World Kinect Corporation 2026 Q3 Earnings Call

Good evening, everyone, and welcome to World Kinect's third quarter 2026 earnings conference call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our investor relations website. I am Braulio Medrano, Senior Director of FP&A and Investor Relations. With me on the call today is Ira Birns, Chief Executive Officer, John Rau, President, and Mike Tejada, Executive Vice President and Chief Financial Officer. Now I would like to review our safe harbor statement. Certain statements made today, including comments about our expectations regarding future plans and performance, are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission.

We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. At this time, I would like to introduce our Chief Executive Officer, Ira Birns.

Good evening, everyone, and thank you for joining us. We delivered another strong quarter, reflecting solid execution across the business and continued progress against the priorities we laid out at the beginning of the year. What I find particularly encouraging is what is driving our performance. We continue to strengthen the underlying earnings power of the business while also demonstrating the value of our global platform when market conditions create additional opportunities, something we have clearly experienced throughout this year. I am going to start by providing some brief comments on each of our business segments. Starting with aviation, underlying business trends remained healthy during the quarter, supported by strong commercial passenger activity, most notably in our on-airport fuel supply business in Western Europe and Latin America, as well as solid cargo growth globally.

We continue to see opportunities to expand our on-airport footprint in those markets, and we are also making progress expanding the value of our service offerings. Speaking of services, trip support has long been part of our aviation offering, and this quarter, commercial trip support services delivered strong year-over-year improvement. The addition of Universal has further strengthened and expanded our trip support capabilities in business and general aviation, providing us with greater opportunities to serve customers more broadly, deepen those relationships, and grow our participation in higher-value services. I also recently attended NBAA, the National Business Aviation Association conference in Las Vegas, where I spent time with our team and our business and general aviation customers and came away encouraged by the growing opportunities we see in this part of our business. Mike will provide some additional context on other factors that impacted aviation results during the quarter.

Turning to marine, we delivered another outstanding quarter as the business continued to outperform. That performance benefited in part from fuel prices and volatility that for much of the quarter, were higher than we had anticipated in late July when we reported second-quarter results. Ongoing volatility, schedule disruptions, and shifting trade patterns continue to create opportunities for us to help customers navigate changing trading conditions. These are precisely the types of conditions that demonstrate the value of the scale and capabilities of our global marine platform. Our extensive supply network, access to liquidity, and ability to reliably source and deliver fuel where and when customers need it allow us to help them navigate that complexity while creating additional opportunities for us to capture attractive returns.

As a matter of fact, over the years, we have successfully managed through several periods of geopolitical disruption and the resulting high fuel prices and market volatility, helping customers navigate those conditions while generating strong financial results. Of course, we remain disciplined in how we pursue those opportunities, particularly around credit, liquidity, and risk. I also recently attended SIBCON, the Singapore International Bunkering Conference, where I spent time with our team, customers, and suppliers. Those conversations also reinforced the value we bring to our customers throughout market cycles and the strength of those relationships, particularly in more challenging market environments. Turning to land, I am pleased with the continued progress we are making. We have spent considerable time over the past several years simplifying this business and sharpening our focus, and the changes we have made are already beginning to generate more attractive returns.

With that portfolio work largely behind us, the story is increasingly shifting from simplification to performance and growth. Our focus is now on driving profitable growth in our core businesses, including retail and cardlock. We see opportunities to grow our position through better execution while continuing to improve pricing, productivity, operating efficiencies, and returns. The result is a land business that is more focused, more predictable, and becoming a more meaningful contributor to our overall earnings growth. Stepping back from the individual businesses, I think there are three important takeaways from the quarter. First, the underlying earnings power of the company continues to strengthen. Our refocused portfolio, especially in land, and the continued expansion of our higher-value services in aviation, are contributing to stronger underlying earnings. Disciplined management of our cost base is also contributing to that improvement.

Our ability to capture meaningful upside when market opportunities arise, as we've seen in Marine this year, can further strengthen our earnings. Second, we are not simply focused on growing earnings, but on generating higher returns on the capital we deploy and creating greater long-term value. The progress we are seeing reflects the benefits of concentrating our resources on a more focused set of core commercial offerings. Third, we generated solid cash flow this quarter, demonstrating how our earnings performance is translating into a stronger cash flow profile. That strong cash generation further enhances our financial flexibility and our ability to invest in the business, pursue attractive opportunities, and return capital to shareholders. Taken together, stronger underlying earnings, improved returns, and strong cash conversion give us confidence in the direction of the business and our ability to create greater shareholder value over time.

As we enter the final quarter of 2026, we remain focused on execution while continuing to build the foundation for 2027 and beyond. We do recognize that some of the market conditions that benefited us this year will evolve over time, but the underlying changes we have made to the business are not dependent on those conditions. We have transformed land into a more focused business with a stronger earnings profile. We have significantly strengthened our aviation platform and expanded our higher-value service capabilities. We have a marine platform that continues to demonstrate its ability to perform well across a range of market environments. Across the company, we remain focused on disciplined capital allocation, generating higher returns on capital, and continuing to strengthen cash generation. While market volatility can create incremental opportunities for us, our objective is not to rely on volatility for growth.

It is to continue improving and growing the underlying business while maintaining the capabilities and financial strength to capitalize on opportunities when they arise. I am pleased with the progress we have made this year, and I want to thank our employees around the world for their hard work, their commitment to our customers, and for continuing to demonstrate our core values in everything they do. With that, let me turn the call over to Mike Tejada for the financial review.

Thank you. Thank you, Ira, and good evening, everyone.

Before I discuss the results, I want to briefly address our use of non-GAAP financial measures. As we have stated previously, our GAAP results can include items that do not reflect our ongoing operating performance, such as restructuring and exit costs, impairments, operating results of non-core divestitures and business exits, and other non-recurring items. Reconciliations of our non-GAAP measures are available on our investor relations website and in today's webcast materials. Total non-GAAP adjustments in the third quarter were approximately $18.2 million, or $12.8 million after tax. I will now turn to our consolidated results, which exclude these non-GAAP adjustments. Building on Ira's comments, we delivered record third quarter adjusted EPS of $0.99, up 83% year over year.

Consolidated adjusted gross profit was $279 million, up 12% year over year, led by another strong quarter in marine, with gross profit increasing 131% year over year. Aviation continued to deliver strong commercial results, supported by a Universal Trip Support acquisition, which closed in the fourth quarter of 2025, and land's adjusted operating income in the third quarter more than doubled year over year, further demonstrating the benefits of our simpler, more focused portfolio. Let's take a closer look at each segment. Starting with aviation. Third quarter volume was 1.9 billion gallons, up 1% year over year. Gross profit was $148 million, up 4% year over year, driven primarily by stronger commercial fuel resale performance, as well as contributions for our expanded trip support business. These benefits were partially offset by lower gross profit in our physical inventory business, where significant price movements negatively impacted margins during the quarter.

Looking to the fourth quarter of 2026, we expect aviation to deliver strong year-over-year gross profit growth and remain relatively flat compared with the third quarter of 2026. Turning to marine, the segment delivered another strong quarter, with gross profit of $59 million, up 131% year-over-year. Volume was 3.7 million metric tons, down 8% year-over-year, reflecting continued conflict-related disruptions to shipping patterns and customer activity. Although margins have continued to moderate since the initial disruption, market prices and supply conditions continue to support increased profitability across the business. Our global supply relationships, local market knowledge, and disciplined execution enable us to respond quickly to changing conditions while remaining a trusted partner to our customers and suppliers. Looking to the fourth quarter of 2026, we expect marine gross profit to remain above the prior year level, but decline sequentially as the incremental market benefits continue to moderate.