Good day and thank you for standing by. Welcome to the First Quarter 2023 Casey’s General Stores 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. Please go ahead, sir.

Thank you. Good morning and thank you for joining us to discuss the results from our first quarter ended July 31, 2022. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, 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 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 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 the conflict in Ukraine 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 made 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 and GAAP financial measures referenced on this call as well as the detailed breakdown of the operating expense increase for the 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 first quarter results. Darren?

Thanks, Brian and good morning everyone. We are looking forward to sharing our results in a moment, but I’d like to start by thanking our 43,000 team members for their commitment to our guests and our communities throughout the busy summer season. Our team is performing exceptionally well. We certainly would not have delivered another strong quarter without their unwavering efforts. Food innovation remains a top priority at Casey’s. This summer, we launched our newest specialty pizza, the delicious barbecue brisket pizza. Although we have planned to make it a limited time offering, we are now keeping it on the menu because of positive guest feedback and strong demand that far exceeded our expectations. This fall, our team is celebrating the 21st birthday of Casey’s legendary breakfast pizza by rolling out a new beer cheese breakfast pizza made with the Midwest Staple Bush Life. The new product will be a lot of fun for our guests but will be available just in time for tailgating parties this football season. As our guests shift into their fall routines and head back to worker school, Casey’s will be here ready to serve them. Casey’s is proud to support the communities we call home and we aim to have a positive local impact by supporting fundamental needs. In August, Casey’s Cash for Classrooms giving campaign raised over $700,000, thanks to our generous guests and passionate team members. These funds will support grants to local schools and our footprint. The grant application process opens in October and we encourage schools, teachers and parent-led organizations to apply. In July, we published our second annual environmental, social and governance, or ESG report. You will see other community giving initiatives beyond our Cash for Classrooms program highlighted in this report. We are proud of the progress we…

Thank you, Darren and good morning. Before I jump into the financials, I’d also like to take a minute to acknowledge the team for the incredibly strong performance throughout the entire business. The company executed really well during the quarter from operating the stores, rolling out our new summer items, managing fuel and serving guests all the while continuing to collaborate with our business partners to manage the inflationary and the supply chain challenged environment. Total revenue for the quarter was $4.5 billion, an increase of $1.3 billion or 40% from the prior year. Total inside sales for the quarter were $1.3 billion, an increase of $123 million or 11% from the prior year. For the quarter, grocery and general merchandise sales increased by $88 million to $923 million, an increase of 10.5% and prepared food and dispensed beverage sales rose by $35 million to $344 million, an increase of 11%. Reported figures were favorably impacted by operating 3% more stores on a year-over-year basis, primarily due to the acquisitions, which closed over the course of the prior year first quarter. Generally speaking, our in-stock levels improved during the quarter versus prior year and that also helped reported revenue. Retail fuel sales were up $1.1 billion in the first quarter due to a 3.3% increase in total gallons sold to $689 million as well as a 52% increase in the average retail price per gallon. The average retail price of fuel during this period was $4.49 a gallon and it peaked on June 15 at $4.94 per gallon compared to $2.95 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 $836 million in the first quarter, that’s an increase of $112 million or 16% from…

Alright. Thanks, Steve. I’d like to again say thank you and congratulations to the entire Casey’s team for delivering an outstanding quarter. Our three-pronged business model gives us the unique ability to navigate the current inflationary environment affecting both food and labor while also managing fuel volatility, allowing us to thrive in various economic climates. We are committed to executing the strategic plan we laid out in January of 2020. As a reminder, the three pillars of our strategic plan are; to reinvent the guest experience; create capacities through efficiencies; and be where the guest is via disciplined store growth. All three pillars are supported by investing in and growing our talented team and supported by technology. Inside the store, we have made great strides of joint business planning with our vendor partners, allowing us to manage product mix and strategically adjust retail prices, while maintaining a relative value position in the marketplace. This is reflected in the grocery and general merchandise results with mid single-digit same-store sales and expanded margins. Our private label program has great momentum, exceeding 5% of the grocery and general merchandise penetration, by the end of the first quarter, providing our guests a high-quality and cost-effective product. Prepared food and dispensed beverage continues to be an excellent value proposition alternative to QSRs. Each of our dayparts have items for our guests to get a great meal at a reasonable price, especially important in these inflationary times. Specifically, in the breakfast daypart, we’ve rolled out a $4 breakfast value offering. Additionally, our whole pies and line pricing represent a great value for families versus other dining out alternatives. On the digital side, our mobile app now represents 65% of all digital revenue which is primarily driven by whole pies. We’ve added more grocery and general merchandise…

Thank you. [Operator Instructions] And our first question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Please go ahead.

Alright. Thank you. Good morning, everyone.

Good morning. Hi, Bonnie.

Hi. I just had a couple of questions on prepared foods. First, I think it’s great to hear how the pricing you’ve implemented has been holding up and could you give us a sense of how much or the rate of pricing you’ve implemented so far this year? And then second, you mentioned that cheese cost have moderated a bit. So prepared food margin maybe won’t be as pressured going forward. But curious what your thoughts are about taking further price increases maybe to mitigate the margin pressures going forward? Thanks.

Yes. Hi, Bonnie, this is Darren. I’ll go ahead and start. With respect to the price increases, really, over the last year, we’ve had three different rounds of price increases in Prepared Foods and an attempt to kind of keep up with inflation. The reality of it is right now, we’re facing about 14% ingredient cost inflation in that category, and that’s a difficult one to keep up with. And we’re not inclined to chase cheese costs because that’s a commodity that has its ebbs and flows. And what we don’t want to do is get out of bed versus the marketplace. So we really try to manage that point. But we have taken pricing. We’re going to continue to monitor the situation. But obviously, as you’ve seen in the results, we’ve got good velocity as well. So our units are hanging in there, flat to slightly up and the pricing has been incremental. So it has put a little bit of pressure on the margin in the short-term, but we are growing the business. We are taking share in important dayparts like the breakfast daypart. So we feel good about where we sit right now and then we will continue to monitor the situation for additional opportunities to take price if we need to. Steve, do you want to comment on the cheese itself?

Yes. I think, Bonnie, on cheese specifically, cheese was about a 30% headwind for us in the first quarter based on current trends right now. I think it will be kind of – it’s low double digits – percent increase. So it’s a significantly less of a headwind than it was in the first quarter. We’ve also been able to lock in about third of our cheese purchases for the rest of this fiscal year rates that are at least comparable to prior years. So I do think we will have a little bit less of a headwind. And to Darren’s point, on the pricing, we’ve taken – we’re low double-digit percentage terms in most of the Prepared Food line items from a pricing standpoint which will continue to flow through. And the last point I would make around the margin is just – and we have made some tweaks to our production schedules in the stores as we have a better sense of some of the new menu items. And so I think we will right size a little bit some of the stale levels that we’ve been absorbing in the past couple of quarters.

Okay. And just maybe a quick follow-up because that was helpful. So if I think about your comp growth in prepared food and low double-digit pricing, should we assume – has there been some pull back in terms of volume? In terms of the business, how much is the pricing sticking? Just wondering how the consumer has been responding to the three price increases.

Bonnie, it’s been a little bit category by category. We’ve seen still strong unit movement in our breakfast daypart. That’s gone really well. Pizza slices have been a great performer, cold dispensed beverages have performed well and actually donuts have come back quite a bit, and that was more supply chain related than anything else versus the prior year. So we are seeing good movement. Our whole pies from a unit standpoint have been a little bit soft, a little closer to flat, but the pricing has stuck. And so – we think we’re in a good spot there. And again, we will continue to monitor this. But it is absolutely a big priority of ours to continue to grow Prepared Foods business and accelerated rate, and we’re seeing that happen right now.

Alright. Thank you.

And our next question comes from the line of Ben Bienvenu with Stephens. Your line is open. Please go ahead.

Hi, good morning, everybody.

Hi, Ben.

So, I want to ask about the – your guidance for full year same-store fuel gallons maintaining flat to up 2%. Obviously, prices ran up a lot to start the year. They have since fallen off. The outlay by quarter or year-to-date, how would you describe what has happened relative to your initial expectations? And when we think about kind of what’s remaining to get to that guidance, is it that as gasoline prices have fallen, you’ve seen volumes recover so you continue to feel comfortable on the flat to up 2%. If you could just talk about those dynamics, that would be helpful.

Yes, sure, Ben. In terms of what we experienced in the first quarter, clearly, in the first half of the quarter, wholesale costs ran up, retail prices ran up. And as we looked at our business, if we segment those price ranges by quartile, we certainly saw the largest volume erosion occur at the highest quartile of pricing. And then at the lowest quartile, we actually saw some gallon grows. And when we compare ourselves versus the OPIS data, we see that we’re outperforming the industry in our geography from a volume standpoint. So now that prices have come down to a little closer to normal, although they are still much higher than they were prior year. We’re starting to see some of that volume recovery. And so we think it’s a little too early to call the ball on guidance for the full year when we’re only quarter of it – quarter into the game. And as we saw in this first quarter, a lot can happen in the quarter. We can hit record highs and we can come all the way back down in the span of a quarter. So – we think we’re just maintaining guidance for now, and then we will update that after the second quarter when we have a little bit more visibility.

Okay. That makes sense. Shifting gears a little bit to operating expenses. The quarter didn’t really capture much of the fuel price decline that we’ve seen. But for the balance of the year, that’s a tailwind for you guys with respect to that guidance line item. What is the – at what price level – fuel price level, does the guidance reflect for the balance of the year? And just how should we be thinking about credit card fees as we move through the year?

Yes, Ben, this is Steve. I’ll answer that. Guidance reflects current pricing levels. So we’re obviously off of where we were in the first quarter, for sure, quite a bit. And so we’re making a static assumption on what happens with retail prices. We don’t try to follow that bouncing ball, but it implicitly, if retail stay where they are, we would have less incremental credit card expense headwind, obviously, than we had in the first quarter.

Okay. So if I could follow-up on that, Steve, given that when you initially offered guidance for the year, fuel prices were quite a bit higher, and they have come off quite a bit. Are you seeing underlying inflation around wages still in your business in excess of what you originally thought? You noted taking some of the hours down. Could you just talk about kind of the underlying core OpEx growth absent fuel prices relative to how they looked at the start of the year?

Yes. I think it’s generally consistent from kind of a rate pressure perspective. I think it’s consistent with what we thought. It’s still hard to find people, attract people and retain people and we’re working very hard to do that. It’s a little bit less acute than it was maybe 6 months ago, but we definitely are still continuing to need to pay people more this year than we were paying them last year. I think our average hourly rate, if you exclude our store manager population is almost $14 an hour now across our footprint, which is up a couple percent from what it was last year. The thing that is helping us in that comparison is last year, as we kind of reopening from COVID, we had a lot of special retention related initiatives in place on hiring and referral and summertime bonuses, etcetera. We have not had to keep those or reinstitute those. And so the absence of the prior year specials is – is flattering a little bit the amount of rate inflation that we’re actually experiencing now. But it’s still a couple of hundred basis points year-over-year of incremental rate inflation, which is consistent with what we thought it would be when we gave the guidance

Thank you. And our next question comes from the line of Anthony Bonadio with Wells Fargo. Your line is open. Please go ahead.

Hi, good morning, guys. Congrats on the beat.

Good morning.

So, I just want to ask about the grocery and general merch gross margin, pretty impressive performance there, and it looks like that 33.9% is the highest we’ve seen at least going back to 2015. Can you just talk about the sustainability of that level? Is that the right way to think about modeling that segment going forward?

Yes, Anthony, this is Darren. Yes, there is a couple of things going on there. The first thing I do is give a lot of credit to our merchandising team, along with our supplier partners, they really engage in joint business planning last year and came up with some great plans to execute this year. And I think to a certain extent, you’re seeing the benefit of that planning and the actions taken in those margin results. And so that would be point number one. Point number two is our private label performance has really been outstanding. And as you saw during the quarter, that mix shifted from about 5% at the end of the fourth quarter last year to about 5.4% as we sit here today in this quarter. And so – but what I’d point out in there is while that’s a sales penetration number on private label, if you look at units, our unit share is up over 9% and our gross profit dollar contribution from private label is up over 9% as well. And so the private label, as national brands get more expensive, more people shift over to those private brand products and those are all margin accretive for us. So we’re seeing both of those things happen. So from a sustainability standpoint, I would say we should still be in good shape to be able to maintain those kind of margins. And the team has also done a really nice job of balancing, taking retail price where we’ve had cost increases, but also keeping a relative gap to competition. So we’re able to take share at the same time.

Got it. That’s super helpful. And then just a follow-up on labor hours, I just wanted to ask about the decision to reduce? Darren, can you just walk us through what drove that? To what extent that was driven by efficiency gains in your operations and just how we should think about the sustainability there, too?

Yes, Anthony, with respect to the labor hours, our operations team has really done a fantastic job, just being more effective at managing labor and while we’re talking about that, I just mentioned that we have stood up a continuous improvement team who is clearly focused on driving efficiencies in our store operations and removing non-value-added work from the operations team. So I think it was two-pronged benefit. One was simply greater focus on managing the labor and being effective with the reducing over time, reducing non-productive hours and then the continuous improvement team identifying things that we don’t need to do in stores and can be done more efficiently elsewhere or just eliminate it altogether, and that’s reduced hours in the stores. And so the combination of those two have really led to some efficiencies. And frankly, we’re in the early stages of that. So we fully expect to find further opportunities to be more efficient in our stores.

And our next question comes from the line of Irene Nattel with RBC Capital Markets. Your line is open. Please go ahead.

Thanks, and good morning, everyone.

Good morning.

Good morning. Can you talk through a little bit around what you’re seeing from a consumer behavior standpoint traffic basket? Last quarter, we were talking about trading down and package sizes. We’re hearing a lot about trading down from premium to more value products. Any sort of detail you could provide would be great.

Yes, Irene. Well, first, let me start off by telling you a little bit about our consumer overall and some of the demographics around our consumers because I think this is important to understand. The first thing I’d say is our geography is worse to our advantage in this respect. In the 16 states we operate in, we – our states are in the lower end of cost of living, if you rank all 50 states. So the most expensive state we operate in is ranked 22nd from cost of living perspective. And seven of our states are in the bottom 10 of cost of living. So we live in a very affordable geography, operating in a very affordable geography to begin with. Then if you look at our guest income, 72% of our guests make over $50,000 a year. So the combination of our guests making over $50,000 a year and living in a very affordable geography really works to our benefit. And so as that as a backdrop, from a consumer behavior standpoint, certainly, record high fuel prices impacted consumer behavior. So on the fuel side of the business, what we saw was a reduction in average gallons purchased per fill up is about 8% reduction in the average fill up. But the average number of transactions went up about 8%. So people were just buying less fuel, but coming more frequently to do that, which, in a lot of ways, works to our benefit because it gives us more opportunities to convert that guest to an inside guests as well. We also saw some shifting around among the fuel slate itself. So you saw people shifting down from premium and mid-grade into regular unleaded or into higher ethanol blends and our higher ethanol blends E15, E85 were up high 20s, low 30% versus prior year. So you definitely saw that behavior. On the inside of the store, like I was just talking about, we saw that shift from some of the more expensive national brands into our private brand product, which again is margin accretive for us. We’ve also seen some trade down in pack sizes from larger pack sizes to smaller, particularly in the beer category, where people aren’t switching out of super premium and imports in the cheaper types of beer. They are just trading down from larger pack sizes into smaller pack sizes within the beer category, which is also margin accretive for us. So, so far, things have been working out pretty well from a consumer behavior standpoint.

That’s great. Thank you. And just would like your updated thoughts on sort of sustainable or sustainable levels of gas margins because, of course, we’ve been having a lot of OpEx conversations. But those two elements work in tandem. So it’s a real peak input into what the outlook is for earnings. So can you share your thoughts with us, please?

Yes, sure. As you know, predicting fuel margin is a little bit of a crystal ball type exercise. But consistent with what we said in our prepared remarks, we don’t expect fuel margins to remain in the $0.40 range. That was unique situation. Costs ran up to an all-time high and then costs fell back down a little closer to normal. And when you get through a cycle like that and you have a long way to fall, margins typically widen out on the backside of that cost curve. And so we certainly experienced that. Our fuel team did a great job managing through that volatility and it worked to our benefit. Our – from a planning standpoint, for us, we are looking at margins more normalizing over the balance of the year, and we will have to see how that goes. There is a lot of things going on in the world right now that could cause those costs to run up again. But consistent with what we have seen throughout history, when they run up like that, they eventually hit a peak and then they have to come back down again and we will manage it similarly to the way we did this past time.

Thank you. And our next question comes from the line of Kelly Bania with BMO Capital Markets. Your line is open.

Hi. Good morning. Thanks for taking our questions.

Good morning.

Just wanted to follow-up – good morning. Wanted to follow-up on the OpEx and just clarify, is there something that is coming in or has the potential to come in higher than your original expectations because it just seems like with where the gas prices are now and the math that you gave last quarter, it seems like it should translate into about $40 million in lower credit card fees on an annual basis. So, maybe it’s just within – still within the range, but can you just clarify that for us?

Sure, Kelly. Good morning. This is Steve. I will give that a shot. As Darren said, foremost – first and foremost, we are trying to wait until the end of the second quarter to – we will reassess all of the guidance here. By the time we get the second quarter because we will have seven months of experience by the time we have that call. I think that’s probably overarching thought on not changing anything. But we certainly incurred more credit card fees to your point in the first quarter than we had thought. Credit card fees will still be quite a bit higher than the prior year based on current pricing for sure. The other piece is we have definitely incurred higher incentive compensation expense on the long-term components of the comp program, those multiyear kind of performance share pieces, and we will continue to have higher expense associated with those for the next couple of quarters. That would be higher than we had expected at the time. And so I still feel like the annual guide is reasonable based on everything that we know right now. We were right – we are kind of right where we thought we would be, albeit with a different combination of things to get us there. And so we will reassess here at the end of the second quarter.

Okay. That makes sense. And just wanted to follow-up. You made a couple of comments on just the value that your inside prepared food options bring relative to QSR and maybe other options in the market. And just maybe if you could just give us an update on what are the ranges in terms of price gaps, how those have trended, what you are targeting? And what has been happening as gas prices have moderated in recent weeks here between traffic and ticket and these dynamics?

Yes. With respect to the prepared foods pricing and value proposition, when we look at what’s going on in the marketplace, there has been a lot of inflation that’s happened in the QSR and restaurant industry. And if you think about most restaurants in the U.S. are either independent operators or franchise operated. And so they are really small businesses even if they fly a big flag and so they are taking price at a pretty aggressive rate. And when we look at our pricing, if you think about our whole pie business as an example, it’s $15.99 is the most expensive specialty large pizza that we sell. And that with an order of breadsticks for $5 could feed a family of four. It’s pretty tough to feed a family of four in any QSR and certainly any casual dining environment for under $25. So, that value proposition is really strong. Then on the single-serve side, we just rolled out our breakfast value offer at $4. That’s a tough proposition. Most QSRs are at $5 now for any sort of breakfast value offering. So, we think we have got a really good value proposition for consumers. And like I said, when we look at the share data, it looks like we are taking share. So, I think that’s resonating with the guests. From a traffic standpoint, traffic has certainly gotten better as fuel prices have dropped. We didn’t – in the first quarter, our traffic was only down about 0.5%. So, we were almost flat even with record high fuel prices. So – we started to see a little bit of recovery there, and we think that only continues to get better as time goes on.

And our next question comes from the line of Chuck Cerankosky with Northcoast Research. Your line is open.

Good morning everyone. Great quarter. Could you talk about store openings, the rest of the year, you got off to looks like a slow start in getting the stores open. Are you seeing permitting problems still and certain difficulty in the builders getting components, especially for refrigeration?

Yes, Chuck. We did have a little bit of a slow start. But historically, that’s not all that unusual for us to have a slower start in the first quarter. And if you think about it, it kind of makes sense given our geography in the Midwest, typically we don’t start construction projects in January and February because of weather. And so if you are going to open in May, June timeframe, you got to start that project in kind of January, February to make that happen. And so first quarter tends to be a slower quarter for us anyway. That’s never got in the way of us getting our full year number. And we have got over 20 stores under construction as we speak. We got another 30 that will start construction between now and the end of the calendar year. And then our acquisition pipeline is looking really strong right now. So, we have full confidence we are going to get our full year number. It’s just a little bit of a timing issue.

Regarding acquisitions, could you talk about the environment for acquisitions versus last year where you got quite a few closed, please?

Yes. Last year was a great year for acquisitions and really both on – we had some of those larger acquisitions that got a lot of headlines, but we did a lot of smaller deals as well. And we are seeing that same dynamic play out right now. We have a really robust pipeline of smaller deals that you will never hear about other than on a call like this. But that’s looking really good. And then we have had some more larger deals that have come our way and we are actively engaged in those processes. And as you know, those are competitive. So, we have to see how that all shakes out. But we like what we are seeing right now from a deal flow perspective, and we think that’s just a reflection of the more complex and difficult operating environment that the old industry is in right now and smaller players are looking to get out of the industry.

And our next question comes from the line of Greg Badishkanian with Wolfe Research. Your line is open. Please go ahead.

Good morning. This is Spencer Hanus on for Greg. So, have you guys seen any acceleration in trade down quarter-to-date? And then as private label penetration picks up, are you seeing national brands start to take a less aggressive stance on raising prices as their units could be impacted?

No. Spencer, we haven’t really seen any acceleration in trade down. We – like I said before, with the private label, we have seen that shifting over to private label. A lot of that velocity in private label is coming from the national brands as people shift over to more affordable and high-quality options. We have not seen the national brands look at that data and make different decisions regarding their cost posture. And so we still see national brands passing on cost increases and we continue to flow most of that through to the consumer. And that just – that’s a bigger gap between the national brands and the private brands, which works to our benefit. So, we continue to do that.

Got it. That’s helpful. And then just taking a step back, can you walk us through how your overall unit sales trended in 1Q versus 4Q? And then I don’t know if you mentioned this, but have you talked about what the product inflation was during the first quarter?

Yes. Unit velocity overall was really about flat. And it’s a very different category-to-category, but let’s call it flat overall. In terms of inflation, we saw about 6.5% inflation in the grocery and general merch category and like I said before about 14% in prepared foods.

Okay. Great. Thank you.

Thank you. And our next question comes from the line of Bobby Griffin with Raymond James. Your line is open. Please go ahead.

Good morning Bobby.

Thanks for taking my question and congrats on the results [ph]. First is just a quick clarification question. Steve, on the gross margin headwind in prepared foods, I believe you referenced 190 bps was from cheese and then there was like 80 bps from LIFO. Is the remaining 270, all the higher waste from grab-and-go or are there other parts of that 270 basis points to get to the 540?

No. It’s more than just – it’s more than just waste. Waste is the single biggest remaining item in that delta, but we continue to have inflation pressure across other parts of that category. We got a lot of coffee inflation on a year-over-year basis, quite a bit of donut input cost inflation on a year-over-year basis. So, broad-based, it’s inflation across everything except cheese, plus higher waste levels would account for the difference.

Okay. That’s helpful. I just want to clarify that. And then I guess, lastly, more higher level, good comments about the uptick in market share around the breakfast category. So, can you may be put in context where Casey’s market share is today in that category versus historical levels? Is it at an all-time high, or is there opportunities to get back to maybe where it was, I don’t know, a few years ago or something like that?

Yes. We have actually grown the market share about 200 basis points from our most recent analysis. And as best we can identify, that’s coming largely from QSR in our geography. And so I don’t have a good historical reference point, Bobby, to know whether our breakfast market share is at an all-time high or not, but it has certainly grown over the last year and I think because we see that coming from QSR, we feel really good about the proposition that we are offering to our guests right now.

Okay. That’s helpful. I appreciate the details. Best of luck going forward.

Thanks.

And our next question comes from the line of Krisztina Katai with Deutsche Bank. Your line is open. Please go ahead.

Hi. Good morning and congrats on a great quarter. I just wanted to talk about customer acquisition and your loyalty program. I believe you referenced that it now consists of 5.5 million members. What do you see from repeat behavior from these customers? And what are some of the ways maybe you could give us examples of what you are working on to make sure that there is going to be continued stickiness or even higher repeat levels? So, maybe just update us on where you are in your personalization efforts.

Yes. Krisztina, with respect to our rewards members, we see that they visit our stores about 15% more frequently on an annual basis than our non-rewards members, and they spend about 12% more per transaction. So, they are a far more profitable guests than our non-rewards members. And they are far more active as well. When we measure this, we measure activity from a rewards member on a 30-day basis where most of the industry does that on a 90-day basis. And we see about 52% active participation on a monthly basis of 30 days. And so that’s really high, about 64% on a 90-day basis, and you can compare that to just about any rewards program in the QSR space, and that is far in excess of what you would see there. So, we have very active members. One of the things we do to try to engage them more frequently as we are shifting our emphasis to more individualized activation. So, we have – we started off with what we call curation, which was the majority of our messaging to reward guests was kind of a message to everybody on the platform or most of the people on the platform. Then we have migrated over to segmentation where we look at cohorts of guests and we would like behavior and then we send the message specifically to them and then individualizes where we send a specific message to an individual guest. Right now, between the segmented and the individualized guests, we are about 80% of our messaging is going to those two groups. So, we are seeing much higher response rates from those groups as we target those messages more towards their individual behavior.

That’s great. Thank you for that color. And maybe if I could just follow-up on the fuel trends and the traffic that you are seeing, especially following the end of the first quarter, what are you seeing from a consumer behavior perspective, how has that been changing, if at all, since the first quarter? Because I think you said your fill rate was down 8%, but it was offset by increased trips. So, I am just curious what is happening with trips and fill-up rate as we sit here sort of the middle of September?

Yes. Just to be clear, the 8% was a reduction in the average fill-up per guest. That wasn’t a number for overall volume going down. Because remember, on the flip side of that equation, you had an 8% increase in fuel trips. So, that was really kind of offsetting it. So, what we are seeing is, overall, volumes are getting better and they have gotten consistently better as we hit those peak retail prices, and we have come down. And we have seen pretty consistently once we get down into the upper $3, low $4 range, in fuel pricing, price points, the volume starts to recover and actually become a little bit positive. And so it’s just a matter of where we are on that evolution back down to more normalized retail pricing that drives that volume activity.

Thank you. And our next question comes from the line of John Lawrence with The Benchmark Company. Your line is open.

Hi. Great. Thanks guys. Good quarter. Congrats.

Good morning John.

Could you comment just a little bit, have you seen any comment on performance in some of the newer markets, say Knoxville, any difference in those markets? And secondly, remind us on the remodel schedule and when will we see some of those units getting remodeled and getting in fully with the kitchens, etcetera? Thanks.

Yes, John. So far, things are working according to plan. As you can imagine, it takes a while to permit for remodels, particularly where we are putting kitchens in stores. And so in Knoxville, in particular, we have only got two stores that have been remodeled at this point, but we have got a full plan to get those done and most likely by the end of the fiscal year to get a lot of those remodels done. So, early results are really only a reflection of us sort of doing some basic remerchandising and cleaning up the stores and changing some signage. But really, the real benefit will come when we get the full remodels in the kitchens end. Oklahoma City, we are kind of in the middle of that process right now. We have got about half of the stores we intended to remodel done, and we are starting to see the benefits of those remodels in those stores. The other half are in varying stages of either under construction or being started. So, quite a bit of noise in those numbers overall when we have stores shutdown for remodels. So, I would say that we are pleased with what we are seeing so far when we come out post remodel the prepared food is accelerating as we expected. And so we are confident that, that trend will continue in those other markets. We just have to let the process play out and get through those remodels.

Great. Thanks a lot. Good luck.

Thank you.

Thank you. And I am showing no further questions. And I would like to turn the conference back over to Darren Rebelez for any further remarks. End of Q&A:

Alright. Well, thanks for taking the time today to join us on the call. And again, we are off to a strong start this year, and I would also like to thank our team members once again for all their hard work and contributions and everybody, have a great day.

This concludes today’s conference call. Thank you for participating. You may now disconnect.