Martin Midstream Partners Reports First Quarter 2023 Financial Results and Declares Quarterly Cash Distribution

• Total leverage of 4.25 times as of March 31, 2023, compared to 4.53 times as of December 31, 2022
• Reported net loss of $5.1 million for the first quarter of 2023, which includes a $5.1 million impact from loss on extinguishment of debt
• First quarter adjusted EBITDA of $30.6 million after giving effect to the exit of the butane optimization business, which incurred net losses of $8.8 million for the quarter
• Declares quarterly cash dividend of $0.005 per common unit

KILGORE, Texas--(BUSINESS WIRE)-- Martin Midstream Partners L.P. (Nasdaq:MMLP) (“MMLP” or the "Partnership") today announced its financial results for the first quarter of 2023.

Bob Bondurant, President and Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership, stated, “I’m pleased with our first quarter as adjusted EBITDA of approximately $31 million, after giving effect to the exit of the butane optimization business, was in line with guidance, even as we experienced headwinds in the agriculture market that impacted our fertilizer and lubricants businesses. However, robust demand for our Transportation services, both marine and land, offset those challenges, speaking to the strength of our diversified business model.

“During the quarter we continued our focus on debt reduction resulting in both lower outstanding debt and a lower leverage ratio. Borrowings under our revolving credit facility were reduced $16 million resulting in total debt at March 31, 2023 of $500 million compared to $516 million at December 31, 2022. As we plan to exit the butane optimization business at the conclusion of the selling season during the second quarter, we anticipate additional butane liquidation proceeds of approximately $20 million which are earmarked for further debt reduction.”

FIRST QUARTER 2023 OPERATING RESULTS BY BUSINESS SEGMENT

TERMINALLING AND STORAGE (“T&S”)

T&S operating income (loss) for the three months ended March 31, 2023 and 2022 was $3.1 million and ($0.1) million, respectively.

Adjusted segment EBITDA for T&S was $9.1 million and $6.9 million for the three months ended March 31, 2023 and 2022, respectively, reflecting contractual index-based fee increases combined with reduced operating expenses across our divisions.

TRANSPORTATION

Transportation operating income for the three months ended March 31, 2023 and 2022 was $9.4 million and $7.0 million, respectively.

Adjusted segment EBITDA for Transportation was $13.2 million and $10.5 million for the three months ended March 31, 2023 and 2022, respectively, reflecting continued robust demand for land transportation services coupled with improving marine fleet utilization and higher day rates.

SULFUR SERVICES

Sulfur Services operating income for the three months ended March 31, 2023 and 2022 was $4.6 million and $12.7 million, respectively.

Adjusted segment EBITDA for Sulfur Services was $7.2 million and $15.1 million for the three months ended March 31, 2023 and 2022, respectively, reflecting reduced demand in our fertilizer business in part due to a delay in the planting season related to weather conditions, leading to higher inventories and declining prices.

SPECIALTY PRODUCTS

Specialty Products operating income for the three months ended March 31, 2023 and 2022 was $4.6 million and $10.0 million, respectively. Included in the Specialty Products results is operating income of $0.3 million and $5.7 million, for the three months ended March 31, 2023 and 2022, respectively, attributable to the butane optimization business.

Adjusted segment EBITDA for Specialty Products was $(3.6) million and $11.3 million for the three months ended March 31, 2023 and 2022, respectively, primarily reflecting decreased NGL margins combined with lower demand in our lubricants packaging business. Included in the Specialty Products results is adjusted EBITDA of $(8.8) million and $5.7 million for the three months ended March 31, 2023 and 2022, respectively, attributable to the butane optimization business. Adjusted Segment EBITDA for Specialty Products after giving effect to the exit of the butane optimization business was $5.2 million and $5.6 million for the three months ended March 31, 2023 and 2022, respectively.

UNALLOCATED SELLING, GENERAL AND ADMINISTRATIVE EXPENSE (“USGA”)

USGA expenses included in operating income for the three months ended March 31, 2023 and 2022 were $4.2 million and $4.1 million, respectively.

USGA expenses included in adjusted EBITDA for the three months ended March 31, 2023 and 2022 were $4.1 million and $4.1 million, respectively.

CAPITALIZATION

At March 31, 2023, the Partnership had $500 million of total debt outstanding, including $100 million drawn on its $200 million revolving credit facility and $400 million of senior secured second lien notes due 2028. At March 31, 2023, the Partnership had liquidity of approximately $40 million from available capacity under its revolving credit facility. The Partnership’s leverage ratio, as calculated under the revolving credit facility, was 4.25 times at March 31, 2023. At the end of fourth quarter 2022, we announced adjusted leverage of 4.27 times, which included a debt sub-limit carve out of $29.7 million. In order to compare December 31, 2022 to March 31, 2023, the December ratio is adjusted to exclude the $29.7 million debt sub-limit carve out, bringing the leverage ratio at December 31, 2023 to 4.53 times compared to 4.25 times at March 31, 2023, a reduction of 0.28 times. The Partnership was in compliance with all debt covenants as of March 31, 2023.

On February 8, 2023, the Partnership completed the sale of $400 million in aggregate principal amount of 11.500% senior secured second lien notes due 2028. The Partnership used the net proceeds of that offering to repurchase, through a tender offer and then redemption, all of the Partnership’s 1.5 lien notes due 2024 and second lien notes due 2025.

QUARTERLY CASH DISTRIBUTION

The Partnership has declared a quarterly cash distribution of $0.005 per unit for the quarter ended March 31, 2023. The distribution is payable on May 15, 2023 to common unitholders of record as of the close of business on May 8, 2023. The ex-dividend date for the cash distribution is May 5, 2023.

QUALIFIED NOTICE TO NOMINEES

Section I: This announcement is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Section II: The entire amount of the distribution realized per U.S. Treasury Regulation 1.1446(f)-4(c)(2)(iii) is in excess of cumulative net taxable income.

RESULTS OF OPERATIONS

The Partnership had a net loss for the three months ended March 31, 2023 of $5.1 million, a loss of $0.13 per limited partner unit. The Partnership had net income for the three months ended March 31, 2022 of $11.5 million, or $0.29 per limited partner unit. Adjusted EBITDA for the three months ended March 31, 2023 was $21.7 million compared to $40.0 million for the three months ended March 31, 2022. Adjusted EBITDA after giving effect to the exit of the butane optimization business for the three months ended March 31, 2023 was $30.6 million compared to $34.3 million for the three months ended March 31, 2022. Net cash provided by operating activities for the three months ended March 31, 2023 was $49.3 million, compared to $28.4 million for the three months ended March 31, 2022. Distributable cash flow for the three months ended March 31, 2023 was $9.5 million compared to $15.2 million for the three months ended March 31, 2022.

Revenues for the three months ended March 31, 2023 were $244.5 million compared to $279.2 million for the three months ended March 31, 2022.

EBITDA, adjusted EBITDA, distributable cash flow and adjusted free cash flow are non-GAAP financial measures which are explained in greater detail below under the heading "Use of Non-GAAP Financial Information." The Partnership has also included below a table entitled "Reconciliation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted Free Cash Flow" in order to show the components of these non-GAAP financial measures and their reconciliation to the most comparable GAAP measurement.

An attachment included in the Current Report on Form 8-K to which this announcement is included contains a comparison of the Partnership’s adjusted EBITDA for the first quarter 2023 to the Partnership's adjusted EBITDA guidance for the first quarter 2023.

Investors' Conference Call

Date: Thursday, April 20, 2023

Time: 8:00 a.m. CT (please dial in by 7:55 a.m.)

Dial In #: (888) 330-2384

Conference ID: 8536096

Replay Dial In # (800) 770-2030 – Conference ID: 8536096

A webcast of the conference call along with the First Quarter 2023 Earnings Summary will also be available by visiting the Events and Presentations section under Investor Relations on our website at www.MMLP.com.

About Martin Midstream Partners

MMLP, headquartered in Kilgore, Texas, is a publicly traded limited partnership with a diverse set of operations focused primarily in the Gulf Coast region of the United States. MMLP’s primary business lines include: (1) terminalling, processing, and storage services for petroleum products and by-products; (2) land and marine transportation services for petroleum products and by-products, chemicals, and specialty products; (3) sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and (4) specialty products, including natural gas liquids, marketing, distribution, packaging, and transportation services. To learn more, visit www.MMLP.com. Follow Martin Midstream Partners L.P. on LinkedIn, Facebook, and Twitter.

Forward-Looking Statements

Statements about the Partnership’s outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all references to financial estimates rely on a number of assumptions concerning future events and are subject to a number of uncertainties, including (i) the effects of the continued volatility of commodity prices and the related macroeconomic and political environment and (ii) other factors, many of which are outside its control, which could cause actual results to differ materially from such statements. While the Partnership believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in anticipating or predicting certain important factors. A discussion of these factors, including risks and uncertainties, is set forth in the Partnership’s annual and quarterly reports filed from time to time with the Securities and Exchange Commission (the “SEC”). The Partnership disclaims any intention or obligation to revise any forward-looking statements, including financial estimates, whether as a result of new information, future events, or otherwise except where required to do so by law.

Use of Non-GAAP Financial Information

To assist management in assessing our business, we use the following non-GAAP financial measures: earnings before interest, taxes, and depreciation and amortization ("EBITDA"), adjusted EBITDA (as defined below), distributable cash flow available to common unitholders (“distributable cash flow”), and free cash flow after growth capital expenditures and principal payments under finance lease obligations ("adjusted free cash flow"). Our management uses a variety of financial and operational measurements other than our financial statements prepared in accordance with U.S. GAAP to analyze our performance.

Certain items excluded from EBITDA and adjusted EBITDA are significant components in understanding and assessing an entity's financial performance, such as cost of capital and historical costs of depreciable assets.

EBITDA and adjusted EBITDA. We define adjusted EBITDA as EBITDA before unit-based compensation expenses, gains and losses on the disposition of property, plant and equipment, impairment and other similar non-cash adjustments. Adjusted EBITDA is used as a supplemental performance and liquidity measure by our management and by external users of our financial statements, such as investors, commercial banks, research analysts, and others, to assess:

• the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;
• the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness, and make cash distributions to our unitholders; and
• our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing methods or capital structure.

The GAAP measures most directly comparable to adjusted EBITDA are net income (loss) and net cash provided by (used in) operating activities. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss), operating income (loss), net cash provided by (used in) operating activities, or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted EBITDA in the same manner.

Adjusted EBITDA does not include interest expense, income tax expense, and depreciation and amortization. Because we have borrowed money to finance our operations, interest expense is a necessary element of our costs and our ability to generate cash available for distribution. Because we have capital assets, depreciation and amortization are also necessary elements of our costs. Therefore, any measures that exclude these elements have material limitations. To compensate for these limitations, we believe that it is important to consider net income (loss) and net cash provided by (used in) operating activities as determined under GAAP, as well as adjusted EBITDA, to evaluate our overall performance.

Distributable cash flow. We define distributable cash flow as net cash provided by (used in) operating activities less cash received (plus cash paid) for closed commodity derivative positions included in Accumulated Other Comprehensive Income (Loss), plus changes in operating assets and liabilities which (provided) used cash, less maintenance capital expenditures and plant turnaround costs. Distributable cash flow is a significant performance measure used by our management and by external users of our financial statements, such as investors, commercial banks and research analysts, to compare basic cash flows generated by us to the cash distributions we expect to pay unitholders. Distributable cash flow is also an important financial measure for our unitholders since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flow at a level that can sustain or support an increase in our quarterly distribution rates. Distributable cash flow is also a quantitative standard used throughout the investment community with respect to publicly-traded partnerships because the value of a unit of such an entity is generally determined by the unit's yield, which in turn is based on the amount of cash distributions the entity pays to a unitholder.

Adjusted free cash flow. We define adjusted free cash flow as distributable cash flow less growth capital expenditures and principal payments under finance lease obligations. Adjusted free cash flow is a significant performance measure used by our management and by external users of our financial statements and represents how much cash flow a business generates during a specified time period after accounting for all capital expenditures, including expenditures for growth and maintenance capital projects. We believe that adjusted free cash flow is important to investors, lenders, commercial banks and research analysts since it reflects the amount of cash available for reducing debt, investing in additional capital projects, paying distributions, and similar matters. Our calculation of adjusted free cash flow may or may not be comparable to similarly titled measures used by other entities.

The GAAP measure most directly comparable to distributable cash flow and adjusted free cash flow is net cash provided by (used in) operating activities. Distributable cash flow and adjusted free cash flow should not be considered alternatives to, or more meaningful than, net income (loss), operating income (loss), Net cash provided by (used in) operating activities, or any other measure of liquidity presented in accordance with GAAP. Distributable cash flow and adjusted free cash flow have important limitations because they exclude some items that affect net income (loss), operating income (loss), and net cash provided by (used in) operating activities. Distributable cash flow and adjusted free cash flow may not be comparable to similarly titled measures of other companies because other companies may not calculate these non-GAAP metrics in the same manner. To compensate for these limitations, we believe that it is important to consider net cash provided by (used in) operating activities determined under GAAP, as well as distributable cash flow and adjusted free cash flow, to evaluate our overall liquidity.

MMLP-F

Non-GAAP Financial Measures

The following tables reconcile the non-GAAP financial measurements used by management to our most directly comparable GAAP measures for the three months ended March 31, 2023 and 2022, which represents EBITDA, Adjusted EBITDA, Adjusted EBITDA after giving effect to the exit of the butane optimization business, distributable cash flow, and adjusted free cash flow:

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Sharon Taylor - Executive Vice President & Chief Financial Officer (877) 256-6644 investor.relations@mmlp.com

Source: Martin Midstream Partners L.P.