Q1 2023 Star Group LP Earnings Call
Good day and welcome to the Star Group fiscal 2023 first quarter results Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your Touchtone phone and Swift.
Your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Chris Witty Investor Relations adviser. Please go ahead Sir.
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 and 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.
Company's annual report on Form 10-K for the fiscal year ended September 32022.
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 Jeff.
Thanks, Chris and good morning, everyone. The first quarter of fiscal 2023 was somewhat unusual in that during one month October temperatures were 130% colder than the prior year period. However October is typically a transitional month for our customers with a lower overall impact on volumes sold and it also falls outside of our.
Our weather hedge contract.
The rest of the quarters weather was only slightly colder than fiscal 2022 resulted in a $24 million charge against our weather hedge program.
As a reminder, our weather hedge runs through March 31.
So this charge could be reversed depending on second quarter results. We were currently experiencing warmer than normal temperatures throughout our operating footprint.
We were well prepared for the start of the heating season I am pleased with our overall performance, which included delivering adjusted EBITDA. It was $4 $6 million higher than the same period, a year ago as well as an encouraging net gain in accounts.
Typically we achieved net account growth of one 7% our total of 7000 customers representing our best such results in years.
The ongoing volatility in product cost some isolated concerns over supply availability and the cool temperatures in October created.
It created a great deal of new account activity during the quarter while.
While largely temporary in nature, we were pleased to be in a position to take advantage of this increased market activity and we believe that our ongoing efforts in improving the customer experience combined with a replicate reputation of our brands as being among the most reliable and trusted within the markets. We serve also contributed to the strong net gain performance.
A recap of our results would not be complete without mentioning how grateful I am to our talented staff.
It was not only supported but taken true ownership and effectively executing our strategy of differentiating star from the competition through outstanding customer service. This team has remain completely committed to providing the absolute best service possible to our customers and I could not be more proud of them.
During the period, we also acquired two heating oil dealers that added roughly 1.5 million gallons of oil.
And other petroleum products annually.
Annually to our company.
We continue to evaluate a number of opportunities that support our strategic growth plan.
While it's too early to say how fiscal 2023 will play out we are managing through the milder temperatures encountered in the month of January with a focus on expense control operational efficiency and solid margin management and we believe we're well positioned to address whatever challenges are opportunities might percent present themselves over the remainder of that.
Heating season.
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 increased by 2 million gallons or 2% to 89 million gallons as the additional volume provided from acquisitions and the impact of colder temperatures more than offset net cut.
Attrition and other factors temperatures for the fiscal 2023 first quarter were 15% colder than last year, but still six 6% warmer than normal our product gross profit did rise by $14 million or 10% to $151 million, reflecting it in <unk>.
Kris and per gallon margins and the higher home heating oil and propane volume delivery branch and G&A expenses increased by $9 million or 10% to $105 million compared to $96 million last year higher product and delivery costs drove an increase in.
Bad debt expense credit card processing fees and vehicle fuels totaling $3 $4 million.
As of December 31, 2022, we also recorded an expense of $400000 under our weather hedge reflecting the colder weather versus a benefit of $2 $2 million recorded during the prior year period, representing an increase in operating costs of $2 $6 million.
All other costs rose by three.
$3 million or approximately 3%.
During the first quarter of fiscal 2023, we recorded a $17 $6 million noncash charge for the change in the fair value of our derivative instruments by comparison in the first quarter of fiscal 2022, we recorded a $13 $4 million charge.
Net income decreased by 1 million to 13, and a half million dollars largely due to the after tax impact of the unfavorable noncash change in the fair value of derivative instruments of $4 million and an increase in net interest expense of $2 million.
Partially offset by higher adjusted EBITDA of $4 $6 million.
Adjusted EBITDA rose by $4 6 million to $49 million, reflecting the higher home heating oil and propane volume and an increase in per gallon margins more than offsetting higher operating costs and now I'd like to turn the call back over to Jeff.
Thanks Rich at this time, we're pleased to address any questions. You may have Chuck. Please open the phone lines for questions. Yes, Sir we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if it using a speakerphone. Please pick up your handset before pressing the keys Antwerp to all your question. Please press Star then two and at this time.
Pause momentarily to assemble our roster.
And the first question will come from Tim Mullen with Longton management. Please go ahead.
Hey, Thanks for taking my questions I wanted to ask you about.
The unit repurchases and the customer gains.
On the unit repurchase it was clear you guys slowed down the peace repurchases in December .
As the stock price appreciated given the addition to your Larian index.
How if at all is that inclusion impacted your thinking about future repurchases.
And then second on the customer gains it.
It sounds like given they're a function of kind of market conditions and physical supply and then your comment earlier in the call about them being temporary can you comment.
Either or any reversal to that trend that you've seen.
I guess really last October .
And any sense for kind of how durable and long lasting and those gains might be.
<unk>.
I'll take the <unk>.
First question on the unit repurchase we still have our unit repurchase program.
Again, it's it's an automatic <unk>.
Graham with.
With J P. Morgan runs that for us. So we're not we're not involved in that on the day to day basis, and we got a certain target price.
Uh huh.
J P. Morgan has to buy in units and.
We'll have to evaluate whether change that price to go up or go down.
Depending on the acquisition opportunities that we have versus.
Buying in units.
Okay.
Yes and no.
Right.
Yeah on the new account side clearly our strongest month was October although we had solid results throughout the throughout the quarter we.
We've seen less.
Market activity in January Theres, no question about that.
Some of that is the fact that at this time of year typically many prospects potential customers have already selected a supplier.
But I think Theres also a.
A combination of play with.
With the weather.
The temperatures.
Across our footprint are down approximately 30% in January so we definitely saw less activity in the marketplace, it's very difficult to see what that means for the rest of the year, but Thats January .
Okay and in terms of the.
Gains.
Are most of those folks that sign up for <unk>.
Contracts that last.
Year or are those really just temporary they need physical supply you have it and they ask you to come to deliver.
Yeah.
It's a combination of both so there is some.
Customers that sign up on a variable price.
And then we've got customers that sign up on our protected priced.
The agreement is typically a year if not longer.
Okay, great. Thanks, very much guys.
Again, if you have a question. Please press Star then one.
Again that is star then one.
This concludes our question and answer session I would like to turn the conference back over to Mr. Jeff <unk> for any closing remarks. Please go ahead.
Well. Thank you for taking the time to join US today and your ongoing interest in Star Group, We look forward to sharing our 2023 fiscal second quarter results in April take care everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Yeah.
Right.
[music].
Uh huh.
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