Good day, and thank you for standing by. Welcome to the Casey's General Stores' Second Quarter Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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 second quarter ended October 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'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 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, 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 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 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, GAAP financial measures referenced in this call as well as the detailed breakdown of the operating expense increase for the second quarter can be found at our website at www.caseys.com under the Investor Relations link. With that said, I'd now like to turn the call over to Darren to discuss our second quarter results. Darren?

Thanks, Brian, and good morning everyone. We'll dive into the strong second quarter results in a moment. But first, I want to thank our team for their commitment to our guests and especially during the holiday season, I'm so grateful for what we've accomplished this quarter and so far this year. This fall we saw our guests head to Casey's for everything they need, from our fast delicious breakfast offering, including fresh bean-to-cup coffee to convenient fill-up or delicious pizza meal occasion. On the heels of last year's breakfast relaunch, our breakfast offering pulled guests in with a fan favorite our loaded Breakfast Burrito as well as our buzzworthy LTO, the ultimate Beer Cheese Breakfast Pizza featuring Busch Light beer cheese sauce. This only a Casey's offerings generated store traffic, online pizza orders, and a lot of conversation about Casey's this fall. In November, we held our Annual Veterans Giving Campaign across all our stores to raise funds for organizations to support veterans and their families. As a veteran myself, I know the great sacrifice that these families have made and the challenges they face. With the help of our generous guests and partners at PepsiCo, we've raised over $1 million to help two outstanding organizations. The Children of Fallen Patriots and Hope For the Warriors. These funds will allow the charities to have an even greater impact on the lives of veterans and their loved ones. Thank you to our vendor partners, each Casey's team member that made the donation ask in our stores, and especially to our guests who truly do good when they shop at Casey's. Now let's discuss the results from the quarter. As you've seen in the press release, we had an excellent second quarter. Diluted EPS finished at $3.67 per share, a 42% increase…

Thank you, Darren, and good morning. Before I jump into the financials, I would also like to take a minute to acknowledge the team given the very strong performance throughout the entire business. The company showed great resiliency throughout the quarter in all three legs of our business led by store operations performed exceptionally well. Total revenue for the quarter was $4 billion, an increase of $716 million or 22% from the prior year. Total inside sales for the quarter were $1.3 billion which is an increase of $129 million or 11% from the prior year. For the quarter, grocery and general merchandise sales increased by $88 million to $917 million, an increase of 10.6%. Prepared food and dispensed beverage sales rose by $42 million to $351 million, which is an increase of 13.5%. Results were favorably impacted by operating 3% more stores on a year-over-year basis. And our in-stock levels did improve during the quarter versus the prior year, which helped inside sales, especially in prepared food. Second quarter retail fuel sales were up $587 million to $2.6 billion due to a 5% increase in gallons sold to $702 million as well as a 22.6% increase in the average retail price per gallon. That average price of fuel during the period was $3.75 a gallon compared to $3.06 a year ago. As a reminder, we define gross profit as revenue less cost of goods sold but excluding depreciation and amortization. Casey's had gross profit of $811 million in the second quarter, an increase of $93 million or 13% from the prior year. This was driven by higher inside gross profit of $41 million or 8.9% as well as an increase of $52.5 million or 22.7% in fuel gross profit. Inside gross profit margin was 39.8%, down 90 basis points…

All right thanks, Steve. I'd like to again say thank you and congratulations to the entire Casey's team for delivering a great quarter. Due to them we're confident in delivering on our improved fiscal '23 outlook. During the first half of the year, our merchandising team has done an excellent job driving business inside store by offering guests value and quality on products, including our private label program, our revamped breakfast and coffee offering, and our made-from-scratch pizza. The store operations team continues to execute the store simplification plan, was able to do this while efficiently managing operating expenses including reducing same-store labor hours by 3%. For prepared food and dispensed beverage margin, we continue to manage our costs prudently, while holding our relative value proposition for our guests. We're very pleased with the top line growth in PF&DB thus far. With respect to store growth, our business development team is evaluating strong deal flow, and we will remain disciplined with respect to valuations. We're able to leverage our strong balance sheet to achieve this and have unique flexibility to flex our balance sheet if the right opportunity presents itself. This is especially useful in the current macroeconomic environment where there are still inflationary, supply chain, and numerous other pressures. Casey's has historically been resilient in recessionary times as the business model allows for our guests to find quality and value conveniently. Our fuel team has done an excellent job maximizing fuel gross profit dollars, balancing volume and margin. The team has been able to grow gross profit dollars without losing share. The first half of the year has been very volatile for fuel pricing and having a centralized pricing and procurement team has been paramount for the success of the fuel business. On the digital side, orders through our…

Thank you. [Operator Instructions] Our first question comes from the line of Anthony Bonadio with Wells Fargo. Your line is now open.

Yes. Hi, good morning guys. Congrats on the beat. So I just wanted to ask about OpEx for starters. It looks like the revised guidance seems to imply little improvement and maybe even some level of cost acceleration in the back half, especially if I pull out that impairment charge in Q2. Can you just talk about your assumptions there and what might be driving that?

Yes, hi, good morning Anthony. This is Steve. I think the - probably the biggest incremental headwind really the only incremental headwind of note that we would be looking at right now would be incremental investment compensation - I'm sorry, incentive compensation for the organization, just given the strong results year-to-date, that's going to be partially offset, if retail prices of fuel continue to trend down, that would be a little less, credit card headwind and OpEx spends than we have been looking at this time last quarter. But generally, beyond those two things, I think most of our operating OpEx assumptions are largely unchanged.

Okay, that's helpful. And then just on unit growth. Obviously you guys are running quite a bit below the run rate for that 80 store target for the year. Can you just talk about what gives you confidence in your ability to hit that target? And then how are you currently planning organic openings in the back half? And then what does that imply about your expectations around potential deal flow?

Yes, Anthony, this is Darren. Yes, we are confident in getting to that 80 unit number for the year. We are also a little bit of a slow start for sure and a lot of that was just driven on some supply chain and permitting challenges earlier in the year. Most of those had been largely resolved, and we have stores under construction right now. So it's - so that's about half of the 40 units will be NTIs. And as we have a clear line of sight to getting to that number and probably a little bit above that. On the acquisition side, we've got a number of deals that are under agreement. So we just got to get them to close and we have confidence that we will close those and we have a couple of others that we're in advanced stages of - we're just not prepared to talk about right now, but given that we should comfortably get to the 80 store number that we have targeted for the year.

Thank you. Our next question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is now open.

All right. Thank you. Good morning, everyone.

Good morning, Bonnie.

I had a question on the consumer and just wanted to hear from you, what behavior changes you might be seeing either during your quarter then possibly in November? I guess I'm asking or thinking about it in the context of the lower prices at the pump. So curious if there's been any change there. And also then inside your store, any changes with downtrading, pack sizes, et cetera?

Yes, Bonnie. Just as a reminder, when we look at our guests, we buy [indiscernible] from middle-to-upper income and lower income. So for our guest base, about 72% of our guests make over $50,000 a year. So we put them in the middle-or-upper income and then we have the lower income consumers, I draw that distinction because they're really behaving differently. The middle-to-upper income consumers are really not changing much of their behavior, we still see them coming frequently and buying the products with they traditionally bought with some minimal exceptions for that. With a lower income consumer, we're seeing a couple of different changes that you kind of alluded to, they are certainly shifting more to private label product and seeking out the value there. We see them trading into more ethanol blended fuels, they tend to price the retail cheaper than non-ethanol blended fuels. We're also starting to see some behavior where they're taking different products and using those as meal replacements. So think of a protein shake or enhanced juices as a - as an alternative to a meal. So we'll see some of that. The other thing we're seeing with lower income consumers is this, which actually works out as a benefit to us, is they are ordering less deliveries for pizza. But what they are doing is stopping ordering pizza, they're just simply picking it up at the store, because it's cheaper than having it delivered. So we're starting to see at that lower end where some guests are trading value for convenience. But, overall, we're seeing strong shopper engagement across the board, it's just some different behaviors within each of the categories.

That's helpful and then just quick follow-up on that, is that behavior accelerating in any way, Darren? Just again thinking, the last month or two has been pretty consistent some of these pressures that you called out.

Yes. I'd say in some respects, it's probably accelerating a little bit from first quarter to second. I would say on the fuel side is moderated a bit, given the fact that retail prices have come down for fuel. So - but by and large, it's been fairly consistent.

Thank you. Our next question comes from the line of Ben Bienvenu with Stephens. Your line is now open.

Hi, thanks, good morning.

Good morning.

Good morning, Ben.

I want to ask two questions. My first is related to just the relationship between same-store sales and operating expense growth. It is beginning to normalize. You've shown a really solid acceleration in same-store sales growth inside the store as your operating expense growth has moderated. And you talked about I think, Steve, it was you that mentioned that your same-store hours are down. So, I wanted to talk a little bit about maybe the productivity you're seeing in the stores and the additional sales you're extracting from lower labor hours. And then to what extent price is factoring into your same-store sales growth that you've seen in each of your two major merchandise categories?

Yes, Ben, this is Darren. With respect to the dynamic of sales growth and labor. We began this fiscal year, we made a concerted effort there. We want to attack OpEx and the primary driver of OpEx for us is in our stores. And so we did a couple of things, we focused on store simplification and on turnover or an - on employee engagement rather with the goal of reducing turnover. And so what we've done is we've found some ways, let's remember different tactics. I'm just making the job of running our stores a little simpler. And at the same time focused on some things that employees were telling us that they want to see from us, and so the combination of those two things have resulted in really the highest engagement scores that we've ever had as a company among our team members overall, and particularly in our stores. And so what that's done is, it's reduced our turnover and so we've seen some sequential improvement in turnover every single month this year. And as a result of that, our overtime hours are down and our training hours down. So our overtime in the second quarter was down about 22% and our training hours were down 25%. So, we were able to maintain the hours of operating the store and just operating it more effectively and at the same time, pull out what I call those non-productive hours that we were spending on overtime and on incremental training because we are turning over people so much. So what gives me a lot of comfort is that we've achieved this OpEx result the right way. We have an impact of the guest experience in a negative way and so we think it's really sustainable.

Okay. That's great. My second question is related to merchandise margins. So the prepared food and dispensed beverage margins were down quite a bit in the quarter. Steve, you called out I think you said 90 basis points from cheese and then a 25 basis point LIFO charge. As we look to the balance of the year, given that you've maintained your 40% in-store merchandise sales margin. Is grocery going to be leading the charge in terms of margin improvement in the back half? Is prepared food going to get better as we move through the balance of the year? If you could deconstruct kind of the composition of the implied improvement in merchandise margins as you move through the rest of the fiscal year?

Yes, Ben, and good morning. This is Steve. I'll start with that. I expect that we will continue to have sequential improvement in our prepared food margins here as we go through the second half of the year. We are - in prepared foods specifically, we're still looking at low double digit type of inflationary increases generally in that category. And we're running mid-to-high single digit price increases at the moment. And so we will continue to frequently look to address that gap. We want to preserve our value proposition with guests and we think that's certainly been a positive to some of the revenue results that we've had in that category. But we have more work to do, just around the price inflation dynamic. Clearly, cheese is going to continue to be a wildcard for us, but we're consciously paying attention to that gap and making sure that we don't chase commodity inflation in a way that negatively impacts or confuses our guests, but recognizing that ultimately we will continue to close that gap. I would expect on the grocery side, we will stay fairly consistent. We will look at - be looking at a variety of calendar year price increases on our normal schedule with a lot of that centered of store merchandise come January 1 and we will be making price adjustments and at the same time, we have visibility on one of that's contracted and so I would expect that to be relatively constant, but more work on the prepared food side in the second half of the year.

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

Good morning, this is Ben Wood on for Kelly. Thanks for taking our questions. We wanted to start with the fuel side and look at the dynamic between margins and volumes for fuel. To us, this quarter looks like a little stronger volumes in softer margins which is kind of the opposite of what we feel other players in the industry are talking about. Did you guys see an opportunity to take gallon share that prompted you to be a little bit more aggressive? And have your margins run a little lower? I guess - asked different ways, what do you think the market grew for fuel gallons, and are you gaining share there?

Yes, Ben, this is Darren. Our stated goal on fuel is to optimize gross profit dollars and so that's always going to be a balance between volume and margin and throughout the quarter - this is a pretty volatile quarter from a cost standpoint. And so we were managing in real time how to stay as competitive as we can, given the margin environment that we are playing with. And so, we feel really good about the balance that the team struck this quarter. Yes, we were lower than the OPIS benchmark on margin by a couple of cents for what that's worth, but, we are also well ahead of the volume number. And I think it's important for us anyway in our business model to make sure that we're striking that right balance, so we're not chasing away guests. Because we have such a robust in-store offer there we want to maintain that traffic. And I think we did a good job of achieving that, and by the way at a $0.40 margin which is pretty robust. With respect to market share given that the Midwest OPIS volume numbers indicated anywhere from 6% to 9% down during the quarter, depending on what month you're looking at and the fact that we were flat. So I would have to conclude that we took some share from somebody, just not sure who that was.

Great, thank you. And then if I could just follow up on kind of the OpEx discussion. But in particular to the relationship to the - this quarter to the previous 10% guide. What came in specifically ahead of plan, was it mostly just those labor improvements? And then if you could you just provide a little more color on the decision not to lower full year OpEx guide in light of the significant beat? Is that just conservative or is there some visibility on costs that got spread into the second half?

Yes, hi. This is Steve. Certainly when we were looking at OpEx relative to, and I think we had said around 10% was the initial expectation for the quarter. To Darren's earlier commentary, the operating team continues to frankly over-deliver on our own expectations, and the training and the overtime dollars are significant, and those were expensive hours. And so, when we make incremental reductions in those hours, the dollars disproportionately fall through. So I do think we outperformed where we were hoping to land in that respect within the quarter for sure. And then back to the second half of the year I - certainly I believed that the low end of that range is a number that we can deliver against, and we will do our best to come in below that number. And as I think we said on an earlier question, there is incremental incentive compensation that we do need to absorb coming into the second half of the year just given the company's strong performance. So that will be a little bit of a modest headwind. But I feel very good about our ability to land at the bottom end of that range in a worst case scenario.

Thank you. Our next question comes from the line of Bobby Griffin with Raymond James. Your line is now open.

Good morning. This is Alessandra Jimenez on for Bobby Griffin. Thank you for taking our questions and congratulations on another solid quarter. First, can you maybe talk about just what the pricing adjustments in the prepared foods business you noted during the prepared remarks? And do you feel comfortable where you are priced to date based on the current commodity costs?

Yes. This is Darren. With respect to pricing in prepared foods, in about the last 14 months, we've taken four different price increases and so we've tried to keep pace to a certain extent with inflation, but we're also trying to balance that with our relative value proposition to our guests. And so, when we look at where we're at today, I think we're in a decent spot. That doesn't mean that we won't take more price action, but what it does mean is that we've had very solid performance from those categories from a volume perspective. And again that's our highest margin category even at current rates. And so, the more we sell at a 56% or 57% or 58% margin, the better for Casey's. So, we're always cognizant of that and we're just trying to strike that right balance. Our consumer insight work tells us that our guests still perceive us as a good value. So we're - we feel like we're striking that right balance for the moment, but we continue to keep an eye on those commodity costs. And when we think those are a little more permanent in nature, then we'll take pricing action to offset that. But right now it's fairly volatile and what we don't want to do is raise prices too much and then have to whipsaw the customer and go backwards. So we feel like we're in a - in an appropriate spot for the moment, and we'll continue to monitor and take pricing action as we think we need to.

That's very helpful. Thank you. And then one follow-up from an earlier question, did you see any correlation in acceleration in inside sales and higher volumes, fuel volumes as fuel price is moderated or comes fairly stable and consistent throughout the quarter?

Our traffic certainly improved from first quarter to second quarter inside the store and our gallon volume improved over that same period. So there is somewhat of a correlation. I'd be careful to draw a too brighter line on that one because about three quarters of our transactions are non-fuel related. So there's about 25% of those guests that come in for fuel and some of those translate into the store. But I would say, by and large that's a function of - the inside traffic is a function of what we're offering inside the store more so than it is our price for fuel.

Thank you. Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Your line is now open.

Good morning everybody. Excuse me. Great quarter. As the price of fuel trends down, is there any effect on the arithmetic to what the cents per gallon might be?

You're referring to what the margin might be, Chuck?

Correct, correct. Darren, does - say we get to $2.50 a gallon, does that make it harder for the industry to hold around $0.40 CPG?

I don't think it's so much a function of the absolute number as much as it is where the trend is going. When wholesale costs are coming down, they typically drop faster than the retail price. That widens out the margins. So whether you're at $4 a gallon retail or $2 a gallon retail, if the wholesale cost is coming down, that margin is going to widen out a bit. Where we'll start to see the flattening out is when the wholesale costs start to flatten out, and that bottoms out, and then we'll land at more of an equilibrium point. And then if it starts to go up again, then we'll see the opposite effect. So, right now since really the beginning of October, we've experienced a steadily declining wholesale environment. So you would expect those margins to expand. What I would remind everybody of is that we saw the same thing happen last year. In the month of November last year, wholesale costs dropped $0.40 a gallon, and then over the next two months they rose $0.60 a gallon. So we're just - it's a dynamic environment. We just got to keep focused on executing our strategy day-to-day. But I don't think landing at any certain retail price point is going to make it easier or more difficult to maintain margins.

Thanks. And then Darren, on the competitive side with some customers quite sensitive to what's happening to the economy. How do you see that affecting your competitors and willingness to price through ingredient costs?

Well, I think everybody is playing a different hand right now. With respect to that, I would think that the smaller, perhaps less resilient retailers are going to have to price through more of those commodity costs because they've got to survive. We are in a fortunate position where we can be a little more strategic than that and really focus on the consumer value proposition, which is what we're doing. And I think we're striking a good balance of that right now. Would I love our margin rate to be a little bit higher? Sure, I would. But I like what our gross profit dollar growth has been and it seems to be outpacing most. And we're getting the volume forward as well. And so I think we're growing some loyalty with our guests, which is more important for the long term.

Thank you. Our next question comes from the line of Irene Nattel with RBC Capital Markets. Your line is now open.

Thanks and good morning everyone. Just sort of thinking through some of this discussion...

Good morning.

Good morning - around margins versus volumes and whether we're talking about fuel or we're talking about pizza, it sounds as though you're doing really well with these - with your gross profit dollars at slightly lower, but still robust levels of margin. Does that kind of give you pause and make you rethink a little bit some of the margin targets?

Are you referring specifically to inside the store, Irene?

Yes. Yes, just sort of - if you can get to your growth, if you can continue to gain share and get to your gross profit dollar target with maybe slightly lower margins, but higher volumes. Is that the way we should - is that something that you're thinking through on a go forward basis?

We really haven't specified a margin percentage target. I mean, historically we've been right around that 60% margin range for prepared foods and 40% overall. We like to keep that, but we have to be cognizant of the environment we're in right now. And when we're in a, what I would call, a hyper-inflationary environment, there's obviously going to be pressure and we're going to have to try to balance the margin rate desires with our value proposition to the guests and keeping the volume there. So the gross profit dollars are coming right now. Certainly when inflation moderates and we get some time to normalize some things, we'd like to see that margin come up closer to more historic levels, but we're not going to force ourselves into a position where we're managing to a rate that might be artificial and ultimately negatively impact the guest experience.

Understood. Thank you. And then just switching gears for a moment to M&A. You mentioned that you're certainly having a lot of very interesting discussions. Can you talk a little bit about sort of the tone of the discussions and any changes in expectation around valuation?

Yes, I don't want to get too deep into any conversations we're having specifically there. What I would say is that we've seen a real acceleration in the number of sellers that are out there right now, and so we're in varying discussions with each of them and a lot of those valuation-type discussions really depend on the situation the sellers in right now in the competitive landscape from a buyer's side. Certainly I would expect rising interest rates to have an impact on valuations at some point. It just depends on who those buyers are and what their access to capital is and the strength of their balance sheet today in given time. But that's my expectation here in the foreseeable future is with interest rates where they are, I'd anticipate valuations start to creep down.

Thank you. Our next question comes from the line of John Royall with JPMorgan. Your line is now open.

Hi guys. Thanks for taking my question. Good morning. So, just a broad one on capital a little. You guys have built cash over the past few quarters, you have $415 million of cash right now on your balance sheet at least as far back as my model goes, I think that's a record. Steve mentioned I think $800 million in liquidity and the balance sheet is in great shape. So any thought on acting on your buyback authorization here or really is it more about kind of keeping some dry powder around given your commentary on acquisitions?

Yes, well, I think it's all of those, John. We're always talking about what's the right way for us to deploy the capital. Certainly, I think the cash number is a record as well. We think so that we're fortunate to be in that position at the moment. But there is no doubt in the very near term it's largely driven by just the timing of our capital spending and the PP&E that we've guided to where we've had a light first half of the year for the reasons Darren mentioned before. And so we will spend a disproportionate amount of that PP&E guide here in the second half of the year. So, I do think there'll be a draw on the cash balance seasonally. But, third quarter is usually our lowest cash flow generation quarter anyway, it's just because of the winter in our geography. So a lot of that is already earmarked for second half capital spending, but we are certainly conscientious of the fact that the company's profitability remains very strong. And at some point, it doesn't make sense for us. So obviously just sit on a very large cash balance and so we're going to continue to look at the repurchase opportunity that's out there, but just going back to our broader capital allocation right. And anything that we can invest and that we feel confident, it's going to drive EBITDA, our ROIC accretion is where we would go first. I like our leverage position. So I - we may nip and tuck a little bit on the debt side, but I don't think we would make a big move there, necessarily we will tend the dividend and obviously - eventually, then we wouldn't get to share repurchase. But second half of the year will be a heavier CapEx number for us. And so that's really primary factor in our thinking of - what we do as a cash balance, we have right now.

Okay, great, thanks, Steve. That's really helpful. And then maybe just another quick one, just hoping for an update on your private label business, unless I missed it, I don't think you mentioned, yes, this morning and just how that's trending and specifically wondering if there is no - has been a significant market share pickup due to consumers switching on inflation and if that can be quantified in any way?

Yes, John. We have seen sequential growth in our private label. So kind of being consistent with how we've talked about before, we exited the second quarter at 5.4% mix of private brands. I think that was 5.1% in the first quarter. But that number, the way we've been talking about is always going to be impacted negatively by tobacco and alcohol to a certain extent. Because we're getting those consistent quarterly cost increases in tobacco and so we pass those on to the consumer. So tobacco start - mix starts to have an impact on our ability to grow the private label mix. And by carve tobacco and alcohol out of that, because we don't have any private label products in either of those categories. I just focus on the rest of the store where we have products. We are a 12% mix on sales. I'm sorry, 10% mix on sales, 12% on units, and 13% on gross profit dollars. So we are seeing the private brand portfolio that have a meaningful impact on the categories that participates in and we're still growing. We have another 38 items will be rolling out between now and the end of the year and certainly more in the pipeline for next year.

Thank you. Our next question comes from the line of Krisztina Katai with Deutsche Bank. Your line is open.

Hi, good morning, and congrats on a nice quarter. Can you make some comments on the value that you bring in your various day parts relative to QSR competition? Can you just talk about the price differential of your offering in light of inflation that is still running high? And it sounds like your peers are mostly passing through these costs, so is that providing an opportunity for Casey's to widen the gap as inflation eventually starts to moderate and you can gain more share?

Yes, Krisztina, and the breakfast daypart, we've really tried to balance a couple of things we've leaned both on value and on innovation. And so, if you look at this past quarter, we had the Busch Light Beer Cheese Breakfast Pizza, which was a great innovation we saw tremendous momentum in our breakfast pizza sales as a result of that. We also leaned into our Ultimate Breakfast Burrito, which has been a real popular along with our guests and so pushing that on the innovation side, we're also had a $4 value offer for the more price-conscious consumers. So, I think we were able to balance those between value and innovation. On the value side, a $4 meal deal is a really good value relative to QSR in this space. And so we had a really strong results in breakfast. About 10% growth in the breakfast daypart versus prior year and that was cycling over a 10% from the prior year, so, with the breakfast launch last year. So really strong value proposition, we're seeing that momentum in the breakfast daypart.

That's great. And then I just wanted to follow up on the private label discussion. All national brands starting to notice some of the unit losses as you gain some brand and volume share and is that perhaps you driving a different conversation where they're starting to offer some concessions to bring down their prices. Well, it's not really happening yet.

Well, you know, that's an ongoing discussion we have with our supplier partners. And that's one of the things that we engage in during our joint business planning is talking about the breadth and depth of assortment. And the cost of goods and how we balance all of those things. And so there is a discussion about space, there is a discussion about cost of goods, there is a discussion about promotional activity. And we pull all of those things together. So, certainly having alternative products, that can offer an incremental value to the guest is important to us. And so, there are national branded suppliers want to stay in a relevant range. So yes, we definitely engaged in those discussions and we're in the process for that right now.

Thank you. Our next question comes from the line of John Lawrence with Benchmark. Your line is now open.

Yes, thanks. Good morning, guys.

Good morning.

Could you - just a second, you mentioned construction being delayed. Does this have any real impact on trying to get the remodel stores, adding the kitchens to the acquisitions, does that push that out a little bit?

You know, John, that - the construction delays haven't been so much on the remodel activity from a construction or supply chain standpoint. That's been more driven by permitting. It just takes time depending on the municipality to get through the permitting process on those remodels.

Great, thanks. And second one from me, just - can you talk about anything innovation-wise, that's - I know you don't want to say too much competitively, but things have been worked down in prepared food innovation-wise?

You're right, John. I don't want to talk too much detail about that. I'll tell you that, our culinary team is hard at work, and we've got some nice innovation lined up for the first half of the calendar year, but that's about all I'm going to say about that one.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Darren Rebelez for closing remarks.

All right. Thank you for taking the time today to join us on the call. We've had a great first half to the fiscal year and are excited to continue that momentum into the second half. And with the holiday season approaching, we wish everyone a warm and safe holiday season, especially our team members who continue to serve our guests and our communities every day.

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