Transcript
Good day, everyone, and welcome to the Global Partners First Quarter 2025 Financial Results Conference Call. Today's call is being recorded. All lines have been placed in listen-only mode. 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'd like to turn the call over to Mr. Geary for opening remarks. Please go ahead, sir.
Good morning everyone and 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. 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.
Thank you, Sean. Good morning everyone. We had a strong first quarter across the company, generating healthy year-over-year growth across our key profitability metrics. Product margin in our wholesale segment was up from the prior year, reflecting strong execution by our teams, a favorable market environment, and the successful integration of additional terminal assets. Since the end of 2023, we have continued to invest in and optimize our terminal assets, expanding our midstream footprint to more efficiently serve our throughput and wholesale customers. These enhancements strengthen our ability to link refined liquid energy products with downstream markets, supporting the evolving needs of suppliers and customers in today's dynamic energy landscape. Our gasoline distribution business benefited from healthy fuel margins, supporting strong overall performance. Ongoing portfolio optimization resulted in a decrease in company-operated sites, reducing our station operations product margin year-on-year in the quarter. By maintaining financial discipline and carefully directing our capital, we are able to invest in accretive organic growth and selective acquisition opportunities while continuing to consistently return cash to unitholders. In April, our Board increased our quarterly cash distribution on common units to $0.7450 per unit, equating to $2.98 on an annualized basis. The distribution will be paid May 15th to unitholders as of the close of business on May 9th. With that, now let me turn the call over to Greg for the financial review.
Thank you, Eric, and good morning, everyone. As I review the numbers, please note that all comparisons will be with the first quarter of 2024, unless otherwise noted. Looking at our key profitability metrics, net income for the first quarter was $18.7 million versus a net loss of $5.6 million last year. EBITDA for the first quarter increased to $91.9 million from $56.9 million and adjusted EBITDA increased to $91.1 million from $56 million in the prior year period. Distributable cash flow was $45.7 million in the first quarter compared with $15.8 million in the prior year period and adjusted ECF was $46.4 million compared with $16 million last year. The primary growth driver behind these results was the strong performance of our wholesale segment. It's important to provide some context for the year-over-year comparison. As a reminder, in Q1 of 2024, certain products in our wholesale segment were negatively impacted by the timing of mark-to-market valuations, which were then fully recovered in what was a very strong second quarter last year. In contrast, the timing and magnitude of mark-to-market impacts were minimal in Q1 this year, meaning our reported results more closely aligned with the strong performance of our core operations. TTM distribution coverage as of March 31, 2025, was 2.03 times or 1.96 times after factoring in distributions to our preferred unitholders. Turning to our segment details, GDSO product margin increased $0.2 million to $187.9 million in the quarter. Product margin from gasoline distribution increased $4.2 million to $125.8 million, primarily reflecting higher fuel margins year-over-year. On a cents per gallon basis, fuel margins increased $0.02 to $0.35 in Q1 2025 from $0.33 in Q1 2024. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, decreased $4 million to $62.1 million in the first quarter of 2025. The decrease was due in part to the sales and conversions of certain company-operated sites, consistent with our ongoing strategy of portfolio optimization. At quarter end, we had a portfolio of 1,561 sites, a decrease of 40 sites year-over-year. In addition, we operated or supplied 66 sites under our Spring Partners retail joint venture. Looking at the Wholesale segment, first quarter 2025 product margin increased $44.2 million to $93.6 million. Product margin from gasoline and gasoline blend stocks increased $27.4 million to $57.1 million, primarily due to more favorable market conditions in gasoline. Product margin also benefited from the 2024 acquisitions of terminals from Gulf Oil and ExxonMobil, which were acquired in the second and fourth quarters of 2024. Product margin from distillates and other oils increased $16.8 million to $36.5 million, primarily due to more favorable market conditions and distillates and winter weather that was, on average, 9% colder than the prior year period. Commercial segment product margin increased $0.1 million to $7.1 million. Looking at expenses, operating expenses increased $6.6 million to $126.7 million in the first quarter of 2025, primarily related to our terminal operations and the addition of the Gulf and ExxonMobil terminals in 2024. SG&A expense increased $3.9 million in Q1 2025 to $73.7 million, reflecting in part increases in long-term incentive compensation, wages and benefits, various other SG&A expenses, and a decrease in acquisition costs. Interest expense was $36 million in the first quarter of 2025, up $6.3 million from last year, primarily due to higher average balances on our credit facilities related to our terminal acquisitions in 2024. CapEx in the first quarter was $17.9 million, consisting of $9.6 million of maintenance CapEx and $8.3 million of expansion CapEx, primarily related to investments in our gasoline stations and terminals. Our balance sheet remains strong at March 31st, with leverage as defined in our credit agreement as funded debt to EBITDA at 3.28 times and ample excess capacity in our credit facilities. We had $354.7 million outstanding on the working capital revolving facility and $167 million outstanding on the revolving credit facility. Before I turn the call back to Eric for closing comments, let me review our upcoming Investor Relations calendar. This month, we'll be participating in EIC's 22nd Annual Energy Infrastructure Investor Conference. And in June, we'll be participating at the Stifel Cross Sector Insight Conference and the BofA Energy Credit Conference. If you're attending one or more of the events, we look forward to meeting you there. Now, let me turn the call back to Eric for closing comments.
Thank you, Greg. As we look ahead, the power of our scale, the resiliency of our integrated model and the creativity of our people position us to just not weather disruption, but to find opportunity within it. We are confident in our strategy, focused on disciplined execution, and committed to delivering long-term growth for our unitholders. Now, Greg, Mark, and I would be happy to take your questions. Operator, please open the line for Q&A.
Thank you. Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.
Thank you. Good morning. Congratulations on a successful quarter. I wanted to begin by discussing the GDSO and the high grading associated with it, as well as the adjustment of capital towards the terminals. Could you elaborate on the opportunities you see for continuing this process, as well as any potential acquisitions or insights you have regarding the terminal side?
Yes, I mean, I think, Selman, basically, we're always reviewing our retail business, and we're looking at our assets, and we're looking at the most efficient or best way to operate or supply those assets. It's not a static environment, and we continue to look at them. But as we acquire assets and operate them, we may make later decisions that optimize the value we can generate from those assets. I wouldn't look at it as repositioning capital per se to terminals; rather, I think of it as being opportunistic and doing what is best at that moment in time. M&A is busy. It's busy at every level, whether that's terminal or whether that's retail. It's really about finding the right deal that fits the company, that we think competitively advantages us and allows us to make a somewhat higher return. So those are the places we're going to continue to focus on and try to be competitive.
Got it. Thank you for that. And then could you just talk a little bit about the market conditions that allowed wholesale to do so well and then currently what you're seeing in the marketplace?
Yes, I can start, and Mark can fill in anything I missed, Selman. It's Greg. A couple of things. One, it was a nice cold winter up here in the Northeast, which definitely helped our wholesale distillate business. We've had two back-to-back warm winters. It was 9% colder, and then it was really the integration of our terminaling assets, the ExxonMobil terminal in East Providence and the Gulf terminals that really added to our additional capacity on the wholesale side and allowed us to take advantage of market opportunities that were out there. So, I think it was a nicely normalized quarter for us. I mentioned in my points that last year was a tougher comparison. We didn't do as bad as it looks like last quarter; we just got that back in 2025. But I think really, it was a nicely quarter that was optimized around the integrated assets we've had on the terminaling side. And I don't know, Mark, if you have anything to add there?
No.
Let me ask about the timing and tariffs. Were there any disruptions in the Northeast markets that you were able to take advantage of?
Yes, Selman, it's Mark. The tariffs were in effect for a very short time, probably just two days, specifically impacting Canadian oil, which is more relevant to us. Although this created some market volatility, which typically works to our advantage, it was only temporary. Currently, there is no significant effect on supply or market conditions. Our primary concern is how these tariffs might influence consumer behavior, which could eventually affect our store sales, but that remains uncertain. If there is going to be an impact, it will likely be in that area. As for supply, margins, and overall business optimization, there is no real effect at this time.
Got it. Okay. Appreciate the color. Thank you so much.
Thanks.
Thank you. Mr. Slifka, there are no further questions in the queue. I'll turn the floor back to you for any final comments.
Thank you for joining us this morning. We look forward to keeping you updated on our progress. Enjoy the rest of your spring, everyone.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.