Alimentation Couche-Tard Inc.

Good morning. My name is Sylvie, and I will be your conference operator. Good morning. My name is Sylvie, and I will be your conference operator. Good morning. My name is Sylvie, and I will be your conference operator. I will now introduce Mr. Jean-Philippe Lachance, Vice President, Investor Relations and Treasury at Alimentation Couchetard. I will now introduce Mr. Jean-Philippe Lachance, Vice President, Investor Relations and Treasury at Alimentation Couchetard. I will now introduce Mr. Jean-Philippe Lachance, Vice President, Investor Relations and Treasury at Alimentation Couchetard.

Hello. First, I would like to welcome you to the teleconference on the distribution of the financial results of the third quarter of the Couchetard food exercise 2023. All lines will be placed in discretionary mode to avoid any unnecessary noise. Following the presentation, we will answer the analysts' questions directly. We would like to remind you that this web broadcast will be available on our website for a period of 90 days. In addition, note that some of the topics discussed during this webcast could consist of prospective statements provided by society with usual warnings. These warnings or risks, as well as these uncertainties, are described in our financial reports. It is therefore possible that our future results may differ from the information presented today. Les résultats financiers seront présentés par M. Brian Hanisch, président et chef de la direction, et M. Claude Tessier, chef de la direction financière. Good morning. I would like to welcome everyone to this web conference presenting Alimentation Couche-Tard's financial results for the third quarter of fiscal year 2023. All lines will be kept on mute to prevent any background noise. After the presentation, we will answer questions from analysts asked live during the web conference. We would like to remind everyone that this webcast presentation will be available on our website for a 90-day period. Also, please remember that some of the issues discussed during this webcast might be forward-looking statements, which are provided by the corporation with its usual caveats. These caveats or risks and uncertainties are outlined in our financial reporting. Therefore, our future results could differ from the information discussed today. Our financial results will be presented by Mr. Brian Hanisch, President and Chief Executive Officer, and Mr. Claude Tessier, Chief Financial Officer.

Brian, you may begin your conference. Thank you, Jean-Philippe, and good morning, everyone. Thank you for joining us for this presentation of our third quarter 2023 results. We're pleased to report solid results this quarter, and I want to begin by sincerely thanking our great team members around the world for their hard work and focus on our customers. As our global markets face persistently high inflationary conditions, particularly in Europe, where energy prices have spiked materially in the quarter, we've remained focused and committed to delivering a strong and consistent value to our customers and maintain cost discipline inside of our operations. In convenience across the network, we had strong double-digit growth in our food program, as well as in our private label items, both offering a high quality at a great value. Throughout the quarter, we continue to be pleased with the resilience of our customers. And through our localized pricing efforts and ongoing fuel promotions, we're providing them with further benefits. While mobility results are still impacted by stay-at-home work and higher prices, we continue to generate very healthy fuel margins, offsetting these softness and volumes. Before I turn to the results, I want to go over the announcement from earlier this morning of our proposed acquisition of certain European assets from Total Energies. We've submitted a firm and irrevocable offer and it entered into exclusive negotiations to acquire 100% of Total Energy's retail assets in Germany and the Netherlands, as well as a 60% controlling interest in the Belgium and Luxembourg companies. The proposed acquisition would include 2,193 sites with 1,195 of those being located in Germany, 566 in Belgium, 387 in Netherlands, and 45 in Luxembourg. These are high-quality locations with very strong market positions in each country and in close proximity to our current footprint in Europe. Following my presentation, Claude will cover in more detail the financing for this proposed offer, which is also detailed in a presentation on this proposed acquisition available on our website. Our next step is to enter into a consultation process involving employee representative bodies in the four countries outlined, as well as the approval of the relevant competition authorities. We're beginning these meetings in the upcoming days, and it's expected that the proposed transaction would be completed before the end of the calendar year 2023. For some time, we've been seeking a sizable acquisition. This one will grow our European network by close to 80%. bringing value to our shareholders and being a strong geographic and strategic fit. We're truly excited to bring these assets from Total Energy into the Couch Star family, having a deep respect for the operations, management, and employees in the four countries involved, as well as a great confidence of the benefit of having them join forces with our leading global retail operations. By growing into Europe's largest market, Germany, and other European markets near our successful Scandinavian, Irish, Polish, and Baltic networks, we believe we can generate material synergies and create additional growth opportunities in some of Europe's strongest economies. While adding Total Energy's assets will be game-changing growth for our network, I also want to highlight other exciting recent announcements. First, we closed the acquisition of True Blue Car Wash, which currently has 65 car wash locations conveniently located in our core markets in high-traffic areas in Arizona, Texas, Illinois, and Indiana, and with a strong pipeline of future new industry sites planned and under development. We see this acquisition as a natural extension of our current car wash business of more than 2,500 locations and a part of our commitment to lead and innovate in a fast-growing segment that meets our customers' mobility needs. Adding True Blue's high-quality car wash sites has already presented compelling opportunities for cross-promotion and loyalty building, which began immediately under close. And 32 days after close, we're very pleased with the early results. We've also entered into a binding agreement for the acquisition of the fuel and convenience retail sites from Big Red Stores. These are modern, high-quality, well-located sites across the state of Arkansas, aligning with our growth ambitions in that area. As they're predominantly large format sites, we will have ample space to enhance our fresh food programs and product assortment and services in these sites. Finally, following the fulfillment of our obligations with the Competition Bureau in Canada, we're now able to bring the benefits of the Wilson acquisition to our Canadian market. Now let me turn to our results for the quarter, beginning convenience. Compared to the same quarter last year, Sainsford merchandise revenues increased 4.8% in the United States, 3.5% in Europe, and 2.3% in Canada, driven by strong results in our food programs, as well as by our diversified offer in our beverage categories, and partly offset by continued softness in cigarette revenues from both illicit competition in Canada and just overall softness in the category across the industry. Across the network, our Fresh Food Fast program continues to grow, with over 4,500 locations open globally. Sales are up 23% on a same-store basis, and profits are accelerating, with the customers and our store team members strongly engaging in our products. Our $5 pizza and fresh-baked cookie programs are in high demand, and as we introduce new items such as our griddle cake sandwiches, we're getting very positive feedback from our customers, and we're seeing it in the sales. For dispensed beverage, we've made improvements that will enhance our customer experience and drive sales. In the U.S., we launched a national coffee rebrand initiative to better communicate the quality of our coffee and bring coffee house feel to our stores. We've also launched a free coffee day in the U.S. with over 450,000 cups of coffee given away that day. Mountain Dew Purple Thunder sales continue to drive growth in our polar pop and now exceed 11 million cups year-to-date. In packaged beverage, our private brand drinks continue to provide a creative double-digit growth in our highly competitive products at great values to our consumers. In age-restricted global alcohol sales had a strong performance, with European sales leading the way, up strong single digits. Our upgraded wine wall displays are exceeding expectations, resulting in increased unit movement, as well as the launch of our new private label brand wine, which is now selling in 2,400 locations in the United States. Lottery's also performed well during the quarter, driven by large U.S. jackpots, as well as a well-executed holiday selling season. Across the network, we continue to see inflationary pressure on our packaged goods and supply costs, and we've been working in collaboration with our vendors on costs and investments to help deliver value back to our customers. In our global merchandise supply chain, we still have had some isolated challenges, but overall our in-stock and on-time delivery rates are materially improved from previous quarters. Turning to our data-driven work in pricing, we now have that running in all BUs in Europe and North America, and we're evolving our tools to be more responsive to the inflationary market conditions we've seen over the past quarters. In promotions, we're in the final preparatory stage of piloting our approach to integrate price and promotion analytics together, which will allow us to simultaneously optimize both regular and promotional items that are frequently bought in multiples by our customers. And in the assortment side, we are now live across all of our major categories in North America with a focus on identifying strong performing products, getting them onto our shelves quickly while eliminating those slow moving items. Moving to our fuel business, same store road transportation volumes decreased 2.3% in the U.S., by 1.2% in Europe and other regions, and increased by 0.5% in Canada. Overall demand remained unfavorable, impacted by high prices driven by the higher crude prices compared with corresponding quarter in 2022, as well as heavy rebrand activity on our part in the quarter. As I mentioned earlier, we continue to generate very healthy fuel margins, offsetting the decline in these volumes. In our Circle K fuel rebrand work, we completed over 300 locations during the quarter and now have over 3,800 Circle K fuel branded sites in the U.S., While this is disruptive in the short term, it's absolutely a positive for both our consumers and our profitability over the long term. We've continued this quarter with local fuel promotion days in the U.S. to help alleviate some of the cost pressures at the pump, including over 70 events with a range of 25 to 40 cent per gallon price drops during prime driving hours. Here we're seeing significant lifts in volume, as well as valuable engagement and brand building in our store offerings and at the forecourt. Our EV fast charging network now consists of 1,380 charging stalls covering more than 300 locations. Following the opening of the biggest truck charging site in the Nordics this October, we've opened four more truck charging sites in Sweden, and 15 more will open in the coming year. To date this fiscal year, we've had over 1 million charging transactions on Circle K chargers in Europe, which is double the amount from the same time last year. This increase is driven both by network expansion and continued growth of utilization in our chargers. In our innovation work, we've made great progress in smart checkout, which is aimed at providing our customers with the quickest and easiest checkout experience. We hit a major deployment milestone recently with over 2,000 smart checkouts now live in the U.S., and we have approximately 120 smart checkouts live in Europe. We believe this is a materially faster and easier transaction than traditional self-checkouts and will lead to higher customer satisfaction over time. And the net promoter scores certainly support that so far into this journey. In our proprietary pay-by-plate program in Europe, we've passed 1.5 million transactions where we offer the service. And now, before I turn it over to Claude, I want to note significant recognition for our sustainability work over the quarter, including being recognized as a 2023 Top-Rated ESG Performer by Sustainalytics, as well as MSCI ESG. In addition, we were awarded the Bronze Ecovalidus Medal for our sustainability efforts in Europe. And in Canada, Women in Governance honored us with a Bronze-Level Parity Certification for our progress towards gender parity in our workplace. I'll pause there and let Claude take you through more of our third quarter financial results.