Q4 2023 Suburban Propane Partners LP Earnings Call
Okay.
Speaker 1: Good day and welcome to the Suburban Propane Partners Fiscal 2023 Full Year and Fourth Quarter Results Conference Call.
Good day and welcome to the suburban propane partners fiscal 2023 full year and fourth quarter results Conference call.
Speaker 1: All participants will be in 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 will be an opportunity to ask questions.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event.
To ask a question you May press Star then one on your telephone keypad.
Your question. Please press Star then two.
Please note today's event is being recorded.
Speaker 1: I'd now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead, sir.
I'd now like to turn the conference over to Davin, Dambrosio, Vice President and Treasurer. Please go ahead Sir.
Speaker 2: Great, thank you. Good morning, everyone. Thank you for joining us this morning for our fiscal 2023 fourth quarter and full year earnings conference call.
Great. Thank you good morning, everyone. Thank you for joining us this morning for our fiscal 2023 fourth quarter and full year earnings conference call.
Speaker 2: Joining me this morning are Mike Stavall, our President and Chief Executive Officer, Mike Kugelin, Chief Financial Officer, and Steve Boyd, our Chief Operating Officer.
Joining me this morning are Mike sort of all our president and Chief Executive Officer.
Cougar, and Chief Financial Officer, and Steve Boyd, our Chief operating officer.
Speaker 2: This morning we will review our fiscal 2023 fourth quarter and full year financial results along with our current outlook for the business.
This morning, we will review our fiscal 2023 fourth quarter and full year financial results along with our current outlook for the business. Once we concluded our prepared remarks, we will open the session to questions.
Speaker 2: Once we concluded our prepared remarks, we will open the session to questions.
Speaker 2: 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 and financial condition and results of operations.
Our conference call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1934 as amended relating to the partnerships future business expectations, and predictions and financial condition and results of operations.
Speaker 2: 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.
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 suburban propane dot com.
Speaker 2: While subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statement.
All subsequent written and oral forward looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements.
Speaker 2: Our annual report on Form 10-K for the fiscal year ended September 30th, 2023, which contains additional disclosure regarding forward-looking statements and risk factors, will be filed on or about November 22nd.
Our annual report on Form 10-K for the fiscal year ended September 30th 20 twenty-three.
Which contains additional disclosure regarding forward looking statements and risk factors will be filed on or about November 20.
Speaker 2: Once filed, copies may be obtained by contacting the partnership or the SEC.
Once filed copies may be obtained by contacting the partnership or the S. E C.
Speaker 2: So, our 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 a K, which was furnished to the this morning.
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.
Speaker 2: Form 8K will be available through a link in the investor relations sections of our website.
Form 8-K will be available through a link in the Investor relations sections of our web website.
Speaker 3: At this time, I'll turn the call over to Mike Stavall for some opening remarks. Mike. DR. STAVALL Great. Thanks, Devin. And thank you all for joining us this morning.
At this time I'll turn the call over to Mike Stovall for some opening remarks, Mike.
Great. Thanks, Davin and thank you all for joining us this morning.
Speaker 3: Fiscal year 2023 was another great year for suburban propane, in addition to overcoming a challenging weather pattern with some of the warmest temperatures on record during the most critical months for heat related demand, that's namely January and February , as well as a persistent inflationary cost environment to deliver strong earnings.
Fiscal year 'twenty to 'twenty three was another great year for suburban propane. In addition to overcoming a challenging weather pattern with some of the warmest temperatures on record during the most critical months for heat related demand, that's namely January and February as well as a persistent inflationary cost environment to deliver strong earnings.
Speaker 3: We succeeded in accomplishing a number of significant goals in fiscal 2023 that provide further support for our long-term strategic growth initiatives.
We succeeded in accomplishing a number of significant goals in fiscal 'twenty to 'twenty three.
Provide further support for our long term strategic growth initiatives.
Speaker 3: So let me highlight a few noteworthy accomplishments for fiscal 2023.
Let me highlight a few noteworthy accomplishments for fiscal 2023.
Speaker 3: Through our wholly-owned subsidiary, Suburban Renewable Energy, LLC, we acquired a platform of R&G production assets from Equilibrium Capital Group, a leading sustainability-driven asset management firm. These assets included a large-scale R&G production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic digest...
Through our wholly owned subsidiary suburban renewable energy LLC, we acquired a platform of RMG production assets from equilibrium capital group, a leading sustainability driven asset management firm. These assets included a large scale RMG production facility and Stanfield, Arizona that is currently operating in.
<unk> seven anaerobic digesters manure rights for approximately 55000, dairy cattle and the interconnect with an interstate pipeline on premise.
Speaker 3: manure rights from approximately 55,000 dairy cattle, and interconnect with an interstate pipeline on premise.
Speaker 3: An operating facility in Columbus, Ohio, that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas.
And operating facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas.
Speaker 3: And we have an active development project to upgrade the biogas into pipeline quality R&G for sales.
And we have an active development project to upgrade the biogas into pipeline quality RMG for sales.
Speaker 3: We formed a partnership with Equilibrium to serve as a long-term platform for the identification, development, and operation of additional R&G projects, and currently have a pipeline of potential R&G projects to invest in that are in various stages of evaluation.
We formed a partnership with equilibrium to serve as a long term platform for the identification development and operation of additional R&D productive projects and currently have a pipeline of potential R&D projects to invest in that are in various stages of evaluation.
Speaker 3: We have advanced the engineering and construction activities for our anaerobic digester pursuant to an agreement with Adirondack Farms, which is a family-owned dairy farm in upstate New York to produce RNG from dairy cow manure, which we expect to be up and running in fiscal 2025.
We advance we've advanced the engineering and construction activities for our anaerobic digester pursuant to an agreement with Adirondack farms, which is a family owned dairy farm in upstate New York to produce RMG from dairy cow manure, which we expect to be up and running in fiscal 'twenty to 'twenty five.
Speaker 3: Once all three of these renewable natural gas facilities are operating at run rate capacity,
Once all three of these renewable natural gas facilities are operating at run rate capacity will.
Speaker 3: We will be generating revenues from tipping fees, RNG sales for approximately 850,000 MMBTUs per year, environmental attribute credits, and fertilizer sales.
We will be generating revenues from tipping fees RMG sales for approximately 850000 M N V to use per year.
Environmental attribute credits in fertilizer sales.
Speaker 3: We also continue to support our uncontrolled subsidiaries, Oberon Fuels and Independence Hydrogen.
We also continue to support our uncontrolled subsidiaries over on fuels and independents hydrogen.
Speaker 3: as they begin to scale their platforms for the production and sale of ultra-low carbon, renewable dimethyl ether, and clean hydrogen, respectively.
They began to scale their platforms for the production and sale of ultra low carbon renewable dimethyl ether and clean hydrogen respectively.
Speaker 3: During fiscal 2023, we invested additional capital into Oberon fuels to support the commercialization of RDME as a blend with propane or as a precursor to hydrogen production.
During fiscal 2023, we invested additional capital that's over on fuels to support the commercialization of <unk> as a blend with propane or as a precursor to hydrogen production.
Speaker 3: And we were the first in the world to begin delivering propane plus RDME at a 4% blend level to our forklift customers in Southern California.
And we were the first in the world to begin delivering propane propane plus Rd and me at a 4% blend level to our forklift customers in southern California.
Speaker 3: We've also invested in a proprietary blend facility in our Anaheim location and are actively testing different blend levels in forklift engines to expand the potential commercial applications for propane plus RDMA.
We are also investing in our proprietary blend facility in our Anaheim location and are actively testing different blend levels and forklift engines to expand the potential commercial applications for propane plus our D N a.
Speaker 3: In our core propane business, our operating personnel did an excellent job safely delivering outstanding service to our customers and executing on our customer-based growth and retention initiatives. In fact, during fiscal.
And our core propane business, our operating personnel did an excellent job safely delivering outstanding service to our customers and executing on our customer base growth and retention initiatives.
And factor in fiscal 'twenty to 'twenty three.
Speaker 3: We were able to deliver organic growth in our customer base even after excluding the impact of new customers that we acquired in an acquisition.
We were able to deliver organic growth in our customer base, even after when after excluding the impact of new customers that we acquired in that acquisition.
Speaker 3: This is a testament to the stability of our platform and the quality of service that our field personnel work so hard to deliver to our customers and local communities every day.
This is a testament to the stability of our platform and the quality of service that our field personnel worked so hard to deliver to our customers and local communities every day.
Speaker 3: We also acquired and successfully integrated a well-run propane business in a strategic market in our Upper Northwest Operating Territory, which provides excellent synergy potential.
We also acquired and successfully integrated a well run propane business and a strategic market and our upper northwest operating territory, which provides excellent synergy potential.
Speaker 3: And we continue to foster the growth of our greenfield market expansion efforts in seven markets around the country.
And we continued to foster the growth of our Greenfield market expansion efforts in seven markets around the country.
And from a balance sheet perspective.
Speaker 3: Despite deploying nearly $230 million on investments to support our strategic growth initiatives and capital expansion in our R&G business in 2023,
Despite deploying nearly $230 million on investments to support our strategic growth initiatives and capital expansion in our R&D business in 2023.
Speaker 3: Our total debt increased by just $123 million, compared to where we ended fiscal 2022, as we were able to utilize excess cash flows to manage our overall leverage profile.
Our total debt increased by just $123 million compared to where we ended fiscal 2022.
As we were able to utilize excess cash flows to manage our overall leverage profile.
Speaker 3: Our long-term strategic growth plan is to continue to foster the growth of our core propane business while making strategic investments in the energy transition to lower carbon renewable energy alternatives.
Our long term strategic growth plan is to continue to foster the growth of our core propane business, while making strategic investments in the energy transition to lower carbon renewable energy alternatives.
Speaker 3: Our core propane business is the engine that helps provide the cash flow to support these strategic investments. And as society transitions.
Our core propane business is the engine that helps provide the cash flow to support these strategic investments.
And our society transitions to these lower carbon solutions.
Speaker 3: Suburban Propane is leveraging our 95-year legacy of an unwavering commitment to safety and excellence in customer service and our reputation as a trusted distributor of energy to local communities in order to position the business
Urban propane is leveraging our 95 year legacy of an unwavering commitment to safety and excellence in customer service.
Our reputation as a trusted distributor of energy to local communities in order to position the business for long term growth and sustainability and a lower carbon economy.
Speaker 3: for long-term growth and sustainability in a lower carbon economy.
Speaker 3: A little later, I'll provide some closing remarks. However, let me turn it over to Mike Cooglan to discuss the full year and fourth quarter results in a little more detail. Mike, over to you.
A little later I'll provide some closing remarks, however, let me turn it over to Mike <unk> to discuss the full year and fourth quarter results in a little more detail Mike over to you.
Speaker 4: Thanks, Mike. And good morning, everyone. I'll start by focusing on our full year results, which included 53 weeks of operation.
Thanks, Mike and good morning, everyone.
I'll start by focusing on our full year results, which included 53 weeks of operations in fiscal 2023 compared to 52 weeks in the prior year and give some color on the fourth quarter toward the end of my remarks.
Speaker 4: fiscal 2023 compared to 52 weeks in the prior year, and get some color on the fourth quarter toward the end of my remarks.
Speaker 4: To be consistent with previous reporting, I am excluding the impact of unrealized non-cash market-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of $3.7 million in fiscal 2023, compared to an unrealized loss of $27.9 million in the prior year.
To be consistent with previous reporting I'm, excluding the impact of unrealized noncash mark to market adjustments on our commodity hedges, which resulted in an unrealized loss of $3 $7 million in fiscal 2023.
Compared to an unrealized loss of $27 $9 million in the prior year.
Speaker 4: along with certain other non-cash items and acquisition-related transactions.
Along with certain other noncash items and acquisition related transaction costs.
Speaker 4: Excluding these items, net income for fiscal 2023 was $138.4 million or $2.17 per common unit compared to $171.1 million or $2.71 per common unit in the prior year.
Excluding these items net income for fiscal 2023 was $138 $4 million or $2 17 per common unit.
Compared to $171 $1 million or two hours to $72 or 71 cents per common unit in the prior year.
Speaker 4: Adjusted EBITDA for fiscal 2023 was $275 million, compared to $291 million in the prior year.
Adjusted EBITDA for fiscal 2023 was $275 million compared to $291 million in the prior year.
Speaker 4: As Mike mentioned, our earnings for the fiscal year were impacted by lower heat-related demand resulting from extremely warm weather during the most critical months of the heating season and from the continued impact of inflationary pressures on our expenses.
As Mike mentioned, our earnings for the fiscal year were impacted by lower heat related demand, resulting from extremely warm weather during the most critical months of the heating season.
And from the continued impact the inflationary pressures on our expenses.
Speaker 4: Although those headwinds presented operating challenges, our earnings for the year benefited from organic growth in our customer base.
So those headwinds presented operating challenges our earnings for the year benefited from organic growth of our customer base.
Speaker 4: Propane unit margin expansion and contribution from the R&G facilities acquired in December .
Propane unit margin expansion and contribution from the R&D facilities acquired in December.
Speaker 4: Retail propane gallons sold in fiscal 2023 were 396 million gallons, which is 1.2% lower than the prior year.
Retail propane gallons sold in fiscal 2023 were 396 million gallons, which was one 2% lower than the prior year.
Speaker 4: primarily due to the impact of warm and inconsistent temperatures throughout the heating season, partial set by favorable customer-based trends.
Primarily due to the impact of warm and inconsistent temperatures throughout the heating season.
Partially offset by favorable customer base trends.
Speaker 4: With respect to the weather, average temperatures for fiscal 2023 were 8% warmer than normal and 2% colder than the prior year.
With respect to the weather average temperatures for fiscal 2023 were 8% warmer than normal and 2% colder than the prior year.
Speaker 4: Although we experienced an overall increase in heating degree days compared to the prior year, the weather pattern was characterized by extremely warm temperatures during the critical heating months, January , February , or most pronounced in our East Coast and Midwest operating territories.
Although we experienced an overall increase in heating degree days compared to the prior year. The weather pattern was characterized by extremely warm temperatures during the critical heating months January and February.
Most pronounced in our east coast and Midwest operating territories.
Speaker 4: Our operations in the West generally experience normal to cooler than normal temperatures.
Our operations in the west generally experienced normal to cooler than normal temperatures.
Speaker 4: For the month of January and February , average temperatures were 16% warmer than normal and 11% warmer than the same period last year, and were on par for the warmest on record for that two-month period.
So the month of January and February average temperatures were 16% warmer than normal and 11% warmer than the same period last year and we're on par for the warmest on record for that two month period.
Speaker 4: From a commodity perspective, propane inventory levels in the U.S. were elevated throughout the year and were much improved compared to 2022.
From a commodity perspective propane inventory levels in the U S were elevated throughout the year and were much improved compared to 2022.
Speaker 4: According to the Energy Information Administration, U.S. probe and inventories at the end of September 2023 were at 101 million barrels, which is 20% higher than September 2022 levels and 11% higher than historical averages for that time of the year.
According to the energy information Administration U S propane inventories at the end of September 2023, we're at 101 million barrels, which is 20% higher than September 2022 levels and 11% higher than historical averages for that time of the year.
Speaker 4: As a result of the increased inventories and other factors, average wholesale prices basis Montbellevue for fiscal 2023 were 75 cents per gallon, which were 39% lower than the prior year.
As a result of the increase in inventories and other factors average wholesale prices basis Mont Belvieu for fiscal 2023 were <unk> 75 cents per gallon.
Which were 39% lower than the prior year.
Speaker 4: excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier.
Excluding the impact of the mark to market adjustments on our commodity hedges that I mentioned earlier total.
Speaker 4: Total gross margin of $842.7 million for fiscal 2023 increased $25.5 million, or 3.1%, compared to the prior year, primarily due to higher propane unit margins and margin contribution from the R&G assets acquired in December from R&G sales and related environmental attributes, as well as tipping fees.
Total gross margin of $842 $7 million for fiscal 2023 increased $25 $5 million or three 1% compared to the prior year.
Primarily due to higher propane unit margins and margin contribution from the Orangey asset.
And in December from warranty sales and related environmental attributes as well as tipping fees.
Speaker 4: Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2023 increased 4 cents per gallon, or 2%, compared to the prior year, primarily due to effective selling price management during a period of declining commodity prices that helped offset the impact of inflationary pressures on our delivery costs and other expenses.
Excluding the impact of the unrealized mark to market adjustments propane unit margins for fiscal 2023 increased four cents per gallon or 2% compared to the prior year.
Generally due to effective selling price management during a period of declining commodity prices that helped offset the impact of inflationary pressures on our delivery costs and other expenses.
And with respect to expenses.
Speaker 4: Combined operating and G&A expenses increased $45.5 million, or 8.7%, compared to the prior year, primarily due to the impact of inflationary pressures across many areas of the business.
Combined operating and G&A expenses increased $45 $5 million.
Eight 7% compared to the prior year, primarily due to the impact of inflationary pressures across many areas of the business.
Speaker 4: and most significantly within payroll and benefit related expenses and vehicle lease and repair.
And most significantly within payroll and benefit related expenses and a vehicle lease and repair costs.
Speaker 4: The comparison of our expenses the prior year were also impacted by the cost associated with the acquisition and operations of the new R&G asset.
The comparison of our expenses. The prior year were also impacted by the costs associate with the acquisition and operations of the new R&D assets.
Speaker 4: included within general and administrative expenses for fiscal 2023, or acquisition-related costs of $4.7 million, which were excluded from adjusted EBITDA.
Included within general and administrative expenses for fiscal 2023 were acquisition related cost of $4 $7 million, which were excluded from adjusted EBITDA.
Speaker 4: Net interest expense of $73.4 million for fiscal 2023 increased $12.7 million compared to the prior year, due to a higher level of average outstanding borrowings under a revolving credit facility to fund the R&G acquisition in the second quarter, coupled with higher benchmark interest rates for borrowings under the revolver, as well as the impact of the $80.6 million in green bonds assumed in the R&G acquisition, which carry an interest rate of 5.5%.
Net interest expense of $73 $4 million for fiscal 2023 increased $12 $7 million compared to the prior year due to a higher level of average outstanding borrowings under our revolving credit facility to fund the Orange acquisition in the second quarter, coupled with higher benchmark interest rates for borrowings under the revolver.
As well as the impact of the $86 million in Green bonds assumed in the Orange acquisition, which carry an interest rate of five 5%.
Speaker 4: Total capital spending for the year was $45 million and reflected $20 million of maintenance CapEx and $25 million of growth.
Total capital spending for the year was $45 million and reflected $20 million of maintenance capex and $25 million of growth.
Speaker 4: Our growth capital included $3 million associated with the expansion and upgrade of the R&G production facility in Stanford, Arizona, and the ongoing construction of the R&G facility at Adirondack Farm.
Our growth capital included $3 million associated with the expansion and upgrade of the Orange production facility in Stanford, Arizona and the ongoing construction of the R&D facility at Adirondack forums.
Speaker 4: For fiscal 2024, capital spending for our propane operations is expected to be consistent with historical levels, which is between 40 and 45 million dollars.
For fiscal 2020 for capital spending for our propane operations is expected to be consistent with historical levels, which is between 40 and $45 million in capex for the R&D projects is expected to range between 25% to $35 million, excluding the benefit of potential investment tax credits.
Speaker 4: And CapEx for the R&G projects is expected to range between $25 and $35 million excluding the benefit of potential investment tax credits.
Turning to our fourth quarter results.
Speaker 4: Given the nature of our fiscal calendar, the fourth quarter of fiscal 2023 included 14 weeks of operations compared to 13 weeks in the prior year.
Given the nature of our fiscal calendar fourth quarter of fiscal 2023 included 14 weeks of operations compared to 13 weeks in the prior year.
Consistent with the seasonality of our business, we typically report a net loss for the fourth quarter.
Speaker 4: consistent with the seasonality of our business, we typically report a net loss for the fourth quarter.
Speaker 4: With that said, excluding the effects of non-cash adjustments in both years, we reported a net loss of $33.2 million, or $0.52 per common unit, compared to a net loss of $27.1 million, or $0.43 per common unit in the prior year.
With that said, excluding the effects of noncash adjustments in both years, we reported a net loss of $33 2 million or <unk> 52 cents per common unit.
<unk> to a net loss of $27 1 million or 43 cents per common unit in the prior year.
Speaker 4: just EBITDA for the fourth quarter of fiscal 2023 increased slightly to $3 million.
Adjusted EBITDA for the fourth quarter of fiscal 2023 increased slightly to $3 million.
Speaker 4: Total gross margin increased $15.4 million, or 12%, primarily due to an increase in volume sold.
Total gross margin increased $15 $4 million or 12%, primarily due to an increase in volume sold.
Speaker 4: higher unit margins, and an increase in service-related revenue.
Unit margins and an increase of service related revenues.
Speaker 4: Combined operating and G&A expenses increased $15.2 million, or 12.2%, due to higher variable operating costs in support of the increase in volume sold, the impact of the additional week of operation.
Combined operating and G&A expenses increased $15 2 million or 12, 2% due to higher variable operating costs and supported the increase in volume sold.
The impact of the additional week of operations costs associated the operations of the new R&D assets and a continued impact of inflation.
Speaker 4: Costs associate the operations of the new R&G assets and the continued impact of inflation.
Speaker 4: And turning to our balance sheet, as Mike mentioned, we invested more than $230 million to fund our strategic growth initiatives during fiscal 2023.
Turning to our balance sheet.
As Mike mentioned, we invested more than $230 million to fund our strategic growth initiatives during fiscal 2023.
Speaker 4: Although the investments were initially funded with debt, including borrowings under the revolver and the assumption of the green bonds, our total debt outstanding at the end of the fiscal year reflected an increase of $123 million as we utilized excess cash flow from operating activities to repay revolver borrowings.
Though the investments were initially funded with debt, including borrowings under the revolver and the assumption of the green bonds. Our total debt outstanding at the end of fiscal at the end of the fiscal year reflected an increase of $123 million as we utilized excess cash flow from operating activities to repay revolver borrowings.
Speaker 4: As a result of the increase in debt, our consolidated leverage ratio at the end of fiscal 2023 was 4.28 times.
As a result of the increase in debt our consolidated leverage ratio at the end of fiscal 2023 was $4 two eight times.
Speaker 4: Although the leverage metric has been elevated relative to our historical levels following the R&G acquisition, it has improved in each of the last two quarters as we utilize excess cash flows to repay revolver borrowings, including a repayment of $28 million during the fourth quarter.
Although the leverage metric has been elevated relative to historical levels. Following the <unk> acquisition has improved in each of the last two quarters as we utilized excess cash flows to repay revolver borrowings, including a repayment of $28 million during the fourth quarter.
Speaker 4: We remain well within our DEC covenant requirement of 5.75 times, and as I mentioned last quarter,
We remain well within our debt covenant requirement of 575 times and as I mentioned last quarter.
Speaker 4: factoring the projected run rate EBITDA contributions from the RNG assets, the pro forma consolidated leverage ratio approaches four times. With that I'll turn it back.
Factoring the projected run rate EBITDA contributions from the Orangey assets, the pro forma consolidated leverage ratio approaching four times.
Now I'll turn it back to Mike.
Great. Thanks, Mike.
Speaker 3: As mentioned in our October 26th press release, our Board of Supervisors declared our quarterly distribution of 32.5 cents per common unit in respect of the fourth quarter of fiscal 2023, which equates to an annualized rate of $1.30 per common unit. The quarterly distribution is payable on November 14th. So, our unit hold is a record as of November 7.
As mentioned in our October 26 press release, our board of Supervisors declared our quarterly distribution of <unk> 32, and a half cents per common unit in respect of the fourth quarter of fiscal 2023, which equates to an annualized rate of $1 30 per common unit.
The quarterly distribution is payable on November 14th to all.
Our unit holders of record as of November 7th.
Speaker 3: So just a few closing remarks regarding our long-term strategy.
So just a few closing remarks regarding our long term strategy.
Speaker 3: Our success and longevity as an organization is due to the hard work and dedication of our people. They are guided by our
Our success and longevity as an organization is due to the hard work and dedication of our people.
They are guided by our three corporate pillars.
Speaker 3: The Suburban Commitment to Excellence in Safety and Customer Service.
The suburban commitment to excellence in safety and customer service.
Speaker 3: our devotion to giving back to the local communities through our Suburban CARES platform, and our innovation for the future through the Go Green with Suburban Propane.
Our devotion to giving back to local communities through our suburban cares platform.
And our innovation for the future.
Through the go green with suburban propane pillar.
Throughout our 95 year history, we have expanded our role as a trusted local provider of energy with our commitment to the highest standards for safety exceptional customer satisfaction and reliability.
Speaker 3: We have expanded our role as a trusted local provider of energy with our commitment to the highest standards for safety, exceptional customer satisfaction and reliability.
Speaker 3: Suburban propane is continuing its legacy as the true pioneer in the US propane industry.
Suburban propane is continuing its legacy as the true pioneer in the U S propane industry.
Speaker 3: through our comprehensive growth strategy that builds on the low carbon attributes of propane.
Through our comprehensive growth strategy that builds on the low carbon attributes of propane.
Speaker 3: and our investments in innovative renewable energy products and technologies through our Suburban Renewable Energy Subsidiary. All across the energy sector.
And our investments in innovative renewable energy products and technologies through our suburban renewable energy subsidiary.
All across the energy sector, we are seeing a shift toward cleaner energy alternatives.
Speaker 3: while propane will continue to be relied upon as a versatile,
Propane will continue to be relied upon as a versatile affordable and available clean energy source that is produced domestically.
Speaker 3: Suburban Propane will continue to build off of our well-established legacy and core strength.
Suburban propane will continue to build off of our well established legacy and core strengths to solidify our place in the localized energy distribution network.
Speaker 3: to solidify our place in the localized energy distribution network by making strategic investments in both the propane sector
By making strategic investments in both the propane sector.
Speaker 3: and into renewable energy alternatives for businesses and local communities across the country.
And into renewable energy alternatives for businesses and local communities across the country.
Speaker 3: We are committed to delivering solutions to help mitigate the long-term effects of climate change.
We are committed to delivering solutions to help mitigate the long term effects of climate change.
Speaker 3: Positioning suburban propane for long-term growth and sustainability.
Positioning suburban propane for long term growth and sustainability.
Speaker 3: enhancing the career development opportunities for our valued employees.
Enhancing the career development opportunities for our valued employees.
Speaker 3: and creating long-term value for all of our key stakeholders.
And creating long term value for all of our key stakeholders.
Speaker 3: Finally, I want to thank the more than 3,300 employees for helping make fiscal 2023 another very successful year for Suburban Propane.
Finally, I want to thank the more than 3300 employees for helping make fiscal 2023, another very successful year for suburban propane.
Speaker 1: Of course, I hope you and your families remain safe and healthy, and wish everyone a very happy holiday season. We appreciate your support and attention this morning, and we'll now open the call for questions. So Rocco, would you mind helping us with that? Yes, sir. Absolutely. If you'd like to ask a question, please press star then one. If your question's already been addressed and you'd like to remove yourself from queue, please press star then two. Once again, ladies and gentlemen, that's star then one if you have a question.
Of course, I hope you and your families remain safe and healthy and wish everyone. A very happy holiday season. We appreciate your support and attention. This morning, and we'll now open the question for the call for questions. So Rocco would you mind, helping us with that yes, Sir absolutely if you'd like to ask a question. Please press Star then one.
My question has already been addressed I would like to remove yourself from queue. Please press Star then two.
Once again, ladies and gentlemen that stars I'm wondering if you have a question.
Speaker 1: Today's first question comes from Gabe Marine with Mizzou. Please go ahead.
Today's first question comes from Gabe Moreen with Mizuho. Please go ahead.
Speaker 1: Morning, guys. Morning, Gabe. A couple of questions for you, if I can. One is just in your expectations for O&M growth, appreciating that last year's 9 percentage plus or minus growth was partially inorganic. Just wondering what you're seeing out there and expectations for FY24 on the O&M and G&A side.
Good morning, guys.
Good morning Gabe.
Quick question a couple of questions for you if I can one is just in your expectations for war.
<unk> growth appreciating that last years, 9% ish plus or minus.
It was partially inorganic.
I'm, just wondering what youre seeing out there and expectations for FY 'twenty for all the O&M and G&A side.
Speaker 4: So with inflation continuing to be an ongoing factor across the country, I do expect, we do expect expenses to continue to trend upwards.
So with inflation continuing to be an ongoing factor across the country I do expect we do expect expenses to continue to trend upward. However, if you look at the decline we've talked about this a bit on the last call. The percentage increase certainly is starting to moderate a bit but it's certainly not going away. So it's volume.
Speaker 4: However, if you look at the decline, and we talked about this a bit on the last call, the percentage increase certainly is starting to moderate a bit, but it's certainly not going away.
Speaker 4: So volumes, of course, are going to have a big impact on what our operating expenses are ultimately going to be.
Of course, we're going to have a big impact on what our operating expenses relatively going to be.
Speaker 4: But I do expect the net increase to be less than what we've experienced over the last couple of years.
But I do expect the net increase.
Be less than what we would experience over last couple of years.
Speaker 4: But ultimately, expenses are going to be driven by what buying.
But ultimately expenses are going to be driven by what volumes are going to be.
Speaker 5: Great. Thanks, Mike. And then I think there was a pretty decent step up in your equity earnings this quarter. Can you just speak to that a little bit about whether that was Oberon, Independence, Hydrogen, maybe where that was coming from?
Great. Thanks, Mike and then I think there was a pretty decent step up in your equity earnings. This quarter can you just speak to that a little bit about whether that was oberon independents hydrogen.
Maybe where that was coming from.
Speaker 4: It was ready to Oberon and then nothing unusual, just us picking up our equity in the earnings of the sub.
It was right to O'brien.
Nothing unusual just us picking up.
Our equity and earnings of the sub.
Speaker 5: And maybe if I can just ask a bigger question.
Thanks, Mike and maybe if I can just ask a bigger picture question.
Speaker 5: You talked about investing in both propane and RNG. Clearly, there's one of your competitors out there that's undergoing a strategic review of its propane operations. Can you just talk about interest in scaling and propane versus making more of those RNG investments and how you think about kind of allocating capital on both sides, particularly with some of the stuff out there that might be out there on the market at the moment?
I think you've talked about investing in both propane and RMG.
There is one of your competitors out there that is undergoing a strategic review of its propane operations can you just talk about.
Interest in scaling and propane.
First is making more of those R&D investments and how you think about kind of allocating capital on both sides, particularly with some of the stuff is out there that might be out there in the market at the moment.
Speaker 3: Sure, Gabe. You know, look, our long-term strategy is clear. We are totally committed to our core propane business, and we've done a couple of small acquisitions each of the last couple of years, and that is done in very strategic markets and at very good valuations.
Sure Gabe.
Look our long term strategy is clear we are totally committed to the CLARCOR propane business.
And we've done.
A couple of small acquisitions each of the last couple of years.
And that is done in very strategic markets and at very good valuations.
Speaker 3: But we're also very much focused on the energy transition, as I think has been evidenced by the past couple of years of investments, not only in the RNG platform, but the stakes that we've taken in an independent hydrogen to get involved in clean hydrogen production and distribution with Oberon and some other opportunities that
We're also very much focused on the energy transition is as I think as been evidenced by the past couple of years of investments not only in the R&D platform, but.
The stakes that we have taken and and independents hydrogen to get involved in clean hydrogen production and distribution with Oberon.
And some other opportunities that.
Speaker 3: that we see. And we do believe that the long for the long term of this of this company we're focused on building a growth platform.
That we see and we do believe that the long for the long term of this of this company we're focused on.
Building a growth platform. Okay propane is a great business. It's a it is it is the engine that provides the excess cash flow to to be able to make the investments that we're doing and.
Speaker 3: Propane is a great business, it is the engine that provides the excess cash flow to be able to make the investments that we're doing and it's been a great business. We run it, as you know.
And it's been a great business, we run it as you know.
Speaker 3: really, really well. And we've all been here for decades. And we really do have great things ahead of us for the propane industry. But the propane industry has always struggled with headwinds around weather volatility and a highly mature competitive market that doesn't have tremendous growth opportunities.
Really really well and we've all been here for for decades, and we really we really do have great things ahead of us for the propane industry with the propane industry as has has always struggled with.
Headwinds around weather volatility and are highly mature competitive market that doesn't have tremendous growth opportunities and so are our strategic growth is to transition to create a growth platform and set this business up for the next 95.
Speaker 3: And so our strategic growth is to transition to create a growth platform and set this business up for the next 95 years with propane being a significant piece of that because I really don't honestly see propane.
Years.
With propane being a significant piece of that because I really don't honestly see propane.
Speaker 3: losing out in the transition to cleaner energy because it is a clean energy source, but I do see
Losing out and the transition to cleaner energy because it is a clean energy source.
But I do see alternatives.
Speaker 3: Clearly going to develop like the renewable natural gas, like hydrogen, obviously the government just committed billions of dollars to hydrogen hubs around the country. So I think our focus is a combination of continuing to foster the growth.
Clearly you're going to develop like the renewable natural gas like hydrogen obviously the government just committed billions of dollars to hydrogen hubs around the country. So I think.
Our focus is.
A combination of continuing to foster the growth of propane, while setting the business up and creating a growth platform and our growth platform as we execute is going to generate growth.
Speaker 3: of propane while setting the business up and creating a growth platform and that growth platform as we execute is going to generate growth that we expect to be able to deliver increased returns.
We expect to be able to deliver.
Creased returns through for our unit holders in the form of distribution growth as well as perhaps as we as we create a.
Speaker 3: for our unit holders in the form of distribution growth.
Speaker 3: as well as perhaps as we create a more different growth profile.
Sure.
Rent growth profile, perhaps a re rating of the risk profile of that.
Speaker 3: perhaps a re-rating of the risk profile that
Speaker 3: you know the market perhaps perceives in the propane industry. And that that can be a two way approach to creating long term value.
The market, perhaps perceived in the propane industry.
That can be a two way.
Roche to creating long term value for our for our shareholders. So that.
Speaker 3: for our shareholders. So that is our strategy.
That is our strategy.
Speaker 3: I'm not really going to comment on your other question about the strategic direction that one of our competitors is going to take. I think they've been pretty clear about their intentions.
I'm not really going to comment on your other question about the strategic direction that one of our competitors is going to is going to take.
I think they've been pretty clear about their intentions and.
Speaker 3: And, you know, I think they've also been pretty clear about some of the challenges that they've faced in their business over the past several years. So, I'll just leave it at that.
And.
I think they've also been pretty clear about some of the challenges that they face.
And their business over the past several years, so I'll just leave it at that.
I appreciate it thanks, Mike.
Thanks Gabe.
Speaker 1: And ladies and gentlemen, as a reminder, if you would like to ask a question, please press star then 1 at this time. We will pause for just a moment while we assemble our roster.
And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one at this time.
We'll pause for just a moment, while we assemble our roster.
Speaker 1: And everyone, that concludes our question and answer session. I'd like to turn the conference back over to the management team for any closing remarks.
And everyone that concludes our question and answer session I would like to turn the conference back over to the management team for any closing remarks.
Speaker 3: Great. Thanks, Rocco. Appreciate your help today. And again, appreciate everybody's support and attention. I really do wish you all a happy holiday season. We look forward to talking with you again in early February after our first quarter results. Thank you.
Great. Thanks, Rocco I appreciate your help today and again appreciate everybody's support and attention I really do wish you all a happy holiday season, we look forward to talking with you again in early February.
After our first quarter results. Thank you.
Speaker 1: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect. Your lines will have a wonderful day.
Okay.
[music].