Alimentation Couche-Tard Inc. (ATD) Earnings Call Transcript & Summary

Good morning, everybody. I am Alain Bouchard, Founder and Executive Chairman of the Board of Alimentation Couche-Tard. It is my pleasure to welcome you to our Annual Shareholder Meeting. I now declare the meeting open. In accordance with the corporation's bylaw as Executive Chairman of the Board, I will chair this meeting; and Melanie Charbonneau, Chief of Legal Affairs and Corporate Secretary, will act as Secretary.

[Interpreted] Thank you, Mr. Bouchard. Some information, reminders and rules before starting the meeting. The agenda for the meeting includes the receipt of our audited consolidated financial statements for the fiscal year ended April 27, 2025, together with our auditor's report. The appointment of our independent auditor and to set its remuneration by the Board of Directors. The election of directors of the corporation, an advisory vote on our executive compensation policy and the review of and vote on 3 of 6 shareholder proposals received from 2 of our shareholders this year, provided that 3 of the shareholder proposal received from the MÉDAC Mouvement d'éducation et de défense des actionnaires for the education and defense of shareholders listed in the proxy circular will not be submitted to a vote. Mr. Bouchard will present all proposals. They will not need to be sent on it. Only holders of record as of July 9, 2025, or their duly appointed proxies who are registered with our transfer agent and have obtained a control number prior to this meeting may participate, ask questions and vote at the meeting. All other persons may attend the meeting as guests. At the appropriate time, shareholders or their duly appointed proxies will be asked to vote on the meeting platform after all items on the agenda have been presented. You will have only a limited time to do this. If you already voted and you vote again on the platform, it will change your previous vote. Registered shareholders and duly registered proxies who have already voted do not need to vote again unless they wish to change their vote. All duly registered shareholders and proxy holders may ask questions to the presenters during this meeting. There are 2 ways to proceed. Questions can be submitted in writing during the meeting using the dialogue box in the next function or by telephone by leaving the name telephone number and the subject of the question using the dialogue box in the message function to be contacted by telephone during the question period. Questions received will be addressed at the end of the meeting during the question period. When asking a question, please state your name and who you represent if applicable and confirm that you are a registered shareholder or a duly appointed proxy holder. So that as many questions as possible are answers, shareholders and proxy holders are asked to be brief and concise and to address only one topic per question. Questions from multiple shareholders on the same topic or that are otherwise related will be grouped, summarized and answered together. Answers will not be provided to questions that have already been answered or that are redundant or repetitive or are irrelevant to the corporation's operation or to the business of the meeting, nor will the corporation respond to questions that are related to nonpublic information about the corporation that are related to personal grievances or that are otherwise offensive. I must advise you that some of the topics discussed during these presentations following the legal part of the meeting may constitute forward-looking statements issued with the usual provisions. We cannot guarantee that any forward-looking statements will materialize. And accordingly, we urge our meeting attendees to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking statements and we caution you to not place undue reliance on these statements. Details of the cautionary statement regarding forward-looking statements may be found in the Alimentation Couche-Tard management proxy circular for the 2025 fiscal year, which is available on SEDAR+ and on the corporation's website and in the presentation accompanying the shareholder meeting. We shall now proceed with Mr. Bouchard.

Thank you, Melanie. I now appoint TSX Trust Company as scrutineer of this meeting, represented today by Ms. [indiscernible] and [ Ms. Isabelle Vachon]. The Secretary has informed me that we have received confirmation from the TSX Trust Company that it has sent the documents regarding the meeting to all shareholders of records on the corporation's books on July 31, 2024. The scrutineers -- I am in instructor to -- instructing the secretary to keep these documents in the corporation's records with the affidavit from the TSX Trust Company, confirming that they have been sent to Couche-Tard shareholders. The scrutineer has submitted to me its report on attendance at the meeting, showing that a quorum has been reached. I ask the secretary to attach the scrutineers' report to the minutes of this meeting. Accordingly, I declare this meeting duly convened and legally constituted. The first item on the agenda regards receipt of the corporation's financial statements. I now submit for receipt the consolidated financial statements of Alimentation Couche-Tard and its subsidiaries for the fiscal year ended April 27, 2025, as well as the auditor's report on these financial statements. The next item on the agenda concerns the appointment of the auditor for the current fiscal year and the authorization provided to the Board of Directors to set its remuneration. As indicated in the circular, the corporation recommends the appointment of PricewaterhouseCoopers, a firm of chartered professional accountants until the next Annual Meeting of Alimentation Couche-Tard. I propose that PricewaterhouseCoopers be appointed auditor of the corporation and that the Board of Directors be authorized to set the auditor's compensation. As indicated in the circular, the Board of Directors has set the number of directors to be elected today at 16. Biographical notes on the candidates are included in the management proxy circular made available to our shareholders. I shall now introduce the 16 people who have been nominated. Louis Vachon, Board member since 2021 and Lead Director; Jean Bernier, Board member since 2019; Karinne Bouchard, Board member since 2021; Eric Boyko, Board member since 2017; Marie-Eve D’Amours, Board member since 2023; Janice Fields Board member since 2020; Eric Fortin, Board member since 2021, Richard Fortin, Co-Founder and Board member since 1988; Stephen Harper, Board member since 2024. [ Milanico ] Board member since 2006; Marie-Josée Lamothe, Board member since 2019; Monique Leroux, Board member since 2015; Alex Miller, President and CEO and Board member since 2024, Réal Plourde Co-Founder and Board member since 1988; Louis Têtu, Board member since 2019; and myself, Alain Bouchard, Co-Founder, Board member since 1988 and Executive Chairman of the Board. Each candidate has indicated that they desire to serve as a director of the corporation. I propose that each of these individuals be elected as a director of the corporation until the close of the next Annual Shareholders Meeting or until a successor is duly elected and appointed. As mentioned at the start of the meeting, votes will be cast today through a single electronic ballot after the items on the agenda have been presented. The next item on the agenda is the advisory vote on the Board of Directors' executive compensation policy. We are confident that you will judge the corporation's executive compensation program to be based on a performance-based approach aligned with our shareholders' long-term interest. As it is a consultative vote, the results of the vote will not be binding on the Board. However, the Board will take account of this result and other comments from shareholders. The full text of the advisory resolution appears in the management proxy circular. I propose adopting the advisory resolution concerning the corporation's executive compensation practices set out in the management proxy circular. I will now hand over the mic to Melanie.

The next item on the agenda concerns the 5 shareholders proposal received this year from the Mouvement d'éducation et de défense des actionnaires the MÉDAC, represented by Mr. Willie Gagnon and the 1 shareholder proposal received this year by Share -- Shareholder Association for Research and Education, represented by Mrs. Delaney Greig, who is the Director, Investor Stewardship at University Pension Plan Ontario. These proposals relate to minimizing all forms of waste, disclosure of languages mastered by employees, disclosure of languages mastered by executives, advisory vote on environmental policies, in-person annual shareholder meetings and emission reduction strategies. The corporation has reproduced in annex of this management proxy circular, the full text of this proposal. Text has not been modified other than for translation purposes. The appendix state also the corporation's response to MEDAC and shares proposal. Relating to shareholder proposal 1, 2 and 3, the company has agreed with MEDAC not to submit this proposal to shareholder vote. As for shareholders' proposal 4, 5 and 6, which are submitted to vote, we refer you to the company's response in Appendix C of the management proxy circular. Although the corporation shares MEDAC and share positions on the importance of these issues, we believe that our current practices and disclosures in each area are adequate and meet regulatory requirements, and we invite our shareholders to vote against these 3 proposals. Mr. Gagnon would like to address the assembly and speak to the MEDAC proposal. Hi, Mr. Gagnon, you now have 4 minutes to talk about your 2 proposals.

Yes. Thank you. Can you hear me well?

Yes, we hear you very well.

So thank you. My name is Willie Gagnon. I work for MEDAC, which is a shareholder with Alimentation Couche-Tard since a few years. So the 3 proposals that we have agreed not to put to a vote because the state of discussions that we have had with the corporations on the [indiscernible] at the time of printing were not definitive. We are continuing our discussions with the company on those proposal, reduction of waste, the language required by for employers and employees, they are found in the circular, but they don't reflect our current conversation with the corporation. And that is why we have decided and accepted to not go to a vote right now on these 3 proposals. So we are going to vote on a proposal for on environmental policies. Our arguments are there. They are the same as our arguments in favor on the advisory vote on compensation. For the environmental question, I won't talk about that further. If only to say that this proposal has gained 17% vote last year. So 17% of shareholders agreed to that proposal last year. So proposal 5 on in-person AGMs. We are sad to not be there in person to talk to you today. I'm sure that the executive is together in a room. It would have been good for us to be there with them. So we invite you to bring back in-person AGMs. We can see what you say about lowering the carbon footprint, the reduction of carbon footprint that are gained through virtual meetings. We are not against virtual meetings. We would like to have information on these carbon footprint reductions and other reasons for having virtual meetings. We will remind you that last time, this proposal gained 30% approval. So we invite the majority of shareholders to support this proposal. And I would like to end by saying that we are happy with our dialogue with the company, and we are continuing to discuss these remaining issues. So thank you very much.

Thank you, Mr. Gagnon for your comments. So now madam [ Peg ] would like to speak to the Assembly about proposal #6. Hi, [ Mrs. Peg ] can you hear me well? You have 2 minutes to talk about your proposal.

So thank you, Madam Secretary. It's sad that we cannot see each other during this meeting. We can only discuss by phone University Pension Plan. UPP is a jointly sponsored pension plan for Ontario's university sector and a shareholder in Alimentation Couche-Tard. I will just correct that University Pension Plan is the filer of this proposal. It was submitted with the support of the Shareholder Association for Research and Education. The proposal comes after 3 years of engagement as part of the Climate Engagement Canada Investor and Led initiative. Our proposal requests that Couche-Tard disclose a greenhouse gas emission reduction strategy, including midterm targets covering material operational emissions and an approach to Scope 3 value chain emissions. Over the term of our engagement, Couche-Tard has made progress in measuring its emissions and assessing its exposure to climate-related risks. However, we believe that in order to remain competitive, attract international capital and address the transition risk impacting its business, particularly as a fuel retailer, Couche-Tard needs a coherent transition strategy, one that includes emission targets aligned with internationally in recognized methodologies. Many of Couche-Tard's self-identified peers, including Empire, Metro and Costco have already put in place such strategies and targets. In its disclosure, Couche-Tard identifies the many climate transition risks to which it is exposed, including regulatory, legal, technological, market and reputational risks related to climate change, all of which threaten shareholder value of less than addressed. We, therefore, believe that it is incumbent upon management to provide shareholders with a strategy to reduce the greenhouse gas emissions at the center of these risks.

I am sorry, Madam. Your time is now done. So I thank you for your comments. We are going to ask you to vote with your electronic system. I'll remind you that the items to be voted are the appointment of the auditor and to set its remuneration by the Board of Directors, the election of directors and advisory Board on our executive compensation policy and the 3 shareholders' proposals submittee. You will now be asked to vote on each of the 4 items on the agenda. When you are asked to do so, please go to the voting page and press 4 or withhold button next to the resolution to appoint PricewaterhouseCoopers as the corporation's auditor. Press the 4 or withhold button for each candidate for director. Press the 4 or against button for the advisory resolution on the corporation's executive compensation practices. Press the 4 or against button for each of the 3 shareholder proposals. Once the electronic voting is complete, the voting page will disappear and your votes will automatically be recorded. You will now have a few moments to fill out the electronic ballots, and we will resume the meeting once the voting has ended. [Voting].

Thank you for your patience. I have received the scrutineers' report on the voting results, and I confirm the following: I confirm that the resolution on the appointment of PricewaterhouseCoopers has been adopted. Regarding the election of directors, Louis Vachon, Jean Bernier, Karinne Bouchard, Eric Boyko, Marie-Eve D’Amours, Janice Fields, Eric Fortin, Richard Fortin, Stephen Harper, Mélanie Kau, Marie-Josée Lamothe, Monique Leroux, Alex Miller, Réal Plourde, Louis Têtu and myself, Alain Bouchard have been elected as directors of the corporation. I am pleased to announce that the Board's approach to executive compensation has been adopted. Finally, regarding the 3 shareholder proposals submitted, I wish to announce that each proposal was rejected as recommended by the corporation. Details of the results will be available shortly on the SEDAR website and on the corporation's website. With the legal portion of the meeting now completed, it is time to close the meeting and move on to the corporate presentations. I therefore declare the formal meeting closed. I'm reflecting on the 45th anniversary of Couche-Tard, which took place in February of this year, 45 years that says a lot about my age. I was young at that time. When I opened my first store in Canada from day 1, it was all about our customers and our people. How to be a good manager, serve the customer, keep the store clean and have it ready for visitors. Sure, basic stuff, but I build my dream on those basics. And this year, we are reinforcing them so we can keep winning the customer for the next 45 years. I'm not sure that I'll still be there, but still we all know that the retail sector is all about customer relationships and customer service. That is what I have always loved about this business. And it is why I decided to build a big chain. And today, it is indeed an impressive global network in 29 countries with over 149,500 team members and nearly 17,300 stores. Is it -- it is fair to say that this has exceeded even my wildest dream. However, I firmly believe that we are just getting started. We will continue on growing and serving a new customers as we build new stores and bring on new family members. It is in our DNA, and we are good at this, and we will continue on this path in the months and years a year. Why am I so confident about our future and how we will continue to strive for excellence, easy. I am surrounded by an amazing group of leaders and team members. This year, Alex Miller became our third President and CEO, and the transition has been remarkably seamless. Alex has surrounded himself with an impressive group of executive leaders who, like him, are ready to take on the challenges of a demanding economic landscape. The executive team is not only providing excellent leadership and vision to lead our business, but they are also deeply committed to protecting and promoting our special culture, which has been at the heart of this company from the day it started. I must also add that our team members across the globe never cease to amaze me. No doubt, daily realities are tough across our network from high prices to unprecedented climate events and shifting geopolitical conditions. Yet, our people are more engaged than ever, helping their communities, their customers and each other. And for that, we have been recognized as an exceptional workplace by Gallup for the fourth year in a row. Each year, this recognition fills me with pride and never gets old. From the outset, I have always believed that our business, no matter how large it becomes, is built one store at a time. Our customers don't visit a chain. They visit one store, and they wanted to be ready to serve them quickly with a smile and a warm welcome. That is what convenience is all about. And it is what I have built my dreams on for the last 45 years. We sell time. I want to thank all our team members, customers and shareholders for sharing in that ambition and supporting us as we move forward in the road ahead. I will now hand over the mic to our President and Chief Executive Officer, Alex Miller.

Thank you, Alain. My first year as President and CEO coincides with the 45th anniversary of Couche-Tard. Few companies, large or small, make it as long and successfully as we have been able to do so. I have no doubt that this is because of our special culture of putting our people and customers first, an approach started by Alain when he opened our first store in Laval, Canada and one that continues to guide us today across our global network. Like Alain, the favorite part of my job is being in our stores. I probably visit them close to 150 days a year, whether on a market pride tour or just dropping in casually for coffee and a snack. I love watching our people interact with our customers, seeing what they're doing in real time, and I couldn't be more proud of them. However, the reality is that it is more challenging than ever in the retail world as consumers are hurting and continue to carefully watch their spending. That is why I've asked the entire company to make winning the customer our #1 priority as we begin the next 45 years of our company's journey. Over the last several months, we have been listening carefully to our customers to understand why they visit our locations and what they need from us to make them loyal customers. Not surprisingly, as Alain learned decades ago, to win the customer, we need to be good at the basics and keep our promise of easy. That is at the heart of the convenience business and our mission of making our customers' lives a little easier every day. From introducing bundled meals deals in North America to expanding our loyalty programs in the U.S. and Europe and continuing our fuel day promotional events, we are relentlessly focused on providing ease and compelling value to win our customers. Last October, in the U.S., we launched our $3, $4 and $5 meal deals, bundling popular food items at value pack prices to create a satisfying and affordable meal option. While meal deals have become common in QSRs, quick service restaurants, we have differentiated ourselves through partnerships with our suppliers by offering a variety of options, including energy drinks and chips that are not available at QSRs. These meal deals have been instantly popular with our customers. And in January, we expanded the offer across Canada. We are also providing more value and ease. In our growing loyalty membership programs. In the U.S., our efforts with Inner Circle have been on unlocking more savings for our customers through personalization and adding new capabilities that tailor our offers and content to different customer segments. In Europe, we are advancing our Extra program with new concepts designed to offer rewards across all products and services at our sites, whether a customer is looking to fill up with fuel, charge an electric vehicle or grab a snack. On our forecourt, we held numerous fuel promotional events at thousands of stations across the network, which offered our customers immediate discounts at the pump as well as fuel cards to use on future visits. These events continue to bring impactful savings to our customers while driving more traffic to our locations. Owning food and thirst is fundamental to winning the customer. Quenching thirst is the main reason customers visit inside our stores, and we strive to be the #1 thirst stop across our markets. We are growing our beverage category by offering great assortment, innovation and value in both packaged and dispensed beverages at affordable price points. We are also increasing our exclusive beverage deals and promotions with our vendors and sponsors, driving excitement for our customers and bringing them back to our locations. In our Fresh Food Fast program, we have been listening closely to customer feedback and data. This has led us to launching our North American meal deals as well as focusing more than ever on consistency and simplicity to improve execution and ensure that we have the right local products available at the right time. We are pleased with the performance of our fuel business in terms of both volumes and margins as we maintain market share and continue to build value for our customers through the optimization of our fuel supply chains globally. Our B2B work continues with solid results in Europe, and we are encouraged by its growth in the U.S. as new initiatives and strategic relationships bring in business and fleet customers. Our network of truck accessible sites is growing as we expand our offer of high-speed diesel and relevant services for the long and short-haul truck driving customers. In e-mobility, we are proud to build on our established leadership position as a charging destination in Europe while expanding our charging network in North America. Perhaps the most exciting development this year for our e-mobility customers has been the opening of our biggest charging hub in Sweden, which has 26 high-power chargers for both passenger cars and heavy vehicles as well as sustainable forecourt concept for seamless and efficient charging. Our customers are thrilled with the experience, both on the forecourt and inside the store, where they can also enjoy our popular pizza offer. Growing the network in new communities and countries has been essential to our DNA over the last 45 years. This year, we reached new customers in Europe by bringing the Circle K brand to dozens of locations in our 4 new countries, which we acquired from TotalEnergies. Our synergies are on track 1 year into the acquisition, and we are very encouraged by the positive reception by our customers to our services and products. We also created 4 new business units, led by local leaders who best know how to serve their customers and communities. In June, we closed on the acquisition of GetGo Café Markets from supermarket retailer, Giant Eagle. GetGo is an innovative food-first convenience store experience that operates approximately 270 convenience retail and fueling locations across Pennsylvania, Ohio, West Virginia, Maryland and Indiana. We are excited to bring the GetGo team members into our family as we learn more about its made-to-order food and loyalty programs, which are extremely popular with customers. We are also making good progress in our ambition of building 500 new-to-industry stores in 5 years. Here, we are reaching and delighting new customers in rural areas as well as those looking for a high-speed diesel offer. In our efforts to win the customer, we are determined to have store operations that are fast, friendly and customer-ready, and we know that customer-centric teams are critical to our success. Improving retention and lowering turnover is essential here, and we are making notable progress by investing in our store team members in areas they care about, including compensation, benefits, training and engagement. We are also helping store team members with new scheduling tools and programs to simplify their workload and make it easier to operate our stores and take care of our customers. As a result, our turnover and retention metrics are at levels that we could not have imagined only a couple of years ago. For the fourth year in a row, we have been recognized as a Gallup exceptional workplace, which is a testament to our highly engaged customer-centric teams. There is nothing more important to me than protecting and promoting our special culture, and we are humbled that in a dynamic and demanding year, our team members continue to feel heard, valued and respected at work. I am also deeply proud of how our global teams continue to support our customers and communities during times of crisis. This year, we had unparalleled weather emergencies in the U.S. from devastating hurricanes and historic winter storms across the South, catastrophic wildfires in Southern California and most recently, deadly floods in Texas. In each case, our team members showed incredible courage and dedication by keeping our stores open and providing essential supplies and services to customers. Throughout our company's history, from pandemics to refugee crisis to climate disasters, we are always ready to support our customers and communities when they need us most. As a responsible retailer, sustainability continues to be very important to our customers and team members. Here, we remain disciplined and transparent in our approach as we navigate turbulent conditions and evolving stakeholder expectations. We are steadfast in our global commitment and are pleased with our progress in our planet, people and prosperity framework. You can read all about our sustainability work in our 2025 report. No doubt, we are living through uncertain times with many geopolitical and economic headwinds. However, what is most important to me is that we stay relentlessly focused on our customers by getting the basics right, providing compelling value and ease and doing the right thing for them and our team members. As we have done for the last 45 years, I remain confident that by relying on the values we live by, global scale and proven ability to successfully grow the network, we will continue to win the customer and move forward in our vision to become the world's preferred destination for convenience and mobility. For that, I want to thank all team members, customers and stakeholders for their continued commitment and support of our business. Now we will turn next to our Chief Financial Officer, Filipe Da Silva.

[Interpreted]. Thank you, Alex. Let's begin with our overview of our financial performance since 2015. The following metrics illustrate the work our teams have done year after year to create value for our shareholders. As you can see, total gross profit has grown at an annualized rate of 9.5% since 2015 and by 7.6% over the past year to more than 13 billion. In addition, since 2015, our EBITDA has grown at an annualized rate of more than 12% and our adjusted diluted earnings per share have grown at an annualized rate of nearly 12% to more than 5.9 billion and 2.71 per share, respectively, which is a perfect demonstration of our consistent operation level. And finally, shareholders' equity, a good indication of value creation has grown by more than 14% per year since 2015. If you look at this chart showing EBITDA growth since 2000, you can see the long-lasting equation that has been in place for more than a decade. The equation of strong revenue and gross profit generation, combined with structural operational execution and disciplined cost control has driven a sustained streak of excellent performance by generating EBITDA growth of nearly 18% annually since the year 2000. It is remarkable to see the starting point of 100 million in the year 2000 and how far we have come to achieve EBITDA of more than 5.9 billion this year. Over the past 10 years, Alimentation Couche-Tard share have increased in value by more than 145%, outperforming the benchmark index in Canada. It is interesting to note that an investment of $1,000 in Alimentation Couche-Tard shares made 30 years ago, more precisely on June 30, 1995, would be worth more than 800,000 today based on the share price at the closest trading on July 31, not calling the return from dividends paid over the year. Once more, last year, we saw the resilience of our business model, including the strength of the cash flow generated. Our EBITDA increased by 6.1% over the previous years to approximately 5.9 billion. In the same period, we generated fresh free cash flow of over 1.8 billion. Over the year, we have seen strong growth in free cash flow with a compound annual growth of 5.7% between 2015 and 2025. In fiscal 2025, we were able to maintain a strong return on capital employed, a particularly important metric for assessing our operational efficiency. A disciplined operation -- operating performance, combined with efficient capital allocation strategies enabled us to achieve a 12.2% return on capital employed this past year. Finally, we look at -- we took advantage of our solid results and of the vision of our promising future to raise our quarterly dividend by more than 14% year-over-year. Notably, we have now increased our dividend every year since the first dividend payment on November 15, 2005. This demonstrates our commitment to rewarding our shareholders for the long term as our profit grows. In addition, on July 21, 2025, we announced the reinitiation of our shares repurchases program. Authorizing the buyback of up to 10% of our public float outstanding, representing 77.1 million shares in total. Based on the share price at July 14, 2025, completion of the program in full would represent a total investment of approximately CAD 4.2 billion or CAD 5.8 billion. At that time, there were slightly over 948 million shares issued and outstanding with a strong balance sheet and confidence in our operating model, we view this program as an efficient way to create a long-term shareholders. We will turn to discussion now and question.

What -- so we have one question about the of 7-Eleven and Couche-Tard. What can you say about that?

So Filipe, thank you for the question. As we said before, acquisitions have always been part of Couche-Tard's DNA, and we will continue to acquire and widen Couche-Tard's footprint via acquisitions. It's something that we are convinced we have know-how and we want to continue consolidating the market in the United States and Europe. The results that we have gained with the acquisition of total shows us that we have a good know-how. We will continue to work on acquisition. We have an interesting pipeline, and we believe that in the next years, you will see Couche-Tard acquiring new files.

So thank you, Filipe. So just to validate if we have other questions, I think not. So thank you to everybody for your questions, for your attention, and we can now close this meeting. So thank you, everybody. Thank you, and see you next year. [Statements in English on this transcript were Spoken by an interpreter present on the live call.]