Q3 2021 Star Group LP Earnings Call
[music].
Good morning, and welcome to the Star Group third quarter 2021 results Conference call. All participants will be on listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then 1 on your telephone.
On the pad to withdraw your question. Please press Star then 2 please note that this event is being recorded I would now like to turn the conference over to Chris witty Investor Relations adviser. Please go ahead.
Thank you and good morning with me on the call today are Jeff Wisdom, President and Chief Executive Officer, and Rich Embury, Chief Financial Officer, I would now like to provide a brief safe Harbor statement.
This conference call May include forward looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties that may cause the company's actual performance to be materially different from the poorer performance indicated or implied by such statements.
All statements other than the statements of historical facts included in this conference call are forward looking statements.
Although the company believes that the expectations reflected in such forward looking statements are reasonable it can give no assurance that such expectations will prove to have been correct important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call. The company's annual report on form 10-K for the fiscal year ended September 30th 2020, and the company's other file.
<unk> with the SEC.
All subsequent written and oral forward looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements unless otherwise required by law. The company undertakes no obligations to publicly update or revise any forward looking statements whether as a result of new information future events or otherwise after the date of this conference call.
I'd now like to turn the call over to Jeff who is named Jeff.
Thanks, Chris and good morning, everyone and thank you for joining us to discuss our third quarter and fiscal year to date results. While summer is typically a less active time for star.
And then the heating season of mix of factors, both positive and negative impacted results versus the prior year period.
The volume of home heating oil and propane fell 26% as a result of significantly warmer temperatures compared to the third quarter of fiscal 2020.
Which was the second coldest on record over the last 50 years within the New York Metropolitan area.
However, as areas previously impacted by the pandemic have begun to normalize we benefited from increased HVAC equipment installation revenue and related gross profit along with higher sales of other petroleum products.
Our service revenue has also increased year over year, but this positive development was more than offset by the additional expenses associated associated with returning to a more traditional off season work load as well as the more normal level of heating system maintenance.
We also took the opportunity to invest in additional technical training for our field our field staff all of which had been somewhat pause in the third quarter of fiscal 2020.
Given all of these factors our performance came in largely as anticipated and more in line with historical levels.
Although we did not complete any new acquisitions in the quarter. The businesses, we acquired earlier in the year are performing well on aggregate.
And we are currently working on several additional <unk>.
Tractive tuck in opportunities our acquisition program remains an important part of our growth strategy.
For the first 9 months of the fiscal year adjusted EBITDA decreased by $2.4 million for.
Versus the same period in 2020.
As fiscal 2021 winds down we are pleased with our overall performance as the business, particularly in the face of slightly warmer temperatures certain rising inflationary costs and the $6.7 million dollar reduction in weather insurance proceeds due to the the seasonal timing of degree days.
I remain confident the steps, we're taking through the third and fourth quarters, while of star well positioned and prepared for next seeding season.
On whatever challenges and opportunities are presented.
With that I'll turn the call over to rich for additional comments on the quarter rich.
Thanks, Jeff and good morning, everyone for the fiscal 2021 third quarter, our home heating oil and propane volume decreased by 13 million gallons of 26% of 38 million gallons as the impact of significantly warmer temperatures of net customer attrition more than offset the additional volume provided for by acquisitions.
Interest for the quarter were 24% warmer.
Then last year as Jeff mentioned, the third quarter of fiscal 2020 was the second coldest on record over the last 50 years.
The volume of other petroleum products sold increased by 7 million gallons, the 41 million gallons at certain sectors rebounded from COVID-19 impact on economic activity.
Our product gross profit decreased as we expected $13 million of our 18% to $72 million due largely due to the lower home heating oil and propane volume sold.
Delivery and branches rose by $2 million to $75 million due to the additional costs from acquisitions and a slight increase in expense within the base business.
Our net loss increased by $12 million, primarily due to a decrease in adjusted EBITDA.
Adjusted EBITDA declined by $15.6 million to the loss of $10 million as lower home heating oil and propane volumes more than offset the impact from improved home heating oil and propane per gallon margins the.
The adjusted EBITDA loss for the third quarter of 2021 was more in line with historic levels for.
For the 9 months.
Of fiscal 2021, our home heating oil and propane volume decreased by 10 million gallons of 3% for 285 million gallons at slightly warmer temperatures net customer attrition and other factors.
More than offset the impact from acquisition temperatures for the first 9 months of fiscal 2021, or 1% warmer than the prior year comparable period, but still 11% warmer than normal the volume of other petroleum products sold increased by 2 million gallons or 2% to the 112 million gallons.
The decline in motor fuel sales experienced during the first half of 2021 was more than offset by a rebound experienced in the third quarter of.
Our product gross profit was $413 million unchanged from last year as lower home heating oil and propane volume was offset by an increase in home heating oil and propane per gallon margin.
Delivery and branch expenses Rose just by $1.6 million as additional costs from acquisitions of $2 million in of $6.6 million decline in the benefit recorded under the weather hedge program was partially offset by a $7 million or 3% decline in operating expenses in the base business.
Net income rose by $25 million to $111 million due largely to a favorable change in the fair value of the derivative instruments.
Adjusted EBITDA did decline by $2.4 million to $155 million.
Lower total of home lower total operating expenses in the base business higher home heating oil and propane margins and $2.4 million of adjusted EBITDA provided from acquisitions.
More than offset by the decline in.
And the weather hedge benefit and the impact from lower home heating oil and propane volume and with that I'd like to turn the call back over to Jeff.
Thanks Rich. This time, we're pleased to address any questions. You may have Emily please open the phone lines for questions.
We will now begin the answer the question and answer session to ask a question you May Press Star then 1 on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble our roster.
Okay.
Okay.
Our first question comes from Mark Savino from private Investor. Please go ahead.
Yes, guys I was wondering about.
Your receivables are any any problems there it seems that there are creeping from.
Absolutely not when you look at our net.
Day sales outstanding our days outstanding of receivables are.
40 were 48 were 48 days as of.
The June of last year and this year. There are 41 day now there is no significant increase in the cost of home heating oil. So you will see.
An increase of point to point, if you look at the <unk>.
This year versus last year.
Oh, that's great.
1 other thing actually wax on the in better shape. This year than we were last year.
Oh, that's great 1 other question and that is labor.
You know your statement I can I just feel that there is some stress on your on your labor to get good people and train them on is that how is that going.
There's no question that the labor market has certainly tightened up we've point out of <unk>.
A number of programs in place.
Both to improve retention of our existing workforce.
And.
And just really to make the positions that.
That we're recruiting for more attractive.
So like many businesses.
We continue just to try to find creative ways to.
Reduce employee turnover.
And to keep the.
The valuable employees and associates that we have and and also to attract new ones. So the I think you know we're not the only business.
No challenge from that regard right now but.
No it is making progress.
It's all over for share.
Yes, I was the manager of UBS for 20 years, and I was gonna play for 30 years total end of.
I I I I now see a lot of issues a lot of new people and I'm I know I know theyre, having a hard time training.
But I'll give you an example of light.
I see these young guys know they like the they'll come up our street and they have this big truck and we always set of a program that said you know you always keep moving forward, you never backup and and and they'll pulling for a driveway and back yes.
The 30 foot vehicle up and of the streets, you know and so I get concerned that it's.
That's crazy I I get concerned that.
With the new people that that you could have a big issue with with <unk>.
The accidents and and just problems you know so.
Well, frankly, I would say that our field training.
And retention has.
It's been fairly constant.
Really more contained.
At this point too.
Customer contact employees, a lot of our inside kantar.
Contact center employees and those things were.
We go on partially like really in a hybrid remote environment.
As the result of the pandemic and so ongoing training.
Well, let's see it become more more difficult, but we've had a pivot a little bit too.
To continue to keep our training programs in place for those folks.
Okay, well that's great.
You know ive been an investor since 2006 tenths of the reorganization and your guidance of hidden homerun for sure I've made a lot of money. So I appreciate it keep up the good work and maybe we will talk next quarter.
Thank you very much.
Our next speaker is Michael crowding from 10-K capital. Please go ahead.
Yeah, Hey, good morning, guys and thanks for taking my questions.
Just a couple of questions. This morning.
My recollection is the capex picked up from the quarter.
I was just curious to know what might be driving that.
And then on the capital allocation side 2 questions.
First of all I'm wondering.
Jeff what youre seeing as far as the acquisition pipeline is concerned and whether you see the potential for any.
Like really large needle moving acquisitions.
And then on the stock repurchase side.
Is that kind of previewed last quarter I was expecting the without changes in the formula just given the higher stock price you would probably buy back a lot fewer shares and that seems true occurred in the second quarter.
So rich I'm just wondering what your thoughts are.
In terms of adjusting that formula.
Yeah in terms of I think the acquisition question in terms of acquisitions I would say that the ACA.
Heavy level of right now.
Pretty much typical what we see for.
For this time of year.
We've been fortunate enough to close on 5 acquisitions so far.
In fiscal 'twenty, 1 on trailing 12 month basis, we've closed on the a total of 7 tenths of the activity has been there and we continue to look as I mentioned in my opening comments we continue.
To work on several attractive tuck in opportunities.
And as far as the the.
The larger opportunities are concerned you just never know when you're going to get them.
I can tell you today that you know.
We may not have seen 1 and then tomorrow.
There's a more significant opportunity in front of us. So that's that's where we are with that but I would say in terms of our pipeline right now it's pretty typical of what we are used to seeing.
The mid summer.
Okay.
Yes with regard to the with regard to the Capex, we did have some additional.
Investment in the fleet and some of the other plant if you will nothing.
2 out of the ordinary but were up about $2 million to $3 million in and the investment in the fleet and.
With regard to capital allocation, we will have to possibly revisit the formula where we just might stay Pat.
Where we are with the unit repurchases.
Okay, all right. Thanks for taking my question.
Yes.
Sure Michael.
Again, if you have a question. Please press Star then 1.
This concludes our question and answer session I would now like to turn the conference back over to Jeff Wisdom for closing remarks. Please go ahead.
Well. Thank you for taking the time to join US today on your ongoing interest in Star Group, We look forward to sharing of our 2021 fiscal fourth quarter results with you in December thanks, everybody.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.