Transcript
Good day, everyone, and welcome to the Global Partners Third Quarter 2025 Financial Results Conference Call. Today's call is being recorded. With us from Global Partners are President and Chief Executive Officer Eric Slifka, Chief Financial Officer Gregory Hanson, Chief Operating Officer Mark Romaine, and Chief Legal Officer and Secretary Sean Geary. At this time, I'd like to turn the floor 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 meanings of federal securities laws, including projections or 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, and thank you for joining us. We performed well in the third quarter, consistent with our expectations, reflecting operational strength and disciplined execution across the organization. We experienced a strong performance in our Wholesale segment in Q3, driven by favorable market conditions in gasoline and the continued optimization of our liquid energy terminal network. Over the past 2 years, we have significantly scaled our terminal assets, meaningfully enhancing our product distribution network and positioning Global Partners for long-term growth. This effort reflects our strategy of efficiently connecting liquid energy products with downstream markets, leveraging the integration of terminals acquired from Motiva, Gulf and ExxonMobil. These assets continue to perform well, strengthening our supply chain flexibility, contributing to throughput growth and enhancing our network. We are pleased that fuel margins have remained historically strong even with the year-over-year decline. Our retail network is a critical part of our strategy as we invest in, optimize and upgrade our portfolio. Recently, we expanded our marine fuel supply operations into the port of Houston. As a reminder, today, our bunkering business is centered in the Northeast, and now we have extended this business into the Gulf Coast. On the retail side, we're continuing to redefine the convenience store experience through our all-time Fresh and newly reimagined Honey Farms Market brands. These brands embody our 4 pillars: community, hospitality, local and fresh, while introducing chef-driven menus, clean label offerings and hyperlocal engagement. Through our new loyalty platform, these benefits, we are creating a seamless personalized experience designed to drive repeat business, build long-term loyalty and strengthen the connection between our guests and our brands. Turning to our distribution. In October, the Board declared a quarterly cash distribution of $75.50 per common unit or $3.02 on an annualized basis. This marked our 16th consecutive quarterly distribution increase. The distribution will be paid on November 14 to unitholders of record as of the close of business on November 10. With that overview, I'll turn it over to Greg for the financial review. Greg?
Thank you, Eric, and good morning, everyone. As I review the numbers, please note that all comparisons will be with the third quarter of 2024, unless otherwise noted. Net income for the third quarter was $29 million versus $45.9 million last year. I would note that last year's quarter had a $7.8 million onetime gain on asset sales that affected that number. EBITDA was $97.1 million for the third quarter compared with $119.1 million and adjusted EBITDA was $98.8 million versus $114 million. Distributable cash flow was $53 million compared to $71.1 million, while adjusted distributable cash flow was $53.3 million versus $71.6 million. Trailing 12-month distribution coverage remained strong as of September 30, with 1.64x coverage or 1.5x after factoring in distributions to our preferred unitholders. Turning to our segment details. GDSO product margin decreased $18.8 million to $218.9 million. Product margin from gasoline distribution decreased $19.3 million to $144.8 million, primarily due to lower fuel margins compared with the same period in 2024. On a cents per gallon basis, fuel margins of $0.37 were down 7% from the previous year. In the third quarter of 2024, we experienced strong fuel margins, in part due to Wholesale gasoline prices declining by $0.57 during the quarter. In comparison, in this year's third quarter, Wholesale gasoline prices declined only $0.11. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased $0.5 million to $74.1 million, in part due to an increase in sundries. At quarter end, we had a portfolio of 1,540 sites, 49 fewer than the same period last year. The site count does not include the 67 locations we operate or supply under our Spring Partners Retail joint venture. Looking at the Wholesale segment, third quarter product margin increased $6.9 million to $78 million. Product margin from gasoline and gasoline blend stocks increased $18.5 million to $61.5 million, primarily due to more favorable market conditions in gasoline and the expansion of our terminal network. Product margin from distillates and other oils decreased $11.6 million to $16.5 million, primarily due to less favorable market conditions in residual oil. Commercial segment product margin decreased $2.5 million to $7 million, in part due to less favorable market conditions in bunkering. Turning to expenses. Operating expenses decreased $4.6 million to $132.5 million in the third, primarily related to lower maintenance and repair expenses at our terminal operations. SG&A expense increased $5.8 million to $76.3 million, reflecting in part increases in wages and benefits and various other SG&A expenses. Interest expense was $33.3 million in the third quarter of '25, down $1.8 million from last year, in part due to lower average balances on our credit facilities. CapEx in the third quarter was $19.7 million, consisting of $11.9 million of maintenance CapEx and $7.8 million of expansion CapEx, primarily related to investments in our gasoline stations and terminals. For the full year, we now anticipate maintenance capital expenditures of approximately $45 million to $55 million, while expansion capital expenditures, excluding acquisitions, are anticipated to be approximately $40 million to $50 million, relating primarily to investments in our gas station and terminal business. Our current CapEx 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. Turning to our balance sheet. As of September 30, leverage as defined in our credit agreement as funded debt to EBITDA was 3.6x. We had $240.6 million outstanding on the working capital revolving credit facility and $124.8 million outstanding on the revolving credit facility. Looking ahead to our Investor Relations calendar, next month, we'll be participating in 2 events, the BofA Securities 2025 Leveraged Finance Conference and the Wells Fargo 24th Annual Energy and Power Symposium. Please contact our Investor Relations team if you'd like to schedule a meeting during the conference. Now let me turn the call back to Eric for closing comments. Eric?
Thanks, Greg. We remain focused on capital discipline and operational efficiency, continuously seeking opportunities to drive sustainable returns and long-term value creation for our unitholders. Our scale, integrated operations and talented team give us the flexibility to respond to market shifts and pursue growth opportunities that create lasting value for all of our stakeholders. Now Greg, Mark and I would be happy to take your questions. Operator, please open the line for the Q&A.
Our first question comes from Selman Akyol with Stifel.
Can you talk a little bit more about entering the bunkering market in Houston?
Yes. I mean we're already obviously in the business. We felt that there was an opportunity, and we feel like the assets that we've entered into there are differentiated versus our competition. And so we're already, like I said, in that business, we already have the customer list. We already have the know-how and the knowledge, and we think it's a good fit for the company.
Got it. And when you say sort of differentiated offering, can you just explain that a little bit?
Yes, primarily just the location of the facilities and how we're going to go to market to supply that very busy corridor that is not always so easy to deliver fuel in.
So you're on the Houston Ship Channel?
We're outside of it, yes.
Just outside. Okay. Can you talk a little bit about the acquisition environment? And you noted that store counts were lower relative to where you were third quarter last year. And so I'm just curious to more to go there? Or do you think you can add stores from here? How should we be thinking about that?
Yes, it's Greg Hanson. I can discuss the sites. We conducted a significant optimization program on our sites last year. Over the past 12 months, we've sold seven sites, converted fifteen sites, and terminated some low-margin dealer relationships. We continue to optimize, but there may not be much room left for major site divestitures at this time. Overall, we are satisfied with our portfolio, even though it appears to have declined year-over-year due to last year's optimization efforts. We will continue to make minor adjustments, but we are content with the current state of our portfolio. On the M&A front, the retail sector has been relatively quiet as we entered the fourth quarter, but we are noticing an increase in activity and more deals emerging in that space. Additionally, we are still exploring opportunities in the terminalling area throughout the year, and there has been a noticeable uptick in retail activity.
Got it. So Parkland, which is north of the border, was recently acquired, but they have stores in the U.S. Do you face much competition from them?
We do not have any competition from them as none of our retail operations in the GDSO segment are located in their area at this time.
Got it. And then there's been reports of sort of the lower end consumer being under pressure. And I'm wondering if you're seeing that and if you have any thoughts going forward on that?
Yes, we've definitely observed that this year, similar to many other retailers. There's noticeable pressure on lower-income consumers, with many trading down from premium to more generic brands. We're working to leverage our loyalty program to enhance promotions. While there's pressure overall, we were pleased with our performance this summer in the C-stores. We've seen a year-over-year increase, and that’s without adjusting for same-site performance, despite operating 16 fewer company-run sites than last year. Being up in GDSO station operations is quite impressive for us. It was a strong summer overall, particularly in the Northeast where we continue to cater to a higher-income demographic. Overall, we’re satisfied with our C-store performance this summer. However, I agree that it's well acknowledged that the lower-income consumer is under pressure, while higher-income consumers are still spending, which is positive.
Got it. And then the last one for me. Just how is labor going for you guys? Is it getting any easier?
I would say that wage inflation has eased somewhat. However, in the retail environment, we still face significant turnover. Compared to the time frame of 2022 and 2023, we're in a better position. We're focused on optimizing our labor hours and ensuring we have the right associates in the right stores to enhance sales, and we will keep working on that.
Got it. I guess what I was thinking about is, is it easier to get people now? Are you seeing more resumes, more people? I mean resume is too strong of a word, but are you seeing more applicants, that kind of thing?
Yes. I think we are overall versus the last couple of years, definitely.
We have reached the end of the question-and-answer session. Mr. Slifka, I'd like to turn the floor back over to you for closing comments.
Thanks for joining us this morning. We look forward to keeping you updated on our progress. Everyone, have a great Thanksgiving.
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.