Earnings call transcript Q3 2023

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Operator

Good day and welcome to the Suburban Propane Partners Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note, being recorded. Please

now Davin D’Ambrosio, would like Please to to over conference the Vice ahead. turn go I President Treasurer. and

Davin D’Ambrosio

us fiscal Good morning conference Betsy. morning, Thank for Thanks, everyone. call. for third XXXX joining our quarter earnings you this

this Steve our and along Joining we Operating This Boyd, Officer; our morning we Chief Chief and will Mike questions. outlook Financial for we Once will prepared to current third our morning, results, Chief open Chief with Kuglin, Officer are quarter review Accounting Executive the session Stivala, me business. President Mike Officer; financial our our and Officer. the concluded remarks,

call predictions, of the results related of conference to Our Exchange financial within of future operations. as forward-looking Section the expectations business condition amended, the partnership’s XXE and and meaning Act contains statements Securities of XXXX

and forward-looking certain can results cause listed statements in such in be materially risks of forward-looking press our at differ to referred viewed our could suburbanpropane.com. to uncertainties. These that earnings important website which actual cautionary release, as the statements, are We’ve statements which discussed factors those on involve some from

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

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

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

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

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

Mike Stivala

adjusted for all history. highest fiscal results third improvement joining was of million, an XX% you $X or quarter third Thank quarter strong morning. prior Good of our Davin. another for quarter XXXX with year The the our us Thanks, over quarter. million in And Great. EBITDA Propane, $XX today. third Suburban any nearly reported for

from benefitted to parts increased of in results strong customer Operating spring volumes temperatures due territories cooler X.X%. demand our certain by which

personnel base We effective retention customer a selling environment. also great continued management expenses inflationary in a our growth and operating have initiatives, in and success persistent price job by and managing our

we included the acquired quarter second of the Additionally contributions at the platform that the RNG quarter. beginning from

platform, and renewable our natural upgrades now at or facility. our for Within daily Stanfield, at help gas plant are Arizona RNG developing, to pipeline our exceed facility, initial that projections to we optimize production and started completed injection planned operations

including making we expenses. the operating maintenance who great the will are operating Stanfield reduce Additionally, integrating and company. support our facility, third-party previously were personnel at enhance onboarding a functions, operating progress controls our employed This by

RNG facility, assets which We to beginning gas to construction – New the of fiscal performance reach RNG in also and Ohio the continued the at York, run capital production for Adirondack and at include capacity constructed the upgraded advance XXXX. of the to of the production. and we Columbus, in facilities installation before improvements Farms two expected and equipment rate are These enhancements asset

debt million. as capital Fuels, to fund well our $XX by acquire a cash we to of in operations, support propane make excess flows our ongoing business, projects core a a to in way and strategic business West During in RNG Oberon the additional reduced investments as quarter, to the well-run on Coast the market propane in very balanced also growth we used approximately

positioning being to for legacy we’re trusted calls, of stated XX-year propane of previous a measured core our As the taking local and our on occasions on earnings approach and quarterly sustainability. long-term business a business have a the of of strength provider growth Leveraging number communities. to I very energy

moment and our strategy added on remarks some provide In a initiatives. come closing color for I’ll back

over point, However, results detail. third Mike Kuglin, this quarter I’ll to at turn to our it Mike? more discuss in

Mike Kuglin

Mike, reporting, commodity everyone. I’m To good hedges, mark-to-market be the third resulted impact which Thanks, of quarter on excluding and I consistent morning, our our unrealized $XXX,XXX discuss previous for with as unrealized items results, and Along prior certain year. third to costs. an million quarter $X transaction of of an unrealized acquisition-related with the other loss compared in non-cash in loss the adjustments

compared a the loss net our business, or With typically the $X.X loss million breakeven common quarter for million year. third our to of the compared Adjusted we the $X.X quarter fiscal third to $X.XX was net per $XX million year. third the XX.X% in EBITDA for million nature $XX.X or year. prior unit or in seasonal in prior the said, to the experience Given that quarter increased

earnings at growth improvement the cooler organic of the contribution that in production spring the beginning acquired our base the quarter. mentioned, along and temperatures in sold customer higher second the RNG volumes facilities contributed driven by Mike was from As

customer third gallons, which Retail X.X% propane trends. markets in weather were than XX.X to gallons certain cooler due was and higher sold year, primarily million quarter base in the favorable the prior

were east, heating and cooler our to territories north of quarter, temperatures warmer to average increase the degree the normal the While in portions in spring that comparable demand. certain experienced X% much heat-related contributed than in temperatures an of third prior measured in year as and days west

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

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

the increased X.X% or that of gross to our assets. and the compared of commodity volumes prior hedges to the earlier, total contribution their impact margin due million the third mark-to-market RNG $XXX.X $XX.X higher mentioned adjustments, year, sold margin for primarily million I Excluding from quarter

Excluding quarter the our to matured declining of unrealized prices that a were mark-to-market flat for propane period. the benefit offset as the favorable the period during commodity adjustments, of prior unit on selling compared margins management third year, their during impact hedges effective price commodity less

continued of albeit payroll part combined expenses, on lease vehicle pace, due the impact G&A year, inflation or to operating a increased the of as moderating $XXX.X associated primarily the of as million the third and costs as and costs With operating repair variable million new expenses the respect prior to sold, compared higher to operating $X.X quarter for and X.X% assets. increase in RNG with at volumes well costs

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

than and hand Arizona, cylinders of spending facility the inventory RNG lower of XXXX. Adirondack in RNG by capital year to the associated December is expected construction Farms the more upgrade facility expansion ongoing with the the offset at production growth completed for which Stanfield, million spending we and capital lower be to on prior a due $X.X primarily tanks as was than of leverage the on Total million the quarter and level $X.X of propane

$XX million Overall, capital investment the spending between to the on $X $XX fiscal million in fiscal XXXX and projects million $XX is in to XXXX, expected excluding cash RNG range million of potential credit. and benefit between

balance our to sheet. Turning

$XX quarter, million year-to-date under during million to the under the third the million with we As the a revolver acquisition. $XX.X flows we’ve borrowings On from of mike the $XXX basis, RNG revolver fiscal operating repaid borrowed fund mentioned, cash activities. of repaid

the leverage to month at trailing X.XX of quarter, our XXXX As a quarter. debt for second end the times June improved during increase X.XX the and ratio in result third of consolidated compared the times repayment ended period XX the earnings

our covenant RNG Although debt the well their approaches times, contributions within times. X in EBITDA Factoring remain elevated to target levels leverage of forma pro times. metric X.XX is assets, rate our and the from the historical of our run level we requirement ratio projected leverage X.X relative consolidated

to to RNG continue remain portfolio. the fund excess focused and will on as platform growth strengthen propane arise business, the strategic our cash the We energy of the to fund flows to And within opportunities renewable utilizing growth, as as capital balance sheet. core well plant

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

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

to Mike. Back you,

Mike Stivala

Mike. Thanks,

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

paid quarterly will as Our to unitholders of our August August Xth of distribution on record Xst. be

strong coverage XXXX. very times June XX at X.XX for distribution ended continues remain to Our trailing the months

launched with the clean energy on our the sectors of in closing strategic economy. highlighted XXXX, lowering multiple advocating few footprint a Just focus it for versatile Propane go the remarks. solution qualities When a propane inherent as green of we across Suburban carbon pillar corporate to

achieve energy can standards. While and aggressive businesses also help transition investing that to in innovative technologies the low-carbon accelerate

investments commercial in Hydrogen, companies for multiple and that developing logistics developing support Since Independence made and across can strategic infrastructure we and manageable like expertise, stage from that time, initial Fuels benefit back-office Suburban’s functions deep markets. have vision energy Oberon operational

to With novel their are processes progress a good platform also assistance, transition with making both companies and in the potentially providing exposure energy. or renewable to Propane efforts. While commercialization disruptive Suburban toward technologies our business

producing have subsidiary, diversified build owns Suburban qualifying for tax and investment that production Renewable we our offtake, outright, recently, The environmental and geography, Suburban an credit current out portfolio are Most of through eligibility facilities Propane wholly-owned RNG feedstock, attributes to RNG by credits. begun Energy. platform

And pipeline daily currently as interconnect exceeding adjacent volume our to the injecting I is in remarks, enhancements injection. opening facility stated a and Stanfield, into the projections facility is through processing to Arizona RNG and for initial the producing my

Columbus upgrading, fiscal XXXX The facilities of XXXX. as such, of and or Adirondack beginning of the following planned end and the fiscal construction undergoing begin are RNG toward we’ll

stages of additional a also our have opportunities We evaluation. in RNG in are various acquisition pipeline number that or of development

we of conclusion, to investments helps are because the that flow business, cash our energy core much the it to on strength and propane propane continuing In is the growth of provide foster the our focused our transition. support very business stability in

investments carbon, As making up renewable ongoing the energy mentioned, transition for the are in set strategy order alternatives energy in business we to to future. I lower the

our long-term effort value for to the unitholders to employees, value create In stakeholders. other our and an

plans, growth strategic long-term organization, very and also and opportunistic on a measured provides balance the while an which growth. as capital the fund in our to taking execution our sheet approach strong for access support We’re a staying to disciplined focused of maintaining sustainability

to we welcome customers communities all serve are I thank on that growth employees Propane hard employees to the take business. for of for all more Finally, supporting of the the the comfort safety day. to our than this the you, at and work you and want Suburban and and opportunity and focus operations unwavering new their the Thank that RNG every do X,XXX

wouldn’t always, the us attention if this as now that? with to you and Betsy, helping we questions. appreciate up we’ll And And call morning support your and open mind

Operator

now will Instructions]. [Operator session. begin question-and-answer We the

from Moreen Please question ahead. today first comes The from Gabe Mizuho. go

Gabe Moreen

everyone. morning, Good

Mike Stivala

Gabe. morning, Good

Gabe Moreen

comments off start environment. or an of of I from on some seeing year? standpoint moderating facing and there kind on rate expectations about that next be can may I OpEx inflation what maybe into what you think elaborate Maybe out the what next Mike made kind heading we could – you’re Maybe inflationary your

Mike Kuglin

coming in to the last but months. say, behind experienced increase the in – compared lining, increase but Yes. certainly what in XXXX, rate it The the guess XXXX, XX certainly certainly drivers flat in of saw to biggest the of payroll. the and would was most – we expenses was pronounced, XX one and is down moderating I is then we And of not throughout increase we rate

of vehicle elevated Outside starting last pretty expenses, a increase as been of is years. remain down I they’ve we the look bit. rate say come couple And of that, to the forward, elevated, in but

Gabe Moreen

Can And mentioned there. talk There ask you you how the pipeline Mike. versus can looking Are to then, And here? RNG eminent doing additional now potentially is anything propane capital there more maybe active right West of if acquisitions. allocating did opportunities potential like about the Coast? additional Thanks, acquisitions the I about at playoff on just how you you then, is? RNG one

Mike Stivala

Gabe. eminent, nothing there’s Yeah,

we’re throughout strategic think to lots portfolio team different that’s team country. building I always as There and continuously our in know that operate of opportunities helping now corporate have we pretty know the the active assets You you evaluating business active that is in opportunities, well opportunities our evaluating of space. that an there development relationships as us

with And companies eminent. a a is, sort that that level I and we that know there think bootstrap be that conversations of giving know are is platform you themselves on I advantage investors long-term our RNG a think of the think nothing startup know you we’re of in different assets have of that in lot or operation we But having. there’s one and to would the us hands create involvement I and the the you focus been in whole equity see bring business an private RNG other platform things now the whether right it out of

We’re evaluate these at we very opportunities. deliberate in and look the way

continue going patient in regard. be to that to We’re

I years at market to you to prior it less be less same capital, to in have and say the the seems smaller markets and there those come we’re that active allocating be with then I has five years propane. the mom-and-pops to we’re in have be we’re relates gotten thing As over but the to to always they know, I market to pipeline they strategic at multiple. There’s And right you years. but past going opportunities the would – think always two Propane, think really the in looking that. know

know of is allocation front And on really so, is dependent the opportunity that’s us. particular strategic how in the you

cash You know, capacity is excess have generating flow the flow. cash we’re thing good And excess the allocate business. that, we from that to

renewable continued in less opening as expansion that of we had we and $XX my capital the of was to million. you combination know we million, than fund know debt said also platform the You propane by remarks, I a reduced acquisition $XX

of be the while sort now that platform. know way flow the excess to we like this you out for building So cash opportunistic with we’re

Gabe Moreen

Great. Thanks, Mike. Appreciate it.

Mike Stivala

Thanks, Gabe.

Operator

with Please James Spicer The go from comes TD next question Securities. ahead.

James Spicer

Hey, good – your morning. In

Mike Stivala

James. Hi,

James Spicer

you projected forma business. from RNG remarks leverage pro run EBITDA the in Prepared contributions your factored rate mentioned

terms broadly thinking various in of build Just more there wondering assuming you’re thinking contributions or should we for what RNG your about multiples about EBITDA how and be then projects?

Mike Stivala

the Yeah you math. I mean do think I can

I You approaching at X times say X.X and we’re know, we’re now times.

have. in – the terms that do incremental EBITDA could you how So math on of the what that we that means

like We I there – out what mean going give to style, we’re our projecting out we haven’t contributions don’t not the guidance be, that’s not that. typically

it So, you the we X we’re and on basis forma way did the that giving deal it, to at at before guidance when basis the pro to us you look get times. that know looked was closer the we on that’s it

the way the that kind you shaking is of that’s So we’re know out. leverage

question. second your question as was? second far what As Remind me your

James Spicer

build the on just was it yeah – Yeah,

Mike Stivala

multiples, Build build multiples. yeah the

James Spicer

Yeah.

Mike Stivala

Sorry.

renewable be stages kind thinking think facility I so single of we single stage. So, high that this multiples going should probably in And think what investments in we at yeah high for our Farms that’s to the actually capital constructing mid to you are obviously early in energy still is expect deployment and it in know digit digit. assets future the of as we’re build here know on about build know of you where we’re you be multiples build Adirondack the multiples about know you

James Spicer

that’s helpful. Okay,

also on you this your relative can budget? where year you Okay, of full remind to are at point CapEx kind me

Mike Kuglin

Yeah.

million. number that, between $X a basis translates out to expect our CapEx running the would somewhere associated at I the we’d steel to given year came this last similar to $XX So million to propane million in cylinder on and expect year around and typically side, year full this $XX that assets. on year elevated expect RNG then would million. an between the see to $XX build million And addition million purchases. tanks cost around $XX see of with of additional the the we to $XX is, We

James Spicer

includes Okay, and maintenance CapEx? both that growth

Mike Kuglin

That’s correct.

James Spicer

very Okay. much. Thank you

Mike Stivala

James. Thanks,

Operator

The go Wells next Baramov Please Fargo. with question ahead. comes from Ned

Ned Baramov

– Thanks for the morning. taking Hey, good

Mike Stivala

Ned. Hey,

Ned Baramov

Questions – hi.

it is you is volume Arizona facility on – the your maybe touch driving ahead outperformance the there? So any potential there what is of internal Can And upside? additional expectations. tracking seems the RNG

Mike Stivala

more [ph] performance growth the the sending deployed is locally expansion more putting of get the are some area farms performance that meaning, feedstock for there that [minorant] opportunities really in of their the the bringing bringing to from of here, more there are digester the currently from facility. we in get without itself in So ability in. we’re to capital – to are still feedstock enhance some yield from not out and that situated that both an capital, our other the

we our local But as digester do biosolids oriented well. DX in as also take in biomass

there we’re So so of amount going the that both of of take that of time. opportunities some we the to a are That’s increase feedstock bringing amount in bit can production. to these increase streams

since actual those – all and previous focused assets. the and working the great past is of for some we’ve of had out performance enhancing the that to enhancing I what think performance ownership the six are on the they months assets owned streamlining we digesters business, the – we performance really we’ve challenges now worked seeing that assets through themselves, our of really the

Ned Baramov

details Got et it. the recent most detail on cetera? behind the you process, potential, second the And up acquisition my sized Coast, any can provide propane question, West synergy your more on –

Mike Stivala

It’s relatively Ned. small,

less answer. purchase $XX it, million a You I think know said of I first my price. than in It’s

or good that market they acquisitions, because have growth So, synergies we not growth is is see through or opportunities to at significant other that be something – that But it’s we that’s where a it contributor. you experiencing. the really of in propane markets either look know way population the

– the share, in This out good competitors for sits and up expand while one a of the synergies us in to market drive in good one there to to going you generate take of synergies. upper ours other our also north really particular platform their one know middle right our team gives that’s west an the territory opportunity and putting operating

So, acquisition, coast our business. deal deal. the to the the important operations doing is to a and kind of right propane but Not a us for continue it’s be yeah big west on not it’s see big to for

Ned Baramov

had. all That’s great. you, I Thank that’s

Mike Stivala

Great. Thanks, Ned.

Operator

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

Mike Stivala

again Betsy. as this Appreciate your Thanks, another Great. Thank great Please out of Suburban attention. you, all your summer. us safe talking joining November Propane. for close out we We year to forward in you the fiscal morning. Enjoy look be to rest there. for

So, thank again. you

Operator

now Thank attending today’s concluded. conference The has you presentation. for

disconnect. You may now

Suburban Propane Partners (SPH) 3 Aug 232023 Q3 Earnings call transcript