Murphy USA (US:MUSA)2021-05-02 13:23Financial Data and Key Metrics Changes - Total revenue for Q1 2021 was $3.5 billion, up from $3.2 billion in Q1 2020, reflecting the impact of the QuickChek acquisition [20][23] - Net income for Q1 2021 was $55.3 million, down from $89.3 million in Q1 2020, attributed to increased depreciation, interest expenses from QuickChek, and one-time acquisition-related costs [25] - Adjusted EBITDA for Q1 2021 was $154.8 million, compared to $170.7 million in the same period in 2020 [24] Business Line Data and Key Metrics Changes - Fuel margins reached $0.225 per gallon, consistent with Q1 2020, despite rising prices [9] - Same-store sales in the merchandise segment showed strength, particularly in tobacco, which grew sales and margin dollars by about 2% [12] - Non-tobacco merchandise sales grew nearly 10%, contributing to an increase in overall margin contribution dollars by approximately $5 million in Q1 [12] Market Data and Key Metrics Changes - Fuel volumes were down 10% year-over-year for Murphy USA, but April volumes improved to within 5% of 2019 levels, indicating a recovery in demand [11] - Average retail gasoline prices per gallon during Q1 2021 were $2.37, compared to $2.14 in 2020 [23] Company Strategy and Development Direction - The company is focused on leveraging the QuickChek acquisition to achieve $28 million in synergies over three years across fuels, merchandise, and operational expenses [8] - Management emphasized the importance of integrating QuickChek's technological advancements, such as computer-assisted ordering, to enhance customer-facing technologies at Murphy stores [18] - The company aims to maintain its competitive edge by optimizing supply chain processes and enhancing store-level execution in food and beverage categories [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong multiyear EBITDA growth, supported by improved fuel volumes and retail margins in Q2 2021 [28] - The company noted that structural changes in the industry are favoring its high-volume model, which is expected to differentiate its performance from less advantaged competitors [10] - Management acknowledged challenges related to rising fuel prices and labor availability but remains optimistic about sustaining market share gains [32][51] Other Important Information - The company closed the QuickChek acquisition on January 29, 2021, funded by $500 million in senior notes and a $400 million term loan, increasing total debt to approximately $1.8 billion [20][21] - Capital expenditures for Q1 2021 were approximately $56 million, primarily allocated to new store construction [26] Q&A Session Summary Question: Insights on merchandise business and market share retention - Management indicated that initiatives in promotional activity and new product offerings are expected to sustain or grow market share despite challenging comparisons from last year [32] Question: Impact of FDA's menthol cigarette proposal - Management noted that while the proposal could lead to a reduction in tobacco consumption, the company is well-positioned to adapt through its focus on noncombustible products [38] Question: Long-term fuel volume growth outlook - Management expects fuel demand to stabilize around a growth rate of plus or minus 0.5% per year, influenced by factors such as vehicle miles traveled and population growth [44] Question: Construction costs and supply chain impacts - Management has not yet seen significant impacts from construction cost inflation due to established contracts for modular store builds [47] Question: Potential wage increases and their impact - Management highlighted that a national minimum wage increase could pose a $30 million headwind, but the company is prepared to leverage technology to mitigate labor costs [54] Question: Product resets and their impact on margins - Management confirmed that product resets are occurring across all categories, leading to improved sales and margin performance [59]