Q2 2022 Star Group LP Earnings Call
[music].
Good day and welcome to the Spar group fiscal 2022 second quarter results conference call.
All participants will be in a listen only mode.
We need at least another conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask.
A quick question you May Press Star then one on I touched on phone to withdraw your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Alison Ziegler Investor Relations Advisor. Please go ahead.
Thank you and good morning with me on the call today are Jeff Wisdom, President and Chief Executive Officer, and Rich <unk>, 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 and may cause the company's actual performance to be material 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 incorrect important factors that could cause actual results to differ materially from.
The Companys expectations are disclosed in this conference call. The company's annual report on Form 10-K for the fiscal year ended September 32021, 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.
Re qualified in their entirety by the cautionary statements.
As 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 with them.
Thanks, Alison and good morning, everyone. Thank you for joining us to discuss our second quarter and fiscal year to date results.
Second quarter was rather challenging due to extreme volatility in the <unk>.
Wholesale cost of home heating oil, which varied from $2.36 per gallon to.
So as high as $4 44 per gallon during the period.
It should come as no surprise that our working capital needs increased substantially, but Fortunately, we were able to access $100 million of our seasonal working capital line, bringing the total to $400 million. However.
However, the rapidly changing conditions conditions impacted our ability to deliver the adjusted EBITDA results, we would've otherwise expected even as we believe we took the right steps to mitigate such headwinds as much as possible.
The sudden and significant increase in wholesale product costs drove higher operating expenses expenses in areas, such as bad debt and credit card fees, while at the same time elevating customer price sensitivity.
The oil and propane margins did rise by three <unk> versus the prior year, but this increase was not sufficient to offset the impact of the higher operating expenses and a shortfall in volume, which which rich will review further in a moment.
We remain keenly focused on reducing customer attrition and churn as ever, especially as we navigate through this period of extreme price volatility.
I'm pleased to report that during the quarter start purchased one small heating oil dealer and in April purchased another adding approximately $5 5 million gallons in aggregate of annual volume.
Both companies are well established full service businesses located within our current operating footprint. We continue to evaluate additional acquisition opportunities that align with our growth strategy strategy to strengthen and broaden our brand portfolio.
Overall, despite the unique challenges that the second quarter presented we're certain that the steps we have taken to improve the company over the past three years, which include removing unnecessary overhead expense improving the customer experience and placing us in a better competitive position has made store a stronger and more resilient business better prepared and able to respond.
These types of conditions.
As we navigate through the remainder of fiscal 2022, I am confident in our ability to continue to provide the best possible customer experience and improve bottom line results.
Even as we remain vigilant in monitoring and addressing inflationary pressures pressures across many aspects of our business with that I'll turn the call over to rich to provide additional comments on the quarter's results rich thanks, Jeff and good morning, everyone.
For the quarter, our home heating oil and propane volume decreased by 9 million gallons or about five 5% to 149 million gallons as the additional volume provided from somewhat colder temperatures and acquisitions was more than offset by net customer attrition and other factors.
Please note that the volume delivered during the three months ending March 31, 2022 was reduced by approximately $3 5 million gallons as certain deliveries were made in the first fiscal quarter in anticipation of another COVID-19 wave.
Temperatures for the fiscal 2022 second quarter were 3% colder than last year, but still 4% warmer than normal.
Our product gross profit decreased by $6 million to $222 million as the decline in home heating oil and propane volumes sold was only partially offset by an increase in margin of three two cents per gallon.
Operating expenses did increase by $6 million of which $600000 was attributable to our weather hedging program.
Recent acquisitions accounted for $1 4 million in operating costs and expenses in the base business rose by $4 million higher.
Higher sales of over $178 million up 30% driven by the higher cost of product led to an increase in bad debt and credit card fees of $2 $7 million.
The remaining expense variance reflects a relatively nominal $1 million or 1% increase in wages benefits and other factors. We posted net income of $81 million in the second quarter of fiscal 2022 or $4 million less than the prior year, reflecting a noncash favorable change.
And the fair value of derivative instruments, and a $12 million decrease in adjusted EBITDA.
Adjusted EBITDA decreased by $12 million to $108 million as the impact of a decline in home heating oil and propane volume of 9 million gallons and higher operating expenses more than offset an increase in home heating oil and propane per gallon margins as I just mentioned the volumes sold during the second.
Quarter was lower by $3 5 million gallons, reflecting deliveries made during the first quarter in anticipation of another COVID-19 wave and lastly temperatures were warmer than normal.
Turning to the results for the first half of fiscal 2022, our home heating oil and propane volume decreased by 11 million gallons or four 5% to 236 million gallons as the additional volume provided from acquisitions was reduced by slightly warmer temperatures net customer attrition and other factors temper.
For the first half of fiscal 2022, or one where a half a percent warmer than last year, but again still 10% warmer than normal our product gross profit increased by $3 million or 1% to $357 million as higher home heating oil and propane margins of six six per gallon or five.
<unk> and higher motor fuel gross profit more than offset the decline in home heating oil and propane volume.
Operating expenses did increase by $15 million year over year of which $2 3 million was attributable to our weather hedging program in fiscal 2022, we recorded a benefit of one point.
$1 million under the weather hedge compared to a benefit of $3 4 million recorded in fiscal 2021.
Recent acquisitions accounted for an increase of $3 million in operating expenses, while base business operating costs rose by $9 $5 million.
Bad debt and credit card fees were higher by $3 $5 million due to higher sales of 30% and the remaining expense increase in the base business was about 3% or so we posted a net income of $96 million for the first half of fiscal 2022 or $27 million lower than the prior.
Period due to a noncash unfavorable change in the fair value of derivative instruments and a decrease in adjusted EBITDA.
Adjusted EBITDA decreased by $13 million to $152 million as the impact of a decline in home heating oil and propane volume of 11 million gallons and higher operating expenses more than offset an increase in home heating oil and propane per gallon margins of six six.
Four 5% and lastly temperatures were still.
About 10% warmer than normal for the fiscal 2022 heating season, and with that I'd like to turn it back over to Jeff.
Thanks Rich at this time, we are pleased to address any questions. You may have operator, please open the phone lines to questions.
Thank you we will now.
Taking the question My first question to ask a question you May Press Star then one on your Touchtone phone.
Are you seeing with speakerphone, please pick up your handset before pressing the keys.
But anytime youre questions have been answered and you would like to withdraw your question. Please press Star then.
Finally, we'll cross momentarily glaucoma thereafter.
Okay. Thank you I would like to ask a question. Please press Star then one to be joined into the queue.
Okay.
Our first question comes from Michael <unk> with Bank capital. Please go ahead.
Hey, good morning, guys.
Good morning, Good morning, Mike.
Just just one question really.
Or maybe two part question.
I seem to recall.
10-Q.
You mentioned that you had.
Pace.
Six are incurred some expenses.
In order to get expedited product delivery I'm just curious.
How much that added to costs in the quarter.
And then.
Jeff in your opening remarks.
<unk>.
Hi.
<unk>.
Volatility in.
Product costs during the quarter.
Just wondering is there anything differently.
You could have done.
Hence you somehow.
Magically forecast there.
They are kind of price volatility and other conditions that you ultimately ended up facing this quarter. Thanks.
Yes, Mike this is rich we.
We did pay a premium as did all our other competitors in the market for at certain times, when we had to buy some make some spot purchases.
And the volatility in the quarter really started in <unk>.
March so it's been pretty extremely volatile.
Even even past March.
And there is nothing we would have done different.
We don't have a crystal ball as to where prices are going to go where they're going to go up or we're going to go down we have we have our inventory levels that coming into the season and going out of the season.
And we have the same hedging program that we've always had but it was extremely volatile and you saw sometimes upward or downward movement in the market about almost a dollar a gallon at times if not more.
Yes, yes, okay.
Okay. Thanks.
Yes.
Okay.
If you would like to ask a question.
And then wanted to rejoin the queue.
The next question comes from Ken <unk> with Northern can management. Please go ahead.
Alright, thanks, very much I'm just curious.
If you could give a sense for when we may or may not get an update to the share repurchase program.
1 million shares or so our units left.
On the existing program any color on that thanks.
Yes.
We're still running through those units then.
From time to time, we will look at it and when we have an open window too.
To make changes to that plan, we will we will take a look at that all within the confines of.
Our capital our capital program, whether it's.
Reducing some of our debt or making acquisitions or buying units.
And can you just remind me when that window is open again.
It should open in four or five days after the end of the.
After after we report so it will be.
Probably sometime in the middle of next week.
Great. Thank you.
Youre welcome.
At this time there are no other callers in queue. So I'll turn the call back to Mr. Wilson 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 third quarter results in August thanks, everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.