Murphy USA Inc.

Good morning. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. Thank you. Christian Peichel, Vice President of Investor Relations. You may begin your conference.

Great. Thank you, Emma. Good morning, everyone. With me, as usual, are Andrew Clyde, President and Chief Executive Officer, Mindy West, Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and Controller. After some opening comments from Andrew, Mindy will provide an overview of the financial results, and then we'll open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur. Projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K, and other recent SEC filings. MurphyUSA takes no duty to publicly update or revise any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found on the investor section of our website. With that, I'll turn the call over to Andrew.

Thank you, Christian. Good morning, and welcome to everyone joining us today. Third quarter results clearly demonstrate that the earnings power of our business has been and we expect will continue to be sustained throughout a variety of different macro economic environments and business conditions. Looking back over the past three years, we performed well during the onset of the COVID-19 pandemic, successfully navigated supply chain challenges during the early period of the recovery, and widened our advantage in the most recent period of higher cost and inflationary wage pressures. We have prospered during periods of sharp rising product prices that threatened broader consumer spending, and in the most recent quarter, delivered strong financial results as prices fell and interest rates rose. If our advantaged business can thrive across these varied macroeconomic environments, each characterized by unique challenges and opportunities, we remain confident in our ability to perform if the economy worsens or if we embark upon a period of economic recovery. Our distinct model and enduring strategy have served our shareholders well, and we see no reason to believe the future will be any different in MRF USA. Affordability matters, and we are clearly seeing the benefits of our everyday low-price strategy in our third quarter results. On a same-store basis, Q3 gallons were up 9%, tobacco margins were up nearly 6%, and non-tobacco margins were up nearly 9%. Powerful proof points that our low-price offer is resonating across categories, resulting in volume growth and market share gains. The QuickCheck offer also continues to resonate with customers as it delivers high-quality food and convenience items at value prices. We continue to invest in our customer value proposition at QuickCheck and grow in the markets where it has already earned a loyal customer base and valuable brand recognition. This strong in-store performance amidst a challenging and uncertain economic backdrop further solidifies our view that for most consumers, a trip to Murphy USA represents a largely non-discretionary occasion, a trend that we are seeing continue into the fourth quarter. Our affordable offer continues to be underpinned by the low-cost DNA of our organization and our efficient operating model. While higher costs have impacted both our business and other industry operators, we continue to be advantaged from a labor perspective. The operating expense comparisons are beginning to moderate as we start to lap some of the targeted wage adjustments and other inflationary impacts over the last 12 months. OpEx at the store level is up 6.4% for the quarter, including roughly $4 million of special incentives to our store associates. We cannot be more pleased with the impact of this appreciation program, which increased the engagement of our associates and allowed them to do what they do best, serve customers, drive merchandise sales, and recruit like-minded new associates. As we exited the summer, store-level engagement has maintained at a high level, and while staffing remains a challenge for the industry, we have seen a positive impact on recruiting and applicant flow in recent months. Alongside these short-term investments in our affordable offer and operating model, we continue to prioritize disciplined capital allocation as we think about long-term investments. Our organic growth program continues to be the single most impactful driver of long-term sustainable growth in EBITDA and earnings per share. I'm pleased to report that we're on track to deliver between 40 and 45 new stores in 2022, and expect a similar level of activity in 2023. Importantly, all of our new stores are exceeding internal expectations and are incrementally positive to the network averages as evidenced by the stronger APSM versus same-store sales figures in the fuel and non-tobacco categories. In addition, we are on track to complete three E3 raisin rebuilds, which replace high-performing kiosks with a larger 1,400 square foot store that features a broader assortment of higher margin merchandise, better grab-and-go food offer, and a more favorable customer experience. In addition to organic growth, share repurchase remains a key element of our broader capital allocation strategy and underpins our value creation pledge to investors. Given recent performance and our view of the sustainability of this performance, We believe our stock offers a compelling value based on both current and long-term earnings outlook. We continue to believe share repurchase represents the most impactful use of free cash flow for long-term investors beyond capital allocated to organic growth. As such, we continue to be active in share repurchase, buying back nearly 800,000 shares during the third quarter for $212 million at an average price of $276 per share. This amount represents significant progress against the five-year, $1 billion program our Board approved in December of 2021, and we are currently on track to complete that program well ahead of schedule. Finally, I would note that while debate and uncertainty continue to exist with respect to the new baseline for long-term fuel margins, the excess cash generated and used to buy back shares over the past three years represents real and enduring value to long-term investors, with more than 25% of outstanding shares being repurchased over that period. Investors who have held throughout this period have not only enjoyed significant price appreciation, but can expect to enjoy a greater percentage of future earnings and shareholder distributions without having allocated more capital to their Merck USA investment. With that, I will turn the call over to Mindy.