Yesway, Inc. (YSWY) Earnings

Management highlights

- Company Overview & IPO Milestone - Yes Way, Inc. is the 15th largest convenience store operator in the U.S., operating 449 stores across rural and suburban Southwest and Midwest markets under two complementary brands: Yesway and Allsup's, with Allsup's iconic deep-fried burrito as a core traffic driver. - The company completed its initial public offering on April 22, 2026, raising approximately $322 million in net proceeds after full exercise of the green shoe option. Proceeds were used to fully redeem preferred equity and repay $30 million of total debt, strengthening the company's balance sheet for future growth. - The company owns approximately 65% of the real estate underlying its store base, providing operational flexibility and long-term site control. - Operational Highlights - Record first quarter 2026 results, with profitability reaching an all-time high, and positive same-store sales and fuel gallon growth sustained through the end of May 2026, the first two months of Q2. - A multi-quarter labor efficiency initiative reduced same-store labor hours by 3.5% in Q1 2026, driving a 2.8% year-over-year decline in same-store operating expenses. Many non-peak shifts now operate with only a single employee, supporting a highly efficient operating model. - One new store was opened in Q1 2026. The company has agreed to sell 29 underperforming stores in Iowa and Kansas to sharpen operational focus, simplify the supply chain, and concentrate density in core regions, with the transaction expected to close by the end of fiscal 2026. - Yes Way Rewards loyalty program penetration reached 18.5% of inside store sales and ~15% of fuel gallon transactions, enabling targeted promotions that drive higher visit frequency and larger basket sizes. - Strategic Priorities - Accelerate profitable growth through organic new store development and selective, opportunistic M&A, leveraging the highly fragmented nature of the U.S. convenience store industry. - Invest in technology, product expansion, and customer experience improvements to drive traffic, loyalty, same-store sales growth, and store-level productivity.

Guidance

- Management introduced full fiscal year 2026 guidance, with all metrics excluding the 29 stores expected to be sold by year-end: - Same-store inside merchandise sales growth guidance of 1.25% to 3.25%, reflecting an expected deceleration from the outsized Q1 2026 growth rate that benefited from favorable weather comparative - Adjusted EBITDA guidance of $210 million to $220 million - Capital expenditure guidance of $85 million to $95 million, including three pipeline stores converted from build-to-suit to self-funded to maintain strategic flexibility - Expected total new store openings of 6 to 8 for full fiscal 2026, including the 1 store opened in Q1 - Continued fuel price volatility driven by Middle East geopolitical conflict creates upside potential to outperform the high end of adjusted EBITDA guidance if current strong fuel margin levels are sustained, though management notes long-term sustained high fuel prices could create some consumer demand stress that could offset some of this benefit.

Segment performance

Yes Way, Inc. has two core operating segments: Inside Merchandise and Fuel. 1. Inside Merchandise: Total inside merchandise sales increased 9.5% year-over-year to $213.7 million, representing 31.5% of total company revenue. Same-store inside merchandise sales grew 4.5% year-over-year, and same-store inside merchandise gross profit increased 9.8% year-over-year. 2. Fuel: Total fuel sales increased 16% year-over-year to $464.3 million, representing 68.5% of total company revenue. Same-store fuel gallons sold increased 0.2% year-over-year, total fuel margin increased 48.5% year-over-year to 49.4 cents per gallon, and same-store fuel gross profit increased 38.5% year-over-year. Diesel currently accounts for 38% of total fuel volume, above the industry average in the 20% range. Overall total company store contribution increased 72.7% year-over-year to $74.6 million, adjusted EBITDA increased 112.9% year-over-year to $59.2 million, and the company reported net income of $30.2 million compared to a net loss of $5.6 million in the prior year period.

Risks & headwinds

- Volatility in global oil and fuel prices driven by ongoing Middle East geopolitical tensions, which could create unexpected margin compression if market conditions shift, though current volatility has benefited near-term retail fuel margins - General economic weakness and sustained high consumer fuel and merchandise prices could pressure consumer disposable income, leading to reduced demand, trading down to lower-margin products, and softer same-store sales growth - Execution risk associated with new market expansion (e.g., entry into Arizona) and new store development pipeline - Integration risk for potential future acquisitions, though management maintains a disciplined approach focused on high-value density-building opportunities - Uncertainty around long-term mean reversion of current elevated fuel margins, which could pressure profitability in 2027 if margins revert to historical structural levels

Analyst Q&A

• Q: Have you noticed meaningful shifts in consumer behavior or trading down following eight weeks of higher gas prices? /

  A: Management notes the company's core rural customer base is less susceptible to macro consumer pressure, and Yes Way's existing value positioning (with meal price points of $4-$6) has kept customer demand very sticky. The only notable shift is modest trading down from premium to lower fuel grades, which actually has a net positive impact on overall gross profit. Inside store transactions and average basket size remain positive, with no meaningful trading down observed.

• Q: What is the status of your new store pipeline, what is the long-term opportunity in the new Arizona market, and is the multi-quarter labor efficiency initiative nearing an end? /

  A: The company holds a strong pipeline of land for new stores, with 6-8 openings planned for 2026 and ~26 planned for 2027, with most of the 2027-2028 pipeline located in Arizona. Arizona has structurally higher fuel margins than the company's existing core markets, with similar favorable demographics, and will be the company's highest growth market in the near term. Management expects only modest incremental labor efficiency gains going forward, as the operating model is already very efficient, and no further large quarterly reductions are expected.

• Q: What factors would drive results to the high or low end of your 2026 EBITDA guidance, and will excess cash from high fuel margins be used to accelerate growth? /

  A: The primary upside driver to guidance is continued Middle East conflict sustaining current high fuel margins, which would deliver sizable overall profitability benefit even with modest potential consumer stress. The company is using excess cash to accelerate new store development by locking up land earlier for out-year openings, is pursuing incremental high-return diesel expansion projects, and has renewed active evaluation of opportunistic M&A opportunities after a multi-year period of focusing primarily on organic growth.

• Q: What is the structural long-term fuel margin outlook after current elevated levels, and what are key tailwinds for inside merchandising? /

  A: Trailing twelve month CPG (fuel margin per gallon) through Q1 2026 was 43.8 cents, and management expects the long-term structural margin to settle in the low 40 cent range, with a gradual upward drift as new stores have a higher diesel mix, which carries a structural margin premium. Key Q1 inside merchandising tailwinds included strong performance in packaged beverages, candy and snacks, and alternative nicotine, with additional vendor funding supporting cigarette category growth.