CrossAmerica Partners Posts Record Q1, Tightens Balance Sheet

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

CrossAmerica Partners delivered an upbeat tone on its latest earnings call, underscoring a record first quarter and stronger profitability. Management highlighted robust EBITDA growth, a swing back to net income and sharply higher distributable cash flow, all supported by better retail margins and tight cost control. They acknowledged headwinds from softer fuel volumes and weaker wholesale results but framed these as manageable within a more efficient, cash‑generative model.

Record Q1 Adjusted EBITDA

CrossAmerica reported adjusted EBITDA of $35.1 million for the first quarter of 2026, its best Q1 on record. That figure marked a 45% jump from the prior year’s $24.3 million, adding $10.8 million of incremental earnings and signaling strong operating leverage despite volume softness.

Return to Net Income

The partnership moved back into the black with net income of $10.7 million, reversing a $7.1 million loss a year earlier. Management pointed to the surge in EBITDA and lower interest and impairment charges as the key drivers behind the improved bottom line.

Retail Gross Profit and Fuel Margin Strength

Retail gross profit climbed to $74.3 million from $63.2 million, an 18% year‑over‑year gain that underscored the segment’s improving economics. Retail fuel margin expanded sharply to $0.437 per gallon from $0.339, roughly a 29% increase that offset declining volumes and supported overall profitability.

Merchandise Performance and Margin Expansion

Merchandise gross profit rose to $27.0 million, up 8% from the prior year as the company leaned into higher‑margin categories. Gross margin on merchandise widened by 180 basis points to 29.7%, helped by an improved product mix and successful promotions such as breakfast sandwiches and chicken tenders.

Cash Generation and Distribution Coverage

Distributable cash flow more than doubled to $21.5 million from $9.1 million, a 136% increase that bolstered the balance sheet and investor returns. The distribution coverage ratio improved to 1.07 times for the quarter, up from 0.46 times, with trailing 12‑month coverage reaching 1.25 times as the partnership maintained a $0.525 per‑unit payout.

Expense Discipline and Efficiency Gains

Operating efficiency was a recurring theme as total operating expenses fell to $56.4 million, a $2.4 million decline and the sixth straight quarter of reductions. Retail operating costs were down about 3% on a same‑store basis and wholesale operating expenses dropped 10%, while G&A decreased by $1.2 million to $6.5 million.

Capital Allocation and Debt Reduction

The partnership continued to recycle capital, selling 16 real estate properties for roughly $12.7 million in proceeds. Most of that cash went to debt repayment, trimming the credit facility balance by about $10 million and lowering credit‑facility‑defined leverage to 3.35 times from 4.27 times a year earlier.

Lower Cash Interest and Favorable Debt Mix

Cash interest expense declined to $10.3 million from $12.4 million as the company benefited from lower borrowings and a more favorable debt structure. Over 55% of the credit facility balance is hedged at a blended fixed rate of around 3.4%, producing an effective facility rate of 5.6% at quarter end and limiting exposure to rate volatility.

Disciplined Capital Spending

Capital spending remained measured at $3.4 million for the quarter, with $2.1 million directed to growth and $1.3 million to sustaining projects. Management emphasized food‑related investments at company‑operated sites as a key lever to drive higher merchandise sales and further margin expansion.

Retail Fuel Volume Declines

Despite the strong margin performance, same‑store retail fuel volumes fell about 7% year‑over‑year as consumers reacted to higher and more volatile pump prices. Company‑operated locations saw volumes slip roughly 4%, while commission locations were hit harder with about a 14% decline.

Wholesale Segment Profit Decline

Wholesale segment results lagged as gross profit dropped to $23.3 million from $26.7 million, a decline of about 12.7%. Management attributed the pressure to lower fuel volumes and reduced rental income tied to asset sales and conversions, reflecting the trade‑off between portfolio pruning and near‑term earnings.

Wholesale Fuel Gross Profit and Margin Pressure

Wholesale motor fuel gross profit slipped to $14.5 million from $15.8 million, an 8% decline that reflected both pricing and volume headwinds. Margin per gallon contracted by roughly 3%, while volumes fell around 6%, underscoring a tougher competitive backdrop in the wholesale channel.

Dealer Contract Losses and Site Reductions

Lessee dealer and controlled site counts in the wholesale business declined 23% year‑over‑year as asset sales and class‑of‑trade conversions continued. On the retail side, company‑operated locations ended the quarter at 340 sites, down 12 from the prior quarter and 36 from a year earlier, signaling a smaller but more focused network.

Fuel Price Volatility and Volume Sensitivity

Rising and volatile fuel prices in March and April created additional volume pressure as CrossAmerica and peers passed higher costs through to the pump. Management described a careful balancing act between protecting margins and preserving volumes, with commission locations in particular seeing reduced throughput as prices climbed.

Lease Accounting Changes and Balance Sheet Leases

An amendment with Getty led to an accounting reclassification of 106 sites from operating leases to finance leases, increasing reported finance lease obligations by about $56 million versus year‑end. While largely non‑economic, the change will shift roughly $3 million of rent into principal and interest, modestly raising reported interest expense in future periods.

Reduced Wholesale Rental Income from Asset Sales

Targeted property sales and conversions also weighed on wholesale rental income, adding to the segment’s profit decline for the quarter. Management framed the move as part of a broader portfolio‑optimization strategy that trades some rental revenue today for balance‑sheet strength and higher‑return opportunities over time.

Outlook and Forward Priorities

Looking ahead, CrossAmerica signaled a focus on maintaining leverage near 4 times or below while continuing to pay down the credit facility through selective real estate sales. Management expects durable cash flow and healthy fuel margins into the spring and summer driving season and will keep emphasizing retail investments, merchandise margin gains, cost discipline and interest‑rate risk management to sustain distribution coverage.

CrossAmerica’s latest quarter painted a picture of a leaner, more profitable partnership that is navigating fuel‑volume and wholesale challenges with pricing power and cost control. For investors, the key messages were stronger cash generation, improving leverage and a disciplined capital strategy, all of which support the current distribution while leaving room to invest in higher‑margin retail initiatives.