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Introduction & Market Context
CrossAmerica Partners LP (NYSE:CAPL) presented its first quarter 2025 earnings results on May 8, 2025, revealing a significantly improved net loss position despite ongoing challenges with distribution coverage. The fuel distributor and convenience store operator, currently trading at $22.04 (down 3.33% from the previous close), demonstrated mixed performance across its business segments while maintaining its quarterly distribution.
The company’s presentation comes amid a challenging environment for fuel retailers, with the stock currently trading between its 52-week range of $18.43 to $25.73. CEO Charles Nifong and CFO Maura Topper led the earnings call, highlighting operational improvements and ongoing strategic initiatives.
Quarterly Performance Highlights
CrossAmerica Partners reported a net loss of $7.1 million for Q1 2025, a substantial 59% improvement from the $17.5 million loss recorded in the same period last year. Adjusted EBITDA increased modestly by 3% to $24.3 million, up from $23.6 million in Q1 2024.
However, distributable cash flow (DCF) declined by 22% to $9.1 million compared to $11.7 million in the prior-year period, resulting in a concerning distribution coverage ratio of just 0.46x, down from 0.59x in Q1 2024. The partnership maintained its quarterly distribution at $0.5250 per unit.
As shown in the following quarterly results summary:
The trailing twelve-month distribution coverage ratio stands at 1.04x, indicating that while the partnership is covering its distributions on an annual basis, the margin of safety has narrowed significantly from the 1.37x coverage reported a year ago.
Detailed Financial Analysis
Retail Segment Performance
The retail segment delivered strong results in Q1 2025, with gross profit increasing by 16% to $63.2 million compared to $54.4 million in Q1 2024. Operating income rose slightly by 2% to $11.5 million.
Motor fuel gross profit in the retail segment showed impressive growth of 20% to $31.2 million, driven by both volume increases and margin expansion. Retail fuel margins improved by 10% to $0.339 per gallon, while volume increased by 4% to 126.5 million gallons.
Merchandise gross profit also performed well, increasing by 16% to $24.9 million, although the merchandise gross margin percentage decreased slightly by 20 basis points to 27.9%. Same-store sales excluding cigarettes declined marginally by 1% to $48.7 million.
The following detailed breakdown shows the retail segment’s performance metrics:
Wholesale Segment Challenges
The wholesale segment presented a more challenging picture, with gross profit decreasing by 1% to $26.7 million. The volume of gallons distributed fell significantly by 11% to 162.9 million gallons, continuing a trend observed in previous quarters.
Despite the volume challenges, wholesale operating income increased by 8% to $19.5 million, and motor fuel gross profit rose by 8% to $15.8 million. This improvement was primarily driven by a substantial 23% increase in wholesale margin per gallon to $0.097.
Strategic Initiatives and Capital Allocation
CrossAmerica Partners continued to invest in growth initiatives during the quarter, with capital expenditures totaling $10.1 million, including $7.4 million allocated to growth projects. These investments focused on targeted material renovations and projects to increase food offerings at retail locations.
The partnership’s presentation highlighted its capital strength and ongoing focus on balance sheet management:
The company’s leverage ratio stood at 4.27x as of March 31, 2025, with an effective interest rate of 6.1% on its credit facility balance of $778.0 million. Management noted the ongoing benefit of interest rate swaps in the current elevated rate environment.
Non-GAAP Financial Measures
To provide a clearer picture of its operational performance, CrossAmerica Partners included a detailed reconciliation of its non-GAAP financial measures:
This reconciliation highlights how factors such as interest expense ($12.8 million, up from $10.5 million in Q1 2024) and depreciation, amortization, and accretion expense ($26.3 million, up from $18.7 million) impact the company’s reported results.
Forward-Looking Statements
Looking ahead, CrossAmerica Partners emphasized its "continued focus on execution, cash flows, and strong balance sheet" as key priorities. The partnership faces challenges in balancing growth investments with maintaining adequate distribution coverage, particularly given the current interest rate environment and its impact on financing costs.
The decline in distribution coverage ratio to 0.46x for the quarter raises questions about the sustainability of the current distribution level if cash flow trends don’t improve in upcoming quarters. However, the trailing twelve-month coverage ratio of 1.04x suggests that management views the Q1 results as temporary rather than indicative of a long-term trend.
CrossAmerica Partners’ strategic focus on retail segment growth and margin improvement appears to be yielding positive results, potentially offsetting the volume challenges in the wholesale segment. The continued capital investments signal management’s confidence in the company’s long-term growth prospects despite near-term pressures on distributable cash flow.
Full presentation:
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