Ladies and gentlemen, thank you for standing by and welcome to the World Fuel Services First Quarter 2022 Earnings Conference Call. My name is Jerome and I'll be coordination the call this evening. During the presentation all participants will be in a listen-only mode. After the Speakers remarks, there’ll be question-and-answer session . As a reminder this conference is being recorded. I will now like to turn the conference over to Mr. Glenn Klevitz, World Fuel's Vice President Treasurer and Investor Relations. Mr. Klevitz you may begin your conference.

Thank you, Jerome. Good evening, everyone and welcome to the World Fuel Services first quarter 2022 earnings conference call. I am Glenn Klevitz and I'll be doing the introductions on this evening's call, alongside our live slide presentation. This call is also available via webcast. To access this webcast or future webcasts, please visit the World Fuel Services website and click on the webcast icon. With us on the call today are Michael Kasbar, Chairman and Chief Executive Officer; and Ira Birns, Executive Vice President and Chief Financial Officer. By now you should have all received a copy of our earnings release, if not you can access the release on our website. Before we get started, I would like to review World Fuel's Safe Harbor statement. Certain statements made today, including comments about World Fuel's expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause World Fuel's actual results to materially differ from the forward-looking information. A description of the risk factors that could cause results to materially differ from these projections can be found in World Fuel's most recent Form 10-K and other reports filed with the Securities and Exchange Commission. World Fuel assumes 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 as defined in Regulation G. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in World Fuel's press release and can be found on its website. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. As with prior conference calls, we ask that members of the media and individual private investors on the line participate in listen-only mode. At this time, I would like to introduce our Chairman and Chief Executive Officer, Michael Kasbar.

Thank you, Glenn. And thank you everyone for joining us this evening. I want to start by recognizing our global team for their tremendous individual and team effort and execution during these turbulent times. First with COVID, then supply chain disruptions, and now coupled with historic price -- fuel price volatility arising from geopolitical events. During all of it, we have continued to deliver on our commitments to our customers and suppliers each and every day, with extraordinary skill and expertise. Remaining calm in the face of what was in essence a perfect storm of logistical complexity, and difficulties and market dynamics. A big thank you to all of you. I've always said that our company is diversified business model is uniquely positioned to deliver during times of uncertainty in the markets we serve, and that when taken together complement each other during times of heightened volatility. This quarter solid overall result is a perfect example of that. In our aviation segment at commercial passenger business aviation and cargo volumes were all up year-over-year with commercial passenger volume approaching 80% in 2019 pre pandemic levels globally. Our aviation services and technology offerings also delivered strong year-over-year growth. Well our core aviation business performed very well. Aviation results were negatively impacted by historic factor dated fuel price environment, which Ira will explain in greater detail shortly. At the same time our marine business performed extremely well navigating a sharply rising bunker fuel price environment where average bunker prices increased 30% sequentially. Unlike our variation business most of our marine transactions are executed on a spot basis and we earn higher returns on the back of higher prices resulting in extraordinary performance when compared to recent periods. As credit capacity and variably tightens and high price markets, the scale of our business and the strength of our balance sheet differentiates us in a volatile pricing environment, we can continue to provide our customers with the products, services and credit they require when they need it most. And simply put, this served us well in the first quarter. With the backdrop of high container and dry bulk rates, strong commodity demand, capacity constraints, rising interest rates, supply chain efficiencies, and sustainability, we have expanding opportunities to play an important role in the success of our marine customers. And lastly, our land business performed well in the first quarter, we experienced seasonably strong results in our UK heating oil business and solid contributions from our natural gas and power activities, which serve to further augment the immediate benefits from the addition of the Flyers Energy operations four our overall land business. With Flyers Energy, we are better positioned to build a more ratable and leverageable national platform with a myriad of growth opportunities ahead. And now I will turn the call over to Ira for his review of our financial results.

Thank you, Michael. Before I walk through our first quarter results, please note that the following figures exclude the impact of non-operational items, which are highlighted in our earnings release. These items include acquisition related expenses and integration costs, which can aggregate were only $500,000 after tax in this year's first quarter. To assist you in reconciling results published earnings released the breakdown of the non-operational items can be found on our website, and last slide of today's webcast presentation. Furthermore, before getting to the numbers, as Michael already mentioned, this was a quarter which clearly demonstrates the value of our diversified business model, with aviation negatively impacted by unprecedented market pricing dynamics, while marine significantly benefited from the sustained high price environment and land delivered strong results with fliers now on board. I will get into the details shortly, but I thought it was important to start by pointing this out. Consolidated revenue in the first quarter was $12.5 billion up more than 100% year-over-year, and putting us on a $50 billion annual run rate for revenue for the first time in our history. Volume continue to improve across all of our business segments, as commercial aviation passenger volumes continue to recover, contributing to a 26% year-over-year increase in consolidated volumes. Adjusted first quarter net income and earnings per share were $26.8 million and $0.42 per share respectively. Adjusted EBITDA for the first quarter was $75 million, that's an increase in $14 million, or 23%, compared to the first quarter of last year. With regard to second volumes, aviation volume was 1.7 billion gallons in the first quarter. That's down 2% sequentially from a seasonally strong fourth quarter, but an increase of 45% compared to the first quarter of 2021. The year-over-year volume increase resulted principally in the ongoing…

Thank you, Ira. As I mentioned earlier, over the last several decades, we have designed a business model that we believe is built to be resilient through times and adversity. Since our operating model was not constrained by a single method of fulfillment, our physical operations is just one component of what we call 3PV, our third-party physical inventory and logistics and virtual modes of fulfillment. It is our global network of third party supply and service partners. Excuse me, together with our physical inventory and distribution capability, which is further supported by our evolving virtual or digital capability that manages costs and creates operational integration with our customers and partners, and has become a bonafide technology and software business. The combination drives strong value creation, that deep commoditize this energy to provide real value add to the market. As you know, we have reshaped our land portfolio and Mike Crosby gets a lot of credit for that, and I will be forever grateful for his contributions. As a result of his work and many others, I believe the quality of our earnings, and the diversity and complementarity of our portfolio will help us drive more durable, readable and repeatable results. The rollout of our common operating model under John Rawl, combined with the arrival of our long sought after liquid land platforms and world connect Sustainability Solutions, better positions us for operating leverage, taking market share and embracing transitions. As mentioned earlier, the resiliency of our business model allows us to pivot and respond to the inevitable gyrations of energy logistics and the endless amount of geopolitical and societal issues that impact local, national and global commerce. Our revolution from the simple intermediaries to a sophisticated underwriter of risk and omnichannel and an omnichannel participant speaks volumes about our potential. Our evolution continues to be a source of pride for our team. It's what motivates and animates us in our mission to support global commerce each and every day. I'm optimistic about the opportunities we have across all of our end markets, and I'm increasingly confident in our ability to execute our 3PV growth plan with a growing suite of highly desirable energy solutions. I'd like to now open the call to Q&A operator.

. Our first question comes from the line of Ken Hoexter from Bank of America. Please proceed with your questions.

Great, good afternoon, Michael and Ira. And phenomenal results if not for the inventory issue. So let’s hit on the aviation for a quick second. And I guess more on the inventory side? Ira are there things you can do in the in term? I don't know maybe not take possession of as much and move away from the down side and just do the reselling, is that an opportunity to avoid some of these backwardation issues? Or is it something you have to do to get price certainty and understanding the market at any given time? Maybe just walk us through your thoughts on that?

Yes, and I'm going to intercept the past to Ira, and he'll fill in with some details. So, just a short history lesson. We got involved, in the physical part of the market, particularly in aviation, I think it was 2003. And took us a little while to develop expertise there. And we certainly have it today. I mean, very proud of what we do every day to keep aviation and a lot of other folks supplied. And we're thinking extraordinarily responsible counterparty. So, we have extended that model to many, many locations. And if not, for our inventory, in some locations, there wouldn't be supply where there wouldn't be reliable supply, there is the cost of that. And because there is no perfect hedge within jet fuel, and we're a conservative company, we're a risk management company, and we like to cover offer risks. And there are not really perfect hedges for jet fuel. In this crazy market, these were not effective, as Ira suggested. So we're revisiting some of our deployment of those physical locations, and we're also reviewing some other things that we can do in terms of pricing structures on buy and sell. So, but we can turn on a dime, that is the nature of the business. It's a contractual business with commitments, and we uphold those commitments, and we always have. So, we've reviewed that as we do with all of our businesses, these are extraordinary times. So we believe that we'll have some ability to moderate, but those will not really kick in until Q3. So I don't know, if you want to add some more color to that Ira?

No, I think Mike said all, clearly, we're trying to optimize and fairy no more inventory than we need to. And also, as Mike mentioned, as we get into the third quarter, we have some more flexibility in terms of pricing structure and trying to find ways to reduce the specific risk as much as we can. But once again, as Mike said, it doesn't turn on a dime, you can't do it overnight. But something we're heavily focused on managing through the short term.

And Ira just to clarify, or Mike, this is completely different than a few years ago, where you got caught in terms of hedging and pricing went the other way, where you could have made money right, so you got out of the hedges. This is just a factor of taking ownership of that to like you said, Michael, to ensure you had inventory at specific locations?

I think it's really a question of scale. It's a question of scale and extremity. So certainly we broke out the business and we're significant global participant, and the business has grown and the severity of the movements is what in a short period of time is created the impact. So one of -- there's other comments you want to make Ira on that?

Yes, no, I mean, this is different than when you're talking about and this is purely, the inventory that we have to support the core business. And just because of the structure of the market, it's just very difficult to avoid the losses right now, again, there's lots of things we're focused on, we try to shorten the amount of transit times that we have, which creates more risk, in some cases buying and location rather than buying in the Gulf Coast, and then being locked in for several weeks as the fuel travels up the pipeline. So this is a little different, the market has never seen this level of backwardation before, meaning next month price versus the spot price, that difference is just absolutely extraordinary. So, yes, we're working on focusing on how we can mitigate some of those impacts. And as time goes on over the next couple of months, the chances increase significantly, that we'll be able to do that.

Great. And just one other follow up to me, and then I'll hand it over. You mentioned Ira in your remarks, the change in in cycle terms, I think I've only seen you rein it in, maybe in a weaker economic time, where you were concerned about bad debt and potential for bankruptcies, and surrendered and so maybe walk through, I mean, obviously, now you're extending more credit as pricing goes up and volumes are increasing. So maybe walk through your process there, how you do have to wait till contracts are renewed to change those cycle times, or walk us through where it is now versus where it is historically?

Yes, I think you’re talking about the trade cycle, in that it might be in terms of

Yes, sorry, yes.

That's something we've worked on, religiously for years. And, of course, the tighter you could manage that trade cycle, the better your longer term cash flow profile is going to be. And there's a little bit of risk mitigation there as well. So we've been bringing that down, over time, some of that mix of business, some of that is just smarter business. We're great trading partners, but maybe in some cases, we're a bit too great. And, had too much flexibility historically, in terms of things like extended terms beyond traditional trade terms. So we've got much less of that. So, we had been pretty consistently running at about a seven-day trade cycle for several years, and we've discontinued to work at that every quarter. And now it's just a little over four days. I don't think we could bring it down much lower than that. But we're looking to maintain that level between four and five days, which is compared to a lot of other businesses, a lot of other industries, a very respectful, respectable metric. And of course, it reduces the amount. Think about we're a run rate of $50 billion revenue, and we only have about $700 million of net working capital. That's a pretty good comparative. And so we just worked at it every day. And we worked through receivables, we work through payables, worked through inventory days and instant solve for the lowest net number possible.

Great, thanks, Mike. Thanks, Ira. Great, great job on the marine and certainly the land side and on Flyers. Thanks for the time over to Ben.

Thank you. Your next question comes from the line of Ben Nolan from Stifel. Please proceed with your question.

Thanks, Ken. I've got a couple here. First is, I forgot one of you, Ira might one of you talked about I think it was you Ira talked about the impact of on the business in a rising interest rate environment. And how that has historically been positive. Obviously, we are in a seemingly a very quickly rising interest rate environment. Can you help me just help me walk through maybe each of the segments or just in general how that does impact the business in the margins and volumes and everything else? And how big of a determinant is it in and how the business does?

Yes, so the greatest impact Ben is in marine, because as we've mentioned many occasions, marine is a spot of business meaning, what pricing transactions every day as opposed to aviation where we're heavily locking into contracts for the year at a time. And even in parts of the land, we're locking many contracts for multiple years at a time. So I would say the interest rate is secondary, but important. I say that, because I mean, the principal driver this quarter in particular, is just the substantial increase in flat price or the price of a metric ton of bunker fuel, rising to more than $800. So, that's one. And then if you combine that with rising interest rates, you've got a world -- many folks that we may, come up against the market don't have the size balance sheet that we do. So, they need more capital and capital is becoming more expensive. So it just naturally makes them a little less competitive, or in some cases a lot less. And it gives us a greater chance to win on the back of our global scale and strong balance sheet. And that has historically, as it did, this quarter, provided greater opportunities for us in the market. And it's led to much stronger results. So this isn't the first time we've seen that. Less of an impact in the other businesses, the interest factor, of course, the competitive issue could impact everyone that's participating in a commodity in a sharply rising price environment. But in the short term, we see the greatest impact in marine, just because we're reacting and bidding on business on a day-to-day basis, without long-term commitment, so to speak. So that's why in this environment, you've seen the greatest positive impact in marine, but there are parts of land as well as an example where we also saw improvement in results, we saw that in Flyers in our first quarter that they outperformed our expectations driven in part by that phenomena, and even our land UK business. In my prepared remarks, I mentioned that March was a record, where they also improved their results, indirectly tied to this issue as well. So hopefully that answers your question that you have across the business.

Yes, that's helpful. I appreciate it. Speaking of Flyers, the land numbers are pretty good. Really good. And you'd call that Flyers are sort of outperforming and I know there's a degree of seasonality there. But, a quarter into the deal now. Does it feel like you what sort of you had originally outlined in terms of your expectations for accretion and the impact on the company? Does it feel like given us one solid quarter end that is might have been a little conservative yet?

Yes. They weren't -- I'll say couple of things. They were a little conservative by design, because when you're doing something new, you don't want to get ahead of your skis until you hit slopes, so to speak. So, we had a good first run in the first quarter, and you're kind of seasonality and first quarter is a seasonally weakest quarter for that business historically. So, we saw our performance there, to the extent that maybe there won't be seasonality, because it's not definite that they're going to repeat that in the second quarter. But overall, I would say, yes, based on where we are today, things could change. They're certainly performing at a level above, our initial expectations, which is just fantastic. A great team of people. They've been working around the clock to kind of integrate themselves into the world fuel platform. And, we've learned a lot about what they do well, and there's even though were the bigger company, we're learning from them every day, in some areas, some areas are learning from us, but we certainly gotten off to a good solid start. And we hope that continues for the balance of the year.

All right. And then last, well, if I'm limited to three, maybe I'll have one little tiny palm. Heating oil was one of the things on landside, you called out as having a good impact. Natural gas prices, especially in Europe, with LNG, everything else are just crazy. And I think there's a lot of people looking for alternatives to meet their thermal energy demand. Are we in an environment here do you think where maybe there's an opportunity to continue to see a little extra benefit for whether it's heating oil or fuel oil or whatever, just people looking for a higher margin for you alternative to a really expensive natural gas price.

No, I don't think that is necessarily the case. Anything we did, as you pointed out, we did very well in the heating oil season in the UK, combination of weather and just volatility in the marketplace. But that season is about to end. And I think obviously, we're doing this, we still did really well in April. But once you get into May in June, that level of activity wanes, whether what you're describing may have a positive impact as we approach the fall. And the question, I'm guessing if I said that would be the case. But, despite the craziness going on, in many parts of Europe, our guys, hunker down and really delivered very, very solid results, and Chris and the rest of the team in the UK for this they really nailed it. And looking forward to nailing in again next winter season in that part of our business.

Great, well, they're probably a few pints in the UK at this point. But the…

Just a little clarity, when you talking about some switching between heating oil and natural gas. I'm not sure they do quite that as well.

That's right, just because natural gas is so high, it maybe there's a little bit more persistent demand for heating oil. This kind of the…

Yes, you know, I'm going have to say, I don't know the answer that question, but I'll research that.

Okay, the last and this is just a little really just kind of a modeling type question, maybe Ira. There was a, I think, a little over a $5 million other income item that add impact on net income, any color as to where that came from?

Yes, of course. So, I knew you're going to ask that question. So we got the answer. So, there's some -- one area we've done a much, much better job at the last several years is managing foreign exchange risk, we actually have a couple of new folks that we brought on board that focus on that day in day out to make sure, we don't have any unnecessary losses. In this particular quarter, we actually, with all the volatility, we couldn't avoid generating some gains. So we've had a couple of million dollars of foreign exchange gains, in regions they are very difficult to hedge and markets move in the right direction. And we also had, I would say, more than our average income from minority investments we have a couple of those. One of them relates to the Exxon deal in aviation that we did several years ago. As those markets in Europe come back, we generated some more profitability there. And there were a couple other miscellaneous buckets, but most of it was the equity earnings and a couple of million dollars of foreign exchange gains. So that offset a bit of the growing amount of interest expense which was great.

Okay. Well, I appreciate that color. And thanks for letting me have an extra half question there.

Yes, I don’t know you’re still listening, we know you will have unless for it. Thanks Ben.

Mr. Kasbar, there are no further questions at this time. I'll now turn the call back to you for closing remarks.

Well, thank you. I really want to say thank you to our incredible dedicated, talented, passionate team that really makes our company what it is every day of the week for our customers, our partners, our shareholders communities. So thank you very much and look forward to talking to you next quarter. Thanks very much for all your support.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.