Earnings call transcript Q4 2022

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Operator

Welcome to the CrossAmerica Partners Fourth Quarter and Full Year 2022 Earnings Call. My name is Hilda, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the call over to Maura Topper.

You may begin.

Maura Topper

operator. you, Thank thank quarter and joining CrossAmerica the Good full you year fourth and XXXX Partners morning for earnings call. is With today Charles and CEO me President. Nifong, Charles then I overview discuss the a and will from will opening results. operational highlights and CrossAmerica's performance brief quarter, the financial provide some of comments, up we questions. call the end, the At will open to

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

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

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

U.S. conform today's accounting During measures performance principles, call, we may generally accepted to GAAP. certain do not also that provide or

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

CrossAmerica website XX period call a of conference the be being days. will available of and is on a webcast, recording call Today's for this

the With that, call to over Charles. I turn now will

Charles Nifong

taking thank to Maura joining appreciate everyone the on with us Maura. us today. you We you, call. the I time and be Thank for

the today's typically financial what other in and also our I results. review through on year. calls. and Maura quarter briefly similar some detail full call, review to of I will provide updates highlights market the a I some few will will the then operating for color fourth go During the on more

get with we operating the changed operating to I we the to into quarterly results, reporting our that simplify segment segments. wanted our of starting performance Before have results, assessment the note of these

see XXXX reporting release XX-K. provide press more Maura this our during You of presentation. in both new and will this segment Form earnings specifics her section our morning's will

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

increased an for growth million segment fourth the to For quarter when an wholesale increase X% of by of X% profit was compared the fourth gross fuel $XX.X $XX.X the million profit compared to was quarter fuel $XX.X driven in margin. of in the XXXX. XXXX, increase This million, XXXX. of of $XX million profit our Wholesale gross fourth to quarter gross

for gallon and crude XXXX our discounts $X.XXX XXXX. better increase The higher in XX% other by oil fuel and our per fuel $X.XXX initiatives costs consolidation fourth gallon generate terms due Our the in from to year-over-year fourth sourcing which was to driven brand increased of purchases. by quarter wholesale per margin the prices, quarter higher of primarily

our With gallons margin has segment our it revised than variable now did. reporting, wholesale less segment fuel previously supply

fuel As basis less a our gallon will on wholesale a also going per margin reported cents variability result, have forward. segment

The gallons to expiration efforts due and was same in the million fourth XXX.X real XXXX in the estate business compared quarter to the when in gallons was compared fourth of volume wholesale period of extent, optimization largely did decline to million our Our to XXXX. in XXX.X XXXX not for the volume renew. base quarter we contracts lesser a volume of and, our lower

the the year-over-year Energy gasoline down generally single be end volume down. of quarter. in down was approximately somewhat quarter. demand the has basis, continued Information a volume Administration national X% the national towards been end, period for gasoline since quarter low to the basis. national the on Based The digits year-over-year demand On on decline In data, moderated a

For X.X%. the same-store quarter with wholesale in the volume since wholesale demand. approximately was has line performance In quarter, same-store national our end, down volume period our the been segment segment gasoline overall

quarter across more also X% I'll same-store retail sites, less I our basis, which will overall volume an on note of for than entire stores, at same-store outperformance our by retail touch later. driven on is portfolio, inclusive our same down which the was

certain our the sites. to of On prior was for the $XX.X certain to million contracts increase the rent year the due base rent, of $XX.X and a reopening quarter slight our compared of closed dealer renewal wholesale million, previously

mentioned we continues that durable is rental quarter. after us income stream last incredibly quarter, income to for and an our As quarter perform steady

In is our profitability revised fuller our segment retail as reporting financial picture with fuel in retail of sites included a retail segment entire our segment. now results for the segment, the provides associated the the

compared as when million the quarter quarter XX% XXXX. segment retail the gross or Our increased of well performed profit to fourth during $XX.X

Motor XXXX. period our fuel the profit XX% increased in compared same when merchandise profit gross to gross increased and X%

our outperformed. volume quarter the data showing demand to than volume volume For quarter, for national the approximately decline an basis, less retail segment Compared same-store retail declined year-over-year. a on the X% volume the X% for

part decline from end, last that the quarter the was that benefited Retail year's the volume the approximately the generally in the continuing in to In quarter. outperform my better COVID same-store volume year, Omicron quarter comments. the to been spoke to year-over-year surge-driven data as we flat the same-store demand prior period has of latter earlier occurred fourth to national later comparison I volume certainly since in

up year our margin quarter, environment XX% gallon experience. the half since favorable on. the fuel prices of the end declined approximately on the margins margin Retail generate street have helped been generally of weaker, able consistent that was quarter to Retail the in a the were typical cents start a second basis retail year-over-year. which execute we per with On margin front,

last cigarettes were year-over-year relative excluding sales basis. X% year. approximately a a sales our same-store up For inside basis, inside sales on on approximately Inside same-site increased X% to

as sales our margin the The of up performance X% in X% approximately overall our end, year. out. in quarter is our strong since store in approximately have categories to been strength front, snacks XXX period In the work due retail our retail the results same-store year-over-year members segment the certain day basis prior was do that hard the packaged products. such to to over and On beverages, tobacco up and day testament the margin points a team

operating of importantly, of the inside focus at stores. outperformance, the team just don't members business and daily strategies, volume happen. successful at reflect improvement growth on level strong dedicated sales most The efforts the margin to detail execution the our a and They our attention

the slide, turn the full you our If next year. to will segment performance briefly for review I

driven Our $X.XXX in XXXX. in segment X% full was $XXX.X gallon gross of for profit reported per from The generated year-over-year X% fuel in a per increase wholesale per decline million XX% the XXXX, partially year profit $XXX.X gallon XXXX, increase in increase million for margin over XXXX in gross to fuel by a volume. a the offset $X.XXX gallon by

fuel for profit million increased retail segment's year of compared XXXX. gross XX% full gross Motor full profit $XXX.X increased merchandise XX% $XXX to profit our the our increased and XXXX, XX%. year to of million gross The

the our XXXX. X% year full a same-store relative our retail basis, On XXXX for convenience volume fuel to stores for declined

on full for cigarettes XXXX. store same-store sales X% year a retail excluding basis the Our increased

to to and properties. evaluate We noncore divest look continue portfolio our for opportunities

$XX.X For we XX full proceeds. or divested XXXX, the of year properties million in

slightly we years, We were this last these the less types than active sales hoped. front successful three have been past although we with of year, the over on divestitures had

pipeline. have we a good However,

our evaluating to within to constantly recycling portfolio for invest capital are portfolio. We growth opportunities to our returns opportunities by enhance look in our

contracts of from purchase during on price plus Community Service XX the and funded sub-wholesaler a accounts the credit assets we cash XX this to locations, and consisted commission dealer-owned hand. $XX.X working acquisition of acquisition capital. the through of assets locations. acquisition borrowings capital a Stations quarter, On fuel two front, on facility wholesale We The million on closed fourth for supply

acquisition. results results slightly on from better this segment acquisition slightly months these to quarter wholesale line the Our of two expectations. for performing initial than the in than less include is fourth results, Based full our

back to the year partnership. of Slide for financial looking the it you performance XXXX, was next exceptional slide, a If X, and turn on

were sheet and balance and Our for levels, record prior coverage than significantly year strong DCF EBITDA, year and year. the at lower the we distribution a leverage finished with the

our strategic Our to demonstrated acquisition of materially the the X-Eleven sites record in XXXX and results XXXX acquisition. value of contributed in the

since many the in As actions a positioned taken the well it strategic now and and to partnership have perform the is XXXX, future. of we result

favorable macro XXXX We financial on And performance to have record our extraordinary in generate ability of a capitalize last the several track demonstrated multiple environments. economic across to our over results illustrate a particular, performance. environment years

without not team. of year possible performance past this CrossAmerica extraordinary the the efforts would The been of have

is CrossAmerica for that have We performance. in thank and a that I they The team's them committed results, evident at hard work strong do. our is all to solid, team here higher

its year. in are to to XXXX, and our continue to value position now the the seek from prior In service maximize in We terms of efficient excellent basic portfolio our and value be to objectives and provide the unchanged our future. customers, operations

and are providing units your our time. of our increasing a your steady, being you which unitholders, means over For of focused value know with simply objectives on flow stated cash ultimate that stewards capital, good the dependable

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

Maura Topper

Thank you, Charles.

please the XXXX. to you driven segment year If in about fourth in the our to environment Charles of in comments. his with and quarter income income the increases X, fuel margin I both from segments by compared like for net and favorable income the net $XX.X The We fourth of each retail Slide was income wholesale that million spoke net results the full fourth to of increase $XX XXXX primarily in quarter benefiting year-over-year the for operating million of in turn would quarter reported would review partnership.

which of EBITDA for fourth XXXX. an compared was was to $XX.X of million for $XX quarter million fourth of the EBITDA when quarter XX% increase XXXX, the adjusted of Adjusted

$XX increase quarter partially $XX.X by quarter segments, primarily the distributable and increase the in cash the to cash increase expense. due The fourth retail distributable flow million for in offset Our flow the in XXXX. an wholesale fourth million interest X% of operating both XXXX for cash was income of was in versus

XXXX, attractive in impacted million swaps rate continue our of we experienced at to environment an in points. as was credit the benefit rate the on with approximately of expense basis facility interest our we interest place rate from we Although have revolving swap periods, prior rising $XXX by XX

million. X.XXx Our of for attributable XXXX the to to per distribution for $XX The current fourth quarter unit XXXX of of quarter partnership fourth third distribution of the paid X.XXx coverage quarter total XXXX. $X.XXX compared a was the for the of during a almost quarter

year $XX net year over full year million. an Adjusted million the compared $XXX.X EBITDA increase XXXX, the income the of to For was million XXXX, XXXX to XX%. of increased $XXX.X for full $XX.X full million of of for

of For the XXXX, XXXX. of the for increase distributable cash the full $XXX.X cash $XXX.X flow over year year distributable million of XX% million, was full flow of an

full distribution cash year coverage from in compared year year to full the Our full of XXXX. of the the of These flow resulted figures the for for XXXX the of X.XXx million of to cash earnings for XXXX generation earnings million generation full compared earnings $XX for was year flow of of from strong the X.XXx XXXX. $XXX of

to expenses performance earlier, of our as updated our segment our intersegment profit wholesale to segment the related reporting XXXX, our wholesale fourth included wholesale retail we allocation As on our Charles the gross well an the fourth retail the as of fuel sales by Prior the during operating to simplify quarter segment segments. to mentioned sites. assessment of of segment quarter,

segment fuel the to and In fuel includes sales time of and sites. our operating management entire independent company-operated to gross and on each estimated moving only segment our dealers on expenses based includes reported and results The sales on yesterday dealers. retail Certain agent also at lessee gross profit effort. the are commission profit level forward, the wholesale segment allocated

for under for XXXX. segments In updated the press our segment our XXXX also results and reporting quarterly release, can each as updated our well. XXXX for full the find XXXX year data provided XXXX, In segment for these earnings XX-K, we of have and you this reporting of

as or to $X.X our increase compared our to XX% primarily was for to increased the profile. quarter maintenance the locations, year. employment fourth well expenses compared increased increased store-level costs quarter. to prior fourth due million expense Turning The as for company-operated XXXX Operating spending

XXXX, were full quarter The fourth of quarter. The X-Eleven assets And certain experienced that to XXXX partially staffing of able quarter for to over broadly continuing of in company-operated were the challenges fourth retail the at of quarter to was employment labor hiring by all come fourth quarter items XXXX quarter. U.S. the fourth improved locations Compared of marked economy. increase in of course fourth substantially and the by quarter store-level we spending also more we therefore, quarter was to a the of the first acquired our nearly XXXX, function conditions, own the hours staff which costs the for contributed from that quarter. online a the the staffing

also hourly We those moderating economy, experienced experienced wage broader increase the in though population recent our to wage quarters. those store an pressures in in rates across similar employee are

a X-Eleven due costs to decrease the compensation year. the increased higher expenses and equity sites last acquired to head by approximately acquisition that in count corporate G&A Our X% for offset year-over-year. expense is we related This quarter primarily

On million primarily higher to equity declined to reduction basis, offset year acquisition expenses our $XX.X $XX.X a costs, full a compensation G&A due in million from by expenses.

upgrading and G&A technology XXXX costs up investments as as payroll X% improve to acquisition expenses equity in in systems certain and information well compared compensation, was and 'XX performance. business head to corporate Excluding higher count due to

to fourth efforts a that spend the $X.X due spent from was assets expenditures of growth-related quarter fourth capital was significant of next the million million which primarily XXXX rebranding X-Eleven. on a to We This the our of of total being with acquisition expenditures. capital $X.X million, slide. $X.X during from decline total to related Moving the of quarter

during work. continued investment rebranding spending car included this in store and targeted quarter upgrade certain upgrades capital and wash Growth-related

million levels million. from of For year decline of $XX.X XXXX This totaled $XX.X million the our growth-related. level also our that $XX.X expenditures of million full XXXX, being capital of with and a $XX.X XXXX was

two a moderate from portfolio we we the quarterly noted the the saw targeted over high years, made incurred XXXX levels expenditures in As throughout of mid-XXXX investments last XXXX, result we as growth of through end the capital our from have the in XXXX.

earnings. I strong from results operational As earlier, this stated cash year's significant generated

our from our from referenced facilities. the in proceeds of preferred November, of of down XXXX asset of of cash and existing the allowed The issuance Additionally, capital security flows strength distribution Service generation million our the to on complete first were benefited Charles sales in our quarter of release XXXX XXXX, earlier. working $XX.X in that investors, pay the acquisition flow capital us million business, from our our assets to pay cash $XX invest credit Community Stations to in our and

of results operating moderation deleveraging a has strong of combination and over This resulted in the leverage ratio XXXX. our of course continued

account the As of total blended our XXXX. credit the organization would for third the leverage to December quarter taking as at X.Xx to overall into be X.Xx X.Xx fourth XX, around a in XXXX, the if our the leverage ratio we calculate of our levels, aggregate agreements, of end defined compared ratio of debt end and quarter were at

to credit performance and and our focus to at facility-defined on ratio the associated manage aggregate operational on cash approximately leverage Xx basis. will both continue our We blended flow generation

conclusion, pleased a with very In were strong to Charles quarter. a XXXX noted, positive we wrap up fourth as

Over were as the the to position our continue XXXX. our sheet, able of we acquire performance we attractive utilize strengthen positive course to well operational assets balance to us enter and year,

for you can With Hilda, if that, please line open questions. I'll the ask

Charles Nifong

you on please today. We to Should some a happy call everyone out have any us. reach We'll thank us to be today. we appears Have good don't joining them. have the It questions questions day. for later, address

Operator

for today's participating. concludes conference. Thank you. This you Thank

You disconnect. may now

CrossAmerica Partners (CAPL) 28 Feb 232022 Q4 Earnings call transcript