World Kinect (WKC) 26 Oct 232023 Q3 Earnings call transcript

Thank you for standing by, and welcome to World Kinect Corporation's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to the Vice President, Investor Relations, Elsa Ballard. Please go ahead.

Good evening, everyone, and welcome to World Kinect's Third Quarter 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. President President Michael Relations.With Executive like Kasbar, Ira Executive Vice call on Officer; to Ballard, Officer.Before Birns, is Financial harbor today Chairman Vice review Elsa our of started, statement. me Investor the and we safe I'm get Chief I'd and and Chief cause forward-looking materially comments uncertainties subject are to range of Certain including expectations future that about statements made to plans statements regarding risks actual that could and our differ. today, and results performance are a could other that materially and of presentation measures. new non-GAAP can with forward-looking Factors the no results cause differ future release of also or recent includes information Securities certain publicly assumes results be to these most statements our any obligation in Form found or to financial events.This to Exchange the reports light in Commission.World Kinect XX-K revise and filed revisions press GAAP found directly is A included to their reconciliation most our and non-GAAP measures of financial measures financial our website. release comparable can these in on be

begin Kasbar. will Chairman be prepared At remarks, period. question-and-answer would minutes with Officer, time, of then I a by Executive Michael Chief to this introduce followed and like which our will several We

now over spending conferences, our Thank employees. a months few it's world good than ever with strong engaging service as of is the the I've more and is the afternoon, ever, World of Kinect's been. our time It you, to offices Elsa, industry everyone. the in great and demand been that me as last deal at for customers clear around

I an exercise reliably energy now. meet value industry we believe sustainability and interest nearly an I environment customers' ever energy operating supply complicated our requirements a mission grappling have disjointed regulatory safely, years to and within continue changing environment.For needs industry have quarter don't for for environment. managing and most from a possible.The demonstrated discipline of efficient been increasingly our inflationary base on and manner execute we ability and customers our with broad in Despite are customers, third higher suppliers than financial in creating to providing prescriptive Our and this, and the more experienced to both rate solutions, expectations to XX influx our partners

leverage capital operating demand as near management. to global continue on platform aviation focus saw full working the We heightening our we of our while return

Our delivered a credit during fruit weakness the marine see constrained returns bear few despite sustainability experiencing physical land began solid our our and quarter. a And business some in in business to less locations environment. investments

strategy further out businesses, we quarter to of you a as a X-pillar-focus accelerate our low-carbon efficiencies energy in This needs will to future with stream our and where expect suite conventional be. continue needs of maximizing solutions current build and of earnings renewable activity fuels. expanding We capabilities.Last exactly increasing to diversify I our and and are growth by customer's our aligned global availability energy the management is their shared where

have built seaports, distribution retail we highly and platform marine network We a of this with optimizing dedicated of our will cardlocks, and established while global stations processes. professionals thousands competent efficient and assets.In and airports, aviation, do

this expect opportunities Sustainability our for an Simultaneously, low-return We for businesses be addition continue borders portfolio, expand evidenced is excellent of to our of further and our no XX% team. recently continue from reallocating and global it better sustainability, part we great businesses of business to segments. by accretive to we meeting produced are that our further replicating This our look in U.S. quarter, or And material margin Midwest operating noncore and our and in our returns. exiting this a cardlocks land target. medium-term sustainability are to land XX expect inorganically.Speaking and to knows organically result grow the land business. and things business we capital sharpening

these so of believe are and the continuing continue our all to embrace marketplace.Finally, across the and to we in customers to will businesses needs on evolve automation, current of bringing solutions meet recent to game hyper-focused I AI future changer. be the And advances and we a our offerings

cost lives employees.Before leveraging and we market drive more detail. are wrap hosting of ability AI already our creating more up, corporate Investor We an I greater and line improving I'd in discuss improve over many been for long for financial the our to be value believe a next us tools will while time. to top of registration these a have that shortly.I'll and our growth, We the be now and like efficiency, for business announce will Ira a quarter. the review to turn sharing information We'll year in call strategy of Day March link of to management

results. everyone.For and you, please evening, note adjustments for Thank no reflect quarter good Kasbar, GAAP starters, Mr. the results to third that

some more to segment. volumes quarter, the This gross by our and quarter, And nonoperational segment the prior in comparative passenger marine impact due in significantly X.XX our increased travel webcast record X% year-over-year from was and also segment, which to are in which slightly and down offset in gallons, to consolidated declined partially provide certain detail prior-year Reconciliations volatility highlights. another continue year's robust from gross was last on profit gross website, the release. always prices in lower in XX% which by summer consolidated do our segment.Aviation with a billion up now presentation.Now I'll items, financial earnings as primarily exclude On X.XX the let's due the was third year. profit volume the profit basis, total benefited Relations gallons are numbers of season. However, our billion they're land Investor increased highlighted

to profit gross year-over-year $XXX the million However, was quarter. down slightly in

at successful interest have renewals environment. contract achieving current recent higher We considering the margins on commercial rate been

interest price to significant has during quarter profit net both activity.The strategy as $XXX efforts nearly of reduction expense. contributing reduction enabled our However, business the as increased gross muted the net to capital a return us fuel returns overall to and of in volatility result was as profitability rationalize well aviation year-over-year, inventory-related reduce working result our improvement by million in our low

As We the we seasonal fourth an part segment. be industrial activities X/X mitigated volume commercial gross this converted commercial land activity while billion. aviation million gas a strong natural North to and to year-over-year, land relates through profit could retail profit, expect America. $XXX.X volume, on X% approximately from to sustainability-related the prior if in in in in our quarter. reported service generated Similar in up activities That's X.XX that saw our of lower holiday an remains were we to decline power and the the Volumes offerings, continuing power calls. second in the up our passenger to have principally gross due gallon our look and decrease third business we profitability this X% business That's gas approximately increase equivalents.From land offset in for noted volume positive into projected quarter, total and natural by the standpoint, increase of quarter, year-over-year. profitability season.Turning trends

in was profit, of current volume down metric quarter expect and marine in solutions third in Europe.Looking the quarter, strength renewable of X.X growth from business our considering strong a the experienced we energy pricing gross continued we conditions.And segment to market tons environment XX% fourth and power million year. last business year-over-year lastly, the Specifically, our modest in decline our

stable.Decreased from Third than was margin and few related overall the lower we quarter, activity near-record highs. average marine prices leading to quarter volumes fuel profit million, prices business but anticipated and year led down into prior bunker experienced when broadly, $XX weakness of were market record modest volatility is results to a XX% a at gross locations. were which lower or pressure, the in More principally physical some

the year's capital gross with market real marine last is working remain capital profit record regardless efficiencies While down price investment environment. working from no net levels, exceptional of

we the bunker last the quarter. when gross were sequential expenses $XXX the market and Again, of prices increase in due down consolidated modest to higher.Our total third expect and quarter down below X% marine the volatility margins in range be comparison last profit of marine million is expect fourth fourth quarter, to guidance considerably from quarter gross quarter, were third And year's while the well 'XX operating ahead provided to should profit. this averages, we For remain year-over-year. historical a

range Looking the million ahead a modest be to the $XXX fourth representing million, will of quarter, we in $XXX consolidated operating expect decline. expenses to sequential

This down generation, capital be the the quarter face came increases, interest which 'XX significantly For managing working of a of for the net million, efficiencies, we terms team a should has of progress which year, remain guidance towards at us testament consolidated at time efforts the our working 'XX has interest, and COVID but allowed to course have driving expenses over of us in low. business. a level, we has in our also reduce which our expense.Speaking XX% XX% our and years significant flow segment I to area these job and record interest within operating talked this inflationary is focus making sequentially several generally interest margin obviously same the has XX% already contributed the record to our $XX full reduce the year-over-year. This capital, on across our flat economic all cash mentioned operating expense, enabled working XXXX.In on also efficiencies current efforts improving that's in margins, further the years. excluding environment, environment, done we to focused strong to expenses rate year-over-year Considering range in great our after have at about trade capital but the year-over-year increased heightened target of driven cycle

relatively As the interest down to significantly sequentially, quarter, we expense again, be we year-over-year. expect be ahead should fourth but look to flat

for half Our the was effective the tax third first adjusted for year. higher effective quarter XX% rate XX%, the than rate -- our somewhat of

cash flow million, million our framework. $XXX year-to-date our to employ and continued terms fourth a to expect our flexible to strong past our third fueling capital average XX%.In flow our approximately in the million, $XX we quarter, an XX% generally the tax the full performance allocation with consistent rate has tax of been flow, to be have nearly this additional now $XXX we quarter, resulting over bringing this of rate of adding year operating flow quarter, X year, annual For cash ability cash cash operating operating years

summary, Our million which third guiding strategic solid an and supporting capital our to investments in returning consistent, both eye $XX delivering increased business have principles shareholder and EBITDA value.So delivered buybacks quarterly we results with also totaled year-to-date, on another through contribution. $XXX million-plus the capital in allocation quarter all shareholders while remain the with our growth for of dividends, organically through priorities

sustainability emerging Our business be land contributor strong in a segment. to continues our

record highs continues to XXXX, efficiently. the from While declined marine of our our business very profitability clearly manage this team

And on we it this for carefully beyond.That's interest back managing our strong and to broader even towards interest has across me. capital expenses operating the to to of to $XXX business I'd working remain focused to profitable expense Thank we Our cash also and open higher turn focus over driving rate million, call results in environment. the look we call flow ensure growth the operator contributed drive strong like mitigating while intently XXXX on to Q&A. as you. now year-to-date

James. first Our comes of line Raymond Pavel of Instructions] question from Molchanov [Operator the

exposure you in start the lot Can the aviation there X start activity airline weeks outside talk of effect that we've the disrupted about business segment? me with the the on And of the a Let ago, in of seen any your East, regional region. market? is crisis aviation. to Middle Since

Thanks, Pavel.

region. very from business very, been And you global, demand impact know. the that Our our within modest has as is

a location. that's major not So operating

de doing we're the then business de has also know, on been aviation And have the worldwide. other in the our marketplace terms you As minimis. activity impacts But impact been of minimis.

that and in market's it's contained scenario and and reaction is, that's there incident whole of -- As terms represented to obviously the tragic the horrific been it.

So no the business. to impact meaningful

revenue net at been renewables? question number Good you've kind past. low to EBITDA ago percentage this the X I months hear. asked and share and carbon Okay. Same this or What enough from in point coming is of to

together. Pavel, which thanks pieces asked last those question, with the for we answer the last quarter, the you quarter, consistent way pull

think little this gas say and power includes both that quarter slightly. was XX%. I would XX% told I are and numbers actually a That -- solutions. of you XX% number has and little of gone that EBITDA. it approximately over I a of activities It's up quarter our last sustainability-related those GP over

from So about quarter. up X.X% X%, last

Okay. And the on segment. then lastly, marine

are evidence any Is So given marine international obviously, stabilizing? headwinds, disposal a volumes lot that there of just at the trade your macro.

Well, it, is as immaterial low overall The I for steaming economic in is management. certainly well as of digit. impact the that, terms of market, both the to an emissions reasons softer, macro is slow dimension single think, not

robust. had segment. And it's not modest a So that's certainly the impact on

I additional to add think Ira may some to that. color have

Yes.

say, to focus for in recently addition Mike things historically may comments have couple rationalize on the our that of you Marine of In what us is the we to been some if we've done had in to Aviation, similar specifically, business years doing volume. over of lower-margin sake one the last

I So more see as the the that quarter. question would the our I stable opportunities at of stable? is by we're additional with we itself. now possibly was, materially at a year-over-year from more impact pick impacted is to volume in both some QX. market up we it next numbers dropping found bit -- of ourselves that it would well level are some say volume level don't as that I a say your

Our of line of next question of comes Ken America. from Hoexter the Bank

So hang on. negotiations? diversion all locations resolved? a in were if in out you'll Canada? up you that few talk Ben, freight Marine, strikes going was West the and it and marine in about that get running Can it's noted on of Was port side the Is Was now? minute, because what you impacted. a

resolved, particular X It X is generally different all stories. locations,

that, of and now some during quarter. them is that and some disruption. in way is us, would any get material we had from of had behind to of issues impacted of a One of short-term a XX% quarter. -- those issues them them expect But the X I had say disruptions the other don't in one that fourth

was it that I vessels, locations strike the -- -- if from that What wasn't what disabled Okay. at that on you no stopped site was have from idea you port the just something at it -- something say, you stopping

Europe at during the volume locations something specific quarter. location the in X was It X in hampered that in U.S.

Okay.

a over to this our share then is the lot with winning been more changed So this inflection, market business a years, lot Pavel's that people Ira, the customers? now, at talked Is is you've the for right years. or seeing to as at we've Has the there? Or this at competitive aggregating out about, about is of just it the all? or competitors this market Is Obviously over question about a existing many this Or we've consolidation? service docs business competitive still airports. volumes? got wait you're take providing and increasing customers

market, a is little container both. conditions, I'm of I the know, mean, bit certainly it's Obviously, now. market level right -- you the at strongest not sure as not

it part disciplined a So is to of approach us having returns.

to Marine the to for bunker environment trying not susceptible record of when again, year sake returns. volume the we're highly levels. is grow after volume. and profitability prices results So growing last We're And again, growing by evidenced hit the related as pricing phenomenal

little both. So it's bit a of

of business that which, they all them have hit new business existing after in with this has rates order have we always that entertained sense to to business customers, might are increased customers, we those in away to hurdle hurdle in rates interest to from that again, right, have us. the some resulted new ascribed XX for with guys rate us Our ago. make additional months walking And environment, but maybe

that factors described. you both those So a combination of it's of

network operations I marine, in up And as aviation, has in talked it, we it greatly creates I business, ability achieves more feeling expands, expanded able more the our our as and land well obtaining And opportunities. and ability make then just efficiencies my on share. And as competitive, to be as the about And our confident to of in more returns think put to and to gaining our locations upside platforms. think, market Ken. sustainability. as in open a has that In new bit efficiency certainly well significant got our create we're as comments to greater I that us the

comments referred the I were to those that earlier. So

density, we areas those portfolio -- of where see able the So of future growth operating it's those and leverage, return. we in when and portfolio, terms grabbing growth, a about talk return outcomes achieve sharpening managing the growth a with the to in with that's reasonable get being to

extend the to flow seeing want didn't Thoughts to It outstanding as ask need your When question. credit financial that actually cash you low, oil It be [indiscernible] credit. the used a when I prices you flow. customers. like went Ira, were cash and in extending on your to we've a you're it was to up, swim you a sounds to you you'd talk X about then thought Maybe for target, -- improving right? there cash So talk And in cash the despite margin blend happen on there? XX% seen run-up questions, second. I'll in maybe what need backdrop get with and to your what fuel. do just flows And it flow about

many Okay, often And which our so this and sharp years, first at that many, is Part many of rise all rates that isn't the get expense. easy. the the that, our -- first. X focusing in completely flow mentioned returns pat funding returns were right? we doesn't capital that environment Mike of increase X%, I the cash in trying ourselves but a that we're mentioned working team We on the X should. -- has But some in on to of for in already. very So in part terms summer, at look returns. to related more been aviation margin, successful interest interest mitigate many, team we're X% years don't know time story, the for back. versus in We

to we with of efficiencies we how side, in much we carry terms also day. go market terms customer compared supply inventory on business, more where terms business on and how drive do and who how and focused the this to every we our we're So do we

prices point cycle So bringing by cycle days. this our raised down. trade that a you I relatively great the quarter fact that X less high, our than trade was despite are mean,

terms the doing you cash increased quarter. we're Over of So the of that, maintain high they has question we answer we the healthy they're couple in trying rate they're I'll able to advance. it's which could in salesperson next will to achieve digits, the returns. third by in Every driving in single of a really to levers. going that terms been most a your business of for of hurdle and We're hard the environment generate market, be, mix very that? have have run, of revision when to right? So hit using have pricing despite and a question maintain long And by to a that amount that that going

million One capital. meaning and reduction payable almost And has time. been in days receivable really most for working we well. balance mentioned I other and our even. of long In perfectly have margin, don't has at is we're one a is working we've that them their year-over-year. Marine $XXX capital done the much improved very Aviation that excelling out marine, we inventory generally match-funded, significantly.

in even we've there's lot no different of real puzzle. working there But So seen some has the to Land improvement. still capital a marine. pieces

giving better to improved put us that's cash a So to higher better performance in price in position a drive environment. shot even flow a us

done but thing we haven't that many, about the expenses be I target, many in years. the flat mentioned greatest In that year-over-year, not maybe -- to terms it's our operating of brag we margin should

So reducing focusing single it. looking hour half categories. I'm line it's G&A optimizing, costs this one about on on item for many But because P&L. in passionate unnecessary a on probably on, We're go could I the at a really every start.

there. For already successes example, seen we've some

effective. to my money, dollar IT finance people team to we've And We is function that into a every be our best right, there. have our of one spend moved more we focus of on a focusing that spends in on being function lot more effective finance

to we're finally as how bit and of North operating we're should is America, But in Flyers XX terms Part marine efficiencies, also getting post catching closer the to Our still a contribute a in fully to XX, and there their efficiencies. land up operating acquisition, driving next organization on focusing HR where closer well. improve is integrated behind. efficiencies also we team of aviation over and that get months

accomplishment then this progress make significant for didn't So 'XX that's year much more that us. on and we'll we progress that big a year, We make but into one. next think

thing -- of first hand bit presume is in some smoothed with quarter, to there a to want it seasonality patiently fourth about but that to the that I waiting, that I Or Ben off you last with been talk quarter? you he's have because to Europe used little that there means the still out

a I that yes, Flyers was annual more that rates quarters were at Well, the the that from for But in at business, everyone's about in land stronger quarters now run end have of I because the generally when softest it's bit and looking has we And by day, the was wearing that. U.K. thinking out smoothed shorts weather-dependent U.K. before. beginning us October of the the way,

acquisition. out starting than become piece the change, and be post hope, And in you would out to may volume weather with much third second that's of Flyers and it pie. profitability considerably but smoothed a quarters we've weaker more the the but smaller So

there's less well. yes, as of So that

the question of from line comes Our of next Ben Stifel. Nolan

by just few questions. start to have me I appreciate I for thanks sticking a Ken let though. saying X that, so. do And to

asking The capital. clarify with was to respect -- all, to what is first on well, Ken first of just working

from So if as working fair? into at respect shouldn't the cash any to capital, It net relatively would there that effectively your quarter, be flow constant, working capital. that Is be, we if should remain back least correct? -- just operations be fourth with what prices aspirationally give look fuel

said. the and a makes what to the that everything little mean, additional ZIP the in they've code, somewhat if December. in to over on generate despite and relative the constant prices prices doing if I fourth in If some it cash stay just went in flow the that stays, November be But hypothetically may to difficult calm yes, Obviously, again should we cash quarter. deliver through end we been I last of weeks, water happen calm, at Yes. relatively we're fourth roof, dependent this quarter. the the more day, are price few can able that's what

Okay.

portfolio, have in ask, a strategic focus to there need trying there to on look some -- what I bit as areas are at you evolution So effort? look Or things in up grow as mean, that accomplish least to that I capital-light and with to been further it? a areas you that been you holes some at are also you want feel if the in adjacent that little of you've forward? this you have these building traditional footprint are wanted are or that of doing. I'm curious you do and going accomplish to capital like there can Or

Good question, Ben. And it depends.

mix, So of things. a business it's a different a number mix of

some brokerage, power providing there, activity, some advisory risk we're management. balancing activity it's and some on -- gas, merchant So

environmental then carbon on-site on So it And the that would would the It runs full and side, would be be side agreements. It power the advisory. spectrum. be solar services certificates. energy renewable

a initiatives. lot a their beautiful a something thing intellectual It's So everyone and capital less sheet do don't of are complicated. scalability, their a eminent And needs those balance activities. more plan. sustainability have It's have friendly with necessarily of them because to or number rather very

advisory, the with carry the and both also give assessment out knowledge So do implementation. base, navigate them we're that, able plan, a an the to them help

of are adept and that those of well. reasonably understanding how certainly some And sheet balance manage we've borders at activities quite using So that capabilities. our done the balance some within work to We're sheet.

we on business of just sustainability it depends that So activity have. part what

and our we power understand terms But in that. model of is So we and certainly, and and merchant the the of we've domain pretty got and those participation differently. in it deep in capability certainly molecules judicious how side electrons, we're the understanding robust, those But side expertise. gas merchant work of participate

tapping that there's the area are So parts sheet. it's balance step, of by step not the many but

the the I share Okay. of the was that mean well thinking And me, me though you're that the investments reasonably if I could here maybe very are shares in outside repurchases. me also with I terms it not respect bad. lastly much And surprised reflected than shares. that, in not alternative, deployment me you then of being how I you bit good, appreciate other a just like convertible have deployment that's seem fruit buybacks firm as sort or that sit to capital you seems acquisitions. been And Mike. another consequence maybe of as talk about it the through curious results soft, making how as think price record-setting, is about of and where although through capital the you then for doesn't little as was a well between maybe talk lower-hanging Can but to and things? or somewhat in

to fun a question for Ben. answer Always you,

beginning recently issued convert. right? say, But any a always the could dividends, purchases be our buybacks repurchased in organic don't amount now you'll allocation towards the additional optimal we business when where for allocation more So million us and as optimal term. of capital always decisions that Depends shares albeit growth, see I to the So inorganic kind share we a always say the a the but as $XX either are long opportunities, can our right? in outside capital fixed dollar at opportunities us on bit expensive timing all a consideration a economic of that of consideration. We necessarily As analysis, great part on a we repurchase, lot evaluate, the just the point year. choose stock right on opportunities of higher around alongside June strategic well of look, is those going are the the our framework, worth carefully multiples value a or we may stock million overall or world other over pure X.X drive over amount remember, it's as

of types always liquidity to have as for we available those investments and provide So flexibility well. financial

effectively So we're at flexibility. the drive to maintaining all those trying allocate level possible the outcome, the best of but levers to day, while the financial of also end shareholder between appropriate

one. I So probably you that the on can that's give best answer

If I'm -- going on for you had to a to that press second.

say? targets at sort stack how to now then are you share of moment, for of and the of had this at where does it are look some right are the If also out up market, would you price where based relative sort in potential valuations today's today we on that

[ Mike where cost only listening next a that room further that's a sustainability-related such There's comparing as completed it consider relative multiples invest no businesses. that cheap, but synergistic say recently going to short periods strategic of the right? comes course, end considering no really part into ridiculously to buying translates to is as of say stock an on low, a now right, bolt-on So our income a the our is opportunities that, a isn't ], say, we're trying opportunity day, at it in alluded drive Pavel back our lot of key that different available go in opportunities -- other cardlock are you're On right? a it the more the solid to history, and part basis, dollar basis literally land. in but attractive every one to cash certainly and in scale. of everything, was. counsel of doesn't that's simple of a to you than with now would should when that pretty right your have relative really supposed dollar, it's this, mean North am to you're still our factor, That where easy integration. as is still shares, the We investment I growth they -- initiatives, again, small That's to business we our because America. in would

than as considered, may on at other considered it's periods argue yes, opportunities better the seriously seriously a alongside time it And been being So average, have is other but it's well. you'd today more in past. it being more

Sir? for Kasbar remarks. turn I you. conference like Thank now would to to back the closing Michael

support, The always. do X,XXX we Kinect your us day also you as And work outstanding every what for is I teammates. like World like who thank I'd to thank to our makes that our investors over are.

next very look to and everyone care. Bye-bye quarter. talking you thank Take for forward to much, now. So

participating. you This today's conference call. Thank concludes for

disconnect. now may You