10-Q: CrossAmerica Partners LP Q1 2026 Earnings Report

CrossAmerica Partners LP reports improved operating income and net income in Q1 2026 compared to Q1 2025, driven by strong retail segment performance and reduced expenses.

Summary

• CrossAmerica Partners LP reported operating revenues of $841.8 million for the first quarter of 2026, a decrease of 2% from $862.5 million in the same period of 2025.
• Net income available to limited partners was $9.965 million ($0.26 per common unit) for Q1 2026, a significant improvement from a net loss of $7.780 million ($0.20 per common unit) in Q1 2025.
• Operating income increased by $21.7 million to $23.750 million in Q1 2026, compared to $2.001 million in Q1 2025.
• The retail segment saw a substantial increase in gross profit by $11.1 million to $74.3 million, driven by higher motor fuel and merchandise margins, despite a 7% decrease in fuel volume.
• The wholesale segment experienced a decrease in gross profit by $3.3 million to $23.3 million, primarily due to lower motor fuel and rent gross profit, impacted by site sales and conversions.
• Operating expenses decreased by $12.9 million to $79.9 million, largely due to a $9.2 million reduction in depreciation, amortization, and accretion expense, including lower impairment charges.
• Interest expense decreased by $2.1 million to $10.75 million due to a lower average outstanding debt balance and a lower average SOFR rate.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, with significant improvements in profitability and cash flow generation, alongside effective cost management.

Positives

• Significant improvement in net income available to limited partners, turning a loss in Q1 2025 to a profit in Q1 2026.
• Operating income more than tenfold increase from $2.0 million in Q1 2025 to $23.75 million in Q1 2026.
• Retail segment gross profit increased by 18% to $74.3 million, driven by a 28% increase in motor fuel gross profit per gallon and an 8% increase in merchandise gross profit.
• Overall operating expenses decreased by 16% to $79.9 million, primarily due to a substantial reduction in impairment charges and the impact of site sales.
• Interest expense decreased by 16% due to lower debt balances and reduced SOFR rates.
• Distributable Cash Flow increased significantly to $21.5 million in Q1 2026 from $9.1 million in Q1 2025.
• Distribution Coverage Ratio improved to 1.07x in Q1 2026 from 0.46x in Q1 2025, indicating improved ability to cover distributions.

Negatives

• Operating revenues decreased by 2% to $841.8 million, primarily due to a 6% decrease in fuel sales volume and a 15% decrease in rent income.
• Wholesale segment gross profit decreased by 13% to $23.3 million, impacted by lower motor fuel and rent gross profit.
• Motor fuel volume in the wholesale segment decreased by 6% due to lost dealer contracts and site conversions.
• Rent gross profit in the wholesale segment decreased by 20% due to site sales and conversions.
• The number of company-operated retail sites decreased by 36 to 340, and commission agent sites decreased by 6 to 228, totaling a reduction of 42 retail sites.
• The number of lessee dealer sites decreased by 93 to 319, although independent dealer sites increased by 62 to 666.

Risks

• Volatility in crude oil and wholesale motor fuel prices can significantly impact revenues, cost of sales, and gross profit.
• Market conditions may not always allow for immediate pass-through of wholesale motor fuel price changes to retail customers.
• Debit and credit card fees increase with higher retail prices, potentially impacting gross profits without a corresponding increase in retail gross profit.
• Seasonality affects sales volumes, with lower volumes historically in the first and fourth quarters.
• Inflation can increase costs of goods sold and operating expenses, and there is no guarantee that these costs can be fully passed on to customers.
• Divesting assets, while optimizing the class of trade, can result in reductions in gross profit and operating income.
• Potential for future legislation and changes in regulations, governmental policies, and enforcement interpretations.
• Risks associated with transporting and storing motor fuel, including environmental liabilities.
• The Topper Group's business strategy and operations, and potential conflicts of interest, could affect the Partnership.
• Availability of cash flow to pay current quarterly distributions is subject to the Board's discretion.
• Motor fuel price volatility due to geopolitical developments.
• Potential for a reduction in demand for motor fuels.
• Changes in U.S. trade policy, including tariffs.
• Competition in operating industries and geographical areas.
• The consummation of financing, acquisition, or disposition transactions and their effects.
• Environmental compliance and remediation costs.
• Existing or future indebtedness and the related interest expense, and the ability to comply with debt covenants.
• Failure to comply with applicable tax and other regulations or governmental policies.
• Future income tax legislation and changes in energy policy.
• Technological advances.
• Impact of worldwide economic and political conditions, wars, acts of terrorism, weather conditions, natural disasters, and hazards associated with transporting and storing motor fuel.
• Outcome of pending or future litigation.
• The Partnership's ability to comply with federal and state laws and regulations.

Future Outlook

The company anticipates continued focus on optimizing its property portfolio through divestitures of lower-performing assets, which may reduce gross profit and operating income but also lead to lower interest expense due to debt repayment. Conversions of lessee dealer sites to company-operated or commission agent sites are expected to increase gross profit and operating expenses in the retail segment and reduce gross profit in the wholesale segment. Acquisitions will be pursued opportunistically, dependent on market conditions, target availability, regulatory compliance, and financing.

Management Comments

• Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
• The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.

Industry Context

StockSavvy.ai notes that CrossAmerica Partners LP's Q1 2026 results reflect typical industry dynamics in fuel distribution and retail, including sensitivity to fuel prices, seasonality, and ongoing portfolio optimization through divestitures and conversions. The improved profitability, particularly in the retail segment, suggests effective margin management amidst fluctuating fuel costs and a strategic shift in asset class.

Comparison to Industry Standards

• The improvement in Distributable Cash Flow and the Distribution Coverage Ratio to over 1.0x is a positive sign, indicating the company is generating sufficient cash to cover its distributions, a key metric for master limited partnerships (MLPs) in the fuel and energy infrastructure sector.
• The retail segment's margin per gallon of $0.437 (before credit card fees and commissions) for motor fuel in Q1 2026 shows an increase from $0.339 in Q1 2025, suggesting better pricing power or a shift towards higher-margin products/channels.
• The wholesale segment's margin per gallon of $0.094 in Q1 2026 is slightly down from $0.097 in Q1 2025, which is typical for wholesale fuel distribution where margins are often thinner and more volume-dependent.
• The significant reduction in depreciation, amortization, and accretion expense, particularly impairment charges, suggests a more stable asset base or a more conservative approach to asset valuation compared to the prior year.

Legal Proceedings

• The company is from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business, seeking compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims, punitive damages, civil penalties, or other losses, or injunctive or declaratory relief. Management believes that these proceedings, individually or in aggregate, will not have a material adverse effect on the consolidated financial position, results of operations, or cash flows.

Related Party Transactions

• Revenues from TopStar (affiliated with Topper Group) were $9.1 million in Q1 2026.
• Accounts receivable from TopStar were $0.8 million at March 31, 2026.
• Purchased a property from TopStar for $0.2 million in February 2025.
• Leased real estate from the Topper Group, with rent expense of $2.3 million in Q1 2026.
• Incurred expenses under the Omnibus Agreement (management services from DMI, affiliated with Topper Group) totaling $30.2 million in Q1 2026.
• Amounts payable to Topper Group related to Omnibus Agreement expenses were $5.0 million at March 31, 2026.
• Distributed $7.7 million to the Topper Group for common unit ownership in Q1 2026.
• Distributed $2.6 million to affiliates of John B. Reilly, III (Board member) for common unit ownership in Q1 2026.
• Accretion on preferred membership interests issued to related parties was $0.7 million in Q1 2026.
• Incurred charges of $0.4 million for maintenance and environmental remediation from an entity affiliated with the Topper Group in Q1 2026.
• Received $0.2 million from DMI (affiliated with Topper Group) for environmental remediation costs in Q1 2026.
• Purchased convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr. for $4.5 million in Q1 2026.
• Amounts payable for convenience store products were $1.9 million at March 31, 2026.
• Leased vehicles from an entity affiliated with the Topper Group; lease expense was insignificant.
• Leased office space from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr.; rent expense was $0.3 million in Q1 2026.
• Engaged a company affiliated with John B. Reilly, III for public relations and website consulting; cost was insignificant.

Stakeholder Impact

• Shareholders: Improved net income and distributable cash flow suggest a stronger ability to maintain or potentially increase distributions, positively impacting unitholder returns.
• Creditors: Improved liquidity and a strong Distribution Coverage Ratio indicate a reduced risk profile for debt servicing.
• Suppliers: Continued fuel supply agreements for divested sites maintain relationships, while overall business performance impacts future purchasing volumes.
• Employees: While not explicitly detailed, improved financial performance can lead to greater job security and potential for bonuses or incentives.
• Customers: The company's strategic shifts and operational focus may influence product availability and pricing, though direct impacts are not detailed.

Next Steps

• Continue to evaluate the highest and best use class of trade for each property.
• Divest certain assets, often lower performing properties.
• Pursue acquisition targets that fit the company's strategy on an opportunistic basis.
• Continue to supply fuel through long-term contracts for divested sites.
• Use proceeds from sales to pay down borrowings on the Credit Facility.
• Distributions on preferred membership interests are payable in cash quarterly starting in the fourth quarter of 2026.

Key Dates

Recommendation

The company has shown significant improvement in profitability and cash flow generation, turning a loss into a profit and improving its distribution coverage. However, the decrease in revenues and wholesale segment performance, coupled with ongoing strategic asset rationalization and potential for future market volatility, warrants a cautious 'hold' stance. Investors should monitor the success of retail segment growth and the impact of continued divestitures.

Keywords

CrossAmerica Partners LP, 10-Q, Quarterly Report, Fuel Distribution, Retail Operations, Convenience Stores, Motor Fuel, Financial Statements, Operating Income, Net Income, CAPL