Earnings call transcript: Global Partners sees Q4 2024 EBITDA drop, stock dips

Global Partners LP (NYSE:GLP) reported a decline in its Q4 2024 adjusted EBITDA to $97.8 million, down from $112.1 million in the same quarter of the previous year. The company’s adjusted distributable cash flow also decreased to $46.1 million from $58.8 million in 2023. Following the earnings announcement, Global Partners’ stock price fell by 1.06%, closing at $56.57. Despite the quarterly decline, InvestingPro data shows the stock has delivered an impressive 31.4% return over the past year and is trading near its 52-week high of $60. According to InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels.

Key Takeaways

• Q4 2024 adjusted EBITDA decreased by 12.8% year-over-year.
• Adjusted distributable cash flow fell 21.6% compared to Q4 2023.
• Stock price declined by 1.06% following the earnings release.
• Full-year GDSO and wholesale segment margins showed improvement.
• Strategic investments totaled $528 million for 2024.

Company Performance

Global Partners faced a challenging Q4 2024, with declines in key financial metrics such as adjusted EBITDA and distributable cash flow. Despite these setbacks, the company achieved growth in its GDSO and wholesale margins, indicating resilience in its core operations. The market’s reaction reflects concerns over the reduced cash flow and EBITDA, though the company’s strategic investments and operational expansions suggest potential long-term benefits.

Financial Highlights

• Revenue: Not disclosed for Q4 2024.
• Adjusted EBITDA: $97.8 million (down from $112.1 million in Q4 2023).
• Adjusted Distributable Cash Flow: $46.1 million (down from $58.8 million in Q4 2023).
• Trailing twelve-month distribution coverage: 1.81x (1.72x after preferred distributions).

Outlook & Guidance

Global Partners anticipates 2025 to be a year of growth and opportunity. The company plans to continue integrating recently acquired assets and is exploring further acquisitions in the retail and terminalling sectors. Capital expenditures for 2025 are projected between $135 million and $155 million, with a focus on maintenance and expansion.

Executive Commentary

• "Our system is designed to allow us to source barrels from anywhere," stated Mark Romaine, Chief Operating Officer, highlighting the company’s flexible sourcing capabilities.
• CEO Eric Slifka remarked, "We begin 2025 at a strong financial and operational position," emphasizing the company’s readiness to capitalize on growth opportunities.
• Slifka also noted, "We continue to look at whatever is out there," indicating ongoing interest in strategic acquisitions.

Risks and Challenges

• Potential tariffs on oil and gas imports from Canada and Europe could impact supply chains.
• Declining cash flow and EBITDA might affect investor confidence and funding capabilities.
• Market volatility and economic uncertainties pose risks to fuel margins and profitability.
• Integration of new acquisitions may face operational challenges and require significant resources.
• Competition in the retail and terminalling sectors could pressure margins and market share.

Q&A

During the earnings call, analysts inquired about the potential impact of tariffs on supply chains, to which executives assured flexibility in sourcing. Questions also focused on growth opportunities in the Houston market and ongoing evaluations of acquisition prospects, reflecting investor interest in the company’s expansion strategy.

Full transcript - Global Partners LP (GLP) Q4 2024:

Conference Operator: Good day, everyone, and welcome to the Global Partners Fourth Quarter and Full Year twenty twenty four 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 Hansen 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.

Mark Romaine, Chief Operating Officer, Global Partners: Good morning, everyone. Thank you

Sean Geary, Chief Legal Officer and Secretary, Global Partners: 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 filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or update any forward looking statements.

Now it is my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Eric Slifka, President and Chief Executive Officer, Global Partners: 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 22,000,000 barrels. Our expansion included 25 terminals acquired in December 2023, backed by a significant twenty five year take or pay contract with Motiva Enterprises, a subsidiary of Saudi Aramco (TADAWUL:2222).

In April, we added four Northeast terminals complementing our network in that region. And in November, we acquired a 959,000 barrel terminal located on a seven thirty acre parcel in East Providence, Rhode Island with infrastructure capabilities to accommodate long range vessels. These strategic investments totaling more than $528,000,000 have solidified our role as an essential part of The U. S. 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 $90,000,000 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 (NYSE:XOM). GDSO product margin was up almost $26,000,000 for the year, even with a tough comparison due to an especially strong retail fuel margin in the fourth quarter of twenty twenty three. 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 $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 14 to unitholders of record as of Feb ten. 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 marketing expertise to seize growth opportunities and create value for our unitholders.

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

Gregory Hansen, Chief Financial Officer, Global Partners: 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 twenty twenty three. Adjusted EBITDA for the fourth quarter of twenty twenty four was $97,800,000 compared with $112,100,000 in the same period of 2023. And adjusted DCF was $46,100,000 versus $58,800,000 in 2023. Across these numbers, the variance between the fourth quarter of twenty twenty four and 2023 is primarily related to the exceedingly strong fuel margin environment we experienced in our GDSO segment in the fourth quarter of twenty twenty three.

Trailing twelve month distribution coverage as of December 31 was 1.81x or 1.72x after factoring in distributions for our preferred unitholders. Turning to our segment details. GDSO product margin decreased $31,800,000 in the quarter to $213,600,000 Product margin from gasoline distribution decreased $32,100,000 to $145,700,000 primarily reflecting lower fuel margins year over year.

Mark Romaine, Chief Operating Officer, Global Partners: On a

Gregory Hansen, Chief Financial Officer, Global Partners: $0.08 to 0.36 in Q4 twenty twenty four from $0.44 in Q4 twenty twenty three. This was primarily driven by the volatility in wholesale ARBAR prices during the fourth quarter of twenty twenty three when wholesale ARBAR prices decreased $0.34 per gallon from the September to the December 2023. In contrast, wholesale ARBAR prices increased $0.04 per gallon in the fourth quarter of twenty twenty four. That said, the retail fuel margin environment in the fourth quarter of twenty twenty four 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 $20,200,000 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 twenty twenty three.

Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased 300,000 to $67,900,000 in the fourth quarter of twenty twenty four. 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 C stores totaled fifteen eighty four sites. In addition, we operate 64 sites under our Spring Partners retail joint venture. Looking at the wholesale segment, fourth quarter twenty twenty four product margin increased $27,900,000 to $79,800,000 Product margin from gasoline and gasoline blend stocks increased $13,200,000 to $38,600,000 primarily due to the acquisition of 25 terminals from Motiva in December of twenty twenty three and to more favorable market conditions.

Product margin from distillates and other oils increased $14,700,000 to $41,200,000 primarily due to more favorable market conditions than distillates. The Commercial segment product margin increased $200,000 to $8,600,000 Looking at expenses, operating expenses increased $12,100,000 to $128,100,000 in the fourth quarter of twenty twenty four, primarily reflecting the addition of 30 terminals from Motiva, Gulf and East Providence acquisitions. SG and A decreased $1,900,000 in the quarter to $79,400,000 Interest expense was $34,400,000 in the quarter compared with $20,700,000 in 2023, primarily due to interest expense related to our 8.25% senior notes issued in January of twenty twenty four, 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 $46,800,000 consisting of maintenance CapEx of $15,000,000 and expansion CapEx of $31,800,000 primarily related to investments in our terminal and gasoline station business. For the full year of 2024, we had $46,900,000 in maintenance CapEx and $56,400,000 in expansion CapEx.

For the full year of 2025, we expect maintenance capital expenditures in the range of $60,000,000 to $70,000,000 and expansion capital expenditures, including excluding acquisitions, in the range of $75,000,000 to $85,000,000 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 31 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 31, we had $229,500,000 in borrowings outstanding on our working capital revolving credit facility and $167,000,000 outstanding on the revolving credit facility. Now let me turn the call back to Eric for his closing comments.

Eric Slifka, President and Chief Executive Officer, Global Partners: Thanks, Greg. We begin 2025 at 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 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 and A.

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

Selman Akyol, Analyst, Stifel: 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?

Mark Romaine, Chief Operating Officer, Global Partners: Hey, Selman, it’s Mark. Good morning. I can’t tell you exactly what percent of our supply comes. It’s not something we break out for obvious reasons, for competitive reasons. But I will say that Canadian barrels are 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 Vermont, New Hampshire, Maine and then as you move down into Boston, Providence, maybe into Connecticut. So 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

Eric Slifka, President and Chief Executive Officer, Global Partners: our system for our customers.

Mark Romaine, Chief Operating Officer, Global Partners: 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 Caribs, 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 may have to pay a little bit extra for a barrel lighter.

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 it’s a key point not just for this particular 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.

Selman Akyol, Analyst, Stifel: 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 just in terms of maybe doing an acquisition or does it change desire where you would want to be more emphasis to get into other parts of the country?

Eric Slifka, President and Chief Executive Officer, Global Partners: Yes. Simon, it’s Eric Slutska. It does not. 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 applied. 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, 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 we’re 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, Analyst, Stifel: 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?

Mark Romaine, Chief Operating Officer, Global Partners: Yes. Selma, it’s Mark again. I mean, just broadly, 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’ll look to we consider new retail assets every time they become available.

As you know, we’re very disciplined. So 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. So 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 and so we’ll look to kind of organically grow those. It may take some time because there’s permitting and things like that. These are not flip the switch opportunities like adding new companies. User 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.

Sean Geary, Chief Legal Officer and Secretary, Global Partners: So I

Mark Romaine, Chief Operating Officer, Global Partners: think it is an area that we’re very interested in. We’re going to keep focusing on that and other regions and look for opportunities to grow through acquisition, but also look for opportunities to grow organically. And then if you flip, if you just dial it back to retail, 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.

Selman Akyol, Analyst, Stifel: 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, bid ask spreads getting closer, anything you can just make on commentary along those lines?

Eric Slifka, President and Chief Executive Officer, Global Partners: Yes. 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 terminalling. We continue to look at whatever is out there. I think generally speaking, depending 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 we’re hopeful that we’ll get some transactions done in the next year.

Selman Akyol, Analyst, Stifel: Okay. Thank you very much.

Conference 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, President and Chief Executive Officer, Global Partners: Thanks for joining us this morning, everyone. We look forward to keeping you updated on our progress. Everyone, enjoy the weekend. Thank you.

Conference 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.

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