CrossAmerica Sees Several Reasons for Optimism

ALLENTOWN, Pa. — CrossAmerica Partners LP is seeing signs of a return to normality, prompting optimism for this summer and the remainder of 2021 following a bumpy first quarter, according to its Q1 2021 earnings call, held earlier this month.

On the wholesale side of its business, the partnership's fuel volume increased 32 percent during the first quarter, with 292 million gallons distributed, compared to 221 million gallons distributed during Q1 2020. This boost was primarily driven by acquisitions and asset exchanges that were completed in 2020, offset by the impact of COVID-19.

Motor fuel gross profit from its wholesale segment increased 7 percent, primarily driven by the 32 percent increase in motor fuel volume, and despite a 19 percent decrease in wholesale fuel margin per gallon.

CrossAmerica President and CEO Charles Nifong noted that the fuel volume environment is "obviously, decidedly better" than at this time one year ago.

"For example, our same-site volume for the last week in March was up approximately 80 percent year over year," he said during the earnings call. "If you look at the quarter overall, our same-site volume was down approximately 3 percent relative to 2020, which again was two relatively normal months and then a severe COVID impact in March."

For the current year to date, same-site volume performance through late April is up approximately 5 percent year over year as CrossAmerica overtakes the severe volume declines of 2020.

"A further reason for optimism is that if you look at the volume on a sequential week-over-week basis, we are seeing same-site volume building, which is both a normal pattern as we head into the summer months and a further sign that miles driven and people's mobility are approaching every return to pre-pandemic levels," Nifong said.

Overall for the first quarter of 2021, CrossAmerica reported an operating loss of $0.9 million and a net loss of $4 million. Adjusted EBITDA was $20.7 million, down 18 percent from the same period in 2020.

Its retail segment reported gross profit of $19.7 million, up from $2 million during Q1 2020. This included $10.4 million in gross profit from merchandise.

The retail segment also reported motor fuel gross profit of $5.4 million, up from $0.4 million in 2020. CrossAmerica attributed this to a 171 percent increase in volume, driven by an increase in company-operated and commission sites as a result of its April 2020 acquisition of retail and wholesale assets, and the March 2020 CST fuel supply exchange. The company also realized a higher average fuel margin per gallon due to the increase in company-operated sites.

The partnership continues to see strong inside sales at company-operated sites.

Retail fuel volume at company-operated sites is also showing positive signs, with same-store volume up approximately 3 percent during the quarter.

"As we saw over the course of the last year, consumers gravitated to our stores due to their convenience and enhanced product offerings," Nifong said.

During Q1, CrossAmerica divested three non-core properties for $0.9 million. Looking ahead to future acquisitions, it expects positive results from its pending purchase of 106 stores from 7-Eleven Inc. as soon as the deal closes.

Nifong acknowledged that while results for the quarter were not as strong as the company hoped for, CrossAmerica is experiencing considerable positive momentum.

"Rising crude prices combined with typical seasonality effects impacted our first quarter results adversely. However, we are optimistic as the overall operating environment continues to recover from the impacts of the COVID pandemic," he said.

Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded motor fuel in the United States. It distributes fuel to approximately 1,700 locations, and owns or leases approximately 1,100 sites. The company's geographic footprint covers 34 states.