Yesway (NASDAQ:YSWY) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.

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Summary

Yesway Inc. reported record first-quarter results, with adjusted EBITDA increasing 112.9% year over year to over $59 million, driven by strong performance across food service, merchandising, and fuel platforms.

The company successfully completed its IPO, raising approximately $322 million in net proceeds, which were used to redeem preferred equity and repay debt, positioning Yesway for continued growth through organic initiatives and selective M&A.

Guidance for fiscal 2026 includes same-store inside merchandise sales growth of 1.25% to 3.25%, adjusted EBITDA of $210 to $220 million, and capital expenditures of $85 to $95 million, with plans to open 6 to 8 new stores.

Yesway emphasized its strong rural focus and value proposition, noting resilience in consumer behavior despite higher gas prices, and highlighted strategic initiatives like expanding diesel offerings and enhancing private label products.

Management expressed confidence in long-term growth opportunities, supported by a seasoned leadership team, strategic site selection, and ongoing investments in technology and tools to drive profitable growth.

Full Transcript

OPERATOR

Welcome to the Yesway Inc. First quarter 2026 earnings conference call. At this time, all participants are listening. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your touchtone telephone. We ask that you limit yourself to one question and a follow up. Please be advised that today's conference is being recorded. I would like to turn the call over to Lauren Scott, Investor Relations Representative. Please go ahead.

Tom Turkla (Chairman, President, and Chief Executive Officer)

Thank you Operator and thank you all for joining us today for Yesway's first quarter 2026 earnings conference call. With me on today's call are Tom Turkla, Chairman, President and Chief Executive Officer, and Erica Ailes, Chief Financial Officer. Before we begin, a reminder that today's discussion will include forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. Any forward looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from what is expressed or implied. These risks include, but are not limited to, volatility in global oil prices, general economic conditions, our ability to execute our growth strategy, and changes in consumer demand and fuel consumption trends. For a more detailed discussion of risks, please see our final prospectus dated April 21, 2026 as filed with the SEC on April 23, 2026 and our other filings with the SEC. Our forward looking statements made on this call represent our outlook only as of today, June 2, 2026, and we disclaim any obligation to update these statements except as may be required by law. In addition, during this conference call we may make reference to certain non GAAP financial measures, including adjusted EBITDA and store contributions. Reconciliations of these non GAAP financial measures to the most directly applicable GAAP measures are available on the Investor Relations section of our website and in our first quarter 2026 earnings press release which was issued earlier this morning. A replay of today's call will also be available on the same website shortly after we conclude the Q&A session, and with that, I'd like to turn the call over to Tom Turkla. Thank you, Lauren, and good morning everyone and thank you for joining us today. As this is our first quarterly earnings call as a public company, I would like to begin by taking a step back and providing a brief overview of the Yesway's history, our business and the key attributes that we believe set us apart in the convenience retail industry, Yesway was founded in 2015 with a clear vision to build a scaled customer focused convenience store platform serving attractive rural and suburban markets across the United States. Since that time, we've grown rapidly and deliberately. As of March 31, 2026, we operated 449 stores, making Yesway the 15th largest convenience store operator in the country. The convenience store industry is large, growing and highly resilient, having demonstrated durability across market cycles, supported by consumers ongoing needs for fuel, food, beverages and everyday essentials. Within that environment, Yesway has built a differentiated platform anchored by two strong and complementary brands, Yesway and Alsace. Both brands have deep roots in the communities they serve and benefit from strong customer loyalty. We offer a unique food service platform positioning us as a true destination convenience store rather than simply a stop for fuel or basic necessities. Allsup's is especially well known for its iconic Deep Fried Burrito, a signature product that has become closely associated with the brand and serves as an important driver of customer traffic, repeat visits and loyalty for our combined store base. More broadly, our stores offer a compelling and convenient mix of freshly prepared food, grocery items, beverages, snacks and higher margin private label products. This assortment allows us to serve multiple customer occasions throughout the day, from coffee and breakfast in the morning to lunch and dinner options, snacks, beverages and household essentials later in the day. By combining a recognizable food service identity with everyday convenience, we have established ourselves as a go to destination for customers seeking quality, speed and value. Our stores are strategically located in attractive rural and suburban markets across the Southwest and Midwest. In many of these communities, our stores play a role that goes beyond the traditional convenience retail. We are often the convenient retail destination of choice and in certain markets, effectively the local grocer. That position gives us a meaningful connection with our customers and communities and it reinforces the recurring nature of traffic across our network. Over the past decade, we have established a strong track record of growth and operational improvement driven by a combination of new store development, strategic acquisitions and disciplined execution across our store base. Since inception, we have completed 27 acquisitions, including the transformational acquisition of Allsup's in 2019, helping expand our footprint, strengthen our market position and build density in attractive geographies. Supporting this growth is a seasoned leadership team with deep expertise across both real estate and convenience retail. Notably, our real estate expertise is critical in identifying the right markets, the right sites and the right formats for long term value creation. On that note, we primarily operate under a company owned company operating model and own approximately 65% of the real estate underlying our store base. This approach provides operational flexibility, strong site control and the ability to reinvest through new store development remodels and raise and rebuild projects across our stores. Standardized operating procedures, training in uniform technology supports consistency and efficiency across the platform with many of our stores able to operate with just a single employee during non peak hours. Additionally, our sites are typically located on oversized lots with strong visibility and traffic patterns, with our newer stores featuring expanded forecourts and dedicated high flow diesel lanes designed to support long term fuel growth. We also continue to invest in technology and tools to support smarter decision making across merchandising, pricing, labor, fuel, food service and capital allocation. These capabilities are vital to our ability to proactively evaluate growth opportunities, integrate acquisitions, improve store performance and drive profitable growth over time. For example, the first party data generated through our Yesway Rewards program helps enhance customer engagement through more targeted promotions, driving more frequent visits and larger basket sizes. Yesterday's growth has been rapid and strategic, culminating on April 22 with the successful completion of our initial public offering. The IPO was an important step for the company and provides us with additional resources and flexibility as we enter our next phase of growth. Inclusive of the full exercise of the green shoe option, we raised approximately 322 million in net proceeds which we have used to fully redeem our preferred equity and to repay $10 million of debt. An additional $20 million of debt repayment was made following the close of the offering. The IPO has positioned us well to execute on several key priorities. First, we plan to continue accelerating our growth through organic initiatives and selective expansion. This includes new store developments, investments in innovation, technology and product expansion that will enhance the overall customer experience. We believe these initiatives will help drive traffic, strengthen loyalty and improve same store sales and store level productivity over time. Second, the IPO proceeds provided us with an opportunity to further optimize our balance sheet and strengthen our financial position. Maintaining flexibility is important as we continue to grow, particularly in an industry where scale, disciplined capital allocation and operational execution matter. And finally, we will continue to evaluate selective and opportunistic M and A acquisitions have been an important part of our growth story to date and we believe the convenience store industry remains highly fragmented. Our approach will remain very disciplined. We will focus on opportunities where we can create value, build density, strengthen our brand presence and apply our operating model effectively. Before turning to our first quarter results, I want to recognize the people who made this progress possible. Yes Way success is directly tied to the hard work, commitment and consistent execution of our tremendous employees from our store teams who serve customers every day to our field leaders and corporate teams who support the platform. Our people are the foundation of this company. On behalf of the leadership team and our board, I want to thank all of our employees for everything you've done to bring YES way to this important milestone and for everything you continue to do as we begin this sixth chapter as a public company. Turning now to our financial performance, we are pleased to deliver record first quarter results driven by broad based strength across our food service, merchandising and fuel platforms with fuel sales and margin materially higher year over year. Most notably, our profitability reached an all time high with adjusted EBITDA increasing 112.9% year over year to over $59 million. Thanks to our inside merchandise sales increased 4.5% continuing a positive trend of growth in 12 of the past 13 quarters. Same store gallons sold increased 0.2% with total fuel margin increasing 48.5% year over year to 49.4 cents per gallon. At a higher level, we believe our fuel business maintains structural advantages supported by strong local refinery partnerships, our strategic rural footprint and a higher diesel mix which now represents approximately 38% of total fuel volume. These attributes continue to position us as preferred fueling destination across our target markets. Given we now are approximately 2 months into the second quarter, we are also pleased to report that the positive momentum in our business has continued with same store sales and gallons positive through the end of May. Looking ahead, we remain confident in long term growth opportunity. Essay we operate in a large, resilient and highly fragmented industry benefiting from consumer preferences for faster, convenient and affordable options. Within this environment, we believe Yesway is well positioned as a go to destination for customers in the markets we serve. Our differentiated food service offering best in class operating standards, strong service culture, flexible and value generating real estate strategy and proven M&A capabilities all support our continued growth. With that, I will now turn the call over to Erica to discuss our quarter results and financial outlook in more detail. Erica thanks Tom and good morning everyone. As mentioned, we delivered a record first quarter marked by continued same store sales growth, strong margin performance and profitability at an all time high. Inside merchandise sales increased 9.5% year over year to 213.7 million or 4.5% on a same store basis. The increase was driven primarily by pricing initiatives taken during Q4 2025 and Q1 2026 which we expect to continue to favorably impact same storee inside sales for the remainder of the year. In our fuel business, Yesway is executing well in the current environment and maximizing fuel gross profit. In the first quarter, fuel sales increased 16% year over year to 464.3 million, with fuel margin increasing 48.5% year over year to 49.4 cents per gallon. To provide more context, the geopolitical developments in the Middle east have increased fuel price volatility across the industry, benefiting retailer profitability. As a rule of thumb, retail prices generally increase as wholesale costs rise, protecting retailer cents per gallon margins. Historeically, when wholesale costs have eased, retail prices have tended to lag, which has supported ongoing strength in cents per gallon margins. As a result, volatile pricing environments can benefit both cents per gallon margin and fuel gross profit dollars. Moving on to our same storee performance, total same storee gross profit increased 21.8% year over year, driven by strength across both our fuel and inside merchandise businesses, with same storee fuel gross profit and same storee inside merchandise gross profit increasing 38.5% and 9.8% respectively from the prior period. We effectively controlled costs in the quarter as same storee operating expenses declined by 2.8% year over year. At the beginning of last year, we rolled out a labor efficiency initiative and have since seen same storee labor hours reduced in the previous four quarters, including a 3.5% decline in Q1 2026 storee contribution increased 72.7% year over year to 74.6 million, driven by higher fuel margin and increased fuel volumes and merchandise sales. We also have had more storees opened compared to last year and a higher contribution of new storees. Net income increased to 30.2 million compared to a net loss of 5.6 million in the prior year period and adjusted EBITDA increased 112.9% year over year to 59.2 million, primarily attributable to higher fuel margin. During the quarter, we opened one new storee, ending the period with 449 storees. As a reminder, our current storee count includes 29 storees operating in Iowa and Kansas that we have agreed to sell. As part of our strategy to sharpen operational focus, simplify our supply chain footprint, and reinforce our concentration in core operating regions, we expect the sale to close by the end of fiscal 2026. Turning to the balance sheet, we had cash and cash equivalents of 56.5 million and total debt of approximately 649.5 million. As of March 31, 2026, net cash provided by operating activities was 48.4 compared to 13.6 million in the prior year period. Capital expenditures totaled approximately 11 million compared to 26.3 million in the prior period. Turning to our guidance Our outlook for fiscal 2026 reflects the strength of our first quarter performance and the momentum we have carried into the first two months of Q2. That said, we recognize the geopolitical environment is fluid. While we feel we are well positioned given our value proposition for customers and our favorable diesel exposure, we will continue to monitor the impact of fuel price volatility over the coming months. As such, we've introduced fiscal year 26 guidance as same storee inside merchandise sales growth of 1.25 to 3.25%, adjusted EBITDA of 210 to 220 million and capital expenditures of 85 to 95 million. Assumptions within our CAPEX guidance include three storees in our pipeline that we moved from build to suit to self funded as we leverage the recent performance of the business and maintain strategic flexibility. Lastly, we expect to open six to eight new storees in 2026 and inclusive of the one storee we opened during Q1. Please note that our guidance excludes the 29 operating storees in our Iowa and Kansas portfolio which we expect to sell before year end. And with that I'll turn the call back over to Tom for closing remarks. Thank you Erica. To close. We are very pleased with our record first quarter performance and the strong start to our journey as a public company by continuing to strengthen our differentiated customer offering and maintaining a disciplined approach to capital allocation. Yesway is well positioned to continue delivering profitable growth and long term value for shareholders. Thank you again for joining us today.

OPERATOR

Operator. Thank you. As a reminder to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11. Again we ask that you limit yourselves to one question and a follow up. Our first question comes from Bobby Griffin with Raymond James. Your line is open.

Bobby Griffin (Equity Analyst at Raymond James)

Good morning everybody. Thanks for taking my questions and congrats on a good first quarter as a public company. I guess first I want to follow up, just wanted to follow up kind of consumer customer behavior here following kind of two months of higher gas prices. You noted quarter to date positive same store sales, which is encouraging. But Tom, can you dive in? Have you seen anything noticeable out of your customers as gas prices have gone up? The last call it eight weeks or so, any shifts, trade downs or any shifts inside the store. That's interesting. That'd be worth calling out just for us to kind of gauge how the business is handling or how the consumer is handling that for your business.

Erica Ailes (Chief Financial Officer)

Thank you Bobby. Appreciate the question certainly. We obviously are cognizant of what's going on with the consumer, both with higher gas prices as well as higher merch prices. What we found, we've had very strong baskets and very strong prices as well. Holding, as you see, we had positive gallons. We attribute it to the fact that we've got a very strong rural focus and that our customers are basically less susceptible to some of these. So we are seeing it. Eric and I watch it very closely. We also attribute to the fact we've talked about this before, that we are already a value shop. We're already known as the value of chain. Our price points at 4 and 5 and $6 meals. Other retailers and QSRs are trying to find that balance. Again, we're already there, so we've been pretty sticky. So we're obviously watching it like everyone else is. We're obviously watching the impact of gas prices. We're under $4 now, which is great. We're down $3.83 as of yesterday. That's kind of our trigger to look at that price at $4 in the past back in 2022. But Erica. you can add any to this, but we're basically seeing a little bit. but not a lot. We've basically been holding our own. We're pleasantly surprised at the fact that our customers are very sticky and very resilient, even with the higher cost of fuel and the higher cost of merchandising. Yeah, so I would just add from a data perspective on the fuel side of the business, we do see some trading down from premium to mid grade, mid grade to regular. Obviously, as you can imagine, the margin on that trade down is far exceeding anything to do with that trade down. So that feels very good. Inside transactions were positive for the quarter and the merchandise basket was up as well. So to Tom's point, we feel very good about our value proposition as it relates to sort of the wider concern about the consumer.

Bobby Griffin (Equity Analyst at Raymond James)

Thank you, that's helpful. And then I guess secondly for me just Erica, diving inside the inside gross margins up 190 basis points year over year in the quarter. Just unpacking a little the drivers and the I guess, longevity of some of those drivers because it's pretty impressive performance.

Erica Ailes (Chief Financial Officer)

Thanks, Bobby, Appreciate the question. A lot of that inside margin growth continues to come from our new stores coming into the reporting period. So those new stores are generally operating at a higher food service contribution and lending themselves to a stronger product mix that sort of leans towards those higher margin items. As we mentioned in the prepared remarks, we did take some price in the latter half of 2025 and into 2026 and have seen very, very good results from that. You know, as I just mentioned, transactions being up, units are up in the quarter as well. So we feel good about those takes.

Bobby Griffin (Equity Analyst at Raymond James)

Very good. Appreciate the details. Best of luck here in 2Q.

OPERATOR

Thank you. Thank you. Our next question comes from Simeon Gutman with Morgan Stanley. Your line is open. Hey Tom. Hi Erica. Can you first talk about CPG, how it's trending if you can, even in second quarter. And then can you talk about what you are thinking about for full year CPG and the shape of it throughout the year within the EBITDA guidance? Thanks. Sure. Yeah, we'd be happy to just talk sort of high level on what we're seeing post quarter end. You can imagine as the conflict continues to add volatility in the fuel market, April and May generally and high 40s, low 50s. As far as looking beyond that, we just believe it is too early right now to predict. Obviously if this continues and the volatility continues, there's certainly some upsides for outsized margin, but we're continuing to see that margin be strong to date in Q2. Okay. And then my follow up. Now that you've done so well on inside gross, at least in the first quarter, it looks like the street is modeling. We are modeling a step down. Is there any reason it should step down or do you think we can step at this higher above average rate of I guess, margin expansion? Sure. Great question. What I would point to is just our guidance for the full year. We did have in Q1 obviously a very strong same store sales number. We do think at least some portion of that was helped by weather. We had three major weather events in our portfolio in the comparative period versus only one major ice storm in Q1 of 2026. So we think we'd probably be about 2.6% excluding Weather certainly benefited also from some groupings of SKUs that have a strong correlation to weather like package Bev, et cetera. So I think it's we're certainly not modeling that same store sales growth again. To the extent this conflict continues, we certainly understand that there could be some concerns on stress inside the store. Okay, thanks. Good luck. Thank you. Thank you. Our next question comes from John Heimbuckle with Guggenheim. Your line is open.

John Heimbuckle (Equity Analyst)

Tom wanted to start out. Can you talk about what does the pipeline look like now for 27 openings in terms of where we are in the process of site approvals and I guess construction won't be starting for a little bit. And then I know you got the first two coming in Arizona. What do you think the opportunity in that state is, say, relative to maybe New Mexico?

Tom Turkla (Chairman, President, and Chief Executive Officer)

A great question. As you know, Our model has a 6 to 8 this year and about 26 next year. We have well over that in terms of land either under contract or being negotiated in the pipeline. We always keep a very strong pipeline of a multiple of needed deliveries for the year. We've accelerated that in terms of people in the field. And so we feel very good about 26 and very good about 27. We're actually working right now on moving things up in outer years, utilizing some of our excess cash generated by the fuel margins, which, you know, we get a lot of questions on, but we feel very good about our deliveries in 26 and very good deliveries in 27. To your second question, we're very excited about Arizona. It's got traditionally higher fuel margins, even higher than our New Mexico and West Texas fuel margins, which are also very high to begin with. But the market itself is very strong in terms of its receptivity. The type of customer, as you know, we're going across right now in the southeastern portion of the state first and moving up. But we've got a very strong pipeline right now. In fact, the majority of the things we have in that pipeline that I referenced before, about 26 and 27, really 27 and 28 are in Arizona. Okay, so we're going to go very hard into Arizona. We've already had one grand opening in terms of just the announcement of a groundbreaking. We'll actually have our first grand opening store sometime in the late summer, early fall. Right now, I think that's the date. I'll double check that date. But we feel very good about Arizona. It's got a very strong customer, very strong receptivity to our food service program. Very good demographics are very similar to New Mexico and West Texas. So we think it's a great state for us. We've talked a lot about growing very large in that state. As you know, we're basically concentrating in four states right now. Oklahoma, New Mexico, Texas and Arizona. Arizona will probably be our highest growth state of those four states in the foreseeable future. And maybe my follow up. Right, the labor hours down 3 1/2 percent, which is a pretty sizable reduction. You said you'd been at this for four quarters. So are we sort of nearing the end of this wave? And then how sustainable do you think about, you know, sort of the gift that keeps on giving, that, you know, technology and the like? You know, you can Maybe hold labor hours flat to down for an extended period of time. Sure, yeah. Great question. We have right now a very efficient labor modelel. Right. Our average shift is about 2.3, you know, just over two and a half people per shift. So I would not expect, you know, long term wide reductions. You know, we would think of this as sort of a continued efficiency, getting better data in the hands of the operators so that they can make better decisions. So, you know, we think that, you know, there, there may be some continued upside, but I would not expect this level, you know, every quarter from here out for the next couple years, obviously, because we already have a fairly efficient model.

John Heimbuckle (Equity Analyst)

Okay, thank you.

OPERATOR

Thank you, sir.

Ben Wood

Thank you. Our next question comes from Kelly Banya with BMO Capital Markets. Your line is open. Hey, good morning, this is Ben Wood. On behalf of Kelly and bmo, thank you for taking our questions. I just wanted to step back and now that you guys have formally introduced guidance here, can you just talk about what is your approach to the EBITDA range? What are some of the drivers you think about that would get you towards the low end or the high end? What are the key puts and takes as you're looking at your outlook here? Good morning, Ben. Thanks for the question. So as we think about just first start with the higher end, obviously as I just talked about some of the continued momentum on fuel margin as it relates to the first two months of Q2, to the extent that this does not resolve itself in fairly short order, there's obviously a potential upside that could be sizable here for fuel margin. So we certainly think that that would be overall a benefit to the profitability of the company. Certainly as Tom mentioned in our prepared remarks, and as I mentioned, we recognize that it could be offset from some stress inside the store. Again, we think overall that would be overwhelmingly positive from a profitability standpoint, but want to recognize that very long term sustained higher fuel margins could put some stress on our customers. Great, that's helpful. And then just as a follow up to that, I know you called out moving some of the stores from build

Erica Ailes (Chief Financial Officer)

to suit versus you know, self funded. As we think about potential upside and your growth plan is that, does that, should that be how we should think about your reinvesting the growth or is there opportunities to accelerate the overall square footage or store growth or other, other priorities you might reinvest some of this upside down? It's a great question. In fact, it's the one we're dealing with most often right now because the excess cash being generated by the higher fuel margin. We're fortunate to not have a whole lot of deferred maintenance in our portfolio. We've done a very good job over the years of not investing in stores and shredding stores that we don't want and so really focusing on those income producing things. Obviously first and foremost it's accelerating new builds. As you know, we have 15 to 30% returns on those very consistent roics. You can't just plop a store down and so it takes some time. So we're accelerating the outer years in terms of land to tie up so we think we can go ahead. I can't quantify what it's going to be, but certainly the direction is there. We're still looking at additional fuel expansions. Diesel island expansions are few and far between, but they've been some of our highest returning initiatives over the past couple of years. There are a few left, some technology upgrades, but we're also starting now. As you know, we started out by being an acquirer 27 MA deals for our first five years including a very large transaction of just under a billion dollars of allsups in 2019. We're much more active right now in looking but it's not in our model. We're certainly looking at acquisitions as well from small to large acquisitions because obviously that could move our dial much more quickly in the next couple of years from a growth standpoint. So primarily it's going to be on building. But I will say that we're now much more open than we have been the past couple of years. As you know, we've built 92 stores really since five years and really kind of stopped buying. I think for one small portfolio a few years ago we bought. So I would say those two things primarily still building, but we are starting to look at more map as well as a good use as a quicker use to generate EBITDA with our excess cash.

Thomas Palmer (Equity Analyst)

Thank you. Our next question comes from Thomas Palmer with JP Morgan. Your line is open.

Erica Ailes (Chief Financial Officer)

Good morning and thanks for the question. Erika, one of your responses earlier you noted that $4 fuel prices have been kind of a trigger point in the past. The detail on trends remaining positive through May was helpful. But I was curious, when fuel prices did go over $4 this time around, did you see behavior changes or were maybe trends a bit more resilient than in past periods? Yeah, sure, good question. So as we mentioned we have seen some trading down on the fuel side of the business, but again you know, overall positive from a gross profit dollars perspective. Obviously as we talked about inside the store, we've seen, you know, not much trading down, not a big increase or measurable increase in, you know, private label pen penetration. For example. We have seen continued momentum with package Bev throughout. So I would say nothing meaningful other than again the first two months being to my earlier point, not quite as strong on a same store sales basis. And we don't have final numbers to share on that perspective. But not continuing at the 4.5% obviously that I mentioned for, for first quarter.

Thomas Palmer (Equity Analyst)

Okay, thank you for that. And then on the price increases you mentioned as one contributor to the inside same store sales growth, where were these price increases most focused? And kind of given the evolving environment, are there any contemplated changes in pricing either way? Right. Increased maybe promotions to help traffic or increased prices just to reflect the more inflationary environment. Thanks.

Erica Ailes (Chief Financial Officer)

Sure. Yeah, I think it's the latter really. To reflect the inflationary environment. I would say that the price increases were not specified in one particular category. This is really about strategic pricing analysis to look at where we thought we were potentially out of market, what products we thought were a little bit more inelastic but not necessarily focused on one specific area.

Thomas Palmer (Equity Analyst)

Understood. Thank you.

Seth Sigman (Equity Analyst)

Thank you. Our next question comes from Seth Sigman with Barclays. Your line is open. Hey, good morning everyone. Nice quarter. Can you just update us on loyalty? You know, where is penetration today? What are some of the opportunities you're finding to use that and perhaps monetize that? Thanks so much. Great, good question. So for the quarter we were at actually about 18.5% of sales inside the store and about 15ish percent on gallons transactions. So that has been fairly rich from us from a penetration perspective in our more recent history, which has been great as we think about it moving forward. The team is really thinking about, you know, strategic marketing to our loyalty again if you know, this conflict obviously continues ways where we can incentivize our loyalty members to transition into the store for potentially some vendor funded marketing efforts. So that's really how we would sort of think about this as we continued, you know, into the remainder of the year. Okay, great. Thank you for that. And then just a follow up on food service. Maybe just update there any changes that you guys are testing, any promotions or marketing that we should be paying attention to in upcoming quarters here. And then I guess back to the point, earlier guidance doesn't really assume that inside margins remain at this elevated level necessarily. So maybe just talk about some of the scenarios that we can think about through the rest of the year. Thank you. Thanks. Great. Thank you very much for the question. Let me answer two things we're looking at. We are a strong focus right now both continued ideation on food service. And we say at the margin we're not going to transform our food service operations. You know, we sell 41 million in proprietary food service—about 24 million of which are world famous burritos, and you know, we're not going to become a QSR as we've talked about before. So there are some things we're looking to ideate in the third and fourth quarters, additional things, but at the margins and you mentioned quite the question previously that was asked. We're also looking, you know, we keep the pricing and promotions around our burrito as kind of sacrosanct to our customers. That kind of drives our value in the stores. We're also looking at doing further enhancements to our private label. We now have about 174, 175 proprietary products. That's also a big initiative right now to look at really refining that, expanding that. Heretofore we've kind of alternate between yes way and all slips is private label products into the stores. We're going to creating kind of our own, you know, kind of Kirkland to a Costco type of a concept which we ideated years ago. So we are both. Those things are very important to us. We've got a very good, you know, signature food service item that makes us a destination obviously in the burrito and the things that are derivative to it. And so we will add some things derivative to it. We're also doing one thing too, which a lot of our brethren are doing, which is just we call it SKU optimization. With our FPA group we're looking at all of our categories and simplifying our menu and even simplifying some of the merch inside the stores as well. Trying to simplify just the product offering making the whole operation much simpler. And so you know, obviously everything is around our burrito. We are looking at a few things we asked to sell out of chicken as well, but we're actually looking at doing some ideation. But I say the most important point to make is at the margin but nothing specific.

Seth Sigman (Equity Analyst)

I don't have a big announcement of a new product but we are looking at some things and like I said. we'll keep adding to and strengthening the offering around the burrito. Great. Thank you both.

OPERATOR

Thank you. Our next question comes from Brad Thomas with Keybanc Capital Markets. Your line is open.

Brad Thomas

Thanks. Good morning, Tom. Good morning, Erica. I wanted to first ask about some of the underlying merchandising trends in the business. Obviously, the industry overall has been benefiting from alternative nicotine energy drinks. Just wondering if you could speak to any smaller trends that you're seeing as tailwinds for the business.

Erica Ailes (Chief Financial Officer)

We had certainly some outsized performance in Q1 from three categories. One being packaged beverage that I mentioned already. That does have a high correlation to the warmer weather or better weather that I mentioned already in Q1. The other category being candy and snacks. We saw some really great performance in Q1 and then to your point, nicotine. So we did benefit from some additional vendor funding in the quarter that actually closed the gap between a lower tier level of cigarettes that actually allowed folks to trade up, which was certainly a benefit in the quarter as well. But those would be the three categories that I would call out.

Brad Thomas

That's great. And if I could ask a follow up on fuel margins, I know that none of us really know when this current situation in the Middle east is going to end.

Erica Ailes (Chief Financial Officer)

But at a high level, is there a good way to think about how much of the fuel margin is temporary versus maybe more structural in this continued upward trend that we've been seeing in the industry for decades? And just maybe how much might be appropriate to think of as sort of a mean reversion as we go into 2027? Thanks. Yeah, so I would think about that a few different ways. So, you know, in 2025, obviously, well, in advance of this conflict, we delivered, you know, a CPG in the low 40s. Our trailing 12 months through Q1, 2026, was a 43.8. So, you know, I think structurally we are likely to be in the low 40s today. You know, I would just say, obviously, I think as you're aware, the new builds that we have been, you know, bringing and opening are generally operating at a higher diesel percent. So historically that typically comes with, you know, a higher margin. Which is interesting that it's, you know, that that higher margin is actually converged at the moment because, you know, gasoline margins are so high right now. But generally that, you know, has been a few cents of differential for us.

Brad Thomas

And there's been periods over history where that's, you know, closer to a double digit benefit.

OPERATOR

So we think in the more recent terms, structurally, 41.

Bonnie Herzog (Equity Analyst)

But again, the types of stores that we have been building will just naturally push that up. Great. Thank you so much. Thank you again. To ask a question, please press star 11. Our next question comes from Bonnie Herzog with Goldman Sachs. Your line is open. All right, thank you. Good morning. I had a follow up question on your inside sales. I guess I was curious to hear how same store inside sales have been

Erica Ailes (Chief Financial Officer)

trending in April and May versus Q1. I think you mentioned, Tom, they were trending positive. But should we assume a decent sequential deceleration from Q1? I guess I'm asking the context of your full year guidance which is 1.3 to 3.3% for same store and said sales which suggests a deceleration for the rest of the year.

Bonnie Herzog (Equity Analyst)

So I just wanted to make sure

Erica Ailes (Chief Financial Officer)

I understand what the drivers are behind this. Yes. Yeah, we do think Q1 was outsized for our expectation for the remainder of the year. And then I think we've probably covered the reasons for that for Q1 in particular.

Bonnie Herzog (Equity Analyst)

So we would see, you know, we

Erica Ailes (Chief Financial Officer)

would expect to see a deceleration in Q2 on a same store basis which you know, we've seen at least in the first, you know, two months of the year. Again, I don't have exact numbers just yet, but what we can see is that, you know, we're positive, you know, quarter to date here. So I don't know exactly what that will be but you know, I think that the guidance will, you know, support that deceleration coming off of Q1. Okay. And then maybe just a quick follow up on diesel. I believe diesel supply has been pressured recently. So just curious to hear from you how you view the supply landscape currently and then you know, maybe remind us how your diesel business really is. Advantage versus peers. And you know, what you're maybe going to do to even drive bigger diesel fuel mix over the long term. I think you touched on this, but it has stepped up in Q1 as a percent. I think you mentioned 38%. Thanks. That's right. Yeah, sure. Yes. So we are at 38% penetration in Q1.

Bonnie Herzog (Equity Analyst)

Again, as those new builds continue to come into our reporting period, I would expect that to continue to increase slightly.

OPERATOR

On the legacy portfolio, we've also been

F

been able to put diesel islands out

D

back or to the side for the

F

high flow diesel lanes, we've, we've done that.

D

We continue to look for adjacent land where we think it makes sense to

F

be able to do that but have generally grabbed the low hanging fruit in the portfolio we've also been adding diesel

D

to the forecourt where we had not

F

previously had diesel there.

D

So that wouldn't be high flow, but

F

certainly picks up some of the local lighter trucks. Think about landscapers, plumbers all of those types of smaller businesses that we can take advantage of.

D

So being in about a 38% I

F

think the industry as a whole operates

D

in the 20s as far as a percentage I don't have the exact figure but so certainly higher from a total industry perspective. But from a supply perspective we feel very good.

F

We've actually had some nice strong gains

D

on diesel gallons in the quarter quarter as well.

F

So you know despite you know inflationary pressures or the volatility on the street price of diesel continuing to go up we've actually been growing continuing to grow those diesel gallons at a clip that we've you know have experienced in prior years as well. So we feel very good about that.

B

Thank you. I'm showing no further questions at this time. This does conclude the question and answer session and you may now disconnect. Good day.

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