CAPL - Earnings call transcript Q1 2019 | CrossAmerica Partners LP

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Operator

Hello and welcome to the CrossAmerica Partners First Quarter 2019 Earnings Call. My name is Rena and I’ll be your operator for today call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. over Palmer, it Investor Director turn Relations. now to Executive Randy of I’ll Mr. begin. you Palmer, may

Randy Palmer

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

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

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

certain on GAAP that with Board or Standards assets these reporting key part into that accounting in February the organizations basis reported provide results XXXX. topic of leases our schedules the lease measures arrangements. During not We’ve U.S. or release. to accepted transparency a I GAAP. our also recognizing and reconcile balance This CrossAmerica lease this XXXX, availability non-GAAP note performance do measures became also leasing principles generally existing effective Accounting earnings press entered Financial XXXX-XX sheet conform we X, provided may leases on information of today’s call, standard that issued to as guidance by modifies and ASU on January increase for that XXX, our guidance should disclosing

presentation call of period our CrossAmerica mentioned disclosure We in have webcast on to the over the this I’ll and that XX recording and will now With lease, of days. and be turn guidance available conference provided slide earlier. I website for that, call call the Gerardo. regarding a filings this Today's new is being a a

Gerardo Valencia

quarter our more you, of Thank some then results earnings through in XXXX in go minutes. I financials yesterday Evan We reported that and go Randy. through afternoon briefly will few and first a details will highlights

some briefly to results quarter. our operating the X, turn you If from will review Slide I of

first support our cover have fundamentals programs but for strategic impacted and our quarter solid and Soft to will shortly. industry of results balance margins demand I which the we XXXX growth business

the XXX,XXX. we This income XXXX. net million operating net of first quarter, loss million income and of reported a of first income of and quarter the For to X.X of X.X confers for operating XXX,XXX

to X.X Agreement lease the the million to decision in of XX.X the which XXXX. first for was than the efforts contributed termination optimization a quarter negative effect which from the first of quarter. shortly. there in was of from divestments approximately X.X accounting impacted contract XXXX, I from about X.X million asset XXXX, of first XXXX. from offset rather Then impacts unit in We SEC the of a of We the million our by also new also was Our XX% were Omnibus were million will low in impacted X.X margin quarter address sell million lines, guide mandate. by the adjusted the for largely EBITDA which some a through These quarter cash decrease these about margin of

paid Our first cash $XX.XX approved to April and quarter month. XXXX quarter flow distributable distribution our later attributable of the first of million for was will the unit board quarterly that XXth, per on XX.X be this a

quarter, XX% For XXXX. was fuel gallon a wholesale margin which the was $X.XX first over our of first increase quarter per the

decline across The the margin with declined with X% industry. efforts volume was associated mainly for our together distributed optimization the gallons Our demand quarter. soft

by we along south some at quarter, regions first some development normally unfavorable our Alabama several Florida programs these the weakness experience some do of compounded were across weather with the that in rebranding seasonal While produced sites. and downtime during some and our

for the year for across the quarter is by weighing profit across increase EBITDA When Regarding decline first in product gross from was XXXX, accounting volume more XXXX first about some versus To X% two by fuel guidance. portfolio. you our first primarily first in about industry EIA's decline the demand our industry The in the lease the still X% Despite that down of optimization our our the a supplied profit give and by decline of Alabama, was declined the gasoline XXXX. our driven mix the the the of indication of month effort, the country, auto quarter. during while gross X%. for in our demand quarter doubled in rental CrossAmerica also XX% quarter volume, new than volume region

OpEx to operations on both SG&A discipline cost and to continue drive efficiencies. focus We

for the business and our balance to provide fundamental strategic program support momentum As mentioned the have XXXX. earlier, should growth near of These we solid future. in

end the finish To exchange, ahead higher we plan. of of the that slide, some previously regarding initiatives. obtain I strategic expect next range to communicated returns If previously to the you we're you turn of our to announced want and would in we to our start discuss asset progressing to

completed We're due change. to of completing We expect dealers transaction the XX and first we final expect have the transitioning be first in week. sites the have finalizing first coming our will average and to these a tranche diligence

the first we the of exchanged. we and of the of intent. signed we of And month XX be much originally contracts high of second balance have than the finishing these, letters announced. have transaction with sites, see for signed of from tranche that likelihood asset faster already XX to Aside the Currently, XX we already dealers

general to our continue partners We to work additional opportunities. with growth find

fuel million we we fuel the Regarding our roughly now our have entails gallons review third strategic that of or on a an completed of supply annual strategic distributed that gallons initiative, about second XXX basis.

this the and new value following synergy of finishing implementation previously the are is our line with in contracts have second communicated. of expect to what The have quarter. We the impact the we of we

see the into page, have this review. bottom we the be of these can of we for value additional on will the could a fewer streamlined portfolio see future. reimaging refreshing of on you brand coming out of charts the of to sites number focus We us as brands As the strategic large or

we're to our continuing business. implement Alabama next Moving of slide, the a transformation to

completing network. very year. We're the of of volumes as before, good We half during Marathon as our have [indiscernible] of a seeing results plans progressing this business changed you mentioned dispenser dispenser We're form reimaging as a as site network the in have and is impacting standpoint. profitability very These with but branding can our the in hard well this see slide. a some it our period the

the third work this by expect quarter complete We to this year. of

with intent Company our mid have asset letter Regarding of the strong operated exchange. exit of around site operations, we company retail of balance a of that signed we west have operator network the upper post the in the

to we of first the refer result, separation quarter XXX,XXX cost a totaling benefits XXXX. As in

We are of [indiscernible] fact the year. the by company end in operations

franchising continue of with the base just XX signature business the portfolio. XX in and year franchised aspiration X, regarding this an sites Circle We of we to first new Finally, sites family signed brands. finish improvement, pending over our with our contracts progress K have have to

an brands the consumers our all fuel from fuel brands. value now brands program We to collaboration very we capture these supply their do strategy with job implementing end have review, after closely to these excellent ensure we're and strategic established and working the with of

our would X, Slide want you to I turn strategy. review long-term to If

best We completed America control now have fuel wholesaler point you largest have the likely today North of plans we're with and the branded strategic across in properties. I America. of North our The key become either one to fuel the the review share wholesalers and we with portfolio largest branded one we're to want

stability our and provide less these also renewals for in So, volatility earnings. our

K the brand. a leading Back to C-Store access of have also family Circle offer We through Court

not company and We people will platform. the a company. We're focused culture our at midstream deal marketing on

you will five see portfolio, and win advantaged will proposition our customers, operational help with us compelling our to decline, asset our are customer and offer. inorganic K that strong that Circle areas in three of disciplined brands slide capture then on rent margin. growth growth rigorous fuel portfolio efficiency, organic maintain The and offset We growth value our operational excellence, pillars there fuel and growth. with industry the top of Then finally growth,

I includes we are leverage ahead allow aiming X.X will in get than covers our the and to XX% in at between Evan. compound the planned least this will to of performance between quarter to and few X.X to original our our This and years. of better With growth into to X% get that, contribute our on X.XX down adjusted and it All annual level. in next which initiatives We're target over us our grow schedule next our rate together several to EBITDA future. turn will times the

Evan Smith

Thank you, Gerardo.

quarter you results X, review turn would would like to Slide partnership. I the please our to If for first

As first same we of EBITDA the XXXX, compared in adjusted XX%. of $XX.X look in XXXX quarter reported decrease of first quarter, of with million reflecting $XX we period a million at the

million quarter for the XXXX. in million was $XX.X Our distributable cash of $XX.X versus XXXX first flow

by As guidance Gerardo and I lease will on negatively our adjusted EBITDA through new few specific minutes. a touched were earlier, flow impacted the in distributable and cash those walk accounting both

paid on of we Our the X.XX times X.XX months, the for coverage XX the an the improvement over XX, was X.XX experience trailing for was months trailing that a for will XXXX which March quarter XX times XXXX. and times distribution basis was

quarter financial first we the times, X.XX defined quarter an the with under the the of with If in XX, our turn facility times the prior next compliance Slide you slide, at X.XX ratios. credit as to increase and covenant ratio leverage ended with would

had May of available our we Xnd, As approximately credit on facility. million $XX

earnings lenders As to to our were in enter negotiations replace we credit during year credit a new into yearend facility. call, facility I five with existing noted our our

the of have this points and it in million I facility new a the completed on not and through now XXXX. $XXX credit matures listed April agreement have slide. all of will credit benefit We new go that

of we’re for financial paid first just provides XXXX of I during However, as capacity attributable and the new a I would months. say on of going banking a increases of our million; ratio XXXX the us $XX trailing distribution per X.XX the $XX.XX agreement that previous flexibility in quarter The the and and finalize paid this coverage this fourth with partnership total forward. a borrowing noted on quarter basis resulted this for XX with to a pleased partners unit of over our times slide, to

rent the the neither as resulted are will EBITDA. lease of to effectively on now capital in principle characterizes characterized financials. segment X rent which characterized payment the January transactions interest the XXXX it under lesser on that into rent year being XX, reduces rent to Under of previous expenses From I as on for and review this results impacted guidance, sales-leaseback leases. you in effect a approximately accounting turn and we same flow million our is of reduces as as which payments new went Slide the interest our year. cash segment accounting to wholesale back expense, profit Prior gross With our lease full paid segment. guidance guidance accounted significantly wholesale million always similar previously and impact other for EBITDA the the based rent retail primarily XXXX expect $X.X as the and $X.X impact There standpoint, If distributable portion a reduced DCF. within payments

on next guidance adoption million the the the of lease of new $X.X to XXXX, $X.X based X, EBITDA XXXX been January cash adjusted the adopted would approximately to it distributable line, The year the have our we standard, flow if X.XX and to has covered to full lease Moving line an the times ratio. million impact accounting new slide, impact of results. been our demonstrate

to improve of driving perspective, expect great enter to deal now manage financial continue sheet XXXX. we to open season. of initiatives, our call turn ratio. flow coverage the of for go XX, will Approximately guidance. mentioned as you adjusted XXXX momentum reported accounting $X.X you us summer compared as a cash as progress of our as line, impacted the make will we $X.X to can impact remainder with million times the Slide In and distributable the the XXXX, should strategic our we the million and we With our quarter results the that If spring leverage a new providing for up X.XX ratio through for and questions. to also first balance Gerardo we conclusion, continue an that, to of EBITDA adjusted line to earlier, our see From on we coverage

Operator

Thank you.

the [Operator first question-and-answer Instructions] Our Brownlow now comes of We James. question will session. Raymond Ben begin from

go ahead. may You

Ben Brownlow

On terms you color those wholesale? sites retail ops, can retail any around as give to there the of you the exit move the

Gerardo Valencia

about I’m about We're pleased we secured have sites. very strong it. operator those a for very it very that pleased

So, getting returns these those returns will better to sides. from They get better be we're be on is to to do expecting able sites.

if you we so see at the well of on these of you what to in -- in there returns we about, we will we should be SG&A the the very And that as site retail you and can if look avoiding and overhead -- course overhead the be we retail numbers have requiring operators. our will to business expect that and for we that then, be business, get of lease point that to should and think not by able will have forward being So good some cost some rest this ourselves organization.

we see convert discussing that from wholesale of is should generate network to these but benefit same in once as we're we a also, the definitely that, from sites get what I to a we over sites, which as there an operator to very contributions So, standpoint. some expecting was from before, the expect strong in be them line another

Operator

you. Thank

Our Morris go Please comes next Growth. with Walter ahead. Baraboo question from

Walter Morris

stability minor and XX% XX% upon certainly XX.X% your seasonal long-term your trade of that yield calculated as the comps. high high and have cash flow gas of fixed. almost to to justifies the I significantly of cash variation higher extremely roughly so light modern some based your XX.X%? flow quality relatively distribution is why demand at premium which and Sunoco presumably trend justifies of shift essentially outside your If that, In a valuation, does and XX.X% stock with than a is

Evan Smith

Yes.

and you a the understand of for doing business very thanks our you're question, well. and lot glad So, Walter, your research very I’m

your that these we to that all but So, we I and seeing you in mind. Walter, in said the through. have of need coming question have deliver we way And will, -- same yourself see you, what the I’m -- I

in were as but and seasonal we have there several that some I was So, to about coming if are seeing quarter just strategic them impact, were through discussing, this -- so we’re initiatives I we start materializing. reflect

to expecting expecting get asset I’m of --- first get So, exchange a in the we’re tranche very to near announced future. the

very a And We been fuel would that start in that second there the we’ve considerably is the quarter. of that, very, quarter, talking about. that’s implementing this. amount of circling that small saw helped to the small so, synergy growing first very us also but Then already have amount

we some that a lines. we’re too. going So, that's discussed of is in of see already business improvements those the in the team then, as And doing number lot Alabama to

So, that materialize well. will as

continuing the focus of we standpoint making we aside a is we But of we I implement very in we’ll the as are have and strong on that on in growth improve the what will to cash that are, to into is, place our growing flow all remain sure that confidence do strong some that. sure level you from Walter, to that, making see I’m implement continue of with to initiatives have from what operators that the strategic future So, start income and quality have same And a which a place. of initiatives. we I’m we

my Walter. that’s So, perspective,

Walter Morris

just just the my of quarter sure add your In back outreach cash math the growth template a that the make for established going for lease year-over-year equity you’ve funded flow in that paid wanted light in the investor as of were Are essentially and increase the EBITDA program paid essentially math the in to flows flat. quality the and to And part finally, and was number the I to the year, going I flat for on show When adjustment cash change and expenses number community year. correct? for the the and you right. adjusted the was that consistency now last as well forward? your that an year-to-year on difference of first this investment cash expense numbers most was make distributable potential stock drops. significantly educate about enterprise Is the my that I

Evan Smith

is this Smith. Walter, Evan

quality more strength. -- investor this outreach nature after fix on more we flow -- multiyear tranche first As about Gerardo more and included regarding announced spoke to provide -- the around the that the the transaction in of details the details around and strategy, will we guidance of guidance first high that focus that the will be and the can cash more

your Regarding second the, point…

Gerardo Valencia

on adjusted X.X back of adjust unit, you’re for line X.X EBITDA. more are the settled year-over-year in absolutely right. adjusted EBITDA, the were that Regarding we charges add you Omnibus and When in the much

the shown investor cash million impact reduction a the full to to flow as X.X it’s of on in the as $XXX,XXX lease slide. new guidance, a only the Just distributable be perspective, opposed from clear

make So, I just that’s want to sure clear.

Operator

[Operator you. You Please from have ahead. Fargo. Instructions] go Lui Sharon ‎Wells Thank question of

Sharon Lui

in of I was to back first coverage in be half it the the timing Do this were of period. asset levels you at XXXX? was tranche? you wondering, a in Coverage you am where of terms I the bit a are with When previously month expectations time? over the anticipate terms to And just what of the it it expect to do supporter. back XX exchange, go said your like completed think,

Gerardo Valencia

Sharon. exchange, addressing the me the then start Let asset of pace

announced XX we So, I we after it in December that complete want month the going announced in XXth. the what to this say to were whether before we

We have the first tranche that also announced of that we complete in year. to plans the first half

always the half. where So, high -- of be I expect lot I announce be tranche to will very within level the in be next so to to that for first the that see case. a we able few I weeks, have risk happen. of that doing will confidence don’t we the these we first do

We're missing on. And of we have of close. foundation -- working balance, So, couple signed already. over the several XX second then, a so intent we be signed, regard we due over just already And discussed, then letters we're have diligence the will started very very, pieces tranche. the as XX we're with that XX the already asset to for which contracts,

in of the of took we -- so seeing, going level bit the the very year of complete to degree make in So, faster of considerably we what I we this faster right then than or that announced, announced. what little we're have able to sure And and a be Sharon, high time that than originally part the have to terms have operators. high have we what we're originally a confident

and being our on, right And team, these and all team, get locations. have his the so, able Wilkins operators to into working George COO been of his

results. very So, we're good seeing

have these been sites Now, dealerized.

have very what of organization announced and the part I’m them the as before. financially, high in now, we excited of to So, to expect these the end we

originally So, sites faster we what from to said. bottom line, finish these we expect expect strong some than we have results that

what terms we're the from seeing transaction. in facing and of that’s So,

quarter describing effect. and some go quarter so people so So, know, you further weather ratio, in cash going weather, very for don’t have, the don’t but out a happens I they is first seasonally earlier, were low typically the terms the and mean coverage us. or And we did don’t these were by they impacted say, shop talking of distributable we and stay flow even guys as seasonal to I home. I’m like about as

And so started impact that us.

EIA the the the volume of X% for two discussed, down first we year. As months was

So, we they spoke with the and felt this impact suppliers too.

we do I that look something years. we have, our in few the mean, expect as it's so So, at see we trends seasonally to last happening

lower see what that that can the quarters. you first quarter saw considerably versus can in we was see -- in cover next You

for So, long-term. we remain the focused on delivering

our Evan? something for in that Anything -- again, with some ability of know we is quarter this So happen and this especially else, first us.

Evan Smith

that's think I No, highlighted.

Just trailing of in X first expect rest the over through quarter the prior seasonality that we ratio a the like would to and the was coverage the quarter, maintain year.

Sharon Lui

assuming Is the you additional you Okay, of great. as an acquisition? about And guess that as the XX% target asset then where you exchange to talk growth your you on range? third-party potential long-term EBITDA that any Can how Slide is do there to drop get from guidance strategy, CAGR. X% well layout to maybe bake-in get GP X it range? to downs Or potential I

Gerardo Valencia

question, good very yes, Yes, Sharon.

of but is -- did scene. what so, of that this ton embedding a And each level it, a are George we have. so process and we lot of a very detailed one have simple his done the So, the it’s region the been a behind slide, directors team, doing have actually work the work we we country, very starting that of across behind also at there the in different

so, then, those each of and deeper area, there there plan at as components the pillars that directors, so as So, slide, are about left talked -- see able growth you our in portfolio that then understand and what’s is in five the those foundation. But grow. is all one in additional bottom and the to improve the do our of to slides them these to be exactly working I’m

industry. to do is So, make offset sure us when to the to we going that that’s allow

going if industry about of electric for as the So, declining the over well fuel volume -- vehicle the of to fleet the well vehicle. likely volume, think of mandates as change in efficiency fuel the some some you in as mandates so efficiency as fuel of be is to of the some the because some future

synergies is this fuel that That’s that we’re be is you’re help our going but -- to small So, then have things about decline align in a years, the really half foundation. of that the us been early propel expecting. portfolio it's growth and also to making to strong that years, the just don’t asset to our the capital. growth that be nonmaterial early to we’re would we will that be K. is exchanges that’s do sure What's exchanges like require have to we doing that, that And goal going offset discussing that’s, Circle seeing that there, the will in going going

into of future the some So, are years, growth, in in doing is be we’ll more have which more the we market. that team organic go growing a of but the people be that there’ll early as then we and

We have They're successful. dealers.

we're history. margins, last is in and of very that. acquisition. But that make third-party And them then year, strongest So, fair, growing very, very there you remember were would what strong we seeing the we’re And multiples, we’re fourth high or what in right developed the about to market be the quarter that be retail very growth. there is I fuel as want with the to going some to some sure disciplined in now should

be be is doing market And just we’re the just some careful seeing things in that assume we a about we need So, there, future we’re just new and to acquisition. about to people want for careful right. brand

So goes know, cycle. we is -- longer-term view but it's my frothy, a is at else through like but the everything that's very right market now

need capital So, the But right some future. to to don’t into some definitely, is straight raise the that going of market get to we now. the go of there these to

Operator

of from Please question Bellamy Baird. Ethan have We go ahead. another

Ethan Bellamy

of they're just to cash With within but the -- disposition getting the that there about rate, is space from prospective ultimate those? the respect obviously the another, now, of rid flow meaningful distribution incentive of all trend those, curious

Evan Smith

Ethan, partner, we're at look burden this general with it's is Evan. low right this very you're point and amount. in at, split the but the a It's discuss our is low fairly something evaluate small we and because

long-term any not there. So decision made there's been

Operator

James. Our Ben of ahead. Raymond next comes go Please Brownlow from

Ben Brownlow

follow Thanks for taking my up.

year the to Just supply strategic of you the quarter. up this is a just it's that us step remind not how your and $XX in like to level with confidence just review fuel on seems a for that hit going target into related of this is review line Can up that kind year? this complete synergies top to million the end of annual

Gerardo Valencia

Ben. Yes,

that, that both about by for as on the costs captured that talked XX million of very would on, So, and on confident come. And with we we I’m close our well that years we I think we have as this well we million fuel stated plan deliver is And you as capture as to put million year. things the so XX XX I that end synergies distribution. some between think will -- what since of of XXXX, July we that to

already and that seeing, worked So, we contract brands basically, the of we some the results so, working we're implementing end so tail that. of we of it of before, on it describe what strong was we're -- of to all March, that if we're starting at at implement, I on and so And looking some it. I'd as results at say, looked the that would seeing

already. expecting considerable impact June flowing see So, April, May, into to I -- we a quarter a very the of should am see second

Ben Brownlow

or that strategic Alabama that sites, just And of that the was to are of that be clear, kind total the million part jobs terms from $X.X sub benefit fuel review?

Gerardo Valencia

now, the additional is or XXX right we're review sites. so what strategic so now describing we're focusing No, on that

So, with not sites, really one. X we were started Alabama but the these inclusive of

strategic is of exclusive conducting right that, the Ben. we're that So, review now

be talking we're really just going looking now from where about to we're sites. additional getting So, at

specific. in markets Alabama the with do to nothing it's So,

Operator

show you. time. I at no Thank this further question

Randy Palmer

operator. Okay, thank you,

Let for me to over comments. Gerardo turn closing some it

Gerardo Valencia

Yes.

I you say just just wanted you before to leave guys. So,

seasonal some loss and as were we that experienced softer-than-normal demand. by we So, industry discussed impacted further

in However, what focused have to a you initiatives, will and we I have we continue we very our [indiscernible] it. have strategic strong very have we focus understand all clear progress that to that want make

sites are how acquisition setting across we history largest and So, discuss, of just the these bringing that convert to the of partnership, operation. as this sites company and future to and dealing knowing, we're implementing XXX in growth dealer the for we’re asset the we for growth organization, whole along, so, organization site up

capturing We’re the supply. with strategic fuel fuel margins

We’re through Transitioning Alabama. do in operators lastly, we’ve we growth operation best of going we operate stronger implementation territories one in great have culture the by finishing bottom that the I’m strategy then the to director and embedded to And from the up. owned going that be each convenience to a we and have the deliver industry. discussed where of each say,

right some that time in guys wholesaler the in near that make of we but North the right the America. to have have to that'd So, look best the and takes me Thanks and me a for very become strategy, of high team, you degree seeing confidence also the give future. forward proud, already fuel we

Randy Palmer

call. Thank We today. you, today’s you us of conference That Gerardo. does each complete Okay. appreciate joining

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

Operator

for and Thank ladies conference. today’s participating. gentlemen. you, This concludes Thank you

disconnect. now may You

CrossAmerica Partners (CAPL) 7 May 192019 Q1 Earnings call transcript