Murphy USA Inc (MUSA) 2022 Q1 法說會逐字稿

At this time, I would like to welcome everyone to the Murphy USA First Quarter 2022 Earnings Conference Call. (Operator Instructions)

Now I would like to turn the conference over to Christian Pikul, Vice President of Investor Relations. Please go ahead.

With me as usual are Andrew Clyde, President and Chief Executive Officer; Mindy West, Executive Vice President and Chief Financial Officer; and Donnie Smith, Vice President and Controller. After some opening comments from Andrew, Mindy will give us a brief overview of the financial results, and then we'll open up the call to Q&A. Please keep in mind that some of the comments made during this call, including the Q&A portion, will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurances can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ.

For further discussion of risk factors, please see the latest Murphy USA Forms 10-K, 10-Q, 8-K and other recent SEC filings. Murphy USA takes no duty to publicly update or revise any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to generally accepted accounting principles or GAAP. We have provided schedules to reconcile these non-GAAP measures with the reported results on a GAAP basis as part of our earnings press release, which can be found in the Investors section of our website.

With that, I'll turn the call over to Andrew.

This is one of the busiest weeks of the year here at Murphy USA as we report earnings, hold our Annual General Meeting of Shareholders, and meet with our Board of Directors. And looking back over the most recent quarter and last year, we certainly have a lot to be proud of in terms of our results and share price performance, but just as importantly, how we went about achieving those results. And we have just as much to be excited about in terms of our future potential, given the enduring advantage of our low-cost business model, the loyal engagement of our growing customer base, and the incredible spirit of our store associates, and the field and home office staff who support them.

As I was reflecting over the weekend on my letter to shareholders from this year's annual report, -- it struck me that of all the commitments to our stakeholders, our commitment to provide affordable transportation, fuel, and convenience products to our customers is becoming more and more relevant with each passing week and month. We continue to learn more and more about our customers and their needs and by analyzing the behavior of around 100,000 Murphy Drive Rewards customers who have shopped with us each month since 2019, we are learning a lot about how they are navigating the current environment.

First, their spend with us is rising significantly, as fuel prices are up over $1 a gallon, but their consumption remains relatively stable as fewer gallons per trip are made up by increased trip frequency. As such, we represent an increasing percentage of their household income, which tells us that their purchases from Murphy USA are not discretionary. They must get to work, drive their kids to school, and get to the store, as most of them do not have the luxury to work remotely and shop online.

Second, the extra trip is generating incremental merchandise sales, particularly in the tobacco category where we are providing significant value relative to the competition. Third, as we reinvest margin into relatively lower prices at the pump, and with our tailored promotions for our consumer packaged goods, we are also gaining new customers who are seeking greater value as they make the choice to switch brands before choosing to drive fewer miles or consume less of the products we sell.

As a result of increased fuel volume and traffic, merchandise sales and margins from attached categories continue to grow. The benefit of being more affordable and increasingly relevant to consumers is that we are gaining share profitably for both established and emerging categories. This holds true not just for our Murphy branded stores, but also for the QuickChek brand given their compelling price-to-value offers in food and beverage, convenience items, and low-priced motor fuel. In short, our affordable customer value proposition is resonating in the current inflationary and high fuel price environment.

Supporting our value proposition is our low-cost business model, which not only continues to demonstrate its relative advantage in the face of macro-challenges all retailers are facing, but continues to further evolve through the leadership and initiative of our staff. While we continue to see a smaller than historical store applicant pool, we are keeping up with the turnover inherent to a business like ours while taking additional steps to retain staff and fill vacancies through special incentives and recruiting marketing.

The team is doing a great job managing merchandise challenges by resetting planograms and introducing new products and substitutes to keep the shelf stocked. In addition, Core-Mark did a great job navigating supply chain challenges in helping to keep our stores well-stocked, especially around featured products for impactful promotions we successfully executed during the quarter.

In addition, the acceleration of the CD4 implementation at Murphy, a reverse synergy where QuickChek has a more advanced capability is on track to generate over $2 million in additional contribution this year by faster identification and resolution of out-of-stock or mispriced products. Our early wins from our food and beverage strategy are improving sales and contribution while streamlining labor and cost to serve for both brands. Necessity is the mother of invention, and one of the ways our asset development team is keeping our rate and rebuild guidance intact is by finding ways to repurpose more and more equipment and components from existing stores before they are torn down as we navigate supply chain issues.

The list goes on, but I think you get the point. We remain intent not only in preserving our competitive advantage, but growing it. As a senior leadership team, we are in the early stages of outlining the next wave of top and bottom line growth initiatives similar to the campaigns we launched back in 2018 that transformed some of our critical capabilities like the retail fuels pricing excellence initiative and enhance the foundation of our business model, like our 0 breakeven and employee value proposition initiatives.

As we like to say at Murphy USA, we will never be complacent and we have a great opportunity to build on our current momentum. As this virtuous cycle of winning with the customer with our EDLP offers, delivered through our advantaged business model by engaged employees and business partners continues, we're also able to invest in our other stakeholders. We recently kicked off the third year of our roundup campaign benefiting the Boys & Girls Club of America, which thanks to our engaged customers continues to make a positive impact in the communities we serve.

During the quarter, we also repurchased more than $150 million of our shares while continuing to grow our dividend, continuing our industry-leading track record of total shareholder returns. The notion that when we win with our customers, all our stakeholders win is not new by any means, but the ongoing work over the past 2 to 3 years as part of our ESG reporting has placed an even greater focus on what really matters in the end to have a sustainable business, like being more affordable and relevant to your customers.

Taken together, the team's hard work and efforts generated strong first quarter results for Murphy USA. Importantly, a key element underpinning our earnings strength, namely a high structural fuel breakeven requirement for the industry remains in place as cost pressures continue and fuel price volatility is increasing. This means smaller fuel retailers face an increasingly uncertain future, and that risk is being partially offset through higher industry margins.

In this environment, we are able to extend our discount to peers, generating greater loyalty amongst our existing customers, and attracting more price-sensitive customers. As a result, we not only delivered strong year-over-year gallon growth for the quarter, but our per-store fuel volumes in April 2022 were higher than the same period in 2019, providing further proof that we are not only taking share but taking share profitably as we ship from COVID recovery to yet another new and different macro setting.

While our volumes are higher, we note that the recovery in macro-demand remains fragile and will be subject to natural and artificial fluctuations as total fuel demand remains exposed to inflationary pressures, coupled with emerging geopolitical risk, and concerns about future recessionary pressure. Despite these risks, it is evident to us that our value proposition will continue to resonate with more and more value-seeking customers, further increasing our advantage in the marketplace and sustaining our ability to grow this advantage into the future regardless of the macro-environment we face.

One particular element of the first quarter results that is more temporal and subject to movement of commodity prices is the outsized contributions from our product supply plus RINs performance, which added $0.107 per gallon to our all-in margins.

As we've said consistently and repeatedly in the past, we expect PS&W Rent margins to average $0.02 to $0.03 over time. We've also noted that during periods of extreme price volatility, PS&W results will be skewed to the directional move in prices. Thus, Q1 results are consistent with the price environment that saw RVO prices move up over $0.90 during the quarter. In fact, if we back out the uncontrollable impact of this price change, for example, all the timing and inventory adjustments, we see about $0.027 per gallon of net contribution resulting from RIN sales, partially offset by a loss we incurred that is embedded in our internal spot-to-rack transfer price.

To provide a little further context for these results, I would direct you to Q1 2020 results where RBOB prices fell a little over $1 per gallon and resulted in total PS&W contribution of negative $0.44 per gallon or about $0.07 to $0.08 below our stated long-term average. This should serve as yet another reminder that the product supply and RINs part of the business remains relatively stable over time, absent price movements, as each of these volatile quarters delivered the underlying $0.02 to $0.03 per gallon we have told investors to expect. I suppose the big unknown question at the moment is when, not if, we see a significant falloff in commodity prices, where we typically see outsized retail margins, and typically achieve our greatest gallon growth.

I'm now going to hand the call over to Mindy to briefly review the financial results, and then we will wrap up and open the call to Q&A.

Revenue for the first quarter of 2022 was $5.1 billion compared to $3.5 billion in the year ago period. Average retail gasoline prices were $3.43 a gallon versus $2.37 per gallon in the first quarter of 2021. Adjusted earnings before interest, taxes, depreciation, and amortization or EBITDA was $277 million in the first quarter versus $154.8 million in 2021. Net income for the quarter was also higher than the previous year at $152.4 million versus $55.3 million in 2021, and the effective tax rate for the first quarter was 24%.

Total debt on the balance sheet as of March 31, 2022, was approximately $1.8 billion, of which approximately $15 million is captured in current liabilities, representing the 1% per amortization of the term loan, and the remainder a reduction in long-term lease obligations as they are paid through operating expense. Our $350 million revolving credit facility had a 0 outstanding balance at quarter end and is currently undrawn. These figures result in an adjusted leverage ratio that we report to our lenders of approximately 1.9x, and cash and cash equivalents totaled $356.4 million as of March 31, up about $100 million since year-end.

And with that, I will turn the call back over to Andrew.

I believe this quarter's results highlight that the advantages embedded in our model are increasing, and many of the structural factors are unlikely to dissipate in the near future, as smaller retailers in the sector face increased challenges. While we are certainly not immune to some of these factors, we believe our scale, business model, customer positioning, and continuous improvement mindset better positions us to mitigate these pressures, thus growing our relative cost advantage. As a result, I remain highly confident in our ability to compete and win in this environment and continuing delivering best-in-class total shareholder returns in any environment we may face in the future.

And with that, operator, we can open up the lines for our questions.

(Operator Instructions) We'll take our first question from Ben Bienvenu with Stephens. I am hearing no response, we'll move next to John Royall at JPMorgan.

I just wanted to ask on inflationary pressures. Your station OpEx came in at the lower end of the full-year guidance range for the quarter, which I think is somewhat of an upside surprise, at least in my thinking. So what are you seeing right now on the cost side, after you strip out the impact of credit card fees, which I think are relatively well understood. What do you see in the station OpEx side, and how do we think about that relative to the Q1 period?

We're not immune to the pressures that everyone is facing. We did make some of the step changes in labor last year, and I believe we got ourselves relatively well-positioned. There are some additional changes we're making this year, but we started in a pretty good spot, having digested a lot of those last year. Supplies continues to be an area where we have increases and some price changes. Some of our maintenance providers are asking for diesel surcharges, for example, and so there's just an ongoing set of things like that, that we and many others are facing. So as we said, we're not immune to it, but I think with our scale, having made some of the changes, having a compelling employee value proposition creates stability as well.

In your history as a public company, I don't know if you've really had this happen, but I'm sure it has in your tenure with the company. In the past, when you guys have picked up market share in periods like this where prices has caused people to trade to lower-priced retailers. Have you been able to hold on to some of that share when price goes back down? I know you were sort of able to do that with the tobacco share that you gained starting the COVID period, you kind of held on to it even when we came out of it. Have you seen similar impacts on the price trade now?

If you go back to 2007 and 2008, that's probably the best example. It was before my time, but I did study that period deeply for Murphy USA. The company was gaining shares significantly, as crude prices were going up to $140, and then you had the period in 2009, where prices fell off very significantly. Look, the reality is when you get below $2, customers aren't as price sensitive. So there's some portion of that volume that you don't hold on to.

In a recessionary period, where you see softer demand as we did then, we probably had outsized gains up until July 31, 2008, and so you definitely give some of that away when you have broader recessionary periods. I think the big difference that is in place today versus then is the structural breakeven requirement for the industry, is a step level or 2 or 3 higher than it was then. We've seen the labor pressures, and we don't see those going away, additional regulations looming, et cetera. Some of the market share around tobacco, for example, has gone away.

I think the industry structure has also shifted. Murphy is a stand-alone company. We had some other spin-offs as well. So, I think there is something about higher prices that are going to benefit us. I think there's something about a $2 a gallon fall-off where people aren't going to be price sensitive, but I think the world is a different place than it was in 2008. I don't know if that's helpful, but I think structurally this environment sets up much better for us than, for example, the 2009-2010 period on the other side of a big run-up.

We'll go next to Bonnie Herzog at Goldman Sachs.

I'd like to ask a little bit more about some of the comments you were just making because I think you touched on this on your prepared remarks when you mentioned the key question on everyone's minds is how sustainable are these incredibly elevated fuel margins? And I agree in terms of what you just called out in terms of the structural change that we're seeing, which should help, but when do you expect these margins sort of to revert a little bit back towards historical levels? And then in the context of that, thinking about your guidance, you've called out this $0.21 per gallon just certainly for modeling purposes only, but Q1 was clearly well above that. So, how comfortable are you with the ranges you laid out for the year given the strength you saw in Q1? So just to comment on your guidance as well would be helpful.

As you said, that is not guidance. It was for modeling purposes. And I think the other thing we made very, very clear to analysts and investors is, it was for modeling for capital allocation purposes, right? And at that $0.21 model number, we could achieve our objectives around growth and meet minimum expectations for share repurchases. And we just simply said, look, if there was more of that residual margin that we've seen in the last couple of years, if it was delivered, we had a very clear line of sight to what we would do with that, and we would buy back more shares, right, which we did in the quarter, and we would continue to allocate capital in a similar manner.

So I think we're comfortable living in a $0.21 environment, and we've got very clear line of sight to what we would do in a $0.25 environment. If you think about the residual margin that we've earned in the past and the fact that we earned it again this quarter, and you ask yourself, what would you have to believe to continue earning it in the future? I think there's a few things we think about. I think in this quarter, we saw record absolute price increase, $0.90 a gallon. And you book in that to the Q1 of 2020 at $1, you saw an equal and opposite effect there.

And so arguably, you would say the retail margin for us was probably understated in the quarter because it was a rising price environment. I think the second point I would make is there was actually a lot of volatility, up and down movement within the quarter, and especially in the last month or so. I'm trying to describe how much of the residual would you keep?

There's almost what we would call sort of a risk premium that's worth $0.01 or $0.02 or $0.03 of that, whereby when prices run up and then they fall sharply and then they run up again and fall sharply in a $0.10 or $0.15 or $0.20 range, I could imagine that a small retailer has to be thinking about, okay, well, if prices fall, are they just going to rise again within the week? And with the current geopolitical issues we've had, the various bands or proposed bands, that's the kind of volatility we're seeing. So, I think if you put yourself in the shoes of a weaker retailer, they would ask themselves, okay, what do I do in that environment?

What that means for us, was that we can gain volume at a lower cost than perhaps in the past by putting some of that margin on the street. So we're going to continue to stay affordable, relevant with our everyday low price offer. And so I think you have both now the structural change, you've got the greater volatility. You've got the sort of risk premium where maybe you've got a different behavior there.

I think as long as we're going to be in a high price, high cost, volatile environment, it's not clear to me what would change. When that environment changes, that might be the environment where commodity prices fall, and we know what happens in that type of environment. And so coming out on the other side of that, as I suggested to John, I think at least the structural challenges that we're seeing in the environment are likely to persist, and that's the big difference.

From a consumer standpoint, this is a nondiscretionary purchase for them. I think our view is $5 is the new $4, as vehicles are more efficient, you've had inflation and wage growth, et cetera. And so we certainly haven't seen in our markets the kind of demand destruction that we saw at $4 a gallon back in 2008. So I think this is the perfect setup for our business and business model and customer value proposition.

As you can appreciate, it's very difficult to understand exactly what's going on because things have seemed to stay so elevated. And then maybe a little bit of a follow-up question as it relates to your fuel volume, as you reported gallons on an SSS basis.

Just looking at what you reported in the quarter, it seems to be below 2019 levels on that basis. So just curious to hear if you think gallons will have a return to what I'm asking is pre-COVID levels. And then just based on that and then just thinking about in the context of the share gains that you're talking about, how that's translating in terms of maybe gallons and if, in fact, you're bringing in new fuel customers?

So for the quarter, you're absolutely right. We performed below 2019, and 2019 Q1 was a good quarter. April of 2022 is the first full month where we have performed above 2019 levels. And so you can look at the public OPUS data, which I believe underrepresents demand from their survey, but it's still a good proxy in the other public peers, et cetera. I think you can reach the same conclusion that we are taking share and doing that profitably. So, we feel confident around that.

I mean I think this is where the Murphy Drive Rewards data is just so helpful when you have your own 100,000 member panel data that you can look back and you can see they've made purchases with us every single month across fuel, tobacco, and merchandise, and see their behaviors and how they're navigating the current environment, we know from a 100,000 consumer sample that we're also gaining new customers, and we're continuing to see that in new participants and members in our Murphy Drive Rewards program. And so this is not different from what the company saw in the higher rising price environment of 2007 or '08. It's no different than what other everyday low-price retailers see in our sector, or in other common goods sectors as well.

One final question from me, if I may, because you just touched on something about April. So it sounds like gallons are better in April than they were back in April of '19, so they're accelerating. So that's interesting in light of everything. So maybe you could share with us some of the month-to-month trends that you saw during Q1 and then a little bit more color on what you're seeing in April as it relates to, especially quite frankly, fuel margins. If gallons are picking up, what does that mean for fuel margins during the month of April?

We saw ongoing acceleration throughout the quarter, and look every month in a quarter, especially the first quarter, where you've got winter storms and various things impact the business, especially when you're comping over similar quarters from prior years, et cetera. But generally, the trend is an acceleration, and we kind of crossed that 4-minute mile mark, if you will, and got above 2019 in April. And in seeing that, we're not seeing a degradation of the margin because the pressures remain that drive the structural breakeven requirement, which sets the market margin, if you will. And because of some of the volatility, we're able to pretty efficiently grow the volume and get some share gains in the process.

So, trends are accelerating on a month-to-month basis, so far this year, kind of what you're seeing in general?

So far this year, correct.

Our next question comes from Bobby Griffin at Raymond James.

First question, I want to talk on maybe just switch over to QuickChek, more high level means you guys crossed the 1-year mark since the acquisition. Just curious on your view of how the integration went in the first year, some good areas that you like, and areas that you maybe want to work on and then what some of the big initiatives are from integration in year 2?

I think one of the things that we loved about QuickChek were the people and the culture. And everything that we thought we were joining up with has been the case. I've been especially excited about the leadership there, not only our new leader, Blake Segal, but the team on the ground there and how they've embraced change. It hasn't been without challenges and questions, and we spend a lot of time on that. One of the beauties of being a public company is you have an equity program at certain levels, and I think people all of a sudden realize when you have a business and it performs, and you're part of a big company that there is excitement and motivation around that as well.

So we knew we had a strong team and really thank and appreciate their engagement, frankly, given all the changes that have taken place. They had a very proud history in the past and a lot of success. The food business is really picking up nicely. We're seeing the morning dayparts pick up from both a beverage and a breakfast sandwich standpoint. We've done some pretty in-depth consumer work to understand where the brand strength is, what are some of the pillars that we're going to really amplify in our food and beverage strategy?

But at the same time, we have also not surprisingly identified some low-hanging fruits, some quick wins, and some more medium-term initiatives where we can create value there. So, I think the thing we like as a leadership team as an opportunity set where we can make a good business better. And we think we have the opportunity to do that. And again, that relies on a strong team to be able to do that. So great brand in the market there. So I'll stop there, but I think those are 2 of the things we're most excited about with the integration.

The second, kind of 2 parts, the second part of this question. One is what are some of the big moving blocks you're working on this year? Two, you gave some great data on the MUSA customer, and it's clearly a very defensive business you have there with Murphy's and performed extremely well. QuickChek is a little bit different mix. How has that customer responded to inflation, higher prices? Any difference between the 2? I think you could maybe say some of their products are a little bit more discretionary than what Murphy's kind of mix of business is. So any details there would be appreciated.

Look, I don't know about all of our QuickChek customers, but I know a good cup of coffee in the morning for me is not discretionary, and we are good too for that. The same for the best rate of Italian sub in New Jersey from a value standpoint. So, I think one of the things, as we really got to know in the business is, the customer is more like our customer than not. They just happened to buy more food and beverages at their stores. Our customers eat too, as we like to say. They just don't buy as much of it from us. So I think there's opportunities around food and beverage optimization. There's always menu rationalization, there's price optimization. They only launched their loyalty program right before COVID arrived and got into delivery.

So our team here built the first of its kind everyday low-price loyalty program with Murphy Drive Rewards. So turning that talent towards the opportunity of QuickChek around digital loyalty and consumer insights creates a big opportunity. There's opportunities to optimize. We've spent a lot of our efforts around cost management. It wasn't cost cutting, it was around optimizing. And so if you think about a QSR-like business, there are going to be opportunities to optimize labor way supply chain on top of pricing and promotions. So, we think there's a great opportunity set to continue to make that business stronger, as well as in the opportunity to take those advantages into new stores, as we continue to grow that brand.

This is the first quarter we had all 3 months of the acquisition in there. So getting the seasonality right in the model, it was a little bit off last year. Just when you look at merchandise GP, you guys left the year unchanged. How did the quarter come in versus internal expectations in line? Was there any kind of moving parts that surprised you? And then the seasonality implies the step-up, but just anything there for us to keep in mind on the modeling standpoint?

First of all, we did not have January in the numbers last year. We closed on January 29. So this is 2 months. So, I think one of the things you could look at is the unit margin this quarter is really due to 2 things. The mix improved. We had a lot of higher-quality sales, especially around packaged beverage, and we would to look at those as kind of more attached to fuel. So, as we grew gallons, we got more of the attached sales packaged beverage being a big part of that. But there's also just ongoing innovation in packaged beverage, and we're taking full advantage of that. And then on the other side of the mix, we have a little lottery. That kind of comes and goes with jackpots.

And frankly, a lot of the stimulus money we saw went towards higher lottery sales as well. So that gets cut off, you see a little bit of difference there. And we had less general merchandise PPP this year than last year. So mix was a big part of the unit margin trends. And so I'd like to think some of that continues. We also had an exceptional promotion that grew the unit margin in March, and so some of that may not repeat exactly the same way, but I would say the trends continue to be strong and favorable for both brands as the businesses continue to recover from COVID and become more relevant in the current environment.

We'll move next to Ben Bienvenu with Stephens.

I want to ask about just this idea of breakeven and the dynamics in the first quarter. And I think there's a recognition that margins have structurally gone up since pre-COVID. And I think if we look at the last 9 quarters, you've beaten on fuel in each of the last 9 quarters since COVID started, and from our observation, one of the dynamics that's interesting in this quarter is the strongest PS&W plus RIN margin, I think, on record that we can see, which would imply on the other side that the retail margins are materially artificially suppressed as well. I know there was some volatility in the quarter.

But when you think about the resilience of the business today, the positioning of the business today, and the underlying earnings power of the business today. You're giving us periodic updates around guidance and at investor conferences, but obviously, the breakeven is changing with each passing month as costs go up, volume dynamics change. So how should we be thinking about where the equilibrium is, where the breakeven is? And how much of what you're seeing now is onetime versus not? I know you've covered this. So just elaborating further would be helpful, I think.

Look, I think your first observations are spot on. This is a single largest price increase we've ever seen in a quarter, and there's almost a very high r-squared regression that then shows that that's the highest PS&W margin because of the uncontrollable timing adjustments and looking that and anchoring the regression on the other end is Q1 2020, which has just the perfect equal and opposite effect. And of course, retail fuel margins were especially strong in Q1 of 2020. So you're right that the retail margin is probably a little bit understated. But if you put it all together, it's still a good representation of what we get.

So what sets the earnings power for us, we're a price taker, but as an everyday low price retailer we are going to be looking for opportunities to gain share and do that profitably and responsibly to have the lowest price out there for our customers. We don't update every month, every quarter sort of the breakeven dynamics for the industry, but if you think about the big drivers for, say, that third quartile retailer, I mean, certainly, it's going to start with their merchandise contribution and did they recover their tobacco gains and losses or not that they lost from COVID? If their fuel gallons are down and still down, they haven't recovered all of the attached categories.

If the food and beverage offer isn't as relevant and you've got more drive-throughs and other delivery services, et cetera, maybe that part of the business. So, I can imagine that the top line is still impacted for a number of these players, and they've had to pass through higher prices in merchandising, which creates this vicious cycle, where if I lose some volume, I'll lose some share. I got to raise prices. I'll take the penny profit and margin, and it's a very vicious cycle, but it can go on for a while. Then you get to the cost side of the equation and the same thing, right?

I'm having to pay a little bit more to get the labor, I'm having to work a little bit harder as an owner operator, and my maintenance costs are a little bit higher. We've got great partners in our business, whether it's Core-Mark, whether it's our fuel transport partners, and we're able to manage our costs there. They're probably not able to maintain the same cost structure with their third-party providers because they like the scale, and so I would imagine they're going to continue to see cost pressures and you divide it by lower gallons, I would imagine that they continue to see increases in the breakeven requirement, and that's before credit card fees. I mean our credit card fees were up $0.105 a gallon this quarter versus prior years. It is a significant increase that just reflects the market power of Visa, MasterCard, and the credit card companies, and so we're not immune to that, but it really impacts the smaller players more significantly than us.

So I just think all these pressures just continue to compound, and so because of our scale, the cost advantage, et cetera, we're able to just reinvest part of our profit back into even lower relative prices across the categories to drive demand, and it creates more of a virtuous cycle for us, as I described in our prepared remarks.

My second question is about share repurchase. I know you don't typically talk about your intention or desire when and where to buy back stock. But an interesting observation, I think, is in each of the last several quarters, the stock has performed well, and at any given point in time, it looks like you've been buying the stock at lower prices than where the stock is finishing the quarter. And when thinking about why or when you buy back stock relative to other opportunities you have?

I assume it's a moving target in terms of the earnings power of the business and how it's evolving. And I'm curious, is some monitoring of the breakeven, how you decide what are the fair price to buy back the stock? Because in this quarter, it might have seen that $180 a couple of quarters ago would have been a healthy price, and it's 30% below where it is now. So when thinking about a refreshed underwriting of your business and the repurchase program, how do you think about this? Can you help us think about how to think about it?

So we throw this chart in our investor deck every year for the last few years, and we talk about our total shareholder return and the movement of the share price and 1 year, 3 years, 5 years since then basis, it leads our industry and it leads all the major indices. And I think our leadership team and our Board is really focused on long-term shareholder values. And when we show on the right-hand side of that chart, what's the raise the bar formula to maintain the same compounded annual growth of our share price.

We just lay out some simple parameters, what do you have to believe about the EBITDA, what do you have to believe about the multiples, and what you have to believe about the shares outstanding. And we go to conferences and people tell us, "Oh, we're long-term shareholders will be in it 2 to 3 years. Well, there's a 5-year chart right there. And if you think about the amount of stock we bought back every year, we would be the largest shareholder each and every year based on our buyback because we have a long-term view of a business, not a 1-year, 2-year even 3-year view of the business.

So it's really hard for us to sit here today and look out 5 years and not see a share price that is not significantly higher than it is today. If you just use the simple formula of how much earnings is the business going to deliver, what's the shares outstanding? And what's the multiple being assigned? And look, if we see a major market correction, you're going to see it show up at lower multiples across all the companies. Well, that will revert it sometime. So our shares are just going to be cheaper in that environment.

Our price rises and falls, right? And with the outbreak of geopolitical risk, we saw our price just within the last 60 days, back below $180 a share. We're able to take advantage of those opportunities. So I think, Ben, it starts with a much longer-term view of the business, the sustainability of the business, the fact that we talk about affordability, we talk about engagement with our staff, we talk about being a low-cost responsible retailer. Those are the things that make us sustainable. And then that way, we can be aligned with long-term investors through our share buybacks.

And so look, we don't always get it right when we do a 10b5-1 and set parameters, and maybe there are some things we see out there that cause us to do more or do less in any given quarter. But I think the message that we are trying to deliver is over a period of time, this is our primary way of giving value back to shareholders is going to be balanced with our organic growth. The amount of organic growth is a function of the pipeline and the opportunity set in front of us.

And clearly, this year is a little bit lower than what we ideally would have wanted it to be this year. But when we balance those things out and you put that organic growth into that EBITDA formula, again we can't see a scenario 5 years out where the business isn't worth more at a share price 5 years before that endpoint. And we just keep rolling that mindset forward into the future.

That does conclude our Q&A session. At this time, I'll turn the conference back over to Andrew for any concluding remarks.

Thanks for all the questions today from the analysts and the investors listening in. We're certainly excited about the quarter, but I think as we shared in the remarks, we remain just as excited about the future potential of our business.