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Operator: Good day, and welcome to the First Quarter Fiscal Year 2026 Casey’s General Stores Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Brian Johnson, Senior Vice President, Investor Relations and Business Development. Please go ahead.

Brian Johnson: Good morning, and thank you for joining us to discuss the results for our first quarter ended July 31, 2025. I’m Brian Johnson, Senior Vice President, Investor Relations and Business Development. With me today are Darren Rebelez, Chairman, President and Chief Executive Officer; as well as Steve Bramlage, Chief Financial Officer. Before we begin, I’ll remind you that certain statements made by us during this investor call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include any statements relating to the potential impact of the Fikes transaction, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, the company’s supply chain, business and integration strategies, plans and synergies, growth opportunities and performance at our stores.

There are a number of known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any future results expressed or implied by those forward-looking statements, including, but not limited to, the integration of the recent acquisitions, our ability to execute on our strategic plan or to realize benefits from the strategic plan, the impact and duration of conflicts in oil-producing regions and related governmental actions as well as other risks, uncertainties and factors, which are described in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the SEC and available on our website. Any forward-looking statements made during this call can reflect our current views as of today with respect to future events, and Casey’s disclaims any intention or obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise.

A reconciliation of non-GAAP to GAAP financial measures referenced in this call as well as a detailed breakdown of the operating expense increase for the 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?

Darren Rebelez: Thanks, Brian, and good morning, everyone. Before we dive into our strong first quarter performance, I’d like to congratulate the entire Casey’s team for executing an outstanding summer plan at a high level and delivering a terrific guest experience across Casey’s Country. I’d also like to highlight the positive impact Casey’s is making on our communities. As students head back to school, Casey’s is excited to see the impact of our Cash for Classrooms grants come to life. Last year, we awarded $900,000 to schools throughout our communities. Thanks to the generosity of our guests and team members, along with the support from our supplier partner, Coca-Cola, this August campaign raised over $1 million, fueling our continued commitment to supporting education and enriching the lives of children across our footprint.

Now let’s discuss the results from the quarter. Diluted EPS finished at $5.77 per share, a 19% increase from the prior year. The company generated $215 million in net income and $414 million in EBITDA, both of which are an increase of 20% from the prior year. Inside the store, we saw positive traffic growth as guests responded well to our innovation and promotional activity in the prepared food and dispensed beverage category. We also experienced margin expansion, driven primarily by the grocery and general merchandise category. Our fuel team is doing an excellent job balancing fuel volume and margin, achieving positive same-store gallons and margins above $0.40 per gallon. As we work through the last year of our 3-year strategic plan, I’m extremely confident in our team’s ability to execute at a high level and continue to grow the business.

I would now like to go over the results and share some of the details in each of the categories. Inside same-store sales were up 4.3% for the first quarter or 6.7% on a 2-year stack basis, with an average margin of 41.9%. Same-store prepared food and dispensed beverage led the way as sales were up 5.6% or 10.2% on a 2-year stack basis, with an average margin of 58%. Whole pies and bakery performed well in the quarter. Margin was down approximately 30 basis points from the prior year as the lower margin from the recently acquired CEFCO stores was partially offset by modest retail price adjustments, primarily in bakery and cost of goods management. Same-store grocery and general merchandise sales were up 3.8% or 5.4% on a 2-year stack basis, with an average margin of 35.9%, an increase of approximately 50 basis points from the prior year, primarily due to favorable mix shift to higher-margin items such as energy drinks and nicotine alternatives within their categories.

Turning to fuel. Same-store gallons sold were up 1.7% with a fuel margin of $0.41 per gallon. According to OPIS fuel gallons sold data, the Mid-Continent region saw an approximate 3% decline this quarter, suggesting we continue to grow market share. The fuel team is successfully balancing volume and margin, and the performance shows it. We continue to be judicious managing operating expense with an increase of 3% on a same-store, excluding credit card fee basis, lapping a 0.7% increase in the prior year. Our focus on simplifying the operations once again resulted in reduced training and overtime hours, yielding an overall decrease of 1% in same-store labor hours. I would now like to turn the call over to Steve to discuss the financial results from the first quarter.

Steve?

Stephen Bramlage: Thank you, Darren, and good morning. We’re clearly starting the third year of our 3-year strategic plan on a really strong note, and I’m extremely proud of the hard work of the team during the quarter. Total revenue for the quarter was $4.6 billion. That’s an increase of $469 million or 11.5% from the prior year. That’s due primarily to higher inside sales as well as higher fuel gallons sold, partially offset by a lower retail fuel price. Results were also favorably impacted by operating approximately 8% more stores on a year-over-year basis. Total inside sales for the quarter were $1.68 billion, an increase of $210 million or 14.2% from the prior year. For the quarter, prepared food and dispensed beverage sales rose by $53 million to $458 million, an increase of 13.2%, and grocery and general merchandise sales increased by $156 million to $1.23 billion, that’s an increase of 14.6%.

Retail fuel sales were up $178 million in the quarter as an 18% increase in fuel gallons sold was partially offset by a 9% decline in the average retail price. The average retail price of fuel during this period was $3 a gallon, and that compares to $3.31 a year ago. We define gross profit as revenue less cost of goods sold, but excluding depreciation and amortization. Casey’s had gross profit of $1.11 billion in the quarter, an increase of $157 million or 16.5% from the prior year. This is driven by both higher inside gross profit of $91.1 million or 14.8%, as well as higher fuel gross profit of $59 million or 18.8%. Inside gross profit margin was 41.9%, up 20 basis points from a year ago. Prepared food and dispensed beverage margin was 58%.

That’s down 30 basis points from prior year. Cheese was $2.11 per pound for the quarter compared to $2.09 per pound last year. That’s an increase of 1% or less than 10 basis points. There was an approximately 110 basis point headwind from the CEFCO stores that was partially offset by modest retail price adjustments as well as strong cost of goods management. The grocery and general merchandise margin was 35.9%, an increase of 50 basis points from the prior year. And the change is primarily due to favorable mix shift within the category. Fuel margin for the quarter was $0.41 per gallon. That’s up $0.03 per gallon from prior year. This is inclusive of an approximately $0.015 per gallon drag due to the CEFCO stores. Total operating expenses were up 14.6% and were $88.7 million in the quarter.

Approximately 10% of the total operating expense increase is due to unit growth as we operated 221 more stores than in the prior year. Same-store employee expense accounted for approximately 1.5% of the increase, as modest increases in wage rates were partially offset by the reduction in same-store hours. Higher insurance and property taxes contributed to approximately 1% of the increase. Net interest expense was $26.9 million in the quarter, and that’s up $12.8 million versus the prior year, which is primarily due to the financing associated with the Fikes transaction. Depreciation in the quarter was $109 million, and that’s up nearly $15 million versus the prior year, primarily due to operating more stores. The effective tax rate for the quarter was 22.7%.

That’s compared to 24.1% in the prior year. The decrease was driven by an increase in tax benefits that we recognized on share-based awards. Additionally, as part of the One Big Beautiful Bill Act, our cash taxes will be reduced by approximately $90 million related to capital spending over the course of the fiscal year. This will not impact the tax rate for EPS purposes. Net income was up versus the prior year to $215.4 million, an increase of 19.5%. EBITDA for the quarter was $414.3 million. That’s an increase of 19.8%. Our balance sheet remains in excellent condition, and we have more than ample financial flexibility. On July 31, we had total available liquidity of $1.4 billion. Also on July 31, our debt-to-EBITDA ratio was 1.8x as calculated under the covenants in our credit facilities.

For the quarter, net cash generated by operating activities of $372 million, plus purchases of property and equipment of $110 million resulted in the company generating $262 million of free cash flow, and that compares to $181 million generated in the prior year. At the September meeting, the Board voted to maintain the quarterly dividend of $0.57 per share. During the first quarter, we repurchased approximately $31 million in shares, and we have approximately $264 million remaining on our existing share repurchase authorization. As a reminder, investing in EBITDA and ROIC accretive growth investments remains our primary capital allocation priority. But consistent with our fiscal year 2026 outlook and given our modest leverage levels of strong cash flows, we repurchased shares during the quarter, and we expect to continue to do so for the remainder of the fiscal year.

Consistent with our past practice, we plan to update annual guidance on our second quarter earnings call when we’re through the seasonally largest time of the year. Now our results for August were as follows. Same-store volumes, both inside and outside the store, are consistent with our annual guidance expectations. Fuel CPG was near $0.40 per gallon and current cheese costs are slightly favorable versus the prior year. As a reminder, the second quarter is the final quarter where we’re going to be comping nonownership of Fikes in the prior year. With this in mind, we expect second quarter operating expense to be up mid-teens, as we had previously communicated. I’ll now turn the call back over to Darren.

Darren Rebelez: Thanks, Steve. I’d like to thank the entire Casey’s team for an outstanding first quarter. We started our fiscal year off strong and are doing an excellent job of executing on the 3-year strategic plan. The summer months are the busiest inside the store and our team met guest expectations extremely well. Our merchandising plan for the summer was executed at a high level throughout the organization. From those that created the plan to those at the stores carrying out the plan to our supply chain and fuel teams and every team member in-between, this team effort resulted in positive traffic to our stores and strong performance across the entire business. We also brought back our most popular LTO with the Barbecue Brisket pizza and whole pies were a growth driver for the category.

Using guest insights and data gathered from our nearly 9.5 million Casey’s Rewards members helps us get the right products on the shelves at competitive prices for our guests. All of this resulted in strong same-store results that were primarily driven by positive units in traffic. At the pump, we continue to gain market share as our same-store gallons growth outpaced OPIS data in our region. We believe our robust inside offering and competitive fuel pricing gives guests reasons for Casey’s to be the one-stop shop for prepared food, grocery items and fuel. Overall, we’re extremely excited about the Casey’s business model and have high confidence in our ability to carry this momentum into the future. We will now take your questions.

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Operator: [Operator Instructions] And our first question comes from Pooran Sharma with Stephens Inc.

Pooran Sharma: Congrats on the strong quarter here. I guess I just want to start off with maybe understanding cheese costs. You mentioned they’re slightly favorable versus the prior year. I was just maybe wondering if you could help us unpack that benefit a little bit. And if you could help us understand how much of your needs you have booked for the year?

Darren Rebelez: Pooran, you kind of broke up on that question. Could you repeat that, please?

Pooran Sharma: Yes. Just wondering if you could help us unpack the benefit from lower cheese cost and help us understand how much of your needs you have booked for the year.

Stephen Bramlage: Yes. So in the quarter, it was obviously really close to prior year. I mean we were a little less than 10 basis points difference on a year-over-year basis from a cheese cost perspective. As we sit here today, we are about 70%, 7-0 percent locked on our forward cheese requirements for the remainder of this fiscal year. So Q2, Q3 and Q4 are all right around 70% locked. And we only lock if we can lock at it comparable or generally slightly favorable rates on a year-over-year basis. And so we feel pretty good about the certainty of cheese costs going forward. And with the 30% of the strip that’s open for us in the second quarter and the 70% we have hedged, that’s why we’re sitting here today, we’re just a little bit ahead on a year-over-year basis.

Pooran Sharma: Okay. I appreciate that color there. And I just wanted to understand kind of the strength behind the fuel business. I mean you mentioned it in your prepared comments, you’re outpacing the region. You have a strong offering that drives traffic inside the store. But maybe I was wondering if you could talk about Fuel 3.0. Last quarter, I think you said about 3% of your supply was coming in from this initiative. So I was wondering if you could provide us with an update on that initiative?

Darren Rebelez: Yes. With respect to Fuel 3.0, we continue to procure more of our fuel through that vehicle. For the combined business, it’s about 8.8% of our total fuel procured and I would say that the majority of that is coming from the Fikes acquisition. As you recall, there’s a fuel terminal we picked up and they have been shipping fuel like this for a while. So the bulk of it is there. We’re about 3% of our fuel on the base business is being procured through Fuel 3.0. So making good progress. The team is still integrating, but we like what we see so far on that.

Operator: Our next question comes from Chuck Cerankosky with Northcoast Research.

Charles Cerankosky: Great quarter. Could you go into a little more detail on price versus volume in store, please? You mentioned bakery, but how about some of the other categories?

Darren Rebelez: Well, just overall, Chuck, we have about 1.5% in traffic increase and then about 3% coming from price overall. So that will get you to roughly your 4.5%. The majority of that price is coming through the tobacco category with cigarettes. And so has been our practice for years, as those manufacturers pass on cost increases, we pass this on to the guest, and that’s what’s driving the tobacco side of it. Outside of that, there’s very modest price increases at all in the quarter. And a little bit on candy, just passing on cost increases but very little. And really, what we’re seeing is more units purchased in the basket, which is really helping to drive the sales as well.

Charles Cerankosky: Darren, would that increase in units be true for both prepared foods and the grocery/merchandise?

Darren Rebelez: Yes, it is. It is, Chuck. I mean more so in the prepared foods than in the grocery, but I mean, we’re seeing really good strength in nonalcoholic beverages in the grocery category and in snacks as well.

Operator: Our next question comes from Chuck Grom with Gordon Haskett.

Charles Grom: Great quarter. I was wondering if you could just speak to the overall health of your consumer across income cohorts, any incremental evidence of trade down. And then regionally, is there anything to note in the border stores, Texas region?

Darren Rebelez: Yes. I’ll first talk about guest strength from an income cohort standpoint. For the rewards members that we have, where we can really track their behavior and have full visibility, we’re really seeing relatively strong performance across all income cohorts. And the way we break that down is $50,000 or less in income, $50,000 to $100,000, and then everybody above $100,000. And so the lower income group, that $50,000 under are still shopping the stores and still buying at a fairly healthy clip, just not as much as the other income cohorts, about 160 basis points lower than the higher income cohorts, but still coming to the store, still buying. And really, where we’re seeing the most strength inside of that is in our prepared foods business.

I think that value proposition for the quantity and quality of the food that you’re getting is really resonating with that group as well as the others. Probably on the other side, the category most pressured by lower income consumer is cigarettes. But again, our cigarette mix is lower than most of the industry. So I think we’re a bit insulated from that perspective.

Charles Grom: Individually?

Darren Rebelez: Yes, you asked about the Texas stores. There’s a little bit more pressure down there than there is with the base business. But keep in mind also, those CEFCO stores are still CEFCO stores right now. They’re not Casey’s stores. We’ve converted 3 proof-of-concept stores, but we haven’t converted anything else. So they don’t have the food proposition that we have in our base business. And so as we start to remodel those stores, we’ll start to change the trajectory of that — those businesses, but it’s a bit — it’s under a bit more pressure than our base business at the moment.

Charles Grom: Okay. I appreciate that. And then my follow-up question is just on the CEFCO business, the drag on the prepared foods line. In particular, I believe in the back half of last year, it was around 150 basis points, 160 basis points. You called out about 110 basis points this quarter, which is a really nice improvement. Can we dive into that? What are you guys making progress on? And how should we think about that drag on the total business in the coming quarters?

Darren Rebelez: Yes. We’ve made a few adjustments to the assortment, really just kind of some basic stuff, just clean up some things where maybe some items weren’t selling very well, so we’ve eliminated those items. And so that’s definitely helped. They’ve adopted a little bit more of our promotional approach, not 100% yet because they don’t have all the assortment. But we’re evolving in that direction. And so we’re starting to see a little bit of benefit. We won’t see the biggest benefit until we convert the kitchens and start selling the full assortment. So at the moment, their prepared foods business runs at a margin rate just slightly greater than half of the margin rate of a Casey’s store. So there’s going to be that drag until we get those stores converted and fully up to speed.

Stephen Bramlage: And just as a reminder, realistically, we don’t expect significant synergy capture from remodeling the stores until a year-plus from now, and that’s a function of just timing of us being able to get permitting and construction, et cetera, finished.

Operator: Our next question comes from Bobby Griffin with Raymond James.

Robert Griffin: A great start to the fiscal year. I guess Darren, first, I just wanted to maybe touch on the wings test, if there’s anything more you can share there? I know you guys are still in kind of very early learnings, but we touched on it last quarter. Just curious, anything incremental over the last couple of months?

Darren Rebelez: Not too much. I mean the team is definitely working on it. And we’re taking the approach on this that we have with a lot of other product innovations. And I think it’s worked to our benefit is that we’ll continue to work it, continue to evolve it until we get it right, and it will roll out when it’s ready to roll out. And so we’ve identified a few opportunities with some flavor profiles, with some builds. We’re still tweaking some equipment needs, but we like what we’re seeing. We’re making progress. And as soon as we feel confident we have it completely dialed in, that’s when we’ll start to expand.

Robert Griffin: Fair enough. And I appreciate those details. And then I guess, secondly, it does seem the last couple of quarters, the core prepared food business out of Casey’s has really found some nice momentum on the margin side, enough so that you can offset the Fikes dilution. Can you maybe unpack that a little bit more? I mean I think you guys mentioned Fikes is a 110-basis point drag. So it implies the core was up nicely. How much is left there? And kind of what do you think that — does that create a better pricing opportunity for you guys to even push harder on competition? Or how do you think about that if this core margin improvement is sustainable?

Darren Rebelez: Yes. Our — with our prepared food margin, I think we’ve got a couple of things. One is we’ve made some progress on the procurement side from a cost of goods standpoint. So that’s certainly helped particularly on dispensed beverages. I think the other big piece of it is the acceleration of our whole pie business. Our whole pie business is the largest or the highest margin subcategory within prepared foods, and it’s the largest. And so when that sorts to grow, everything gets better in our prepared food business when that’s growing, and that’s what we’re experiencing right now. So we like what we see and hoping for that momentum to continue.

Operator: Our next question comes from Anthony Bonadio with Wells Fargo.

Anthony Bonadio: So just to dig in a little bit on that earlier fuel question. A lot of your peers are sort of struggling to just try to water on fuel gross profit dollars. And you guys managed to grow both same-store gallons and fuel margins with the Fikes headwind in there. So can you just talk a little bit more about what you think is driving that dispersion and then what you’re seeing out there competitively, just given some of the commentary we’re hearing from your peers?

Darren Rebelez: Yes. I’d say there’s really 3 things that we think are helping out our fuel volume. The first is really our prepared foods offer. And as we talked about before, Anthony, you fill up your tank once a week or so, but you eat 3, 4, 5 times a day. And I think with our food proposition really resonating with people, it’s driving more traffic to the stores. So we just simply have more shots on goal from a fuel standpoint, once you’re already on the lot than perhaps some of our competitors do. The second piece is our value perception. And in the research we do with our Guest Insights team, we ask guests to compare us to our largest competitors. We score the highest on offering low prices and on good value for the money.

And so I think there’s a perception, people are coming to the store anyway for prepared foods, but we also have a great value perception overall with the store. So there’s not a lot of incentive to go shopping around for fuel price. And great credit to our fuel team, over the last number of years, they’ve been able to very consistently execute our pricing strategy. And so over time, guests build some confidence around the idea that we’re always going to be competitively priced. If you’re already at the store anyway and you know we’re going to be competitively priced, there’s just not a good reason to shop around. And so I think that consistency has helped our fuel business. And it — and we haven’t had to get overly aggressive from a margin standpoint because we’ve been always competitive and consistently so.

Operator: Our next question comes from Michael Montani with Evercore ISI.

Michael Montani: Just wanted to ask a two-parter. First off, I was wondering if you could comment a little bit about the M&A backdrop that you’re seeing out there, both in terms of smaller deals and then also potentially the larger kind of 50-plus store deals. So that was one thing. And then the other one was just on seasonality. I understand you don’t want to update the full year guide, but in the past, 2Q earnings power is usually pretty similar to 1Q and then you get maybe a 40%, 50% step down in the back half of the year. So just wanted to understand if there’s any puts or takes on the timing side or otherwise, we need to keep in mind when we’re thinking about kind of the sequential earnings cadence through the year?

Darren Rebelez: Alright, Michael, with respect to M&A, and I’ll let Steve talk about seasonality. But on the M&A front, I would say on the small deal M&A, it’s kind of business as usual. Our team is out in the market. We’re seeing a lot of interest from sellers. We think that’s a good environment. I’d say it’s nothing different than normal. On the larger deal M&A, we’re having some conversations with folks. We haven’t had anything active at the moment, but we’re in the market, and we’ll see how things evolve as we get through the year.

Stephen Bramlage: And on the seasonality, no changes in our view of kind of how seasonality works and we believe that by the time we get to the second quarter earnings call, we’ve got visibility really to the first 7 months of the year at that point. And I think those are 7 of the 8 largest months we have in our fiscal year, and it just allows us to have a pretty high degree of confidence dialing in a refined view of the full year. So we feel like we’ve had a good start, for sure, to the beginning of this year, but we’ve got a lot of work in front of us and a long way to go. And so we’ll stick with the play that we feel has worked for us so far around kind of managing expectations.

Operator: Our next question comes from Bonnie Herzog with Goldman Sachs.

Bonnie Herzog: Maybe just a quick follow-up on this topic just in terms of phasing because I know you guys mentioned previously that you expected this fiscal year to be more second-half weighted given the timing of the Fikes acquisitions. So I’m just thinking about in the context, the strength in Q1. First, love to hear how the quarter came in maybe relative to your internal expectations? And then I guess if it was a little bit stronger, does it suggest maybe some conservatism to your guidance this year?

Darren Rebelez: Well, Bonnie, what I’d tell you is I kind of reiterate what Steve said, we had a great first quarter. We think we’re off to a good start from August results we just shared and we’ll update everybody at the end of second quarter when we have a little bit more visibility into the balance of the year.

Stephen Bramlage: I mean the one thing I would reiterate, Bonnie, is that the seasonality dynamic has not changed, I mean as far as I know in the business. I do think I’d reiterate for everybody the way the comping on a year-over-year basis, right, Fikes heavily influences that, right? So we’re going to have big total changes in the first half of the year because we didn’t have Fikes in the comparable period. But if you get to the second half of the year, we obviously have Fikes in that prior year period. And so the total change numbers will look a little bit different because it’s just not quite as stark of a difference. And that has not changed from any of our guidance expectations either.

Bonnie Herzog: Okay. And then just one other quick question on promos. You did mention that, that really helped drive traffic and strength inside the store in the quarter. So could you maybe quantify your spend levels this quarter versus the prior quarter and then maybe year-over-year? I guess I’m just hoping to understand maybe how much your promo spend has increased either sequentially or year-over-year?

Stephen Bramlage: Yes. Well, I guess the first thing I would point out is a large amount of the promotional activity that you see in a store from us is in conjunction with our vendor partners, right? And so BOGOs and that sort of thing are very often funded completely or at least partially certainly within the grocery category by our vendor partners. And so that spend per se doesn’t show up directly in our financials. The absolute level of promotion, for sure, has continued to increase as the absolute level of business and the number of stores that we have has increased. But the majority of the promotional spending is really not directly being funded by the company.

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

Kelly Bania: Just wanted to go back to CEFCO now coming up almost on a year, I guess, 10 months. And just curious if there’s any more learnings that you can share or even refinements to that original plan for the $45 million in synergies. It sounds like there’s some very basic changes that you’ve been able to make on the inside of the store that’s helping margins. But just as you kind of step back big picture, can you give us a little more color about how CEFCO stores are comping and the competitive environment that they’re facing?

Darren Rebelez: Yes. I would say that broadly speaking, Kelly, that the CEFCO integration is on track with what we expected. And I think we’ve described earlier, in the early stages of really any integration and this one’s no different, we expect to get more synergy early on from fuel and in this case, some G&A synergies because we acquired the entire business for the back office and that sort of thing. And that is tracking as we would have expected. But the biggest synergies come from putting our prepared foods in, and to get that done, we have to remodel stores and put kitchens in. And so there’s a longer lead time on that. We really having gotten that work started in earnest yet, but the team is fully engaged on developing those plans and getting those permits executed so that we can begin that work.

But I would say, generally speaking, that it’s on track. In terms of how we’re comping with, there’s a lot of noise in those numbers. There are some changes in behavior have occurred as we’ve taken over the operation, particularly on the fuel side, you may recall that they had one person pricing fuel for the entire company, that was our CEO, and so we’re probably taking a little different approach on that. And so we’re seeing some different results, both on the volume and margin side. So there’s puts and takes to that. But I think overall, it’s working as we would expect. And as we start the actual integrations and conversions, we’re confident that, that performance will accelerate. Steve, do you have anything you want to add to that?

Stephen Bramlage: No, I think we’re sitting here today, we’re ahead on fuel for the reasons Darren said, expectations were ahead on SG&A from what we had originally set out. I think 45 is still a good number. But I think we feel very good that the prospects once we remodel the kitchens, we probably will land the plane above that. But because the bulk of the synergies are coming from kitchens, we really haven’t started too soon to provide a different number.

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

Jacob Aiken-Phillips: So I wanted to start with thinking about store growth like in the outer years past the 3-year target and especially in the context of there’s some larger public competitors making some bigger acquisitions as well as some private players with good, prepared food offerings, kind of aggressively expanding geographically.

Stephen Bramlage: So is there — sorry, Jacob, was there a question in there?

Jacob Aiken-Phillips: How should we think about store growth in like outer years in the context of the competition and like where you’ll expand geographically?

Darren Rebelez: Yes. With respect to store growth broadly, I mean, we haven’t obviously issued our next 3-year plan, which we will do in June of next year, and so we’ll share those numbers. But if I step back, our fundamental growth algorithm is trying to drive 8% to 10% EBITDA growth. And to get to that 8%, we typically get half of that from growing the base business through all of our merchandising and operational initiatives, and then half of that through store growth, so think about 4% to 5% unit growth per year. About half of that will come from NTIs that we build and source the real estate for, and the other half directionally comes from M&A, typically small-deal M&A. We don’t typically build in any sort of assumptions on larger scale M&A because those are more opportunistic as sellers become sellers.

So that’s how I would think about it more broadly. Our geography that we operate in today can support a large number of new stores in it. There’s a lot of towns and a lot of white space that do not have Casey’s that would benefit from one. So we see a really unlimited runway for unit development, just within our geography, let alone in the adjacent states to that.

Jacob Aiken-Phillips: Got it. And then — so you’ve been pretty explicit in benchmarking Casey’s against QSRs, so both on valuation and on just like innovation. So how do you measure success on the front? And then what KPIs should we be looking at to track or gauge the progress there?

Darren Rebelez: To me, success would be looking at how our same-store sales performance measures up to theirs. And I would say, even more specifically on prepared food and defense beverage and if you look at this quarter as an example, we were up 5.6% same-store or a little over 10% 2-year stack, I think that compares really favorably and that’s in prepared foods. That compares really favorably to just about any QSR or pizza concept that’s out there that we have visibility to. So I would say that the consistency of our results and the absolute magnitude of them would put us in pretty good shape right now relative to those peers.

Operator: And our last question comes from Corey Tarlowe with Jefferies.

Corey Tarlowe: And I guess, Darren and Steve, I wanted to ask about the grocery and general merchandise category. What’s driving the growth? I’m assuming energy drinks is helping. And then second, on the margin for the category, I think this is the best gross margin that you’ve had for the category in a really long time in the first quarter. Could you talk a little bit about the drivers of that? And maybe what helped, what — as we think about what’s ahead, maybe what stays in and what comes out? Any color you could provide there would be really helpful.

Darren Rebelez: Yes, Corey. Yes, I would say growth driver in grocery and general merchandise has clearly been nonalcoholic beverages. That’s been the strongest growth area, a little over 8%. There’s some puts and takes on the rest, modest increases here and there. But I would say that is the big driver. And as you mentioned, energy drinks being the strongest contributor to that grocery or to the nonalcoholic beverage growth. Really from a margin standpoint, there’s 2 things going on. I think our team has done a great job in terms of joint business planning and keeping cost of goods in check and managing retail pricing. And so we’ve had good margin management there. But you also have a mix dynamic. It’s really having an impact.

And so if you think about what’s going on, the tobacco category or nicotine overall, that mix is dropping. It’s about 130 basis points lower this year than it was last year from a mix perspective. But the margin is increasing as the share of combustible cigarettes goes down and the share of nic alternatives goes up. So you’re seeing a little bit higher margin, although on a lower mix. Then you go to nonalcoholic beverages, which is the highest margin subcategory inside of grocery and general merchandise that about — had about 120 basis point improvement in margin rate, but it’s also growing in share by about 120 basis points. So you combine those 2 and you’re just seeing a natural inflation of the margin just via the mix. So that’s really what’s going on there.

Corey Tarlowe: Got it. That’s really helpful. Is there any way to put into context maybe what that could look like more going forward for the gross margin for that category? Should we expect something close to 36%. I mean the category has historically been in the low 30s. So I’m just curious how do you think about the trajectory there?

Stephen Bramlage: Yes, I’d be careful of doing that, right? I’d remind you what we’re — we’re not trying to optimize the margin of either grocery or prepared food. We’re trying to deliver the best inside the store gross profit velocity outcome that we can. And so we — at times we’ll lean into grocery to help provide something in prepared foods or vice versa. And it may make a lot more sense for us to reinvest excess margin, as an example, from a grocery momentum into something that drives more prepared food units because that’s the highest margin stuff we have in the store. And so I’d just be real cautious about trying to define kind of the end point of where margins are because we’re trying to manage the whole thing and improve inside margin and inside gross profit velocity in total.

Operator: Thank you. There are no further questions at this time. I’d like to turn the call back over to Mr. Rebelez for closing remarks.

Darren Rebelez: Okay. Thank you for taking time today to join us on our call. Before we go, I want to once again express my gratitude to our team members for all their hard work this quarter. Have a great rest of the week.

Operator: Thank you for your participation. You may now disconnect. Good day.

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