CAPL - Earnings call transcript Q3 2019 | CrossAmerica Partners LP

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Operator

Hello and welcome to the CrossAmerica Partners Third Quarter 2019 Earnings Call. My name is Michelle and I will 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. Please note that this conference is being recorded.

the Secretary. to turn Director Federer, now Corporate and will call Mike over Senior I Mr. may you Federer, begin.

Mike Federer

earnings today operator. you President; members CrossAmerica XXXX of for you, Evan joining With Thank Good Officer; leadership the Partners morning Smith, Chief our third and CEO executive Gerardo Valencia, are and Financial thank call. and me other quarter team.

over comments from to of CrossAmerica’s turn and highlights the Gerardo financial and the overview the to results. will up operational end, open Evan brief questions. call provide discuss the we and a some the will quarter, opening to then At performance call will

of I should posted on webcast CrossAmerica slides this presentation utilize and website. point some the during that part out morning’s event. will are the follow we slides will call are that These today’s as available

and we session, be revenue, Before the plans, metrics, including remind I achieved regarding to differ assurance projections There expected actual will from that statements or opportunities expectations, like not of begin, today’s operational beliefs future expectations. will results management’s everyone call, that and can be would expectations may future the no forward-looking that organization. include question-and-answer and

filings XX-K for important including Exchange Securities the reports on could affect Form annual that factors Form CrossAmerica’s and a results. see and Please on with reports of quarterly Commission, XX-Q discussion actual our

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

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

now Valencia. I’ll over call turn that, With the to Gerardo

Gerardo Valencia

in briefly will results go XXXX We Evan I afternoon, the highlights and few more of in our then yesterday third minutes. and go a Mike. reported the through quarter detail you, will financials earnings some Thank through

Overall, and operationally quarter we had a very strong financially.

are our sound flow to We deleveraging customers all in distributable on its supported balance partnership, the our management. highest fundamentals level of sheet, and growing history with the our by strategy, delivering quarterly portfolio business our strategic cash our

I am very our proud of team.

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

the all For third our with indicators quarter, in our are of line strategy.

double field which in approach and our our We with optimization operating growth an XX%. fuel profit SG&A continued expenses delivered digits wholesale by of our a grow. and focused on combined increase We to reduced disciplined basis, through agenda is

these EBITDA adjusting efforts when for grew XXXX for on the comparable guidelines. we X% adjusted a the our basis accounting versus newly quarter Through

basis. quarter Cash on to any a third We solid we’re comparable Distributable by such very material XXXX able versus a and Flow XX% without to having reject capital. generate Our increased had flows

our to If will you X, discuss distribution turn our ratio. want coverage to fuel again wholesale margin once I and Slide

the third the been by fuel past is level quarters. the was third This over and of XX% gallon which highest over this cents quarter in gallon, an quarter wholesale supported per Our fuel in was that the few increase the XXXX. history we for growth the is have synergies per $X.XX margin partnership’s discussing

XXXX. third in a is the performance history of the at our a our field not quarter our but one-off highest look end partnership’s to level with margin of $X.XXX steadily increased we strategy as trailing this in per result gallon the of wholesale [$X.XX] we its rather at As situation, XX-month of have the a basis,

basis, five we side we years. of level times X.XX coverage trailing a highest charts the ended Looking on the over ratio, XX-month our with right at of the in the page, the steady On quarter ended is which growth period highest a few X.XX four seen at testament discipline. and improvement years, continued have in is past over which over the our the times, and quarters a

to I business. turn provide with you which will Slide initiatives, [indiscernible] want our our an you strategic If on update to X,

two September are with X, have dealerised of Couche XXX of our a under K and As we segment. for now Circle sites asset completed exchanges total that Tard, now wholesale

intent are and we completed XX XX, continuing of We’re the the have overall of remaining by be expect current to quarter timeline on the work without asset Of XXXX. a just final already XX we utilized exchange the the with first XX remaining to and our have obvious that change these sites part based and completed. sites signed of letter be to contracts

agreements X, our relationship that with October them. lease we master fuel upper further and have sites Midwest. run are to operators yield with very supply our XX announced strong and On expands the we They in Applegreen this of the closing

With the operating completion of XXX this are agreement, us. sites they over for now

we of as generate that this, will excellent benefit operation. a retail million stage adjusted we our million our X now as We are EBITDA in this the process. see We direct final do to X.X to efficiencies we in anticipate

Review to In fuel margin to the and to expect wholesale realize and fourth during the regards we quarter third our we the improvement, did contributions fuel continue Fuel associated synergies, reflecting Supply Strategic quarter.

this suppliers work with to our to continue We process. strategic

with network. changed are and The now the sites Alabama, have and hard re-imaging of and our across brand across expenses we re-imaged program branded re-branding most we the [indiscernible] Regarding business. being completed have

the will benefit months have of we these seeing network the expect optimizing quality, coming first quarters EBITDA benefits projects, our this the we As with of plan are XXXX. and profitability and years. our beyond nine completion XX% increasing of a volume the network in the original an network With we improved of over

progress we our continue third EBTIDA metrics. We we distributable an foundation make and strong in our and cash to establishing with partnership. a adjusted the To performance our growth initiatives conclude, in were in as saw improvement quarter financial flow pleased in for

it turn Evan. to over will I that, With

Evan Smith

you, Thank Gerardo.

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

quarter reflecting X%. of EBITDA third reported we adjusted in period compared million, of to increase the million XXXX, $XX.X an of $XX of the same For XXXX,

quarter cash distributable the versus was in of XXXX, flow million third an of $XX.X increase Our $XX.X million, XX% for year-over-year. XXXX

on for basis X.XX distribution for was X.XX of trailing months, that paid we was and the in times improvement a trailing times times XX, quarter which third the Our the September XX XXXX X.XX the ending coverage an over XXXX. generated XX months was

XXXX earlier, touched on for adjusted Gerardo period January on guidance new X, As the went the into we that three-months accounting lease XXXX. for have effect

at presentation slides. adjustments appendix the how in the on XXXX We and for XXXX have you of for provided the depending both lease to reconciliations look choose it

times, decrease ratios. no next would third on the debt ended from as new and you defined times the Slide credit at credit we of in improved remain the EBITDA at slide, a ratio a and to end If leverage X, financial compliance facility our with lower the turn quarter X.XX the X.XX first facility, with quarter borrowings under through covenant our

of have of our execute plans on our X, with liquidity million as million credit and We million from group $XXX.X of another accordion available we November to under $XXX our sufficient and $XXX additional had our capacity facility nominal lender capacity facility. credit

the quarter in noted a times on per as this paid X.XX $X.XXXX XX-months. trailing unit to total a during over previous ratio resulted for a attributable $XX on million. for XXXX the the slide, of of I The coverage partnership distribution of paid second third the of XXXX a quarter of And basis

had CapEx. being in has in and sites, remains Hurricane the million volumes growth positive with with as on re-imaging quarter, as in Our occurred that re-branding of well program modest investment the primarily which margins, $X.X re-building total a total $X.X of with the Florida from required in and the for XXXX. impact the expenditures been Alabama Michael associated million This business relatively capital the third has

In position we the our conclusion, feel we that to XXXX. believe a and performance are quarter about finish good in good third in

coverage to other and from continue expect our initiatives. and leverage as strategic our sheet manage We balance to and the benefits we ratio asset exchanges our see the improve

will for that, open it now up With we questions.

Operator

from I that Instructions] [Operator Ethan you. have queue and Baird. with the Bellamy in Thank question question one comes do

open. is proceed. Please line Your

Ethan Bellamy

Hi, a everybody. of questions. couple morning good I have

The problem an be that impediment I we clearly anything are guys the to is is, and you do, competitors some keep first to think what then every of the material guys IDRs? outlier that quarter would your best more of those you thing you that by turned seem for if quarter of would IDRs, eliminating don’t [indiscernible], from

Evan Smith

with is partner, but but partner. you This Evan. with those that that can we to morning. Ethan. this be continue business a operating our are results focused we Hi, and see for the we general That’s general that have on to joining. continue in discussions quarter, discussion the well the Good ongoing have Thanks

Ethan Bellamy

if M&A trading there I’m asset wondering out. terms could Separately, that you it speak get looks mean the broadly if from knocked you like once out more just Okay. or exchange could upside guys of what’s about out? in the be carved further potential could M&A generally Speedway what anything and market

Gerardo Valencia

So, thanks morning. to from Ethan, hear you. good and Good

say lot there we’re many in monitoring, is county, I’m opportunities to last that that organizations continue were there out – activity to and the see from and the quarters. a few going say to we marketplace very results of So, going healthy some I’m there’s the participating we’re in across

from continue very do, add being of whatever is we’re activity, and out to we what are multiples] also we a say value while that to and going sure we we environment about what there, seeing considering causing to are making asses but we the standpoint. very we’re lot so So, I’m acquisition seeing some that also [operational disciplined an can

in at standpoint we – about the consider partner Speedway capital. looking regarding you right from and Marathon we the focusing our happening of look we considering that it do very side marketplace from to know spend we wouldn’t multiples, are from we with a seeing discussed continuing and that’s forward now Ethan, say at – we’re where what how because what as that to conclude and about seems disciplined our together and any initial we but K to there and that are with my also was be execution can now, general about Circle before, be is opportunities as think would numbers saying, are a something we’re I to I of being we’re then very there, other speculation we whatever we’re high the that exchange that. some outlook because and pure anything And be,

be with, with just Speedway I going can’t tell are whatever doing So, organization. they to their

Ethan Bellamy

appreciate fair. that that we certainly anything we so, capital should CapEx, in question, the or as year CapEx, we else items maintenance are over that’s next Okay, sort lumpy spending Appreciate there modeling? discipline. any One and the housekeeping be look of

Gerardo Valencia

Go on, Evan.

Evan Smith

winding sites the talked about Marathon, it some- have the in money some about and CapEx we’ve year in we through, with had spending concerned of rebranding much pretty we to and course, this run been it million assets. Ethan, we’ve re-branding around see not would not down a specific $X is Yes, so almost is that next Alabama that we run with its growth year that expect that’s that those down be would it’s

Ethan Bellamy

final trending seen sound a what then, years you’ve X% EV are you kind one, questions penetration problem the what I M&A find come to so the a refined pretty be or how maybe too your structural hard monopolizing we products the what’s of or big is, [indiscernible] for to product U.S.? and if demand some don’t a anticipate exchanges, how And looks like same results, by, doesn’t and X.X% demand? long-term concern store could demand do get do have you market Historically, [indiscernible] type Okay. about going in long-term, and it thought but, declines here, done are does there that oil long-term many in look to

Gerardo Valencia

place mean, and From K of with very, Ethan, EV of from Circle has presence closely – we long-term happening and a from of and is working standpoint we’re a K where course Norway continuing get. done aware subsidies what’s what K very standpoint has were large very we’re I a a that that to a globe are lot using there Norway and the in Circle government that’s Circle because there the has that learning as is of penetration of a highest market is and EV across a the

standpoint is – to and of our regulations, what when talk for behavioral standpoint. a – fuel that demand, Europe differently seen A has from are we about other and always decline companies to there lot seeing we that there consumers is know different then dynamics by going behave is a the U.S. consideration companies has analysis always driven planning a be even from so I have and X%. oil been we own of what

and driven happen future, and to continue up coming the that’s car very more EVs will based not from do we in that on that by in being So, the much but see fleet not near efficiency EV, are in that term. the

that making U.S., to Circle We’re it were understand the in happens battle do the and continuing but to our customers that or sure we monitor in not in just happen how as that help to the sure to make U.S. U.S. that support if, happens it to leverage we us it if can we as K can

and but of terms yes, of very there proud right In there been we a have where some continuing some being what been high investing to to is to areas our support in digits are growing are are our re areas, and able implement are we and demand, we but single seeing and drive have that. what efficiencies our doing there we erosion are others, seeing you of programs Alabama we that positive so further like volumes some volumes we

see other brought help will is going operator a that plan there. our believe in change where where with what right we be to as continued and companies are to So, operators us to to but strong we that, we we we now Applegreen support erosion, we sites. going continue to We there are being very is that’s would like different that invest just said,

to to struggle We’re they supporting and our as expect base some be some there businesses we or able themselves. have acquire

Ethan Bellamy

the good Okay. you. Gerardo. Thank Keep up work.

Gerardo Valencia

Ethan. Thanks,

Operator

Okay. [Operator Instructions]

further no have We questions.

Gerardo Valencia

Well, operator. good very

our we all are conclude, their we I strong continuous very foundation mentioned strong and built we’re growth, So, with and with to pleased results, I portfolio. contributions. our we thought acknowledge performance, sustainable we a team delivering customers have before our very financial for just want

Our so and quarters. we accomplished much reason few people are for greatest our they the assets last have are the

questions, thank say the operator? everybody Are to there want organization. other Just to in you any

Operator

sir. No,

this questions queue no the in have We at time.

Mike Federer

your you Okay. today’s joining questions us. us That feel and We conference today completes to contact call. follow-up free if each any you. appreciate of Thank have

Operator

This for you Thank and Thank your teleconference. gentlemen. you, ladies today’s participation. will conclude

may now You disconnect.

CrossAmerica Partners (CAPL) 8 Nov 192019 Q3 Earnings call transcript