Star Group, L.P. Price & Performance (SGU)

This conference call may include forward looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties in may cause the company's actual performance to be materially different from the performance indicated or implied by such statements.

All statements other than statements of historical facts included in this conference call are forward looking statements. Although the company believes that the expectations reflected in such forward looking statements are reasonable, it it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10 for the fiscal year ended 09/30/2024, the company's other filings with the SEC. All subsequent written and oral forward looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety the risk factors and other cautionary statements contained in the company's disclosures. Unless otherwise required by law, the company undertakes no obligation to publicly update revise any forward looking statements, which as a result of new information, future events or otherwise after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff? Thanks, Chris, and good morning, everyone. The first quarter was a busy one for Star due to our acquisition related activities combined with slightly colder temperatures. And adjusted EBITDA rose $3,000,000 year over year.

Despite our increased workload from a busy quarter, I'm pleased with our overall ability to control expenses as well as our ongoing improvement in the performance and contribution of our service and installation business. Increased productivity and efficiency within our base business has been specific area of focus for our operating team. So it's quite encouraging to see our work having a positive and meaningful impact on the bottom line results. Looking ahead, we're benefiting from colder temperatures thus far in the second quarter and in fact January finished 20% colder than last year and 7% colder than normal. Pace with the added demand. I'm always delighted to see how well our entire team steps up when it matters the most and I could not be more proud of their efforts. As previously reported, completed a sizable strategic acquisition This further strengthens our propane presence within company's existing operating footprint and we're excited to welcome our new employees as well as a quality well regarded brand to the Star Group family.

We'll have to see how the remainder of the heating season progress but we remain 100% committed providing our customers with the outstanding reliability and service they've come to expect. And at the same time, we will continue to focus on operational efficiency and controlling costs. I believe we are well positioned for the remainder of fiscal twenty twenty five. With that, I'll turn the call over to Rich to provide additional comments on the quarter's financial results. [indiscernible] Thanks, Jeff, and good morning, everyone. For the quarter, our home heating oil and propane volume rose by 2,000,000 gallons or 3% to approximately 82,000,000 gallons as the additional volume provided from acquisitions and somewhat colder temperatures was slightly offset by the impact of net customer attrition and other factors. Temperatures for the three months ending 12/31/2020 We're 4% colder than the prior year and 10.5% warmer than normal. Our product gross profit increased by $5,600,000 or 4% to approximately $151,000,000 due to an increase in per gallon margins and higher home heating oil and propane volumes [indiscernible] We realized that combined gross profit from service and installation of $6,900,000 dollars for the three months ending 12/31/2024, compared to gross profit of $4,400,000 in the prior year with a $2,500,000 increase due in part to recent acquisitions as well as improvements in the base business.

Branch delivery and G and A expenses increased by $5,000,000 dollars in the first quarter of fiscal twenty twenty five largely due to recent acquisitions.

Expenses in the base business were largely unchanged. During the first quarter of fiscal twenty twenty five, we recorded a $5,000,000 non cash credit related to the change in fair value of our derivative instruments by comparison, in the first quarter of fiscal twenty twenty four, we recorded a $19,000,000 non cash charge.

Net income did increase by $20,000,000 in the quarter to $33,000,000 as the favorable non cash change the fair value of derivative instruments of $24,000,000 and an increase in adjusted EBITDA of 3,000,000 was only partially offset by higher income taxes of $8,000,000 Adjusted EBITDA increased by $3,000,000 to $52,000,000 as a $4,000,000 increase in adjusted EBITDA from recent acquisitions and an increase in per gallon margins in the base business, more than offset the impact of a $3800000.03800000.0 gallon decrease in home heating oil and propane volumes sold in the base business.

And with that, I'll turn the conversation and call back to Jeff. Thanks.

Thanks, Rich.

At this time, we're pleased to address any questions you may have.

Wyatt, please open the phone lines for questions. Thank you. We will now begin the question and answer session.

And our first questioner comes from Tim Mullen with Narlington Management. Please go ahead.

Hi, thanks very much. I have two quick questions. One is, [indiscernible] curious to hear your views in terms of what's driving the increase in the service and installation business? I don't know if there's maybe a focus for some of the recent acquisitions or maybe it's a function of kind of colder weather. [indiscernible] And then the second question is just in terms of customer credit. It didn't seem like there was any dramatic changes in terms of provisions and write offs, but just curious anecdotally you've seen any weakening in terms of people's ability to pay and pay on time? Yes, Tim. In regards to service and installation and the the improvement in the results, certainly there's a component of that rather significant component that's related to recent acquisitions. And that's helped improve the results overall. But we have also undertaken an initiative internally on our base business to really focus on improving performance notably productivity which our employees have really bought into and we've seen some progress in gain some traction there. And then just also look to every opportunity really to sell more products and services to our existing customers. And that's been a program that has been recently launched that has so far gone well for us.

So we're optimistic about that and we'll have to see how it goes. But certainly we're pleased with the results overall. Now with regard to Credit Yes, there has been some in the general economy, you keep hearing about weak credit. I can't say that that that doesn't exist, but to a certain extent, our customers did get a bit of a relief, if you will, in the quarter as as cost of product is down and selling prices generally are down this year versus last year because of the lower cost of product.

We did sell a little bit more because it was a bit colder and we had some acquisitions, but sales are down even though EBITDA is up because of the lower underlying cost of product. But we'll have to see how this all settles up at the end of the heating season.

Sure. All right. Thanks very much.

And our next question comes from Michael Pruning with ten ks Capital. Please go ahead.

Hi, good morning guys. Congratulations on just terrific execution across the board.

Just a couple of questions. So as far as capital allocation is concerned, congratulations on the recent spate of acquisitions. I'm just wondering what you're thinking as at this point in terms of your in terms of both additional further acquisitions, your ability to [indiscernible] and also capital allocation in terms of dividends and share buybacks. Thanks.

So Michael, I would say in terms of capital allocation, we typically wait when we talk about the distribution, we typically wait until after the heating season to make any decisions on changes or increase to distribution. We just want to have a better sense of how the years is progressing We know we want to, we need to make what we consider to be replacement acquisitions to replace any business that has been lost and then then it really basically boils down to unit repurchases and growth acquisitions and those are decisions we make or make it on a regular basis just in terms of the economics and the return as well as just [indiscernible] as you're aware, Some of the most ideal acquisitions and sizable deals aren't always available to kind of tend to come in chunks. So it's timing and things that we talk about all the time in terms of what's the investment investment for the company.

Okay, terrific. So it doesn't sound like then obviously this is [indiscernible] As I'm sure, Rich, is wanting to remind us, Obviously, it is a decision for the Board of Directors, but it doesn't sound like the recent acquisitions you've made should prevent further modest increases in the distribution going forward?

I would say you're trying to put words in my mouth. [indiscernible] decision at the next time we get together, which I believe is in is in April. Yes. We'll have to see Michael.

Okay, terrific. Thanks. And just finally, Jeff, any observations on customer churn Either as a function of the current heating season or acquisitions you've made or just I guess anything new on the customer churn Yes. I'd say reflecting on the first quarter, our customer losses remained in check and in fact on a percentage basis on a gross basis we probably had one of our better quarters in a number of years from a loss standpoint. The gains have been new customer additions have continued to be sluggish. I think to some degree that's a reflection of while the temperatures were slightly cooler than than last year, the prior quarter, last year. But they're still 10% warmer than normal and there was relative price stability in that period. So there wasn't as much movement in the marketplace as there was, let's just say, in fiscal twenty twenty three in the first quarter that we observed. [indiscernible] those things kind of all combined for fewer gains in the first quarter. I am pleased to report and we'll just have the quarter progresses, but we're off to to a pretty we've got off to a pretty cold January and it looks like we've got a pretty stable forecast for February.

And thus far in January, it seems like our new customer additions have every we'll see how the quarter progresses.

Okay, great. Thanks for the updates.

With no further questions, this concludes our question and answer session. I would like to turn the conference back over to Jeff Lozman for any closing remarks.

Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our twenty twenty five fiscal second quarter results in May. Thanks everybody.

The conference has now concluded. You for attending today's presentation.

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