Title

Presentation

Global Partners LP beats earnings expectations. Reported EPS is $0.52, expectations were $0.24.

Operator: 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. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka, Chief Financial Officer, Mr. Gregory Hanson, Chief Operating Officer, Mr. Mark Romaine, 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.

Sean Geary: 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 LP. 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. Global Partners LP undertakes no obligation to revise or update any forward-looking statements. It is my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Eric Slifka: Thank you, Sean. Good morning, everyone, and thank you for joining us on today’s earnings call. 2024 was a transformative year of growth for Global Partners LP. We integrated thirty new terminals across the Atlantic Coast, the Southeast, Texas, and the Northeast, more than doubling our storage capacity to approximately twenty-two million barrels. Our expansion included twenty-five terminals acquired in December 2023, backed by a significant twenty-five-year take-or-pay contract with Motiva Enterprises, a subsidiary of Saudi Aramco. In April, we added four Northeast terminals complementing our network in that region. And in November, we acquired a nine hundred and fifty-nine thousand barrel terminal located on a seven hundred and thirty-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 supply 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 excellence, while our retail teams have continued to elevate the experience with new offerings for our guests at our fuel 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 twelve 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.

Eric Slifka: 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 the potential impact of any proposed tariffs. Turning to our distribution. In January, the board declared a distribution of $0.74 on all outstanding common units for the fourth quarter. This marked the thirteenth consecutive quarterly increase and reflects our continued strong financial position. The distribution was paid on February fourteenth to unitholders of record as of February tenth.

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, terminalling, and marketing expertise to seize growth opportunities and create value for our unitholders.

Eric Slifka: With that, let me turn the call over to Greg for his financial review. Greg?

Gregory Hanson: 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 twelve-month distribution coverage as of December thirty-first was 1.81 times or 1.72 times after factoring in distributions for our preferred unitholders.

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 cents 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 Arbob prices during the fourth quarter of 2023, when wholesale Arbob prices decreased $0.34 per gallon from the end of September to the end of December 2023. In contrast, wholesale Arbob prices increased $0.04 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.

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 2023. Station operations product margin 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 divestitures and conversions of certain company-operated sites. At quarter-end, our GDSO portfolio of fueling stations and c-stores totaled 1,584 sites. In addition, we operate sixty-four 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 twenty-five 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 in distillates. The commercial segment product margin increased $0.2 million to $8.6 million. Looking at expenses, operating expenses increased $12.1 million, primarily reflecting the addition of thirty 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 eight and a quarter 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 million to $70 million and expansion capital expenditures excluding acquisitions in the range of $75 million to $85 million, relating primarily to our gasoline station and terminalling 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 thirty-first 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 thirty-first, we had $229.5 million in borrowings outstanding on our working capital revolving credit facility and $167 million outstanding on the revolving credit facility.

Gregory Hanson: Sorry. Now let me turn the call back to Eric for his closing comments. Thanks, Greg.

Eric Slifka: 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 Partners LP as we build on our success of the past year. We continue to integrate our recently acquired assets and look to deliver continued value to our unitholders. 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.

Operator: Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. Thank you. Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.

Selman Akyol: 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 US borders?

Mark Romaine: Hey, Selman. It’s Mark. Good morning. I can’t tell you exactly what percent of our supply comes from outside the US. 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. So, you know, Vermont, New Hampshire, Maine, and then as you move down into Boston, Providence, maybe into Connecticut. So, you know, it’s an important barrel for the region. But I think, you know, for us, Eric talked about it in his comments. You know, 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, you know, while we’ll stay close to it, we’ll make sure that our system, you know, 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, you know, whether that’s taking in imports from, you know, from other regions, it be Canada, Europe, the Caribs, anywhere, we can take a barrel from anywhere.

So I’m not that worried about the supply dynamic, the price would 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 our system really allows us to source barrels from anywhere, and that’s a key point not just for this particular 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.

Selman Akyol: 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 as a 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 wanna be more emphasis to get into other parts of the country?

Eric Slifka: Yeah. Selman, it’s Eric Slifka. It does not. You know, what I wanna 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 the cost 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 gonna make sure that the barrel gets supplied.

It just might be a little bit more costly. You know? So it’s a minor bump in the road. Over time, those supply chains 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 gonna change how supply moves around the globe. But for us, we’re gonna 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 wanna invest and where we believe we actually have competitive advantages. Actually, we believe 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.

Selman Akyol: 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 wondering what you’re taking on.

Mark Romaine: Yeah. So it’s Mark again. I mean, just broadly, you know, 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, you know, we’ll look to grow all three legs of that stool. We’ll look to, you know, we consider new retail assets every time they become available. As you know, we’re very disciplined. So, you know, we’re not gonna do a deal for the sake of growing. We’re gonna do a deal if we think we can add value and we think we could drive synergies through it. So we continue to look for retail opportunities to grow. Some of the assets that we bought and, you know, that we got in the Motiva transaction, we have seven terminals in Texas.

Some of them have real growth opportunities, and so we’ll look to kind of organically grow those. You know, it may take some time because there’s permitting and things like that. These are not, you know, these aren’t flip-the-switch opportunities like adding new companies. These are investments I think we have the opportunity to make. We’ll continue to try to leverage our sales and supply functions to grow that, you know, that supply and wholesale presence. So I think it is an area that we’re very interested in. We’re gonna keep focusing on that and other regions as well and look for opportunities to grow through acquisition, but also look for opportunities to grow organically. And then if you flip, you know, if you just dial it back to retail, we, you know, we’ve been operating those assets, I think, 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.

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

Eric Slifka: 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 retail or whether that’s terminaling. We continue to look at whatever is out there. You know, I think generally speaking, depending on asset quality really matters as to what multiples things go at. 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 get some transactions done in the next year.

Selman Akyol: Okay. Thank you very much.

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

Eric Slifka: Thanks for joining us this morning, everyone. We look forward to keeping you updated on our progress. And everyone, enjoy the weekend. 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.