Global Partners LP (NYSE:GLP) Q4 2023 Earnings Call Transcript
Global Partners LP (NYSE:GLP) Q4 2023 Earnings Call Transcript February 28, 2024
Global Partners LP beats earnings expectations. Reported EPS is $1.41, expectations were $0.96. GLP isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day everyone and welcome to Global Partners Fourth Quarter 2023 Financial Results Conference Call. Today's call is being recorded. [Operator Instructions]. 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; Mr. Sean Geary. At this time, I'd 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. These statements include projections, expectations and estimates concerning the future financial and operational performance of Global Partners. No assurances can be given that these projections will be obtained whether 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 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 Slifka.
Eric Slifka: 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 fourth quarter and full year performance. 2023 was a transformative year for Global. We closed on the Motiva terminals and the retail JV with ExxonMobil. These accretive deals positioned the company to drive new growth opportunities and increase our earnings power. First in June, we invested $69.5 million in cash for a 49.99% 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.
Second, in December, we acquired 25 liquid energy terminals from Motiva Enterprises for $313.2 million in cash. The Motiva transaction broadens and diversifies our footprint. We nearly doubled our storage capacity by adding terminals in seven 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 seven times in the second 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. 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 two years, we invested more than $745 million 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 unit holders 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. 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 $212.3 million from $273 million. 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?
Gregory Hanson: Thank you, Eric, and good morning, everyone. As we go through the numbers, please note that all comparisons will be with the fourth quarter of 2022, unless otherwise noted. Adjusted EBITDA for the fourth quarter of 2023 was $112.1 million, compared with $106.9 million in 2022. And net income for the fourth quarter was $55.3 million versus $57.5 million. Distributable cash flow was $59.4 million for the fourth quarter, compared with $57.3 million in 2022. And adjusted DCF was $58.8 million versus $57.3 million in 2022. Adjusted EBITDA and adjusted DCF include our proportionate share of EBITDA and DCF related to our 49.9% interest in our Spring Retail Partners joint venture. Adjusted DCF is not used in our partnership agreement to determine our ability to make cash decisions and may be higher or lower than DCF as calculated under our partnership agreement.
Adjusted DCF is presented solely to provide investors with an enhanced perspective over financial performance. Trailing 12-month distribution coverage as of December 31st was 1.9 times or 1.85 times after factoring in distributions to our preferred unit holders. Turning to our segment details, GDSO product margin increased $22.2 million in the quarter to $245.4 million. Product margin from gasoline distribution increased $21.8 million to $177.8 million, primarily reflecting higher fuel margins year-over-year. On a cents per gallon basis, fuel margins increased $0.07 to $0.44 from $0.37 in Q4 2022, as wholesale gasoline prices declined $0.34 from 9/30/23 to 12/31/23, versus declining prices of $0.01 in Q4 2022. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased $0.4 million to $67.6 million in the fourth quarter of 2023.
At quarter end, our GDSO portfolio consisted of 1,627 sites comprised of 341 company operated sites, 302 commission agents, 182 VC [ph] dealers, and 802 contract dealers. In addition, we operate 64 sites on behalf of Spring Partners Retail Joint Venture. Looking at the wholesale segment, fourth quarter 2023 product margin decreased $18.8 million to $51.9 million. Product margin from distillates and other oils decreased $30.2 million to $26.5 million, primarily due to less favorable market conditions and distillates in the quarter. Product margin from gasoline and gasoline blend stocks increased $11.4 million to $25.4 million, primarily due to more favorable market conditions in gasoline year-over-year. Commercial segment product margin decreased $1.5 million to $8.4 million, primarily due to less favorable margins in our bunkering business.
Looking at expenses, operating expenses decreased $2 million to $116 million in the fourth quarter of 2023. SG&A expenses increased $0.5 million in the quarter to $81.3 million. Interest expense was $20.7 million in the quarter compared with $19.7 million in 2022. And CapEx in the fourth quarter was $34.1 million, consisting of $25.4 million of maintenance CapEx and $8.7 million of expansion CapEx, primarily related to investments in our gasoline station business. For full year of 2023, we had $60.8 million in maintenance CapEx and $28 million in expansion CapEx. For the full year of 2024, we expect maintenance capital expenditures in the range of $50 million to $60 million and expansion capital expenditures, excluding acquisitions, in the range of $60 million to $70 million, relating primarily to our gasoline station and terminal 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 1231, 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 capacity in our credit facilities. As of December 31st, total borrowings outstanding in our credit agreement were $396.8 million. This consisted of $16.8 million of borrowings under our working capital revolver and $380 million outstanding under our revolving credit facility. In January, we completed the private offering of $450 million aggregate principal amount of 8.250% [ph] senior unsecured notes due 2032.
We used 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?
Eric Slifka: 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.
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