CAPL - Earnings call transcript Q3 2021 | CrossAmerica Partners LP

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Operator

Good morning, and thank you for joining the CrossAmerica Partners Third Quarter 2021 Earnings Call. My name is Darrell and I will be your operator for today’s call. At this time all participants are on listen-only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded. the to turn Financial Topper, now Officer. will call Maura over Chief I begin. you Maura may

Maura Topper

is operator. of questions. and you, I financial slides up posted to part discuss the are the XXXX during on and me comments, At the the call These President. Third today’s as joining we the that and quarter, event. the are some provide slides performance CrossAmerica utilize presentation point open Quarter will CEO should opening the today will results. and Charles With end, from will Call. will this some brief Thank CrossAmerica will that Earnings morning morning’s operational Partners webcast then of available Good overview I out call follow we thank website. a Nifong, and CrossAmerica’s Charles you for highlights

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

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

Accepted not may Accounting certain conform Generally U.S. that we measures provide do call, today’s also During Principles or GAAP. to performance

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

Charles Nifong

Thank appreciate this joining everyone I Maura. us morning. you,

especially for always, since today we you As our on thank joining I call CFO August. your in first us in the welcome Maura partnership. interest as

on We our team. are have to glad her

on acquisition recent updates During most through color market third trends quarterly some X-Eleven highlights will stores of to go XXXX. I detail convenience then the also more operating on our provided will review update for from quarter Maura similar today’s some along our financial and I in will call, of provide results. with I briefly in the calls. the what during other the

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

and million, third to of volume fuel gross or of compared million $XX.X For both increase third fuel the XXXX, when of to wholesale XX% the quarter our gross the the Wholesale when $X.X margin or increase million, an was quarter. This XXXX. compared segment increases was driven by of $XX.X was million, quarter quarter profit profit $X.X during third XX% of XXXX. an

to an the when well XXX Our recovery the million the same due assets compared as XXXX in of X-Eleven COVID-XX. for volume period third to increase as acquisition XXXX, was quarter of wholesale fuel X% largely from the of from gallons continuing

In the up store for were approximately of wholesale buying X% we in terms quarter same year-over-year. performance

mid to quarter and relative some at XXXX down or than on X% as September in to to see same basis weakness the to site a down site are more August last X%. fears did Delta relative of same year For from We we slightly early relative approximately up variant, Year-to-date the their Delta X% were variant XXXX. approximately wholesale was a volume relative peak. volume

customers XX% customers acquired or the gallon X%. party a all with approximately gallons with XXXX per for gallon quarter to of the fixed markup fuel an gallon being of our contracts we XXXX addition of the variably saw DTW The price retail our third of for newly increase $X.X per third was or terms received our of for driven on margin primarily remaining per our the our sites third with gallons an compared wholesale in increase In mix, sold volume per year-over-year retail factors. We of primarily $X.X by gallon, segment. increase to with three quarter, quarter reporting

increased noted, First, company America’s a we as margin just we benefited which across I volume variable supply sites, operated on retail from basis.

certain to due costs initiatives consolidation. sourcing better our from benefited of as such strategic the we Second, execution brand

per gallon $XX.XX Finally, prices barrel the increased quarter to third margin per the oil from for quarter barrel fuel crude as discounts, of per third our benefited of for wholesale XX% XXXX also terms XXXX. from higher $XX.XX

for our margin While per gallon fuel to the increase negative. the environment the quarter wholesale fuel was macro margin quarter, mixed for we

XXXX quarter. We third are been prices fourth oil over oil in rising crude have October generally last up environment since through from of end now of the late a year. Crude the the start the price of quarter XX%

half oil in For third quarter, last prices the increase since and weeks or few continued respite latter of then have to rise to albeit but the over the then, began so. first declined, some quarter crude of half the the with

we done and As BX of typically the had the of the fuel permanently. in dynamics and margins perhaps earlier historical and diverge achieved fuel the lower this crude so COVID fact quarter what altered in noted support that third experience price prior year. theory the with we consistently the have oil fuel market, provides materially magnitude have we calls, that on increases year has margins experienced The to from

for COVID In related issues terms quarters several now. of not rent, we’ve any experienced rent

rent for during to XXXX. year, prior the rent associated the comparison concessions the the the and made Our in favorable quarter benefited from quarter

also gross retail profit compared quarter segment when well rose the as the performed quarter million, XX% XXXX. of during or $X.X Our third to

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

quarter quarter volume was year-over-year. For On a in the week the for site volume X%. comparable volume basis on week retail a approximately comparable XX% our was same XXXX retail same down site relative to basis, up

inside relative X% For to and relative our last inside same comparable site to flat week on up sales XXXX. sales approximately the basis year, were

continued have retail Our both on sales inside volume and metrics. to well sites perform

On retail industry significantly compare Particularly, the wholesale side, our have the our have we the to relative overall locations to to to and be looking favorably portfolio XXXX. outperformed we’ll volume overall. relative relative data performance at

relative our past spent months. we sales on in which to XX success perform flat initiatives they’re the inside metrics, of to for brain were sites inside reflects While and continuing XX retail imaging and the X% still up strongly, quarter, ongoing have of both sales XXXX. are the volume capital our On upgrades retail impact and site to

Our include from newly acquired rolling segment also were results quarter quarter. acquired this on the a retail sites sites our X-Eleven. throughout basis These

reflective not full these Nonetheless, near results So our of the newly anywhere assets. quarter’s acquired results do reflect locations. included these for from are financial contribution a results meaningful

we’ve the particular pleased at performance of the and Although been fuel it by a environment margin is sites, early, in the location.

locations they of into tools new successful. ensuring members continue integrating energy operations put need these effort and our into to our and to and We lot the successfully knowledge be a team have

DTW segment important segment quarters, reviewing retail in on to or noted a variable our the performance is financial supplies basis. retail margin prior we remember wholesale segment our As

between wholesale sites is So retail these split segments. profitability and of the our overall fuel

isolation. relative prior margin sites I to contributed Overall, our the per in As the wholesale the fuel quarter for ago, our our DTW in a fuel wholesale at our to overall segment not the results makes our gallon a to mentioned financial retail moment fuel margin apparent margin is wholesale looking retail meaningful year. and profitability sites increase retail the to segment that contribution to overall and

year-over-year. in expenses X-Eleven producing by the an of prior addition seen count integration increase the primarily increase driven operating the increasing increase expenses and sites The through of to work the G&A we X-Eleven both we was site operating sites, our average in company in As our have an compared year. operating XX%

increase our have with an also G&A sites, costs consistent we related $XXX on experienced the the the sites working The other in labor overall. agreements increases We X-Eleven increase capital. the primary acquisition the the at and for for been for In to quarter including of million, in management of experienced regards consideration headcount. total increase in to X-Eleven in third closed sites fees as has inventory with broader XX and end for quarter, associated in the the the drivers costs transaction, acquire economies XXX what announced to retail of

final of closed work X, licenses partnership November on all of for and once anticipate As receipt on of the are properties inventory consideration total operational we three closing had the an including permits. five required and $XX.X the capital. We sites additional in other million,

and performing rebranding time, far. As how on sites sites relatively had have these earlier, pleased short has and with the are how the comments touched briefly we process my the overall a the only site so of retail while gone are we amount I integration of with

and these We are acquired going already sites assets are we well from positioned to seeing forward. perform believe a positive impact the

also divest We portfolio property we September in quarter Through million investing sells, XX for and million had look properties. in for evaluate for to XX, to sites for non-core opportunities had proceeds. $X.X proceeds. our continue a properties busy We XXXX invested $X.X XX

expect have to a core. to active strong have of transactions pipeline continue and an We four

of strong demonstrate process of despite continue our forward, this some beginning quarter strategic are initiatives. quarter, invest results recycling the the capital Overall, growth the in challenges will our to of within a portfolio. had Looking opportunities financial we to we and

efforts months As overall CrossAmerica impact the these teams in contributors to executing coming these our assets. I review. this positive noted provide appreciated. a position you. To detailed to that, and our be brief earlier, good will plans of all provided summary, great substantially We we a glimpse our completed more results overall to listening sites With on execute Maura years. quarter and Their thank a In job to and transaction with for exit of financial believe in these of our plan. I have we returns our and strong and CrossAmerica assets performance are to team have turn strategic we X-Eleven the done members believe financial for our integrating tremendous in third dedication as growth shareholders. over quarter it in and we financial are will unit continue

Maura Topper

Thank you, Charles.

XXXX you the quarter compared If for third net quarter the results to third XXXX. X, I the review turn for of of please million million We partnership. like income third $X.X to of our in slide quarter $XX.X would would reported to

quarter the driven of gain, sold Circle properties K from to benefited $X.X $XX.X gain income asset million with exchanges related the by on the in a XXXX during gains During when XXXX. a was was the million third to primarily to third net an of sold $XX.X increase the properties compared quarter million third XXXX. XXXX XX% quarter the of for third of of sale quarter Adjusted the which EBITDA compared of

$XX.X million was compared versus from for the reflecting XXXX distributable cash wholesale of increase income for and XX% an tax retail our XXXX of a was the $XX.X third the million to tax of million increase flow the the As in primarily year-over-year. from Our of quarter for benefit in increases current XXXX, driven operating of Distributable third addition assets $X.X expense quarter The X% quarter third Charles of benefited quarter million by flow EBITDA cash in a adjusted XXXX. $X.X covered. X-Eleven of third in segments acquired both and of

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

XX, XXXX was September the XXXX. a versus September X.XX For ended times for slight our XX trailing months times XX, X.XX trailing distribution months XX coverage decline ended the

million next the quarter $XX.X If capital $X during the quarter. of of coverage quarter, capital quarter $X on on you projects I we being the that the times of million X.XX a rebranded to growth third a year-over-year the turn represented partnership of the capital And with approximately other during slide, of second ratio a to for the Growth XX noted $X.X on in spent as million In from sites EMV basis million of sites the certain the expenditures. distribution quarter attributable $X.X total included total million of million. the almost a a related including to decline previous our unit resulted for the rebranding and related months. for slide, will improvements. in acquired XXXX This third $XX overall, our regards X.X of being during paid and on per expenditures site portfolio, existing upgrades, please this $XX.X on of X-Eleven XXXX projects, paid approximately

of for certain our of quarter, those upfront from generally retail of completion. portion conversion the time to post last site related period spending I site final suppliers As The in for our the at conversions, either reimbursed after including gallons acquired are we mentioned in spend, X-Eleven is a sales and segment. strong performance a brand sites, by particularly project of the current quarters over and or prior substantial in impact the evident the

If July to during credit you new call. our our capital turn review were entered discussed On CAPL to existing This Marts slide indirect ongoing credit XX, partners, JKM Joe’s the a is subsidiary facility the credit a X, capital from million credit revolving delayed an the Marts as business structure, X-Eleven facility properties or new of XXXX, the JKM been facility. facility is The JKM second which the to this available $XX agreement. of I Kwik million needs credit $XXX of owned forward. Joe’s credit earnings term term We the delayed acquisition CrossAmerica wholly the has support secured consisting store Kwik loan XXX capital quarter of new our we working senior a and the facility. into and portion and wanted facility, million of facility $XXX used call to loan drop convenience revolver fund drop a move

provide newly credit maximum integration our leverage pre-existing of ongoing increased X-Eleven. are the include under assets credit manage The to agreement structure assets for ratio under Due this to July does to flows generated. us flexibility acquisition, the actually to better us our leverage amended the from also through XX, CAPL of the XXXX. We pro of until allow facility ratio financial not forma cash calculation and EBITDA acquisition our assets with facility from our the as amendment CAPL XXXX our our acquired

under facility will on down. capital new ratio to assets the these As are boarded fully organization, our step credit leverage our

increases As assets paid EBITDA these from new and a result of our cash defined with our revolver balance generated credit is facility these down flows. cash as

we to these structural leverage this result, anticipate quarter our be quarter next that As a definitions. will and level due highest

and forward, our but at blended to community. present ratios, credit we leverage report As for organization will leverage two our look the to the as whole we speak investor leverage a going our facility defined aggregate financial also ratio

if organization credit the ratio times. acquired around were overall, of impact into pro As our our the our a to defined September of XXXX, total leverage ratio forma XX levels, taking calculate benefit and for as newly blended account assets, leverage agreements, X.X the debt we be our in of aggregate would

outlook financial and board that on on defined our a will distribution distribution impact in we have basis. the basis facility aggregate I regular continue blended of noted rate. will quarter and position, to times leverage we and defined ratio we facility any on our our quarterly expect credit credit XX As with our down blended months over and toward previously, aggregate ratios, Well, a four both not to move this our on level our our current will a based current next the a course for move target do operations and review of four this

information statement acquisition financing. certain for months CrossAmerica, in and the six properties. by and acquired as regarding layer statements value the unit integration period forma X-Eleven early XXXX pro acquisition, for the with sites a their earlier, income that note first Charles pro been that did holders the to for of prior great balance similar our top providing forma for should pleased As sheet come. is adjustments accounting, week, the and the XXXX believe to last We owners locations we I acquired their process financial for noted X-K and file performance. Form operated statements for the a will and this results some with on These provide years the we’ve of

well forma these or charges not by or in the incurred interlinked of the do location the CrossAmerica statements incurred items pro X-K adjustments noted COVID-XX any These of the only be the Year. behind X-Eleven to by impacts conclusion, statements fourth segments position noted with contributing the the that historical as partners, we wholesale and strong As profit with bulk overall performance financial owners any earlier, SG&A quarter do they as third include retail performed level information. store include In us other include integration pro during of our the are and a entering the in the to and loss quarter also industry. the Charles in prior including good a factors forma not to quarter, non-recurring site pandemic, New

months XX reduce next and leverage XX our As our I have to a ratio expect to coverage target we within the to noted plan our stay range. over

our sites sheet our up strategic it will will we acquisition open balance from on X-Eleven With of forward, performance. XXXX the Looking our our initiatives benefits to transactions, we continued that, as other overall see our manage continue for and questions. we the

Operator

And thank you.

Instructions] from We question session. do [Operator the have question will RBC. begin populated answer just that and a now Scotto We Elvira

Your line is now open.

Elvira Scotto

the more over a bit Can quarters? what talk that developing little the of few seeing you you’re labor next and how see about kind you front on

Charles Nifong

This morning. Charles. is good Elvira,

on labor been just elevations of like tight we’ve out seeing temporary And had rate. it’s stores So terms and shortages. depending permanent cases it’s everyone folks programs and cases in to rates. at finding front other some there, been base we’ve the upon the implemented market, the In we retail adjust certainly else, we’re

at fairly the well, to continue least. far, it definitely able quarters manage that been get but And market, somewhat, store several think. to terms we’ve it improve we at things better, so it’s with outlook so necessarily end seen in but I unemployment the the September things level. in have overall that, how added the But obviously enhanced expense may some depending would And still we of to tight it’s that was benefits of expectation and for out the there the upon It’s say tough there. very it’s to of expect

Elvira Scotto

then more talk I changes to And appears margin how have provide you changed stays? a prices. of a sort and Maybe more trend do were historically you versus think detail crude the margin between divergence can think when pandemic the little you in and the that. little the that But your, about trended fuel wholesale has talking that oil bit that

Charles Nifong

Yes.

I’ve awakened important higher I others a costs, you mid we that listen change a a would margin store make if the I be to little if it’s I I would they to certainly at oil fuel been points think typically certainly there to competitors year, terms margins say either offering know have in saying higher. well, being fuel for it with also what and of been don’t seem less certain permanent once breakeven our market. some certainly and case. to expected know. longer a but because operators in this to have has now certainly, anywhere endemic in becomes bit COVID fuel the of increase in as store. lasted we’ve the draw that their more overall our is that is we’ve the more happened much the how they declines people and is get not sales hesitant for bias continue single will initially. also mean, and crude been Whether terms their from fact been while think than valid market operators low They digits was margins mean, has out the seems more So you there about towards past more I’ve that’s a And And emphasis margin But continued prices on that of that. margin what near in I have say, labor the seen in business, been was would such of their in inside in that of fuel to to of parts it I that look put

Operator

Thank you.

[Indiscernible] from Our comes next from question Fargo. Wells

is line now open. Your

Unidentified Analyst

questions. taking for Thanks the

could stores and permits expect you of you provide licenses the On transaction? rough a the the timeline remaining when X-Eleven and last the deal to three all secure complete from

Charles Nifong

there of three Yes, some getting so be peculiarities those associated market Philadelphia are those the with and in permits. in terms to Philadelphia stores happened

visibility I substantially come we overall to complete I what terms on great finished So right the portfolio have those will my acquisitions and not of in they’re in transaction sites now material. start those we’ve price purchase don’t as and We’ve substantially when will contribution with comments I say acquired their at of said October. with are the to-date over. the both

or to not So we’re we’ll material sites certainly over, but of the anytime three get whether soon it’s overall optimistic over those impact the they not acquisition. come

Unidentified Analyst

about to metrics to for level M&A this market maybe it. of activity just XX you normalizing participate Charles. then Got appetite months? maybe could And And next the in then talk the leverage the Thanks your generally? XX

Charles Nifong

Yes.

that So of the I’ll address second part first. question

her right comments operational obviously we’re and too as assets that a So that it ensure and just from perspective, also the bringing Maura on way the we’ve perspective, our capital integrating now, focused should. touched from performs leverage, that down on completed, these acquisition

So means that’s that think in our overall. primary in you out all astutely mid the that the the being, latter next I year, going market to we’ll to looking year market not the until from of terms be active focus that say, we’re half of for pointed that as time

have look was monitor the to or would us while be still market we’ve want our strategic be purchase order something again, do notwithstanding, moment the in do continued we for processing something just to at continue while from to the for this expectations our elevated And us So from seen, perspective high. deal to levels. at being, special sellers has in what market, something But something special be and we’re to to finished price it a for those we’ve it time really to sites. X-Eleven from and that

Operator

[Operator you. Instructions] Thank

Charles Nifong

doesn’t call queue. everyone thanks. us like for further and thank the any the you on joining today wish there questions it look in we Well, Again, well,

Operator

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

disconnect. You may now

CrossAmerica Partners (CAPL) 9 Nov 212021 Q3 Earnings call transcript