CAPL - Earnings call transcript Q1 2018 | CrossAmerica Partners LP

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Operator

Good morning, and welcome to the CrossAmerica Partners First Quarter 2018 Earnings Call. My name is Michelle and I'll be your operator for today's conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. And please note that this conference is being recorded. call Mr. the turn now over to I'll Randy Director of Investor Relations. Palmer, Executive you begin. Sir, may

Randy Palmer

performance Operator. and we’ll of thank are of utilize to will call opening the With provide Thank point the morning At this Officer during as we provide Valencia, Good you, and some quarter, Chief Smith, Leadership then over should website. available CrossAmerica's first turn to Jeremy CEO; CrossAmerica These of the the brief will and Financial XXXX a Team. part today's open-up President; discuss are will Evan the CrossAmerica other are highlights follow you will morning's quarter earnings the Executive event. Evan from webcast today some will comments, call. call call I members that and operational results. Gerardo to me and presentation Bergeron, overview questions. the Gerardo slides posted our the Partners slides joining financial for out we end, on that Jeremy

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

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

recording reported we non-GAAP Generally provided results And to of on website call, our now or with earnings that reconcile call our Jeremy days. release. measures may to schedules call available that these Today's not for over press Accounting performance measures conference CrossAmerica of this webcast Accepted and part call basis GAAP a certain We’ve XX Bergeron. period also that, as U.S. do I'll with today's will a of provide the turn on be is Principles a During conform being GAAP. the

Jeremy Bergeron

quarter you, our Thank those go Randy. the through quarter. Evan minutes. results to afternoon of some in the few We wanted and a reported and earnings first Gerardo highlights yesterday XXXX first in details I review But will

be of our EBITDA $X For which main the of our distribution the retail a well. per our broke the quarterly pleased first adjusted quarter during $X.XXXX by the our we segments. end that million Board wholesale paid retail income over first performance of to million operating Overall, approved with with month. of businesses were XXXX this quarter both of as $XX attributable quarter reported both and of we wholesale will unit and performed Yesterday

While Gerardo in with details. Jet-Pep be experience will seasonal we our acquired some talking about newly which Assets did more weakness acquisition

arrangements. improve full to those performance partner our a working sites general are We overall including our evaluating supply with for

over We to will value be expect driving to good coming this our unitholders. position With turn be that summer season and for now in for it continues Gerardo. I to

Gerardo Valencia

team my than Thank customers to on Group. XX CrossAmerica to future about consumers. you, product I CrossAmerica of X, Wholesale and very with NWS, excited integration market with I glad our March National Jimmy. me management I joined getting the am the today. as here and BP be former finish very am years more [indiscernible] after

turn the to business quarter. the as grow we as the cost with general in with and for our X, of with of improve both will consolidation. season collaborations we partner at Slide As first partnership If our I end strong participating we capture provide strategic brief sublime, the we overview base the and retailers, industry

the past continue of over generate look we $XX we million. over As and twelve rental to gallons months, over gross distribute income of X fuel billion

XX.X% wholesale in to continue annually a CST generates within a Supply, CST on Fuel distributed hold margin X.X per $X.XX fuel the gallons which network. interest We billion legacy approximately gallon

Our over operation over these rights dealer less locations, XXX. approximately consists We X,XXX key XXX including of including control the of types. types, of in owning over XX%

within on of quarter portfolio you first we have Slide a here As real we can turn our X, significant recap see, built operating CrossAmerica. some estate Please results.

resulted of $X.XXX our fuel by fuel in This We margin by quarter grew For Jet-Pep the wholesale in XXXX. gallon from acquisition. X% in quarter. first a increasing gallons motor increased primarily with to we distributed the rental $X.XXX we quarter. X% Along our in driven also volume, another wholesale quarter the had in gross first profit a X% the profit our increase increased for during gross XXXX first

represented first rental of our gross profit other and the XX% XXXX, quarter of gross For profit. total

quarter, quarter up the XX period XXXX for During in $X.XXXX we margin $X.XXX fuel sites first of per in from the gallon our our to XXXX. operated for grew same company the

the I would like quarter. next slide, to first the to review highlights from over a Turning few

by compared to driven Our and wholesale This quarter first in XXXX. first EBITDA XX% our of increased for the adjusted quarter the growth both segments. of retail was XXXX,

the general the in in cost with have the partner. noticed as may we to discipline our operations you as integrate previous have further seen we continue past on slides, management we As focus

$X XXXX. During decline over the July million expenses have the This declined related quarter or XX%. is to our of we synergies in G&A discussed

and plan of quarter $X.X We XXXX. are ahead first over our million the have captured through of

the in of region country When acquisition established to vision base about want is greater seasonally we recent of and in XXXX. as did made the This result. softness was briefly index business, during flat a acquired impacted Jet-Pep closed some of November our which our a talk most Assets to portfolio I see quarter. the the which supply Finally we margin this

Jet-Pep network chain regional also our for part As We are and of improving different freight the of XXX fuel sites. our supply quarter Overall quarter. these both sourcing a portfolio, see includes XXXX. we from network process about the these to rest we what the and first business weakness growth part the to the finalize experienced of despite field and of plans of of I about are well for the the potential further which in we clearly isolated plan define expect the in performed the

and a to turn XX synergy spring cost total million portfolio the X.X further plan. will over the of significant driving opportunities that of XX half brief synergy a closed, After achieved first we million be provide summary, years within to exceed reentering I and synergies end since please we in those million of you captured position first transaction In on approximately the CrossAmerica expect believe of lower three annual you our cost our review of of savings first which we by If CST $XX the supplier of synergies and the are strong of following XXXX, the to summer deliver update and we In had cost season. and with July Through ACT the additional we X, within synergies. our we of to XXXX. capture Slide will months. with quarters in announced we announces merger three and complex are contracts of ahead identified scale, purchasing

a built foundation. strong have We

it You growth turn cost that, together base integrating improving With make partner our accretive customers should and over acquisition. we Evan. for our life synergy, continue strategy business will our topline I will with expect our general that to completing easy capital and to

Evan Smith

Thank you, Gerardo.

first our EBITDA If to quarter in Slide touch you partnership. results of XXXX. X, reported the for would turn please would on We quarter million the to first $XX.X like for $XX XXXX compared million I of adjusted

to the on flow paid XXXX The during ratio paid of times XXXX resulting X.XX quarter for million. a for cash of total first $XX first $X.XXXX partnership was per of distributable XXXX fourth basis. the the quarter of a over in a quarter a million coverage of distribution unit attributable Our $XX.X

paid month on trailing was X.XX coverage times Our XX a basis.

management quarter. businesses coupled our positive had with growth our the for wholesale As touched in our both on impact earlier, expenses and performance Gerardo the of the overall retail on a

material as XXXX credit turning which a in and increased it about revolving up total and from of we period we capacity that to walk support including credit amendment which ratio from credit XXXX, credit through range wanted but is our applicable our in lending LIBOR permitted believe between applicable loans recent from to times extended basis our and need amendment for with maturity and April alternate provides XX, to for overall quarter I this the Finally as defined and of million, fees this first first XXX vary our did was margin leverage were of within able out leverage X.X our under XXX and X has that to to and amended facility. continue our several during Last manage group million points. amendment pleased the our the of X.X business. in the Slide extends to quarters, leverage the commitment X.XX the leverage increased base grow with where which the flexibility rate were to three week margin on also with to acquisition XX after us based the we in a at times we us X.XX by our quarter reduced We facility be with to make four ratio decrease ratio total line our facility and ended times. quarters briefly the defined target facility to closing things

this recent to wanted that paid will I be Finally later quarterly announced address our distribution month.

$X.XXXX related made per eliminate and improve equity to $X.XXXX quarterly to going $X.XX ratio, equity which per further to Agreement. unit reduces expenses to distribution annualized rate In decision dilution of Omnibus Board made decision any amended rate into forward $X.XX effort of the XX% our from coverage the management further was our team reduce a per unit reduce to unit the unit. the per funded to an Our immediately

our these instead such forward primarily cash. general units Going we’ll settling for in of obligations issuing to partner expenses,

expenses. and versus the our units was yield year press and XXX,XXX for was As near issued we distribution XX%, settling continued for during the being current it this expenses these quarterly unitholders. approximately in units of equated release, Omnibus our option calendar the partnership its With better that common noted to for cash issuance distribution determined XXXX pay to the

XX.X% would management quarters. at evaluate we through this While we work per anticipate will Board the the coming unit of remainder for our to the level be continue as that and something XXXX, staying team

will evaluate to we expenses manage go and general to complete Gerardo strategy focus earlier working by and the accretive will third partners we year capturing and through leverage our an the As managing coverage expect continue our year. as ratio overall with continue we through that, the for emphasis it party growth acquisitions we on in will and we balance and our that sheet focus noted maintain we should presentation, With synergies now up with move open as improving on questions. on

Operator

question Bienvenu queue the [Operator from one Instructions] in I Ben Incorporated. Stephens, have from

Your sir. line open, is

Daniel Imbro

or It's on on obviously you you ahead of for from. look level? thus of being - are just like start costs savings want operational I capture transferred Is are removing actually synergy buckets what an more Ben. those Imbro far schedule. more what to updated Can some best targets color kind do and those guys practices a it synergy Daniel is provide on on impressive

Evan Smith

synergies captured realized. at captured had That's thing. to related have merger already overhead look been some since the D&A some that hard have good resets sort We Couche-Tard, you numbers of reductions, with areas. been have of headcount most salary synergies where pay, If in date largely that the been been that's a and of the that

our has that the same ultimately our supplier our partner general and As relying power opportunities with And the forward, our that from to those partner we our supply hopefully have that we has and going largely think relationships will at evaluating are be suppliers the mid-scale looking better vendors. general purchasing focused relationships about with against cost. - where larger those the relationships upon

Jeremy Bergeron

know I the in of you described two is integrating within And Circle add and organizations, operation the Dan call, our as our just component just been - if as just then K. as well one I so wholesale could is we other beginning have CrossAmerica

all to enables well perspective. from capture of synergies topline the what that the some Now us

there Circle As have are at all within that functions we all of look learning applying Fuel contract CrossAmerica expertise place, have important Supply the Evan of by K. we lot described, bringing the we we are management in when that under a in scale that

overhead the to optimize go and forward way in in So is which were tradings the improving to our market now which mostly what reductions, of way the we early related chain. most and we growth. see going topline will supply By we

Daniel Imbro

move to little within has on retail last and that a months your increased noted revolver, challenging? the and how was in the balance sheet, get market bit XX look I you If leverage as flexibility I how is changed range more industry say think M&A the today the over your does the targeted given

Jeremy Bergeron

that any of parts is seeing - what in M&A We of independently we see a CrossAmerica we seeing that is add activity are within than used - can now and lot is then more was to we're other the opportunities what when now managing network. value

independently, doesn't portfolio. working going values hope portfolio we portfolios. add portfolio for only of we you with can happen an have some add as any look price IPO to with that of can and certain we partner the So you now CrossAmerica assets at portions to know synergies that industry any in can add our other But we general to value and when would

So we activity. lot seeing of are a

have the partnerships. our evaluate a to sure we pipeline make and opportunities for broad that we're continuing accretive in We we're range are different to progressing that

Daniel Imbro

expected And we stronger higher Thanks. weaker of one you gasoline more higher me, geographically, demand for any little prices. back environment industry-wide, say side being or gasoline seeing a prices? then stepping or of let Are more the demand to the to - a a entering pretty be last pockets on bit particular normal response pretty seem

Jeremy Bergeron

see different in We the pockets of U.S. increases definitely

in across So there's seeing the in environment. the we're do seeing Actually we're dependent the on well to that's and with a has is going demand based I from else different wouldn’t to growth rate demand portfolio of we're say available of - Florida, some in income. a that more fuel some differences standpoint. price regions. what because the and I'm population like demographic and growth areas those and don't standpoint our more some the this strong to income not areas - a where seeing growth with price is the from in seeing as very deal on our demand growth we're dependent fuel - And growth population as well, as anywhere say and very on have

Operator

Patrick question Baird. in queue Wang the from next The with comes

is line Your open.

Patrick Wang

help cost results included if they freight savings transportation cost ACT's recent CrossAmerica's fully also benefit? reflected just those renegotiations? understand a do to negotiations, be the which following quarter you the the XQ magnitude you there contracts. expect you expect of Can us or that were mostly And were in material,

Jeremy Bergeron

material expecting you but and I general are disclose expecting working in it right cannot in tell we're to through the coming now here, see - more exactly exactly we we is, can't this - to I benefits see future. but are what

captured So it's of already in something quarter seeing the year. we've the that not first

Patrick Wang

with - hedging by at the fuel to what And K's those extent on protected programs volumes purchases, turn volumes? with is those looking Circle not hedging Jet-Pep its to CrossAmerica fuel CrossAmerica just sites, back specifically then historically

Jeremy Bergeron

the when that year. first what of of have in of now But region year. to now in be - at than first we some be first current there's see we actually of for that we we volatility contract of the some typically the the we the The what would look we quarter the in right part which rest of has are quarter the even in more we typically balance of than that you expect that CrossAmerica And for this that volatility have the seeing think to the that those seeing going we're typically country, impacts portfolio. what - we we - know so structure seasonality

volatility is So it's than part exposed as it's my not region specific in portfolio of CrossAmerica. other to But related more volume only region. by more but that related to to the are our I which the demand is, this point or opportunity well of we supply in margin in any dictated guess

point supply We for at have are proposition. time to and want to what sourcing chain freight. best value We of working communicate a different is the we're appeal on consumers those looking this through optimization And brands the locations. and in actually brand both that including identifying

for of going expect delivering in value are Jet-Pep to process more the some and deliver. leverage and of we to best collaboration scale the quarter. know our this strategic the where supply finalizing be our So is we're for I to we will purchasing more value fuel where be There part

Patrick Wang

the as for you would expect volumes] final those And a as qualify [differ discount check, terms well? they do

Jeremy Bergeron

and under not that’s portfolio a be to agreement we the which don’t we where for forward, we are those our where bought going receive majority that discount. supply historically receive branded contract that’s So terms expect of

Evan Smith

not So currently network. a it’s branded

so we’re buying it’s a not field. currently Jet-Pep So brand

recognized are brands one what brands now right the strength is that are big at brand, would but few the from best entail And I structuring looking actively in in same also which weeks. command the deals We right supply we area. those now supplier, that or in both of the was be a brands well negotiations premium next that we’re will and saying

but those currently in is working on no establishing contacts just there discounts, So paying now. we’re

Operator

The & FBR Robert Company. Balsamo comes question from in the next from queue

Your line open. is

Robert Balsamo

elaborate a questions have was Most little the wondering distribution. if can been of my I bit answered. you just on

million – million IDR. Looking or were CST quarter at CST upwards by there in year the relinquishing the is a a so almost past reducing to $X around quarter IDR X.X distribution payments

part improved by that So will drive in CST. by kind of addition to IDRs be the leverage, reduction the of reduction improved cost

Jeremy Bergeron

the to well. payments correct. is a in partner reduction be there that With general this IDR reduction Robert will as

Robert Balsamo

are I rates moving before forward for in updated... coverage our think distributions coverage supportive. distribution any it outlook view about you re-emphasizing target increasing Great, looks mean

Jeremy Bergeron

coming and XXXX. times the year target our over into In X.X

Operator

The from from queue next Lui question Wells the Fargo. in Sharon comes

Your line is open.

Sharon Lui

that at the the balance up there is the size that plan a how to following arrived about distribution of could question a the target back is this touch your could Just cut. reasonable run potentially on the of for like you sounds assumption. rate get the on maybe the coverage distribution reduction but you to just year, maintain It be to

Evan Smith

Evan. where and process issuing had especially the an that the looked when now thought dilutive we is was. was units this been Sharon we Really the yield We amount dollar going at how it’s look on with basis for what fees paid amount these management last essentially the a stack. essentially over rate issuing reducing through back year went we’re dollar and that distribution off and that we at by run the equity this the

that essentially how So was derived. time that number the – was

Sharon Lui

think least should forward the of is in it the and this keep year at is coverage rate about this we going I hence where flat how And distribution and for plan to guess the the XXXX. balance is

Evan Smith

move longer our we towards our Our as thinking X.X coverage. is term then X.X and hit

As benefits our opportunities cash we from continue our to to time. synergy flow and other distribution we at increase realize policy that capture reevaluate will

Jeremy Bergeron

just capturing but in our add there general partner besides company a about talked both is is we for whether the from as so is see strength be portfolio going lot also our working to and we’ve current opportunities improve so also a bit groups. about coming there based dollar very what continued to value. little they together the we synergies We to contemplating which opportunity with definitely future our those opportunities. opportunity a of just timing, the and how deliver looking growth of – a standpoint then from see we’re lot that is the there There, Sharon, business. that are third-party now of course the And of it’s the portfolio larger combined a there to And terms acquisition of of to I that is and also

Sharon Lui

perspective, that point about that tax year. this the the Yes. if and after dropdowns. And asset give if referring you on you from is update a clarity but for an well I maybe I guess exchanges latest targeted previously on talked thoughts timing of an just can know that of wondering exchange your asset

Gerardo Valencia

Sharon, very so question. good Yes

first the communications with We are the committed in both have parties transaction with with continues to discussions working transaction to of on getting previous you. get our line

Now or simple pipeline it than individual large terminal large is a more asset. a a complex

between I So we have now tell we faster confident continue on expect to I’m very relatively we And once that specific establish be announce growing. expect you I come a these these soon. can to a in that can able blueprints deal much pace areas

Sharon Lui

that on on you And then working I the guys and sourcing the guess Jet-Pep I know are freight. also acquisition,

terms In margin can start seeing when the in we volumes. timing benefit and the of

Jeremy Bergeron

decent So there are here. components

briefly was I describing just want as earlier. I So

structured creates Our this Jet-Pep a both and our some flat supply in you at is know results. as currently index volatility will

will of will related Now we basis the expect on that saw Jet-Pep a that expect that a in of I of EBITDA I portfolio do XX% be XXXX. deliver over what on first And to of EBITDA volatility. addition addition top quarterly - flat quarter these

always first are saw growth. will a change in our the seeing what April in support we We quarter also versus considerable volume which

that we future. as and supply very and the We it improving we both see chain growth involves from and our condition supply coming mentioned optimizing we further I and these the before structure are inherited near from in agreements – will are freight Jet-Pep

of that progress we’re we determination to finish finishing the the consumers. the mentioning lot and we are will volume a And are initiate reducing working appeal as for was about the synergies this brand purchasing fuel that As be best on proposition of to – expect leverage and we a was one just we currently scale I saying fuel I different our portfolio before. which to

to suppliers it. these result to place comes also able here scale deliver and the be leverage with to our into strategic so that the collaboration So field

Sharon Lui

Of credit times I leverage of the the facility terms off? in last the rolls when that threshold I guess just guess question five of course very helpful. timing

Evan Smith

That dropdown would the end XXXX. which was quarters, Jet-Pep that of on that first four would mean – quarter currently which we acquisition, of after based the would Sharon at material. It’s would that is the the be acquisition last

Sharon Lui

you. Thank great. Okay

Jeremy Bergeron

– acquisition would acquisition of But above million would $XX that to that complete X.X if above expand we material back an then leverage. go we of

Operator

queue another comes question Janney question Montgomery. do the and Gyure We that with have in from Mike

open. is Your line

Mike Gyure

Can you then and distribution. one little guys a you about we’re maybe acquisitions future the talking finance equity ticking think talk then the how of debt change the guys you at at that is restructuring point change, doing a account recent expect into refinancing XX:XX that would in distribution. light Does the bit to a mix of refinancing I

Jeremy Bergeron

It’s capacity And a now revolver the a rate good we better have a more little additional question. which flexibility well. there actually and us helps

We are on leverage on and managing flexibility check. focused the balance keeping in that conscious sheet

is looked asset there. And - raise we've we sale mechanisms exchanges, including do so historically at there various can we’ve used we think to leasebacks capital value

So there revolver. in different types the of addition using to are

going be finance And which don’t doing stress focused have so we’re methods accretive but our to we different balance sheet. to on transactions

Mike Gyure

things maybe then there? or on fee the been the one expenses, more And equity equity other funded there expenses is only funded the management

Jeremy Bergeron

to. the management it’s partner. with predominance fee it arrangement limited the Yes No, general all that’s

Operator

questions have We the at further call the queue no turn remarks. over closing I Mr. for to would in any Palmer this time.

Randy Palmer

operator. call. complete of today. you, conference appreciate today's does joining thank you That each us Okay, We

Thank do you follow-up and you to free feel any please contact day. good a have If questions have us.

Operator

Ladies participating. Thank teleconference. concludes you and today's gentlemen, this for

may You now disconnect.

CrossAmerica Partners (CAPL) 8 May 182018 Q1 Earnings call transcript