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spk00: Good day, everyone, and welcome to the Global Partners First Quarter 2023 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slivka, Chief Financial Officer, Mr. Gregory Hansen, Chief Operating Officer, Mr. Mark Romain, and Chief Legal Officer, Mr. Sean Geary. At this time, I would like to turn the call over to Mr. Geary for opening remarks. Please go ahead, sir.
spk01: Good morning, everyone. Thank you for joining us. Today's call will include forward-looking statements within the meaning of federal securities laws. These statements include projections, expectations, and estimates concerning the future financial and operational performance of global partners. which are based on assumptions regarding market conditions, demand for liquid energy products, and convenience store products, the regulatory and permitting environment, the forward product pricing curve, and other factors which could influence our financial results. We believe these assumptions are reasonable given currently available information. Our assumptions and future performance are subject to a wide range of business risks, uncertainties, and factors which are described in our filings with the Securities and Exchange Commission. and which could cause actual results to differ materially from the partnership's historical experience and present expectations or projections. Gold Partners undertakes no obligation to revise or update any forward-looking statements. Any material comments concerning future results or operations will be communicated through news releases, publicly announced conference calls, or other means that will constitute public disclosure for the purposes of Regulation FD. Now my pleasure to turn the call over to our President and Chief Executive Officer, Eric Sliska.
spk03: Thank you, Sean, and good morning, everyone. Let me begin by thanking the entire global team for propelling us to a solid start in fiscal 2023. Our performance reflects the great work being done across our liquid energy terminal network and convenient markets every day to deliver quality products and superior service to our customers and guests. Q1 was another strong quarter for our GDSO segment, which posted a 6.1% higher product margin. This increase helped more than offset the effects of warmer than normal temperatures on distillates and other weather sensitive products. Our results speak to the diversification of our business model, which serves us extremely well in what is frequently a dynamic weather environment. On our year end call, I spoke with you about three acquisitions we completed in 2022. These transactions have strengthened the earnings power of our GDSO portfolio, adding more than 60 company operated convenience markets and related fuel operations, along with fuel supply arrangements at more than 55 additional sites. In March, we signed a joint venture agreement to invest alongside ExxonMobil to acquire 64 convenience and fueling facilities in the greater Houston area. The agreement is expected to close in the second quarter of 2023. We're excited about the opportunity to expand our footprint into the fast growing Texas market and look forward to operating these sites on behalf of the joint venture. On the corporate governance front, During the first quarter, we were extremely pleased to welcome Claire McGlory to our board of directors. As CFO and COO at Ataros, a $6 billion strategic investment firm, Claire has been instrumental in guiding growth-oriented businesses across a wide range of industries. She also brings more than 13 years of energy experience to our board, having served as CFO, EVP, and treasurer for Sunoco LP. We look forward to benefiting from clear strategic experience, industry perspectives, and leadership background. Turning to our distribution, in April, the board agreed upon a quarterly cash distribution of $65.50 or $262 on an annualized basis on all our outstanding common units for the period from January 1 to March 31. The distribution will be paid on May 15th to unit holders of record as a close of business on May 9th, 2023. Let me conclude my remarks by updating you on the status of our agreement with Gulf Oil Limited Partnership to acquire five of Gulf's refined product terminals in Connecticut, Maine, Massachusetts, and New Jersey. We are continuing to work through the regulatory review process and will share any material developments as appropriate. Now let me turn the call over to Greg for the financial review. Greg?
spk02: Thank you, Eric, and good morning, everyone. Looking at our first quarter 2023 results, adjusted EBITDA was $76 million compared with $74.9 million, and net income was $29 million compared with $30.5 million for the same period in 2022. DCF was $46.3 million compared with $49.9 million in the same period last year. Please note that adjusted EBITDA and DCF include a net gain on sale and disposition of assets of $2.1 million and $4.9 million for the first quarter of 2023 and 2022, respectively. DCM distribution coverage as of March 31, 2023, including the Q4 2022 one-time special distribution, was 3.3 times, or 3.2 times, after factoring in distributions to our preferred unit holders. Excluding the net gain on the sale of assets, which included the gain from our sale of our Revere terminal in June of last year, TPM distribution coverage was 2.7 times or 2.6 times after factoring in distributions to our preferred unit holders. Turning to our segment details, GDSO product margin was up $10.5 million in the quarter to $183.5 million. The gasoline distribution contribution to product margin was up $5.9 million to $120.8 million. primarily due to higher fuel margins and an increase in volume sold due to our 2022 acquisitions. Fuel margins increased $0.01 per gallon to $0.32 per gallon in the first quarter of 2023 from $0.31 per gallon in the first quarter of 2022. Station operations product margins, which includes convenience store and prepared food sales, sundries, and rental income, increased $4.6 million to $62.7 million from the first quarter of 2022. This reflected an increase in activity at our convenience stores in part due to our 2022 acquisitions. At the end of the first quarter, our GDSO portfolio consisted of 1,656 sites comprised of 343 company operated sites, 297 commission agents, 188 VC dealers, and 828 contract dealers. Looking at the wholesale segment, first quarter 2023 product margin increased $6 million to 53.1 million. Gasoline and gasoline blend stock product margin contributed 20.4 million, up 22.7 million from the same period in 2022, primarily reflecting more favorable market conditions year over year. Product margin from distillates and other oils decreased 16.7 million to 32.7 million, primarily due to less favorable market conditions in distillates and residual oil, offset by improved margins in crude oil. Warmer weather negatively impacted our weather sensitive products as temperatures were 60% warmer than normal during the first quarter of 2023 and 13% warmer than the first quarter of 2022. In addition, in the first quarter of last year, we experienced extreme commodity price volatility as a result of the Russian invasion of Ukraine, which benefited the distillate product margin in that period. The improvement in crude oil primarily reflects a decrease in expenses related to the expiry of a pipeline commitment in the fourth quarter of 2022. Our commercial segment product margin was flat at 8.1 million in the first quarter of 23 and 22. Looking at expenses, operating expenses increased 9.1 million to 108.3 million, largely associated with our GDSO operations, including our 2022 acquisitions, in part due to higher salary and rent expenses and an increase in maintenance and repair expenses. SG&A expenses increased $6 million in the first quarter of 23 to $62.3 million, reflecting increases in wages and benefits and various other expenses, partially offset by a decrease in accrued discretionary incentive compensation. Interest expense was $22.1 million in the first quarter of 23 versus $21.5 million in the same period of 2022, as increased interest rates were partially offset by lower borrowings under a credit facility. CapEx in the first quarter was $15.2 million, consisting of $9.6 million of maintenance CapEx and $5.6 million of expansion CapEx, primarily related to investments in our gasoline station business. For full year 23, we continue to expect maintenance capital expenditures in the range of $50 to $60 million and expansion capital expenditures, excluding acquisitions, in the range of $55 to $65 million, relating primarily to investments in our gasoline station business. These current estimates depend, in part, on timing of completion of projects, availability of equipment and workforce, weather and unanticipated events, or opportunities requiring additional maintenance or investments. Our balance sheet remains strong in 331, with leverage, which is defined in our credit agreement, as funded debt to EBITDA of approximately 1.75 times at the end of the quarter. We continue to have ample excess capacity in our credit facility. As of March 31, 2023, total borrowings outstanding under the credit agreement for $346.3 million. This consisted of $247.3 million under our $950 million working capital revolving credit facility and $99 million under our $600 million revolving credit facility. Adding to our balance sheet strength, this past week we entered into an amendment to our credit agreement with our bank group. The amendment extends the maturity date from May 2024 to May 2026. The total committed amount of the facilities under the credit agreement remains at $1.55 billion. Looking ahead on our investor relations calendar, on May 23rd and May 24th, we will be participating in EIC's 20th Annual Energy Infrastructure CEO and Investor Conference. In June, we will be at the Bank of America Energy Credit Conference. For those of you who are participating in this conference, we look forward to seeing you shortly. Now let me turn back the call to Eric for closing comments. Eric?
spk03: Thank you, Greg. We remain focused on driving returns for our stakeholders through a combination of organic growth, operational efficiency, and M&A. We're off to a solid start in 2023 and are well positioned to deliver on our strategic objectives. Now, Greg, Mark, and I will be happy to take your questions. Operator?
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line from the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Selman Ackle with Stiefel. Please proceed with your question.
spk04: Thank you. Good morning, and congrats on another nice quarter. Let me just start off. On the Gulf oil, is this taking longer than you originally anticipated, or do you have any comments there at all on that when you think this might actually get done?
spk02: Yeah, sure. I'll start off, Salman. Good to hear from you. Yeah, so, I mean, it is not taking any longer than we anticipated. I mean, I think if you talk to a lot of companies out there, the FTC is taking longer to review a lot of things. We anticipated going into this acquisition that, you know, it potentially could be a long acquisition process with the FTC, but we continue to endeavor to work with them and, you know, hopeful to get this thing closed as soon as we get the approval from them.
spk04: Got it. Okay. And then turning to your announcement with Exxon, if you could maybe help us understand that a little bit more. I doubt you'll answer me if I ask sort of for pricing or what the investment is, but what I guess I'm really trying to understand is they're going to supply the fuel, you're going to manage the... the stations. Can you just talk a little bit about how this arrangement is going to be?
spk03: Hi, Selin, it's Eric. You know, it's really a partnership. If you think about, you know, Exxon is good at certain things and Global is good at certain things. I think this is a partnership that will allow us to focus on what our expertise is and that is operating sites, that is pricing sites, that is managing sites. And in terms of supply, look, they're a refining behemoth and their job is going to be to supply the locations, right? So we think it's a fit because for us it puts us in a market that we haven't been in. you know, with ExxonMobil and, you know, obviously we think ExxonMobil is going to be a fantastic partner for the company. And as we've shown in the past, you know, once we end up with assets and markets, we've been able to expand our footprint, right? And so the goal here is operate these assets, get comfortable with the business in Texas, and then look to growing.
spk04: Got it. I'm sorry. Go ahead, please.
spk02: I'm just going to add on the financial side. I mean, it's very much almost an equal partnership. We have a 49.9% interest. They have the majority of the interest, but the investment is very much similar. And on the return parameters, we haven't put out any numbers on the actual investment, but I would guide you to that. It is in line with our target investment of sort of mid-teens, unlevered IRR, on a deal like this and very similar to other acquisitions we've made in terms of multiples.
spk04: Okay, I do appreciate that. And so then as you think about future expansion in this market, should we look for more of sort of this JV way of growing or do you think you would go out and actually more typically go out and buy own, uh, lease, uh, you know, manage for other folks, that kind of thing.
spk03: Yeah. We're actively looking to, you know, grow the business there and whether it ends up being a partnership or, or operated by us. I mean, you know, it'll be one or the other.
spk04: Got it. Okay. So, so there's nothing that precludes you from doing something outside of it.
spk03: You know, obviously there are Parker down there and, and, uh, And so, you know, for us, the focus would be to grow with them. But should that not happen, we're prepared to move forward on our own.
spk04: Got it. Okay. And then just pivoting over, just kind of curious, any improvement on sort of utilization from EVs where you've installed chargers? Are you seeing anything on that front? Anything you can talk about there?
spk03: yeah i think i think you know utilization you know has ticked up and um you know if before it was uh in the low single digits uh you know i'd say that's you know picked up anywhere from uh to six to eight percent you know and my view just generally is as more vehicles electric vehicles come into into use uh those who have what I'll call is electric charging stations are going to garner a bigger part of that market. I still think it's difficult at that utilization rate to make money. That being said, with government support, there's some potential for actual returns out of the business.
spk04: So from that standpoint, as you kind of look forward, do you see adding more charging stations and potentially accessing government funds and all that stuff?
spk03: Yeah, but it's about scale. I mean, you've got to do it in a big enough way to move the needle, right? And you're proposing sites to the government and they're releasing funds and then you're building it. So any sort of any sort of real impact P&L-wise is going to take a little bit. But, you know, we have our own riders looking to get and be approved by the government for these funds. So, I mean, we're on it. We're after it. You know, it's just going to take a while to scale it up. I think it's still – yeah, I think we're still a little reticent to go after it on our own, right, because I'm not sure the return's there. But with government funds, it – you know, we think there's a return there.
spk04: Got it. And then just commentary in and around the acquisition market, if you'd be so kind.
spk03: Yeah, you know, it's been very busy, continues to be busy. We're looking at everything, you know, and not just at the states that we're in, but, you know, we haven't won every potential deal that's out there. But we do like to see them. And frankly, missing some deals tells me that we're showing good financial discipline. But the deals that we think really fit and we can create value with, they're the ones that we're going to hopefully be successful at in the bids.
spk04: Got it. Thank you so much.
spk00: We have reached the end of the question and answer session. Mr. Sliska, I'd now like to turn the floor back over to you for closing comments.
spk03: Sure. Thank you for joining us this morning. We look forward to keeping you updated on our progress. Enjoy the weekend, everybody.
spk00: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
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