Caseys General Stores, Inc.

Good day, ladies and gentlemen, and welcome to the KQ General Store second quarter fiscal year 2022 earnings conference call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. To ask a question, you will need to press star and then 1 on your telephone. As a reminder, this call is being recorded. If anyone should require operator assistance, please press star and then 0. I would now like to turn the call over to 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 second quarter ended October 31st, 2021. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today is Darren Rebellas, 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 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, performance at our stores, and the potential effects of COVID-19. 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 and pending acquisitions, our ability to execute on our strategic plan or realize benefits from the strategic plan, related governmental actions, as well as other risks, uncertainties, and factors which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q 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 claims, any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. A reconciliation of non-gap-to-gap financial measures referenced in this call, as well as a detailed breakdown of the operating expense increase for the second quarter, can be found on our website at www.casey.com under the investor relations link following this call. With that said, I would now like to turn the call over to Darren to discuss our second quarter results. Darren?

Thanks, Brandon. Good morning, everyone. We're looking forward to sharing our results in a moment. but I'd like to start by thanking our 43,000 Casey's team members for their tireless efforts as we look to overcome the ongoing challenges with COVID-19 and the resulting supply chain issues. Our team members have done an outstanding job navigating this new and difficult situation, and the team's ability to perform under the circumstances is something I'm especially proud of and grateful for. At Casey's, our purpose is to make life better for our communities and guests every day. I'm proud to report that we continue to make excellent progress in this regard during the second quarter. This quarter, Casey's Cash for Classrooms giving campaign raised nearly $1 million to support local schools and our communities through grants thanks to our generous guests and passionate team members. These grants will provide much-needed funds to local schools and the communities where we operate. Then in November, Casey's held a veterans-focused giving campaign in partnership with PepsiCo to raise funds for organizations providing assistance to veterans and their families. As a veteran myself, I know the great sacrifices these families have made and the challenges they face. This year's campaign raised nearly $1 million that will help two outstanding organizations, Children of Fallen Patriots and Hope for the Warriors. These funds will allow the charities to have an even greater impact on the lives of veterans and their loved ones. Thank you to our vendor partners, Each case is a team member that made the donation ask in our stores and especially to our guests who truly do good when they shop at Casey's. Now let's discuss the quarter's results. As you've seen in the press release, we delivered yet another strong quarter. Diluted earnings per share were $2.59 per share. And while down from the prior year, we're still impressive in the wake of the extremely challenging retail operating environment that we're currently facing. Total gross profit dollars of $718 million was an all-time high for the second quarter. Net income was $96.8 million. EBITDA was $217 million, down 2% from the prior year, primarily due to higher operating expenses. Inside-the-store sales volumes were positive and grew stronger throughout the quarter, partially aided by our new breakfast menu launch in October, which is proving to be a big hit with our guests and exceeding our early expectations. we experienced increased gas counts and positive same-store fuel volumes. We maintained our brewer margins inside the store while dealing with a myriad of product and inflationary challenges. In fuel, we nearly matched the prior year's margin of 35 cents per gallon, despite the retail price of fuel increasing nearly $1 per gallon. The second quarter was also the first full quarter operating the Buc-ee's and Circle K acquisitions, which are on track to realize expected synergies. We announced our third strategic acquisition this year with an agreement to acquire 40 stores from Pilot Corporation in the Knoxville, Tennessee area that is expected to close in the third quarter. Overall, we remain very confident in our ability to deliver on our strategic commitments and manage through the near-term challenges presented by the current environment. I would now like to go over our results and share some of the details in each of the categories. Inside same-store sales were up 6% for the second quarter, with an average margin of 40.7%. Same-store grocery and general merchandise sales were up 6.8%, and the average margin was 33.3%, in line with the same period a year ago. We believe we are taking share in this category in our geography based on industry data and peer performance. Packaged beverages and salty snacks continue to perform well, due largely to the successful store resets and assortment optimization efforts completed last fiscal year. Non-alcoholic beverages were up over 24% on a two-year stack basis. Alcohol same-store sales were up low single digits, despite challenging comparisons, and remain up over 22% on a two-year stack basis. The merchandising team did an excellent job maintaining margin while overcoming inflationary headwinds. Our private label program and procurement initiatives contributed favorably to gross profit margin this quarter. Same-store prepared food and dispensed beverages were up 4.1 percent. The average margin for the quarter was 60.6 percent, up 50 basis points from a year ago. Pizza slices continued to perform exceptionally well, up 21 percent in the quarter. While our self-distribution model helped mitigate some supply chain challenges, we most acutely felt product availability challenges in the prepared foods category during the quarter. At various times during the quarter, and sometimes for nearly the entire quarter, we were out of stock with key items such as donuts, fountain beverage cups, and chicken. During the second quarter, same-store fuel gallons sold were up 2.5%, with a fuel margin of $0.347 per gallon, down slightly but still largely comparable to the same period last year. the fuel team continues to do a tremendous job balancing fuel margin and volume to optimize the profitability of the category. The higher fuel profitability levels are clearly being impacted by the rising operating costs the entire industry is incurring, both in terms of labor as well as higher credit card and EMV compliance fees. I'd now like to turn the call over to Steve to go into some detail on the financial statements. Steve?