Global Partners LP Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Performed well in Q3, consistent with expectations, with operational strength and disciplined execution.
• Wholesale segment had strong performance in Q3 driven by favorable gasoline market and terminal network optimization; terminal assets scaled over 2 years enhancing distribution network.
• Retail network investment ongoing, with expansion of marine fuel supply to Houston port; redefining convenience store experience with Fresh and Honey Farms Market brands, and new loyalty platform.
• Board declared a quarterly cash distribution of $75.50 per common unit, 16th consecutive increase.

Segment Performance

• Wholesale Segment: Third quarter product margin increased $6.9 million to $78 million. Product margin from gasoline and gasoline blend stocks rose $18.5 million to $61.5 million due to favorable gasoline market and terminal network expansion; product margin from distillates and other oils decreased $11.6 million to $16.5 million due to residual oil conditions.
• Station Operations: Product margin increased $0.5 million to $74.1 million, including convenience store and prepared food sales, etc. At quarter end, the portfolio had 1,540 sites, 49 fewer than the same period last year.
• Commercial Segment: Product margin decreased $2.5 million to $7 million, in part due to less favorable bunkering conditions.
• GDSO Product Margin: Decreased $18.8 million to $218.9 million. Gasoline distribution product margin decreased $19.3 million to $144.8 million due to lower fuel margins; station operations product margin increased $0.5 million to $74.1 million.

Guidance

• Full-year maintenance capital expenditures anticipated to be approximately $45 million to $55 million.
• Expansion capital expenditures, excluding acquisitions, anticipated to be approximately $40 million to $50 million, primarily relating to investments in gas station and terminal business; current estimates depend on project timing, equipment, workforce, weather, and unanticipated events.

Risks

• Business risks, uncertainties, and factors could cause actual results to differ materially from projections, as per SEC filings. Our assumptions and future performance are subject to a wide range of such elements.

Question and Answer

Q: Can you talk a little bit more about entering the bunkering market in Houston?

A: Yes. We felt there was an opportunity, and the assets entered are differentiated versus competition. We already have the customer list, know-how, and knowledge, and it's a good fit for the company.

Q: And when you say sort of differentiated offering, can you just explain that a little bit?

A: Primarily just the location of the facilities and how we're going to go to market to supply that busy corridor not always easy to deliver fuel in.

Q: 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?

A: We went through a big optimization program last year. Sold 7 sites, converted 15 sites, and terminated low-margin dealer relationships. Probably not a big runway on site divestitures now. Seeing some signs of life on retail M&A in fourth quarter, and continue to look at terminalling opportunities.

Q: Selman Akyol: 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?

A: We do not. None of our retail GDSO segment operates in their footprint as of today.

Q: 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?

A: Yes, we've seen pressure on lower income, consumers trading down. Leveraging loyalty program to grow promotions. Summer C-store performance was up year-over-year even with site reductions, and Northeast location has higher income trend.

Q: And then the last one for me. Just how is labor going for you guys? Is it getting any easier?

A: Wage inflation has calmed a bit, but retail has high turnover. Compared to 2022-2023, better, working on optimizing labor hours and associates in stores.