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CP

CrossAmerica Partners LP (CAPL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net income was $16.9M, essentially flat year-over-year ($16.7M), while Adjusted EBITDA fell to $35.5M from $47.6M on lower fuel margins and higher retail operating expenses due to site conversions .
  • Retail segment gross profit rose 9% to $75.1M on stronger merchandise performance, while wholesale gross profit fell 22% to $25.9M on lower volumes and margin per gallon; distribution coverage compressed to 1.06x vs 1.80x in Q4 2023 .
  • CAPL recorded $11.6M net gains from property divestitures in Q4 and ended the quarter with leverage (credit facility-defined) at 4.36x and $767.5M drawn on the facility; quarterly distribution was maintained at $0.525/unit .
  • Management emphasized continued portfolio optimization (retail conversions, divestitures) and cited macro headwinds (softer fuel and store demand, inflation, higher interest costs); no Q&A occurred on the call, limiting incremental guidance color .

What Went Well and What Went Wrong

What Went Well

  • Same-store retail volumes and inside sales outperformed industry trends in Q4 despite weak national demand; CEO: “our retail results, particularly our same-store volume and same-store inside store sales, both of which outperformed the market, were solid” .
  • Merchandise gross profit rose 27% to $28.1M on higher store count and slight margin percentage improvement to 28.4% .
  • Strategic real estate actions: sold 11 sites in Q4 for $17.3M proceeds and recorded $11.6M net gains; management expects continuation of the divestiture momentum into 2025 .

What Went Wrong

  • Retail fuel margin per gallon declined 9% year-over-year to $0.376 (vs $0.415), and wholesale margin per gallon declined 13% to $0.082, both impacted by crude price behavior and terms discounts .
  • Adjusted EBITDA fell 26% year-over-year to $35.5M; distribution coverage contracted to 1.06x, reflecting lower margins and higher cash interest expense .
  • Retail operating expenses rose ~32% year-over-year in Q4 (site count +22%; company-operated count +25%) amid conversion ramp-up, elevated repairs & maintenance, and store labor, pressuring segment profitability .

Financial Results

Consolidated Results vs Prior Periods

MetricQ4 2023Q3 2024Q4 2024
Operating Revenues ($)1,014,685 1,079,163 944,222
Gross Profit ($)102,045 111,226 100,983
Operating Income ($)26,962 27,096 28,332
Net Income ($)16,743 10,708 16,861
Diluted EPS ($)0.42 0.27 0.42
Adjusted EBITDA ($)47,627 43,938 35,463
Distributable Cash Flow ($)35,792 27,140 21,082
Distribution Coverage (x)1.80x 1.36x 1.06x

Segment Breakdown

Retail SegmentQ4 2023Q3 2024Q4 2024
Gross Profit ($)69,006 83,587 75,087
Motor Fuel Gallons Sold (M)124.486 148.380 141.377
Margin per Gallon ($)0.415 0.406 0.376
Merchandise Gross Profit ($)22,065 30,494 28,124
Merchandise GP %28.2% 27.9% 28.4%
Operating Expenses ($)39,664 52,224 52,246
Operating Income ($)29,342 31,363 22,841
Same-Store Gallons (M)117.458 126.119 119.919
Same-Store Merch Sales ex cigs ($)52,407 60,843 53,366
Wholesale SegmentQ4 2023Q3 2024Q4 2024
Gross Profit ($)33,039 27,639 25,896
Gallons Distributed (M)205.296 186.946 180.453
Margin per Gallon ($)0.094 0.090 0.082
Rent Gross Profit ($)12,592 9,525 9,753
Operating Expenses ($)9,052 8,542 7,121
Operating Income ($)23,987 19,097 18,775

KPIs and Balance Sheet/Capital

KPIQ2 2024Q3 2024Q4 2024
Credit Facility Balance ($)789.5M 772.4M 767.5M
Leverage (Credit Facility-defined, x)4.39x 4.21x 4.36x
Quarterly Distribution ($/unit)0.525 0.525 0.525
Distribution Coverage (Current Quarter, x)1.30x 1.36x 1.06x
Retail Sites (End of Period)589 597 594
Wholesale Sites (End of Period)1,075 1,046 1,041
Q4 CapEx ($)—7.7M (5.1M growth) 7.2M (5.1M growth)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Distribution ($/unit)Q4 20240.525 (Q3 maintained) 0.525 (maintained) Maintained
Leverage Target (Credit Facility-defined, x)2025~4x focus (prior commentary) “manage… at approximately 4x” Maintained
Portfolio Divestitures2024→2025Active in 2H’24, expected busy Q4 Expect momentum to continue into 2025 Continued
Retail Conversions StrategyOngoingConversions to retail/commission agents Continue optimizing portfolio, strategic conversions Continued

Note: No quantitative revenue, margin, OpEx, OI&E, tax-rate guidance was provided; distribution policy reaffirmed and leverage focus reiterated .

Earnings Call Themes & Trends

TopicQ2 2024 (Prev Mentions)Q3 2024 (Prev Mentions)Q4 2024 (Current)Trend
Macro demand (fuel/inside)Soft fuel demand; retail gross profit up; margin $0.373/gal National fuel demand down ~5%; CAPL outperformed; retail margin $0.406/gal National gasoline demand down ~4%; CAPL outperformed; retail SSS +2% Persistent softness; relative outperformance
Fuel margin dynamicsRetail margin $0.373; wholesale margin $0.087 Retail margin $0.406; wholesale $0.090; benefited from declining crude Retail margin $0.376; wholesale $0.082; tighter given range-bound crude Down sequentially; YoY mixed
Portfolio conversions+43 sites to retail in Q2; higher company-operated count Continued conversions; +79 company-operated YoY; +36 commission YoY 107 sites converted in 2024; continued strategic focus Execution continues
Divestitures10 properties; $11.9M proceeds; $6.5M net gain 9 properties; $7.2M proceeds; $5.3M gain; busy Q4 expected 11 sites; $17.3M proceeds; $11.6M gain; momentum into 2025 Accelerating; capital recycling
Interest expense/swapsRising interest costs; hedges expiration impact (April 1) Cash interest $13.7M; swaps from 2020 expired; effective rate ~6.5% Cash interest $12.9M; ~50% swapped ~3.4% blended; effective ~6.2% Elevated vs 2023; partly mitigated by swaps
Expenses (labor/R&M)Retail OpEx +22% YoY; site count +28% company-operated Retail OpEx +27%; same-store labor down ~1%; R&M up Retail OpEx +32%; same-store OpEx +8%; labor & R&M drivers Managing mix; elevated during ramp

Management Commentary

  • CEO: “our retail results… outperformed the market” and “we remain committed to executing our strategy while adapting to market conditions to ensure we continue to generate strong results for our unitholders” .
  • CFO: “Adjusted EBITDA was $35.5 million… down 26%… [driven by] record results in Q4 2023… increase in operating expenses in the retail segment… higher cash interest expense” .
  • Strategic focus: “We converted 107 sites to our retail class of trade… These conversions position our portfolio to generate more profitability over the long term” .
  • Balance sheet and rates: “a little more than 50% of our current credit facility balance is swapped to a fixed rate of approximately 3.4% blended… effective interest rate… 6.2%” .
  • Divestitures: “We… divested 11 sites… $17.3 million… expect that momentum to continue into 2025” .

Q&A Highlights

  • No questions were taken on the Q4 2024 call; the session concluded without Q&A .
  • As a result, no additional guidance clarifications were provided beyond prepared remarks .

Estimates Context

  • Wall Street consensus estimates (S&P Global Capital IQ) for Q4 2024 could not be retrieved due to a provider daily limit; therefore, estimate comparisons are unavailable at this time. Values would be retrieved from S&P Global if accessible.
  • Implication: Without consensus benchmarks, the quarter’s relative performance should be evaluated against prior-year and prior-quarter actuals and management’s qualitative commentary .

Key Takeaways for Investors

  • Retail segment resilience: same-store volumes and inside sales outperformed industry in Q4 despite weak national demand; merchandise gross profit up 27% with margin percentage slightly higher, supporting near-term stability .
  • Margin sensitivities: retail and wholesale margins contracted versus last year (retail $0.376 vs $0.415; wholesale $0.082 vs $0.094) as crude price volatility normalized; watch commodity trend and terms discounts into early 2025 .
  • Strategy creates near-term OpEx drag: ramp-up costs and higher company-operated mix lifted retail OpEx (+32% YoY in Q4), compressing Adjusted EBITDA and coverage; expect normalization as converted stores mature .
  • Capital recycling ongoing: robust divestiture gains ($11.6M in Q4) and active pipeline set to continue in 2025, aiding balance sheet flexibility amid elevated leverage (4.36x) .
  • Interest cost headwind persists: swap expirations increased interest expense versus 2023; ~50% of balance hedged at ~3.4% helps, effective rate ~6.2% at Q4-end .
  • Distribution maintained: $0.525/unit for Q4 2024 with coverage at 1.06x; monitor coverage trajectory as margins and OpEx normalize .
  • Trading angle: near-term moves likely driven by margin per gallon trends and updates on conversions/divestitures; medium-term thesis hinges on retail skew, merchandise growth, and disciplined leverage management around ~4x .