CrossAmerica Partners (CAPL) 27 Feb 242023 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the CrossAmerica Partners Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Maura Topper, Chief Financial Officer. Please go ahead.

Thank you, operator. you Year the XXXX thank Quarter Partners and Full and Earnings morning, for CrossAmerica joining Fourth Good Call. With CEO me and Nifong, President. today is Charles some the overview We'll comments full for year, off the I today and Charles start will then discuss call the quarter and results. CrossAmerica's of providing an and operational financial performance with opening

will then open We up questions. the call to

webcast that and follow will as available call website. are presentation CrossAmerica slides posted are of Today's on the the part

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

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

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

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

to I will that, now With over the call Charles. turn

Thank you, Maura.

the be joining I appreciate us for thank morning. today. schedule with to always, your you in this As and time We us everyone Maura making

the for done financial I updates in a also previous I results. on today's the highlights calls. call, Maura fourth through to commentary detail full and review what XXXX. have will provide similar will and our few operating the other will quarter year then some of on I go During market our more

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

segment the increase the of $XX in income. in of For quarter profit XXXX. fourth million million volume our offset increased driven to fuel quarter to fuel rental compared gross by an $XX.X and by The XXXX, decrease X% partially was margin, a increase in fourth wholesale

Our X% increased million wholesale to $XX.X million gross quarter order profit quarter XXXX. the fourth of XXXX the in $XX.X fourth of from fuel in

of gallon our $X.XXX margin Our market fuel our X% in by quarter to conditions. $X.XXX in to our our fuel efforts of The driven costs wholesale purchasing to fourth XXXX. improve increased margin the per primarily gallon from was and fourth the XXXX in in per beneficial quarter fuel per success gallon increase

oil fact that price spot decline X% evidence our lead XXXX, impact per per is business. the average the wholesale for the from Texas a improved did year-over-year beneficial gallon quarter The Intermediate For WTI barrel Historically, the relative crude quarter of in the $XX.XX barrel quarter, decreased fourth $XX.XX West quarter of for of XXXX. quarter the in fuel in and it costs per a to to on margins lower additional in would comparison. not our prior sourcing fourth the their fuel year fourth of

a decline The the assets XXXX. to the lessee XXXX XXXX, certain quarter gallons to reflecting compared decline by to Our dealer in of class XXXX the X%. fourth trade lower of was of in the station acquired fourth community conversion wholesale volume sites compared and retail of when offset of the largely same-site same volume, our the quarter due of million during million volume was quarter XXX.X fourth period in XXX.X to for gallons partially service

X% year-over-year. part the national the overall quarter to the to approximately due same-store half volume States, end, better our winter us, demand wholesale quarter, performance period in X% In available national to data the weather softer line For to Based the slightly since in our to for demand. was the on down was in than segment volume quarter United due eastern demand. has been of wholesale the volume in but year-over-year, X% same-store also overall wholesale down

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

XX% profit the stream fourth Aside representing rental rent decrease changes, wholesale continues XXXX. quarter to due our our a of in a our in our income gross of for class trade from be durable of business, income for to segment

XXXX, For segment, of the retail quarter profit. in strong million generating fourth for gross very the $XX performance was

gross our increased increased fuel approximately profit the when and merchandise period XX%, was gross XX%, compared our margin motor merchandise Our profit XX points to in XXXX. profit gross up basis percentage same

experienced cents we $X.XXX On as strong margins fuel fourth retail basis $X.XXX fourth X% gallon per of the year-over-year to gallon fuel in the increased in compared of at per quarter front, XXXX, gallon a per margin margin fuel relatively on the our quarter XXXX.

on As from wholesale segment segment the our review, our retail improved as fuel costs benefits in I well. sourcing touched

prior segment fuel this profited While retail by enhanced to margin product also our margin lower costs results our market the we relative our conditions strong year. quarter, for from were in fuel fuel retail

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

factors, certain while was issues of volume the the construction compares Our same-site favorably I data retail site-specific segment adjusting driven along earlier. such When same-store down, part rebuilding at retail some major plazas demand toll for to national with referenced or roads. we still in have as travel volume due sites decline these our out

impacting the our start have been of Our January. weather results since retail with softer year volumes the in

remains prior overall February. year. prior Retail weeks, but as in same-store year, lower have moved a stronger recent were Retail volume January than the in has improved somewhat but still fuel to relative we bit into margins soft the

last Inside were driven of cigarettes, X% excluding by deli. the the for up sales strong fourth basis our basis, same-site to beverages a on sales year the relative X% inside approximately a sales increased same-store categories year-over-year performance sales, primarily and quarter. The was approximately inside for packaged quarter. on For

On towards and driven in the XX% million, by gross merchandise higher from the sales gross improvement well due increase in as sales efforts margin our product percentage. products. front, The store a sourcing we same-store merchandise our margin to in our count, initiatives our increased and sales improvement to margin increased continued store have our merchandise to merchandise pricing, margin was store certain $XX.X promotions on store shift higher-margin as regards

weather due quarter noted sales softer inside the certain same-store since of down to cigarettes, and overall as in fuel markets volume period winter the as inclusive are with demand end, approximately In X% well.

we quarter last if to retail sites are prior third in noted quarter, sites quarter, company-operated we year prior up up modestly and segment, our XX relative the from the look at by retail company-operated company-operated As of the site our X count, XXXX. you

increased In merchandise commission it to site prior margin segment same-store classes of conversion or both XX gross agent for due was and to is of sales, to the classes Our relative certain sites all margin the quarter trade, positive count store percentage gallon, year. our to our per locations. quarter trade another of relative company-operated merchandise of were sites up other increase by same-store our either as margin, retail XXXX. commission-operated the third from Overall,

next performance our the the I you turn year. review full for slide, to will segment If briefly

flat decline generated driven to fuel million X% full for rental profit relatively margin Our in by the decrease the compared in for slight being wholesale segment a gross period. year $XXX.X million a decline of was reported $XXX.X XXXX, XX-month fuel when and The with volume the XXXX. income

Our of of fuel to XXXX. for the the $X.XXX margin full $X.XXX the year was XXXX gallon wholesale per per full for for segment gallon year

in gallons the XXXX. XX, was volume was in period XXXX, commentary. I volume during million fourth period to for wholesale due mentioned period that compared the XX-month million slight December same gallons when XXX.X compared to The my to factors XXXX of earlier for quarter the same primarily Our XXX.X the ending decline

outperformed on demand. overall wholesale available the X.X%, down the year, same-site based volume national full was For which data our to national volume us, approximately

$XXX For XX%, profit rose the XXXX, other or the full XXXX. segment's to This Merchandise X% of of million year year $XXX.X motor full profit for offset full profit compared retail million partially was a $XX.X XXXX. gross decline $X.X gross when million gross increased by to our to of X% increased revenue fuel in XX%. compared our or year million or of while $X.X million the

market. fuel an crude we in margin extraordinary show extended compare period XXXX XXXX, Considering continued As period prior extraordinary you quite declining the motor fuel of third with the oil recall, and the to part quarter prices. of results strength during retail fuel favorably of margins the fuel XXXX, overall had our this year and in due

to On year margin available relative relative of segment relative demonstrates a the to slightly to for same-store our have basis, outperformance our our we XXXX, which, retail for data. national volume to fuel full us, again, increased national demand data XXXX

store national retail industry to basis, data compares sales. on on which full same-store sales, cigarettes Our X% for also favorably increased a excluding year XXXX, same-store the

and our We core also divest portfolio look for continue to to X properties. evaluate opportunities

of to the and to for We number these These assets calls. partnership that have relationship began For of the Applegreen, pending the the assumed active transaction, these the XXXX. company Group year. have last full strategy area as currently The year the will sites Applegreen. to These impact Applegreen. our for our release, like and with is locations the We result Applegreen to context, coming a control this retail of and look locations are lease company-operated forward with and properties to transaction control were will locations transaction, to CrossAmerica, of before in additional effort retail more we, our overall for the leasing operate locations results. year press a an described and we are locations what company of long-term we partnership in divested for previous terminated, the as good segment sites leases us of divestitures million be of to focus on these noted we transaction and locations to than company intend increased positively under less retail operating now sites $X.X Topper XX retail would out leases to XX And commission make at we of locations. our we previously operated the take convert or of prior proceeds. the XXXX, to solid part leasing we in expect In control

to turn We ways If want to scale. basic wholesale and Slide to improve are they business you service X, benefits excellent or next customers. of retail value realizing whether the and We provide unchanged. the customers, find operational efficiencies to our business, to to remains our to continue seek continue slide, strategy the our

value long-term create our to portfolio unitholders. our optimize for to seek we Finally,

certain Our long-term of convert to the efforts sites position of to from as strategy portfolio the company-operated on for changes I trade industry. control and value retail in or commission prior today to that in and market classes part existing sites on capitalize touched to and calls this

to objective the is last capital of stated us in I time. that entrusted be year, dependable to As unitholders flow units do unitholders good increase their we have steady, with stewards all a and to provide value our of ultimate over our cash our and the

another X work the results No yet years. our CrossAmerica. strong many at year of well its quarter better thrive positioned in and year have noted of talented financial finished release, successful quarter in is extremely here quarter the commitment. all excellent past those today, together without The even strength XXXX overall partnership's and for strong outstanding the fourth we members fourth skilled your The execution and overall, have in organization was I are team. the and our be to including the of of the for record partnership strategic that XXXX demonstrable actions last proud results. balance fourth be the and was in we beyond. the CrossAmerica year, results a with of our successful reflect thank team strategy could business of quarter the you highly of financial sheet as partnership how proof individuals to an soundness great history. Finally, over and best hard fourth this terms team press people. The the listening the of we this am To work have at they taken

it over I detailed a for review. financial turn that, will more to With Maura

Thank Charles. you,

quarter quarter like of for $XX.X would income the If turn results fourth fourth a interest quarter of operating broadly was the by X, you reported for our partnership. please EBITDA would XXXX, XXXX, fourth from to of income quarter EBITDA the net up for quarter higher We I XXXX, adjusted of slight million in quarter Slide million net fourth the of $XX.X quarter prior XXXX. XXXX fourth of of offsetting the decline income year. Adjusted the to to for $XX.X with expense million review for fourth the to compared for driven X% higher compared the million of $XX.X the

Our Charles million, and in The flow $XX.X for driven of of merchandise retail results the quarter flow increases and distributable by quarter in segments cash distributable million fourth in fuel XXXX margin adjusted $XX.X for income cash comments. strong to due primarily XXXX. fourth his from up wholesale operating and EBITDA the X% was were increases the both reviewed our the

was quarter compared to current the quarter X.XXx of fourth for X.Xx the XXXX. for coverage distribution Our

unit. discussed paid distribution XXXX, top the and line quarter of the of gross some of profit our per Charles earlier. of drivers $X.XXX quarter the performance During partnership for fourth primary the a

Turning $X.X the in compared to fourth segment our quarter. classic increase that referenced to XXXX operations. to fourth primarily the the which count was almost increased due the to retail in year quarter compared that prior Operating was trade This in for to due million our segment, comments. of site expense conversions expenses portion the the his increased entirely Charles

Retail segment count while prior our the for XX%. of fourth XXXX from increased the site approximately operating company-operated year, was average than quarter more up XX% expenses

we our converted seeing company-operated sites for for the locations. with these of incremental largest expense the As locations are trade, we expectations profile any have of operating converted trade, are expenses company-operated are sites line cost of which these in operating of to have they as our the classes to

to X% with of primarily quarter of area the retail footprint. as expenses excluding the managing compared On expenses categories. we and have approximately Same-store a our increases location for same-store in XXXX, basis, across the segment all of expanded up as categories management focus operating we operating XXXX fourth segment the have fourth retail fees, labor to labor were our expenses, those store company-operated continued year-over-year, flat were in quarter on

the compensation and Our higher equity G&A legal year-over-year, fees. for due X% primarily expense expenses increased to quarter

full year million year-over-year, net margin $XX.X a the of primarily a declined during million by strong in to $XX.X was from XXXX. quarter function of motor XXXX, gross For which profit driven of fuel the decrease environment income the primarily fuel decline in The was third XXXX.

million million for of Adjusted XXXX compared XXXX. EBITDA full in was $XXX.X $XXX.X year to the

distributable For the due full of interest to flow increase compared as cash XXXX income. also net cash in adjusted year XXXX, million as to full earned XXXX. XXXX our full year distributable lower was decrease to of impacted in year $XXX.X compared flow was XXXX the by in $XXX.X well that an the million The expense cash EBITDA for

year full of distribution compared Our full the for for XXXX the coverage X.XXx X.XXx of was to XXXX. year

of has team's plans. that partnership years, XXXX, and initiatives ratio during than evidence the time execute we on Over continued ability have place more the increased coverage to X in its X.Xx X.Xx the of approximately in our strategic to put those from the past distribution benefits

Operating of expenses to the compared of year full year $XX increased for XXXX. full XXXX the million

As discussion, dealer locations earlier, I primarily incremental conversion locations. operating increase to segment quarter to our of in my the noted driven commission lessee retail the during fourth company-operated was expenses and due by

approximately operating footprint. across fourth to XXXX, of retail and team operating XXXX to evidence in compared to Similar up segment our driven was Same-store store X% retail personnel primarily comments footprint. on other focus approximately levels the given on expenses to able operating growing above-store expenses were my manage to again, our our by efficiently higher segment labor costs, flat our XXXX, quarter, same-store

$XX driven G&A year more outstanding from expenses legal a increased and of On to in XXXX, XXXX as $XX.X compared compensation basis, million equity-based an expenses to in full million in our grants primarily by higher XXXX as in increase seeing XXXX fees. result a

on total expenditures. and total Moving fourth being growth-related capital million $XX.X that to of spent next a of We million during the slide. expenditures $XX.X the capital quarter

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

As of was our $X our December was XXXX facility XX, from million, credit $XXX balance a balance. million paydown total XXXX, which year-end

strong deleveraging able opportunities in the our also to were flow utilize results we XXXX, reinvest growth while business of to efforts. cash During continuing the

was December Our credit of facility XX, defined leverage as XXXX. X.Xx ratio

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

with in place in November. impact environment, XXXX felt to we have we the rate although continue as and into put elevated periods, interest benefit rate and in early Additionally, the we the from April interest XXXX prior swaps of

XX% of of with balance quarter approximately was the those to a credit of certain XXXX, swapped As facility a of rate, end off end rolling the hedges of at fixed XXXX. first our current of the portion

taking As has into contracts our facility credit the the against an on of X.X%, currently swap interest December capital current account, which XXXX, rate interest the rate XX, backdrop. attractive the partnership is our rate into was rate effective place

had very the our In business the as the over several made of and the around continued conclusion, Charles a performance XXXX, building momentum strategic choices noted, the partnership we years. on positive XXXX strong past have

to our strong forward on focus maintaining to cash year We on unitholders. and generating a generating focus flows are balance with a ahead, and sheet durable consistent execution, value for looking continuing the

With we that, to up questions. open it will

[Operator Instructions]

any any today. thank Well, Again, good us it today. appears for free questions questions please we later, joining us. reach to Should to we you a feel Have don't have have out everyone day.

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