This call is being recorded on Thursday, November 5th, 2026. I would now like to turn the conference over to Randy Palmer, Investor Relations. Please go ahead.
Thank you, operator. Good morning, and thank you for joining the CrossAmerica Partners Third Quarter 2026 Earnings Call. With me today are Maura Topper, CEO and President, and Jon Benfield, Chief Financial Officer. We will start off the call today with Maura providing some opening comments and an overview of CrossAmerica's operational performance for the third quarter, and then Jon will discuss the financial results. 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 may include forward-looking statements regarding expected revenue, future plans, future operational metrics, and opportunities and expectations of the organization. There could 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 statement. 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 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.
After the conclusion of our commentary this morning, if you do have any questions, please feel free to reach out to us. With that, I will now turn the call over to Maura.
Thank you, Randy. Thank you to everyone joining us this morning. We appreciate you making the time to be with us today. As an overview of our third quarter 2026 results, Adjusted EBITDA for the quarter was $38.7 million, which was down 6% from the prior year. We, like the industry broadly, were challenged by fuel volume this quarter, with elevated and climbing prices at the pump pressuring demand across both of our segments. We did have some meaningful wins in the parts of the business we have more control over. We grew our merchandise margin percentage by 140 basis points, grew merchandise gross profit 2% despite 7% fewer company-operated sites, continued to reduce operating expenses, and earned a higher retail fuel margin per gallon.
Combined with a very strong first half, these results leave us well ahead of last year through the first nine months, with Adjusted EBITDA up 22% and Distributable Cash Flow up 30% year-over-year. Turning to slide four, I will review some of the detailed operating results of our third quarter. Our retail segment gross profit declined 2% to $78 million compared to $80 million in the third quarter of 2025. The decrease was primarily driven by a decline in motor fuel gross profit, partially offset by growth in merchandise gross profit and other revenue. Retail fuel gross profit declined $3.2 million, or 8%, when compared to the third quarter of 2025.
During the quarter, we operated in a generally rising fuel price environment, with the average cost of a gallon of gasoline across the country reaching a high of just below $4.50 a gallon in late September. Diesel prices experienced a material increase over the course of the quarter as well. Underlying input costs remained volatile throughout the quarter, though somewhat less so than in earlier parts of the year. Elevated fuel prices impacted customer demand and our volumes, though underlying input cost volatility helped offset some of the volume impacts with increased fuel margins. On a same-store basis, our retail segment reported a 7% decline in volume year-over-year, with same-store volume at our company-operated locations down approximately 5% for the quarter, with a more elevated decline in our commission locations, resulting in the segment's overall volume performance.
Our overall segment same-store volume performance trailed industry volumes trends modestly throughout the quarter, though we experienced a material improvement in our volume profile over the course of the quarter, with September volumes, on a relative basis to last year, much stronger than earlier parts of the quarter. October's volume trends in the retail segment have generally been somewhat softer than our September results, though ahead of our overall third quarter average. Turning to our fuel margins in our retail segment, on a cents per gallon basis, we earned 40.4 cents per gallon in the third quarter of 2026, a 5% increase compared to 38.4 cents per gallon in the third quarter last year. Fuel input cost volatility has remained an ongoing aspect of 2026, requiring a high level of focus from our teams around the country to ensure we are competitively priced daily.
Our third quarter margins moderated materially from the elevated margins we and the industry experienced in the second quarter of this year. That being said, the input cost volatility we have experienced in 2026 has generally resulted in fuel margins that are stronger than we would have typically anticipated in the rising fuel price environment we have experienced this year and in the third quarter. In the period since quarter end, fuel margins have remained within the range of volatility we've seen throughout 2026. We continue to believe in our strategic focus of controlling retail fuel pricing whenever possible to ensure our locations remain top of mind for customers in all price environments. Moving from our retail fuel operations to our store sales, our third quarter 2026 results continued a series of important positive performance trends in this critical area of our business.
On a same-store basis, our overall inside sales were down 1% for the third quarter compared to the prior year, with same-store sales excluding cigarettes increasing 0.4%. We experienced growth in the areas of other tobacco products and food, both branded and proprietary, which has been our trend all year to date. In spite of the fuel volume demand trends we've experienced during the quarter, we were again this quarter able to limit the impact of general customer traffic trends with the important investments we've made in recent years in our convenience store offerings. We also saw a strong increase in merchandise margin percentage, which came in at 30.3%, up 140 basis points from the prior year. We benefited from a better merchandise mix and better execution in some of our core categories, primarily the important food and beverage categories, as well as beer and cigarettes.
The strong margin results contributed to a 2% increase in our merchandise gross profit to $32.8 million, which we achieved in spite of a 7% decline in average company-operated site count during the quarter compared to the third quarter of 2025. Jon will go through this in more detail, but I'll note that total operating expenses declined again this quarter, our fifth consecutive quarter of year-over-year declines. In retail, savings in store-level employment costs largely offset higher maintenance and environmental costs. In wholesale, operating expenses were down meaningfully as our controlled site count declined. This type of expense performance takes a great amount of focus from our operations teams, as well as technology-assisted improvements that are benefiting our operations.
Moving on to the top-line results for the wholesale segment, gross profit was $23.1 million compared to $24.8 million in the third quarter of 2025, a decline of 7%. The decrease was primarily driven by lower fuel volume, with wholesale margin per gallon flat for the quarter. Wholesale motor fuel gross profit declined 9% to $14.4 million in the third quarter of 2026 from $15.7 million, driven by an 8% decline in volume for the quarter. Wholesale segment volume during the quarter was impacted by many of the same challenges due to elevated prices that I discussed in my comments on the retail segment. Same-store performance in the wholesale segment was down approximately 7% year-over-year, with the remaining decline in volume due to the net loss of independent dealer contracts.
Our third quarter wholesale fuel margin of 8.8 cents per gallon reflects continued benefit from our fuel sourcing efforts, and in this quarter, higher payment terms discount associated with our higher fuel costs. We also continued our real estate optimization work during the quarter, selling 15 properties and realizing $10.6 million in proceeds. As we had discussed previously, 2025 was our biggest year ever in regards to property sales. We are continuing our targeted real estate efforts in 2026, and we continue to have a strong pipeline for the balance of the year, though at a lower level than in 2025. Concluding my comments, our third quarter was impacted by fuel volume pressure from elevated prices. We delivered on the parts of the business we control, and we remain well ahead of last year through nine months.
Our priorities remain generating strong and durable cash flows from our operations, maintaining a disciplined approach to our balance sheet, and investing in the quality and competitiveness of our network. Before I turn it over to Jon, I again want to be sure to thank our team members around the country for their hard work and dedication this quarter. Our team's focus and effort on what we can control during this volatile 2026 has helped us drive the performance of our business, and our leadership team appreciates all of your hard work. With that, I will turn it over to Jon for a more detailed financial review.
Thank you, Maura. If you would please turn to slide six, I'll go over our third quarter financial results. We reported net income of $8.8 million and Adjusted EBITDA of $38.7 million for the third quarter of 2026, compared to net income of $13.6 million and Adjusted EBITDA of $41.3 million for the third quarter of 2025. As Maura noted, Adjusted EBITDA declined 6% or $2.6 million year-over-year. The decrease in Adjusted EBITDA was primarily driven by the factors that Maura covered in her comments, a decline in motor fuel volume in both the retail and wholesale segments, partially offset by an increase in merchandise gross profit in the retail segment and a decline in operating expenses across both segments.
The decline in net income was primarily driven by the decrease in Adjusted EBITDA, in addition to lower net gains in connection with our ongoing real estate optimization efforts, with $7.4 million in net gains for the third quarter of 2025, compared to $2.4 million in net gains for the third quarter of 2026. Net income also benefited from lower impairment charges included in depreciation, amortization and accretion expense. Our Distributable Cash Flow for the third quarter of 2026 was $21.8 million, a decline from $27.8 million for the third quarter of 2025. The decrease for the third quarter of 2026 in Distributable Cash Flow was primarily driven by the decline in Adjusted EBITDA, in addition to increases in sustaining capital expenditures. We also experienced lower cash interest expense during the quarter, which was offset by higher current income tax expense.
Our Distribution Coverage Ratio for the third quarter of 2026 was 1.09 x compared to 1.39 x for the same period of 2025. For the trailing 12 months, our Distribution Coverage Ratio was 1.32 x compared to 1.00 x for the trailing 12 months ended September 30, 2025. During the third quarter of 2026, the partnership paid a distributithon of $0.525 per unit. Turning to the expense portion of our operations, in total across both segments, we reported operating expenses for the third quarter of 2026 of $56.3 million, a $1.3 million or 2% decrease year-over-year. Retail segment operating expenses for the third quarter declined $0.2 million, and wholesale segment operating expenses declined by $1.1 million. In our retail segment, our average segment site count was down approximately 7% year-over-year.
On a same-store, store-level basis, operating expenses in our retail segment were up approximately 1% for the third quarter of 2026 compared to the third quarter of 2025. The increase was primarily driven by higher maintenance and environmental costs, largely offset by reduced store-level employment costs as we remain focused on efficient staffing in our stores. Returning to our wholesale segment, operating expenses declined by $1.1 million or 16% for the quarter. This decline was primarily driven by the decline in lessee dealer or controlled site count within the segment year-over-year due to asset sales and, to a lesser extent, conversions to our retail class of trade. We reported G&A expenses for the quarter of $6.7 million, a slight increase year-over-year, primarily driven by higher legal fees.
We remain focused across the organization on efficient expense management at our locations as well as at the corporate level, ensuring that we are investing in customer-facing areas at our locations that will drive the long-term health and sustainability of our sites and driving operating efficiencies in our above-store operations. Moving to the next slide, we spent a total of $7.2 million on capital expenditures during the third quarter, with $1.9 million of that total being growth-related capital expenditures and $5.3 million of that being sustaining capital expenditures. Approximately a third of our sustaining capital expenditures during the quarter were related to environmental compliance. As we noted last quarter, given our strong results year to date, we again accelerated some maintenance capital spending from future periods, with a continued focus on supporting the resiliency of our sites.
Because sustaining capital expenditures vary from quarter to quarter, we encourage you to look at our Distribution Coverage Ratio on a year-to-date and trailing 12-month basis, which were 1.28x and 1.32 x, respectively. Regarding our growth capital spending, we remain focused on our company-operated locations, especially in food-related investments that will contribute to our merchandise sales and margin results. Turning to our balance sheet, our Credit Facility defined leverage ratio was 3.72 x compared to 3.56 x as of September 30, 2025. Our management team remains focused on the cash flow generation profile of our business, utilizing our normal course operations and our targeted real estate optimization efforts to manage our leverage ratio at approximately four times on a Credit Facility-defined basis.
Our Credit Facility balance increased slightly over the course of the third quarter, primarily as a result of changes in working capital and capital spending, but remains down approximately $18 million year to date as a result of our strong results and targeted asset sales. Utilizing proceeds from asset sales over the past year to pay down our debt again benefited our cash interest expense during the third quarter of 2026. Our cash interest declined from $11.3 million in the third quarter of 2025 to $10.7 million in the third quarter of 2026. Our existing interest rate swap portfolio continues to benefit us as well. As of September 30, 2026, about 60% of our current Credit Facility balance was swapped to a fixed rate of approximately 3.4% blended, and our effective interest rate on the total Credit Facility at the end of the third quarter was 5.6%.
In conclusion, we are pleased with our performance through the first nine months of 2026, with Adjusted EBITDA and Distributable Cash Flow well ahead of last year, even as the third quarter showed how elevated prices can pressure fuel volume. We continue to position our portfolio to generate durable and consistent cash flows into the future. We are looking to close out 2026 strong, maintaining discipline with our balance sheet and generating value for our unitholders.
That completes today's conference call. We appreciate each of you joining us today. If you have follow-up questions, please feel free to contact us. Thank you, and have a great day.
Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.