Good day, and thank you for standing by. Welcome to Casey's General Stores Second Quarter Fiscal Year 2024 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 Brian Johnson, Senior Vice President of 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, 2023. I am Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Board Chair, President and Chief Executive Officer; and Steve Bramlage, Chief Financial Officer. Before we begin, I'll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to 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 are 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 that are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. Any forward-looking statements made during this call reflect our current views as of today with respect to future events, and Casey's disclaims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise. A reconciliation of non-GAAP to GAAP financial measures referenced on this call as well as a detailed breakdown of the operating expense increase for the second 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 second quarter results. Darren?

Thanks, Brian, and good morning, everyone. We'll discuss the excellent second quarter results in a moment. First, I want to thank our team, including the new team members in our 17th state of Texas for their dedication and hard work. We're excited to welcome the great state of Texas to the Casey's community. I know -- I speak for our entire team when I say we're extremely humbled by the response from our caring guests and dedicated team members to our annual Veterans giving campaign in November. This year's campaign resulted in over $1.2 million, just an outstanding outcome and for two great causes. Hope For The Warriors and Children of Fallen Patriots. We are so grateful to our communities and guests for their generous act of rounding up their purchase. As a veteran and myself, I know the great sacrifices these families have made and the challenges they face. Thank you to our partners at PepsiCo, who contribute to this campaign, our Casey's team members and especially to our guests who truly do good when they shop at Casey's. Now let's discuss the results from the quarter. Diluted earnings per share finished at $4.24 per share, a 16% increase from the prior year. Inside sales remained strong, driving inside gross profit dollars up 10% to $553 million. The company generated $159 million in net income, an increase of 15% and $306 million in EBITDA, an increase of 13% from the prior year. Inside the store, same-store sales were up despite lapping a very strong second quarter last year, while margins improved both sequentially and year-over-year as ingredient costs improve. On the fuel side of the business, we continue to strike the right balance between volume and margin. Similar to the first quarter, there are no significant macro events that…

Thank you, Darren, and good morning. Our performance was excellent in the second quarter as we saw great results inside and with fuel, while we continue to operate the stores efficiently. This was despite a challenging comparison from the second quarter last year and that's a testament to the resiliency of our business model and our team's execution. Total revenue for the quarter was $4.1 billion, an increase of $86 million or 2% from the prior year due primarily to higher inside revenue. Total inside sales for the quarter were $1.3 billion, and that's an increase of $78 million or 6% from prior year. For the quarter, Grocery and General Merchandise sales increased by $47 million to $964 million, an increase of 5.2%. Prepared Food and Dispensed Beverage sales rose by $31 million to $382 million, an increase of 8.9%. Results were also favorably impacted by operating more stores on a year-over-year basis. Retail fuel sales were up $11 million in the second quarter, as a 4% increase in gallons sold to $730 million was partially offset by a 3.5% decrease in the average retail price per gallon. That average retail price of fuel during the period was $3.62 a gallon, compared to $3.75 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 $886 million in the second quarter, an increase of $75 million or 9.2% from the prior year. This was driven by both higher inside gross profit of $48.8 million or 9.7% and higher fuel gross profit of $24.4 million or 8.6%. Inside gross profit margin was 41.1% and that's up 130 basis points from a year ago. The Grocery and General Merchandise margin was 34%, an increase of 70 basis points from…

Thanks, Steve. I'd like to thank the entire Casey's team for another quarter of outstanding results. We know that it's a challenging time for consumers everywhere. And we're so proud of the ability of our team members and stores to serve those guests with high-quality products. Our private label program continues to shine, and we saw positive growth in units and gross profit dollars during the quarter and continue to see a favorable impact on inside margin. And our guests are gravitating towards Casey's Rewards as we have over 7.3 million members today. On the Prepared Food and Dispensed Beverage side, Thin Crust Pizza continues to do well and has achieved a 13% share of whole pies throughout the quarter. The innovation team also moved to the breakfast daypart for the launch of the Ultimate Waffle breakfast sandwich, which has come out of the gate strong. Our continuous improvement team deserves price for all it has done to operate the stores efficiently and effectively while maintaining or improving guests and team member satisfaction. The team was able to take out another 2% of same-store labor hours in the quarter. We continue to expand our store count with complementary geographic growth. Recent acquisitions have strengthened our Eastern footprint in Kentucky and Tennessee, while we've also ventured into Texas, which we think is a hand and glove fit in our Southwest footprint. All of the stores are within our existing distribution radius, it fit the Casey's playbook of rural and suburban geographies. On the fuel side of the business, we had another strong quarter, both in fuel margin and gallons. With each passing quarter, we are becoming more confident that our industry has the necessity due to higher operating expenses, reset to a higher fuel margin environment. And with our team and the capabilities that we've stood up, we're focused on continuing to maximize gross profit dollars. As we look ahead to the second half of fiscal '24 and beyond, I'm excited about Casey's and our ability to execute our strategic plan. Our balance sheet affords us the ability to be disciplined but opportunistic with our store growth and our capabilities throughout the organization will allow for that growth to be efficient and innovative. We'll now take your questions.

[Operator Instructions] Our first question comes from the line of Ben Bienvenu with Stephens.

Steve, I want to follow up on the commentary you gave on quarter-to-date. You noted that the inside same-store sales results in the month of, I guess, November, and I don't know if that includes the stub period of December, but it's within the range of the annual guidance. Does the composition of the same-store sales growth looks similar to 2Q and that Prepared Foods is outpacing grocery. And any color that you can offer on kind of that divergence grocery moderating in the second quarter while same-store sales in Prepared Foods remains very strong, would be helpful.

Sure, Ben. I'll answer the first part of that and let Darren talk a little bit about the experience in the second quarter. The commentary is meant to be quarter-to-date, so it includes a little bit of a stub period into December. And yes, generally, were within the annual range for total inside and Prepared Food quarter-to-date is running a little bit stronger than Grocery similar to what we experienced in the second quarter. Darren, do you want to a couple of comments on that second quarter experience.

Yes. In the second quarter, Ben, we saw a little bit of softness on the Grocery and General Merchandise side that was primarily in the tobacco category, specifically cigarettes. And I think you've seen that throughout the industry that cigarette volume was significantly softer in the second quarter, and so that offsets some strength in some of the other categories. We also encountered a little bit of weather anomalies, which I don't typically like to talk about, but it does impact the beverage business to a certain degree, and we saw some of that in October as well. But I didn't see anything trend-wise outside the cigarettes that was very concerning. And I think what was encouraging to us is that our Prepared Food growth actually accelerated from the first quarter into the second. And so a very strong 2-year comps plus 17%. And so we're seeing the overall business perform very well.

Okay. Great. My second question is related to your operating expense growth guidance. You raised that -- you noted that 3Q growth year-over-year will be elevated and implied in kind of the updated guidance that you've given in the 3Q commentary that you've given is a pretty substantial step down in growth from 3Q to 4Q. Is it just a function of comparisons or what else is going on there? You made nice progress in the period on labor hours.

Yes, I'll start with that, Ben. I would expect year-over-year total OpEx growth to be the highest in the third quarter, and that's purely a function of lapping the benefit we had last year and then you're combining that with the fact that now all of these year-to-date acquisitions, all of which have closed relatively recently, certainly the EG and the Texas transactions, we'll have several million dollars of integration-related activity and almost all of that will hit us in the third quarter. And so I would expect that we would be back to -- you can call those back into the number mechanically in the fourth quarter, but we would be back into a more normalized run rate in the fourth quarter, albeit with a higher number of units coming into the system. But that 3% number we gave for same-store OpEx, excluding credit cards, that number should be very consistent quarter in and quarter out, just -- and that's a testament to how well the mothership is managing OpEx at the stores right now.

Next question comes from the line of Anthony Bonadio with Wells Fargo.

Congrats on the nice quarter. So I just wanted to ask about fuel margins in the context of the new guidance. I'm getting something in the mid-30s per gallon, maybe a little higher implied in the back half to get to that new 8% to 10% EBITDA growth number. I guess, one, is that the right way to think about it? And then two, can you just talk about why that's the right number? And then just different puts and takes around that.

Yes, sure, Anthony. With respect to the fuel margin, we tend to prefer to be a little bit conservative on those forecasts because as you well know, it's a pretty volatile category. That being said, we we've seen 5 out of the last 6 quarters, be in that $0.40 range. So we're not -- we don't see anything specifically that would cause a pullback in fuel margin, but we're just being conservative on that front. And so that's really about it in terms of the modeling.

Okay. Got it. And then just on inside margins. Obviously, another very strong quarter there. I know you guys have kind of talked about being comfortable around that 40% level over the long term. It seems like the current environment, as I think about things like mix as well as a lot of the things you guys are doing internally sort of remains favorable. I guess can you just talk about the sustainability of what we're seeing today? And just how you're thinking about the trade-off between sort of flowing that through versus investing in value?

Yes. Well, we think the margins are sustainable for a couple of reasons. When you look at how the mix is evolving with the tobacco category being one of the lower-margin categories in the assortment and that the size of that category shrinking as a percentage of the total business, that's favorable to a margin rate as that mix becomes more heavily reliant on the higher-margin categories. The second piece of that is our Prepared Foods business. Our Prepared Foods business continues to grow, and you saw the margin expansion in that business. And so when you combine those two, that's a more sustainable margin mix. And the third thing I would say is our private label continues to grow inside the portfolio, which also blends up the margin. So those three things are all working for us. Now with respect to investing in value, we do invest in value to a certain extent today primarily through our private brand. And so with our private label products, even though they represent significant value to the guest, those are highly margin accretive to us. So that works out well. And more recently, what we're seeing from a consumer standpoint is it at the lower end of the economic spectrum, you're starting to see consumers shift heavier over to Prepared Foods as opposed to Grocery and General Merch. I think that's just a function of the relative value that our Prepared Food represents versus some of the other snack products and packaged good products you see on the other side. So all of that is constructive to margins. And so that's why we think that's sustainable, and we don't need to engage in extreme value offerings to maintain and drive the traffic.

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

I had a question on your gross in general merchandise. First, your same-store sales were a bit soft. So for a little bit more color on the drivers of this? And more color on SIG sales the quarter, Darren, I know you called that out, but just curious to hear if your SIG business decelerated versus Q1 and wondering if you're making any changes to your nicotine category or possibly pricing on SIGs to mitigate some of these pressures.

Yes. Sure, Bonnie. I think on the SIG category itself, just combustible cigarettes were down about 4% in the quarter. And typically, what we've been able to do is pass on price and have that price flow through and with the unit decline offset and still stay relatively positive on the dollars and the category. That was not the case in this last quarter. I think to a large extent, that's a reflection of where the consumer is right now. As you know, the cigarette consumer tends to be a lower income consumer generally. And so what we've seen is a bit of trade down from that consumer into either not buying cigarettes as frequently or trading down to lower-tier brands. And so our team is assessing where to go from here on the cigarette category. But also that's not as significant a category for us as it is for others. So we don't feel the need to knee-jerk react. I mean, we still had a strong quarter. We were still constructive on margin. our gross profit dollars are growing at an accelerated rate relative to our peers. And so we don't feel any sort of undue pressure to do something different. We'll have to see how things play out with that category over time.

Yes. That makes sense. And then curious to hear your color on the consumer and maybe how things have changed in the last few months and maybe your outlook also just in the context of that color on your dayparts, maybe where stronger or weaker than expected, especially the morning daypart.

Yes. I guess if I step back and I look at our consumer base, I'd just remind everybody that about 3/4 of our consumers make over $50,000 a year. And given our geographic footprint, we are in a very low cost of living geography. In fact, the most expensive state we operate in is ranked 27th in cost of living. So that $50,000 [ tends ] to go a long way. So with that cohort of guests, 75% or so, we're really not seeing any change in consumption behavior. The changes we're seeing is on the other 25%, which are lower income consumers. And so we've seen a couple of things there. They're gravitating more towards our private label. Their cigarette purchases have been impacted, both in uni-velocity and in just what they are buying when they do buy, like we were just mentioning. They're pulling back on premium fuels and open more towards ethanol-blended fuels. But generally speaking, that's for that cohort of guests. So as we look forward, we still feel really good about the value proposition that we offer. 80% of our guests believe that we offer a good value for the money. And our traffic was flat over the quarter inside the store and our gallons were flat outside of the store. And so we're not suffering from a lack of traffic, and we're seeing people gravitate more towards the Prepared Foods as a relative value proposition. So we think as we look forward to the balance of the year, we still feel really good about the resilience of the consumers in our geography.

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

I guess the first question for me is, is it possible to size what the tobacco drag was on the grocery segment, just so we can get a little bit of a better flavor of how kind of the business performed ex tobacco?

Yes, Bobby, we would have been about 100 basis points higher top line growth ex tobacco and grocery.

Perfect. That's very helpful. And then, I guess, secondly for me is just on the labor hours reduction and other great performance this quarter. Is the team finding new task and opportunities inside the store, and those are kind of the reduction? Or is this a function of kind of the lower overtime that we've discussed in the past, given that turnover continues to move in the right direction as well? Or is it a combo of both, I guess?

Yes, Bob, I'd say it's a combination of both really, it's primarily driven, though, by the continuous improvement team, identifying nonvalue-added work that we can take out of the stores. That would be the primary impact. So that's a 2% reduction in labor hours. The overtime and training year-over-year has actually flattened out in terms of dollars, but we're using less hours when you factor in the wage rate. So if you think about flat dollars, but our average wage year-over-year is up about 3.5%. So that over time came down a bit, training was about flat. So we think it is a combination, not as dramatic as it was last year when we were really taking big swaths of overtime and training out with the reduced turnover. The turnover continues to reduce, but just not at the same rate as it was last year.

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

Everyone. Great quarter. I've got another question about the labor hours. What are you still able to do around fine-tuning the store hours and the number of stores that are doing pizza delivery and the number of days they're doing pizza delivery. How much of that is still available to help the store labor hour calculation.

Yes, Chuck. I would say that there's probably limited upside on that front as we sit here today. Our team constantly evaluates operating hours overall to determine whether we need to make adjustments there. But I would say that, that process is pretty dialed in at this point. So to be just fine-tuning here and there. In terms of labor relative to delivery, we have a small number of stores that are still doing delivery. I think it's a couple of hundred at this point. Yes, about 10%, so call it 250 stores. they're delivering ourselves. And the rest of it is through third parties. So that's not a labor impact for us. It is a margin impact when we have that delivery. But because that we only pay per delivery, we don't have a delivery driver at the store, waiting for another delivery order to come in. It's a far more efficient way for us to do delivery. So that's probably running for us as well.

Okay. And then private label products, where are you at on number of SKUs? And where is your goal on that?

Yes. We've got 310 SKUs in the assortment right now, and that's a result of adding a number of SKUs in the last quarter and then taking some out that just weren't performing as well as we expected them to. So still, it's the highest SKU count that we've had on private label since we've started. There's still plenty of runway there. The team's got a pipeline of products that we'll be introducing over the next several quarters. And then we're also starting to evaluate different tiers of private label. So think of premium products that would still be a significant value versus national brand, but elevated quality and uniqueness. So still a lot of way to go there.

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

This is Ben Wood on for Kelly. So for the past 3 quarters, you've had flat gallons, which seems to be outpacing public peers down low single digit and outpacing the broader industry where you compete in where your commentary seems to be pointing towards down mid-single digit for that period, implying pretty solid market share gains. So first, can you provide any color on what you guys think is driving those market share gains? Is it loyalty or the value proposition inside the store? Or are you investing some fuel margin to get the bargain hunting customer? And then second, just more generally, if the industry and your competitors are losing gallons at a mid-single-digit pace, is that sustainable longer term? Or at some point, are the independents and small chain operators going to have to change strategy to try to drive some more gallons through their stores.

Yes, let me take the first part first. The flat gallons and now we're driving it. If I step back, our stated strategy, which has not changed since I've been here in the 4.5 years I've been here, for our fuel team is to drive gross profit dollars in fuel and to maximize gross profit dollars in fuel. That's going to be a combination of balancing gallon growth and fuel margin. And so we don't look at a fuel margin number and try to achieve that number in any given quarter. Our goal is to balance those two to maximize gross profit dollars. And so I think this was a great example in this quarter of doing that. We maintained flat gallons, and like you said over the last several quarters, we've maintained those flat gallons, and we were north of $0.40 a gallon on margin. Now if you were to look at the OPUS numbers, and I think this is reflective of what's going on in the industry right now, OPUS would say that fuel margin in our geography was about $0.48 a gallon. So that was higher than where we were clearly. It also said that gallons were down 5.2% in the quarter, significantly below where we are. To your second question, that is not sustainable for them. it clearly isn't. But what it is, is it's a reflection of the challenges that smaller and midsized operators are facing with inflation and in particular, the impact that the tobacco category has on them. If you look at what their mix is, their mix is probably 40% to 50% cigarettes. And so when that category underperforms like it has in the last quarter or two, that's going to have a material impact on their P&L. They don't have a choice. They're operating in survival mode right now. And so they're taking that higher margin and willing to sacrifice those gallons to get it. And that's -- in the short term, that can work if you're trying to survive, in the long term is not sustainable. For us, we're not in that position. We're not as exposed to the tobacco categories, as the others. And we benefit from keeping that traffic in the store because we have high-margin Prepared Foods to sell people and high-margin private label to sell people that a lot of those others don't have. So it's important for us to keep that balance to keep that traffic. And you can see in the EBITDA results where most are going backwards in EBITDA, we had double-digit growth in EBITDA. So that is not just one metric or the other. It's a combination of all of these things working together that really makes our algorithm work for us.

Ben, maybe I would add one thing there is it just it also continues to drive smaller operators out of the industry in the long run. It's just more and more difficult for small independent operators to compete not just against us, but just anybody with any reasonable amount of scale and so part of the -- we believe part of the long line of consolidation opportunities that exist today in the industry is a function of it's just getting harder and harder for the smaller operators to do business. And we just don't see that trend changing anytime in the near term, partially because of all the dynamics we just discussed.

Okay. Great. And then I know, so I know we're only two quarters in, but with the guidance update, you're now expecting EBITDA growth within the long-term plan compared to kind of originally pointing us towards flat. And one of the discussion points at your Analyst Day was that your original plan seemed to imply an acceleration in EBITDA growth we calculated to kind of the 12% to 15% range in year 2 and year 3. Have expectations for the cadence changed? Or is some acceleration in the EBITDA growth and eventually getting above that 8% to 10% long-term plan, still the right way to think about it?

I'll take a crack at that. I would not divine anything into our updating here midstream in the first year around what we're saying in the out years of year 2 and 3. We're committed to an 8% to 10% CAGR over that 3-year period of time. The reality is that the year has clearly started off stronger than we anticipated that it would be. And some of that's clearly fuel margin related, and some of that's just really good performance across the operations. And so we'll take a stronger start than we anticipated every day of the week, and we still feel equally good about all of our longer -- medium and long-term prospects for driving growth as we did when we had the Investor Day.

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

On private label, which has been very successful for you, I was just curious to get an update on how your joint planning is going for the new calendar year with your national brand partners? Are they noticing or potentially responding to Casey's taking unit share in grocery? And anything you can share on expectations around pricing starting in January? And if you think that there's any possibility that maybe prices are going to start to roll back?

Yes, Krisztina, I guess, on joint planning. We are in the process of wrapping that up as we speak. And I think the planning sessions have gone really well so far. We've had good success over the last couple of years working with our primary CPG partners and growing their business and ours together. And so we enter into all of these discussions with that spirit, and I think we have some really good plans during the final stages of development working right now. With respect to the private label, it really kind of depends on the category and the manufacturing we're talking to. Our goal always and we communicate this with our partners is not to steal share from a national, it's to grow the overall category and growing the category both with national branded products as well as private label products. And I've used chips as an example. In the last quarter, we had a really strong quarter in chips. The national brands grew 10% and 2% positive unit growth. That's a good result in the quarter. Our private label chips grew 38% and 33% units in the quarter. So it is possible to do both and to have the success at both. And so that's what we're striving for with all of this is to achieve that. In some cases, our national brand manufacturers or also the manufacturers of their respective private label products. So we have varying degrees of integration on that front. In terms of pricing, I'm not really prepared to talk about price. Those conversations are still underway, but we would anticipate some low single-digit inflation probably being passed through somewhere around the beginning of the year -- calendar year.

And then just a quick follow-up on some of your comments around the low-end consumer trading down, do you think that you're attracting a new customer in your Prepared Foods business as part of the trade down? Or is the acceleration that you saw in the second quarter, all organic? So how do you think about opportunities for customer acquisition in this environment? And essentially walking them into our loyalty program to make sure that they stay with you.

Yes. I like our opportunity here in this sort of economic environment. Our Prepared Foods business really does represent a tremendous value for consumers. You can get a whole pie and two sides for far less money than it would cost to take the family out to the QSR as an example. And so we have the opportunity to attract new guests to our stores based on the fact that it's just at our normal pricing, it's a strong value. And then again, like I said, what we're starting to see on the -- with our lower income consumers is that they're making a choice about what food to buy and they're gravitating more towards prepared foods as opposed to packaged foods because the prepared foods offer incremental value there. So we see the ability to grow that business on both sides, which is great for us because it's the highest margin category that we operate in.

Our final question comes from the line of John Royall with JPMorgan.

So could you dig in a little on some of the ingredient costs tailwinds in Prepared Foods. And what are your expectations for the second half of the year for ingredient costs? It looks like you're tracking at the top end of your guidance range for inside margin. And you made some adjustments to guidance, but you didn't adjust that one. So should we assume that margin may come in a little in 2H? And just anything there on what looks like maybe a conservative second half guide on the inside margin.

This is Steve. I'll start with that. Specifically -- cheese, let's start with cheese. That's obviously the biggest input cost and the one that gets the most attention. We're about 80% hedged or locked I should say, for the second half of the year on cheese costs. And so I would expect that to be modestly favorable at current spot prices year-over-year, similar to what it was in the second quarter. So somewhere between 5% and 10% favorable based on the current strip for cheese for the rest of the year. Most of the other input costs on the Prepared Foods business are not contractual, a lot of commodities with proteins, et cetera. And so right now, we don't have a reason to believe that protein cost experience for the second half will be significantly different than what it was in the first half, which is just a modest slow improvement on a year-over-year basis. I think that would be somewhat similar. You've seen that really in the LIFO charge, the experience we've had in the first half of the year, specifically in Prepared Foods, right? We still have LIFO expense, but we have less year-over-year. And that's really just a function broadly of what kind of inflation pressure we're having in that business.

Great. And then my next question is on the buyback guide, $100 million on the year. You used the word opportunistic, but putting on a guide for the year, I think, suggests that maybe it's becoming a little more entrenched maybe in your capital allocation framework. Can you just talk about how we should think about the buyback as part of the framework going forward.

Yes. Listen, I think your point -- it's a point well taken. You obviously had not been active and share repurchase for the last couple of years. We tried to message the folks at the Investor Day that as the company grows and continues to generate more operating cash flow and that cash flow outstrips in the short term, our ability to allocate it back into growth, which is always going to be the first stop on the bus for us if we can grow EBITDA and ROIC, do it accretively that's where we'll put the money. It just gives us more flexibility around capital allocation. And so as the leverage level continues to slowly tick down. I'm not sure that necessarily serves us well, letting that continue to get lower. It's driving up the cost of capital. We've got ample flexibility now. And so share repurchase just becomes kind of a logical next stop. We've been pretty disciplined on how we pay the dividend around 15% to 20% payout ratio and trying to match EBITDA growth over the medium term. We're not going to walk away from that. We've raised the dividend, I think, for 24 years in a row at this point. And so we're proud of that. But we simply have more available cash and share repurchase feels like an appropriate part of the capital allocation when you put all of the pieces of the balance sheet and just cash flow generation together. And so it's not going to be nearly as significant as what we're reinvesting into growth. I would not want to set that expectation. But the reality is I do think it has a part to play more so than it has over the last couple of years.

Thank you. I would now like to turn the conference back to Mr. Darren Rebelez for closing remarks.

All right. Thank you, and thanks for taking the time today to join us on the call. Before we sign off, I want to thank our team members for all their hard work this quarter and wish everyone a happy holiday season and a new year.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.