Global Partners Q4 2023 Earnings Report

Global Partners EPS Results

• Actual EPS: $1.41
• Consensus EPS: $0.96
• Beat/Miss: Beat by +$0.45
• One Year Ago EPS: N/A

Global Partners Revenue Results

• Actual Revenue: $4.41 billion
• Expected Revenue: $4.39 billion
• Beat/Miss: Beat by +$15.63 million
• YoY Revenue Growth: N/A

Global Partners Announcement Details

• Quarter: Q4 2023
• Date: 2/28/2024
• Time: N/A
• Conference Call Date: Wednesday, February 28, 2024
• Conference Call Time: 10:00AM ET

Global Partners (NYSE:GLP) is a publicly traded master limited partnership engaged in the wholesale distribution and retail marketing of petroleum products. The company sources refined petroleum products from major refineries and suppliers and transports them through an integrated network of pipelines, terminals and storage facilities. Global Partners focuses on delivering fuel and related services to commercial, industrial and residential customers, positioning itself as a key midstream and downstream energy operator in its core markets.

Through its extensive terminal network in the northeastern United States and eastern Canada, Global Partners supplies gasoline, diesel, home heating oil, kerosene, propane and biofuels to a broad customer base. The partnership also owns and operates a chain of branded gasoline stations and convenience stores, serving consumers under various regional banners. In addition, Global Partners’ marine division provides bunkering and marine fueling services in the Caribbean and along the East Coast, leveraging dedicated deepwater terminals and storage facilities.

Headquartered in Waltham, Massachusetts, Global Partners LP has grown its asset footprint over multiple decades to support a diverse set of customers, including municipalities, utilities, commercial fleets and end-use consumers. The partnership’s integrated model combines midstream logistics with retail marketing, enabling it to optimize supply, distribution and pricing across its operations. Global Partners continues to pursue strategic acquisitions and infrastructure investments to strengthen its presence in core markets and enhance service offerings.

Global Partners Q4 2023 Earnings Call Transcript

Key Takeaways

• Global Partners closed two major 2023 deals: it acquired a 49.99% stake in the Spring Partners retail JV with ExxonMobil (64 convenience and fueling sites for $69.5 million) and purchased 25 Motiva liquid energy terminals for $313.2 million, nearly doubling its storage capacity across seven new states.
• These accretive transactions include a 25-year take-or-pay throughput agreement with Motiva and strengthen the company’s integrated supply, storage, wholesale and retail network with pipeline, rail and waterborne capabilities.
• In Q4 2023, adjusted EBITDA rose to $112.1 million (vs. $106.9 million a year ago) and distributable cash flow increased to $59.4 million (vs. $57.3 million), driven by higher fuel margins in gasoline distribution.
• The Board approved a quarterly cash distribution of $0.70 per unit ($2.80 annualized), maintaining a trailing 12-month coverage ratio of 1.9× (1.85× after preferred distributions).
• Entering 2024 with a strong balance sheet (2.86× funded debt/EBITDA), the company issued $450 million of 8.25% senior notes to refinance debt, and expects 2024 CapEx of $50–60 million for maintenance plus $60–70 million for expansion.

[Operator]

Good day, everyone, and welcome to the Global Partners 4th 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. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka Chief Financial Officer, Mr.

[Operator]

Gregory Hansen Chief Operating Officer, Mr. Mark Romain and Chief Legal Officer, Mr. Sean Geary. At this time, I'd like to turn the call over to Mr. Geary for opening remarks.

[Operator]

Please go ahead, sir.

[Speaker 1]

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 Global 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 filings with the Securities and Exchange Commission.

[Speaker 1]

Global Partners undertakes no obligation to revise or update any forward looking statements. Now it's my pleasure to turn the call over to our President and Chief Executive Officer, Eric Jalifka.

[Speaker 2]

Thank you, Sean, and good morning, everyone. I'll begin by recognizing the exceptional Global Partners team. Their hard work, operational excellence and creativity enabled us to execute our acquisition strategy while delivering solid 4th quarter and full year performance. 2023 was a transformative year for global. We closed on the Motiva terminals and the retail JV with ExxonMobil.

[Speaker 2]

These accretive deals position the company to drive new growth opportunities and increase our earnings power. First in June, we invested $69,500,000 in cash for a 49.99 percent ownership interest in our Spring Partners retail joint venture with ExxonMobil acquiring 64 convenience and fueling facilities. This transaction enables us to apply our extensive operational and management expertise in the growing Houston metro area. 2nd, in December, we acquired 25 liquid energy terminals for Motiva Enterprises for $313,200,000 in cash. The Motiva transaction broadens and diversifies our footprint.

[Speaker 2]

We nearly doubled our storage capacity by adding terminals in 7 new states. These terminals with pipeline, rail and waterborne capabilities support the growth of our integrated supply, storage, wholesale and retail network in rapidly growing areas of the country. The acquisition is supported by a 25 year take or pay throughput agreement with Motiva, the anchor tenant at these facilities and includes minimum annual revenue commitments. Our integration of the Motiva assets is well underway and we feel very good about being able to achieve our target acquisition multiple of below 7 times in the 2nd year of ownership. The Spring Partners retail joint venture and the Motiva acquisition directly align with our strategy to acquire, invest in and optimize synergistic high quality assets that complement our operational capabilities.

[Speaker 2]

As I noted in this morning's earnings release, with these two deals along with the strength of our legacy assets and business execution, our market diversification and growth potential have never been stronger. Between acquisitions and expansion CapEx, over the past 2 years, we invested more than $745,000,000 to buy strategic assets and grow organically while maintaining the strength of our balance sheet. In January, the Board approved a quarterly cash distribution of $0.70 or $2.80 on an annualized basis on all outstanding common units. The distribution was paid on February 14, 2024 to unitholders of record as of the close of business on February 8, 2024. Before turning the call over to Greg, I want to briefly update you on our pending acquisition of refined product terminals from Gulf Oil.

[Speaker 2]

This morning, we announced that as part of an amended and restated purchase agreement, Gulf's refined products terminal in Portland, Maine will be removed from the transaction and that the purchase price of the transaction will be reduced to 212,300,000 dollars from $273,000,000 We continue to work through the regulatory process for this transaction. With that, let me turn the call over to Greg for the financial review. Greg?

[Speaker 3]

Thank you, Eric, and good morning, everyone. As we go through the numbers, please note that all comparisons will be with the Q4 of 2022, unless otherwise noted. Adjusted EBITDA for the Q4 of 2023 was $112,100,000 compared with $106,900,000 in 2022 and net income for the Q4 was $55,300,000 versus 57,500,000 dollars Distributable cash flow was $59,400,000 for the 4th quarter compared with $57,300,000 in 2022 and adjusted DCF was 58,800,000 dollars versus $57,300,000 in 2022. Adjusted EBITDA and adjusted DCF include our proportionate share of EBITDA and DCF related to our 49.9 percent interest in our Spring Retail Partners joint venture. Adjusted DCF is not used in our partnership agreement to determine our ability to make cash distributions and maybe higher or lower than DCF as calculated under our partnership agreement.

[Speaker 3]

Adjusted DCF is presented solely to provide investors with an enhanced perspective over financial performance. Trailing 12 month distribution coverage as of December 31 was 1.9 times or 1.85 times after factoring in distributions to our preferred unitholders. Turning to our segment details. GDSO product margin increased $22,200,000 in the quarter to $245,400,000 Product margin from gasoline distribution increased $21,800,000 to 177,800,000 dollars primarily reflecting higher fuel margins year over year. On a $0.01 per gallon basis, fuel margins increased $0.07 to 0 $0.44 from $0.37 in Q4 2022 as wholesale gasoline prices declined $0.34 from ninethirtytwenty 3 to twelvethirty onetwenty 3 versus decline in prices of $0.01 in Q4 2022.

[Speaker 3]

Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income increased $400,000 to $67,600,000 in the Q4 of 2023. At quarter end, our GDSO portfolio consisted of 16 27 sites comprised of 3 41 company operated sites, 302 commission agents, 182 lease fee dealers and 8 02 contract dealers. In addition, we operate 64 sites on behalf of our Spring Partners retail joint Venture. Looking at the wholesale segment, 4th quarter 2023 product margin decreased $18,800,000 to $51,900,000 Product margin from distillates and other oils decreased $30,200,000 to $26,500,000 primarily due to less favorable market conditions in distillates in the quarter. Product margin from gasoline and gasoline blend stocks increased $11,400,000 to $25,400,000 primarily due to more favorable marketing conditions in gasoline year over year.

[Speaker 3]

Commercial segment product margin decreased $1,500,000 to $8,400,000 primarily due to less favorable margins in our bunkering business. Looking at expenses, operating expenses decreased $2,000,000 to $116,000,000 in the Q4 of 2023. SG and A expenses increased $500,000 in the quarter to $81,300,000 Interest expense was $20,700,000 in the quarter compared with $19,700,000 in 20 22. And CapEx in the 4th quarter was $34,100,000 consisting of $25,400,000 of maintenance CapEx and $8,700,000 of expansion CapEx, primarily related to investments in our gasoline station business. For full year of 2023, we had $60,800,000 in maintenance CapEx and $28,000,000 in expansion CapEx.

[Speaker 3]

For the full year of 2024, we expect maintenance capital expenditures in the range of $50,000,000 to $60,000,000 and expansion capital expenditures, excluding acquisitions, in the range of $60,000,000 to $7,000,000 relating primarily to our gasoline station and termite businesses. These current estimates depend in part on the 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 at twelvethirty one with leverage, which is defined in our credit agreement as funded debt to EBITDA of approximately 2.86 times. We continue to have ample access of capacity in our credit facilities. As of December 31, total borrowings outstanding in our credit agreement were $396,800,000 This consisted of $16,800,000 of borrowings under our working capital revolver and $380,000,000 outstanding under our revolving credit facility.

[Speaker 3]

In January, we completed the private offering of $450,000,000 in aggregate principal amount of 8.25 percent senior unsecured notes due 2,032. We use the proceeds from the offering to repay a portion of the borrowings outstanding under our current credit agreement, primarily related to the Motiva acquisition and for general corporate purposes. Now let me turn the call back to Eric for closing comments. Eric?

[Speaker 2]

Thank you, Greg. We begin 2024 with a strong balance sheet and cash flows that position us to execute on our strategic priorities and the growth opportunities ahead. Operator, please open the call for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.

[Speaker 4]

Good morning. Maybe just starting off with the Gulf Oil Amendment. Does that now presumably you ex that out and that was the big thing that was holding up HSR. So do you have a timeline for closing?

[Speaker 3]

Yes. So sorry. Hey, Tom, how are you doing? It's Greg Hanson. So we're not going to talk much about the GOL transaction other than what we put in 8 ks.

[Speaker 3]

We are still working with the FTC to get to move that forward. And so that's all we're going to talk about at the moment.

[Speaker 4]

Okay. Then can you as you enter 2024, what's your outlook for your JV with XOM?

[Speaker 3]

Yes. I mean, I can speak to Eric and Mark, feel free to add. I I think we're very excited about the JV. We closed on it in June of last year. We've been we spend a lot of time on it, getting it up to the standards of how we operate sites and we're excited about that marketplace in Houston.

[Speaker 3]

We do think it's a potential good growth opportunity for us in Texas. It's a growing market. It's the largest C store market in the U. S. There's still a lot of fragmentation down there and consolidation that needs to happen.

[Speaker 3]

And it's a white space for us as you guys know in the C store space for us. So it has room for growth. So I think overall we're excited about the opportunity and look to continue to grow in 2024.

[Speaker 4]

So we should expect to see growth out of that in 2024?

[Speaker 3]

That's the goal.

[Speaker 4]

Okay.

[Speaker 2]

Yes. I would say we're going to be opportunistic like we always are. And we'll try to look at every potential deal and every transaction. And there's a lot going on at the company. There is Motiva has a few assets.

[Speaker 2]

The Motiva assets were that are in the Texas market. So the question is, can we find the right deals, the right assets to create higher returns by utilizing our asset base.

[Speaker 4]

Understood. Any comments on the strength in your cents per gallon this quarter?

[Speaker 3]

Yes. I think overall, in a less volatile year, we continue to believe that margins are going to be higher than they have been historical. Historically, given a number of factors, including higher expenses for lower tier operators and higher breakevens for lower tier operators. I think the Q4 was very strong, much stronger than the previous 9 months and you've had some of that just because the fall off in prices to start the Q1. There was a big decline in wholesale RBOB in October and that sort of set the stage for the quarter.

[Speaker 3]

But I think overall, we continue to believe that margins may not be as strong as they were in the Q4 going forward, but they will continue to be stronger than they have been historically.

[Speaker 4]

Understood. And then the last one for me. And as you look back over 2023, you very consistently raised the distribution. And I certainly don't expect you guys to opine on anything that the Board may or may not do. But when you think about running the business and your coverage ratio, is this a comfortable coverage ratio for you?

[Speaker 4]

Would you be comfortable at lower levels? Do you think it needs to go up? Is there any way you could maybe frame up some thoughts around that?

[Speaker 3]

Sure. I think we're at a comfortable level. We're very comfortable with the coverage ratio at 1.9 times and 1.85 times over the LTM basis for the year. Partially that's reflected in the strength of the 4th quarter numbers. If you look back since we've gone public in 2,005, our coverage ratio since 2,005 is 1.6 times after the preferred distribution.

[Speaker 3]

So we've always maintained strong cash flows. I think we're comfortable definitely at a lower level than 1.9 times, I would say. Our goal is to make sure that we have the capital to execute on our expansion capital budget and also maintain the strength of our balance sheet to continue to look at consolidated market both on the retail gasoline side and on the terminalling side. So we do expect there to be continued opportunities for acquisitions and we need to make sure that we're keeping our balance sheet in a position to execute on those. And so retaining some excess cash flow is important for that piece.

[Speaker 3]

But I think it will depend on what the opportunities are out there and how our Board wants to capture those opportunities. But if there is a lack of opportunity, we may choose to distribute more than retain. But if there's more opportunities, we may need to retain a little bit more keep our balance sheet strength.

[Speaker 4]

All right. Thank you very much.

[Operator]

Our next question comes from the line of Gregg Brody with Bank of America. Please proceed with your question.

[Speaker 5]

Good morning, everybody. Just on the acquisition front, you touched on it, but maybe give us a better sense of what the opportunity sets out there. Is it we still expect it to be busy this year? Just some color there would be helpful.

[Speaker 2]

Hey, Greg, it's Eric. It still is busy. I would say there's going to be a lot of opportunity. The question is, do we think it will fit us? We've got to be very well aware of any overlaps that may exist too and the problems that may create.

[Speaker 2]

And so we'll try to look at everything like we always do. And then if the right deals come up in the right locations with the right assets, we'll try hard to see if we can buy it. And I think that's the same thing that we've done since really the history of the company, right, is acquisitions is key to us, it's key to our growth. And there are plenty of markets that we're still not in. So there's lots of opportunity out there.

[Speaker 5]

Are there any markets that are particularly attractive to you that you're focused on getting into?

[Speaker 2]

Yes. Well, I would say our preference, we think the assets that have the most flexibility in terms of how they're accessed have the most value. And so if you have assets that are waterborne and have large docks and have ways to get in and out and have good tankage, I mean, I think it's the same story for every terminal operator, but also access in by rail is important. So scale in all these markets is critical to make sure that you really have the best assets that are positioned in the future to provide the most flexibility for new users.

[Speaker 5]

I appreciate the color guys. Thank you.

[Speaker 4]

Thanks, Craig.

[Operator]

Thank you. We have no further questions at this time. Mr. Slifka, I would like to turn

[Speaker 2]

the floor back over to you for closing comments. Thank you all for joining us this morning. We look forward to keeping you updated on our progress. Thanks, everyone.

[Speaker 3]

Thank you.

[Operator]

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.