Good day, everyone, and welcome to the Global Partners Second Quarter 2023 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call. [Operator Instructions]. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Chief Financial Officer, Mr. Gregory Hansen, Chief Operating Officer, Mr. Mark Romaine; and Chief Lead 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.

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, which are based on assumptions regarding market conditions, demand for liquid energy products and convenience store products, regulatory and permitting environment, product pricing curve and other factors, which could influence our financial results. We believe these assumptions are reasonable given currently available information. Our assumptions and future performance are subject to a wide range of business risks, uncertainties and factors which I described in our filings with the Securities and Exchange Commission, which could cause actual results to differ materially from the partnership's historical experience and present expectations or projections. Global Partners undertakes no obligation to revise or update any forward-looking statements. 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 purpose of regulation FD. It's now my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thank you, Sean, and good morning, everyone. Let me begin this morning by recognizing the terrific work of our entire team in contributing to a solid second quarter. With our Wholesale and GDSO segments performing above our expectations. From our fueling stations and convenience markets to our liquid energy terminals the relationships created by our team members with customers and guests every day is a key differentiator that allows us to maintain a competitive advantage across our businesses. From an operating perspective, we bring an exceptionally high level of technical, marketing and M&A expertise amassed over decades in the energy industry. This expertise powers the 3 core tenets of our growth strategy, acquire, invest and optimize. We continue to advance our strategy in the second quarter. In June, the joint venture owned by subsidiaries of Global and Exxon Mobil, completed its acquisition of 64 convenience and fueling facilities in the greater Houston area, which expands our footprint into Texas. We invested approximately $69.5 million in cash for a 49.9% ownership interest in the joint venture and under an operations and maintenance agreement, we operate and manage these locations. Our planned acquisitions of 5 of Gulf's refined product terminals in New England and New Jersey continues to work its way through the regulatory review process. We remain hopeful that the acquisition will close in the second half of this year. Including Gulf, in less than 2 years, we will have announced or completed more than $570 million of acquisitions while maintaining the strength and flexibility of our balance sheet. Applying our target mid-teens returns, these deals are transformative for Global, building on our competitive position and driving increased value for unitholders. We continue to put our energy to work in the clean fuel space. In June, we were the title sponsor…

Thank you, Eric, and good morning, everyone. We are very pleased with our second quarter results. However, I will note that the year-over-year comparison is challenging, given the exceptionally strong results of our Wholesale segment in the second quarter of 2022, which were driven by the historically steep backwardation of the forward product pricing curves in that period. Also in comparing our year-over-year performance, keep in mind that net income, EBITDA and DCF for the second quarter of 2022 included a net gain on sale and disposition of assets of $76.8 million, primarily related to the sale of our Revere terminal in June of last year. For the second quarter of 2023, adjusted EBITDA was $91.6 million compared with $134.9 million for the same period in 2022. Net income was $41.4 million compared with $162.8 million and DCF was $54.8 million compared with $178.2 million in the same period last year. TTM distribution coverage continues to be strong at June 30, 2023, including the Q4 2020 special distribution it was 2.3 x or 2.1x times after factoring in distributions to our preferred unitholders. Turning to our segment details. GDSO product margin was up $0.2 million in the quarter to $199.1 million. The gasoline distribution contribution to product margin was down $2 million to $127.9 million, in part due to decline in volumes sold. Fuel margins continue to be strong at $0.31 per gallon in the second quarter of 2023, essentially flat compared with the second quarter of 2022. Station operations product margin, which includes convenience store and prepared food sales, sundries and rental income, increased $2.2 million to $71.2 million from the second quarter of 2022, primarily due to an increase in activity at our convenience stores in part due to the acquisition of Tidewater Convenience last September. At the…

Thank you, Greg. We have a healthy and well-capitalized balance sheet that continues to position us positively for long-term growth. Looking ahead, we remain focused on executing our strategic priorities to maintain our competitive position and drive value for our unitholders. Now Greg, Mark and I will be happy to take any questions. Operator?

[Operator Instructions]. Our first question comes from the line of Gregg Brody with Bank of America.

Thanks for the time here. Can you talk a little bit about what you're seeing on the demand side in terms of the behavior of the consumer at the pump and your observations there? And just -- every quarter, we talk about how the breakevens are improving from your perspective? Are they going higher, which helps you for your competitor -- for the marginal provider of gasoline. Can you talk a little bit how that's trending?

Yes, I missed the end of that, Gregg. But I think on the demand side of the equation, gasoline demand has been good at our stations, and we're pleased with that year-over-year number. We still compare things to 2019, and we're still off similar to what we were seeing last year versus 2019. But from a gasoline standpoint, we've been tracking positively. From a diesel demand standpoint, we've seen a different story, and we're down year-over-year in diesel, but I think that's consistent with the rest of the industry. I didn't hear the end part of that. So I'm not sure I think was the question of...

I can repeat. Just at the GDSO segment, on every quarter we talk about how the margins seem to be getting better and it's one of the arguments is that the breakevens keep going up. Can you talk a little bit how that's trending? Do you see anything different -- anything that's breaking that trend or it continues?

I think overall, I mean, we're going to see -- we'll see some ups and downs, we'll see margins expand and compress. I mean that's just the nature of the business. But I think overall, we continue to see margins trend positively. I just think it's our overall bias that as we go forward, you're going to see that margins expand somewhat due to increased cost to run the business. But we have seen expansion in margins and our biases that will continue.

And then just moving over to the wholesale. I think it was last year where we started talking about how much more volatility there was in the business that was allowing you to earn greater margins. And last year was a special year. But I'm just curious, is that element still...

I would say that last year was, as you said, it was especially last year was very unique market conditions, I would say market conditions like we had never seen before, and that's -- that was true in 2020 as well. So we've seen a real -- we've seen extremes in market conditions. I would say that what we're seeing this year is much more normalized. Last year, we saw -- everything was higher last year. Margins were higher, costs were higher, risks were higher. And so what we're seeing -- we're seeing the market kind of normalize back to what we're used to, both on the volume and the margin side of the wholesale business.

And then just last one. On the M&A side, Can you talk a little bit about the opportunity set. And I don't know if you can give us specifics on the most recent acquisition, how much you're paying for them, how much synergies you're seeing? Or just whatever you're comfortable to telling us there.

Sure. Greg, it's Eric Slifka. Just I'd say it continues to be very active. There's lots of opportunities out there, whether it's terminals, whether it's retail, it's just finding the ones that fit us best and then trying to go after them and be the successful winner. I'd say, and I've said this in the past, the good news is we don't win every one. So I think that tells us that we're not overpaying, and we're in the right zone. But we continue to work hard to look at deals and be competitive and the ones where we can bring the most value to are likely the ones that were going to be the winners of, right? In terms of multiples, maybe they were off a little bit. I wouldn't say that it sort of depends on the assets, right? But as usual, there always seems to be bidder who may think it fits them a little bit better and maybe they're willing to pay another half a turn or a turn more, right? So it really depends on the assets.

When you say it's off a little bit, are you saying valuations are lower? Or...

Yes. I think yes. I mean I think it's -- I think cost of the money is higher and that people have to have more discipline right? And even longer-term financing is more expensive too. And that has to get baked in. I think it's hard to pretend that your cost of interest isn't higher. And so most of the competitors that are acquirers, they're borrowing money right? And they may not even be borrowing it from banks, right? So they've got more expensive money. And that has to depress multiples a little bit, right? But once again, it depends, right? Because everyone's got a slightly different set of economics and somebody could say, "Oh, we're going to stretch a little for this because for them, it's really not a stretch. It just looks into the market, right. Because they have more value that they can bring to a particular transaction.

[Operator Instructions]. Our next question comes from the line of Tyler Rakers with Stifel.

Tyler Rakers on for Selman. Could you guys share some color as to the GDSO volumes being a little down year-over-year, just given the acquisitions made during that period.

Yes. We were 1.2% down year-over-year, Tyler, on a total basis. As Mark mentioned, we've seen diesel off year-over-year, as I think a lot of the other industry participants have seen. We also -- it was not a great quarter from a weather traffic standpoint up here in the Northeast. And can't quantify how much that played a role, but definitely was a very wet June for us. And I think it rained -- we had a rainy day every weekend of June. So that factors in. I think, overall, we're pretty happy where volumes are overall. Could they be better? Definitely they could be better. But I think gasoline demand is still decent out there.

Yes. Let me just clarify the comment I made earlier with regard to gasoline demand and specific to -- with the comments I made were specific to our company-operated stations, right? So where we -- and I think part of that is got to do with -- when you talk about volume and margin, I think part of that is due to how we're running our sites, the quality of sites that we run and the experience that we create for the . So I just want to clarify that if those comments on volume were specific to our company operated sites.

And if I could ask, with the as you said, regarding the M&A environment with the higher interest we're seeing, if maybe we'd see as well as with the Exxon deal, if we'd see more of these JV structured deals going forward?

Yes. I don't really know. I mean, I'd say we're going to try to be opportunistic, right? And the concept at least with the JV with Exxon is can we expand it. But it's -- we're already in Texas. We've been in Texas for a while doing wholesale. We think this is a natural extension for global regardless of that. And what I'd say generally is we're having more conversations now because we're recognized differently in that market, which is, frankly, how we've built the business over decades of doing what we do, right.

We have reached the end of the question-and-answer session. Mr. Slifka, I'd now 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. Enjoy the weekend, everyone. Thank you.

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.