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01/11 08:14
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects mixed financial performance with a net loss of $7.1 million, declining wholesale volumes, and increased operating expenses. Although adjusted EBITDA improved slightly, distributable cash flow decreased, and distribution coverage weakened. The Q&A section highlighted challenges such as subdued demand and weather impacts, with management providing vague responses on tariff impacts. The absence of strong positive catalysts and weak financial health indicators suggest a negative stock price reaction, likely in the range of -2% to -8%.
Retail segment gross profit $63,200,000 (16% increase year-over-year from $54,400,000) driven by increased motor fuel and merchandise gross profit.
Retail fuel margin 33.9¢ per gallon (10% increase year-over-year from 30.8¢ per gallon) due to steady increase in crude oil prices.
Overall retail volume Declined 4% year-over-year; adjusted for leap year, the decline is 3%. Impacted by significant winter weather and Easter demand last year.
Inside sales (same store basis) Down approximately 1.5% year-over-year; excluding cigarettes, down 1% year-over-year.
Merchandise gross profit $24,900,000 (16% increase year-over-year) driven by increased sales from higher store count.
Wholesale segment gross profit $26,700,000 (1% decrease year-over-year from $27,000,000) due to decline in fuel volume and rental income.
Wholesale motor fuel gross profit $15,800,000 (8% increase year-over-year from $14,600,000) driven by movements in crude oil prices.
Wholesale volume 162,900,000 gallons (11% decline year-over-year from 184,000,000 gallons) primarily due to conversion of sites to retail.
Base rent $10,100,000 (decrease from $12,400,000 year-over-year) due to site conversions and real estate rationalization.
Net loss $7,100,000 (improvement from net loss of $17,500,000 year-over-year) driven by asset sales and absence of prior year lease termination expense.
Adjusted EBITDA $24,300,000 (3% increase year-over-year from $23,600,000) due to improved volume and merchandise performance.
Distributable cash flow $9,100,000 (decline from $11,700,000 year-over-year) primarily due to higher cash interest expense and sustaining capital expenditures.
Distribution coverage (trailing twelve months) 1.04 times (decrease from 1.37 times year-over-year); coverage for the quarter was 0.46 times compared to 0.59 times last year.
Capital expenditures $10,100,000 total; $7,400,000 growth-related and $2,700,000 sustaining capital expenditures.
Credit facility balance $778,000,000; leverage ratio of 4.27 times.
Cash interest expense $12,400,000 (increase from $10,100,000 year-over-year) primarily due to expiration of advantageous interest rate swaps.
Effective interest rate 6.1% on total capital credit facility.
New QSR Locations: Opened four new QSR locations in company operated convenience stores.
Food and Beverage Programs: Continued expansion of food and beverage programs at various stores.
Retail Site Count Increase: Increased overall retail site count by 64 sites during the first quarter of 2025 compared to the first quarter of 2024.
Retail Segment Performance: Retail same store volume has been down slightly less than 2%, performing better than overall national demand.
Operational Efficiency: Retail segment gross profit increased 16% to $63,200,000 compared to $54,400,000 in the first quarter of 2024.
Cost Management: Continued to evaluate portfolio and divest non-core properties, divesting seven sites for $8,600,000 in proceeds.
Class of Trade Conversions: Executed strategic conversions of lessee dealer sites to company operated retail sites.
Real Estate Rationalization: Ongoing real estate rationalization efforts to generate additional capital for strategic investments.
Market Demand Risks: Fuel and inside store merchandise demand remained subdued for the first quarter, with retail same store fuel volume in line with the overall market and merchandise sales under prior year results.
Weather Impact: Significant winter weather during the first two months of the quarter impacted volume across broad geographic segments.
Tariff Uncertainty: The implementation of tariffs on Canadian gasoline imports created volatility in the fuel market, leading to uncertainty regarding costs and supply.
Economic Environment: The overall economic environment remains uncertain, with many public companies withdrawing financial guidance due to various pressures.
Interest Expense Increase: A $2,300,000 increase in interest expense year over year due to the expiration of beneficial interest rate swaps contributed to financial challenges.
Operating Expense Increase: Operating expenses increased by $6,800,000, primarily driven by a 20% increase in retail segment expenses due to site count growth and weather-related costs.
Volume Decline: Wholesale segment gross profit declined 1% due to an 11% drop in fuel volume, primarily from the conversion of lessee dealer sites to retail.
Seasonal Weakness: The first quarter is historically the weakest for the partnership, with coverage ratios falling below one during lower activity winter months.
Retail Segment Growth: Increased overall retail site count by 64 sites during Q1 2025, with a focus on converting lessee dealer sites to company operated retail sites.
Wholesale Segment Optimization: Continued efforts to divest non-core properties and improve overall cost of product, contributing to improved wholesale fuel margins.
Capital Expenditures: Spent $10.1 million on capital expenditures in Q1 2025, with $7.4 million allocated to growth-related projects.
Food and Beverage Expansion: Opened four new QSR locations in company operated convenience stores and expanded food and beverage programs.
Future Revenue Expectations: Despite a challenging Q1 2025, management remains optimistic about growth in motor fuel and merchandise gross profit due to increased retail site count.
Margins Outlook: Retail fuel margins showed strength, with expectations for continued improvement as the market stabilizes.
Capex Guidance: Expect to maintain focus on growth-related capital expenditures to support retail segment expansion.
Financial Projections: Management aims to manage leverage ratio at approximately four times on a credit facility defined basis.
Distribution Paid: $0.0525 per unit for the first quarter of 2025.
Net Loss: $7,100,000 for the first quarter of 2025.
Adjusted EBITDA: $24,300,000 for the first quarter of 2025, an increase of 3% from the prior year.
Distributable Cash Flow: $9,100,000 for the first quarter of 2025, a decline from $11,700,000 in the prior year.
Distribution Coverage: 0.46 times for the first quarter of 2025, compared to 0.59 times for the same period in 2024.
The earnings call reflects mixed financial performance with a net loss of $7.1 million, declining wholesale volumes, and increased operating expenses. Although adjusted EBITDA improved slightly, distributable cash flow decreased, and distribution coverage weakened. The Q&A section highlighted challenges such as subdued demand and weather impacts, with management providing vague responses on tariff impacts. The absence of strong positive catalysts and weak financial health indicators suggest a negative stock price reaction, likely in the range of -2% to -8%.
The earnings call summary shows mixed results with some positive elements like retail segment growth and successful site conversions. However, the increase in operating expenses, decline in net income and distributable cash flow, and decreased distribution coverage indicate financial challenges. The Q&A session did not provide additional insights, and the soft industry environment with increased interest expenses and supply chain challenges further contribute to a negative outlook. Despite some strategic gains, the overall sentiment is negative due to financial pressures and economic factors.
The earnings call presents a mixed outlook. While there are positive signs like increased retail gross profit, fuel margin, and adjusted EBITDA, there are also concerns such as declining net income and increased operating expenses. The Q&A session highlights challenges like decreased wholesale and retail volumes and higher labor costs. The lack of new strategic initiatives or partnerships further tempers expectations. Thus, the stock is likely to experience a neutral reaction in the market over the next two weeks.
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