Martin Midstream Partners L.P. Q3 FY2023 earnings call

Segment Performance Discussion

• Third quarter adjusted EBITDA $26.2M vs revised guidance $25.1M, improvement of $1.1M. Treading 12 months ending Sept 30, 2023 adjusted EBITDA excluding exited butane optimization $117.1M.
• Transportation segment: Largest cash flow generator, land transportation miss due to reduced miles driven, lowered Q4 guidance by $1.1M; marine transportation had miss but sees demand strength.
• Terminalling and storage: Slight revenue decrease, 3% expense increase.
• Specialty products: Adjusted EBITDA exceeded guidance, packaged lubricants and grease margins up.
• Sulfur services: Fertilizer group exceeded guidance, pure sulfur side also exceeded.

Balance Sheet and Capital Resources

• Total long-term debt $462.5M, leverage ratios improved. Maintenance CapEx $29.4M (increase from guidance), growth CapEx $10.1M (reduced from guidance). Distributable cash flow $5M, adjusted free cash flow $1.5M. EBITDA guidance unchanged at $115.4M after butane exit, land transportation Q4 guidance lowered.

For the third quarter, the transportation segment had adjusted EBITDA of $9.5 million compared to revised guidance of $12 million. Land transportation within it had adjusted EBITDA of $6.7 million vs $8.5 million, miss due to 8% reduction in miles driven. Marine transportation had $2.8 million vs $3.5 million. Terminalling and storage segment had $8.2 million vs $9.1 million (1% revenue decrease, 3% expense increase). Specialty products segment had $6.8 million vs $5.2 million (packaged lubricants and grease exceeded). Sulfur services segment had $5.4 million vs $3.1 million; fertilizer group $2.2 million (exceeded breakeven, 13% sales volume increase); pure sulfur $3.2 million vs $3 million.

• Lowered land transportation division guidance for Q4 by approximately $1 million.
• 2023 EBITDA guidance remains unchanged at $115.4 million after giving effect to the exit of the butane business.
• Maintenance capital expenditures forecasted to be $29.4 million for the year, an increase from guidance.
• Growth CapEx forecasted to be approximately $10.1 million for 2023, reduced from initial guidance.

• Weakening U.S. economy negatively impacting transportation requirements from specialty industrial customers.
• Delays in projects in and around Beaumont due to inability to get carbon capture managed.
• One-time SG&A and OpEx costs in certain segments (e.g., phantom units issued to management affecting Marine Group and terminalling/storage).

Q: Kyle May asked about lower mileage in the transportation segment and when it could turn around.

A: Bob Bondurant said load count was highest average per day, shift to shorter hauls due to economic slowdown, late Q3 pickup in chemical hauling carried into Oct, expecting slower Q4 but trend with U.S. economy later first quarter to second.

Q: Tim Howard asked about projects in and around Beaumont, scale, and delays.

A: Bob Bondurant said scale similar to high purity deal, some projects slowed/deferred due to carbon capture issues.

Q: Tim Howard asked about quantifying one-time SG&A and OpEx costs.

A: Sharon Taylor clarified one-time expenses in Marine Group related to phantom units given to management in June and July, with adjustments in June and additional tranche in Q3.

Q: Tim Howard asked about business in Tampa.

A: Bob Bondurant said Tampa trucking business continued strong, phosphate business expected to do well rest of winter and next spring/summer.