Q1 2022 Star Group LP Earnings Call

Good day.

Welcome to the Star Group fiscal 2020 to first quarter results Conference call.

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Please note this event is being recorded.

I'd 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 and Barry 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 performance indicated or implied by such statements.

All statements other than 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 2021, and the company's other filings 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 obligation 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 wish them Jeff.

Thanks, Chris and good morning, everyone.

Despite the company facing temperatures that were six 3% warmer than last year and 18 six.

6% warmer than normal negatively impacting demand I'm pleased with our overall performance for the first quarter of fiscal 2022.

We were able to overcome the weather related volume shortfall with solid margin management and strong expense controls, particularly in the face of certain inflationary pressures to deliver adjusted EBITDA in line with the prior year.

Our customer retention also improved as our net change in accounts was almost equally driven by both an increase in customer additions as well as a decrease in losses versus the prior year further supporting our focus on the customer experience.

In addition, I'm happy to report that our acquisition program remained active during the period as we purchased three heating all businesses. They brought with them approximately 3 million gallons of annual product sales, we continue to evaluate interesting opportunities that support our strategic growth plan.

A recap of our results would not be complete without mentioning how grateful I am to our employees.

Who while despite the unique circumstances over the past year have remained entirely focused on servicing our customers.

Most notably their willingness to step up and in many cases work extended hours to meet the added demand brought on by much colder weather in January which is further evidence of our team's dedication to our customers.

It's too early to say how fiscal 2022 will play out, but we are encouraged to see core temperatures over the past months and believe we are well positioned to address whatever challenges or opportunities might present themselves for the remainder of the heating season.

With that I'll turn the call over to rich.

Thanks, Jeff and good morning, everyone for the quarter, our home heating oil and propane volume decreased by two and a half million gallons or approximately 3% to 87 million gallons as the additional volume provided from acquisitions and other factors was more than offset by the impact of warmer temperatures and that customer.

Christian as Jeff mentioned temperatures for the fiscal 2022 first quarter were 6% warmer than the prior year period, as well as approximately 19% warmer than normal.

Our product gross profit increased by $9 million or 7% to $137 million as an increase at home heating oil and propane margins more than offset the impact of the lower volume so.

Our operating total operating costs increased by $9 million or 10% to $96 million of which 1.8 million related to the change in our weather hedge position.

Acquisitions accounted for $1 6 million of the increase and then the base business expenses rose by $5 6 million, reflecting higher wage rates the impact of increased product cost on certain operating expenses somewhat higher insurance premiums and a normalization of our medical expenses.

Yes.

During the first quarter of fiscal 2022, where we recorded a $13 million noncash charge relating to the change in the fair value of our derivatives by comparison in the first quarter of fiscal 2021, we recorded a $17 million noncash credit or change in there.

<unk> change of about $30 million.

Our net income decreased by $23 million to $14 $5 million largely due to the after tax impact of the unfavorable change in our derivative instruments.

Adjusted EBITDA decreased slightly by $800000 to $44 5 million as the impact of higher per gallon margins was more than offset by lower volume somewhat higher operating expenses and unfavorable change in our weather hedges and a slight decline in service profitability.

And with that I'll turn the call back over to Jeff.

Thanks Rich at this time, we're pleased to address any questions you may have it's.

Sarah could you. Please open the phone lines for questions.

Thank you.

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble our Ross.

Yeah.

Yeah.

Our first question comes from Tim Nolan with.

Laurel Tin management. Please go ahead.

Hey, guys I'm just curious if you could give any color in terms of when we can expect updates with regards to the buyback.

Well, we have a we do have a footnote in the 10-Q as to what we purchased what we purchased the shares for and what remaining shares are outstanding.

What else what other information can I hope it would.

Would there be any update too.

What's left on the existing program Yeah. That's it's right there in that it's very clear understanding in the 10-Q, but I can.

And look it up and give it to you if you like.

I mean, I see that Theres about $1 9 million units left I'm, just curious that with the <unk>.

Program will be updated.

The window falling earnings when when that can be changed.

Yeah, you know what.

We're running around depending on what's available and then in the in the calculation, we we buy about <unk>.

200 to 250000 units a month, so that will last us until the until the next open window and I can't promise, whether we're going to increase the buyback our shares but just historically we have.

And sorry, what when does that window open again, well that would be.

That would be May after we report the first to the second quarter.

Great. Thanks, very much first week or so.

Thank you.

Yeah.

Okay, and if you'd like to ask a question. Please press Star then one at this time.

Next question comes from Michael Conti, with 10-K capital. Please go ahead.

Yeah, Hey, Hey, guys. Good morning, I know, it's kind of a cliche, but.

I did want to congratulate you on a terrific quarter.

Just great execution across the board given the.

Weather headwinds.

And then post in terms of margins cash conversion cycle.

And also customer attention.

Just a couple of questions just first on the customer churn or customer retention.

This is the best quarter I can remember in a long time do you think we're starting to see an inflection point here.

What's your thinking on customer churn and customer retention going forward.

Yeah, Michael I am I'm encouraged you know.

We're all going to have to see how the rest of the year.

Unfolds, but certainly we were coming off of that.

Very strong quarter I'm encouraged to see not only a reduction in customer churn reduction in losses and improvement in retention as we've talked about in prior calls, but we also saw an increase in new customer additions and we just continue to work on improving the customer.

Experience.

Using technology employee training.

Analytics as a way to work smarter and really better understand our customers and at this point so far the results seem to be supporting that so you know what.

We'll have to see how things.

Unfold as we move forward, but.

Certainly I think encouraging progress.

That's really great and I wanted to call that out as I am.

Mentioned on prior calls even just small changes in customer retention and customer churn can actually have a dramatic value on the long term value of the company. So it's really really encouraging to see that progress.

Be great to see further progress going forward.

Just a couple of other quick questions.

Wondering if you can give an update on the acquisition front.

And in particular, whether you see any large or the potential for any transformative deals at this point and then I know the buyback is.

It has already been raised.

I'm just curious in terms of capital allocation, if you feel satisfied with the number of shares you're repurchasing right now.

It seems to be a little bit lower than.

Prior quarters, it's obviously, that's determined by the formula, but I'm just wondering if you've given any towards two adjusting that for Mueller hurdle, given the slightly lower repurchase rate.

In light of the.

Our repurchase you made outside the repurchase program.

And I'll close with those two.

Questions. Thanks.

Okay.

Physicians.

So I'm going to take the repurchase question first Jeff sure you, but we.

We can't really increase the number of shares that we buy back I mean, it's it it's a it's a calculation.

There's nothing we can do it's the FCC formula.

A look back over I guess 60 days then.

We're limited to how much we can amount, which we can buy back.

Jeff did you want to discuss the acquisition question.

Yeah.

Just Jeff just before you go on with the ACA.

Acquisition.

Just to just to finish on the buyback rich is it not possible to adjust the formula there.

Okay.

A few more shares it's not our formula isn't it.

It's an FCC derived formula.

That you look back we can't adjust anything.

Okay, and you kind of just the price the price that you're using to repurchase or anything yeah.

Yeah, we can always adjust the price if we want to sure.

Okay that would require a board decision.

Yeah, that's what I'm asking.

Well, we have a price out there and you can look at our numbers and figure out kind of where where it was but yeah sure. We don't want to overpay either.

Understood. Okay. So it sounds like you're not.

Desirous of making any changes to try to pick up the repurchase rate at all.

That's as far as the price goes that's correct.

Okay alright. Thanks.

Yeah.

Okay.

Michael in terms of acquisition activity I mean, the activity level overall, it's been pretty consistent over the past.

Five to six months and it continued into the heating season in which there's a little bit unusual as we get farther into the season in Austin sellers are very busy running their own businesses. So there's a little bit of a distraction there, but we're encouraged by that and as I mentioned we.

We completed three small but.

But I feel are high quality deals in the first quarter and have a number of prospects in various stages of evaluation and discussion so I'm encouraged as for.

Transformative deals difficult one to answer.

At this point.

I don't see anything.

In our immediate future, but that could change tomorrow.

As opportunities present themselves.

Okay sure yeah. Thanks for the update and again congratulations on just terrific execution across the board.

Okay.

Thank you.

Yeah.

Again, if you'd like to ask a question. Please press Star then one at this time.

Yeah.

At this time there appears to be no. Further question. Thank you I would now like to turn the call back over to Mr. Woodman for any closing remarks.

Well. Thank you for taking the time to join US today and your ongoing interest in Star Group, We look forward to sharing our 2022 fiscal second quarter results with you in April .

Everybody.

The conference is now concluded. Thank you for attending today's presentation you may now disconnect.