Earnings call transcript Q1 2023

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Operator

Greetings and welcome to the Sunoco LP’s First Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Rachel, SVP, Finance and Treasurer. Please go ahead.

Scott Rachel

Thank you and good morning, everyone.

Officer; me Chief are Chief Executive Dylan Chief with LP’s Kim, Operations call of Bramhall, and members President Officer; Financial the this team. Joe morning Sunoco Officer; the On management other and Karl Fails, forward-looking Today’s subject to that various call statements are and risks will uncertainties. contain assumptions the future include and operations statements These regarding financial expectations and partnership’s performance. partnership subsequent Actual results based to on events. update obligation could differ undertakes materially these no and the statements SEC for as Please the refer our release factors. well our list to filings a earnings as these of with

today’s measures, call, financial each refer for distributable as we non-GAAP During website will also of Please including cash measure. certain discuss adjusted. to financial LP reconciliation and the Sunoco adjusted EBITDA a flow

X% first adjusted sold Sunoco quarter, gallons ago, quarter record first quarter I’d a a of $XXX of year XX%. $X.XXX EBITDA makeup margin a the to The highlights. $XX partnership X.X looking X-Eleven gallon per per from was of to like first include the our call the $X.XXX results the million. delivered gallon with start million increase sold payment year. of quarter, of year Fuel ago. for by million gallons first the billion compared $XXX an to of up compared all at margin in some benefit last Fuel

first same the quarter operating in year. last period We capital. the and of increase growth spent in from capital maintenance first Total million million expenses were an $X $XXX $X $XX of million million, quarter

first X% a last trailing On ratio per coverage in balancing of to quarter X.Xx. compared XXXX, the $XXX XX, quarter, growth quarter investment unit We to $X.XXX quarter the opportunities. million our cash increases $XXX distribution ratio distribution, an plan April adjusted yielding annually metric financial and increase in in declared as targets over a first of a evaluate future quarter. we XX-month was and First million of X.Xx coverage distributable flow current

At approximately sheet. we outstanding of balance X.Xx first leaving Turning the Leverage million to end million X.Xx, quarter the our at from end had down $XXX liquidity. quarter, the $XXX facility, the last quarter. on of credit was of revolving the

completed we Located acquisition the with to and first Transfer Laurel expects terminals terminals unitholders and Coast accretive the these Midwest, the ownership. Energy. from across pipelines. connections East The Zenith the have Colonial, yesterday, be Finally, XX acquisition the Buckeye, of in year of Energy to partnership

at we few to results back growth Strong on to past our years flow target to below strong distribution and or coverage, us leverage long-term continue over and cash allowed capital reinvest execute generation the our with capital strategy has able allocation are into equity increased and our distributable The make through yield to per Sunoco’s increase unit distribution acquisitions. financial proposition. enables unitholders. a stability, been growth has distribution organic compelling value result that us flow our and cash to our business prospects

I additional the turn and that, through call Karl our growth over now to walk will performance quarter thoughts With on recent first initiatives. to some

Karl Fails

Thanks, morning, everyone. Scott. Good

capital including acquisitions. business, discipline realized improved and yet lower our in Even deployed years year. about volume year, remain have delivered through strength, were up recent quarter last of volumes continued our to contributions continued operations margin relative volume than from Our strong team by have Starting first we last industry solid another as organic the we we consistent quarter supported though first expense and volumes, both prior see to versus performance our investments. with quarter, the across X%

contributed will margins. few margin last of performance over to strong continued items a point per the quarter these With the margins, few respect first that years $X.XXX in margins as I we the to delivered gallon. out

with well are as the markets. volatility continued as fuel margins Some breakeven in consistent higher industry namely prior discussions,

in the which annually received also that gallon contributed our we margin. $X.XX quarter, per over this for first X-Eleven to Specifically quarter, occurs payment the reported makeup

X with of Yesterday, past Moving in acquisition growth. Energy. the our on we addition our on XX the closed terminals second months to from Zenith

distribution our deliver investment. expand We our strategic of provide objectives us that opportunities we and to portfolio distribution are This to fits growth are presence on these another this combination into EBITDA forward our providing existing solid The acquisition in with looking footprint, expect of distribution a synergies, majority market is with each our these these terminals new excited synergies fuel overlay growing multiple ability fuel of and our to assets reach. markets. the single-digit of with portfolio. about The mid our fuel yet our terminals deliver remaining returns. After example

on comment expenses. a Finally,

guidance You our XXXX remain core me today confident we last expenses we with XXXX those of line expenses numbers. about quarter talk one in our with constantly have to strengths Controlling that guidance. December. ability our remains guidance and announced into in expenses. to thought our heard an first lot provided put December were of We update a and manage We

by and approximately capital to to However, Zenith of operating of between expenses $XXX increasing by to to the projecting changes million, million $XXX Energy $X our of include million, adjusted we want million include: increase $XX a acquisition increasing $XX and EBITDA The to of range adding portfolio. our impacts the $XXX $XX an spend million. maintenance $XXX million, million million

are I the Joe? our on stakeholders focus Joe, our up time optimization, solid and efficient proven stating delivering results to will tight we business. off profit expense strategy continue operations by start and to year that growing we to through our Before strong for over gross turning control, a of will the to and wrap

Joe Kim

Karl. and the first through details. Scott Karl delivered key Thanks, quarter. strong you We walked a morning, have Good everyone.

that would additional provide I like to some are few there However, commentary. a items

our confidence have in to and long-term. continue model, both We business short-term

another started, year we strong we this Before have and year. we provided stated expect to guidance,

Third of remains into way expectation our the same. the XXXX,

been expectation enhanced acquisition. recent base our most Our has by

we deliver continue after results As will thus, a result, types confidence increased of increase. year These to we strong our year, us that distribution a guidance. give we investments announced

a have we to years, commitment X secure last our distribution. demonstrated the Over

cut have even unforeseen never environments. economic through and challenging distributions We

Given to again meet our increase above decision ratio, thoughtful distribution very target a one remain and, to increase. a multiyear sheet, the our key of stay growth path The this clear that increase to following pillars, finally, frame. our distributions criteria, has coverage company, protect as is any we’re over a balance to time

We’re confident the on these of all factors. answer is yes

concludes that our Operator, prepared remarks.

You the for may open questions. line

Operator

Instructions] Mizuho. [Operator Gabe you. Thank with from Our question Moreen first comes

Gabe Moreen

parties? Can Maybe can you Hi, particularly post-synergies? to excited off that about business as whether far if see good I anything morning, also, curious talk you’re much as specific And also how with then just timing integrating guess, assets, the multiple third a on just you for Zenith I’m Sunoco about of the from doing guys. the acquisition. mid-single-digit being, standpoint? getting start any growth I versus terminals And

Karl Fails

Gabe, Yes. is morning, Good Karl. this

being in think little talked synergies I the on this first past. of about over probably is X – our faster the our operation. years a We’ve the acquisition, synergy captured capture

I think by probably synergy the year, end at rate. will first of we be run the our

So we year, be we get next into those time by should the in mid single-digits.

North the an my I’ll this between nice that as not asset combination I a just portfolio existing good excited not big North is some remarks like area but some kind only terminal. business distribution in our we as about in example It’s be. the it place as give of new. prepared quite far have As Carolina. asset about, is of overlay we’re And one terminal talked excited to and fuel Salmon, Carolina the just we’re in a we’d that about, profile, mix

that in our network just area. to I different a in and terminals, example combination good of, terminals, whole terminals love the track I think the little terminals But and of own I customers third again, that as well. So in third-party welcome mentioned, have with volumes being business third-party think presence our of in with able parties in distribution our companies a with but record our an one a think fuel we businesses as and our keeping you large that’s we’re purchasing and put that have growing

it’s going be So to mixture both. a I good think of

Gabe Moreen

you’re market right year? follow-up out expect now, what through on Should And there? I Great. general thoughts in additional just the maybe of rest the could if seeing the M&A deals we

Joe Kim

Hi, Joe. Gabe, this is

that buy stuff can bring last I that We synergies We attractive it’s finally, X to at market, deliver for see plays. the believe especially see or We opportunities. think value table. shows the appropriate And I for top highly is buyer’s and we think still track a of what I’ve on results. our today. still on synergies multiples, said X years companies record and those add probably that

market looks we this And – last the good will year, we So I I year saw year. again see think what this think for us.

Gabe Moreen

the company, X%. as that to curious at think bit to it lot I you need than little the X% when you check maybe, more Joe, assume far different M&A you How level? I about accelerate the boxes we a kind the of at latitude increase. mean had then arriving – rate? maybe a think, have flexibility say mentioned to a should What maybe growth I’m that And refers kind in And markets. see, seems to that you’d lot those a just be distribution yourself the for need stay Great. more staying as like growth would aggressive to of X%, giving of you

can that, speak to too. So maybe you

Joe Kim

Yes.

strong pillars want very I and sheet balance last characterize our growth. time the way distribution, is you remain the think we it secure exactly very appropriate same, that –

So if put ability gives the grow a to of X%, value is us lot we at growth opportunities the there do see, it an evolving creation that flexibility for capital to continue sheet. opportunity it on on Depending X%, provides into balance us. more X%, the

at So think And where this. if I you’re we know like just with going look flexibility. and you I the –

look does more? look is the at continues where now, that in think a there future, as possibilities up we good business history to coverage But just it ability that in I us X% in fashions. bring the gives performance for allocate If at the really at you confidence we our set and it of our our different the and our position we’re can right perform, sitting question,

Gabe Moreen

Joe. Thanks, it. Got

Operator

Citi. Spiro next question Dounis Our from comes with

Unidentified Analyst

for Chad Hi, is on this Spiro.

one Just me. for question

with does features the commencing, at curious view distribution this growth Just anything about SUN? IDR way change the the

Joe Kim

very and think have They them. an multiple Chad, ET been this also is have and GP is every one of Joe. company, supportive incredibly No, I like stakeholders, patient. we

our for intend all record to track a goal stakeholders. on stakeholders. for to we’ve more importantly, value And our forward path, So is create going-forward our And basis a going shows our obvious think done on all I that. value create we

Unidentified Analyst

makes me. sense. Thank That Okay. That’s you. it for

Operator

Fargo. next Ned comes Our with Baramov question Wells from

Ned Baramov

Hey, taking the for Thanks good morning. question.

talk CapEx frame time the requirement of You around the Zenith maybe and about mentioned investments? growth assets. and around the acquired maybe Could potential opportunities in opportunities the you these

Karl Fails

had all Zenith Yes. updated guidance, do have mentioned Ned, I with as my changes the prepared in remarks, those to in our really acquisition.

so capital we which is capital update that And is those capital these along some but is comes with necessarily maintenance guidance. didn’t material our associated why growth growth assets, there any assets, there not with

Ned Baramov

Got on the maintenance you how it. And then for I any think but your guidance volumes margins CapEx and ranges on OpEx, EBITDA Zenith that about and acquisition, does XXXX? change reflect guess updated

Karl Fails

Yes.

right we year. finished we mean As of here, just months the sit I four

months still We have put in we that we and left, guidance together really feel December. the eight back good about

but you were we a target just we singular margin that, those we that we our profit. a going year, and target, not singular of a we together modified this guidance thought If where gross margin back that, when for in we that expected that look you bit past, midpoint was up, at we multiply little right, that ranges, volume gave where a in kind gave and to volume was fuel end that, good exactly gave the how

we change we is still that now, And sit would are that. comfortable and think that so as materially don’t here there with anything

have As slightly the different might be there I past, in a path. talked

are than are gross margins we still little versa, vice or profit we weaker a and if the range expect stronger to So, same volumes little a in and of come EBITDA. assumed

Ned Baramov

Thanks That’s all that. I had. for

Karl Fails

You bet.

Operator

from question JPMorgan. next comes our And Royall John with Instructions] [Operator

John Royall

taking my for Thanks morning. Good guys. question. Hi

on maybe recognizing the Zenith have question like geographies think spread acquisition some begs growth where that distribution the kind have front, you fill a different it’s on do with there in acquisition here on driving is that looks to you and side? would some you at this interplay some So, business, focus like across geographically holes the the of point you

Joe Kim

Hi is John, Yes. Joe. this

at alright, – as as income, to, I to pretty down geographically, still I that’s growth when criteria so far comes some acquisitions. we think one, look and think basic comes synergies. it opportunities it that and Stable

criteria that synergies. stable on if Puerto at we So, geography. fit was And existing growth But an income. We I you and saw we that side, administrative of thought did Rico, geographies, we the from outside our our would three, obviously it kind more think was also opportunities. that new look could of When those layering for – top geographies. saw

So, the versus criteria being I think those one probably overriding particular just more another. versus geography focused are on

John Royall

higher That makes maybe then sense. level Thanks question. a Joe. And

on, You are on you structural where past work-from-home to I guys we is was impacted insights of sales same-store gasoline then perspective And kind are have in volume from and sticky they business dynamics? acquisitions, had of if any have thoughts the today miles you dynamics. gasoline wondering impaired good demand from demand trends in around how permanently traveled COVID maybe if and kind your relative stripped work-from-home out a XXXX? on and by the

Karl Fails

our most with is where still last side versus is – network in And about numbers last few volumes would XXXX have the you say, year. really John, see part, gasoline years. the I good for at the and even the us line And and you Yes. off the versus in off publicly a there that industry our looking on of a I own think can thinking many been are over it’s question.

And it’s we that growth whether or like share, profit our up in gross and strategy we with been the XX us for one, like the capital through that, it’s we And talked the Peerless Joe organic Gladieux overall margins, pick market side. feel breakeven with just has opportunity just or to about, then on that compensates so months it’s activity. than more through did whether our an higher it’s the through whether acquisitions criteria last commercial with think

XXXX. at that a fuel So, is behind lot as in you – demand, pretty it drivers look was what far as measures, to the close of traveled vehicle by miles

of overall been last you If trend XX upward the history an generally in look the efficiency. it’s back years, fuel in

so exactly But what’s the couple to that last necessarily over have on our And clearer up years. anyone we slightly is ball seen than crystal know that don’t of lot pick a else’s going I happen.

for different we So, even with it’s can results. our put up of the about stability scenarios, where, predictable really us, portfolio,

Joe Kim

to couple things that. will And a I John, add of

look up capital growth I the quarter, U.S. at think business, to what Karl is the said close But evident first probably by you number base that, we the as our very similarly average. if put in tracking working. it’s our obviously, is

materially. outpacing are we U.S. So, the average

your As I I upside U.S. the question probably potential about trends, think guess of far as as, there U.S. consider kind I overall should of heart for as the is think point far one overall volume. probably data Street

allows level office data metro biggest and track of that to are a on the pre-COVID people everybody with track of of pre-COVID office. office. from XX U.S., XX% we the the a are they they say, coming is the still company, code They markets kind of to and a in has basis. And of it now, One kind the Right called monthly company sitting K. from we actually key the into security metrics that you Kastle access track

have – comes – people the work an that more, you that more home assumption it If more make people to returning. start less upside that are going are going come is and volume from you give think does when going to become industry into to the I office if to

John Royall

you. Thank helpful. Very

Operator

session. question-and-answer our closing are We

comments. like would Please to I back for Now, floor go to Scott turn over Rachel the closing ahead.

Scott Rachel

Thanks on this call us everyone joining for morning. the

always, questions, if me. free Thanks. have to to reach you follow-up out As feel any

Operator

call. concludes This today’s conference

and Thank lines you your at your this great You participation a have may day. for time. disconnect

Sunoco (SUN) 2 May 232023 Q1 Earnings call transcript