Global Partners LP (NYSE: NYSE:GLP) announced its fourth-quarter 2023 financial results, highlighting significant strategic acquisitions and a strong balance sheet. The company completed transformative deals, including the acquisition of Motiva terminals and a retail joint venture with ExxonMobil (NYSE:XOM), which are expected to provide new growth avenues. The financial performance showed an adjusted EBITDA of $112.1 million, with a net income of $55.3 million.
The company's gasoline distribution segment saw an increase in product margin, while the wholesale segment experienced a decrease due to market conditions.
Global Partners is optimistic about future growth opportunities and intends to maintain a strong financial position to support its expansion and acquisition strategy.
Key Takeaways
- Global Partners acquired 64 convenience and fueling facilities in Houston and 25 liquid energy terminals from Motiva Enterprises, expanding its operational footprint.
- The integration of Motiva assets is in progress, with expected target acquisition multiples in the second year.
- A quarterly cash distribution of $0.70 per common unit was approved by the board.
- The amended purchase agreement with Gulf Oil reduced the price to $212.3 million and excluded the Portland, Maine terminal.
- The company's leverage ratio stands at approximately 2.86 times, with a strong balance sheet after a private offering of $450 million in senior unsecured notes.
Company Outlook
- Global Partners anticipates maintenance capital expenditures of $50 million to $60 million and expansion capital expenditures of $60 million to $70 million for 2024, excluding acquisitions.
- The company is focused on maintaining a strong balance sheet and cash flows to execute strategic priorities and capture growth opportunities.
Bearish Highlights
- The wholesale segment product margin decreased to $51.9 million due to less favorable market conditions for distillates.
- SG&A expenses increased to $81.3 million.
Bullish Highlights
- The GDSO product margin increased to $245.4 million, driven by higher fuel margins in the gasoline distribution segment.
- Operating expenses decreased to $116 million, contributing to a solid financial performance.
Misses
- There were no specific misses mentioned in the transcript summary.
Q&A Highlights
- The company expressed excitement about growth opportunities in 2024 and plans to be opportunistic in pursuing potential deals and transactions.
- Global Partners expects margins to be higher than historical levels due to various factors.
- The company is comfortable with a coverage ratio of 1.9 times and intends to retain excess cash flow for expansion and acquisitions.
- They are actively looking for acquisitions, focusing on assets with flexibility and good access, such as waterborne and rail access.
Global Partners LP, with its strategic acquisitions and positive financial results, demonstrates a strong position in the market. The company's focus on operational expansion and maintaining a solid financial foundation indicates a forward-looking strategy aimed at capitalizing on growth opportunities in the evolving energy sector.
InvestingPro Insights
Global Partners LP's (NYSE: GLP) recent financial results reflect a company on the move, with strategic acquisitions and a robust balance sheet setting the stage for future growth. To provide further context to these results, InvestingPro data and tips offer additional insights into GLP's market performance and financial health.
InvestingPro Data:
- Market Cap: $1.57 billion
- P/E Ratio (Adjusted as of Q4 2023): 11.08
- Dividend Yield as of the latest data: 6.12%
InvestingPro Tips:
1. With a dividend yield of over 6%, Global Partners LP stands out as a significant income-generating stock, particularly as it has maintained dividend payments for 19 consecutive years, showcasing a reliable commitment to returning value to shareholders.
2. The stock's low price volatility combined with a strong return of 27.58% over the last three months indicates a stable investment that has recently experienced substantial growth.
For investors interested in a deeper dive, there are additional InvestingPro Tips available for Global Partners LP, which can be accessed by visiting https://www.investing.com/pro/GLP. These tips could be particularly valuable for investors seeking to understand the nuances of GLP's performance and potential in the current market.
To take advantage of the full suite of InvestingPro features, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This offer extends to a wealth of tips, with a total of 10 InvestingPro Tips available for Global Partners LP, providing a comprehensive analysis of the company's financial metrics and market position.
Full transcript - Global Partners LP (GLP) Q4 2023:
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.
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.
Selman Akyol: Good morning. Maybe just starting off with the Gulf Oil amendment, does that now, presumably you ex that out and that was the big thing that was holding up HSR. Do you have a timeline for closing?
Gregory Hanson: Yes. Sorry. Hey, Selman, how are you doing? It's Greg Hanson. We're not going to talk much about the Gulf transaction other than what we put in the 8-K. We are still working with the FTC to move that forward. That's all we're going to talk about at the moment.
Selman Akyol: Okay. Then can you, as you enter 2024, what's your outlook for your JV with XLM?
Gregory Hanson: Yes, I can speak and Eric and Mark, feel free to add. I mean, I think we're very excited about the JV. We closed on it in June of last year. We've spent a lot of time on it, getting it up to the standards of how we operate sites, and we're excited about that marketplace in Houston. We do think it's a potential good growth opportunity for us in Texas. It's a growing market. It's the largest C-store market in the U.S. There's still a lot of fragmentation down there and consolidation that needs to happen. It's a white space for us, as you guys know, in the C-store space for us, so it has room for growth. I think overall we're excited about the opportunity. We'll look to continue to grow in 2024.
Selman Akyol: So we should expect to see growth out of that in 2024?
Gregory Hanson: That's the goal.
Selman Akyol: Okay.
Eric Slifka: Selman, I would say we're going to be opportunistic like we always are. And we'll try to look at every potential deal and every transaction. And there's a lot going on at the company. There's, Motiva has a few assets, the Motiva assets that are in the Texas market. So, the question is, is can we find the right deals, the right assets to create higher returns by utilizing our asset base?
Selman Akyol: Understood. Any comments on the strength in your cents per gallon this quarter?
Gregory Hanson: Yes, I mean, I think overall, in a less volatile year, we continue to believe that margins are going to be higher than they have been historically given a number of factors, including higher expenses for lower tier operators and higher break evens for lower tier operators. I think the fourth quarter was very strong, much stronger than the previous nine months. And you've had some of that just because the fall off in prices to start the first quarter. There was a big decline in wholesale revolving in October, and that sort of set the stage for the quarter. But I think overall, we continue to believe that margins may not be as strong as they were in the fourth quarter going forward, but they will continue to be stronger than they have been historically.
Selman Akyol: Understood. And then the last one for me, and as you look back over 2023, you very consistently raised the distribution. And I certainly don't expect you guys to opine on anything that the board may or may not do. But when you think about running the business and your coverage ratio, is this a comfortable coverage ratio for you? Would you be comfortable at lower levels? Do you think it needs to go up? Is there any way you could maybe frame up some thoughts around that?
Gregory Hanson: Sure. I think we're at a comfortable level. We're very comfortable with the coverage ratio at 1.9 times and 1.85 times over the LTM basis for the year. Partially that's reflected in the strength of the fourth quarter numbers. If you look back since we've gone public in 2005, our coverage ratio since 2005 has been 1.6 times after the preferred distribution. So we've always maintained strong cash flows. I think, we're comfortable definitely at a lower level than 1.9 times, I would say. Our goal is to make sure that we have the capital to execute on our expansion capital budget and also maintain the strength of our balance sheet to continue to look at acquisitions. I mean, we do think it'll continue to be a consolidated market both on the retail gasoline side and on the terminaling side. So we do expect there to be continued opportunities for acquisitions. And we need to make sure that we're keeping our balance sheet in a position to execute on those. And so retaining some excess cash flow is important for that piece. But, I think it'll depend on what the opportunities are out there and how our board wants to capture those opportunities. But if there is a lack of opportunities, we may choose to distribute more than retain. But if there's more opportunities, we may need to retain a little bit more to keep our balance sheet strength.
Selman Akyol: All right. Thank you very much.
Operator: Our next question comes from Gregg Brody with Bank of America. Please proceed with your question.
Gregg Brody: Good morning, everybody. Just on the acquisition front, you touched on it, but maybe give a better sense of what the opportunity set out there. Is it do we still expect it to be busy this year? Just some color there would be helpful.
Eric Slifka: Hey, Greg. It's Eric. It still is busy. I would say there's going to be a lot of opportunity. The question is, do we think it'll fit us? We've got to be very well aware of any overlaps that may exist, too, and the problems that may create. And so, we'll try to look at everything like we always do. And then if the right deals come up in the right locations with the right assets, we'll try hard to see if we can buy it. And I think that's the same thing that we've done, since really the history of the company, right is acquisitions is key to us. It's key to our growth. And there are plenty of markets that we're still not in. So, there's lots of opportunity out there.
Gregg Brody: Are there any markets that are particularly attractive to you that you're focused on getting into?
Eric Slifka: Yes, well I would say our preference, we think the assets that have the most flexibility in terms of how they're accessed have the most value and so if you have assets that are waterborne and have large docks and have ways to get in and out and have good tankage, I mean I think it's the same story for every terminal operator but also access in by rail is important so scale in all these markets is critical to make sure that you really have the best assets that are positioned in the future to provide the most flexibility for their users.
Gregg Brody: I appreciate the color guys, thank you.
Eric Slifka: Thanks Gregg.
Operator: Thank you. We have no further questions at this time. Mr. Slifka, I would like to turn the floor back over to you for closing comments.
Eric Slifka: Thank you all for joining us this morning. We look forward to keeping you updated on our progress. Thanks everyone.
Gregory Hanson: Thank you.
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.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.