Global Partners LP ($GLP)

Good day, everyone, and welcome to the Global Partners First Quarter 2026 Financial Results Conference Call. Today's call is being recorded. 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, Ms. Kristin Seabrook. At this time, I would like to turn the call over to Ms. Seabrook for opening remarks. Please go ahead.

Good morning, everyone, and thank you for joining us. Today's call will include forward-looking statements within the meaning of federal securities laws, including projections and 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, including supply and demand, 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?

Thank you, Kristin, and good morning, everyone, and thank you for joining us on today's earnings call. We started 2026 with a strong first quarter, driven by solid execution across our operating segments and supported by the continued strength of our integrated liquid energy platform in a dynamic commodity environment marked by heightened geopolitical tension and global supply disruptions. Our business is built to perform across a wide range of market conditions. And given the current volatility, we remain focused on managing risks and opportunities while continuing to optimize our asset base to enhance returns. Our results this quarter were driven by a colder-than-normal winter in the Northeast and more favorable market conditions in wholesale and commercial, along with improved fuel margins in our gasoline distribution and station operations segment. Importantly, these results reinforce the resiliency of our model. We do not rely on any single commodity, geography or market dynamic to generate cash flow. Instead, we manage a diversified portfolio of assets and adjust our operating approach to reflect the conditions in front of us. That flexibility remains a core strength of Global. Whether markets are volatile or more stable, our focus is the same: disciplined execution, prudent capital allocation and maintaining a strong balance sheet to support long-term value creation for our unitholders. Turning briefly to our distribution. Last month, our Board approved a quarterly cash distribution of $76.50 (sic) [ $0.7650 ] per common unit or $3.06 on an annualized basis. This marks our 18th consecutive quarterly increase, supported by healthy coverage and the cash-generating capacity of our business. The distribution will be paid on May 15 to unitholders of record as of May 11. Now let me turn the call over to Greg for the financial review. Greg?

Thank you, Eric, and good morning, everyone. As we review the numbers, unless otherwise noted, all comparisons will be with the first quarter of 2025. Net income in the first quarter of 2026 was $70.1 million versus $18.7 million. EBITDA was $142.1 million in the first quarter versus $91.9 million in '25, and adjusted EBITDA was $140.4 million in '26 compared with $91.3 million. Distributable cash flow was $96.4 million in the first quarter of '26 compared with $45.7 million and adjusted DCF was $96.8 million versus $46.5 million. We maintained healthy distribution coverage at the quarter end of 1.96x or 1.9x after including distributions to our preferred unitholders. Moving to our segment details. GDSO segment product margin increased $11.4 million in the quarter to $199.3 million. Product margin from gasoline distribution increased $10.9 million to $136.7 million, primarily reflecting higher fuel margins year-over-year. On a cents per gallon basis, fuel increased -- fuel margin increased by $0.06 to $0.41 in Q1 '26 from $0.35 in Q1 2025. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased $0.5 million to $62.6 million in the first quarter of '26. At quarter end, our GDSO portfolio of fueling stations and C-stores consisted of 1,513 sites, exclusive of the 68 sites under our Spring Partners retail joint venture. Turning to our Wholesale segment. First quarter product margin increased $60.5 million to $154.1 million. Product margin from gasoline and gasoline blend stocks increased $44.1 million to $101.2 million, and product margin from distillates and other oils increased $16.4 million to $52.9 million. These increases in our Wholesale segment product margin are primarily due to more favorable market conditions in gasoline and residual oil. We are pleased with the performance of the Wholesale segment, which delivered strong results in the heightened commodity price volatility during the quarter. We do expect the current steep backwardation in the forward product pricing curve to increase the cost of carrying our hedged inventory in future periods, and we remain focused on disciplined inventory management. In our Commercial segment, product margin increased $4.6 million to $11.7 million, primarily due to more favorable market conditions. Operating expenses increased $2.5 million in the first quarter to $129.2 million, reflecting expenses associated with our GDSO and terminal operations. SG&A increased $25.6 million to $99.3 million, primarily reflecting higher performance-based incentive compensation expense. We expect SG&A expenses to normalize in the remaining quarter of 2026 -- quarters of 2026. Interest expense was $35.5 million compared with $36 million in the same period of 2025. CapEx in the first quarter was $31.9 million, consisting of maintenance CapEx of $10 million and expansion CapEx of $21.9 million, primarily related to investments in our gasoline station business. For full year 2026, we expect maintenance CapEx in the range of $60 million to $70 million and expansion CapEx, excluding acquisitions, in the range of $75 million to $85 million. Our current CapEx estimates depend in part on the timing of project completions, the availability of equipment and labor, weather and any unforeseen events or opportunities that require additional maintenance or investments. Our balance sheet remains strong at March 31, with leverage as defined in our credit agreement as funded debt to EBITDA at 3.1x and ample excess capacity in our credit facility. As of March 31, we had $408.3 million borrowings outstanding on our working capital revolver and $103.5 million outstanding on our revolving credit facility. On our IR calendar this month, we'll be participating in the 23rd Annual Energy Infrastructure CEO and Investor Conference. For those of you participating, we look forward to seeing you. Now let me turn the call back to Eric for his closing comments. Eric?

Thank you, Greg. We delivered an exceptional quarter, and the entire Global Partners team executed at a high level across all segments. We also recognize that a portion of these results reflect market conditions shaped by the ongoing conflict, which continues to drive volatility across global energy markets. We are managing the remainder of the year with the same discipline that drove this quarter while planning for a range of scenarios as the conflict evolves. With that, Greg, Mark and I will be happy to take your questions. Operator, please open the line for Q&A.

[Operator Instructions] Our first question comes from the line of Selman Akyol with Stifel.

First of all, congratulations on very nice results. That was very impressive. Let me ask you this. Are you seeing any changes in customer patterns, any signs of demand destruction at all given the higher fuel prices yet?

Yes. I mean nothing noticeable in the quarter in March. Obviously, one thing we track is average fill-ups and average gallons per fill-up, and we have seen some decline in that through March and April. But overall, I mean, the consumer continues to be pretty healthy. I do think, obviously, that higher gasoline prices will impact the share of wallet going forward. So it's something we continue to lean in on promotions and loyalty in our C-store to drive customers into our stores. But depending on how long this prolonged goes on, it could have a further impact on potential demand at the pump.

Got it. And then nice uptick year-over-year in your fuel gallon CPG. How is that going in given the volatility? And I'm really kind of thinking March, you had 1 month of the volatility, but you've seen certainly more of that in -- as we've gone into the second quarter. So I'm just kind of wondering how CPG is holding up.

Yes. Selman, it's Eric. Margins continue to show the same historic resiliency that they have. And if there is a decline in volume, margins historically have expanded, right? So I think that, that is going to hold true. And I think that, that's what we're seeing now. But generally, too, there's a lot of price volatility in the market. And so you're waking up certain days and the product prices are moving $0.15, $0.20, $0.30 -- to me, that volatility represents an opportunity. The amount of price changes that we're making -- somebody quoted me internally here, we've made the same amount of price changes already that we typically make in a year. That's in the tens of thousands. That's in the tens of thousands.

Wow, that's quite a stat. So in this environment, how do you think about acquisitions? Are they easier? Is it you'd rather pause and see how things shake out? Is there anything...

I mean we -- yes. No, we continue to look at everything that's out there. I would say the landscape is as competitive as it's ever been, but we're trying to be involved in every process that is out there. And it will be interesting to sort of see, if anything, or what gets done or what gets sold.

Got you. But are you seeing sellers' expectations come in at all?

It's interesting. It's based more on cash flow and multiples, right? But like multiples are still strong, right? So it's competitive.

Got you. You guys referenced sort of the higher carrying cost for inventories at wholesale, I guess, just in general. But is there any thoughts of carrying lower inventories given the carrying costs? Or is that just cost of doing business and we're not having problem getting any product, so we'll keep inventories robust?

Hi, Selman, good morning, it's Mark. Yes, that's actually something that we've done historically. It's part of our playbook, and it does kind of highlight the benefit or the value of the storage capacity that we have, and we can tailor our inventory levels based on market conditions. As you might expect, when markets get extremely backwards, we're able to reduce inventories down significantly during that run-up. -- capture additional margin and then mitigate some of the risk associated with holding inventory. So we're at a point now where we're -- we've drawn down inventories in this environment. We'll continue to manage them tightly. On the flip side, if the markets contango, obviously, we're building inventory. So that is a key risk mitigation lever that we're able to pull and really kind of tailor to the market conditions of the current environment.

Got it. Let me just ask you one macro question, and I don't know if it's unanswerable or not, but -- so we're getting ready to go into the driving season, the summer driving season, sort of peak demand. The U.S. has been selling down. Our exports are pretty robust. Do you think there's supply tightness out there as we get into the summer at all? Do you have any thoughts on kind of what that's going to look like the summer just in general with everything going on?

Yes. It's Mark again, Selman. I think if you look at inventories, and we just had this conversation yesterday, they're pretty low. We've got a lot of exports leaving the Gulf, maybe some leaving New York. Imports for gasoline into the PADD 1 have been very light. And we've been drawing -- the U.S. has been drawing inventories pretty aggressively over the last, call it, 6 weeks, maybe 8 weeks. So we're at a pretty low level heading into a key driving season. Some of this -- some of it will depend on how long the current situation goes on. But even if the conflict is resolved tomorrow, there's been a lot of damage done to worldwide production and inventories are at a pretty low level across the board. So it will be interesting to see how that plays out. I don't think an end to the war is going to solve the problem immediately. The system is going to take time. When I say system, I mean worldwide, but we're obviously specifically focused on PADD 1 and to a lesser degree, PADD 3. But I think you're going to have some lasting impact to that, and we'll see how it plays out. But there is some underlying fundamental strength in the market that I think we're going to see play out for, I might say, at least through the end of the year.

Selman, it's Eric. I just want to -- I want to add one other thing. It will be interesting to see how countries position themselves [Foreign Language] inventory and storage for moments like this. And if a lot of other countries look at storing crude or products in caverns or throughout the country and make sure that they have product on hand and how that plays out into price...

Yes. pricing [indiscernible]

Yes. That's a big macro point, right? Because even if everything came back, it's just -- it's not going to be the same as it was before, right? So it will be different. And if countries go and decide they want to build secure inventory that they can use in a market like this, that's going to put pressure on supply because it's going to show up as increased demand.

Yes, we've seen -- we've already seen comments coming out of Australia for that. All right, guys. Again, very nice quarter, and I will leave it there.

I will now turn the call back to Mr. Slifka for closing comments.

Thank you for joining us this morning. We look forward to keeping you updated on our progress. Thanks, everyone.

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.