Thank you for standing by, and welcome to World Kinect Corporation's Fourth Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please remain in your line. I would now like to hand the call over to VP Investor Relations and Communication, Elsa Ballard. Please go ahead.

Good evening, everyone, and welcome to World Kinect’s fourth quarter and full year 2023 earnings conference call, which will be presented alongside our live slide presentation. Today’s presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communications. With me on the call today is Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer. Before I get started, I would like to review our Safe Harbor statement. Certain statements made today, including comments about our expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. World Kinect assumes no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP measures. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a Q&A period. At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Thank you, Elsa, and good afternoon everyone. As we prepare for our upcoming Investor Day in a few weeks, I've been reflecting on our journey and our future direction. The last ten years have brought significant volatility in the energy markets, commerce, geopolitics, and natural disasters. During this challenging decade, our customer base, especially airlines and shipping companies, faced severe financial pressures. I am proud to say that our company navigated this period with great skill, financial stability, and sound stewardship despite the turbulence. Our team managed these challenges effectively, minimizing risk while addressing the impacts of market disruptions on our customers and suppliers, showcasing our expertise and reliability. Today, we have a transformed business profile, characterized by a higher quality of earnings and a more predictable, synergistic portfolio. The words that resonate with me as I reflect back and look ahead are resiliency, focus, momentum, and leverage. This gives me great enthusiasm and optimism for our future. We are well-positioned with a cohesive operating model, consistent processes, and an experienced leadership team. We have a strong global team committed to leveraging our well-developed core distribution platform. This platform buys, moves, and sells energy directly and through a network of partners worldwide, serving commercial, industrial, and governmental clients. Our extensive knowledge in global aviation and marine is rapidly expanding into land-based businesses and products, representing a larger market opportunity. To clarify, while we do not refine products, we excel in refining our services. Our global platform has been tested in unforeseen ways and has proven to be more resilient and insightful. We have learned from our experiences, enhancing our operating model and becoming a more capable financial and commercial partner. Each challenge has better prepared us for future market obstacles, allowing us to deliver increased value to both the market and our investors. From our origins as a broker to becoming a global industrial distribution entity, World Kinect exemplifies transformation, and our mission continues. Our aviation and marine sectors are established global operations, and our extensive experience has led to the sophisticated core distribution platform we have today that achieves consistent performance. Our land operations are developing to mirror the aviation and marine distribution model, gaining momentum as we align our core national and global platforms. Successes are becoming more frequent as our team focuses on standardizing methodologies across people, assets, processes, and tools. We have strengthened our land leadership team by blending in-house talent with proven professionals from acquired companies, all to deliver value to customers and suppliers. This approach will help us achieve the cash flow, returns, and growth opportunities we recognize in this sector. A key component of our land segment involves fuel distribution to retail gas stations and convenience stores. We have expanded our reach by adding nearly 300 new retail locations in 2023, primarily under long-term contracts, demonstrating our strong reputation and relationships with supplier brands. Next, our Cardlock network consists of unmanned retail stations for refueling light commercial vehicles, in addition to serving commercial and industrial clients with fuel, lubricants, power, and natural gas. Our well-established distribution platform is further enhanced by a growing sustainability and renewable energy division. We are committed to increasing access to renewable energy and lower carbon fuels, playing a significant role in developing these solutions through financing, logistics, marketing, technical expertise, and various services to support innovative companies dedicated to their missions. We continue to broaden our range of complementary energy management solutions across our business lines, deepening relationships with customers and suppliers through offerings like renewable energy solutions and emissions reporting, helping our clients achieve lower carbon and net-zero objectives. These essential services enhance our customers' operations and have a strong connection to our other offerings. All these efforts are integral to the ongoing energy transition as we move forward. We are focusing on the areas that matter to our customers and aligning our core distribution model accordingly. Our strategy is closely aligned with our customers’ present and future needs, enabling us to address their conventional energy requirements while supporting their energy management strategies. While still a minor part of our overall business, our renewable and energy management offerings are growing and will contribute significantly to revenue, profitability, and the industry over time. Although the solutions we provide are specialized, much of our operations are consistent across our business activities. The majority of our revenue comes from our core distribution model, showcasing our unique capability to meet both customer and supplier needs. We facilitate the buying, movement, and selling of the essential molecules and electrons that our customers require for their operations. For instance, we are assisting several clients with alternative fueling solutions in response to the recent trade disruptions in the Red Sea, similar to how customers relied on our expertise during the COVID period when normal transportation patterns were disrupted. In 2023, we witnessed the benefits of our core distribution platform. Despite experiencing non-recurring financial impacts in the fourth quarter, which Ira will detail, we delivered solid core operating results with healthy adjusted EBITDA, driven by strong growth in our aviation segment. This segment not only rebounded from the previous year's extreme conditions but also capitalized on improved operating leverage. The marine segment followed a record 2022 but still performed strongly in 2023, while our land business faced some weather-related hurdles in the first half yet continued to grow in our natural gas, power, and renewable energy solutions. The integration of the Flyers team and platform propelled us further forward.

Ladies and gentlemen, please remain in your line. We are experiencing technical difficulty. Please remain in your line. And thank you for your patience.

Hi, we're back. We’re ready to reconvene. Thank you.

Yes. Okay, well, welcome back. Sorry for the technical difficulties. I think I’ll just pick up where I’m pretty sure we left off. So, we’ve been speaking to you about our medium-term adjusted operating margin target for the past few quarters. But there’s only a piece of the story. As the global demand for energy continues to grow, we’re intending to increase our market share, improve our operating efficiency, and continue to extend our value deeper into both our customer and supplier value chains as we’ve been doing for some time now. We’ve got a greater level of confidence in our ability to execute. We’ve got a much sharper focus and I can feel the momentum building. And the demand for our services is as strong as it’s ever been. And all through the change, our focus has remained constant. Our mission was then and still is now to meet our customers’ energy needs in the most efficient manner possible and to provide our supply partners with the world’s most reliable distribution platform. We work every day to improve access to and ensure the surety of energy supply through our core distribution platform. I look forward to sharing more about our strategy and our outlook at our upcoming Investor Day, but what you should take away is that we are better positioned than ever to drive sustainable long-term growth with a favorable market position and a clear strategy to capture opportunities across our three businesses. Before I turn the call over to Ira for a review of our financial results, I want to thank my 5,330 colleagues who work every day to ensure the success of our customers, suppliers, and company, and to our investors, thank you for your support and we look forward to seeing you on March 13 in New York City.

Hey everyone, thank you, Michael, and good evening. Given the unfortunate delay, I will try to speak as quickly as possible. I’m going to begin by reviewing a number of non-GAAP adjustments in the fourth quarter, which aggregated $87 million, or $67 million after-tax. Complete reconciliations of GAAP to non-GAAP financial measures are included in our earnings release, today’s presentation, and on our IR website. The largest of the non-GAAP adjustments was a $49 million charge related to an erroneous bid in the Finnish power market, which we had disclosed when it occurred in November. In our role as a market access provider for both producers and commercial customers of electricity in Finland, we submit a routine daily bid to Nord Pool, which is a commercial power market in the Nordic region, which effectively represents the net of related consumer demand and producer production on a given day. In November, we inadvertently submitted a daily bid for an amount substantially greater than intended. Once we became aware of the error, we made immediate efforts to mitigate the impact, including a request that Nord Pool delay or rerun the related bidding process. When it became apparent that Nord Pool would not take action to mitigate the effects of this obviously erroneous bid, we quickly covered the associated positions fulfilling all related market obligations. This incident was unique and isolated. The result of several independent and exceptional circumstances, all of which together translated to an extraordinary and unfortunate result. We have carefully assessed and reviewed our internal processes and have implemented additional measures to minimize the risk of a similar incident occurring in the future. We also recorded additional non-GAAP adjustments in the fourth quarter. These included asset impairments of $32 million related to the write-down of two investments, the rationalization of non-core business activities, including some of which have been discontinued, as well as a further rationalization of our global office footprint, which began during COVID. Additionally, we incurred costs associated with workforce restructuring activities as we continue driving greater efficiencies in our business. These restructuring activities combined with the rationalization of our office footprint and certain non-core business activities all resulted in immediate cost savings. We understand that in aggregate, these adjustments amount to a large sum. However, aside from the charge related to the Finnish bid, we believe all of the other items help to further simplify our business, enabling us to focus more clearly on growing our core conventional business and our sustainability-related activities. Total fourth quarter non-recurring cash outflows related to all of these non-GAAP adjustments was approximately $50 million, and again, the details are included in our earnings release and on our website. Now let's turn to our fourth quarter and full year financial highlights. And as a reminder, the following results exclude the impact of all the items that I just walked through. On a consolidated basis, total volumes of 4.5 billion were essentially flat year-over-year. Adjusted gross profit was down 1% to $280 million from the fourth quarter of 2022, primarily due to lower profits in our marine and land businesses, partially offset by strong results from our aviation business. And looking at the full year, volume of 18 billion was down approximately 2% with adjusted gross profit at $1.1 billion, up 2% from last year. This is primarily due to a 36% increase in profitability year-over-year in our aviation business, which had a fantastic year, rebounding solidly from 2022, partially offset by lower profits in marine and land. Now some additional details segment by segment, both for the fourth quarter and for the full year. Within the fourth quarter, aviation volumes were 1.78 billion gallons, down 1% year-over-year, impacted by the lower return business activity we shed, generally offset by rateable higher return business. Despite the modest decline in year-over-year volumes, fourth quarter gross profit was $131 million, an increase of 19% year-over-year, driven primarily by the achievement of higher returns amidst the elevated interest rate environment. While full year aviation volumes of 7.3 billion were up only 3%, they were impacted by the rationalization of certain lower return business activity. Aviation full year gross profit increased 36% to $486 million. One last comment on the achievement of aviation's higher returns. We not only achieved such returns by improving margins, which contributed to the significant increase in gross profit, but also by significantly improving working capital efficiency over the course of 2023, contributing to solid cash flow generation. As we look to the first quarter, while aviation results should experience a seasonal decline from the fourth quarter, we expect a year-over-year increase in gross profit again driven by our team's continued focus on optimizing returns across our commercial and business in general aviation platforms. For the land business, while fourth quarter volumes increased 5% year-over-year to 1.62 billion, adjusted gross profit declined 9% to $105 million, due principally to some margin pressure in the U.S. and a lower contribution from the UK, which experienced unseasonably warm weather for much of the fourth quarter. These declines were offset in part by increased gross profit from our natural gas activities as well as increased profitability related to our renewable energy solutions activity. For the full year, land volumes were up slightly at 6.2 billion, driven by increased volume again associated with our natural gas activities, mostly offset by lower liquid fuel volumes, principally due to extreme weather conditions that significantly impacted demand in the early part of last year. Adjusted gross profit for land declined 6% to $448 million, again driven by the extreme weather conditions as well as some margin pressure in our broader commercial and industrial business in the latter part of the year. And similar to the fourth quarter, these declines were partially offset by healthy improvements in our natural gas business as well as continued growth in both our power and renewable energy solutions activities, where we continue to find opportunities to expand relationships with customers as their energy transition journeys and related needs evolve. As shared in previous quarters, the percentage of land volume associated with our natural gas and power business was 37% for the fourth quarter and 34% for the full year. That's up from 32% and 30% in 2022. This is in addition to our continued focus on distributing cleaner liquid fuel products, such as renewable diesel. Overall, these numbers demonstrate our broader focus on cleaner sources of energy for a growing suite of customers throughout the world. Looking to the land's first quarter, while gross profit is expected to be up modestly, the story is effectively opposite of what I described for 2023, with commercial and industrial liquid fuels rebounding from the weather-related weakness experienced in last year's first quarter, partially offset by an expected reduction in natural gas activity driven in part by severe cold weather-related market disruptions in mid-January. And lastly in marine, fourth quarter volumes were 4.3 million metric tons, down 8.5% year-over-year, but up 6% from the third quarter when, as previously noted, we believe we reached a bottom from a volume perspective. Year-over-year, lower volumes and bunker prices coupled with a decline from higher volatility levels in the fourth quarter of 2022 were the primary drivers of the 21% reduction in gross profit to $44 million. Full year marine volume declined 12% to 16.8 million metric tons and gross profit declined to $173 million, down 33% year-over-year. We’ve discussed this over the course of last year, but it’s worth reiterating that lower profitability again was due to a comparison to an extraordinary year in 2022 for marine, which was positively impacted by exceptional volatility and record bunker fuel prices. While marine gross profit declined year-over-year, the business performed very well considering the significantly lower price environment where similar to aviation, marine further improved capital efficiency, contributing to solid returns for the year. Looking to the first quarter, we are expecting marine to be flat to up slightly from the fourth quarter with margins holding steady, but expect a decline in profitability from the first quarter of 2023 when volatility levels still remained high. Now let’s turn to adjusted consolidated operating expenses, which were $207 million in the fourth quarter, consistent with our guidance range last quarter. This is up only 2% year-over-year, and for the full year, these expenses were effectively flat compared to 2022, again demonstrating our continued efforts to manage expenses tightly despite a highly inflationary macro environment for much of the year. For the first quarter, we expect operating expenses will be in the range of $199 million to $203 million, down sequentially driven in part by the cost reduction actions taken during the fourth quarter. Again, we remain committed to enhancing operating efficiencies as evidenced by recent actions. We increased our operating margin to 26% in 2023 and we remain focused on achieving our medium-term operating margin target of 30% by continuing to drive cost efficiencies in our business and by also further sharpening our portfolio of business activities. This will enable us to continue to simplify our story while achieving increased profitability and greater shareholder returns. Fourth quarter interest expense was $32 million, slightly above the high end of our guidance range, driven principally by funding costs associated with the unanticipated non-recurring cash outflows during the quarter, but it was down $3 million from the fourth quarter of 2022. As we look ahead to the first quarter, we expect interest expense to remain generally flat with the fourth quarter, representing another year-over-year decline. And with expected interest rate declines over the course of the year, we should benefit from further reductions in interest expense as the year progresses, contributing to an expected several million dollar decline in interest expense compared to 2023. Our effective – adjusted effective tax rate for the fourth quarter was 21.1%, and our full year adjusted effective tax rate was 21.7%, both slightly below guidance. Looking forward to 2024, we expect our adjusted effective tax rate will be in the range of 23% to 27%, up a few percent from 2023, which benefited in part from the reversal of certain valuation allowances, many of which became necessary during the pandemic. And despite the one-time cash outflows that we experienced during the fourth quarter, we still generated $5 million of operating cash flow, bringing year-to-date operating cash flow to a solid $271 million, further supporting our strong liquidity profile, which provides us with the capital we need to invest in organic business activities, fund strategic investment opportunities, and return capital to our shareholders through buybacks and dividends. Speaking of buybacks and dividends, these totaled $94 million in 2023 and include the additional repurchase of just over 500,000 shares for $10 million during the fourth quarter. Our capital allocation priorities remain consistent, supporting the growth of our business while carefully managing balance sheet leverage and also increasing shareholder value through buybacks and dividends. I look forward to discussing these priorities with you as Mike indicated at our upcoming Investor Day on March 13. So in closing, we generated $386 million in adjusted EBITDA, driven principally by a strong rebound in aviation results, generally offset by a significant decline in marine profitability from the record results they achieved in 2022. While our land and liquid fuels business activities were negatively impacted by weather-related challenges in the first half of the year, this was partially offset by solid improvements in our natural gas and renewable energy solutions activities. We delivered $271 million of operating cash flow for the year despite again unanticipated non-recurring cash outflows in the fourth quarter, further strengthening our balance sheet with net debt to adjusted EBITDA at only 1.5x at year-end, providing us with significant financial flexibility to continue investing in our core business, while also remaining focused on identifying the right strategic investment opportunities for us that could accelerate growth and operating leverage in our core platform. Speaking of operating leverage, again we improved our adjusted operating margin to 26%, with a continued focus on driving additional operating efficiencies towards our medium-term goal of 30%. And one last time, I look forward to seeing all of you, or most of you at our upcoming Investor Day event on March 13, where again our goal will be to help simplify our story, talking about what we have done best for decades, as well as some of our newer sustainability-related activities and how they fit into our core operating model and maybe most importantly, share our views for the exciting growth opportunities we expect looking forward. Thank you.

Our first question comes from Ben Nolan of Stifel. Ben, please go ahead with your question.

Oh, thank you, operator. Glad to finally get through to you guys. I wanted to ask a couple of things, but first, Ira, you finished up talking about moving to that 30% margin. You’re making some gradual progress. I’m just trying to wrap my head around sort of what’s realistic. If I go back to 2018, 2019, volumes were 10% higher, but costs, employee costs were 10% lower. G&A costs were 30% lower. Where is the wood that can be chopped here? How do you – how are you going to get to that 30%? Is it more top-line or bottom-line focused?

I would say great question. If you put it in perspective, Ben, 4% beyond where we were in 2023 coming out of the year, you're talking about $40 million of efficiency. While that’s a big number, it may not be as massive as you would think when you’re simply looking at going from 2026 to 2030. So saying that for starters. It’s a combination of both items that you mentioned, right? It’s a combination of greater focus on business activities that drive greater returns. The Cardlock business with Flyers is a great example of that, where the return in that business is well above 30%. Right? Doing more of the things like we did in the fourth quarter, which included some workforce restructuring activities, looking at offices that are barely being utilized, that cost us several million dollars that we don’t really need anymore in today’s environment, and also elimination of some certain non-core activities that were actually draining the P&L as opposed to adding to it. So we’ll continue to look at things like that and seek opportunities. At the end of the day, we’re looking to drive greater efficiencies on every line item in our P&L. And you mentioned G&A being up, but the last couple of years it’s been flat. We’re trying to bring that number down a little bit, but at least it hasn’t been growing. Considering the highly inflationary environment we’ve been in, we feel that’s a pretty good outcome, but sure, we could do better. Right? So we’re pretty confident that combination of getting some cost-efficient GP, more of that into the mix and combining that with identifying more cost efficiencies, different geography, opportunities for labor, for example, where there’s some arbitrage there, we’re looking at all sorts of things along those lines to make steadier progress towards hitting that number. So yeah, it’s true to your polite comment, we only achieved a 1% improvement over 2022 and 2023. We’re looking to achieve further improvement this year and of course, even more improvement in 2025 and beyond.

Right. I appreciate that color. As it relates to sort of your strategy and also knowing that we’ll probably hear more about that in just a few weeks now. Where would you say is the priority? This might be just another way of asking the same question, but is your – is management’s focus more on sharpening the pencil here and making the existing business more efficient or finding ways to grow the business, and appreciating again you’re probably trying to do both, but where would you say is the greater level of emphasis?

Ben is Mike, thanks for the question. Aviation and marine, as you heard in my prepared comments, have been active for quite a number of years. Land has been a journey. Kinect is kicking in, and we are seeing the same thing with Land; Flyers is making great contributions, Lykins, a number of different businesses that we brought into the mix here. Admittedly, this has been a bit of a slog. We’ve got, we think a good consolidated team in the mix. So it’s flexing liquid land, flexing our sustainability business. We are seeing activities coming there, certainly enhancing aviation and marine. You never take that for granted. And we’re leveraging aviation and marine. There’s a good amount of cross-sale with sustainability. I was suggesting that in my comments. And then it’s cost, it’s continuous cost management culture. Do we need 46 vendors for a particular item? So that continues and getting operating leverage on the platform? So it’s ongoing work, but certainly looking at land and looking at our sustainability as growth engines, we feel good about that and we feel like we’re in a better position now.

All right, great. And then if I could just one last one. You’d mentioned that obviously the craziness that’s going on in the Red Sea and the Panama Canal, and that there were some reminiscences to post-COVID time, and that was a really good period for the marine business. Are you starting to see any financial outcomes that are at all similar to that or any possible bright spots in marine as a function of all of the crazy things that are going on in the world?

I don't think that you're going to see anything earth-shattering. You never know, but the thing is, a lot of the planets need to be aligned. It's not one thing. You have a good amount of slow steaming going on. So certainly, it's a perfect way for us to help the market and be able to create value in the marketplace and be able to participate in that value creation. We're not really expecting it's going to be seriously robust. But it's generally positive when there are certain types of dislocation that we can monetize by providing solutions. So not forecasting it to be robust. But – and the thing now too is, as much as I hesitate to say this, is that we have become a physical participant in the marketplace in very select locations. So while we're still very asset-light, that was part of the gambit, right, to become a truly strategic partner to our clients and to be able to fill a gap. We experience some of those dislocations now, but not nearly as much as pure physical players.

One thing I'd add to that, Ben, is even though marine didn't produce as much, it may not have a massive benefit from some of the things you described. Even at the level of profit contribution that they're driving today, the operating margin of that business is very strong. We're actually in a position now where in the fourth quarter we had zero working capital invested in that business. So again, that's supporting both margins and returns. So when there are opportunities and disruptions and prices go through the roof, we tend to make a lot more money in that business. But even at these levels, the team is doing a phenomenal job. It's not competing for capital with aviation and land, and yet it's still producing a reasonable amount of cash flow for us. So we're going to talk more about that at Analyst Day. So I just wanted to give you a preview.

All right, well, great. And I appreciate it. Thanks, guys.

Thank you. Our next question comes from the line of Ken Hoexter of Bank of America. Your question, please. Ken?

Hi, this is Adam Roszkowski on for Ken Hoexter. Thanks for having me, Michael, Ira, Elsa. I guess to start with the yesterday coming up, what is the margin picture for the sustainably linked land business, and how should we be thinking about the structural returns on this ESG portfolio over the next couple of years here? Thanks.

Look, that – Mike will be commenting after me. But let me give my thoughts again. I would start by saying that that's still small, but it's growing, it's picking up steam, and there's very little capital tied up in that business because there's a big service-oriented component. And where there is some need for investment, it's relatively small. So the returns of that business over time should be higher than the historical conventional businesses we've been in that involve investments in inventory, for example, or physical assets like a small part of our marine business, and even aviation. So we'll share some more detail on that at Analyst Day. But certainly the opportunity there is more that people are your asset in that business principally. So as we start building up scale and we can leverage the folks that we have, the returns in that business will continue to increase over time. But again, at this stage, we don't have that leverage yet. So those returns are not yet where we'd like them to be.

I think that's fine. We'll pick that in New York.

Got it. Then switching over to aviation, you talked about right-sizing this portfolio. Can you talk about any business that is maybe left to call? And then how do you think about the sustainability of gross margins? And is there any notable repricing that is taking place within this business first quarter or this year?

What was the first part of that, Adam?

Any business that is left to maybe shed off that a…

Okay. Yes. So a big part of the shedding really took place as we entered the mid-part of 2023, which is when our largest contract renewal cycle takes place in an extremely elevated interest rate environment? We worked really hard to get our margins to a better place to mitigate some of the incremental interest costs that we were obviously incurring over the course of 2023. And as you can see from our numbers, our margin increased 10%, which is pretty significant considering our volumes. So whether that continues. So we've already got the extra margin last year. We are always – the team is always trying to do the best job possible in achieving optimal margins as we get into the cycle in the mid-part of 2024, we're not necessarily going to have the same quantum leap in margins that we had in the summer of 2023. But we're striving for the best possible outcome as the year progresses. And we've actually started the year out pretty strong, which is a positive sign. So the jury is still out on what we will be able to achieve in margin as the year progresses. But we started the year at a very strong level and we're going to try really hard to hold on to that at a minimum.

Got it. And then just a clarifying one, did you ever give the operating income breakdown impact between corporate and land on the finished bid impact?

Yes. The finished bid impact is all in land. It's all in land and it all flowed through gross profit.

Okay. And then last one, if I can, just on interest expense. You talked about a several million dollar decline next year for your expectation. And you mentioned that lower interest rates are what is underpinning that. Is there any more room for working capital efficiency? How are you thinking about that in your outlook this year?

Look, we don't like tons of interest expense any more than you do. So we're trying to do everything within our power to bring that number down and not solely leave it to the Fed. So there are a lot of things we're focusing on. We did a phenomenal job. Our net trade cycle was lower than I ever remember across the entire business in 2023. I don't know if we could bring that down much further, but we look at efficiency opportunities in that regard every day. And we also look at opportunities where we may be able to generate some cash from some non-core assets to pay off some debt and reduce interest expense as well. So there are all sorts of things we're focused on. At a minimum, we should see a several million dollar decline. It could be greater than that depending on the outcome of certain activities that are underway.

Thanks, Ira, Michael, Elsa, appreciate it.

Thanks, Adam.

Thank you. Our next question comes from the line of John Royall of JPMorgan. Your line is open. John?

Hi. Good evening. Thanks for taking my question. So I had a follow-up on Marine. You've normalized a bit from the 22 levels that were impacted by price volatility, but still well ahead of where you were in 2021. Can you talk about what's structural there and what's maybe still impacted by the short-term volatility issues? And then just maybe how we should think about that business longer term relative to the 4Q run rate?

Again, I think volumes are pretty stable now. I think last quarter some folks asked about our volumes and we felt, and maybe predicted accurately that we hopefully hit a bottom and we rebounded from that bottom in the fourth quarter. So I guess we were generally correct, and we think at this point, volumes are pretty stable. There seems to be some upside opportunity, but not necessarily a really big number. As Mike alluded to earlier, margins are still a bit ahead of historical averages, but considering the interest rate environment we're in, that makes complete sense. So assuming none of us expect interest rates to drop dramatically, regardless of which Fed Governor you speak to in 2024. So I think that storyline will remain as it is today, which means that it should be not necessarily a play on words, pretty steady sailing for 2024 and I think the run rate we're at is a reasonable run rate to expect, and there can always be some upsides and downsides. But the volatility factor that we benefited from is really behind us now. And now it's pure blocking and tackling and generating returns that achieve the margin thresholds that we set for our team.

Great. Thank you. And then follow-up on the buyback. You stepped up the pace a little bit. Last year going from about $50 million in 2022 to $60 million in 2023, is that a good number to think about for 2024? And then how do you think about cadence there? Is it just opportunistic when you have the cash flows, or are you timing the market all? We notice some quarters you buy back stock and some quarters you don't, so just any color on the timing will be helpful.

Yes. It's generally been opportunistic. We always try to buy back I would say at least 40 million or so, which keeps our share count steady, which means it's offsetting the dilutive impact of employee awards. Last couple of years we exceeded that a bit as our stock was definitely not where we wanted it to be. So we bought back a bit more. So I think we'll always be in that ballpark. There may be an exceptional year, plus or minus, but I think we've been pretty consistent there, and we expect that we'll remain generally consistent somewhere in that range depending upon our cash flows, stock price, market environment, competing priorities for capital, etc.

Thank you.

Thank you. Our next question comes from the line of Pavel Molchanov of Raymond James and Associates. Your question, please Pavel.

Thanks for taking my question. As I looked at the cash flow statement for the quarter, there was an acquisition. Can you talk about what it is that you bought?

Great question. So we made a small acquisition in Michigan of basically several cardlocks, similar to the cardlock activity we picked up with a Flyers acquisition. And I’m happy to ask you that’s a great example of a completely synergistic, easy to integrate business opportunity, albeit it was small, where we literally integrate, I’ll get shot for saying this by people on our team overnight. Right. Because all we have to do is add those cardlocks to our network, which is basically through the use of technology, and ensure they’re getting fueled through a local provider. And that’s it. We picked up, I think, two employees in that old transaction, and we got to pick up basically all of their GP. We would do that every day if we could, and we’re always looking at opportunities like that. That was one that worked out for us in the fourth quarter.

Okay, question that I ask every quarter, what was the low carbon percentage of EBITDA or operating income in Q4?

The good news is we had pretty exceptional results in that part of our business, Pavel, in the fourth quarter. So those numbers stepped up a little bit from, call it 10% or 11%, 2%, 2.5% higher. I would say for the full year of 2023, we were low teens, so maybe a little better than what I had shared earlier. And we expect 2024 to be similar. So, we’re making some slow and steady progress there. There’s always going to be pops in a given quarter. Again, fourth quarter, the numbers were actually a bit higher than that. But if you normalize it and you look at the year-over-year, we grew from 9% of GP in 2022, and that number was up to close to 13 in 2023. And then the EBITDA metric from 2022 to 2023 was even more impressive, went from seven to somewhere around 14. So we doubled, again part of that was based on some pretty big wins we had in the fourth quarter that aren’t necessarily going to be repeated every quarter. But we should be safely in double digits for GP and EBITDA, percent of the total in those related businesses in 2024 as well.

Right. I think this touches on maybe one of the questions asked earlier, but when you sell a gallon of renewable diesel, SAF, et cetera, is that a higher margin profile structurally compared to its petroleum counterpart?

It could be. So, I think it’s fair to say that you’ve got a product, a commodity that is not in ample supply. The demand for it does vary. There was a time when we had plenty of sustainable aviation fuel and there was a lot of interest. But when you start to talk about the price, that interest disappeared. You are seeing some economies of scale come through. But I think to answer your question directly, the answer is yes. So you know that, you know that yes, simply the answer is yes. And, sometimes the amount of effort required to source it, certainly in the early days, but you are seeing the distribution, the production become more mainstream. Many of these products, not all of them are drop-in fuel. So they drop right into our distribution platform. And certainly, with our end users, there are some products that require a little bit of educational aspect to it, and we’ve got the expertise to be able to do that. But yes, Pavel, they are definitely attractive from that dimension.

Thanks very much.

Thank you. I would now like to turn the conference back to Michael Kasbar for closing remarks. Sir?

Well, thank you very much to everybody listening today, our supporters, analysts following our stock, and certainly our investors. We feel like we’ve got a far greater focus and good momentum in the organization. We look forward to seeing you all in New York to talk some more about our business. And thanks again to our colleagues, on behalf of the management team, and all of the folks that we work with every day. Thanks for doing what you do. We’ll see you all in a quarter. Take care. We’ll see you in New York. Take care. Bye-bye.

Bye, everybody.

This concludes today’s conference call. Thank you for participating. You may now disconnect.