Casey's General Stores, Inc. Aktie

Good day, and thank you for standing by. Welcome to the First Quarter FY 2027 Casey's General Store Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam James, Senior Vice President of Finance and Investor Relations. Sir, please go ahead.

Good morning, and thank you for joining us to discuss the results of our first quarter ended July 31, 2026. My name is Sam James, Senior Vice President, Finance and Investor Relations. With me today are Darren Rebelez, Chairman, President and Chief Executive Officer; and Steve Bramlage, Chief Financial Officer.

Before we begin, I will 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 the potential impact of the Fikes transaction expectations of 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 and performance at our stores.

There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any uncertainties or any future results expressed or implied by those forward-looking statements, including, but not limited to, the integration of the recent Pipes acquisition, our ability to execute our strategic plans or realize the synergies from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions as well as other risks, uncertainties and factors which are described on our most recent annual report on Form 10-K, our 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 disclaims any attention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of our operating expense increase for the first quarter can be found on our website at www.caseys.com under the Investor Relations link.

With that said, I'd like to turn the call over to Darren to discuss first quarter results. Darren?

Thanks, Sam, and good morning, everyone. Before we go into further detail on our outstanding first quarter performance, I'd like to thank the entire Casey's team for their hard work during our 100 days of summer or for the excellent job they did serving our guests. I'm also about of the positive impact we're making on the communities we serve. As students said back-to-school, our annual path for classrooms giving an raised funds for grants that will support schools, students and teachers.

This year, with the help of our guests, team members and supplier partner, Coca-Cola, we raised over $1.8 million. This is a new record and reflects our shared commitment to invest in the future of the communities we call home. We're through the first quarter of our fiscal 2027 to 2029 3-year strategic plan that we laid out in June where we highlighted Casey's advantaged convenience QSR flywheel with our 3 lines of business under 1 operating cost structure. Our strong first quarter result is yet another proof point that our advantaged model is working as we continue to gain share, both inside and outside the store.

Now let's discuss the results from the quarter. Diluted EPS finished at $7.37 per share, up 28% from the prior year. Net income was $274 million, an increase of 27% from the prior year. The company generated $485 million of EBITDA, 17% higher than the prior year and up 40% on a 2-year stack business. Inside the store, prepared food and dispensed beverages remained strong. PF&DB transactions were up over 100 basis points, driving PF&DB units up nearly 4% versus the same period in the prior year as best continue to gravitate toward our abundant offering, compelling value and continued innovations such as our Bacon, Cheeseburger, pizza LTO.

Inside margin expansion was driven primarily by prepared food and dispensed beverage mix. In forecourt, the capabilities we developed over the past couple of years helped us navigate a volatile environment. Fuel margin was nearly $0.48 per gallon, while same-store gallons were roughly flat. One note on the quarter. As part of our integration of the Fiest acquisition, approximately 1% of our total store base have planned disruption associated with remodeling legacy [indiscernible] stores to Casey's. As a result, same-store sales, both inside and outside the store faced a slight headwind. Despite this, we still posted strong same-store results for the quarter and remained ahead of schedule our integration efforts. The stores have been already remodeled to Casey's in prior periods have performed exceptionally well and we expect to remodel [indiscernible] Setco stores throughout the fiscal year.

With that disclaimer out of the way, I'd like to now go over our results and share some of the details in each of the categories. inside same-store sales were up 3.2% for the quarter or 7.7% on a 2-year stack basis. Gross profit margin for the quarter was 42.2%, up 30 basis points from the prior year. For Person dispense fabrics by the way, as same-store sales were up 4.8% or 10.7% on a 2-year stack basis, with a gross profit margin of 59.3%. The majority of same-store sales growth was from traffic with minimal pricing. This was highlighted by great performance in whole pies with units up nearly double digits in the quarter.

Same-store grocery and general merchandise sales were up 2.7% or 6.5% on a 2-year stack basis with a gross profit margin of 35.6%. Energy dreams and nicotine alternatives continue to outperform the category with double-digit growth. The alcohol category, specifically Bayer, was a headwind during the quarter. On the fuel side, same-store gallons sold were down slightly at 0.3% but were positive 1.4% on a 2-year stack basis with a fuel margin of $0.478 per gallon. The Mid-Continent region saw an approximate 6% decline this quarter according to Opus fuel gallon sold data, indicating that our play is working and we continue to gain market share and drive guest traffic.

In the quarter, same-store operating expense, excluding credit card fees increased 5%. Steve will provide some of the specific puts and takes related to operating expense changes. But I'm extremely proud of our operations team to be able to meet the increased food demand without meaningfully increasing store labor hours as same-store round were roughly flat for the quarter.

I'd now like to turn the call over to Steve to discuss the financial results from the first quarter. Steve?

Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for our team members' hard work executing a plan during our busy summer months. It takes the entire organization's buy and to be able to generate such strong results, which are not easy to achieve. Our total revenue for the quarter was $5.68 billion. That's an increase of $1.11 billion or 24.3% from the prior year due primarily to higher inside sales and a higher retail price of fuel. Higher fuel gallons also contributed. The results were favorably impacted by operating approximately 2% more stores on a year-over-year basis.

Total inside sales for the quarter were $1.78 billion, and that's an increase of $94 million or 5.6% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $34 million to $493 million, an increase of 7.4% and grocery and general merchandise sales increased by $60 million to $1.28 billion, an increase of 4.9%. And inside same-store sales had an approximate 25 basis point headwind from the Fikes construction. Retail fuel sales were up $991 million in the quarter as the average retail price of fuel rose 33% from $3 to $3.99 per gallon, and total gallons sold increased by 2.5%.

Same-store gallons sent an approximately 50 basis point headwind from the Fikes construction. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. Casey's had total gross profit of $1.24 billion in the quarter, an increase of $127 million or 11.4% from the prior year and up 29.7% on a 2-year stack basis. This is driven by both higher inside gross profit of $44.3 million or 6.3% as well as higher fuel gross profit of $73.4 million or 19.6%.

Inside gross profit margin was 42.2%, and that's up 30 basis points from a year ago. The increase is primarily due to mix shift and solid cost of this management. Also, during the first quarter, we made a modest change in accounting for inside cost of goods sold related to internal distribution costs that had no net impact on inside margin in the aggregate, but it did create a slight tailwind to the PF and DB margin and a slight headwind to the grocery and [indiscernible]. We believe this change better reflects the true cost of goods sold between the 2 categories.

Prepared food and dispensed beverage gross profit margin was 59.3%. That's up 130 basis points from prior year. Cheese was $1.93 per pound for the quarter compared to $2.11 per pound last year. It's a decrease of 9% or an approximate 45 basis points benefit to the margin, along with the aforementioned distribution cost reclass, these 2 items accounted for all of the margin change in the quarter. The grocery and general merchandise gross profit margin was 35.6%, a decrease of 30 basis points from the prior year, and that change is completely attributable to the distribution cost reclass. Fuel margin for the quarter was $0.478 per gallon, up $0.068 per gallon from the prior year and sequentially about $0.01 stronger than the fourth quarter of fiscal 2026 which reflected the beginning of the Middle East conflict and the related volatility in global petroleum markets.

Total operating expenses were up 8% or $55.9 million. Approximately 2% of the total operating expense increase was due to unit growth as we operated 64 more stores than the prior year. Same-store credit card fees added approximately 1.5% to the increase primarily due to the previously mentioned higher retail prices per gallon. Same-store employee expenses accounted for approximately 1% of the increase due primarily to increases in labor rates as same-store labor hours were roughly flat. Insurance, primarily same-store health care insurance was responsible for approximately 1% of the increase.

In addition, same-store repairs and maintenance and same-store utilities collectively made up approximately 1% of the increase. Net interest expense was $22.1 million in the quarter, that's down $4.8 million versus the prior year, which is primarily due to deleveraging associated with the Fikes transaction. Depreciation the quarter was $116 million. That's up $7 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 21.1% compared to the prior year of 22.7%. That decrease was driven by an increase in tax benefits that were recognized on share-based awards.

Our financial flexibility remains excellent. On July 31, we had total available liquidity of $1.4 billion. Also, our credit facility debt-to-EBITDA ratio was 1.5x. For the quarter, net cash generated by operating activities of $384 million less purchases of property and equipment of $194 million resulted in the company generating $190 million in free cash flow compared to generating $262 million in the prior year. The decrease in free cash flow is due in large part to the planned increase in capital expenditures from the Seco store remodels. At the September meeting, the Board of Directors voted to maintain the quarterly dividend at $0.65 per share.

During the first quarter, we repurchased approximately $46 million in shares. While we're off to a great start to the year. Consistent with our past practice, we plan to update annual guidance on our second quarter earnings call, and we are through the seasonally largest time of the year. Our results for August were as follows: same-store volumes, both inside and outside the store were consistent with the first quarter results and within our annual guidance ranges. Fuel CPG is in the low $0.40 per gallon.

Current cheese costs are slightly favorable versus the prior year. We expect the second quarter operating expense increase to be similar to the first quarter, and that's partially driven by the increase in retail fuel prices as compared to the second quarter of fiscal 2026.

I'll now turn the call back over to Darren.

Thanks, Steve. As we just wrapped up our first quarter into the new plan, I'm as excited as ever about our progress. Our food team is doing a tremendous job. [indiscernible] have continued their strong momentum in the quarter. Just are flocking to the Casey's Rewards platform as we're now over 11 million members. We believe our abundant and value-oriented food offering is not only a differentiator driving inside traffic but is also driving traffic to the pump. This, coupled with our fuel team doing an excellent job balancing fuel margin in gallons during an uncertain environment has yielded great results. This is our 3-legged business model in action.

During fiscal year 2026, we remodeled approximately 50 Setco stores to Casey's. In first quarter of fiscal year 2017, we've remodeled 24 more stores. We're extremely excited about the results we're seeing as the average PFDD list at the stores that were remodeled to Casey's has been approximately 30% versus the results of the same period prior to remodel. While we're busy with [indiscernible] conversions has not stopped us from continuing to grow the store base as we are on track to meet our 120 store unit goal for the fiscal year. Operational efficiency is another key pillar of the strategic plan.

As we discussed at Investor Day, we expanded our continuous improvement efforts to include both the store and the enterprise as a whole. We're off to a great start as the team has completed a number of initiatives with many more on track for completion during the fiscal year, both at the store and throughout the organization. Overall, I'm very proud of the team's execution of the plan. We look forward to building on the momentum we have going throughout the fiscal year and beyond.

We will now take your questions.

[Operator Instructions]

Our first question comes from the line of Edward Kelly with Wells Fargo.

I wanted to start on fuel margins. I was hoping that you can maybe talk about the trend in fuel margin during Q1. I think you said you had a very strong start last quarter, which I think a lot of us kind of assume that maybe that was -- just curious what the rest of the quarter looked like. And then the underlying dynamics that drove that really robust Q4 performance and strong start.

Just curious as to the sustainability of those dynamics through the quarter, and then just lastly related to all this, as you think about your mid-40s sort of margin guide, anything you're seeing out there currently that sort of raises question about that at all? Maybe talk about breakevens as part of that.

This is Steve. I'll address the first. The first 1 on fuel margins during the course of the quarter. Yes, we certainly -- we did enter the beginning of the fiscal year in a good position, certainly given the experience that we had in the fourth quarter. But I would say, honestly, that the quarter was volt's always the word I would describe with fuel margins. There were days when it was in the 60s. There were days when it was in most days, it was in the 40s. And to some extent, depending on the headlines that you read about in the paper and social media, there would be a corresponding move and to margin over the next year or 2.

So I don't think it's possible to really drive a solid trend during the course of the quarter. The floor for sure was higher which is what we saw in the fourth quarter of last year because of the conflict that was unchanged, but it really moved around quite a bit based on headlines as we went through the quarter.

[Operator Instructions]

Our next question comes from the line of Greg Melich with Evercore ISI.

I'd love to follow up on sort of the trends you saw through the quarter, particularly with how much of the comp decel in grocery and prepared food might have been people getting squeezed in terms of cash they had filling up the gas tank at the same time, anything about that in the trends from -- since the quarter as well?

Yes, Greg, this is Darren. I'll go ahead and take that one. Yes, I would say that the trends that we saw in first quarter were similar to what we've seen over the last several quarters. a couple of points. One is that the lower-income consumers are being slightly more impacted than the other income cohorts. If you look at our business, all 3 in the cohorts that we measure had positive growth in the quarter. So I'll caveat it with that. But I would say that been more of the impact we saw in the grocery and general merchandise side is really driven by category trends versus demographic trends.

And what I mean by that is you look at the 3 areas where we had some softness is beer, snacks and cigarettes. And those categories have all been challenged for different reasons. That's an industry-wide phenomenon. We're not immune to that. On the beer side, we were able to make up for a good part of that with our liquor business. ready-to-drink cocktails in particular, were up over 30% in the quarter. So we saw some good strength there, not enough to overcome the dragon beer.

Snacks, I think we talked about this before. We're seeing a lot of price action taken from the National brands, which has put some pressure on there, and 6 has been a multi-decade trend. On the other side, on grocery and general merchandise, real strength in Nick alternatives up 47% in the quarter. Energy continues to perform well at 12% and nonalcoholic beverages overall, were a strong contributor. So overall, I'd say the trends are what they are.

And then lastly, when I look at a 2-year stack basis, Grocery and General Merchandise up 6.5% in an environment like this, I think, is pretty solid performance.

[Operator Instructions]

Our next question. next question will come from the line of Tom Palmer with JPMorgan.

I wanted to maybe just follow up on the CFCO commentary in terms of the remodels. You noted 25 basis point inside same-store sales headwind and 50 on the fuel side -- fuel gallons. How did this compare to kind of what you would see on past remodels? And then as we look out here over the next couple of quarters, should we be thinking about a similar kind of headwind? Or does like a lift from the remodeled stores start to more than offset, let's say, any headwind from the disruption during the remodels?n

Yes. This is Darren. On the remodels, this is to be expected when we do heavy lifting. Why you didn't see this in the first quarter -- or fourth quarter of last year, was there is a cohort of stores that already had kitchens in them that we were able to convert in just a matter of days. So there's really very minimal impact to the performance of the business while those were being remodeled. -- this next tranche of stores that we started this quarter, this past quarter are impacted anywhere from 4 to 6 weeks. And so that puts a pretty significant drag.

They've not closed the entire time, but they're closed for a good part of it and then partially under construction part of it. So there's a lot of disruption that puts a drag. It is not anything different than what we would normally see in a remodel of other acquisitions. Probably the biggest difference is the [indiscernible] stores tend to be higher-volume stores versus others that we've acquired in the past. And so it has more of a disproportionate impact. And there's just more of them that we're remodeling.

So -- that all said, we've been very happy with the results coming out of the remodels. And so at some point, to your point, Tom, these numbers will inflect, but that's probably later in the fiscal year. And so I wouldn't expect to see that in the second quarter, probably not anything meaningfully in third quarter. It'll probably be more fourth quarter or you start to see that inflection point.

Yes. And I would probably just add to that, all of this was confidence in our annual guidance, we knew all this was going to happen. And so none of this is a surprise and I think it's exactly kind of the impact and the timing that we would have expected.

Our next question will be from the line of Bonnie Herzog with Goldman Sachs.

I had a question on [indiscernible] which has remained elevated over the last several years. So could you provide a little more color on the FQ1 drivers and how you expect the cadence for OpEx to trend from here. And then curious if you could touch on how much of the increase in the quarter was tied to the new stores or subco, maybe labor, credit card fees or other inflationary pressures? And just really just trying to think about how we should think about normalized OpEx growth from here over the long term?

This is Steve. In terms of the waterfall, that I think will end up on the web page as we've done in the past. But to get to the total OpEx change of the 8% in the quarter, about 1.5 points of that was same-store employee expense. So think of kind of 3% wage rate offset by flat hours gets you kind of 1.5 points. About 2% would have been what we would kind of broadly bucketed same-store operations. So that would be repairs and maintenance, utilities, insurance, self-insured for health care, that would go into that 2% bucket new units to your point, is about 2% all by itself, just the ramp of new units.

Credit card fees, same-store credit card fees would be another 1.5 points, almost 2 points and then you get kind of everything else in the 1% bucket, which would be technology and supplies and some miscellaneous things. We continue to believe -- the best way to think about OpEx on a long-term basis is consistent with the algorithm, right, we'll grow.

We firmly believe we can grow operating expenses at a slower rate and we're going to grow EBITDA over the medium and long term. I think that's imminently achievable for us. And for this year, I'd just probably point back to -- we obviously haven't updated the guide for the year. But the squeeze math for the rest of the rest of the year. If you go back to what we experienced in the fourth quarter of last year, you'll get less OpEx growth on a year-over-year basis this year to land the plane within that range. And especially if you take the second quarter is going to look similar to first because of the credit card fee dynamic you should be able to land second half of the year pretty close.

Our next question will come from the line of Mark Carden with UBS.

This is Matthew [indiscernible] on for Mark. So I was wondering if you could touch on the competitive landscape and promotional landscape a little bit. Are you seeing any impact from price investments from some of the merchants on your inside sales or grocery and gen merch and any shift from kind of your convenience store peers and competition and thing?

Matthew, this is Darren. Really, we haven't seen any unusual or different activity from the C-store competitive. And I think that's a reflection of the more challenged environment that they find themselves in. relative to us with a big Prepared Foods business. But yes, we really haven't seen much of that there. On the pizza side of the business, it's been a it's been a mixed bag. I think there's been some more promotional activity.

But again, I'd remind you of how we approach the business. We have our own degree of promotional activity, but our starting point is far lower in price versus the national brands. We're close to, on average, about $3 for a single topping pizza below what a national brand would be priced at just line pricing. And then also, as a reminder, about half of our stores don't even have a national brand pizza competitors. So we're really in a very good competitive spot.

And what we did see over the quarter was that similar to the dynamic that we described in Investor Day, where we've taken minimal price while the pizza QSR set has taken more price we saw that dynamic in first quarter continue. And that gap that we had from our pricing in Prepared Foods to theirs actually widened even further. So we think we saw that in numbers with the unit growth and the dollar growth as well in PF&DB.

Our next question comes from the line of Chuck Cerankosky with Northcoast Research.

Great quarter. I'd like to return to the nicotine category. It's shrinking on the cigarette side. Could you talk a little bit about the -- I kind of came even think of the name right now, the artificial cigarettes and then what it means for the inside merchandising as you change space allocation or need to use other products to get the traffic back?

Yes. Chuck, this is Darren. And they're called nicotine alternatives. And so yes, that -- what we've seen over the course of the last couple of years is as the secular decline in combustible cigarettes continues, nicotine alternatives is starting to replace that lost volume. Now it's not a 1 for 1 yet. It hasn't quite grown that fast. But if you think about how the categories are trending with cigarettes down 1% or 2% on a sales basis and down call it, 5% or 6% on a unit basis and nicotine alternatives up 47% in the quarter.

You can see where that change is going to come here soon. from a space allocation standpoint, I think that's where our merchandising team has done a really good job is getting ahead of this. And we talked about this on previous calls. We reset those nicotine backbars to reduce the combustible cigarette space to make more room for nicotine alternatives. And that move a couple of years ago is I think we were 1 of the first in the industry to do that. And really improved our benefit.

And I think that's 1 of the reasons that you see the strength in that category today in our stores. And we just did another adjustment this past fiscal year to give even more space in the nicotine alternatives. So the category overall is definitely shifting in favor of those alternatives, and we expect to be a leader in that space.

Our next question comes from the line of Pooran Sharma with Stephens.

Just a quick one from me. I think you mentioned your cheese cost is $1.93 per pound. Was just wondering if you could give us how much your -- as you're looking out here, how much you're covered and how many orders you are covered out?

Yes. For this is Steve. I'll address that. We are about 80% covered through early into the first quarter of next fiscal year. And generally, certainly, for the remainder of this fiscal year, the out quarters, we would be covered in a modest tailwind to margin each of those 3 quarters.

Our next question will be from the line of Cory Tarlowe with Jefferies.

have a 2-parter. So the first, I would love an update on chicken wings. And then second is on M&A I think you've placed recently a little bit more emphasis on Texas. Could you maybe talk a little bit about the strategy within that market, please?

Corey, this is Darren. With respect to wings, wings are performing well. We've been really happy with the results so far, we're still in 850 stores, and we'll start rolling out the next tranche of stores here later this month. We didn't do any rollouts over the 100 days of summer, just to give our stores a chance during their biggest peak period to execute at a high level. So we'll start those now, and we'll start getting those open probably in early third quarter.

Wings, like I said, it performed well, 1 of the encouraging things is about 38% of guests have purchased wings at a wings only order. And you recall when we talked about this strategically, we are looking to achieve another night of the week or another occasion, in addition to pizza. And so those wing-only orders really represent that incremental occasion. And so the folks that have had a wing-only order had increased their frequency of prepared food purchases overall by about 30%.

So it's a really good fact pattern for us. We're still early stages and still growing as an example, in the Des Moines DMA, which we've had the wings in the longest, we were up 46% in the quarter over prior year. So there's still a long runway for growth there. and very bullish on that category.

And our next question will come from the line of Kelly Bania with BMO Capital Markets.

Steve and Darren, I wanted to just go back to the beer snacks and cigarette momentary and the impact on the grocery comps -- just curious a little bit more color there when that kind of weaker trend started? And are you seeing just more of a unit slowdown? Or is there a trade down to lower price points or smaller pack sizes? And do you -- or some of the vendor plans to promote these categories through the rest of the year?

Yes, Kelly, or go ahead and take that. And you got something different going on in each of those. I'd say I'll just start with cigarettes because that's the easiest that's been for 30, 40 years, that trend. So nothing new to report in cigarettes. -- other than it's just continuing to be under pressure. And like I said, I feel better about that category, the total nicotine category now than I have in a long time because of Nick alternatives and the growth rate we're seeing there and the margin profile.

As a reminder, the margin in Nick alternatives is double what it is in combustible cigarettes. So that ends up -- that math ends up working out pretty favorably on a gross profit dollar standpoint over long term. Snacks is something that we've experienced for the last couple of years. where the national brand manufacturers have just taken a lot of price primarily in chips. And so you see a lot of pressure in that category. And while there's been some some price action that they're taking of take-home packages, they're not taking that on immediate consumption packages, which is the bulk of what we sell.

So there's just -- they just price themselves out of the market, frankly. Now what we're doing about that is we've leaned heavier into our private label offering. And so we're seeing really good growth in those same categories in our private label products. So we think we're not really traffic necessarily, but the retails are lower. And so it doesn't have quite the impact on the sales line as we might otherwise have. In beer, beer has been a category that's really struggled for the last couple of years. I think it started off with Budweiser and their social media snap and then it's just kind of hung in there like that.

The one bright spot is super premium beer would make Ultra. But outside of that, it's been soft. What we've really done is we have made sure that we're were priced appropriately. We are looking at space allocation in the category to make sure we're appropriately spaced and then leaning a little bit heavier on the liquor category. And like I mentioned earlier on the call, Ray to drink cocktails up 30-plus percent. So that's been a good offset, and that's a little bit more on trend with where the consumers are going.

Our next question will be from the line of Brad Thomas with KeyBanc Capital Markets.

I wanted to ask about the same-store gallons. I know it's tracking within your annual guidance. This was the first quarter being negative after about 6 quarters of being positive. Just curious what you were seeing in the quarter, how much of the decline is being a tougher comparison that you're up against? And then to what extent is fewer gas sales trickling through to the inside comp? I'm not sure if you've been able to look at that yet.

Yes, Brad, I'll go ahead and take that. Just on the same-store gallons on the trend, a few things I'd point out. One is down 30 basis points. So our annual guide was down 1% to 2%. So we're talking about pretty nuanced numbers there, point number one. Point number two, as Steve described with the CFCO REIT model, that's about a 50 basis point drag on overall gallons. So you -- so if you net that out, you're probably up 20 basis points. So that's, again, nuance, but it's probably right in the middle of the annual guide range.

Now on a 2-year stack basis, we were cycling a 1.7% same-store gallon number. And to put that in perspective, so we're -- on a 2-year stack, we're up 1.4%. The OPIS Mid-Continent region, which is where we operate primarily over that same 2-year period is down 10%. So we've taken significant share in fuel and 20 basis points here, 30 basis points there doesn't concern me when the overall trend is where it is. And from a -- I would just add with a consumer behavior standpoint on fuel, with higher fuel prices. We're seeing exactly the type of behavior that we would expect to see fewer gallons per trip, but more trips made which ultimately accrues to our benefit if we had more people coming to the store.

People are trading out of premium and mid-grade and opting for regular or higher ethanol blends of fuel higher ethanol blends of fuel carry a higher margin for us than clear gasoline. So while these trends kind of ebb and flow, it's very consistent with prior periods of higher gas prices and ultimately out to our benefit.

Our next question will come from the line of Krisztina Katai with Deutsche Bank.

I had a follow-up to grocery. So Darren, you've highlighted strong growth in energy in nonalcoholic beverages and nicotine alternatives, but obviously, snacks remain challenged. So do you think the weakness in snacks is entirely a function of pricing and value perception? And are you starting to see evidence, maybe of a more durable shift in consumer behavior? Obviously, there is a shift towards healthier consumption patterns or also any GLP-1 usage that you might be seeing? And if that is warranting any kind of a revision of how you're thinking about maybe what the inside of the box needs to look like, maybe 2 to 3 years from now?

Yes. Thanks, Krisztina. And certainly, we keep an eye on that. But when I look at what's happening in the category, and as I mentioned before, on snacks in particular, National brand shuts down around 8%. TC's chips up 16% in units. So -- if it was a GLP-1 impact, I don't think we'd see the strength in our own private brand. We just -- we see overall negative trend in the category. So I can't put my finger on the idea that it's a GLP-1 type issue.

That being said, there is certainly a trend of people leaning more towards protein-heavy snacks and foods in general, we are seeing that and our merchandising team has done a nice job of bringing in more protein-dense snacks and other foods -- to satisfy that need, and we are seeing good growth in those. They're just smaller categories.

So they really don't move the needle as much on the overall GnGM category, but they are going well. And we are saying it tuned to that trend, we just -- I just don't see it yet to make any more dramatic shifts at this point.

Our next question will be from the line of Bobby Griffin with Raymond James.

Darren, I wanted to touch on just the Texas opportunity further. And I think you called out on the remodel stores for Fikes they're performing well. But can you dive into a little bit more about what those stores are kind of showing versus maybe corporate average once they get your Casey's pizza in there. I think bikes were higher performing stores. So is that translating into a higher just larger pizza business? And is that indicative of what maybe the opportunity could be as you open up new to industry or you do tuck-ins, you guys completed a small tuck-in in Texas after the quarter end?

Yes, Bobby. Like we said, the performance of the CECO stores has been fantastic so far coming out of the remodels. And what I'd say is most encouraging is that these stores were high volume. They were generally higher volume than our average. Now not in Prepared Foods, but their prepared foods business is probably the best that we've ever acquired. I don't think there's been anything that's even close to how CECO is performing in Prepared Foods prior to acquisition.

And so when we can come in and take a store already doing well in Prepared Foods and layer our program on top of it and see the types of lifts that we're seeing, 30-plus percent year-over-year is really encouraging. And even in the proof-of-concept stores that had the full Casey's assortment for over a year, they're still comping positively. And so we feel really good about what we see. We've also had some new to industry stores that we built out in Texas over the last year since we've been down there, and those are performing very well.

So we really like Texas overall. We -- as you know, this has been a goal of ours to get into that state for a while now. The 2 acquisitions we've done and now 1/3 coming have been very good to us, and the new industries are doing well and as I have looked at Texas outside of the big 4 cities of Dallas, Austin, San Antonio and Houston. The rest of that entire state is Casey's Country and from our perspective, it's got a long, long runway for growth.

Our next question will be from the line of Daniel Glioma with Capital One Securities.

Kind of a follow-up on kind of state strength. You have stores in 9 different states. If you think about customers at the state level, are there certain states or areas of the country where you're seeing a stronger consumer or weaker ones?

Daniel, I'd have to look. I probably have to look a little closer to try to answer that question. Nothing jumps out at me probably 1 example that we have seen is between Illinois and Indiana on the border where Indiana has suspended gas tax in that state, and Illinois hasn't done anything similar. And so we're seeing a little bit of weakness along the border in Illinois from a fuel perspective, but we're also seeing a corresponding strength on our -- on the other side of the border in our Indiana store side.

I'd say it's kind of a wash just guess kind of playing an arbitrage game. But outside of that, I couldn't specifically point to any 1 state doing better or worse than the others. I mean, they always perform a little bit differently, but nothing that really jumps out that concerns me.

Yes. I think it's worth reinforcing it. If you just think about part of the strategic that Casey's has and then we tried to highlight at the Investor Day, right, the geographic footprint we have remains in some of the lowest cost of living parts of the country. And so broadly speaking, the money that our consumers earn goes further than it would certainly for consumers who are similarly situated on the coast, and we feel like that just accrues to our benefit, for sure. And I think that is a very fair statement for the vast majority of the communities that we serve and continue to serve.

[Operator Instructions]

Our next question comes from the line of Jacob Aiken-Phillips with Melius Research.

This is Sam [indiscernible] on for Jacob. I was just wondering if you could zoom out a little and touch on M&A as a whole. Have you seen the industry change at all in the last several quarters? And then also, just wondering if you could remind us on philosophically just how you see M&A contributing to your 120 new unit growth target by the end of the fiscal year?

Yes, Sam, I'd say the M&A environment is still really good. And that's a reflection of the challenging environment that the industry finds itself in, particularly the small operators. And -- and so I would say it's changed. I'd say it's still consistent, they even gotten a little better from a buyer's perspective. And multiples have stayed relatively flat, but the EBITDA that's multiplied by as not. And the EBITDA, even with the higher fuel margins, tends to go backwards for the smaller operators.

So we find ourselves paying a lower absolute price for some of these assets, even though the multiples are about the same. And consistent with our guidance, every year, we go into that giving a number of stores we'll add in the fiscal year. This year, it's 120. We go into that, assuming half of that will come from new to entry builds half of that will come from the small deal M&A and that's exactly how we see it playing out this year, give or take a couple.

And I would now like to hand the conference back over to Darren Rebelez for closing remarks.

All right. Thank you for taking time today to join us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter. Have a great day. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Hello, and thank you for joining us today for our Investor Day. It's great to see both new and familiar faces in the crowd, and we are very excited to share our strategic plan. I'm Brian Johnson, Senior Vice President of Investor Relations and Business Development.

Before we begin, I'll remind you that today's presentation includes forward-looking statements and non-GAAP measures within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to the expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, business and/or integration strategies, plans and synergies, supply chain, growth opportunities and performance at our stores. There are a number of known and unknown risks, uncertainties and other factors that may cause our results to differ materially from any results expressed or implied by these forward-looking statements.

Including, but not limited to, the execution of our strategic plan, the integration and financial performance of our acquired stores, wholesale fuel, inventory and ingredient costs, distribution challenges and disruptions. The impact and duration of conflicts in oil-producing regions or other geopolitical disruptions as well as other risks, uncertainties and factors, which are described in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission and available on our website. Any forward-looking statements contained in this presentation represent our current views as of the date of this presentation. with respect to future events, and Casey's disclaims any intention or obligation to update or revise any forward-looking statements in the presentation, whether as a result of new information, future events or otherwise.

A reconciliation of non-GAAP to GAAP financial measures referred to in this presentation are included in the appendix at the end of the presentation and can be found with the rest of the presentation and on our website at www.caseys.com under the Investor Relations link.

So today, you'll hear from several members of our leadership team who both delivered on our most recent plan and will lay out how we plan to execute on another compelling 3-year strategic plan. First, we have Darren Rebelez here to speak about Casey's, highlight our most recent 3-year performance and discuss the evolution of our strategy. Next, Steve Bramlage will address the financials and the path to achieving our growth algorithm. Following Steve will be Tom Brennan and Brad Haga, who will discuss our plan to accelerate inside sales, particularly with food and beverage. We will then take a short break, followed by Ena Williams, laying out the strategy for growing units and enhancing operational efficiency. Nathaniel Doddridge will then join Ena to shed light on our scalable foundation. Subsequent to Nathaniel, Chad Frazell will take the stage to chat on how the team member value proposition fits into our strategy.

Lastly, Darren will provide some closing remarks, but that will really end with the star of the show, Casey's pizza for lunch. Following lunch, we'll have a Q&A session around 12:30. We are extremely excited to share our next 3-year plan with you today.

And now I will turn it over to Darren.

All right. Good morning. Thanks, Brian. I'm Darren Rebelez, Chairman, President and CEO of Casey's. On behalf of the entire Casey's organization, I'd like to welcome you to our Investor Day.

We're really excited to share with you our vision for the next 3 years. I'll let you hear from the leaders that are going to make it happen. So over the course of the day, we'll highlight our strong say-do ratio as proven by delivering on our commitments over the previous 3 years, discuss our clear competitive advantages, show how Casey's stands alone in the public marketplace as the only convenience QSR and show the advantage flywheel that, that creates and share with you our confidence that this proven and resilient model has a long runway for compounding growth that will continue to generate even more shareholder value in the years to come.

Now you see the word evolving here, and that word is intentional. What you will not see today is a radical departure from a strategy that's been clearly working. But rather, we'll share with you how we intend to amplify our strengths and points of differences to further drive shareholder value. But before we get into the specifics of our strategy, first, I want to introduce you to who Casey's is. We're an S&P 500 company that has an enterprise value of over $30 billion, operating in 19 states, primarily in the Midwest. We operate nearly 3,000 convenience stores, making Casey's the third largest convenience store chain in the United States.

Our delicious pizza has helped make us the fifth largest pizza chain in the U.S. We also have the fourth most liquor licenses of any retailer in the U.S. It's this combination of restaurant quality food, inside offering and fuel capability within one convenience box that makes Casey's truly unique. We sit at the intersection of convenience and QSR. And throughout today, we'll show you how Casey's differentiates itself from both the convenience store and QSR industries with the result being industry-leading growth for the organization and market-leading shareholder returns.

Now I couldn't be more proud of what we've built and are continuing to build and we have some unique advantages that set us apart from the convenience and QSR industries. First, roughly 2/3 of Casey's stores are in towns of 20,000 people are fewer, giving us a strong market position in rural areas.

Secondly, our prepared food program is unmatched within the convenience space with restaurant-quality food across all dayparts. We support an advanced AI-enabled technology platform, coupled with our nearly 11 million rewards members driving higher spend, increased visit frequency and more personalized guest engagement. Our business is vertically integrated, distributing both inside products and fuel giving us positive control over the value chain and the ability to support our rural footprint.

Lastly, this is all supported by our consolidated scale and amplified by our 100% company-owned and operated retail stores, where we have end-to-end control over the upstream partnerships with vendors enabling quicker speed to market for in-store execution. Now these unique advantages create an operating model that's unmatched in the public marketplace. What makes our model so powerful is the flywheel it creates, a 3-legged stool with prepared food and dispensed beverages, grocery and general merchandise and fuel all operating under 1 cost structure.

Our guests can visit our stores and simultaneously get a hot meal or cool beverage and fuel their vehicle all with 1 trip. And unlike traditional convenience in QSR operating models, we can do that for any meal or snack as we have a relevant offering across all dayparts. This helps drive consistent visits and creates a loyal guest base that's coming to our stores throughout the day for a one-stop shop across categories. With growing traffic, our operating leverage improves, while also increasing resiliency and reducing earnings volatility as we're not overly reliant on any one line of business. This creates a flywheel of leveraging shared fixed costs across 3 lines of business that generate diversified resilient cash flows to reinvest back in our value proposition, driving more traffic to our stores and continuing to compound earnings growth over time.

Now the success of this flywheel has led to strong financial results and has been doing so for a long time. But recently, those results have accelerated. Consistent store count growth, coupled with robust inside sales is proof that the Casey's model is working. Now this proven algorithm has led to compounding EBITDA growth and improving returns on invested capital.

Now recently, we've only gotten stronger, posting a 16% EBITDA CAGR over our most recent 3-year strategic plan. This acceleration has also been noted by the markets. As we were named a [indiscernible] to the S&P 500 in April. This is a big milestone for our company and shows our play delivers shareholder for value over the long term. Now one of the things that we take pride on Casey's is what we call our say-do ratio. In other words, when we make a commitment, it's our expectation that we made good on that commitment.

With the commitments we laid out at our Investor Day. [indiscernible] our operating expenses grew by approximately 600 basis points less than our EBITDA. Now reducing same-store labor hours through continuous improvement was a major contributor to our efficiency gains and Ena will review our [indiscernible] in detail, our plans to continue these efforts later today.

Our enabling foundation is stronger than ever as we made great strides in leveraging technology, with one example being an AI demand-driven forecasting tool that's helped us reduce distribution center working capital by 33% and improved order fulfillment at our stores. And a robust team member value proposition delivered better, more rewarding experiences, leading to significant reduction in team member turnover, industry-leading overall engagement scores and a growing talent pipeline. That executed more than 23,000 promotions over this time period.

Now look, I'm so proud of what we [indiscernible] Cost pressures have forced menu prices higher, which has created a vicious spiral as higher menu prices are pressuring restaurant traffic. The combination of increased costs and declining traffic is pressuring earnings and reducing operating leverage, forcing menu prices even higher. Even with 42% increase in the food [indiscernible]

Profits are down 20 basis points from 2019 levels. Not only the earnings being pressured, but customers are prioritizing rising flexibility and convenience over the dine-in restaurant experience. Customers are moving away from on-premise dining and shifting towards off-premise and the younger generations are doing so at a more [indiscernible] rate.

In Casey's is perfectly positioned to benefit from this shift as younger generations are only accelerating that trend. So as the QSRs are dealing with some structural challenges in their industry, convenience stores are experiencing changing dynamics as well. The industry, again, is generally resilient, but customer preferences are shifting, and the food forward operators are separating themselves from the rest of the industry, resulting in fragmentation and consolidation. All -- this results in scale matter now more than ever. Convenience store industry has historically proven itself to be resilient over the long run. But the number of total of convenience stores and total fuel gallons sold in the United States have been remarkably steady while inside sales have continued to grow. Casey's has also proven resilient as our advantaged operating model outpaces the industry and continues to gain share.

While traditional convenience store operators have one more leg of the stool than the QSRs do, they, too, are facing increased operating pressures. Like the QSRs average hourly earnings have grown twice as fast as in the past. The combination of increased cost pressures, the secular decline in cigarettes in the lack of a prepared food program as many of convenience store operators increasingly reliant on higher fuel margins to make ends meet.

The result has been declining traffic and declining traffic, combined with increased costs is pressuring earnings and reducing operating leverage creating a vicious downward spiral effect on their business. Now as the industry is shifting away from cigarettes and towards prepared foods, earnings are shifting with it. As compared to the bottom 7 deciles of the National Association of Convenience stores, Casey's inside sales skew 11 percentage points higher in Prepared Foods and 5 percentage points lower in cigarettes. This favorable mix leads to approximately double the EBITDA per store versus the industry. So the trend is clear. Food forward operators like Casey's are winning and Casey's has 40-plus years of experience in the food business. And despite the convenience industry maintaining a steady store count, it remains very fragmented. Nearly 2/3 of the stores in the industry of the 150,000 convenient stores in the industry are operated by chains of 10 stores or fewer. As we've discussed, those smaller operators are struggling to keep up with inflation and other costs. And most don't have the scale, technology or capital to make the necessary investment in food to thrive.

So as such, the industry is consolidating. In the larger, more sophisticated players like Casey's can leverage our superior positioning to grow through M&A. Ena will speak more to our growth strategy later in the presentation. But these trends in the industry really represent a tailwind for Casey's, which really puts us in a position to win with our advantaged model. We have what we refer to as a unique convenience QSR profile that's differentiated from any public a competitor.

Our rural footprint restaurant-quality food service allow us to operate in areas others do not with a prepared food offering that's a true differentiator. We also have a robust private label offer in sophisticated fuel capabilities but we don't rely on fuel as a sole traffic driver as 70% of our inside transactions aren't even tied to fuel. These advantages feed into our convenience QSR flywheel were our 3 lines of business under 1 operating cost structure provide maximum optionality to deliver value back to guests and thrive in really any operating environment. Now as our robust and competitively priced inside offer, including pizza and wings and private brands attract more guests to our stores, we continue to take fuel gallon share from the industry.

Our competitive prices at the pump, combined with our sophisticated fuel capabilities, provide Casey's strong margin profile. Now this concept allows us to be flexible on where and how we're driving gross profit dollars. We're nimble to our evolving guest needs, and we can manage each business to complement the other. And we can do all of this in an efficient manner as we have one cost structure for the entire operation. And by being 100% company-owned and operated, we have the flexibility to make timely decisions that are in the best interest of Casey's, not an individual store or a franchisee. This creates compounding earnings growth and the flywheel continues to spin. But don't just take my word for it. You can see the flywheel in motion.

Since we're not beholden to using menu price as our only lever to offset costs. Our prepared foods value proposition is widening. Over the past 3 years, food away from home prices have increased 14%. Over the same period, Casey's has increased the average prepared food selling price by only 5%, creating -- or while maintaining a strong margin rate. And the result is taking share from the QSR industry. With our high-quality food offering at a strong value, Casey's has driven prepared food and dispensed beverage traffic up 13% over the past 3 years. And we're doing that while the QSR traffic has declined 1% over the same period of time. And those guests that are coming for our food have also filled up at the pump. As our same-store gallons have increased by 2% while the Mid-Continent OPUS fuel demand has declined by 8% over the same period. And we're not sacrificing fuel margin to do that because our cents per gallon have been $0.39 or higher each of the past 3 fiscal years. The momentum continues as disciplined investment enhances guest value and operational efficiency.

Now taking share and maintaining or improving margin has been achieved while also operating the business more efficiently. We're growing EBITDA more than we're growing operating expenses, which is a key component of our algorithm. Our competitive advantages, coupled with our advantaged convenience QSR flywheel have proven to be successful. As we continue to grow, leverage our scale even further, impress our advantages. We're entering the next 3 years in a position of strength.

Our operating model of primarily small rural communities in suburbs with 100% company-owned and operated stores and positive control over the distribution network, combining the best of convenience and QSR at scale gives us confidence in our ability to meet or exceed our commitments over the next 3-year strategic plan.

Now I love the hand we're holding and I'm excited to share the plans for the next 3 years. Our goal for the next years will look familiar to many of you, and that's by design. We prioritize ratable, consistent and industry-leading growth. Steve will discuss how we get there from a financial metric standpoint. And following Steve, we'll discuss how our unique insights into our guests a strong enabling foundation and an excellent team member value proposition will help support our growth drivers, which are: number one, accelerating the food and beverage business while growing the number of units and continuing to focus on enhancing operational efficiency throughout the organization.

Now before I get into the details, I'd like to illustrate how our EBITDA growth algorithm stacks up against historical results of others in the industry. Growing earnings is hard enough by compounding growth over the short, medium and long term is rare. Only 20 of the 53 retailers and restaurants in the S&P 500 or 400 grew EBITDA by at least 8% over the past year. That number dwindles down to 10 when you add a 5-year requirement.

And finally, over a 1, 5 and 10-year time frame, only 7 companies, including Casey's, have been able to achieve that ratable and consistent growth over a 10-year window. There's very few retailers or restaurants, the S&P 500 or 400 that have achieved that sustained growth that we have over the short, medium and long term. There are no public companies that are convenience QSR.

Casey's is truly a category of 1 and a strong investment opportunity. So now I'm going to turn it over to Steve to discuss the financials.

Okay. Thank you, Darren, and good morning. Today, I'm going to discuss our financial expectations and the goals that we have for the next 3 years, and I hope to clearly reaffirm why we feel so confident in our ability to deliver against them. And I'm going to quickly cover 4 topics. First, we're going to revisit our actual results over the past 3 years. we're not aspiring to a performance level that is any different from what the company has already delivered over many, many years. And as Darren showed a couple of minutes ago, the past 3 years, they've simply been an acceleration of that historical success.

Second, the achievement of our commitment has translated into accelerating free cash flow. It's an important determinant of increasing shareholder value. This also has further strengthened our balance sheet and it provides us with tremendous current and prospective financial flexibility. We're going to review the specific outlook for the next 3 years and the growth algorithm that continues to underpin it.

Fourth and finally, I'll discuss our capital allocation strategy, along with our return on investment expectations when we invest shareholder money. With that, let's start with revisiting our performance vis-a-vis our aspirations from 3 years ago. So I see a lot of green on this slide, and it's a testament to the excellent work from our 50,000 team members in the stores in our distribution centers, our drivers, our leadership team and everyone in between. I mentioned this on our fourth quarter call recently in the context of our fiscal '26 results, but it's equally valid and it's even more germane for the past 3 years. Results like this are not easy to achieve. And we are really proud of what the team has been able to do.

We grew EBITDA to 16% CAGR over the past 3 years and that exceeded the top quintile target of 8% to 10%. Now this was generated from both existing units or what we refer to as the mother ship and the 504 new stores that we built or that we acquired. That level of growth was well in excess of our initial 350 unit goal, aided in part by the [indiscernible] acquisition, the largest so far in the company's history.

Inside the store, we grew same-store sales at 4% CAGR and same-store gallons at approximately 1%. These are especially impressive as we know that we're outperforming our geographic competition both inside and outside the store. From a margin standpoint, we saw expansion inside where we grew margin 230 basis points and at the pump where we averaged approximately $0.40 per gallon. We were able to successfully leverage our growing scale and continue to invest in our capabilities as we grew operating expenses on a CAGR basis, almost 600 basis points less than EBITDA.

And the result was free cash flow expansion. We generated almost $1.7 billion in free cash flow over the course of the last 3 years, which was itself an acceleration of the approximate $1.2 billion that we generated over the previous 3-year planned strategic cycle. In fact, we generated more free cash flow from fiscal '24 to fiscal '26 than we did in the preceding 13 years. Free cash flow generation has been a priority area of focus for us in the past 2 strategic plans based on investor feedback and I think that it's developing as we hoped and as we expected as it would.

This additional cash flow puts our balance sheet in an extremely strong position, and it enables our investment plans for the future. Simply put, we can invest capital as we need and choose to in order to expand our strategic and our operational advantages, both inside and outside the store, without compromising our ability to grow units EBITDA and ROIC.

Our leverage ratio of 1.5x is currently a bit below our long-term target of 2x, and we have ample liquidity of $1.4 billion, along with a low cost of debt. If the right strategic opportunity comes along, we have the ability to take on several additional turns of leverage. Realistically, there's not a lot of potential deals of this size. But in the right circumstances, we would be willing to temporarily increase leverage, bundle it with a firm commitment to quickly work our way back towards our long-term target of 2x as we demonstrated with both the Buchanan and the Fikes acquisition. As you can see on the chart, we don't have any substantial near-term debt maturities that will be a strain on cash or expose us to unfavorable market dynamics in any material way.

So let's transition from the past to the present and to the future. I know that I speak for the entire management team when I say again that we love the hand that we're holding and that we firmly believe that we control our own destiny. The play we're running is winning. And we have spent a long time pressure testing it to ensure the reality in the facts of our exogenous environment support our premise that this play is poised to continue to work far into the future. The strategic differentiators that make Casey's sui generis are stronger than they have ever been and our relative advantage in this industry that is highly fragmented and lacking scale is only growing. We hope that this page is not a surprise to any one in the room. It continues to represent a high level of performance for or anyone in the retail, in the restaurant space. not just the convenience industry. It also represents more of the same. We're not trying to do something that we have been unable to do in the past. We have consistently been able to achieve this level of performance across multiple economic cycles and against an ever-evolving consumer and competitive set. It's really difficult for our competition to replicate the flywheel effect of our business in the way that our prepared food business, our grocery business, our fuel business and our scale, all complement, supplement and ultimately reinforce each other. Now the rest of the day is meant to reaffirm for you with specific facts and examples why we believe the plan is achievable and to instill a new the same level of confidence that we already have in our ability to execute it.

So specifically, the EBITDA growth target of an 8% to 10% CAGR over the next 3 years is still a top quintile growth, and it's consistent with our historical results. Now for transparency, we define top quintile growth as EBITDA growth on a multiyear CAGR basis for all of retail, excluding REITs, and restaurant companies that are within both the S&P 500 and the S&P 400 composites. Simply put, we intend to accomplish this by doing what we already do well and to continue to get better at it each and every day. We plan to grow the store base by at least 400 units. That's a CAGR of at least 4% over the next 3 years, and that will be through a mix of organic growth and acquisition. Now please note there are no large deals assumed in this number. We will be able to achieve this growth exclusively with smaller store and all -- or excuse me, with single store and smaller multiunit deals combined with new construction. For some perspective on the pipeline, we're currently land banking construction sites for opening in our fiscal 2030 and beyond.

Hopefully, we've already demonstrated that we have the balance sheet and the integration experience to take on a larger deal that would help us exceed the goal if the opportunity were right. And financially, it would act very similarly to the way Fikes did in our last plan, which was really to serve as icing on the cake for these goals over that 3-year plan. We plan to grow inside same-store sales at a mid-single-digit pace, while also modestly expanding inside margin. This will be a combination of prepared food and dispensed beverage growth outpacing grocery and general merchandise growth mix shift within the grocery and the general merchandise category itself as well as continuing to leverage our scale and our relationships with vendors to optimize margin. Please note that our goal is not simply to harvest every margin expansion opportunity that we see. We're trying to drive more gross profit dollar velocity. And often, it makes sense for us to reinvest in promotion and price support inside the business to maintain our value abundance positioning and to drive more traffic to the store rather than simply drop through more margin. In fuel, we expect to be approximately flat on same-store gallons, which likely will mean that we're continuing to take share in our geography.

Similar to FY '27, while we do not guide per se to fuel margin, to make the algorithm work, we would expect the plan to average approximately mid $0.40s per gallon. And over the course of the plan, we generally expect for margin to annually grow commensurate with CPI as it has done for many, many years. We have more opportunity in front of us to leverage our scale in the organization and our central capabilities to keep growing operating expenses at a rate it's lower than EBITDA, making the next store a little bit more efficient than the store that came before it. This level of performance should generate free cash flow of approximately $2 billion.

Now just a quick reminder on a two pronged algorithm that about half of the growth will come from the existing business and the other half will come from the new unit growth we referenced earlier. Over the remainder of the day, Tom, Brad, Ena, Nathaniel and Chad will lay out the plan on how we will execute it. We've proven over the short the medium and the long term that we can ratably grow EBITDA, and we're simply better equipped now than we have ever been to execute this plan over the next 3 years.

Everyone in Casey's leadership team is keenly aware of our role as a steward of the legacy, the culture, the communities, the guests and the team members that those who proceeded us have left to us. We're also stewards of shareholder money. The easiest way for me to describe capital allocation at Casey's is as stops on a bus. The first stop is always to reinvest into EBITDA and ROIC accretive growth via new store construction and M&A. And because our maintenance requirements are quite low, approximately 75% of our PP&E spend is -- has been and likely will continue to be growth oriented.

The second stop on the bus -- we target a steady-state leverage ratio of 2x debt-to-EBITDA. And given our current leverage, you should expect no discretionary deleveraging from our current levels. The third stop, we have a long track record of returning cash to shareholders with 27 consecutive years of dividend growth, and we are really proud of the fact. I am keenly aware of the fact that our dividend yield has been declining over the past couple of years. And honestly, [indiscernible] one and totally okay with the reason that, that has happened.

Our long-term philosophy on the dividend is to maintain an approximate 15% to 20% payout ratio and to increase the dividend consistent with the midterm EBITDA growth. And at the final stop, once we've met our first 3 priorities, we get to share repurchase. Now historically, this has not been a major part of our capital allocation plan. However, as we continue to grow and generate more and more cash, we have leaned into share repurchases. The reality is at the current scale of the company, we're going to generate more free cash flow in most years, then we have opportunities to reinvest it within a 12-month period of time, absent a large contemporaneous deal, with an above-trend investment and deleveraging need, we will become a more consistent and ratable repurchaser of shares.

And as a reminder, we have a fresh $1 billion share repurchase authorization available to us. And I want to cover our return expectations when we invest shareholder funds. As a starting point, our current cost of capital is a touch above 7.25%. For the fiscal year of 2026 we had an ROIC of 12.7%, which is a 90 basis point expansion from our fiscal 2023 and represented our highest level since 2018. Our return expectations for a new unit are the same, whether we build it or whether we buy it. The expectation is double-digit after-tax returns by the second or the third year. and mid-teens by year 5 or 6. Mature markets tend to be on the early end and new markets a little bit later in that range. The difference is primarily a function of how quickly in new markets our prepared food takes off, think of buying pizza from a gas station relative to our core markets.

And finally, I'd point out that our long-term incentive plans are fully aligned with EBITDA growth, ROIC improvement and TSR is the 3 performance metrics that determine our payouts. If I'm proud of the success we've had, both in growing the company and improving returns and at the same time over the past several 3-year cycles. Now as I wrap up, I want to leave you with a couple of key points. First, the ultimate expectation is the same as it's been to continue delivering top quintile EBITDA growth of 8% to 10%. Second, we are confident and our ability to execute on this goal is we've done it for a long period of time, and we just completed a plan where we grew EBITDA well in excess of that goal, and we were able to achieve all of those underlying metrics across the board. Third, we're able to support this growth with a really strong balance sheet that affords us ample liquidity to operate and grow the business while being ready for the next right large acquisition without compromising our small deal M&A and the building of new units.

Our balanced algorithm has proven to be successful. We're generating EBITDA growth from both our existing stores and from the new and acquired stores. All of this gets funded with a capital allocation strategy that prioritizes driving EBITDA and ROIC growth and accretion while generating more free cash flow than we have ever had.

In conclusion, we love the hand that we're holding. We have a proven strategy to ratably grow this business, and we've done that over the short, the medium and the long term. We continue to control our own destiny and our play is more effective and it's harder to replicate than it has ever been. I for one, I'm extremely excited for the next 3 years at Casey's.

So let's start talking about specifically why we feel so good about that statement and how we're going to do it. It's my great pleasure that I'm going to turn it over to Tom Brennan, our Chief Merchandising Officer. Tom?

Thanks, Steve. My name is Tom Brennan, and I'm the Chief Merchandising Officer at Casey's. Let me start with the simple framework for how to think about the business. Everything we're going to show you today starts with the guest and how that translates into consistent and ratable growth for the long term. We serve a loyal high-value guest to a strong wallet share. And importantly, that base is getting younger, positioning us well for sustained success. We're also differentiated in how we serve that guest.

Our category of one model spans both convenience and QSR, allowing us to capture more tripmissions in dayparts than traditional peers. Underneath that are 3 core structural advantages, disciplined dynamic category management, vertically integrated partnerships and exclusivity into a loyalty platform that's increasingly a real-time personalization engine. When you put those pieces together, what you'll see is an integrated system, one that drives frequency, increases basket and creates a flywheel of engagement, data and reinvestment. That system is what enables us to consistently drive traffic and that, in turn, gives us confidence in delivering mid-single-digit same-store sales increases year-over-year, with an overweight on unit growth supported by modest pricing. If you start with a guest, the data is compelling. We have a broad generational mix with increasing engagement from Gen Z, giving us both stability today and growth over time. While we skew more rural, our guests still value convenience.

Roughly 70% of our rewards members earn over $50,000 annually and we operate in 6 of the top 10 and 13 of the top 20 lowest cost of living markets in the U.S., which strengthens disposable income. They're also highly loyal. On average, rewards members have visited more frequently and spent roughly 4x more than nonmembers. And importantly, satisfaction is at an all-time high. So when you put it all together, we have a guest base that is engaged, high value and increasingly digital exactly the profile that supports consistent repeatable performance. So what do our guests actually want? It comes down to 5 things, great taste, strong value, convenience, consistency and relevance. The key is that we designed our [indiscernible] deliver all 5 every day across our approximately 800 million annual transactions. That's why we invest in real Kitchens proprietary our innovation and a regionally relevant assortment while continuously removing friction and improving reliability because that combination, quality and value delivered with convenience is what drives repeat behavior and long-term loyalty.

One of our most important structural advantages is the breadth of trip missions we serve. We're not just competing as a convenience store or a QSR. We're operating across both throughout the day. That gives guests more reasons to visit and engage with Casey's. You see that reflected in the business. Over 70% of guest visits are not [indiscernible] Dinner is a meaningful and growing daypart. And on-trend categories like energy drinks continue to grow at a strong pace. The result is a structurally advantaged model with more ways to win across dayparts and more opportunities to drive trips. The way we manage categories is a key driver of how we translate demand into returns. Every category has a defined role whether it's driving traffic, building baskets, enhancing margins or creating future growth optionality. That directly informs how we allocate space, capital and marketing investment across the business. What this enables is a more dynamic model where we can scale winning categories faster, exit underperformers more decisively and continuously improve returns on invested capital. The result is an assortment that stays aligned with the evolving guest demand and a system that drives stronger performance over time, both foundational elements for ratable mid-single-digit same-store sales growth.

A great example of that framework in action is the energy drink category. I'd like to say the growth of energy drinks to FI's gravity, and we've responded by expanding cold vault space to support that increasing velocity. The speed at which we can adapt to changing categories is one of the big structural advantages of being 100% company-owned and operated giving more oxygen to a growing category in the form of visional facings, translated directly into results, helping to drive mid-teens growth in both sales and units over a 3-year period, truly gravity do fine. It's a good proof point of how we operate. We identify where the guest is moving and we reallocate space and capital quickly to capture that opportunity. Another Key traffic lever is being early and exclusive on new high-quality product launches. Our scale, strong vendor partnerships and vertically integrated model allow us to bring differentiated products to market quickly and with meaningful impact. These launches are high incremental for both Casey's and our partners, capturing guest attention and driving engagement at the shelf. For example, during our lead market launch of Monster's Ultra Red White and Blue as purchasers were new to the integrin category at Casey's, clear evidence of incremental trial. This isn't about shifting share. It's about driving new trips and expanding our guest base.

Underpinning all of this is a highly integrated marketing engine. We operate seamlessly across social, loyalty, paid media, digital merchandising and our own channels. This isn't a set of disconnected functions. It's 1 coordinated system designed to acquire new guests, engage them across touch points and ultimately drive them back into the Casey's ecosystem. That level of integration is a real differentiator for us and a key driver of sustained traffic and engagement. And importantly, this creates a powerful flywheel. We invest in digital capabilities and personalization, thereby driving higher loyalty participation. That in turn, increases transactions and engagement which generates more data and unlocks new monetization opportunities. We then reinvest those gains back into the system, further strengthening the cycle. This flywheel is a key driver of our ability to deliver repeatable long-term growth. A critical enabler of that flywheel is our investment in the digital experience. We've rebuilt both the app and web platforms, giving us the ability to personalize at scale and accelerate our speed to market. From here, the focus is on continuing to simplify the guest experience, expanding rewards functionality and ensuring our back-end infrastructure can support continued growth.

So this is both a near-term growth driver and a long-term capability unlock for the business. Where this really comes to life is in personalization. We're now dynamically segmenting guests and engaging them in real time across their life cycle. That allows us to drive frequency with active guests, prevent churn and reactivate lapsed users. And importantly, we're doing this in a highly automated, scalable way. We're moving from static campaign-driven marketing to always on data-driven engagement. And we're seeing that translate directly to loyalty performance. We've hit nearly 11 million members with strong growth in both enrollments and engagement. But what matters most is how those members behave. Personalized offers are driving cross-category trial and new capabilities like gamification are increasing engagement and frequency.

Loyalty at Casey's is no longer just a program, it's a core growth engine for the business. In parallel, we're scaling our digital commerce delivery capabilities. We've significantly simplified the ordering experience removing friction and expanding the assortment available digitally. On delivery, we've now scaled over 2,000 locations and are seeing strong order growth. By bringing more of the store into our e-commerce experience and expanding delivery, we're driving incremental traffic accelerating sales and increasing Casey's relevance with our guests. Another piece of the model gaining real momentum is Casey's Access, our retail media network. We're seeing increasing vendor investment driven by strong returns, particularly when paired with our food-led activations.

At the same time, we're expanding the inventory, giving partners more ways to engage across both digital and in-store touch points. Importantly, that revenue is reinvested back into our marketing engine, driving incremental traffic and sales. This creates another reinforcing loop within our ecosystem, further accelerating growth over time. When you step back and look at the results, the impact is clear. Digital sales are growing at a high teens rate on a multiyear basis, led by particularly strong growth in delivery. We're also seeing a meaningful shift toward digital in the ordering mix bringing in a more engaged higher-value guest. And that's the point. This isn't just digital for convenience. It's digital as a driver of frequency, basket growth and long-term compounding. From a broader perspective, what you've seen is a guest-led model where demand is broad and growing. We're reallocating capital dynamically to capture it and digital loyalty and marketing are amplifying that growth. Put together, this creates a reinforcing system that drives traffic, frequency and basket over time in a ratable repeatable fashion.

From that foundation, we will transition next to Brad Haga who will share how Casey's will accelerate food and beverage growth as part of this next 3-year plan.

All right. Thanks, Tom. My name is Brad Haga, Senior Vice President of Prepared Food and dispensed beverages here at Casey's. As you just heard, we start everything with the guest, especially when it comes to our prepared food platform. The first key pillar of our strategy map, we'll talk about today.

Today, we're going to cover the following ground. First, we've been serving pizza for a long time, and our innovation in pizza continues to pay dividends. Secondly, our goal is to make everything we do as good as the pizza. We'll also talk about winning another occasion with our wings platform. And finally, leveraging our proprietary food expertise to drive our private brand platform. KC serves many needs for our guests, as you saw on the mission trip scorecard that Tom shared. We think about our menu the same way. whether it's starting your day, grabbing a quick lunch, a fill-in trip or a family dinner. We have built a menu that serves occasions throughout all dayparts for our guests. Now we put a lot of effort into the rest of the menu, but make no mistake, the crown jewel is pizza, roughly half of our revenue in prepared food.

And to execute Casey's delicious pizza, we make it by hand daily in our kitchens. What sets us further apart is our ability to drive the pizza business through innovation. A few years back, we sold a big gap in our assortment with Crest Innovation, Thin Crust. Another big differentiator for us is our specialty pizza assortment. There is nothing more unique and beloved than Casey's famous breakfast and Taco pizzas. We haven't stopped there. Within the past year, we've added 4 new everyday specialty pizzas and delivered a steady stream of exciting limited time offers. If you're in the room today, you're going to get to try some of our new specialty pizzas for lunch.

One is a past cases favorite that our guests begged us to bring back. So we improved it and brought back our Bacon Cheeseburger pizza for this summer and celebration of America's 250th birthday. Quality and abundance are king for us. But we don't stop there when it comes to giving back to our guests. Each Saturday through the college football season last year, we offered our guests 40% off any whole pie. This effort drove 40% unit growth on our whole pie business on Saturdays, which also helped us to drive double-digit unit growth across the entire system for the whole fiscal year. That's winning in pizza. And to make sure that volume comes consistently delivering pizza that is Casey is great every time. As of today, we have pizza certified 15,000 of our team members to ensure our guests always get the best pizza from us.

We are winning in Prepared Foods where the pizza QSR industry is struggling with accelerated growth over the past year, growing our prepared food business 16% over the 3-year period. That growth has shown up across our markets as well. 60% of our stores reside in DMAs where we own #1 pizza market share position. Even better, 40% of our stores grew Pizza units north of 10% this past fiscal year. Now let's dig into the rest of the menu. Our hot sandwich business has been on fire, we have put a tremendous amount of energy into our breakfast and lunch sandwich quality improvements and innovation over the past 3 years, incredible numbers, we have grown sandwich sales by 26% annually.

Our bakery business also has shown aggressive growth, growing 8% per year since our last Investor Day. Once again, product innovation and building a more premium offer has delivered with a new delicious cookie program that features amazing collaborations with big brands like Reese's, Snickers and Hershey's. Another area that we've placed a ton of effort has been in our dispensed beverage platform. In just a few short years, we have launched our new coffee brand, darn good coffee. And more recently, we now have our own frozen carbonated beverage brand Frostbite by Casey's. We leverage our dispensed beverage businesses to drive traffic to our stores. And this summer, you can get any fountain or Frostbite for $0.89. And when you're in Casey's country, our Frostbite beverages are always free on Frostbite Fridays. As you've heard, we've been very busy driving quality improvements across our existing assortment and developing new and exciting products and program. The real key to our success is how we sustain growth quarter-over-quarter, year-over-year. Let's take a look at a short video that will give you some insight into how we get things done from lining on an opportunity all the way to commercializing and scaling across our stores. Let's take a look.

[Presentation]

All right. So a little peak into the tent, covering some of the why and the how we went after the wing opportunity. Our approach with wings was to create a wing program that rivaled best-in-class wing purveyors. We don't want to just participate. We want to win with wings. And I know there have been a lot of questions about our plan to expand soft wings and how are we going to do it? So here you go. As of now, we have scaled the program across our Antony DC, about 850 stores. This fiscal year, we will roll the program to market served by our Terra DC as well as our Setco acquired sites. The following year, we will scale to the rest of the system.

So essentially, from here on out, we'd be fully scaled in the next 24 months. A few other nuggets on wings so far at Casey's. Half our stores do not have a formalized large-scale pizza or wing competitor within 5 miles. Secondly, for our wing only basket guests, order frequency has grown by 30% since the initial trial. And lastly, and we don't mind selling wings with pizza. Thus far, guests who added wings to a pizza have a basket that is 50% bigger than whole pies alone, and we will take that all day.

Now let's talk a little bit about private brands. We have had a lot of success with our private brands. We've closed in on about 10% of our grocery unit mix is private brands with about 350 SKUs. Private brands now for us is represented in almost in half the grocery categories. And when we look at Casey's proprietary products, that's combining prepared food and dispensed with private brands, Roughly 30% of our inside revenue comes from private brands and 40% of our inside gross profit comes from KC's proprietary items and we really see a bright future ahead for these items that truly differentiate Casey's. We're now leveraging all of our culinary resources and business process to optimize the Casey's private brand program. What you saw in the wing video will be applied to a private brand program development from here on out. And there's 3 areas of focus. We're going to start with the products themselves to ensure they stand tall from a quality and taste perspective. We will be looking at the value proposition to drive more volume to our products in a time where guests are looking for more value.

And finally, we're working to ensure we have the right brand design framework to enable us to drive and build sustainable growth with our private brand platform.

In summary, we are taking share versus QSRs. A strength of our business can clearly be seen in our differentiated traffic trends that start with delivering great food at a tremendous value. Away-from-home CPI would suggest we've taken far less retail than the QSR industry, passing more value to our Casey's guests has helped us grow prepared food and dispensed beverage 16% on a same-store basis over the past 3 years.

While the QSR marketplace has seen continued pressure, we plan to continue to focus on delivering more value for our guests. Driving prepared foods is something that clearly QSRs and most convenient stores see us an important strategic initiative. But doing food well is hard. We have structural strategic advantages when it comes to winning with food. Starting with Darren talked about it, we've been doing this for 40 years. That's a lot of reps, making great food is not foreign to us.

Our stage gate product development process and culinary expertise is not different than what you'd see in a sophisticated restaurant chain. And I can tell you, our Pantry is full. We have 60 items in the Pantry that we will launch over the next 24 months, essentially with food, 2 years of our next 3-year strategic plan is in the hopper already.

Another advantage, controlling the supply chain. Casey's resources, it's our warehouses, our trucks, our drivers, making sure the stores get what they need. And maybe most importantly, it's just a restaurant mindset that shows up in our kitchens each and every day where our guests can enjoy handmade pizza throughout the footprint. When you put all this together in a mixing bull, you get a formula that is very difficult to copy. And that's why we would expect the gap between cases and whomever is across the street to widen.

Thank you very much for your time today. Let's take a quick break. We'll come back with Ena Williams chatting about another key pillar of our strategic plan, growing units.

[Break]

We are not changing our self-distribution strategy. However, if there is a highly strategic acquisition outside of our distribution area, we feel confident in our ability to leverage our new third-party relationships to service those stores until we have critical mass to expand our distribution network. This gives us even more flexibility we're looking for larger deals. And as proven with CEFCO, when we make an acquisition, we are not just changing out the signage. We build the stores the Casey's way. I am so proud of the team for how they have executed the plan to bring Casey's to life. See for yourself.

[Presentation]

All right. So now when we add new units into the Casey's store base, whether built or bought, we need to operate them efficiently. So next, I will discuss some of our successes from the last 3 years with continuous improvement, talk about expanding this approach from our store team members to the entire enterprise and how we will streamline our kitchen operations in the process.

Over the past 3 years, we deliberately focused our continuous improvement efforts where we could drive the greatest impact our stores. Roughly half of our total operating expenses are at the store level. The approach was straightforward, but disciplined. The goal was to simplify operations, remove unnecessary complexity and enable our store teams to operate more efficiently. The financial goal was to grow operating expenses slower than EBITDA. During this time period, we implemented roughly 50 process improvements to reduce or eliminate nonvalue-added complexity within the store. Here are a few examples. We introduced a smart safe process, saving the store manager upwards of 2 hours a day closing the books. We added label makers in the kitchens to produce labels on demand, eliminating the need for roles and roles of item-specific labels, taking up space in our stores and our warehouses. We outsource laundry giving team members that time back to focus on execution and serving the guest. The results were clear as we reduced our same-store labor hours by approximately 5% over the 3-year period, and grew EBITDA almost 600 basis points more than operating expenses on a 3-year CAGR basis. And we did this the right way. How do we know this? -- team member engagement scores and guest OSAT reached all-time highs and turnover has improved by 70 percentage points. And building on that success within our stores, we are now expanding continuous improvement across the entire enterprise.

The strategy is consistent, but the scope is broader, and we are applying the same disciplined approach of clearly defining business problems prioritizing the highest value opportunities and then scaling those solutions. We've organized this work into 5 core work streams. First, continuing our focus on store simplification, which remains foundational from the prior strategy. Some of these projects include prepared food packaging optimization such as bag cheese sauce and [indiscernible] cans. Digitize cigarette audits, reducing the time it takes to account inventory. Bulk windshield washer fluid for automatic refills at the pump island instead of team members refilling manually. Transforming our kitchen with improvements like installing dedicated hot water lines, I'll speak more about that project later. You know these all sound simple but add tremendous value.

The second work stream focuses on optimizing nonstore labor and expenses. The third one is around streamlining merchandising and supply chain operations. The fourth on automating administrative and transactional work and the fifth work stream involves taking a hard look on how work gets done across the organization. The goal is simple. -- embed continuous improvement as a core enterprise capability. I mentioned a few of the improvements we made in our stores, and many of those were in the kitchen. Working in the Casey's kitchen is hard, and we owe it to our team members to continue looking for ways to make their jobs easier and more efficient. We have identified a few areas to make that happen. The first is around having the right equipment available to remove complexity. I'll give you an example using our crown jewel, our pizza and are made from scratch Dow.

This is one of the important factors that sets us apart from our competition and adds to the quality our guests love and expect. What you may not know is that though making involves science with precise measurements and the hot water needs to be within the specific temperature range. So before, and I'll picture this, our team members have to run the wall until it got hot, then use the monitors to measure until the right temperature was achieved. If it was too cold, then more hot water had to be added. If it was too hot, then they have at cowater, back and forth, back and forth if you get the picture.

So to make it easier, we install a dedicated spicket and tank system to dispense while they're at the right temperature every single time. This simple change not only sales water usage and time but also ensures consistency with the crest. In addition to removing tasks from the kitchen, we identified an opportunity to optimize the way the kitchen and equipment are laid out. We worked with the process engineer to help us change the kitchen configuration. By placing equipment and ingredients closer to the Make area that reduces the time team members are walking and crossing over each other. This new layout will help our team members handle increased unit volume. All these store builds will be specked with this new equipment and layout, and we will be determining how to scale these improvements across our existing store base.

Another way we can support the kitchens is by leveraging technology in our AI tools, using technology to improve our ingredient ordering process for both accuracy and inventory management, is a priority for our strategic plan. In addition to improving our ordering processes, we will continue to leverage technology to improve production planning for our grab-and-go items as well as optimize our made-to-order systems to have items like our pizza ready when the guest expects them. We know our kitchens and our restaurant quality prepared food are a couple of our biggest differentiators and we are always working to make sure our team members and guests get the best food and experience they can. The simplification and optimization efforts I just spoke of will help us meet these goals.

So I spent some time discussing how we are going to operate the business more efficiently. Now I want to talk about how we are laying a foundation that will be scalable as we grow the store base past 3,000. In this next segment, I will cover the importance of achieving a scalable foundation and how we will leverage our technology and AI tools to support this growth. Then that Daniel will take you through the ways our fuel business also helps facilitate our growth. Our prior 3-year strategy was primarily about building a foundation, centralizing capabilities modernizing systems and creating the infrastructure needed to support growth. As we look forward, the focus shifts to leveraging that foundation. Because of the investments we've made across our store support center, our fuel operations, field leadership and supply chain, we are now positioned to scale the business more efficiently. We also have a strong experienced leadership team to execute using these tools. In practical terms, that means growing our store footprint with proportionately lower incremental investment. We've built a platform that is centralized, scalable and future ready, allowing us to increase capacity, improve planning and drive productivity across the organization.

As we scale the strategy, AI will be an important tool, but it will not be used, but it will be used in a targeted and specific way. We are looking for clearly defined opportunities where AI can help Casey's operate better. In some cases, AI enables us to move faster, whether that's improving throughput or modernizing systems and others, it helps us solve problems more effectively by identifying root causes or removing friction. The key point is discipline. AI is a tool that supports continuous improvement is not a substitute for it. We have already identified successful use cases. Earlier, Tom discussed our hyper personalized guest experience. I talked about how we're using AI in our real estate selection process. And later, Nathaniel will discuss how we are optimizing fuel. But now I want to highlight 2 other examples in which we have found success using AI. This first case study shows how we identified an opportunity to improve our demand forecasting and planning. We implemented relax as our inventory management and demand forecasted solution to stand up a fully integrated process as opposed to the fragmented manual model we had before.

We had several goals when we started this journey. From improving store in-stock levels, to simplifying the store ordering process with the goal of reducing working capital in our distribution centers and increasing capacity. The results have been significant. A 550 basis point improvement in merchandise availability, a 94% reduction in manual order adjustments, a 33% reduction in warehouse inventory dollars. An increase of DC capacity by about 300 stores and a 4% decrease in average order size. So to date, we focused on general merchandise and grocery that is delivered to our stores through our distribution centers. And our next steps are to extend these capabilities further to include prepared foods kitchen ingredient forecasting, direct store delivery vendors and third-party distribution partners. This is a great example of how scalable systems, combined with continuous improvement create both immediate results and long-term value. This next example highlights how our field leadership team found value using AI-enabled tools as well. Now I will take you through a life -- a day in the life of a Casey's district manager, who has on average 12 stores in his or her territory.

So previously, our district managers took almost a full day to pull reports and gather data from various sources in order to identify opportunities to address. This work informs that the district manager where they spend their time and how they map up the week ahead. Through our store insights capability, we can now automatically generate weekly summaries of key performance metrics across all other locations. Not only does this new tool eliminate the need for field leaders to manually pull data from multiple reports. It gives them time back to spend in stores, coaching and developing store managers and creating action plans alongside store leadership to close gaps. This is a game changer for our fuel team. Another clear example of how AI when applied thoughtfully can enhance productivity, improve decision-making and reinforce operational discipline.

I'll now welcome Nathaniel to the stage to discuss our expensive fuel capabilities. Nathaniel?

Thanks, Ena. My name is Nathaniel Doddridge, I'm the Senior Vice President of Fuels at Casey's. As you've heard today, our scalable foundation gives us ability to grow while driving efficiency and leverage across our business model. Fuel is a very important part of that foundation. Not only is a meaningful business on its own, but as an enterprise capability at Casey's that strengthens our cost position, our resilience and our long-term growth.

Over the last few years, we've invested heavily in the fuel business and the recent results highlight our ability to win. Our recent quarter is an example of what winning looks like as we grew fuel profit by over 29% and to $397 million in the quarter.

Now let me walk you through how we'll continue to leverage our robust fuel capability as we maintain our winning track record. So our fuel strategy starts with an integrated supply chain built for cost advantage, flexibility and resilience. Our contracts with refiners, which cover 75% of our total demand have strong overlap with our retail footprint and provides access to over 300 fuel terminals that allows us to optimize our procurement costs and maintain the utmost flexibility. We pair that with our newest capability, our upstream self-supply and risk management capability, which helps us navigate volatility, create additional incremental value and add security of supply.

As you would expect, this multipronged approach to supply has been really, really handy during the recent Iranian conflict. We execute our supply plan through our physical network, including our proprietary transportation fleet which spread out across 40 different markets includes over 450 fuel drivers and delivers over 60% of the fuel that we sell at our stores. We also have our growing terminal access, which includes our company-owned, company-operated fuel terminal in Waco, Texas, which gives us direct control over our delivery economics, keeping our buying benchmark below OPUS. This outcome of leveraging these capabilities is really, really simple.

Lower cost per gallon delivered to our retail locations as well as our other business lines, greater control in these very volatile markets that we're experiencing in a system that becomes even more valuable as we continue to grow our gallons. And it's really the combination of all of these capabilities that I described not just one of the individual capabilities on their own, that really differentiates us from most of the convenience store industry. So our fuel capabilities don't operate in isolation. They really work together to create this compounding growth engine. As mentioned prior in the procurement and transportation side, we drop structurally advantaged cost and supply security -- at retail, our sophisticated pricing capability allows us to optimize our market positioning, while also maintaining a consistent, competitive and fair price for our guests. And as we grow, we're also extending these benefits and our capabilities into our business-to-business relationships, which includes our fleet business, our dealer business as well as our wholesale business.

All of these benefits continue to compound as we're also improving our asset utilization all along the way. Due to our investments in our people, our processes and our technology, fuel has now become a very reliable and ratable M&A synergy for us, helping us to continue to create value for the enterprise as we scale. All of this, coupled with our in-store offering, which we've talked about heavily today, has allowed us to take market share.

As Darren showed earlier, total gallons in the U.S. have been roughly flat. In the Midwest, we've seen mid-single-digit declines. However, when you look at our gallons over the last 3 fiscal years, we've grown gallons by over 30%, finishing FY '26 at just over 3.5 billion gallons sold. This is a combination, of course, of our growing store base, but we think even more importantly, is more gallons from our existing stores, which highlights and informs our ability to take market share.

With our gallon growth, our cost advantages continue to grow, our returns grow with those as well. And with a strong foundation of capabilities in place, our primary focus over the next 3 years is the same as what we've said throughout the day, run the same play, scale what's already working. -- because the math for me is a fuel guy is pretty easy. Every penny that we add to our fuel results generates over $35 million in annual fuel gross profit.

So over the next 3 years, our focus, like I said, is extending this advantage in a disciplined and repeatable way, and we're focused on 4 key areas: the first, optimizing our portfolio continuing to refine our supply economics by utilizing our internal data science team, also leveraging our modernized technology stack that's underpinned by AI. We're going to continue our relentless pursuit of pricing excellence, while also making sure that the products we sell to our stores, at our stores to our guests are continuing to evolve, like more premium and more higher ethanol blends.

Scaling our physical supply chain will be the second item, leaning in on our newest self-supply capabilities. self-supply has grown substantially over the last 2 years, and it now makes up approximately 15% of of our total supply mix. But we know there's additional opportunities to continue to refine our supply mix. Scaling our supply chain will also be anchored by growing our transportation fleet. Both of these items, growing our fleet leaning in more on self-supply lowers our total cost of goods for our retail sites as well as our other businesses. We're also going to focus on expanding our integration benefits, continuing to refine our M&A playbook to accelerate synergy capture. We feel great about our progress in this space, especially post CFCO integration. And if you recall, fuel was one of the very first synergy opportunities we committed to. But we know there's still opportunities out there for us to reduce unnecessary costs and really delay some of these M&A synergies.

And finally, growing gallons with discipline, not just growing gallons to grow, particularly as we think about our fleet business. That's a huge opportunity for us. But even more specifically, at our 300-plus locations that have commercial fueling lanes where diesel is actually the majority of the fuel that's sold at those stores. This is about scaling a model we believe works with clear line of sight on stronger economics an additional long-term value creation.

So as I wrap up, our fuel capabilities have become an important part of our scalable foundation. Although fuel has always been a key component at Casey's. I'm not sure we've always said that it's a key growth enabler, but that's what we're saying today. The fuel foundation is now in place. And we have a strategy that's working and we're winning. Our robust capabilities enable favorable pricing and procurement, further enabling our growth, that growth then amplifies our advantages through scale and utilization, growing store count and in turn, growing gallons puts more volume back in our flywheel.

Overall, fuel is a durable engine for value creation for the enterprise. And it's a very important part of our uniquely positioned, and I think everyone would agree are now well balanced 3-legged stool business model.

I'll now turn the presentation over to Chad to talk about our team member value proposition.

Thanks, Nathaniel, good morning. My name is Chad Frazell, Chief Human Resources Officer. And today, I want to walk you through how our people strategy is supporting Casey's growth. And more importantly, while our talent and leadership strength is the reason to be confident in our long-term outlook. At Casey's, we anchor everything in our team member value proposition or TMBP. It's designed to deliver our Casey's culture, build a strong leadership pipeline, support engagement and well-being and ultimately, power sustainable growth for the business. Over the past 3 years, we've made meaningful progress. And as we look ahead to our next 3-year strategic horizon, we're doing so from a position of strength.

Let's start with where we've been. Across the organization, our TMVP has driven tangible, measurable results. We've lowered overall turnover, maintained engagement levels above 80%, achieved our lowest store turnover rate since pre-pandemic levels and delivered all-time high guest OSAT scores, all while improving operational efficiency in our stores. That combination matters. It tells us we're running more efficiently, while improving both the team member and guest experience. The foundation behind these results is disciplined talent management. We've invested in store and district manager compensation to improve market competitiveness while strengthening performance management, succession planning and internal development with a particular focus on the field, where the majority of our workforce and future leaders come from. This has allowed us to create a strong internal pipeline and reduce reliance on external hiring for critical leadership roles. As we look forward, our strategic focus narrows to 1 critical pillar, career growth. We believe the ability to clearly see, assess and progress along a career path is 1 of the strongest drivers of performance, retention and leadership development.

Over the next 3 years, our career growth strategy will focus on 2 areas that matter most to our long-term success: store leadership and the extended leadership team. There is no better example of this than our Division Vice President, Andy Oliva. She started her career in 2000, working part time in the kitchen and over 26 years later, having worked in nearly every store and multi-unit leader position She's leading 1/4 of our chain. In stores, clarity and consistency are key. First, we brought role clarity to the front line. We've clearly defined what success looks like at each leadership level and created a deliberate path to store manager, 1 that moves through the kitchen. That path ensures store leaders develop the operational people and financial skills required to lead high-performing stores. Second, centralized hiring continues to be a differentiator.

Our plan is to continue to extend centralized hiring to the majority of our stores over the next 3 years. It's helping us lower both team member and store manager turnover, improve quality of hire and allow store leaders to focus on running great operations rather than constantly staffing vacancies. Third, we're increasing leadership readiness through a new district manager and training program, ensuring district leaders are fully equipped to coach, develop and sustain performance across their markets. Together, these efforts strengthen the talent bench responsible for leading the majority of our workforce and directly support consistency, execution and growth at the store level. Beyond the stores, our extended leadership team is a significant strategic strength and an important reason to be bullish on Casey's future.

First, we make intentional leadership moves. These aren't about simply filling roles. They're about increasing enterprise capability. rotations, expanded scopes and targeted assignments help us to develop leaders who can operate across functions and scale with the business. Second, we leverage trusted external partners to accelerate development. These partners complement internal capabilities and allow us to expose leaders to best-in-class thinking faster. Third and critically, we benefit from strong leadership tenure, deep institutional knowledge drives better decision-making, stronger collaboration and stability during periods of growth and change. Over time, this compounds into stronger successors and smoother transitions. The result is exceptional leadership depth, high engagement, strong intent to stay metrics and an organization that's ready for what's next. The extended leadership team is fully aligned and all in. What ties all of this together is what we call building the talent machine.

Our model integrates 3 gears culture grounded in Casey's Cares and engagement, compensation and well-being, ensuring we remain competitive and supportive, talent management with career growth at the center. When these elements work together, we create a self-reinforcing system, 1 that attracts, develops and retains the people who will drive performance for years to come. To close, we're starting this next 3-year strategic plan from a position of strength. I've spent the entirety of my 35-year career in retail, 10 years in store operations and 25 in human resources. I can confidently say I've never worked with the team that is more capable, experienced and engaged.

Our leadership pipeline is deeper. Our processes are more disciplined and our commitment to developing leaders, especially in the field directly supports execution, stability and growth.

Thank you. I'll now pass it back to Darren to close out.

All right. Thanks, Chad. Well, we hope you in the audience and those on the webcast have a greater appreciation for who Casey's is and why we remain a compelling investment opportunity. We operate as a category 1 in the public marketplace as the only convenience QSR. We're positioned at the intersection of convenience and QSR, our 3-legged stool operating model with prepared food and dispensed beverage, grocery and general merchandise, and fuel creates an unmatched flywheel for growth.

We have clear competitive advantages, including our unique rural footprint, a restaurant-quality food program, which is vertically integrated at 100% company-owned and operated stores with consolidated scale. We have a loyal and growing guest base that prioritizes great products and a great value and Casey's Rewards now has nearly 11 million members, creating a sticky guest base that drives traffic.

We have substantial white space to continue our proven track record of disciplined unit growth in either existing or new markets through both M&A and new stores. And all of this has resulted in durable ratable growth and long-term value to shareholders. We have an outstanding tenured leadership team with relevant experience and a proven track record of delivering results. To sum it all up, we have a growth algorithm that has proven to be successful over the long term, has grown even stronger in recent years and has tremendous white space for continued growth for the foreseeable future.

So before I wrap things up, I just wanted to leave you with this. Today actually marks my seventh year anniversary with Casey's as a CEO. And when I reflect back on that 7 years, I couldn't be more proud of what this team has accomplished. And this is the beginning of my third 3-year planning cycle. And I can confidently say with 100% conviction that we have never been holding a better hand and never been better positioned the next 3 years than we are sitting right here today.

So with that, I want to thank you for attending today, listening to our plan. And now for the star of the show, we're excited to share our lunch pizza. You got to have the breakfast pizza and earlier today. And so for those on the webcast, we'll be back at 12:30 Eastern for our Q&A session. Thank you.

[This call length has exceeded streaming capabilities - Please refer to the preliminary transcript that will be posted shortly.]

We're going to start the Q&A process here in about 2 minutes. So if you could kind of get your last beverages,

we'd appreciate it.

All right. We're going to start the Q&A portion of [indiscernible] A couple of just quick one for us. [Operator Instructions]. And we've got two ladies here on the side that we walk around microphones that will help you out. They will pick who they will go to. So, go ahead.

Good morning or at this point, and thank you for having us Corey Tarlowe, Jefferies. Darren, one message I think that was very clear from your remarks that this is becoming a much more diversified business across fuel food. I think 1 pressing question on investors' minds today is what happens if or when CVG starts to come down, and we start to think about the lens into this 8% to 10% EBITDA growth target and the ability for the company to achieve that target amid a potentially declining CPG environment seen really strong results after the last quarter.

Well, I would first say that if you go back to the structure of the industry, the setup really doesn't lend itself to declining fuel margins. Now if we're talking about 1 quarter versus another, that's one thing. But -- and there's always going to be that volatility from quarter-to-quarter. But over the long term, we've seen is very consistent that CPG tends to rise commensurate with CPI. And we have a long history of of measuring that, and we don't have any reason to believe that, that wouldn't be the case going forward.

And like we talked about earlier today, when you look at the composition of the industry, 2/3 of it nearly 90,000 of the 150,000 Canadian stores are in change of 10 stores or less. They don't have food. They don't have the technology, they don't have the scale. They're overexposed to cigarettes and cigarettes is a declining category. So they don't have a lot of levers to pull to survive, frankly. And so the lever they do have is on fuel price. And so they can extract more margin and that sets a baseline for the rest of us to compete off of. So we don't see anything structural that it will change the trajectory of the fuel margins over time.

Hi. Good afternoon, Krisztina Katai from Deutsche Bank. Thank you for today's presentation. So you spoke to a mid-single-digit it sales comp target. And I was hoping if you could speak to the drivers behind that acceleration in relation to this year 2% to 5% outlook. If you could touch on how much the incremental contribution you're expecting from wings as that rolls out over the next 2 years there? And then if you could contextualize for us just to increase personalization that nearly 11 million loyalty members. What is the role that is playing here?

Okay. Tom, do you want to take a first crack at that?

Yes, certainly. So as you heard earlier, we definitely plan to grow our prepared food dispensed beverage business faster than grocery general merchandise. Part of that is structural because cigarettes is obviously part of [indiscernible] general merchandise. But as we look outside of food and we look specifically at the package side of the business, and certainly, we have a private brand presence, but it's predominantly national brands. We're seeing a lot of acceleration in the energy drink category, a lot of acceleration in teen alternatives.

And so we're very bullish on continued innovation, continued guest adoption there. There's definitely a trend for a lot more functionality. So guests expect protein, they expect energy, they expect fiber, collagen, right? There's all kinds of additives and beneficial ingredients that are becoming more prevalent in products. And so we're certainly position to capitalize well on that trend. And then from a personalization standpoint, as I discussed, we have it live and running today on our app, we'll continue to not only build even more data sets and a better understanding of our guests.

But as we continue to enhance our overall digital platform, we'll be able to engage guests that much more impactfully and drive relevance in to that platform. And so we feel really good about how all of those working together will enable us to deliver that mid-single-digit growth.

And maybe I would just add specifically on wings. Clearly, it's in the mixing bowl, right, for the next couple of years. If you look back to what Brad said earlier, we're not really going to be at a full exit rate for wings across the business until the last year of this plan, right, coming into that. And so is it a positive contributor to the mid-single digits? Yes. Is it something that candidly, if we didn't have it? Would we still probably be confident we could get to mid-single digits? Yes.

And so I think it's going to give us a nice positive contribution but it's going to be relatively nascent to our ability to generate mid-single digits here over the next couple of years just because of that ramp.

It's Brad Thomas with KeyBanc. Thank you for taking my questions, for doing this. The question is about the EBITDA guidance, the 8% to 10%. You have strongly outperformed these numbers over the last 5-plus years. And so the question is really how to think about any elements of conservatism that may be in this guidance, just how you make that take and the importance of consistency for you going forward?

Yes, I can go ahead and start, and I'll let Steve clean it up for me if I misspeak. But yes, on the 8% to 10% is the way we look at that, and we've shared this a lot with our growth algorithm. It's new units every year and 4% from what we call the mother ship, just running the base business better, and that's everything from operational efficiency, to merchandising efforts to marketing, rewards, et cetera, et cetera. That is 100% within our control, and we feel very good over a long track record of doing this, and we feel very confident that we deliver that and again, within our control. what can layer on top of that is a large deal M&A, which we don't make into any of our numbers.

Those are more opportunistic that can accelerate it. And we're -- the fact of there is we're operating in a pretty volatile world. So I think a little bit of conservatism didn't do anybody any harm. And we're confident we can deliver the numbers that we've committed to. And as you point out, we do have a track record of beating that. And it is certainly our intention to try to beat it again. But what you can take to the bank is 8% to 10%, and we feel pretty good about is I think we -- the ratability of the company's performance really over decades.

I think it served us well, right? And so Personally, I don't love giving aspirational targets that I'm not totally sure are going to come to pass. That usually doesn't end well. And so I feel super confident that we've got the track record and the plan to Darren's point, we can deliver these numbers. I feel very good about it. And some things can certainly go our way to give it more upside, but we'll start with what we thought that we control.

Bobby here from Raymond James. Darren and team, I was curious if you can just maybe talk a little bit about how you think about the price gaps today going forward? I guess in the context that you have established a pretty nice price gap versus your peer demonstrating in that slide, but then you have the AI tool for demand forecasting coming to the prepared food side of the business now, which in theory should open up, I would imagine some interesting opportunities on waste and things like could either be reinvested or drop down.

So just kind of any talk around conceptualizing that and how you think about it on the go forward.

I can maybe start with that. I think in terms of that price gap, and we're talking about prepared foods, in particular, as we look at the landscape right now, the dynamics I talked about earlier with the QSRs aren't going away. If inflation continues at the rate has been going -- the QSR industry is under that pressure to do something with price. I mean, they have a few levers, right? You have price lever, you have the operating expense level and you have the product cost lever. So if you save money on ingredients, it's probably a bad outcome for your food. If you cut back your labor to months, it's probably a bad outcome for your service. And if you take prices up too high, that's a bad outcome for your sales. So -- they're not in a great spot. We don't have that problem. And so we would continue to maintain a more conservative pricing posture and let that gap widen out and drive more velocity to our stores.

Now with the demand forecasting, that's really more on the supply chain side. So where it will help is just being more efficient with inventory, and we'll probably be able to take some costs out of working capital. would we reinvest that in even more price TBD, we have to see, but it gives us another lever to play with if we choose to use it that way. Maybe what I would just add to that, if you think about the two parts of the business inside of how we approach price. To Darren's point, on prepared food with an almost 60% margin business, right? Velocity is our brand, and we want more not less city.

And so I think of pricing there is like a break class kind of a thing for us, right? It's a very commodity-oriented cost input business. We want to keep the gap. We know we certainly can price if we need to. We've not been able -- not needed to do that and it served as well are business, it's a little bit different. So there's a lot of structural tailwind to margin on the grocery side, like we talked about. Part of the reason the net momentum is accretive to margins, we will take enough price on grocery to preserve margins, right? Those are a packaged goods business, right? There's less kind of differentiation on coke is a 20-ounce coke for us and someone else. And so you should expect us to largely preserve margin and/or lean into promotional support to offset some of the cost pressure we might otherwise have we treated a little bit differently depending on which side of the house it's coming from.

Jacob Aiken-Phillips, Melius Research. I wanted to ask about Kasais. Can you just give a little bit more color on [indiscernible] you're doing? Is it through the app in-store activations, should we think of it as like a high margin of profit stream or funding for traffic? And then I know a lot of focus on food, but could you talk with that for nicotine promotion and personalization in that record?

Yes. So we have inventory both in-store and digitally. And so everything from push notifications, a takeovers to different messaging to our guests. Inside of our stores, we have digital menu boards, which are all part of the Access universe. We have activated the majority of our fuel pumps as well. so that while the guest is filling up on the forecourt, they can see different advertisements, both from us and our proprietary brands as well as obviously a lot of our national brand partners. We also have a number of stores that have digital screens on our fountain -- and so that's also part of the access inventory. And so we're constantly thinking about ways to bring more inventory to our partners. So they see a return for that investment.

And so we've got a great flywheel working, where we've continually ramped the spend in access on a year-over-year basis, and that's being driven by the partners getting returns for that spend. And so we feel really good about how we're positioned today. We know there's opportunity to continue to grow inventory into the future. Certainly, as we grow unit count, right, that's going to grow that as well. But as I mentioned, we're on a journey of continually modernizing the digital experience and access plays a key part in that.

So the other thing I'd add to that is with our access program, we gained revenue. We have some costs associated at the margin, so to speak, from access. We reinvest in advertising for -- primarily for our prepared foods. So -- we're not using that as another P&L line. We're using that to drive more velocity in our highest-margin categories into the store.

Pooran Sharma with Stephens. I just wanted to ask about wings. And I wanted to ask you in the frame of your pizza business, you do hedge out commodity volatility the pizza business. So I'm thinking as you scale out wings in the next 24 months, how do you plan on reducing the volatility associated with wings, what type of instruments are there for you guys to use?

Do you want to touch on that?

Yes. I mean I'll start with that. What do we do today, maybe start with our biggest commodity exposure in the existing business is cheese. It's a pretty significant cost item for us, obviously. And so we do tend to buy forward block cheese. We'll go out for some 5 quarters. And I think we said on the last call, we're largely hedged for first 3 quarters of '27 and kind of halfway hedged in '28. We're not using derivatives per se when we do that, right, because we most of these commodities, right, it's a little bit different -- we actually are physically going to take possession of these.

And so on the wing side, specifically as it grows, we're going to buy protein, right, as part of that, and we're going to consume that protein. And so our procurement organization, for sure, will look at how can we do that most effectively. Most of our protein buys under some form of a contract today will obviously be buying more chicken than we have historically. That's certainly the plan. But time will tell exactly how we do that, but we'll be very sensitive to making sure we're minimizing the volatility on the protein buy that we have that ramps up.

Mike Montani with Evercore. I was just going to ask for [indiscernible]. Actually, you mentioned about 4 different initiatives, I think, to help drive efficiency on the fuel side. You had the trucking fleet, for example, and then optimizing NIC for a couple of them. But could you give us some sense of quantification of how significant that could be in terms of cents per gallon. I think that 1 of the concern points is you all are kind of market takers on some per gallon, but there could be some opportunity there to control your own destiny as well. Just want to make sure I understand that.

Yes, I'm not sure I can commit to a since per gallon benefit. But I would say that I think that maybe the way to think about it is just as we to do in the study is what inning of the capability right? And so when you think about net new capabilities for us, I would say that we're in the latter innings of that. But when you think about the capabilities that we've actually initiated like we talked about today, with things like self-supply, trucking fleet, things like that.

We're probably still middle innings on those things. And so as you think about layering those capabilities into the business, there's some incrementality there, right? But I think at the end of the day, I'm not sure we're in a position to commit to the CPG value, but I would maybe just categorize it as there's still some innings left in the ballgame for us to add that additional value to the cost per gallon. And I think the thing about it, too, to think of -- not all that falls through, right? At the end of the day, we're about a consistent competitive value every day. It's a very competitive market.

We're the only category that day in and day out, there's a price on the street that changes pretty drastically. And so all those things, again, they'll always fall through to the bottom line. But I think we still got several earnings left -- and I would just add that you could probably assume that the benefit over the next couple of years as the thing continues to build out those capabilities is already embedded in our guidance for the next few years. We know we're going to add more trucks we're going to add more drivers. We're going to increase the amount of self supply that we do. All of those things on that rental gallon are accretive to us. It's just, there's not a lot of incremental gallons at any moment in time from truck. And so it gradually works its way into [indiscernible] and do the math.

Phillip Blee for William Blair. Thanks for the question. So when you think about the core consumer, there's a lot of narrative around K-shaped economy, changing preferences across younger cohorts, GLP-1 usage. So just given your average customer, how do you think about your positioning call versus peers in this more dynamic backdrop? And then are there more specific strategies you're employing here to accelerate share gains just against a lot of these changing behaviors.

Maybe I'll start with that, and then Tom, you can add some more color. I would say that our guests are hanging in there from a consumption standpoint. And when we look at different income cohorts, about 50,000 a year and under or family income is low income. 50 to 100 is middle and upper income is 100 or more. And we see those upper 2 cohorts pretty much staying consistent with what they have been. All 3 income cohorts are growing. One of the things that really works in our favor here, we've talked about being concentrated in the Midwest and now to a certain extent in the South, you talked about the small town rural footprint.

So if you think about that income level in the context of a small town and rural community, it's very different in that income level sitting here in Manhattan today. And so that spending power just is that much greater in those areas because of the cost of living. And so I think -- we're in 9 of the bottom 10 cost of living states in the country. And so very affordable. And so our guests have a little more discretionary income than perhaps others in different geographies. Any other color you want to add on the gas?

Yes. I would just say this is the power of our structural advantage from a model standpoint. So guests are definitely getting more discerning. And we can adapt with agility to that change. And that's -- we show that through our -- the way we manage categories, the way we expand space of categories that are winning in the store, the way we lean into them from a reward standpoint, a marketing standpoint, partnership standpoint with our supplier partners and then also how we exit others that are not performing are not relevant with our guests.

I'd also highlight amazing work that our omnichannel marketing team is doing around our social presence and how we've been able to really grow awareness and brand love among the younger cohorts, which again positions us well for future growth.

Mark Carden from UBS. I wanted to ask on wings obviously making some really nice pressure on progress in that front. In your more mature markets, are you still seeing a lack of cannibalization between wins and your pizza business? Do you see any shifts in how customers are cases for wings, just whether it's being more of an add-on versus a new occasion. And then just what are you seeing with respect to bringing in new customers versus existing customers and in their baskets?

Yes. I think we're seeing a mix of both. And as I said earlier, I think we are seeing new guests, and we're seeing the frequency of those guests buying food grow. We're also seeing guests that buy pizza buy wings with pizza. So -- we see it as a win on both occasions as a new occasion for some guests, but then selling wings with pizza is surely beneficial for us.

Kelly Bania from BMO Capital. Thanks for all the pizza. So over the last 3 years, reduction in same-store labor hours has been one, really impressive, but I think also a major contributor to that gap of OpEx versus EBITDA. And I guess in light of all the prepared food innovation and coming there. Can that be similar in the next 3-year plan or some of the low-hanging fruit kind of captured in the last 3 years? I'm just trying to think about really putting some numbers. I know you gave some great examples some very specific things happening, but just trying to put kind of a range of what that could look like.

Do you want to take the shot? Listen, we didn't quantify in the new guidance, the degree to which we think we can keep operating expenses growing slower than EBITDA. There's going to be a positive for sure, to our benefit, will it turn out to be 600 or something different. We're not going to go there. I think we feel really good that most of the progress we've made heretofore has been in the stores. generally, right? The stores is the majority is in a shot of our OpEx, but it's not all of the OpEx.

And we really actually -- if you go back to the last 2 strategic plan periods, we added quite a bit above store for a variety of reasons because we just didn't have capabilities, right? We didn't have asset protection. We didn't have strategic sourcing. They were just kind of basic blocking and tackling things we had to -- as we sit here today, we have those capabilities. We have a lot of traction from them. And frankly, we should be able to leverage those capabilities as the company grows and not need to make those kind of incremental investments that we've done historically that helps the math a lot by simply not building functions that we already have.

But a lot of the continuous improvement work that I referenced that Somerton leads for us here A lot of that will be, I would say, more above-store oriented around process improvements around systems, et cetera. Now we're not done with the stores for sure. But I think we're much more inclined to reinvest time saved in the store back into the store to let them make wings, right? There are some things we're doing that are going to require more time to be spent store. So we're not going to build a net savings for that kind of stuff in the model because the savings comes from mid-single-digit growth driven by prepared food at 60% margin. That's how the math is going to help.

Yes. And I'll just say, like the previous 3 years, like you mentioned, Kelly, we're about taking complexity out of the store, and it resulted in a reduction in the labor. Now we're going to continue to focus on that. As Steve said, the store, we're not going to abandon that. But taking that complexity out is giving them more capacity to do more of wings and other food platforms that may come in the future. And so we're taking that same disciplined approach and moving it upstream, so we are growing the whole store base about growing the OpEx above store with it, right?

I'd just add one other thing that's maybe a little less appreciated in that simplicity work that Ian and her team are doing is that as the job gets simpler in the stores, the team members stick around longer, the turnover goes down, the turnover goes down, the training hours go down, the overtime goes down. And that's the gift that keeps on giving, even if we're not actually taking any more labor out of the schedule, OpEx is coming down just share by not turning people over as much.

Tom Palmer, JPMorgan. You introduced a 400-store growth over the next 3 years. Your prior target in the past 3 years was 500. I know the $400 million does not include larger scale M&A. And Steve, you did mention it at least a couple of times the possibility of something larger. So maybe some context to kind of why that lower growth versus the prior 3-year period? And to what extent you're kind of reserving room to layer on something bigger in that target?

I take you back to the beginning of the last 3-year point, the initial target was 350 odd stores, right? And I think at the time, that was about a 4% as well as memory serves. So we're continuing to -- back to the two-pronged algorithm, right? The mothership is going to give us, just pick 8, right? Half of the 8 its need to be 4 to make that math work. So that actually is unchanged from what we thought we were going to do. And [indiscernible] was icing on the cake, right? I didn't plan on it, didn't need it necessarily to get to that number. It came in. Obviously, we then raised the number of stores that we're going add on here. And so back to the conservatism comment, we want to be able to control our own destiny.

We can control our own destiny at 8% to 10% with singles, right? There are prospects out there that would give us more units in 1 fell swoop, but we don't totally control when they come and how it plays out. And so for us to give the highest level of confidence, we can make that 8% to 10% work. with acquisitions we can control. We're just sticking with single A large deal like Fiege 2.0 for sure, would change that target. There's no doubt about that.

Bonnie Herzog, Goldman Sachs. Everything seems to be working very well. So congratulations on all of that. But I'm curious to hear from your perspective, maybe what's not working so well or maybe where you think you could be doing a little bit better. Darren, you and I talked about this the other day. So maybe specifically like to hear a little bit more color on sort of where you're up with your private label business and if you see further opportunities to expand there? And is there anything else?

Yes, sure. I'd say there's always something we can do better. And what I would say, I'm really proud of this team because nobody is ever satisfied with where we're at. And even though it would be pretty easy to get satisfied with some of the results we've posted over the last few years, but nobody is ever really satisfied. So if you look at some of those things, I would say, private label is a big opportunity for us. It's been a great program. We launched it about 5 years ago.

And off to a really good start and kind of hit more of a flat spot, I would say, as it performed poorly. It just hasn't performed to our expectations. And so we're taking a fresh look at that and talk about that in a little bit. I think we still have some opportunity with dispense beverages. You've seen the work we did with Frostbite and branding that frozen beverage offer I'd say our coffee after still has some room to grow, quite a bit of room actually. So there are some areas that despite some of the top line numbers that I think we can still be better we are never going to be satisfied with the amount of pizza we sell. So we're always going to look to sell more of that. We'll never be satisfied with how well we run stores.

We can always run stores better. So there's plenty of things to work on, Bonnie. And Brad, do you want to talk a little bit about private label and where we're at in that process. Yes. So we didn't hit a flat spot. Again, a ton of success over a handful of years. And I think when we went back and looked at it, I think we've got opportunity.

First thing I talked about was we view every single thing we make and have and is it great? And is the quality and the taste of exitable, where we want it to be to our pizza standard. So that's the first thing we're doing right now. The second thing we're going to do is we're going to make sure there's a tremendous amount of value in everything we do. So we talked about the wider the gap is, making it easy math for a guest to choose one of our great products versus a potential national brand that's taken a bunch of cost or something like that. And the third thing we're going to do is build the right design framework and architecture to give us runway for years and years to come and a place to go. So that work is going on right now.

I would expect by the time we see you guys talk to you a year from now or something, we'll probably be further down the road there.

Edward Kelly, Wells Fargo. I wanted to follow up on the growth in the 400 stores that you mentioned, independents are under increasing pressure today. Can you talk about what the pipeline looks like and how you think about the mix of sort of acquisitions, smaller acquisitions versus new store builds within that 400? And then specifically, I'm curious about geographic focus. So Texas is a newer market for you where you have [indiscernible]. Curious what you've learned from being there so far, and it's a big market, but a competitive market. How do you think about your ability to win in that market and the focus in terms of growth there moving forward?

Yes, I'll go ahead and take that. Every year, we enter into the year with a growth target this year, it's 120 stores. And we go in with the assumption that half of those are going to be small deal M&A and half of those are going to be organic new-to-industry builds. As Steve would say, that number is always precisely wrong. Although this past year, we actually stuck the landing, I think the first time, exactly 40 and 40. But we have the flexibility. We -- as Ina mentioned, I think we're -- right now, our real estate team is sourcing sites that we'll be building in fiscal year. And so we have a very deep pipeline, a very large land bank of sites. And then equally on the M&A side, our M&A team has a long list of folks that we are talking to or have spoken with and believe we can act on over time.

So we'll just have to see timing and sequencing of where that lands, but that mix is, give or take, half and half. With respect to Texas, we love Texas. We've been very happy with what we're seeing in Texas so far. And when I think of growth prospects, this is the anecdote I'd like to give in Iowa or home state, we have 550 stores with a population of 3 million people. The population of Texas is 30 million people. So are we going to put 5,500 stores in Texas, probably not. But could we swing and see 1,000 stores, 2,000 stores Yes. I don't see any reason why not. And our brand has been really well received in Texas.

And so yes, you're right. To a certain extent, it's competitive, but that's primarily in the big cities. So you got DFW in Austin, San Antonio, that's never been really our sweet spot of operating in the big cities. We go out in the suburbs and the smaller towns. That was one of the things that was really attractive about the SEPCO acquisition was they were -- both stores are really in Casey's country. And so it's a very natural fit for us. And we -- as we go look at those types of towns as towns of 20,000 people or less, it's wide open from our perspective. So we're really happy with that.

Let me ask you guys something. This is fun. I got 25 minutes left. So what about the pizza I mean you -- a lot of you are in New Yorkers. All right. Cheese where you have the chefs are saying that you guys blew out of the cheeseburgers. So yes, we're pretty proud of that pizza. And I know New Yorkers are proud of their pizza, and that's interesting, but we think ours is pretty good. Okay. Well, again, thank you, everybody, for coming in. I appreciate your interest in Casey's, and enjoy the rest of your day. All right. Thank you. Thank you.

Good day, and thank you for standing by. Welcome to the Casey's General Stores Fourth Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, 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 fourth quarter and fiscal year ended April 30, 2026. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, 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 the potential impact of the Fight transaction, 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 and performance at our stores.

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 acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and 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 disclaims 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-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the fourth quarter can be found on our website at www.caseys.com under the Investor Relations link.

With that said, I would now like to turn the call over to Darren to discuss our fourth quarter and fiscal year results. Darren?

Thanks, Brian, and good morning, everyone. Before we dive into our strong results for the year, I would like to take a moment to highlight some of the great work [indiscernible] is doing in the communities we serve. Our purpose here is to make life better for our guests and communities every day. It's not just something we say. It's truly something our team members live out every day.

This fiscal year, with the support of our guests, team members and partners, Casey's contributed more than $8 million towards our strategic giving priorities of education, hunger relief and support for community service, including first responders, military veterans and their families. Through our pass for classrooms program, schools and educational organizations across our footprint received 100 grants totaling $1.3 million. In support of hunger relief, more than 10 million meals were provided to local food banks through our Feeding America campaign, and through our work with military nonprofit partners, we helped support more than 2,000 veterans and their families. This impact was made possible because of the dedication of our 50,000 team members, the generosity of our guests and the support of our partners. All of us here at Casey's are proud of how we keep showing up for our communities, and I want to thank everyone who played a role this past year.

Now let's discuss the results for this past fiscal year. We had an outstanding fiscal '26 that achieved the highest ever diluted earnings per share, finishing at $19.16, and net income of $714 million, both representing a 31% increase over the prior year. The company also generated nearly $1.5 billion in EBITDA, its highest ever, an increase of 23% from the prior year. Inside the store, the growth was impressive. Total inside sales grew 10.2% during the year, while inside same-store sales were up 4.2%, or 7% on a 2-year stack basis. Total prepared food and dispensed beverage sales grew 10.2%, and same-store sales were up 5.2%, or 8.8% on a 2-year stack basis.

Total grocery and general merchandise sales were up 10.1% and same-store sales grew 3.9%, or 6.2% on a 2-year stack basis. Whole pizzas and nonalcoholic beverages helped drive the strong results during the year. Inside margin expanded 70 basis points year-over-year to 42.2% as our merchants have done a tremendous job working with our vendor partners to get the right products on the shelves while maintaining a strong value proposition for our guests.

This remarkable performance inside the store is a testament to our team. Over the course of the fiscal year, we launched successful LTOs, expanded our specialty pizza menu, introduced a new frozen carbonated beverage platform and finished our wing test and started scaling. We also partnered with Monster on a red, white and blue [indiscernible] flavor that was sold almost exclusively at Casey's from late January to early May. This product, celebrating America's 250th anniversary, resonated extremely well with guests and was a top seller in the energy category throughout the quarter. It also helped raise hundreds of thousands of dollars for hope for the Warriors and the children of Follow Patriots Foundations, two causes that we are passionate about here at Casey's.

At the pub, fuel gross profit was up 21% with total fuel gallons sold up 10% and fuel margin averaging $0.426 per gallon over the course of the year. The capabilities of our fuel team has developed over the past several years helped us excel during a time of uncertainty and volatility.

Our operations team continues to run the stores efficiently. For the year, same-store operating expenses, excluding credit card fees, were up only 3.7% for the year, impacted favorably by a reduction of same-store labor hours of 0.2%. At the same time, guest satisfaction and team member engagement were at or near all-time highs as we continue to view operational excellence and store simplification efforts through the lens of our team members and guests. Our fiscal 2016 results illustrate the durability and strength of Casey's advantaged business model but we're confident in our ability to deliver results in a variety of economic clients.

I'd now like to turn the call over to Steve to discuss the fourth quarter and our outlook for fiscal '26. Steve?

Thank you, Darren, and good morning. Prior to going over to the financials, I'd also like to thank the team for their hard work and their dedication throughout the year. The incredible financial results for the quarter and the full year are a function of the entire organization working together and executing at a very high level. The results that we are delivering are not easy to achieve.

Now on to the great financial figures for the fourth quarter. Diluted earnings per share was $4.37. That is a 66% increase from the prior year. Total inside sales rose 7.4% from the prior year to over $1.5 billion with an average margin of 42.4%, which resulted in total inside gross profit dollars up $61 million or 10.5% from the prior year. Total prepared food and dispensed beverage sales rose by $36 million to $428 million. That's an increase of 9.2%. And total grocery and general merchandise sales increased by $68 million to $1.09 billion, an increase of 6.7%.

The same-store prepared food and dispensed beverage sales were up 6.6% for the quarter. The average margin for the quarter was 59.5%. That's up 170 basis points from a year ago. Whole pizzas and appetizers [indiscernible] performed well in the quarter. Improved waste was the primary driver of margin improvement and a lower LIFO charge also favorably impacted margins. Cheese costs were down $0.06 per pound from the prior year to $2 [indiscernible], which had an approximate 15 basis point benefit to margin. Same-store grocery and general merchandise sales were up 5.1% and the average margin was 35.7%. That's an increase of 90 basis points from the same period last year.

Sales were particularly strong in nonalcoholic beverages, specifically energy drinks. Margin expansion was primarily driven by cost of goods management, while product mix notably, nicotine and nicotine alternatives also had a favorable impact.

During the fourth quarter, same-store fuel gallons sold were up 1.5% with a fuel margin of [indiscernible] per gallon. That is up approximately $0.093 per gallon compared to the prior year. Retail fuel sales were up $446 million in the fourth quarter due primarily to a 14.1% increase in the average retail price from $2.98 to $3.40, along with a 3.6% increase in the total gallons sold to $848 million, which also contributed. We believe the flywheel of our unparalleled inside offering paired with competitive fuel prices is helping our comps both at the pump and inside the store.

Total operating expenses were up 10.1%, or $67 million in the fourth quarter. Approximately 2% of the total OpEx increase is due to operating 40 more stores than in the prior year. Same-store employee expense accounted for approximately 1.5% of the increase due primarily to increases in labor rates as same-store labor hours were roughly flat. Same-store credit card fees contributed approximately 1% of the increase due to the higher retail prices of fuel. Higher performance-based variable incentive compensation and discretionary charitable contributions contributed to approximately 4% of the increase.

Net interest expense in the quarter was $21.7 million. That's down $6 million from the prior year. Depreciation in the quarter was $115.5 million, and that's up $8.1 million versus prior year, primarily due to operating more stores. The effective tax rate for the quarter was 23.7%, compared to 23% in prior year, and that's due to an increase in unfavorable permanent differences.

Net income was up versus the prior year to $162.7 million. That is an increase of 65.5%. EBITDA for the quarter was $350.3 million, an increase of 33.2%. Our balance sheet remains in excellent condition, and we have ample financial flexibility. On April 30, we had total available liquidity of $1.4 billion. Also, our debt-to-EBITDA ratio as calculated under the terms of our credit facilities was 1.5x.

For the quarter, net cash generated by operating activities of $398 million, less purchases of PP&E of $191 million, resulted in the company generating $207 million in free cash flow. This brought our total free cash flow generation for the fiscal year to $722 million. This is inclusive of an approximate $100 million cash tax benefit, related to capital spending over the course of the fiscal year from the One Big Beautiful Bill. Return on invested capital for the fiscal year finished at 12.7%. That's up 120 basis points from the prior year, and this represents the highest return on invested capital achieved since a tax [ aided ] 2018.

At the June meeting, the Board of Directors voted to increase the dividend to $0.65 per share. That is a 14% increase, marking the 27th consecutive year that the dividend has been increased. During the quarter, we repurchased approximately $63 million of shares, and the Board also expanded the existing share repurchase program up to a total amount of $1 billion. We anticipate approximately $200 million in share repurchases in fiscal '27. And furthermore, we're providing an outlook as follows for fiscal '27.

The company expects inside same-store sales to increase $0.02 to $0.05 with inside margin above 42%. The company expects same-store fuel gallons sold to be between negative 1% to positive 1%. Total operating expenses are expected to increase approximately 5% to 7%. And the company expects EBITDA to increase between 8% to 10%, which would imply a 35% increase on a 2-year stack basis at the midpoint of the range. We expect to open at least 120 stores in fiscal 2027 through an even mix of M&A and new store construction.

Net interest expense is expected to be approximately $95 million. D&A is expected to be approximately $490 million, and the purchase of PP&E is expected to be approximately $800 million. Please note this is inclusive of the cost of converting the majority of the [indiscernible] stores to Casey's. The tax rate is expected to be approximately 24% to 26% for the year.

Now consistent with our prior practice, we are not guiding to a fuel margin CPG, nor are we providing earnings per share. However, for modeling purposes only, the FY '27 EBITDA outlook is based on a mid $0.40s per gallon fuel margin, combined with the other points of guidance. Our main experience was as follows. Inside same-store sales, same-store gallons sold and fuel CPG margin are all consistent with achieving the annual guidance. Current cheese costs are modestly favorable versus the prior year. And we expect first quarter operating expense to be up high single digits, partially attributable to higher [ credit card ] fees due to the higher retail prices of fuel.

With that, I'll turn the call back over to Darren.

Thanks, Steve. I would like to again express my gratitude and congratulate the entire Casey's team for delivering another record year. Their hard work and dedication in executing our 3-year strategic plan was impressive and has showed up in our exceptional financial results. In June of 2023, we laid out a plan that had 3 pillars. Accelerate the food business, grow the number of units and enhance operational efficiency. We've now completed that plan, and I'm extremely proud of the growth of the organization, as well as meeting and exceeding our financial goals.

Over the course of the plan, we had a thin crust pizza, [ simple pizza ] LTOs, including 3 regional offerings and an expanded specialty pizza menu. In addition to Pizza, we revamped our Hot [indiscernible] lineup create a new fryer platform with [indiscernible] Fries and launched 2 new beverage platforms with [indiscernible] coffee and our frozen carbonated product, [ Frostbite ].

For this summer, we recently brought back a [indiscernible] favorite, Bacon Cheeseburger Pizza and made it even better by pairing it with Casey's fries, and our [ soft wings ] were sold at nearly 850 stores by the end of the fourth quarter. Despite lapping our largest store growth year in company history of fiscal 2025, we opened 80 stores with [ free ] acquisitions and 40 new builds in fiscal 2026. We were able to do this while converting 50 [ Setco ] stores to Casey's, bringing our synergies to those sites. This brought our 3-year total to over 500 new units, which well exceeded our original 350 unit goal.

While adding and remodeling a substantial number of stores, we continued our commitment to operating the business more efficiently. Through continuous improvement, we have done a great job of identifying opportunity areas to make the stores more efficient, while improving overall guest satisfaction with strong team member engagement. For the course of the past 3 years, we reduced same-store labor hours by approximately 5%, while also improving turnover by more than 70 percentage points.

As we closed out our 3-year strategic plan, I want to reiterate how proud I am of the work we've accomplished and grateful for the amazing team we have in place. On behalf of the Casey's team, we're all excited to share with you our plan for the next 3 years on June 24 in New York [indiscernible]. We love the hand we're holding. We look forward to continuing the momentum.

With that, we will now take questions.

[Operator Instructions] Our first question comes from the line of Bobby Griffin with Raymond James.

Congrats on capping off an impressive 3-year plan, Darren and team. My first question, Darren, is on the fuel side of the business and more of a high-level question. Just -- has -- in your view, as the historical relationship we're used to between higher [indiscernible] prices and higher oil prices and fuel margin compression just broken down more over the last, call it, a few years. And I guess I'm just asking this in the context that in the quarter, [ RBOB ] went up over $1.50, and you guys still reported the highest record CPG margin in Casey's history. And even when you look back versus the time of Russian Ukraine, it still was materially better of outsized gains.

So just any thoughts there on -- have the dynamics in the industry and the cost pressure has just changed a relationship that maybe [indiscernible] on Wall Street were kind of used to being a little bit more firm with higher oil versus compression CPG?

Yes, Bob, it's a good question. I don't know that it's fundamentally changed for the industry. I do think it did play out a little bit differently this quarter than maybe we've experienced historically. And what I mean by that is there's a lot of volatility in that path from where we started, when the conflict started up to today. And so it wasn't a smooth increase going up like we've experienced before. There's a lot of choppiness. And I think, generally speaking, as a retailer, we don't like to change those prices as frequently as maybe the dynamics on the ground or the wholesale cost is changing.

And so when you hold those prices somewhat flat and then it drops for a little bit, you make some -- your margins widens out for a moment in time and then it spikes back up and it gets compressed. So I think it was just a little bit more volatile on the way up relative to the experience we've had in the past, and that enabled us to capture a bit more margin than we might have otherwise done.

Our next question comes from the line of Krisztina Katai with Deutsche Bank.

Congrats on a really strong finish to the year. I wanted to ask you guys on the inside margin progression, right? When we look at prepared food margin, it was, I think, the best margin in 5 years that you have seen. Also on the grocery side, we continue to see really strong performance. So I wanted to get your views on how do you view the durability of that? Like how much of what you were seeing in the fourth quarter is repeatable? And I know on the prepared food side, you said reduced waste was the biggest driver. So can you just speak to how much opportunity there still from an extension perspective?

And then just on the grocery side, like how are you guys viewing volume versus price, if you could touch on those dynamics?

Yes. Christina, this is Steve. I'll maybe take a shot at that. I think broadly on margins there are clearly some structural tailwinds that are helping us, but we would expect to continue, certainly, on the grocery side of the business. If I start there, right, we mentioned now for more than several quarters, the mix shift that is benefiting us in the grocery categories. Nicotine is probably the single biggest contributor to that. So as combustible cigarettes generally continued to decline as a portion of that mix replaced by nicotine alternatives that is a very accretive margin switch for us and for, frankly, any retailer our position of having leaned in early and disproportionately with some of the changes we made in our back bar.

Planograms and creating more space for nicotine alternatives and shrinking space for cigarettes for the first time really ever, has given us, I think, a structural advantage in the marketing of those products. And so I do think that is going to continue to accrete for us generally to a lesser extent, but still real. the shifts within the nonalcoholic beverage category. So energy drinks have been the star performer for us for a while. And that part of the store, and those are a higher-margin category than other things in that non-alcoholic category. And so as they continue to outperform, that will also naturally accrete up.

Finally, within the [ center store ] in grocery, our investment in our liquor assortment and the footprint and the [indiscernible] advantage we have with, I think, over 1,500 liquor licenses, allow us to have a much broader assortment in that category. And within the alcohol category at large liquor is going to be margin accretive for us certainly relative to beer. So we feel good about structural tailwind on the grocery side of the business.

And the prepared food side of the business is more commodity oriented, right? So we're a little bit more subject to what's happening in the market. And so certainly, the fall and cheese costs was a modest benefit for us this year, that can give and take away equally, the waste progress we've made has very much been self-help. I think we feel we have more opportunity there. But prepared food is going to be more sensitive to commodity cycles. And certainly, as we continue to lean into new products in there and mix that category a little differently as wings grow and pizza velocity accelerates, certainly pizza velocity will be accretive to that category also.

Our next question comes from the line of Edward Kelly with Wells Fargo.

Congrats to the great quarter. I wanted to ask you about momentum in the business and the cadence, and what from the consumer. Obviously, gallons and inside sales were strong despite higher gas prices. But can you talk about the cadence there? What you saw as you got into April? Maybe more color around May. I'm just kind of curious if consumer behavior has really started to change at all related to this?

And then more specifically, you gave a little bit of color around May. I'm just kind of curious if you could maybe expand upon how you were thinking about the guidance the year in terms of the inside sales guide and the range, which I know is more typical to you. But I'm just curious as to sort of what the puts and takes were around that range?

Yes. And I'll go ahead and talk a little bit about consumer. I'll let Steve talk about guidance. With respect to the consumer, I would say, overall, I think consumers are hanging in there. They're -- they're probably being a little more discerning about where they shop and how they spend their money. But we're seeing growth across all of the income cohorts. And the way we look at that is below $50,000 a year in income is low income. $50,000 to $100,000 a year is mid, and above $100,000 is higher income. And I'd say that all 3, we're seeing growth a little bit less so in the lower income. The other two cohorts, which is 3/4 of our guest base are spending comparably to what they've been spending on.

In terms of specific behaviors, really, we're not seeing a lot of change on the inside store. We are seeing some change in fuel, but it's very minor. And it's all the things that we always talk about. If fuel prices get high, we start to see premium sales dip a little bit. We see sales of ethanol blended fuel go up because it's a little cheaper. We see gallons per transaction drop a little bit. We see fuel transactions themselves go up because people are coming more frequently. So all of those dynamics are happening right now, but in low single-digit percentages. So this is kind of very nuanced behaviors.

The one thing that is a little bit new that we've seen is the gallons redeemed through our Casey's Rewards program were up 23% in the quarter. So people are clearly seeing value in our rewards program in leveraging those points to take some sense off a gallon for fuel. And that's making that fuel value proposition even stronger for Casey's and our guests.

So Steve, I'll let you talk about the guidance.

I think that when we put the guidance out there, we're trying to provide a range at least as it relates to the inside and outside volumes where we feel we have really good prospects to land in the middle of that range for the course of the year. And so within May specifically, what we saw in May makes us feel very good about our ability to land in the middle of that annual range. So I think it's very consistent.

And CPG, we provide the modeling guide to CPG, just sanity check everybody on what it takes to get within that range. And clearly, the margins broadly in the industry are strong at the moment. And so we feel good about our ability to achieve kind of that modeled number that's required to give the EBITDA range.

The one thing I would point out, if you just think of sequencing, right, the strength of the fourth quarter CPG number is great right now. It's obviously difficult comp when we get to the fourth quarter of FY '27. And so we are taking that into account as we kind of think of sequencing. So we're -- strong CPGs as we sit here today. Not necessarily assuming we will have equally strong year-over-year CPGs in the fourth quarter just because of the way the conflict has impacted things.

Our next question comes from the line of Jacob Aiken-Phillips with Melius Research.

Congrats on the strong quarter, and the strong results overall. I wanted to ask about wings. As you've rolled it out more broadly, are you seeing that same incrementality across those markets as you did in the early test stores? And does it vary in any way by geography, store format, daypart, et cetera?

Yes, Jacob, broadly speaking, the wings have performed very well for us so far. Again, it's very early stages. We were rolling out a lot of stores in the fourth quarter. So hard to pin down a lot of results to the overall P&L just from that one area.

From a geographic standpoint, these are all being supplied out of our [ Ankeny ] distribution center. So within that geographic range is where the -- where all the wing stores are. So it's pretty comparable geographies. So not -- there's always a little bit of nuance between DMAs, but for the most part, fairly consistent.

What we're really happy about was the goal was to try to create an incremental occasion per week, so to speak. And where you could get pizza and wings if you wanted to, but you could also -- the wings were good enough that they could stand alone as a separate order. And -- and we are seeing some of that. We're definitely seeing nice attachment with pizza, but we're also seeing guests [indiscernible] on their own. And what happens is when a guest orders wings on their own, they increased their prepared food order frequency by 30%. So that's a really good [ fact ] pattern for us. We really like to see that trend, and we'll continue to try to reinforce that to grow that. But we're seeing the incrementality there.

Our pizza volume, whole pizza volume where we're selling wings is still up high single digits. So is certainly not cannibalized at all, and it is adding a different occasion for our guests.

Our next question comes from the line of Pooran Sharma with Stephens Inc.

Congrats on posting extremely robust results here. I just wanted to maybe understand how you guys were thinking about approaching that $5 level in retail gas prices? I think, on the last call, you mentioned that there were some specific actions that you may take if you get to that level. It seems like we're kicking closer to that level than we were on the last call. So maybe just wanted to get a broader update on just how you're feeling there?

And then if you could also provide an update on how -- on hedging your cheese cost?

Yes. [indiscernible] with respect to the retail price of fuel, we have historically started to see a little bit of demand destruction as you get closer to that $5 a gallon range. We're sitting around the $420-ish average retail price right now. So we still have a ways to go.

And when we look back to the beginning of the Ukraine Russia war, we're -- if you take on an inflation-adjusted basis, we're about $1 per gallon lower today as we sit here today than we were at the peak during that conflict. So I think we still have quite a ways to go before we start to get to where we might see some demand destruction. And again, when you start to see that, you see some of those consumer behaviors.

I'm not sure that there's much that we would do on our side to change the play we're running. We tend to price at the lower end of the competitive set as it is. And so we would certainly strive to maintain that posture in the marketplace. And we think, ultimately, in a higher price environment that accrues to our benefit as we get more people coming to our stores versus somewhere else. But that's about all we would plan to do on the fuel side.

Our next question comes from the line of Chuck Grom with Gordon Haskett.

On store growth, can you speak to the decision to accelerate growth? And I guess, how this speaks to the acquisition opportunities that are out there and your opportunities to continue to consolidate stores?

Yes, Chuck, I'll talk about the store growth for this year, and I'll let Steve talk about M&A opportunities.

This -- I guess I would wouldn't necessarily characterize our target for this year is so much an acceleration over a course of time as it is an acceleration just versus prior year. And typically, our growth algorithm will call for about 4% new units every year. That's what 120 new units gets us is right around that 4% range. It is an acceleration from last year. But last year, remember, we had just acquired the CEFCO chain, and so we are integrating that business. [ And so ] we pulled back a little bit on new store growth. to give our team a chance to absorb the CEFCO acquisition and start working on the remodel.

So it's really more a timing and sequencing thing. So I would say the guidance for store growth for this year is much more getting back on track from a historic standpoint and really more consistent with our growth algorithm.

And as it relates to just forward visibility around, kind of, the M&A environment, I think we feel very bullish on it. I know we feel [indiscernible] very bullish on it. As you know, there is a very long tail of small players in the industry, the majority of stores in the industry are owned by small players, and a lot of those are under significant operational pressure beyond just kind of noncourse generational change. And so I think the outreach that Brian leads for us here, I think we've -- we're on tagging and having more conversations than we ever had.

I think there's a lot of receptivity to what Casey's can bring to an owner of a business as a steward of that business going forward. And I think we feel highly confident in, broadly speaking, what's happening in the industry from a consolidation standpoint prospectively and certainly, our ability to play a role in continuing to pursue those opportunities in a way that makes sense for us and our shareholders.

Our next question comes from the line of of Bonnie Herzog with Goldman Sachs.

I just had, I guess, a question on your EBITDA guidance this year. Your 8% to 10% growth expectation is quite impressive. So hoping to hear what gives you the confidence to be able to generate this growth, especially considering the tough comps from last year?

And then what are the key drivers of this growth between fuel and inside performance? And I guess, what might drive upside to guidance as well, as what could possibly cause you to fall short of guidance?

Bonnie, I'll take a crack at that. I appreciate you acknowledging that. We know that, listen, it's a big number on an absolute basis. We are very sensitive to that reality and the strong finish to the fourth quarter makes the absolute number a little bit bigger. But fundamentally, right, our mousetrap we are highly confident that mousetrap continues to work, and we believe it is strategically differentiated. And so our algorithm for this business generally is that half of our EBITDA growth is going to come from what we would call the mothership and half is going to come from new units.

The prior question, we addressed our confidence in new unit contribution, both building and buying them. So we feel very good about the 120 units, and about a flow-through of the new units we've added in fiscal '26. And then from a mothership perspective, right, the strength that we addressed earlier, just the inside store performance that the margin tailwinds that we have broadly in the store. And the differentiated offer that we have both in grocery and prepared food, the velocity we've had in the units and just with the platform expansion in the wings, specifically on prepared food and a lot of the momentum on pizza.

We need -- if we need 4% EBITDA growth from the mothership, I think between the grocery business and the margin accretion, the assortment that we have and just the platform expansion and the velocity on the prepared food business, we feel really good that there's a path that is largely within our control. So to land us to that 8%, 10%.

Our next question comes from the line of Corey Tarlowe with Jefferies.

The inside sales have been particularly strong, but I wanted to just double-click on a question that was asked earlier around chicken wings. Could you just provide a little bit more context around, how big do you think this can be in terms of percentage of preferred food sales, or [indiscernible] per box or comp lift or maybe margin? Just to give us some flavor for, no pun intended, for how -- how to think about the ultimate potential of this initiative?

And then, Steve, just a follow-up on the OpEx guide. I think you said for Q1 is up high singles. And that includes credit card fees and seeming that, that doesn't go away, but then the full year guide, I think, is [ 5% to 7% ]. So could you just describe that dynamic as well?

Yes, Corey, I'll talk about the sales and wings. Still very early stages to determine the whole potential for wings, and we really haven't given any numbers. But ultimately, as we think about long term, and I want to emphasize this, this is a long-term comment. So don't go baking it into any models, Corey.

But we think this has the potential to be the size of the pizza business, frankly. Now that -- it took us 40 years to get to where we are today in Pizza. So -- so it's going to take us some time to continue to build that credibility. But everything we're seeing right now would suggest that this can be an incremental occasion, that it's good enough to stand on its own. And what I'd tell you is, even in our Des Moines DMA where we've had it for over a year, we're comping at a 20% growth rate year-over-year from the launch. So we think there's still a lot of upside there.

We still have 2 more years of just rolling it out across the system where we get fully scaled. And once we're fully scaled and -- we'll probably be able to do a little more from a marketing perspective to continue to drive the business. So not really prepared to give a number today, but suffice to say we have a lot of confidence in the team and the plan and the upside potential for that part of the business.

Our next question comes from the line of Irene Natell with RBC Capital Markets.

Let me just add my congratulations to the [indiscernible]. A couple of questions. First of all, I think you mentioned that you're going to complete the conversion of the CEFCO stores this year. So, I guess, first question is how should we kind of be thinking about the cadence of lift in, I guess, inside store sales as and once that's completed?

And then just a follow-up question on something you just said about wings over the long term. Should we be thinking about wings as kind of having multidimensional offerings over time in the same way that pizza got for example? So again, like how that could scale up over time?

Yes, Irene. With respect to the CEFCO remodels, yes, we said that we would be largely complete by the end of this fiscal year, and we are still on track to do that. The team is doing a fantastic job getting those remodels underway. What I'd tell you is it's a little bit choppy in terms of trying to model the impact for those. What I can tell you is post remodel, what we've experienced so far in the 50-ish stores that are remodeled, is that they've exceeded our expectations.

Now having said that, as we go into this next phase of remodel, these remodels are a little more [ complicated ], a little more involved where we have to actually build kitchens in the stores. So the stores are coming off-line or -- or are under remodel for, call it, 4 to 6 weeks. And so they'll take a dip in performance while that construction is going on, then they come out the other end and they accelerate. So -- and we'll have close to 130 of those stores throughout the fiscal year in varying stages of that. So a little bit tough to say what the overall impact is.

Kind of the way I think about it is, it's kind of neutral for this year. We don't see a lot of upside. I don't see really any downside. But it's a process to get through. Going into next fiscal year would be when we're largely clean, the remodels will be done, and then we should be able to experience some of that upside. So I think we still have a lot of dry powder left with the CEFCO conversions for next fiscal year.

[Operator Instructions] Our next question comes from the line of Mark Carden with UBS.

So you guys called out the strength in whole pies. Do you think you're seeing much incremental food away-from-home trade-in coming as a result of fuel price increases? And just how are you thinking about price gaps in pizza today relative to the major national chains?

Yes, Mark, a couple of things on that. We are we are experiencing some great growth on [ whole pie ]. I think it is a combination of the great work our team has done on the innovation front in terms of getting really interesting and unique pizza builds out in the marketplace in conjunction with pulsing in some promotional opportunities to create value for our guests.

But by and large, we are priced anywhere from $1 to $3 below the national brand competitors on whole pizzas, and that's -- that tends towards the $3 range, not so much the $1 range overall. If you look in this past year, the top 4 pizza chains that we track, they've taken about 2.5% price this year, this past year, we haven't taken any. And we haven't taken any for a couple of years while they have continued to do that. So I think that value proposition is just that much stronger for us right now.

With respect to high gas prices, I do think it's interesting because there's been a narrative that pizza velocity in the industry is under pressure because of high gas prices. But we have fuel pumps in front of all of our stores with a big price [ line ], it flashes what the gas price is and our pizza business is up 10% year-over-year. So I'm not sure that gas -- there's a strong correlation between cat prices and pizza performance. But suffice it to say, we feel good about our value proposition, and it seems to be resonating with our guests.

Our next question comes from the line of Chuck Cerankosky with Northcoast Research.

Great quarter. Congratulations. A question about your closed store base of [ 41% ]. How many of those are fits that are in the process of being remodeled? How many will be sold and what kind of cash might that generate and the other, and how many of those are just going to reopen out of the 41 that aren't in [ flight ].

Yes, Chuck. I'll take that. So the [indiscernible] those are not stores that are going to reopen, right? We would consider those permanently divested. Some of those are Fike. The best example I give you is the state of Mississippi. So we acquired 10 or so stores, I think, as part of that total transaction in the state of Mississippi and upon further review, decided that just wasn't the right place for us to fly the flag at the moment given that location and the capital returns that we expected. So we did ultimately sell those stores.

And so you can see total monetization on the cash flow statement. We got about $42 million last year from largely the sale of those 41 stores. There were some other things in there, but it gives you a sense of what the monetization of those were. And there were some other CEFCO stores beyond the Mississippi ones, but there were also stores from prior acquisitions. And then sometimes, we will close two old stores when we build a brand-new store. So it's a variety of things. But CEFCO certainly is contributing there, and Mississippi is probably the highest [indiscernible] decision that we made against [indiscernible].

Our next question comes from the line of Tom Palmer with JPMorgan.

I wanted to ask, and I know Corey touched on this, but on the OpEx growth, running a bit higher to close out the year. It sounds like the start of the year than the 5% to 7% growth outlook. When do we start to see OpEx growth taper off?

And when we think about the drivers, are there new expense initiatives we should be thinking about versus maybe more mechanical items such as lapping nonrecurring costs like the elevated incentive comp?

Yes. Thomas, Steve, I'll take that. So the 5% to 7% for the year, I don't think there's a lot of special new initiatives per se that would be included in that number. We tend to run in the stores, or the majority of our operating expense. I think stores are about 75% of our total OpEx. And so you're looking at a 4% kind of wage rate increase across the store base, partially offset by some hours. But by and large, you've got 4% in most of your base there. We will certainly have new units coming in as well, which would increase that.

I think the sequencing in the first quarter versus the fourth quarter is probably the most impactful from a modeling standpoint. And so yes, high credit card fee, higher credit card fees year-over-year first quarter of this year, for sure, because of higher retail. And if you think of what contributed to the higher OpEx print in the fourth quarter of '26, a lot of that was discretionary or performance-based. So 4% of the increase we had in the fourth quarter of '26 was discretionary charitable contributions and higher performance compensation.

And so the planning assumption is right, we go back to the normal course and incentive comp normalizes, we've kind of prefunded a lot of our charitable giving for the next couple of years. And so by the time you get to the fourth quarter, you actually on a year-over-year basis would have a much lower OpEx increase. And so when you sequence it that way, you can kind of add it back in that 5% to 7% range.

Our next question comes from the line of Mike Montani with Evercore ISI.

Just wanted to ask about two things. One was just a clarification, if I could, in terms of traffic and ticket, and how the comp cadence played out throughout the quarter. And then the follow-up was around EBITDA synergy realization from CEFCO. Are you guys closer to $20 million or $10 million this year? And do you still think $40 million plus is attainable kind of over the next 2 years?

Yes, Mike, with respect to traffic [ in ticket ], we're -- I was really happy with how we performed in the fourth quarter from that perspective. Our [indiscernible] was up about 3%. Our ticket was up about 2.5%, and that's basically what gets you to the 5.5% same-store comps. So I feel really good about the balance that we're striking. We're keeping pricing action at a minimum and largely, that's taking place in the nicotine category. Overall, there's a couple of other areas, candy in particular, that have some price actions, virtually none in Prepared Foods. And we're winning on traffic, which is, I think, more sustainable way to grow the business and our team has done a fantastic job driving traffic to the stores and then building that basket once they get there.

Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets.

Great quarter here. I wanted to ask about store growth and different geographies and how you think about the competitive landscape is really the question I wanted to ask, you're moving more into Texas and in Florida. These are not big markets for you today, but obviously, you have tremendous potential going forward. Wondering if you could just touch on any nuances you're seeing from a competitive standpoint in these or any other markets?

Yes, sure, Brad. Certainly, we're getting into some newer geographies for us as you mentioned, Texas and Florida in particular. And even as we've expanded our footprint further east into Ohio, Michigan, Kentucky, Tennessee, we start to run into some different competitors. But overall, we faced some pretty strong [ bettors ] in the geographies we do operate in, in a more concentrated basis, and we perform very well there. So we're very confident that in spite of perhaps a different competitive set than we're accustomed to. We performed very well against really the best in the business. And they do well, what they do well, and we do [indiscernible] we do good at. And so I think our model is a little bit differentiated versus a lot of theirs, and so we compete pretty favorably.

Texas in particular has been a good market for us as we've gotten in there. Florida is a little different with us being in the [ panhandle ], I would probably envision us from a store development standpoint, probably moving more north and west towards the core footprint of our geography as opposed to South and East towards the heart of Florida from that perspective. But that's how we're looking at it today. We feel very confident in our ability to compete in whatever geography we're operating in.

Our next question comes from the line of Kelly Bania with BMO Capital Markets.

Congrats on a strong quarter. Steve, I wanted to just go back to fuel margins a little bit. You talked about it a little bit with respect to your comments on the sequencing there. But I think what sticks out is just clearly how strong the year ended from a fuel margin standpoint, and you're still guiding to your algorithm for fiscal '27. And I think you called out a [ mid-40s ] CPG, which I guess, would call for continued expansion from the [ 42.6% ].

And so I'm just curious what drives that further increase in CPG for next year, is that just given how strong they've already started out? Is there something more structural with what Casey's is doing internally? And do you think that mid-40s is sustainable in future years? Or could we come off of this kind of elevated environment at some point?

Kelly, I'll try to address it. So there's -- I think there's a lot of things in the ball, right? So technically, we're not guiding the mid-40s. We just are telling you at mid-40s is what makes the math work.

Now having said that, for sure, we're starting off the year strong, right? The exit from the fourth quarter flatters our ability to achieve that number for the course of the year. We know that. We're sensitive to having to lap a really strong number in the fourth quarter in this fiscal year. We don't know what the conflict is going to [indiscernible] or how that's going to play out. So we're [ sensitive ] to do that. But structurally, [indiscernible] things on the structural side.

When we do the correlations historically, COVID notwithstanding, CPGs have tended to increase pretty consistently with CPI. And so we do generally feel pretty good about that reality. And so for sure, we don't see that necessarily breaking. And secondly, the cost of doing business in the industry for the small players has only gone up, and the pressure that they feel across other aspects of the business has also only become more acute. And so for most of the industry, right, the 2/3 that are in chains of 10 stores or less, they just have a checkbook. They don't have a prepared food business and a grocery business than a fuel business. They have a checkbook for the store. They have to pay people the same amount that we have to pay people. They don't have the procurement benefits that we have. They're over-indexed on tobacco relative to us.

They don't have any ability to scale or have any kind of a digital platform. The only thing they can do in the short term to help their situation to stay above water is to turn a lever on fuel margin. And so it's very difficult based on the [indiscernible] information for the industry for us to continence resetting for the industry at a much lower level of CPGs than kind of we see right now, again, onfall notwithstanding.

So you put all of that in the full. The structural stuff, the entrance strength that we have because of the conflict, we feel like that modeling guide that we have is imminently achievable also based on what we know right now.

Thank you. I would now like to hand the conference back over to Darren Rebelez for his remarks.

All right. Thank you for taking the time to join us on the call today. We look forward to sharing our next 3-year strategic plan in a couple of weeks. Have a great rest of your day. Thank you.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q3 FY 2026 Casey's General Stores Earnings Conference Call. [Operator Instructions] Please be advised, today's conference is being recorded.

I would now like to turn the conference over to your speaker today, 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 third quarter ended January 31, 2026. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, 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 the potential impact of the Fikes transaction, 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 and performance at our stores. 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 acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and 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 disclaims 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-GAAP to GAAP financial measures referenced in this call, as well as a detailed breakdown of the operating expense increase for the third quarter, can be found on our website at www.caseys.com under the Investor Relations link.

With that said, I would now like to turn the call over to Darren to discuss our third quarter results. Darren?

Thanks, Brian, and good morning, everyone. Before we go into further detail on our outstanding third quarter performance, I'd like to praise the entire Casey's team for their hard work serving our guests. The team's high level of execution across the board is reflected in the numbers I'll share with you shortly.

But before I do that, I want to highlight the positive impact Casey's is making throughout our geography. Supporting the community is core to who Casey's is. And right now, we're activating our Feeding America campaign in partnership with DoorDash. The campaign will benefit over 60 local food banks in our footprint. Thank you to our guests and team members who are engaging in this campaign to combat hunger and food insecurity.

Now let's discuss the results from the quarter. Diluted earnings per share finished at $3.49 per share, up 50% from the prior year. Net income was $130 million, an increase of 49% from the prior year. The company generated $309 million in EBITDA, 27.5% higher than the prior year. Inside the store, prepared food and dispensed beverages remained strong, supported by a compelling value proposition and continued innovation, such as the 2 new specialty pizzas, Twisted Pepperoni and Ultimate Meat. Margin expansion was driven primarily by grocery and general merchandise.

As a result of our joint business planning process, our guests have early access to Monster's Ultra Red, White and Blue Razz flavor, celebrating 250 years of American independence. This product will be sold almost exclusively at Casey's locations up until Memorial Day weekend. In the fourth quarter, our team executed well as same-store gallons grew for the fifth consecutive quarter while fuel margin exceeded $0.40 per gallon.

I'd now like to go over our results and share some of the details in each of the categories. Inside same-store sales were up 4% for the third quarter or 7.9% on a 2-year stack basis with an average margin of 42.2%. Same-store prepared food and dispensed beverage led the way, as sales were up 4.3% or 9.2% on a 2-year stack basis with an average margin of 58.3%. Continuing the momentum from the prior quarter, whole pies and hot sandwiches in all dayparts performed well during the third quarter.

Same-store grocery and general merchandise sales were up 4% or 7.4% on a 2-year stack basis, with an average margin of 35.7%. Energy drinks and nicotine alternatives continue to outperform the category with double-digit growth. On the fuel side, same-store gallons sold were up 0.4% with a fuel margin of $0.41 per gallon. The Mid-Continent region saw an approximate 4% decline this quarter according to Opus fuel gallons sold data, indicating that we continue to take market share.

In the third quarter, same-store operating expense, excluding credit card fees, increased 4.6%. Same-store labor hours were down slightly as the organization continues to prioritize efficiency while being mindful of guest satisfaction where scores for the fiscal year are at an all-time high.

I would like to now turn the call over to Steve to discuss the financial results from the third quarter. Steve?

Thank you, Darren, and good morning. Before I begin, I also want to share my appreciation for the hard work and the great results from our team members. Total revenue for the quarter was $3.91 billion. That's an increase of $12 million or 0.3% from the prior year, primarily due to higher inside sales as well as higher fuel gallons sold that was nearly offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 1% more stores on a year-over-year basis.

Total inside sales for the quarter were $1.48 billion, an increase of $80 million or 5.7% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $26 million to $423 million, an increase of 6.5%. And grocery and general merchandise sales increased by $54 million to $1.06 billion, an increase of 5.4%. Retail fuel sales were down $57 million in the quarter as a 2.3% increase in fuel gallons sold was offset by a 4.6% decline in the average retail price. The average retail price during the period was $2.72 a gallon, and that compares to $2.85 a year ago.

We define gross profit as revenue less cost of goods sold, excluding depreciation and amortization. Casey's had gross profit of $1.01 billion in the quarter, an increase of $94 million or 10.3% from the prior year. This is driven by both higher inside gross profit of $51 million or 8.9%, as well as higher fuel gross profit of $46.2 million or 15.3%. Inside gross profit margin was 42.2%, that is up 130 basis points from a year ago.

Prepared food and dispensed beverage margin was 58.3%, and that's up 50 basis points from prior year. Cheese was $2.05 per pound for the quarter compared to $2.12 per pound last year, that's a decrease of 3% or approximately a 20 basis point benefit to margin. Margin also benefited from improved waste, which was partially offset by promotional activity. The grocery and general merchandise margin was 35.7%. That's an increase of 150 basis points from the prior year. The change was impacted by strong cost of goods management, as well as a favorable mix shift within the category. Fuel margin for the quarter was $0.41 per gallon. That's up $0.46 per gallon from prior year.

Total operating expenses were up 4.1% or $27.4 million in the quarter. The total operating expense comparison benefited from $13 million in onetime deal and integration costs that we incurred in the prior year related to the closing of the acquisition of Fikes, which amounted to a roughly 2% year-over-year benefit. Approximately 1% of the total operating expense increase is due to unit growth, as we operated 31 more stores than the prior year. Same-store employee expense accounted for approximately 1.5% of the increase due to increases in labor rates, which were partially offset by reduced same-store labor hours. Snow removal due to unfavorable weather in the geography during the quarter contributed to approximately 1% of the increase. And finally, higher variable incentive compensation and charitable contributions contributed to approximately 1.5% of the increase.

Net interest expense was $23.4 million in the quarter. That's down $6 million versus the prior year. That's primarily due to paying off debt associated with the Fikes transaction. Depreciation in the quarter was $114.1 million. That's up $8.9 million versus the prior year, primarily due to operating more stores.

The effective tax rate for the quarter was 24.1%. That compares to the prior year of 19.2%. The increase this year was driven by a onetime benefit in the prior year from revaluing state deferred tax liabilities following the closing of the Fikes transaction. Our financial flexibility remains excellent. On January 31, we had a total available liquidity of $1.4 billion. In our credit facility debt-to-EBITDA ratio ended the quarter at 1.6x. For the quarter, net cash generated by operating activities of $260 million, less purchases of PP&E of $184 million, resulted in the company generating $76 million of free cash flow, and that compares to generating $91 million in the prior year. At the March meeting, the Board of Directors voted to maintain the quarterly dividend at $0.57 per share. Also during the third quarter, we repurchased approximately $76 million in shares.

We are updating our previously communicated fiscal 2026 guidance as follows: Fiscal '26 EBITDA is now expected to increase 18% to 20%. The company now expects inside same-store sales to increase between 3.5% to 4.5% and an inside margin of between 41.5% to 42.5%. Total operating expenses are expected to increase approximately 10%. And the tax rate is now expected to be between 23.5% and 24.5% for the fiscal year. The remainder of our annual guidance remains unchanged.

Now our results for the month of February were as follows. Same-store volumes, both inside and outside the store, were strong, and they are reflected in the updated annual guidance. Fuel CPG was in the low $0.40 per gallon. Current cheese costs are slightly favorable versus the prior year. And we expect fourth quarter operating expense to be up mid-single digits. That's partially attributable to higher expected variable incentive compensation.

I would now like to turn the call over to Darren.

Thanks, Steve. About a year ago, we began a test for chicken wings in our Des Moines market at 225 stores. I'm happy to announce that we've expanded to over 550 stores as of the end of the third quarter. Our culinary team has done a great job getting the flavor profile right with 5 sauces and 3 dry rubs that have resonated with our guests. Our goal with the wings has been to complement pizza and create an incremental occasion within our prepared foods business. While we do not have financial metrics to share on the wings yet, the platform has been largely incremental, as our [ PC ] units in the stores where we sold wings were up high single-digit percentages in the quarter.

Within Casey's Rewards, we crossed a major milestone as we now have over 10 million members. This is a testament to the whole team, from marketing to store operations and everyone in between, providing real value for our guests to earn and use points throughout the store and at the pump. As we continue to grow, we're excited for more guests to join the Casey's Rewards platform.

On the fuel side, our fuel team continues to grow our capabilities. They prioritize business and business relationships, growing our self-supply capabilities and remaining focused on increasing our capacity to haul fuel in Casey's trucks. This, coupled with our strong inside offering, gives us a strategic advantage in the fourth quarter.

And lastly, as we are now in the final quarter of our 3-year strategic plan, I'd like to announce that we have set a date, June 24, for our next Investor Day. We'll hold the event in New York City and plan to release our next 3-year strategic plan at that event. And I'll let you in on a little secret: We plan to serve our famous pizza at the event. We will now take your questions.

[Operator Instructions] Our first question comes from Corey Tarlowe with Jefferies.

Great. Darren, I was wondering if you could comment on the impact of volatility on your business? And any comments on the recent events and some of the impacts that, that might have had on either fuel sales or profitability?

Yes. Sure, Corey. As you well know, volatility is

[Audio Gap]

par for the course in this business. And so these events like what's happening with Iran right now happen from time to time. The most recent history we have on that was a few years ago when the Russia-Ukraine war began. And typically, what happens in a situation like this is the cost runs up on gasoline, and it's driven by crude oil primarily and then flows through the system. Wholesale prices move up. Retail prices move up, but tend to move a little bit more slowly. And so margins get a little bit compressed on the front side of that curve. When there's an ultimate inflection point and costs start to come down, retail prices will come down as well that also tend to come down more slowly and the margin expands. So over the course of the cycle, it historically has ended up being a net positive from a fuel margin standpoint. But it is a little bit of tightening on the front end, a little bit of expansion on the back end.

When we look at the history from the most recent event with the Ukraine war, that's exactly what played out. Margins did get a little bit compressed, but not bad. I mean, the quarter -- our quarter in '22, where we had the first initial shock from the Ukraine war, we printed a $0.36 fuel margin that quarter, then the subsequent 3 quarters were all over $0.40 a gallon. So again, there'll be a little bit of tightening, but this is not a huge deal from a margin perspective.

And then on the volume side of things, with absolute retail prices, we really don't start to see any level of demand destruction until we're approaching $5 a gallon in retail. And we -- as we sit here today, we're right around $3 a gallon in our footprint. So we have quite a ways to go before we would be concerned from a volume standpoint.

That's very helpful. Steve, I just wanted to follow up, as you think about the inside same-store sales of 3.5% to 4.5%. Some of your largest vendors have called out that they're investing in price. How do you think about pricing impacts within the full year guide? And what do you expect to have from a pricing perspective? Because I do believe you also mentioned increased promotions.

Yes, Corey, thank you. We don't -- we don't lean heavily into price as a general manner as a constituent part of our inside sales bridge. As you know, we had a little under 3% pricing, reflecting

[Audio Gap]

in our current quarter, and that's primarily on the nicotine category where we tend to just pass through the manufacturer, price increases that we have. I mean, our -- the strength of our inside offer is very much especially in prepared food, predicated on the value proposition that we've worked very hard to maintain.

We took almost no price. I think actually with the way commodities worked in the quarter, we had negative pricing net within the prepared food category. And so as our QSR competitive set broadly has continued to take price in the last couple of years, that's really helped the velocity of units in that prepared food category, and we will continue to run that play. We like to be a value proposition on that side. And so I would not expect us to lean into price heavily going forward in prepared food. We always have that as an insurance policy if we would need to, but we simply have not needed to do that.

On the grocery side, we do use pricing to preserve margin. That's a contractual business for us annually. And so we will continue to take price in that category, commensurate with the inflation we take from our partners. And the pricing we do receive, to your point on promotion in the grocery category, especially is often largely or completely offset by promotional support from our vendor partners.

Our next question comes from Mark Carden with UBS.

So to start, particularly solid performance in grocery and gen merch. Can you provide a little more color on what drove the strength in nonalcoholic beverages? Would assume the Monster's more of a benefit next quarter, but if you saw a tailwind there, definitely let us know. And then do you think there was a stocking up that sit ahead of the severe winter weather that helped the segment?

Yes, Mark, this is Darren. On the non-alc beverages, it was driven primarily by energy overall. Energy was up about 14% in the quarter. There's also -- we had strong growth in our flavor enhanced waters. And so both of those 2 categories really contributed to the non-alc beverage performance.

In terms of stocking up, I don't think we saw any real change in behavior from that perspective during the quarter. And so -- and I'm not sure what the impetus would have been during the third quarter to for that to happen. So no, we didn't see any of that behavior in the quarter.

Our next question comes from Chuck Grom with Gordon Haskett.

You noted that quarter-to-date sales are strong, yet your implied fourth quarter guide has a pretty big decel on the stack. So I was just wondering if you could reconcile that and maybe just double click on the overall health of your customer based across income cohorts? Any changes we've seen recently?

Yes. Maybe, Chuck, I'll talk about the health of the customer. I'll let Steve talk about the guidance in that bridge. From a consumer standpoint, health of the customer, we're still seeing customers shop at our stores across all income cohorts. For sure, the operating income cohorts are stronger, but we're growing business across the low-income cohorts as well. And what we're seeing in terms of behavior difference, I'd say, the middle and upper income cohorts are performing about the same. They're still shopping at our stores. They're shopping across all categories, very little change in their behavior.

The lower income cohorts are still growing with us. I think that's an important thing to call out. They are growing at a slower rate than the other cohorts. Accepted prepared foods where they're actually growing as strong, if not stronger than the higher income cohorts. And I think that's really a reflection of the value proposition that our prepared foods category offers relative to QSRs and other of our national brand pizza competitors. They're also leaning a little bit heavier on the dispensed beverage side within prepared foods because that typically represents a better value than the bottled and canned beverages on the grocery and general merchandise side.

On grocery and general merchandise, lower income consumers are buying at a little bit lower rate, still growing again. And that kind of holds together logically as they may have opportunities to go to a grocery store and buy in bulk at a lower unit cost than what we would be able to provide. But that's really what we're seeing on the consumer side. Still feel very good about the overall health of consumer and their shopping habits. And Steve, do you want to talk a little bit about the guidance?

Yes. Sure. Chuck, we normally don't give quarterly specific numbers for much at all because we're probably not that precise. But coming into the fourth quarter, we're trying to serve up some [ squeeze math ] for people as best we can. So I think on the inside number, I think year-to-date, we're about 3.8% or so on the inside number. The inside range, the midpoint of that range is right around where we are, maybe a touch higher. So ultimately, I think that [ squeeze math ] would indicate that fourth quarter should look pretty close to what the year-to-date inside experience.

[Audio Gap]

we're not expecting it to be significantly different.

Okay. Great. And then just on the grocery margins up really, really healthy here, right, up 150 basis points, talked about cost of goods management and mix. Maybe dive into the cost of goods management, where you are with your vendors on some of that journey versus how much of it was mix? Just so we can think about the complexion in the next few quarters.

Yes. This is Darren. Yes, on the cost of good management side, I think it's really just a reflection of our joint business planning process. Our merchants have done a really good job of partnering with our supplier partners in creating plans that allow us to manage that cost of goods a little bit more effectively and at the same time, grow the business for all of us. And so I'd say that's really what you see on the cost of goods management side.

The mix is really a couple of different things. The fastest-growing subcategory within grocery and general merchandise is nonalcoholic beverages, and that also carries the highest margin rate and had some margin expansion in the quarter. So that's favorably mixing. The other thing I would call out is the nicotine category, and that's a combination of a couple of things. The combustible cigarette mix has gone down, and that's the lowest margin part of that subcategory. The nicotine alternatives, so I think the pouch business is up 31% in the quarter. [ Vape ] was up another 12 as enforcement actions against illicit vape have improved. And so those both carry more than double the margin rate of combustible cigarettes. So when you throw all that into the mix, that really does favorably impact the grocery and general merchandise category margin rates.

Our next question comes from Kelly Bania with BMO Capital Markets.

Darren, you, I think, made the comment that you typically don't see demand destruction until the retail price of fuel hits closer to $5 per gallon. And obviously, we're still far away from that. I was just curious if you have seen any impact to consumer behavior, traffic ticket, inside sales just in the past few weeks? And if you are making any contingency plans from a promotional perspective if this fuel margin environment remains elevated or continues to increase?

Yes, Kelly, we've seen no signs at this stage of the cycle in terms of any change in guest behavior. Certainly, people don't like seeing gas prices go up. But again, I'll put this in perspective. Right now, after this last week or so's events, retails are up, give or take, on average, about $0.30 a gallon. At that $0.30 a gallon, our -- in the low $3 a gallon range on average. That's still $0.30 below the starting point when the Ukraine war began.

So we -- fuel prices had run down quite a bit over the last year or so. So we were actually sitting in a really low position. So the fact that we moved up a little bit more recently still puts us at a very low absolute retail price relative to recent history. So again, we're still not seeing any sort of behavior change. In the event that we start to get up into that close to $5 a gallon range, we certainly will do some things to encourage demand. But as it stands right now, our traffic to our stores has been positive, and that's a great credit to our merchandising, our food team, our store ops teams who are running great stores every day to get people to come in. And that's worked across the board. And so that value proposition relative to other alternatives is still very strong. And so in a higher price environment for fuel, I think more consumers will be more discerning about where they spend their money. And they'll see the value proposition that we have every day in our stores, and I think that ultimately accrues to our benefit.

Just wanted to also ask about the wings. It sounds like that's now at 550 stores. Can you talk a little bit more about the timing and cadence of additional rollout of that program to more stores? And also, can you tie in just how you think about the pricing of that item? I think what we're seeing is $7.99 for 8 pieces. And just curious how you think about the value proposition of that category to say, pizza or hot sandwiches or some of your other core prepared food offerings?

Yes. So with respect to timing, we're going to have a more measured rollout over time. And we'll do that essentially by distribution center to make sure the supply chain is running efficiently. And keep in mind, this just isn't selling a new product. We have equipment that we need to install in stores to enable that process. We have to do a lot of training. So I would say over the next 2 years would be the cadence where we would roll out the rest of the chain.

With respect to pricing, we intend to approach the pricing similar to how we've done with pizza in terms of keeping a gap relative to any sort of national brand competitor. So we encourage trial and adoption and continue to grow the unit velocity on that business. Our ultimate goal for this platform is really to create an incremental occasion in addition to pizza. And so it certainly can be an add-on to the pizza, but also as a quality and value proposition to stand-alone [ comment on ] as an incremental occasion.

And in the early indications are that we are selling the product to wing-only customers. And we're also seeing that when people are buying our wings, they are increasing their frequency of visit as a result of that. So we feel very good about the progress so far. Still have a long way to go, but things are working well so far.

Our next question comes from Michael Montani with Evercore ISI.

Yes. Congrats on the results. Just wanted to ask if I could, I guess, on 2 areas. One is, if you could discuss a little bit, Steve, any synergies that you realized kind of in the quarter and then what a realistic full year outlook is for synergy from CEFCO? And then just a follow-up on the wings, how should we think about potential CapEx investment, if it's a light touch versus a heavier touch? How do you see that kind of split out over time? And then similarly, on the OpEx side, do you need to add kind of a full-time equivalent worker to be able to deliver the wing value prop?

This is Steve. I'll maybe start on the synergy one, turn it to Darren for the wings. We are right where we expect it to be as it relates to the integration of Fikes and CEFCO is probably the overarching comment I would make. If you go back to the synergy capture that we expected and talked about at the time of the closing of the deal, so a year ago this quarter, the early innings of those synergies were going to be some G&A capture, which were right where we thought we'd be, probably a little bit ahead of that. And certainly some fuel benefit capture both from converging the supply agreements of the 2 entities together, which we just completed actually this quarter, everybody is now on the same kind of time line with the same volume benefit in those negotiations as well as the pricing, which we took over really on day 1 and centralized that pricing. So most of those synergies have all been realized.

We have started to take some synergies inside the store slowly as we put some of our product into some of the proof of concept stores that we converted a while ago, and we're also now in the process, converting another 50 stores that had previously had kitchens in them, we'll have 50 more converted by the end of the fiscal year. Those stores will also start to show prepared food synergies, which is the bulk. About 40% of the total synergies we expected to capture would ultimately be prepared food because we're putting pizza in. That will follow the conversion schedule.

And so long story short, we -- Fikes for sure, as we had communicated at the beginning of the year, will be EBITDA accretive for us this year comfortably. So -- and the synergy capture is right where we expect. And the bulk of the prepared food synergy capture will really start in the first half of next fiscal year, and we'll ramp that up throughout the course of the year.

Yes, Michael, I'll go ahead and take the wings. From a CapEx perspective, it's a pretty light lift. Really, it's just putting a commercial fryer into the stores. We have electrical. We have [ van hoods ] already. There's a little bit of small wares that are required to produce the product. But that's it. It's just -- we got thousands of stores we have to install them into. So it takes a little time. But from a CapEx perspective, it's not a significant investment.

On the labor side, it's not as -- it's a little more scientific in terms of how we add the labor, it's not just adding an FTE. We have a pretty robust labor modeling process that we go through with time motion studies to understand what it actually takes to produce any product in our kitchens. And then the team forecasts the demand in those stores. And based on that, they will get an incremental labor allocation to the stores.

If the volume were high enough, it may warrant an incremental FTE. I would say, for the most part, at this stage, it's warranting incremental hours but not necessarily an FTE at this stage of the game, but every store has their own specific allocation based on that math. And then that ebbs and flows as the volume -- the actual volume experience goes forward. So that's how we approach the labor.

Our next question comes from Bonnie Herzog with Goldman Sachs.

I was hoping you could touch on the durability of your new unit growth, I guess, over the long term? Curious to hear from you what is a sustainable pace, new unit growth? And how many sites do you have in your pipeline? I guess, can you share with us if you're still on track to deliver on your guidance this year and to add, I guess, the 80 new stores, which implies about 60 new store openings in the fourth quarter? And then are you guys also sort of on track to add the 500 new stores by the end of this fiscal year?

Yes, Bonnie, we are definitely on track to open 80 stores this year. I'm not sure what numbers you're looking at for the fourth quarter, but we do not need to open up 60 stores in the fourth quarter to get to our 80. So -- and remember, that's a combination of new store -- new to industry stores and M&A. And so on both fronts, we are well positioned to wrap up the fourth quarter and hit that 80 for this year. And that 80 million for this year will get us to 500 for the 3-year planning horizon, which was originally 350 stores, then we moved it up to 500. So I feel very good about that.

And then on a sustainable basis, we are well situated from a pipeline perspective on NTIs, and we have stores right now, if we're buying real estate, we're really putting that into FY '28 or '29 pipeline at this point because the pipeline is in good shape. And then in the M&A front, I'd say the team feels very good about the small deal M&A and the pipeline there as well. And remember, we like to have both NTIs and M&A working at the same time. And if multiples get a little bit too rich on the M&A side, we can lean heavier on the NTI side to keep that ratable store growth.

And lastly, I'd say just in terms of the pace, our algorithm or growth algorithm at a high level is pretty straightforward. We get about 4% growth from organic, running the mothership. So same-store sales, fuel profitability, efficiency in our operations and then 4% from new units. So give or take, every year, we kind of approach that year with a goal of growing the units by 4% per year. So we pulled back a little bit in this current fiscal year deliberately. So we have the opportunity to integrate the CEFCO acquisitions because there's a lot of work to be done there. But then we'll be back on that 4% unit growth rate.

Our next question comes from Jacob Aiken-Phillips with Melius Research.

So thanks for the clarity on the unit expansion. I'm just curious, as we're approaching the new strategic plan -- I'm not going to ask for numbers, but how should we be thinking about the biggest growth levers from here? And you outlined unit expansion. And you recently talked about how maybe you're going back to adding some labor to the stores as opposed to the constant reduction in same-store hours. So just levers on top line and bottom line that we should be thinking about?

Yes. Jacob, I think first of all, I don't want to share too much about the next 3-year plan. I want you to come to New York City and have some pizza with us, and we'll tell you all about it in June.

But yes. Look, fundamentally, we're still going to grow the business by growing new units, by running the business efficiently, by growing our inside sales. And so we'll have all kinds of details around that. But I mean, those are the things we're going to continue to do to grow our business.

On the labor side, I've mentioned on the last few calls that when we entered into this 3-year strategic planning cycle that we're wrapping up right now, we said we would reduce labor hours by 1% same-store per year over the 3-year period. And we have actually exceeded that goal with great work done by our operations team and continuous improvement team to make that happen. But that's not something that just goes on in perpetuity. And so as I've communicated before, I think we're close to the end of that. There will always be efficiencies that we'll continue to work on, but you should not expect that we'll just continue on a cadence of reducing same-store labor hours.

That being said, as the business grows and volumes increase, there will be a need to add some labor back to meet that need in keep the guest satisfaction scores at the all-time highs that they are currently at. So -- but that all comes with incremental sales, incremental margin, incremental gross profit. So we're happy to add those hours back when the business warrants those additional hours. And that also works the other way. If the business were to go backwards, we would pull back on those hours to rightsize the labor allocation with the business demand.

Got it. And then just on cheese real quick. Can you update us on like what the annual amount of pounds you use in terms of cheese? And then you said cheese is slightly down in 4Q, but can you update us on like how much exposure you have locked in over the next 2 quarters?

Yes. We move about 45 million pounds. Yes. In the quarter, about 11.5 million pounds. For a full year, about 45 million pounds. We're 80% locked on cheese through this quarter and the next couple of quarters. And then -- and that's about where we like to keep it when we can lock in favorability. It's slight favorability, it's not massive favorability, and then we have another 20% we can buy on spot when conditions are favorable.

Our next question comes from Edward Kelly with Wells Fargo.

I wanted to first just follow up on wings. I was curious -- I know you don't want to give too many numbers, but curious as to how you think about the margin implication overall with wings? And then taking a step back, adding fryers, I don't want to get ahead of ourselves, but how are you thinking about potential for other products as it pertains to this category?

Yes. On the margin, we like the margin profile in wings. It is obviously a protein versus something like pizza that's a little more dough-based. So it doesn't carry the same margin rate that pizza would. So far, there hasn't been any real margin implications because the mix hasn't been great enough to do that. Over time, if it became a big enough business, that could put a little bit of pressure on margin rate. But it would grow gross profit dollars and improve trips and everything else. So we're okay with that. Our goal isn't margin rate, it's gross profit dollar growth. And so to the extent that, that plays out, over time, we're comfortable with it.

In terms of other products, I guess, the thing we haven't talked about, we rolled out fries in addition to the wings. That was the most commonly requested side item to go with the wing. So we are selling wings or fries right now. We have -- we're cooking some of the other products that we already had in the store in the larger fryers. We'll have to see as time goes on whether we expand that. But for now, we have a long way to go in terms of growing the wing business, and we're more focused on doing that and doing that well and getting that velocity up and creating that incremental occasion per week in that business before we start tackling other products.

Great. And then just a follow-up on the M&A question. I was curious as to where you feel like you are with the integration of Fikes and what that means in terms of your ability to execute on another large deal if something came about? And maybe just thoughts on what the market currently looks like there?

Yes. In terms of the integration cadence, well, by the end of this fiscal year, we will have 50 stores converted. We've got about 25 converted right now. We're on a cadence of about 3 per week. So by the end of the fiscal year, we'll have the first tranche of 50 done. The plan for next year will roughly be to wrap that up in the next fiscal year. There will be some stragglers there, but the bulk of the work will occur next fiscal year.

From a balance sheet perspective, we could do another deal right now. Obviously, our leverage ratio is low. We have ample liquidity. We have the ability to do that. Just practically speaking, with the timing it would take, starting right now to do something of a similar size to a Fikes, it would take time. So we're in a position to be able to execute on a larger deal if the opportunity were to present itself.

As you can imagine, there are -- there are only -- there's a finite number of chains of that size that just exist and then a smaller number than that, that are actionable. We are definitely engaged with potential sellers and working through those processes all the time. But one of the things that kind of narrows the aperture a little bit for us is that we set a pretty high bar on asset quality. Because ultimately, the biggest synergy we bring to any acquisition is our prepared foods. And so the physical buildings need to be able to accommodate adding a kitchen where the real estate has to be large enough that we can bump out a building and add in a kitchen. That has to be a high enough percentage of the total stores that we acquire to make it work for us.

So we're a little bit picky, but I think that pickiness has proven beneficial for us over time. And so we like how the market sets up for us. We just need to have the right combination of timing and willing sellers so that we can act on those opportunities.

Our next question comes from Brad Thomas with KeyBanc Capital Markets.

And let me hand my congratulations on a nice quarter here. I wanted to ask about the competitive landscape, and I know that Casey's remains in an advantageous position relative to your rural footprint. But just curious, Darren, if you could comment any more on what you're seeing out of the other [ Seastar ] players and restaurant competitors of yours?

Yes. We're -- it's a competitive environment. I think when you look at either -- I guess I'll take a restaurant first. I think the restaurant industry at large and QSRs and pizza players in particular are under quite a bit of pressure. The advantage that Casey's holds relative to those folks is that we're in 3 businesses. We're in the fuel business, the grocery business and the prepared food business. The restaurants are in 1 business, and it's the food business. And so they have to absorb all of the increased costs that we've all experienced over the last several years and absorb that within the prepared foods. And so that's translated into menu price increases. I think that's been well documented.

And so that relative gap between restaurant pricing and our pricing has widened over the last couple of years. And so that value proposition for us just gets all the stronger. And so I feel very good about our position relative to national brand QSR chains. And so as a reminder, half of our stores don't even have a national brand pizza competitor. But the other half that do, we have a very strong value proposition relative to them.

And then by the same token, on the convenience store side, I think we have the same thing. We still have a lot of stores in the suburbs. We face some of the best competition that our industry has to offer, and we perform very well there, largely because we have that differentiated food offer that really is unique and represents a great value proposition. It's hard to execute. So a bulk of the convenience store industry doesn't even have a prepared foods program. And those that do are largely in the sandwich business or fried chicken business, something not pizza and certainly not pizza like we do it. And so we really have a unique niche within the industry. And I think our results over the last several years would speak to the fact that, that niche has really resonated with guests, and we performed very well across all environments.

That's really helpful. And maybe if I could just ask a follow-up to try to tie together the question around where oil prices may be going and how that might influence your updated financial guidance in June. Is there a particular price for gas and oil where we could think about or should think about the algorithm changing? Is it that $4 gas number that you referenced earlier, Darren? Just curious about how you think about it from kind of a long-term standpoint.

Yes. Look, Brad, I would say long term, this doesn't change anything. Fortunately or unfortunately, I've been in this industry long enough now to go through a number of these cycles. And every one of them runs its course, like I described earlier where margins get a little bit compressed on the front end of the curve and expand on the back end. So I think from a long-term algorithm, growth algorithm standpoint, what's going on today is not changing anything. It will run its course. Who knows how long that will be? I'd say, we ran a complete cycle in 24 hours yesterday. So it's kind of hard to tell how this will all shake out. But ultimately, it will normalize. And so the long-term algorithm will be the same.

In terms of the quarter, I would just go back to what Steve commented on our experience. We've had a strong start to the quarter that's reflected in the guidance. Our February experience on margin was $0.40 a gallon, and we'll have to see how the rest of the quarter shakes out. But I mean, I don't know how to handicap that. We had a $0.30 cost swing from high to low yesterday. And so I haven't looked at the news in the last hour. So I'm not sure what's going on today, but we'll manage it appropriately and we'll see how the quarter shakes out.

Our next question comes from [ Jack Hardin ] with Stephens.

This is Jack Hardin on for Pooran Sharma. I wanted to ask about labor You've done a really strong job over the past several years at reducing same-store labor hours. And so at this point, how should we think about the runway for further productivity gains? Are we closer to a state of a steady state labor model? And do you see incremental opportunity from here?

Yes, Jack, I commented a few minutes ago about the fact that I think we're probably closer to steady state. And look, we'll -- we have a continuous improvement team for a reason. We will always look to find ways to make the job and stores easier. And sometimes that ultimately results in less labor needed. But by the same token, we're always focused on growing our business. And as you sell more stuff, it requires more labor to produce that stuff, stock that stuff, sell that stuff. So that will ebb and flow. I would not expect to see the types of labor decreases that we saw over the last 3-year period. But again, we'll always focus on managing that expense line tightly and add where we need to and take away where we don't need it anymore.

Our next question comes from Scott Stringer with Wolfe Research.

Appreciate the time. You kept the fuel volume guidance unchanged, but performance has been nicely positive year-to-date as you're taking share. So is that at least fair to say that you're tracking at the high end of your range for the year?

Yes, Scott, I wouldn't say that we're tracking at the high end of the range. I'd say we're tracking in the range, and that's where we feel comfortable guiding everybody at this point. And so we have been pleased with the performance so far.

Okay. Got it. And then there is also some positive commentary around tobacco sales. So specifically on the tobacco alternatives. Is there a potential that these newer products can return the category as a whole back to positive growth?

Yes, I do think there is that potential. What we've seen a little bit more recently is the decline in combustibles has slowed. Albeit, it's still -- from a unit perspective, it's still dropping, but not at the same rate as it was for the last several quarters. So the combination of that decline slowing with the inflation that happens on the combustible side in addition to the growth in alternatives and vapor has actually netted that category out to positive. And that hasn't been that case for quite a while. So we'll have to see how it plays out. But at this point, that is correct. It is actually starting to see some growth in the overall nicotine category.

Thank you. Ladies and gentlemen, we're coming up on the end of our hour long call. I would now like to turn the call back to Darren Rebelez for closing remarks.

All right. Thank you, and thanks for taking time today to join us on the call. And before we go, I just want to thank our team members once again for all their hard work this quarter. Have a great rest of the week.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

Ladies and gentlemen, thank you for standing by. Welcome to Casey's General Stores Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference 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 31, 2025. I'm Brian Johnson, Senior Vice President of Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, 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 the potential impact of the [indiscernible] transaction, 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 and performance at our stores.

There are a number of known and unknown risks and 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 acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan.

The impact of duration of conflicts in oil-producing regions and 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 disclaims 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-GAAP to GAAP 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 caseys.com under the Investor Relations link.

With that said, I'd like to turn the call over to Darren to discuss our second quarter results. Darren?

Thanks, Brian, and good morning, everyone. Before we dive into our excellent second quarter performance, I'd like to congratulate the entire Casey's team for their hard work throughout the quarter to serve our guests and our communities. In addition, I want to highlight the positive impact Casey's is making with veterans and their families. For more than a decade, Casey's has partnered with 2 veteran focused nonprofits for our annual roundup campaign, children in the fall in Patriots and hope for the warriors.

Each year, it's humbling to see the support from our guests team members and partners at PepsiCo, and I'm proud to share that this November, we raised $1.2 million for these 2 outstanding organizations. As a veteran myself, I'm grateful to those who stand with our military community and support them when shopping at Casey's.

Now let's discuss the results for the quarter. Diluted EPS finished at $5.53 per share and net income was $206 million, both of which earn an increase of 14% from the prior year. The company generated $410 million in EBITDA, a 17.5% increase from the prior year. Inside the store, the prepared food and dispensed beverage category saw guests responding well to our innovation and promotional activity within the and category.

We also saw margin expansion which is primarily driven by the grocery and general merchandise category. This was underpinned by increased guest traffic as effective merchandising, along with solid store level execution is leading to more guests shopping our stores.

Strong execution of our fuel strategy by the fuel team, coupled with our robust store offer, resulted in our fourth consecutive quarter of fuel gallon growth. This was accomplished while also growing cents per gallon margin.

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 3.3% for the second quarter or 7.5% on a 2-year stack basis with an average margin of 42.4%. The 2-year stack was an acceleration from the first quarter. Same-store prepared food and dispensed beverage was quite strong as sales were up 4.8% or 10.3% on a 2-year stack basis with an average margin of 58.6%.

Whole pies and hot sandwiches in all dayparts performed well in the quarter. Breakfast performed exceptionally well with our maple Waffle breakfast sandwich highlighting the innovation our culinary team is bringing to the category.

Margin was down approximately 10 basis points from the prior year as the lower margin from the South Coast stores was nearly offset by improvement in waste and cost of goods management. Same-store grocery and general merchandise sales were up 2.7% or 6.4% on a 2-year stack basis, with an average margin of 36%, an increase of approximately 40 basis points from the prior year, primarily due to a favorable mix shift to higher-margin items such as energy drinks and nicotine alternatives within their categories.

On the fuel side, same-store gallons sold were up 0.8% with a fuel margin of $0.416 per gallon. The cording Gulf's fuel gallon sold data the Mid-Continent region saw an approximate 2% decline this quarter, so we believe we are continuing to grow market share.

Fuel performance remained robust, supported by strong premium and mid-grade demand stable diesel sales, consistent pricing discipline and solid gains in fleet volumes. The organization remains mindful of effectively managing operating expenses while maintaining or improving team member engagement and guest satisfaction.

In the second quarter, same-store operating expense, excluding credit card fees, increased 4.5%, lapping a 2.3% increase in the prior year. Same-store labor hours were flat even as we invested more labor hours to the kitchens appropriately to meet the strong pizza demand during the quarter. I would now like to turn the call over to Steve to discuss the financial results from the second quarter. Steve?

Thanks, Darren, and good morning. Before I begin, I also want to acknowledge the hard work and the great results from our team members. Total revenue for the quarter was $4.51 billion, an increase of $559 million or 14.2% from the prior year due primarily to higher inside sales as well as higher fuel gallons sold partially offset by a lower retail fuel price.

Results were also favorably impacted by operating approximately 9% more stores on a year-over-year basis. Total inside sales for the quarter were $1.66 billion, an increase of $190 million or 13% from the prior year. For the quarter, Prepared food and dispensed beverage sales rose by $50 million to $468 million, an increase of 12% and grocery and general merchandise sales increased by $141 million to $1.19 billion, an increase of 13.4%.

Retail fuel sales were up $273 million in the quarter, as a 16.8% increase in fuel gallons sold was partially offset by a 4.8% decline in the average retail price. The average retail price of fuel during the period was $2.96 a gallon, and that compares to $3.11 a year ago. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization.

Casey's had gross profit of $1.12 billion in the quarter, an increase of $163 million or 17% from the prior year. This is driven by both higher inside gross profit of $83.8 million or 13.5% and as well as higher fuel gross profit of $65.1 million or 20.9%. Inside gross profit margin was 42.4% and that's up 20 basis points from a year ago.

Prepared food and dispensed beverage margin was 58.6%, down 10 basis points from prior year. Cheese was $2.11 per pound for the quarter, and that compares to $2.25 a pound last year, a decrease of 6% or an approximately 35 basis point benefit to margin. There was an approximate 130 basis point headwind from the SEPCO stores that were partially offset by improved waste accretive mix and the favorable cheese cost comparison.

The grocery and general merchandise margin was 36%, an increase of 40 basis points from the prior year. The change was impacted by a favorable mix shift within the category as well as cost of goods management, and that includes manufacturer funded promotional activity associated with alternative nicotine products. Fuel margin for the quarter was $41.6 per gallon, and that's up $1.4 per gallon from prior year. This is inclusive of an approximately $1.5 per gallon drag from the [indiscernible] stores.

Other income was $40.9 million, that's an increase of $14.2 million or 53.4%. The increase primarily was due to wholesale fuel gross profit from the Fikes acquisition, but it did also include a onetime $8 million benefit, which is the result of a prospective change in the way that we will administer our gift card program. Total operating expenses were up 16.7% or $101.9 million in the quarter.

Approximately 10.5% of the increase is due to unit growth. Same-store employee expense accounted for approximately 2% of the increase due to increases in labor rates, which were offset by flat same-store labor hours. Higher variable incentive compensation contributed to approximately 1% of the increase.

Net interest expense was $24.7 million in the quarter, and that's up $12.1 million versus the prior year, which is primarily from financing the Fikes transaction. Depreciation in the quarter was $109 million. That's up $14.6 million versus prior year, primarily due to more stores. The effective tax rate for the quarter was 24.7%, nearly comparable to the prior year. Net income was up versus prior year to $206.3 million, an increase of 14%. EBITDA for the quarter was $10.1 million compared to $348.9 million a year ago, and that's an increase of 17.5%.

Our financial flexibility remains excellent. On October 31, we had total available liquidity of $1.4 billion. Also, our credit facility debt-to-EBITDA ratio was 1.7x. For the quarter, net cash generated by operating activities of $347 million less purchases of PP&E of $171 million resulted in the company generating $176 million in free cash flow compared to $160 million in the prior year.

In December, the Board of Directors voted to maintain the quarterly dividend at $0.57 per share. During the second quarter, we repurchased approximately $31 million of shares and we now expect to repurchase approximately $200 million in the fiscal year in total, up from our previous expectation of approximately $125 million, and that's due to stronger earnings and higher cash flows.

Consistent with our normal second quarter call practice, we are updating certain full year financial metrics. Fiscal 2026 EBITDA is now expected to increase 15% to 17%. The company now expects inside same-store sales to increase between 3% to 4%, and we expect an inside margin of 41% to 42%.

The tax rate is now expected to be 24% to 25%. The remainder of our annual guidance provided at the beginning of fiscal '26 remains unchanged. Our results for November were as follows: same-store volumes, both inside and outside the store were consistent with our revised annual guidance expectations.

Fuel CPG was in the low 40s, and current cheese costs are slightly favorable versus the prior year. As a reminder, we will now have lapped the closing of the Fikes' acquisition, and therefore, the third quarter will have Fikes' results in both periods. As such, we expect third quarter operating expense to be up mid-single digits. I'd now like to turn the call back over to Darren.

Thanks, Steve. Throughout the quarter, we built on the momentum from the summer months and our inside comps accelerated to your stack basis. OPIS are performing exceptionally well as we saw a very strong response to our Thin Crust Thursdays in our college football Saturdays promotions. OPIS grew faster than the prepared foods category. While the category also printed a strong margin, which shows we can be creative with our promotional activity and balance margin performance.

We also saw positive traffic to the stores as guests continue to believe Casey's has a strong value proposition. In the forecourt, we continue to gain market share as our same-store GALNS growth outpaced OPUS data in our region again. Our ability to drive guests to the pump with our strong inside offering remains a strategic advantage for the company.

I would again like to express my gratitude to the entire Casey's team for an excellent quarter. As we look to close out our 3-year strategic plan, I cannot ask for a better team to execute the plan and deliver industry-leading results. We will now take your questions.

[Operator Instructions] And our first question will come from Ed Kelly with Wells Fargo.

I wanted to just start on fuel. I mean, obviously, the backdrop has been challenging. You've been outperforming. Can you just maybe talk a bit about the sustainability of that. And then Q3 is off to a good start. I mean, it seems like rack prices have helped.

Do you expect margins to just kind of revert back in short order. And then stepping back on all this, has anything changed fundamentally either with your approach here or the competitive backdrop that we should be aware of?

This is Steve. I'll maybe start on a couple of those. Certainly, nothing has changed with our approach. Maybe start with that. I think some of the results that the team has had so much success delivering or directly related to how consistent we have been with our approach of trying to balance profitability and volume to the pad.

They've done an excellent job of having consistent offer available to guests. And we firmly believe that contributes for sure, to the success that we've had. Our fly track around our performance relative to the rest of the market begins with the store.

And so the fact that the vast majority of our guests are coming to the store to go inside the store, 3 out of 4 of our transactions don't involve the purchase fuel gives us a lot of stickiness with those guests. Our guests, we believe, are a little less elastic than the average guest because they're already coming to the pad for the inside and store offer.

So that has certainly helped our outperformance relative to the market that we're in. As it relates to the seasonality of margins, I guess, is how I would address the question. Generally speaking, the winter for us, the third and fourth quarters, we're going to have seasonally lower margins than we do in the first half of the year.

That's been the case for a while. We don't have any reason to expect that, that would be significantly different. But beyond the recognition of what happens seasonally, we really don't prognosticate around what's going to happen with forward-looking margins and beyond what the November experience has been.

And then maybe just a quick follow-up on OpEx, up 4.5% on a same-store basis, which is a little higher than maybe what we expected. Can you just maybe speak to that quickly and how we should be thinking about the back half?

Yes. Listen, our full year round expectations, full year expectations are unchanged. We did not change the 8% to 10% expectation for full year total OpEx. And so we are pretty much where we thought we would be exiting the first half of the year related to OpEx.

The timing of lapping the Fikes transaction is going to naturally step down the year-over-year change that we'll experience in OpEx in the second half of the year, and we're trying to give some visibility into that with the third quarter expectation of mid-single digits. We've been -- we've had a very long success run here quarter-wise of reducing same-store labor hours.

In the store they were flat this year -- or this quarter, I'm sorry. That's very consistent with our expectations as eventually, we were going to come to the end of that multiyear effort to literally drop hours to the bottom line with the promotions that we had in the store, especially the pizza promotions on Saturdays, we prudently added some labor back into the store.

And so it's kind of how we ended up flat with the same-store labor hours. But total OpEx, very consistent with our expectation beyond what we enumerated in the press release. There were some miscellaneous things higher insurance costs, higher utility costs, legal is a little bit higher for us. Advertising was a little bit higher.

But by and large, I think total OpEx performance very consistent with expectations.

And the next question will come from Chuck Grom with Gordon Haskett.

This is [ Ryan Bulger ] on for Chuck here. Good to talk to you today. My question was going to be on the mix dynamic as you see these [ Setco ] stores roll into the base the comp base next quarter.

Obviously, we've been talking about the impact on margins for a while, but I was just wondering if you could speak to anything you would expect to see in terms of how that would play out with the mix differences there, traffic can take out, et cetera? And any impact that could have on comps as they roll into the base next quarter?

Yes, Ron, this is Darren. Clearly, the [ Seco ] stores are carrying a lower margin than the Casey stores, both in prepared foods and in grocery and general merchandise. And that's because they're still [ Setco ] stores. They're not Casey's stores yet. Now that effort in terms of rebranding will start to kick off in earnest at the beginning of the calendar year.

We'll start converting the -- their larger stores, they have kitchens in them already. Those are a little bit easier from a conversion standpoint. And then we'll once we get those done, then we'll start to convert the other stores. So we would expect that, that trajectory will change a bit on the prepared food side, in particular, once we get those kitchens in and the rebranded to Casey's and they get our full assortment with private label and all the rest.

So we expect that margin to accrete over time. But as it stands right now, their margin rate in Prepared Foods is about half of what the mothership Casey's, Prepared Foods margin is. So it is going to have an impact. I was really proud of the team this quarter in terms of managing the rest of the business whether it's through cost of goods management, waste management and overall execution so that we mitigated that impact from the [indiscernible] stores onto the overall Casey's portfolio.

Yes. No, I was just curious if there would be anything on the comp side as they roll into the comp base next quarter.

Well, as we roll through, I mean, we haven't done that math yet, but I mean, there will certainly be an impact so when they blend it in, the blended in there was an impact to the margin. So as we cycle over that, we'll see that. It should blend up a little bit, but we'll have to see when we get there.

And the next question will come from Bonnie Herzog with Goldman Sachs.

All right. I had a question on your guidance. You did update your EBITDA guidance for this fiscal year, which is great to see, especially considering the strong results in the first half, but your guidance does still imply a sequential deceleration in EBITDA growth in the second half.

So just hoping to hear some of the drivers that? And then as you mentioned, you lapped the Fikes acquisition in November, but is there anything else contributing, I guess, to the implied deceleration in growth?

Bonnie, this is Steve. I mean, I'll just start with that. It's obviously been a very strong first half of the year for us and that played a part in this. But as it relates to the second half, specifically, we've tried to be pretty clear with people just mechanically, the way the math has worked, right?

We're not going to -- we do not expect the same absolute level of year-over-year EBITDA growth in the second half that we had in the first half just because we already have pikes sitting in the base now.

There's really no change in expectation for us from the mothership performance per se. And the FICs performance is generally on plan as well. And so I don't -- we're not trying to message any different expectation for kind of second half experience vis-a-vis first half experience other than mechanically, but the math is naturally going to come down just because we have a higher number in the prior year second half period.

Okay. And then maybe just a quick follow-up just because Fikes' acquisition has been a year. Can you just remind us your M&A strategy, where you're at and sort of what the market's like right now? Obviously, it's still very fragmented. Just any color there would be helpful in terms of what you're seeing and how actively you're potentially pursuing further M&A?

Yes, Bonnie, this is Darren. We really haven't had any change in our strategy or our approach to M&A. As you know, we focus on a small deal kind of tuck-in acquisitions and that's sort of normal course. We have our dedicated M&A team that is on that full time.

And we're seeing good results from that group and very consistent with what we've expected. The larger type of M&A is more opportunistic and those are fewer and further between typically. And for us, it's not just a matter of buying something for the sake of buying it. If we need the right level of asset quality that we can we're able to put our kitchens into those stores and really run our play.

So while we do see a lot more out there than we are willing to buy because they're just not the right quality for us. There is some activity out there. We are participating in some of those processes, but again, we set a fairly high bar for ourselves in terms of the asset quality. So we'll probably say no to more things than we ever say yes to.

And our next question will come from Bobby Griffin with Raymond James.

And congrats on a solid half. Darren, I just wanted to maybe circle back on the OpEx side, in particular, the same-store OpEx. And you guys, as you noted, have done incredible work on the hours basis, but maybe that's in the later innings.

So when we look at like the year-to-date same-store OpEx of, call it, averaging out around high 3s, is that the right level for this business going forward with the store growth plans and kind of the expansion opportunities you have across Texas and whatnot? Or do you still think there are opportunities to maybe push that down to closer to 3 or high 2s on a same-store basis?

Well, Bobby, we haven't guided beyond this year, so I'm not going to really try to forecast that right now. I would say that, like I said the last couple of quarters, I think a lot of the hour reduction work has largely been completed.

Now having said that, that work is never done, to be clear. We have a team that's dedicated to looking at in-store processes and always striving to become more efficient. But I would say at this stage, a lot of that will be fine-tuning and tweaking as opposed to larger reductions in labor hours.

The other thing I'd remind everybody about in this quarter in particular, our traffic was up 1.5%. Our whole pie sales were up 8% in units. And so as we grow the business on a same-store basis, there's natural -- there's a natural inflection point where some more labor needs to get added into the stores to meet the demand.

At the same time, we've had the highest overall satisfaction scores from our guests than we've ever had in this most recent quarter. So I don't want to get overly fixated on the labor number or on the OpEx number per se.

We certainly manage it and we keep it close. But I think the combination of driving traffic, delivering outsized growth in our highest-margin categories and having a really great overall satisfaction scores from our guests is a really winning combination and very hard to do in retail, and we're doing it right now.

And so that's what we're really focused on. And when our gross profit dollar growth is growing at the pace it is our EBITDA growth is growing at the pace it is. That's how we know we're doing it the right way. And so we're very comfortable with where we are at this point from an OpEx perspective.

Understood. Very helpful. And then maybe just as my follow-up on a different subject. Alternate nicotine, there were some obvious manufacturer promotions during the quarter.

But just curious, as you and the team have set out on the new calendar year, what are your expectations from promo activity in that category? Do you continue to expect it to be growing from a promotional basis or see higher promo potential going forward?

Yes. Not sure about the promotional activity going forward. We'll still have more work to do with the manufacturers to understand how they're thinking about that as well.

What I would say though is that overall, that category has been growing really fast over the last few years as volumes in combustible cigarettes go down. And so we would expect that, that trend will continue. And as combustibles continue to erode and more people seek other nicotine alternatives for them.

And right now, that business is working well for us. I think we shared a couple of quarters ago that we reset all of the back bars in our stores to reduce the space allocated to combustible cigarettes and increase the space available for those nicotine alternatives really to meet the guest need where they are. And that play is working well for us. So we expect that longer-term trend to continue.

And our next question will come from Chuck Cerankosky with Northcoast Research.

Good morning, everyone. Great quarter. Could you talk about the declining cost of the gallon of gasoline and your customers' behavior in store? You said earlier that to the fourth store visits don't include gasoline, but is there an interplay between declining cost of fuel and say, more prepared food store visits and bigger prepared foods purchases? And also, how about the influence of lower gas prices on your in-store promotions.

Yes, Chuck. Clearly, any time we have lower absolute fuel prices that leaves guess with more discretionary income in dollars to spend. So we always like that scenario. But what I would say more broadly is that I think guess in general, are just being a little more discerning about where they spend their money because there's a lot of other cost pressures outside of our stores that folks are dealing with right now.

And so what we're seeing is people are appreciating the value proposition that they experience at Casey's. And we see it in a couple of different areas. When you look at our whole high business, as an example, when we run promotions, we get great uptake on the promotions, which would speak to the value, but we also see that people are trending more towards higher-priced items.

So specialty pizzas as opposed to single topping pizzas. So those are more expensive, but they're getting the right value equation, the quality of the product and the price. Same with our bakery category where people are trading up to multi packs versus single items. Those costs more, but on a per unit basis, those are less.

So we think that people are really picking and choosing where they're going to spend their money and where the best intersection of quality and value come together where people are really spending their money.

And so low fuel prices certainly help, but I think a more robust in-store offer and getting that value equation right is probably the bigger driver of the results inside the store.

And our next question will come from Pooran Sharma with Stevens.

Maybe just wanted to peer, more into cheese. Could you maybe update us on how much you have hedged? I think last quarter, you said you were about 70% locked up for the year. Just wondering if there's any update to that?

Yes, this is Steve. We continue to chip away at locking in favorable rates -- favorable prices for ourselves, but the team has really doing a good job of staying on top of that and being advantageous for us. So as we sit here today, we're about 80%, 80% [indiscernible] for the next 4 quarters or so the second half of this fiscal year in the first half of what would be our fiscal '27.

And we only lock something and if it's either favorable on a year-over-year cost basis or neutral. And so we're generally neutral or favorable on 80% of what we think we need to buy here for the next 4 consecutive quarters.

Great. I appreciate the color there. I guess on my follow-up, maybe just wanted to peer into guidance here and understand that seasonally second half does step down from first half. But just given your commentary earlier on how November is trending fuel margin-wise, would it be fair to assume kind of more of a 3Q weighted split for the second half? So like maybe, let's say, like a 55-45 split in 3Q and 4Q, just given the favorability in fuel margins you've seen in November?

Listen, I think it would not be wise for me to go there. I think it's fair to assume that we were low 40s CPG for the month of November, and we'll probably leave it at that. I think historically, you can look at kind of a weighting between Q3 and Q4 and that's probably as good of a crystal ball as anybody would have around kind of how those quarters seasonally will behave.

Yes. Pooran, I would just add that there's a lot that can happen in the fuel market from a commodity standpoint that's 100% out of our control. So what happens in November is really no indicator of what could happen in January. So we kind of play out 1 month at a time.

And the next question will come from Benjamin Wood with BMO.

This is Ben on behalf of BMO. And Kelly Bania. First, we just wanted to start with -- could you give us an update on what the last 12-month EBITDA contribution was from CECO and maybe how that came in relative to your internal plan? And then following up on kind of Bonnie's question.

As we think about the composition of new store growth over the next 12 months, is that more or acquisitions? And then can you just walk us through how you're thinking about the potential returns more recently on your new to industry builds versus your potential acquisitions?

Yes, Ben, I'll go ahead and start with the store growth piece, and I'll let Steve talk about [indiscernible] EBITDA. The store growth, we expect always a balance between new to industry and M&A. And so typically, when we set our new store goal for the year, we'll we kind of go into it planning for a 50-50 split. Now acquisition is going to be a little bit lumpy. So we that number is usually wrong. But we go into it with that expectation in that plan, and we have the ability to do that.

If acquisitions run a little bit hot, then we usually throttle back the new-to-industry builds and get to our target, and then that allows us to land bank for the situations where maybe acquisitions slowed down a little bit, then we have the ability to flex the other way and accelerate new to industry build so we can maintain that consistent ratable growth.

So that's kind of how we view store growth from a return standpoint. We're always looking to achieve that mid-teens return after a few years when the stores start to mature, we have a long track record of achieving that, and we're really format agnostic, meaning whether that's a new to industry or an acquisition, we still have the same return expectations either way. Steve?

Yes. Listen, what I would say on Fikes is we're right where we thought we would be. So their own plan for us. The plan is very consistent with kind of the pro forma assumptions that we had at the time we bought them. LCM Is a little misleading. I'm not going to go there just because if you think of the first 2 quarters that we and Fikes, a lot of deal costs there was -- it was kind of a wash from an EBITDA basis for the second half of last fiscal year. But for this fiscal year, there -- we said that would be EBITDA accretive. Healthy EBITDA accretion it is, would not be EPS accretive because of the interest that is still the case.

We continue to realize synergies primarily from fuel and SG&A as we sit here at this point in time, to Darren's earlier comment, the biggest group of the $45 million of synergies were ultimately trying to get is going to come from inside the stores and that's dependent on the timing with which we can remodel the first.

So we will certainly not fully realize synergies this fiscal year, and that was never the expectation. But right where we thought it would be well on our way to ultimately getting to $89 million, $90 million of kind of fully synergized EBITDA, but we won't see all of that this fiscal year because of the timing of remodels.

Great. And then just as a follow-up, could you give us an update on what the latest thinking around your wing test and then as you're thinking about timing of broader rollout, what are you guys looking for at this point? Are you still trying to refine the offering or the labor or are there calendar events like the Super Bowl or March Madness that might be a little bit more conducive to a broader launch?

Yes, Ben, with the wings, like we've talked about, we still had some menu refinements that we're working on. some procedural gaps we were trying to close. I think a lot of that work has been wrapped up where we've got some new flavor profiles that we just literally in the last week got back into the test stores, and we've broadened that store base a little bit to make sure we've got that right.

So we're I'd say a lot of the development-type work, we think, is largely done. We're validating that as we speak, and then we would proceed to start rolling out. So we haven't really announced the time line for that just yet. But I think that, that work is well underway. And so I think we're getting closer to the finish line there.

And the next question will come from Brad Thomas with KeyBanc Capital Markets.

Congrats on a strong quarter here. I want to first ask a big picture question about competition. This is something that comes up a lot in our conversations with investors about the growth of many of the private convenience stores it seems like your results are clearly very insulated today, but I was wondering, Darren, if you could talk a little bit more about your confidence level in your installation from some of that competition.

Yes. Look, I think from a competitive standpoint, we have a little bit of a mixed bag. And what I mean by that is, yes, there is certainly some rural areas where we don't face a lot of the larger regional players that you're referring to.

We do have some of those larger regional players that we compete with every single day in some of our larger markets. I'll just use our home market of Des Moines, Iowa, as an example. It's probably one of the most competitive convenience store markets in the country.

And so we face 3 of those regional competitors as we speak in this market, and we performed exceptionally well here. We have that in a number of different markets Texas, in Missouri in Illinois. So I feel very comfortable in our ability to compete at the highest level with the regional players in the industry. And we have a differentiated offer. They do well at what they do, and we do well at what we do and those things aren't always the same.

But I think we can look market-by-market where we have that more intense competition, and we do very well there.

That's helpful. And if I could ask a follow-up on the state of the consumer. This is an unusual quarter with the government shutdown and impact on Snap. Curious if there was anything that you've seen in your business from a consumer perspective.

I shared a little bit before about what we're seeing more broadly with the consumer. With respect to Snap. Snap is a very low percentage of our business. It's a little bit less than 2% of our sales are SNAP eligible. So we really -- the government shutdown, while unfortunately, really didn't have much of an impact on our business at all that we could discern from the numbers.

[Operator Instructions] And our next question will come from Mike Montani with Evercore.

Just wanted to ask if you could unpack a little bit further some color, Darren, on state of the consumer and the K-shaped economy and in particular, I guess, with guide, it seems to imply about 50 bps of diesel for the back half of the year, even though compares get a bit easier optically into the fourth quarter. .

And we thought you could have like 20 to 40 bps of tailwind from SAFCO stores getting into the comp. So just wanted to understand maybe if you could break out how the comp progressed over the quarter, a little more color about what you see in November. And then just some high-level commentary about that consumer.

Yes. I guess, as we saw the comp progress through the quarter, it's really that trajectory was more a reflection of the comps we are cycling. So it kind of stepped down August, September, October, but when you look at the 2-year stack, it really was the other way, it accelerated.

So we had a very tough comp in October, and we cycled that. That was probably our lowest comp sales month of the quarter from an inside perspective. But like I said, on a 2-year stack basis, we were about 6.5% last quarter. We were 7.5% this quarter, so I feel really good about the strength of the business and the trajectory it's on.

From a consumer perspective, again, I think -- and we've done some research on this. there's sentiment out there among consumers and then there's how they behave. And I think broadly speaking, if you look at different income cohorts, the middle and upper income cohorts are feeling fairly good about the economy.

There's some that have a negative view, but the majority would have either a neutral or positive view of the economy the majority in those cohorts would feel at least neutral or more financially secure. The lower income is under more pressure from both of those perspectives. But they also say that they intend to maintain their visit frequency to convenience stores.

So that's encouraging for us. And again, the actual behavior we're seeing in the stores is that they're still coming as frequently as they were as evidenced by our traffic increasing over the quarter.

They're still buying as evidenced by our same-store sales performance relative to others in the space but they are being more discerning about where they spend the money and how they spend it.

And I think for us, with our prepared food proposition, in particular, it represents a really strong value relative to other alternatives out there, particularly in the QSR space. And so we're finding more people gravitate to us because of that strong value proposition and we continue to maintain that. So I feel very good about the spot we're in right now from a guest perspective.

We had just done a deep dive actually on your last point about the share gain potential for prepared meals where you all stood out positively. And I was curious if there's anything you could add that helps to bridge us to the chicken wings in terms of LTOs or other innovations down the pipeline?

Well, we certainly think that the wings have the potential to create another occasion for the guests, and I would expect that from a quality and pricing perspective to really represent a great value proposition for the guests, and that's the feedback we're getting so far in the test market.

So I would expect that to perform well when we go to a broader rollout and again, our pizza proposition has always been there. People are -- people recognize us for that. And as they become more value conscious, they're gravitating more towards us. And so again, relative to comparable quality products out there and we compete more with QSR from a quality perspective, our value is much stronger than most out there and it's resonating with guests.

[Operator Instructions] I show no further questions at this time. I would now like to turn the call back over to Darren for closing remarks.

All right. Thank you for taking the time today to join us on the call. Before we go, I want to thank our team members once again for all their hard work this quarter and wish them and everyone on the call and listening in a happy holiday season.

This concludes today's conference call. Thank you for participating, and you may now disconnect.