Ladies and gentlemen, thank you for standing by. And welcome to the Q4 FY 2021 Casey’s General Stores Earnings Call. At this time, all participants are in listen only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to turn the call over to Brian Johnson, Senior VP. You may begin sir.

Thank you. Good morning. And thank you for joining us to discuss the results from our fourth quarter and fiscal year ended April 30, 2021. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today is Darren Rebelez, 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 meanings of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to 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, performance at our stores and the potential effects of COVID-19. 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 pending Buchanan Energy acquisition, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of COVID-19 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. Now I’d like to turn the call over to Darren to discuss the fiscal year results. Darren?

Thanks, Brian, and good morning, everyone. The past 12 months have been like no other and that includes our astounding financial results, which we’re pleased to share today. Casey’s 2021 fiscal year yielded the strongest results in our 53-year history and I am humbled to be the one that gets the share how we delivered this phenomenal performance with you today. I want to begin my comments by personally recognizing the over 40,000 people that make our business go every day. We cannot deliver on our progress to make the lives of our guests and communities better every day without you.

Thanks, Darren, and good morning. I too am pleased to be able to share and reporting some remarkable performance with you today, as I marked my first year with the company. Our team deserves all the credit, we could not be prouder of the dedication and the agility that they’ve exhibited this past year. The fourth quarter was really a tale of two quarters. Sales in the first half were muted by extremely cold weather throughout most of February and same-store comparisons were challenging given the company’s strong performers last year right before COVID-19 showed up. As anticipated, our same-store sales comps then came roaring back once we began lapping the shutdowns from the pandemic. Please note that the prior year have an extra day due to leap year, but given the size of the pandemic’s impact, it’s not material to year-over-year comparisons. Total revenue for the quarter was $2.4 billion, which is an increase of $565 million or 31% from the prior year. This was due to an increase in retail sales of fuel of approximately $445 million driven by an increase in the number gallon sold and the higher retail price of fuel, along with an increase in inside sales of $115 million. Same-store fuel gallons sold were up 6.4% compared to the same period a year ago. Total gallons sold were up 10% to 535 million gallons. Our centralized fuel team continues to successfully balance volumes and margin, as we aim to grow gross profit dollars. Casey’s fourth quarter of fuel margin was $0.33 per gallon versus $0.41 per gallon in the prior year. The company did not sell any RINs during the quarter. The average retail price of fuel during this period was $2.70 a gallon, compared to $2.05 a year ago. Same-store inside sales were up 12.8% for the quarter as guest traffic counts improved compared to the start of the pandemic. Total inside sales rose 14.4% to $913 million. For some additional context, our two-year stacked fourth quarter same-store inside sales growth is 7.2%. Inside margin rose 100 basis points to 39.9%.

Thanks, Steve. First, I would like to congratulate the entire Casey’s team again for delivering a record year and impressive results. Their hard work and dedication are going to be called upon once again as we look ahead to fiscal 2022. Casey’s is well-positioned to not just compete but to win and accelerate our growth. Why, because of our business model is uniquely positioned to take advantage of this moment, given our strategic plan and specifically the momentum ahead for our differentiated food business, our recent M&A milestones and the strength of our balance sheet. I couldn’t be more excited about the opportunities that are with Casey’s this coming fiscal year. We’re seeing positive momentum for our prepared food items, from pizza to bakery and beverages we expect that trend to continue. Color and innovation within our prepared food and fountain category will also drive results in fiscal 2022. In April, we rolled out a new made-from-scratch Cheesy Breadstick product that has been a big hit with our guests. What’s particularly funny about this product is that leverages are made-from-scratch pizza dough that we’ve been using on our pizza for many years. Our dough, the key differentiator from our competitors will leverage this strength to springboard other innovation in the not too distant future. In addition to alleviating our food offerings, the stores have never been more guest-ready and merchandised to deliver product sales volume and velocity. Resetting our stores has resulted in our in store experience, working even harder for us just in time for peak summer traffic. A key component that we’ve reached that was to optimize the placement of our private label products. We’ve already become the number one brand for packaged bakery, meat snacks, as well as nuts and seeds in store. Looking ahead, we plan…

Our first question comes from Karen Short with Barclays Capital.

Housekeeping, I just want to clarify, in terms of your quarter-to-date commentary on gallons and in store comps is that -- just to clarify, is that where you are trending today and then had a bigger picture question.

No. That’s where we expect to land for the entire quarter. We’re actually little ahead of that quarter-to-date today and that’s a function of just the timing in the prior year of the shutdowns and the re-openings. So the shutdowns were more significant at the beginning of the first quarter last year. It’s a little easier comp. So, that number that we gave is where we expect to land for the first quarter.

Okay. And then, so I guess, I just wanted talk a little bit on your mid-teen commentary on OpEx. So, obviously, you pointed out, okay, I am assuming in rank order what the contributing factors are on the mid-teen guidance for growth. But I guess, obviously, you have an algorithm of EBITDA of 8% to 10% growth and with this comp guidance and your OpEx guidance we’re getting to kind of mid single-digit to high single-digit decline in EBITDA for the year. So wondering if you could kind of push that out a little bit more, because it doesn’t seem like, you should be getting higher sales growth, I guess, for the OpEx that you’re guiding to?

I’ll maybe start with that. So there is a couple of things embedded in there, Karen. So, the easiest way of the OpEx first, the easiest way for me to think about the components of the OpEx is, we’re going to get 9% more units coming in with that approximately 200 stores and 75% of those units are going to come essentially now, right? We have already closed the Buchanan. We’re closing Circle K this month. So, that’s coming in in the early first quarter essentially fully loaded and so that’s a big component of that increase and so facts if you’re doing a little bit of averaging on the rest of the unit 7% to 9% of the increases just the timing of the new units coming in and that leaves somewhere 7% to 8% for the rest of the OpEx on what we would call the mothership. And if you go back to the fact we will definitely have more hours in the system, because of the way we’re scheduling this year versus COVID and you have got rising wages. You’re actually -- you have OpEx going up somewhere in that mid-to-low high single-digit number, which is not terribly far off from where our medium-term algorithm would have us to be and we have not, obviously, made any comments specifically around EBITDA expectations. Clearly, the acquisitions are bringing incremental EBITDA associated with them. But our commitment to that 8% to 10% EBITDA growth over the medium term is we’re fully aligned behind that. I think we feel very, very good about our ability to achieve that. We just happen to have a pretty big slug of acquisition-related operating expense coming into the system all at the same time in this fiscal year.

Okay. But just to clarify on the wages, I think, you’ve typically talked about kind of 5% being a standard pressure year in, year-out, is that -- has that changed into this year or is that still the right kind of number to think about?

I think we’ll have higher than that this year. I think we’re currently running about 100 basis points or so higher than that number with our current forecast, right? We’re dealing with the same dynamic that you’re reading about in the paper for all the retailers. There is clearly labor pressure in terms of both availability and wage rates in the system. So that would be reflective of what we know today and I think it’s a touch higher than what we had in the last year or two for sure.

Okay. Thanks so much. I’ll go back in the queue.

Our next question comes from Bonnie Herzog with Goldman Sachs.

Thank you. Good morning, everyone. I guess, I had a question this morning on your prepared foods same-store sales. It ended up much stronger in the quarter than it was trending early on where I think your trends were actually negative. So, could you share how each of the months in the quarter maybe for us were trending and really when things turned positive resulting in sales up being 13.4%? And then if you could provide how this business has been trending so far in May and early June, I think that would be really helpful/ I am curious also to hear how consumer behavior has evolved in the last couple of months, especially with vaccine counts increasing. Has conversion been increasing a lot and what about basket sizes and maybe some comments on shopping hours? Thank you.

Yeah. Bonnie, this is Darren. I guess, trends were up in the quarter. If you recall in our March call, we were just coming out of February. In February we had some really adverse weather situation throughout the Midwest and so that got compounded by the fact we’re cycling over a really strong prepared foods performance the prior year and so we were a little bit depressed on the prepared foods going into that call. Of course, right after that, we took the back half of March and all of April we’re cycling over the shutdowns from COVID. So things materially shifted and accelerated. That was also to a certain extent by the fact that things were starting to re-open a little bit and relax. So we saw a great momentum in the prepared foods business and we continue to see that momentum moving forward and so what we’re seeing from a consumer behavior standpoint is, the morning day part is trying to recover a bit. We’re not all the way back to pre-COVID levels, but if you look at our traffic patterns we have had some significant improvement in the morning day part and in the overnight day part, which affects the breakfast category as well. People are starting to go back to work, we’re now in the summers, of course, schools are out. So we don’t think that full recovery in the morning day part is really going to kick in until the fall when the schools back in session. But at the moment, we’re experiencing some nice increases in the prepared foods and we expect the momentum to continue throughout the summer.

Okay. Thank you.

Our next question comes from Bobby Griffin with Raymond James.

Good morning, everybody. Thank you for taking my questions. Just one quick housekeeping, I want to check on the OpEx. Does the mid teens commentary for FY 2022 includes the $11 million of acquisition costs?

Yes. It’s full -- it’s a fully loaded number. Yes.

Okay. And are you going to one-time out that cost or should we include that in, when we arrive and everything’s going to be on a GAAP basis, just want to make sure we get the model apples-to apples-in the first quarter?

We will convert to our report on a GAAP basis and just quantify the impact of all the transaction-related activity.

Perfect. I appreciate the detail. And then, I guess, bigger picture kind of wise for me, just diving into the fuel margin a little bit. Fourth quarter in a row I believe a pretty material outperformance versus the industry, as well as in a -- you had a rising crude environment as well going on this quarter. So just curious when you look at that is, do you believe that’s still somewhat of a function of the quote-unquote COVID environment or at this point, is the outperformance really a function of all the work, the fuel team has been doing on sourcing and pricing and that type of outperformance could be somewhat sustainable going forward?

Yeah. Bobby, this is Darren. I would say, it’s a combination of both of those things and certainly our fuel team has done a fantastic job of navigating this environment and it’s a challenging environment to say the least. But we still are executing on pricing very well that the team is doing a great job there. And then on the procurement side, we’re at 75% of our fuel volume under contract at this point and we have opportunities to continue to refresh and renew some of those contracts and we think we have some favorability there as well. But I would have to say, at this point, I think, which is where you’re going, after a year of these kind of margins, I have to believe that the pressures on the smaller operators are not going away and we just talked about labor pressures that certainly coming, the EMV liability shift just occurred, that’s happening, credit card fees are arising, those are all pressures that smaller operators simply don’t have a lot of levers to mitigate and so they’re forcing to taking that in fuel pricing and that’s constructive to margins for the industry. So I have said all along. I think that we probably won’t continue to stay at this level of margin. But I don’t think we’re going back to pre-COVID levels of margin either, we will be somewhere in between there. But as long as this challenge in the industry persists I think we’re going to see that reflected in more elevated fuel margins.

Okay. Great. And I guess, lastly for me real quick on prepared food, great to see the sales trends really start to pick up as we start to lap these comparisons and the country reopens. Just the pathway back to kind of the 62% gross margin range, if that business was then before COVID? Is that all just a function of volume or given some of the inputs, is it pricing and mix of business, like anything there just to help us think about how we can return back to that pre-COVID gross margin range?

Yeah. I think there’s a couple of things there and certainly velocity helps the margins as the write-offs as a percentage of the sales volume decrease. So, certainly, that’s a component of it. There’s a mixed component as well, where the breakfast, day part tends to be a little bit higher margin, but we’re losing-- or we’re not losing but we’re -- we haven’t completely regained the velocity in the morning day part that we had once before. So we’re still working on that. But -- and then there -- we’re assessing whether we have retail pricing opportunities as well. But we think all of that is part of the equation to getting those margins back to more historic levels.

Thank you. Our next question comes from Ben Bienvenu with Stephens.

Hi. Thanks. Good morning, guys.

Good morning.

Good morning.

I want to piggy back on Karen’s questions about OpEx. You stated your commitment to the long-term EBITDA growth algorithm. I am curious, you’ve -- I think within that, you’ve targeted a high single-digit OpEx growth as a component of the EBITDA. If we continue to see an inflationary wage environment, would you expect that level to be higher and would that potentially impair your ability to deliver the EBITDA growth that you would like to? And then I am also curious, as you think about the variability on OpEx this year, if you deliver upside growth to your same-store sales, would you expect your OpEx growth to accelerate as well or could we get a little bit better leverage on that if your same-store sales growth accelerates more than you expect?

Yeah. Good morning, Ben. This is Steve. I’ll start maybe to handle the first question first. We’re not walking away from our algorithm commitment at all. I think we feel very good about our ability to continue to generate EBITDA consistently over the medium-term and long-term in that 8% to 10% CAGR range. We feel good about that. I mean to the extent, there is incremental wage pressure in the system and for sure that there is, right? We’ll go back to what Darren talked about before. What would you expect us to do, right? We have a lot of tools given our scale to how do we counteract that we can-- we will schedule smarter. We will obviously look for ways to automate more within the store environment. There are pricing levers at certain price points available for us to take. And then, so we will take all of the actions you would expect, anyone to take, you has a decent size of labor component of their cost of sales to take. And so I don’t feel like pressure on OpEx in any discrete period of time, puts us into a situation that all of the other levers available to us, aren’t able to offset. I think we may have to run a slightly different play, for sure, but there’s plenty of optionality in our model to keep us on the path of generating the EBITDA targets that we have.

Yeah. And Ben, I would just add to that. Those targets, 8% to 10% EBITDA growth, I mean, those are CAGR numbers. And so over a period of time, there’s a lot of timing that goes into that. Obviously, we had a very strong year this past year that we’re wrapping up. We’ve got some unique things going into this year, where we’re closing too big acquisitions and there’s costs associated with those early on, all those stores hit early on. So I don’t think that the algorithm is at risk at all. There is just timing and sequencing element to it. And to Steve’s point, around the increased cost. These costs are not unique to Casey’s. This is -- a lot of the cost pressures that we’re experiencing are cost pressures that the entire industry is experiencing as well. So we do think there’s going to be an inflationary component to what goes on. We’re currently assessing that. The good news for us is that we were proactive in negotiating cost of goods for this fiscal year, so -- or for this calendar year, rather. So we’ve already got costs locked in for through the end of the calendar year in a lot of our major categories. So we -- we’re -- to a certain extent immune to the cost pressure that’s coming on some of our in-store categories, but the rest of the industry may not be. And so we’ll be able to leverage that and as prices move up, we’ll be able to move that up as well and be able to counteract some of the cost pressures we’re experiencing.

I think maybe the last thing I’d add, Ben, to that point, is just a reminder that, a quarter of our OpEx is not store related and so I would fully expect, you know, on that component of the business we’ll work very hard to keep that flat, right? We’ll get the benefit of spreading overhead over a larger and larger base of stores, right? We don’t need to add overhead at the same rate that we’re adding store units and so that will provide some natural offset to anything that is happening in the field.

Okay. Understood. Very helpful. I want to ask about your commentary that you didn’t sell any RINs in the quarter, obviously, we’re in a very inflationary RIN price environment, S&D is tight in that market. I am curious are you holding at bay your RINs and expecting to sell them in future quarters? And on the same lines, how is your increased contracted fuel levels impacting your ability to generate RINs, does that have any bearing on the number of RINs that you’re able to fill?

Yeah. I’ll start with the second part first. Our contracts with our suppliers really doesn’t impact the number of RINs that we collect. So there’s really no impact there. With respect to selling the RINs, our team monitors the RIN market closely and -- every day. And the fact of the matter was RIN prices were going up pretty ratably throughout the entire quarter. So we didn’t see a need to sell into a rising market. So we just -- we held onto them and we’re waiting to opportunistically assess when that -- those RIN values were kind of leveling out. And then we do protect ourselves on the downside, if they start to slide back. We can -- we could sell them at a certain price. So that’s kind of how we’ve approached it. We’ll continue to do that opportunistically and so that’s where we’re at on that one.

Thank you. Our next question comes from John Royall with JP Morgan.

Hey. Good morning guys. Thanks for taking my question.

John, good morning.

Can we talk about the cadence of synergy capture on Bucky’s in the first three years as you see it now, I think your fiscal 2022 guide suggests probably not much hitting in the first year? And then do you have an EBITDA estimate on the Circle K stores you can speak to?

Yeah. Hey, John. Good morning. This is Steve. I’ll start with that. Your premise is right. I don’t think there’s going to be a significant synergy capture number associated with Bucky’s. Certainly not in the first half of this year, obviously, as we get our feet under us. We had committed to about $23 million of total synergy capture over a three-year period of time. And if you think about the pieces, we’ll get some of the G&A and the fuel-related procurement synergies. I think some of that will come through in the current fiscal year albeit, again, probably, not in the first half. But the majority of the synergies are going to be associated with uplift around inside the store mix as we put kitchens into a lot of those stores, and obviously, it takes time for us to permit those sites and to do the actual renovation. So I would expect our PP&E number this year reflects the fact we’ll be spending extra money to remodel those stores. I think the synergy capture associated with that spend probably is more of a fiscal 2023 item. But it will -- we will probably get a couple million dollars this year, but I think that will be back half loaded.

Yeah. The only thing I’d add to that is, when you do these acquisitions, you build your synergy targets pro forma based on what you believe going into it. And then once you own it, then you get under the hood and you get to really see everything that’s going on. And I’ll tell you, our team on the ground is even more optimistic now about the potential synergy capture then we were probably going into it. So, we feel very, very confident that on both of these that our synergy targets are well within reach, and perhaps, have some even further upside.

Okay. That’s helpful. Thank you. And then can you parse your guidance for inside sales of mid single-digit between prepared foods and grocery maybe just high level? And then any commentary on margins on the grocery side in fiscal 2022, just this coming off the drag from the mix you had during the pandemic?

We’ve -- I mean, directionally, I would tell you, if you just think of what we’re lapping from a comp standpoint. I would expect a prepared food number for the year to be stronger on a year-over-year basis than the grocery number. If you just start thinking of those two, you have to average back to the inside sales. We’re not going to quantify those two. But mathematically, prepared food should have an easier set of comps, frankly, than the grocery side of the business. And I think from a margin perspective, on the grocery side of the business, I think, we feel very good about that, right, a lot of the initiatives that influence the good performance on margin we had in the fourth quarter around strategic sourcing. Darren referenced, right, a lot of the cost of goods sold contract are sorted here for this fiscal year and I think they’re sort of in a favorable fashion for us. Obviously, private brand penetration is only going to help us here. The mix is a general role with merchandise resets is going to help us. And so I think not sure we would -- it’s reasonable to expect quarter-to-quarter outperformance like we had in the fourth quarter every time. But I think we feel pretty good about, there’s some momentum behind margin accretion in the grocery side of the business going forward.

Thank you. Our next question comes from Anthony Lebiedzinski with Sidoti & Company.

Good morning and thanks for taking the question.

Good morning.

So, in terms of the increased wage probably that you are seeing with everybody else and as far as the ability to offset that, I mean, you touched on a little bit that as far as your small operators are feeling the pain too as far as. Just wondering about like your ability to offset that whether you’re looking at higher gas margins or increasing pricing inside the stores, how should we think about that?

Yeah. Anthony, this is Darren. Yeah. I don’t want to get into the specifics of what exactly we will do. But we have a pretty wide range of tools at our disposal. I mean, we do have retail pricing that we can always take. We have fuel pricing that we can always take and manage. Our prepared foods business presents a unique opportunity for us. Those are -- that -- those food products are not commoditized like a lot of other categories within the store where the consumer walks around knowing what the right prices of certain items in that category versus perhaps on some of the other center store categories. We can always be more efficient with our general operations and with labor, and so we put a lot of effort behind optimizing our schedule to make sure we’re providing the right amount of labor for our stores and meet the demand of guests. So, again, there is a lot of different levers we’ll pull and we continue to monitor that and operate as efficiently as we can.

Got it. Okay. Thanks for that. And then just wondering if you could quantify as far as the Casey’s Rewards Program as far as spending per transact or per visit as far as how that is different from a new member and frequency that you’re seeing so far from your loyalty members?

Yeah. And with respect to that, we have a deferred revenue impact on the grocery category about 20 basis points, on prepared food and fountain, it’s a little bit higher, about 60 basis points. And certainly, our Rewards Program guests are our most frequent shoppers and our most loyal guests. They come to the store more often and they tend to spend more money when they do. And so that’s been a real positive for us as we continue to grow that database. We continue to learn more about them and their habits and that we can more directly market to them and their cohorts and drive more frequency. But we’re up to 3.6 million members, that number continues to grow and we’re really pleased with how quickly that ramped up considering we just -- we launched that program just right from the pandemic started.

Thank you. Our next question comes from Kelly Bania with BMO Capital.

Hi. Good morning. Thanks for taking my questions.

Good morning.

Hi, Kelly.

Just want to go back to the questions about EBITDA, CAGR, and I think, maybe the better way to ask the question is just, are you thinking about growth from fiscal 2021, if you are very fuel -- a lot of volatility but a very fuel margin driven year for EBITDA and earnings. Is that a good base that we can think that we can continue to kind of have that algorithm of 8% to 10% off of that or is there any anomalies that we should think about or look maybe at the prior year to think about a more normalized algorithm of growth from?

Kelly, this is Darren. I’ll take that. I think when you’re looking at the algorithm, I would say, and then kind of the way we think about is that, certainly, fuel margin has been a favorable tailwind for us, but throughout the pandemic. Again, we expect those margins to be elevated from where they were a couple of years ago pre-pandemic. We don’t expect them to necessarily maintain at the levels that we experienced in the last fiscal year and so that we think will start to equalize as volumes start to come back. And then on the store side, we expect volumes to recover over the course of the year to more something we’re resembling pre-pandemic levels and so that’s really how the algorithm works. So I think both of these things, the same kind of shifts from one side to the other, but ultimately, planes out at 8% to 10% EBITDA CAGR that we’ve committed to. And again, when we made that commitment, we said it was a CAGR, because things happen and there is variables from a year-to-year standpoint. Certainly, the pandemic created one variable. We have acquisition integration creating another variable. But we still feel very bullish about the idea that the algorithm works. It’s just going to be some timing and sequencing as to how that recovery ultimately plays out and the acquisition integrations play out as well.

Okay. Thank you. That’s helpful. Just a couple of more questions on my end. In terms of the gallon -- the comp gallon outlook for mid single-digit, I guess, just curious how you think about how your share is tracking in gallons? What your strategy is? I guess, maybe we were thinking maybe that would be a little higher next year just looking at kind of the national average data, but maybe just curious what you’re seeing in your market and how you’re kind of managing that kind of comp gallon strategy at this point?

Yeah. What we’re seeing in our geography, frankly, is -- based on all the information we can gather. We’re outperforming our competitors from a gallon standpoint, as well as a margin standpoint. So, recall our strategy has been to optimize gross profit dollars and that’s a balancing act between getting growing profitable gallons. And so I think we’ve done a good job with that so far. And again, based on the indicators that we see in our geography, we think we’re out performing. So we don’t believe we’re losing any market share from that standpoint. The cadence of that growth is going to largely be dependent on one, how we execute with regard to I talked about. And the other piece is just how things resume to more normal. And so what we’ve seen in our geography is traffic is starting to improve, people are starting to go back to work, but now we’re in the summer and the school is out, and so we think that the summer will probably normalize a little bit and then we’re going to get back to the fall. And from we’ve seen and heard so far, it appears in most school districts are going to go back to in person school, so we believe that more people will be out and about, more people will be going back to work, because daycare challenges would have been addressed and so we’ll think we’ll start to see some of more of that recovery feather in throughout the course of the year. I still believe ultimately that there is going to be a bit of a dynamic with some virtual work as in addition to people coming back to work. So that dynamic is going to have to play out over time. So we think that certainly from a gallon standpoint, we’ll continue to grow, but we’re also cognizant of the fact that this recovery is going to take a little bit of time.

Thank you. Your next question comes from Matt Fishbein with Jefferies.

Hey. Good morning. Thanks for squeezing me in here. Can you remind us where these acquired stores are in terms of cost per store relative to the base and I think you said a quarter of the OpEx is not store related in terms of total company? In terms of the expected wage pressure next year, store wage is probably the larger contribution to the total increase? But which is generally seeing more pressure right now, is it store wages or warehouses and distribution? Just -- and also if you could provide any color on maybe how much of the mid-teens increase in OpEx is owing to the full year of Joplin being up and running?

Yeah. Hi, Matt. This is Steve. I’ll try to deconstruct that. I mean, generally speaking, I would tell you, we are -- I think it’s just as tight and tough of a market for us on the warehouse distribution side in terms of wages and just labor availability as it is store labor. I am not sure I would draw much of a distinction between that. There is certainly less wage pressure as a general rule on salary staff. But on the distribution side I think it seems like it looks a lot like the store environment based on what we see right now. To your question around the acquired stores, it’s a little bit of a mix. On average I think a typical Bucky’s store is a little bit bigger than an average Casey’s store if you’re just using it across the system. So those stores would come in with a little hire per store OpEx number than what we have an average, but they’re also going to generate higher EBITDA per store. So I think that would be my point there. The Circle K deal those would tend to be a smaller stores generally than our average footprint stores that you probably have just on the other side of the Buchanan conversation. And can you remind me, there is one more question I think in there.

It was Joplin.

Oh! Joplin, listen, our Joplin -- Joplin is going to save us money on a year-over-year basis just because we’re taking the miles off the road. So we have several million dollars of distribution savings from Joplin in fiscal 2022, which is embedded in that overall OpEx number. That’s what’s helping us offset on that 25% that’s non-store-related. Joplin has given us a benefit there.

Thank you. Your next question comes from Paul Trussell with Deutsche Bank.

Hi. Good morning. This is actually Krisztina Katai on for Paul. Thanks for squeezing us in here. I just want a follow-up question. I mean you talked about your outlook for inside comp sales to be up sort of in that mid single-digit range? And you touched on this earlier, but can you just walk us through against the various puts and takes for gross profit margins for inside sales as we really think about the various cost components like cheese and any potential planned promotions that you might have?

I’ll start with cheese. Right now based on, we’re about 70% locked in the first quarter. I think we’ll have a little bit of deflation on cheese in the first quarter, a couple of pennies a pound that would be a modest tailwind for us on margin. As you look out for the rest of the year, the turn strip would be very comfortable and for a total year in terms of cheese cost. So on a full year basis I don’t think cheese will have a significant impact on margin one way or the other for us though it will be a little bit of a benefit in the first quarter. And then when you’re back to product cost on the grocery side of the business, I think we’re well insulated from inflation on the product cost standpoint. I think that’s going to probably be a tailwind for us in that grocery category. We are more exposed to commodity cost on the prepared food side of the business beyond just cheese where we’ve got proteins, et cetera, that have a little bit more pressure. But I don’t think there is more product cost inflation in the system today than we’ve dealt with in the last couple of years. I don’t -- I think our remarkable inflationary pressure generally is going to be on the wage side more than on the product side as we sit here today.

Okay. Got it. That’s helpful. And secondly I just wanted to ask about your capital allocation prior days. Obviously, you have just completed your largest acquisition to-date. Stores growth will be accelerated here as we exit-COVID. But you do have a $300 million share buyback authorization. So how you think about the balance between all of your strategic initiatives, paid down debt and resuming a share buyback program at some point?

Yeah. This is Darren. I’ll start with that. Our strategy has been and continues to be that we’re going to invest all of our discretionary capital towards growth. And so, after we certainly satisfied the dividend, we’ll go ahead and invest in growth opportunities and that’s what we have and that’s what we’ll continue to do from. So as long as those growth opportunities present themselves, we don’t have any short term plans to take advantage of the share buyback authorization that we have. It’s out there. We don’t have those opportunities. From a leverage standpoint, the balance sheet is in great shape. We’re about 2.5 times debt-to-EBITDA as we sit here today post closing the Buchanan transaction. We will pay down some debt over the course of the year. We like to have that debt-to-EBITDA down in the low 2’s, but aside from that’s how we’re looking at it. First invest in growth. Certainly, take care and protect the dividend. We’ll delever a little bit on the balance sheet and we have the share price authorization or the share repurchase authorization out there if we choose to use it.

And just maybe to reinforce Darren’s commentary from the prepared comments, the reason we’re over index in our growth is because from a value creation standpoint, if we can drive incremental EBITDA and we can improve returns on capital with growth investments. We think that’s the right play to run from a shareholder perspective and we don’t see an end of those opportunities here in the near-term and so that feels like the right place for us to put the marginal investment dollars certainly for the next couple of years based on what we see right now.

Thank you. Your next question comes from Chuck Cerankosky with Northcoast Research.

Good morning, everyone.

Hi, Chuck

In looking at the some of these inflationary trends especially in your cost of goods area, is there any opportunity for inside margin, i.e., forward buying to help you out other than fuel?

Just can you ask that question one more time, Chuck. When you said inside margin and buying to help us?

Forward buying.

Forward buying.

Forward buying, I might have not heard that part.

I am sorry. Yeah. Listen, we do -- we, obviously, do some of that with the cheese commodity. We occasionally will do that with some of the other commodities. We de facto by locking in supply agreements with a lot of the grocery providers on the CPG and DSD side of the business, right? We have locked in our cost of goods for the calendar year for -- beyond the calendar year for several of those. So I think we have essentially done that on the grocery side and where it makes sense for us, we’ll do it on the prepared foods side. But it’s probably there’s less forward certainty on that side of the business today than there is on the grocery side, just by the nature of the contracts that we have.

Thank you.

Our last question comes from Brian McNamara with Berenberg Capital Markets.

Hey. Good morning. Thanks for taking the question. So you’re a quarter removed from the big store reset and I am curious how the private brand rolled out just trending relative to your internal expectations, you exited Q3 at a 3% penetration, it seems like you stayed there through Q4. How do you see private brand penetration a year from now?

Yeah. Brian, this is Darren. We’re really pleased with how that’s progressed, and more recently, we’re getting a little bit closer to that 4% mix of private brands as we go into the summertime and some of the beverage category start to accelerate, water, in particular, we’re nearly 50% share in bottled water within our stores for Casey’s brand. We’ve also got another 100 plus items in the pipeline that we expect to rollout over the next four months to six months. So we feel like we’re well on track to continue to grow that business. We haven’t given out any real targets for this year. But suffice to say, we feel really good about the innovation around those categories, the pipeline that we have and the continued rollout of it. So we expect to continue to grow that share at a pretty meaningful clip.

Got it. And then just one quick last one for me, speaking with another C store industry participant recently, they opined at least to me that 2021 could be the biggest year ever in terms of industry consolidation. It sounds like you guys are optimistic as well, but I’d be curious on your thoughts on the opportunities you’re seeing in M&A and the drivers of those opportunities? Thank you.

Yeah. We’re pretty bullish on the opportunity within the industry as well and we have talked about some of those drivers during the call with increased cost pressures, increased regulatory pressures. You need to have the scale and capability to really compete effectively in this environment. The other thing that I think is really going to create some tailwind from an M&A standpoint there is a potential tax changes and tax treatment of capital gains. And so if that ultimately comes to pass and capital gains rates double, which is some of the discussion right now. There is a lot of these independent operators that are -- if they were on the margins before they are probably looking to sell right now. And so we have seen some increased interest, our M&A team is actively reaching out to candidates throughout our geography to see if there is interest and so we’re having conversations right now. We think there will be more opportunities to come.

Thank you. This concludes the Q&A portion of today’s conference. I’d like to turn the call back over to Darren.

All right. Well, thanks everybody for joining us this morning on the call and we’re looking forward to visiting with you again on our first conference -- first quarter conference call in September. Thank you.

Ladies and gentlemen, this concludes today’s presentation. You may now disconnect and have a wonderful day.