Martin Midstream Partners L.P.

Good morning, my name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the MMLP third quarter earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Sharon Taylor, Chief Financial Officer. Please go ahead.

Good morning, and thank you to everyone joining us on the call today. Here in the room are Bob Bondurant, CEO, Randy Tauscher, COO, David Cannon, Controller, and Danny Cabin, Director of FP&A. During this call, we will make forward-looking statements as defined by the SEC. These statements are based upon our current beliefs as well as assumptions made by the management team and information currently available to us. Please refer to our earnings press release issued yesterday afternoon and posted on our website as well as our latest filings with the SEC for a list of factors that could impact the future performance of Martin and cause our actual results to differ materially from our expectations. We will discuss non-GAAP financial measures on today's call. The earnings press release includes a reconciliation of these non-GAAP financial measures to their comparable GAAP financial measures. And with that, I will turn it over to Bob to discuss third quarter earnings.

Thanks, Sharon. First, I would like to begin with comments regarding the impact of Hurricane Milton on our people and on our assets. Our Martin team members who operate and manage our Tampa terminal and our trucking operations in Central Florida are all safe and accounted for. We shut down both operations more than 24 hours before landfall, and as a result, our people were able to reposition themselves to safety. Regarding our assets. Our Tampa terminal had no storm surge issues, but the heavy rain filled our tank farm infield and submerged several of our pumps, which will be repaired. We also have some tank insulation damage that will also need to be repaired. Our trucking terminal located in Mulberry had only very minor damage. All in all, we feel very blessed to have experienced minimal impact to our people and to our locations. Now I would like to focus on our overall third quarter operating performance. For the third quarter, we fell short of guidance by 1.3 million as we had adjusted EBITDA of 25.1 million compared to third quarter guidance of 26.4 million. As I mentioned in yesterday's press release, the primary contributor to our guidance shortfall was an increase in expense related to our long-term incentive plans which are tied to the fair market value of our common units. As a result, we recognize an additional $1.4 million in expense when compared to guidance. Without this expense recognition, we would have had exceeded forecast by $0.1 million. The impact of this expense recognition when compared to guidance negatively impacted our terminating and storage segment by $0.6 million, both our sulfur services and our specialty product segments by 0.3 million each and our transportation segment by 0.2 million. Now I would like to break down our adjusted EBITDA performance by each segment. For the third quarter, our largest cashflow generator was once again our transportation segment, which had adjusted EBITDA of 11.6 million compared to guidance of 10.8 million. Within this segment, our land transportation business had a very stable quarter and had adjusted EBITDA of 6.5 million compared to guidance of 6.4 million. We believe this stability will continue in the fourth quarter in this business. Our marine transportation business had adjusted EBITDA of 5.1 million compared to guidance of 4.4 million. While our forecasted utilization was on target with guidance, Our average inland day rate exceeded forecast by 8%. We continued to see stability in rates due to tightness in the inland market, and as a result, expect stable cash flow in this business line in the fourth quarter. Our next strongest cash flow generator in the third quarter was our terminating and storage segment, which had adjusted EBITDA of $8.4 million compared to guidance of $9 million. The missing guidance can be entirely attributed to the increased incentive compensation expense of $0.6 million. Without this charge, our terminating and storage segment was in line with guidance. Looking toward the fourth quarter, we believe both operations and adjusted EBITDA will remain stable for our terminating and storage segments. Our third largest cash flow generator was our specialty product segment, which had adjusted EBITDA of $4.6 million compared to guidance of $6.5 million, a miss of $1.9 million. Excluding the long-term incentive compensation expense charge of $0.3 million, we missed guidance by $1.6 million. This miss was primarily the result of weak performance from both our packaged lubricant and grease business lines. Both groups saw weaker demand for their products than forecasted. We believe this weak demand is being driven by the slowing U.S. economy. Looking toward the fourth quarter, the overall weaker economy combined with the seasonal reduced demand for our lubricant and grease products should result in softer cash flow in the fourth quarter relative to the other three quarters. Finally, I would like to discuss the performance of our sulfur services segment. which had adjusted EBITDA of 4.2 million compared to guidance of 3.7 million. Without the long-term incentive-based compensation charge of 0.3 million, we would have exceeded guidance in this segment by 0.8 million. The pure sulfur side of our sulfur services segment had adjusted EBITDA of 3.7 million compared to guidance of 3.1 million. The primary driver of this outperformance was the strong volume of sulfur production from our Gulf Coast refinery customers. The daily volume of sulfur handled was 12% greater than our forecast as we logistically manage approximately 3,600 tons per day of sulfur production into or through our Beaumont terminals. Looking toward the fourth quarter, subject to any unexpected refinery turnarounds, We remain optimistic that sulfur production from our refinery customers will continue to remain at these higher levels, which should allow us to achieve or exceed guidance in the pure sulfur side of the business. Our fertilizer group had adjusted EBITDA 0.4 million, which was 0.3 million less than EBITDA guidance for the third quarter. While the volume of fertilizer sold in the third quarter was 27% less than forecast, We realized an improvement in actual gross margin per ton relative to guidance. This margin improvement was a result of the mix of fertilizer products sold in the third quarter when compared to our forecast. Looking toward the fourth quarter, we anticipate the normal seasonal trough and cash flow relative to the first and second quarters for the fertilizer business. Before I turn the call over to Sharon, I would like to make a few comments regarding our pending transaction with Martin Resource Management Corporation. As you know, MRMC approached MMLP with an initial buyout proposal on May 24, 2024, which was reviewed by our board's conflicts committee, which consists of three independent directors and was assisted by independent financial and legal advisors. A robust process ensued, and the committee negotiated hard on behalf of the unaffiliated unit holders to maximize value. The pending transaction will deliver nearly a dollar more per unit than the initial proposal. In the weeks ahead, we will follow a proxy statement with more detail on the transaction, and we look forward to engaging with unit holders as we work to secure the necessary approvals to complete the transaction. While we look forward to keeping you all updated until the proxy is filed, we have no more information to share regarding the pending transaction. As such, the focus of our call today will be on our third quarter performance. We ask that you please keep questions focused on our financial and operational performance. Now I'll turn the call back over to Sharon.