CrossAmerica Partners (CAPL) 7 Nov 242024 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the CrossAmerica Partners Third Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 7, 2024.

I would now like to turn the conference over to Maura Topper, CFO. Please go ahead.

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

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

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

release. our press with results on reported earnings non-GAAP a our provided as have measures reconcile basis part that We of these schedules GAAP

now website call will days. a to XX Today's turn available call period is being CrossAmerica will recording over that, conference and webcast, for the I Charles. With be this a on the of call of

in this your I thank appreciate you, in for partnership. We Thank morning. interest today you and Maura everyone joining listening and us for the Maura.

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

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

segment, we sites operating gross our performance. for converting compared a and strong sales the success our to in the in the For a segment our by quarter the wholesale in to XX% gallons driven third from realized prior increase income same-store XX% and year, retail and retail segment profit increase store

We managed quarter backdrop, benefiting from and with margins environment and strong market decreased industry weak soft categories. that outperforming in store and achievement this with the for certain despite store an was fuel fuel segment gallons performance retail remains demand demand Considering third the the overall sales. our good environment industry our inside in

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

gallon a per basis quarter XXXX the margin On X% our was fuel fuel gallon of as compared retail margin on per cents our $X.XXX front, increased quarter in the XXXX. the margin third of gallon third to per year-over-year $X.XXX fuel in

per gallon highest the margin $X.XXX $X.XXX gallon second well The of and for fuel and the first was quarter retail fuel above third the quarter quarters, XXXX per for for year, respectively. the the margin

of on due Our to of benefit such pricing margin most as slower to the during retail quarter, market from the price oil to street a have trend we fuel margins fuel generally conditions. retail fuel declining quarter crude for discussed which, calls, benefited the prior adjustment tends

gasoline to a us, quarter flat demand national same-store retail basis, on demand data available Based approximately the volume year-over-year. volume X% for For down quarter. was on overall the national was our for

New in our growing year-over-year, our due well benefited stores the at strong company-operated in by our to from during quarter Thruway York, York outperformed. So primarily retail on a sites. quarter, very the particularly for approximately strong our relative which volume basis, volume performance particular, same-store same-store X% Northeast volume New performed locations, In

without strongly successfully retail our fuel same-store margin the evident volume as In of national over margin results strong end, volume commissioned and the in quarter for since in is period performance been sacrificing the year. fuel the has prior strong in quarter period We has which down to contrast demand, since the X% achieved This the quarter. end. up company-operated roughly the been overall

part margins In good, the lower generally a overall of third same period, than weeks quarter, been the have from in level the the first oil rise October. slightly prices at in retail although due the to results during fuel

year down year-over-year For cigarettes, inside on third prior quarter. same-store quarter. to for sales X% Inside on a the our sales, basis inside were a the compared sales excluding flat for same-store basis, the were

data fuel prior demand, numbers sales demand both inside national available the based store with sales with us, for demand and the year. on was quarter, count to down to weak national overall for compared unit As

again, So industry on our segment the a for quarter. the inside basis, retail sales relative outperformed

was and performance sales the beverages the store categories tobacco in our packaged of other as quarters. prior led by CrossAmerica, primarily For

food On margin merchandise driven slightly associated recently front, profit the converted the declined relative the prior certain to our sales $XX.X beverage count. XX% in due to increased merchandise particularly by the with higher million, to gross retail locations. year margin store from of store and costs merchandise our expansion increased The offerings, our store

to were for improvement the end, also an store of since still is sales slightly approximately across industry. been same-store and for year-over-year environment indicative September year, when the sites have of ongoing our month soft flat the to demand prior the which sales quarter period down the the sales In performance the

the we locations sites our the in company-operated The company-operated driven year. increase if segment, of you prior from lease site primarily XX are company-operated April. was by conversion our count up completion in In retail company-operated our retail at the Applegreen count, sites site retail of look to

quarter the our for XXX converted focused count Our as locations at site flat third and we sites. at site efforts to our break year the of quarter on second a this company-operated company-operated newly team is on gave our the company-operated conversions operations

count year. typically are agent the to a XX site in existing XXXX easier Our quarter retaining involves location than to to an of third cases, increased the do X conversions to site and trade relative relative of existing sites dealer the to These company-operated sites of a as many at commission location. commission conversion the second class quarter converting this the

We are simply with dealer. changing the the economic relationship

economically dealer, us In involves conversion convenience be forward. we of a in better at have As provide which to other win-win cases, location. of mutually higher commission the now both typically level been will conversions site, a productive the store class that we us off dealer to is quarter, a of relationship in enables agent a dealer and and have going with operate of at the situation last stated consumer the the that the to and doing these dealer, beneficial successful creating us all trade sites bring a for change manner a experience better the at a commission at allows that

these to our X of margins active and increase count In we total, the third the retail our site overall. numbers, the XXXX, compared overall to during second and quarter increased extremely during quarter can third XX to exposure retail of at quarter fuel during XXXX XXX added relative you past sites with we and have we the our our commission third retail the to locations year. quarter months on conversions the of by the count retail end executing been this Based strategy see business that site of on site

on to the wholesale Moving segment.

in a $XX.X declined to lessee to million decline dealer in commission the an gallon. degree in For agent gross quarter sites significant of segment which now $XX.X retail in million certain decline segment. third partially quarter for of The increase a compared driven The volume, profit margin by third in by to primary the company-operated per offset overall XX% conversion sites, XXXX, are of fuel XXXX. our was wholesale the the volume the accounted was by decrease factor and

Our of in of wholesale from million $XX.X decreased third $XX.X gross XXXX to the fuel the million motor quarter XXXX. profit quarter third in XX%

gallon XXXX within of to prices per X per the and terms the XXXX. $X.XX by corresponding its per the the we in on third quarter fuel impact oil third X% driven Our in was the gallon level The discounts $X.XXX margin margin fuel wholesale periods quarter from primarily increased in received certain our crude gallon of relative gallons. increase of on

other reduction for from benefited gallons. our we for market sourcing favorable experienced as continue a we this conditions to fuel our work in certain terms quarter also fuel and purchase We costs achieving better also supply, on

The for class compared retail Our third the in of converted to of wholesale to now gallons of of primarily results. our due XXXX, a was from the retail decline lessee same to volume gallons XXX.X million was decline period compared to in trade. reflecting XXXX XXX.X in in the third million dealer sites volume gallons certain sites quarter when our XX%. conversion the these The are reflected segment XXXX of quarter

For same-store down in the year-over-year. was segment quarter, the approximately our X% wholesale volume

XX% same-store largely of to was So sites our volume the segment. due XX% drop for decline between additional the converting decline in the of and overall volume, volume the the segment difference X% to retail

the has X% was to to my overall same-store fuel performance demand. us in continued for wholesale data our so since outperformed demand X% demand for mentioned retail around the comments, period national year-over-year. national In down As same-store quarter, down third national indicated the end, volume quarter available segment volume be around the quarter

wholesale same-store data. is year-over-year, volume but outperform continuing also our overall So negative be national to continuing volume to

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

sales these of retail now stated have margins our store in the we our As increase retail in and in in no fuel form through at helped dollars, segment drive to results rent segment these are our longer for quarter. the the while which income operating rent locations, past,

X million divested for net $X.X we proceeds, million. properties quarter, $X.X the gain a During in of resulting in

we activity Our for had continued quarter quarter sales. third second the property in divestiture the strong

Our quite be fourth is and pipeline with of to busy sales. for the us property expect we quarter active, another quarter transactions

execution transactions certain overall of in portfolio sites to business to our generate evidence into volume our seek exit as of area deploy strategy is Our elsewhere in the capital our this we balance to of sheet. or

by site operations. strategic results a to had the highlighted we from our strong positive financial conversions Overall, quarter, retail

with and retail ongoing this Even relative positioning significant challenges, preferred demonstrating retail destination. offerings, delivered financial value as results demand see our our effectiveness operating continue consumers a volume to Our segment sales reflect in of us solid that metrics, and strategy. the

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

Thank you, Charles.

If third review third of quarter income quarter net to please of the the for the of of XXXX, to quarter partnership. reported million like our results of third the third as X, for third decrease million Slide the $XX.X million XXXX net was adjusted million EBITDA income of $XX.X strategic I a turn for compared a XXXX. We from changes for adjusted of in would reviewed, though, Charles $XX.X of has $XX.X that Adjusted EBITDA the of to would result slight as X% you quarter EBITDA of quarter composition with our initiatives. XXXX, in

quarter cash flow due year-over-year compared Our flow for $XX.X of spending. slightly distributable third capital as well in $XX.X the for increase decline sustaining cash quarter third was of higher primarily to million an XXXX distributable XXXX. The to million interest was expense as the in

retail locations reinvestment a to of customers function require of they sustaining attractive count site particularly capital for which our in Our company-operated is to remain level visit. locations, the ensure spending elevated higher our increased an capital segment,

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

distribution September trailing ended period XXXX, XX, September the XX, X.XXx XXXX. compared was Our ended the for for months to XX same coverage X.XXx

paid distribution During the third of unit. partnership per $X.XXX the a of quarter XXXX,

discussed and the drivers his our Charles quarter some of top the of comments. performance line profit for primary in gross

to our retail our offset driven sites in the retail $XX.X of conversion wholesale in by wholesale Turning a was our third Operating portion primarily This quarter. decrease operating operating Both in the expenses operations. of $X.X by increased compared segment, segment. expenses the segment. our our XXXX quarter segment changes an were to expenses from million for in comprised third of expense our increase $XX.X to million million

highest Our drove expenses majority in per including segment. a retail count the site XX% retail XX% operating in trade, in expense count segment year-over-year XX% company-operated so average locations. class that increase increase site of the increase Company-operated of are our the increased site and year-over-year, locations

employment year-over-year. costs. quarter X% year-over-year, same-store strength our consecutive a employment total in approximately expenses declines basis, An locations under managing On focus continued X% for third our labor company-operated year-over-year of operating on store just costs was of area with costs our increased our down same-store

Our increases to prior on experienced with over is continues years. wage X to team benefiting work more than staffing hours efficient X the and from locations our moderate

repairs experience environmental including cost increases supplies same-store in the did maintenance We during maintenance, and quarter. and

spend the customer Our a to in focus and sites to again, effectively customer-facing, our efficiently in areas are these experience. is parts continued that ensure of valuable

expenses increased as of higher selectively to have as of to our the million due organization's year-over-year, expense primarily as segment work. retail well growth G&A part quarter ongoing as support Our we and $X.X for management the in legal class the added increased fees divestiture trade optimization headcount

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

accompanied targeted our image often additional incentives the our food from quarter, included product suppliers. investments past backcourt with sites to well site add selected as growth-related and capital spending fuel at which reimbursements in investments, portfolio this During are options of or company-operated as

our million, March which was a million facility As our September XX, XX, of $XX $XXX.X XXXX, from XXXX balance balance. total was decrease credit

strong over X reinvest in Our deleverage course business, our past our during in the quarters, divesting our X quarters. performance complete coupled past operational with assets the the distributions us allowed and to Charles success reviewed, quarterly of that noncore

ratio credit XXXX. from X.XXx leverage of XX, focused credit a facility at defined was as as June basis. which ratio decrease a our on facility-defined of remain XXXX, managing on XX, September leverage Our Xx approximately We was X.XXx

into interest expense quarter we savings the rate but rate of million We to increased which end increased quarter have the entered of the of first XXXX during interest swaps expire overall positive $XX.X the costs. third quarter at highly quarter cash interest swaps XXXX. of $XX.X Our XXXX, X interest from rate in valuable in the from had from million the did first third of XXXX XXXX, our

facility X.X% a time, approximately environment. fixed is balance credit swapped XX% more little advantaged blended, to our than this which rate in rate current an rate a At is of current of the

the of facility credit the higher the that during during than Applegreen quarter balance quarter. the prior second also transaction due third year, primarily Our XXXX completed was to we

credit Our in facility interest increase to elevated balance the expense also our year-over-year. contributed

end rate credit at X.X%. interest on facility capital total the quarter the is effective third of Our the

quarter continuing as business noted, the as our of partnership of spite as in fuel well demand softer to execute the In store to our remain converted in Charles focused conclusion, efforts a experienced third stores XXXX team operations We environment of performed in during their the ongoing on to and as performance the ramp base sales. well optimize moving forward.

on on We focus and with unitholders. our consistent generating continue to durable and focus cash flows flexible a strong and for maintaining sheet balance value a driving

we for up that, it questions. will open With

[Operator Instructions]

have Have us. questions, today. have Again, joining feel it appreciate follow-on Well, questions we any day. we contact great please today. doesn't appear us you Should free a to everyone any

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