Good day, everyone, and welcome to the Global Partners Fourth Quarter 2021 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 Acting General Counsel and Vice President of Mergers and Acquisitions, Mr. Sean Geary. At this time, I would like to turn the call over to Mr. Geary for opening remarks. Please go ahead, sir.

Good morning, everyone. Thank you for joining us. Before we begin, let me remind everyone that this morning, we will be making forward-looking statements within the meaning of federal securities laws. These statements may include, but are not limited to, projections, beliefs, goals and estimates concerning the future financial and operational performance of Global Partners. Forward-looking statements are based on assumptions regarding market conditions, such as the crude oil market, business cycles, demand for petroleum products, including gasoline and gasoline blendstocks and renewable fuels, utilization of assets and facilities, weather, credit markets, demand for convenient store operators, the regulatory and permitting environment and the forward product pricing curve, which could influence quarterly financial results. These statements involve significant risks and uncertainties, some of which are beyond the partnership's control, including, without limitation, the impact and duration of the COVID-19 pandemic, uncertainty around the timing of an economic recovery in the United States, which will impact the demand for the products we sell and the services we provide; uncertainty around the impact of the COVID-19 pandemic to our counterparties and our customers and their corresponding ability to perform the obligations and/or utilize the products we sell and/or the services we provide; uncertainty around the impact and duration of federal state and municipal regulations and directives related to the COVID-19 pandemic and other assumptions that could cause actual results to differ materially from the partnership's historical experience and present expectations or projections. We believe these assumptions are reasonable given currently available information. Our assumptions and future performance are subject to a wide range of business risks and uncertainties. In addition, such performance is subject to risk factors, including, but not limited to, those described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements that may be made during today's conference call. With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through news releases, publicly announced conference calls or other means that will constitute public disclosure for the purposes of Regulation FD. Now it's my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thank you, Sean. Good morning, everyone, and thank you for joining us. Sustained momentum in our GDSO segment contributed to a solid fourth quarter performance for Global. Retail fuel volume and margins increased year-over-year in the quarter, while demand across our convenience store portfolio continued to improve amid the recovery in the U.S. economy. Our Q4 results capped a successful 2021 in which we continue to navigate the pandemic and the related macroeconomic challenges that have affected virtually all industries during the past year. Combined product margin, which came in at $802 million for the full year, was on par with 2020. That is remarkable. That is a remarkable result when you consider the extraordinary benefit to wholesale product margins that we saw in Q2 of 2020 as a result of the extreme shift in the forward product pricing curve. Our performance this past year speaks to the strength of our vertically integrated assets, a high-value portfolio comprised of approximately 400 owned and 450 leased properties. These assets help us create long-term value for our unitholders and deliver exceptional performance for the consumers and businesses across the regions we serve. Now let me touch on our recent highlights, which advance our strategy of driving profitable growth in consolidating markets. In November, we signed an agreement to sell our Revere Terminal in Boston Harbor for $150 million in cash. The transaction is expected to close in the first half of this year, subject to customary closing conditions. As part of the agreement, we will lease back key infrastructure from the buyer and continue operations at the terminal post-closing. From a capital allocation perspective, the deal demonstrates our goal of optimizing our asset base. Upon closing, the transaction provides us with significant cash proceeds upfront and strong cash flows over the life…

Thank you, Eric, and good morning, everyone. As Eric noted, we capped a solid performance in 2021 with a strong fourth quarter, highlighted by continued strength in our GDSO segment. As we go through the results, please keep in mind that net income, EBITDA, adjusted EBITDA and DCF in full year 2021 include a total of $9.7 million in compensation and benefits and expenses associated with the passing of our General Counsel in May and the retirement of our former CFO in August. For the fourth quarter and full year of 2020, these metrics include a $7.2 million loss on the early extinguishment of debt related to the redemption of our 7% 2023 senior notes in the fourth quarter of 2020. Adjusted EBITDA for the fourth quarter of 2021 was $66 million compared with $49.9 million for the same period in 2020. The $16.1 million increase was due largely to our GDSO segment, which experienced higher fuel volume and margin as well as increased activity in the C-stores. For the full year, adjusted EBITDA was $244.3 million compared with $287.7 million in the same period of 2020. As Eric noted, our full year 2020 results benefited from an extreme shift in the forward product pricing curve in the second quarter of the year that significantly strengthened our Wholesale segment. Net income for the fourth quarter of 2021 was $19.3 million compared with $4.4 million for the same period of 2020. For full year 2021, net income attributable to the partnership was $60.8 million compared with $102.2 million for 2020. DCF was $30.5 million for the fourth quarter of 2021 compared with $7.3 million in the prior year period. DCF for the full year of 2021 was $120.7 million compared with $156.4 million in 2020. TTM distribution coverage as of December…

Thanks, Greg. As demonstrated by recent transactions, we continue to deliver on our strategy to optimize and grow our assets. We are focused on deals that provide ongoing cash flow and acquisitions to enable us to leverage our scale, supply relationships and integrated business model. We are putting significant effort into positioning our assets and infrastructure to play a critical role in the energy transition, while also investing in the people power that keeps us growing and innovating. As a critical infrastructure business serving a significant portion of the U.S., we are confident in our ability to provide the vital energy products, goods and services of today and tomorrow. Now Greg, Mark and I will be happy to take your questions. Operator?

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

Can you maybe just start off with just how our margins are going in this current environment given the consistent upward pressure we've seen on prices?

Selman, it's Eric. I would say it's been really interesting over the past almost 2 years now. There has clearly been a shift in the market as to how it passes through increased costs and margin and obviously, there are no guarantees there. But over the last couple of years, as we've seen markets increase, in commodity costs, margins have either kept pace or increased at retail. Volumes given the change in flow are still a little bit off, but it appears so far that those increasing costs and the margins that are needed to increase with those costs have more than kept pace.

All right. I appreciate that. And then maybe could you discuss a little bit more what you're hoping or expecting out of your Electric Innovation Strategist? I don't know if there's any goalpost you can pull with that in terms of maybe how many charges you guys get installed? Or just anything we should be looking for, I guess.

Yes. I mean I think, look, it's -- the math is still difficult. And so we're trying to be very thoughtful about how we approach it and working with the state and the federal governments to figure out how to expand that business in a thoughtful way is going to be really important. That's not to say that -- and that's on the electric side, right? But I do think the very, very broad-brush way of thinking about terminalling, by example, is there's going to be a requirement to carry different fuels and different products that are less commodity than, let's say, gasoline. And so I think that's going to be a fundamental pressure and change that happens to the business, and I think there's going to be an opportunity around that.

Got it. Then let me just ask you a little bit about G&A, and I clearly hear you on the higher benefits and wages. Coming out of Q3, as you noted, there were some onetime fees in there for Daphne of $3 million. So when I look at the fourth quarter, I'm really looking at sort of $51 million to $57 million. And I'm just wondering, is that the run rate sort of less higher professional fees should we be thinking about? Is there any way you can maybe help quantify sort of what would the ongoing expense would be because clearly, you've done a couple of acquisitions. You've had a disposition as well. So I'm just trying to figure out maybe the professional fees aren't as recurring and just trying to get to a run rate.

This is Greg Hanson, Selman. I will help you out there. I mean, even in the fourth quarter, we had a number of onetime things. We didn't break them out, but we did have acquisition expense onetime, and we actually had some additional severance expense, unfortunately, from passing of another colleague in the quarter. That said, I would say, overall, our expectation is the run rate right now is a little high. We have added some overhead related to the acquisitions. We're also investing heavily on our HR and employee recruiting areas and also in technology. But we're also making a big push to hire additional top staff for sort of our human capital initiatives to help us further expand the business. So I'd say that the fourth quarter overall was a little bit heavy, and the run rate should be a little bit better going forward.

Understood. And then can you also just maybe just comment on the impacts you're seeing from inflation?

Yes. I mean I can start off, and Eric and Mark, you can go ahead. I would say there has not been material impacts to our business. I would say on the C-store side, we have seen some price increases from our suppliers, but we've been able to pass those along to our consumers. I think if you look historically, the C-store space has historically benefited -- not benefited, but done much better during periods of inflation and periods of potential recessions. So overall, we're not seeing it. I would say we've seen some on the CapEx side from equipment and building materials. We've seen some inflation there that could potentially impact the way we look at our expansion CapEx, but nothing that's impacted our returns to date.

Great. And then last one for me. Do you guys have any more potential assets for sale. Should we be thinking about that as being another source of cash this year?

So obviously, we always look to optimize what we have. And as you buy and consolidate business with respect to our individual assets it may change. And so there is always, I'd say, a natural churn of assets. Is there anything material like that on the horizon? Not that I'm aware of, but that's not to say that if somebody came along and we thought we could get the right deal for the right asset then we would take a hard look at doing something with it.

Yes. We have about $7 million in net proceeds from retail asset sales, Selman, in 2021. We still, as Eric mentioned, we've got a number of sites that are on the market for sale. Nothing big or material but sort of our normal course upgrading of our portfolio as we turn through stuff. So I do from a sort of capital financing perspective, I do view it as a source of proceeds to reinvest into our expansion CapEx on NTIs and raze-and-rebuilds.

Yes. I mean, Selman, I do think very broadly, industrial space today is going for much, much bigger numbers than ever and at triple net prices that I don't think anybody would have ever imagined 5 years ago, right? And so we're going to try and be efficient if we can and if there's opportunity.

Mr. Slifka, now I would like to turn the floor back over to you for closing comments.

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

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.