Good morning and thank you for joining the CrossAmerica Partners First Quarter 2022 Earnings Call. With me today is; Charles Nifong, CEO and President. Charles will provide some opening comments, a brief overview of CrossAmerica’s operational performance and highlights from the quarter, and then I will discuss the financial results.

At the end, we will open up the call to questions. I should point on that today’s call, we’ll follow some presentation slides that we will utilize during this morning’s event. These slides are available as part of the webcast and are posted on the CrossAmerica website.

Before we begin, I would like to remind everyone that today’s call, including the question-and-answer session, may include forward-looking statements regarding expected revenue, future plans, future operational metrics, and opportunities and expectations of the organization.

There can be no assurance that management’s expectations, beliefs and projections will be achieved, or that actual results will not differ from expectations.

Please see CrossAmerica’s filings with the Securities and Exchange Commission, including annual reports on Form 10-K and quarterly reports on Form 10-Q for a discussion of important factors that could affect our actual results. Forward-looking statements represent the judgment of CrossAmerica’s management as of today’s date.

And the organization disclaims any intent or obligation to update any forward-looking statements. During today’s call, we may also provide certain performance measures that do not conform to US Generally Accepted Accounting Principles or GAAP.

We have provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press release. Today’s call is being webcast and a recording of this conference call will be available on the CrossAmerica website for a period of 60 days. With that, I will now turn the call over to Charles..

Thank you, Maura. Maura and I appreciate everyone joining us this morning. As always, we thank you for your interest in the Partnership. During today’s call, I will briefly go through some of the operating highlights for the first quarter.

I will also provide an update on certain trends in the market and review some additional information similar to what I provided on previous calls. Maura will then review in more detail the financial results. Now, if you turn to Slide 4, I will briefly review some of our operating results.

For the first quarter of 2022, our wholesale fuel gross profit was $32.8 million, a 54% increase when compared to the first quarter of 2021, driven by increases in both volume and fuel margins. Wholesale segment gross profit was $46.9 million, an increase of 35% or $12.1 million when compared to the first quarter of 2021.

Our wholesale fuel volume was 320.2 million gallons for the first quarter of 2022, an increase of 10% when compared to the same period of 2021, largely due to the acquisition of assets from 7-Eleven. In terms of same-store volume performance in wholesale for the quarter, we were down approximately 0.5% year-over-year.

While we were close to flat on same site volume performance overall. For any given week in a quarter, there was material variability away from that overall number. In January, same site volume was down in a low double-digits year-over-year as the country dealt Omicron surge.

February volumes were up in the mid-single-digits year-over-year as activity picked up when omicron receded. Finally, March volumes were negatively impacted by the surge in fuel pricing, due to the Ukraine conflict and other factors. The surge in fuel prices continue to adversely impact same site volumes into April.

Although at recent weeks we have seen improving volume performance. We also saw an increase in our whole fuel margin per gallon for the quarter, reported $0.102 compared to $0.073 per gallon for the first quarter of 2021, an increase of 40%. The year-over-year increase was primarily driven by the following factors.

First, we benefited from increased volume to CrossAmerica’s company operated retail sites, which we supply on a variable margin basis. Second, we continue to benefit from better sourcing costs due to the execution of certain strategic initiatives, such as our brand consolidation.

Finally, our wholesale fuel margin per gallon also benefited from higher variable fuel margins due to market conditions. On our wholesale rent, our base rent for the quarter was $13.3 million compared to the prior year of $13 million, a slight increase due to the reopening of certain previously closed sites.

Our retail segment also performed well during the quarter, as gross profit rose $13 million or 66% when compared to the first quarter of 2021. Our motor fuel gross profit increased 93%, and our merchandise gross profit rose 61% when compared to the same period in 2021.

For volume on a same site basis, our retail volume was up 4% for the quarter year-over-year. Our ability to grow retail, same site fuel volumes that still maintains strong margin performance in the case that continued success of our retail strategic and operating initiatives and our ability to deliver overall value to the consumer.

For in site sales, on a same site basis, our in site sales were down 3% relative to last year. However, in site sales excluding cigarettes were up 1% year over year on a same site basis.

As a reminder, reviewing our retail segment financial performance, it is important to remember the wholesale segment supplies our retail segment on a variable margin basis. So the overall fuel profitability at these sites is split between our wholesale and retail segments.

The fuel margin to our retail sites recorded in the wholesale segment makes a meaningful contribution to our wholesale segment, and to our overall profitability, that is not apparent looking at the retail segment’s financial results in isolation.

As we review our expenses for the quarter, we saw an increase in our operating expenses compared to the prior year. The increase in operating expenses was primarily driven by the addition of the 7-Eleven sites, which increased our average company operated site count from 151 to 254, a 68% increase in site count year-over-year.

Maura will also provide some additional commentary on expenses and inflation in her comments. Our G&A expense declined $1.2 million or 15% for the quarter year-over-year, primarily due to a decrease at acquisition-related costs associated with the 7-Eleven sites that we acquired.

We finished the acquisition of the last year remaining sites of 7-Eleven portfolio during the quarter in February. Our strong results for the quarter are due in part, the solid contribution of the 7-Eleven portfolio assets. We continue to work on maximizing the results of these assets as well as the results of our entire retail portfolio.

As part of our ongoing initiatives, we continue to evaluate our portfolio and look for opportunities to divest non-core properties. For the first quarter, we had four property sales for $1.5 million in proceeds.

We have a strong pipeline of identified opportunities within our portfolio to execute on 2022, as we continue to process a recycling capital to invest in growth opportunities within our portfolio. On the capital raising front, we issued $25 million in preferred securities at the end of the quarter.

The capital raise was part of our financing plan for the recently completed acquisition of assets from 7-Eleven and reduce the outstanding borrowings that were initially used to fund the transaction at acquisition. The preferred securities were issued to entities controlled by our Chairman, Joe Topper and Vice Chairman, J. B.

Reilly, and reflect the strong and ongoing commitment of these individuals to the partnership. Maura will provide more details on the capital raise in her comments.

For the period sensitive quarter-end, as I touch on in some of our earlier comments, we continue to see some weakness in fuel gallons, both wholesale and retail in April, as the impact of higher fuel prices weighed on the consumer.

The last few weeks we have seen the impact moderate with improving gallons and in site store sales, we are optimistic by the strong summer driving season in comparison to recent years. Finally, a word of thanks to all the employees of CrossAmerica.

Throughout the COVID period, that either out in the field serving customers, both retail and wholesale or working in the office to support our operations.

It is easy to take that feet for granted, but as you look there are still large number of firms and employees not back to working on site yet, one realizes how unique we have been during the COVID period, got all our employees beyond location, essentially the entire time.

To all of our employees listening today, thank you for your dedication to the partnership and for your contributions delivering the solid first quarter results.

In conclusion, the first quarter was a strong period for us despite a challenging operational environment, driven by concerns about Omicron in January, and later in the quarter, the extreme oil market pricing and volatility pressures in March.

Our results this quarter illustrate the underlying strength of our asset portfolio, and provide evidence of the impact our strategic initiatives have had on improving our operational performance With that, I will turn it over to Maura for a more detailed financial review..

Thank you, Charles. If you would please turn to Slide 6. I would like to review our first quarter results for the Partnership. We reported net income of $5 million for the first quarter of 2022 compared to net loss of $4 million in the first quarter of 2021.

The increase in net income was primarily driven by the year-over-year increases in operating income in both the wholesale and retail segments, with each segment benefiting from the acquisition of assets from 7-Eleven, along with the favorable fuel margin environment.

Adjusted EBITDA was $32 million for the first quarter of 2022, which was an increase of 55% when compared to the first quarter of 2021. Our distributable cash flow for the first quarter of 2022 was $24.2 million versus $15.8 million for the first quarter of 2021, which was an increase of 54%.

The increase in distributable cash flow was primarily due to the increase in operating income in both the wholesale and retail segments, partially offset by an increase in cash interest expense. Both the first quarter 2022 adjusted EBITDA and distributable cash flow numbers were record highs for the first quarter with the Partnership.

Our distribution coverage for the current quarter was 1.22 times, compared to 0.79 times for the first quarter of 2021. Our distribution coverage on a paid basis, for the trailing 12 months, was 1.39 times, compared to 1.23 times for the 12 months ended March 31st, 2021.

I’ll take a moment here to comment on the topic that is top of mind and for many of us at this moment, inflation. Throughout this first quarter, and past several quarters, we have been closely monitoring the impacts of inflation on our various costs, including the price of fuel, the price of merchandise as well as labor and other operating expenses.

To-date, we have generally been able to identify and pass through these costs to customers. There were some impact to volume during the last portion of the quarter at higher fuel prices, as Charles noted earlier. We are mindful of the impact of inflationary pressures across the economy on consumers.

So while our team is adapting strategies to maintain our fuel, merchandise and overall margin profile. We’re focused on ensuring that we are competitively priced in our markets, so we’re in a destination of choice of our customers. If you will, please turn to the next slide.

The Partnership paid a distribution of $0.525 per unit during the first quarter of 2022 attributable to the fourth quarter of 2021, for a total of almost $20 million. And as I noted on the previous slide, this resulted in a coverage ratio of 1.39 times on a paid basis for the 12 months.

In regards to our capital expenditures during the first quarter, we spent a total of $8.9 million with $7.4 million of that total being growth related capital expenditures. This represented a year-over-year decline of approximately $1.7 million.

Growth related capital spending during the quarter was primarily related to the continued integration of the sites acquired from 7-Eleven, as well as remodeling of sites in our existing portfolio, EMV upgrades and site rebranding.

As Charles noted earlier, in the first quarter, we also completed the issuance of a $25 million preferred equity security by our wholly-owned subsidiary, CAPL JKM Holdings LLC. The security provides for a 9% cumulative preferred return to the holders.

The preferred membership interest in CAPL JKM Holdings will be exchangeable in the future, subject to certain terms and conditions, for common units of CrossAmerica Partners, at an exchange price of $23.74 or into cash, if the holder still elect.

The net proceeds for the security issuance were used to prepay a portion of the Term Loan component of the JKM credit facility. The issuance of the preferred equity security was approved by the Conflicts Committee at the board of our general partner as well as our full board.

During the first quarter of 2022, we did see an increase in the value of our inventory, driven by the increased price of motor fuel over the course of the quarter, which are related increase in our accounts payable balance over the course of the quarter as well.

As is typical in our industry, our current liabilities are greater than our current assets. Due to the longer settlement timeframes, the real estate and motor fuel taxes as compared to the shorter settlement of receivables and inventory turnover.

In spite of the significant increase in the price of motor fuel over the course of the quarter, we were able to improve our net working capital position over the course of the quarter, due to our deleveraging activities and cash generation from operations.

In regards to our two credit facilities and leverage, as of March 31st, 2022, if we were to calculate a leverage ratio for the organization overall, as defined – in our credit agreements. Taking into account our total debt levels and the benefit of the pro forma impact of our newly acquired assets.

Our blended aggregate leverage ratio would be around 4.9 times, compared to approximately 5.1 times at the end of the fourth quarter of 2021. We will continue to move toward our target leverage ratio level of 4 to 4.25 times on both the credit facility defined and blended aggregate basis over the next 18 to 24 months.

In conclusion, as Charles noted earlier, we had a solid first quarter, despite the challenging operational environment. As we move further into 2022, we will continue to focus on our operations and manage our balance sheet, including our leverage and distribution ratios and are in a good financial position entering the summer driving season.

With that, we will open it up for questions..

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] so far we have no questions. So we’ll just give it a moment here just in case..

Okay, well it doesn’t seem like we have today..

No, no questions..

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So again thank you to everyone for joining us on the call. As an additional note, Maura and I will be attending the EIC Investors Conference next week. We also be hosting a webcast to our presentation on Monday. We’ll be providing additional details on the webcast on our website later this week. So we hope that you’ll be able to join us on the webcast.

Again, thanks for your interest in the Partnership. Have a good day..

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for joining. You may now disconnect..