Murphy USA Inc.

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 would like to withdraw your question, again, press star and one. I would now like to turn the call over to Vice President of Investor Relations, Kristen Peichel. You may begin.

Hey, thank you, Kayla, and good morning, everybody. Thanks for joining us today. With me, as usual, are Andrew Clyde, President and Chief Executive Officer of Mindy West, Executive Vice President and Chief Financial Officer, and Donnie Smith, Vice President and Controller. After our opening comments, Mindy will provide an overview of the financial results, and then Andrew will provide a quick overview of our guidance, 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 or that the 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 MurphyUSA 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 will turn the call over to Andrew.

Thank you, Christian. Thank you everyone on the call for joining us today. Over the course of any quarter, we are constantly reflecting on our performance and our outlook as we shape the narrative for the quarterly earnings call and the key messages to convey to investors, as well as our employees, partners, and others that tune in for an update. And while this is just a point in time in our ongoing path to sustainable long-term value creation, we truly look forward to the opportunity to provide updates on our path, and more importantly, reinforce the messages we believe are most instructive for investors. By now, the various scraping services and bots will have automatically generated their quarter-over-quarter headlines about lower revenues and profits without any insight into the price of gasoline, the structure and direction of the commodity market, the evolution of industry structure, or the relative advantage amongst competitors. And we, too, could spend a lot of time this morning discussing this year's third quarter results compared to last year's record results, but we don't think that's especially helpful. What is helpful and important for investors to understand is that third quarter performance has evolved from an extraordinary set of conditions in the prior year what we previously described as a once in every six to eight year price drop, to sustainable and durable financial performance in 2023. And to be sure, we do not expect full year results in 2023 will exceed those of 2022, but that really shouldn't be news to anyone except the bots. Instead, we believe investors should be focused on two fundamental questions. What is the sustainable trajectory given the advantage competitive positioning of the MRF USA business model in the years ahead? And how does the current momentum and initiatives underpin and support that view? So today's call seeks to continue our ongoing discussion with investors on these important questions. Our sustainable trajectory and current momentum reflect three unique and differentiated value drivers. channeling the advantage generated from heightened fuel volatility into value for a growing customer base to sustain gallon growth and market share gains, optimizing the in-store performance of the existing network while transforming the future network to efficiently deliver new and innovative offers, and investing in distinctive capabilities to accelerate customer trial and adoption to enhance returns on capital. Starting with fuel, one of the greatest sources of value in our business is derived from underlying price volatility, whether created by large-scale macroeconomic or geopolitical price shocks or refining and logistics disruptions or supply-demand imbalances. In the current environment, the macro setup continues to be a headwind for our customers as higher volatility at higher price levels with persistent inflationary pressures means MRF USA has more and more value-seeking customers trading down to our stores. This benefit accrues to us at the expense of the marginal players who, in this environment, are themselves forced to raise prices, perpetuating the cycle that drives fuel break-even requirements higher for the industry and shifts gallons and market share to value-oriented retailers like MRF USA. Third quarter and year-to-date results reflect the impact of foundational share gains we have achieved. While same-store fuel volumes were down 4.7% versus the prior year quarter, the two-year stack remains strong, up 4.3%, in a telling commentary on the goodwill we have generated with customers due to our ongoing commitment to bottom-of-market pricing. While we expect and expected some subset of consumers to be a little less price sensitive in lower price periods, our ability to attract more customers in high price periods and retain them through our loyalty benefits, incredible customer service, and other great products at great value is clearly evident. Within this broader context, we sustained annual volumes within our guided range at margins above our suggested range. Year-to-date all-in margins are $0.31 per gallon. Below the 22, year-to-date average of $0.356 per gallon, but still attractive given the low relative volatility in the first half of 2023. And importantly, margin dynamics remain rational and have even improved in certain regions like the Northeast. And while we certainly hope and pray that global risk diminishes and domestic supply helps to balance prices Our job, indeed our purpose, is to generate the most value for our customer in any environment. We win because we provide our customers value and affordability during the most difficult times. As we think about year-to-date margins we have experienced, coupled with a strong start to the fourth quarter, we think the equilibrium margin range for the nearly 5 billion gallons of refined product we sell in our stores will likely be even higher in 2024. Turning to in-store performance, as we look back over our history as a standalone public company, I would characterize the first 10 years since our spinoff as transforming how we conduct business in our stores, optimizing our high-volume formats, reducing our break-even requirement to enhance merchandising and reduce costs, channeling the incredible spirit of our associates towards aligned objectives, and creating a unique, everyday low-price loyalty platform with Murphy Drive Rewards. As we think about the next 10 years, it is a continuation of this foundation and transforming the kinds of stores we do business in and how we interact with our customers. It is through this lens that I want to discuss our trajectory and momentum in merchandise performance as well as operating expenses. The new stores we are building are strongly accretive to the network average, as shown in our earnings release comparing APSM performance which captures all stores compared to same store sales performance, which excludes stores open since January 1st, 2022. These new stores come with higher volumes, higher merchandise sales and margins, but also come with higher operating costs as you would expect given the larger store footprint. More importantly, these stores deliver higher returns, a better coverage ratio, and a more attractive offer for our customers, helping us to sustain and grow market share. These in-store results are underpinned by continued learning through innovation and a focus on growing food and beverage contribution, in addition to the underlying strength in our nicotine business. In this quarter, we saw significant momentum in food and beverage sales driven by our partnership with the New York Giants, where we have developed signature subs at QuickCheck, and by our improved grab-and-go and co-branded frozen beverage results at Murph USA. While not home runs in any individual quarter, these singles and doubles generate cumulative and enduring benefits while also demonstrating tangible results of our innovative mindset and relentless commitment to our customers. In total, these efforts grew food and beverage sales and contribution dollars for the quarter by 6.1% and 5.7% respectively. Our nicotine business continues to outperform, gaining share in all key categories. while strong tobacco performance makes it relatively more difficult to shift or merchandise mixes a percentage. And remember, we take dollar signs to the bank, not percentage signs. The steady growth in contribution margin dollars supports rateable growth in our merchandise business. In fact, over the past four years through the impact of COVID and our acquisition of QuickCheck, We have altered the trajectory of our merchandise business, generating high single-digit growth rates in sales and margin dollars, a trend we expect to continue into 2024. With respect to store-level costs, we think about the impacts from both a people perspective and an operating cost perspective. We are investing in our people, improving our staffing metrics, getting the right store leaders in place, supporting the assistant manager cohort, in establishing career pathing to identify talent and develop people. These efforts generate benefits in reducing the number of stores at risk from a staffing perspective, improving hours of operations, reducing overtime, as well as the cost associated with higher turnover. For the quarter, people costs were up 3.6% on a per store basis. Store operating costs also reflect the impact of multi-year contracts that have come up for renewal, warranty expirations from our earlier EMV investments and dispensers, higher shrink, largely due to higher retail prices, as well as the added square footage and number of stores in our network. These non-people costs were up 9.6% on a per-store basis, driving the total cost increase of 5.8% per store. Wrapping up the discussion with our capability investments, our trajectory and decade-long track record of merchandise improvement directly reflects the investments we've made to understand our customer. This journey started with Murphy Drive Rewards, which we believe has generated over $250 million of incremental margin contribution since 2018, largely in tobacco considering the market share gains since its inception. Similar capability investments in retail pricing excellence have enabled us to capture more value from fuel price volatility. In fact, if we evaluate our SG&A investments and capabilities, they have generated by far the highest returns of any investment made in the past decade. Going forward, our corporate cost reflects new investments we are making across the business to extend our competitive advantage over the next decade and include our digital transformation and in-store experience campaigns. We've been able to get the right talent at the right time in El Dorado and in New Jersey to help us drive some critical initiatives over the coming years. These costs are reflected in our G&A expense, and we expect to radically continue this pace of growth into 2024. In summary, we are very pleased with third quarter results, the sustainable trajectory of the business, and the current momentum we are seeing in the fourth quarter as we head into the new year. The strength and agility of our business model has once again demonstrated resilience and generated success over the past 10 years, not to mention about a tenfold increase in shareholder value for investors since the spend. I'm now going to hand the call over to Mindy to briefly review the financial results and discuss our capital spending, after which I'll review the elements of our 2023 guidance and then open up the call for some questions.

Thank you, Andrew, and good morning, everyone. Revenue for the third quarter of 2023 was $5.8 billion versus $6.2 billion in the year-ago period. Adjusted EBITDA was $306 million versus $367 million, and net income was $167.7 million, or $7.69 per share, versus $219.5 million, or $9.28 per share. Average retail gasoline prices were $3.41 per gallon versus $3.67 per gallon in the year-ago period. Total debt on the balance sheet as of September 30th was approximately $1.8 billion, of which approximately $15 million is captured in current liabilities, representing the 1% per annum amortization of the term loan and the remainder of reduction in long-term lease obligations as they are paid through operating expense. Our $350 million revolving credit facility had a, once again, zero outstanding balance at quarter end and is currently undrawn. These figures result in gross adjusted leverage that we report to our lenders of approximately 1.8 times. Cash and cash equivalents totaled $125 million, up from $93 million as of June the 30th after CapEx of $79 million and share repurchases of $65 million. clearly demonstrating the accretive benefits of our positive free cash flow business. Now, I also want to add some color around the store count table and the earnings relief. You will notice four QuickCheck stores were closed during the quarter, totaling six year to date. These closures represent non-fuel stores that reach the end of their useful life, and we're allowing the lease to expire. In strong markets where we want to maintain and grow the QuickCheck brand, We will build brand new stores with a fuel offer in a better location with better economics. Andrew is going to address the remaining elements of our guidance, but I will kick off the conversation and go ahead and discuss our 2023 capital spend, which for the full year 23 is likely to come in between $325 million and $375 million, or $50 million below our guided range. We expect most of this spend to carry over into 2024. as our new-to-industry stores are experiencing longer cycle times than anticipated, and some maintenance initiatives and corporate project spend has now been deferred into 2024. And with that, I will turn the call back over to Andrew.

Thanks, Mindy. That's a great segue into a quick review of how we're tracking against 2023 guidance. So, let's start with our organic growth. The 2023 plan included up to 45 new-to-industry stores. As cycle times for new construction projects has lengthened over the past two years, we have not been able to put new stores into service as quickly as we would like. Permitting continues to be an issue for both our project developers as well as when we're building and opening individual stores. Contractors continue to face a variety of challenges, including labor shortages and supply chain constraints. Hooking up utilities has also been an issue in getting new stores across the finish line. So taken together, we are estimating 9 to 11 new stores will be put into service in the fourth quarter, resulting in a total of 27 to 30 new stores for the year, and that includes six new QuickCheck stores. We will end the year with four new stores under construction, with another 10 beginning in Q1 of next year. So hopefully that gives you some sense of the lag effect we are experiencing. We expect these conditions to largely continue into 2024, impeding our ability to grow as fast as we would like next year. Nevertheless, we maintain a robust land pipeline and an ambitious build schedule and expect at least 30 to 35 new stores to open in 2024, with activity expected to accelerate in 2025. While we think about capital allocation on an up-to basis, knowing that the longer-term trend will catch up and reverse over time, we think it will be more helpful to provide annual guidance on an at-least basis. Despite the challenges around new store growth, as our network matures and our formats continue to evolve, we have new opportunities to direct growth capital with return potential that is equally or more compelling as new stores. These projects include raise and rebuilds, which we were able to accelerate in 2023, converting 33 kiosks into 1,400 square foot stores. with more dispensers, a boutique fuel offer, and expanded higher margin in-store merchandise offer. This figure is above our guided range of up to 30 raise and rebuilds. Additionally, we are in the early stages of renovating our 2,800 square foot stores to better serve our customers with a redesigned interior that provides a better shopping experience, focusing on improved food and beverage offer. Early results from nine pilot stores suggest customer uptake is strong, and we are committing capital to renovate up to 50 stores in 2024. So in addition to be able to flex our growth capital with more raise and rebuilds to backfill delays in the NTI program, we're also investing in store renovations and other projects that will be an integral part of our capital plans moving forward, and we can update you in February with more details on what that will look like in 2024. Turning to the remaining elements of our guidance, Fuel volumes are trending to be slightly above the midpoint of our guided range. Merchandise contribution dollars also should be slightly above the midpoint of the guided range. Store-level OPEX is trending just above the midpoint of the guided range, approximating about a 5.5% year-over-year increase, and we expect that trend to continue as we build and rebuild larger stores next year. SG&A expense will also be above the midpoint of the guided range. largely representing multi-year capability investments we are making this year, where we are ahead of schedule on both execution and delivery. Our tax rate also remains within the guided range. Thank you, Mindy, for already addressing the 2023 CapEx program. In keeping with tradition, I'd like to just close with some insights around preliminary October performance, where I'm happy to say volumes have improved on a year-over-year basis. running just shy of prior year volumes at retail margins of about 33 cents per gallon. So we are off to a great start in the fourth quarter and are excited to enter 2024 with significant operational and financial momentum. With that, we can open up the lines for questions, operator.

And at this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from the line of Anthony Bonadio with Wells Fargo. Your line is open.

Yeah, hey, good morning, guys. Nice quarter. I just wanted to drill in a little bit on the PS&W margin contribution. Can you just talk us through the underlying components there? I know you've talked about a modest benefit from supply tightness, I think to the tune of around one cent per gallon in recent quarters. Is that still the right way to think about it? And then it looks like RBOB was net down in Q3. So just maybe more on what drove the upside there this quarter.

Yeah. Mindy, you want to take that one?

Sure. Most of the results, Anthony, are reflective of mostly the direction of prices. As we looked at last year where we saw the big price fall, we would expect, given the direction of prices and the way we account for inventories to have a negative impact for product supply and wholesale, Conversely, this year was kind of the opposite of that, low volatility in the business, which resulted in us being able to capture some gains in those inventory variances. So really, the fluctuation in products planned wholesale results quarter to quarter, mostly in any quarter, is just based on the direction of our overall product price movement.

Okay. Thanks, Mindy. And then just on break-evens, I wanted to dig in a little there and more specifically around the recent narrative around support from weaker trends in tobacco. If we look at industry data, it seems like sales have softened, but we've also got this ongoing shift out of cigarettes into higher margin alternative products that seems to be at least partly offsetting as I think about gross profit dollars earned by the marginal player. Is there anything you can do to help us sort of quantify or frame what's going on there? And then is it fair to say that the marginal player is just doing worse in capturing that transition?

Yeah, so in terms of traditional combustible cigarettes, non-combustible, smokeless, I guess the more premium vapor products, et cetera, I would expect to see brands like Murphy USA and the larger chains continuing to grow and take share in those categories relative to the marginal players. One of the things that I know has been vocalized by some of the tobacco manufacturers is the frustration with a lot of the illicit vapor products that are being sold out there. And if you did a survey of in many of our rural markets, you'll find that many of those smaller operators are selling products that were not approved by the FDA that did not get a stay in court. And we may even be the only retailer responsible in that market not selling those products. And I know that is having an effect on combustible products as well as some of the other vapor products. Unfortunately, you see some of the marginal players reverting to tactics like that, unfortunately, as part of their means to sustain profitability. Beyond that, though, I don't have as much insight into the details of their tobacco mix. I don't know if that's the particular issue you were getting at or not, Anthony.

Yeah, that's right. Thanks, guys.

And your next question comes from the line of Ben Bienvenu. Your line is open.

Hey, thanks. Good morning, everybody.

Morning. So I want to start, if we could, just on the fuel gallons, which, you know, despite lapping a huge growth number last year, up 11% on a same-store basis, was only down 4%. The two-year stack accelerated sequentially. despite having kind of a similar fall off in pricing that led to a favorable consumer response last year. Can you talk about the things you're seeing from your consumers that kind of in concert with the moves you're making around price are leading to the stickier share gains and how you think that informs kind of what the new baseline fuel productivity of your stores looks like going forward?

Yeah, thanks, Ben. And look, I think the last quarter we kind of said, look, if volumes were down four to five percent, we would consider that a win considering the significant gains that we got last year in a really high price environment. And we know, look, on the margins, some customers aren't going to be as price sensitive in lower price environments like we're experiencing right now. But I do believe When customers come to us in those high-price environments, they sign up and become a member of Murphy Drive Rewards and get those benefits. They get into our stores and they see the incredible value and great service that they can expect there. It just creates a stickiness. I believe this consumer segment continues to feel the brunt of the inflationary pressures that remain today. persistent. So even at the lower prices, you know, they're still feeling that pain. And I believe that bodes well for everyday low price retailers, especially in categories like ours, where they don't view our products as discretionary. They need our product to get to work and for their simple pleasures in life. So I think a lot of it speaks to who our customer is and the pressures that they continue to face. And we just continue to see, you know, more customers trading down to MRF USA. And we can see it, Ben, not just in the fuel category, but other categories, you know, as well, where we can look at a panel of same customers over a period of time, how their mix shifts, and how we get new customers in both premium and discount categories of tobacco, for example. So I think if we continue to see volatility, as we continue to see inflation, as we continue to see high interest rates, these pressures are going to build up. And I think it just bodes well for a business like ours.

Yeah. Okay. Makes sense. My second question is kind of following up on a comment, Andrew, that you made around the new midpoint or equilibrium for margins as we look forward, kind of reassessing that in 2024. And I think, you know, if we look at the third quarter, really there was kind of every reason for margins not to be very good. Yet the margins you delivered sort of pierced through the headwinds of rising RBOB prices during the quarter sequentially. And so I'm wondering, you know, are you willing to put more specificity around the new range or is that something you'd like to do more formally next year?

Well, I think we'll put more specificity around the suggested range, but I don't think we're going to go back to guiding fuel margins because it just led to so many short-term conversations as opposed to maintaining the dialogue on a much longer-term, sustainable basis. So by providing a range this year that, you know, Ben, we kind of did a you know, a walk down from the 34 cents from the prior year to get to the upper end of the range. We developed a slide five that highlighted why we thought in the investor presentation, you know, why the 26 cents was sustainable. And that was the basis for the range. We'll continue to do that type of analysis to provide the range. But, you know, there's so many factors that ultimately influence it, right? As Mindy highlighted, the the structure of prices rising and falling. When prices get high, the impact that has, especially with volatility on the marginal player wanting to move prices up more quickly because of the challenges they're facing. The broader competitive dynamic is rational, but it varies regionally as new competitors move into a market. Certainly when we build new stores, you know, we may be more aggressive in those markets to establish top of mind awareness with consumers. And we've seen that in some of our markets. And then all of a sudden those markets become a little bit more, um, you know, rational. So there's so many variables in there. So I'd like to think we were thoughtful in the 26 to 30 cent range. I'll admit we got it wrong. Uh, but fortunately on the high end and I hope to be as thoughtful on the, uh, you know, the range we provide next year, but it's going to be more of a, again, a suggested range. So we avoid the short-term, you know, margin focus of the discussions with investors.

Yeah. Okay, great. And we'll stay tuned until then. Best of luck with the rest of the year. Thank you.

And your next question comes from the line of Bobby Griffin with Raymond James. Your line is open.

Hey, good morning, everybody. Congrats on another great quarter. I guess, Andrew, first I want to touch on just the non-cigarette same-store sales growth. You know, modestly negative understanding went up against a very big comparison the prior year. Is it really just a comparison that's driving that, or was there some breakdown behavior from consumers or some opportunities in certain categories that you might look at and say, hey, that's a good opportunity for us to do a little better in 2024?

Bobby, that's a great question. And certainly if you've got a two-year stack, you could just kind of rest on that and make that your answer. As you know, we're not that complacent when we look at our business. I mean, I'll give you an example. You know, on a sales basis, you know, center of store was down. And on a two-year stack, only up 2%. Food and beverage was up 7% to your stack, but only up 1.1%, you know, on a margin basis. And so as I think about the big initiatives that we are in the midst of, and as I noted, we are ahead of schedule in terms of both execution and delivery, they're all focused on non-tobacco, sorry, they're all focused on non-tobacco merchandise, including food and beverage. Some examples. You know, our price and SKU optimization for the center of the store, we've gotten really good at fuel pricing and tobacco pricing. We're now applying that to the center of the store. The demand forecasting work we've done at QuickCheck is going to improve production planning and labor planning. We're already seeing it flow to the bottom line from both a margin and a cost standpoint, along with the pricing improvements that we've made that will flow through in full year results next year. MDR is great. We're now personalizing offers in a much more sophisticated way than we've ever done before. Everyone knows Murphy USA is great for upselling. Now we're doing a better job of doing that at QuickCheck, especially on the food and beverage side with the digital customer order screens. Our in-store experience campaign, we've got 17% more selling space in the center of the store. We've adopted queue lines from QuickCheck. The food and beverage layout has been redesigned for an expanded grab-and-go and dispense beverage area. So I think your point's spot on, and that's where a significant amount of our focus has been this year on improving that part of the business. And I expect to see really good results on that in 2024.

Thank you. My second question was actually on MDR, but you hit on that response, so I'll go ahead and come back in the queue, and best of luck here in the fourth quarter, guys. All right. Thanks, Bobby.

And your next question comes from the line of Bonnie Herzog. Your line is open.

Hi. Good morning. This is Ethan Huntley on for Bonnie Herzog. Thanks for taking our questions. I guess first, maybe a topic of discussion lately has been GLP-1 drugs. So I'm curious to hear your thoughts on the potential impact on your business from the growing use of these drugs. I guess, sort of, have you seen any impact on your inside sales or any changes in consumer behavior, either from a basket, traffic, or maybe a category perspective? And then maybe if you could touch on, you know, your initiatives that you could implement, you know, sort of to mitigate these potential impacts over the next, say, five to 10 years.

Yeah, I think it's way too early to tell.

Okay. All right. Got it. And then maybe let's talk about fuel margins again. You know, we've covered it quite a bit, but I'm curious if you can maybe, you know, help outline the impact that a tight diesel fuel supply market had on your margins and volumes during the quarter, and I guess sort of any color you can provide on that dynamic more recently.

Yeah, I don't know, Min, if you want to speak to the diesel side.

I mean, as you know, we are more RBOB focused, more gasoline focused versus diesel. So while that had an impact, that was really just on the margin for the most part. The margins that we were able to drive home in the quarter were really more a function of our execution against our strategy. Also, the persistent market structure equilibrium, which continues to pressure retailers, as Andrew said, to raise margin to cover costs. Margins coming into July were a little soft, and we had three separate price moves on a Friday, which challenged us, but we were able to recover from that in the months of August and September, posting really strong results. Really, it's just that our executing against our strategy and that market equilibrium, which is allowing us to continue to generate that strong cash flow and earnings even in a relatively stable market environment. And of course, we would be able to have significant upside if we ever get a return to volatility, which we certainly will. So as Andrew said, as we look out into October in the fourth quarter, we continue to be encouraged by the traffic in our store. with volumes right near last year's and at much higher margins at least so far in the fourth quarter. So diesel not really having a material impact on the bottom line for our results at least.

Yeah, I think the other thing you have to think about is I drive a diesel truck. Most of our customers who are driving a diesel truck on a farm or a ranch or on the wool field or something like that, they're not switching out because of the mission of that vehicle to a gasoline vehicle. vehicle because of the requirements they have. So it's really a non-discretionary, you know, purchase for them. Fortunately, you know, we're not having supply outages or anything else because of the tightness as well. And the ag season is, you know, kicked off to a good start, and that's certainly helping volumes out of our proprietary terminals. So, you know, something you keep an eye on, but it's not impacting the business in, you know, any

negative or major way. Got it. That's helpful. Thank you very much.

And your next question comes from the line of Corey Tarlow with Jefferies. Your line is open.

Hi. Good morning, and thank you for taking my questions. Firstly, Andrew, I believe you had mentioned that you're piloting, I believe, nine stores with a redesigned interior and improved food and beverage with the potential to scale that or renovate up to 50 stores next year could you talk a little bit about the early performance that you're seeing from these stores and what's different in these stores versus your more traditional stores yeah so it's too early to give you you know detailed performance data uh we're kind of a month or so uh into that but so far customer feedback is extremely uh

encouraging as well as feedback from the staff. In fact, we have teams out there, part of our leadership teams visiting the three markets those are in. So part of the feedback we got is our food and beverage strategy was around how the store is organized, where the food and beverage offer is presented in the store. And so if you walk in now, you'll see grab-and-go stores. at the back of the store versus where it was closer to the front. One of the things that we had to do because it was in the front was put more shading on the windows to keep the refrigeration stable. Customers didn't like all the shading on the windows because the store wasn't as open, transparent, and lit from a perceived, hey, I'll look in the store if it looks dark That's not as good a sense. By moving it to the back, you've got a grab and kind of prepare, reheat counter area that's significantly larger. I think before you had one small microwave that was down low. Now you've got two larger ones up on a counter. You know, more people are using that feature than ever before. We set up queuing lanes like we had trialed at QuickCheck that were highly successful, and it took about a couple of weeks for customers to get used to it. I was in one of the stores on Monday, and there were six customers in the queue lane. They all lined up exactly like they were supposed to, and, you know, that's an opportunity to – sell more impulse items that way. So it's largely centered around relocating the grab and go food and beverage, which is what Murphy USA has the right to win with the customers because it's the best national and regional brands. It's a better space for them to grab and add condiments or to reheat those items. uh similarly from a coffee standpoint with the bean to cup and dispense beverage um you know that uh you know the condiments that go with the coffee uh are you know better positioned for them so it's just a better overall experience but now the layout flows better you've got the queuing lanes which then adds more selling space uh and then it just opens up the store both from a safety line of sight for the store associates and for the customers to be able to see as well. And again, look, some of this isn't, you know, highly innovative, you know, kind of earth shattering findings. But again, they're examples of the singles that we can hit like so many of our initiatives over the year. And so we have the opportunity to one, address that in all the existing 2800 square foot stores and then we'll be building in our first we call it store of tomorrow store next year which you know takes all the learnings from our consumer research and strategy work into a format that enhances this further that's great

Very helpful. Thank you so much for all the color. And then I just wanted to follow up. I think early on in your prepared remarks, you had mentioned that you'd seen an improvement in the Northeast. I was wondering if you could provide any additional context or color as to what drove that improvement. Thank you so much.

Yeah, look, I think as we look across our various markets, we see you know, volume margin, traffic, et cetera, vary to a variety of factors. It's no surprise to anyone that, you know, the Northeast demand has not picked up as much as other parts of the business. We see that not only in some of our data but other industry data and then, you know, services that provide insights on broader consumer spending. And I believe that our promotional activity, our New York Giants launch with those subs, which have had a meaningful impact on the food sales at QuickCheck, some of our innovative frozen energy drink concepts, et cetera, have really helped from a traffic standpoint for QuickCheck in particular. And then the margin environment has just improved there where it was a little bit weaker over the summer. It's now improved, more consistent with what we'd seen in some prior quarters.

Great. Thank you so much and best of luck. Thank you.

And there are no further questions at this time. Andrew Clyde, I'll turn the call back over to you.

Great. Well, thanks, everyone, for tuning in. As I said, we truly look forward to these opportunities to provide updates on our journey towards long-term value creation. We're excited about all the opportunities that we have in front of us and look forward to our next updates. Thank you.

And this concludes today's conference call. You may now disconnect.