Earnings Call Transcript - YSWY Q1 FY2026

Operator

Welcome to the YesWay, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star-11 on your touchstone telephone. We ask that you limit yourself to one question and a follow-up. Please be advised that today's conference is being recorded. I would like to turn the call over to Lauren Scott, Ambassador Relations Representative. Please go ahead.

Lauren Scott, Head of Investor Relations

Thank you, Operator, and thank you all for joining us today for YesWay's first quarter 2026 earnings conference call. With me on today's call are Tom Turkla, Chairman, President, and Chief Executive Officer, and Erica Ailes, Chief Financial Officer. Before we begin, a reminder that today's discussion will include forward-looking statements within the meaning of of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results, performance, or achievements to differ materially from what is expressed or implied. These risks include, but are not limited to, volatility in global oil prices, general economic conditions, our ability to execute our growth strategy, and changes in consumer demand and fuel consumption trends. For a more detailed discussion of risks, please see our final perspectives dated April 21, 2026, as filed with the SEC on April 23, 2026, and our other filings with the SEC. Our forward-looking statements made on this call represent our outlook only as of today, June 2nd, 2026, and we disclaim any obligation to update these statements, except as may be required by law. In addition, during this conference call, we may make reference to certain non-GAAP financial measures, including adjusted EBITDA and store contributions. Reconciliations of these non-GAAP financial measures to the most directly applicable GAAP measures are available on the Investor Relations section of our website and in our first quarter 2026 earnings press release, which was issued earlier this morning. A replay of today's call will also be available on the same website shortly after we conclude the Q&A session. And with that, I'd like to turn the call over to Tom Turcliffe. Tom?

Tom Turcliffe, CEO

Thank you, Lauren, and good morning, everyone, and thank you for joining us today. As this is our first quarterly earnings call as a public company, I would like to begin by taking a step back and providing a brief overview of the S-Way's history, our business, and the key attributes that we believe set us apart in the convenience retail industry. The S-Way was founded in 2015 with a clear vision to build a scaled, customer-focused convenience store platform serving attractive rural and suburban markets across the United States. Since that time, we've grown rapidly and deliberately. As of March 31, 2026, we operated 449 stores, making Yesway the 15th largest convenience store operator in the country. The convenience store industry is large, growing, and highly resilient, having demonstrated durability across market cycles, supported by consumers' ongoing needs for fuel, food, beverages, and everyday essentials. Within that environment, Yesway has built a differentiated platform anchored by two strong and complementary brands. Yesway and Alsup's. Both brands have deep roots in the communities they serve and benefit from strong customer loyalty. We offer a unique food service platform positioning us as a true destination convenience store rather than simply a stop for fuel or basic necessity. Alsup's is especially well known for its iconic deep-fried burrito, a signature product that has become closely associated with the brand and serves as an important driver of customer traffic, repeat visits and loyalty for a combined store base. More broadly, our stores offer a compelling and convenient mix of freshly prepared food, grocery items, beverages, snacks, and higher margin private label products. This assortment allows us to serve multiple customer occasions throughout the day, from coffee and breakfast in the morning to lunch and dinner options, snacks, beverages, and household essentials late in the day. By combining a recognizable food service identity, with everyday convenience, we have established ourselves as a go-to destination for customers seeking quality, speed, and value. Our stores are strategically located in attractive rural and suburban markets across the Southwest and Midwest. In many of these communities, our stores play a role that goes beyond traditional convenience retail. We are often the convenient retail destination of choice and in certain markets effectively the local grocer that position gives us a meaningful connection with our customers and communities and it reinforces the recurring nature of traffic across our network over the past decade we have established a strong track record of growth and operational improvement driven by a combination of new store developments strategic acquisitions and discipline execution across our store base since inception we have completed 27 acquisitions including the transformational acquisition of all ships in 2019 helping expand our footprint strengthen our market position and build density in attractive geographies supporting his growth is a seasoned leadership team with deep expertise across both real estate and convenience retail notably our real estate expertise is critical in identifying the right markets the right sites and the right formats for long-term value creation on On that note, we primarily operate under a company-owned, company-operating model and own approximately 65% of the real estate underlying our store base. This approach provides operational flexibility, strong site control, and the ability to reinvest through new store development, remodels, and raise and rebuild projects. Across our stores, standardized operating procedures, training, and uniform technology supports consistency and efficiency across the platform. many of our stores able to operate with just a single employee during non-peak hours. Additionally, our sites are typically located on oversized lots with strong visibility and traffic patterns with our newer stores featuring expanded forecourts and dedicated high-flow diesel lanes designed to support long-term fuel growth. We also continue to invest in technology and tools to support smarter decision-making across merchandising, pricing, labor, fuel, food service and capital allocation. These capabilities are vital to our ability to proactively evaluate growth opportunities, integrate acquisitions, improve store performance, and drive profitable growth over time. For example, the first-party data generated through our YesWay Rewards program helps enhance customer engagement through more target promotions, driving more frequent visits and larger basket sizes. YesWay's growth has been rapid and strategic, culminating on April 22nd with the successful completion of our initial public offering the IPO was an important step for the company and provides us with additional resources and flexibility as we enter our next phase of growth inclusive of the full exercise of the green shoe option we raised approximately 322 million in net proceeds which we have used to fully redeem our preferred equity and to repay 10 million of debt an additional 20 million of debt repayment was made following the close of the offering the IPOs position as well to execute on several key priorities first we plan to continue accelerating our growth through organic initiatives and selective expansion this includes new store development investments in innovation technology and product expansion that will enhance the overall customer experience we believe these initiatives will help drive traffic strengthen loyalty and improve same-store sales and store level productivity over time second the IPO proceeds provided us with an opportunity to further optimize our balance sheet and strengthen our financial position maintaining flexibility is important as we continue to grow particularly in an industry where scale discipline capital allocation and operational execution matter and finally we will continue to evaluate selective and optimistic M&A acquisitions have been an important part of our growth store to date and we believe the convenience store industry remains highly fragmented our approach will remain very disciplined we will focus on opportunities where we can create value build density strengthen our brand presence and apply our operating model effectively before turning to our first quarter results I want to recognize the people who made this progress possible yes I success is directly tied to the hard work commitment and consistent execution of our tremendous employees from our store teams who serve customers every day to our field leaders and corporate teams who support the platform our people are the foundation of this company on behalf of the leadership team and our board i want to thank all of our employees for everything you've done to bring yesway to the support milestone and for everything you continue to do as we begin this next chapter as a public company turning now to our financial performance We are pleased to deliver record first quarter results, driven by broad-based strength across our food service, merchandising, and fuel platforms, with fuel sales and margin materially higher year-over-year. Most notably, our profitability reached an all-time high, with adjusted EBITDA increasing 112.9% year-over-year to over $59 million. dollars. Same-store inside merchandise sales increased 4.5%, continuing a positive trend of growth in 12 of the past 13 quarters. Same-store fuel gallons sold increased 0.2%, with total fuel margin increasing 48.5% year-over-year to 49.4 cents per gallon. At a higher level, we believe our fuel business maintains structural advantages, supported by strong local refinery partnerships, our strategic rural footprint, and a higher diesel mix, which now represents approximately 38% of total fuel volume. These attributes continue to position us as preferred fueling destination across our target markets. Given we now are approximately two months into the second quarter, we are also pleased to report that the positive momentum in our business has continued, with same-store sales and gallons positive through the end of May. Looking ahead, we remain confident in long-term growth opportunities for ESWA. We operate in a large, resilient, and highly fragmented industry, benefiting from consumer preference for faster, convenient, and affordable options. Within this environment, we believe ESWA is well positioned as a go-to destination for customers in the markets we serve. Our differentiated food service offering, best-in-class operating standards, strong service culture, flexible and value-generating real estate strategy, and proven M&A capabilities all support our continued growth. With that, I will now turn the call over to Erica to discuss our quarter results and financial outlook in more detail. Erica? Thanks, Tom, and good morning,

Erica Ailes, CFO

everyone. As mentioned, we delivered a record first quarter marked by continued same-store sales growth, strong margin performance, and profitability at an all-time high. Inside merchandise sales increased 9.5% year-over-year to $213.7 million, or 4.5% on a same-store basis. The increase was driven primarily by pricing initiatives taken during Q4 2025 and Q1 2026, which we expect to continue to favorably impact same-store inside sales for the remainder of the year. In our fuel business, Yesway is executing well in the current environment and maximizing fuel gross profit. In the first quarter, fuel sales increased 16% year-over-year to $464.3 million, with fuel margin increasing 48.5% year-over-year to $0.494 per gallon. To provide more context, the geopolitical developments in the Middle East have increased fuel price volatility across the industry, benefiting retailer profitability. As a rule of thumb, retail prices generally increase as wholesale costs rise, protecting retail or CPG margins. Historically, when wholesale costs have eased, retail prices have tended to lag, which has supported ongoing strength in CPG margins. As a result, volatile pricing environments can benefit both CPG margin and fuel gross profit dollars. Moving on to our same-store performance, total same-store gross profit increased 21.8% year-over-year, driven by strength across both our fuel and inside merchandise businesses. with same-store fuel gross profit and same-store inside merchandise gross profit increasing 38.5% and 9.8% respectively from the prior period. We effectively controlled costs in the quarter as same-store operating expenses declined by 2.8% year-over-year. At the beginning of last year, we rolled out a labor efficiency initiative and have since seen same-store labor hours reduced in the previous four quarters, including a 3.5 percent decline in Q1 2026. Store contribution increased 72.7 percent year-over-year to 74.6 million, driven by higher fuel margin and increased fuel volumes and merchandise sales. We also have had more stores opened compared to last year and a higher contribution of new stores. Net income increased to $30.2 million compared to a net loss of $5.6 million in the prior year period. And adjusted EBITDA increased 112.9% year-over-year to $59.2 million, primarily attributable to higher fuel margin. During the quarter, we opened one new store, ending the period with 449 stores. As a reminder, our current store count includes 29 stores operating in Iowa and Kansas that we have agreed to sell as part of our strategy to sharpen operational focus, simplify our supply chain footprint and reinforce our concentration in core operating regions. We expect the sale to close by the end of fiscal 2026. Turning to the balance sheet, we had cash and cash equivalents of 56.5 million and total debt of approximately 649.5 million as of March 31st, 2026. Net cash provided by operating activities was $48.4 million compared to $13.6 million in the prior year period. Capital expenditures totaled approximately $11 million compared to $26.3 million in the prior period. Turning to our guidance, our outlook for fiscal 2026 reflects the strength of our first quarter performance and the momentum we have carried into the first two months of Q2. that said we recognize the geopolitical environment is fluid while we feel we are well positioned given our value proposition for customers and our favorable diesel exposure we will continue to monitor the impact of fuel price volatility over the coming months as such we've introduced fiscal year 26 guidance as follows same store inside merchandise sales growth of 1.25 to 3.25 percent, adjusted EBITDA of $210 to $220 million, and capital expenditures of $85 to $95 million. Assumptions within our CapEx guidance include three stores in our pipeline that we moved from build to suit to self-funded as we leveraged the recent performance of the business and maintained strategic flexibility. Lastly, we expect to open six to eight new stores in 2026, inclusive of the one store we opened during Q1. Please note that our guidance excludes the 29 operating stores in our Iowa and Kansas portfolio, which we expect to sell before year-end. And with that, I'll turn the call back over to Tom

Tom Turcliffe, CEO

for closing remarks thank you erica to close we are very pleased with our record first quarter performance and the strong start to our journey as a public company by continuing to strengthen our differentiated customer offering and maintaining a disciplined approach to capital allocation yes way is well positioned to continue delivering profitable growth and long-term value for shareholders. Thank you again for joining us today. Operator? Thank you. As a reminder,

Operator

to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself in the queue, please press star 11 again. We ask that you limit yourself to one question and a follow-up. Our first question comes from Bobby Griffin with Raymond James.

Bobby Griffin, Analyst — Raymond James

Your line is open. Good morning, everybody. Thanks for taking my questions, and congrats on a good first quarter as a public company. I guess first I wanted to follow up. You just wanted to follow up kind of consumer customer behavior here following kind of two months of higher gas prices. You noted, you know, quarter date positive, same store sales, which is encouraging. But Tom, can you dive in? Have you seen anything noticeable out of your customers as gas prices have gone up the last call at eight weeks or so? Any shifts, trade downs or any shifts inside the store that's interesting to be worth calling out just for us to kind of gauge how the business is handling or how the consumer is handling that for your

Tom Turcliffe, CEO

business thank you Bobby appreciate the question slightly we obviously are cognitive what's going on with the consumer both the higher gas prices as well as higher merch prices what we found we've had very strong baskets and very strong prices as well holding as you've seen we had positive gallons we We attribute it to the fact that we've got a very strong rural focus and that our customers are basically less susceptible to something. So we are seeing it. Eric and I watch it very closely. We also attribute it to the fact, we've talked about this before, that we are already a value We're already known as a value chain. Our price points, we have $4 and $5 and $6 meals. Other retailers and QSRs are trying to find that balance again. We're already there. So we've been pretty sticky. So we're obviously watching it like everyone else is. We're obviously watching the impact of gas prices. We're under $4 now, which is great. We're down $3.83 as of yesterday. That's kind of our trigger to look at that price at $4 in the past, back in 2022. But, Erica, you can add any to this. But we're basically seeing a little bit, but not a lot. We've basically been holding our own. We're pleasantly surprised at the fact that our customers are very sticky and very resilient, even with the higher cost of fuel and the higher cost of merchandising. Anything you want to add, Erica?

Erica Ailes, CFO

Yeah, so I would just add from a data perspective, on the fuel side of the business, We do see some trading down from premium to mid-grade, mid-grade to regular. Obviously, as you can imagine, you know, the margin on that trade down is far exceeding, you know, anything to do with that trade down. So, you know, that feels very good. Inside transactions were positive, you know, for the quarter, and the merch basket was up as well. So, you know, to Tom's point, we feel very good about our value proposition as it relates to sort of the wider concern about the consumer.

Bobby Griffin, Analyst — Raymond James

Thank you. That's helpful. And then I guess secondly for me, just, Erica, diving inside the inside gross margins, you know, up 190 basis points year over year in the quarter, just unpacking a little of the drivers and the, I guess, longevity of some of those drivers because it's pretty impressive in performance.

Erica Ailes, CFO

Thanks, Bobbi. I appreciate the question. A lot of that inside margin growth continues to come from our new stores coming into the reporting period. So those new stores are generally operating at a higher food service contribution and lending themselves to a stronger product mix that sort of leans towards those higher margin items. As we mentioned in the prepared remarks we had we did take some price in the latter half of 2025 and into 2026 and have seen very very good results from that you know as I just mentioned transactions being up units are up in the quarter as well so so we feel good about about those takes very good appreciate the details best of

Operator

luck here in 2Q. Thank you. Thank you. Our next question comes from Simeon Gutman with Morgan

Simeon Gutman, Analyst — Morgan Stanley

Stanley. Your line is open. Hey, Tom. Hi, Erica. Can you first talk about CPG, how it's trending, if you can, even in second quarter? And then can you talk about what you are thinking about for a full year CPG and the shape of it throughout the year within the EBITDA guidance? Thanks.

Erica Ailes, CFO

Sure. Yeah, we'd be happy to just talk sort of high level on what we're seeing, you know, post quarter end. You can imagine, you know, as the conflict continues to add volatility in the fuel market, you know, April and May generally and high 40s, low 50s. You know, as far as looking beyond that, we just believe it is too early right now to predict, obviously, if this continues and the volatility continues, you know, there's certainly some upsides for outsized margin, but we're continuing to see that margin, you know, be strong to date in

Simeon Gutman, Analyst — Morgan Stanley

Okay. And then my follow-up, now that, you know, you've done so well on inside gross, at least in the first quarter, it looks like the street is modeling, we are modeling a step down. Is there any reason it should step down or do you think we can stay at this higher above average rate of, I guess, margin expansion?

Erica Ailes, CFO

Sure. Great question. What I would point to is just our guidance for the full year. You know, we did have in Q1, obviously, a very strong same-store sales number. We do think at least some portion of that was helped by weather. We had three major weather events in our portfolio in the comparative period versus only one major ice storm in Q1 of 2026. So, we think we'd probably be about 2.6% X weather, you know, certainly benefited for also from some, you know, you know, groupings of SKUs that have a strong correlation to weather like package BEV, et cetera. So, I think it's, you know, we're certainly not modeling that same, store sales growth. Again, to the extent this conflict continues, we certainly understand that there could be some concerns on stress inside the store.

Tom Turcliffe, CEO

Thanks. Good luck.

Operator

Thank you. Our next question comes from John Heimbachle with Guggenheim. Your line is open.

John Heimbachle, Analyst — Guggenheim

Tom, I want to start out. Can you talk about what does the pipeline look like now for 27 openings in terms of where we are in the process of site approvals, and I guess construction won't be starting for a little bit. And then I know you've got the first two coming in Arizona. What do you think the opportunity in that state is, say, relative to maybe New Mexico?

Tom Turcliffe, CEO

A great question. As you know, our model has a six to eight this year, and about 26 next year, We have well over that in terms of land either under contract or being negotiated in the pipeline. We always keep a very strong pipeline of a multiple of needed deliveries to the year. We've accelerated that in terms of people in the field. And so we feel very good about 26 and very good about 27. We're actually working right now on moving things up in outer years, utilizing some of our excess cash generated by the fuel margins, which, you know, we get a lot of questions on. But we feel very good about our deliveries in 26 and very good about deliveries in 27. To your second question, we're very excited about Arizona. It's got traditionally higher fuel margins, even higher than our New Mexico and West Texas fuel margins, which are also very high to begin with. But the market itself is very strong in terms of its receptivity, the type of customer. As you know, we're going across right now in the southeastern portion of the state first and moving up. But we've got a very strong pipeline right now. In fact, the majority of the things we have in that pipeline that I referenced before about 26 and 27, really 27 and 28, are in Arizona. So we're going to go very hard into Arizona. We've already had one grand opening in terms of just the announcement of a groundbreaking. We'll actually have our first grand opening in the store sometime in the late summer, early fall right now. I think that's the date. I'll double check that date. But we're very good about Arizona. It's got a very strong customer, very strong receptivity to our food service program, Very good demographic very similar to New Mexico and West Texas. So we think