TSE:PKI Parkland Q1 2023 Earnings Report C$32.65 +0.44 (+1.37%) As of 04/17/2025 04:00 PM Eastern Earnings HistoryForecast Parkland EPS ResultsActual EPSC$0.64Consensus EPS C$0.32Beat/MissBeat by +C$0.32One Year Ago EPSN/AParkland Revenue ResultsActual Revenue$8.16 billionExpected Revenue$8.73 billionBeat/MissMissed by -$572.13 millionYoY Revenue GrowthN/AParkland Announcement DetailsQuarterQ1 2023Date5/3/2023TimeN/AConference Call DateThursday, May 4, 2023Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Parkland Q1 2023 Earnings Call TranscriptProvided by QuartrMay 4, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Morning. My name is Joelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Parkland Q1 Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:26Thank you. I would now like to turn the conference over to Valerie Roberts, Director, Investor Relations for Parkland. Please go ahead. Speaker 100:00:34Thank you, operator. With me today on the call are Bob Espie, President and CEO and Marcel Teunissen, Chief Financial Officer. This call is webcast, and I encourage listeners to follow along with the supporting slides. We will go through our prepared remarks and then open it up for questions from the investment community. During our call today, we may make forward looking statements related to expected future performance. Speaker 100:01:07These statements are based on current views and assumptions and are subject to uncertainties, which are difficult to predict. These uncertainties include, but are not limited to, expected operating results and industry conditions among other factors. Risk factors applicable to our business are set out in our annual information form and management's discussion and analysis. We will also be discussing non GAAP and other financial measures, which do not have any standardized meanings prescribed by IFRS. These measures are identified and defined in Parkland's continuous disclosure documents, which are available on our website or on SEDAR. Speaker 100:01:40Please refer to these documents as they identify factors which may cause actual results to differ materially from any forward looking statements. Dollar amounts discussed in today's call are expressed in Canadian dollars unless otherwise noted. I will now turn the call over to Bob. Speaker 200:01:54Thank you, Val, and good morning, everyone. We appreciate you joining us today. The Parkland team has a lot to be proud of in the first I'd like to highlight a couple of accomplishments. First, I want to thank and congratulate the entire team for safely Completing our scheduled turnaround at the Burnaby Refinery. Our team has a track record of consistent execution And they completed this 8 week process on time and on budget. Speaker 200:02:23I'd next like to highlight our Journey Rewards loyalty program, which Partnering with Air Canada's Aeroplan. Journey Reward links our family of fuel and on the run convenience brands, In addition to building closer relationships with our customers, Journeys' goal is to drive organic growth by incentivizing loyalty. In the 3 years since its launch, we have grown our cardholders to over 4,500,000 in Canada. The past few years Have proven that Journeys members are loyal, higher spending customers, and they are now responsible for a quarter of our retail fuel transactions. Members on average pump 20% more gasoline each fill and spend 7% more in our stores. Speaker 200:03:10During the quarter, Journey members have contributed over 20% of the same store sales volume growth we experienced. In the past few months, we have made significant platform enhancements to our Journee app. These strengthened our digital connection to our customer And set the foundation to support our new loyalty partnerships. Our partnership with Aeroplan is exciting for many reasons. Firstly, our customers will benefit. Speaker 200:03:37By bringing these 2 leading loyalty brands together, we will deliver Canadians greater value, greater choice and greater rewards. Secondly, it significantly expands our reach with over 10,000,000 combined members. Thirdly, It accelerates momentum in our organic growth strategies, building on our relationship with CIBC. The addition of Aeroplan We'll further strengthen our loyalty growth platform. We continue to explore additional partnerships for our Journee program to offer more to our customers and extract greater value. Speaker 200:04:11Journey is quickly becoming one of Canada's top retail loyalty programs. If you are not already a Journee member, I encourage you to sign up and download the app. With that, let's move to slide 3. Before we discuss the quarter in detail, let me step back to provide a brief overview of our business as well as some high level observations. As followers of Parkland, you know that our purpose is to power journeys and energize communities. Speaker 200:04:40With operations in 25 countries, we are Our retail business satisfies the fuel and convenient needs of consumers and our commercial business provides companies with industrial fuels. These businesses are complementary. Our retail and commercial businesses are backed by our multi product integrated supply chain. By operating in all three parts of the value chain, we secure cost competitive supply for our customers and at the same time capture attractive margins. This is our supply advantage. Speaker 200:05:22Parkland is a growth company. Through consistent execution, Strategic acquisitions, successful integration and our talented team, we have built a portfolio of leading brands that provide our customers with their daily energy and convenience needs. We bring these together through our on the run food and convenience offer and with our Journee loyalty platform. Acquisitions have played a big part in our growth. We are now focused on integrating the companies we purchased, Capturing synergies and driving organic growth. Speaker 200:05:57We are exercising strict capital discipline by prioritizing lowering leverage followed by enhancing shareholder distributions and organic growth. Our Q1 results are excellent. We have lots of good news to share, including exceptional same store volumes and sales in our retail business and robust growth in our international business from organic initiative, We continue to work on the reset of our U. S. Business. Speaker 200:06:28Donna Sankar moved from our Canadian business to be President of our U. S. Operations. She has simplified structure recruited external talent and placed proven Parkland leaders into our U. S. Speaker 200:06:40Organization. I am confident the changes we have made over the past several months sets the U. S. On course to deliver the consistent and improved performance we expect. With that, I will hand it over to Marcel to discuss our segmented results in more detail on Slide 4. Speaker 300:06:58Thank you, Bob, and good morning, everyone. Parkland delivered an adjusted EBITDA of $395,000,000 in the quarter. This is up $12,000,000 from prior year Despite an approximate $100,000,000 impact from the turnaround at the Burnaby Refinery. This is a tremendous result Reflecting the resilience of our business model, contributions from acquisitions and organic growth. We are firmly on track to achieve our 2023 guidance. Speaker 300:07:29Our Canada segment delivered adjusted EBITDA of $167,000,000 Commercial volumes were lower due to unseasonably warm weather. Our retail business performed well with a 7.3% lift In same store sales volumes, a large portion driven by journey members. In addition, we see the positive impact of our Crevier and Husky acquisitions. Fuel unit margins were lower due to the declining commodity price environment, But continue to trend above historical averages. Our convenience gross margin increased by 45% year over year to $87,000,000 This was driven by same store sales growth ex cigarettes of 6.8% and growing our food category through the acquisition of M and M Food Market. Speaker 300:08:22Our international segment delivered adjusted EBITDA of $183,000,000 up over 120% from last year. A key contributor of this growth was the consolidation of the remaining 25% of Sol last year. Fuel volumes increased approximately 40% Due to organic growth in contracted commercial volumes combined with the completion of and synergies from our Jamaica acquisition. Fuel unit margins increased from 2022 due to our regional supply advantage. USA delivered adjusted EBITDA of $21,000,000 which reflects the impact of environmental compliance cost of $17,000,000 related to previous periods. Speaker 300:09:11Fuel unit margins were higher, but volumes were lower compared to last year Due to our decision to limit our U. S. Wholesale business and due to severe winter weather conditions in the Rockies and North Dakota. We have high confidence in the fundamentals of our USAA business and our new leadership team is focused on unlocking its full potential. Refining delivered adjusted EBITDA of $38,000,000 This reflects the scheduled 8 week turnaround, which resulted in composite utilization of 33%. Speaker 300:09:45During the turnaround, we optimized financial performance by selling our unused pipeline capacity and increasing our import of refined products. The turnaround was success We completed on time and budget and we returned to normal operations in early April. Net earnings per share increased more than 20 This increase reflects good operational performance and the accretive returns on recent acquisitions, including our consolidation of Sol and our leverage ratio decreased to 3.3 turns. The pie chart on the right shows the trailing 12 months adjusted EBITDA contribution of our 3 business lines. Retail commercial, each of which includes the benefit of our supply advantage and refining. Speaker 300:10:34As you can see, retail makes up almost half with the remaining half split almost equally between our commercial and refining business. Growth in our retail and commercial lines of business will outpace the growth from the refinery, Meaning the refineries relative contribution to Parkland will continue to reduce. On a trailing 12 months basis Parkland has delivered 1 point $67,000,000,000 of adjusted EBITDA, which includes 100% of Sol, the impact of the refinery turnaround and our weaker Q3 last year results. This shows the positive momentum in our results. Moving to Slide 5. Speaker 300:11:14I would now like to shift the discussion to the future and our journey to 2025. You are familiar with these numbers and on this call, we will provide greater transparency into the actions we are taking to drive this growth. And as a reminder, this will be done without acquisitions. In 2023, we are targeting $130,000,000 of incremental EBITDA from This will get us to the midpoint of our guidance. Lower earnings from the refinery due to the planned turnaround and normalizing margins We'll be offset by full year inclusion of the 2022 acquisitions and stronger U. Speaker 300:11:51S. Results. We expect to add $50,000,000 through synergies and And we expect organic growth to deliver approximately $80,000,000 this year. Through 2025, we will deliver approximately $200,000,000 of incremental adjusted EBITDA to achieve our $2,000,000,000 ambition. This growth is comprised of $100,000,000 of synergies and cost efficiencies, plus $100,000,000 from organic growth initiatives or about 3% per year. Speaker 300:12:24We continuously review our portfolio for optimization opportunities including divestments. We will speak more to these actions in a moment, but first I want to emphasize the expected outcomes of our near term strategy. By 2025, we expect that with a capital program consistent with current levels, we will achieve adjusted EBITDA of $2,000,000,000 and cash flow of $9.50 per share. We are focused on delivering shareholder returns and grow our return on invested capital to more than 11% by 2025. And lastly, we expect to reduce our leverage ratio to the low end of our 2 to 3 times target. Speaker 300:13:05The actions we are taking are clear and we are confident that they will drive shareholder value. And with that, let's move to Slide 6. We continue to focus on integrating the businesses we have recently acquired. As you know, it can take up to 3 years For example, our recently acquired terminals in Eastern Canada have provided us with optionality and we expect a material improvement in our supply economics And lower cost of product. Although industry fuel unit margins has softened from Q4, our margins have held firm reflecting our supply capabilities and advantage. Speaker 300:13:52In our retail business, we have now converted 21 Husky sites to Chevron in Western Canada, With each providing a refreshed on the run convenience store offering, the transformation is impressive. By offering a trusted brand, Implementing robust merchandising strategies and linking customers to our Journeys loyalty program, we are seeing few volumes and same store sales Since late 2020, we have spent almost $3,000,000,000 on acquisitions, including the consolidation of Sol. We are focused on fully leveraging the benefits of our scale on creating an operating platform to deliver additional synergies and a competitive cost structure. We expect to deliver approximately $100,000,000 of direct and indirect This will include a reduction of third party spend, the consolidation of our systems and processes And other cost efficiencies. I'll pass it back to Bob to talk about organic growth on Slide 7. Speaker 200:14:57Thanks, Marcel. The Parkland team is also focused on organic growth and we are seeing great progress. In the Retail segment, we continue to expand our on the run convenience network. We have 6 70 locations across Canada, U. S. Speaker 200:15:15And International segments. This now includes our 1st stand alone urban store in the Vancouver area. We are on track to meet our target of 1,000 on the run sites by the end of 2025. Our same store sales growth On the commercial sides, scale has allowed us to become the trusted supplier of industrial fuels in the regions we serve. The growth of our international business has been a few years in the making and was hidden by the impacts of the pandemic. Speaker 200:15:53We are now starting to see the benefits of the improvements the team has been making. Our volumes increased by more than 600,000,000 leaders We're over 40% year over year. Our competitive advantage has allowed us to win new commercial business and optimize asset utilization. We are seeing continued strength in our retail business. Turning to slide 8. Speaker 200:16:18We have a clear strategy for identifying assets That no longer align with our core business objectives, we regularly review our portfolio to identify underperforming assets and assess the potential impact of disposition on our financial performance. We've acquired many great businesses over the last couple of years And there is an opportunity to optimize the portfolio and streamline our businesses. This is an important part of our broader capital We expect to generate up to $500,000,000 from the sale of non core assets and work is well underway. At the end of the Q1, we had more than $200,000,000 of assets held for sale. This includes approximately $100,000,000 of high value real estate, of which 85% are in advanced negotiations. Speaker 200:17:08These sites are primarily in urban areas with high real estate value. Assets held for sale also reflect non core Canadian assets, including a terminal in Eastern Canada that is also in advanced negotiation and parts of our commercial business in Canada. We expect to be marketing that business in the next few months. We carefully considered the market conditions and timing of asset disposals to ensure that we can maximize the value of the assets we sell. This involves assessing market demand, identifying potential buyers and negotiating favorable terms for the sale. Speaker 200:17:47The cash generated by these disposals will be considered in our capital allocation framework and used to reduce debt and increase shareholder returns. Moving to Slide 9. Parkland's management and Board are focused on maximizing shareholder value. Earlier this year, With the help of an independent financial advisor, we completed a detailed review of strategic alternatives for the refinery with the Board. We reviewed several options, including a sale or spin off and considered the impact of leverage and dis synergies. Speaker 200:18:23Following this detailed review, we concluded that Parkland's continued ownership of the refinery maximize shareholder value at this time. The Burnaby Refinery is a highly strategic and integrated asset. Approximately 90% of its output supplies Parkland customers. The BC market has limited import options. Other key market participants own refineries outside of the province And ship finished product into the region on the Trans Mountain pipeline. Speaker 200:18:54Burnaby Refinery allows us to remain competitive. Parkland has added significant value to the refinery since it was acquired in 2017. Through a combination of safe and reliable operations, Strategic commercial agreements and logistics optimization. Parkland has contributed to a doubling of the mid cycle adjusted EBITDA. As a result, a significant portion of this increase is unique to Parkland. Speaker 200:19:22Turning to Slide 10. I've been President and CEO of Parkland for 12 years. During this time, the Parkland team has delivered remarkable growth across many metrics. One of the highlights of my role is being able to spend time with our teams in each area of the business. I see firsthand Their commitment to safely serving our customers, conversations I have and the operations I see Underpin the confidence I have in our team to deliver continued growth and success. Speaker 200:19:53In Canada, I recently visited our retailers. Many Have had to work longer hours because of a shortage of staff. I'm impressed with how they continue to serve our customers with an exceptional level of service. I also toured our 1st standalone C store Speaker 400:20:10and Speaker 200:20:10caught the enthusiasm of our operations team and our customers about the early success they are seeing. In the U. S, I visited our team in the Midwest and spent time touring our convenience stores. I spoke with our distribution team and drivers, and I'm grateful for the way They brave harsh winter conditions to supply our commercial customers with their energy needs. On a visit to Puerto Rico, I saw the results of rebranding an entire market from to Exxon in record time. Speaker 200:20:39This enabled us to free up supply and run it through our platform. The team did this without impacting our market share and We improved our supply economics by moving this volume into our system. At our refinery, in parallel with the successful turnaround, Our supply team captured an opportunity to improve our financial performance by selling our pipeline capacity and increasing our import of refined products. These are just a few of the many accomplishments from our team that give me conviction that our strategy is the right one to deliver long term value To all our shareholders, our large long term shareholders agree. I do not believe our current Stock price reflects the performance and quality of our company. Speaker 200:21:23To close this gap and enhance shareholder returns, We are taking clear actions that will lead to improved cash flow and returns by growing our business to $2,000,000,000 without further acquisitions or dilution to our shareholders. Specifically, we will capture synergies and cost efficiencies. We will deliver organic growth. We will sell non core assets. Through these actions, our leverage ratio will be lowered to the low end of our guidance range by 2025 And our return on invested capital will increase to above 11%. Speaker 200:21:58We're excited about the future of Parkland and are confident that we're well positioned to create value for our shareholders. We look forward to keeping you updated on our progress and thank you for your continued support. With that, we will turn it over to the operator for questions. Operator00:22:15Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 500:22:50Good morning, everyone. Thanks for the time. Just curious on the piece of some of the Synergy optimization you talked about, I think the $100,000,000 target was referenced. Is that something we should expect sort of equally throughout the period? Or do you expect to capture some of that Speaker 400:23:08Yes. Thanks, Steve, and thanks for the question. Capturing that is an annual run rate target and we'll see the bulk of that flow into This is towards the end of the year. Speaker 300:23:25Yes. No, and Steve, of course, as you know, we've done 20 acquisitions. So depending on Which vintage those acquisitions were, whether they were earlier in 2021 or later in 2022, those come at a slightly different rate, but we said EUR 50,000,000 In this year, so in 2023 relative to last year, and I think a lot of that just goes ratably through the year. And then the additional 100 For the next 2 years, so that will be the run rate by 2025 again, that will be equally. So normally our supply synergies, they come quite early in the periods Because they kind of instant, whereas cost synergies and operational improvements, they tend to be a bit more as we go through change and change programs a bit more later in the period. Speaker 500:24:08I appreciate the color. And just one follow-up, if I may, is on the refinery. Understand the strategic review took place. I'm curious if there's any change in the strategic value of the assets over time as Trans Mountain expands and different options become available. Is that it something that was contemplated in the analysis and how do you think about sort of that the future temporal value of the asset? Speaker 400:24:33Yes. Again, thanks for the question here, Steve. You're right, we did look at the refinery And as part of that looked at the forward view in the economics, as TMX comes up, We don't believe that that will have a material impact on the economics. We do believe that The impact of that will be pushed into the market. And ultimately, that refinery continues to be A highly profitable asset for Parkland and certainly when you look at the refining complex throughout North America, it's a top quartile performer. Speaker 500:25:19That's great. Thanks, Rich. Appreciate the time. And would just note that the new journey features on the pump are making the whole process far more seamless. Thanks. Speaker 500:25:26Appreciate it. Speaker 400:25:30Thanks, Steve. Appreciate your loyalty as a customer. Operator00:25:36Your next question comes from Ben Isaacson with Scotiabank. Please go ahead. Speaker 600:25:41Thank you very much and good morning everyone and congrats on a good Good to see the pieces starting to come together. Two questions for you. Number 1 is, you identified up to $500,000,000 of Non core asset divestitures, you talked about the $200,000,000 held for sale. Can you talk about the other $300,000,000 and Whether or not you pursue them or not, can you just give us a sense as to kind of where they are and what they are? Speaker 400:26:09Yes, we've consistent with what we've communicated in the past. I mean, as the quickest area and one that we're Proceeding quite well on is our retail business, particularly in Canada, where we're looking at high value sites that don't generate a lot of Cash flow. The second thing within the retail business is looking at our the tail of our network And pushing some of that and selling that to dealers or others Depending on the site, we do have some distribution assets, particularly as Part of our purchase of OPEC in Eastern Canada, we're looking at divesting 1 or 2 of those facilities. And then in our Canadian commercial business, consistent which we've talked in the past, there are some businesses that we are looking at. Again, these will be proceeding here over the next 1 to 2 years. Speaker 400:27:16And as you know, Divestitures do take time. And also, I do want to assure people that these are good assets and we will It will be dependent on getting a competitive price for these assets. Speaker 600:27:34That's great, Bob. Thank you. And just one more question, if I may. In terms of the U. S. Speaker 600:27:39Business, so if we clean up some of the noise that we had in this quarter, you are continuing to capture synergies. There may be a little bit of organic growth opportunities. It seems like you're putting a pause on further M and A in the U. S. When we put that all together and when we About the U. Speaker 600:27:54S. In a normalized or in a mid cycle environment, how should we think about EBITDA or EBITDA margins? Or is there some way to kind of guide us in terms of what that business looks like? Speaker 400:28:05Yes. Look, I think we've telegraphed here what the base business runs at and when you do the Some of all the acquisitions, and would be consistent that we would expect to get in the 30% Lift through synergies and consistent with what we've done in the past, tends to come from 3 areas. 1 is our Supply, second is operating improvements in the business, many of which have been made, but many more to come. And then the third is looking at the MD and A within the business. Speaker 600:28:48Okay, great. Thanks so much. Appreciate it. Operator00:28:52Your next question comes from Derek DeLay with Canaccord Genuity. Please go ahead. Speaker 700:28:58Yes. Hi, guys. Thanks for taking the questions. I just want to switch gears a little bit. Can you just talk about The $17,000,000 compliance cost within the U. Speaker 700:29:08S. Business, what that was? It sounds like it was related to prior periods. And Is this something that we should expect to reoccur at any point? Speaker 400:29:21Yes. Thanks, Derek. I'll turn that over to Marcel to talk through. Speaker 300:29:25Yes. So thanks for the question, Derek. So yes, indeed. So we this was related to previous periods and sales that we made in previous periods. So it was just a timing on recording, Recording the environmental obligations, so wind obligations and Oregon LCFS obligations specifically, so there was a timing of it. Speaker 300:29:44And we should have recorded it when these were due. But as we were finalizing the year and closing it up, there was a gap in what we had recorded. So it's kind of more A timing issue and of a one off nature for this quarter, but it wasn't per se a loss, it was more like when we accounted for it. Speaker 700:30:05Okay. So then when we think about the U. S. Business, I mean, over the last couple of quarters and I get it's changed with the elimination of some of these spot market sales. Is this sort of like a mid-forty million dollars EBITDA run rate business per quarter? Speaker 700:30:19Is that how we should think about it going forward? Speaker 300:30:24Yes, it should. And I think in the way that we've talked about both this year And $130,000,000 of increase relative to last year as well as when we look into 2025, a big portion of those improvements we to come out of the U. S. Business within that. So yes, you add back what was more of a special for the Q1 period as well as that we did have some quite severe weather in Q1 and sort of move, for instance, the kind of the agricultural season into Q2 or early Q2 as Post to Q1 with what we normally see. Speaker 300:30:59So we expect that to kind of to continue to improve in the second quarter. And then the synergies which we talked about and other value that we can create in that U. S. Business, we expect to see continued improvement there. Speaker 700:31:14Okay, good. And then just one well, maybe 2 more, as it relates to the international business and SOL. Can you just give us a little bit more color on what helped drive the strength there at Seoul? I guess tourism was very strong and it appears like there was an increase in oil and gas Drilling within the region. And then secondly, can you remind us how many of the countries within Seoul have regulated fuel margins? Speaker 400:31:42Yes. Look, again, I do want to thank the international team for driving a really strong quarter. And it's a lot of the stars aligned for the team during the quarter. And as you highlighted, we did See, if you recall last year, there was continued lockdowns because of Omicron in the region and it also curtailed tourism. So there were sort of 2 factors. Speaker 400:32:09So we saw that recovery pull through quite nicely. I mean, look, that's sustainable on a year over year basis. The business is cyclical. So we do tend to see higher earnings In Q1, Q4, Q1 and Q2, Q3 tend to be a bit softer. And then look, the team did an One job continuing to grow their wholesale business on the base platform. Speaker 400:32:38Some of those sales were spot, but not a material amount. And again, we do expect the business to continue to perform strongly here going forward. The other thing is we had Jamaica run through. We also had a full year now of our of the 25% minority piece that we purchased, so there's some M and A that's running through. And then the team's making great progress on synergies from some of the deals that they've done over the last couple of years. Speaker 400:33:10So again, all around some excellent execution there and we're seeing that come through In very strong performance. So we're very pleased with the performance of the business. Speaker 300:33:20Yes. And to your second question, I don't have Exact number of how many markets are actually regulated on the retail side, but these are usually just think of the smaller markets in the Caribbean, Where we are often the only player or one of 2 players and that there is some regulations there that help with the market dynamic. The bigger markets, when we talk about the Dominican Republic, Puerto Rico, those are not regulated, as well as some of the markets in South America, they're not, but it's mostly to smaller markets. Speaker 700:33:52Okay, great. Thank you very much. Operator00:33:56Your next question comes from Vishal Shreedhar with National Bank. Please go ahead. Speaker 800:34:03Hi, thanks for taking my questions. Just wanted to jump back to the U. S. Segment for the $17,000,000 in compliance costs. Just wondering if management has made any changes to their controls to reassure that it won't happen again? Speaker 800:34:22And if so, how significant are those changes such that it won't these types of issues won't reoccur? Speaker 300:34:31Yes. And it's a fair question, Vishal. So yes, we have made those. And as Bob already highlighted, we have made quite a number Changes in the team already in the U. S, more experienced team with all that. Speaker 300:34:45We and that includes the finance team, so I'll mention that, As well as some of the controls that around some of this, this is kind of the environmental piece is a bit of an emerging kind of activity in parts of the So as it has grown, we have now tightened the controls to make sure that we're on top of those. Speaker 800:35:06Okay. And moving on to the international segment, there was some contracted volumes. Wondering if that's A sticky piece of business that we should continue to consider as we reflect on our model. Is that more of a one time Events, and if so, could you specify the magnitude of that business for us? Speaker 400:35:30Which business? The commission holder. Yes. We don't break that out. Again, there is a lot of underlying Sustainable growth in the business, the majority of the earnings and the spot portion is relatively small. Speaker 800:35:49Okay. Thank you. Operator00:35:53Your next question comes from Michael Van Aelst with TD Cowen. Please go ahead. Speaker 600:36:00Thank you. I'm wondering how the Divestment of $500,000,000 worth of assets would affect your $2,000,000,000 EBITDA target for 2025, if at all. Speaker 700:36:12Yes. Look, Speaker 400:36:15I believe and we talked about some of the assets, particularly the retail assets. Now these aren't large cash flow producers. So we expect certainly there the impact to be minimal. And in some of the other assets that we're looking at, we do There is quite a bit of overhead to support these businesses. So we do expect to be able to meet our target. Speaker 400:36:45And certainly if that changes, we will update our investors accordingly. Look, I mean, the key thing is that we get the returns that we continue to improve cash conversion in the business and ultimately Can we deploy that cash into deleveraging the business here? Speaker 300:37:07Yes. And some of the cash flow that we will generate As we've indicated before, we'll use that to reinvest in our business. So it's not all going through the balance sheet. So some of that will use to reinvest In businesses generate more to offset that, there will be at times a bit of a timing difference between when we get the cash and when we invest and what comes out of it, but That will come to more organic growth as well. Speaker 600:37:33Okay. So as you make these divestitures, we shouldn't expect To adjust your guidance for 2025? Speaker 400:37:42No, we're Certainly with the ones that we've identified, we're confident that we can do it and maintain. The other thing is looking at our cash flow per share, Right. That's another core metric here that we'll continue to drive. Speaker 600:38:00Okay, great. And then You talked about $100,000,000 of M and G and A cuts, which is pretty substantial by 2025. I'm assuming that's off the current run rate of Got it around 625,000,000 is that a fair Speaker 400:38:15Yes, that's a good way to look at that. Speaker 600:38:19Dan, are those synergies or are those just getting leaner? What is that? Speaker 400:38:24Well, it's a mix of both, right? As Marcel said, we did a significant amount of M and A and we've always said it takes Up to 36 months to start to realize full impact and part of it's the growth that we've experienced and would be part of our natural Synergy capture and then the others would be looking at again just the overall structure and Looking for opportunities that have come through the growth that we've experienced. Speaker 600:38:59Okay. And just going back to SOL, following up on earlier questions, You had a substantial increase in EBITDA. Even when you normalize for the 100% ownership of Sol, it was still up whatever 64% or 80% or something like that. I don't remember the exact number. But when I was reading the press release, I got the sense that Some of that spot volume was a bigger component of it and is less predictable or less ratable as you guys like to talk about it. Speaker 600:39:32But In your comments, Bob, it sounds like that was a small part of it. Speaker 300:39:38So like So Speaker 400:39:44again, the other thing is taking into account the seasonality of the business, right. So And we did have a COVID recovery here. So like you say, the stars aligned for the business and they did exceptionally well here. Speaker 600:39:59Okay. And just on some of that spot business, you was Do you know why some of your some of those buyers were switching over to Parkland? Is our competitor having a problem? Is there Are you actively recruiting new business like this? What was the target? Speaker 400:40:20No, look, I mean, Look, we'll always sell when we can, right? So, but I would say it speaks To the strength of our supply system in region where we have a competitive cost structure and again what we've Seeing over the quarters here is that team has been able to continue to drive growth through that channel. And And again, ultimately, the economics that we have will ensure that we continue to win in that space. Speaker 300:40:52Yes. And maybe, Michael, I will also point out that if you look at when we acquired this business in 2019, that was probably the only the last normal comp year that you've had. 2020, We already saw COVID 2021, 2022. So 2023, you see actually also the outcome of 3 years of work of transforming that business Since we have had ownership, right? And so I think that's important. Speaker 300:41:15So the Jamaica acquisition, Bob already mentioned. And then we look at squeezing out more margin for the same volume. Puerto Rico, Bob mentioned it, what we did there, which I think is quite amazing. We rebranded that network to mobile. That freed up our supply as well and that gave us the ability to get more money out of it. Speaker 300:41:35But I think you should see it more as when you compare to previous periods, it's the 1st year that we really see under our ownership With markets being kind of normal and so that gives us confidence in those numbers for international, it's the high season, But also a lot of hard work that's gone in over the last few years. Speaker 400:41:54Yes. One other item is on the confidence around the base business. I mean the team did add Supply capacity, we added 1 new ship into the region to accommodate the growth that we've seen. So again, Look, the business is performing well. The one thing that our team here can do is follow-up a bit on the seasonality of the business Just to make sure that you guys are understanding that and the impact of that in the run rate of the business. Speaker 600:42:26That'd be helpful. Thank you. Operator00:42:30Your next question comes from Peter Sklar with BMO. Please go ahead. Speaker 600:42:35Hi, Marcel. Now that we're on the international business, how much of the lift in EBITDA was due to the Jamaica acquisition? Speaker 400:42:45Yes. Specifically, I'm not sure we've broken that out right. But again, That business has performed well. The team integrated that business quite quickly out of the gate. So we're able to capture Not only operational, but also some of the overhead burden in that business. Speaker 400:43:07And then we did move that supply onto our supply system and that did create significant lift as well. So, but we don't specifically break that out in our disclosure. Speaker 600:43:24Okay. But it sounds like it's something we should consider when we look at the year over year improvement. It sounds like it was significant. Speaker 400:43:31And that is a sustainable portion of the EBITDA here. Speaker 300:43:35And Jamaica within the region is a large market, right? We often talk in our markets or International market about the larger countries and we refer to Dominican Republic and Puerto Rico, Jamaica is that as well. It's its own economy. So it's quite a number of people there, so it's a significant portion of our business going forward. Speaker 600:43:54Okay. Switching gears here, can you talk about Mobility and traffic trends both in Canada and U. S. That you're experiencing And where we're at relative to pre COVID levels? Speaker 400:44:13So in Canada specifically, I mean, again, there is some recovery here because of The impact of Omicron had in Q1 in Canada as well. Look, but I would Point to just the fundamentals of the business. So a lot of the same store sales growth we saw in the business has been driven by journey, in fact. Roughly 2 thirds driven by journey and 1 third driven by market recovery. And it's interesting because that's a program we've been investing in here for the last 3 years. Speaker 400:44:52If you recall, we launched that During the pandemic at about this time and as we've been accumulating customers, we've been seeing the positive impact of that. And we did highlight that when we do get a customer onto the loyalty platform with their We see about a 20% increase in their fuel spend and about 7% in the backcourt. So that does show the benefit of that program. And look, I'm really excited about our partnership with Aeroplan. As you know, Aeroplan is one of the leading loyalty programs in Canada and the ability to cross promote With Aeroplan will lead to more participants in our program. Speaker 400:45:43So and we continue and we also are in discussions with a number of other partners, and we expect to see Journee continue to grow here and drive good same store sales Going forward. And one other point there, this is a great example where the investments we've been making in our marketing programs, Whether that's on the run, loyalty and we'll start to see that in our food offer here over the next couple of years. They really do pay off in our organic growth. So as always, I'm very bullish on the ability to grow the business organically and these are great proof Speaker 600:46:27Okay. So Bob, that leads into my last question, which I think you partially answered there, which is The 6.8% comp you had in the backcourt in Canada ex tobacco, which obviously is a very impressive number. Can you talk a little more specifically, like how much was price? How much was journey penetration? What were the strong categories? Speaker 600:46:49Can you Dive in a little bit more. Speaker 400:46:53Yes. Look, certainly a portion of that was driven through the Journey program. As we said, Our penetration on the fuel side, it's still hard to get a correlation between forecourt and backcourt spend At times, but we do see a 7% lift in our loyalty customers. So that's certainly driving some of the same store. If I look through, it really is the center of store that's driving the growth. Speaker 400:47:24We saw a healthy growth in packaged beverage, candy, salty snacks and Some of the other beverage products. So look, we've seen really good Growth in the core part of the business, we don't specifically break out the volume margin, But it's something we can look to do here in the future just to make sure that we're not sacrificing volume for price. I'd say anecdotally, we are seeing the volumes in terms of The SKUs are not falling off as price goes up, but I don't have any specific data on that at this point. Speaker 600:48:08And just lastly, I noticed in your laundry list of attributes there you didn't attribute M and M, so maybe you can talk about that? Speaker 400:48:17Yes. Look, we've seen M and M and again, understand the integration is still in process here. It's been about a year. We've seen some good underlying base growth in that business. So they've had some very good same store sales as well. Speaker 400:48:38And the other thing is we continue to roll the M and M offer out within our On the Run Brand in a larger format than others would typically have in our convenience channel. And the third thing is we are developing our fresh offer in that category as well. So look, that's again, we'll start Drive organic growth here over the subsequent quarters and we'll provide updates on that regularly. Speaker 600:49:11Okay. Thanks for your comments. Your next question comes from Speaker 300:49:15the line of Peter, happy retirement as well. Speaker 600:49:19Thank you. Speaker 400:49:21Thanks for your coverage, Peter. We appreciate it. Operator00:49:26Your next question comes from Matthew Weekes with IA Capital Markets. Please go ahead. Speaker 600:49:33Good morning. Thanks for taking my questions here. Just on the assets kind of held for sale and you mentioned some kind of high quality urban Real Estate and Sites there. I'm wondering if there's a portion of assets held for sale or potential asset sale in the near term here that are related to Certain Husky sites that you'd be required to kind of divest anyway under the Competition Act? Yes. Speaker 600:49:59So Speaker 400:50:01We were we didn't have to divest a lot. And again, as you recall, we partnered with Federated Co OP and that gave us some flexibility through The Competition Bureau process, so ultimately in end, I think we're divesting 6 sites And that would be part of the contribution that you would see on the retail divestitures. Speaker 600:50:29Okay, thanks. That's helpful. And my second question In terms of the U. S. Business and thinking about sort of normalizing some of those impacts going forward and recognizing Kind of more of those RINs and environmental obligations on sort of a regular ongoing basis. Speaker 600:50:47As those sort of grow under The environmental obligations, how do you see that impacting the run rate of the business going forward? And what kind of strategies do you have to kind of offset that in terms of Kind of taking some of the competencies from Canada to profit from those opportunities, pricing, just things like that. Just wondering if you can comment. Speaker 400:51:09Yes. Look, I mean those mostly translate back to the RINs in the market, which is something that's been in the market here for quite a while. And look, It's a mixture of the markets and market dynamics, which allows Pricing of that into the marketplace. And look, it's a very It's something that's been around for decades, right, or a decade, and it's not something that's new in the market, right? Speaker 300:51:45I know the requirements, of course, keep changing, and so We'll be on top of that and depending on each state within the U. S. That will work. So that we'll have to kind of look at that. It typically just gets priced To the end customer, right? Speaker 300:51:59So and that's how that works. Between Canada and the U. S, so to your question, There's not a lot of overlap. Each of these are provincial or state driven, so there isn't a lot of that. But in our kind of environmental compliance book, which we participate in or where we participate in that type of business is one of the business, We do see some of those opportunities which are a bit more with a bit more of an international nature and that's more of an opportunity for us. Speaker 300:52:28But when you talk about generally environmental regulation, It gets passed on to the end customer. Yes. And look, we don't expect that to be a drag on Speaker 400:52:38the business. This was Purely just mismatch in recognition of revenue versus costs. Speaker 600:52:46Okay. Thanks for the commentary on that. I'll turn the call back. Operator00:52:59Next question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 500:53:05Oh, yes. Thank you for the time. I have a quick follow-up. Well, I certainly understand and And frankly commend the leverage reduction strategy. I'm just wondering if low twos is really necessary or optimal. Speaker 500:53:17Is there perhaps the case that 2.5 times is plenty conservative and any incremental free cash flow should be deployed towards buyback? Just curious on your thoughts. Thanks. Speaker 400:53:28Yes. Let me lead it off and I'll turn it over to Marcel. Look, our desire to get our leverage down is 1st and foremost to demonstrate the Cash flow strength of the business. As always, we're always looking at the best way to deploy capital and certainly we can be Tunistic on share buybacks, should our price continue to be low? Speaker 300:53:58Yes. So what So as you recall, our normal range of leverage is 2 to 3 turns. And so we said we want to return to the lower end of that range. So I think that's what we have said. We obviously look at generally what's the best way to allocate capital. Speaker 300:54:16And if we look currently at the cost of debt, that's of course one part. If you look at opportunities and the EBITDA spread maybe on opportunities, We believe to generate the right amounts of value that we should just park that money that we generate that cash that Bob talked about, that we park that in the balance sheet And then wait for the right opportunities following that. But it's important for us to it's really a lot of work to integrate businesses and show the synergies generated cash And with that also create capacity within our balance sheet. Speaker 500:54:49Appreciate the color. Thanks guys. Operator00:54:54There are no further questions at this time. Please proceed. Speaker 400:54:58Great. Thanks everybody for joining in the quarter. We appreciate your support as shareholders and look forward to chatting with you all next quarter. Operator00:55:10Ladies and gentlemen, this concludes your conference call for today. We thank you for participatingRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallParkland Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Parkland Earnings HeadlinesCIBC Cuts Parkland (TSE:PKI) Price Target to C$43.00April 20 at 1:25 AM | americanbankingnews.comCanaccord Genuity Group Cuts Parkland (TSE:PKI) Price Target to C$42.00April 20 at 1:25 AM | americanbankingnews.comSomething strange going on at Mar-a-LagoA former government advisor says a $9 trillion AI breakthrough is nearing launch. It may become America’s biggest advantage in the race against China — and a handful of Musk-linked companies could benefit.April 20, 2025 | Brownstone Research (Ad)ATB Capital Cuts Parkland (TSE:PKI) Price Target to C$45.00April 20 at 1:25 AM | americanbankingnews.comFY2025 EPS Estimates for Parkland Lowered by Atb Cap MarketsApril 19 at 2:45 AM | americanbankingnews.comRaymond James Lowers Parkland (TSE:PKI) Price Target to C$45.00April 19 at 1:27 AM | americanbankingnews.comSee More Parkland Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Parkland? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Parkland and other key companies, straight to your email. Email Address About ParklandParkland (TSE:PKI) Corp distributes and markets fuels and lubricants. Refined fuels and other petroleum products are among the variety of offerings the company delivers to motorists, businesses, consumers, and wholesalers in the United States and Canada. Parkland operates through several subsidiaries that are either company owned-and retailer-operated, dealer-owned and dealer-operated, or dealer-cosigned and dealer-operated. 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There are 9 speakers on the call. Operator00:00:00Morning. My name is Joelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Parkland Q1 Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:26Thank you. I would now like to turn the conference over to Valerie Roberts, Director, Investor Relations for Parkland. Please go ahead. Speaker 100:00:34Thank you, operator. With me today on the call are Bob Espie, President and CEO and Marcel Teunissen, Chief Financial Officer. This call is webcast, and I encourage listeners to follow along with the supporting slides. We will go through our prepared remarks and then open it up for questions from the investment community. During our call today, we may make forward looking statements related to expected future performance. Speaker 100:01:07These statements are based on current views and assumptions and are subject to uncertainties, which are difficult to predict. These uncertainties include, but are not limited to, expected operating results and industry conditions among other factors. Risk factors applicable to our business are set out in our annual information form and management's discussion and analysis. We will also be discussing non GAAP and other financial measures, which do not have any standardized meanings prescribed by IFRS. These measures are identified and defined in Parkland's continuous disclosure documents, which are available on our website or on SEDAR. Speaker 100:01:40Please refer to these documents as they identify factors which may cause actual results to differ materially from any forward looking statements. Dollar amounts discussed in today's call are expressed in Canadian dollars unless otherwise noted. I will now turn the call over to Bob. Speaker 200:01:54Thank you, Val, and good morning, everyone. We appreciate you joining us today. The Parkland team has a lot to be proud of in the first I'd like to highlight a couple of accomplishments. First, I want to thank and congratulate the entire team for safely Completing our scheduled turnaround at the Burnaby Refinery. Our team has a track record of consistent execution And they completed this 8 week process on time and on budget. Speaker 200:02:23I'd next like to highlight our Journey Rewards loyalty program, which Partnering with Air Canada's Aeroplan. Journey Reward links our family of fuel and on the run convenience brands, In addition to building closer relationships with our customers, Journeys' goal is to drive organic growth by incentivizing loyalty. In the 3 years since its launch, we have grown our cardholders to over 4,500,000 in Canada. The past few years Have proven that Journeys members are loyal, higher spending customers, and they are now responsible for a quarter of our retail fuel transactions. Members on average pump 20% more gasoline each fill and spend 7% more in our stores. Speaker 200:03:10During the quarter, Journey members have contributed over 20% of the same store sales volume growth we experienced. In the past few months, we have made significant platform enhancements to our Journee app. These strengthened our digital connection to our customer And set the foundation to support our new loyalty partnerships. Our partnership with Aeroplan is exciting for many reasons. Firstly, our customers will benefit. Speaker 200:03:37By bringing these 2 leading loyalty brands together, we will deliver Canadians greater value, greater choice and greater rewards. Secondly, it significantly expands our reach with over 10,000,000 combined members. Thirdly, It accelerates momentum in our organic growth strategies, building on our relationship with CIBC. The addition of Aeroplan We'll further strengthen our loyalty growth platform. We continue to explore additional partnerships for our Journee program to offer more to our customers and extract greater value. Speaker 200:04:11Journey is quickly becoming one of Canada's top retail loyalty programs. If you are not already a Journee member, I encourage you to sign up and download the app. With that, let's move to slide 3. Before we discuss the quarter in detail, let me step back to provide a brief overview of our business as well as some high level observations. As followers of Parkland, you know that our purpose is to power journeys and energize communities. Speaker 200:04:40With operations in 25 countries, we are Our retail business satisfies the fuel and convenient needs of consumers and our commercial business provides companies with industrial fuels. These businesses are complementary. Our retail and commercial businesses are backed by our multi product integrated supply chain. By operating in all three parts of the value chain, we secure cost competitive supply for our customers and at the same time capture attractive margins. This is our supply advantage. Speaker 200:05:22Parkland is a growth company. Through consistent execution, Strategic acquisitions, successful integration and our talented team, we have built a portfolio of leading brands that provide our customers with their daily energy and convenience needs. We bring these together through our on the run food and convenience offer and with our Journee loyalty platform. Acquisitions have played a big part in our growth. We are now focused on integrating the companies we purchased, Capturing synergies and driving organic growth. Speaker 200:05:57We are exercising strict capital discipline by prioritizing lowering leverage followed by enhancing shareholder distributions and organic growth. Our Q1 results are excellent. We have lots of good news to share, including exceptional same store volumes and sales in our retail business and robust growth in our international business from organic initiative, We continue to work on the reset of our U. S. Business. Speaker 200:06:28Donna Sankar moved from our Canadian business to be President of our U. S. Operations. She has simplified structure recruited external talent and placed proven Parkland leaders into our U. S. Speaker 200:06:40Organization. I am confident the changes we have made over the past several months sets the U. S. On course to deliver the consistent and improved performance we expect. With that, I will hand it over to Marcel to discuss our segmented results in more detail on Slide 4. Speaker 300:06:58Thank you, Bob, and good morning, everyone. Parkland delivered an adjusted EBITDA of $395,000,000 in the quarter. This is up $12,000,000 from prior year Despite an approximate $100,000,000 impact from the turnaround at the Burnaby Refinery. This is a tremendous result Reflecting the resilience of our business model, contributions from acquisitions and organic growth. We are firmly on track to achieve our 2023 guidance. Speaker 300:07:29Our Canada segment delivered adjusted EBITDA of $167,000,000 Commercial volumes were lower due to unseasonably warm weather. Our retail business performed well with a 7.3% lift In same store sales volumes, a large portion driven by journey members. In addition, we see the positive impact of our Crevier and Husky acquisitions. Fuel unit margins were lower due to the declining commodity price environment, But continue to trend above historical averages. Our convenience gross margin increased by 45% year over year to $87,000,000 This was driven by same store sales growth ex cigarettes of 6.8% and growing our food category through the acquisition of M and M Food Market. Speaker 300:08:22Our international segment delivered adjusted EBITDA of $183,000,000 up over 120% from last year. A key contributor of this growth was the consolidation of the remaining 25% of Sol last year. Fuel volumes increased approximately 40% Due to organic growth in contracted commercial volumes combined with the completion of and synergies from our Jamaica acquisition. Fuel unit margins increased from 2022 due to our regional supply advantage. USA delivered adjusted EBITDA of $21,000,000 which reflects the impact of environmental compliance cost of $17,000,000 related to previous periods. Speaker 300:09:11Fuel unit margins were higher, but volumes were lower compared to last year Due to our decision to limit our U. S. Wholesale business and due to severe winter weather conditions in the Rockies and North Dakota. We have high confidence in the fundamentals of our USAA business and our new leadership team is focused on unlocking its full potential. Refining delivered adjusted EBITDA of $38,000,000 This reflects the scheduled 8 week turnaround, which resulted in composite utilization of 33%. Speaker 300:09:45During the turnaround, we optimized financial performance by selling our unused pipeline capacity and increasing our import of refined products. The turnaround was success We completed on time and budget and we returned to normal operations in early April. Net earnings per share increased more than 20 This increase reflects good operational performance and the accretive returns on recent acquisitions, including our consolidation of Sol and our leverage ratio decreased to 3.3 turns. The pie chart on the right shows the trailing 12 months adjusted EBITDA contribution of our 3 business lines. Retail commercial, each of which includes the benefit of our supply advantage and refining. Speaker 300:10:34As you can see, retail makes up almost half with the remaining half split almost equally between our commercial and refining business. Growth in our retail and commercial lines of business will outpace the growth from the refinery, Meaning the refineries relative contribution to Parkland will continue to reduce. On a trailing 12 months basis Parkland has delivered 1 point $67,000,000,000 of adjusted EBITDA, which includes 100% of Sol, the impact of the refinery turnaround and our weaker Q3 last year results. This shows the positive momentum in our results. Moving to Slide 5. Speaker 300:11:14I would now like to shift the discussion to the future and our journey to 2025. You are familiar with these numbers and on this call, we will provide greater transparency into the actions we are taking to drive this growth. And as a reminder, this will be done without acquisitions. In 2023, we are targeting $130,000,000 of incremental EBITDA from This will get us to the midpoint of our guidance. Lower earnings from the refinery due to the planned turnaround and normalizing margins We'll be offset by full year inclusion of the 2022 acquisitions and stronger U. Speaker 300:11:51S. Results. We expect to add $50,000,000 through synergies and And we expect organic growth to deliver approximately $80,000,000 this year. Through 2025, we will deliver approximately $200,000,000 of incremental adjusted EBITDA to achieve our $2,000,000,000 ambition. This growth is comprised of $100,000,000 of synergies and cost efficiencies, plus $100,000,000 from organic growth initiatives or about 3% per year. Speaker 300:12:24We continuously review our portfolio for optimization opportunities including divestments. We will speak more to these actions in a moment, but first I want to emphasize the expected outcomes of our near term strategy. By 2025, we expect that with a capital program consistent with current levels, we will achieve adjusted EBITDA of $2,000,000,000 and cash flow of $9.50 per share. We are focused on delivering shareholder returns and grow our return on invested capital to more than 11% by 2025. And lastly, we expect to reduce our leverage ratio to the low end of our 2 to 3 times target. Speaker 300:13:05The actions we are taking are clear and we are confident that they will drive shareholder value. And with that, let's move to Slide 6. We continue to focus on integrating the businesses we have recently acquired. As you know, it can take up to 3 years For example, our recently acquired terminals in Eastern Canada have provided us with optionality and we expect a material improvement in our supply economics And lower cost of product. Although industry fuel unit margins has softened from Q4, our margins have held firm reflecting our supply capabilities and advantage. Speaker 300:13:52In our retail business, we have now converted 21 Husky sites to Chevron in Western Canada, With each providing a refreshed on the run convenience store offering, the transformation is impressive. By offering a trusted brand, Implementing robust merchandising strategies and linking customers to our Journeys loyalty program, we are seeing few volumes and same store sales Since late 2020, we have spent almost $3,000,000,000 on acquisitions, including the consolidation of Sol. We are focused on fully leveraging the benefits of our scale on creating an operating platform to deliver additional synergies and a competitive cost structure. We expect to deliver approximately $100,000,000 of direct and indirect This will include a reduction of third party spend, the consolidation of our systems and processes And other cost efficiencies. I'll pass it back to Bob to talk about organic growth on Slide 7. Speaker 200:14:57Thanks, Marcel. The Parkland team is also focused on organic growth and we are seeing great progress. In the Retail segment, we continue to expand our on the run convenience network. We have 6 70 locations across Canada, U. S. Speaker 200:15:15And International segments. This now includes our 1st stand alone urban store in the Vancouver area. We are on track to meet our target of 1,000 on the run sites by the end of 2025. Our same store sales growth On the commercial sides, scale has allowed us to become the trusted supplier of industrial fuels in the regions we serve. The growth of our international business has been a few years in the making and was hidden by the impacts of the pandemic. Speaker 200:15:53We are now starting to see the benefits of the improvements the team has been making. Our volumes increased by more than 600,000,000 leaders We're over 40% year over year. Our competitive advantage has allowed us to win new commercial business and optimize asset utilization. We are seeing continued strength in our retail business. Turning to slide 8. Speaker 200:16:18We have a clear strategy for identifying assets That no longer align with our core business objectives, we regularly review our portfolio to identify underperforming assets and assess the potential impact of disposition on our financial performance. We've acquired many great businesses over the last couple of years And there is an opportunity to optimize the portfolio and streamline our businesses. This is an important part of our broader capital We expect to generate up to $500,000,000 from the sale of non core assets and work is well underway. At the end of the Q1, we had more than $200,000,000 of assets held for sale. This includes approximately $100,000,000 of high value real estate, of which 85% are in advanced negotiations. Speaker 200:17:08These sites are primarily in urban areas with high real estate value. Assets held for sale also reflect non core Canadian assets, including a terminal in Eastern Canada that is also in advanced negotiation and parts of our commercial business in Canada. We expect to be marketing that business in the next few months. We carefully considered the market conditions and timing of asset disposals to ensure that we can maximize the value of the assets we sell. This involves assessing market demand, identifying potential buyers and negotiating favorable terms for the sale. Speaker 200:17:47The cash generated by these disposals will be considered in our capital allocation framework and used to reduce debt and increase shareholder returns. Moving to Slide 9. Parkland's management and Board are focused on maximizing shareholder value. Earlier this year, With the help of an independent financial advisor, we completed a detailed review of strategic alternatives for the refinery with the Board. We reviewed several options, including a sale or spin off and considered the impact of leverage and dis synergies. Speaker 200:18:23Following this detailed review, we concluded that Parkland's continued ownership of the refinery maximize shareholder value at this time. The Burnaby Refinery is a highly strategic and integrated asset. Approximately 90% of its output supplies Parkland customers. The BC market has limited import options. Other key market participants own refineries outside of the province And ship finished product into the region on the Trans Mountain pipeline. Speaker 200:18:54Burnaby Refinery allows us to remain competitive. Parkland has added significant value to the refinery since it was acquired in 2017. Through a combination of safe and reliable operations, Strategic commercial agreements and logistics optimization. Parkland has contributed to a doubling of the mid cycle adjusted EBITDA. As a result, a significant portion of this increase is unique to Parkland. Speaker 200:19:22Turning to Slide 10. I've been President and CEO of Parkland for 12 years. During this time, the Parkland team has delivered remarkable growth across many metrics. One of the highlights of my role is being able to spend time with our teams in each area of the business. I see firsthand Their commitment to safely serving our customers, conversations I have and the operations I see Underpin the confidence I have in our team to deliver continued growth and success. Speaker 200:19:53In Canada, I recently visited our retailers. Many Have had to work longer hours because of a shortage of staff. I'm impressed with how they continue to serve our customers with an exceptional level of service. I also toured our 1st standalone C store Speaker 400:20:10and Speaker 200:20:10caught the enthusiasm of our operations team and our customers about the early success they are seeing. In the U. S, I visited our team in the Midwest and spent time touring our convenience stores. I spoke with our distribution team and drivers, and I'm grateful for the way They brave harsh winter conditions to supply our commercial customers with their energy needs. On a visit to Puerto Rico, I saw the results of rebranding an entire market from to Exxon in record time. Speaker 200:20:39This enabled us to free up supply and run it through our platform. The team did this without impacting our market share and We improved our supply economics by moving this volume into our system. At our refinery, in parallel with the successful turnaround, Our supply team captured an opportunity to improve our financial performance by selling our pipeline capacity and increasing our import of refined products. These are just a few of the many accomplishments from our team that give me conviction that our strategy is the right one to deliver long term value To all our shareholders, our large long term shareholders agree. I do not believe our current Stock price reflects the performance and quality of our company. Speaker 200:21:23To close this gap and enhance shareholder returns, We are taking clear actions that will lead to improved cash flow and returns by growing our business to $2,000,000,000 without further acquisitions or dilution to our shareholders. Specifically, we will capture synergies and cost efficiencies. We will deliver organic growth. We will sell non core assets. Through these actions, our leverage ratio will be lowered to the low end of our guidance range by 2025 And our return on invested capital will increase to above 11%. Speaker 200:21:58We're excited about the future of Parkland and are confident that we're well positioned to create value for our shareholders. We look forward to keeping you updated on our progress and thank you for your continued support. With that, we will turn it over to the operator for questions. Operator00:22:15Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 500:22:50Good morning, everyone. Thanks for the time. Just curious on the piece of some of the Synergy optimization you talked about, I think the $100,000,000 target was referenced. Is that something we should expect sort of equally throughout the period? Or do you expect to capture some of that Speaker 400:23:08Yes. Thanks, Steve, and thanks for the question. Capturing that is an annual run rate target and we'll see the bulk of that flow into This is towards the end of the year. Speaker 300:23:25Yes. No, and Steve, of course, as you know, we've done 20 acquisitions. So depending on Which vintage those acquisitions were, whether they were earlier in 2021 or later in 2022, those come at a slightly different rate, but we said EUR 50,000,000 In this year, so in 2023 relative to last year, and I think a lot of that just goes ratably through the year. And then the additional 100 For the next 2 years, so that will be the run rate by 2025 again, that will be equally. So normally our supply synergies, they come quite early in the periods Because they kind of instant, whereas cost synergies and operational improvements, they tend to be a bit more as we go through change and change programs a bit more later in the period. Speaker 500:24:08I appreciate the color. And just one follow-up, if I may, is on the refinery. Understand the strategic review took place. I'm curious if there's any change in the strategic value of the assets over time as Trans Mountain expands and different options become available. Is that it something that was contemplated in the analysis and how do you think about sort of that the future temporal value of the asset? Speaker 400:24:33Yes. Again, thanks for the question here, Steve. You're right, we did look at the refinery And as part of that looked at the forward view in the economics, as TMX comes up, We don't believe that that will have a material impact on the economics. We do believe that The impact of that will be pushed into the market. And ultimately, that refinery continues to be A highly profitable asset for Parkland and certainly when you look at the refining complex throughout North America, it's a top quartile performer. Speaker 500:25:19That's great. Thanks, Rich. Appreciate the time. And would just note that the new journey features on the pump are making the whole process far more seamless. Thanks. Speaker 500:25:26Appreciate it. Speaker 400:25:30Thanks, Steve. Appreciate your loyalty as a customer. Operator00:25:36Your next question comes from Ben Isaacson with Scotiabank. Please go ahead. Speaker 600:25:41Thank you very much and good morning everyone and congrats on a good Good to see the pieces starting to come together. Two questions for you. Number 1 is, you identified up to $500,000,000 of Non core asset divestitures, you talked about the $200,000,000 held for sale. Can you talk about the other $300,000,000 and Whether or not you pursue them or not, can you just give us a sense as to kind of where they are and what they are? Speaker 400:26:09Yes, we've consistent with what we've communicated in the past. I mean, as the quickest area and one that we're Proceeding quite well on is our retail business, particularly in Canada, where we're looking at high value sites that don't generate a lot of Cash flow. The second thing within the retail business is looking at our the tail of our network And pushing some of that and selling that to dealers or others Depending on the site, we do have some distribution assets, particularly as Part of our purchase of OPEC in Eastern Canada, we're looking at divesting 1 or 2 of those facilities. And then in our Canadian commercial business, consistent which we've talked in the past, there are some businesses that we are looking at. Again, these will be proceeding here over the next 1 to 2 years. Speaker 400:27:16And as you know, Divestitures do take time. And also, I do want to assure people that these are good assets and we will It will be dependent on getting a competitive price for these assets. Speaker 600:27:34That's great, Bob. Thank you. And just one more question, if I may. In terms of the U. S. Speaker 600:27:39Business, so if we clean up some of the noise that we had in this quarter, you are continuing to capture synergies. There may be a little bit of organic growth opportunities. It seems like you're putting a pause on further M and A in the U. S. When we put that all together and when we About the U. Speaker 600:27:54S. In a normalized or in a mid cycle environment, how should we think about EBITDA or EBITDA margins? Or is there some way to kind of guide us in terms of what that business looks like? Speaker 400:28:05Yes. Look, I think we've telegraphed here what the base business runs at and when you do the Some of all the acquisitions, and would be consistent that we would expect to get in the 30% Lift through synergies and consistent with what we've done in the past, tends to come from 3 areas. 1 is our Supply, second is operating improvements in the business, many of which have been made, but many more to come. And then the third is looking at the MD and A within the business. Speaker 600:28:48Okay, great. Thanks so much. Appreciate it. Operator00:28:52Your next question comes from Derek DeLay with Canaccord Genuity. Please go ahead. Speaker 700:28:58Yes. Hi, guys. Thanks for taking the questions. I just want to switch gears a little bit. Can you just talk about The $17,000,000 compliance cost within the U. Speaker 700:29:08S. Business, what that was? It sounds like it was related to prior periods. And Is this something that we should expect to reoccur at any point? Speaker 400:29:21Yes. Thanks, Derek. I'll turn that over to Marcel to talk through. Speaker 300:29:25Yes. So thanks for the question, Derek. So yes, indeed. So we this was related to previous periods and sales that we made in previous periods. So it was just a timing on recording, Recording the environmental obligations, so wind obligations and Oregon LCFS obligations specifically, so there was a timing of it. Speaker 300:29:44And we should have recorded it when these were due. But as we were finalizing the year and closing it up, there was a gap in what we had recorded. So it's kind of more A timing issue and of a one off nature for this quarter, but it wasn't per se a loss, it was more like when we accounted for it. Speaker 700:30:05Okay. So then when we think about the U. S. Business, I mean, over the last couple of quarters and I get it's changed with the elimination of some of these spot market sales. Is this sort of like a mid-forty million dollars EBITDA run rate business per quarter? Speaker 700:30:19Is that how we should think about it going forward? Speaker 300:30:24Yes, it should. And I think in the way that we've talked about both this year And $130,000,000 of increase relative to last year as well as when we look into 2025, a big portion of those improvements we to come out of the U. S. Business within that. So yes, you add back what was more of a special for the Q1 period as well as that we did have some quite severe weather in Q1 and sort of move, for instance, the kind of the agricultural season into Q2 or early Q2 as Post to Q1 with what we normally see. Speaker 300:30:59So we expect that to kind of to continue to improve in the second quarter. And then the synergies which we talked about and other value that we can create in that U. S. Business, we expect to see continued improvement there. Speaker 700:31:14Okay, good. And then just one well, maybe 2 more, as it relates to the international business and SOL. Can you just give us a little bit more color on what helped drive the strength there at Seoul? I guess tourism was very strong and it appears like there was an increase in oil and gas Drilling within the region. And then secondly, can you remind us how many of the countries within Seoul have regulated fuel margins? Speaker 400:31:42Yes. Look, again, I do want to thank the international team for driving a really strong quarter. And it's a lot of the stars aligned for the team during the quarter. And as you highlighted, we did See, if you recall last year, there was continued lockdowns because of Omicron in the region and it also curtailed tourism. So there were sort of 2 factors. Speaker 400:32:09So we saw that recovery pull through quite nicely. I mean, look, that's sustainable on a year over year basis. The business is cyclical. So we do tend to see higher earnings In Q1, Q4, Q1 and Q2, Q3 tend to be a bit softer. And then look, the team did an One job continuing to grow their wholesale business on the base platform. Speaker 400:32:38Some of those sales were spot, but not a material amount. And again, we do expect the business to continue to perform strongly here going forward. The other thing is we had Jamaica run through. We also had a full year now of our of the 25% minority piece that we purchased, so there's some M and A that's running through. And then the team's making great progress on synergies from some of the deals that they've done over the last couple of years. Speaker 400:33:10So again, all around some excellent execution there and we're seeing that come through In very strong performance. So we're very pleased with the performance of the business. Speaker 300:33:20Yes. And to your second question, I don't have Exact number of how many markets are actually regulated on the retail side, but these are usually just think of the smaller markets in the Caribbean, Where we are often the only player or one of 2 players and that there is some regulations there that help with the market dynamic. The bigger markets, when we talk about the Dominican Republic, Puerto Rico, those are not regulated, as well as some of the markets in South America, they're not, but it's mostly to smaller markets. Speaker 700:33:52Okay, great. Thank you very much. Operator00:33:56Your next question comes from Vishal Shreedhar with National Bank. Please go ahead. Speaker 800:34:03Hi, thanks for taking my questions. Just wanted to jump back to the U. S. Segment for the $17,000,000 in compliance costs. Just wondering if management has made any changes to their controls to reassure that it won't happen again? Speaker 800:34:22And if so, how significant are those changes such that it won't these types of issues won't reoccur? Speaker 300:34:31Yes. And it's a fair question, Vishal. So yes, we have made those. And as Bob already highlighted, we have made quite a number Changes in the team already in the U. S, more experienced team with all that. Speaker 300:34:45We and that includes the finance team, so I'll mention that, As well as some of the controls that around some of this, this is kind of the environmental piece is a bit of an emerging kind of activity in parts of the So as it has grown, we have now tightened the controls to make sure that we're on top of those. Speaker 800:35:06Okay. And moving on to the international segment, there was some contracted volumes. Wondering if that's A sticky piece of business that we should continue to consider as we reflect on our model. Is that more of a one time Events, and if so, could you specify the magnitude of that business for us? Speaker 400:35:30Which business? The commission holder. Yes. We don't break that out. Again, there is a lot of underlying Sustainable growth in the business, the majority of the earnings and the spot portion is relatively small. Speaker 800:35:49Okay. Thank you. Operator00:35:53Your next question comes from Michael Van Aelst with TD Cowen. Please go ahead. Speaker 600:36:00Thank you. I'm wondering how the Divestment of $500,000,000 worth of assets would affect your $2,000,000,000 EBITDA target for 2025, if at all. Speaker 700:36:12Yes. Look, Speaker 400:36:15I believe and we talked about some of the assets, particularly the retail assets. Now these aren't large cash flow producers. So we expect certainly there the impact to be minimal. And in some of the other assets that we're looking at, we do There is quite a bit of overhead to support these businesses. So we do expect to be able to meet our target. Speaker 400:36:45And certainly if that changes, we will update our investors accordingly. Look, I mean, the key thing is that we get the returns that we continue to improve cash conversion in the business and ultimately Can we deploy that cash into deleveraging the business here? Speaker 300:37:07Yes. And some of the cash flow that we will generate As we've indicated before, we'll use that to reinvest in our business. So it's not all going through the balance sheet. So some of that will use to reinvest In businesses generate more to offset that, there will be at times a bit of a timing difference between when we get the cash and when we invest and what comes out of it, but That will come to more organic growth as well. Speaker 600:37:33Okay. So as you make these divestitures, we shouldn't expect To adjust your guidance for 2025? Speaker 400:37:42No, we're Certainly with the ones that we've identified, we're confident that we can do it and maintain. The other thing is looking at our cash flow per share, Right. That's another core metric here that we'll continue to drive. Speaker 600:38:00Okay, great. And then You talked about $100,000,000 of M and G and A cuts, which is pretty substantial by 2025. I'm assuming that's off the current run rate of Got it around 625,000,000 is that a fair Speaker 400:38:15Yes, that's a good way to look at that. Speaker 600:38:19Dan, are those synergies or are those just getting leaner? What is that? Speaker 400:38:24Well, it's a mix of both, right? As Marcel said, we did a significant amount of M and A and we've always said it takes Up to 36 months to start to realize full impact and part of it's the growth that we've experienced and would be part of our natural Synergy capture and then the others would be looking at again just the overall structure and Looking for opportunities that have come through the growth that we've experienced. Speaker 600:38:59Okay. And just going back to SOL, following up on earlier questions, You had a substantial increase in EBITDA. Even when you normalize for the 100% ownership of Sol, it was still up whatever 64% or 80% or something like that. I don't remember the exact number. But when I was reading the press release, I got the sense that Some of that spot volume was a bigger component of it and is less predictable or less ratable as you guys like to talk about it. Speaker 600:39:32But In your comments, Bob, it sounds like that was a small part of it. Speaker 300:39:38So like So Speaker 400:39:44again, the other thing is taking into account the seasonality of the business, right. So And we did have a COVID recovery here. So like you say, the stars aligned for the business and they did exceptionally well here. Speaker 600:39:59Okay. And just on some of that spot business, you was Do you know why some of your some of those buyers were switching over to Parkland? Is our competitor having a problem? Is there Are you actively recruiting new business like this? What was the target? Speaker 400:40:20No, look, I mean, Look, we'll always sell when we can, right? So, but I would say it speaks To the strength of our supply system in region where we have a competitive cost structure and again what we've Seeing over the quarters here is that team has been able to continue to drive growth through that channel. And And again, ultimately, the economics that we have will ensure that we continue to win in that space. Speaker 300:40:52Yes. And maybe, Michael, I will also point out that if you look at when we acquired this business in 2019, that was probably the only the last normal comp year that you've had. 2020, We already saw COVID 2021, 2022. So 2023, you see actually also the outcome of 3 years of work of transforming that business Since we have had ownership, right? And so I think that's important. Speaker 300:41:15So the Jamaica acquisition, Bob already mentioned. And then we look at squeezing out more margin for the same volume. Puerto Rico, Bob mentioned it, what we did there, which I think is quite amazing. We rebranded that network to mobile. That freed up our supply as well and that gave us the ability to get more money out of it. Speaker 300:41:35But I think you should see it more as when you compare to previous periods, it's the 1st year that we really see under our ownership With markets being kind of normal and so that gives us confidence in those numbers for international, it's the high season, But also a lot of hard work that's gone in over the last few years. Speaker 400:41:54Yes. One other item is on the confidence around the base business. I mean the team did add Supply capacity, we added 1 new ship into the region to accommodate the growth that we've seen. So again, Look, the business is performing well. The one thing that our team here can do is follow-up a bit on the seasonality of the business Just to make sure that you guys are understanding that and the impact of that in the run rate of the business. Speaker 600:42:26That'd be helpful. Thank you. Operator00:42:30Your next question comes from Peter Sklar with BMO. Please go ahead. Speaker 600:42:35Hi, Marcel. Now that we're on the international business, how much of the lift in EBITDA was due to the Jamaica acquisition? Speaker 400:42:45Yes. Specifically, I'm not sure we've broken that out right. But again, That business has performed well. The team integrated that business quite quickly out of the gate. So we're able to capture Not only operational, but also some of the overhead burden in that business. Speaker 400:43:07And then we did move that supply onto our supply system and that did create significant lift as well. So, but we don't specifically break that out in our disclosure. Speaker 600:43:24Okay. But it sounds like it's something we should consider when we look at the year over year improvement. It sounds like it was significant. Speaker 400:43:31And that is a sustainable portion of the EBITDA here. Speaker 300:43:35And Jamaica within the region is a large market, right? We often talk in our markets or International market about the larger countries and we refer to Dominican Republic and Puerto Rico, Jamaica is that as well. It's its own economy. So it's quite a number of people there, so it's a significant portion of our business going forward. Speaker 600:43:54Okay. Switching gears here, can you talk about Mobility and traffic trends both in Canada and U. S. That you're experiencing And where we're at relative to pre COVID levels? Speaker 400:44:13So in Canada specifically, I mean, again, there is some recovery here because of The impact of Omicron had in Q1 in Canada as well. Look, but I would Point to just the fundamentals of the business. So a lot of the same store sales growth we saw in the business has been driven by journey, in fact. Roughly 2 thirds driven by journey and 1 third driven by market recovery. And it's interesting because that's a program we've been investing in here for the last 3 years. Speaker 400:44:52If you recall, we launched that During the pandemic at about this time and as we've been accumulating customers, we've been seeing the positive impact of that. And we did highlight that when we do get a customer onto the loyalty platform with their We see about a 20% increase in their fuel spend and about 7% in the backcourt. So that does show the benefit of that program. And look, I'm really excited about our partnership with Aeroplan. As you know, Aeroplan is one of the leading loyalty programs in Canada and the ability to cross promote With Aeroplan will lead to more participants in our program. Speaker 400:45:43So and we continue and we also are in discussions with a number of other partners, and we expect to see Journee continue to grow here and drive good same store sales Going forward. And one other point there, this is a great example where the investments we've been making in our marketing programs, Whether that's on the run, loyalty and we'll start to see that in our food offer here over the next couple of years. They really do pay off in our organic growth. So as always, I'm very bullish on the ability to grow the business organically and these are great proof Speaker 600:46:27Okay. So Bob, that leads into my last question, which I think you partially answered there, which is The 6.8% comp you had in the backcourt in Canada ex tobacco, which obviously is a very impressive number. Can you talk a little more specifically, like how much was price? How much was journey penetration? What were the strong categories? Speaker 600:46:49Can you Dive in a little bit more. Speaker 400:46:53Yes. Look, certainly a portion of that was driven through the Journey program. As we said, Our penetration on the fuel side, it's still hard to get a correlation between forecourt and backcourt spend At times, but we do see a 7% lift in our loyalty customers. So that's certainly driving some of the same store. If I look through, it really is the center of store that's driving the growth. Speaker 400:47:24We saw a healthy growth in packaged beverage, candy, salty snacks and Some of the other beverage products. So look, we've seen really good Growth in the core part of the business, we don't specifically break out the volume margin, But it's something we can look to do here in the future just to make sure that we're not sacrificing volume for price. I'd say anecdotally, we are seeing the volumes in terms of The SKUs are not falling off as price goes up, but I don't have any specific data on that at this point. Speaker 600:48:08And just lastly, I noticed in your laundry list of attributes there you didn't attribute M and M, so maybe you can talk about that? Speaker 400:48:17Yes. Look, we've seen M and M and again, understand the integration is still in process here. It's been about a year. We've seen some good underlying base growth in that business. So they've had some very good same store sales as well. Speaker 400:48:38And the other thing is we continue to roll the M and M offer out within our On the Run Brand in a larger format than others would typically have in our convenience channel. And the third thing is we are developing our fresh offer in that category as well. So look, that's again, we'll start Drive organic growth here over the subsequent quarters and we'll provide updates on that regularly. Speaker 600:49:11Okay. Thanks for your comments. Your next question comes from Speaker 300:49:15the line of Peter, happy retirement as well. Speaker 600:49:19Thank you. Speaker 400:49:21Thanks for your coverage, Peter. We appreciate it. Operator00:49:26Your next question comes from Matthew Weekes with IA Capital Markets. Please go ahead. Speaker 600:49:33Good morning. Thanks for taking my questions here. Just on the assets kind of held for sale and you mentioned some kind of high quality urban Real Estate and Sites there. I'm wondering if there's a portion of assets held for sale or potential asset sale in the near term here that are related to Certain Husky sites that you'd be required to kind of divest anyway under the Competition Act? Yes. Speaker 600:49:59So Speaker 400:50:01We were we didn't have to divest a lot. And again, as you recall, we partnered with Federated Co OP and that gave us some flexibility through The Competition Bureau process, so ultimately in end, I think we're divesting 6 sites And that would be part of the contribution that you would see on the retail divestitures. Speaker 600:50:29Okay, thanks. That's helpful. And my second question In terms of the U. S. Business and thinking about sort of normalizing some of those impacts going forward and recognizing Kind of more of those RINs and environmental obligations on sort of a regular ongoing basis. Speaker 600:50:47As those sort of grow under The environmental obligations, how do you see that impacting the run rate of the business going forward? And what kind of strategies do you have to kind of offset that in terms of Kind of taking some of the competencies from Canada to profit from those opportunities, pricing, just things like that. Just wondering if you can comment. Speaker 400:51:09Yes. Look, I mean those mostly translate back to the RINs in the market, which is something that's been in the market here for quite a while. And look, It's a mixture of the markets and market dynamics, which allows Pricing of that into the marketplace. And look, it's a very It's something that's been around for decades, right, or a decade, and it's not something that's new in the market, right? Speaker 300:51:45I know the requirements, of course, keep changing, and so We'll be on top of that and depending on each state within the U. S. That will work. So that we'll have to kind of look at that. It typically just gets priced To the end customer, right? Speaker 300:51:59So and that's how that works. Between Canada and the U. S, so to your question, There's not a lot of overlap. Each of these are provincial or state driven, so there isn't a lot of that. But in our kind of environmental compliance book, which we participate in or where we participate in that type of business is one of the business, We do see some of those opportunities which are a bit more with a bit more of an international nature and that's more of an opportunity for us. Speaker 300:52:28But when you talk about generally environmental regulation, It gets passed on to the end customer. Yes. And look, we don't expect that to be a drag on Speaker 400:52:38the business. This was Purely just mismatch in recognition of revenue versus costs. Speaker 600:52:46Okay. Thanks for the commentary on that. I'll turn the call back. Operator00:52:59Next question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 500:53:05Oh, yes. Thank you for the time. I have a quick follow-up. Well, I certainly understand and And frankly commend the leverage reduction strategy. I'm just wondering if low twos is really necessary or optimal. Speaker 500:53:17Is there perhaps the case that 2.5 times is plenty conservative and any incremental free cash flow should be deployed towards buyback? Just curious on your thoughts. Thanks. Speaker 400:53:28Yes. Let me lead it off and I'll turn it over to Marcel. Look, our desire to get our leverage down is 1st and foremost to demonstrate the Cash flow strength of the business. As always, we're always looking at the best way to deploy capital and certainly we can be Tunistic on share buybacks, should our price continue to be low? Speaker 300:53:58Yes. So what So as you recall, our normal range of leverage is 2 to 3 turns. And so we said we want to return to the lower end of that range. So I think that's what we have said. We obviously look at generally what's the best way to allocate capital. Speaker 300:54:16And if we look currently at the cost of debt, that's of course one part. If you look at opportunities and the EBITDA spread maybe on opportunities, We believe to generate the right amounts of value that we should just park that money that we generate that cash that Bob talked about, that we park that in the balance sheet And then wait for the right opportunities following that. But it's important for us to it's really a lot of work to integrate businesses and show the synergies generated cash And with that also create capacity within our balance sheet. Speaker 500:54:49Appreciate the color. Thanks guys. Operator00:54:54There are no further questions at this time. Please proceed. Speaker 400:54:58Great. Thanks everybody for joining in the quarter. We appreciate your support as shareholders and look forward to chatting with you all next quarter. Operator00:55:10Ladies and gentlemen, this concludes your conference call for today. We thank you for participatingRead morePowered by