8-K: CrossAmerica Partners LP Reports Mixed Q4 and Full Year 2024 Results Amid Strategic Shift

CrossAmerica Partners LP reports a decrease in Adjusted EBITDA and Distributable Cash Flow for Q4 and full year 2024, despite growth in retail segment gross profit, as the company continues its strategic transition towards company-operated retail sites.

Summary

• CrossAmerica Partners LP reported a net income of $16.9 million for Q4 2024, slightly up from $16.7 million in Q4 2023.
• Adjusted EBITDA for Q4 2024 was $35.5 million, down from $47.6 million in Q4 2023.
• Distributable Cash Flow for Q4 2024 was $21.1 million, compared to $35.8 million in Q4 2023.
• For the full year 2024, net income was $22.5 million, a decrease from $42.6 million in 2023.
• Full year 2024 Adjusted EBITDA was $145.5 million, down from $165.8 million in 2023.
• Distributable Cash Flow for the full year 2024 was $86.0 million, compared to $116.7 million in 2023.
• The Distribution Coverage Ratio was 1.06x for Q4 2024, down from 1.80x in Q4 2023.
• For the full year 2024, the Distribution Coverage Ratio was 1.08x, compared to 1.46x in 2023.
• Retail segment gross profit increased to $75.1 million in Q4 2024 from $69.0 million in Q4 2023.
• Wholesale segment gross profit decreased to $25.9 million in Q4 2024 from $33.0 million in Q4 2023.
• Leverage, as defined in the CAPL Credit Facility, was 4.36 times as of December 31, 2024, compared to 4.21 times as of December 31, 2023.
• The company sold eleven sites for $17.3 million in proceeds during Q4 2024, resulting in a net gain of $11.6 million.
• For the full year 2024, thirty properties were sold for $36.3 million in proceeds, resulting in a net gain of $23.3 million.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company acknowledges declines in key financial metrics, it expresses confidence in its strategic direction and future growth potential. The positive aspects of the retail segment's performance and the gains from asset sales provide some counterbalance to the negative trends.

Positives

• Retail segment gross profit increased by 9% in Q4 2024 and 14% for the full year, driven by higher site counts and increased merchandise sales.
• Same store retail segment fuel volume increased by 2% in Q4 2024.
• The company generated a net gain of $11.6 million from the sale of eleven sites in Q4 2024 and $23.3 million from the sale of thirty properties during the full year 2024.
• Merchandise gross profit in the retail segment increased by 27% in Q4 2024.
• The company's strategic shift towards retail sites led to a 14% increase in motor fuel gallons distributed in the retail segment for Q4 2024.

Negatives

• Adjusted EBITDA decreased by 26% in Q4 2024 and 12% for the full year, primarily due to lower motor fuel margins and increased operating expenses.
• Distributable Cash Flow decreased by 41% in Q4 2024 and 26% for the full year.
• The Distribution Coverage Ratio decreased to 1.06x in Q4 2024 and 1.08x for the full year.
• Wholesale segment gross profit decreased by 22% in Q4 2024 and 16% for the full year, driven by the conversion of sites to the retail class of trade.
• Same store merchandise sales excluding cigarettes decreased 1% for the full year 2024.
• Interest expense increased by $8.6 million for the full year 2024 due to the termination of certain favorable interest rate swaps.

Risks

• The company's financial performance is subject to fluctuations in motor fuel margins and crude oil prices.
• The ongoing conversion of wholesale sites to retail sites may continue to negatively impact the wholesale segment's gross profit.
• Increased operating expenses, particularly in the retail segment, could continue to pressure profitability.
• The company's leverage ratio of 4.36x could limit its financial flexibility.
• Inflationary pressures on core retail customers could impact future performance.

Future Outlook

The company remains confident in the strength of its business, the execution of its strategy, and the foundation it has built for future growth, despite challenges faced in the first quarter and inflationary pressures.

Management Comments

• Charles Nifong, President & CEO of CrossAmerica, stated, 'We delivered a solid fourth quarter, with growth in our same-store retail gallons and sales, though our financial performance did not match the record levels of the prior year.'
• Charles Nifong also noted, 'Throughout the year, we made significant progress on our strategic goal of converting sites to our retail class of trade, while also successfully divesting select locations to strengthen our long-term financial and competitive position.'
• Charles Nifong added, 'While our full-year results were impacted by a challenging first quarter and inflationary pressures on our core retail customers, we remain confident in the strength of our business, the execution of our strategy, and the foundation we have built for future growth.'

Industry Context

CrossAmerica's strategic shift towards company-operated retail sites reflects a broader industry trend of fuel distributors seeking to capture higher margins and diversify revenue streams through convenience store operations. The company's performance is influenced by factors such as motor fuel margins, crude oil prices, and competition within the retail fuel and convenience store sectors.

Comparison to Industry Standards

• It is difficult to compare CrossAmerica's results directly to specific companies without detailed knowledge of their portfolios and strategies.
• However, similar companies in the fuel distribution and convenience store sectors include Sunoco LP, Global Partners LP, and Casey's General Stores.
• Sunoco LP has also been focusing on expanding its retail presence and diversifying its revenue streams.
• Casey's General Stores, while primarily a convenience store operator, also derives a significant portion of its revenue from fuel sales.
• Global Partners LP operates in a similar space, with a focus on fuel distribution and retail operations.
• CrossAmerica's leverage ratio of 4.36x is within a reasonable range for companies in this sector, but it is important to monitor this metric closely.
• Distribution coverage ratios are also key metrics, and CrossAmerica's ratios of 1.06x and 1.08x for Q4 and full year 2024, respectively, indicate a need for improved cash flow generation.

Stakeholder Impact

• Shareholders will be impacted by the decreased Distributable Cash Flow and Distribution Coverage Ratio.
• Employees may be affected by the ongoing strategic shift and potential site divestitures.
• Customers may experience changes in the retail offerings and site locations as the company converts and divests properties.
• Suppliers may see shifts in demand as the company's retail and wholesale operations evolve.
• Creditors will be monitoring the company's leverage ratio and compliance with financial covenants.

Next Steps

• The company will host a conference call on February 27, 2025, to discuss the fourth quarter and full year 2024 earnings results.
• CrossAmerica will continue to execute its strategy of converting sites to the retail class of trade and divesting select locations.
• The company will focus on managing debt levels and maintaining compliance with its financial covenants.

Key Dates

Keywords

CrossAmerica Partners, CAPL, Financial Results, EBITDA, Distributable Cash Flow, Retail Segment, Wholesale Segment, Motor Fuel, Convenience Stores, Distribution Coverage Ratio