8-K: CrossAmerica Partners LP Reports Mixed Q1 2025 Results Amidst Challenging Industry Conditions

CrossAmerica Partners LP reports a net loss of $7.1 million for Q1 2025, with slight improvements in Adjusted EBITDA but a decrease in Distributable Cash Flow compared to Q1 2024.

Summary

• CrossAmerica Partners LP reported a net loss of $7.1 million for the first quarter of 2025, compared to a net loss of $17.5 million in the first quarter of 2024.
• Adjusted EBITDA increased to $24.3 million from $23.6 million in the same period last year.
• Distributable Cash Flow decreased to $9.1 million from $11.7 million year-over-year.
• The retail segment's gross profit increased to $63.2 million from $54.4 million, while the wholesale segment's gross profit slightly decreased to $26.7 million from $27.0 million.
• Leverage, as defined in the CAPL Credit Facility, was 4.27 times as of March 31, 2025, compared to 4.36 times as of December 31, 2024.
• The distribution coverage ratio for the trailing twelve months ended March 31, 2025, was 1.04 times compared to 1.37 times for the comparable period of 2024.
• The Board of Directors declared a quarterly distribution of $0.5250 per limited partner unit attributable to the first quarter of 2025.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While there are improvements in net loss and retail segment performance, the decrease in distributable cash flow and distribution coverage ratio temper the overall outlook. Management acknowledges a challenging industry environment.

Positives

• Net loss decreased significantly year-over-year, indicating improved overall financial performance.
• Adjusted EBITDA increased, driven by higher gross profit in the retail segment.
• Retail segment gross profit saw a substantial increase, driven by higher motor fuel and merchandise gross profit.
• Retail segment motor fuel margin per gallon increased by 10% to $0.339.
• The company successfully executed its asset rationalization strategy, selling seven sites for a net gain of $5.6 million.
• Leverage ratio improved slightly, indicating better debt management.
• Wholesale margin per gallon increased by 23% to $0.097.

Negatives

• Distributable Cash Flow decreased from $11.7 million to $9.1 million, primarily due to increased interest expense.
• Distribution coverage ratio decreased from 1.37x to 1.04x for the trailing twelve months.
• Same store merchandise sales excluding cigarettes declined by 1% in the retail segment.
• Wholesale segment gross profit decreased slightly by 1% due to a decline in rent gross profit.
• Wholesale motor fuel gallons distributed decreased by 11% due to the conversion of wholesale locations to retail locations.
• Operating expenses for the retail segment increased by 20% due to an increase in the average company operated site count and higher seasonal related repairs and maintenance.

Risks

• The industry faces a challenging operating environment, which could impact future performance.
• Increased interest expense negatively impacts distributable cash flow and distribution coverage.
• Decline in same-store merchandise sales excluding cigarettes could indicate weakening retail performance.
• Decrease in wholesale volume distributed could impact future revenue.
• Increased operating expenses in the retail segment could erode profitability.

Future Outlook

The Partnership undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise.

Management Comments

• 'The first quarter was once again a challenging start to the year for the industry overall,' said Charles Nifong, President and CEO of CrossAmerica.
• Nifong noted that while EBITDA improved modestly, the results reflect the difficult operating environment.
• He highlighted the relative strength of fuel margins and the successful execution of the asset rationalization strategy.

Industry Context

The report acknowledges a challenging start to the year for the industry overall, suggesting that CrossAmerica's performance is being viewed in the context of broader market conditions affecting fuel distributors and convenience store operators.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• However, it mentions that retail fuel volume was in line with the broader market, and the company outperformed in same-store merchandise sales, suggesting a benchmark against industry averages.

Stakeholder Impact

• Shareholders will be impacted by the declared quarterly distribution of $0.5250 per limited partner unit.
• Employees may be affected by the ongoing real estate rationalization efforts and site optimization strategies.
• Customers may experience changes in service and offerings as sites are converted and optimized.
• Suppliers may see shifts in demand based on the company's performance and strategic initiatives.

Next Steps

• The Partnership will host a conference call on May 8, 2025, to discuss the first quarter 2025 earnings results.

Key Dates

Keywords

CrossAmerica Partners, CAPL, Financial Results, Q1 2025, EBITDA, Distributable Cash Flow, Retail Segment, Wholesale Segment, Fuel Distribution, Convenience Stores