Q4 2023 CrossAmerica Partners LP Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the CrossAmerica Partners fourth quarter and full year 2023 earnings conference call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.

Good morning, ladies and gentlemen, and welcome to the Class America Partners' fourth quarter and full year 2020 fee earnings conference call.

At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

If at any time during this call you are quietly needed assistance. Please press star zero for the operator.

Operator: This call is being recorded on Tuesday, February 27th, 2024. I would now like to turn the conference over to Maura Topper, Chief Financial Officer. Please go ahead.

This call is being recorded on Tuesday February 27th 2024, I would now like to turn the conference over to more Hopper Chief Financial Officer. Please go ahead.

Yeah.

Thank you operator.

Maura Topper: Thank you, operator. Good morning, and thank you for joining the CrossAmerica Partners fourth quarter and full year 2023 earnings call. With me today is Charles Nifong, CEO and president. We'll start off the call today with Charles providing some opening comments and an overview of CrossAmerica's operational performance for the quarter and full year, and then I will discuss the financial results. We will then open up the call to questions.

And thank you for joining across America partners fourth quarter and full year 2023 earnings call.

With me today is Charles and I phone CEO and president.

We'll start off the call today are Charles providing some opening comments and an overview of cross Americas operational performance for the quarter and full year, and then I will discuss the financial results.

We will then open up the call to questions.

Maura Topper: Today's call will follow presentation slides that 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.

Today's call will follow the presentation slides that are available as part of the webcast and are posted on across America website.

Before we begin I would like to remind everyone that todays 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.

Maura Topper: 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 U.S. Generally Accepted Accounting Principles, or GAP. 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.

Please see crossing Eric with 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 cross American 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 U S generally accepted accounting principles or GAAP.

We've 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 Cross America website for a period of 60 days.

With that I will now turn the call over to Charles.

Thank you Mara as always more and I appreciate everyone joining us this morning.

Charles Nifong: As always, Maura and I appreciate everyone joining us this morning. We thank you for making the time in your schedule to be with us today. During today's call, I will go through some of the operating highlights for the fourth quarter and full year 2023. I will also provide commentary on the market and a few other updates similar to what I have done on our previous calls. I will then review in more detail our financial results. Now, if you turn to slide four, I will briefly review some of our operating results. For the fourth quarter of 2023, our wholesale segment gross profit increased 1% to $33 million compared to $32.8 million in the fourth quarter of 2022. The increase was driven by an increase in fuel margin, partially offset by a decrease in fuel volume, and rental income.

Thank you for making the time and are scheduled to be with us today.

Today's call I will go through some of the operating highlights for the fourth quarter and full year 2023.

I will also provide commentary on the market and a few other updates similar to what I've done on our previous calls.

Laura will then review in more detail our financial results.

Now if you turn to slide four I will briefly review some of our operating results.

For the fourth quarter of 2023, our wholesale segment gross profit increased 1% to <unk>.

$33 million compared to $32 $8 million in the fourth quarter of 2022.

The increase was driven by an increase in fuel margin, partially offset by a decrease in fuel volume and rental income.

Our wholesale motor fuel gross profit increased 3% to $19 $3 million in the fourth quarter of 2023 from $18 $7 million in the fourth quarter of 2022.

Charles Nifong: Our wholesale motor fuel gross profit increased 3% to $19.3 million in the fourth quarter of 2023 from $18.7 million in the fourth quarter of 2022. Our fuel margin increased 8% from $0.087 per gallon in the fourth quarter of 2022 to $0.094 per gallon in the fourth quarter of 2022. The increase in our wholesale food margin per gallon was primarily driven by our success and our efforts to improve our fuel purchasing costs and to benefit from the market. For the quarter, the average spot price of West Texas Intermediate Crude Oil decreased 5% from $82.79 per barrel in the fourth quarter of 2022 to $78.53 per barrel in the fourth quarter of 2021. Historically, a decline in WTI for the quarter relative to the prior year would lead to lower wholesale prices per gallon in a year-over-year comparison.

Our fuel margin increased 8% from $8.07 per gallon in the fourth quarter of 2022 to $9.04 per gallon in the fourth quarter of 2023.

The increase in our wholesale fuel margin per gallon was primarily driven by our success in our efforts to improve our fuel purchasing costs and to beneficial market conditions.

For the quarter, the average spot price of West, Texas intermediate crude oil decreased 5%.

$82.79 per barrel in the fourth quarter of 2020 to $78 and 53 per barrel in the fourth quarter of 2023.

Historically, a decline at WTO after the quarter relative to the prior year would lead to lower wholesale fuel margins per gallon and a year over year comparison.

Charles Nifong: The fact that it did not for the fourth quarter is additional evidence of our improved fuel sourcing costs and their beneficial impact on our business. Our wholesale volume was 205.3 million gallons for the fourth quarter of 2023, compared to 213.5 million gallons in the fourth quarter of 2022, reflecting a decline of 4%. The decline in volume when compared to the same period in 2022 was largely due to the conversion of certain Blessey dealer sites to our retail class of trade and lower same site volume, partially offset by the community service station assets acquired during the fourth quarter of 2010.

The fact that it did not for the fourth quarter as additional evidence of our improved fuel sourcing costs and they're beneficial impact on our business.

Our wholesale volume was $205 3 million gallons for the fourth quarter of 2023.

$213 5 million gallons in the fourth quarter of 2022, reflecting a decline of 4%.

The decline in volume when compared to the same period in 2022 was largely due to the conversion of certain lessee dealer sites to our retail class of trade and lower same site volume.

Partially offset by the community service station assets acquired during the fourth quarter of 2022.

For the quarter, our same store volume in the wholesale segment was down approximately 3% year over year.

Charles Nifong: For the quarter, our same store volume in the wholesale segment was down approximately 3% year over year. Based on national demand data available to us, our wholesale volume performance for the quarter was in line with or slightly better than overall national demand, and for the period since the quarter end, wholesale same-store volume has been down 2% to 3% year over year. Park due to winter weather in the eastern half of the United States, but also due to softer overall demand.

Based on national demand data available to us our wholesale volume performance for the quarter was in line slightly better than overall national demand.

And the period since the quarter end wholesale same store volume has been down 2% to 3% year over year in part due to winter weather in the eastern half of the United States, but also due to softer overall demand.

Regarding our wholesale right our base rent for the quarter was $13 million compared to the prior year of $13 $7 million.

Charles Nifong: Regarding our wholesale rent, our base rent for the quarter was $13 million compared to the prior year of $13.7 million, a slight decrease due to the conversion of certain lessee dealer sites to company-operated sites. Aside from a decrease in rent due to class of trade changes, our rental income continues to be a durable income stream in our business, representing 38% of our gross profit for our wholesale segment for the fourth quarter of 2023. For the retail segment, performance was very strong for the fourth quarter of 2023, generating $69 million in gross profit. Our motor fuel gross profit increased 11%; our merchandise gross profit increased 18%, and our merchandise gross profit margin percentage was up approximately 70 basis points when compared to the same period in 2020. On the fuel margin front, our retail fuel margin, on a cents per gallon basis, increased 8% year over year as we experienced relatively strong fuel margins of 41.5 cents per gallon in the fourth quarter of 2023, compared to 38.3 cents per gallon in the fourth quarter of 2022.

A slight decrease due to the conversion of certain lessee dealer sites to company operated sites.

Aside from a decrease in rent due to class of trade changes our rental income continues to be a durable income stream in our business, representing 38% of our gross profit for our wholesale segment for the fourth quarter of 2023.

Yeah.

For the retail segment performance was very strong for the fourth quarter of 2023 generating $69 million and gross profit.

Our motor fuel gross profit increased 11%.

Our merchandise gross profit increased 18%.

At our merchandise gross profit margin percentage was up approximately 70 basis points when compared to the same period in 2022.

On the fuel margin front, our retail fuel margin on a cents per gallon basis increased 8% year over year as we experienced relatively strong fuel margins at 41 five cents per gallon in the fourth quarter of 2023 compared to 38 three per gallon in the fourth quarter of 2022.

Charles Nifong: As I touched on in the Wholesale Segment Review, our Retail Segment benefits from our improved fuel sourcing costs as well. While we profited from strong market conditions for fuel margin in our retail segment this quarter, our retail fuel margin results were also enhanced by our lower fuel product costs relative to the prior year. On a same-store basis, on a same-store basis, our retail volume declined 3% for the quarter year-over-year.

As I touched on in the wholesale segment review, our retail segment benefits from our improved fuel sourcing costs as well.

While we profited from strong market conditions for fuel margin in our retail segment. This quarter. Our retail fuel margin results were also enhanced by our lower fuel product costs relative to the prior year.

Our volume on a same store basis, our retail volume declined 3% for the quarter year over year.

Charles Nifong: Our retail segment same store volume decline was driven in part due to some site specific factors, such as the rebuilding or construction of travel plazas at certain sites we have along major toll roads. When adjusting out for these factors, our retail same-site volume, while still down, compares favorably with the national demand data I referenced earlier. Our retail volume since the start of the year has been softer, with weather impacting our results in January.

Our retail segment same store volume decline was driven in part due to some site specific issues such as the rebuilding or construction of travel plazas at certain sites, we have a lot of major toll roads.

When adjusting out for these factors our retail same site volume, while still down compares favorably with a national demand data I referenced earlier.

Our retail volume since startup the year has been softer with weather impacting our results in January.

Charles Nifong: Retail Same Store Volume has improved somewhat in recent months but still remains soft overall relative to the prior year. Retail fuel margins in January were stronger than the prior year, but a bit lower as we have moved into February. For inside sales, on a same-site basis, our inside sales increased approximately 3% relative to last year for the fourth quarter. Inside sales, excluding cigarettes, were up approximately 5% year-over-year on a same-store basis for the quarter.

Retail same store volume has improved somewhat in recent weeks, but still remains soft overall relative to the prior year.

Retail fuel margins in January were stronger than the prior year, but a bit lower as we have moved into February.

Our inside sales on a same site basis, our inside sales increased approximately 3% relative to last year for the fourth quarter.

Inside sales, excluding cigarettes were up approximately 5% year over year on a same store basis for the quarter.

Charles Nifong: Strong sales performance was primarily driven by the categories of packaged beverages and deli. On the store merchandise margin front, our merchandise gross margin increased 18 percent to $22.1 million, driven by our increased sales from our higher store count, the increase in same-store sales, and an improvement in our store merchandise gross margin percentage. The store merchandise margin improvement was due to our continued efforts on certain initiatives we have in regards to pricing, product sourcing, and promotions, as well as a sales shift towards higher-margin products. However, in the period since the quarter end, same-store inside sales, inclusive of cigarettes, are down approximately 2 percent due to winter weather in certain markets and overall softer demand, as noted with fuel volume as well.

The strong sales performance was primarily driven by the categories of packaged beverages at Delhi.

On the store merchandize margin front, our merchandise gross margin increased 18% to $22 $1 million driven by our increased sales from our higher store count the increase in same store sales and improvement in our store and merchandise gross margin percentage.

The storm merchandise margin improvement was due to our continued efforts on certain initiatives. We have in regards to pricing product sourcing and promotions as well as a sales shift towards higher margin products.

And the period since the quarter and same store inside sales inclusive of cigarettes are down approximately 2% due to winter weather in certain markets and overall softer demand as noted with fuel volume as well.

Charles Nifong: As we noted last quarter, in our retail segment, if you look at our company-operated site count, we are up 41 company-operated retail sites from the prior year and up modestly by three company-operated sites relative to the prior quarter, the third quarter of 2023. Our commission agent site count increased by 10 sites relative to the third quarter of 2020. In both classes of trade, the increase is due to our conversion of certain sites from other classes of trade to either company-operated or commission-operated locations. Overall, it was another positive quarter for our retail segment as our margin per gallon, same store sales, same store merchandise gross margin, and store merchandise margin percentage were all up relative to the prior year.

As we noted last quarter in our retail segment. If you look at our company operated site Count. We are up 41 company operated retail sites from the prior year and up modestly by three company operated sites relative to the prior quarter the third quarter of 2023.

Our commission agent site count increased by 10 sites relative to the third quarter of 2023.

And both classes of trade the increase is due to our conversion of certain sites from other classes of trade to either company operated or commission operated locations.

Overall it was another positive quarter for our retail segment as our margin per gallon same store sales same store merchandise gross margin and store merchandize margin percentage were all up relative to the prior year.

If you turn to the next slide I will briefly review our segment performance for the full year.

Our wholesale segment generated gross profit of $128 8 million for the full year 2023.

Charles Nifong: If you turn to the next slide, I will briefly review our segment performance for the full year 2023. A 1% decline when compared to the $130.7 million reported in 2020. The decrease was driven by a slight decline in fuel margin, with fuel volume and rental income being relatively flat for the 12-month period.

1% decline when compared to the $137 million reported in 2022.

The decrease was driven by a slight decline in fuel margin with fuel volume and rental income being relatively flat for the 12 month period.

Our fuel margin for the wholesale segment was eight six cents per gallon for the full year of 2023.

Compared to $8.07 per gallon for the full year of 2022.

Our wholesale volume was $842 6 million gallons for the 12 month period, ending December 31 2023.

Charles Nifong: Our fuel margin for the wholesale segment was 8.6 cents per gallon for the full year of 2023, compared to $0.087 per gallon for the full year of 2022. Our wholesale volume was 842.6 million gallons for the 12-month period ending December 31, 2023, compared to 844.5 million gallons for the same period of 2022. The slight decline in volume when compared to the same period in 2022 was primarily due to the factors that I mentioned earlier during my fourth-quarter commentary.

Compared to $844 5 million gallons for the same period of 2022.

The slight decline in volume when compared to the same period of 2022 was primarily due to the factors that I mentioned earlier during my fourth quarter commentary.

For the full year, our same site wholesale volume was down approximately one 5%, which based on national data available to us outperform the overall mashed up volume demand.

For the full year of 2023, our retail segment's gross profit increased 3% to $253 $5 million compared to $245 million for the full year of 2022.

Merchandise gross profit rose $13 7 million or 18%, while our other revenue increased $3 2 million or 26%.

Charles Nifong: For the full year, our same site wholesale volume was down approximately one and a half percent, which, based on national data available to us, outperformed the overall national volume demand. For the full year of 2023, our retail segment's gross profit increased 3%. $253.5 million compared to $245 million for the full year of 2022. Merchandise gross profit rose $13.7 million, or 18%, while other revenue increased $3.2 million, or 26%. This was partially offset by a decline in motor vehicle gross profit of $7.8 million, or 5% when compared to the full year of 2022.

This was partially offset by a decline in motor fuel gross profit of $7 8 million or 5% when compared to the full year of 2022.

As you recall during the third quarter of 2022, we had extraordinary fuel margins due in part to an extended period of declining crude oil and motor fuel prices.

Considering this extraordinary period in 2022 or 2023 retail fuel margin results repair compare quite favorably with the prior year and show the continued strength of the overall fuel market.

On a same store basis, our fuel margin for our retail segment increased slightly for the full year 2023 relative to 2022, which again relative to national demand data, we have available to us.

Charles Nifong: As you recall, during the third quarter of 2022, we had extraordinary fuel margins, due in part to an extended period of declining crude oil and motor fuel prices. Considering this extraordinary period in 2022, our 2023 retail fuel margin results compare quite favorably with the prior year and show the continued strength of the overall fuel market. On a same store basis, our fuel margin for our retail segment increased slightly for the full year 2023 relative to 2020, which again, relative to the national demand data we have available to us, demonstrates outperformance of our volume relative to national data. Our retail store sales, excluding cigarettes, on a same-store basis increased 8% for the full year 2023, which also compares favorably to national data on industry same-store sales.

<unk> outperformance of our volume relative to national data.

Our retail store sales, excluding cigarettes on a same store basis increased 8% for the full year 2023, which also compares favorably to national data on industry same store sales.

We also continue to evaluate our portfolio and look for opportunities to divest noncore properties for.

For the full year of 2023, we divested 10 properties for $9 $2 million in proceeds.

We were less active with divestitures last year, and what we would like and tend to make this an area of increased focus and effort for us in the coming year.

In our press release, we noted that pending transaction, we have to take control of a number of sites that we currently lease out to Apple Green.

These sites are under long term leases to Apple Green and as a result of the transaction the leases will be terminated and we Cross America will now company operate these 59 retail locations.

Charles Nifong: We also continue to evaluate our portfolio and look for opportunities to divest bond core property. For the full year of 2023, we divested 10 properties for $9.2 million in proceeds. We were less active with the vesttures last year than we would like and intend to make this an area of increased focus and effort for us in the coming year.

Besides our solid assets and good locations at the partnership previously retail company operated prior to leasing the locations to Apple Green.

For additional context, but leasing relationship with Apple Green for these locations began before the top of our group assumed control of the partnership in 2019.

The transaction is part of our strategy to convert more of our control locations to company operated retail or commission locations. As we have described on previous calls.

Charles Nifong: In our press release, we noted that in the pending transaction, we have to take control of a number of sites that we currently lease out to Apple. These sites are under long-term leases to Apple Green, and, as a result of the transaction, the leases will be terminated, and we, Crossamerica, will now company operate these 59 retail locations. These sites are solid assets in good locations at the partnership, which was previously a retail company operated prior to leasing the locations to Apple. And for additional context, the leasing relationship with Applegreen for these locations began before the Topper Group assumed control of the partnership in 2009.

We look forward to company operating lease locations and expect the transaction to positively impact our retail segment and overall results.

If you turn to the next slide slide six our basic business strategy remains unchanged.

Seek to continue to provide excellent service and value to our customers, whether they are retail or wholesale customers.

We want to continue to find ways to improve the business through operational efficiencies and realizing benefits of our scale.

Finally, we seek to optimize our portfolio to create long term value for our unit holders.

Charles Nifong: The transaction is part of our strategy to convert more of our control locations to company operated retail or commissioned locations, as we have described on previous calls. We look forward to operating these locations and expect the transaction to positively impact our retail segment and overall result. If you turn to the next slide, slide 6, our basic business strategy remains unchanged.

Our efforts to convert certain controlled sites from existing classes of trade. The company operated retail or commission sites that had touched on today and in prior calls as part of this strategy to position the portfolio for long term value and to capitalize on changes in the market and industry.

As I stated last year, our ultimate objective and all that we do has to be good stewards of the capital our unitholders have entrusted with us and to provide our unit holders a steady dependable cash flow and to increase the value of their units overtime.

Charles Nifong: We seek to continue to provide excellent service and value to our customers, whether they are retail or wholesale customers. We want to continue to find ways to improve the business through operational efficiencies and realizing the benefits of our scale. Finally, we seek to optimize our portfolio to create long-term value for our unit, and efforts to convert certain control sites from existing classes of trade to company-operated retail or commission sites that I touched on today and in prior calls as part of this strategy position the portfolio for long-term value and to capitalize on changes in the market and in the future.

Finally as noted in our press release this fourth quarter was the best fourth quarter in the partnerships history.

The excellent fourth quarter results pocket loss shuttle proof of the overall soundness of our business strategy and the successful execution of the many strategic actions we have taken over the last four years.

2023 overall, we had another strong year for the partnership in terms of its financial results.

The partnership finished the year with a strong balance sheet and is well positioned to thrive in 2024 and beyond.

The outstanding financial results of this past year, including a record fourth quarter reflect the strength of the team that we have here across America.

No organization can be successful without great people.

Charles Nifong: As I stated last year, our ultimate objective and all that we do is to be good stewards of the capital our unit holders have entrusted us with and provide our unit holders with a steady, dependable cash flow and to increase the value of their units over time. Finally, as noted in our press release, this fourth quarter was the best fourth quarter in the partnership's history. The excellent fourth quarter results are demonstrable proof of the overall soundness of our business strategy and the successful execution of the many strategic actions we have taken over the last four years. 2023 overall was yet another strong year for the partnership in terms of its financial results. It finished the year with a strong balance sheet and is well positioned to thrive in 2024 and beyond. The outstanding financial results of this past year, including our record fourth quarter, reflect the strength of the team that we have here at Crossamerica. No organization can be successful without great people.

I am extremely proud of the highly talented and skilled individuals we had across America and how they work together to be an even better team.

So all of those team members listening today. Thank.

For your hard work and commitment.

With that I will turn it over to Laura for more detailed financial review.

Thank you Charles.

Please turn to slide eight I would like to review our fourth quarter results for the partnership.

We reported net income of $16 $7 million for the fourth quarter of 2023 compared to net income of $17 $1 million in the fourth quarter of 2022 with.

With the slight decline broadly driven by higher interest expense for the fourth quarter of 2023, offsetting higher operating income for the quarter compared to the prior year.

Adjusted EBITDA was $47 6 million for the fourth quarter of 2023 up 8% from adjusted EBITDA of $44 $3 million for the fourth quarter of 2022.

Maura Topper: I am extremely proud of the highly talented and skilled individuals we have across America and how they work together to be even better. To all of those team members listening today, thank you for your hard work and commitment. With that, I will turn it over to Maura for more detailed financial. Thank you, Charles. If you would please turn to slide eight, I would like to review our fourth quarter results for the partnership. We reported net income of $16.7 million for the fourth quarter of 2023 compared to net income of $17.1 million in the fourth quarter of 2022, with a slight decline, probably driven by higher interest expense for the fourth quarter of 2023, offsetting higher operating income for the quarter compared to the prior year.

Our distributable cash flow for the fourth quarter of 2023 was $35 $8 million up 7% from $33 $3 million for the fourth quarter of 2022.

The increases in adjusted EBITDA and distributable cash flow were primarily due to the operating income increases in both our wholesale and retail segments.

And by the strong fuel and merchandise margin results Charles reviewed in his comments.

Our distribution coverage for the current quarter was one eight times compared to 167 times for the fourth quarter of 2022.

During the fourth quarter of 2023.

<unk> paid a distribution of <unk> 52, and a half cents per unit.

Charles discussed some of the primary drivers of our top line and gross profit performance for the quarter earlier.

Maura Topper: Adjusted EBITDA was $47.6 million for the fourth quarter of 2023, up 8% from adjusted EBITDA of $44.3 million for the fourth quarter of 2022. Our distributable cash flow for the fourth quarter of 2023 was $35.8 million, from $33.3 million for the fourth quarter of 2022. The increases in adjusted EBITDA and distributable cash flow were primarily due to operating income increases in both our wholesale and retail segments, driven by the strong fuel and merchandise margin results Charles reviewed in his comments. Our distribution coverage for the current quarter was 1.8 times, compared to 1.67 times for the fourth quarter of 2022. During the fourth quarter of 2023, the partnership paid a distribution of 52.5 cents per unit.

Turning to the expense portion of our operations.

Operating expenses for the fourth quarter increased $5 $2 million compared to the 2020 to fourth quarter.

This increase was almost entirely in our retail segment.

This is primarily due to the increased site count in that segment compared to the prior year due to the classic trade conversions the Charles referenced in his comments.

Retail segment operating expenses for the fourth quarter and 2023 increased approximately 15% from the prior year.

While our average company operated site count was up more than 16%.

As we have converted sites to the company operated class of trade.

Which had the largest operating expense profile of any of our classes of trade.

The incremental operating expenses, we are seeing for these locations are in line with our expectations for these sites as they are converted to company operated locations.

On a same store basis operating expenses in our retail segment were up approximately 4% for the fourth quarter of 2023.

Maura Topper: Charles discussed some of the primary drivers of our top line and gross profit performance for the quarter early, turning to the expense portion of our operation. Operating expenses for the fourth quarter increased $5.2 million compared to the fourth quarter of 2022. This increase was almost entirely in our retail segment, which is primarily due to the increased site count in that segment compared to the prior year due to the class of trade conversions that Charles referenced in his comments. Retail segment operating expenses for the fourth quarter of 2023 increased approximately 15% from the prior year, while our average company-operated site count was up more than 16%. As we have converted sites to the company-operated class of trade, which has the largest operating expense profile of any of our classes of trade.

Compared to the fourth quarter of 2022.

The increases primarily in the area of store labor and management fees as we have expanded our company operated locations upfront.

Same store retail segment operating expenses, excluding those labor categories were flat year over year.

As we have continued to focus on managing expenses across all categories.

Our G&A expenses increased 2% for the quarter year over year, primarily due to higher equity compensation expense and legal fees.

For the full year 2023, net income declined to $42 6 million from $63 $7 million in 2022.

The decline was primarily driven by a decrease in motor fuel gross profit year over year.

It's primarily a function of the strong fuel margin environment during the third quarter of 2022.

Maura Topper: The incremental operating expenses we are seeing for these locations are in line with our expectations for these sites as they are converted to company-operated locations on the same store base. Operating expenses in our retail segment were up approximately 4% for the fourth quarter of 2023, compared to the fourth quarter of 2022, with the increases primarily in the area of store labor and management, as we have expanded our company-operated location footprint. Same-store retail segment operating expenses, excluding those labor categories, were flat year-over-year as we have continued to focus on managing expenses across all categories.

Adjusted EBITDA was $165 $8 million for the full year of 2023 compared to $179 $8 million in 2022.

For the full year of 2023, distributable cash flow was $116 $7 million compared to $149 million for the full year of 2022.

The decrease in distributable cash flow was due to the lower adjusted EBITDA earned in 2023 compared to 2022 as.

As well as by an increase in cash interest expense.

Also impacted our full year 2023 net income.

Our distribution coverage for the full year of 2023 was 146 times compared to $1 seven seven times for the full year of 2022.

Maura Topper: Our G&A expenses increased 2% for the quarter year-over-year, primarily due to higher equity compensation expense and legal. For the full year of 2023, net income declined to $42.6 million from $63.7 million in 2022. The decline was primarily driven by a decrease in motor fuel gross profit year over year, which was primarily a function of the strong fuel margin environment during the third quarter of 2022. Adjusted EBITDA was $165.8 million for the full year of 2023 compared to $179.8 million in 2020. For the full year of 2023, distributable cash flow was $116.7 million compared to $140.9 million for the full year of 2022. The decrease in distributable cash flow was due to lower adjusted EBITDA earned in 2023 compared to 2020, as well as an increase in cash interest expense that also impacted our full year 2023 net income.

Over the past five years. The partnership has increased its distribution coverage ratio of approximately one one times to more than one four times in 2023.

Evidence of the continued benefits of the strategic initiatives, we have put in place during that time and our team's ability to execute on those plans.

Operating expenses for the full year of 2023 increased $20 million compared to the full year of 2022.

As I noted earlier during my fourth quarter discussion. The increase was primarily driven by incremental operating expenses in our retail segment due to the conversion of lessee dealer and commission locations to company operated locations.

Same store retail segment operating expenses were up approximately 5% in 2023 compared to 2022.

Again, driven primarily by higher store labor and above store personnel costs, given our growing footprint.

Similar to my comments on the fourth quarter. Our team was able to manage other same store retail segment operating expenses approximately flat levels to 2022 ever.

Evidence of our focus on operating efficiently across our footprint.

On a full year basis, our G&A expenses increased from $25 6 million in 2022.

Maura Topper: Our distribution coverage for the full year of 2023 was 1.46 times compared to 1.77 times for the full year of 2022. Over the past five years, the partnership has increased its distribution coverage ratio from approximately 1.1 times to more than 1.4 times in 2023, evidence of the continued benefits of the strategic initiatives we have put in place during that time and our team's ability to execute on those plans. Operating expenses for the full year of 2023 increased $20 million compared to the full year of 2022.

To $27 million in 2023.

Primarily driven by an increase in equity based compensation expenses as a result of more grand seeing outstanding in 2023 as compared to 2022.

And higher legal fees.

Moving to the next slide.

Was that a total of $12 9 million on capital expenditures during the fourth quarter.

With $10 $6 million of that total being growth related capital expenditures.

During this past quarter growth related capital spending was primarily comprised of image upgrades that are being funded materially through incentives from our fuel suppliers.

As of December 31, 2023, our total credit facility balance was $756 million.

Maura Topper: As I noted earlier, during my fourth quarter... The increase was primarily driven by incremental operating expenses in our retail segment due to the conversion of lessee dealer and commission locations to company operated locations, same store retail segment operating expenses were up approximately 5% in 2023 compared to 2022, again driven primarily by higher store labor and above store personnel costs given our growing footprint, similar to my comments on the fourth, our team was able to manage other same store retail segment operating expenses to approximately flat levels to 2022, evidence of our focus on operating efficiently across our footprint, on a full year basis, our GNA expenses increased from $25.6 million in 2022, to $27 million in 2023, primarily driven by an increase in equity-based compensation expenses as a result of more grants being outstanding in 2023 as compared to 2022 and higher legal fees. Moving to the next slide, we spent a total of $12.9 million on capital expenditures during the fourth quarter, with $10.6 million of that total being growth-related capital expenses. During this past quarter, growth related capital spending was primarily comprised of image upgrades that are being funded materially through incentives from our fuel suppliers.

So the $9 million Paydown from our 2022 year end balance.

During 2023, we were able to utilize the strong cash flow results of the business to reinvest in growth opportunities. While also continuing our deleveraging efforts.

Our credit facility to find leverage ratio was four two times as of December 31, 2023.

We continue to remain focused on our operational performance and associated cash flow generation to manage our leverage ratio at approximately four times on our credit facility to fund basis.

Additionally, although we have felt the impact of the elevated interest rate environment.

As with prior periods, we continue to benefit from the interest rate swaps, we put into place in early 2020.

And in 2023 in April and November.

As of the end of 2023, approximately 77% of our current credit facility balance was swapped to a fixed rate.

When a certain portion of those hedges rolling off at the end of the first quarter of 2024.

As of December 31, 2023, taking the interest rate swap contracts. The partnership currently has.

To place into our account.

Our effective interest rate on the capital credit facility was four 9%.

Which is an attractive rate against the current rate backdrop.

In conclusion as Charles noted the partnership had a very strong 2023.

Building on the continued positive momentum of our 2022 performance and the strategic choices, we have made around the business over the past several years.

Maura Topper: As of December 31, 2023, our total credit facility balance was $756 million, for the $9 million pay-down from our 2022 year-end balance. During 2023, we were able to utilize the strong cash flow results of the business to reinvest in growth opportunities while also continuing our deleveraging effort. A credit facility to fine leverage ratio of 4.2 times..., as of December 31st, 2020. We continue to remain focused on our operational performance and associated cash flow generation to manage our leverage ratio at approximately four times on a credit facility defined. Additionally, although we have felt the impact of the elevated interest rate environment.

We are looking forward to the year ahead.

Continuing to focus on execution generating durable and consistent cash flows with a focus on maintaining a strong balance sheet and generating value for our unitholders.

With that we will open it up to questions.

Thank you ladies and gentlemen, you will now begin the question and answer session. So do you have a question. Please press star followed by the number one I know Touchtone phone again, that's star followed by the <unk>.

One on your Touchtone phone you will hear a three pronged acknowledging your request should you wish to decline from the polling process. Please press star followed by the number too.

You're using a speaker phone please lift your handset before pressing any keys.

Maura Topper: As with prior periods, we continue to benefit from the interest rate swaps we put into place in early 2020 and in 2023 in April and November, as of the end of 2023. Approximately 77% of our current credit facility balance was swapped to a fixed rate, with a certain portion of those hedges rolling off at the end of the first quarter of 2024, as of December 31st, 2023, taking the interest rate swap contracts the partnership currently has in place into account. Our effective interest rate on the Cap-El Credit Facility was 4.9%, which is an attractive rate against the current rate backdrop.

Again, we want to do you have a question. Please press star followed by the number one on your Touchtone phone.

Well. It appears we don't have any questions. Today should you have any questions. Later, please feel free to reach out to US again, we thank everyone for joining us today have a good day.

Thank you, Sir ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask could you. Please disconnect your lines have a lovely day.

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Okay.

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Okay.

Maura Topper: In conclusion, as Charles noted, the partnership had a very strong 2020, building on the continued positive momentum of our 2022 performance and the strategic choices we have made around the business over the past several years. We are looking forward to the year ahead, continuing to focus on execution, generating durable and consistent cash flows with a focus on maintaining a strong balance sheet and generating value for our users.

Thank you.

[music].

Okay.

Okay.

Yeah.

Okay.

Okay.

Okay.

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Okay.

[music].

Okay.

Thank you.

Uh huh.

Sure.

[music].

Operator: With that, we will open it up to questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touchstone phone. Again, that's star followed by the number one on your touchstone phone.

Okay.

Yeah.

The.

Operator: You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift your handset before pressing any key.

Okay.

[music].

Okay.

Yes.

Yeah.

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Operator: Again, everyone, should you have a question, please press star followed by the number 1 on your touchtone phone. Well, it appears we don't have any questions today. Should you have any questions later, please feel free to reach out to us.

[music].

Operator: Again, we thank everyone for joining us today. Have a good day. Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.