Q1 2024 Ferrellgas Partners LP Earnings Call

Speaker 1: At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tamria Zertouchi, Chief Executive Officer and President of Ferrel Gas. Please go ahead.

Speaker 2: Welcome to our 1st quarter fiscal 2024 earnings call. My name is Tamari and I'm the chief executive officer and president of feral gas. It is a privilege for me to represent the employee owners of feral gas and their great work on this call today.

Speaker 2: Our focus for the quarter was activities in support of exciting key growth initiatives and preparation for our core business peak season ahead.

Speaker 2: In the first quarter, our Blue Rhino brand, the nation's number one brand in tank exchange, increased capacity in its production facilities by between 15 and 20 percent.

Speaker 2: for support of volume growth related to new and existing customers. Additionally, we made investments in the fleet.

Speaker 2: distribution yards and micro fulfillment centers, which will help in increasing throughput, which we measure as cylinders per hour and decreasing overall freight costs.

Speaker 2: Our strategic initiatives in the retail business have been highlighted in our results over the past three years, and no different for this quarter. The activities our teams executed in the first quarter, they place us perfectly for our peak logistics season ahead. Our employee owners delivered the infrastructure changes and resources needed to meet the company's strategic growth goals.

Speaker 2: I could not be more proud of how our sales teams, our customer service representatives, managers, and our drivers across the country help to deliver results each and every day.

Speaker 2: I will now turn the floor over to our Chief Financial Officer, Mike Cole, to go over the financial results for the quarter.

Speaker 3: Thank you, Tamaria, and thank you all for joining us on today's call. I'd like to remind everyone that some statements made during this call may be considered forward looking and that various risks, uncertainties, and other factors could cause actual performance to differ materially from anticipated performance.

Speaker 3: These factors are discussed in our Form 10-K , filed on September 29, 2023, and other documents filed from time to time with the Securities and Exchange Commission.

Speaker 3: Additionally, we know that the purpose of this call is to discuss the results of our operations for the 1st fiscal quarter ended October 31st 2023.

Speaker 3: I'll now get into our consolidated results. Wholesale propane prices during the first quarter of 2024 were much lower relative to prices in the prior year period. And this led to a decrease in our revenues and cost of sales. Revenues were 42.3 million lower, which was largely offset by a decrease of 41.2 million in cost of product as compared to the prior year period.

Speaker 3: As a result, gross profit decreased $1 million, or 0.5%, for the first fiscal quarter 2024 compared to the prior year period.

Speaker 3: Our wholesale sales price per gallon partially correlates to the change in the wholesale market price of propane.

Speaker 3: The wholesale market price at our two major supply points averaged 28.6% and 30.6% less in the first fiscal quarter of 2024 compared to the prior year period. As previously noted, these decreases impacted both the revenue and cost of product changes for the period. Margin per gallon was flat at $1.20 per gallon for both periods.

Speaker 3: We recognize a net loss attributable to Ferrogas Partners LP of $17.5 million and $4.5 million in the first fiscal quarter of 2024 and 2023, respectively.

Speaker 3: Operating expense as a percent of total revenue increased $14.9 million, or 11% for the first fiscal quarter, primarily due to an increase of $5 million from the company increasing personnel for growth projects, including increased acquisitions in the expansion by Blue Rhino into both self-service vending and new customer growth, in addition to $3 million related to the timing of benefit payment.

Speaker 3: The remainder of the increase in operating expense was primarily driven by a 3.9 million increase in vehicle costs as trucks were refurbished to support new customer growth in Blue Rhino.

Speaker 3: The company is also in the midst of an ERP implementation and other IT system upgrades. These investments in technology are designed to improve our processes and ultimately the customer experience. As a data-driven logistics company, this is just another facet to our long-term strategic initiatives focusing on strategic growth, operational excellence, and leveraging technology.

Speaker 3: Adjusted EBITDA, a non-GAAP financial measure, decreased by $16.8 million or 34% to $32.9 million in the first fiscal quarter compared to $49.7 million in the prior year quarter.

Speaker 3: The change was primarily due to the $13 million increase in net loss attributable to Feral Gas Partners, LP, as noted previously, and a $3.9 million EBITDA adjustment for legal fees related to non-core business.

Speaker 3: I'll now turn the call back to Tamara for an operational update.

Speaker 2: Thank you, Mike, in addition to my opening statements, I want to highlight that in the 1st fiscal quarter, feral gas employee owners were very active at the state and national level working with various associations to carry the positive message of propane. Propane, which is clean, portable, affordable, abundant, this great energy provides benefits to millions of customers across the United States and feral gas will remain active in state and national associations.

Speaker 2: We also partnered with Operation Warm Again. It's a national nonprofit organization that provides new coats and shoes for children in need across the country. We are in our third year of this partnership.

Speaker 2: As a company that supplies propane to heat millions of American homes, supporting Operation Warm is a natural fit for us. Every child deserves to feel warm and safe, and I think this truly makes a difference for so many children. It's just one more way that ferrogas fuels life simply for families.

Speaker 2: We are proud to support our employee owners and their families and very, very proud of this one. For the third consecutive year, Ferrel Gas has elected to absorb all additional costs and not pass on the increased cost of benefits to our employees.

Speaker 2: we invest in our workforce. And just like Mike spoke about above in terms of our investment in technology, this is the way in which we invest in our workforce so that they can deliver results. And in the end, their work, it benefits our customers, which is our primary focus.

Speaker 2: We did receive some questions in our investor relations mailbox, and I'm going to turn it back to Mike so that he can talk through a couple of those.

Speaker 3: One of the questions that we've been asked is, has anything fundamentally changed with your business operations to impact EBITDA?

Speaker 3: There have been no fundamental changes to our business operations. There are a couple of key takeaways from our financial results from this fiscal quarter. First, in this fiscal quarter, there were fewer heating degree days versus prior year period, yet our volumes and margins remained relatively flat. This is a testament to the performance of our sales and pricing teams and the benefits of our operational and geographical diversification.

Speaker 3: We believe our diversification, geographic, tank exchange, and customer segments within our retail operations reduces our dependency on cold winters and propane heating for financial performance.

Speaker 3: The second key takeaway is that our expenses were higher relative to the prior period, which has been addressed in our earlier comments. Some of the increases in expenses were attributable to specific actions taken to better position the company to execute on its growth initiatives and market opportunities.

Speaker 3: It is important to note that these expenses are largely within management's control and were not unexpected outcomes from our financial performance.

Speaker 3: We will continue to be diligent in managing our expenses while continuing to provide quality service at a competitive price. This will help ensure satisfied customers and continued financial performance.

Speaker 3: Another question we continue to get relates to our capital structure and the path forward specifically relating to our class B units.

Speaker 3: We will continue to analyze our capital structure to identify the best path forward. The class B units represent our highest cost of capital, and as a result, we continue to evaluate alternative approaches that help reduce our cost. There have been no changes to our capital structure at this time that we could publicly disclose, and we'll continue to update the public when appropriate on any forthcoming changes to the capital structure.

Speaker 3: That are all the questions that we have received. Tamria, I'll turn the call back to you.

Speaker 2: Thank you, Mike. This was an exciting first quarter. We were very focused on our growth initiatives and all of the outcomes that they will provide, but this time I will now turn the call back to our moderator. But before I do that, as mentioned in the announcement for this call, any additional questions may be submitted via our investor relations email box at investor relations at Feral gas dot com. Thank you all for joining.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker 1: St.

Well listen only mode. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Tim Ria, They're Tucci, Chief Executive Officer, and President of feral gas. Please go ahead.

Welcome to our first quarter fiscal 2024 earnings call. My name is Tia Maria as her two G and I'm, the Chief Executive Officer, and President of feral gas. It is a privilege for me to represent the employee owners of feral gas and their great work on this call today.

Our focus for the quarter was activities in support of exciting key growth initiatives and preparation for our core business peak season ahead.

In the first quarter, our Blue Rhino brand the nation's number one brand in tank exchange increased capacity and its production facilities by between 15, and 20% for supportive volume growth related to new and existing customers. Additionally, we made investments in.

In the fleet distribution yards, and micro fulfillment centers, which will help in increasing throughput, which we measure as cylinders per hour and decreasing overall freight costs.

Our strategic initiatives in the retail business have been highlighted in our results over the past three years and no different for this quarter the activities. Our teams executed in the first quarter. They place us perfectly for our peak logistics season ahead, our employee owners delivered the infrastructure changes.

[music].

And resources needed to meet the company's strategic growth goals.

I could not be more proud of how our sales teams our customer service representatives managers and our drivers across the country helped to deliver results each and every day.

I will now turn the floor over to our Chief Financial Officer, Mike call to go over the financial results for the quarter Mike.

Thank you Maria and thank you all for joining us on today's call I'd like to remind everyone that some statements made during this call may be considered forward looking and that various risks uncertainties and other factors could cause actual performance to differ materially from anticipated performance.

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These factors are discussed in our Form 10-K filed on September 29, 2023, and other documents filed from time to time with the Securities and Exchange Commission.

Additionally, we note that the purpose of this call is to discuss the results of our operations for the first fiscal quarter ended October 31, 2023.

I will now get into our consolidated results wholesale propane prices during the first quarter 2024 were much lower relative to prices in the prior year period and this led to a decrease in our revenues and cost of sales revenues were $42 3 million.

Sure, which was largely offset by a decrease of $41 2 million in cost of product as compared to the prior year period.

As a result gross profit decreased one $1 million or 0.5% for the first fiscal quarter 2024 compared to the prior year period.

Our wholesale sales price per gallon, partially correlates to the change in the wholesale market price of propane.

The wholesale market price at our two major supply points averaged 28, 6% and 36% or less in the first fiscal quarter of 2024 compared to the prior year period as.

As previously noted these decreases impacted both the revenue and cost of product changes for the period.

Margin per gallon was flat at $1 20 per gallon for both periods.

We recognized a net loss attributable to Ferro gas partners LP of $17 5 million and $4 5 million in the first fiscal quarter.

2024, and 2023, respectively.

Operating expense as a percent of total revenue increased $14 9 million or 11% for the first fiscal quarter, primarily due to an increase of $5 million from the company increasing personnel for growth projects, including increased acquisitions and the expansion.

Blue Rhino into both self service vending and new customer growth in.

In addition to $3 million related to the timing of benefit payments.

The remainder of the increase in operating expense was primarily driven by a $3 9 million increase in vehicle cost as trucks were refurbished to support new customer growth and blue Rhino.

The company is also in the midst of an ERP implementation and other it system upgrades. These investments in technology are designed to improve our processes and ultimately the customer experience.

As a data driven logistics company. This is just another facet to our long term strategic initiatives focusing on strategic growth operational excellence and leveraging technology.

Adjusted EBITDA, a non-GAAP financial measure decreased by $16 8 million or 34% to $32 9 million in the first fiscal quarter compared to $49 7 million in the prior year quarter.

The change was primarily due to the $13 million increase in net loss attributable to Ferro gas partners LP as noted previously and a $3 9 million EBITDA adjustment for legal fees related to non core businesses.

I'll now turn the call back to <unk> for an operational update.

Thank you Mike and in addition to my opening statements I want to highlight that in the first fiscal quarter Ferrell gas employee owners, we're very active at the state and national levels working with various associations to carry the positive message of propane propane, which is clean and portable.

[music].

Portable abundant.

That's great energy provides benefits to millions of customers across the United States and federal gas, we'll remain active in the state and national associations.

We also partnered with operation warm again, it's a national nonprofit organization that provides new coats and shoes for children in need across the country. We're in our third year of this partnership now as a company that supplies propane to heat millions of American homes supporting operation warm, it's a natural fit for us.

Child deserves to feel warm and safe and I think thats truly makes a difference for so many children. It's just one more way that ferrell gas fuels life simply for families.

We are proud to support our employee owners and their families and very very proud of this one for the third consecutive year Ferrell gas has elected to absorb all additional cost and not pass on the increased cost of benefits to our employees, we invest in our workforce and in <unk>.

Just like Mike spoke about above in terms of our investment in technology.

This is the way in which we invest in our workforce. So that they can deliver results and in the end there work it benefits our customers, which is our primary focus.

We did receive some questions in our Investor relations mailbox, and I'm going to turn it back to Mike. So that he can talk through a couple of those.

Thank you Tamara.

One of the questions that we've been asked is has anything fundamentally changed with your business operations to impact EBITDA.

There had been no fundamental changes to our business operations. There are a couple of key takeaways from our financial results from this fiscal quarter.

First in this fiscal quarter, there were fewer heating degree days versus prior year period, yet our volumes and margins remained relatively flat.

This is a testament to the performance of ourselves and pricing teams and the benefits of our operational and geographical diversification.

We believe our diversification geographic tank exchange and customer segments within our retail operations.

<unk>, our dependency on cold winters, and propane heating for financial performance.

The second key takeaway is that our expenses were higher relative to the prior period, which was which has been addressed in our earlier comments. Some of the increases in expenses were attributable to specific actions taken to better position the company to execute on its growth initiatives and market opportunity.

It is important to note that these expenses are largely within management's control and were not unexpected outcomes from our financial performance.

We will continue to be diligent in managing our expenses, while continuing to provide quality service at a competitive price.

This will help ensure satisfied customers and continued financial performance.

Another question, we continue to get it relates to our capital structure and the path forward, specifically relating to our class B units.

We will continue to analyze our capital structure to identify the best path forward. The class B units represent our highest cost of capital and as a result, we continue to evaluate alternative approaches that help reduce our cost.

There have been no changes to our capital structure at this time that we could publicly disclosed and we will continue to update the public when appropriate on any forthcoming changes to the capital structure.

That are all the questions that we have received Tamara I will turn the call back to you.

Thank you Mike This was an exciting first quarter, we were very focused on our growth initiatives in all of the outcomes that they will provide at this time I will now turn the call back to our moderator, but before I do that as mentioned in the announcement for this call.

Any additional questions may be submitted via our Investor Relations E Mail box at Investor Relations at <unk> Dot com.

Thank you all for joining.

This concludes today's conference call. Thank you for participating you may now disconnect.