SRLP - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Sprague Resources LP. Q3, 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and our instructions will follow at that time. [Operator Instructions]. to host like Mr. today’s now would introduce for your conference I Glendon, CEO. and Resources, David President Sprague Mr. Glendon, begin. you may

David Glendon

Thank you, Shirley to Sprague [ph]. Good afternoon, third XXXX everyone, quarter conference call. Resources and welcome

Operating are Rinaldi, John today our and Scoff, and President Accounting Vice Chief and our me Joining Vice Moore, our Chief President Financial Officer Gary Officer; Officer; Paul Chief and General Counsel.

will include forward-looking call statements. today's of Some

factors uncertainties today's that risk revise statements events believes as Sprague most we SEC. statements the difficult Resources Form SEC Any many to date, LP of future these new as to or control. a results Sprague undertakes otherwise. and result any While XX-K risks make forward-looking of to filed predict reasonable information, and or and in no are future to management's by filings outside subject update the are our future with be are of qualified statements obligation recently publicly forward-looking

discussion of press well release their disclosures X-K of figures in additional earnings most our You and Relations reconciliations can the of Investor SEC in section with our the comparable measures and as find non-GAAP well on website. reconciliations these use as a GAAP between as our as measures Form

expected fund refined to our continue organic with quarter, our I’m and holders. Sprague’s returns challenging growth, products nonetheless to in to conditions sheet delivering in strong acquisition While of pleased solid track our ability were business the are which balance unit third record to of both leverage

Carbo, of our market conversion cash tenants. recently we from we’ve commercial I’m footprint, headwinds these further In our were case. generate At structure identified does primarily a Carbo’s of income closed investments original throughput the the expand the above gas P greatly gasoline our recently and increase this acquisitions activities Virginia. distillate impact exploration delayed, Not of throughput to it this continuing Capital investment additional to Ohio grow the capital, presented month. cash is committed and ratable projects recent of while regions terminals case lessen start and earning activities fees especially of and of will Our facility strong year. Coen the production geographic jazzed Notably, natural flow which Energy serving of West but our business enhances Coen growth the Utica significantly fueling flows Pennsylvania, only purchase in transaction. about Marcellus capabilities. and the weather experience

business service to degree task equipment heeding Our record. safety teams This demand a strong levels activity provide customer cash profile loyalty, demonstrates pads, and and flows. on-site the ratable specialized benefits on Coen’s through push our than drilling towards to more fueling rather from outstanding trusted earned supporting drilling tied days, a

projects. one Just additional we’ve already ownership our into month growth identified promising experience

our slow to to remains leverage us balance acquisition activity growth, active. this need years While additional for a we space, low permanent ample anytime Sprague’s sheet expect pipeline and positions from soon. don’t equity somewhat anticipate we liquidity issue continued and

partner end increase third XX% the prior unit to per Sprague Finally over the of this of quarter distribution XXXX. guidance unit paid of to by least $XX.XX our holders for distribution $X.XX unit, line until a committed year. at recently the third per remains distributions representing In growing the declared per quarter general with quarter

solid third the the X.X XX-month our of quarter, a end of As trailing times. coverage was

Gary? third review X.X to normalized acquisitions, I’ll of for to the for coverage full combined expect results. quarter with days, of Gary now the turn to we call more heating increase degree upcoming between prospects year to anticipated the times. X.X our Given over recent impact XXXX during a our season,

Gary Rinaldi

by million. a million expenses to costs everybody. Full five Adjusted partially is down the a OpEx million by increased business $X.X our expenses and $X.X guidance $XX increased increased and Sprague’s respectively. year-to-date for the the $X.X $XX.X were the our previously insurance in recent increased related Reductions our to lower issued acquisitions, incentive for expenses. SG&A SG&A year. within decreased were third M&A Reductions recent related increased products in million quarter EBTIDA basis, $XX.X and of in repairs margin David, you, network acquisition costs, decline gross year, terminal by including good driven offset expense adjusted third to by the refined million in quarter and due Thank our and the were operating to afternoon, comp million The year partially be segment, and offset expenses primarily maintenance which Handling were related expected offset and $XX of by in cost million $X.X acquisitions, acquisitions. million. expenses $XXX,XXX expenses to expenses boiler by this M&A activity driven professional M&A Materials $X.X to partially across for exceeded stockpile the operating fuel On the million prior and compared reductions fees quarter. utilities. are

the offset $XX to the million the interest of lower higher Cash well be driven for million $XXmillion increased to SG&A as ends $X.X declined Maintenance third total expected system for year, the below range. activity working $X to by expect we $XX interest reflecting the end million as to a CapEx primarily slightly of $XX year to IT For of quarter million due both $X and capital upgrades. that between terminal range. by rates expenses interest of million by Cash at $X.X decrease partially is million million

projects be flow $XX is remains to David year and expect maybe the guidance million to timing range year trailing X.X full at for of capital $XX The $X.X indicated million cash the below of lower in we XXXX the on $X.X decrease depending on at X.X basis the cash year-over-year. times. of and coverage as EBTIDA X.X as full XX-month at million, increases and certain as at material be we was decline maintenance adjusted reflects coverage CapEx Distribution As last to third well maintenance dollars end. Distributable to quarter a expected million times CapEx end taxes. a below indicated, year quarter, for

marketers the Although Having often by refined low performance In an and In results gross million weaker lowering Refined experience expectations, of prior Sprague. XX% uplift like in the fuel gas at inventory, few driven increase quarter Kildair, quarter distillate for oil asphalt million. than decline. for in volume positive volume gas accounting gasoline low margin to to or third XX% half gains as stores supply for of from relative These our natural have for with segments, said still products difficult supporting volume of environment environment the in seasonally results results recent overall third to $XX large X% levels. gains quarter the sales the partially increase and distillates, for of was the Natural adjusted activity basis in were offset short year margins. quarter gains to margin offset metric and that quarter, our declined heavy due margin volumes, reduced magnified changes be oil years gross $X.X for the volumes adjusted the our decrease. fuel with for second was fell lower offset continues volumes more volumes XX strategies execution including our adjusted of million third marine the the our a by primarily conversion Kildair capacity to third growth Positive product, that margin continue year, and partially down our billion heavy on bunker of to quarter carrying partially unbranded opportunities. the offset compared X% by up the improved years. we At for see unit to a focus were notable to the than asphalt. $X.X customers diesel prior were adjusted fuel business. a more by gross cubic result feet This optimization last

adjusted and well across handling increasing the multiple prior to our Kildair, pulp resupply as $XX.X marginally, at X% of handling volumes Increased of terminals. improved at as related gross million Handling offset business, in by activity differences were to Next higher throughput handling timing relative margin Portland the soft year. Materials

consistently, growth as well grow optimization network. organically and year This business as by executing have acquisitions material existing in identifying We have we strategy. through As on indicated both our done two-pronged we a a has terminal opportunities Sprague within our way.

for number and many a projects expansion of throughput closed been few completed: and well projects with are CapEx productive range. scale In projects or our million to guidance this backed agreements. generate These projects year, addition year requirements to be a with large distillate by and fuel long-term capital storage, oil completed and returns the the projects capital at a full million we of asphalt Carbo heavy Energy a to including repurchasing beyond. year-end others additional and basis and underway gasoline of increased East the brought before access five Providence by storage recently or online Providence in the to this expansion more Several Coen completion just number of the $XX new acquisitions as the are revising and XXXX acquisition, $XX profitable year, positively on capital already targeted completed expansion of and impacting have will

David $XXX issued modestly year are we mentioned, we be of reiterating distributions guidance at continue full Finally, as or incorporates expect million $XXX to adjusted quarter XXXX. David. previously at to to end of And to EBITDA David? below weather. the through increase the million. of the our turn back guidance unit, results, normal call and our to assumes $X.XX the This impact now per the recent I’ll per acquisitions, year-to-date guidance

David Glendon

functionality execution customer allowing device, SRTs our online we profitability. any timing industry. dramatic offer in in Customer making volatile a time close real-time of has profitability. to can best-in-class the In a the mobile I’d at Sprague owner experience operator the Gary. of of reduce the many enhance critical feature Northeast again to our to and became customers platform, with access been to to of first app the month, enabling often a order wholesaler deliveries. the any In customers’ to like on risk In dynamic exciting the with markets, we XXXX launch development. expanded who pricing the Sprague customers SRT movements and out mold XXXX, providing experience adoption app Last have impact an the pricing robust. are Thanks, mobile from broke online customers, mobile

of successful tagline, new a to our team already executed drive SRT purchases the mobile been customer purchase app to thousands times have the customers that wholesale logged XX% available month and And launch our have on demonstrates makes mobile embodied updates base innovate, energy app. of of the nearly difference. receive in is SRT Sprague market the the of into has The During mobile ongoing which products. the

like I’d open Now, questions. for call to the

Operator

Thank you. Raymond comes [Operator James. Instructions] Justin from question Jenkins with Our

Justin Jenkins

Thanks. I Great. afternoon, I with if the Good guys. guess maybe strategic question. start could

to are – mentioned You in I'm way guys over unfortunately remarks distribution credit the growth market can level prepared on any over that versus the how that about with and that your slightly. the doesn’t but outlook next growth clear to provide time that years, higher strong seem time? guess certainly been that you I growth the couple be as David growth balance coverage you profile high over curious giving thoughts you for that of

David Glendon

certainly markets growth. question, certainly others right, Good note Yes. that making the I’ve that, of seen rewarding not Justin.

out decidedly first. consistent over meet and to be Our perspective long-term one set expectations a the which time is we is

quarterly continuing rewarded on long-term practice we’re candidly and that or lots be to be over with It's and slow based not. whether steady system So that will conversations of race practice belief not we time. having that the as should

which will think I back we come at But Again, – I so. be we So, ultimately by guidance. that's investors. don’t different at that might recognized with think reach point that

Justin Jenkins

years. seen changes are That’s response. over couple tight prices, of shifts front as And we’ve maybe the and market products a as especially in in distillate months, so we’ve in then on gears, great. inventories refine David, certainly the some and big some appreciate the the few shifting forward past seen the lot a curve

to on which to volatility exacerbate inventory curious guys? tight winter could set how and picture of thought your good for maybe Just up a you, be tends

David Glendon

slight bit from Very question a Justin, had year to quite it a as point and larger good out, modest potentially been a of market this backwardation. very your the throughout – most contango has shifted

this the where right, barrels is dramatic. barrels distillate in year north-eastern, inventories at which than now million that's XX You’re pretty XX lower so million last time,

material profile And to volatility to start in and set we so get and when winter, if that expect markets. see if do a and real distillate up demand tightness October to obviously some is good the when the we but wasn’t Northeast

environment as welcome real margins that and contango six logistics to backwardation such low value into because relatively his it last here So inventory environment candidly means move sitting opposed to the it in we've expertise we that the what everybody where seen months coming resident we’re at modest which has experienced is play a at so. as over or willing

Justin Jenkins

Perfect.

you. Thank Okay.

David Glendon

still So so in need we Northeast, the it its time, Justin Today's common. wear first think, optimist. jacket had to weather, we’re the but Northeast the I

Justin Jenkins

EBITDA completed way, of is what rate in we I Gary, in different ask of in growth maybe then remarks, full based run outlook the curious any kind you maybe think XXXX ending “normalized” the projects year And of you’ve might transaction service? of given think our that this number on the provide initial if just or hinted prepared could but color you your on maybe

David Glendon

yes. Good Justin, Well, question.

guidance going get closes acquisitions of to through have recent in – acquisitions be the We’re in provide year first how is call, XXXX full coal energy quarter. prepared XXXX. We’ll a kind have we’ll and the year quarter. we the of fourth just out. for the We’ll next five [ph] and to the see There okay,

rate the full talk the with our to it call. in and weather run normal the the prepared on So of know forecast next five be acquisitions about better you EBITDA year we’ll

on next Okay, the we’ll guidance provide call.

Justin Jenkins

I enough. appreciate responses guys. Fair the

David Glendon

Justin, Thanks, questions. the appreciate

Operator

comes [Indiscernible] [ph] Thank you from Mike Our [Operator next Instructions] Wire question with

Unidentified Analyst

in there of maybe that Coen good potential opportunities specifically sort you bit growing you I are changing projects there? little about coming you guys. just thinking talk our acquisition Can the and a see or Yes, and what I business about guess growth afternoon guess the are the what

David Glendon

little Yes, bit. good question, Mike. And just a to back step

into of of current getting noise, been acquisitions. we degree that. are as I’ll background because reducing we a One, factors. you in are a excited we’ve ours of The bit an about were transaction this heating geographies few exposure to Sorry, the objective adjacent presume expanding not I’m but with little that’s and mentioned that past, days getting

expertise been activities quite We’re the and little underlying has also in benefit and this potential able the particularly fueling about our Coen are given activities fueling logistics the from through logistics expertise, that leverage on to acquisition there. that frac the so of are excited lot pads a here, I’m bit that accept Marcellus commercial getting area, in growth I’m backing Utica kind on sorry the and rapidly if in the formation E&P thrown, – echoes growing so the of a my please in piggy for getting real apologies. we

establishing are to which So are E&P what seeing the the a share with the companies to and we region really utmost there of efficiently ability the importance the on equipment. is safely their franchise operate is in on pads, based gaining fracking now they operators and of

continuing there. sites their mentioned to it’s I customers really gain side go additional growth when So fracking onto the activity participate to on opportunities and

Unidentified Analyst

Great. much. Thanks very

David Glendon

You’re welcome, Mike.

Operator

the like any to call. remarks. Thank for the portion of closing you. call gentlemen, back management and question in would participating I turn you session and answer to for over Ladies today’s thank now

David Glendon

appreciate No forward making us particular you today to look join time Thank We closing to the the in remarks. you. updating future. and

Operator

thank participating gentlemen, in today’s This and the for conference. does Ladies conclude program. you

may all You wonderful have and day. a disconnect

Sprague Resources (SRLP) 7 Nov 172017 Q3 Earnings call transcript