Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Suburban Propane Partners Second Quarter Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Davin D'Ambrosio, VP and Treasurer. Please go ahead.

Davin D'Ambrosio

Thanks Chad. for XXXX morning Conference Quarter this Call. Difficulty] our Second fiscal Earnings [Technical morning our Chief Mike Executive me Operating are With this Stivala, Steve our Kuglin, Financial Officer. and Officer; Chief President Officer Officer; and Accounting Boyd, Chief Mike Chief and we quarter results, This our will along our the for outlook business. review with second morning, financial current we've our prepared session questions. concluded remarks, the Once to we will open

amended, listed Section relating call results forward-looking statements the statements be financial viewed results of which statements press forward-looking XXE could We've statements, of can of and contains uncertainties. materially in important release, meaning referred which Act and the certain in of conference involve cause to business Our XXXX of future as to suburbanpropane.com. the our such factors are actual at as to partnership's earnings predictions forward-looking cautionary that expectations from some on Exchange the Securities within risks operations. differ and those website These and condition our discussed

written subsequent persons attributable expressly to are behalf entirety forward-looking and in statements or their its on such qualified cautionary acting by the statements. partnership oral While

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

Certain non-GAAP call. measures be this will discussed on

in X-K, was SEC The available well believe link will information of Form we through the provided our a this Form this the as measures Relations description which useful a be X-K website. have Investor of section discussion to in morning. be as of We those a furnished to why our

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

Michael Stivala

customer of you near joining the The warm temperatures all Good us dominated much by fiscal throughout the Thanks, purposes. in half United for the record quarter eastern second for which was heating Thank of today. demand quarter, limited Davin. particularly morning. XXXX States,

January fact, the for X-month than and months on critical reported one of normal. record. demand, during temperatures most XX% In average February, warmer And as that warmest stretch were the was heat-related

colder-than-normal of Our Coast well, historic in certain the precipitation with shortfall experienced Customer operating operations those responded helped snowfall temperatures, demand levels volume coupled to West territories. in of in some offset which our areas. territories Eastern and

the cooler of The second created quarter some of ended fiscal which part quarter. third early end into the March, a with temperatures the momentum has burst late of demand customer at for

many XXXX in when and look latter and its footprint XXXX near-record of heating of temperatures at Therefore, end the was unseasonably December cooler of March, the the colder-than-normal at XXXX, you majority the warm. entirety, the of aside temperatures half warm, our season heating season in in from areas

over However, And success volume managing base scenarios they an and controlling we stabilized past our operating performance. of and and have customer excellent through expenses. have service, prices job things initiatives, selling outstanding several do which our personnel overall before growth the the helps control, providing with managed these can support customer warmer retention our our the managing base, weather years,

a prior help in EBITDA million overall which the of demand, third earnings mitigate year in As the were the coupled first quarter, $X.X our of year, will the weather, the to temperatures of challenging down volumes quarter below the up compared was start strength shortfall X.X% some Despite prior experienced cooler-than-normal quarter, in second softness second performance, with the quarter. to result of XX.X%. quarter a result the was adjusted as the and second quarter

of announced renewable renewable RNG These when Ohio constructed detail front, to second capacity our per quarter, in energy the at the for Farms plans or platform rate announcement, million. gas the Columbus, be year, producing completed of beginning of XX a first during strategic our we approximately with once the run assets, natural mentioned acquisition the $XXX RNG produce combined so. and earnings a and expanded XXX,XXX facility is On at New to as Stanfield, the previously in platform upgrade assets that quarter Adirondack Arizona expected next York, in creates months or MMBtus over Upstate expansion are with

into acquisition the activities agreement Since functions. Equilibrium as to accounting has December, financial seller, we and including focused back-office management Capital, from under to certain benefit the equilibrium integrating have to operational transitional end the XXXX. deep the December of through closing ongoing of provide that Suburban the This such suburban support cash and assets expertise operational at the the team management, been on and agreed management platform reporting continue and knowledge certain transition. during functions these to services and extends Suburban a operating management management allows

the of injection. facility ongoing completed credits and time that DX California, fertilizer and expansion the pipeline LCFS exceeded facility, tipping of were acquisition. Stanfield capital beginning At the we Stanfield And the revenues the in combination from expectations a sales, March, efforts at RNG have daily for substantially DX since sales. generates have RINs, fees we our of

sources into Columbus food in main The food earns and tipping as the facility one fertilizer. fees The tons approximately accepting facility as from area. Columbus receiving biogas is large waste waste and waste of of for and XXX,XXX and for well municipal several processing providers beverage the processing

able we of to the deploying additional the additional sales. R&G, will and credits DX earn RINs, at RNG, upgrading to order capital gas We upgrade biogas will LCFS be be from which fertilizer quality equipment in into sales pipeline to facility install revenue at time

and quarter facilities immediate earnings for our as the fiscal run well benefit facility earnings from will rate to efficiency RIN acquired capacity the Columbus EBITDA at both LCFS once are around potential expected from XXXX, be incentives is installed from potential gas capacity, We values upside additional production Act. Reduction upgrade equipment expect of Columbus gains, run credit achieve Therefore, with fiscal to facility, the as Inflation incremental there increases third contribution XXXX. in in while the EBITDA reach as rate to facilities the an

will up Equilibrium has so, million to XX% venture Suburban $XXX In facilities, or acquired and growth the agreed approximately RNG and long-term been Renewable Suburban for additional Under $XX invest a the fund and joint have joint to venture to identification, will own million. million partnership will once X deployed. years which operation addition platform $XXX over as of the next serve Energy the capital of have Renewable committed projects. development a and to the Equilibrium formed of parties fully agreement, Suburban fund the

additional and varying in partnership. analysis initiatives. for of number strategic this additional We on our of projects I'll RNG closing remarks under In have moment, opportunities and some color provide back a a come stages venture joint

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

Michael Kuglin

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

subsidiaries as accounted the Excluding unit to of Adjusted or transaction for our second income $X.XX was prior and noncash per of million the quarter the $XXX quarter these for as in equity costs, acquisition-related well $X.XX unconsolidated and equity net the to compared for million unit net common method $XXX.X million in year. or items prior under year. EBITDA $XXX.X the common earnings the was $XXX.X second income per compared million

critical were the by for Mike as pressures impacted our warm mentioned, of on continued months extremely of well from resulting quarter the the our most earnings during as expenses. As impact heat-related quarter demand, the lower inflationary weather

organic in margin operating quarter management the our customer benefited challenges, at for the contribution RNG from beginning headwinds facilities those and growth solid base, earnings Although the presented of acquired from the our continued quarter.

was X% quarter second the normal the days, lower to the average With heating weather, weather, XXX.X than quarter. in due were than customer primarily year were temperatures second X.X% in favorable which XX% as and sold respect by gallons the trends. degree propane partially than warmer warmer warmer million year, to offset prior measured prior base gallons, Retail

Although by pronounced most in year, operations days months while and normal we during our critical February the in overall generally our compared to operating East and experienced operations impacted and the in temperatures were degree our most experienced were warm decrease heating January an negatively territories, temperatures. extremely of West the cooler-than-normal prior Midwest to

year and were and of than For warmer last par the January the that record warmer warmest for XX% period. XX% for and than February, on average the period same month X-month on temperatures were normal

contributed XX year. at According were XXXX March year for compared in quarter propane than perspective, and than XX% commodity elevated to historical to declines second a of end the From the barrels, prior inventory at to the higher during quarter. U.S. inventories XXXX second and Energy propane in March the was wholesale Information prices U.S. time remained the levels that Administration, which of the XX% million averages higher levels

to inventories as gallon Belvieu, factors, of basis the XX% a Mont increase result As per year other average prior quarter wholesale quarter. $X.XX prices second and second the of the for decreased in compared

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

commodity unrealized the increased propane and affect on of adjustments, compared a for primarily offset mark-to-market expenses. prior quarter to price the management $X.XX other due unit of margins of during impact declining year, to second X.X% helped Excluding delivery or selling the impact gallon to inflationary per the our pressures period costs that prices the

and X.X% payroll second $XXX.X our benefit-related primarily lease vehicle across costs. quarter areas of the due to continued and inflationary fuel $XX.X pressures operating and respect expenses increased for and the million the higher business, to including to of higher With G&A or million expenses most year, combined compared prior expenses,

by our from were expenses within acquisition-related the EBITDA. excluded of costs and were the prior the operations impacted Included with expenses assets. RNG million, also year second the acquisition associated the comparison adjusted $X.X of to quarter G&A of for costs The were which

operating have pressures superior while will Nevertheless, moderating investments continuing focused been our to efficiencies remain gradually drive our provide flexible the months. inflationary last technology persist, to model service. on in we over Although customer they and few leveraging

under XX.X% for or bonds $XX.X from borrowings outstanding benchmark borrowings interest due as the with the of acquisition, under million green $XX.X to was revolving well higher interest the higher quarter higher rates RNG of in acquisition. facility than million expense of in assumed $X.X average the financing the credit level RNG for year Net our the revolver prior our million second as coupled resulting impact the for

million $X.X carry year higher than long-dated capital interest the of in attractive Stanford, an associated bonds of capital production the of and million are for fixed the rate Total growth RNG spending to green with was Arizona. prior quarter due the expansion upgrade The primarily $XX.X facility X.X%. and

Stanford at capital Although as to construct and facility complete, upgrade the is the take in the we the construction substantially levels expected XX near spending be Farms, to complete. at facility months our expect higher-than-historical growth term which RNG we RNG is the to install Columbus at equipment Adirondack about facility

our to sheet. Turning balance

activities flows in our the renewable all R&D borrowings support make building operating energy platform. of During from goal long-term investments a to purchase out overall second additional the to the assets of cash under production revolver quarter, strategic we and utilize fuels, in and

with of X.XXx. the on the result assumption trailing consolidated ratio a included during resulting to our second impact debt green March total of XX-month the from which XXXX, warmer in of weather the earnings period increase quarter, leverage ended RNG increased the for As the along the bonds, acquisition,

and we X.Xx, metric our Although target elevated requirement our level within X.XXx. the historical debt remain of leverage of levels relative is well to

period working excess We fiscal have our generate high and historically through into of flows. quarters, we now capital needs expect moved to the seasonal cash

focused remain arise platform. growth, to the excess on sheet, including for flows RNG and cash to the fund balance continue to opportunities the as utilizing will capital strategic our We strengthen growth

revolver more our ongoing growth than to capital initiatives. expansion under plans our ample borrowing strategic We have capacity support and

add temporarily earnings the the as expect our metrics run over will potential. leverage time our profile, the we will rate improve to assets reach While acquisition recent debt-funded leverage the acquired from

record track sheet. As stated stewards proven of our being balance last have and great I quarter, we long a of

our provides short-term the long-term We powder of have and earnings the protection that added of conservative long investments management sheet also impact provides but for softness demand potential believed for dry opportunistic initiatives. weather-driven a balance strategic execution

we the course the all $XXX of years, fiscal Over while to the growth of total reduced invest our have by last million business. continuing debt in X the nearly

will we on sheet. stay a also execution focus strategic strong long-term Back continue our you, the we to of As focused goals, to on balance Mike. maintaining

Michael Stivala

Mike. Thanks,

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

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

Our at in earnings distribution the trailing associated X.XXx expenditures and coverage higher quarter capital R&D the for continues and platform. XX-month remain despite healthy lower to our period with interest

few our under build-out Suburban and of a just So energy the more strategic on platform initiatives our Renewable renewable Energy. thoughts

In carbon new the the is the Propane low-carbon stake Oberon in combines RNG of that renewable to aggressive carbon order our continued the distributor the carbon the this addition of California our Through States + DME, propane DME meet the called of we the and offer low our to with Propane to efforts reduction in of during platform propane benefits product blended expansion advance ownership beyond. United reduce Suburban only alternative Fuels, in intensity to renewable quarter, standards in further to traditional commercialize to rDME. producer XX% new

We XXXX. certain the offer the to markets And of for blended the in other all product ultimately, began pilot California of have our parts results country. of of customers April to with we our Southern forklift date, favorable plans California, begun parts in other given expansion in to and program

level We to ratios, increase also performance carbon order greater from reduction. product testing blended higher have and to will to evaluate the on third-party been we of analyzed, current testing emissions Once expect have blend even have the able blend profiles. an which at in results be impact levels started engine

clean production for our business commission their expected Independence which in team in markets, to the Independence As in local facility in to online materials Under is Hydrogen, handling investment initially form XX% distribute and working month. hydrogen Virginia, produces come locally model, have to first been Independence hard Hydrogen Hydrogen clean their for equipment. gases hydrogen this

worked the distribution similarity investment team model business support our closely provide Suburban functional XXXX, their March Hydrogen relative has at model to our Propane -- our Since model. of given in relative our to number to a making Independence particularly with the across of areas business

operating mature for best-in-class model, have and conclusion, been In long a known industry. we our within propane highly competitive

Our the in several personnel an challenges operating economy over done even managing the past face job our core propane many years. have in the excellent operations of

core the created to our growth We Suburban will for business, of Energy. growth our build-out the continued the under propane energy plan, on continue long-term foster subsidiary, our of while of execution platform focusing strategic renewable newly our Renewable

and I of renewable serve sectors energy hard during and growth local proud As their and our as the Suburban opportunity customers I'm low-carbon all our And legacy you, finally, position to X,XXX this their energy last the to making of sustainability, across valued the communities distributors the thank economy, of society than safety Propane alternatives, want strategic investments, unitholders. value XX-year take leveraging and quarter. for of our transitions to for Propane more extremely the solutions of creating at work efforts. to many unwavering are trusted focus long-term for long-term on Suburban and comfort employees we we

always, we that? support would to call helping up As wouldn't if and And us questions. attention mind your open with Chad, now and appreciate like for you the

Operator

[Operator Instructions].

Gabe Moreen First be from from Mizuho. question will

Gabriel Moreen

RNG A opportunity multipart the on set. question

I running, I some or and about is hedging then to streams higher going the the reference wondering to the of facility. Arizona guess, of be kind CapEx wanted to going out with that coming up what forward. hedging, know also revenue facility Just now being the of different approach, to And not

trajectory year? be if for kind us around and sense the you amounts? of Ohio relative much of wondered a the might be good how much of could kind might spend the How facility, this give of Just kind next,

Michael Stivala

Sure.

injecting this as and that and our the value we point, LCFS -- get pipeline, into customer we're the X first long-term have agreement not all your So credits gas question RIN is at with of offtake the contract. that of hedging, on -- large that through we're a we taking

earnings risk, a sort the to attribute acquisition consider we of had As downside this normal well, some certainly, were really as benefit helped values be but market programs a the our we call, decline on of in to RIN LCFS potential last more of markets which this environmental as the I with evaluate LCFS business states contemplate what the we in potential evaluating for the potential and opportunity, the more when country. with said seeing also around us for upside

So at of see and from facility. one deliver as I starting of we're need is injections And had said to particularly the fully capital we things now daily fact, that we're the on we're that trajectory my to opening actually kind of that the this to hedge. evaluating injection, our point, in in to daily remarks, expected, starting We're the to a we're we've results gotten starting some not Stanfield pipeline actually, expectations. deployed, see see exceed the

for So us a good to see. sign that's

exploring additional that's And production fertilizer we're also to additional off, the off opportunities process. sell coming

So efficient today, credit as to sales. ways where as I values current we new well be opportunities environment, sort finding And and do we're happy more already in of upside. the there's believe think are we're identify for

in $XX million then XXXX. of still XXXX. New point and have million $XX construction of another of fiscal There's it XXXX in going to upstate to take capital Columbus is year As capital the bit going equipment. is the but in think to most a in at of going capital upgrade this million-or-so be maybe year, I the capital million the this up facility assets might this of There is of about happen that question, York. RNG to XXXX. Most to another into go the $XX we to in $XX put likely little And probably

that's And we're So we're the to growth on of at. projects. for you CapEx understanding helps with major that -- X kind relative where trajectory that hopefully, those

Gabriel Moreen

was you. gave very helpful. sheet the I kind is And currently behind balance that winter's closed. Mike, everything that now then wanted I guess, comfort of to, with The

quarter's call, sounds you comfortable made occur it about last think accelerating this letting comment I quarter, potentially like you're naturally. it some Maybe deleveraging.

over there's kind What just of thinking change just a -- in there. stance been of your latest kind or wondering I'm if there? is So I'm time.

Michael Stivala

Yes.

full XXXX, are, I in run think reach capacity the will we're where assets these leverage. down naturally Gabe. rate we comfortable When bring that

total have excess actual free -- last fair as that flow opportunity well March a of the we're let's The our $XXX low if the And assets and a you look we up in the few delever end at us cash obviously alone. relative amount other only of of bit invest. was debt million about interesting debt, RNG of to given after a the thing which about million that's September, over years the of has end say, as point, at one $XXX investing the of things, to

flow think opportunity growth afforded balance deploy the So investments capital in propane the to of DME. business excess such higher strength of sheet, capacity the made and has we've investments generating in an opportunity other cash us and Hydrogen RNG platform really I our the the as

Operator

be Wells the Baramov [Operator question Fargo. Ned next Instructions]. And from from will

Ned Baramov

so also approximate us facilities, your -- looking give space funnel? number sense details maybe these competitive And on indicated into? Mike, you typically the is you if who a of your investments, of in your you remarks, RNG at of run indicated size you Are the builds or evaluation. RNG new how you can today? operating do a provide Could and opportunities more maybe under you other remarks, in

Michael Stivala

Ned. over all board, It's Yes. the

potential. I the think framing first of all, just

if deploy over the which which of you joint we're sort capital what think that, at Suburban's a with $XXX years piece next of we million. talked $XXX the I frames looking if combined, X to with the so, about of says potential. -- That is or look that Equilibrium, million venture of about

we're we're capital right opportunities mostly platforms now active Columbus that X that of to to certain a facilities that like bigger a Farms to straight at We the XXX% bit similar little extra to upgrade our doing York. to from capacity Upstate have or range that of RNG capital in in Adirondack want investments opportunities more a we need don't little doing what small bit handful maybe a X maybe ownership of, facility, take New up get need maybe in building

have are maintenance that but the the a have, that we're engineering, the network firms very now identify we support is and to a in with -- team also we we're with our we on that providing all thing projects, construction, that excellent good And with with relationship plus -- there, close York and good we that opportunities. have firms activity New working really that equilibrium of helping us additional procurement the

funnel but warrant deploying pretty that going say the on a nothing patient disciplined capital. to approach and opportunities there's very and So us imminent, I the would we're identifying that is best take is robust,

Ned Baramov

Got it. if Or while this RNG still the up? transactions tuck-in And Is hold? sense then make how ramping do at are on you think kind you? smaller assets of would for look they about propane acquisitions you

Michael Stivala

to to renewable to flow such our it business propane the going still source propane in cash the continue business. us and The energy. of bread opportunities, We're higher is is as growth allows invest that butter, feed

to presence either couple that from into or presence that tuck-in, of active can a the have population we now. that fitting highly is our strategic also small where enhance benefit are continue going but promising, we're are a relatively view We And that have not a There's to for where enough strong a in funnel do growth so very markets have very platform. ways analysis we look big identified to right today. opportunities attractive market of Suburban

seeing. that opportunities of are we're those So kind the

you more season sale us. this the more contemplate and of where heating year of time the business up behind once smaller companies the is is, the for their And know, as putting

is So M&A market also the build and the propane starting funnel to nicely.

Ned Baramov

I Great. One item, housekeeping if may.

as a break you from Suburban Renewable the segment? out will Energy forward, separate subsidiary contributions Going your

Michael Stivala

platform probably RNG to expect newly to rate, expect tail when XXXX of I acquired would would the the that, I end of see get do at sometime is Ned. us earnings the As run

Operator

our and would I conference [Operator back to gentlemen, closing concludes Stivala any question-and-answer over turn for Mike Instructions]. session. the remarks. Ladies this like to

Michael Stivala

Great, season, Chad. of enjoy you to that and look hope you coming for and we you after all your again fiscal today, your forward end our third the quarter. talking the support. Thank again Thank attention We summer to you.

Operator

you, thank for presentation. conference Thank The attending And sir. today's concluded. has now you

You may now disconnect.

Suburban Propane Partners (SPH) 4 May 232023 Q2 Earnings call transcript