CrossAmerica Partners (CAPL) 8 Nov 232023 Q3 Earnings call transcript

Good morning, and welcome to the CrossAmerica Partners Third Quarter 2023 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Maura Topper, Chief Financial Officer. Ms. Topper, please go ahead.

Thank you, operator. you call. the thank quarter Partners and earnings XXXX morning, for CrossAmerica joining third Good today Charles some me performance discuss call a With the is overview from today off President. We'll brief then with the the start financial quarter, Charles I CrossAmerica's results. providing of opening and and Nifong, comments operational CEO will and

are CrossAmerica as questions. Today's presentation slides follow will open part the We of will then the up call the posted webcast and are website. call available on to that

results begin, and forward-looking differ we to including plans, everyone that Form expected reports expectations. beliefs Securities Before will can from opportunities see with would I our actual remind XX-K There or Commission, XX-Q no and a that CrossAmerica's question-and-answer future organization. of and be Exchange that like expectations, the results. be and Form including quarterly assurance and projections achieved will session, today's on the not management's expectations important future revenue, statements call, filings operational factors the discussion metrics could may of on affect for include reports actual regarding annual Please that

disclaims as to Forward-looking judgment the of the CrossAmerica's or update intent today's statements date, and management organization any forward-looking represent any obligation of statements.

may GAAP. During measures that certain principles or generally we provide today's do call, U.S. performance also accounting not conform accepted to

XX on a I GAAP is part the available a a that schedules will call call provided conference of and call turn Charles. as reconcile these results that, non-GAAP of basis for the have website recording over will on now our our We release. webcast, to period with earnings measures of CrossAmerica days. With being Today's press be this reported

Maura. you, Thank

to us, call and Maura everyone appreciate listen morning. making for always, As the this time to and thank the joining you I

the to third and I what briefly will few other through color the quarter. market similar the During updates then the a on review results. Maura previous operating for calls. today's call, more on go I will financial I detail provide provided highlights will also in

Now of if X, to will I results. operating review some turn Slide you briefly our

quarter partially offset the decline quarter profit segment $XX.X fuel gross wholesale $XX.X in fuel X% when a in of $XX.X our to of third profit XXXX. increase in of third million million the declined driven the to quarter to an fuel by compared of third by the in volume. XXXX. gross Wholesale a $XX.X decrease was gross The For million compared X% was million, margins, of decrease profit wholesale XXXX,

declined quarter The factors: by variably to was our gallon year. from margin X% decline quarter business $X.XXX the quarter the first exceptionally of third third current of The fuel of an XXXX primarily was per margin fuel $X.XXX in to performance XXXX. strong third the wholesale in following per driven wholesale in Our the of priced gallon XXXX the X relative

If quarter you strong an recall, we XXXX. third in of environment and experienced the fuel exceptionally the margin industry

margin environment fuel nearly it fuel the year. favorable While generally in of third XXXX environment a the margins, as was was favorable prior not as for the quarter

during gallons primarily was prices the fuel in of driven of product. lower The was by the result year-over-year during lower oil cost resulted certain to by which fuel cost second costs, that of and value the improved fuel and decrease quarter partially This to the lower in dollar our the crude of our terms factor continued was year, purchased quarter. prior during decrease margin offset compared the our the the were the ongoing corresponding motor discounts quarter on from efforts sourcing

than service XXXX compared XXXX gallons XXXX. for when due third period to million The to X% in just by offset to period business. Since of quarter in dealer quarter third we closed retail the volume with community approximately assets assets X.X% this last compared of volume conversion service at that community down year weeks trade for this end, the in transaction to acquisition. Returning class the period. saw on We XXX.X declining fourth approximately to quarter, time volume in same-store certain mentioned year of locations X continued acquired increase wholesale of been the the assets, great lessee same-store partially in to performed them volume X% for and volumes station our quarter, of These year-over-year. I the our few past X% largely our since Our the the the the ago. station to same-store additions gallons have down was XXXX, the was same-store the quarter's million wholesale XXX.X of Wholesale segment of and the in quarter portfolio, during same volume lower has was expectations in better the in the which volume our year-over-year

was rent, year. sites for million compared locations year that quarter due of slight Regarding company-operated million, of conversion to earlier rent prior lessee $XX base certain the our occurred dealer our the the $XX.X decrease wholesale a to to this

decrease from to changes, of the our the rent class trade a to income in continues rental due stream Aside our durable be income in business.

strong during profit. year-over-year very generating the $XX.X XXXX, third due retail our well challenging the of in quarter despite the segment, retail XXXX, margins of quarter to third exceptionally comparison fuel the of million performed segment For the gross

motor profit when for While in compared period merchandise gross fuel same declined increased the our our XX%, XXXX. quarter profit XX% the to gross

on same-store basis, year-over-year. increased For quarter retail the our volume a X% volume for

the geographies since latter quarter strong declined in the volume performance has a same-store and some site-specific As of issues, the end, the in driven the our prior by mid-single digits Wholesale decline certain comparison performance. saw unfavorable period volume segment, to quarter. In year part we an in particularly year-over-year

quarter cents third of margin the fuel retail we fuel XXXX. XX% margins basis per our gallon exceptionally gallon On experienced margin fuel as a front, declined $X.XXX year-over-year the on per in strong at

noted strong the quarter second fuel been from on moment third $X.XXX the we gallon as than basis, quarter However, experienced absolute quarterly was margin. ago, fuel higher generally up what have fuel been a retail volumes in the quarter our while since fuel end margins the I retail an per have And and since quarter. end, margin lower of

For increased to inside all sales approximately basis, X% inside our sales, strong sales beverages on with across year. sales our categories X% packaged food cigarettes, a well. on relative a performing generally approximately year-over-year Inside last basis. categories same-site up The particularly excluding performance and was were same-store

increased improvement front, merchandise in On gross the margin count, store merchandise XX% sales increased the from merchandise gross by in the same-store our store percentage. and store to margin driven million, margin our sales higher our $XX.X increase

higher-margin inside and merchandise over percentage Our place merchandise certain same-store the period in prior was basis XXX end, promotions. we regards to have store up store sales pricing, was approximately initiatives categories margin In gross quarter improvement year. merchandise margin of to product and since are up cigarettes, The points sales to in the shifts towards sourcing X% inclusive due year-over-year. X%

last classes but quarter As retail we are our our look in year, quarter, sites the segment, XX the from at you if up prior second company-operated from retail flat we noted approximately site count, our relative this due prior company-operated of conversion other sites of count is in the sites trade The site from year. to increase of to earlier to the year. certain controlled in year

continue trade other did going we extent, expect company-operated retail we the to have sites or in convert a lesser commission conversion any of classes to not activity, retail quarter, to sites significant Although additional from sites to forward. third

margin. these to ourselves. Overall, profitability that merchandise lease gross segment up For from value challenging we percentage last can prior sites margin same-store year-over-year and store locations, as the positive was we margin do believe retail the to we generate were year's volume, all sales, despite company-operated sites same-store merchandise these Retail enhance retail to comparison convert locations operating It a more quarter our sites' fuel relative long-term for or commissioned the and merchandise year. same-store through

it our identify divestiture $X.X quiet X to the had quarter, we sold at look the to X in or of portfolio The second environments. divestiture remains capital to remain front, which quarter. On free either selling continues We after approximately we X Year-to-date, this selling this for have property properties many continuously fundamentals only will potential we ours perform proceeds. and opportunities. Overall, operating in well across in locations, investing underlying up put manner, leverage strong. reducing the different a growth business million focus quarter properties in a towards

the sheet business. successful healthy on We balance Our for improving be environment, current initiatives work to interest rate is and the continue cannot positioned people. and constantly and executing great without our well hard we

So for it detailed day hard work all drive who forward. With over more that, results generate to team business Maura the members and thank financial review. to you a to I will turn CrossAmerica the to every

Charles. Thank you,

net partnership. XXXX income to primarily was third $XX.X decline compared as EBITDA the third X, quarter Slide the experienced like results to of our earlier. million $XX.X EBITDA income XXXX of of third XXXX. of turn If adjusted XXXX for noted $XX.X in to quarter net review compared the the income the you million would for for in due in margins million that elevated reported quarter was the of of very for quarter to please fuel quarter Adjusted quarter The would to the $XX.X we Charles XXXX. third million I of third We net third of

of million XXXX. cash results versus increase income. also third XXXX $XX.X impacted for decrease in The quarter in to the flow strong flow primarily, distributable in to XXXX that Our quarter in third our million addition was for was distributable cash the expense again, of third exceptionally the third due quarter interest of net cash the an $XX.X quarter

for unit quarter for on coverage $XX of quarter the strength our profit attributable the almost Charles strong discussed the a XXXX. third for second continuing third compared line X.XXx organizational trailing per business the ended period X.XXx execute quarter for distribution our Our of our XX, evidence XXXX, distribution of XX-month months primary was as the September paid and earlier. total our a ended September the compared of These for continues The XX, of of of to provide coverage $X.XXX distribution top quarter to of performance million. some the a XXXX goals. the gross distribution team XXXX. our XXXX of during to for drivers the basis, X.XXx coverage X.XXx comparable to statistics ratio XX quarter On was current partnership

Turning $X.X to Operating of portion increased operations. third XXXX our million expenses the third the for compared the to expense quarter. quarter

add quarter, is we the company-operated being converting a operated in expenses company-operated locations. converted trade, with dealer retail our of cost inflation business to was of Retail for locations was expenses locations the expectations we our locations operating due to Adjusting the earlier by increase year. incremental than locations expenses to the driven for primarily incremental wider this we a operating converted company-operated in last company economy. are The segment number lessee in for for with operating line known increase as This incremental they XX to these the below moderated the store in levels past expense to the meaningfully operating of commission conversion profile As seen the is operating expense and the to when other our months. experienced have the sites

open inflationary which the pressures of Year-over-year, store our hours, are are are and continued driver our hours business. of operating meet X% our costs, customer our primarily team Although, labor up labor impacts number we staffed and result focus continue are the of to ensuring to on labor largest of wages. The the has approximately expenses stores appropriately staffed monitor are on their cost our stores as our needs. same-store

experienced other on been these completed focus have us by cost supply of Although, which and our in offset continued recently in cost this have areas quarter. pressures maintenance area the have year-over-year of business, the we spending, management in team's benefited

increased expenses year-over-year. G&A for X% Our quarter the

was expenses with this by roughly flat G&A compensation driven expense year-over-year. higher So primarily other equity all

which line the capital to We with of next from This of to total of third in $XX.X our third million spending see the being included a expenditures in slide. the $X.X acquisition XXXX our spend with efforts related was million, Moving expenditures. on rebranding $XX.X for quarter growth-related during of X-Eleven quarter million capital total that XXXX. of assets

through past incentives growth-related primarily this fuel funded spending our included During capital image suppliers. that quarter, upgrades from are being

end slightly total As XX, of XXXX, XXXX, of of balance June and up was million facility XX, our our September below balance $XXX.X million, $XXX.X our balance million. XXXX $XXX.X from of credit

rising the fuel XXXX, During resulted quarter of generally capital third of in usage a which working experienced we during quarter. the environment, price a

of upgrades our We are we in and fuel are capital also to roughly will net during related drove as generally quarter-over-quarter the supplier image flat funds credit completed. timing continue facility. the to X balance receive the on incentive uses items quarters These upgrade future our consider matters projects quarter

defined facility X.XXx Our of as credit was XXXX. leverage September XX, ratio

remain to generation on leverage to approximately associated credit flow at on our continue and We cash Xx operational facility-defined our performance focused a basis. manage ratio

although, have the impact we environment. of felt rate Additionally, elevated interest the

continue we of is in periods, rate swaps we fixed place XXXX XX% prior balance swapped with and to our benefit to in the As facility credit rates. from put early Approximately April XXXX. current recently into interest

XX, September of interest contracts, in As place has XXXX, swap account. partnership currently rate into the taking

profit that We balance quarter the is quarter it comparisons, continuing capital our provides to strong flexibility members and in the had ended Our our despite open a quarter's we opportunistically performance to business. of with most this conclusion, strong efforts that we during with is quarter, current interest an positive summer the the maintaining third credit and which our appreciate a into look us effective third attractive forward our our rate continued the performance profile rate noted, country rate with was XXXX. With past around fourth sheet invest of against strong gross We leverage busy season for segment. fuel on backdrop. In team and that, quarter all year-over-year on the in with as in questions. facility a focus retail X.X%, up a of this merchandise will Charles we

Instructions] [Operator

to today. free any later, it have out Well, reach Should to appear have doesn't any feel us. we please you questions questions

for and you have thank day. great joining always, As us, a

thank please gentlemen, and that this for for you your participating Thank you and concludes lines. conference We Ladies you. today. your ask call disconnect