Global Partners LP

Good day, everyone, and welcome to the Global Partners fourth quarter and full year 2024 financial results conference call. Today's call is being recorded. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka, Chief Financial Officer, Mr. Gregory Hansen, Chief Operating Officer, Mr. Mark Romain, and Chief Legal Officer and Secretary, Mr. Sean Geary. At this time, I would like to turn the call over to Mr. Geary for opening remarks. Please go ahead, sir.

Good morning, everyone. Thank you for joining us. Today's call will include forward-looking statements within the meaning of federal securities laws, including projections and expectations concerning the future financial and operational performance of gold partners. No assurances can be given that these projections will be attained or that these expectations will be met. Our assumptions and future performance are subject to a wide range of business risks, uncertainties, and factors, which could cause actual results to differ materially, as described in our findings for the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or update any foreign-looking statements. Now it is my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slivka.

Thank you, Sean. Good morning, everyone, and thank you for joining us on today's earnings call. 2024 was a transformative year of the growth for global partners. We integrated 30 new terminals across the Atlantic Coast, the Southeast, Texas, and the Northeast, more than doubling our storage capacity to approximately 22 million barrels. Our expansion included 25 terminals acquired in December 2023 backed by a significant 25-year take-or-pay contract with Motiva Enterprises, a subsidiary of Savvy Aramco. In April, we added four northeast terminals, complementing our network in that region. And in November, we acquired a 959,000-barrel thermal located on a 730-acre parcel in East Providence, Rhode Island, with infrastructure capabilities to accommodate long-range vessels. These strategic investments, totaling more than $528 million, have solidified our role as an essential part of the US energy infrastructure and enhanced our ability to serve our rapidly growing customer base. We could not have accomplished this without the dedication, resilience, and innovative spirit of our employees across our businesses. From our terminal operations to our retail locations, every member of our team has played a crucial role in our success. I'm especially proud of the way in which we've navigated the dynamic energy landscape while maintaining our commitment to operational excellence and customer satisfaction. Despite severe weather during the year, our terminal staff has consistently demonstrated exceptional service for our customers while our retail teams have continued to elevate the experience with new offerings for our guests at our few locations and convenience markets. Both our wholesale and GDSO segments demonstrated robust growth in 2024. The 90 million increase in wholesale segment product margin reflected, in part, a full 12 months of contributions from the terminals acquired from Motiva and a partial year of ownership of the terminals acquired from Gulf and ExxonMobil. GDSO product margin was up almost 26 million for the year, even with a tough comparison due to an especially strong retail fuel margin in the fourth quarter of 2023. Let me briefly address the steps we are taking to prepare for the potential implementation of tariffs on oil and gas imports, particularly from Canada and Europe. We continue to actively monitor global economic conditions and the evolving supply landscape, holding, as we always do, daily meetings and additional scenario planning to assess potential impacts of any imposed and proposed tariffs. Turning to our distribution, in January the Board declared a distribution of 74 cents on all outstanding common units for the fourth quarter. This marked the 13th consecutive quarterly increase and reflects our continued strong financial position. The distribution was paid on February 14th to unit holders of record as of Feb 10th. In summary, as evidenced by our results, our diverse asset portfolio continues to drive strong performance. With our expanded operating footprint, greater access to critical pipeline and marine infrastructure, and a strong balance sheet, we are well positioned to leverage our supply, terminal, and marketing expertise to seize growth opportunities and create value for our unit holders. With that, let me turn the call over to Greg for his financial review. Greg?

Thank you, Eric, and good morning, everyone. As we review the numbers, please note that unless otherwise noted, all comparisons will be with the fourth quarter of 2023. Adjusted EBITDA for the fourth quarter of 2024 was $97.8 million, compared with $112.1 million in the same period of 2023. And adjusted DCF was $46.1 million versus $58.8 million in 2023. Across these numbers, the variance between the fourth quarter of 2024 and 2023 is primarily related to the exceedingly strong fuel margin environment we experienced in our GDSO segment in the fourth quarter of 2023. Trailing 12-month distribution coverage as of December 31st was 1.81 times or 1.72 times after factoring in distributions for our preferred unit holders. Turning to our segment details, GDSO product margin decreased 31.8 million in the quarter to $213.6 million. Product margin from gasoline distribution decreased $32.1 million to $145.7 million, primarily reflecting lower fuel margins year over year. On a cent per gallon basis, fuel margins decreased $0.08 to $0.36 in Q4 2024 from $0.44 in Q4 2023. This was primarily driven by the volatility in wholesale R-bar prices during the fourth quarter of 23. when wholesale RBOC prices decreased 34 cents per gallon from the end of September to the end of December 2023. In contrast, wholesale RBOC prices increased 4 cents per gallon in the fourth quarter of 2024. That said, the retail fuel margin environment in the fourth quarter of 2024 continued to be constructive and above historical averages, and we are pleased with the results from gasoline distribution, which increased on a full-year basis for 2024 by 20.2 million, or 4%, over the corresponding period in 2023. with fuel margins on a cents per gallon basis for the full year of 2024 of $0.36 versus $0.34 in fiscal year 23. Station operations product margin, which includes convenience store and prepared food sales, sundries, and rental income, increased $0.3 million to $67.9 million in the fourth quarter of 2024. During the year, we continued to optimize our retail portfolio through divestitures and conversions of certain company-operated sites. At quarter end, our GDSO portfolio of fueling stations and T-stores total 1,584 sites. In addition, we operate 64 sites under our spring partners retail joint venture. Looking at the wholesale segment, fourth quarter 2024 product margin increased $27.9 million to $79.8 million. Product margin from gasoline and gasoline blend stocks increased $13.2 million to $38.6 million, primarily due to the acquisition of 25 terminals from Motiva in December of 2023 and to more favorable market conditions. Product margin from distillates and other oils increased $14.7 million to $41.2 million, primarily due to more favorable market conditions than distillates. The commercial segment product margin increased $0.2 million to $8.6 million. Looking at expenses, operating expenses increased $12.1 million to $128.1 million in the fourth quarter of 2024, primarily reflecting the addition of 30 terminals from Motiva, Gulf, and East Providence acquisitions. SG&A decreased $1.9 million in the quarter to $79.4 million. Interest expense was $34.4 million in the quarter compared with $20.7 million in 2023, primarily due to interest expense related to our 8.25 senior notes issued in January of 2024, which were used to facilitate the Motiva acquisition and to higher average balances on our credit facility in part due to the Gulf Terminals acquisition. CapEx in the fourth quarter was $46.8 million, consisting of maintenance capex of $15 million and expansion capex of $31.8 million, primarily related to investments in our terminal and gasoline station business. For the full year of 2024, we had $46.9 million in maintenance capex and $56.4 million in expansion capex. For the full year of 2025, we expect maintenance capital expenditures in the range of $60 to $70 million and expansion capital expenditures, including excluding acquisitions, in the range of $75 to $85 million. relating primarily to our gasoline station and terminaling businesses. These current estimates depend in part on the timing of project completion, availability of equipment and workforce, weather, and unanticipated events or opportunities requiring additional maintenance investments. Our balance sheet remains strong at December 31st, with leverage as defined in our credit agreement as funded debt to EBITDA at 3.47 times and ample excess capacity in our credit facilities. As of December 31st, we had $229.5 million in borrowings, outstanding on our working capital revolving credit facility, and $167 million outstanding on the revolving credit facility. Now let me turn the call back to Eric for his closing comments.

Thanks, Greg. We begin 2025 in a strong financial and operational position. Our strategic investments to expand our portfolio, strengthen our asset base, and broaden our customer relationships prepare us not only to capitalize on the dynamic market environment of today, but to thrive in the evolving energy landscape. We expect this to be a year of opportunity and growth for global as we build on our success of the past year. We continue to integrate our recently acquired assets. We look to deliver continued value to our unit holders. I'm excited about the opportunities ahead. With that, Greg Mark and I will be happy to take your questions. Operator, please open the line for Q&A.

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 is in 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 star keys. Once again, if you would like to ask a question, press star 1 on your telephone keypad. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Selman Ackel with Stiefel. Please proceed with your question.

Thank you. Good morning. Appreciate all your comments on GDSO. In terms of your thoughts on tariffs, can you just say how much of your supply comes from outside U.S. borders?

Hey, Selma, it's Mark. Good morning. I can't tell you exactly what percent of our supply comes. You know, it's not something we break out for obvious reasons, for competitive reasons, but I will say that Canadian barrels are, you know, they're an important part of the supply landscape, the entire supply landscape for the, really for New England, maybe into the Northeast. The further north you get, the more important that barrel is. Vermont, New Hampshire, Maine, and then as you move down into Boston, Providence, maybe into Connecticut. It's an important barrel for the region, but I think for us, Eric talked about it in his comments, We're looking at this, we're meeting, we're doing scenario planning, we're trying to understand what the potential impact might be. We've never really dealt with this before, so it's a little bit unknown at the moment. What I will say is that our system is designed to allow us to source barrels from anywhere. And that's one of the great things about our system and our assets is that we're not tied into one source of supply. So we can literally go anywhere for a barrel. And I think that's important. So while we'll stay close to it, we'll make sure that our system, we do the best to supply our system for our customers. But I think we have flexibility to go anywhere to get a barrel. And whether that's shipping up Colonial, whether that's taking in imports from other regions, whether it be Canada, Europe, the Caribbean, anywhere, we can take a barrel from anywhere. So I'm not that worried about the supply dynamic. The price will be the price. You know, you may have to pay a little bit extra for a barrel. I don't know. We'll see how that works out. But I think the key thing for us is that our system really allows us to source barrels from anywhere. And that's a key point, not just for this particular system, for this potential event, but I think it's a key point in general when you look at our system because it allows us to source from anywhere, source the lowest cost barrel, optimize around that effort, and I think we're very comfortable in that setting.

Understood, and no doubt tariffs are creating a lot of uncertainty out there, and you're not the only company trying to wrap your head around it. Let me ask you, so with that backdrop, does that in any way change sort of your thought plans or, you know, just in terms of maybe doing an acquisition or does it change, you know, desire where you would want to be more emphasis to get into other parts of the country?

Yeah. Yeah. It does not. You know, I, what I want to be very clear about is, The terminals in the Northeast that take a lot of product from Canada are incredibly flexible facilities because they can take product in from anywhere in the world. And so it's not a matter of if, it's a matter of what price because there's great clearing mechanisms. So our perspective here is although it may increase costs of supply, the barrel is still going to be there. And we, given our system, actually have the ultimate flexibility as to how we source and where we source that barrel. And so, albeit it might be not the best economic outcome for others, for the consumer, at the end of the day, we're going to make sure that the barrel gets supplied. It just might be a little bit more costly. So it's a minor bump in the road. Over time, those supply chains will adjust. And by the way, because it's all on the water, literally they will adjust in weeks. So our perspective is, you know, it's business as usual. It's going to change how supply moves around the globe. But for us, we're going to be as efficient as we can be in supplying and sourcing the lowest cost barrels. to make sure that we're delivering on our promise to our guests and customers. So long answer to the question, but it doesn't affect how we think about our business and how we want to invest and where we believe we actually have competitive advantages. Actually, we think this highlights our competitive advantages in the markets that we're in. So I hate to say it, but it's positive for our business model. And I actually think it's one of the things that differentiates us versus our competitors.

Got it. Can you maybe talk about what you're seeing in Houston and maybe what the growth plans are for that? You've had it now for a while. Just kind of wondering what you're thinking on.

Yeah, so I'm going to ask Mark again. I mean, just broadly, you know, we've got – We've got the retail down there, we've got terminals, and we've got a pretty sizable wholesale and branded rack business down there. I think from a growth standpoint, we'll look to grow all three legs of that stool. We consider new retail assets every time they become available. As you know, we're very disciplined. We're not going to do a deal for the sake of growing. We're going to do a deal if we think we can add value and we think we can drive synergies through it. We continue to look for retail opportunities to grow. Some of the assets that we bought and that we got in that Motiva transaction, we have seven terminals in Texas. Some of them have real growth opportunities. We'll look to organically grow those. It may take some time because there's permitting and and things like that. These aren't flip the switch opportunities like adding new containers. These are investments that I think we have the opportunity to make. We'll continue to try to leverage our sales and supply functions to grow that supply and wholesale presence. So I think it is an area that We've been operating those assets, I think, for a year and a half. And I think we've got our arms around them. I think there's a lot of opportunity to grow those volumes and store sales on site. So we're very focused on that region, and I think we're positive about our opportunities down there.

Got it. And then just last one, just in kind of staying on acquisitions, anything changing in terms of either the, you know, the number of potentials you see out there, anything in terms of pricing, you know, bid-ask spreads getting closer, anything you can just make on commentary along those lines?

Yeah. I mean, I think it continues to be really busy and there's lots of stuff out there and there's lots of movements, whether that's a, Mike SanClements, retail or whether that's terminal and we continue to look at whatever is out there. Mike SanClements, You know, I think, generally speaking, depending asset asset quality really matters as to what multiples things go at. Mike SanClements, And I do think that there are some spreads that have opened up between certain types of sites, but we continue to be very active. And, you know, we're hopeful that we'll get some transactions done in the next year.

Okay. Thank you very much.

Thank you. We have reached the end of the question and answer session. Mr. Sliska, I would like to turn the floor back over to you for closing comments.

Thanks for joining us this morning, everyone. We look forward to keeping you updated on our progress. Everyone enjoy the weekend. Thank you.

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.