Q3 2023 Martin Midstream Partners LP Earnings Call

Okay.

Speaker 1: Good morning, my name is Audra and I will be your conference operator today. At this time I would like to welcome everyone to the MMLP third quarter earnings conference call. Today's conference is being recorded.

Good morning, My name is Andre and I will be your conference operator today at this time I would like to welcome everyone to the M. M. L. P third quarter earnings conference call.

Today's conference is being recorded.

Speaker 1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one again.

Speaker 1: At this time, I would like to turn the conference over to Sharon Taylor, Chief Financial Officer.

At this time I would like to turn the conference over to Sharon Taylor Chief Financial Officer. Please go ahead.

Speaker 2: Thank you, operator, and good morning, everyone, and thank you for joining us today. In the room are Bob Bondurant, CEO , Randy Tauscher, COO, David Cannon, Controller, and Danny Cavan, Director of FP&A. I'll begin with our...

Thank you operator, and good morning, everyone and thank you for joining us today in the room are ball Bonder and CEO .

Andy Tauscher C O O, David Cannon controller, and Danny Cavin director of F. D N a.

I'll begin with our cautionary statements. During this call management may be making forward looking statements as defined by the SEC.

Speaker 2: During this call, management may be making forward-looking statements as defined by the SEC.

Speaker 2: These statements are based upon our current beliefs as well as assumptions and information currently available to us. Please refer to our press release issued yesterday afternoon as well as our latest filings with the SEC for a list of factors that could impact the future performance of Martin and cause our actual results to differ from our expectations.

These statements are based upon our current beliefs as well as assumptions and information currently available to us.

Please refer to our press release issued yesterday afternoon, as well as our latest filings with the SEC for a list of factors that could impact the future performance of Martin and cause our actual results could differ from our expectations.

Speaker 2: We will discuss non- GAAP financial measures on today's call such as adjusted EBITDA, distributed cash flow, and free cash flow. In addition, we will refer to adjusted EBITDA after giving effect to the exit of the butane optimization system.

We will discuss non-GAAP financial measures on today's call such as adjusted EBITDA distributable cash flow and free cash flow. In addition, we will refer to adjusted EBITDA after giving effect to the exit of the butane optimization goodness you will find a reconciliation of these.

Speaker 2: You will find a reconciliation of these non- GAAP measures to their nearest GAAP measures in our earning press release posted on our website. Now I will turn the call over to Bob to discuss second quarter results by segment. Thanks, Sharon.

non-GAAP measures to their nearest GAAP measures in our earnings press release posted on our website now I will turn the call over to Bob to discuss second quarter results by segment. Thanks Sharon.

Speaker 3: I would now like to discuss the performance of Martin Mitzrein's operations, comparing the actual results of the third quarter to our third quarter revised guidance.

I would now like to discuss the performance of Martin Midstream operations, comparing the actual results of the third quarter to our third quarter revised guidance.

Speaker 3: As a reminder, the third quarter is typically our weakest cash flow quarter relative to the other three quarters of the year. Primarily due to the seasonality in our fertilizer business, which is historically weaker in Q3.

As a reminder, the third quarter is typically our weakest cash flow quarter relative to the other three quarters of the year, primarily due to the seasonality in our fertilizer business, which is historically weaker in Q3.

Speaker 3: For the third quarter, we had a just a debit dot of 26.2 million compared to our third quarter revised guidance of 25.1 million.

For the third quarter, we had adjusted EBITDA of $26 2 million compared to our third quarter revised guidance of $25 1 million.

Speaker 3: and improvement over guidance of 1.1 million or 4.4%.

An improvement over guidance of $1 1 million or four 4%.

Speaker 3: For the Triton 12 Month in September 30, 2023.

For the trailing 12 months ending September 32023.

Speaker 3: including the results of our recently exit butane optimization business. We had adjusted the data of 117.1 million.

Excluding the results of our recently exited butane optimization business, we had adjusted EBITDA of $117 1 million.

Speaker 3: For the third quarter, our largest cash flow generator was our transportation segment, which had a just a divot dov 9.5 million compared to revived guidance of 12 million.

For the third quarter, our largest cash flow generator was our transportation segment, which had adjusted EBITDA of $9 5 million compared to revise guidance of $12 million.

Speaker 3: Within this segment, our land transportation business had adjusted if it's off $6.7 million compared to revised guidance of $8.5 million.

Within this segment our land transportation business had adjusted EBITDA of $6 7 million compared to revise guidance of $8 5 million.

Speaker 3: The missing adjusted if it does compared to our forecast for the land transportation business was primarily due to an 8% reduction in forecast in miles driven.

The Miss in adjusted EBITDA compared to our forecast for the land transportation business was primarily due to an 8% reduction in forecast at miles driven.

Speaker 3: Well, the third quarter had the strongest daily load count of the year. A long haul load count was down due to a slowing demand primarily from our specialty industrial customers. We believe this is due to the.

While the third quarter had the strongest daily low kind of the year.

Long haul load count was down due to a slowing demand primarily from our specialty industrial customers.

We believe this is due to the weakening U S economy.

Speaker 3: As a result of the weekend economic outlook, which we believe will negatively impact the transportation requirements from our specialty industrial customer base. We have lowered guidance for land transportation for the fourth quarter by 1.1 million.

As a result of the weakened economic outlook, which we believe will negatively impact the transportation requirements from our specialty industrial customer base, we have lowered guidance for land transportation for the fourth quarter by $1 1 million.

Speaker 3: A Marine Transportation Business had adjusted EBITDA of 2.8 million compared to guidance of 3.5 million.

Our marine transportation business had adjusted EBITDA of $2 8 million compared to guidance of $3 5 million.

Speaker 3: Well, we missed guidance in the third quarter. We do see continued strength in both the man and daily market rates in the inland barge market.

While we missed guidance in the third quarter, we do see continued strength in both demand and daily market rates in the inland barge market.

Speaker 3: Compared to the second quarter, our average MN2 barge to day rate increased over 3%.

Compared to the second quarter, our average and then two barge tow day rate increased over 3%.

Speaker 3: However, negatively impacting our third quarter performance was a decrease in overall fleet utilization compared to forecast as one of our inland toes went into the shipyard for a lengthy dry dock.

However, negatively impacting our third quarter performance was a decrease in overall fleet utilization compared to forecast.

One of our inland tows went into the shipyard for a lengthy dry dock.

Speaker 3: This inmento is now currently working at an improved day-race.

This inland tow is now currently working at an improved day rates.

Speaker 3: The other negative impact to third quarter performance was a one time charge to marine transportation's unallocated SGNA.

The other negative impacted third quarter performance was a one time charge to marine transportation unallocated SG&A.

Speaker 3: Looking toward the end of the year, we feel comfortable with our existing fourth quarter guidance from marine transportation.

Looking towards the end of the year, we feel comfortable with our existing fourth quarter guidance for Marine transportation.

Speaker 3: Our second strongest cashflow generator in the third quarter was our terming and storage segment, which had adjusted Ibedav 8.2 million compared to guidance of 9.1

Our second strongest cash flow generator in the third quarter was our Terminalling and storage segment, which had adjusted EBITDA of $8 2 million compared to guidance of $9 1 million.

Speaker 3: We had a slight 1% revenue decrease compared to guidance and a 3% increase in total expenses, some of which were one time charge.

We had a slight 1% revenue decrease compared to guidance and a 3% increase in total expenses.

Some of which were one time charges.

Speaker 3: Now I would like to discuss the performance of our specialty products business segment, which was our third largest cash flow generator in the third quarter.

Now I would like to discuss the performance of our specialty products business segment, which was our third largest cash flow generator in the third quarter.

Speaker 3: In this segment, we had adjusted the EBITDAF 6.8 million compared to guidance of 5.2 million.

In this segment, we had adjusted EBITDA of $6 8 million compared to guidance of $5 2 million.

Speaker 3: Well, our combined NGL and propane groups met their third quarter guidance. Our package lubricant and our grease businesses combined to exceed third quarter guidance by 1.7 million.

While our combined NGL and propane groups met their third quarter guidance, our packaged lubricant and grease businesses combined to exceed third quarter guidance by $1 7 million.

Speaker 3: Our sales volume for packaged lubricants and grease both approximated our forecast, but margins for both business lines exceeded forecast.

Our sales volume for packaged lubricant and grease, both approximated our forecasts, but margins for both business lines exceeded forecast.

Speaker 3: Our package lubricant margins on a per gallon basis exceeded forecast by 35% and our grease margin on a per pound basis exceeded forecast by 19%. Finally, I would like to...

Our packaged lubricant margins on a per gallon basis exceeded forecast by 35%.

Our gross margin on a per pound basis exceeded the forecast by 19%.

Finally, I would like to discuss our sulfur services segment.

Speaker 3: This segment had adjusted Ibedo 5.4 million compared to guidance of 3.1 million.

This segment had adjusted EBITDA of $5 4 million compared to guidance of $3 1 million.

Speaker 3: Our fertilizer group had adjusted Ibedo 2.2 million, exceeding third quarter guidance by 2.1 million, as we had forecasted a break even quarter.

Our fertilizer group had adjusted EBITDA of $2 2 million exceeding third quarter guidance by $2 1 million as we had forecasted a breakeven quarter.

Speaker 3: Our overall fertilizer sales by him exceeded forecast by 13%. As we had unforecasted liquid fertilizer sales to the South American export mark.

Our overall fertilizer sales volume exceeded forecast by 13% as we had forecasted liquid fertilizer sales to the South American export market.

Speaker 3: We also had unforecasted dispersal sales to the US markets. As our customer base began to proceed, the continued decline in dispersal pricing had floored due to upward pressure in sulfur commodity prices. The primary feature.

We also had on forecasted dispersal sales to the U S markets as our customer base began to perceive that continued decline and dispersed oil pricing had floored due to upward pressure and sulfur commodity prices the primary feedstock for dispersal.

Speaker 3: Also, having unforecasted liquid and dispersal cells in the third quarter, it allowed us to improve manufacturing utilization at two of our fertilizer plants, which also contributed to improve profitability.

Also by having on forecasted liquid and disperse all cells in the third quarter. It allowed us to improve manufacturing utilization at two of our fertilizer plants, which also contributed to improved profitability.

Speaker 3: The pure sulfur side of our sulfur services segment had adjusted if it died of 3.2 million, which exceeded guidance by 0.2 million.

The pure sulfur side of our sulfur services segment had adjusted EBITDA of $3 2 million, which exceeded guidance by $2 million.

Speaker 3: We continue to see strong self-reproduction from our refinery suppliers, which continues to support this business line with greater volumes and profitability than originally forecast.

We continue to see strong sulfur production from our refinery suppliers, which continues to support this business line with greater volumes and profitability than originally forecasted.

Speaker 3: to summarize in the third quarter, we at Strength in our margin businesses are set to a certain degree by underperformance in some of our fee-based business life.

To summarize in the third quarter, we had strength in our margin businesses offset to a certain degree by underperformance in some of our fee based business lines.

Speaker 3: However, on a combined basis, Martin Mischrie exceeded guidance by 1.1 million, confirming that in spite of certain cashflow variability between segments, overall, our restructured refinery services business model is designed to deliver long-term stable and sustainable cashflow.

However, on a combined basis Martin midstream exceeded guidance by $1 1 million confirming that in spite of certain cash flow variability between segments or.

Overall, our restructured refinery services business model is designed to deliver long term stable and sustainable cash flows.

Speaker 3: Now I would like to turn the call over to Sharon to discuss our balance sheet, capital resources, leverage, and capital investment.

Now I would like to turn the call over to Sharon to discuss our balance sheet capital resources leverage and capital investment.

Thank you Bob.

Speaker 2: Total long-term debt outstanding on September 30th consisted of 62.5 million drawn on our 175 million revolver that matures in 2027. And 400 million of senior secures secondly notes do 2028. For a total of 462.5 million, which is an increase of 2.5 million from the end of last.

Total long term debt outstanding on September 30th consisted of $62 5 million drawn on our 175 million revolver that matures in 2027 and $400 million of senior secured second lien notes due 2028.

A total of $462 5 million, which is an increase of $2 5 million from the end of last quarter. This slight increase quarter over quarter was expected as the semi annual payment for interest related to our outstanding notes due in August of the quarter.

Speaker 2: The slight increase quarter over quarter was expected as the semi-annual payment for interest related to our outstanding notes was due in August of the-

Speaker 2: Our total bank compliant leverage was 3.95 times at the end of the quarter compared to 4.14 times on June 30.

Our total bank compliant leverage was 395 times at the end of the quarter compared to 414 times on June 30.

Speaker 2: a .19 time reduction driven by an increase in our trailing 12-month EBITDA after giving effect to the exit of the butane optimization business.

8.19 time reduction driven by an increase in our trailing 12 month EBITDA after giving effect to the exit of the butane optimization business.

Rounding out our financial ratios.

Speaker 2: First-lane leverage was 0.53 times, and interest coverage was 2.2 times. Liquidity under the revolving credit facility was approximately 84 million, and the partnership was in compliance with all covenants at the end of the course.

Lean leverage was five three times and interest coverage was two two times liquidity under the revolving credit facility was approximately $84 million and the partnership was in compliance with all covenants at the end of the quarter.

Speaker 2: Now let's focus on capitalized spending during the quarter and how that projects for the rest of 2020.

Now, let's focus on capitalized spending during the quarter and how that projects for the rest of 2023.

Speaker 2: Maintenance capital expenditures for the quarter were 7.2 million. A slight increase from our forecast of 7.1 million.

Maintenance capital expenditures for the quarter were $7 2 million.

A slight increase from our forecast at $7 1 million.

Speaker 2: We are now forecasting maintenance capex to be 7.4 million in the fourth quarter, bringing our total for the year to 29.4 million, which is an increase of 2.8 million from our guidance.

We are now forecasting maintenance capex to be $7 4 million in the fourth quarter, bringing our total for the year to $29 4 million, which is an increase of $2 8 million from our guidance.

Speaker 2: The majority of this increase is within the short-based segment related to repairs on the Galveston Folkhead and to the Port Arthur Darktruck.

The majority of this increase is within the shore based segment related to repairs on the Galveston bulkhead and two the port Arthur Doc catcher.

Speaker 2: Growth cap X was 3.4 million for the quarter, or 2.1 million less than 4 cap.

Growth Capex was $3 4 million for the quarter are $2 1 million less than forecasted cap.

Speaker 2: Capital expenditures related to the Oliom Tower, which will provide feedstock to the DSM-Semicim joint venture with 2.6 million of the quarterly total.

Capital expenditures related to the OEM tower, which will provide feedstock to the DSM semi chem joint venture with $2 6 million of the quarterly total.

Speaker 2: The original budget for 2023 related to the Olium Tower was 12.7 million, however, we are now forecasting a total spend of only 7.2 million for the year as construction costs are now more heavily weighted to the latter months of the project in the first quarter of 2020.

The original budget for 2023 related to the OEM tower with $12 7 million. However, we are now forecasting a total spend of only seven 2 million for the year as construction costs are now more heavily weighted to the latter months of the project and the <unk>.

First quarter of 2024.

Speaker 2: Accordingly, the total growth CAPEX forecast for 2023 is reduced as we now expect 2023 spend to be approximately 10.1 million compared to our guidance of 17.5 million.

Accordingly, the total growth Capex forecast for 2023 is reduced as we now expect 2023 spend to be approximately $10 1 million compared to our guidance of $17 5 million.

Speaker 2: Year-to-date growth cap act expenditures through the third quarter were 6.1 million, with an additional 4 million forecasted for the fourth.

For clarity.

Year to date gross capex expenditures due to the third quarter were $6 $1 million with an additional $4 million forecasted for the fourth quarter.

Speaker 2: The Tribunal cash flow for the quarter was 5 million and adjusted free cash flow with 1.5 million.

Distributable cash flow for the quarter was $5 million and adjusted free cash flow with $1 5 million.

Speaker 2: Finally, 2023 EBITDA guidance remained unchanged at 115.4 million after giving effect to the exit of the detainment.

Finally, 2023, EBITDA guidance remains unchanged at $115 4 million after giving effect to the exit of the butane business we.

Speaker 2: We have adjusted fourth quarter guidance for the land transportation division down by approximately one million, but all other segments remain the same. For the- We have adjusted fourth quarter guidance for the land transportation division down by approximately one million, but all other segments remain the same.

We have adjusted fourth quarter guidance for the land transportation division down by approximately $1 million, but all other segment to remain the same for.

For the full guidance by business line. Please refer to slide three of the third quarter earnings summary presentation released along with our earnings yesterday evening and available on our website.

Speaker 2: Please refer to slide three as the third quarter earning summary presentation released along with our earnings yesterday evening and available on our web.

Speaker 2: This concludes my prepared new mark, so I'll turn the call back to the operator for Q&A.

This concludes my prepared remarks, so I'll turn the call back to the operator for Q&A.

Speaker 1: Thank you. At this time, I would like to remind everyone in order to ask a question, press star, and the number one on your telephone keypad. We'll take our first question from Kyle May from Siddodean Company.

Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

I'll take our first question from Kyle May from Sidoti <unk> Company.

Hi, good morning, everyone.

Good morning, good morning.

Speaker 4: Bob, wondering if you could maybe expand on the lower mileage and the transportation segment for this quarter? And I know you mentioned you've already made some adjustments for the fourth quarter, but just kind of, how you're thinking about that aspect of the business and then when it could potentially turn around.

Bob wondering if you could maybe expand on the the lower mileage in the transportation segment for this quarter.

And I know you mentioned, you've already made some adjustments for the fourth quarter, but just kind of how youre thinking about that aspect of the business and then when it could potentially turnaround.

Speaker 3: Yeah, so big picture as I made it in my comments was our total load count with the highest average per day and the quarter. So what does that mean? How does your mileage down when your load counts up?

Yes, so big picture as I made in my comments was our total load count was the highest average per day in the quarter. So what does that mean, how does your mileage down when you load counts up and we've had a shift to a shorter haul kind of scenario around refinery basis et cetera.

Speaker 3: and it we've had a shift to a shorter haul kind of scenario around refinery bases, et cetera because the demand in long hauling is down a lot of it coming from the chemical industry some from longer term from the lubricant

Cause the demand and long hauling is down a lot of it coming from the chemical industry.

From longer term from the lubricant business.

Speaker 3: that just a demand because economic slowdown is happening.

Just a demand because the economic slowdown is happening so when you think about it as you run.

Speaker 3: So when you think about it, as you run a shorter haul, that's more expensive. You know, you got a higher pay rate.

Shorter hauls thats more expensive you got a higher pay rate.

Speaker 3: keep a driver employed, he's got to get paid even though he's running shorter versus a longer term haul. So that's one piece of it. Another piece is the frequency of short hauls you have more time, repair and maintenance related to that. So

Keep a driver employed he's got to get paid even though he is running shorter versus longer term haul. So thats one piece of it. Another piece is the frequency of short haul as you have more over time repair and maintenance related to that so.

Speaker 3: bigger picture if you will. A short haul rate has probably a higher operating cost or a mile while it does versus a long haul. So all that kind of plays into the equation. The win is it's gonna turn around. We've seen late in the third quarter a pickup in our chemical hauling and it's carried over a little bit into October . So hopefully that's boating well for us. We're gonna also try to increase our customer base.

Bigger picture, if you will shorter haul rate has probably a higher operating cost per mile. It does versus the long haul. So all of that kind of plays into the equation, but when is this going to turn around.

We've seen late in the third quarter, a pickup in our chemical hauling.

It's carried over a little bit into October so hopefully that's boding well for us.

We're going to also try to.

<unk> increased our customer base.

Speaker 3: We have a fleet of chemical traders that need to be have a higher utilization. So we're going to try and expand our chemical base, customer base, if you will. So all that combined, I think we're going to see a slower fourth quarter overall, but probably, you know, it'll trend along with the U.S. economy probably later first quarter into the second quarter. That's our instinct. Any addition? Yeah, this is Randy. I just said that we have a

Have a fleet of chemical traders that need to be have a higher utilization. So we're going to try and expand our chemical base.

Customer base, if you will so all that combined I think we're going to see a slower fourth quarter overall, but.

Probably you know it'll it'll trend along with the U S economy, probably later first quarter into the second quarter. That's our instinct any any addition, yes. This is Randy.

To add that we have.

Speaker 5: Excuse me, a seasonality aspect to the chemical and lubricant business.

Excuse me a seasonality aspect to the chemical and lubricant business than you typically would see a little slow down.

Speaker 5: typically we see a little slow down, you know, beginning around Thanksgiving time through the first of the year. But the element of the forecuter that we normally see in improvement is from the LPGs, particularly if we have any kind of long and sustained winter from the propane side, but our butane business.

Beginning around Thanksgiving time through the first of the year.

The element of the <unk> that we normally see an improvement as from the LPG <unk>.

Particularly if we have any kind of a long and sustained winter.

The propane side, but our butane business.

Speaker 5: or our customers in the VU team business that are propane business typically elevates for the trucking department quite a bit in the fourth quarter in the first.

Our customers in the butane business in our propane business typically elevates the trucking department quite a bit in the fourth quarter and the first quarter.

Speaker 4: Okay, great, that's helpful. And then I also wanted to ask about, I believe the release mentioned in some of your prepared comments, talk about delays in the semiconductor manufacturing facility. Just wonder if you can give us kind of an update on the current status of development, and then should we expect any delays in the overall project completion?

Okay, Great that's helpful.

And then I also wanted to ask about I believe the release mentioned in some of your prepared comments talked about delays in the semiconductor manufacturing facility.

Just wonder if you can give us kind of an update on the current status of development and then.

Should we expect any delays in the overall project completion.

Speaker 5: This is Randy again. So the answer to that is we expect a slight delay in the project completion. And now I'm talking about our OEM plant to the second quarter of 2024 from late first quarter.

This is Randy again, so the answer to that is we expect a.

Slight delay in the project completion.

And now I'm talking about our OEM client to the second quarter of 2024.

From late first quarter 2024.

Speaker 5: And then yes, I mean, absolutely when our intended customers are announcing delays of their plan, our demand will be kicked down the road a little bit, likely much of it in 2025. And I think when we look at 2025.

And then and then yes, I mean, absolutely one when our intended customers are announcing delays.

Their plan, our demand will be kicked down the road.

A little bit likely.

Much of it into 2025.

Okay, Great. That's helpful. I appreciate the time this morning.

Thank you Scott.

Thanks.

Speaker 1: And again, as a reminder, if you would like to ask a question, please press star one. We'll go next to Selman Akiol.

And again as a reminder, if you would like to ask a question. Please press star one we will go next to Selman <unk> with Stifel.

Speaker 6: Hi guys, this is Tim on for Selman. Thanks for taking the time. Previously you guys had highlighted some potential projects in and around Beaumont. Just wondering if you could expand on what kind of projects you guys are seeing and potentially the scale of those projects.

Hi, guys. This is Tim on for Selman, Thanks for taking the time.

Previously you guys had highlighted some potential projects.

In and around Beaumont, just wondering if you could expand on what kind of projects you guys are seeing and potentially the scale of those projects.

Yes, so the.

Speaker 5: The scale of those projects to us would be very similar to what you saw on our our high purity.

The scale of those projects to us would be.

Very similar to what you saw on our on our high.

Speaker 5: deal. So we're not, we're talking, you know, a couple of 10 of millions of dollars, that would be our contribution to the project that we had discussed previously. Now, those projects have slowed down in one case. The project has been deferred because of the inability to get the carbon capture managed on their side. So I'd say there's, we're still talking to people and there's more to come on that, but nothing else to report at this time.

High purity.

So we're not talking.

A couple of tens of millions of dollars that would be our contribution to the projects that we had discussed previously know now those projects have slowed down in one case.

The project has been deferred because of the inability to.

To get the carbon capture managed on their side.

So I'd say there is we're still talking to people and theres more to come on that but nothing else to report at this time.

Speaker 6: Got it, thanks. And you guys have also mentioned some one time SG&A and OPX costs within a couple of your segments. Is there any way for you guys to quantify how much that impact was for the quarter? And obviously since they were one time, we should see a step up and fork.

Got it thanks.

And you guys had also mentioned some onetime SG&A and opex costs within a couple of your segments is there any way for you guys to quantify how much.

That impact was for the quarter and obviously since there were onetime we should see a step up in <unk> and <unk> cash flow.

Speaker 6: So I want to clarify first we are talking about the one time expenses in the marine group. Correct and then I think there is also some I thought you guys had mentioned some.

So I wanted to clarify first we're talking about the one time.

Expenses in the Marine group.

Correct and then I think there is also some.

I thought you guys had mentioned some expenses within.

Our terminalling and storage.

So.

We have.

Speaker 2: What some of those are related to in both termiling and in the Marine group is some phantom units that we gave out to management in July . So a couple of things happened in June . We already had two tranches of those of those.

What some of those are related to in both Terminalling and in the Marine Group is Phantom units that we gave out to management and July . So a couple of things happened in June we already had two tranches of those.

Those.

Speaker 2: on the books and the unit price had come down to a point where we made an adjustment in June . And then we issued another tranche to our employees in July . And so that tranche the...

On the books and the unit price had come down to a point, where we made an adjustment in June and then we issued another tranche to our employees in July and third that tranche the <unk>.

Speaker 2: came on in the third quarter. And so when you look at those SG&A costs, you had a reduction in the second quarter and an additional charge in the third quarter. So that's some of those differences there.

Came on in the third quarter and so when you look at those SG&A costs, you had a reduction in the second quarter and an additional charge in the third quarter. So that some of those differences there.

Speaker 6: got it make sense. and then the last one for me is just wondering if you could get him give an update on your guys' business down in florida and tam

Got it makes sense.

And then the last one for me is just.

Just wondering if you could give an update on your guys business down in Florida.

Florida and Tampa.

Speaker 5: Yeah, the trucking business in Tampa has continued to be strong. We're getting the types of returns in Tampa that we see throughout our trucking business.

Yes.

The trucking business and cap has.

Continued.

To be strong.

We're getting the types of returns in Tampa that we see throughout our our trucking business.

Speaker 5: That's been a good growth area for us, and we would anticipate.

And that's been a good growth area for us.

And we would anticipate.

Speaker 5: for the rest of this winter and the next spring.

For the rest of this winter and next spring.

Speaker 7: early next summer that the phosphate business do quite well and there would be a lot of need for our husband and wife to round there.

And early next summer that the phosphate business do quite well.

And there'll be a lot of need for our for us moving products around there.

Understood.

All I had thank you guys for the time.

Thank you.

Speaker 1: And there are no further questions at this time. I would like to turn a conference over to Bob Bond or App for closing remarks.

And there are no further questions at this time I would like to turn the conference over to Bob <unk> for closing remarks.

Thank you Roger.

Speaker 3: We are pleased with our third quarter results, meeting guidance by a little over $1 million as our diversified refinery services model continues to return stable cash flows, allowing us to continue to strengthen the balance sheet and get closer to our leverage goal of below 3.75 times.

We are pleased with our third quarter results, beating guidance by a little over $1 million as our diversified refinery services model continues to return stable cash flows, allowing us to continue to strengthen the balance sheet and get closer to our leverage goal of below 375 times.

Speaker 3: During the call we discussed the delayed start-up of the ELSA plant, even with the delay we remain positive about the strategic alliance with Samsung, CNT, America, and Donjian, USA, EAK, expanding our existing asset based on fuel growth and growth, both revenue and cash flows with low capital requirements.

During the call we discussed the delayed startup of the Elfa plant.

Even with the delay we remain positive about the strategic alliance with Samsung CNT America, and Don Gen USA, Inc, expanding our existing asset base to fuel growth and grow both revenue and cash flows with low capital requirements.

Speaker 3: Finally, I want to say that here at Martin, we are saddened by the recent attacks on Israel, the ongoing conflict and unimaginable human suffering. Our hearts go out to every person and family impacted by these horrific events and we pray for resolution to the conflict soon. That concludes our call. Thanks for-

Finally, I want to say that here Martin we are saddened by the recent attacks on Israel. The ongoing conflict in unimaginable human suffering our hearts go out to every person in family impacted by these horrific events.

For resolution to the conflicts.

That concludes our call thanks for joining us shortly.

Good day.

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Operator: Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the MMLP third quarter earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Sharon Taylor: At this time, I would like to turn the conference over to Sharon Taylor, Chief Financial Officer. Please go ahead.

Sharon Taylor: Thank you, operator, and good morning, everyone, and thank you for joining us today in the room or Bob Bondurant CEO, Randy Tauscher, COO, David Cannon, Controller, and Danny Kevin, Director of FPNA. I'll begin with our cautionary statement. During this call, management may be making forward-looking statements as defined by the SEC. These statements are based upon our current beliefs as well as assumptions and information currently available to us. Please refer to our press release issued yesterday afternoon, as well as our latest filings with the SEC for a list of factors that could impact the future performance of Martin and cause our actual results to differ from our expectations.

Sharon Taylor: We will discuss non-GAAP financial measures. On today's call, such as adjusted EBITDA, distributed cash flow, and free cash flow. In addition, we will refer to adjusted EBITDA, after giving effect to the exit of the butane optimization business. You will find a reconciliation of these non-GAAP measures to their nearest GAAP measures in our earnings press release posted on our website.

Bob Bondurant: Now, I will turn the call over to Bob to discuss second-quarter results by segments. Thanks, Sharon.

Bob Bondurant: I would now like to discuss the performance of Martin midstream's operations, comparing the actual results of the third quarter to our third quarter revised guidance. As a reminder, the third quarter is typically our weakest cash flow quarter relative to the other three quarters of the year, primarily due to the seasonality in our fertilizer business, which is historically weaker in Q3. For the third quarter, we had adjusted EBITDA of 26.2 million compared to our third quarter revised guidance of 25.1 million, an improvement over guidance of 1.1 million or 4.4%.

Bob Bondurant: For the trading 12 months ending September 30, 2023, excluding the results of our recently exit butane optimization business, we had adjusted EBITDA of 117.1 million. For the third quarter, our largest cash flow generator was our transportation segment, which had adjusted EBITDA of 9.5 million compared to revised guidance of 12 million. Within this segment, our land transportation business had adjusted EBITDA of 6.7 million compared to revised guidance of 8.5 million. The missing adjusted EBITDA compared to our forecast for the land transportation business was primarily due to an 8% reduction in forecast in miles driven.

Bob Bondurant: While the third quarter had the strongest daily load count of the year, a long haul load count was down due to a slowing demand primarily from our specialty industrial customers. We believe this is due to the weakening US economy. As a result of the weakened economic outlook, which we believe will negatively impact the transportation requirements from our specialty industrial customer base, we have lowered guidance for land transportation for the fourth quarter by 1.1 million.

Bob Bondurant: A marine transportation business had adjusted EBITDA of 2.8 million compared to guidance of 3.5 million. While we miss guidance in the third quarter, we do see continued strength in both the man and daily market rates in the inland barge market. Compared to the second quarter, our average inland two barge tow day rate increased over 3%. However, negatively impacting our third quarter performance was a decrease in overall fleet utilization compared to forecast as one of our inland tows went into the shipyard for a lengthy dry dock.

Bob Bondurant: This inland tow is now currently working at an improved day rate. The other negative impact at third quarter performance was a one-time charge to marine transportation's unallocated SGNA. Looking toward the end of the year, we feel comfortable with our existing fourth quarter guidance for marine transportation. Our second strongest cashflow generator in the third quarter was our terming and storage segment which had adjusted EBITDA of 8.2 million compared to guidance of 9.1 million. We had a slight 1% revenue decrease compared to guidance and a 3% increase in tow expenses, some of which were one-time charges.

Bob Bondurant: Now, I would like to discuss the performance of our specialty products business segment which was our third largest cashflow generator in the third quarter. In this segment, we had adjusted EBITDA of 6.8 million compared to guidance of 5.2 million. While our combined NGL and propane groups met their third quarter guidance, our package lubricant and our grease businesses combined to exceed third quarter guidance by 1.7 million. Our sales volume for package lubricants and grease both approximated our forecast but margins for both business lines exceeded forecast. Our package lubricant margins on a per gallon basis exceeded forecast by 35% and our grease margin on a per pound basis exceeded forecast by 19%.

Bob Bondurant: Finally, I would like to discuss our Silver Services segment. This segment had adjusted EBITDA of 5.4 million compared to guidance of 3.1 million. Our fertilizer group had adjusted EBITDA of 2.2 million exceeding third quarter guidance by 2.1 million as we had forecasted a break even quarter. Our overall fertilizer sales volume exceeded forecast by 13%. As we had unforecasted liquid fertilizer sales to the South American export market, market. We also had unforecasted dispersal sales to the U.S, markets as our customer base began to proceed that continued decline in dispersal pricing had floored due to upward pressure in sulfur commodity prices, the primary feedstock for dispersal.

Bob Bondurant: Also, having unforecasted liquid and dispersal sales in the third quarter, it allowed us to improve manufacturing utilization at two of our fertilizer plants, which also contributed to improve profitability. The pure sulfur side of our sulfur services segment had adjusted EBITDA 3.2 million, which exceeded guidance by 0.2 million. We continue to see strong sulfur production from our refinery suppliers, which continues to support this business line with greater volumes and profitability than originally forecasted. To summarize, in the third quarter, we had strength in our margin businesses offset to a certain degree by underperformance in some of our fee-based business lines.

Bob Bondurant: However, on a combined basis, Martin Midstream exceeded guidance by 1.1 million, confirming that in spite of certain cashflow variability between segments, overall, our restructured refinery services business model is designed to deliver long-term stable and sustainable cash flows.

Sharon Taylor: Now, I would like to turn the call over to Sharon to discuss our balance sheet, capital resources, leverage, and capital investment. Thank you, Bob. Total long-term debt outstanding on September 30 has consisted of 62.5 million drawn on our 175 million revolver that matures in 2027, and 400 million of senior secures secondly notes due to 2028, for a total of 462.5 million, which is an increase of 2.5 million from the end of last quarter.

Sharon Taylor: The slight increase quarter over quarter was expected as the August of the quarter. Our total bank compliant leverage was 3.95 times at the end of the quarter compared to 4.14 times on June 30. A 0.19 times reduction driven by an increase in our trailing 12-month EBITDA, after giving effect to the exit of the butane optimization business. Rounding out our financial ratios, first-ling leverage was 0.53 times, and interest coverage was 2.2 times.

Sharon Taylor: Liquidity under the revolving credit facility was approximately 84 million, and the partnership was in compliance with all covenants at the end of the quarter.

Sharon Taylor: Now, let's focus on capitalized spending during the quarter and how that projects for the signatures for the quarter were 7.2 million, a slight increase from our forecast of 7.1 million. We are now forecasting maintenance capex to be 7.4 million in the fourth quarter bringing our total for the year to 29.4 million, which is an increase of 2.8 million from our guidance. The majority of this increase is within the short-based segment related to repairs on the Galveston bulkhead and to the Port Arthur Doc structure.

Sharon Taylor: Growth CAPEX was 3.4 million for the quarter, or 2.1 million less than forecasted. Capital expenditures related to the Olium Tower, which will provide feedstocks to the DSM and Semi-Kim joint venture was 2.6 million of the quarterly total. The original budget for 2023 related to the Olium Tower was 12.7 million, however, we are now forecasting a total spend of only 7.2 million for the year as construction costs are now more heavily weighted to the later months of the project in the first quarter of 2024.

Sharon Taylor: Accordingly, the total growth CAPEX forecast for 2023 is reduced as we now expect 2023 spend to be approximately 10.1 million compared to our guidance of 17.5 million for clarity. Year-to-date growth CAPEX expenditures due to third quarter were 6.1 million with an additional 4 million forecasted for the fourth quarter.

Sharon Taylor: Distributal cash flow for the quarter was 5 million and adjusted free cash flow was 1.5 million. Finally, 2023 EBITDA guidance remains unchanged at 115.4 million after giving effect to the exit of the detain business. We have adjusted fourth quarter guidance for the land transportation division down by approximately 1 million, but all other segments remain the same.

Sharon Taylor: For the full guidance by business line, please refer to slide three as the third quarter earning summary presentation released along with our earnings yesterday evening and available on our website.

Sharon Taylor: This concludes my prepared remarks, so I'll turn the call back to the operator for Q&A. Thank you.

Operator: At this time, I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad.

Kyle May: We'll take our first question from Kyle May from Siddodean Company. Hi, good morning, everyone. Good morning.

Bob Bondurant: Bob, I'm wondering if you could maybe expand on the lower mileage and the transportation segment for this quarter, and I know you mentioned you've already made some adjustments for the fourth quarter, but just kind of how you're thinking about that aspect of the business and then when it could potentially turn around. Yeah, so a big picture as I made it in my comments was our total load camp was the highest average per day in the quarter.

Bob Bondurant: So what does that mean? How does your mileage down when your load counts up? And we've had a shift to a shorter haul kind of scenario around refinery bases, et cetera, because the demand and loan hauling is down, a lot of it coming from the chemical industry, some from longer term from the lubricant business, just a demand because the economic slowdown is happening. So when you think about it, as you run shorter haul, that's more expensive.

Bob Bondurant: You've got a higher pay rate to keep a driver employed. He's got to get paid even though he's running shorter versus a longer term haul. So that's one piece of it. Another piece is the frequency of short haul as you have more overtime repair and maintenance related to that. Bigger picture, if you will, a short haul rate has probably a higher operating cost or a mile while it does versus a long haul, so all that kind of plays into the equation.

Randy Tauscher: The wind is just going to turn around. We've seen late in the third quarter of pickup in our chemical hauling, and it's carried over a little bit into October, so hopefully that's boating well for us. We're going to also try to increase our customer base. We have a fleet of chemical traders that need to have a higher utilization, so we're going to try and expand our chemical base, customer base, if you will. So all that combined, I think we're going to see a slower fourth quarter overall, but probably, it'll trend along with the US economy probably later first quarter into the second quarter. That's our instinct, any addition.

Randy Tauscher: Yeah, this is Randy. I just said that we have a, excuse me, a seasonality aspect to the chemical and lubricant business, and then it typically would see a little slow down, you know, beginning around Thanksgiving time through the first of the year, but the element of the four cuter that we normally see in improvement is from the LPGs, particularly if we have any kind of long and sustained winter from the propane side, but our butane business or our customers in the butane business that our propane business typically elevates for the trucking department quite a bit in the fourth quarter in the first quarter. Okay, great. That's helpful.

Randy Tauscher: And then I also wanted to ask about, I believe the release mentioned in some of your prepared comments, talk about delays and the semiconductor manufacturing facility. Just wonder if you can give us kind of an update on the current status of development, and then should we expect any delays in the overall project completion? This is Randy again, so the answer to that is we expect a slight delay in the project completion.

Randy Tauscher: And now I'm talking about our OEM plant to the second quarter of 2024, from late first quarter, 2024. And then yes, I mean, absolutely when our intended customers are announcing delays of their plant, our demand will be kicked down the road a little bit, you know, likely much of it into 2025. Okay, great. That's helpful. Appreciate the time this morning. Thank you, Scott. Thanks. And again, as a reminder, if you would like to ask a question, please press star one.

Randy Tauscher: We'll go next to Selman Akyol with Spiefel. Hi guys, this is Tim on for Selman. Thanks for taking the time. Previously, you guys had highlighted some potential projects in and around Belmont. Just wondering if you could expand on, you know, what kind of projects you guys are seeing and potentially the scale of those projects. Yeah, so the scale of those projects to us would be very similar to what you saw on our, on our high purity deal.

Randy Tauscher: So we're not, we're talking, you know, a couple of ten of millions of dollars. That would be our contribution to the project that we had discussed previously. Now, those projects have slowed down in one case. The project has been deferred because of the inability to get the carbon capture managed on their side.

Randy Tauscher: So I'd say there's, we're still talking to people and there's more to come on that, but nothing else to report at this time. I got it. Thanks. And you guys have also mentioned some one-time S-U-N-A and OPEX costs within a couple of your segments. Is there any way for you guys to quantify how much that impact was for the quarter? And obviously since they were one time, we should see a step up and 4Q cashflow.

Randy Tauscher: So I want to clarify first, we are talking about the one-time expenses in the marine group. Correct. And then I think there is also some, I thought you guys had mentioned some expenses within termiling and storage. So we have what some of those are related to in both termiling and in the marine group is some phantom units that we gave out to management in July. So a couple of things happened in June.

Randy Tauscher: We already had two tranches of those on the books and the unit price had come down to a point where we made an adjustment in June. And then we issued another tranche to our employees in July. And so that tranche, the came on in the third quarter and so when you look at those S-G-N-A costs, you had a reduction in the second quarter and an additional tranche in the third quarter. So that's some of those differences there. Got it.

Unnamed: Make sense.

Randy Tauscher: And then the last one for me is just wondering if you could get a given update on your guys' business down in Florida and Tampa. Yeah, the trucking business in Tampa has continued to be strong. We're getting the types of returns in Tampa that we see throughout our trucking business. And that's been a good growth area for us. And we would anticipate for the rest of this winter and next spring and early next summer that the phosphate business do quite well. And there would be a lot of need for us moving products around there. Understood. That's all ahead.

Unnamed: Thank you guys for the time. Yeah. Thank you.

Operator: And there are no further questions at this time.

Bob Bondurant: I would like to turn a conference over to Bob Bond or out for closing remarks. Thank you, Audra. We are pleased with our third quarter results, meeting guidance by a little over $1 million as our diversified refinery services model continues to return stable cash flows, allowing us to continue to strengthen the balance sheet and get closer to our leverage goal of below 3.75 times. During the call, we discussed the delayed start-up of the alpha plant, even with the delay, we remain positive about the strategic alliance with Samsung, CNT, America, and Donjian, USA, Inc., expanding our existing asset based of fuel growth and growth, both revenue and cash flows with low capital requirements.

Bob Bondurant: Finally, I want to say that here, Martin, we are saddened by the recent attacks on Israel, the ongoing conflict and unimaginable human suffering. Our hearts go out to every person and family impacted by these horrific events, and we pray for resolution to the conflict soon.

Operator: That concludes our call. Thanks for joining us shortly, today. And that does conclude today's conference call. Thank you for your participation. You may now disconnect.

Operator: Please wait, the conference will begin shortly.