Q4 2023 World Kinect Corp Earnings Call

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Operator: Thank you for standing by. And welcome to World Kinect Corporation's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Thank you for standing by and welcome to the World connect corporations fourth quarter of 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation that will be a question and answer session to ask a question during this.

You won't need to press star one one on your telephone to remove yourself from the queue. Please press star one one again I.

Operator: To remove yourself from the queue, please press star 11 again. I would now like to hand the call over to VP of Investor Relations and Communication, Elsa Ballard. Please go ahead.

I would not like to end the call over to V T Investor Relations and communication Elsa Ballard. Please go ahead.

Elsa Ballard: Good evening, everyone, and welcome to World Kinect's fourth quarter and full year 2023 earnings conference call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our Investor Relations website. I'm Elsa Ballard, VP of Investor Relations and Communications. On the call today are Michael Kasbar, Chairman and Chief Executive Officer, and Ira Birns, Executive Vice President and Chief Financial Officer. Before I get started, I'd like to review our safe harbor statement. Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. World Kinect assumes no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP measures.

Good evening, everyone and welcome to all connect fourth quarter and full year 2023 earnings conference call, which will be presented alongside our lifestyle presentation.

Today's presentation is also available via webcast honor Investor Relations website, and also Ballard B P M Investor Relations and communications with me on the call today is Michael <unk>, Chairman and Chief Executive Officer, and <unk> Executive Vice President and Chief Financial Officer.

Before I get started I would like to review our Safe Harbor statement.

Certain statements made today, including comments about our expectations regarding future plans and performance are forward looking statements that are subject to a range of uncertainties and risks that could cause results materially differ.

Factors that could cause results to materially differ can be found in our most recent foreign 10-K, and other reports filed with the Securities and Exchange Commission.

Connect assumes no obligation to revise or publicly released the results of any revisions. These forward looking statements in light of new information or future events.

This presentation also includes certain non-GAAP measures.

A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure is included in our press release and can be found on our website we.

We will begin with several minutes of prepared remarks, which will then be followed by a question and answer period.

This time I would like to introduce our chairman and Chief Executive Officer, Michael Cashback. Thank you also and good afternoon everyone.

As we plan for upcoming Investor day in a few weeks I've been reflecting on where we have come from and where where you're going.

We all know the last 10 years have seen tremendous volatility in energy markets Commerce, geopolitics and even natural disasters.

Elsa Ballard: A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a question and answer period. At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar. Thank you, Elsa, and good afternoon, everyone.

Throughout this 10 year period, our customer base, particularly airlines and shipping companies experienced significant financial stress I'm proud to say that our company went through this period with tremendous skill financial stability and stewardship in the face of massive turbulence. Our team is navigated through these challenges and consistently.

Mitigated risks, while managing the impacts of market disruption on our customers and suppliers demonstrating both our expertise and reliability as a counterparty.

Today, we have a materially different business profile with a higher quality of earnings and a more predictable and synergistic portfolio. So.

So resiliency focus momentum and leverage or the words that resonate with me when I look back and look forward and that's why I made more enthusiastic and optimistic about our future than ever before.

Michael J. Kasbar: As we plan for our upcoming Investor Day in a few weeks, I've been reflecting on where we have come from and where we are going. We all know the last 10 years have seen tremendous volatility in energy markets, commerce, geopolitics, and even natural disasters. Throughout this 10-year period, our customer base, particularly airlines and shipping companies, experienced significant financial stress.

I believe we are better positioned with are common operating model common business processes and seasons leadership team. We have the force multiplier of a focused and aligned global team intent on leveraging our core distribution platform that we had spent decades developing and refining.

Our core distribution platform buys moves and sells energy directly and through a network of partners around the world to commercial industrial and governmental entities.

We have deep domain expertise in global aviation, a marine and we are rapidly developing similar global expertise and land based businesses and products, which represent a larger market opportunity.

To be clear, we don't refine the products, but we do refine the service.

Michael J. Kasbar: I'm proud to say that our company went through this period with tremendous skill, financial stability, and stewardship in the face of massive turbulence. Our team has navigated through these challenges and consistently mitigated risk while managing the impacts of market disruption on our customers and suppliers, demonstrating both our expertise and reliability as a counterparty. Today, we have a materially different business profile with a higher quality of earnings and a more predictable and synergistic portfolio. So resiliency, focus, momentum, and leverage are the words that resonate with me when I look back and look forward. And that's why I remain more enthusiastic and optimistic about our future than ever before.

Global platform has been stress tested and unforeseeable ways and is demonstrably more resilient and wiser, we have incorporated our experienced in alerting us from these events into our operating model, becoming an ever stronger financially and commercially responsible counterparty with each test we are better equipped to address the <unk>.

X market challenge delivering greater value to the marketplace and investors.

<unk> humble beginnings as a broker and simple reseller in secondary finance company to the global industrialized distribution business. We are today World can act as a story of transformation in our evolution and mission continues.

Aviation Marine segments are mature global businesses Ah decades of experience have enabled us to establish the sophisticated poor distribution platform. We operate today that delivers consistent performance.

<unk> business is evolving to resemble the aviation I'm redistribution model, gaining momentum as we define and a line or chord national and global platforms.

Windsor coming more regularly because their team is more focused on institutionalizing standard methodology across people assets processes and tools, we have in which the land leadership team by combining home grown talent steeped in the understanding of our core model with proven talent from acquired companies is.

Well as experienced industry professionals to deliver value to customers and suppliers.

That's how we will achieve the cash flow returns and growth we know exists in this business.

Michael J. Kasbar: I believe we are better positioned with our common operating model, common business processes, and seasoned leadership team. We have the force multiplier of a focused and aligned global team intent on leveraging our core distribution platform that we have spent decades developing and refining. Our core distribution platform buys, moves, and sells energy directly and through a network of partners around the world to commercial, industrial, and governmental entities. We have deep domain expertise in global aviation and marine, and we are rapidly developing similar global expertise in land-based businesses and products, which represent a larger market opportunity. To be clear, we don't refine the products, but we do refine the service.

Foundational component of our land segment consists of fuel distribution to retail gas stations and see stores.

We are continuing to expand our footprint by adding almost 300, new retail sites in 2023 to our customer base most under traditional longterm contracts, which is a testament to our reputation the space and the deep relationships with the supplier brands we represent.

Next is her card locked network card locks being unmanned retail stations for refueling light commercial vehicles.

We also serve commercial and industrial consumers, otherwise known as C. N I too, which we distribute fueling lubricants as well as power of natural gas.

And that's strong established and market leading core distribution platform is complemented by a growing sustainability and renewable energy business.

We are focused on increasing the availability of renewable energy and lower carbon fuels. We play an important role in facilitating the development of renewable solutions by bringing financing logistics marketing technical knowledge and a myriad of services to facilitate the lower carbon solutions the market needs by supporting these <unk>.

Pioneering innovators in startups that are solely focused on their mission.

We also continue to expand our suite of complimentary energy management solutions across our other three business lines deepening our relationships with customers and suppliers with services like renewable energy solutions and emissions reporting and helping our customers achieve lower carbon in net zero goals. These.

Michael J. Kasbar: Our global platform has been stress-tested in unforeseeable ways and is demonstrably more resilient and wiser. We have incorporated our experience and learnings from these events into our operating model, becoming an ever stronger financial and commercially responsible counterparty. With each test, we are better equipped to address the next market challenge, delivering greater value to the marketplace and investors. From our humble beginnings as a broker and simple reseller and secondary finance company to the global industrialized distribution business we are today, World Kinect is a story of transformation, and our evolution and mission continue.

Or essential services that our customers need to better run their operations and they have a high attachment right to our other offerings.

All of these are part and parcel of the energy transition in progress today and growing into the future. We are selecting the areas that are important to our customers and leverage our core distribution model.

The strategy is exactly a line to our customers current and future needs. We are not only serving our customers conventional energy needs today, but also enabling their energy management strategy going forward.

While still a small percentage of our overall business I renewable energy management offerings continue to grow and will represent a greater contribution to revenue profitability in the industry over time.

And while the solutions, we are providing to our customers are specialized much of what we do is operationally common across our business activity. The vast majority of our business is derived from our core distribution model are critical and unique ability to satisfy both customer and supplier needs, we are buying moving and selling the molecules and electric.

Michael J. Kasbar: Our aviation and marine segments are mature global businesses. Our decades of experience have enabled us to establish the sophisticated core distribution platform we operate today that delivers consistent performance. Our land business is evolving to resemble the aviation and marine distribution model, gaining momentum as we define and align our core national and global platform. The wins are coming more regularly because our team is more focused on institutionalizing standard methodology across people, assets, processes, and tools.

<unk> that our customers need to transport their passengers and manufacture and distribute their products.

As an example of the value of the World connect connect network. We are assisting a number of our clients will alternative fueling options in response to the recent disruption to trade in the Red Sea.

This is similar to the Covid period, where dislocations in normal transportation patterns mentor customers had to rely more on X R expertise and global supply capabilities.

We saw the benefits of our core distribution platform in 2023, although we experienced non-recurring financial impacts in the fourth quarter, which I really will cover and his comments, we delivered solid core operating results with healthy adjusted EBITDA.

This was on the back of especially strong growth within our aviation segment, which not only rebounded for the extreme backwardation in the private prior year, but also benefited from improve operating leverage.

Michael J. Kasbar: We have enriched the land leadership team by combining homegrown talent steeped in the understanding of our core model with proven talent from acquired companies, as well as experienced industry professionals to deliver value to customers and suppliers. That's how we will achieve the cash flow, returns, and growth we know exists in this business. A foundational component of our land segment consists of fuel distribution to retail gas stations and convenience stores.

Marine came off a record year in 2022 in bunker prices and market volatility were considerably higher but still perform very well in 2023.

And while our land business in North American experience, some weather related challenges that affected results in the first half of the year. We drove continued growth in our natural gas and power and renewable energy solutions activities.

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Michael J. Kasbar: We have continued to expand our footprint by adding almost 300 new retail sites in 2023 to our customer base, most under traditional long-term contracts, which is a testament to our reputation in the space and the deep relationships with the supplier brands we represent. Next is our Card Lock Network, Card Locks being unmanned retail stations for refueling light commercial vehicles.

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Michael J. Kasbar: We also serve commercial and industrial consumers, otherwise known as C&I, to whom we distribute fuel and lubricants, as well as power and natural gas. And that strong, established, and market-leading core distribution platform is complemented by a growing sustainability and renewable energy business. We are focused on increasing the availability of renewable energy and lower carbon fuels. We play an important role in facilitating the development of renewable solutions by bringing financing, logistics, marketing, technical knowledge, and a myriad of services to facilitate the lower carbon solutions the market needs by supporting these pioneering innovators and startups that are solely focused on their mission. We also continue to expand our suite of complementary energy management solutions across our other three business lines, deepening our relationships with customers and suppliers with services like renewable energy solutions and emissions reporting and helping our customers achieve lower carbon and net zero goals. These are essential services that our customers need to better run their operations. And they have a high attachment rate to our other offerings.

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Michael J. Kasbar: All of these are part and parcel of the energy transition and progress today and growing into the future. We are selecting the areas that are important to our customers and leveraging our core distribution model. This strategy is exactly aligned to our customers' current and future needs.

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Michael J. Kasbar: We are not only serving our customers' conventional energy needs today but also enabling their energy management strategy going forward. While still a small percentage of our overall business, our renewable and energy management offerings continue to grow and will represent a greater contribution to revenue, profitability, and the industry over time. And while the solutions we are providing to our customers are specialized, much of what we do is operationally common across our business activities. The vast majority of our business is derived from our core distribution model, our critical and unique ability to satisfy both customer and supplier needs. We are buying, moving, and selling the molecules and electrons that our customers need to transport their passengers and manufacture and distribute their products. As an example of the value of the World Kinect network, we are assisting a number of our clients with alternative fueling options in response to the recent disruption to trade in the Red Sea.

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Michael J. Kasbar: This is similar to the COVID period, where dislocations in normal transportation patterns meant their customers had to rely more on our expertise and global supply capability. We saw the benefits of our core distribution platform in 2023. Although we experienced non-recurring financial impacts in the fourth quarter, which Ira will cover in his comments, we delivered solid core operating results with healthy adjusted EBITDA. This was on the back of especially strong growth within our aviation segment, which not only rebounded from the extreme backwardation in the prior year but also benefited from improved operating leverage. Marine came off a record year in 2022 when bunker prices and market volatility were considerably higher, but it still performed very well in 2023.

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Well welcome back sorry for the technical difficulties I think I'll, just pick up where I'm pretty sure we left off at shell.

Yeah, we've been speaking to you about our medium term adjusted operating margin a margin target for the past few quarters, but there is only a piece of the story.

As the global demand for energy continues to grow.

We're intending to increase our market share improve our operating efficiency and continue to extend our value deeper into both our customer and supplier value change as we've been doing for some time now.

Operator: And while our land business in North America experienced some weather-related challenges that affected results in the first half of the year, we drove continued growth in our natural gas and power and renewable energy solutions activities, and integration of the Flyers team and platform, Wynkoop. Ladies and gentlemen, please remain in your line. We are experiencing technical difficulties.

We've got a greater level of confidence for our ability to execute we've got a much sharper focus.

And I can feel the momentum building in the demand for our services is as strong as it's ever been.

And all through the change your focus has remained constant our mission was then and still is now to meet our customers' energy needs in the most efficient manner possible and to providers supply partners with the world's most reliable distribution platform.

We work every day to improve access to and ensure the surety of energy supply through our core distribution platform.

Operator: Please remain in your line. Thank you. Ladies and gentlemen, please remain in your line; the program will begin, will commit, will continue momentarily. We are experiencing technical difficulties.

I look forward to sharing more about our strategy and our outlook at our upcoming Investor day.

But.

What you should take away is that we are better positioned than ever to drive sustainable long term growth with a favorable market position and a clear strategy to capture opportunities across our three businesses.

Before I turn the call over to IRA for a review of our financial results I want to thank my 5330 colleagues, who work every day to ensure the success of our customers suppliers and company.

Operator: Please remain in your line. Ladies and gentlemen, please remain in your line. We are experiencing technical difficulties.

And to our investors. Thank you for your support and we look forward to seeing you on March 13th in New York City.

Pirates.

Hey, everyone. Thank you, Michael and good evening and considering the unfortunate delay I will try to speak as quickly as a new Yorker, possibly could.

Operator: Please remember your line, and thank you for your patience. Ladies and gentlemen, please remain in your line. Your program will continue momentarily. We are experiencing technical difficulties.

I'm going to begin by reviewing a number of non-GAAP adjustments in the fourth quarter, which aggregated $87 million or $67 million. After tax complete reconciliations of GAAP to non-GAAP financial measures are included in our earnings release todays presentation and on our IR website.

Operator: Please remain in your line. Thank you for your patience. Please continue to hold. Ladies and gentlemen, please remain in your line. Your program will continue momentarily. We are experiencing technical difficulties.

The largest of the non-GAAP adjustments was a $49 million charge related to an erroneous bid in the finished power market, which we have disclosed when it occurred in November.

In her role as the market access provider for both producers and commercial customers of electricity in Finland, we.

We submit a routine daily bid to Nord pool, which is a commercial power market in the Nordic region, which effectively represents the net of related consumer demand and producer production on a given day.

Operator: Please remain in your line. Thank you for your patience. Ladies and gentlemen, please remain aligned; we are experiencing technical difficulties. Please remain in your line. Thank you for your..., please continue. Ladies and gentlemen. Thank you for standing by.

In November we inadvertently submitted a daily bid for an amount substantially greater than intended.

Once we became aware of the error, we made immediate efforts to mitigate the impact including a requested Nord pool delays, we'll rerun the related bidding process.

When it became apparent that Nord pool would not take action to mitigate the effects of this obviously erroneous bid we quickly.

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Covered the associated positions with drilling oil related market obligations.

This incident was unique and isolated the result of several independent and exceptional circumstances, all of which together translated to extraordinary and unfortunate results we.

Operator: Your call will resume at 525. Ladies and gentlemen, please remain on your line. Your call will resume in approximately five minutes.

We have carefully assessed and reviewed our internal processes and implemented additional measures to minimize the risk of a similar incident occurring in the future.

We also recorded additional non-GAAP adjustments in the fourth quarter. These included asset impairments of $32 million related to the write down of two investments the rationalization of noncore business activities, including some of which have a discontinued as well as a further rationalization of our global office footprint, which began during code.

Operator: Please stay on your line and continue to hold. Ladies and gentlemen, your program will commence in approximately five minutes. Again, please remain in your line; the program will continue momentarily. Thank you for your patience and please continue to hold.

Good.

Additionally, we incurred costs associated with workforce restructuring activities as we continue driving greater efficiencies in our business. These restructuring.

Actually activities combined with the rationalization of our office footprint in certain non core business activities. All resulted in immediate cost savings.

We understand that in aggregate these adjustments amount to a large sum however, aside from the charge related to the finished goods. We believe all of the other items helped to further simplify our business, enabling us to focus more clearly on growing our core conventional business and our sustainability related activities.

Operator: Ladies and gentlemen, please remain in your line. Your program will continue momentarily. Again, please remain in your line. Your program will continue momentarily. Thank you for your patience, and please continue to hold.

Total fourth quarter nonrecurring cash outflows related to all of these non-GAAP adjustments was approximately $50 million and again the details are included in.

Operator: Ladies and gentlemen, please remain in your line. Your program will continue momentarily. Again, please remain in your line. Your program will commence, and it will continue momentarily. Thank you for your patience, and please continue to hold.

In our earnings release and on our website.

Now, let's turn to our fourth quarter and full year financial highlights and as a reminder, the following results exclude the impact of all the items that I just walked through.

On a consolidated basis total volumes of $4 5 billion were essentially flat year over year adjusted gross profit.

<unk> was down 1% to $280 million in the fourth quarter of 'twenty, two primarily due to lower profits on marine and land businesses, partially offset by strong results from our aviation business.

Operator: Hi, we're back. We're ready to reconvene. Thank you.

Operator: Yeah. Okay, well, welcome back. Sorry for the technical difficulties.

And looking at the full year.

Volume of 18 billion was down approximately 2% with adjusted gross profit at $1 1 billion up 2% from last year. This.

Michael J. Kasbar: I think I'll just pick up where I'm pretty sure we left off. So, you know, we've been speaking to you about our medium-term adjusted operating market margin target for the past few quarters, but that's only part of the story. As the global demand for energy continues to grow, we intend to increase our market share, improve our operating efficiency, and continue to extend our value deeper into both our customer and supplier value chains, as we've been doing for some time now. We've got a greater level of confidence in our ability to execute, we've got a much sharper focus, and I can feel the momentum building. And the demand for our services is as strong as it's ever been. And all through this change, our focus has remained constant.

This is primarily due to a 36% increase in profitability year over year, our aviation business, which had a fantastic year rebounding solidly from 2022, partially offset by lower profits in marine and land.

Now some additional detail segment by segment for both for the fourth quarter and for the full year.

Within the fourth quarter aviation volumes were 178 billion gallons down 1% year over year impacted by the lower return business activity, we shed generally offset by ratable higher return business.

Despite the modest decline in year over year volumes fourth quarter gross profit was $131 million, an increase of 19% year over year, driven primarily by the achievement of higher returns of its the elevated interest rate environment.

While full year aviation volume of $7 3 billion, which up only 3%.

It was also impacted by the rationalization of certain lower return business activity.

Aviation full year gross profit was extremely strong.

Rebounding from the prior year, which was impacted by feedback gradation, but also benefiting from the achievement of higher returns at mist amidst the elevated interest rate environment and solid growth at our last half mile Airport operating locations principally in Europe.

Full year gross profit increased 36% to $486 million for aviation.

Michael J. Kasbar: Our mission was then and still is now to meet our customers' energy needs in the most efficient manner possible and to provide our supply partners with the world's most reliable distribution platform. We work every day to improve access to and ensure the surety of energy supply through a core distribution platform. I look forward to sharing more about our strategy and our outlook at our upcoming Investor Day. What you should take away is that we are better positioned than ever to drive sustainable long-term growth with a favorable market position and a clear strategy to capture opportunities across our three businesses. Before I turn the call over to Ira for a review of our financial results, I want to thank my 5,330 colleagues who work every day to ensure the success of our customers, suppliers, and company. And to our investors, thank you for your support, and we look forward to seeing you on March 13th in New York City. Ira? Hey, everyone. Thank you, Michael. And good evening.

One last comment on the achievement of aviation has higher returns, we not only achieved such returns by improving margins, which contributed to the significant increase in gross profit, but also by significantly improving working capital efficiency over the course of 2023 contributing to solid cash flow generation, which while I will separately address shortly.

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As we look to the first quarter, while aviation results should experience a seasonal decline from the fourth quarter, we expect a year over year increase in gross profit again, driven by our team's continued focus on optimizing returns across our commercial and business in general aviation platforms.

For the land business, while fourth quarter volumes increased 5% year over year to 1.62 billion adjusted gross profit declined 9% to $105 million due principally to some margin pressure in the U S. At a lower contribution from the U K, which experienced unseasonably warm weather for much of the fourth quarter.

These declines were offset in part by increased gross profit from our natural gas activities as well as increased profitability related to our renewable energy solutions activity.

For the full year land volumes were up slightly at $6 2 billion driven by increased volume again associated with our natural gas activities, mostly offset by lower liquid fuel volumes, principally due to extreme weather conditions, which significantly impacted demand in the early part of last year.

Adjusted gross profit per land declined 6% to $448 million again, driven by the extreme weather conditions as well as some margin pressure in our broader commercial and industrial business in the latter part of the year.

Ira M. Birns: And considering the unfortunate delay, I will try to speak as quickly as I possibly can in New York or possibly could. I'm going to begin by reviewing a number of non-GAAP adjustments in the fourth quarter, which aggregated $87 million or $67 million after tax. Complete reconciliations of GAAP to non-GAAP financial measures are included in our earnings release, today's presentation, and on our IR website. The largest of the non-GAAP adjustments was a $49 million charge related to an erroneous bid in the Finnish power market, which we had disclosed when it occurred in November, in a role as a market access provider for both producers and commercial customers of electricity in Finland. We submit a routine daily bid to Nordpool, which is a commercial power market in the Nordic region, which effectively represents the net of related consumer demand and producer production on a given day.

Similar to the fourth quarter. These declines were partially offset by healthy improvements in our natural gas business as well as continued growth in both our power and renewable energy solutions activities, where we continue to find opportunities to expand relationships with customers as their energy transition journeys and related needs evolves.

As shared in previous quarters, the percentage of land volume associated with our Natgas empower business was 37% for the fourth quarter and 34% for the full year, that's up from 32% and 30% in 2022.

Visited this is in addition to our continued focus on distributing cleaner liquid fuel products such as renewable diesel overall these numbers demonstrate a broader focus on cleaner sources of energy for a growing suite of customers throughout the world.

Looking to the lands first quarter, while gross profit is expected to be up modestly the stories effectively opposite of what I described for 'twenty, three with commercial and industrial liquid fuels rebounding from the weather related weakness experienced in last year's first quarter, partially offset by an expected reduction in natural gas activity driven in.

Part by severe cold weather related market disruptions in mid January.

And lastly in marine fourth quarter volumes were $4 3 million metric tons down eight 5% year over year, but up 6% from the third quarter. When as previously noted we believe we reached a bottom from a volume perspective.

Year over year lower volumes in bunker prices, coupled with a decline from higher volatility levels in the fourth quarter of 'twenty two with the primary drivers of the 21% reduction in gross profit to $44 million.

Ira M. Birns: In November, we inadvertently submitted a daily bid for an amount substantially greater than intended. Once we became aware of the error, we made immediate efforts to mitigate the impact, including a request that Nordpole delay or rerun the related bidding process. When it became apparent that Nordpool would not take action to mitigate the effects of this obviously erroneous bid, we quickly..., excuse me, we quickly..., covered the associated positions, fulfilling all related market obligations. This incident was unique and isolated, the result of several independent and exceptional circumstances, all of which together translated to an extraordinary and unfortunate result.

Full year Marine volume declined 12% to $16 8 million metric tons and gross profit declined to $173 million down 33% year over year. We've discussed this over the course of last year, but it's worth reiterating lower profitability again, we.

It was due to a comparison to an extraordinary year in 2022 for marine which was positively impacted by exceptional volatility in record bunker fuel prices.

While marine gross profit decline year over year, the business performed very well, considering a significantly lower price environment, where similar to aviation.

Marine further improved capital efficiency contributing to solid returns for the year.

Looking to the first quarter, we are expecting marine to be flat to up slightly from the fourth quarter with margins holding steady, but expected decline in profitability from the first quarter of 2023 when volatility levels still remain high.

Now, let's turn to adjusted consolidated operating expenses, which were $207 million in the fourth quarter consistent with our guidance range last quarter.

This is up only 2% year over year and for the full year. These expenses were effectively flat compared to 2022 again, demonstrating our continued efforts to manage expenses tightly despite a highly inflationary macro environment for much of the year.

For the first quarter, we expect operating expenses will be the range of $199 million to $203 million.

Down sequentially driven in part by the cost reduction actions taken during the fourth quarter.

Again, we remain committed to enhancing operating efficiencies as evidenced by recent actions.

Ira M. Birns: We have carefully assessed and reviewed our internal processes and have implemented additional measures to minimize the risk of a similar incident occurring in the future. We also recorded additional non-GAAP adjustments in the fourth quarter. These included asset impairments of $32 million related to the write-down of two investments, the rationalization of non-core business activities, including some of which have been discontinued, as well as the further rationalization of our global office footprint, which began during COVID. Additionally, we incurred costs associated with workforce restructuring activities as we continue driving greater efficiencies in our business. These restructuring activities, combined with the rationalization of our office footprint and certain non-core business activities, all resulted in immediate cost savings.

We increased our operating margin to 26% in 2023, and we remain focused on achieving our medium term operating margin target of 30% by continuing to drive cost efficiencies in our business by also FERC further sharpening our portfolio of business activities.

This will enable us to continue to simplify our story, while achieving increased profitability and greater shareholder returns.

Fourth quarter interest expense was 32 million slightly above the high end of our guidance range driven principally by funding costs associated with the unanticipated nonrecurring cash outflows during the quarter.

But it was down $3 million from the fourth quarter of 2022.

As we look ahead to the first quarter, we expect interest expense to remain generally flat with the fourth quarter, representing another Europe over year decline.

It was expected interest rate declines over the course of the year, we should benefit from further reductions in interest expense as the year progresses contributing to an expected several million dollar decline in interest expense compared to 2023.

Our effective adjusted effective tax rates for the fourth quarter was 21, 1% and our full year adjusted effective tax rate was 21, 7% both slightly below guidance looking forward to 2024, we expect our adjusted effective tax rate will be in the range of 23% to 27% up a few.

Percent from 'twenty, three which benefited in part from the reversal of certain valuation allowances, many of which became necessary during the pandemic.

And despite the one time cash outflows that we experienced during the fourth quarter, we still generated $5 million of operating cash flow, bringing year to date operating cash flow to a solid 271 million further supporting our strong liquidity profile, which provides us with the capital we need to invest in organic business activities fund strategic investments.

Ira M. Birns: We understand that in aggregate, these adjustments amount to a large sum. However, aside from the charge related to the finish bid, we believe all of the other items help to further simplify our business, enabling us to focus more clearly on growing our core conventional business and our sustainability-related activities. Total fourth quarter non-recurring cash outflows related to all of these non-GAAP adjustments were approximately $50 million.

<unk> opportunities and return capital to our shareholders through buybacks and dividends.

Speaking of buybacks and dividends these totaled $94 million in 'twenty three.

That include the additional repurchase of just over 500000 shares for $10 million during the fourth quarter.

Our capital allocation priorities remain consistent supporting the growth of our business, while carefully managing balance sheet leverage while also increasing shareholder value through buybacks and dividends I look forward to discussing these priorities with you as Mike indicated.

At our upcoming Investor day on March 13th.

So in closing we generated $386 million of adjusted EBITDA, driven principally by a strong rebound in aviation results generally offset by a significant decline in marine profitability from the record results. They achieved in 'twenty two.

Ira M. Birns: And again, the details are included in our earnings release and on our website. Now, let's turn to our fourth quarter and full year financial highlights. And as a reminder, the following results exclude the impact of all the items that I just discussed. On a consolidated basis, total volumes of $4.5 billion were essentially flat year-over-year.

While our land liquid fuels business activities were negatively impacted by weather related challenges in the first half of the year. This was partially offset by solid improvement in our net gas and renewable energy solutions activities. We.

We delivered $271 million in operating cash flow for the year. Despite again unanticipated nonrecurring cash outflows in the fourth quarter further strengthening our balance sheet with net debt to adjusted EBITDA at only one five times at year end, providing us with significant financial flexibility to continue investing in our core core business.

Ira M. Birns: Adjusted gross profit was down 1% to $280 million in the fourth quarter of 2022, primarily due to lower profits from marine and land businesses, partially offset by strong results from our aviation business. Looking at the full year, volume of $18 billion was down approximately 2%, with adjusted gross profit at $1.1 billion, up 2% from last year. This is primarily due to a 36% increase in profitability year-over-year in our aviation business, which had a fantastic year, rebounding solidly from 2022, partially offset by lower profits in marine and land. Now, some additional details, segment by segment, for both the fourth quarter and for the full year. Within the fourth quarter, aviation volumes were 1.78 billion gallons, down 1% year-over-year, impacted by the lower return business activity we shed, generally offset by rateable, higher return business. Despite a modest decline in year-over-year volumes, fourth quarter gross profit was $131 million, an increase of 19% year-over-year, driven primarily by the achievement of higher returns amidst the elevated interest rate environment. While full-year aviation volume of $7.3 billion was up only 3%, it was also impacted by the rationalization of certain lower-return business activities.

While also remaining focused on identifying the right strategic investment opportunities for us that could accelerate growth and operating leverage in our core platform.

Speaking of operating leverage again, we improved our adjusted operating margin to 26% with a continued focus on driving additional operating efficiencies towards our medium term goal of 30%.

And one last time I look forward to seeing all of you or most of you at our upcoming Investor Day event on March 13, where again our goal will be to help simplify our story.

Talking about what we have done best for decades, as well as some of our newer sustainability related activities and how they fit into our core operating model and maybe most importantly share our views from the exciting growth opportunities. We expect looking forward. Thank you and I will now turn the call back over to our operator to finally begin our Q&A.

The <unk> session.

Thank you operator.

As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again, please standby, while we compile the Q&A roster.

Our first question comes from the line of.

Ben Nolan of Stifel. Your question. Please Ben.

Oh, thank you.

Operator glad to finally get through to you guys.

I I wanted to ask a couple of things, but first.

A ari finished out talking about moving to that 30% margin, you're making some gradual progress.

Hi.

Just trying to wrap my head around sort of what's realistic if I go back to 2018, 2019 volumes were 10% higher but costs reenter employee costs were 10% lower G&A costs were 30% lower.

At where is the wood.

They can be chopped here like.

How do you how are.

How are you going to get to that 30% is it more in a more topline or bottom line focused.

I would say a good great question. If you put in perspective, then you're 4% beyond where we were in 2023 coming out of the year is you know you're talking about $40 million of efficiency, while that's a big number it may not be as massive as you would think when you're simply looking at going from 26% to 30. So you are saying that for starters. It is.

A combination of both.

Ira M. Birns: Aviation full-year gross profit was extremely strong, rebounding from the prior year which was impacted by steep backwardation, but also benefiting from the achievement of higher returns amidst the elevated interest rate environment and solid growth at our last half-mile airport operating locations, principally in Europe. Full-year gross profit increased 36% to $486 million. One last comment on the achievement of aviation's higher returns; we not only achieved such returns by improving margins, which contributed to a significant increase in gross profit, but also by significantly improving working capital efficiency over the course of 2023, contributing to solid cash flow generation, which I will separately address shortly. As we look to the first quarter, while aviation results should experience a seasonal decline from the fourth quarter, we expect a year-over-year increase in gross profit, again, driven by our team's continued focus on optimizing returns across our commercial, business, and general aviation platforms. For the land business, while fourth-quarter volumes increased 5% year-over-year to $1.62 billion, adjusted gross profit declined 9% to $105 million, due principally to some margin pressure in the U.S. and a lower contribution from the U.K., which experienced unseasonably warm weather for much of the fourth quarter.

Items that you mentioned right. It's a combination of greater focus on business activity that drive greater returns on the <unk>.

<unk> business with wire is a great example of that where the return to that business well above 30% right.

Doing more of the things like we did in the fourth quarter, which included some workforce restructuring our restructuring activities looking at offices that are barely being utilized the costless.

$1 million that we don't really need any more in today's environment.

And and also elimination of some.

Certain non core activities that were actually draining the P&L as opposed to adding to it.

So we'll continue to look at things like that.

And seek opportunities, but at the end of the day, we're looking to drive greater efficiencies on every line item in our P&L and you mentioned G&A being up at the last couple of years. It's been flat you know, we're trying to bring that number down a little bit but at least it hasnt been growing consider and considering the highly inflationary environment. We've been in if we feel that the.

A pretty good outcome, but sure we can do better right. So.

We're pretty confident that combination of getting some.

Cost sufficient G P more of that into the mix.

And <unk>.

Combining that with you know identifying morph more cost efficiencies.

The different geography opportunities for Labor for example, where there is some arbitrage there. We're looking at we're looking at all sorts of things along those lines to make steady progress towards hitting that number. So we yeah. It's true to your point comment we only achieved a 1% improvement over 22 and 'twenty three.

We're looking to achieve further improvement this year and Adam and of course, even more improvement in 'twenty five and beyond.

And I appreciate that color.

As it relates to sort of your strategy in <unk> and also in it and knowing that will permanently hear more about that in just a few weeks now.

<unk>, a where where would you say is the priority as it is it and this might be just another way of asking the same question but.

Is your Eni is management's focus more on sharpening the pencil here and making the existing business more efficient or finding ways to grow the business.

And appreciating again, and probably trying to do both but but where would you say that the greater level of emphasis.

Ira M. Birns: These declines were offset in part by increased gross profit from our natural gas activities, as well as increased profitability related to our renewable energy solutions activities. For the full year, land volumes were up slightly at $6.2 billion, driven by increased volumes, again associated with our natural gas activities, mostly offset by lower liquid fuel volumes, principally due to extreme weather conditions, which significantly impacted demand in the early part of last year. Adjusted gross profit for land declined 6% to $448 million, again driven by the extreme weather conditions, as well as some margin pressure in our broader commercial and industrial business in the latter part of the year.

And as Mike and thanks for the question Aviate.

Aviation Marine as you heard in my prepared comments.

I have been active.

For quite a number of years land has been a journey.

In our Connecticut Avenue.

Is kicking in and we are the same thing with land in appliances, great contributions like ends up.

<unk> are different.

In our businesses that we brought into the mix here.

Admittedly. This is this has been a big slog.

We've got we think a good consolidated team in that neck. So it's <unk>.

Flexing in a liquid land flexing in all our sustainability business we are seeing.

Activities coming there certainly enhancing aviation and marine we never take that for granted and we're leveraging at aviation Marine is getting that cross sell with sustainability hours, suggesting that in my comments and then as costs its continuous cost management that culture.

Do we need in all 46 lenders for a particular item. So that's ehow continues.

And they are getting operating leverage on the platform. So it's is.

It's an ongoing.

Our work but.

Certainly looking at land and looking at our sustainability as growth engines, we feel good about that.

We felt like where to best position now.

Ira M. Birns: Similar to the fourth quarter, these declines were partially offset by healthy improvements in our natural gas business, as well as continued growth in both our power and renewable energy solutions activities, where we continue to find opportunities to expand relationships with customers as their energy transition journeys and related needs evolve. As shared in previous quarters, the percentage of land volume associated with our natural gas and power business was 37% for the fourth quarter and 34% for the full year. That's up from 32% and 30% in 2022. This is in addition to our continued focus on distributing cleaner liquid fuel products, such as renewable diesel. Overall, these numbers demonstrate our broader focus on cleaner sources of energy for a growing suite of customers throughout the world.

Alright, great and then if I could just one last one.

Ian mentioned nerd in at all obviously, the craziness that's going on in the Red Sea and the Panama Canal and then there were some reminiscences too.

Covid time.

And yeah.

That was a really good period for the marine business.

Are you starting to see any any.

Financial outcomes that are at all similar to that or.

Any any.

Possible bright spots and marine as a function of all of the crazy things that are going on in the world I don't I don't think that you're going to see.

Anything Earth shattering you never know back that everything is asking a lot of the policy to be aligned its share of adapt not one thing you gave a good amount of slow steaming going on.

No.

Certainly.

It's it's a perfect way for us to help the market and be able to bid.

Create value in the marketplace and be able to participate in that value creation.

We're not really expecting it is going to be seriously robust, but it's generally positive. When there are certain types of dislocation that we can we can monetize by providing solutions. So just not forecasting it to be robust but.

And the thing now too is it as much as I hesitate to say this is that you know.

We have become a physical participate in the marketplace in very select locations. So while we're still very asset light.

Ira M. Birns: Looking to the land's first quarter, while growth profit is expected to be up modestly, the story is effectively the opposite of what I described for 23, with commercial and industrial liquid fuels rebounding from the weather-related weakness experienced in last year's first quarter, partially offset by an expected reduction in natural gas activity, driven in part by severe cold-weather-related market disruptions in mid-January. And lastly, in marine, fourth quarter volumes were 4.3 million metric tons, down 8.5 percent year over year but up 6 percent from the third quarter. As previously noted, we believe we have reached a bottom from a volume perspective. Year-over-year lower volumes and bunker prices coupled with a decline from higher volatility levels in the fourth quarter of 22. With a primary driver of the 21% reduction in gross profit to 44 million dollars, full year marine volume declined 12% to 16.8 million metric tons, and gross profit declined to $173 million, down 33% year over year.

That was part of the Gambit right to become a truly strategic partner.

To our clients and to be able to fill a gap.

We experienced some.

Of those dislocations now, but not nearly as much as pure physical players.

The one thing one thing I'd add to that Ben is is even though marine.

You didn't produce as much it may not have a massive benefit from some of the things you described even at the level of profit contribution that they are driving today.

Are these the operating margin of that business is very strong we're actually in a position now where in the fourth quarter, we had zero working capital invested in that business.

So that again that's supporting.

Both margins and returns.

So when there are opportunities of disruptions and prices go through the roof. We then to make a lot more money in that business, but even it at these levels you know the team is doing a phenomenal job.

It's not compete for capital with with aviation and land and get it still producing a reasonable amount of cash flow for us. So we're going to talk more about that at analyst day. So just wanted to give you a preview.

All right well, great and I appreciate it thanks guys.

Thanks, Matt.

Thank you.

Our next question.

Comes from the line of Ken Huckster of Bank of America. Your question. Please Chen.

Hi, This is Adam Russ Koski on for Ken exterior, Thanks for having me Michael IRA Asaf.

I guess to start.

With the extra day coming up.

What is the margin picture for the sustainably links land business and how should we be thinking about the structural returns on this ESG portfolio over the next couple of years here.

Also we will look at that.

Might be common after me, but I'll let.

We gave my thoughts again.

I would start by saying that that still small.

But it's growing it's picking up steam and there's very little capital tied up in that business, because theres, a big service oriented component and where there is where there is some need for investments relatively small. So the returns are that business over time should be higher than the the istar.

Ira M. Birns: We've discussed this over the course of last year, but it's worth reiterating. Lower profitability again was due to a comparison to an extraordinary year in 2022 for marine, which was positively impacted by exceptional volatility and record bunker fuel prices. While marine growth profit declined year over year, the business performed very well considering the significantly lower price environment, where, similar to aviation, Marine further improved capital efficiency, contributing to solid returns for the company. Looking to the first quarter, we are expecting Mariner earnings to be flat to up slightly from the fourth quarter with margins holding steady, but we expect a decline in profitability from the first quarter of 2023 when volatility levels still remain high. Now let's turn to Adjusted Consolidated Operating Expenses, which were $207 million in the fourth quarter, consistent with our guidance range last quarter.

Conventional businesses, we've been in that involve investments in inventory for example, or or physical assets like.

Small part of our marine business maybe in aviation.

So, we'll we'll share some more detail on that at analyst day, but certainly the opportunity there that's more of a peak.

People are your asset in that business, principally so as we start building up scale and we can leverage that.

The folks that we have that.

The returns in that business will continue to increase over time.

But again at this stage, we don't have that leverage yet. So those those returns are not yet where you know where we'd like them to be.

I think that Irobot will pick it up there in New York.

Got it.

And then switching over to aviation you talked about.

Right sizing. This portfolio can you talk about any business that is maybe left to call.

And then how do you think about the sustainability of gross margins and is there any notable repricing that is taking place within this business first quarter or this year.

But what was the first part of that Adam.

Any business that is left to maybe shed off that.

Oh.

Yes, yes.

Yes, so so a big part of the quote unquote shedding.

It really took place as we entered the mid part of 'twenty, three which is where our largest contract renewal cycle or which is one of our largest contract renewal cycle takes place in an extremely.

Ira M. Birns: This is up only 2% year-over-year, and for the full year, these expenses were effectively flat compared to 2022, again demonstrating our continued efforts to manage expenses tightly despite a highly inflationary macro environment for much of the year. For the first quarter, we expect operating expenses to be in the range of $199 to $203 million, down sequentially, driven in part by the cost reduction actions taken during the fourth quarter.

Elevated interest rate environment.

We worked really hard to get our margins to a better place to mitigate some of the incremental interest costs that we were obviously incurring.

Over the course of 'twenty three.

And as you can see from our numbers are our margin increase you know, 10% which is.

Pretty significant considering our volumes.

So.

Whether that continues so we already got the extra margin last year.

You know we're always the team is always trying to do the best job possible in achieving optimal margins as we get into the cycle in the mid part of 'twenty four.

We're not necessarily you're going to have the same quantum leap in margins that you know that we had in the summer of 'twenty three but we're.

We're striving for.

The best possible outcome.

Ira M. Birns: Again, we remain committed to enhancing operating efficiencies, as evidenced by recent action. We increased our operating margin to 26% in 2023, and we remain focused on achieving our medium-term operating margin target of 30% by continuing to drive cost efficiencies in our business and by also further sharpening our portfolio of business activities. This will enable us to continue to simplify our story while achieving increased profitability and greater shareholder return. Fourth quarter interest expense was $32 million, slightly above the high end of our guidance range, driven principally by funding costs associated with the unanticipated, non-recurring cash outflows during the quarter.

As the year progresses, and we've actually started the year out pretty strong which is a which is a positive sign up so jury's still out on what we will be able to achieve in in in margin as the year progresses, but we started the year at a very strong level and we're going to try really hard to hold onto that at a minimum.

Got it.

And then just to clarify one did you ever give the operating income breakdown impact.

Between corporate and land on the finished bid impact.

Yes, the the finish did impact us all in land.

It's all in land in it and.

It all flowed through gross profit.

Okay, and then last one if I can just on interest expense you talked about several million dollars.

Yeah dollar decline next year from your expectation and you mentioned that lower interest rates or what is.

Underpinning that is there any more room for working capital efficiency. How are you thinking about that in your outlook. This year.

Look we're a we don't we don't like tons of interest expense any more than you do so we're trying to do everything within our power to bring that number down and not solely I'll leave it to the fed.

So there are a lot of things we're focusing on.

We got a minute we did a phenomenal job our our net trade cycle was lower than I ever remember across the entire business in 2023.

Ira M. Birns: But it was down $3 million from the fourth quarter of 2022. As we look ahead to the first quarter, we expect interest expenses to remain generally flat with the fourth quarter, representing another year-over-year decline. And with expected interest rate declines over the course of the year, we should benefit from further reductions in interest expenses as the year progresses, contributing to an expected several million dollar decline in interest expense compared to 2023. Our adjusted effective tax rate for the fourth quarter was 21.1%, and our full-year adjusted effective tax rate was 21.7%, both slightly below guidance.

I don't know if we could bring that down much further, but we look at efficiency opportunities in that regard every day.

And we also look at opportunities, where we may be able to generate some cash from some non core assets to pay off some debt and reduce interest expense as well. So there are all sorts of.

Things were focused on at a minimum we should see a several million dollar decline it could be greater than that depending on the outcome of certain activities that are that are underway.

Thanks, IRA Michael helps I appreciate it.

Thanks, Ed.

Thank you.

Our next question.

Comes from the line of John Real of J P. Morgan Your line is open John.

Hi, good evening, Thanks for taking my question.

So I had a follow up on marine you've normalized the bid from 'twenty to levels that were impacted by.

Price volatility, but still well ahead of where you were in in 'twenty one.

Can you talk about what structural there and what's maybe still impacted by the on the.

Short term volatility issue issues and then just maybe how we should think about that business longer term relative to the <unk> run rate.

Again, I think volumes are pretty stable now I think that last quarter. Some folks ask about our volumes and we felt and may be predicted accurately that.

We hopefully at a bottom and we rebounded from that bottom in the fourth quarter. So I guess, we were generally correct.

Ira M. Birns: Looking forward to 2024, we expect our adjusted effective tax rate will be in the range of 23 to 27 percent, up a few percent from 23, which benefited in part from the reversal of certain valuation allowances, many of which became necessary during the pandemic. And despite the one-time cash outflows that we experienced during the fourth quarter, we still generated five million dollars of operating cash flow, bringing year-to-date operating cash flow to a solid $271 million, further supporting our strong liquidity profile, which provides us with the capital we need to invest in organic business activities, fund strategic investment opportunities, and return capital to our shareholders through buybacks and dividends. Speaking of buybacks and dividends, these total $94 million in 2023 and include the additional repurchase of just over 500,000 shares for $10 million during the fourth quarter.

And we think at this point you know volumes are pretty stable there seems to be some upside opportunity.

But not necessarily a really big numbers, Mike alluded to earlier.

Margins are still a bit ahead of historical averages, but considering the interest rate environment. We're in that makes complete sense, so assuming none.

None of us expect interest rates to drop dramatically, regardless of which fed governor you speak to in.

In 2024, so I think that storyline will remain.

As it is today, which means that it should be.

Not necessarily a play on words pretty steady sailing.

For you know for 24, and I think the run rate, we're at as a reasonable run rate to two.

Do you expect in there can always be some upsides and downsides, but.

You know that the volatility factor.

That we benefited from is really behind US now and now it's pure blocking and tackling and generating returns that achieve our.

The margin thresholds that we set for our team.

Sure.

Great. Thank you and then.

Follow up on the buyback.

Kept up the pace, a little bit last year going from about 50.

$50 million and $22 million to $60 million and 23 is that a good number to think about for 24 and then.

How do you think about cadence there or is it just opportunistic when you have the cash flows.

Or are you timing the market always uses we noticed some quarters you buy back stock in some quarters you don't stop.

Just any color on the timing would be helpful.

Yes, it's generally been opportunity opportunistic we always try to buyback I would say you know at least $40 million, or so which which keeps our share count steady, which means it's offsetting the dilutive impact of employee awards last couple of years, we exceeded that a bit as as our stock was definitely not where we wanted it to be.

Ira M. Birns: Our capital allocation priorities remain consistent, supporting the growth of our business while carefully managing balance sheet leverage while also increasing shareholder value through buybacks and dividends. I look forward to discussing these priorities with you, as Mike indicated, at our upcoming Investor Day on March 13. So in closing, we generated $386 million in adjusted EBITDA, driven principally by a strong rebound in aviation results, generally offset by a significant decline in marine profitability from the record results they achieved in 2022. While our land liquid fuels business activities were negatively impacted by weather-related challenges in the first half of the year, this was partially offset by solid improvement in our natural gas and renewable energy solutions activities.

So we bought back a bit more.

So.

I think we'll always be in that ballpark, there may be an exceptional year.

Plus or minus but I think we've been pretty consistent there and we expect that <unk> will remain generally consistent in somewhere in that range, depending upon our cash flows stock price market environment.

Competing priorities for capital et cetera.

Thank you.

Thank you.

Our next question.

Comes from the line of Pavel <unk> of Raymond James and Associates. Your question. Please Pavel.

Thanks for taking my question as I looked at the cash flow statement for the quarter.

There was an acquisition can you talk about why it is that you bought.

Great question.

So we made a small acquisition in Michigan of.

Basically several card locks Sim.

Similar to the card lock activity, we picked up with the Florida acquisition.

And I'm happy to ask the that's a great example of a.

A completely synergistic.

Easy to integrate a business opportunity, albeit it was small.

Where we literally integrate.

Ira M. Birns: We delivered $271 million in operating cash flow for the year despite, again, unanticipated non-recurring cash outflows in the fourth quarter. This further strengthened our balance sheet with net debt to adjusted EBITDA at only 1.5 times at year end, providing us with significant financial flexibility to continue investing in our core business while also remaining focused on identifying the right strategic investment opportunities for us that could accelerate growth and operating leverage in our core platform. Speaking of operating leverage, again, we improved our adjusted operating margin to 26% with a continued focus on driving additional operating efficiency towards our median term goal of 30 percent. And one last time, I look forward to seeing all of you, or most of you, at our upcoming Investor Day event on March 13th, where again, our goal will be to help simplify our story, talking about what we have done best for decades, as well as some of our newer sustainability-related activities and how they fit into our core operating model, and maybe most importantly, share our views on the exciting growth opportunities we expect in the future. Thank you, and I will now turn the call back over to our operator to finally begin our Q&A session. Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. To remove yourself from the question queue, you may press star 1-1 again.

August Shocker, saying this by people on our team overnight right because all we have to do is add those card lock store network, which as you know basically.

Through the use of technology and ensure they are getting fueled through.

Through local a local provider and that's it we picked up I think two employees in that old transaction and.

And we got to pick up basically all of their G. P. We.

We would do that everyday as we could and we're always looking at opportunities like that that was one that worked out for us in the fourth quarter.

Okay.

Question that I ask every quarter.

<unk> was the low carbon.

Percentage of EBITDA or operating income in Q4.

So the good news is we had pretty exceptional results in that part of our business barbell in in the fourth quarter. So those numbers stepped up a little bit from call. It 10, 11% D O two to two 5% higher.

I would say you know for the full year of 'twenty. Three we were you know low.

Low teens, so maybe a little better than what I had shared earlier and we expect 24 to be similar so we're making some slow and steady progress there there's always going to be you know pops.

Pops in a given quarter again fourth quarter the numbers were.

We're actually higher a bit higher than that but.

But if you normalize it and you look at the.

The year over year.

We grew from the owners.

90% of G P. In.

22, and that number was up to close to 13 in 'twenty three and in EBITDA.

<unk> from 22 to 23 was even more impressed went from seven to somewhere around 14, so we doubled.

Again part of that was based on some some pretty big wins, we had in the fourth quarter that arent necessarily going to be repeated every quarter, but we should be safely in double digits for G. P <unk> and EBITDA percent of the total.

Those related businesses in 2024 as well.

Sure.

And I think this touches on maybe one of the questions asked earlier abate.

When you sell a gallon of renewable diesel SaaS.

Sarah.

Is that a higher margin.

Profiles structurally compared to its petroleum counterpart.

It could be.

So.

I think it's fair to say that.

You know you've got.

In our product a commodity that is not an ample supply.

The demand for it it does vary.

There was a time when we had plenty of sustainable aviation fuel.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Ben Nolan of Stiefel. Your question, please, Ben. Oh, thank you, operator. Glad to finally get through to you guys.

And there was a lot of interest.

But when you start to talk about the price that interest disappeared.

You are seeing some economies of scale come through.

But I think.

To answer your question directly the answer is yes.

Benjamin Joel Nolan: I wanted to ask a couple of things. But first, Ira, you finished talking about moving to that 30% margin; you're making some gradual progress. I'm just trying to wrap my head around sort of what's realistic. If I go back to 2018-2019, volumes were 10% higher, but costs, you know, employee costs were 10% lower, and G&A costs were 30% lower. Where is the wood that can be chopped here?

So.

You know that.

Yeah.

The answer is yes and.

Sometime.

The amount of effort.

Required to source it.

Certainly in the early days, but you are saying.

The distribution and production become more mainstream in many of these products are all the time are dropping fuel also.

They drop right into our distribution platform and certainly with our end users. There are some products that require a little bit of educational.

Aspect to it and we've got the expertise to be able to do that but.

But yes citadel.

Definitely.

Ira M. Birns: Like, how do you, how are you going to get to that 30%? Is it more, is it more top-line or bottom-line focused? I would say, you know, great question. If you put it in perspective, then, you know, 4% beyond where we were in 2023 coming out of the year is, you know, you're talking about $40 million in efficiency. While that's a big number, it may not be as massive as you would think when you're simply looking at going from 26 to 30. So, you know, saying that for starters. It's a combination of both items that you mentioned, right?

You know attractive from that dimension.

Alright, thanks very much.

Thank you I would now like to turn the conference back to Michael Casbah for closing remarks, Sir well. Thank you very much to everybody listening today.

Our supporters.

All analysts following our stock and certainly our investors.

We feel like we've got a far greater focus.

And.

Good momentum in the organization.

We look forward to see you all in New York to talk some more about our business and thanks again to.

Our colleagues.

We have a management team and all of our.

The folks that we work with every day. Thanks.

Thanks for doing what you do.

See you all in a quarter take care and we'll see in New York take care Bye Bye bye.

Bye everybody.

This concludes today's conference call. Thank you for participating and you may now disconnect.

Yeah.

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Ira M. Birns: It's a combination of greater focus on business activity to drive greater returns. The card lock business with flyers is a great example of that, where the return on that business is well above 30%, right? Doing more of the things like we did in the fourth quarter, which included some, you know, workforce restructuring activities, looking at offices that are barely being utilized, the cost of several million dollars that we don't really need anymore in today's environment, and also elimination of some certain non-core activities that were actually draining the P&L as opposed to adding. So, we'll continue to look at things like that and, you know, seek opportunities. At the end of the day, we're looking to drive greater efficiencies on every line item in our P&L.

Ira M. Birns: And you mentioned G&A being up, but in the last couple of years, it's been flat. You know, we're trying to bring that number down a little bit, but at least it hasn't been growing considering the highly inflationary environment we've been in. We feel that's a pretty good outcome, but sure, we could do better, right?

Michael J. Kasbar: You know, we're pretty confident that, you know, combining some cost-efficient GP, more of that into the mix, and combining that with, you know, identifying, you know, more cost efficiencies, you know, different geography opportunities for labor, for example, where, you know, there's some arbitrage there, we're looking at, you know, we're looking at all sorts of things along those lines to make steadier progress So we, yeah, it's true, you know, to your polite comment, we only achieved a 1% improvement over 22 in 23. We're looking to achieve further improvement this year and, of course, even more improvement in 25 and beyond. Right, and I appreciate that color.

Yes.

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Benjamin Joel Nolan: As it relates to sort of your strategy, and also, you know, knowing that we'll probably hear more about that in just a few weeks now, where, where would you say the priority is? Is it it?

Okay.

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Michael J. Kasbar: And this might be just another way of asking the same question. But is your, you know, management's focus more on sharpening the pencil here and making the existing business more efficient or finding ways to grow the business? And appreciating, again, you're probably trying to do both. But, but where would you say is the greater level of emphasis? Ben, this is Mike.

Michael J. Kasbar: Thanks for the question. You know, Aviation Marine, as you heard in my prepared comments, you know, have been active for quite a number of years, you know, land has been a journey, you know, Kinect is kicking in and, you know, we are the same thing with land, you know, Flyers has great contributions, Likens, you know, a number of different, you know, businesses that we brought into the mix here. Admittedly, this has been, you know, a bit of slog, you know, we've got, we think, you know, a good consolidated team in the mix, so it's, you know, flexing, you know, liquid land, flexing, you know, our sustainability business, we are seeing, you know, activities coming there, certainly enhancing aviation and marine, you never take that for granted, and we're leveraging aviation marine that's doing that cross sale with sustainability, I was suggesting that, you know, in my comments, and then it's cost, it's continuous, you know, cost management culture, you know, do we need, you know, 46 vendors for a particular item, so that, you know, continues and, you know, getting operating leverage on the platform, so it's, you know, it's an ongoing, you know, work, but certainly looking at land and looking at our sustainability as growth engines, we feel good about that, and, We feel like we're in a better position. All right, great.

Yes.

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Benjamin Joel Nolan: And then, if I could just one last thing, you mentioned that obviously the craziness is going on in the Red Sea and the Panama Canal and that there were some reminiscences of the post-COVID time, and that was a really good period for the marine business. Are you starting to see any financial outcomes that are at all similar to that or any possible bright spots in marine as a function of all of the crazy things that are going on in the world? I don't think that you're going to see anything earth-shattering. You never know what will happen.

Michael J. Kasbar: And the thing is, a lot of the planets need to be aligned. It's not just one thing; you have a good amount of slow steaming going on. So certainly, it's a perfect way for us to help the market and be able to create value in the marketplace and be able to participate in that value creation. We're not really expecting it's going to be seriously robust, but it's generally positive when there are certain types of dislocation that we can monetize by providing. So, not forecasting it to be robust, but, and the thing now, too, as much as I, you So, while we're still, you know, very acid light, you know, that was, you know, part of the gambit, right? To become, you know, a truly strategic partner, you know, to our clients and to be able to fill a gap. You know, we have experienced some, you know, of those dislocations now, but not nearly as much as pure physical.

Yes.

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Ira M. Birns: The one thing I'd add to that, Ben, even though Marine didn't produce as much, it may not have a massive benefit from some of the things you described, even at the level of profit contribution that they're driving today, the operating margin of that business is very strong. We're actually in a position now where, in the fourth quarter, we had zero working capital invested in that business. So, you know, that again is supporting both margins and returns. So when there are opportunities and disruptions, and prices go through the roof, we tend to make a lot more money in that business. But even at these levels, you know, the team is doing a phenomenal job.

Yes.

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Ira M. Birns: You know, it's not competing for capital with aviation and land, and yet it's still producing a reasonable amount of cash flow for us. So we're going to talk more about that at Analyst Day, but I just wanted to give you a preview.

Benjamin Joel Nolan: Alright. Well, great, and I appreciate it. Thanks guys.

Operator: Thank you. Our next question comes from the line of Ken Hoexter of Bank of America. Your question, please, Ken. Hi, this is Adam Roszkowski on behalf of Ken Hoexter.

Adam Roszkowski: Thanks for having me, Michael, Ira, Elsa. I guess to start, with Esther Day coming up, what is the margin picture for the sustainably linked land business, and how should we be thinking about the structural returns on this ESG portfolio over the next couple of years here? Well, look, that, you know, might be coming after me, but I'll let...

Yes.

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Ira M. Birns: I would start by saying that it's still small, but it's growing, it's picking up steam, and there's very little capital tied up in that business because there's a big service-oriented component, and where there is some need for investment, it's relatively small. So the returns of that business over time should be higher than the historical conventional businesses we've been in that involve investments in inventory, for example, or physical assets like a small part of our marine business, or maybe in aviation. So we'll share some more detail on that at Analyst Day, but certainly, the opportunity there is that people are your asset in that business principally. So as we start building scale, and we can leverage the folks that we have, the returns on that business will continue to increase. But again, at this stage, we don't have that leverage yet. So those returns are not yet where, you know, where we'd like them to be. I think that's fine; we'll pick them up in New York. I got it.

Adam Roszkowski: Then, switching over to aviation, you talked about right-sizing this portfolio. Can you talk about any business that is, maybe, left to call? And then how do you think about the sustainability of gross margins? And is there any notable repricing that is taking place within this business, you know, in the first quarter or so? What was the first part of that, Adam? Any business that is left to maybe shed off that, oh yeah. Yeah,

Okay.

Okay.

Ira M. Birns: Yeah, so a big part of the quote unquote shedding really took place; we entered the mid part of 23, which is when our largest contract renewal cycle took place in an extremely, you know, elevated interest rate environment. We worked really hard to get our margins to a better place to mitigate some of the incremental interest costs that we were obviously incurring, you know, over the course of 23. And as you can see from our numbers, our margin increased by, you know, 10%, which is, you know, pretty significant considering, you know, our volumes. So whether that continues, we, you know, we already got the extra margin last year. You know, we're always, the team's always trying to do the best job possible in achieving optimal margins.

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Ira M. Birns: As we get into the cycle in the mid part of 24, you know, we're not necessarily going to have the same quantum leap in margins that, you know, that we had in the summer of 23, but, you know, we're striving for the best possible outcome as the year progresses, and we've actually started the year out pretty strong, which is a positive sign. So, you know, juries go out on what we will be able to achieve in terms of margin as the year progresses, but we started the year at a very strong level, and we're going to try really hard to hold on to that at a, And then, just to clarify one thing, did you ever give the operating income breakdown impact between corporate and land on the finished bid impact? Yeah, the finished bid impact is all in land. It's all on land, and it all flowed through Gross Props.

Okay.

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Adam Roszkowski: Okay, and then last one, if I can, just on interest expense. You talked about a several million dollar decline in your expectations next year, and you mentioned that lower interest rates are what is underpinning that. Is there any more room for working capital efficiency? How are you thinking about that in your outlook this year? Look, we don't like tons of interest expense any more than you do.

Okay.

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Okay.

Ira M. Birns: So we're trying to do everything within our power to bring that number down and not solely leave it to the Fed. There are a lot of things we're focusing on. We did a phenomenal job. Our net trade cycle was lower than I ever remember across the entire business in 2023. I don't know if we could bring that down much further, but we look at efficiency opportunities in that regard every day. And we also look at opportunities where we may be able to generate some cash from some non-core assets to pay off some debt and reduce interest expense as well.

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Ira M. Birns: So there are all sorts of things we're focused on. At a minimum, we should see a several million dollar decline. It could be greater than that, depending on the outcome of certain activities that are underway. Thanks, Ira, Michael, and Elsa; I appreciate it.

Thanks.

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Okay.

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Yes.

Okay.

Operator: Thank you. Our next question comes from the line of John Royall of J.P. Morgan. Your line is open, John. Hi, good evening.

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John Royall: Thanks for taking my question. So I had a follow-up on Marine. You've normalized a bit from 22 levels that were impacted by price volatility, but still well ahead of where you were in 21. Can you talk about what's structural there?

Ira M. Birns: And what's maybe still impacted by the short-term volatility issues, and then just maybe how we should think about that business longer term, relative to the four key run rates? Again, I think, you know, volumes are pretty stable now. I think the last quarter, some folks asked about our volumes. And, you know, we felt and maybe predicted accurately that we had hit a bottom, and we rebounded from that bottom in the fourth quarter. So, I guess we were generally correct. And we think, at this point, you know, volumes are pretty stable. There seems to be some upside opportunity, but, you know, not necessarily a really big number, as Mike alluded to earlier. Margins are still a bit ahead of historical averages, but considering the interest rate environment we're in, that makes complete sense. So, assuming, you know, none of us expect interest rates to drop dramatically, regardless of which Fed governor you speak to in 2024. So, I think that storyline will remain, you know, as it is today, which means that it should be, not necessarily a play on words, pretty steady sailing for 24.

Okay.

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Okay.

Okay.

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Ira M. Birns: I mean, I think the run rate we're at is a reasonable run rate to expect, and there can always be some upsides and downsides. But the volatility factor that we benefited from is really behind us now. And now it's pure blocking and tackling and generating returns that achieve the margin thresholds that we set for our team. Great, thank you.

John Royall: And then follow up on the buyback. You stepped up the pace a little bit last year going from about 50 million in 22 to 60 million in 23. Is that a good number to think about for 24? And then how do you think about the cadence there?

Ira M. Birns: Is it just opportunistic when you have the cash flows? Or are you timing the market at all? We noticed, you know, some quarters you buy back stock, and some quarters you don't. So just any color on the timing would be helpful.

Okay.

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Okay.

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Operator: Yeah, it's generally been opportunistic. We always try to buy back, I would say, you know, at least 40 million or so, which keeps our share count steady, which means it's offsetting the dilutive impact of employee awards. Last couple of years, we exceeded that a bit, as our stock was definitely not where we wanted it to be, so we bought back a bit more. So, you know, I think we'll always be in that ballpark. There may be an exceptional year, plus or minus, but I think we've been pretty consistent there. And we expect that, you know, we'll remain generally consistent in, you know, somewhere in that range, depending upon our cash flows, stock price, and market environment. Competing Priorities for Capitalism.

Okay.

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Pavel Molchanov: Thank you. Our next question comes from the line of Pavel Molchanov of Raymond James and Associates. Your question, please, Pavel. Thanks for taking the question. As I looked at the cash flow statement for the quarter, there was an acquisition. Can you talk about what it is that you bought?

Ira M. Birns: Great question. So we made a small acquisition in Michigan of basically several card locks, similar to, you know, the card lock activity we picked up with the Flyers acquisition. And I'm happy to ask you, that's a great example of a completely synergistic, easy to integrate, you know, business opportunity, albeit it was a small one, where we literally, you know, it's a great, you know, I'll get shot for saying this by people on our team, you know, overnight, right, because all we have to do is, you know, add those card locks to our network We picked up, I think, two employees in that old transaction, and we got to pick up, you know, basically all of their GPs. We would do that every day if we could, and we're always looking at opportunities like that. That was one that worked out for us in the fourth quarter.

Yeah.

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Okay.

Okay.

Okay.

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Pavel Molchanov: Okay, a question that I ask every quarter, what was the low carbon percentage of EBITDA or operating income in Q4. So the good news is we had pretty exceptional results in that part of our business, Pavel, in the fourth quarter. So those numbers stepped up a little bit from, call it, you know, 10, 11 percent, you know, to, you know, two, two and a half percent higher. I would say, you know, for the full year of twenty-three, you know, we were, you know, low teens.

Okay.

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Ira M. Birns: So, you know, maybe a little better than, you know, what I had shared earlier. And, you know, we expect twenty four to be similar. So, you know, we're making some slow and steady progress there. But there's always going to be, you know, fluctuations in a given quarter. Again, fourth quarter, the numbers were actually higher, you know, a bit higher than that. But, you know, if you normalize it and you look at, you know, the year over year, you know, we grew from, you know, nine percent of GP in twenty two. And that number was up to close to thirteen in twenty three. And then the EBITDA metric from twenty two to twenty three was even more impressive, going from seven to somewhere around fourteen. So we doubled, you know, again. Part of that was based on some pretty big wins we had in the fourth quarter that aren't necessarily going to be repeated every quarter.

Okay.

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Michael J. Kasbar: But we should be safely in double digits for GP and EBITDA percent of total, you know, in those related businesses in 2024. Right. And I think this touches on maybe one of the questions asked earlier about, When you sell a gallon of renewable diesel, SAF, cetera, is that a higher margin profile structurally compared to its petroleum counterpart?

Michael J. Kasbar: It could be. So, I think it's fair to say that, you know, you've got a product, a commodity that is not in ample supply. The demand for it, it does vary.

Michael J. Kasbar: There was a time when we had plenty of sustainable aviation fuel, and there was a lot of interest. But when you start to talk about the price, that interest disappears. You are seeing some economies of scale come through. But I think to answer your question directly, the answer is yes. Uh, so, um... You know, that. Simply, the answer is yes, and sometimes the amount of effort required to source it, certainly in the early days, but you are seeing the distribution, and the production become more mainstream.

Okay.

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Okay.

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Michael J. Kasbar: Many of these products, not all of them, are drop-in fuels, so they drop right into our distribution platform, and certainly with our end users, there are some products that require a little bit of an educational aspect to them, and we've got the expertise to be able to do that, but yes, Pavel, they are definitely attractive from that dimension. Thanks very much. Thank you. I would now like to turn the conference back to Michael Kasbar for his closing remarks. Thank you very much to everybody listening today, our supporters, analysts following our stock, and certainly our investors. We feel like we've got a far greater focus and good momentum in the organization.

No.

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Thanks.

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Michael J. Kasbar: We look forward to seeing you all in New York to talk some more about our business. And thanks again to our colleagues on behalf of the management team and all of the folks that we work with every day. Thanks for doing what you do. We'll see you all in a quarter. Take care. We'll see you in New York.

Okay.

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Sure.

Yes.

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Operator: Take care. Bye bye. Bye, everybody. This concludes today's conference call. Thank you for participating. You may now disconnect, www.worldkinect.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Glenn Klevitz, Jack Atkins, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect Jack Atkins, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect www.glennklevitz.com www.worldkinect.com GLENN KLEVITZ, JACK ATKINS, BENJAMIN NOLAN, GLENN KLEVITZ, MICHAEL KASBAR, Ira Birns, World Kinect GLENN KLEVITZ, JACK ATKINS, BENJAMIN NOLAN, GLENN KLEVITZ, MICHAEL KASBAR, IRA BIRNS, WORLD KINECT GLENN KLEVITZ, JACK ATKINS, BENJAMIN NOLAN, GLENN KLEVITZ, MICHAEL KASBAR, IRA BIRNS, WORLD KINECT GLENN KLEVITZ, JACK ATKINS, BENJAMIN NOLAN, GLENN KLEVITZ, MICHAEL KASBAR, IRA BIRNS, WORLD KINECT, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? www.worldkinect.com Jack Atkins, Benjamin Nolan, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect www.acousticguitar.com, Michael Klevitz, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, Michael Klevitz, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, www.worldkinect.com ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? www.worldkinect.com ? ? ? ? ? ? ? ? ? ? ? ? ? ? In the name of the Father, and of the Son, and of the Holy Spirit.

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Operator: Amen. In the name of the Father, and of the Son, and of the Holy Spirit. Amen. In the name of the Father, and of the Son, and of the Holy Spirit. Amen. www.mooji.org www.worldkinect.com Jack Atkins, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect Jack Atkins, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect Jack Atkins, Kenneth Hoexter, Benjamin Nolan, Glenn Klevitz, Michael Kasbar, Ira Birns, World Kinect, www.worldkinect.com, In the name of the Father, and of the Son, and of the Holy Spirit.

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Operator: Amen. In the name of the Father, and of the Son, and of the Holy Spirit. Amen. In the name of the Father, and of the Son, and of the Holy Spirit. Amen. Amen. Bluestem Lifestyle Before and After World Kinect www.worldkinect.org

Okay.

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