CrossAmerica Partners(US:CAPL)2021-11-09 17:10Financial Data and Key Metrics Changes - For Q3 2021, net income was $8.8 million compared to $21.2 million in Q3 2020, with the previous year benefiting from a $12.9 million gain from property sales [21] - Adjusted EBITDA increased by 20% year-over-year to $35.9 million [22] - Distributable cash flow rose by 2% year-over-year to $30.4 million [22] - Distribution coverage for the current quarter was 1.53 times, slightly up from 1.50 times in Q3 2020 [22] Business Line Data and Key Metrics Changes - Wholesale fuel gross profit was $34.1 million, an increase of 11% year-over-year, driven by volume and margin increases [8] - Retail segment gross profit rose by 43% year-over-year to $8.4 million, with motor fuel gross profit increasing by 122% [13] - Retail volume on a same-site basis was up 14% year-over-year, while inside sales were flat compared to last year but up 9% relative to 2019 [13][14] Market Data and Key Metrics Changes - Wholesale fuel volume was 355 million gallons, an 8% increase compared to Q3 2020 [8] - Crude oil prices increased by 73% from $40.89 per barrel in Q3 2020 to $70.58 per barrel in Q3 2021 [10] - The company experienced a mixed to negative macro fuel margin environment despite the increase in wholesale fuel margin per gallon [11] Company Strategy and Development Direction - The company is focused on integrating newly acquired 7-Eleven sites and evaluating opportunities to divest non-core properties [18] - There is a strong pipeline of transactions expected, with plans to recycle capital for growth opportunities [19] - The company aims to reduce leverage over the next 12 to 24 months while maintaining a stable distribution rate [28] Management's Comments on Operating Environment and Future Outlook - Management noted that labor shortages are impacting retail operations, with expectations that this tight labor market will continue for several quarters [33] - There is uncertainty regarding the permanence of changes in fuel margin dynamics due to the pandemic, but current trends suggest a shift towards higher fuel margins [34][35] - The integration of 7-Eleven sites is progressing well, and management is optimistic about their future performance [29] Other Important Information - The company closed on 98 sites from the 7-Eleven acquisition for a total consideration of $262 million [17] - Capital expenditures for Q3 2021 totaled $10.5 million, with $9.5 million allocated to growth-related projects [23] - The company has amended its credit agreements to provide financial flexibility for ongoing acquisitions [26] Q&A Session Summary Question: Can you talk about labor market conditions? - Management indicated that labor shortages are prevalent, requiring adjustments in pay rates, and expect this tightness to persist for several quarters [33] Question: Can you elaborate on the divergence in wholesale fuel margins? - Management acknowledged a shift in market dynamics, with operators now placing more emphasis on fuel margins due to increased costs and changing sales patterns [34] Question: What is the timeline for the remaining 7-Eleven stores? - Management stated that the final three stores are in Philadelphia and are awaiting permits, but their impact on the overall acquisition is not material [37] Question: What is the current M&A market activity? - Management expressed a cautious approach to new acquisitions, focusing on integrating existing assets and reducing leverage before pursuing further opportunities [38]