Murphy USA Inc.

Thank you for standing by. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the Murphy USA fourth quarter 2023 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 would 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, please press star 1. Thank you. I will now turn the floor over to Christian Peichel. You may begin your conference.

Thank you, Christine. Good morning, everyone. Appreciate you joining us today. With me 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 kick off our guidance conversation. After some follow-up comments from Andrew, we will 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, 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 it over to Andrew.

Thank you, Christian, and good morning, everyone. We are excited to discuss our fourth quarter 2023 performance, which reaffirms the strength of our strategy and business model, as well as our enduring commitment to driving sustainable value for all our stakeholders. When looking at our fourth quarter and full year 2023 results, it's clear to us that Merck USA is delivering results. And it all revolves around the concept of more. And let me tell you what I mean by more. I often share that I believe the Murphy USA and QuickCheck brands are serving the largest and fastest growing customer segment in the US. Customers who are struggling to make ends meet, living paycheck to paycheck, and who value affordability above all else. When we look at our most loyal customers through the lens of our loyalty data, what do we see? First, we continue to get more from the same customers. When we look at a large panel of customers who have been shopping with us every month since 2019, we see that they are spending 50% more at MurphyUSA in 2023 than they were in 2019, about $177 per month. Second, we are getting the same from more customers. New loyalty members that visited us for the first time in 2023 are making the same frequency of trips as the 2019 most loyal cohort, about five transactions per month. But they are spending at higher levels, and they are shopping more of the store, with 28% of them having bought fuel, tobacco, and non-tobacco each month. In addition, we're getting more from our existing stores. As we continue to build on our history of lowering our fuel break-even margin requirement and improving our coverage ratio, new initiatives are helping us maintain that trajectory. For example, one element of our digital transformation initiative focuses on upsell suggestions at the QuickCheck touchscreens. Early pilots show uptake of suggested sell items have more than doubled. At Murphy, creating personalized offers through machine learning initiatives is resulting in more share of wallet captured from the same customers. Same initiatives and investments, they allow us to achieve more with less. Last year, we piloted a more sophisticated demand forecast and production planning tool at QuickCheck stores. This initiative has resulted in driving a larger basket with better availability of items while also improving labor scheduling accuracy. In other words, doing more with less staff hours. The pilot stores have demonstrated a 20% uplift in hop, grab, and go products, leading to an increase in contribution of 6% net of spoilage. due to stronger in-stock positions during periods of peak demand, increasing our speed of service, and giving customers more of what they want. The same demand forecast is now fine-tuning our labor scheduling. We're also getting more from our new stores. We added 22 new stores to the Murphy-Brandon network in 2023, and while supply chain and permitting issues have deferred some of the financial impact of our new store program, Most importantly, performance of these new stores has not been compromised. The 74 new Murphy Banner stores added over the last three years averaged about 290,000 gallons per store month in 2023, nearly 20% higher than the network average in 2023, delivering more gallons to more customers. From a merchandise perspective, we are seeing total merchandise sales per store month of about $205,000 about 15% higher than the Murphy Network average, which is impressive given these stores are still ramping to their full potential. We've also put 13 new QuickCheck stores into service over the same three-year period, helping QuickCheck generate record results in food and beverage sales and margins in the fourth quarter. Additionally, we're excited to share that QuickCheck has received recognition for the number one spot in the CSP survey of the 20 best C-store coffee programs of 2023, and the number two best gas station for food in the USA today. This recognition confirms what we already know, that QuickCheck is a world-class food and beverage platform known for its high-quality fresh offer and innovative programs that keep customers coming back for more. In addition to new stores, we are getting more from our legacy network of kiosks when our raise and rebuild program converts them into 1,400 square foot stores with an expanded center store offer and higher merchandise contribution. In short, these stores are selling more gallons and more merchandise. The raise and rebuild stores from calendar years 2020 through 2022 averaged 307,000 gallons per store month in 2023. about 27% higher than the network average. They average 230,000 per month in merchandise sales, or about 27% higher than the Murphy Network average also. Given our performance against this backdrop and the environment in which we compete that is characterized by flat to negative macro demand, especially in fuel and cigarettes, this begs the question, if we are getting more in the marketplace, what does that mean for everyone else? We believe it means others, especially those who don't have their own unique value proposition, are getting less. We're taking share. Based on what we have all observed over the past few years when certain segments of the competition loses sales and sees their cost increase, they are relegated to make it up in the form of higher fuel margins. So what does this mean for Merck USA? It means we also take home more cents per gallon at each store which in turn funds more organic growth, more investments in distinctive capabilities that will generate even more in the future, allowing us to buy back more shares. This is the virtuous cycle and flywheel that defines MurphyUSA. So I know the million-dollar question remains. If you're getting more from other parts of the business in the future, do you still expect to capture more fuel margins? And the short answer is yes, and I will cover that in a little bit more detail after Mindy reviews quarterly results and kickstarts the guidance conversations with some details around our 2024 capital plan. Mindy?