Suburban Propane Partners LP (SPH) 2024 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Suburban Propane Partners third-quarter earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions) This call is being recorded on Thursday, August 8, 2024.I would now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead.

早安，女士們先生們，歡迎參加 Suburban Propane Partners 第三季收益電話會議。此時，所有線路均處於僅監聽模式。演講結束後，我們將進行問答環節。（操作員說明）本次通話於 2024 年 8 月 8 日星期四進行錄音。請繼續。

Great. Thank you, Chris. Good morning, and thank you for joining us for our fiscal 2024 third-quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, our Chief Financial Officer; and Steve Boyd, our Chief Operating Officer. This morning we will review our third quarter financial results along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions.

偉大的。謝謝你，克里斯。早安，感謝您參加我們的 2024 財年第三季財報電話會議。我和我們的總裁兼執行長 Mike Stivala 一起來到這裡。麥克‧庫格林 (Mike Kuglin)，我們的財務長；和我們的營運長史蒂夫·博伊德。今天早上，我們將回顧第三季的財務表現以及我們目前的業務前景。一旦我們準備好的發言結束，我們將開始提問。

Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the partnership's future business expectations and predictions, financial condition, and results of operations. These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on behalf are expressly qualified in their entirety by such cautionary statements.

我們的電話會議包含經修訂的 1934 年證券交易法第 21E 條含義內的前瞻性陳述，涉及合夥企業的未來業務預期和預測、財務狀況以及營運結果。這些前瞻性陳述涉及一定的風險和不確定性。我們列出了一些可能導致實際結果與此類前瞻性聲明中討論的結果存在重大差異的重要因素，這些因素在我們的收益新聞稿中被稱為警告聲明，可以在我們的網站suburbanpropane.com 上查看。所有隨後由合夥企業或代表行事的人作出的書面和口頭前瞻性陳述均明確符合此類警告性陳述。

Our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, and Form 10-Q for the period ended June 29, 2024, which will be filed by the end of business today, contain additional disclosures regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the Investor Relations section of our website. At this time, I'd like to turn the call over to Mike Stivala for some opening remarks. Mike?

我們將於今天營業結束前提交的截至 2023 年 9 月 30 日的財政年度的 10-K 表格年度報告和截至 2024 年 6 月 29 日的 10-Q 表格年度報告包含有關前瞻性的額外披露。和風險因素。可以透過聯絡合夥企業或 SEC 取得副本。本次電話會議將討論某些非公認會計準則措施。我們在今天早上向 SEC 提交的 8-K 表格中提供了這些措施的描述，並討論了為什麼我們認為這些資訊有用。表格 8-K 可透過我們網站投資者關係部分的連結取得。現在，我想將電話轉給 Mike Stivala，讓其致開場白。麥克風？

Thanks, Davin, and good morning. Thank you all for joining us today. The fiscal 2024 third quarter presented significantly warmer than normal weather and in many areas extreme heat, which followed a winter heating season that was 9% warmer than normal, and lacked sustained cool temperatures in the critical months for heat-related demand. Average temperature for our fiscal 2024 third quarter were 14% warmer than normal, unlike the prior year third quarter, which benefited from colder average temperatures that generated a late burst of demand from our residential customer base. While the warm weather negative impacted customer demand for heating purposes in the third quarter, we benefited from growth in our counter-seasonal customer base.

謝謝，達文，早安。感謝大家今天加入我們。2024 財年第三季的天氣明顯比正常溫暖，許多地區出現極端高溫，此前冬季供暖季比正常溫度高 9%，並且在與供暖相關的需求的關鍵月份缺乏持續涼爽的氣溫。2024 財年第三季的平均氣溫比正常高 14%，與去年第三季不同，去年第三季受惠於較冷的平均氣溫，導致住宅客戶群後期需求激增。雖然溫暖的天氣對第三季度客戶的供暖需求產生了負面影響，但我們受益於反季節客戶群的成長。

Overall volumes for the third quarter were 8.6% lower than the prior year third quarter. As we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job, managing selling prices and leveraging our efficient operating model to help manage costs, which help mitigate the impact of warmer weather on earnings. For the quarter, adjusted EBITDA was $27 million, a decrease of $6 million from the prior year third quarter, but in line with our expectations for this shorter period, despite the warmer weather. In our renewable natural gas operations, during the third quarter, we continued to drive operational excellence, increase feedstock intake and production levels, and grow revenue opportunities.

第三季的整體銷售量比去年第三季下降了 8.6%。正如我們過去一貫所證明的那樣，我們的現場營運人員繼續出色地管理銷售價格，並利用我們高效的營運模式來幫助管理成本，這有助於減輕天氣變暖對收益的影響。本季調整後 EBITDA 為 2,700 萬美元，比去年第三季減少 600 萬美元，但儘管天氣變暖，但仍符合我們對這段較短時期的預期。在我們的再生天然氣業務中，第三季我們繼續推動卓越運營，增加原料攝取和生產水平，並增加收入機會。

In fact, the operational enhancements we have implemented have resulted in an increase in feedstocks processed and higher levels of daily RNG injection at our Stanfield facility, reaching a daily peak injection level as high as 1,500 MMBtus in the quarter. RNG injection for the quarter as a whole averaged around 1,000 MMBtus per day, as the facility did experience extended periods of limited injection, resulting from power outages from severe storms in the area. In addition, revenues in the facility have been adversely impacted by lower prices for California LCFS credits, and to a lesser extent lower benchmark natural gas prices, but benefited from higher D3 RIN values. Both the Stanfield and Columbus facilities reported higher revenues from tipping fees, resulting from increased intake of food, beverage, and other waste feedstocks compared to the prior year third quarter.

事實上，我們實施的營運改善措施增加了斯坦菲爾德工廠加工原料的數量，提高了每日 RNG 注入量，本季每日尖峰注入量達到 1,500 MMBtus。整個季度的 RNG 注入量平均每天約為 1,000 MMBtus，因為該設施確實因該地區嚴重風暴造成停電而經歷了長時間的有限注入。此外，該設施的收入受到加州 LCFS 信用價格下降以及基準天然氣價格下降（較小程度）的不利影響，但受益於較高的 D3 RIN 值。斯坦菲爾德和哥倫布工廠均報告稱，由於食品、飲料和其他廢物原料的攝入量與去年第三季度相比有所增加，因此傾倒費收入有所增加。

Additionally, during third quarter, we utilized excess cash flow to acquire two small retail propane businesses in strategic markets in Florida and Nevada, for a total investment of nearly $13 million, and we also repaid $10.5 million of outstanding debt under our revolving credit facility. We also continue to advance our capital improvement plans for the installation of RNG upgrade equipment at our Stanfield at our Columbus, Ohio facility and the construction of our anaerobic digester facility at Adirondack Farms in Upstate, New York. As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025. Therefore, despite the challenges resulting from warm weather in fiscal 2024, we continue to execute on our long-term strategic growth plans, which include investing in the growth of our core propane business, and building out our renewable energy platform, while maintaining a disciplined approach to deploying additional capital in order to foster the growth, and strength of the balance sheet.

此外，在第三季度，我們利用多餘的現金流收購了佛羅裡達州和內華達州戰略市場的兩家小型零售丙烷業務，總投資近1300萬美元，並且我們還根據循環信貸安排償還了1050萬美元的未償債務。我們也繼續推動資本改善計劃，在俄亥俄州哥倫布市的斯坦菲爾德工廠安裝 RNG 升級設備，並在紐約州北部的阿迪朗達克農場建造厭氧消化設施。正如我在上季度的財報電話會議上提到的，我們預計這兩個設施將於 2025 年下半年完工。因此，儘管 2024 財年面臨溫暖天氣帶來的挑戰，我們仍將繼續執行長期策略成長計劃，其中包括投資於我們核心丙烷業務的成長，以及建立我們的再生能源平台，同時保持嚴格的紀律部署額外資本以促進資產負債表成長和實力的方法。

In a moment, I'll come back for some closing remarks, however, at this point, I'd like to turn the call over to Mike Kuglin to discuss the third quarter in more detail.

稍後，我將回來發表一些結束語，但是，此時，我想將電話轉給 Mike Kuglin，以更詳細地討論第三季度。

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, as I discuss our third quarter results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately $3 million in the third quarter of fiscal 2024, and fiscal 2023, along with certain other non-cash items and acquisition-related transaction costs. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year, with that said, the net loss for the third quarter was $8 million, or $0.12 per common unit, compared to a net loss of $1.5 million, or $0.02 per common unit, in the prior year.

謝謝麥克，大家早安。為了與先前的報告保持一致，在我討論第三季業績時，我排除了未實現的按市價調整對我們的商品對沖的影響，這導致了第三財季未實現的損失約 300 萬美元。 2024 年和2023 財年，以及某些其他非現金項目和收購相關的交易成本。鑑於我們業務的季節性，我們通常會在財年第三季度出現淨虧損，也就是說，第三季度的淨虧損為 800 萬美元，即每普通單位 0.12 美元，而去年同期的淨虧損為上一年為150 萬美元，或每普通單位0.02 美元。

Adjusted EBITDA for the third quarter was $27 million, compared to $33 million in the prior year. As Mike mentioned, our earnings for the quarter, were impacted by lower heat-related demand resulting from a continuation, of a seasonably warm weather, but benefited from unit margin expansion, controlling operating expenses, and greater contribution from our RNG operations. Retail propane gallons sold in the third quarter were 71.7 million gallons, which was 8.6% lower than the prior year, primarily due to warmer weather across most of our operating footprint. Average temperatures as measured in heating degree days were 14% warmer than normal, and 10% warmer than the prior year third quarter.

第三季調整後 EBITDA 為 2,700 萬美元，去年同期為 3,300 萬美元。正如麥克所提到的，我們本季的收益受到季節性溫暖天氣持續導致的與熱力相關的需求下降的影響，但受益於單位利潤率擴張、控制營運費用以及我們的 RNG 業務的更大貢獻。第三季零售丙烷加侖銷售量為 7,170 萬加侖，比前一年減少 8.6%，這主要是由於我們大部分營運區域天氣變暖。暖氣度日平均氣溫比正常值高 14%，比去年第三季高 10%。

From a commodity perspective, wholesale propane prices, were somewhat range-bound during the quarter, but generally trended lower. However, the pace of the decline trailed the sharp decline experienced in the prior year, resulted in average wholesale prices increasing 11.5%, compared to the prior year third quarter, basis Mont Belvieu. At the end of the third quarter, the nation's propane inventories were at 75.8 million barrels, which was 7% lower than June 2023 levels, but remain elevated compared to historical averages for this time of the year. Excluding the impact of the mark-to-market adjustments on our commodity hedges, as I mentioned earlier, total gross margin of $163.4 million for the third quarter decreased $7.8 million, or 4.5%, compared to the prior year, primarily due to lower volumes sold, partially offset by higher unit margins and higher margin contribution from our RNG business.

從大宗商品的角度來看，本季丙烷批發價格有些區間波動，但整體呈現走低趨勢。然而，下降的速度落後於去年經歷的急劇下降，導致平均批發價格與去年第三季相比上漲了 11.5%（以 Mont Belvieu 為基礎）。截至第三季末，美國丙烷庫存為 7,580 萬桶，比 2023 年 6 月的水準低 7%，但與今年同期的歷史平均值相比仍處於較高水準。正如我之前提到的，不包括以市價調整對我們的商品對沖的影響，第三季的總毛利率為1.634 億美元，與前一年相比下降了780 萬美元，即4.5%，這主要是由於銷量下降銷售量，部分被更高的單位利潤率和我們的 RNG 業務的更高利潤率貢獻所抵消。

Propane unit margins for the third quarter increased $0.07 per gallon, or 3.8% compared to the prior year. With respect to expenses, combined operating and G&A expenses of $135.1 million for the third quarter decreased $2.3 million, or 1.7% compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs, overtime, and other costs that flex with volume sold was lower variable compensation and cost savings and efficiencies realized in our RNG operations. Partially offsetting those savings was an increase in self-insurance accruals, for a legal matter that was settled during the quarter. Net interest expense of $18.4 million for the third quarter was marginally lower than the prior year as savings from a lower level of average outstanding borrowings under our revolving credit facility, were offset by higher benchmark interest rates for borrowings under the revolver.

第三季丙烷單位利潤率每加侖增加 0.07 美元，比去年同期增加 3.8%。在費用方面，第三季營運和一般管理費用合計為1.351 億美元，與上年同期相比減少了230 萬美元，即1.7%，這主要是由於可變運營成本降低，其中包括燃料成本、加班費和其他彈性成本隨著銷售量的增加，我們的 RNG 營運實現了較低的變動補償、成本節約和效率提高。自我保險應計費用的增加部分抵消了這些節省，該法律問題已在本季度得到解決。第三季的淨利息支出為1,840 萬美元，略低於上年同期，這是因為我們的循環信貸安排下的平均未償還借款水平較低而節省的費用被循環貸款下較高的基準利率所抵消。

Total capital spending for the quarter of $14.7 million, was $5.3 million higher than the prior year, primarily due to growth capital from advancing our construction efforts at our Columbus and Adirondack facilities, as well as spending on propane dispensers, and cylinders to support growth within our commercial customer base, and the timing of fleet purchases. While we continue to make progress with construction efforts at our RNG facilities, the level of CapEx spending in the current fiscal year will be below the low end of the range that we have previously discussed, primarily due to timing. Our current estimate for capital spending for the RNG projects is expected to range between $10 million to $20 million in fiscal 2024, and between $35 million to $45 million in fiscal 2025. Our annual CapEx estimates for our propane operations, are expected to be consistent with historical levels, which is between $40 million and $45 million.

本季的總資本支出為1,470 萬美元，比上年增加530 萬美元，主要是由於推進哥倫布和阿迪朗達克設施的建設工作以及丙烷加油機和鋼瓶的支出以支持內部增長而產生的增長資本。雖然我們的 RNG 設施的建設工作繼續取得進展，但本財年的資本支出水準將低於我們之前討論的範圍的下限，這主要是由於時間安排。我們目前預計 2024 財年 RNG 專案的資本支出將在 1,000 萬美元至 2,000 萬美元之間，2025 財年將在 3,500 萬美元至 4,500 萬美元之間。我們對丙烷業務的年度資本支出預計將與歷史水準保持一致，即 4,000 萬美元至 4,500 萬美元之間。

Turning to our balance sheet, during the third quarter, we repaid $10.5 million of borrowings under the revolver with cash flows from operating activities, and our consolidated leverage ratio for a trailing 12-month period ended June 2024 was 4.68 times. Although the leverage metric remains elevated, relative to our historical levels following the RNG acquisition, and from the impact of the warm weather on earnings, we remain well within our debt covenant requirement of 5.75 times, and continue to make progress on strengthening the balance sheet with debt repayments from excess cash flows. We will continue to remain focused on utilizing excess cash flows, to fund the planned growth capital within our RNG platform, as well as to strengthen the balance sheet, and as opportunities arise to fund strategic growth of our core propane business and our renewable energy portfolio.

轉向我們的資產負債表，第三季度，我們用經營活動產生的現金流償還了循環貸款下的 1050 萬美元借款，截至 2024 年 6 月的過去 12 個月期間的綜合槓桿率為 4.68 倍。儘管槓桿率指標相對於 ​​RNG 收購後的歷史水平仍然較高，並且考慮到溫暖天氣對收益的影響，但我們仍然完全符合 5.75 倍的債務契約要求，並在加強資產負債表方面繼續取得進展通過超額現金流償還債務。我們將繼續專注於利用多餘的現金流，為我們的RNG 平台內的計劃增長資本提供資金，並加強資產負債表，並在出現機會時為我們的核心丙烷業務和可再生能源投資組合的戰略增長提供資金。

We have more than ample borrowing capacity under our revolver, to support our capital expansion plans and ongoing strategic growth initiatives. As we continue to focus on the execution, of our long-term strategic goals, we will also stay focused on maintaining a strong balance sheet. With that, I'll turn the call back to Mike.

我們的左輪手槍擁有充足的借貸能力，可以支持我們的資本擴張計劃和持續的策略成長計劃。在我們繼續專注於長期策略目標的執行的同時，我們也將繼續致力於維持強勁的資產負債表。這樣，我會將電話轉回給麥克。

Thanks, Mike. As announced on July 25, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our third quarter of fiscal 2024, which equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on August 13 to our unitholders of record as of August 6. Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024. Just to reflect a moment on our results through the first nine months of fiscal 2024, and the state of the business.

謝謝，麥克。正如 7 月 25 日宣布的那樣，我們的監事會宣布 2024 財年第三季度的季度分配為每普通單位 0.325 美元，相當於每普通單位的年化率為 1.30 美元。我們的季度分配將於 8 月 13 日支付給截至 8 月 6 日記錄在案的單位持有人。截至 2024 年 6 月的過去 12 個月，我們的分配覆蓋率持續維持在 1.91 倍的健康水準。只是為了回顧我們 2024 財年前 9 個月的表現以及業務狀況。

Overall performance through the first nine months, was certainly affected by the lack of heat-related customer demand, throughout the vast majority of the heating season and into the third quarter. Propane volumes decreased by 3.9%, compared to the same nine-month period last year, despite heating degree days that were at times significantly warmer than the prior year. Our management team has managed through these warm weather scenarios, many times in the past and our experience and best-in-class business model, coupled with some growth in our non-weather dependent customer segments, helped to mitigate the effects on the bottom line. Our core propane business remains strong.

前九個月的整體業績肯定受到供暖相關客戶需求缺乏的影響，從供暖季的大部分時間到第三季度都是如此。儘管供暖日數有時明顯高於去年，但與去年同期 9 個月相比，丙烷銷量下降了 3.9%。我們的管理團隊過去曾多次應對這些溫暖的天氣情況，我們的經驗和一流的業務模式，加上我們不依賴天氣的客戶群的一些增長，有助於減輕對底線的影響。我們的核心丙烷業務依然強勁。

In fact, even with the weather-related earnings shortfall, compared to the prior year, our excess cash flows and strong liquidity position provide capital to continue to invest in growth opportunities in both our core propane business, and our renewable energy platform. As society continues to seek alternatives, for lowering carbon intensity across all aspects of the economy, we are starting to see increased recognition and momentum building, for the benefits of propane as an immediate, and as a long-term solution in the energy transition. In line with our Go Green with Suburban Propane Corporate pillar, we are continuing to foster the growth of our Core Propane business through advocacy and innovation while also investing in the build-out of an interconnected renewable energy platform, for the long-term growth of Suburban Propane. As we have stated in the past, we manage this business for the long-term and are making strategic investments, to set the business up for the next 95 years.

事實上，即使與前一年相比，與天氣相關的盈利出現短缺，我們過剩的現金流和強大的流動性狀況也為我們的核心丙烷業務和可再生能源平台的增長機會提供了資金繼續投資。隨著社會不斷尋求替代方案，以降低經濟各個方面的碳強度，我們開始看到越來越多的人認識到丙烷作為能源轉型中的直接和長期解決方案的好處並形成動力。根據我們的「郊區丙烷走向綠色」企業支柱，我們將繼續透過宣傳和創新促進核心丙烷業務的成長，同時投資建造互聯的再生能源平台，以實現長期成長郊區丙烷。正如我們過去所說，我們長期管理這項業務，並進行策略性投資，為未來 95 年做好準備。

And with some of the softness in the broader economy, challenging geopolitical events, and volatility in the stock market, the continued strength of our distribution coverage and focus on balance sheet strength should provide our unitholders with a level of comfort in the long-term sustainability of Suburban Propane in an otherwise uncertain market. Finally, I want to take this opportunity to thank the more than 3,200 employees, at Suburban Propane for their hard work and unwavering focus, on the safety and comfort of our customers and the communities we serve. Thank you, for all that you do every day, and as always, we appreciate your support and attention this morning. And now I'll turn the call over to Chris to see if we have any questions. Chris, you want to help us?

鑑於整體經濟的疲軟、具有挑戰性的地緣政治事件以及股市的波動，我們的分銷覆蓋範圍的持續強勁和對資產負債表實力的關注應該為我們的單位持有人提供長期可持續性的一定程度的安慰在原本不確定的市場中生產郊區丙烷。最後，我想藉此機會感謝 Suburban Propane 的 3,200 多名員工的辛勤工作和對我們客戶以及我們所服務社區的安全和舒適的堅定關注。感謝您每天所做的一切，並且一如既往，我們感謝您今天早上的支持和關注。現在我將把電話轉給克里斯，看看我們是否有任何問題。克里斯，你想幫助我們嗎？

(Operator Instructions) There are no questions at this time. Please proceed.

（操作員說明） 目前沒有任何問題。請繼續。

Great. Thank you, Chris. Again, thank you all for joining us. We look forward to speaking with you again, at the end of our fiscal year in November. I wish you all a good end to the summer, and please, as always, be safe.

偉大的。謝謝你，克里斯。再次感謝大家加入我們。我們期待在 11 月財政年度結束時再次與您交談。祝大家夏天有個美好的結局，請一如既往地註意安全。

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.

謝謝。女士們、先生們，今天的電話會議到此結束。我們感謝您的參與，並請您斷開線路。