SPH - Earnings call 1 2024 | Suburban Propane Partners, L.P.

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Operator

Good morning, and welcome to Suburban Propane Partners' First Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

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

A. D'Ambrosio

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

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

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

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

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

on report September XXXX, period for risk partnership Copies today, business the or Form regarding statements the Form fiscal disclosures 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 December 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 well believe information of we the provided a this Form this as measures description which useful a be have of discussion to morning. as We those furnished to why our

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

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

Michael A. Stivala

thank for and all us Davin, you morning, joining today. good and Thanks,

for heat-related quarter month warm which demand. December, particularly quarter first most of the represents critical the was unseasonably dominated widespread weather, fiscal by month the of XXXX The during of

sector, mitigate However, continued weather active growth adverse to helped impact drying base initiatives, improvements volumes. on the of warmer demand combined and in retention the our customer with agricultural crop in the

XXXX average X% Propane first to despite warmer days volumes for down that heating quarter the warmer of year just than compared XX% degree year than prior were normal and first weather. and were quarter December X% prior warmer the with X% reflecting the fiscal

environment continue do selling to Our model efficient prices at excellent but, operating our leveraging expenses. operations managing help lower to field price in job and an times, volatile a are commodity manage

was integrate renewable business million have $XX.X decrease year. second from operations leadership In practices last number operating of $XX.X the over decades and taken have of we a at we of prior efficiencies, the For as the a operators. million, adjusted of beginning the of the quarter to that kind install EBITDA best-in-class we the our disciplines, quarter, to natural year, and safety gas operating propane our business of steps recognized the developed be acquired

and Columbus, Stanfield the we contracts of the Arizona facilities facilities. location locations RNG who staffed including subsidiary, both taking To Ohio ownership of with achievements the employees these is since overseeing manager highlight terminated the Suburban our now third-party Renewable facilities. of all of These now for are operating at our assets, Energy Stanfield, some our

ahead the management was Group, seller, the Equilibrium by supported years agreement of schedule. that exited We Capital services X

the food tipping to of and production municipal for intake We increased enhance revenues opportunity fee waste DX have of increased local the RNG. improved and

-- we to streams. Stanfield to is digestion our selling now fertilizer of local revenue that are biodegradable provide are production, producers material nutrient-rich which facility, a from the feedstock RNG of by-product anaerobic And remaining after digestate We the feedstock. added selling

RNG. intake DX are the production in enhance production made increase Stanfield manure increase to DX the potentially improvements additional output of to in have equipment to and and output. develop efficiencies relationships beginning area and, we capital of And increase farms dairy turn, to with the RNG amount We both the

on of Columbus, continuing Ohio plans And construction RNG Adirondack capital for to at finally, New are engineering the upstate our of installation anaerobic equipment our digester execute upgrade facility the in improvement advancing our Farms facility we at are and and York.

delays. of for while XXXX, delays at Farms be in the facility to construction some construction to expect in We Columbus have due fiscal experienced the completed we early permitting Adirondack part

still demand, heating while is the to remain can and customer growth commitment manage lot our objectives. control, in we strategic weather So ahead. continue we of season warm to weighed things steadfast a on There we our

handle personnel are some further colder operating conditions weather, as XXXX, in of Our the to softness the from January of in demand demand cold progresses. any very extreme as as to in well event season experienced surge weather-related well adapt as prepared the in such

come I'll moment, strategic color back for and initiatives. a In remarks provide our on some closing added

call turn quarter Mike Kuglin first Mike? the I'll to in detail. discuss our at more results point, to However, over this

Mike Kuglin

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

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

pressures the weather As benefited quarter our from our impacted favorable the beginning organic quarter. earnings resulting demand contributions of at from acquired resulting from expenses, a from the were our second of for greenfield the efforts customer prior that activity some Mike facilities year expansion on production by pattern and lower we inflationary base RNG mentioned, growth heat-related and continued warmer but and

sold widespread on impact drying from and and offset demand unseasonally propane year than due volumes were demand, agricultural base XXX.X temperatures partially gallons quarter early Retail gallons X% inconsistent primarily in the from crop to prior of management. the by resulting customer solid part strong of warm quarter, the million lower first higher the heat-related

With both and most prior quarter, X% heat-related of for respect is December to month warmer Average normal the demand weather, temperatures the during first average temperatures in month XXXX. than first and than the quarter. which the normal warmer than was for warmer December, the critical quarter XX% the first were X% year

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

prices weather per in have the first increased of quarter significantly the for a and quarter gallon, increase in and decreased Mont result the $X.XX first now XX% As average compared first to Since of X% the cold excess Belvieu, prices year of of other the burst of with prior propane $X.XX end the wholesale factors, fourth per the wholesale inventories January, the prices quarter basis prices first with in of XXXX. gallon. quarter the propane and for from from quarter fiscal

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

less tend weather-sensitive a Excluding and as the compared the primarily that industrial decreased as to from residential first due matured year. period favorable the per prior unrealized of last the than of the with well adjustments, that compared less for concentration mark-to-market from or $X.XX a to volumes the X.X% impact gallon hedges unit volumes commercial to commodity of mix be quarter higher volume benefit during margins to propane year,

volume first reported due management a mix, increase effective we compared commodity margins Although of prior segments total in period quarter customer selling an unit price prices. propane due our during to the in declining margins of year unit decreased each to to

expenses, G&A X.X% the to payroll well increased due and costs, benefit-related $XXX.X costs $X.X as to associated production million areas year, as to of operating respect compared facilities. or million expenses higher to other costs the higher with With in RNG combined due and prior our inflation operating persistent primarily

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

of marginally Adirondack and million of gas our Columbus, at as hand. propane offset capital Ohio Total prior lower facility higher cylinders construction the by of associated Farms, inventory spending was the on partially our ongoing RNG with on upgrading spending year first construction higher a CapEx facility to we $XX.X quarter, at primarily the and level equipment growth tanks due the leverage than for quarter of the

sheet. our balance Turning to

quarter. that our Given the needs, portion credit borrow seasonal our totaled fund first of of during we typically revolving nature to the million capital help during seasonal facility $XX.X quarter our and the business, under a working

ratio the XX-month trailing X.XXx. XXXX ended leverage for was period consolidated Our December

the metric covenant we X.XXx. within our Although has the levels leverage our RNG following acquisition, remain requirement relative of to well been historical debt elevated

rate a leverage pattern, weather Xx. the normalized EBITDA and we mentioned, RNG As more from forma run previously in the the projected ratio facilities approaches pro factoring contributions consolidated

the expect February excess towards working after generate peak the time typically late needs Our or which flows. heating season, early frame, we March of cash end to capital

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

support needs borrowing have fund our our under as working initiatives. to and expansion plans revolver than capital ongoing capacity capital strategic We growth for to well ample more heating the as season and our remaining

Mike. Back to you,

Michael A. Stivala

Thanks, Mike.

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

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

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

there positioned rest of the to earlier, financially of demand XXXX, both ahead, and amount a as dictates. we are stated operationally the to heating I fiscal season still adapt ahead as is Looking significant and well

of In weather the operating heat-related cold month. for weeks fact, during footprint we demand performance blast last X driving volume January, and experienced solid a the of across our

influenced been have with are processing production and lower see RNG natural handling the our and while manure declines the overall within California revenues Stanfield made operations, have increasing LCFS recent activities, efficiencies in investments we to improve values. by in In we to starting benchmark prices gas levels,

In support addition, we RNG. RNG are developing to of in Farms offtake RNG long-term ramping and voluntary begin Adirondack facilities the up growth for resources Columbus contracts market, when particularly the focusing internal and our on producing platform our

in we to is energy quarters, renewable plan alternatives. strategic growth while growth previous propane lower foster to in As our our have long-term business carbon core strategic stated making the of investments continue

and are of growth stakeholders. valued enhancing value committed long-term We all long-term for our to for our opportunities career and for the employees development positioning Propane creating Suburban key sustainability,

be take customers the for the challenging employees Propane hard the focus we January. have The especially I moment comfort all latter some in success faced our to of in to than foundation the their in they of X,XXX rooted dedicated and unwavering safety our to want of of efforts, conditions communities thank serve. and their more part a them on and our and continues work Suburban at ongoing

your and with like And as if appreciate attention up And for now the open could support you that. and help always, to questions. we would call Jason, today us

Operator

Moreen Instructions] Our from question Gabe first [Operator comes from Mizuho.

Gabriel Moreen

investments question around cost a thinking or about -- going even some indices, comes gotten SPH seems evaluating about balance of delevering I forward, acquisitions, specifically I've the doing in to as here. curious to from included a your whether organic sheet that have I'm clearly to had benefit. had how wanted have units you're just matters -- just been I capital MLP it to

I'm So all? if curious that's your just changing thinking at

Michael A. Stivala

I have happened impact mid-December immediate index. in additional Gabe. about happy And question, an of performance had units. late. That of of some included certainly That's we're We're trading activity happy run-up our the be great the obviously, also our to units. we in on the a and as mean, seen

so certainly with And pleased we're that.

really this think I long-term great renewable that of propane that of -- good the well with energy a and now recognition run it's for in initiatives space. the we operation also and the good our doing strategic company we're business success the positioning pivoting

be provides us perhaps long-term funding way before. we that unless capital at more future added our in significant to ago, flexibility weren't were, to or we capital certainly, for of it try And that think as respect cost with -- always we don't say, mind, than a the common something this fund comes opportunities point, certainly keep to But attempt acquisition we that we in at need with balanced see much adds additional our the I as to way months growth. access an our growth, we to about So strategy. units better think a they growth obvious fairly few

continue the and down ramp as capacity over platform of the bring We excess can to time. rate RNG up continue run more as naturally business flow generate we to the leverage cash the in earnings to

just try balance to own. because our do So sheet to the nothing repair nothing we say that just would could -- on I

Gabriel Moreen

seems really and interested that. curious, from I'm the your have to or point? hydrogen dairy things it like point growth transition But this lot farms just moment, RNG that. propane entirely Mike, your -- and I is appreciate evaluating at sounds pivoted this standpoint It you like and a your deals in certainly and also evaluating standpoint RNG additional still focus you platforms, potentially at from of an a you're guess? at I Or are your like plate on

Michael A. Stivala

we actually, for time -- this we No, a about. Gabe. excited we that we decent opportunities And -- propane to propane, a of of pipeline year, we're have are have pretty have fully committed

So no, we are balanced. not totally pivoting. We're

propane, of energy to and term. relied-upon have a intend customers that we our communities position going a long of provider term. believe, the great the long it's have We needs propane communities we business the the given permanent energy to to qualities in clean for be And to serve

our strategic So and the business propane no, renewables core we being are very much platform. to focused add also on to

Gabriel Moreen

And you hope just that contracts give if some your the one -- to RNG could I Can you bilateral then one assets. maybe ask around last Mike, mentioned, sign for of you those I permitting the in are think, just us the of, timing, going, some color more how how on stands I'm potential moment. at light maybe curious particularly issues? that conversations about of

Michael A. Stivala

the is of that, in And in Gabe. I voluntary RNG the market really the we're for stages actually, stages. think Yes, early also early

going it's so take And to time.

really given time long-term attribute environmental both at construction and and on assets that Columbus the The natural happen have Stanfield needs have to prices. Adirondack. We already a based contract that gas is

we we As the into voluntary to an sense all that for transfer take also price now, RNG more whether environment. market a the fixed for we look at that more develops, a have produce. outlet But makes will it

drive will the of that. producing outlet an But for RNG develop in to to We we we will needs Adirondack. Columbus process start be and believe have we that the and part to that develop, market voluntary intend and

Operator

our Baramov Wells Ned And Fargo. next Instructions] [Operator from question from comes

Ned Baramov

cadence is given about CapEx and CapEx you spending $XX year maybe $XX the about you Adirondack some talk delays million reasonable for could Can you to of communicated still previously facility? noted the whether -- this the of for range million RNG the talk

Mike Kuglin

as $XX things the the Ned, give at this I million in say, we will Yes. come update. holding lower But develop, firm we're still it's a we're although progressing $XX quarterly $XX that range. in at fair as reports, still planned. looking million towards time, And additional But an estimate. we'll of point, to $XX the future the million probably on this is to million estimate, like still yes, would end

Ned Baramov

of with agreement the XXXX. the the in specifically, to thresholds, then And a certain seller. assets EBITDA the fiscal of achievement paying Equilibrium believe to clause it. I the a payment trigger likelihood on question purchase payment had an earn-out additional potential and, Got more the which respect

do Suburban earn-out the on So work date that to on assets ongoing fiscal based will anticipate be an and Columbus in have I guess, how facility, the XXXX? paying the given performed you

Mike Kuglin

we potential that we in established. any at is monitor quarterly. adjustments reserve, it not accrued at that, reserves have it. we and do that the something continue But made true-up point report we that quarterly. time, estimated time, on we payout We that monitor for and have And to this when for to the we have it communicate in And will point any

Ned Baramov

opportunities M&A Understood. one, maybe And last mom-and-pop have opportunities? are comment these you elaborate footprint? across full that larger then one your packages? if of may. specifically, I propane on Or Can pipeline are these your you a More

Michael A. Stivala

timing. markets of that really of for time. think in are And see this of couple Ned, a was in a No, had the still comment in We we've a think these about don't we're season, opportunities, And about activity we're I had the us. quarter I feeling for the those because type heating very strategic middle typically pipeline lot my it's of we've good our bit in but how mom-and-pop developing.

really acquisitions. more strategic small it's bolt-on, So

Operator

Instructions] are closing This like Stivala [Operator over concludes questions in Michael session. the queue. to more for to question-and-answer back remarks. our I no the would There conference any turn

Michael A. Stivala

Great. and speaking results. you look And at Jason, to heating as season again please second progresses. the end us We of with Thanks, stay forward thank today. all quarter warm and joining safe you the our for

Operator

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

You may now disconnect.

Suburban Propane Partners (SPH) 8 Feb 242024 Q1 Earnings call transcript