CrossAmerica Partners Delivers Record Q1 Earnings Call

Crossamerica Partners LP ((CAPL)) has held its Q1 earnings call. Read on for the main highlights of the call.

CrossAmerica Partners LP delivered a notably upbeat earnings call, underscored by record first-quarter adjusted EBITDA, a swing back to profitability, and sharply higher distributable cash flow. Management stressed cost discipline, margin expansion, and debt reduction as key achievements, while acknowledging ongoing headwinds from weaker fuel volumes and a softer wholesale segment.

Record Q1 Adjusted EBITDA

CrossAmerica reported adjusted EBITDA of $35.1 million for Q1 2026, a record for the quarter and a 45% increase from the prior year. The $10.8 million gain versus Q1 2025 underscores stronger operating leverage across the portfolio and highlights the payoff from recent efficiency and margin initiatives.

Return to Net Income

The partnership posted net income of $10.7 million, reversing a net loss of $7.1 million a year earlier. Management attributed the turnaround primarily to higher EBITDA and lower interest and impairment charges, signaling a healthier earnings profile even amid volume pressure.

Retail Gross Profit and Fuel Margin Strength

Retail segment gross profit climbed 18% year over year to $74.3 million, driven by robust motor fuel margins and stronger merchandise sales. Retail fuel margin expanded to $0.437 per gallon from $0.339, a roughly 29% improvement that more than offset lower gallons sold.

Merchandise Gains and Margin Expansion

Merchandise gross profit rose to $27.0 million, up 8% from Q1 2025, while merchandise gross margin widened to 29.7%, an increase of 180 basis points. Management pointed to an improved product mix and successful promotions, including breakfast sandwiches and chicken tenders, as key drivers of the higher profitability.

Cash Generation and Distribution Coverage

Distributable cash flow surged 136% to $21.5 million compared with $9.1 million a year ago, reflecting stronger earnings and disciplined spending. The quarterly distribution coverage ratio improved to 1.07 times from 0.46 times, while trailing 12‑month coverage reached 1.25 times, supporting the $0.525 per unit payout.

Operating Expense and Efficiency Progress

Total operating expenses fell by $2.4 million year over year to $56.4 million, marking the sixth consecutive quarter of declines. Retail operating costs decreased about 3% on a same‑store basis and wholesale expenses fell 10%, while general and administrative costs dropped $1.2 million to $6.5 million.

Capital Allocation and Debt Reduction

The partnership continued to recycle capital, selling 16 properties and generating roughly $12.7 million of proceeds largely used to pay down debt. The credit facility balance declined by about $10 million during the quarter, helping reduce credit‑facility‑defined leverage to 3.35 times from 4.27 times a year earlier.

Lower Cash Interest and Improved Debt Mix

Cash interest expense declined to $10.3 million from $12.4 million, saving roughly $2.1 million year over year. More than 55% of the credit facility balance is swapped to a fixed rate around 3.4%, contributing to an effective facility rate of 5.6% at quarter end and moderating exposure to rate volatility.

Disciplined Capital Spending

Capital expenditures totaled $3.4 million in the quarter, with $2.1 million directed to growth projects and $1.3 million for sustaining needs. Management emphasized continued investment in food offerings at company‑operated sites to support merchandise sales, enhance margins, and deepen customer engagement.

Retail Fuel Volume Declines

Despite stronger margins, same‑store retail fuel volumes fell about 7% year over year, with company‑operated sites down roughly 4% and commission locations off about 14%. The decline intensified in March as higher and more volatile pump prices weighed on demand, highlighting the sensitivity of volumes to price moves.

Wholesale Segment Profit Under Pressure

Wholesale segment gross profit slipped to $23.3 million from $26.7 million, a decline of nearly 12.7% versus last year. Management linked the drop to lower fuel volumes and reduced rental income stemming from targeted asset sales and conversions as the company continued to reshape its network.

Wholesale Fuel Margin and Volume Challenges

Wholesale motor fuel gross profit decreased 8% to $14.5 million from $15.8 million, reflecting both softer margins and weaker volumes. Margin per gallon declined about 3% while volume slipped 6%, illustrating the tougher environment for wholesale economics even as retail margins remained robust.

Loss of Dealer Contracts and Site Rationalization

Lessee dealer and controlled site counts in the wholesale segment fell 23% year over year, largely due to asset sales and class‑of‑trade conversions. Company‑operated retail site count ended the quarter at 340, down 12 from the fourth quarter and 36 from a year ago, as management continued pruning lower‑return locations.

Fuel Price Volatility and Volume Sensitivity

Management noted that rising and volatile fuel prices in March and April pressured volumes as retailers, including CrossAmerica, passed higher costs to consumers. The team described careful balancing of margin and volume, particularly at commission locations, where pricing decisions contributed to sharper volume declines.

Lease Accounting Change and Balance Sheet Impact

An amended arrangement with Getty reclassified certain leases on 106 sites as finance leases rather than operating leases, adding $56 million of finance lease obligations to the balance sheet. The change will shift roughly $3 million of rent into principal and interest, increasing reported interest expense but not altering the underlying economics of the leases.

Reduced Wholesale Rental Income

Targeted real estate sales and conversions also reduced wholesale rental income, trimming another contributor to wholesale gross profit. Management highlighted that these moves are part of a deliberate portfolio optimization effort, trading near‑term rental revenue for balance‑sheet strength and strategic flexibility.

Forward Outlook and Operational Priorities

Looking ahead, CrossAmerica signaled a focus on maintaining leverage near 4 times while continuing to pay down debt and execute additional selective real estate sales. Management expects durable cash flow and solid fuel margins into the spring and summer, supported by ongoing retail investments, merchandise margin initiatives, cost discipline, and active management of interest rates and lease obligations.

CrossAmerica’s latest earnings call painted a picture of a company leveraging strong margins, cost control, and asset sales to strengthen its financial footing despite softer fuel volumes and wholesale pressures. For investors, the story centers on improved cash generation, healthier leverage metrics, and a more focused asset base, setting the stage for disciplined growth and sustained distributions.