WKC

Thank you for standing by, and welcome to World Kinect Corporation's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Braulio Medrano, Senior Director of FP&A and Investor Relations.

Good afternoon, everyone, and welcome to World Kinect's first 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'm Braulio Medrano, Senior Director of FP&A and Investor Relations. With me on the call today is Ira Birns, Chief Executive Officer, Mike Tejada, Executive Vice President and Chief Financial Officer, and John Rau, President. Now I'd 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.

Thank you very much, Braulio, and good afternoon, everyone. I want to start by saying how proud I am of our team. Despite a far more volatile and unpredictable environment than anyone could have expected, we delivered a strong start to 2026, driven by strong execution and the continued benefits of our focused portfolio strategy. As conditions shifted rapidly following the escalation of the conflict in the Middle East, driving sharp price movements and heightened uncertainty across global energy markets, our teams remained focused, disciplined, and deeply engaged with our customers and suppliers. They navigated real-world complexity, managing rapid price changes, logistical challenges, and tightening conditions while maintaining a clear and consistent focus on safely and efficiently serving our customers. That combination of execution, professionalism, and focus is a defining strength of our organization and one that continues to set us apart.

Importantly, what you're seeing in these results is not just resilience in a volatile operating environment, but evidence of the successful execution of our portfolio optimization strategy. As we've discussed, our exits from non-core and lower-margin activities, particularly within land, have enhanced our financial flexibility and increased our ability to focus on investing in areas where we see more predictable, durable, and attractive returns. We announced today that World Fuel will serve as our unified corporate and commercial brand for substantially all internal and external purposes. This is the logical next step in our repositioning efforts and reflects our strategic clarity and conviction in our approach to value creation. Our customers around the world already know us as World Fuel, and this brand clearly reflects who we are today, a trusted provider of transportation fuels and complementary services.

Just as importantly, this return to our roots reflects the progress we've made simplifying the business and allowing our teams to fully focus on the core activities that benefit from scale, generate solid returns, and offer meaningful opportunities for long-term growth. As noted in our earnings release, World Kinect will remain as our corporate legal name, and our ticker symbol will remain as WKC. With that, I'd like to provide an overview of each of our core operating segments before passing things over to Mike to walk through the financials for the quarter. Marine results were consistent with what we have long communicated. When prices rise materially and volatility increases, this business performs exceptionally well. It has happened before, and well, it just happened again. It is important to note that this was not simply a quarter in which markets did the work for us.

Performance was driven by teams executing under pressure, actively managing pricing, credit exposure, and operational risk in real time while continuing to support customers despite challenging market conditions. We consider this a remarkable outcome, and I want to recognize our entire marine team for their accomplishments in the first quarter. Aviation also exceeded expectations this quarter as higher prices and increased volatility expanded opportunities in our core commercial business while also driving increased government-related activity. The integration of the Universal Trip Support Services business is well underway, and we are pleased with both its performance and how effectively the teams are coming together.

Land core activities performed largely in line with expectations, with strong cardlock and retail results offset by modest softness in our natural gas business. As I mentioned earlier, we have made significant progress with our portfolio exits and expect the vast majority of that work to be completed by the end of the second quarter. Excluding these exit activities, land delivered an operating margin significantly above the prior year, reflecting continued momentum and the benefits of our portfolio optimization efforts. Across the enterprise, and more broadly across the markets we serve, customers increasingly rely on trustworthy counterparties with scale, financial strength, and execution capability. Our global platform, longstanding supplier relationships, and strong balance sheet position us to meet and exceed customers' expectations and to continue delivering when reliability matters most.

Together, this reflects a simpler, more focused business with the scale, measured execution, and balance sheet to perform across a broad range of market conditions. From an earnings standpoint, we delivered incremental profitability in the first quarter, with results supported by the high price, high volatility environment we saw across the market. While more upside is possible given day-to-day unpredictability, our core expectations for the balance of the year have not changed, and our full year assumptions have only been adjusted to reflect the profitability already generated during the first quarter. Mike will walk through our updated guidance in a moment. This quarter's performance reinforces my confidence in our platform, the strength of our team, and the durability of our customer and supplier relationships. Our strong results demonstrate the consistency of our model across a wide range of market conditions and the discipline with which we operate.

With that, I'll turn the call over to Mike to walk through the financial results in more detail. Mike?

Thank you, Ira, and good afternoon, everyone. Before I discuss the results, I want to briefly address our use of non-GAAP 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. We provide reconciliations on our investor relations website and today's webcast materials. Total non-GAAP adjustments in the first quarter were approximately $16 million, or $13 million after tax. Now on to our consolidated results, which exclude these non-GAAP adjustments. As Ira mentioned, we delivered a strong first quarter, benefiting from a dynamic market environment.

While our results were grounded in our core businesses performing in line with expectations we set last quarter, they were further enhanced by our team's strong execution and ability to capture additional upside from pricing and volatility-driven opportunities. Our first quarter results were impacted by the conflict in the Middle East and the related market dynamics. In environments like these, we have demonstrated a proven ability to balance our role as a critical partner to our customers while leveraging our scale, supplier relationships, and the balance sheet to capture market-driven opportunities. This is a key strength of the World Fuel platform and one that affords us the flexibility to generate incremental value when opportunities arise. While these opportunities are not always predictable, they can be meaningful contributors to our overall performance as we saw this quarter.

On a consolidated basis, first quarter volume was 4 billion gallons, down 6% year-over-year. While first quarter gross profit was $254 million, up 10% year-over-year, which was above our expectations going into the quarter. Since marine was the principal driver of our strong performance this quarter, let's start there. Volumes were approximately 4 million metric tons in the first quarter, up 4% year-over-year, and gross profit was $66 million, up a significant 86% year-over-year. This strong performance marks our third-best quarter on record for marine. We entered the quarter expecting a low price, lower volatility environment. However, in March, conditions shifted quickly, with volatility increasing sharply and average bunker prices rising approximately 70% month-over-month.

By leveraging our supplier relationships and strong balance sheet, the team did what they do best and executed extremely well, supporting our customers while capturing strong risk-adjusted returns in our core resale business and at our physical inventory locations. As we have discussed in the past, Marine's baseline performance in low price, lower volatility environments deliver solid returns with minimal working capital requirements. However, when prices rise, credit availability tightens, and volatility increases, the spot nature of the business positions us well and enables us to continue to provide our customers with the products, services, and credit they require when they need it most. Our Marine business has a proven track record of executing in these environments while maintaining disciplined risk management, and this quarter was no exception. This performance is a testament to our team's capabilities and highlights the optionality embedded in our model.

We continue to view this as a major differentiator and a clear driver of value. Looking to the second quarter, we expect marine gross profit to be lower sequentially as price and volatility moderate, though gross profit should be meaningfully higher year-over-year. Now turning to aviation. For the first quarter, aviation volume was down 5%, as expected. However, gross profit was $138 million, up 20% year-over-year, and ahead of our expectations heading into the quarter. Baseline performance in our core offerings was in line with expectations, and the year-over-year increase was driven primarily by the Universal Trip Support acquisition, which we closed in November of last year and is performing as planned.

Core aviation results exceeded our expectations, driven principally by favorable market conditions, which created some short-term opportunities to generate incremental returns in our core commercial business, while also driving increased government-related activity. Looking ahead, we remain confident in the aviation's outlook but are closely monitoring the global supply landscape. As we progress through the year, we recognize that if the conflict in the Middle East continues for an extended period, it could begin to more broadly impact global supply and customer demand beyond what has so far been generally contained. From a baseline standpoint, and as we discussed last quarter, we expect the benefits of our expanded service capabilities and growing international activity to more than offset any competitive pressure.

Heading into the second quarter, we expect our aviation gross profit to be up sequentially, driven in part by the typical seasonal increase in activity, as well as some continued contribution from the current market environment, as well as up year-over-year with the inclusion of Universal Trip Support acquisition. Our land business delivered results in line with our expectations in the first quarter, with volume and gross profit down 15% and 38% year-over-year, respectively, reflecting the impact of our portfolio actions and previously announced business exits. The remaining exit-related activities are progressing as planned and are expected to be materially complete by the end of the second quarter. While these low-return businesses were a meaningful part of our portfolio in 2025, they are not part of our core growth strategy going forward. However, we continue to invest resources to support customers through a smooth transition.

For the quarter, our car, truck, and utility business performed well, benefiting from disciplined yield management that helped margins keep pace with higher working capital costs and credit requirements in a rising interest environment. These results were offset by our natural gas business, which was negatively impacted by severe weather in the Midwest in January. We expect second quarter gross profit to be up sequentially, though down versus the prior year, principally due to the businesses we have exited or in the process of exiting, and the resulting impact on the comparative period. That said, we continue to expect our core land businesses to further improve and drive meaningful year-over-year growth, with operating income still on track to nearly double and operating margin improving significantly toward our 30% target for 2026. Next, I'll cover operating expenses and net interest expense.

Operating expenses in the first quarter were $181 million, up 2% year-over-year. The year-over-year increase reflects the inclusion of the Universal Trip Support business, as well as higher variable compensation costs driven in part by our strong results in the first quarter. These operating expense increases were mostly offset by lower costs from the land simplification actions we have undertaken. Net interest expense in the quarter was $26 million, up versus prior year, driven in part by a reduction in interest income as well as additional working capital requirements during the quarter as prices increased. With that backdrop, let's turn to our outlook and guidance framework. As a reminder, for 2026, we're providing full-year adjusted EPS guidance. We believe this approach better reflects how we manage the business, accounts for seasonality, and provides investors with a clearer framework for evaluating performance.

For the second quarter, while we do not expect Marine to repeat its exceptional first quarter performance, we do expect overall adjusted EPS to be higher year-over-year. For full year 2026, we are updating our adjusted EPS guidance $2.65-$2.85 per share, up from the prior range of $2.20-$2.40 per share. This reflects our overperformance to date, underpinned by baseline expectations that remain on track. Turning to cash flow. Driven mainly by a sharp increase in commodity prices, which impacted working capital, our first quarter operating cash flow was -$46 million, and free cash flow was -$60 million. While we expect prices to normalize over the coming quarters, we are proactively managing our exposure and believe that we remain well-positioned with strong liquidity to deliver positive free cash flow in 2026, consistent with prior years.

Finally, a reminder that we returned $86 million of capital to shareholders through dividends and share repurchases in the first quarter. This includes the $75 million of share repurchase we completed in January, as discussed on the February call. Looking to the remainder of the year, we remain disciplined in our capital allocation framework with a key focus on returning capital and delivering long-term value to our shareholders. As I wrap up, I'd like to leave you with some key takeaways. First, we delivered a very strong start to the year with results well above expectations. While our core businesses executed on target, we captured additional upside in a higher price and more volatile market, especially in Marine. While these conditions have persisted into April, our outlook assumes a return to a more normalized market environment.

Importantly, periods such as these reinforce our role as a trusted partner to customers, providing them with market expertise and access to key supplier relationships, supported by strong credit and liquidity position. Second, as we discussed, Marine delivered extremely strong results in a volatile market, allowing us to capture attractive market-driven opportunities underpinned by disciplined risk management. The strength of our team and market-leading position enable us to significantly outperform our expectations for the quarter. Third, Aviation outperformed our expectations this quarter, and we continue to benefit from our strong global network and expanding service capabilities while remaining focused on disciplined returns. Our integration of the Universal Trip Support business is on track, and we believe we are well positioned to deliver meaningful year-over-year growth. Fourth, Land is progressing well through the exits and divestitures we discussed last quarter.

With a simpler, more focused portfolio and improving operating leverage, we are starting to see a steadier and more predictable baseline contribution from our core offerings. We expect to build on this trend as we move forward with a focus on growth and improve year-over-year operating income and operating margin.

Finally, financial discipline will remain central to how we operate, from cost management to capital allocation. We remain focused on executing our strategy, maintaining a strong balance sheet, and delivering consistent core earnings growth and cash flow generation. With that, I'll turn the call to the operator for the Q&A session. Thank you.

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ken Hoexter of Bank of America. Your line is open, Ken.

Great. Thank you, operator. Hey, good afternoon, good evening, Ira and Mike and team, Braulio. Great job in a volatile environment. You beat our estimates by at least $0.44. Your full year, you're targeting $0.45. Mike, maybe you answered this a little bit in the last part, but maybe you could delve into it. I guess, are you expecting a pullback, right? If you've got, just based on your estimate, you've got what, $2 remaining for the rest of the year, so about $0.66 a quarter. You're expecting a consistent pullback, a pullback through the year? Maybe just walk us through how we should think about that.

Yeah. Hey, Ken. Thanks for the question. What we're kind of flowing through our guidance is a pickup from Q1. While we're taking some headwinds into April, obviously, it's a dynamic market, pretty volatile.

Tailwinds.

Tailwinds. Sorry.

Sorry to correct you.

Yeah, no, good. We're balancing it out. There's a lot of quarter left. Our guidance for the remainder of the year kind of holds consistently. The increased guidance really is a reflection of the Q1 overperformance that we have already kind of recorded. We're just kind of maintaining where we were before for the balance of the year.

Yeah, said in a different way, Ken, or not that different. Considering where we informally guided you for the first quarter, that $2 that you're referring to for the rest of the year is pretty consistent with where we thought the Q2 through Q4 would be going into the first quarter. Obviously, there's the opportunity for some additional upside, but as you see from what's going on today, we have a different story every day, and we're just assuming that we generate the same level of profitability over the balance of the year that we expected going in. If there's some upside, we'll talk about that next quarter. We decided to play it safe.

To be clear, though, what you're saying now is it's not that it's pulled back to that level right now, it's just you're expecting the rollover and pullback in your forecast model. Right now, we're still seeing that volatility in pricing or profit per metric ton or gallon remaining elevated? Or it's already backed down to its historical level?

It's not back to where it was. It's still above where it was. The peak volatility was clear. Look, when these conflicts happen, the craziness is always most severe at the very beginning if you combine price and volatility and uncertainty. There's still some of that. It's not the same degree that it was the first couple of weeks in March. Obviously, there's still volatility in the market that's greater than it was in February. No one knows how long that's going to last. It could last another week, another month, another quarter. It's very difficult to predict. The longer it lasts, in theory, there could be some additional upside, but I don't think any of us could predict that one.

Again, we're for now just assuming that the balance of the year comes through the way we forecast before the conflict began, and there's certainly possibility for some upside, some additional upside, but we'll wait till we have that in the books and closed before we report on it.

If we look at bunker fuel, and I don't know, Ira, maybe tell me if that's a good read on how we should think about marine. You doubled your gross profit per gallon. Should we expect that to pull back? It looked like volumes were down, yet profitability obviously doubled. Maybe talk a little bit about the backdrop on the marine side, given you said it, they really do take advantage of that volatile market. Maybe talk about the sustainability of that.

Yeah. Ken, maybe just to add in, like Ira said, I think that the peak of the volatility we saw so far was in March. April is definitely coming off that level of volatility, which is kind of one of those areas where you could see some additional incremental. Going off of the average of the month, April is performing stronger because obviously January and February were factored into that. Volatility and price are definitely elevated and higher. For April, we definitely have some, we're taking in that obviously higher level of performance. As Ira indicated, that can go away quickly. As we said on the last earnings call, we wouldn't have forecasted or expected the increase in price and volatility we saw throughout the month of March.

We're taking a cautiously optimistic view on the rest of the quarter and the balance of the year, kind of getting back to that normal.

Yeah, just some facts. Average prices for the various products in marine at the peak doubled in March versus February's average. They backed off about 20% from that max in April, but they're still well above February's average, right? You could look at that number and read into it and say, if we stay at the level that we're even at today, even though it's off the high of March, again, that could be an opportunity for some incremental profitability. Not the same level that we saw in March, but certainly a greater profit contribution than we saw in the first two months of the year. That number could change dramatically overnight or maybe it won't, right? We're watching that very carefully and the team's out there trying to generate the best risk-adjusted returns they can without taking any undue risk in this uncertain environment.

Ira, maybe that's a good one or for you or Mike. I guess seasonality, right? How do we think about if you've got maybe a stabilized April and what you're talking about kind of 2Q through 4Q. We normally seasonally see a sizable uptick in the 3Q. Do you think that goes away given this volatility or would you still see some seasonality there in terms of the bump?

That's really more of an aviation seasonality thing. That doesn't go away. That seasonality was factored into our guidance at the beginning of the year. Conflict or no conflict, the third quarter seasonality is still there. That would always be our say the first quarter is generally our weakest quarter of the year. Obviously, that's not what happened this year. We generally pick up a bit in Q2 and peak in Q3, and then come back down in Q4. The Q3 story shouldn't change that much. Obviously, the delta between the first quarter and the third becomes a lot smaller than you thought it was going to be at the beginning of the year. We could add the fact that John, do you want to talk a little bit about what some of the risks to that might be?

Well, we've seen a lot of the airlines announcing schedule reductions, so that could offset some of the growth that we should be seeing in the third quarter. That's a possibility that we could see some reduction there.

We'll still have seasonality, but of course, we don't know what'll happen. You heard I think Lufthansa announced that they were cutting back a whole bunch of flights to be precautionary. We could see some volume degradation because if this drags on much longer. Even with that, the likelihood is it's still going to be a seasonally strong quarter. It may just not be as strong as we would've thought going into the year if those situations start materializing as the summer season carries on.

Yep. Aviation, just to understand, we saw a nice bump in gross profit per gallon on aviation, not to the extreme we saw in marine. I don't know, maybe how much is tied to armed services, how much is tied to maybe flight patterns that you're talking about or changing flight patterns given the Middle East?

One thing to consider, Ken, when you look at our Q1 performance is Universal Trip Support. As a services business, there's no volume associated with that. When you think about it on a gross margin basis, on a per unit basis, it's going to show that we're stronger, that we did have a good Q1. There were some spot business activities, some COVID-related activity as well. That's not a massive part of our business. That is something that we were able to kind of see some opportunities in Q1, and the team was able to kind of take advantage of those. However, part of the, I guess, the margin pickup that you're seeing is related to the services business.

Okay. Last one for me, appreciate the time, is thoughts on credit extension. Usually when prices go up, you've got to extend a lot. We saw accounts receivable go up, what? Almost $800 million sequentially. Your payables did what? Almost $900 million. When you look at the receivables, is that something we should look at? I know you've always historically been such good risk managers. Maybe just walk us through that process, right? Because usually it decreases your cash flow, increases your opportunity. Maybe Ira, just if you want to update on thoughts on that given moves like this as well.

Great question. First quarter was literally hand-to-hand combat, customer by customer. Obviously, if you've got a customer with an $X million credit line and they're pulling the same volume, and the price of jet fuel doubles, you need to double their credit line, to support that level of volume. You have to decide whether you want to do that. The team has historically done a phenomenal job looking at each and every customer, each and every situation, and determining where we have that room and where we might not, and what our options are. They're all different outcomes, but I think we've worked through that. The team's done a phenomenal job of that to date. Obviously, we're spending more time focusing on credit and related risk than.

Not that we don't do that all the time, but obviously we've stepped up that game in this situation as the numbers, as you point out, have grown by several hundred million dollars in aggregate. It's something we do very well. Something could always, God forbid, go wrong, but we manage that well. We monitor it on a day-to-day basis and stay as close as we can to our customers, especially the most sizable ones where the risk is greatest.

That's it for me, Ira. Have a great weekend. Enjoy all the activities and thanks for the time, guys. Appreciate it.

Thanks.

Have a good quarter.

Thanks, Ken.

Thank you. I would now like to turn the conference back to Ira Birns for closing remarks, sir.

Well, thanks everyone. Thanks, Latif. I'd like to just close out by reiterating how proud I am of our team and the incredible effort they put forth in the first quarter. Not that they don't do that every quarter, but this quarter, I would say that you could use a lot of words, incredible, remarkable. John and I, and Mike are extremely grateful for that effort. As we look ahead, we're entering the remainder of the year as a simpler, more focused business built on scale, disciplined risk management, and a strong balance sheet, as I mentioned earlier. Of course, supported by our extremely talented and experienced team, as I just mentioned.

We'll stay close to our customers, just as I mentioned to Ken, in our last answer, execute with the same rigor you saw this past quarter, and remain committed to delivering strong performance through all market environments. We know we haven't always painted a clear picture with all the exits and transformation efforts that have almost been completed. I think our story is getting simpler. We're able to focus more on the core businesses that we've had years and years of experience managing, and those businesses are all generating solid returns, and they all have different levels of growth opportunities that we're 100% focused on now. Moving in the right direction. We appreciate your time and continued interest in World Fuel. We'll talk to you again next quarter. Thank you very much.

Today's conference call. Thank you for participating. You may now disconnect.