Mark, staring up. On the non-alcoholic beverages, it was driven primarily by energy. Overall, energy was up about 14% in the quarter. There's also, we had strong growth in our flavor-enhanced waters. And so both of those two categories really contributed to the non-alcohol beverage performance. In terms of stocking up, I don't think we saw any real change in behavior from that perspective, you know, during the quarter. and I'm not sure what the impetus would have been during the third quarter for that to happen. So, no, we didn't see any of that behavior in the quarter.

Thank you. One moment for our next question. Our next question comes from Chuck Grum with Gordon Haskett. Your line is open.

Hey, thanks very much. Great quarter. You noted that quarter-to-date sales are strong, yet your implied fourth-quarter guide has a pretty big decel on the stack. So I was just wondering if we could reconcile that and maybe just double-click on the overall health of your customer based across income cohorts, any changes you've seen recently.

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

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

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

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

Thank you. One moment for our next question. Our next question comes from Kelly Bonilla with BMO Capital Market. Your line is open.

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

Yeah, Kelly, we've seen no signs at this stage of the cycle in terms of any change in guest behavior. Certainly, people don't like seeing gas prices go up, but again, I'll put this in perspective, right now, after this last week or so's events, retails are up, give or take, on average, about 30 cents a gallon. At that 30 cents a gallon hour, in the low $3 a gallon range on average, that's still 30 cents below the starting point when the Ukraine war began. So fuel prices had run down quite a bit over the last year or so. So we were actually sitting in a really low position. So the fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history. So, again, we're still not seeing any sort of behavior change. In the event that we start to get up into that close to $5 a gallon range, we certainly will do some things to encourage demand. But as it stands right now, our traffic to our stores has been positive, and that's a great credit to our merchandising, our food team, our store ops teams who are running great stores every day to get people to come in. And that's worked across the board. And so that value proposition relative to other alternatives is still very strong. And so in a higher-priced environment for fuel, I think more consumers will be more discerning about where they spend their money, and they'll see the value proposition that we have every day in our stores. And I think that ultimately accrues to our benefit.

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

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

a long way to go, but things are working well so far. Thank you. One moment for our next question. Our next question comes from Michael Mantani with Evercore ISI. Your line is open.

Yes, hi. Good morning. Thanks for taking the question, and congrats on the results. I wanted to ask if I could, I guess, on two areas. One is, you know, if you could discuss a little bit, Steve, any synergies that you realize kind of in the quarter and then what a realistic full-year outlook is for synergy from SEFCO. And then just to follow up on the wings, you know, how should we think about potential CapEx investment? You know, if it's a light touch versus a heavier touch, how do you see that kind of split out over time? And then similarly, on the OPEX side, you know, do you need to add kind of a full-time equivalent worker to be able to, you know, deliver the wing value prop?

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

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

Thank you. One moment for our next question. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open.

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

fiscal year. Thanks. Yeah, Bonnie, we are definitely on track to open 80 stores this year. I'm not sure what numbers you're looking at for the fourth quarter, but we do not need to open up 60 stores in the fourth quarter to get to our 80. So, and remember, that's a combination of new store, new to industry stores and M&A. And so on both fronts, we are well positioned to wrap up the fourth quarter and hit that 80 for this year. And that 80 for this year will get us the 500 for the three-year planning horizon, which was originally 350 stores, and then we moved it up to 500. So I feel very good about that. And then on a sustainable basis, we are well situated from a pipeline perspective on NTIs, and we have stores right now, if we're buying real estate, we're really putting that in the FY28 or FY29 pipeline at this point because the pipeline's in good shape. And then in the M&A front, I'd say the team feels very good about the small deal M&A and the pipeline there as well. And remember, we like to have both NTIs and M&A working at the same time. And if multiples get a little bit too rich on the M&A side, we can lean heavier on the NTI side to keep that rateable store growth. And lastly, I'd say just in terms of the pace, our algorithm, our growth algorithm at a high level is pretty straightforward. We get about 4% growth from organic, you know, running the mothership, so same-store sales, fuel profitability, efficiency in our operations, and then 4% from new units. So give or take, every year we kind of approach that year with a goal of growing the units by 4% per year. So we pull back a little bit in this current fiscal year deliberately. So we have the opportunity to integrate the SEFCO acquisitions because there's a lot of work to be done there. But then we'll be back on that 4% unit growth rate.

Thank you. One moment for our next question. Our next question comes from Jacob Akin-Phillis with Mellis Research. Your line is open.

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

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

Got it. And then just on cheese real quick, can you update us on, like, what the annual amount of pounds you use in terms of cheese? And then you said cheese is slightly down in 4Q, but can you update us on, like, how much exposure you have walked in over the next few quarters?

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

Thank you. One moment for our next question. Our next question comes from Edward Kelly with Wells Fargo. Your line is open.

Good morning, guys. I'll just first just follow up on wings. I was curious. I know we don't want to give, you know, too many numbers, but curious as to how you think about the margin implication overall with wings and then taking a step back, you know, adding fryers. I don't want to get ahead of ourselves, but how are you thinking about, you know, potential for other products, you know, as it pertains to this category?

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

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

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

act on those opportunities thank you moment for our next question our next question comes from brad thomas with key bank capital markets your line is open good morning thanks for taking my

question and let me have my congratulations on a nice quarter here i wanted to ask about the competitive landscape and i know that casey's remains in an advantageous position relative to your rural footprint, but just curious there and if you could comment any more on what you're seeing out of the other C-store players and restaurant competitors of yours. The competitive environment,

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

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

long term this doesn't change anything um fortunately or unfortunately i've been i've been in this industry long enough now to go through a number of these cycles and and every every one of them runs its course like i i described earlier where margins get a little bit compressed on the front end of the curve and and um you know expand on the back end so So I think from a long-term algorithm, growth algorithm standpoint, you know, what's going on today is not changing anything. It'll run its course. Who knows how long that'll be? I'd say we ran a complete cycle in 24 hours yesterday. So it's kind of hard to tell how this will all shake out, but ultimately it will normalize. And so the long-term algorithm will be the same. In terms of the quarter, I would just go back to what Steve commented on our experience. We've had a strong start to the quarter. That's reflected in the guidance. Our February experience on margin was $0.40 a gallon, and we'll have to see how the rest of the quarter shakes out. But, I mean, I don't know how to handicap that. We had a 30-cent cost swing from high to low yesterday. And so I haven't looked at the news in the last hour, so I'm not sure what's going on today. But, you know, we'll manage it appropriately, and we'll see how the quarter should.

Thank you. One moment for our next question. Our next question comes from Jack Harden. Ms. Stevens, your line is open.

Yes, hi. This is Jack Harden on for Paran Sharma. thanks for the question. I wanted to ask about labor. We've done a really strong job over the past several years at reducing same-store labor hours, and so at this point, how should we think about the runway for further productivity gains? Are we closer to a state of a steady-state labor model, and do you see incremental opportunity from here? Yeah, Jack, I commented a few minutes

ago about the fact that I think we're probably closer to steady state. And look, we have a continuous improvement team for a reason. We will always look to find ways to make the job in stores easier. And sometimes that ultimately results in less labor needed. But by the same token, we're always focused on growing our business. And as you sell more stuff, it requires more labor to produce that stuff, stock that stuff, sell that stuff. So that will ebb and flow. I would not expect to see the types of labor decreases that we saw over the last three-year period. But again, we'll always focus on managing that expense line tightly and add where we need to and and take away where we don't need it anymore thank you one moment for our

next question our next question comes from Scott Stringer with the wolf

researcher line is open hey guys appreciate the time you kept the fuel volume guidance and change the performance has been nicely positive year-to-date as you're taking share so is that at least fair to say that you're tracking at the high end of your range for the year yeah Scott I wouldn't say

that we're tracking at the high end of the range I'd say we're tracking in the range and and that's where we feel comfortable guiding everybody at this point and so you have been pleased with the performance so far they got it and

then there was also some positive commentary around tobacco sales so on specifically on the tobacco alternative is there potential that these newer products can return the category as a whole yeah I do think there is that

potential. What we've seen a little bit more recently is the decline in combustibles has slowed a bit. It's still, from a unit perspective, it's still dropping, but not at the same rate as it was for the last several quarters. So the combination of that decline slowing with the inflation that happens on the combustible side, in addition to the growth in alternatives and vapor, has actually netted that category out to positive. And that hasn't been that case for quite a while. So we'll have to see how it plays out. But at this point, that is correct. It is actually starting to see some growth in the overall nicotine category.

Thank you, ladies and gentlemen. We're coming up on the end of our hour-long call. I would and I'd like to turn the call back to Darren Rebellis for closing remarks.

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

Ladies and gentlemen, that's concluded today's presentation. You may now disconnect, and have a wonderful day.