Q1 2024 Superior Plus Corp Earnings Call

May 15, 2024

Operator: Thank you for standing by, and welcome to Superior Plus' first quarter 2024 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you may press star 1 1 again. I would now like to hand the call over to Adam Kornick, Director of Corporate Finance and Investor Relations. Please go ahead.

Thank you for standing by and welcome to Superior Pluses first quarter 'twenty 'twenty four results conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star.

One one on your telephone to remove yourself from the queue. You May press Star one one again I would now like to hand, the call over to Adam <unk> director of corporate Finance and Investor Relations.

Adam Kornick: Go ahead.

Adam Kornick: Thank you, Lateef. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2024 first quarter results. On the call today are Allan MacDonald, President and CEO, Grier Colter, Executive Vice President and CFO, Curtis Philippon, Executive Vice President, Superior Plus, and President Sertares.

Adam Kornick: Thank you Latif and good morning, everyone and welcome to Superior Pluses Conference call and webcast to review, our 2024 first quarter results.

Speaker Change: On the call today are Alan Macdonald.

Speaker Change: President and CEO, Grier, Colter executive Vice President and CFO Curtis fell upon.

Speaker Change: Executive Vice President superior, plus and president's or targets.

Adam Kornick: For this morning's call, Allan and Grier will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. In addition, some of the information provided refers to non-GOT measures. Please refer to Superior's continuous disclosure documents available on CDAR Plus and Superior's website for further details. Dollar amounts discussed on today's call are expressed in U.S. dollars unless otherwise noted. I'll now turn the call over to Allan for his remarks.

Speaker Change: For this morning's call will begin with their prepared remarks, and then we will open up the call for questions.

Speaker Change: Let's start with a reminder, that some of the comments made today may be forward looking in nature and are based on superior current expectations estimates judgments projections and risks further some of the information provided refers to non-GAAP measures. Please refer to superiors continuous disclosure documents available on SEDAR.

Speaker Change: And superior's website for further details.

Speaker Change: Dollar amounts discussed on today's call are expressed in U S dollars unless otherwise noted.

Speaker Change: Now I'll turn the call over to Alan for his remarks.

Allan Angus MacDonald: Well, thank you, Adam. Good morning, everyone.

Allan Angus MacDonald: Well, thank you Ed good morning, everyone.

Allan Angus MacDonald: It's been an important week for Superior Plus. We held our annual General Meeting this week and had the opportunity to update our shareholders on the progress we've made over the past year and our strategy for growth and further transformation of the business. This week marks my first anniversary as CEO, but more importantly, it's also been a year since Superior Plus put its stake in the ground and committed to becoming a multi-energy solutions company focused on generating sustainable organic growth.

Allan Angus MacDonald: It's been an importantly week for superior plus we held our annual general meeting this week and have the opportunity to update our shareholders on the progress we've made over the past year and our strategy for growth and further transformation of the business.

Speaker Change: This week marks my first anniversary Ed.

Speaker Change: But more importantly, it's also been a year since superior plus put a stake in the ground and committed to becoming a multi energy solutions company focused on generating sustainable organic growth.

Allan Angus MacDonald: Since that shift in focus, we've made tremendous progress through the year. We had all the challenges one would expect from such a transformation, including unseasonable weather, closing the $1 billion Soteris acquisition, retooling our leadership team, evaluating our strategy, and building the operating capability to make it all possible. For me, the most exciting part of the journey has been the renewed sense of optimism we have for our business. CITERIS has been an incredible investment. Of this, there is no doubt.

Speaker Change: Since that shift in focus we've made tremendous progress through the year, where we had all the challenge as one would expect from such a transformation, including unseasonable weather.

Speaker Change: Closing the $1 billion of tariffs acquisition.

Speaker Change: <unk> our leadership team.

Speaker Change: <unk>, our strategy and building the operating capability to make it all possible.

Speaker Change: For me the most exciting part of the journey has been a renewed sense of optimism we have for our business.

Speaker Change: So tariffs has been an incredible investment of this there is no doubt.

Allan Angus MacDonald: Mr. Terrace has a proven business model with consistent returns on capital above 20%, significant market share with 40% of the MSUs in North America, and expanded reach into new geographies and verticals and a demonstrated ability to grow by double digits year over year. Soteris is also propelling Superior Plus into a new age.

Speaker Change: <unk> has a proven business model with consistent returns on capital above 20% <unk>.

Speaker Change: Significant market share with 40% of the Msos in North America and.

Speaker Change: And expanded reach into new geographies and verticals and a demonstrated ability to grow by double digits year over year.

Speaker Change: <unk> is also propelling superior plus into a new age.

Allan Angus MacDonald: It's the leading on-road energy provider for renewable natural gas, with over 10% of its fleet now dedicated to RNG distribution. Soterios also remains a key enabler of critical hydrogen research as companies across North America test new applications for hydrogen-fueled applications. And that's just the beginning.

Speaker Change: It's the leading on road energy provider for renewable natural gas with over 10% of our fleet now dedicated to RMG distribution.

Speaker Change: So Terra is also remains a key enabler of critical hydrogen research as companies across North America test new application for hydrogen fueled applications.

Speaker Change: And that's just the beginning.

Allan Angus MacDonald: Perhaps our biggest source of optimism and enthusiasm is within our traditional propane business. With a renewed energy for revolution, not evolution, our propane teams have been working hard to explore opportunities for growth, challenging themselves to create a new operating model for the next era of propane distribution. We've come to believe strongly that our propane assets are among the best in the business.

Speaker Change: Perhaps our biggest source of optimism and enthusiasm is within our traditional propane business unit.

Speaker Change: With a renewed energy for revolution, not evolution, our propane teams have been working hard exploring opportunities for growth.

Speaker Change: <unk> ourselves to create a new operating model for the next era of propane distribution.

Speaker Change: When companies believe strongly that our propane assets are among the best in the business.

Allan Angus MacDonald: We seek significant opportunities as we shift away from our M&A roots and set our sights on operations excellence, challenging our teams with aggressive growth and productivity targets. Over the course of 2024, we will be building new capabilities that enable us to acquire customers organically, lower customer churn, and reduce the cost of delivery, all with lower capital investments than we've seen in prior years. Now, while this journey takes time and is never really finished, we're excited and engaged in growing the superior propane business.

Speaker Change: We see significant opportunities as we shift away from our M&A routes and set our sights towards operations excellence.

Speaker Change: <unk> Z challenging our teams with aggressive growth and productivity targets.

Speaker Change: Over the course of 2024, we will be building new capabilities that enable us to acquire customers organically lower customer churn.

Speaker Change: And reduce the cost of delivery all with lower capital investments than we've seen in prior years.

Speaker Change: Now while this journey takes time and is never really finished we're excited and engaged and growing the superior propane business.

Allan Angus MacDonald: These strategies are the foundation for our leadership's commitment to organic growth and creating shareholder value by operating our business with innovation, passion, and pride. It enables our commitment to conserving capital and reducing Superior Plus' leverage ratio to investment grade. In Q1, we saw many reasons to be optimistic. We posted a 15% increase in EBITDA versus last year. Testaments of the strength of our business, even in light of some significant headwinds thanks to an unseasonably warm winter, Soterios grew 9% in Q1 and successfully expanded its fleet, adding 24 MSUs and ending the quarter with 753 MSUs, as we continue to expand and build out our network beyond the well site.

Speaker Change: These strategies are the foundation to our leadership's commitment to organic growth and creating shareholder value by operating our business with innovation passion and pride.

Speaker Change: It enables our commitment to conserving capital and reducing superior plus as leverage ratio to investment grade.

Speaker Change: In Q1, we saw many reasons to be optimistic.

Speaker Change: Hosted a 15% increase in EBITDA versus last year Testament to the strength of our business even in light of some significant headwinds thanks to an unseasonably warm winter.

Speaker Change: So tariffs grew 9% in Q1 and successfully expanded its fleet, adding 24, msu's and ending the quarter with 753 Msu's as we continue to expand and build out our network beyond the well site.

Allan Angus MacDonald: The propane segment was led by the U.S. Division, posting a 1% increase in EBITDA versus last year and impressive results, all things considered. And I remain very encouraged about the potential for this business to continue to grow and increase its share of the market. But that, of course, will take time.

Speaker Change: The propane segment was led by the U S Division posting a 1% decrease in increase in EBITDA versus last year and impressive results all things considered and I remain very encouraged about the potential for this business to continue to grow and increase its share of the market.

Speaker Change: Well that of course will take time Q1 was encouraging.

Allan Angus MacDonald: Q1 was encouraged. However, in Canada, business was significantly more challenged by weather and its impact on our largely industrial business. We, of course, must factor in the disposition of the Northern Ontario operations last fall as a requirement of closing the CITERRAS transaction. But despite successfully growing our customer base, these additions were not sufficient to offset declines in several large industrial customers' consumption through the winter months. Now, in any seasonal or weather-related business, quarters with this type of adversity happen from time to time.

Speaker Change: In Canada, the business was significantly more challenged with weather and its impact on our largely industrial business we.

Speaker Change: We of course must factor in the disposition of the Northern Ontario operations last fall our requirement to closing the <unk> transaction.

Speaker Change: But despite successfully growing our customer base. These additions were not sufficient to offset declines in several large industrial customers consumption through the winter months.

Speaker Change: Now in any seasonal or weather related business quarters with this type of adversity happened from time to time.

Allan Angus MacDonald: And it's our mission to not let this setback distract us from our objectives to drive customer growth, retention, and operating productivity. This is exemplified in the progress we made in Q1, with initiatives to reduce costs through workforce adjustment, cooperative go-to-market sales initiatives with Seth Harris, and improvements in the effectiveness of our pricing strategy. So with that, let me turn things over to Grier to walk through the Q1 results in detail.

Speaker Change: And it's our mission to not let this setback distract us from our objectives to drive customer growth retention and operating productivity.

Speaker Change: This is exemplified in the progress we made in Q1 with initiatives to reduce costs through workforce adjustment cooperative go to market sales initiatives with soliris and improvements on the effectiveness of our pricing strategies.

Speaker Change: So with that let me turn things over to hear to walk through the Q1 results in detail.

Grier Barrett Colter: Thank you, Allan, and good morning, everyone. Before I get into the results, I'll remind everyone that all dollar figures are in U.S. dollars as we completed our transition to reporting currency beginning in Q1. Generally, we were happy with the performance of the businesses in the first quarter. The weather conditions were challenging, even compared to an unseasonably warm first quarter of 2023, but the results demonstrated great resilience despite this.

Speaker Change: Thank you Alan and good morning, everyone.

Speaker Change: Before I get into the results I'll remind everyone that all dollar figures are in U S dollars as we completed our transition on our reporting currency beginning in Q1.

Speaker Change: Generally we were happy with the performance of the businesses in the first quarter. The weather conditions were challenging even compared to an unseasonably warm first quarter 2023, but the results demonstrated great resilience despite us.

Grier Barrett Colter: First quarter adjusted EBITDA of $236 million was a record Q1 for us and represents an increase of $31 million over Q1 2023, primarily due to the contribution from Soteris, which had another great quarter. Our first quarter net earnings of $85 million compared to net earnings of $109 million in the prior year quarter, with the decrease primarily due to an unrealized gain on derivatives and foreign exchange in the prior year quarter, partially offset by the addition of Soteris. Now turning to business.

Speaker Change: First quarter adjusted EBITDA of $236 million was a record Q1 for us and represents an increase of $31 million over Q1, 2023, primarily due to the contribution from certain tariffs, which had another great quarter.

Speaker Change: Our first quarter net earnings of $85 million compared to net earnings of $109 million in the prior year quarter with the decrease primarily due to an unrealized gain on derivatives and foreign exchange and the prior year quarter, partially offset by the additional tariffs.

Speaker Change: Now turning to the businesses.

Grier Barrett Colter: Soterios achieved record adjusted EBITDA in the first quarter of $51.5 million, growing organically by 9% versus Q1 2023. The result was in line with our expectations and represents strong growth compared to a prior year quarter that benefited from an acute decrease in natural gas prices that provided a one-time benefit on fixed price contracts. We continue to grow our industry-leading fleet of mobile storage units, or MSUs, in the quarter, adding 24 units and bringing the total to 753 at the end of the quarter.

Speaker Change: <unk> achieved record adjusted EBITDA in the first quarter of $51 5 million growing organically by 9% versus Q1 2023.

Speaker Change: The result was in line with our expectations and represents strong growth compared to our prior year quarter that benefited from an acute decrease in natural gas prices that provided a one time benefit on fixed price contracts.

Speaker Change: We continue to grow our industry, leading fleet of mobile storage units or <unk> used in the quarter.

Speaker Change: Adding 24 units and bringing the total to 753 at the end of the quarter.

Grier Barrett Colter: The U.S. propane business produced adjusted EBITDA for the first quarter of $131.4 million, which represents an increase of 1.3 million or 1% compared to the prior year quarter. However, weather was 2% warmer than Q1 2023 and volumes declined as a result, but the decline was more than offset by higher margins. The Canadian business produced $41.1 million of adjusted EBITDA in the first quarter, which was a decrease of $7.6 million compared to the prior year quarter.

Speaker Change: The U S propane business produced adjusted EBITDA for the first quarter of $131 4 million.

Speaker Change: Which represents an increase of $1 3 million or 1% compared to the prior year quarter.

Speaker Change: While there was 2% warmer than Q1 2023 and volumes declined as a result, but the decline was more than offset by higher margins.

Speaker Change: The Canadian business produced $41 1 million of adjusted EBITDA in the first quarter, which was a decrease of $7 6 million compared to the prior year quarter.

Grier Barrett Colter: You will recall from our 2024 guidance expectation, as part of the closing of the Soteris transaction, we were required by the Competition Bureau to divest various propane assets in Northern Ontario, which were sold in Q4 of 2023.

Speaker Change: You will recall from our 2024 guidance expectations as part of the closing of the <unk> transaction.

Speaker Change: We are required by the competition Bureau to divest of various propane assets in northern Ontario, which were sold in Q4 of 2023.

Grier Barrett Colter: These assets contributed $4.4 million of adjusted EBITDA in the prior year quarter, and this was a key driver in the decrease in volumes year over year, representing approximately 9 million gallons in Q1 of 2023. Volumes were also impacted by challenging weather conditions in Canada, which ran roughly 2% warmer compared to Q1 of 2023. The wholesale business generated adjusted ODA of $17.1 million in the first quarter, a decrease of $12.6 million compared to the prior year quarter, primarily due to a return to a more normalized market differential.

Speaker Change: These assets contributed $4 4 million of adjusted EBITDA in the prior year quarter and this was a key driver in the decrease in volumes year over year, representing approximately 9 million gallons in Q1 of 2023.

Speaker Change: Volumes were also impacted by challenging weather conditions in Canada, which ran roughly 2% warmer compared to Q1 2023.

Speaker Change: The wholesale business generated adjusted EBITDA of $17 1 million in the first quarter, a decrease of $12 6 million compared to the prior year quarter, primarily due to a return to more normalized market differentials.

Grier Barrett Colter: As communicated with our guidance earlier this year, the prior year comparative quarter benefited from unusually strong market differentials that resulted in a one-time boost to adjusted EBITDA of $10.3 million, and substantially all of this was realized in Q1 2023. The wholesale business was also impacted in the quarter by the previously mentioned weather patterns across North America.

Speaker Change: As communicated with our guidance earlier this year the prior year comparative quarter benefited from unusually strong market differentials that resulted in a one time boost to adjusted EBITDA of $10 3 million and substantially all of this was realized in Q1 2023.

Speaker Change: The wholesale business was also impacted in the quarter by the previously mentioned weather patterns across North America.

Grier Barrett Colter: Now turning to corporate results and leverage. Corporate operating costs for the first quarter were $5.5 million, which was an increase of $1.3 million compared to the prior year quarter, primarily due to higher incentive plan costs in the current period as a result of an increase in Superior's share price over the quarter. Our leverage ratio for the trailing 12 months ended March 31, 2024 was 3.8 times.

Speaker Change: Now turning to corporate results on leverage.

Speaker Change: Corporate operating costs for the first quarter were $5 5 million, which was an increase of $1 3 million compared to the prior year quarter, primarily due to higher incentive plan costs in the current period as a result of an increase in superior's share price over the quarter.

Speaker Change: Our leverage ratio for the trailing 12 months ended March 31, 2024, it was three eight times.

Speaker Change: An improvement from $3 nine.

Grier Barrett Colter: An improvement from 3.9 a year earlier and also at year-end, which was driven by an improvement in working capital, as previously discussed. This number will move around somewhat from quarter to quarter due to the seasonal nature of our business, but our objective is to improve the metric to 3.7 by the end of 2024 and with a longer-term target of 3.0. In terms of our full year 2024 guidance expectations, the company is maintaining its expected adjusted EBITDA growth in 2024 of 5% compared to 2023 pro forma adjusted EBITDA of 75.5.

Speaker Change: A year earlier and also at year end.

Which was driven by an improvement in working capital.

Speaker Change: As previously discussed this.

Speaker Change: This number will move around somewhat from quarter to quarter due to the seasonal nature of our business.

Speaker Change: Our objective is to improve the metric to $3 seven by the end of 2024 and with a longer term target of 3.0.

Speaker Change: In terms of our full year 2024 guidance expectations. The company is maintaining its expected adjusted EBITDA growth in 2024 of 5%.

Speaker Change: Compared to 2023 pro forma adjusted EBITDA 475 five.

Grier Barrett Colter: Included in the expected growth, we remain to assume that Soteris will grow between 15 and 20% in EBITDA and 1.5, 1 to 5% EBITDA growth for each of our U.S., Canadian, and wholesale propane businesses and approximately $25 million of corporate operating costs. CAPEX guidance is also maintained at roughly $230 million. And finally, the board has approved a quarterly dividend of $0.18 per share, and we continue to pay that in Canadian currency.

Speaker Change: Included in the expected growth, we remained to assume that <unk> will grow between 15 and 20% on EBITDA.

Speaker Change: And 151% to 5% EBITDA growth for each of our U S Canadian and wholesale propane businesses and approximately $25 million of corporate operating costs.

Speaker Change: Capex guidance is also maintained at roughly $230 million.

Speaker Change: And finally, the board has approved a quarterly dividend of <unk> 18 per share and we continue to pay that in Canadian currency.

Speaker Change: And with that I would like to turn the call over for Q&A.

Operator: Thank you. To ask a question, please press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gary Ho.

Speaker Change: Thank you.

Speaker Change: To ask a question. Please press star one on your telephone.

Speaker Change: Remove yourself from the queue you May press Star one again, please standby.

<unk>.

Speaker Change: Our first question. Your question comes from the line of Gary.

Speaker Change: Our day job.

Speaker Change: Capital Metro market.

Gary Ho: Thanks and good morning. We have had very strong propane margins again this morning, and we've seen a decent trend over the past few quarters. Maybe just help us think through...

Speaker Change: Thanks.

Speaker Change: Good morning, good morning, Tommy.

Speaker Change: Simon.

Gary Ho: [inaudible]

Speaker Change: And we are seeing decent demand over the half quarter to quarter, maybe just help us.

Speaker Change: To.

Speaker Change: <unk> been quite getting biotech, Canada, USA retail scale that'll be helpful.

Allan Angus MacDonald: Hey Gary, when you say rule of thumb, can you elaborate a little bit more? Do you mean what would be used as a rule of thumb?

Speaker Change: Hey, Jerry.

Speaker Change: When you say rule of thumb can you elaborate a little bit more than you maybe would it be used as a guide or.

Allan Angus MacDonald: Yeah, exactly. So, yeah, it's been pretty strong in the last few quarters. Mains elevated to cornering, both are kind of sustainable.

Speaker Change: Yes exactly.

Speaker Change: Pretty strong last few quarters around remains elevated just wondering if those are kind of sustainable peaceful.

Allan Angus MacDonald: Yeah, well, there are a couple of things. So, we're using, you know, competitive data and so on... and, you know, obviously, market-driven data. The two big things to watch there are customer acquisition and churn because obviously, if we're charging too much, we're going to see an increase in churn and in customer acquisition and our ability to acquire new customers. I think more than anything, over time, we're going to start to see some divergence because we're looking at being much sharper when it comes to customers who are on the lower end of the volume scale, where we're looking at more fee-based charges versus just volume-related.

Speaker Change: Well there is a.

A couple of things so.

Speaker Change: We are using competitive data.

Speaker Change: So.

Speaker Change: And obviously market driven data.

Speaker Change: The two big things to watch their customer acquisition and churn because obviously if were charging too much we're going to see an increase in churn and customer acquisition and our ability to acquire.

Speaker Change: I think more than anything over time, we're going to start to see some divergence because where we're looking at being much sharper when it comes to customers who are on the lower end of the volume scale, where we're looking at.

Speaker Change: More fee based.

Speaker Change: Charges versus just volume related so tank rentals.

Allan Angus MacDonald: So tank rentals, we're doing a lot of work there. Delivery fees when we're seeing customers that have low activity, like seasonal properties. So looking at the profitability of customers that aren't purely just home heat customers has been an initiative this year. It's very early days, but you'll see some margin improvement through initiatives like this that can't be equated to a price per liter or price per gallon improvement or increase, if you know what I mean. So we're pretty comfortable that we're remaining competitive. In some markets, actually, I think we still have some margin opportunities. And we think there'll be some continued opportunity for the sort of more monthly fee-based.

Speaker Change: We're doing a lot of work there delivery fees when we're seeing customers that have low activity like seasonal property. So looking at the profitability of customers that are.

Speaker Change: Purely just home heat customers has been an initiative. This year, it's very early days, but youll see some margin improvement through initiatives like this that arent that can't be equated to a price per liter or price per gallon improvement or increase if you know what I mean, so we're pretty comfortable that we're remaining competitive in some markets actually I think.

Speaker Change: We have still have some margin opportunity.

Speaker Change: And we think there'll be some continued opportunity on that.

Speaker Change: More monthly fee based versus just price per liter of gallon.

Gary Ho: Okay, that's helpful. And sorry, I got a call late. Curtis is here.

Speaker Change: Okay.

Speaker Change: And so at that point on the call knee OA.

Speaker Change: Great.

Gary Ho: The 140 ads that you disclosed last quarter, correct me if I'm wrong, that's still relevant. And then you've disclosed the 785 average for the year, which suggests it might be more second half weighted. Just wondering if you can provide a bit more color on when you expect the MSUs to be delivered and deployed.

Speaker Change: The 140 ads that you disclosed last quarter.

Speaker Change: Correct me if I'm wrong.

Speaker Change: A relevant and then you have disclosed the 785 average for the year.

Speaker Change: Yes might be more second half weighted.

Speaker Change: I'm just wondering if you can provide a bit more color on when you expect <unk> to be delivered and deployed.

Curtis Philippon: Hey Gary, those numbers are good numbers to go by. Obviously, deliveries tend to come in more in the back half of the year, but those are still good numbers to use for your model.

Gary: Hey, Gary Yes.

Speaker Change: Those numbers are good numbers to go by there is obviously the the deliveries tend to come in more in the back half of the year, but those are those are still good numbers to use for your model.

Gary Ho: Okay, and then, Curtis, while I have you, maybe just give us an update on the Hubs ad expected this year. Any color you can provide in terms of areas that you're targeting and or businesses that might be new, etc.

Speaker Change: Okay, and then Curtis while I have you.

Speaker Change: Maybe just give us an update on.

Speaker Change: Add expected this year.

Speaker Change: Any color you can provide in terms of.

Speaker Change: Areas that you're targeting.

Businesses that might be new et cetera.

Curtis Philippon: Yeah, so on hub addition, so we're quite pleased recently we went to full operations at our newest location We've added a significant operation in South Dakota that's focused on R&G, R&G collection and injection So that's our newest operation. It's our newest operating area that we're pretty excited about the really strong position in the R&G market for us For other locations, maybe I won't get into where exactly we're going on new locations But the big focus in the near term is really increasing capacity at some of our existing locations That we're seeing that we've got more demand than we can handle out of a couple of our existing facilities So the big push right now is to ramp up some additional capacity at a few sites to be able to support that customer demand Okay, great. Those are my questions.

Speaker Change: So on hub addition, so we're quite pleased recently, we went to full operations at our newest location and we've added a significant operation in South Dakota, that's focused on R&D R&D collection, an injection. So thats our newest operations our newest operating area that we're pretty excited about that really.

Gary Ho: Okay, great. Those are my questions. Thank you.

Speaker Change: Strong <unk>.

And in the R&D market for us for.

Speaker Change: For other locations, maybe I won't get into where exactly we're going on new locations, but the big focus in the near term is really increasing capacity at some of our existing locations that we're seeing that we've got more demand than we can handle a couple of our existing facilities. So the big push right now is to wrap up some additional capacity at a few.

Speaker Change: To be able to support that customer demand.

Speaker Change: Okay, Great. Those are my questions. Thank you.

Speaker Change: Thanks, Thanks very much.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Robert Catellier of CIBC Capital Markets.

Speaker Change: Our next question comes from the line of Robert <unk> of CIBC capital markets.

Robert Catellier: Hey, good morning, everyone. I'm happy to see the progress you've made on the US propane side. I'm wondering what you can detail for us in terms of how you drove that margin expansion. In other words, how much is due to retaining pricing as propane declines versus some of the other strategies that

Speaker Change: Hey, good morning, everyone I'm happy to see the progress you've made on the U S propane side.

I'm wondering what you can.

Speaker Change: Detail for us in terms of value drove that margin expansion in other words, how much is due to retaining pricing.

Speaker Change: Propane decline versus some of the other strategies that you just mentioned Dallas.

Allan Angus MacDonald: It's a little early for me to give you specifics, Rob. Hey Rob, by the way, good morning.

Rob: It's a little early for me to give you specifics, Rob Hey, Rob Hey, good morning.

Allan Angus MacDonald: Yeah, a little early for me to give you specifics. You know, we saw an interesting quarter in the US. January and February were a little more seasonal, and actually, we were very, very pleased. March didn't go our way, so I would say some of the gains we made were given back in terms of volume-related fluctuations. But, you know, it's a game of inches, right? We're doing better and better at making sure that customers that we've seen either through acquisition have contracts that were perhaps less favorable to us because they had low volume and non-rental agreements with the tanks, or for some reason, you know, their volume changed, and we ended up changing our approach pricing.

Rob: Little early for me to give you specifics.

Rob: <unk>.

Speaker Change: We saw an interesting quarter in the U S.

Speaker Change: January and February were a little more seasonal and actually we're very very pleased.

Speaker Change: The March didn't didn't go our way so I would say.

Speaker Change: Some of the gains we've made we're giving back in terms of volume related fluctuations, but.

Speaker Change: It's a game of inches right, we're doing better and better on making sure that customers that.

Speaker Change: Where we've seen either through acquisition had contracts that were perhaps less favorable to us because they had low volume in non rental agreements with the tanks or.

Speaker Change: For some reason there volume changed and we ended up changing our approach pricing. It makes a small contribution but in quarters like this.

Allan Angus MacDonald: It makes a small contribution, but in quarters like this, it can make a difference. All that's to say, look, it's really hard for me to give you specifics at this stage, but why don't we just chalk it up to managing the business better and try to keep an eye on making sure that not all margin increases are simply just raising the price per gallon.

Speaker Change: It can make a difference so.

Speaker Change: All that to say look I, it's really hard for me to give you specifics at this stage, but.

Speaker Change: We just chalk it up to managing the business better and try to keep an eye to making sure that not all margin increases are simply just raising the price per gallon.

Robert Catellier: Okay. I have a similar question on the cost side. Can you detail some of the things you're doing in the operations that are helping you on the cost side?

Okay.

Speaker Change: Similar question on the cost side can you detail some of the things you're doing on the operations.

Speaker Change: Are helping you on the cost side.

Allan Angus MacDonald: Over the course of the quarter, we reduced some headcount in Canada to the tune of around 100 people. The U.S.

Over the course of the quarter.

Speaker Change: Reduced.

Speaker Change: Some head counts in Canada to the tune of <unk>.

Speaker Change: Around 100 people.

Speaker Change: The U S. Right now is about 200 people later than it would have been this quarter last year, that's largely through attrition.

Allan Angus MacDonald: Right now, it's about 200 people lighter than it would have been this quarter last year. That's largely through attrition. You know, our route optimization, we made obviously fewer deliveries in Q1 than we would have the year before. You see that through the volume.

Our route optimization, we made obviously fewer deliveries in Q1 than we would have the year before you see that through the volume.

Allan Angus MacDonald: But the deliveries were almost flat, you know, it was marginally lower. Yeah, we did that with driving 100,000 fewer miles, and with about 73, I think it was, or with a substantially fewer number of drivers. So we're starting, you know, it's this, it's this vibration from...

Speaker Change: Yes.

Speaker Change: The deliveries were almost flat it was marginally lower yes, we did that with <unk>.

Speaker Change: Driving a 100000 fewer miles.

Speaker Change: And with about 73, I think it was her with a substantial fewer number of drivers. So we're starting.

Speaker Change: This migration from.

Allan Angus MacDonald: The M&A roots that I was talking about in the opening remarks have led to more operational focus, and, you know, when you have these businesses that you keep pulling together and you just make them more and more aware of the efficiencies, the opportunities they have within the business, and start tackling them, they pay a dividend. It's not going to change the world in one quarter, but if we continue to do this quarter after quarter over time, we're building a much more sustainable bottom line. So like I said, better pricing, being smarter in terms of not just relying on volume but making sure all customers are profitable, for starting down that journey, and then looking to head count in August.

Speaker Change: The M&A route that I was talking about in the opening remarks to more operational focus and.

Speaker Change: When you have these businesses that you keep pulling together it needs to make them more and more aware of.

Speaker Change: The efficiencies opportunities they have within the business and start tackling them.

Speaker Change: Pay a dividend it is not.

Speaker Change: It's not going to change the world in one quarter, but if we continue to do this quarter after quarter over time, we are building a much more sustainable bottom line.

Speaker Change: Like I say better pricing being smarter in terms of not just relying on volume, but making sure our customers are profitable, we're starting down that journey.

Speaker Change: And then looking to head count and the operating efficiency, we have within the business.

Robert Catellier: Okay, great. Thanks for that. And a question on Sitorus. I'm curious if the data center is a vertical of interest. We're hearing another operator have some success, basically serving as a last mile, where some data centers are natural gas powered, self-powered with power on site, and with the CNG operator basically serving as a last mile until they're plugged into a pipeline. Is that a vertical of interest

Speaker Change: Okay, great. Thanks for that.

Speaker Change: Question on CCAR.

Speaker Change: I'm curious if the data center as a vertical of interest we're hearing another operator.

Speaker Change: Some success.

Speaker Change: Basically serving as the last mile.

Speaker Change: Where some data centers are natural gas powered.

Speaker Change: Self powered with the power on site.

Speaker Change: With the <unk>, operator, basically serving as a last mile until they're plugged into.

Speaker Change: <unk> set a vertical of interest for <unk>.

Curtis Philippon: Hey Rob, data centers are top of mind for everybody right now. Obviously, they're significant power consumers that create lots of interesting opportunities. We're working on a number of them.

Speaker Change: Yes, yes.

Speaker Change: Data centers.

Speaker Change: Our top of mind for everybody right now obviously they are significant power consumers that create lots of interesting opportunities that we're working on a number of them. They are a very significant power demand, though and so typically.

Curtis Philippon: They are a very significant power demand, though, and typically, they're more short-term opportunities for a virtual pipeline situation that you're, ideally, building a data center in a place where you have pipeline access gaps. But I do expect that as they're building these things out, there's going to be some interesting opportunities for Soteris to participate in. I think more interesting broadly, I think they tell a really interesting story about the macro things that you see going on in the world that create a great environment for Soteris.

Speaker Change: They are more short term opportunities for virtual pipeline situation that you are.

Speaker Change: Ideally you are building a data center in a place where you have pipeline access gaps, but I do expect that as they are building. These things out that theres going to be some interesting opportunities for <unk>.

Speaker Change: To participate in I think more interestingly broadly I think they tell a really interesting story about the macro things that you see going on in the world that create a great environment for tariffs that so terrorists thrive because we bridge the gap and energy infrastructure and the fit and efficiencies I think data centers are.

Curtis Philippon: Soteris thrives because we bridge these gaps in energy infrastructure and efficiencies. I think data centers are a prime example of new disruptions in energy demand that are causing strains on energy infrastructure. Anytime you have these strains, you have these great opportunities for Soteris to bridge the gap and generate great returns. I think it's still to be determined exactly what role Soteris will play directly in data centers, but I do expect that the disruption in the infrastructure caused by data centers is going to create a number of other ancillary demands on the energy infrastructure that's going to create interesting opportunities for us. As they pull a lot of energy, that creates other gaps where the energy is not getting to for Soteris to fill.

Speaker Change: A prime example.

Speaker Change: Sort of new disruptions in energy demand that are causing streams on energy infrastructure and anytime you have these streams you have these great opportunities for us to bridge, the gap and generate great returns.

Speaker Change: I think it's still to be determined exactly what role <unk> will play directly in Datacenters, but I do expect that the disruption in the infrastructure causeway Datacenters theyre going to create a number of other ancillary demand on the energy infrastructure thats going to cause interesting opportunities for us as they pull a lot of energy that create the other guy.

Speaker Change: <unk>, where the energy is not getting too for the film.

Robert Catellier: Okay, those are all good points. And the last one for me is I wondered if there were any updated thoughts on a potential U.S. listing. Thank you.

Speaker Change: Okay. Those are all good points and last one from me just I wondered if there's any updated thoughts on a potential U S listing. Thank you.

Grier Barrett Colter: Hi Rob, maybe it's Grier. I'll maybe take this one. I would say, yeah, look, we'll always talk about potential ways for us to add liquidity and the other basic benefits. I'd say, look, at this point, probably nothing imminent on that. Yes. Thank you.

Speaker Change: Hi, Rob maybe I'll, maybe take this one.

Rob Dorran: I would say yes.

Rob Dorran: We will always talk about.

Rob Dorran: Sure.

Rob Dorran: Potential ways for us to add liquidity.

Rob Dorran: And the other basic benefits I'd say look at this point, probably nothing eminent on that.

Speaker Change: Yes agreed.

Robert Catellier: Okay, thanks, everyone.

Speaker Change: Thanks, everyone.

Speaker Change: Okay.

Operator: Thank you. Our next question comes from the line of Nelson Ng of RBC Capital Markets. Please go ahead.

Speaker Change: Thank you. Thank you.

Speaker Change: Our next question comes from the line.

Speaker Change: Sorry.

Nelson Ng: Nelson <unk> of RBC capital markets. Please go ahead Nelson.

Nelson Ng: Great. Thanks.

Nelson Ng: Good morning, and Allan, I guess, congrats on your first year at university.

Speaker Change: Good morning, Alan I guess, congrats on your first year at superior plus.

Thanks, Matt.

Nelson Ng: Yeah, my first question is... I didn't hear quite clearly, but Allan, I think you talked about the Taurus allocating a certain portion of MSU's towards R&G, so maybe Curtis can clarify the portion allocated to R&G. What was that in the last quarter and how was it?

Speaker Change: Yes, My first question.

Allan Angus MacDonald: I didn't hear quite clearly, but Alan I think you talked about that.

Speaker Change: Paris allocating.

Speaker Change: Certain portion of Msu's towards R&D, So maybe Curtis can clarify.

Speaker Change: The portion allocated to R&D.

Speaker Change: What was that in the last quarter and how.

Curtis Philippon: and how was that different from a year ago? Hey Nelson, it's Curtis.

Speaker Change: Was that different from a year ago.

Curtis Philippon: The R&G allocation, in the first quarter, probably would have been closer to 5% of our fleet in the early part of the first quarter, and as you trended out to the back end of the quarter, it was pushing 10%, and as we're getting into right now today, we're in the, we're going to be moving into that sort of 10%-ish of the fleet allocated to R&G. So it's a growing portion of an overall growing fleet, for sure, or so within. 5% at the beginning of this year and 10% at the end of or into Q2, as projects ramp up. Nelson, I think Curtis, Q1 of last year would have been nominal, wouldn't it? There would have been.

Speaker Change: Okay.

Curtis.

Speaker Change: The RMG allocation in the first quarter, it probably would've been closer to 5% of our fleet in the early part of the first quarter.

Speaker Change: Trended up to the back end of the quarter. It was pushing 10% and as we're getting into right now today, where we're an orderly move into that sort of 10% ish of the fleet allocated to R&D.

Speaker Change: So it is a growing portion of an overall growing fleet for sure.

So within so.

Speaker Change: 5% at the beginning of this year and 10% at the end.

Speaker Change: Our into Q2.

Speaker Change: What you said.

Speaker Change: Projects ramp up Nelson I think Curtis Q1 of last year would have been nominal.

Allan Angus MacDonald: I don't have the exact number in front of me, but it's definitely grown year over year. And one of the interesting applications for R&G is a number of digester projects, a number of projects that require ambient heat. And so you see more deployment of R&G trailers in the spring and summer, which is a perfect sort of counter-winter work for us as well. So you see a bit of an uptick over Q

Speaker Change: There would have been.

Speaker Change: There is I don't know the exact number in front of me, but it's definitely growing year over year and with one of the interesting applications for R&D as a number of digester projects those number of projects that require ambient heat.

Speaker Change: So you see more.

Speaker Change: Appointment of R&D trailers in the summer and spring and summer, which is perfect sort of counter winter work for us as well. So you see a bit of an uptick over Q2 and Q3 in R&D activity.

Curtis Philippon: We see a bit of an uptick in Q2 and Q3 in R&G activity.

Speaker Change: I see.

Curtis Philippon: And then my next question, probably for Grier, but on the $230 million in CapEx, I think Q1 spend was about $39 million.

Speaker Change: And then my next question.

Speaker Change: Rare, but on the $230 million of Capex I think Q1 spend was about $39 million. So can you just talk about the seasonality of your capex spend.

Nelson Ng: So can you just talk about the seasonality of your CapEx spend?

Grier Barrett Colter: I think it should be relatively even. It was a little wider than we expected in the first quarter, but we fully expect to ramp up and increase spend over the remaining three. So yeah, as I say, 230 is still the number.

And I think.

Speaker Change: It should be.

Speaker Change: Relatively even.

Speaker Change: It was a little lighter than we expected in the first.

Speaker Change: First quarter, but we.

Speaker Change: I expect us.

Speaker Change: To wrap up.

Speaker Change: <unk> spend over the remaining three so yeah as I say like the $2 30 is still the number we were a little lower than what we would've expected I think we were probably about $10 million lower than what we would've expected in the first quarter, but as.

Grier Barrett Colter: We're a little lower than what we would have expected. I think we were probably about $10 million lower than what we would have expected in the first quarter. But as Curtis says, and Soteris is the bulk of the CapEx, it tends to be a little bit late. And the other thing too, we took quite a large order right near the end of the fourth quarter of 2023 with about 50 MSUs. So that's kind of part of the equation as well. But yeah, so it should be relatively even, Nelson, but yeah, we were a little bit wider than we thought.

Speaker Change: Curtis says <unk>.

Speaker Change: <unk> the bulk of the.

Speaker Change: The capex it tends to be a little bit of tail end away at it and the other thing too where we took a quite a large order rate near the end of.

Speaker Change: The fourth quarter 2023, with about 50 MSU So that's that.

Speaker Change: That's kind of part of the equation as well, but yeah. So.

Speaker Change: So it should be relatively even nelson, but yeah, we are a little bit wider than what we saw in the first quarter.

Nelson Ng: Okay, and then just on the MFDs... Are the suppliers having any difficulties delivering on MSUs, or not?

Speaker Change: Okay, and then just on the <unk>.

Speaker Change: Are the suppliers, having any difficulties delivering an MSU or like are.

Speaker Change #100: Are they at capacity or.

Curtis Philippon: I just want to know, are there any potential delays? Not so much due to capacity challenges, but we are working with our suppliers on some new designs that are causing some delays as we're working through the next generation design and making sure that we get that right before

Speaker Change #100: I just want to know are there any potential delays in receiving msas.

Speaker Change #101: Not so much on capacity challenges, but we are working with our suppliers on some new designs that.

Speaker Change #101: That is causing some delays as we're working through that the next generation design and making sure that we get that right before we're shipping those out of the one of the manufacturers and so we're quite excited about that new product. So we are we are taking our time to make sure we get that get that right before they ship.

Curtis Philippon: We're shipping those out from one of the manufacturers. And so we're quite excited about that new product. So we are taking our time to make sure we get that right.

Nelson Ng: Get that right before they ship. OK. And then just one last question. I know it's a bit hard to assess, but do you have a rough estimate?

Speaker Change #102: Okay. Thanks, and then just one last question I know, it's a bit hard to assess but do you have a rough estimate of the EBITDA impacts from the mild weather in Q1.

Nelson Ng: But do you have a rough estimate of the EBITDA impact from the mild weather in Q1?

Grier Barrett Colter: Yeah, I probably have it, but I don't have it at my fingertips.

Speaker Change #103: Yes, I, probably have I don't have it at my fingertips.

Speaker Change #102: Yes.

Speaker Change #102: So a little bit complex because.

Speaker Change #104: Kind of Mark everything to market for <unk>.

Grier Barrett Colter: It's, it's a little bit complex because we kind of marked everything to market for You know, halfway through, like, we released our guidance kind of partway through the quarter, and we were aware that the weather had been a bit challenging for the first part, and we kind of adjusted our estimates for that. Of course, we were still exposed for March, at least, and I think some of February, and so that kind of was not, I don't have the numbers in front of me right now, but we can kind of take that away.

Halfway through like we released our our guidance kind of partway through the quarter and we were aware that the weather had been a bit challenging for the first part and we kind of adjusted our estimates for that of course, we are still exposed for March.

At least and I think some of February and so that kind of was not I don't have the numbers in primary novel, we can kind of.

Speaker Change #105: Take it away.

Grier Barrett Colter: It's probably relatively significant, though, like probably, you know, ten, maybe ten plus a million or whatever. But why don't we go away, get the information for you, and actually get it right, and then we'll put a note out maybe to the group, if that makes sense.

Speaker Change #105: It's.

Speaker Change #105: Probably relatively significant though like probably.

Speaker Change #106: Maybe 10 plus million or whatever but why don't we go away get the information for you.

Speaker Change #106: And actually get it right and then we will we will put a note out maybe to the group if that makes sense.

Grier Barrett Colter: Yeah, I'll get that. Thanks. Thanks, Tom. Thank you.

Speaker Change #106: Yes.

Speaker Change #106: Thanks.

Speaker Change #107: Thanks Nelson.

Speaker Change #108: Thank you.

Operator: Thank you. Our next question comes from the line of Aaron MacNeil of TD Cohen. Please go ahead, Aaron. Good morning.

Speaker Change #108: Thank you.

Our next question comes from the line of Aaron Macneil of TD Cowen. Please go ahead Erin.

Aaron MacNeil: Good morning. Thanks for taking my questions. Curtis, a similar question to the one Nelson just asked, but can you give us a sense of how far your suppliers are booked out and when you might have to make a call on 2025 deliveries? Or if you've, you know, given them any early indications of interest for 2025.

Good morning, Thanks for taking my questions.

Curtis: Curtis similar question to the one Nelson just asked but can.

Speaker Change #110: Can you give us a sense of how far.

Speaker Change #111: Your suppliers are booked out.

Speaker Change #111: And when you might have to make a call on 2025 deliveries.

Speaker Change #111: Or have you given any early indications of interest for 2025.

Curtis Philippon: Hey Aaron, we always work with our suppliers. We have great relationships with the two main suppliers in this space, and as part of that, we're constantly talking with them about what our needs will be for production slots going into next year, and so they're well aware of what our plans are and what that looks like, and we're expecting that it's going to be sort of on a similar scale to this year, a little bit larger, but similar scale going into next year as well.

Speaker Change #112: Hey, Aaron.

Aaron: We always work with our suppliers, we have great relationships with the two main suppliers in this space and as part of that we are constantly talking with them about what our needs will be for production slots going into next year.

Aaron: And so.

Aaron: They're well aware of what our plans are and what that looks like and we're expecting that it's going to be.

Aaron: Similar scale to this year, a little bit larger, but similar scale going into next year as well.

Curtis Philippon: And then maybe one for Grier, you know, as you think about reducing leverage, are you looking at the potential for targeted, you know, underutilized asset dispositions? And if you are, you know, what types of assets could you look at? You know, what the magnitude be in terms of, you know, proceeds? You know, who might be the potential buyer of those types of assets.

Speaker Change #114: Understood and then maybe one for Greer.

Speaker Change #115: As you think about reducing leverage are you looking at the potential for targeted underutilized asset.

Speaker Change #116: <unk> and if you are what types of assets could you look at.

Speaker Change #117: What could the magnitude.

Speaker Change #118: In terms of.

Proceeds.

Speaker Change #119: It might be the potential buyer of those types of assets.

Grier Barrett Colter: Hi Aaron. Yeah, for sure. I think, you know, we always need to think through the portfolio and make sure that we've got, you know, the assets are, you know, yielding, you know, sufficient return. I think it's relatively unlikely, I think, that we're going to sell off businesses or regions. I think we'll always be open to it. But I think, just given what we've built up and the markets that we're in, I mean, we like what we've got.

Speaker Change #120: Hi, Erin.

Erin: Yes for sure I think we always need to.

Speaker Change #120: Through.

Erin: The portfolio and make sure that we've got.

Erin: Assets are yielding.

Erin: Sufficient return I think it's.

Erin: It's relatively unlikely I think that we're going to sell off businesses or regions. I think we'll always be open to it but I think just given what we've built up in the markets that we're in I mean, we like we like what we've got I think it's a question of pushing hard to take more market share, but it's not like we've identify.

Erin: <unk> businesses that are or regions that are underperforming and we want to sell so I think that.

Grier Barrett Colter: I think it's a question of pushing hard to take more market share. But it's not like we've identified businesses or regions that are underperforming, and we want to sell them. So I think that it's unlikely. That said, I mean, if someone was to knock on the door and give us some type of offer, we're obviously always going to entertain it, but I don't think that's really... The focus, I think, is probably a little bit more micro and maybe not what you're asking, but I think of, you know, where we've got. We did a couple acquisitions in a geography where you get overlapping infrastructure like yards or branches, you know, where you can take out small assets like that.

Erin: That's unlikely that said I mean, it's almost knock on the door.

Erin: And give us some type of off or obviously always going to entertain it but I don't think thats really.

Erin: The focus I think probably a little bit more micro and maybe not what you are asking but I think where we've got.

Erin: We did it a couple of acquisitions in a geography, where you get overlapping infrastructure like.

Erin: Yards or branches, where you can take out small assets like that.

Grier Barrett Colter: These are way less material. I mean, these would be like, you know, half a million dollars or quarter million dollars, maybe a million dollars on the large end. But I think it's more stuff like that, where you take out duplicative and add inefficiency to the operation versus outright selling businesses. As I say, we'll always be open to that, but I think it's unlikely.

Erin: These are way less material this would be like half a million dollars or quarter million dollars, maybe a $1 million on the large end but.

Erin: I think it's more stuff like that where you take out duplicative.

Erin: Adding an efficiency of the operation versus outright selling businesses as I say, we will always be open to that but I think it's unlikely.

Grier Barrett Colter: That is sort of what I was looking for. So it's in the single-digit million sort of thing, so not overly material.

Speaker Change #122: That is what I was looking for.

Speaker Change #122: Single digit millions.

Speaker Change #122: So not overly material I guess.

Grier Barrett Colter: Sort of a more widespread impact, you think about, we have double digit numbers of locations that we've identified to take out. And the benefit there is really about increasing efficiency of, you know, avoiding, you know, maintenance costs and regulatory capital. So it'll – the disposition value will be nominal. The cost avoidance isn't, you know, terribly significant on a location-by-location basis. But if you start to, you know, add up to 30, 50 locations, well, then it's starting to, you know, make another positive contribution to the bottom line. This is the boring operating day-to-day stuff that we get into, but it's the stuff you have to do, and it makes a big difference when you do it well.

Speaker Change #123: Sort of a more widespread impact do you think.

Speaker Change #124: We have double digit numbers of locations that we've identified to take out.

Speaker Change #124: And the benefit there is really about increasing efficiency.

Speaker Change #124: Avoiding maintenance costs and regulatory.

Speaker Change #124: Capital.

Speaker Change #124: So it will the.

Speaker Change #124: The disposition value will be nominal.

Speaker Change #124: The cost avoidance.

Speaker Change #124: It's terribly significant on a location by location basis, but if you start to add up to $30 50 locations will then it's starting to yet be another positive contribution to the bottom line. So.

Speaker Change #124: This is the boring operating day to day stuff that we could issue, but its the stuff you have to do and it makes a big difference when you do it well.

Allan Angus MacDonald: Perfect. It makes total sense. Thanks, guys.

Speaker Change #125: Perfect. It makes total sense. Thanks.

Speaker Change #126: Thanks, guys.

Allan Angus MacDonald: Awesome. Thanks Aaron. Thanks for the question.

Speaker Change #125: Yes.

Speaker Change #127: Thanks, Sharon Thanks, Louise Thanks for the question.

Operator: Thank you. Stand by for our next question. And again, to ask a question, you may press star 11 on your telephone at this time. Again, that's star 11 to ask a question. Our next question comes from the line of Ben Isaacson of Scotia. Your question, please, Ben.

Speaker Change #128: Thank you standby for our next question.

Speaker Change #129: And again to ask a question you May press Star one on your telephone at this time again Thats star one to ask a question.

Speaker Change #130: Our next question comes from the line.

Isaacson of Scotia Your question please.

Benjamin Isaacson: Great, thank you. And good morning, everyone. And congrats on the quarter. Allan, I think you mentioned at the start of your comments that MSUs you have a 40% share of the market in North America. Is that right?

Speaker Change #131: Great. Thank you and good morning, everyone and congrats on the quarter.

Speaker Change #132: Alan I think you mentioned at the start of your comments.

Speaker Change #133: Scott Msu's, you have a 40% share of the market in North America is that right.

Allan Angus MacDonald: I really hope so. Hey, good morning.

Speaker Change #134: So I really hope and good morning, I really hope so.

Speaker Change #134: Yes.

Speaker Change #135: Think about the market and you can look at it a couple of different ways. You can look at it in terms of volume, which obviously changes day to day.

Speaker Change #135: But.

Speaker Change #136: Directionally, we have about 40% of the <unk> that are operating in North America. Okay. Okay. Great. So my question is can you talk about the landscape of the rest of the market.

Allan Angus MacDonald: I really hope so. No, yeah, you know, and when you think about the market, you can look at it a couple of different ways. You can look at it in terms of volume, which obviously changes day to day. But, you know, directionally, we have about 40% of the MSUs that are.

Speaker Change #137: Are there consolidation types of opportunities out there how the margins stack up for for your <unk>.

Product versus the rest of the street.

Speaker Change #138: If there are any consolidation opportunities out there would there be antitrust concerns. Thank you.

Speaker Change #137: Yes.

Allan Angus MacDonald: Okay, great. So my question is, you talk about the landscape of the rest of the market. Are there consolidation types of opportunities out there? How do margins stack up for your product versus the rest of the street?

Speaker Change #139: I'm going to offer a couple of comments and then Curtis will probably want to chime in but.

Allan Angus MacDonald: I'm going to offer a couple of comments, and then Curtis will probably want to chime in. There have been a couple of consolidation opportunities that have come our way in the last 12 months, and certainly in my tenure here, Curtis has probably seen some even more. And we didn't ever get to the stage where we had an antitrust conversation for the simple reason that acquiring MSUs by virtue of acquisition versus acquiring them organically, what we're doing, has one big distinction, as profitable as Satara's.

Speaker Change #140: There hasn't been a couple of consolidation opportunities that have come our way in the last 12 months and certainly in my tenure here Curtis has probably seen some even more.

Speaker Change #141: And we didn't ever get to the stage, where we had an antitrust.

Speaker Change #141: Conversation for the simple reason that.

Acquiring msu's by virtue of acquisition versus acquiring them organically. What we're doing is one big distinction when you acquire them by acquisition you acquire their customer base with them and in the few that we've looked at the customer base and the operations weren't as profitable as.

Allan Angus MacDonald: So what you end up doing is acquiring a company and having to work through where they are to get them up to Soteris's level of profitability. And when we looked at it, Greenfield Organic Growth was a better path. So, and you know, and for a lot of cases, because these were ancillary or adjacent businesses, not pure places, The Waste of Terraces.

Speaker Change #141: So tariffs so what you end up doing is acquiring a company in half from being to work through where they are to get them up to <unk> level of profitability and when we looked at it.

Greenfield organic growth was a better path.

Speaker Change #141: So.

Speaker Change #141: And for a lot of cases, because these were ancillary or adjacent businesses not pure place the waste of territories.

Allan Angus MacDonald: So for us, we haven't seen an acquisition target yet that would rival Soteris, and it would be interesting if we did. I don't expect we will in the short term, but if we do, then we'll certainly have a look at it. Antitrust, my educated guess would be I don't think we'd have a big antitrust problem, but I guess that remains to be seen. Curtis, do you have anything you'd add to that? I think that's a good comment.

Speaker Change #141: So not surprising so for us we haven't seen an acquisition target yet that would rival so tariffs and then it would be interesting if we did.

Speaker Change #141: I don't expect that we will in the short term, but if.

Speaker Change #142: If we will if we do then we will certainly have a look at it antitrust.

Speaker Change #142: My educated guess would be I don't think we would have a big antitrust problem, but.

Speaker Change #143: I guess that remains to be seen perhaps do you have anything you'd add to that.

Curtis Philippon: Our focus over time at Soteris is to keep growing this organically, and we feel pretty good about the Soteris team's ability to grow things directly. We haven't really seen the need to go out and acquire other companies, and we haven't really seen a lot of benefit in doing that. We will always look at it. Eventually, as you grow and scale, there will be some interesting tuck-in opportunities, but at this point, we're pretty focused on just greenfield growth. Great, thank you.

Speaker Change #143: Alright advocates could come out.

Speaker Change #143: Our focus over time, Mr. Paris is to keep growing this organically and we feel pretty good about the <unk> team's ability to go grow things directly and so we haven't really seen the need to go out and acquire other companies do.

Speaker Change #143: A lot of benefit we haven't really seen a lot of benefit in doing that we will always look at it eventually as you grow in scale there will be some interesting tuck in opportunities, but at this point, we're pretty focused on just greenfield growth.

Benjamin Isaacson: Great, thank you. My last question is just on the unseasonably warm weather that we've seen play out, not just this year, but over the past few years, would you say that, in the absence of customer growth on a same, not same source sales, but maybe a same customer sales basis, would you expect volume to be flat or maybe to decline slightly over the coming years as you kind of look at how weather patterns have changed?

Speaker Change #144: Great. Thank you.

Speaker Change #145: And my last question is just on the unseasonably warm weather that we've seen.

Speaker Change #146: Play out not just this year, but over the past few years would you say that in the absence of customer growth on a same is not the same store sales, but maybe the same customer sales basis would you expect volume to be flat or maybe to decline slightly over the coming years as you kind of look at how weather patterns.

Speaker Change #145: Changed.

Allan Angus MacDonald: Yeah, yeah. I don't know, like, there's going to be some, some, you know, weather-related variability, obviously warm versus cold. You've got...

Speaker Change #148: Per customer yes.

Speaker Change #147: Yes, yes.

Speaker Change #149: I don't know if theres going to be some some.

Speaker Change #149: Weather related variability, obviously warm versus call you've got.

Allan Angus MacDonald: The notion of fuel efficiency, so new appliances are more efficient, so the exact same home will have a lower energy consumption requirement year over year than it would ten years ago because of insulation, you know, efficiency, things like that. So that's a downward pressure. And then you have us looking at a whole new segment of customers that I think are going to be very good for us. Seasonal customers, backup power customers, and what we have to do there is not think about them in terms of the price per liter they're paying, but in terms of the return on the investment that we're getting.

Speaker Change #150: The notion of a fuel.

Speaker Change #150: <unk> efficiency, so new appliances are more efficient. So the exact same home will have lower energy consumption requirements on the exact in year over year than it was 10 years ago.

Speaker Change #150: Installation efficiency things like that so thats a downward downward pressure.

Speaker Change #150: And then you've got us looking at a whole new <unk>.

Speaker Change #150: Segments of customers that I think youre going to be very good for us are seasonal season.

Speaker Change #150: Seasonal customers backup power customers and what we have to do there is not think about them in terms of the price per liter theyre paying but return on the investments that we're getting so.

Allan Angus MacDonald: So, you know, putting tanks on a customer that might be seasonal or using propane as a backup, that's a customer we want. We just have to price it on a rental basis with delivery fees and monitoring fees.

Speaker Change #150: Putting tanks on a customer that might be seasonal or using propane as a backup that's the customer. We want we just have to price it on a rental basis with delivery fees and monitoring fees. So it will look a little bit different. So our ambition is to continue to be mindful of volume obviously, but for me. The number one driver is added.

Allan Angus MacDonald: So it'll look a little bit different. So our ambition is to continue to be mindful of volume, obviously, but for me, the number one driver is adding, getting more share and adding more profitable customers and having better retention. So I'll take customer growth and retention improvements with more sort of steady state pricing versus the traditional model of signing up, you know, big volume customers and having great years when the weather was in your favor and struggling when it wasn't. That's a long way to answer your question, but I think volume is going to still be interesting, but not the only measure of its success for us going forward. That makes a lot of sense.

Speaker Change #150: And getting getting more share and adding more profitable customers and having better retention.

Speaker Change #151: I'll take customer growth and retention improvements.

Speaker Change #151: With more sort of steady state pricing versus the traditional model of signing up big volume customers and having great years, when the weather was in your favor and struggling when it wasn't so.

Speaker Change #151: That's a long way to answer your question, but I think volume is going to still be interesting, but not the only measure of success for us going forward.

Benjamin Isaacson: That makes a lot of sense, and that should help mute the impact or help with earnings stability.

Speaker Change #151: That makes a lot of time on that.

Hello.

Speaker Change #152: Mute the impact or help with with.

Speaker Change #152: With earnings stability and predictability I guess.

Speaker Change #152: Alright.

Allan Angus MacDonald: Well, you know, we have a fixed base, a fixed cost business with variable revenue, and that's what we want to diverge from and get more of a fixed revenue business. And, you know, and again, we've got so much acquisition. There's work to be done to go back and make sure everybody's profitable through this one. So that's all.

We have a fixed base of fixed cost business with a variable.

Speaker Change #152: Revenue and Thats, what we want to diverge from and get more of them.

Speaker Change #152: Fixed revenue business.

Speaker Change #152: And again, so much acquisition.

Speaker Change #152: There is work to be done to go back to make sure everybody's profitable through this lens. So that's all underway.

Benjamin Isaacson: Great stuff. Thank you very much. Thanks, guys. Good to talk to you.

Great. Thank you very much. Thank you very much thanks, Matt good to talk to you.

Speaker Change #152: Okay.

Operator: Thank you. I would now like to turn the conference back to Allan MacDonald for his closing remarks.

Speaker Change #152: Thank you.

Speaker Change #152: I would now like to turn the conference back to Alan Macdonald for closing remarks, Sir.

Allan Angus MacDonald: Thank you all for joining us today and for taking the time to hear what we have to say and for your very insightful questions. It's such a pleasure to talk to you all, and you know, when I think about the work that we've done, we've come so far in the last year, and this is just the beginning. So I look forward to speaking with you all in the interim and again for our next quarterly results.

Allan Angus MacDonald: Thank you all for joining us today and for taking the time to two.

Operator: So thanks very much. Over to you all. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #153: To hear what we have to say and for your very insightful questions. It's such a pleasure to talk to you all and.

Allan Angus MacDonald: When I think about the work that we've done we've come so far in the last in the last year and this is just the beginning so look forward to speaking with you all in the interim and again for our next quarterly results. So thank you very much over to you operator.

Speaker Change #154: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.