Suburban Propane Partners (SPH) 9 May 242024 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to the Suburban Propane Partners Second Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 9, 2024. And I would now like to turn the conference over to Mr. Davin D'Ambrosio, Vice President and Treasurer. you. Thank ahead. go Please

Good for Thank quarter our call. you. us earnings for this morning fiscal morning, Thank you everyone. joining conference Great. XXXX second

me and Steve President our Chief Stivala, Mike Joining our Boyd, are Officer. Executive Kuglin, Officer; Chief Officer; our Financial Chief Operating morning this and Mike

second questions. will will concluded along our remarks, financial we with business. our morning, we quarter the we've This current the Once to session open review our results, outlook for prepared

the within amended, meaning Section conference partnership's call These statements Our involve risks Act condition as forward-looking the forward-looking of XXXX future financial certain Exchange operations. and relating of Securities results predictions, contains XXE the of uncertainties. and statements business of expectations, to

suburbanpropane.com. cause such to discussed statements which We from partnership our those statements, can materially forward-looking acting in and in actual the release, results to to expressly have statements. of our that by listed are at be their some oral on as attributable in qualified entirety differ are All such viewed the or which its referred important subsequent behalf cautionary statements press written website cautionary on persons forward-looking earnings could factors

may XX-K disclosures XXXX, regarding fiscal which forward-looking on statements this the additional for obtained on ended SEC. risk September filed be contacting year be at Copies Certain XX, by or discussed be measures will call. the report will annual ended March Our business non-GAAP of and contain today, Form for XX-Q the XXXX, Form the period XX, the partnership factors. end and

information X-K, SEC was morning. of a measures those in furnished to our We why Form description as which have of useful a we this believe be as discussion to this the well provided

a Form be of website. available our Relations through section link in X-K Investor the will

I will over to point, call turn Mike? Stivala for opening some the remarks. At Mike this

across the cold of morning. with reported of season Thank operating our widespread vast for mid-January, weather territories, and you X-week were in XXXX during heating majority joining year. the days Davin, extreme the colder prior presented period The unseasonably temperatures today. Great. XX% which fiscal of than warm all degree Thanks, exception good us heating a

XXXX the warmer temperatures which were normal. first quarter normal, also a followed warmer quarter, was X% than fiscal that For than average second X%

warm priority, the demand While things service controlling through for purposes, in managing leverage impacted business they experience selling providing again weather to exceptional were as able did namely customers, heating negatively safety managing a and once season, customer challenging an expenses. highest the keeping our our we can their job operating outstanding prices heating personnel our our and to control, managing

in In base customer recent and to the trends offset in heat-related continued some the demand. addition, our of favorable helped shortfall

year. was As compared below prior to just prior quarter a result, million, quarter. for second were the XXXX EBITDA quarter down the the X.X% year million $X $XXX for fiscal volumes of the Adjusted or X.X% second

to leader to including increase our we excellence increase Arizona gas industry, modifying In additional the practices manure our that operational an to local be install the processed has continuing of Stanfield, natural propane to the efficiencies, are a and made us driving renewable dairies solids manure collection amount volatile in area identifying operations, intake. in mindset

injected have to the production a quarter an with amount RNG daily improvement second to are additional of of the making, of facility day result, are to average continuing we improve And compared the an even further. per at injected we Stanfield that As increase MMBTUs of fiscal the of pipeline the X.X% during XXXX, fiscal XXXX. enhancements opportunities continued average with quarter X,XXX levels we first

in anaerobic improvement capital Upstate digester Ohio New construction equipment installation facility Adirondack and RNG our Columbus, at continuing We're for our the Farms of advance the our York. to of also plans facility upgrade at

expect facilities be the of XXXX. second half both completed We to in calendar

strategic the Florida Finally, small of the closed second total on in acquisitions propane to X $XX end and we in of Nevada, approximately markets quarter, million. subsequent investing a

remarks. on season, I'll results, demand and strategic warm our business carbon our the energy in in fiscal a customer delivered some moment, weather core In making steadfast alternatives. commitment for XXXX our solid long-term growth renewable come personnel heating objectives the operational So we our of in weighed growth of while strategic fostering investments while back to lower closing remain propane

However, quarter over more at to Mike Kuglin to this turn detail. in discuss the it point, second Mike? I'll

our million quarter our Thanks, for mark-to-market reporting, commodity million of gain as prior Mike, the compared which $X.X the unrealized second an in To of . excluding impact I'm previous and good of resulted quarter morning, loss be second unrealized $X.X hedges, consistent results, to I unrealized on year. the in with everyone. discuss an adjustments

common a refinancing the losses loss resulting these and extinguishment as on equity debt the and well accounted Excluding items under from as our credit of agreement the of equity acquisition-related method noncash the in common as unconsolidated as transaction or for to per the well our in subsidiaries prior the unit $XXX.X year, of net $X.XX costs million or compared net for quarter $X.XX year. unit per was income income prior second $XXX.X million

to in Adjusted year. $XXX for the quarter $XXX EBITDA the second million was compared million prior

growth the were resulting most from expansion of our R&D margin the our from quarter by lower contribution customer benefited our mentioned, demand earnings but facilities. Mike warm from heat-related base, quarter weather in organic and As unit during greater impacted for

of weather which the cold in quarter second normal as prior degree prior were X% the for of quarter, second According throughout second to days, impact gallons was the temperatures in primarily mid-January. a and warmer propane year, lower X-week Retail measured gallons, extreme were quarter, than X.X% much average cooler than heating for widespread due to quarter. the the in NOAA, temperatures than million the XXX.X sold except of warm X% period year

mid-January same last influenced degree that an days colder the heavily to Although compared were experienced heating days increase by we heating in the year. year, period XX% prior was increase degree the than

cold average month blast than for weather, were temperatures warmer of short-lived normal. the X% of the Notwithstanding January

March, month prior X% the year. year. the prior than than of And temperatures warmer were warmer were the and X% than XX% warmer and for average normal For XX% February, temperatures than average warmer normal

From decline the perspective, levels million March lower than the At the of XX.X second inventory commodity historical seasonal quarter, was remained propane the X% levels, yet XXXX higher this which March. U.S. propane a the during were the relative X% elevated to than inventories but of year. a experienced in U.S. average for barrels, for at time levels end X-year quarter,

relative gallon, increased basis and $X.XX for to X% the quarter per Mont of year Given prior second the the other compared propane prices prior Belvieu, in to inventory decline factors, the year. wholesale

gross impact from per unit margin higher $XXX.X to our adjustments quarter the quarter of the margin compared contribution the million assets, earlier, due higher $X.X mentioned or year, on gallon Excluding increased I unit to extent volumes primarily and the for RNG propane million the that the an increased propane by second prior X% second lower to hedges margins prior Propane X.X% $X.XX of mark-to-market offset or compared margins the commodity sold. for to total year.

million combined expenses, or for due payroll million G&A fuel operating and to $X.X second respect expenses, $XXX.X increased to primarily quarter the offset With year the in expenses also by benefit-related higher reported The prior of partially our X.X% of compared to lower excluded expenses was which prior million impacted operating by volume-related variable comparison other and EBITDA. in G&A from of acquisition-related costs $X.X year-over-year was and year, adjusted ] the costs. costs [ and

in our prior of higher and inventory year primarily Stanfield, hand. the the production to propane operating efforts million borrowings lower and than spending from was million Net at and growth was as was the the second partial Adirondack million on under compared for $XX.X essentially level tanks benchmark construction rates level by quarter with advancing quarter by a cylinders lower our for due at outstanding flat borrowings to capital $XX.X under refurbished interest the we Total facilities, facility Arizona the year our of capital on and and performance credit RNG expense revolving for of a prior savings offset from revolver. higher of Columbus associated offset as leveraged spending interest improving facility average $X.X

our to sheet. balance Turning

flows $XX.X in under we operating million borrowings the quarter, second cash repay from the During activities to revolver. utilized

of at the X.XXx our XX-month consolidated trailing repayment, ended the ratio compared debt first of X.XXx a period the for the to leverage to end quarter. As March result XXXX improved

well following within requirement excess metric strengthening levels our the to Although warm remain repayments covenant our leverage on from make has debt with been the relative the in weather RNG debt elevated and impact cash balance we progress earnings, the sheet from of continue flows. X.XXx of the to historical acquisition,

the to maintains grid our to maturities, refinancing provided our the March new As second scheduled group. in growth and we the opportunistic our which XXXX. long-term quarter, and position the of strengthen further and refinancing are facility financial in liquidity with debt initiatives. our pleased covenants strategic We're of during of steps extend by interest million support appreciative our pricing continued was provides very $XXX debt outcome enhanced rate this financial ratio extends and further with previously X-year took maturities the reported, support we flexibility of This mature bank revolver,

to With turn back that, Mike. the I'll call

Mike. Thanks,

unit. annualized fiscal As common to quarter of declared XXXX. quarterly rate our unit XX, of per of Supervisors distribution April respect announced $X.XX equates of per on $X.XXX of in our an common Board our second That

will paid May on record unitholders as X. to distribution be of XX quarterly of Our our May

ended healthy Our trailing for the at period to March coverage distribution XX-month continues X.XXx remain XXXX.

to the Looking rest XXXX. of fiscal ahead

demand, and national will period some our executing initiatives to several our our markets operating initiatives strategic throughout segment we Now the of base to and to growth customer beyond turn personnel retention our heat-related continue that to are model support critical expansion enhance in in market further on our for propane footprint. efforts the operations our

prices, California operating improvements RNG while benchmark as continuing minority-owned been lower lesser production increasing to and, platforms production our LCFS are extent, and ether Independence and for of have RNG In revenues level are clean carbon support and We're making the lower Oberon performance the the facility facility. scale to natural gas ultra-low hydrogen, renewable at at their stabilizing that respectively. subsidiaries, to of sale and prices by operations, Fuels we dimethyl the our also influenced Stanfield a our Hydrogen they overall

and Suburban that we innovative sustainability for growth and energy subsidiary. is our through growth Propane our transition still our on and through propane comprehensive early are attributes renewable carbon strategy technologies of Suburban and energy the Energy investments builds long-term in products Renewable low positioning stages, The in the

successfully a And facility. more cash from mentioned, flow extended quarter excess $XX balance as Mike using credit we and the by and second debt than million reduced our our overall renewed sheet perspective, during revolving

help a to are sheet maintaining growth long-term balance As strong objectives. committed always, we to support our

at challenging employees of safety X,XXX to take hard efforts of Propane extremely proud want focus Suburban to thank serve. I the than our on appreciate Finally, communities opportunity we your heating morning. their and unwavering during the all attention and another of the and And for this always, season. as we and this comfort their more I'm work support customers

we'll if Ina, help open up you And that. now with questions. to can And it us

your of [Operator Jeffrey first Mizuho Instructions] from question the Christopher line comes Securities. And from

in those Maybe expectations see maybe the excess cash how to for years. weather are term, the long normalized on priorities what with do you just the maybe with talk of the coming And then about excess funds. flow in kind

it lowering is important. quite propane renewables leverage, but seems talked businesses bolstering about and the like also of You've

Thanks, Chris. Yes.

very our tuck-in a a platform, we're We've amount debt our if taken you in utilizing of at propane done delevering. cash last towards We've obviously approach doing I several and also look think build-out the fair balanced we've excess of acquisitions. energy invested the flow. renewable years,

bit and, that more the think transition. of a in the the our about frankly, stage I the in mentioned see the opening I to country you're world same. remarks going see energy we

that we're transition. early think in the I of innings very

and set And energy the the business future develop by we their as want in distributors for trusted markets we we our decades. intend real to of benefactors see advance history we maturity and long energy newer, local as to cleaner term those energy XX-year investments to as making up further of coming sources in cleaner ensure platforms the good that renewable over energy that the sources, of leverage

the of So I bit from think going you're us. more to see a same

a of and know, strength following leveraging a event you acquisition bit a the a job balance ours, we always of down good we've core of maintain bringing As of done December sheet Equilibrium in with leverage principle that's as XXXX.

so to that's what from think you see And us. I could expect

that generating the also will Obviously, give cash as be we're as in begin to investments incremental that and years, we'll the we to expectations making the mature be coming kind and deliver us EBITDA flows strategic see of well. opportunities

back kind talked that there million of flows, cash Maybe part around ballpark is first think, Any generated? any cash I updated Like past. the that the just just excess about thoughts flows of or of you $XXX of question, number? going to kind the in

Yes, This winter fluctuate with year earnings. that's has going scenario. warmer to a been

were we EBITDA. quarter, $XX about million first down -- we're The year-to-date, in down year-over-year

Second the that a in a quarter quarter relation followed was what great quarter. weather first but was, to tough

in level post is post between a continues of impact that CapEx post to million growth is we the be level our debt heating earnings going affect. and the amount of $XX million earnings and season decline flow to generally to depending range flow have. But CapEx on the and growth So service going excess temporary as cash cash of $XXX on distributions, that the

as just voluntary something the on compared an interest maybe far market update quarter as in as then And transportation RNG to brought in last participating up Great. market. the

are any items there or move? that gating you're to Just particular there update see any waiting

Yes.

I a resource development. we think, all, commercial first dedicated of the hired to RNG

we activities sure the term long you've that market pretty way building seen the we have dedicated late. That for in of sales developing. commercial the prices market. So California RNG voluntary relationships been LCFS is as I'm depressed are have now see some

I from first the X% think the from about quarter we're average quarter. down this

create that some in does that and So revenue market. volatility opportunities

markets RNG computing the to because to going again, So I for the more the demand source for do a of you're see think uptick see from need in I good a concept of longer enhanced think transportation generation to to grows the for see data electric a is for for be of and adoption as just centers, significant for going power term, and the in grid where vehicles innings, going way RNG I of and up solar think in increase think beyond wind electricity grid. RNG is powering to we electric and reality with sources the with the of we demand from the amount never with do of expand more the electric the pure renewable demand on AI developing demand I -- the early we're expanded keep back

demanding we that's, And So the electrification energy we as or think the XX I see voluntary the additional we to reality see. transition cleaner of towards RNG of sets over markets in that years the developing X next the for opportunities that need the think, course future alternatives. of I

Understood. update follow-up past, kind Great. businesses? just expectation Is forward? kind those fit as like Maybe Hydrogen that and that capital Fuels into In more expect? on there's of a going Independence we Any well. of of on the still the the been kind Oberon ratable should

closer both supporting of to the to going of advance serve. towards advancing they products. get next course both enhance both closer they're and scale. scale they commercialization supply of think full-scale capital And we've Well, to be business They're opportunity products will to their them production towards seeking that to grow their the year, the bigger their commercial respective businesses the over been as I And of of models. continue those

be beyond Propane Suburban resources. behind And us them to we that source the been these what we've need perspective stake continue bigger of to we'll continue I capital. welcome start-up but great of in weight attention we've support to in of like whether or to additional continuing a a to source just say, capital, been maintain continue support our companies capital that of, to support from resources pay And to ownership additional put we while investors to the to should

-- determined to progressing next be the a and X lot those I nicely, year. going frankly, think businesses over is so that's are And

Instructions] [Operator

further turn Mr. I'd There this questions at are no like the remarks. Stivala conference to back to closing time. Michael for

And for Great. all of summer enjoy third healthy you and the your you safe I We quarter. and August your support, all catching today. Ina, the look our it for as up our Okay. and with close hope . forward Thanks thank to attention after approaches. in you stay --

Thank for for conference Thank you. today. That concludes participating. all you our

disconnect. all You may