Q3 2024 Superior Plus Corp Earnings Call
Yeah.
Operator: Thank you for standing by and welcome to the Superior Plus third 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'll need to press star one one on your telephone. If your question has been answered, and you'd like to remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded.
Speaker Change: Thank you for standing by and welcome to the Superior plus third 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 this session you will need to press star one on your telephone if your question has been answered.
Speaker Change: Like to remove yourself from the queue simply press Star one again as a reminder, today's program is being recorded.
Chris Lichtenheldt: And now I'd like to introduce your host for today's program, Chris Lichtenheldt, Vice President Investor Relations.
Speaker Change: I would like to introduce your host for today's program Chris Hill.
Chris Hill: Vice President Investor Relations. Please go ahead Sir.
Chris Lichtenheldt: Please go ahead, sir.
Jonathan: Thank you, Jonathan.
Chris Hill: Thank you Jonathan Good morning, everyone and welcome to the Superior plus conference call and webcast to review our 2024 in the third quarter results on the call today, we have Allen Macdonald, President and CEO and Greer culture, Chief Financial Officer.
Chris Lichtenheldt: Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2024 third quarter results. On the call today, we have Allan MacDonald, President and CEO, and Grier Colter, Chief Financial So this morning's call, Allan and Grier will begin with their prepared remarks and then we will open up for questions. Listeners are reminded that some of the comments made today will be forward-looking in nature and are based on the Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAP.
Speaker Change: This morning's call will begin with their prepared remarks, and then we will open up for questions.
Speaker Change: As a reminder, that some of the comments made today will be forward looking in nature and are based on current expectations.
Speaker Change: Judgments projections and risks.
Speaker Change: Further some of the information provided refers to non-GAAP measures.
Chris Lichtenheldt: Please refer to Superior's continuous disclosure documents available on CDER Plus and our website. Dollar amounts discussed on today's call are expressed in U.S. dollars, unless otherwise.
Speaker Change: Please refer to superiors continuous disclosure.
Speaker Change: What was your documents available on SEDAR and our website.
Speaker Change: Dollar amounts discussed on today's call are expressed in U S dollars unless otherwise noted.
Allan MacDonald: I will now turn the call over to Allan.
Alan: And now I'll turn the call over to Alan.
Allan MacDonald: Thanks, Chris.
Allan MacDonald: Good morning, everyone. And thanks for joining our Q3 earnings call.
Alan: Thanks, Chris Good morning, everyone and thanks for joining our Q3 earnings call before I jump in I would like to welcome Chris.
Allan MacDonald: Before I jump in, I'd like to welcome Chris Lichtenheldt, our new VP of Investor Relations. Chris joined us about two months ago and is a seasoned IR veteran who's also had experience on both the buy and sell side. We're really pleased to welcome him. So, welcome.
Speaker Change: Investor Relations.
Speaker Change: She joined US about two months ago and is a seasoned IR veteran.
Speaker Change: Also had experience on both the buy and sell side, we're really pleased to welcome Chris to the team.
Speaker Change: Welcome.
Allan MacDonald: Today is obviously a significant day for Superior Plus, and I'd like to take a few moments to provide some context about our strategy, our future, and our plans to transform the company. I use the word transform for good reason, because that's the journey we've been on. When I joined Superior back in April of last year, it was immediately apparent that this was a company with a lot of potential, but realizing that potential meant tackling some structural challenges. And with any transformation, structural challenges are the most difficult and time-consuming to overcome. and discussions about the long-term future of Superior Plus with our shareholders and with many of you, I heard familiar themes.
Speaker Change: Today is obviously, a significant day for superior plus and I'd like to take a few moments to provide some context about our strategy, our future and our plans to transform the company.
Speaker Change: I use the word transform for good reason because that's the journey we've been on.
Speaker Change: When I joined superior back in April of last year. It was immediately apparent.
Speaker Change: With a lot of potential.
Speaker Change: Realizing.
Speaker Change: Potential tackling some structural challenges.
Speaker Change: With any transformation structural challenges are the most difficult and time consuming so all of our call.
Speaker Change: And discussions about the long term future of superior plus with our shareholders and with many of you I heard familiar themes.
Allan MacDonald: What's the future of propane? And is there a path to growing the core business organically? How will you invest for growth with the current leverage and dividend obligation? You have the right presence in emerging energy markets like CNG, power generations, and renewables like RNG and hybrid. And finally, do you have the team and expertise to make it all happen? These questions have guided our focus over the past year.
Speaker Change: What's the future of propane and is there a path to growing the core business organically.
Speaker Change: How would you invest for growth, but the current leverage and dividend obligations.
Speaker Change: The REIT presence in emerging energy markets like C N G power generations, and renewables like RMG and hydrogen.
Speaker Change: Finally, do you have the team and expertise to make it all happen.
Speaker Change: These questions have guided our focus over the past year and I'm pleased to tell you. All today, we will provide you with a first look at our strategy to transform superior plus into the company. We all believe it could and should be.
Allan MacDonald: And I'm pleased to tell you all today, we will provide you with the first look at our strategy to transform Superior Plus into the company we all believe it could and should be. So with this in mind, let me provide some context in terms of how we plan to raise the bar and transform Superior Plus, moving forward with a more profitable, modernized business model and a stronger, more flexible capital.
Speaker Change: So with this in mind, let me provide some context in terms of how we plan to raise the bar and transport superior plus moving forward with a more profitable modernize business model and a stronger more flexible capital structure.
Allan MacDonald: But before I discuss our future, let's start with where we were. Our company's history includes a long track record of consolidating the North American propane business through acquisitions, and today we proudly operate as one of the leaders in the market across North America. Our most recent acquisitions, Soteris, gave us even broader exposure to growth opportunities. and position Superior Plus as the leader in the CNG energy sector at a time of unprecedented demand for alternative and local lower carbon energy. Despite the addition of satirists, our challenges remain. This was a structure to integrate acquisitions, and our core propane assets were not delivering substantial organic growth.
Speaker Change: But before I discuss our future, let's start with where we were.
Speaker Change: Our company's history includes a long track record of consolidating the north American propane business through acquisitions.
Speaker Change: Today, we probably operate as one of the leaders in the market across North America.
Speaker Change: Our most recent acquisitions for terrorists gave us even broader exposure to growth opportunities.
Speaker Change: <unk> superior plus as the leader in the C and the CMG energy sector at a time of unprecedented demand for alternative and local lower carbon energy solutions.
Speaker Change: The addition of the terrorists are challenges remain.
Speaker Change: We're structured to integrate acquisitions and our core propane assets, we're not delivering substantial organic growth.
Allan MacDonald: While we acquire good assets, we need to organize and operate them differently. Our propane business spanned from producers all the way to commercial customers and individual households across North America. We still operated like a regional company, and the performance reflected that. Our job was to take advantage of this incredible market footprint and customers. and transform our operating model to drive sustainable growth and profitability. That's exactly what we are doing.
Speaker Change: While we acquire good assets, we need to organize and operate them differently.
Speaker Change: Our propane business spans from producers all the way to commercial customers and individuals' households across North America.
Speaker Change: We still operated like a regional company and the performance reflected this.
Speaker Change: Our job was to take advantage of this incredible market footprint and customer base and transform our operating model to drive sustainable growth and profitability and that's exactly what we are doing.
Allan MacDonald: Which leads us to where we are today, with a clear plan to move Superior Plus. Over the past 18 months, we've initiated key organizational changes, including one, retooling our leadership with an experienced team focused on operational excellence. with a mix of both internal and external talent. Two, we have significantly raised our compensation structure to drive alignment between management's priorities and those of our shareholders.
Speaker Change: It leads us to where we are today with a clear path plan to move into superior plus forward.
Speaker Change: Over the past 18 months, we've initiated key organizational changes, including one retooled retooling.
Speaker Change: Our leadership with an experienced team focused on operational excellence with a mix of both internal and external talent.
Speaker Change: Two we've significantly raised our compensation structure to drive up drive alignment between management's priorities and those of our shareholders.
Allan MacDonald: 3. We've made the deliberate decision to shift away from growing through acquisition to a more balanced and disciplined capital allocation approach with a focus on shareholder returns and growing the business organically.
Speaker Change: Three we made the deliberate decision to shift away from growing through acquisition.
Speaker Change: Our balanced and disciplined capital allocation approach with a focus on shareholder returns and growing the business organically.
Allan MacDonald: and finally... As with any successful operations-focused organization, we are embracing performance management. Our new company-wide balanced scorecard has established aggressive performance objectives for each aspect of our business. And as we all know, what gets measured gets improved.
Speaker Change: And finally.
Speaker Change: As with any successful operations focused organization, we are embracing performance management.
Speaker Change: Our new company wide balance scorecard as established aggressive performance objectives for each aspect of our business as.
Speaker Change: And as we all know what gets measured gets approved.
Allan MacDonald: These decisions were critical enablers of our transformation, and while we are in the early innings of reaping the benefits from the work we put in place, I want to share more with you about where we are going. Transform Superior Plus to becoming a best-in-class energy solutions provider. There are three main priorities we've identified as critical to our success.
Speaker Change: These decisions are critical enablers of our transformation and while we are in the early innings of reaping the benefits from the work we've put in place I want to share more with you about where we're going.
Speaker Change: To transform superior plus to becoming a best in class energy solutions provider.
Speaker Change: Our three main priorities, we've identified as critical to our success.
Allan MacDonald: First, I'm excited to introduce Superior Delivery. to what we've named our collective efforts to transform our propane business to drive more sustainable, profitable. Superior Delivers is a productivity initiative and a growth initiative. In fact, it's an everything initiative, a true transformation of the propane operating We have been meticulously working on this transformation program over the last eight months. And it comes after an exhaustive review of our underlying business assets, operating model, and competitive advantage.
Speaker Change: First I'm excited to introduce superior delivers what.
Speaker Change: What we've named our collective efforts to transform our propane business to drive more sustainable profitable growth.
Speaker Change: Superior delivers as our productivity initiatives and the growth initiatives.
Speaker Change: In fact, it's in everything initiative.
Speaker Change: Through transformation of the propane operating model.
Speaker Change: We have been meticulously working on this transformation program over the last eight months.
Speaker Change: It comes after an exhaustive review of our underlying business assets operating model and competitive advantages.
Allan MacDonald: Today we have over 100 specific initiatives in various stages of planning and execution that are all centered around three key areas of the business. First, growing our customer base profitably and retaining our customers for life. Second, becoming the lowest cost operator in the industry. And third, allocating our capital effectively and generating best-in-class utilization of every dollar. To do this, we have to shift our thinking away from inorganic growth toward becoming customer-centric, putting our customers at the core of every decision we make. Data-driven, making decisions with better insights than ever before, and operationally excellent, holding ourselves accountable to ambitious targets and achieving measurable results in everything Over the next three years, as we continue to execute Superior Delivers, our vision is to emerge as the leader in attracting and retaining profitable customers for life.
Speaker Change: Today, we have over 100 specific initiatives in various stages of planning and execution that are all centered around three key areas of the business.
Speaker Change: First growing our customer base profitably and retaining our customers for life.
Speaker Change: Second becoming the lowest cost operator in the industry and third allocating our capital effectively and generating best in class utilization of every dollar.
Speaker Change: Do this we haven't shipped are thinking away from inorganic growth towards becoming customer centric, putting our customers at the core of every decision we make.
Speaker Change: Data, driven making decisions with better insight than ever before and operationally excellent holding ourselves accountable to ambitious targets and achieving measurable results and everything that we do.
Speaker Change: Over the next three years as we continue to execute superior delivers harvest is to emerge as the leader in attracting and retaining profitable customers for life.
Allan MacDonald: We will be the low-cost operator and truly use our scale as a competitive advantage with a capital efficiency far beyond historical levels. While we are announcing this initiative today, we aren't starting today. Superior Delivers has been in progress for months now. And while the road will be long, we've already had some encouraging early wins. And the changes we have made to the business will ensure we have the tools and capabilities to continue to execute with.
Speaker Change: We will be the low cost operator, and truly use our scale as a competitive advantage.
Speaker Change: Capital efficiency far beyond historical levels.
Speaker Change: While we are announcing this initiative today, we aren't starting today.
Speaker Change: <unk> delivers has been in progress for months now and while the road will be long, we've already had some encouraging early wins and the changes we have made to the business will ensure we have the tools and capabilities to continue to execute with haste.
Allan MacDonald: By early 2025, we anticipate our propane business will begin realizing the optimization improvements with a full realization of at least $50 million of incremental EBITDA by the end of 2020. Second, with Soteris, we continue to believe there is excellent long-term opportunity as the industry shifts and new demand for alternate energy solutions arises. There was tremendous excitement about the forecasted growth in demand for energy and Soterios is well positioned to remain the leader in this. We are cautiously evaluating the best opportunities, including expansion and introducing new offerings to capitalize on prospects beyond the wealth. While we are continuing to invest in MNSUs, we are moderating our pace of investment while we assess new markets to ensure optimized returns on our capital and to maximize financial flexibility and Now this is a foreseeable evolution.
Speaker Change: By early 2025, we anticipate our pro paint business will begin realizing the optimization improvements with a full realization of at least $50 million of incremental EBITDA by the end of 2027.
Speaker Change: Second with the tariffs we continue to believe there is excellent long term opportunity as the industry shifts and new demand for alternative energy solutions arise.
Speaker Change: There is tremendous excitement about the forecasted growth in demand for energy and so terrorists is well positioned to remain the leader in this space.
Speaker Change: We are cautiously evaluating the best opportunities, including expansion and introducing new offerings to capitalize on prospects beyond the well site.
Speaker Change: While we are continuing doing continuing to invest in M. S use we're moderating our pace of investment while we we assess new markets to ensure optimize returns on our capital and to maximize financial flexibility and free cash flow now.
Speaker Change: This is a foreseeable evolution versus tariffs as with any emerging businesses opportunity shift and leadership needs to make sure. The business continues to adapt to changing market dynamics.
Allan MacDonald: as with any emerging business. Opportunity shift and leadership needs to make sure the business continues to adapt to changing market dynamics.
Allan MacDonald: Third, as announced this morning, we have made the strategic decision to reduce our dividend by $75. Since our time as an income trust many years ago, Superior Plus has allocated a disproportionate amount of capital towards supporting our... This has limited our financial flexibility to invest more substantially in other shareholder value creating opportunities. We see the transformation of Superior as all-encompassing. and creating financial flexibility is the final key element.
Speaker Change: Third as announced this morning, we have made the strategic decision to reduce our dividend by 75%.
Speaker Change: Since our time as an income trust many years ago superior plus allocated a disproportionate amount of capital towards supporting our dividend.
Speaker Change: This has limited our financial flexibility to invest in more best more substantially in other shareholder value creating opportunities.
Speaker Change: We see the transformation of superior as all encompassing and.
Speaker Change: And creating financial flexibility as the final Qian.
Allan MacDonald: A significant decision, yes, but one we feel is critical in positioning the company for long term success. With this decision, we immediately benefit from approximately $135 million Canadian in additional available free cash. can be directed to short-term opportunities to deliver value to our shareholders by investing in buying back.
Speaker Change: A significant decision yes.
Speaker Change: We feel is critical to positioning the company for long term success.
Speaker Change: With this decision we immediately benefit from approximately $135 million Canadian and additional available free cash flow, which can be wrecked directed short to short term opportunities to deliver value to our shareholders by investing in buying back stock.
Allan MacDonald: It's an exciting day for Superior. And I'm pleased to be able to share this vision with you. And it's just the beginning.
Speaker Change: It's an exciting day for superior and I'm pleased to be able to share. This patient with you and it's just the beginning that's why we're also announcing our plans to host an investor day. The first week of April 2025.
Allan MacDonald: That's why we're also announcing our plans to host an Investor Day, the first week of April 2025. During this event, we'll provide deeper insights into our plans for Superior Delivers, Soteris, and our financial strategy, along with an opportunity to meet our team and hear directly from our leaders about our program. In the meantime, we'll continue to do what we've been doing, challenging ourselves and the business, focusing on execution. Allocating our capital with this.
Speaker Change: During this event, we will provide deeper insights into our plans for superior delivers so tariffs and our financial strategy, along with an opportunity to meet our team and hear directly from our leaders about our progress.
Speaker Change: In the meantime, we will continue to do what we've been doing challenging ourselves and the business focusing on execution and allocating our capital with discipline.
Allan MacDonald: Now, with all that said, I'd like to comment briefly on our Q3 results before passing it over to Grier. Our third quarter is a seasonably lower quarter, lower contribution quarter for us. We're nonetheless pleased with our performance. Our propane business performed in line with our expectations, and Soteris delivered a strong quarter with 15% growth in EBITDA, despite increased competitive pressures.
Speaker Change: Now with all that said I'd like to comment briefly on our Q3 results before passing it over to Greer.
Speaker Change: Third quarter is a seasonally lower quarter.
Speaker Change: Lower contribution quarter for us we're nonetheless pleased with our performance our propane business performed in line with our expectations at the terrorists delivered a strong quarter with 15% growth in EBITDA despite increased competitive pressures.
Grier Colter: And with that, I'll turn things over to Grier.
Speaker Change: That I will turn things over to Greg.
Grier Colter: Thank you, Allan, and good morning, everyone. First, I'd like to elaborate on Allan's remarks about our approach to capital allocation. We continue to be very focused on shareholder returns and effective allocation of the company's cash flow. Over time it became clear that the market was not giving us value for the dividend we were paying and that this was not an optimal use of our capital. The change to reduce our dividend by 75% provides an opportunity to shift our focus to repurchasing our shares while still maintaining an attractive The decision provides an additional $135 million CAD annually to buy our stock at attractive levels, and we are confident that this will provide better return to our shareholders, particularly when considering the prospects for the propane businesses as we execute superior delivers in addition to the future potential for our CNG, RNG, and hydrogen businesses.
Greg: Thank you Alan and good morning, everyone.
Greg: First I would like to elaborate on Alan's remarks about our approach to capital allocation.
Greg: We continue to be very focused on shareholder returns and effective allocation of the companys cash flow.
Greg: Over time, it became clear that the market was not was not giving us value for the dividend we are paying and that this was not an optimal use of our capital.
Greg: The change to reduce our dividend by 75% provides an opportunity to shift our focus to repurchasing our shares while still maintaining an attractive dividend.
Greg: The decision provides an additional $135 million Canadian.
Greg: Annually the.
Greg: The buy our stock at attractive levels and we are confident that this will provide better returns to our shareholders, particularly when considering the prospects for the propane businesses as we execute superior delivers in addition to the future potential for our CMG RMG and hydrogen business.
Grier Colter: The shift from dividends to share repurchases balances our approach to capital allocation. And consistent with our previous messaging, we remain committed to investing in our businesses and de-levering the balance. Over the longer term, the increased cash provide additional flexibility when contemplating the pace of de-levering and when considering future growth opportunities, both organic and inorganic.
Greg: The shift from dividends to share repurchases balances our approach to capital allocation.
Greg: And consistent with our previous messaging, we remain committed to investing in our businesses and delevering the balance sheet.
Speaker Change: Over the longer term to increase cash provide additional flexibility when contemplating the pace of delevering.
Speaker Change: And when considering future growth opportunities, both organic and inorganic.
Grier Colter: Before I get into the Q3 results, I'll remind everyone that the following dollar figures are in U.S. dollars as we completed our transition on reporting currency beginning in Q1. Overall, the business generated $17.4 million of adjusted EBITDA in the third quarter, which represents a decrease of $1.2 million over Q3 2023. Majority of this decrease is a result of lower adjusted EBITDA in the propane business. partly offset by a $4 million increase as a tariff. Our third quarter net loss of $62 million was an improvement of $18.3 million compared to the prior year quarter. Improvement is primarily due to higher income tax recovery.
Speaker Change: Before I get into the Q3 results I'll remind everyone that the following dollar figures are in U S dollars as we completed our transition and non reporting currency beginning in Q1.
Speaker Change: Overall, the business generated $17 4 million of adjusted EBITDA in the third quarter, which represents a decrease of $1 2 million over Q3 2023.
Speaker Change: This decrease was a result of lower adjusted EBITDA in our propane business.
Speaker Change: Partly offset by a $4 million increase asps for tariffs.
Speaker Change: Our third quarter net loss of $62 million was an improvement of $18 3 million compared to the prior year quarter improvement is primarily due to higher income tax recovery.
Grier Colter: and lower transaction restructuring and other costs.
Speaker Change: And Laura transaction restructuring and other costs.
Grier Colter: I'll turn it to the businesses. Starting with propane, in aggregate, these businesses landed roughly in line with our expectations. U.S. propane business had a good quarter, given the strong results and higher tank levels coming out of Q1. adjusted EBITDA of negative 7.9 was 3.3 million lower than the prior year quarter. Canadian propane business produced $1 million of adjusted EBITDA in the third quarter, a decrease of $2.2 million versus Q3 2023. was primarily driven by the divestiture of the non-Ontario assets in the prior year at lower sales volumes due to warmer weather. The wholesale business generated adjusted EBITDA of $1.8 million in the third quarter, an increase of $600K compared to the prior year quarter, primarily due to efficiency.
Speaker Change: Now turning to the businesses star.
Speaker Change: Starting with propane and aggregate these businesses landed roughly in line with our expectations.
Speaker Change: U S propane business had a good quarter given the strong results in higher tank levels coming out of Q1.
Speaker Change: Adjusted EBITDA of negative seven nine was $3 $3 million lower than the prior year quarter.
Speaker Change: Canadian propane business produced 1 million of adjusted EBITDA in the third quarter of <unk>.
Speaker Change: Kris a $2 $2 million versus Q3 2023.
Speaker Change: And was primarily driven by the divestiture of northern Ontario assets in the prior year and lower sales volumes due to warmer weather.
Speaker Change: The wholesale business generated adjusted EBITDA of $1 8 million in the third quarter, an increase of 600 K compared to the prior year quarter, primarily due to efficiency in our business.
Grier Colter: Moving to Soteris, the business produced adjusted EBITDA on the third quarter of $30.3 million, which represents a 15% increase compared to the prior quarter, which is primarily due to a higher MSU base, driving a 24% increase in volumes compared to the prior quarter and partly offset by tighter margins.
Speaker Change: Moving to some tariffs the business produced adjusted EBITDA in the third quarter of 33 million, which represents a 15% increase compared to the prior year quarter, which was primarily due to a higher MSU base driving a 24% increase in volumes compared to the prior year quarter, and partly offset by tighter margins.
Speaker Change: <unk>.
Grier Colter: I'm turning to Corporate Results and Leverage. Operating costs for the third quarter were $7.8 million, which was roughly in line with the prior year quarter. Our leverage ratio at September 30, 2024, was 4.0 times. As you will recall, Q3 is historically a higher leveraged quarter due to seasonally lower cash flow and higher working capital. Over a year to date EBITDA has caused leverage to remain about a tenth of a turn higher than we expected. Over the remainder of 2024, we now expect leverage to remain closer to 4.0 times as we commence our share repurchase program.
Speaker Change: Now turning to corporate results in leverage.
Speaker Change: Corporate operating costs for the third quarter were $7 8 million, which was roughly in line with the prior year quarter.
Speaker Change: Our leverage ratio at September 32024 was 4.0 times.
Speaker Change: As you will recall Q3 is historically, a higher leverage quarter due to seasonally lower cash flow and higher working capital.
Speaker Change: While our year to date Abatage cause leverage to remain about a 10th of a turn higher than we expected.
Speaker Change: Over the remainder of 2024, we now expect leverage to remain closer to 4.0 times as we commenced our share repurchase program.
Grier Colter: Over the longer term, we remain focused on our 3.0 times target.
Speaker Change: Over the longer term, we remain focused on our 3.0 times target.
Grier Colter: Looking at 2024 guidance and expectations. We are recalibrating our adjusted EBITDA growth expectation from approximately 5% to flat compared to 2023 pro forma adjusted EBITDA. This is primarily a result of year-to-date performance and not an indication of our estimate for Q4. We are expecting to come in around our original budget. Growth in propane is expected to come in at the low end of our original estimate around 1%. And as discussed on the Q2 call, we expect Soteris to grow at 10%, both of these relative to our normalized 2023 results. In line with the decreased adjusted EBITDA growth expectations, we are also lowering our 2024 Capital Expenditure Guidance from $230 million to $190 million.
Speaker Change: Looking at 2020 for guidance and expectations.
Speaker Change: Recalibrating, our adjusted EBITA growth expectation from approximately 5% to flat compared to 2023 pro forma adjusted EBITDA.
Speaker Change: This was primarily a result of year to date performance and not an indication of our estimate for Q4.
Speaker Change: Expecting to come in around our original budget.
Speaker Change: Growth in propane is expected to come in at the low end of our original estimate at around 1%.
Speaker Change: And as discussed on our Q2 call, we expect the tariffs to grow at 10% both of these relative to our normalized 2023 results.
Speaker Change: In line with the decrease in adjusted EBITDA growth expectations. We are also lowering our 2020 for our capital expenditure guidance from $230 million to 190 million. This reduction reflects improving capital efficiency and the propane businesses as we begin to see some of the benefits of superior delivers coupled with a more.
Grier Colter: This reduction reflects improving capital efficiency in the propane businesses as we begin to see some of the benefits the Superior delivers, coupled with a more cautious approach to capital spend at Sartaris in light of evolving market dynamics.
Speaker Change: Our cautious approach to capital spend at our tariffs in light of evolving market dynamics.
Grier Colter: Lastly, as discussed earlier, the board has approved a quarterly dividend of 4.5 cents Canadian per share.
Speaker Change: Lastly, as discussed earlier the board has approved a quarterly dividend of $4 five Canadian per share.
Operator: And with that, I will turn the call back over for Q&A.
Speaker Change: And with that I will turn the call back over for Q&A.
Operator: Certainly. And as a reminder, ladies and gentlemen, if you do have a question, please press star 11 on your telephone.
Speaker Change: Certainly and as a reminder, ladies and gentlemen, if you do have a question. Please press star one on your telephone.
Gary Ho: And our first question for today comes from the line of Gary Ho from Desjardins Capital Markets. Your question, please. Thanks. Good morning. Allan, you mentioned in your prepared remarks, the various changes you've made internally, such as retooling management, comp structure. The one that intrigues me the most is you talked about performance management. So what gets measured gets done. So what are the key KPIs for yourself and kind of senior management team? Is it EBITDA growth? Is it share price, free cash flow? Just wondering, what are the key KPIs for the management team?
Speaker Change: And our first question for today comes from the line of Gary Ho from <unk> capital markets. Your question. Please.
Speaker Change: Thanks, Good morning, Alan you mentioned in your prepared remarks, the various changes you've made internally.
Speaker Change: Because we truly management cost structure, but one that intrigues me. The most is talked about performance management.
Speaker Change: So what gets measured gets done so what are the key kpis for yourself.
Speaker Change: Kind of a senior management team.
Speaker Change: EBITDA growth is it share price free cash flow.
Speaker Change: Just wondering what are the key kpis for the management team.
Allan MacDonald: Hey Gary, good morning, those comments are in the context of the transformation in propane and more generally they're kind of applied to the company but also they're very particular to the transformation of propane. So let me kind of give you two verses of it. When we're thinking about the propane business, if you think about a company that was structured for being very adept at Integrating Acquisitions, you can imagine the types of things they'd be looking at, synergies, you know, systems, transitioning, things like that.
Speaker Change: Hey, Gary good morning.
Speaker Change: Those comments are in the context of the transformation in.
Speaker Change: And propane more generally that they're kind of apply the company, but also there.
Speaker Change: Particularly transparent transformation propane.
Speaker Change: So let me give you two versions of it.
Speaker Change: When we're thinking about the propane business, if you think about.
Speaker Change: A company that was structured for being very adept at integrating.
Speaker Change: Acquisitions, you can imagine the types of things that would be looking at synergies systems transitioning things like that.
Allan MacDonald: We're really thinking of it in three big buckets. One Bucket is about our ability to attract and retain customers. So there we're looking at customer number growth and customer retention. which is a level of granularity that really didn't exist in the previous iteration. And you can see why, when we have this disparity of systems and, you know, bringing new companies on, all the records are, you know, obviously by default.
Speaker Change: We're really thinking that three big buckets.
Speaker Change: Sure.
Speaker Change: One bucket is about our ability to attract and retain customers. So there we're looking at customer number growth in.
Speaker Change: <unk> customer retention, which is a level of granularity that really didn't exist in the previous iteration and you could see why when we have this disparity of systems.
Speaker Change: Bringing new companies on all the records are obviously.
Speaker Change: Obviously by default completed.
Allan MacDonald: Second thing is cost. How effectively are we managing our costs to serve? And by that, you know, looking at the profitability of each of our customers.
Speaker Change: Thing is cost how effectively are we managing our cost to serve.
Speaker Change: And by that.
Speaker Change: Looking at the profitability of each of our customers and then finally capital.
Allan MacDonald: And then finally, capital. So when you look at the propane business, those are the big ones.
Speaker Change: So when you look at the pro.
Speaker Change: Pain business those are the big ones when you look at the Corporation.
Allan MacDonald: When you look at the corporation... It's really about how effectively are we growing the business. The gentleman sitting across from me has been leading a lot of initiatives on our return on capital and making sure we have that balance right.
Speaker Change: It's really about how effectively are we growing the business.
Speaker Change: The gentleman sitting across from me is.
Speaker Change: <unk> been leading a lot of initiatives on our return on capital and making sure we have that balance right.
Allan MacDonald: We're looking at the employee base. we have the best. most engaged and inspired workforce and all the talent we need that we're both developing internally and acquiring to make this all happen.
Speaker Change: We're looking at.
Speaker Change: <unk> base.
Speaker Change: The best most engaged and inspired workforce and all of the talent, we need that we're both developing internally and acquiring to make this all happen.
Allan MacDonald: And it's really those kind of parameters of the scorecard that give you that sustainable, profitable growth. So we're looking at how do we make these assets perform to the fullest extent of their potential, and then how are we investing to drive the best growth for shareholders, the best value growth for shareholders long-term. So this scorecard process is is much more than a scorecard. It's really about how you want to run the company going forward. And we like to think that we've got a really balanced approach.
Speaker Change: And it's really those kind of parameters of the scorecard that give you that sustainable profitable growth. So we're looking at how do we make these assets performed to the fullest extent of their potential and then how are we investing to drive the best growth for shareholders. The best value growth for shareholders long term. So this scorecard.
Speaker Change: <unk> is much more than a scorecard, it's really about how you want to run the company going forward and we'd like to think that we've got a really balanced approach.
Allan MacDonald: The last aspect I'd comment on when it comes to performance management is What's inherent in that is setting very specific performance targets. tying both compensation and performance evaluation to that. So we're setting high expectations of ourselves. They're not theoretical. They're measurable. They're on our scorecard, and that's what we're working toward.
Speaker Change: The last aspect I'd comment on when it comes to performance management is such.
Speaker Change: What's inherent in that is setting very specific performance targets.
Speaker Change: <unk>, both compensation and performance evaluation of that so we're setting high expectations of ourselves. They are not theoretical measurable theyre on our scorecard and that's what we're working towards delivery.
Grier Colter: Gary, if I could add to your, just from a numeric standpoint, you know, really focused obviously on on EBITDA, EBITDA for share, EBTDA for share, return on investment cap. kind of be the four that I would throw out.
Speaker Change: Jeremy if I could add.
Speaker Change: Just from a numeric standpoint.
Speaker Change: Really focused obviously on an EBITDA.
Speaker Change: EBITDA per share <unk> per share and return on invested capital those would kind of be the.
Speaker Change: Before that I would throw out.
Gary Ho: Okay, perfect. And then I just wanted to kind of dig into Superior Delivers a little bit, US $50 million plus. Are you able to kind of break that down in maybe key buckets, like how much is maybe cost cutting, how much is customer growth, etc?
Speaker Change: Okay perfect.
Speaker Change: And then just wanted to kind of dig into period deliveries in a little bit U S $50 million plus.
Speaker Change: Are you able to kind of break that down.
Speaker Change: Down and maybe key buckets like how much change maybe cost cutting how much is customer growth et cetera, maybe just give us a preview it is a bit of a wait until investor day in April and.
Allan MacDonald: If you just give us a preview, it is a bit of a wait until investor day in April. And any material restructuring costs, we should we should budget in as well.
Speaker Change: Any material restructuring costs, we should we should budget isn't as well.
Allan MacDonald: Well, let me take the first part and I'll let Grier take the second part. You know, we're going to give you more detail in April. And I'll apologize for the date for all of you, you know, once you get through blackout and the quarterly results that have you all occupied, you get right into March break. So for us. kind of the most convenient time for all of you. So that's why April. When you think about where it's coming from, it's three big buckets in terms of the cash generation. It's the customer aspect, it's the cost aspect, and then it's the capital asset rationalization and utilization.
Speaker Change: Well, let me take the first part and I'll, let Gary take the second part.
Speaker Change: We're going to give you more detail on April.
Speaker Change: <unk>.
Speaker Change: And I apologize for the date for all of you.
Speaker Change: Sure.
Speaker Change: Once you get through blackout.
Speaker Change: The quarterly results, but have you all occupied and get right into March break so for US. It's just kind of the most convenient time for all of you. So that's why April.
Speaker Change: When you think about where it's coming from it's three big buckets in terms of the cash generation. It's the customer aspect. It's the cost aspect and then it's the the capital asset rationalization of utilization and we will be able to give you.
Allan MacDonald: And we'll be able to give you some insight as to where it's coming from. Always, it's always going to be a balance between, you know, being as transparent as we can, and then, you know. I can tell you today that, as I mentioned in my prepared remarks, we have this very meticulously detailed. We've got over, well, I can tell you, we have 137 known initiatives that we're running down right now. Some are already in execution phase. A number of others are in planning phase. We have an approval meeting after this for three hours to go through a bunch.
Speaker Change: Some insight as to where it's coming from always its always going to be a.
Speaker Change: A balance between being as transparent as we can.
Speaker Change: And then.
Speaker Change: Protecting some competitive information.
Speaker Change: I can tell you today that as I mentioned in my prepared remarks, we have this.
Speaker Change: Very meticulously detailed we've got over up while I can tell you. It's a hot we have 137 known and initiatives that we're running down right. Now some are already in execution phase a number of others are in and planning phase we have an approval meeting after this for three hours to go through a bunch.
Grier Colter: So it's very well laid out internally, and we're going to do our best to give you as much transparency as we can in terms of where the money's coming from and how we're thinking.
Speaker Change: So it's very well laid out internally.
Speaker Change: And we're going to do our best to give you as much transparency as we can.
Speaker Change: In terms of where the money is coming from and how we're thinking about it so where do you want to talk about.
Grier Colter: So Grier, do you want to talk about the second part of Gary's Yeah, just if I understand it right, like the I this is not about restructuring. So no, I think this is this is more about the way we use our assets. You know, getting getting maximizing the yield on on what we've got, making sure that we've got the right asset base, whether we're talking physical locations, whether we're talking trucks, tanks, Andy Seidman.
Speaker Change: The second part of Gary's question.
Speaker Change: Yes, just if I understand it right.
Speaker Change: This is not about restructuring. So I think this is this is more about the way we use our assets.
Speaker Change: Getting getting back.
Speaker Change: Maximizing the yield on what we've got and making sure that we've got the right asset base, while you were talking.
Speaker Change: The locations, where they were talking trucks tanks.
Speaker Change: This is a big part of us.
Grier Colter: Thank you. So, I'm going to start by saying that I'm a developer, and I'm a developer is a big part of this. It's using data for, you know, RED optimization, as an example, it's how we price customers, and using the data to more intelligently price customers. This is a lot. This is not about cutting costs and cutting people. So, I think there would not be anything significant as far as we see right now. Of course, we're going to go through this project, and we're going to learn stuff along the way. But, no, at this point, I wouldn't see anything significant.
Speaker Change: Using data for route optimization as an example.
Speaker Change: It's how we price customers and using the data to more intelligently price customers.
Speaker Change: This is a lot because it is not about.
Speaker Change: Cutting costs and cutting people so I think the.
Speaker Change: There would not be anything significant as far as we see right now of course, we're going to go through this project and we're going to learn stuff along the way.
Speaker Change: But at this point I wouldn't see anything significant.
Grier Colter: We are working with a third party on this, so there will be fees in connection with that. But, no, there wouldn't be anything that we can see today on our structure. Perfect.
Speaker Change: We are working with a third party on that so there will be fees in connection with that but no there wouldn't be anything that we can see.
Speaker Change: See today our structure.
Gary Ho: And then maybe just my last question. Sounds like you're pretty active with the buyback. And you've mentioned channeling that $135 million dividend savings to it. So today's share price is roughly 10% of your share's upstanding.
Speaker Change: Perfect and then maybe just my last question. It sounds like you are pretty active with the buyback and you've mentioned channeling that $135 million dividend savings to it. So at today's share price, that's roughly 10% of your shares outstanding.
Gary Ho: So how long would you commit this to? Is it a one year commitment? Or will you be continuing up to a certain share price or multiple?
Speaker Change: Long would you commit to is it a one year commitment or will you be continuing.
Speaker Change: Up to a certain share price or multiple any game plan in terms of the level of buyback not just kind of upcoming 12 months, but beyond.
Grier Colter: Any game plan in terms of level of buyback, not just kind of upcoming 12 months, but beyond? Yeah, here's what I would say.
Speaker Change: Yeah, Here's what I would say it's fair again.
Grier Colter: It's Grier again. So the starting point is we will shift, you know, the difference in previous dividend to, you know, the new dividend that will all go to share repurchase. In addition to that, I'd say in the short run, we'll be even more aggressive than that. And that's the rationale for moving the leverage target at year-end up about two times to give us more flexibility to be more aggressive at these levels. We think this is very good value for our shareholders. And so we'll be even more aggressive than the run rate of the same dividend, if that makes any sense.
Speaker Change: Yes, so the starting point is we will shift.
Speaker Change: The difference in previous dividend.
Speaker Change: The new dividend that will all go to share repurchases.
Speaker Change: In addition to that I'd say in the short run will be even more aggressive than that and that's that's the rationale for moving the leverage target at.
Speaker Change: At year end up about two times to give us more flexibility to be more aggressive at these levels.
Speaker Change: Very good value for our shareholders and so we'll be even more aggressive.
Speaker Change: The run rate of the same dividend as.
Grier Colter: I think in terms of the longer strategy, what level we're comfortable buying at, I'd say we see value for quite a ways here. So I can't tell you exactly how long we see this to be a great value. It'll obviously depend on the way that the share price moves, but we've got quite a lot of runway here where we see incredible value in the share. So it'll be for quite some time.
Speaker Change: That makes any sense I think in terms of the longer strategy.
Speaker Change: At what level, we are comfortable buying out I'd say, we see value for quite a ways here. So.
Speaker Change: Yes.
Speaker Change: Can't tell you exactly how long we see this to be a great value will obviously depend on the way that the share price moves, but we've got quite a lot a lot of runway here, where we see incredible value in the share. So it will be for quite some time.
Gary Ho: Perfect. Okay, those are my questions. Thank you.
Speaker Change: Perfect. Okay. That's all my question. Thank you.
Speaker Change: Thank you thanks Karen.
Robert Catellier: And our next question comes from the line of Robert Catellier from CIBC Capital Markets. Your question, please. Hey, good morning. I just want to clarify based on what I heard, it sounds like the Superior Delivers plan doesn't involve any new capital investment. It's more about rationalizing capital, maximizing what you have. Is that correct?
Speaker Change: And our next question comes from the line of Robert <unk>.
Speaker Change: <unk> from CIBC capital markets. Your question. Please.
Speaker Change: Hey, good morning.
Speaker Change: Just wanted to clarify based on what Ive heard it sounds like the superior delivers plan doesn't involve any.
Speaker Change: New capital investment and it's more about rationalizing capital maximizing what you have is that correct.
Allan MacDonald: Yeah, for the most part, Rob.
Speaker Change: Yeah for the most part Rob Hey, good morning, Tom.
Allan MacDonald: Hey, good morning. You know, let me give you two examples. We've announced today that we're reducing our guidance around capital. Our Superior Deliverance Initiative, one of the early ones, was focused on... May I have we manage our tank inventory and thinking about customers that have that have left us or inactive customers, our tank inventory and market versus our new So, by changing how we measure and maintain our tank levels, and I don't mean fuel here, I mean. we've been able to dramatically increase our tank recycling. So that's contributed millions of dollars to savings in capital in.
Speaker Change: Let me give you two examples.
Speaker Change: We've announced today that we are reducing our guidance around capital superior delivers initiative.
Speaker Change: Was some of.
Speaker Change: The early ones was focused on.
Speaker Change: How we manage our tank inventory and thinking about.
Speaker Change: Customers that have that have left us are inactive customers are tank inventory in market versus our new zinc inventory.
Speaker Change: So by changing how we measure and maintain our tank levels and I don't mean fuel here I mean, the actual physical tanks, we've been able to dramatically increase our tank recycling program. So that's contributed.
Speaker Change: <unk> of dollars savings in capital and in this year. So that's one of the early wins.
Allan MacDonald: So that's one of the early wins, which is, you know, a nice cash win. So there's going to be a run rate reduction in the amount of capital that Superior Propane is going to require going forward. By the same token, we're going to be making some small investments in things like pricing optimization. and the IT side. I talked a lot about data, having, you know, integrating data analytics and being more data driven. You know, we think there's a ton of potential to be unlocked by giving the people in our organization much better tools. for example.
Speaker Change: Nice cash balance.
Speaker Change: So there's going to be a run rate reduction in the amount of capital that superior.
Speaker Change: Propane is going to require going forward.
Speaker Change: By the same token, we're going to be making some small investments and things like pricing optimization tools, which would be more on the it side I talked a lot about data, having integrating data analytics and being more data driven.
Speaker Change: We think there's a ton of potential beyond locked by giving up the people in our organization much better tools, when they're making decisions about things like pricing for example.
Allan MacDonald: That will have a capital component. But in terms of capital, you know, big capital assets, we see that as being a, you know, a small portion and it's more on the capital savings side than... I agree. Would you say that any differently? I don't know. I agree. Right, so some investment obviously, but a net benefit to the capital profile then. That's right. And we don't see it as a sustained capital, you know, requirement in terms of transformation. It'll be, you know, some one time capital.
Speaker Change: That will have a capital component, but in terms of capital Big capital assets.
Speaker Change: We see that as being a small portion of the business.
Speaker Change: And it's more on the capital savings side, then that investment.
Speaker Change: Greg would you say that any differently.
Speaker Change: Great.
Speaker Change: Yeah.
Speaker Change: Alright, so some investment obviously, but.
Speaker Change: Benefit to the capital profile then.
Speaker Change: That's right and we don't see it.
Speaker Change: We don't see that as a sustained capital requirement in terms of transformation it'll be some one time capital investments.
Allan MacDonald: Yeah, I don't want to diminish the significance of the work involved in the operating efforts and skill required to achieve what you're targeting here, because I do believe your targets are You know, they're not insignificant. But I wonder what informs a relatively long timeline in achieving your EBITDA gains, understanding that some of this has already been initiated. And maybe another way to look at it is like, what sort of a path? Is it back loaded or is it sort of a rideable pace of gains? How are you looking at that? Yeah, I'm going to let Grier jump in here, but let me start by That's because it's not a cost reduction.
Speaker Change: I don't want to diminish the significance of the work involved in the operating effort skill required to achieve whats youre targeting here because I do believe your targets are.
Speaker Change: They are not insignificant.
Speaker Change: But I wonder what forums relatively long time timeline in achieving your avatar games understanding that.
Speaker Change: Some of those authority.
Speaker Change: <unk> initiated.
Speaker Change: Maybe another way to look at it as like what sort of a path.
Speaker Change: Back loaded or is it.
Speaker Change: Sort of a ratable pace against how are you.
Speaker Change: Looking at that.
Speaker Change: Yes.
Speaker Change: Let Barry jump in here, but let me start by saying this.
Speaker Change: That's because it's not a cost reduction exercise.
Allan MacDonald: If it was taking costs so, that's not her. This is about building capabilities, and because it has a big top-line and customer component, when you acquire a customer... Obviously, you incur the expense in the first year, and then you start to see contributions. So we're thinking about customers in terms of lifetime value. So for us, the growth element, the capability to demonstrate to all of you that we think we can take material share on this market, we're very confident. We have to build the capability to do that, which is well underway, and then we have to apply it in market, which is starting to happen, but that's going to take time to pay off.
Speaker Change: It was taking costs, so that's not hard to do.
Speaker Change: This is about building capabilities and because it has a big top line and customer component when you acquire a customer obviously you incur the expense in the first year.
Speaker Change: And then you start to see contribution so we're thinking about customers in terms of lifetime value.
Speaker Change: So for us the growth element the capability to demonstrate to all of you that we think we can take material share in this market, we're very confident of that.
Speaker Change: We have to build the capability to do that which is well underway and then we have to apply it in market.
Speaker Change: Which is starting to happen, but that's going to take time to pay off so.
Grier Colter: So, I would think about it that way that, you know, and it's not as long a time frame as you think. We're saying, you know, the run rate in 27, so that means we're effectively achieving most of the initiatives by the end of 26. Yeah, I was going to say something similar. I think that is an important point is the work will be done by end of 2026. But of course, for you to see the full effect of that, you got to wait till 2027. It's probably shorter than it appears in those words. If you look at the split of that incremental, at least 50, probably 10 to 20 of it will come in 2025, 20 to 30 of it will probably come in 2026, and then the remaining, whatever, 10, depending how you mix those numbers, will be just kind of the full realization of the stuff that you were completed by 2026, if that makes any sense.
Speaker Change: I would think about it that way.
Speaker Change: And it's not as long a timeframe as you think we're saying the run rate in 2007. So that means we are effectively achieving most of the most of the initiatives by the end of 2006.
Speaker Change: I was going to say something similar I think that is an important point is that work will be done by end of 2026, but of course for you to see the full effect of that you've got to wait till 2027.
Speaker Change: It's probably sort of in it appears in those words.
Speaker Change: If you look at the split of that incremental at least 50.
Speaker Change: Probably 10 to 20 of it will come in 2025, 20% to 30 or it will probably come in 2026 and on the remaining whatever depending how you mix those numbers will be just kind of at a full realization of the stuff that you are.
Speaker Change: Our completed by 2026, if that makes sense hopefully that helps yes, and we're not stopping at 50, we still have other opportunities that we're exploring so.
Allan MacDonald: Hopefully that helps. Yeah, and we're not stopping at 50. We still have other opportunities that we're exploring.
Robert Catellier: Wait, may I address something in the back? Yeah, I guess I have read the press releases by the end of 27, so I thought you'd hit your run rate at the end of 27, but it sounds like it's at the end of 26, so that's a better frame of reference. Thank you.
Speaker Change: It just is something that.
Speaker Change: Yes, I guess.
Speaker Change: I have read the press releases by the end of 2007, so I probably hit your run rate at the end of 2007, but it sounds like it's at the end of 2006 so.
Speaker Change: But a frame of reference thank you.
Speaker Change: Karl Thanks for the question.
Daryl Young: Thank you. And our next question comes from the line of Daryl Young from Stifel. Your question, please. Hey, good morning, everyone.
Speaker Change: Thank you and our next question comes from the line of Daryl Young from Stifel. Your question. Please.
Speaker Change: Hey, good morning, everyone.
Daryl Young: With respect to the new Superior Deliverance Plan, how should we go about measuring your progress on that? Because something that's always been challenging with the Superior story is just the impacts of weather, quarter to quarter and really glosses over some of the hard work that's done. So are there any metrics you plan to report on to kind of show us progress on how you're doing on that plan? Yeah, I think that's that's one of the big challenges that we that we're tackling in terms of how do we get the right information in your hand so you can see the progress and really delineate it from the normal cyclicality of the business.
Speaker Change: With respect to the new superior delivers plant how should we go about measuring your progress on that because something thats always been challenging with the spear story is just the impacts of weather quarter to quarter and really glosses over some of the hard work. That's done. So are there any metrics you plan to report on that kind of show us progress on how youre doing on.
Speaker Change: Plant.
Speaker Change: Yes, I think that's one of the big challenges that we that we're tackling in terms of how do we get the right information in your hand, So you can see the progress and really delineated from the normal cyclicality of the business.
Allan MacDonald: We're going to give you more at the Investor Day, Daryl. And by the way, good morning. Thanks for the question. I think what you should expect to see is us breaking down in terms of how are we doing with our customers, how are we doing with our costs, and how are we doing with our... That's coming upon us to give you more insight there so, more to come on that.
Speaker Change: We're going to we're going to give you more at the Investor day, Daryl and by the way good morning. Thanks for the question.
Speaker Change: I think what you should expect to see is us break it down in terms of how are we doing with our customers. How are we doing with our cost and how are we doing with our capital.
Speaker Change: Coming upon us to give you more insight there so more to come on that as always Greer and I.
Allan MacDonald: As always, Grier and I... I have a couple of things that, you know, we share in common that we fundamentally believe in. We're, you know, when we give you a number, and this is why we've been hesitant to talk about Superior Deliverance until now, we weren't prepared to give you a number until we had one we could absolutely stand behind. And then when we give you metrics, we want them to be thoughtful. We have to appreciate the sensitivity of putting that information in the market competitively, but we want to be prepared to continue to report on them.
Speaker Change: I have a couple of things that we share in common that we fundamentally believe in.
Speaker Change: We're when we when we give you a number and this is why we've been hesitant to talk about superior levers until now we were prepared to give you a number until we had when we can absolutely stand behind.
Speaker Change: And then when we give you metrics, we want them to be thoughtful.
Speaker Change: We have done I appreciate the sensitivity of putting that information in the market competitively, but we want to be prepared to continue to report on them. So as superior delivers evolves over the next couple of months.
Allan MacDonald: So as Superior delivers, evolves over the next couple of months, we're going to finalize exactly how we're going to characterize this to you. So you should see more.
Speaker Change: We're going to finalize exactly how were going to characterize this TSA you should see more to come on that.
Daryl Young: Got it.
Daryl Young: And then it sounds like you're going to be very aggressive on the NCIB very quickly. If the share price doesn't react the way you maybe hope it does, would there be an argument for launching an SIB? Yeah, look, it's a... The tool we have at Grier, it's a tool, we know that it's there, yeah, I think it's something that we'll continue to consider depending on what happens, so yeah, absolutely, I mean it's, at certain prices it becomes... but let's kind of see how this plays out.
Speaker Change: Got it.
Speaker Change: And then it sounds like Youre going to be very aggressive on the NCS it'd be very quickly.
Speaker Change: If the share price doesn't react the way you maybe hope it does.
Speaker Change: Would there be an argument for launching an SUV.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Two we have <unk>, it's a tool.
Speaker Change: No that it's there.
Speaker Change: Yes, I think it's something that we'll continue to consider depending on what happens so yeah, absolutely I mean, it's.
Speaker Change: At certain prices it becomes more interesting, but let's see how this plays out.
Allan MacDonald: You know, it's a good point to mention.
Speaker Change: Got it.
Speaker Change: It's a good point to mention that.
Allan MacDonald: The Dividend Decision. we thought was very necessary. because one of the things that we believe our company needed going forward was flexibility in terms of its finances. So. That's important, not for managing, you know, a share price day-to-day, but to be able to give us the freedom to make all the right decisions for the company. And now if you look at the situation that we're going into with available cash flow, it gives us the opportunity to have choice when we're So, yes, we're going to support the share price and share buybacks. Yes, we're going to be able to have the freedom to invest in the things that we need to, like Superior Delivers and Soteris.
Speaker Change: The dividend decision.
Speaker Change: We thought was very necessary.
Speaker Change: Because one of the things that we believe our company needed going forward.
Speaker Change: Flexibility in terms of its financial structure.
Speaker Change: So.
Speaker Change: That's important not for managing a share price day to date, but to be able to give us the freedom to make all the right decisions for the company.
Speaker Change: And now if you look at the situation.
Speaker Change: Going into with available cash flow that gives us the opportunity to have choice when we're making decisions.
Speaker Change: No.
Speaker Change: Yes, we're going to support the share price share buybacks, yes, we're going to be able to have the freedom to invest in the things that we need to like superior delivers tariffs.
Allan MacDonald: But, you know, what we want to do is, now that we've got this financial flexibility, we're going to...
Speaker Change: But what we wanted to do is now that we've got this financial flexibility, we're going to hang onto it.
Allan MacDonald: So it's really, really important for us not to get distracted. Got it.
Speaker Change: So really really important for us not to get distracted from that.
Daryl Young: And then with respect to, and apologies if I missed this at the opening, but with respect to the CapEx cut, how much of that is truly sustainable going forward? Like, is there a catch up coming, the $40 million reduction this year, in the future? And would you give us any insights into where your CapEx budget for Certaris might be next year?
Speaker Change: Got it.
Speaker Change: With respect to and I apologize if I missed this the opening but.
Speaker Change: With respect to the Capex cut how much of that is truly sustainable going forward like is there a catch up coming that $40 million reduction this year.
Speaker Change: And would you give us any insights into where your capex budget for certain harvest might be next year.
Grier Colter: Yeah, so it's Grier again, I think. I'll say, so of that 40, you know, 10-ish is going to be Sartaris, probably 30-ish will be The propane businesses, part of it is a... You know, if everything we identified that led to that 30 was all we would identify, then I would say that, you know, part of it was a resetting of, you know, how many trucks, how many locations we need, and then there's a period where you kind of buy less of that stuff to reset to that level, and then it's probably rebound. So now I think, so if 30 was the number, and I think there's more to come, so I think there's more stuff that we'll look at, so let's just, there'll be more to come on this, but no, I don't think that it's permanent.
Speaker Change: Yes, so it's fair again I think.
Speaker Change: I'll say so about 40.
Speaker Change: Finish.
Speaker Change: It is going to be sort of tariffs probably 30 will be.
Speaker Change: The propane businesses.
Speaker Change: Part of it is.
Speaker Change: Yes.
Speaker Change: If everything we identified that led to that 30.
Speaker Change: Although we would identify that I would say that part of it was a resetting of how many trucks how many locations we need and then there's a period, where you kind of buy less of that stuff to reset to that level and then it probably rebound. So no I think so if 30 was the number and I think theres more to come so I think theres more.
Speaker Change: That will look at it so let's just say it will be more to come on this but.
Speaker Change: No I don't think Thats permanent that's on the propane side so.
Grier Colter: That's on the propane side. So while I think there's probably more to talk about, if 30 was all we found, then we might give back 10 or 15 of it next year, I'd say. Hopefully that makes sense. I think we're pretty far through the year, you know, we're going to execute most of this capital plan for Soteris. I think the work we're doing now...
Speaker Change: Well I think there's probably more to talk about F. 30 was all we found then we might go back 10 or 15 of it next year I'll say hopefully that makes sense on a <unk> side.
Speaker Change: I think we're pretty far through the year, we're going to execute most of this capital plan for tariffs I think the work we're doing now.
Grier Colter: I think most of my seniors will probably be more cautious on Sir Terrace Capple. I think what we're doing is... Evaluating whether we should be shifting some of the capital to opening up new markets. We've been pretty focused on driving as much capital into new MSUs and going out to existing markets. And we're seeing there's a different supply-demand relationship. And so for us to spend a little more money on opening up new hubs, as we call them, and going out new markets is something we think we should be doing and probably by fewer MSUs. I think overall, the capital probably, there's a good chance that it will come down next year as we kind of look at the returns on MSUs.
Speaker Change: And I said, it will probably be more cautious on <unk> capital I think what we're doing is.
Speaker Change: So evaluating whether we should be shipping some of the capital to opening up new markets, we've been pretty focused on driving as much capital into new Msu's I'm going on to existing markets and we're seeing.
Speaker Change: Different supply demand relationship and so for us to spend.
Speaker Change: A little more money.
Speaker Change: On opening up new hubs as we call them and going out in new markets is something we think.
Speaker Change: We should be doing and probably by fewer MSU I think overall the capital probably.
Speaker Change: There's a good chance that it will come down next year as we kind of look at the returns on a misuse as I said, we shipped some of the capital maybe we look at.
Grier Colter: As I said, we shift some of the capital. Maybe we look at Some ancillary ideas to shift the business to different spaces, you know, and that's maybe a bad example, but say power generation, that's maybe not a, I wouldn't necessarily take that to the bank. But, you know, these are the kinds of things that we're thinking about, but I think probably fewer MSUs, opening up other markets, and maybe other ideas to shift a little bit of capital away from the traditional. Overall, the capital will probably come down. At this point, I can't give you really more than that, because we're doing the work, right?
Speaker Change: <unk> got some ancillary.
Speaker Change: Is to shift the business.
Speaker Change: To different.
Speaker Change: Different spaces.
Speaker Change: Maybe about example, but say power generation, that's maybe not a I wouldn't necessarily take that to the bank, but these are the kinds of things that we're thinking about it but I think probably fewer msu's.
Speaker Change: Opening up other markets and maybe other ideas to shift a little bit of capital away from the traditional overall the capital will probably come down at this point I can't give you really more than that because we're doing the work right. So we will give much more information and obviously when we set our 2025 guidance on of course, when we get into Investor day.
Grier Colter: So, we'll give much more information, obviously, when we set our 2025 guidance, then, of course, when we get into the investor day and get multi-year numbers, but generally, I would see the capital, in all likelihood, will probably be coming down as we get a little bit more cautious and just react to what we're seeing in the market.
Speaker Change: Multiyear.
Speaker Change: Numbers.
Speaker Change: But generally I would see the capital in all likelihood will probably be coming down as we get a little bit more cautious and just react to what we're seeing in the market. Yes. The only thing I'd add to that Darryl talent is.
Allan MacDonald: Yeah, the only thing I'd add to that, Daryl, is. Look, what we did last year with Soteris... Investing in MSU is absolutely the right thing. are oversold. Tremendous opportunity in the market. First year that we own the business. And really, when you think about capital, you know, what other options do you have other than MSU? Now that we've had the business for a year, you say, OK, now we have more on the table. So. We're looking at expanding our hub presence in the US and Canada, which is going to be really important for us because as we talk, we want to start to start to bring new markets online and new verticals.
Speaker Change: Look what we did last year with the tariffs.
Speaker Change: Best thing and <unk> is absolutely the right thing to do.
Speaker Change: We are oversold tremendous opportunity in the market.
Speaker Change: First year that we owned the business and really when you think about capital.
Speaker Change: What other options do you have other than MFS use.
Speaker Change: Now that we've had the business for you or you say, okay. Now we have more on the table. So we're.
Speaker Change: We're looking at expanding our hub presence in the U S and Canada.
Speaker Change: We're just going to be really important for us because as we talked we want to start to start to bring new markets online and new verticals and one of the things that will continue to inform you guys up and remind you of is you can buy an MSU quickly.
Allan MacDonald: And one of the things that we'll continue to inform you guys of and remind you of is you can buy an MSU quickly. You know, you put an order in for an MSU, you can have it in a matter of months now. You can't open a hub in three months, that takes two years. So when you start to shift the capital from MSU to market expansion or investing in other adjacencies, it's not the same spent timeline. So you might see some ebbs and flows there. But I don't infer from that that we're not investing in the business, it's just the timing.
Speaker Change: You put an order in for an MSU you can have it in a matter of months now.
Speaker Change: You can't open a hub in three months that takes two years.
Speaker Change: So when you start to shift the capital frame msu's up market expansion or investing in other adjacencies. It's not the same spend timeline. So you might see some some ebbs and flows there, but I don't infer from that that we're not investing in the business is just the timing of it.
Daryl Young: That's good. I'll jump back in the queue.
Speaker Change: Got it.
Speaker Change: Okay. That's great. Okay. That's good I'll jump back in the queue. Thanks, guys.
Daryl Young: Thanks, guys.
Patrick Kenny: Thank you. And our next question comes from the line of Patrick Kenny from NBF. Your question please. Thank you. Good morning. Yeah, just to follow up on the NCIB and, you know, I get the merits of buying back at these levels, but just given your current leverage is still, you know, a full turn above your target.
Speaker Change: Thanks, Thank you.
Speaker Change: Thank you and our next question comes from the line of Patrick Kenny from.
Speaker Change: And your.
Speaker Change: Your question please.
Speaker Change: Thank you and good morning.
Speaker Change: Just to follow up on the CIB.
Speaker Change: I get the merits of buying back at these levels.
Speaker Change: But just given your current leverage is still a full turn above your target.
Grier Colter: Just wondering how the buyback strategy compared to, you know, more of a first things first approach to capital allocation, just in terms of prioritizing the leverage ratio first, you know, using the cash savings to get the balance sheet down to that three times target. And then assess the merits of a share buyback at that point versus, you know, resetting the dividend back up or accelerating CapEx.
Speaker Change: Just wondering how the buyback strategy compared to more of a first things first approach.
Speaker Change: Capital allocation just in terms of prioritizing the leverage ratio first.
Speaker Change: Using the cash savings.
Speaker Change: To get the balance sheet down to that three times target.
Speaker Change: And then assess the merits of a share buyback at that point versus resetting the dividend back up or accelerating capex.
Grier Colter: Hi Patrick, it's Grier. Well, first, I would say that, you know, If we left the dividend intact, we remain confident that we could achieve, you know, the growth targets that we set out and the leverage target that we set out. So Um, there was Reducing the dividend and having that cash flow. Yeah, certainly we could. Get at that three times target quicker. I mean, unanimous around the table is that the better use of capital. shares and to not go out of super aggressive de-laboring. strategies. That's the view, but I think it is important that we say, you know, that is still part of our strategy.
Speaker Change: Hi, Patrick it's clear.
Speaker Change: Well first I would say that.
Speaker Change: <unk>.
Speaker Change: But if we left the dividend intact, we remain confident that we can achieve the growth targets that we set out.
Speaker Change: And the leverage target that we set out so.
Speaker Change: Yes.
Speaker Change: Ah, reducing the dividend and having that cash flow, yes, certainly we could.
Speaker Change: Got that three times target quicker I mean.
Speaker Change: Unanimous around the table is the better use of capital is to be purchasing shares.
Speaker Change: Our <unk> Super aggressive delevering.
Speaker Change: Our strategy on that side.
Speaker Change: That's the view, but I think it is important that we say that is still part of our strategy. It is our goal to get to three times.
Allan MacDonald: It is our goal to get to three times. um you know we'll obviously lay out a little bit more specificity around that but you know I think that something in uh early 2027 as a time horizon is probably realistic to get to three times um but things are going to evolve and change and the share price will move around our you know there may be a time when we do move away from share repurchases but certainly that's looking like no time uh soon I think there's lots of runway here where where we can buy shares but certainly we think that that our priority here is to buy the shares back aggressively at this level and you know as I say we'll still be able to manage the the lower debt pathway on the original plan that we had but you know maybe at some point that changes but that's that's our priorities.
Speaker Change: Well, obviously lay out a little bit more specificity around that but I think thats something.
Speaker Change: Early 2027 has the time horizon is probably realistic to get to three times.
Speaker Change: But things are going to evolve and change.
Speaker Change: The share price will move around or there may be a time when we do move away from share repurchases, but certainly that's looking like no time.
Speaker Change: I think there is lots of runway here, where we can buy shares, but certainly we think that.
Speaker Change: Priority here is to buy the shares back aggressively at this level.
Speaker Change: As I say, but we'll still be able to manage the lower.
Speaker Change: Debt.
Speaker Change: Pathway on the original plan that we had but.
Speaker Change: Maybe at some point that changes, but that's that's our priority at this point, yes, I think the only thing I would add to that Patrick.
Allan MacDonald: Yeah, I think that the only thing I would add to that is... is You know, we said we want to get to three times leverage over the next couple, three years. And what we've heard back from a lot of you is we don't see a path to you getting. Now, Grier and I knew for months now that we had a path to getting there, but we were reticent to share the details until we could do it confidently. But if you think about the things we're announcing today... We're generating, and then we will be generating, incremental EBITDA contributions.
Speaker Change: <unk>.
Speaker Change: We said that we want to get to three times leverage.
Speaker Change: Couple of three years.
Speaker Change: And what we've heard back from a lot of you.
Speaker Change: We don't see a path to getting there.
Speaker Change: No Greer and I knew for months now that we had a path to getting there, but we were reticent to share the details until we could do to confidently.
Speaker Change: If you think about the things we're announcing today.
Speaker Change: We're generating and then we will be generating incremental EBITDA contribution from propane. So that's number one that's going to help.
Allan MacDonald: So that's number one, that's gonna help. We're going to be more capital efficient, and we're going to reduce the capex that's required to run and grow the propane business. The Dividend Decision creates more free cash flow in New York. So, we see, obviously, a short-term opportunity with share buybacks or a near-term opportunity, but this in no way jeopardizes our ability to manage our debt. I think, if anything, we've capably answered that question out there of how do you get from here to there with your current cash flows. And it's those three contributing factors that are going to make the difference.
Speaker Change: We're going to be more capital efficient and we're going to reduce the capex is required to run and grow the propane business.
Speaker Change: And.
Speaker Change: The dividend decision creates mark your free cash flow in the organization. So we see obviously, a short term opportunity with share buybacks for a near term opportunity, but this in no way jeopardizes, our ability to manage our debt I think if anything we've capably answered that question out there how do you get from.
Speaker Change: Here to there with your current cash flow situation and it's those three contributing factors that are going to make the difference for us.
Patrick Kenny: Okay, that's great.
Speaker Change: Okay, that's great.
Patrick Kenny: And then, sorry, just on Soterra too, I mean, the 15% growth rate that we're seeing year over year, you know, may not be as high as what was hoped, but still obviously quite attractive. So, you know, I get the strategy to be a little bit more cautious on deploying MSUs going forward, just given the competition. I'm curious if the pullback in allocating capital towards Sir Terrace's growth profile is more returns driven or are you seeing you know weaker say duration or commercial terms with customers and just trying to get a sense as to what sort of the run rate growth profile looks for that business going forward?
Speaker Change: And then sorry.
Speaker Change: Just on <unk> I mean.
Speaker Change: 15% growth rate.
Speaker Change: We are seeing year over year.
Speaker Change: So it may not be as high as what was hoped but still obviously quite attractive so.
Speaker Change: I get the strategy to be a little bit more cautious on deploying msu's going forward just given the competition but.
Speaker Change: I'm curious if the pullback.
Speaker Change: In allocating capital towards <unk> growth profile is more returns driven or are you seeing weaker state.
Speaker Change: Saturation or commercial terms with.
Speaker Change: With customers.
Speaker Change: And just trying to get a sense as to what sort of the run rate growth profile looks for that business going forward.
Grier Colter: Yeah, I think to be fair, we're obviously if you toggle capital down a little bit, the growth will come with it, higher capital, you're going to generate, you know, higher growth, all of the things equal, I think what we've got to do is, is the work to understand and Pretty intricate detail, you know, what these returns look like. I think for me to answer all the questions you just asked, which are really good ones, I don't have those in front of me right now, it's the work that we're doing right now as we continue to recalibrate the business.
Speaker Change: Yes.
Speaker Change: To be fair we're.
Speaker Change: Honestly, if you toggle capital down a little bit the growth.
Speaker Change: We will come with it a.
Speaker Change: Higher capital Youre going to generate higher growth all other things equal I think what we've got to do is as the work to understand and.
Speaker Change: Pretty intricate detail what these returns look like I think for me to answer all the questions. You just asked which are really good ones.
Speaker Change: Don't have those in front of me right now is the work that we're doing right now as we continue to recalibrate the business. So I would expect us to have a much more coherent answer.
Grier Colter: So I would expect us to have a much more coherent answer, you know, when we announce our guidance in terms of why we've made the decisions we've made and what we expect the business to grow at. And you obviously were running different scenarios and flexing it. So quite frankly, the questions that we're asking ourselves right now, so that's probably the best I can say.
Speaker Change: When we announced our guidance in terms of why we've made the decisions we made and what we expect the business to grow at.
Speaker Change: You, obviously were running different scenarios and flexing it so.
Speaker Change: The questions that we're asking ourselves right now so that's probably the best I can do for you, Yes I think.
Allan MacDonald: Yeah, I think, you know, and if you think about the terrace, you have captive markets surrounding our hubs and a demand within those markets and within the markets, there's demand growth, which is why you And then in new and emerging markets, there's We're trying to match our MSU fleet. with the demand in each of those segments. So invariably, as we're creating, or we're entering new markets, the demand for MSUs or the potential to utilize MSUs. So they kind of follow in tandem. And what we don't want to do is introduce, and the MSU fleet introduction is a lot more dynamic.
Speaker Change: If you think about the tariffs.
Speaker Change: You have captive markets surrounding our hubs.
Speaker Change: And within those markets and within the markets Theres demand growth, which is why you've seen what we're doing.
Speaker Change: And then in new and emerging markets, there's obviously demand.
Speaker Change: We're trying to match, our MSU fleet with the demand in each of those segments. So invariably.
Speaker Change: As we're creating are entering new markets the demand for msu's or the potential to utilize msu's increases so they kind of follow in tandem and what we don't want to do is introduce the MSU fleet introduction. There is a lot more dynamic and we talk about capital in annual terms, but we're making it.
Allan MacDonald: And, you know, we talk about capital in annual terms, but we're making these decisions every month. So what we don't want to do is... get out of pace with the expansion in the market and the MSU. We want to keep those moving in tandem. And invariably, there's going to be sort of an accordion effect where you have years where you do big investment, like last year, and then years where you start to rationalize it, okay, and you spend more of your capital on markets. So, I don't want you to read too much into the MSU.
Speaker Change: Every month.
Speaker Change: So what we don't want to do is.
Speaker Change: Get out of pace with.
Speaker Change: The expansion in the market and the MSU fleet, we want to keep those moving in tandem and invariably there's going to be sort of an accordion effect rehab years, where your big investment late last year, and then years, where you start to rationalize it and you spend more of their capital on market expansion. So thats. So I don't want to read too much into the MSU.
Allan MacDonald: fleet investor. in terms of the growth.
Speaker Change: Fleet investment.
Speaker Change: Terms of the growth within centers.
Patrick Kenny: Okay, thank you.
Allan MacDonald: Maybe last one, if I could just, Allan, you touched on, you know, the slew of tuck-in acquisitions before your time as a management team, obviously, that were supposed to deliver, you know, attractive synergies, but perhaps never materialized. I'm just wondering if divestitures of some of these underperforming businesses or platforms were contemplated along with this right-sized payout strategy, or is that something that is still on the table ahead of April and yesterday?
Speaker Change: Okay. Thank you.
Speaker Change: Maybe last one if I could just Alan you touched on.
Speaker Change: The slew of tuck in acquisitions.
Speaker Change: Before your time as a management team obviously.
Speaker Change: That were supposed to deliver.
Speaker Change: Attractive synergies, but.
Speaker Change: Perhaps never materialized I'm just wondering.
Speaker Change: If divestitures of some of these underperforming businesses or platforms.
Speaker Change: Were contemplated a law along with this right sized payout strategy or.
Speaker Change: Is that something Thats still on the table ahead of.
Speaker Change: April Investor Day.
Allan MacDonald: That's a great question. Of course, yeah, of course we looked at divestiture, you know, we did, like this is why it took so long, so we're looking at, I don't know, what it was, 45 in practice. You look at all these assets and you say, okay, are these markets we want to be in? Are these assets that are attractive? Is there a higher and better use of these assets? In other words, are they more valuable in terms of their disposition value than they are to us? And I can tell you unequivocally, when we looked at our, and I'm talking about propane assets here, when we looked at the propane assets, You kind of separate them, right?
Speaker Change: No. It's a great question.
Speaker Change: Oh, Yes of course, we looked at divestiture.
Speaker Change: We did look this is why it took so long so we're looking at I don't know what it was 45 acquisitions are something we did and you look at all of these assets and you say okay are these markets we want to be in these.
Speaker Change: These assets that are attractive is there a higher and better use of these assets in other words are they more valuable in terms of their disposition value than they are to us and I can tell you unequivocally when we looked at our as I'm talking to propane assets here, but when we looked at the propane assets.
Speaker Change: Kind of separate them right because you have the capital assets bulk plants trucks. Those are those come and go and then you have the customers and by and large we are in the right markets and markets that have good growth.
Allan MacDonald: Because you have the capital assets, bulk plants, trucks, those are, you know, those come and go. And then you have the customers and by and large, we're in the right markets. We're in markets that have good growth. They're, you know, they're, they're attractive from a pricing and margin standpoint, and we've got a good customer. So we think actually we've got exactly, we've got a really good footprint to work with. I don't see any markets, we haven't identified any markets that we would... For us, it's really about, okay, how do we truly get the advantage of scale?
Speaker Change: Sure.
Speaker Change: They are attractive from a pricing and margin standpoint, and we've got a good customer base.
Speaker Change: So we think actually.
Speaker Change: We've got exactly we've got a really good footprint to work with.
Speaker Change: I don't see any markets that we havent identified any markets that we want to exit at this point.
Speaker Change: For us it's really about okay. How do we how do we truly get the advantage of scale because even though we have scale, we're not taking advantage of it and we're operating more like a regional propane company that we are like a big national that's what it is incumbent upon us.
Allan MacDonald: Even though we have scale, we're not taking advantage of it, and we're operating more like a regional propane company. So that's what is incumbent upon us. So I, you know, my CFO hasn't kicked me yet, but I can tell you there's no dispositions that we're contemplating. We've got the right.
Speaker Change: My CFO Hasnt kicked me, yet, but I can tell you theres no dispositions that were contemplated and superior drivers we've got the right assets.
Allan MacDonald: Okay, thank you. I appreciate the comments.
Speaker Change: Okay. Thank you I appreciate the comments.
Speaker Change: Pleasure thanks.
Aaron MacNeil: And our next question comes from the line of Aaron MacNeil from TD Cowen. Your question, please. Hey, morning all. Thanks for taking my question.
Speaker Change: And our next question comes from the line of Aaron Macneil from TD Cowen Your question. Please.
Speaker Change: Hey, good morning, all and thanks for taking my questions.
Aaron MacNeil: As it relates to Certaris, now that we're, you know, essentially halfway through the fourth quarter and getting into that winter How do you characterize the competitive dynamic in West Texas, recognizing that you're likely beginning to mobilize some of your assets? out of that region and into some other diversified options.
Speaker Change: As it relates to sort of Taurus now that we're essentially halfway through the fourth quarter and getting into that winter season.
Speaker Change: You characterize the competitive dynamic in West, Texas, Texas, recognizing that you are.
Speaker Change: Likely beginning to mobilize some of your assets.
Speaker Change: Out of that region into some other diversified opportunities outside of energy.
Grier Colter: Hi, Aaron, it's Grier. I'll take a shot at this so Allan can kind of fill in the missing pieces. But the summer market, as we've talked about before, is a little bit different than the winter market. So, you know, you're more reliant, certainly on the drilling and completion work in Q2 and Q3, roughly. Yeah, here we are kind of going into the winter season. We anticipate that the utility work that we've traditionally been able to do, we're just kind of moving stuff over to that right now. So that's what we expected to be similar to previous years, and frack water heating as an example.
Speaker Change: Hi, Aaron.
Speaker Change: Ill take a shot at this and kind of fill in.
Speaker Change: Pieces, but.
Speaker Change: And the summer market as we've talked about before is a little bit different than the winter market. So.
Speaker Change: You're more reliant certainly on the.
Speaker Change: But the drilling and completion.
Speaker Change: Work in.
Speaker Change: In Q2 and Q3 roughly.
Speaker Change: Now here, we are kind of going into the winter season, and we anticipate that the utility work.
Speaker Change: Mark that we've traditionally been able to do well.
Speaker Change: Just kind of moving stuff over to that right now so that's.
Speaker Change: Back to them to be.
Speaker Change: Similar to previous years.
Speaker Change: Our frac water heating.
Speaker Change: Apple and.
Speaker Change:
Grier Colter: mine heating, these other kind of heating or winter kind of drive businesses or sectors, you know, we still anticipate those to be as strong as they were in previous years. So yeah, the conditions that we have seen in the oil and gas space are, you know, I think if you look at what we saw in Q2 and what we said on the Q2 call, just that we anticipated that those would continue kind of through Q3, you know, we saw that it was pretty much exactly kind of what we had thought that it would be, you know, similar, but maybe not quite as severe as we continue to kind of evolve.
Speaker Change: These other kind of heating or winter kind of drives our businesses are.
Speaker Change: Sectors.
Speaker Change: We anticipate those to be as strong as they were in previous years. So.
Speaker Change: Yes.
Speaker Change: The conditions that we have seen.
Speaker Change: On the oil and gas space.
Speaker Change: Think if you look at what we saw.
Speaker Change: In Q2, and what we said on the Q2 call that we anticipated that those would continue through Q3.
Speaker Change: Saw that it was pretty much exactly kind of what we had thought that it would be similar but maybe not quite as severe as we continue to kind of evolve and I think the business did a good job kind of evolving I think the big.
Grier Colter: And I think that, you know, the business did a good job kind of evolving. I think the big The big question I think really is, you know, when so just to be clear, I think we're expecting to be oversold, busy, solid economics through Q4 and Q1. I think the work that we're doing now is how you evolve into the summer season of next year and how you most effectively deploy our leading fleet of MSUs to places where we can get the best return. This is why we're talking about opening up other markets and obviously more to come on that.
Speaker Change: The Big question I think really is.
Speaker Change: So just to be clear I think.
Speaker Change: <unk> to be oversold busy solid economics through Q4 and Q1.
Speaker Change: I think as we bid work that we're doing now is how you evolve.
Speaker Change: And to the summer season of next year.
Speaker Change: How are you.
Speaker Change: Most effectively deploy our leading fleet of MF Skus to places, where we can get the best return and this is why we're talking about opening up either.
Speaker Change: Other markets.
Speaker Change: Now it is more to come on that but yes.
Grier Colter: But yeah, I think what you're asking is, as we move into the winter season, are we expecting it to be kind of similar to previous years? The answer would be yes. I guess just though, in real time, like, are you seeing the supply demand equation? Uh, are we talking oil and gas, or are we talking the other markets that kind of involve those markets? I think it's similar, like what we saw in Q2 was similar to what we saw in Q3. You see less pressure, obviously, in Q4 and Q1 because some of the fleets move away, there's less supply as you go and chase other business, so the dynamics are a little bit different.
Speaker Change: Yes.
Speaker Change: I think what you are asking is as we move into the winter season are we expecting it to be kind of similar to previous years answer would be yes.
Speaker Change: I guess just in real time like are you seeing the supply demand equation in that market tightening up.
Speaker Change: Today.
Speaker Change: Hey.
Speaker Change: Are we talking oil and gas were talking the other markets.
Speaker Change: West Texas markets.
Speaker Change: I think it's as I say, it's similar like what we saw in Q2 similar to what we saw in Q3.
Speaker Change: You see less pressure obviously.
Speaker Change: In Q4, and Q1, because some of the fleets move away. There is less there is less supply as you go and chase other business. So the dynamics are a little bit different I mean.
Allan MacDonald: I suspect that the market's a little bit easier to operate in in the winter when you have less supply around. Yeah, and you think about, too, these contracts don't change overnight, you know, while they're dynamic. jobs over a three or four week period, you know, the contracts we entered wouldn't change dramatically and as Grier said, we're We're starting to reallocate the fleet for the winter season. So it's going to reflect that, to Grier's point. more of the dynamics of last year, but I can't infer from that what that.
Speaker Change: I suspect that the market's a little bit easier to operate and.
Speaker Change: And in the winter when you have less supply around so.
Speaker Change: Yes, and you think about to hit Donaldson.
Speaker Change: These contracts don't change overnight.
Speaker Change: They are dynamic in terms of the jobs over a three or four week period.
Speaker Change: The contracts, we entered would change dramatically.
Speaker Change: As Grier said we are.
Speaker Change: We're starting to sort of reallocate the fleet for for the winter season. So.
Speaker Change: It's going to reflect that to <unk> point.
Speaker Change: More of the dynamics of last year, but I can infer from that what that means for next year.
Speaker Change: Yeah.
Daryl Young: It may be just building on Daryl's question on superior delivers, I assume 2024 is the baseline year. And then I would also assume that you're using maybe a static weather assumption. Is that fair? That's a great question. And yes, we're 2024 is our baseline year. Any incremental benefit from weather would be in addition. Internally, when we're budgeting, we use a five-year average. The last 18 months in my tenure here, we've trended way below the five-year average. But we're not basing sort of optimism around weather into our numbers, these are real savings. Yeah, because I want to make sure the CFO isn't giving me the evil eye here.
Speaker Change: Okay, maybe just building on <unk> question on superior delivers I assume 2024 is that the baseline year and then.
Speaker Change: I would also assume that.
Speaker Change: You're using maybe a static weather assumption is that.
Speaker Change: Fair.
Speaker Change: That's a great question and yes, we are.
Speaker Change: 2024 is our baseline year.
Speaker Change: Any incremental benefit from whether it would be in addition to the numbers that we've laid out but we internally when we're budgeting we use a five year average for the last 18 months in my tenure here we are.
Speaker Change: Trended way below the five year average.
Speaker Change: But we're not facing sort of optimism around weather into our numbers. These are real savings.
Mike: Sure Mike.
Speaker Change: Yes.
Speaker Change: Wanted to make sure the Cfos, giving me Eli.
Grier Colter: That's it, right? I think like, obviously, it's been the degree days have been helpful for sure. I think that we've been kind of running lower than lower than averages. And yeah, if we had that, that would be tailwind. And in addition to that, yeah, that's what we're talking about on Superior Deliver. So yeah.
Speaker Change: That said, Ryan I think like that.
Speaker Change: Obviously that's been.
Speaker Change: Heating degree days have been.
Speaker Change: Helpful for sure I think we've been kind of running.
Speaker Change: Lower than the averages.
Speaker Change: If we had that that would be tailwind.
Speaker Change: Then in addition to that yes.
Speaker Change: We're talking about on superior delivery so yeah.
Grier Colter: and then maybe I'll go there.
Speaker Change: And then maybe I'll.
Allan MacDonald: I'll take one more question. You know, you mentioned being the lowest cost operator. Who do you believe is the lowest cost operator? today, and what sort of delta in margins, like a basis point delta in margins, do you think you need to achieve? It's a really interesting market to make that kind of comparison to if you look at 70% of the industry being private. and the remaining sort of nationals, each with their own unique talent. So I'm not sure that's... is not necessarily going to be our baseline. For us, The question that we've been contemplating is, what's the benefit of scale?
Speaker Change: Sneak one more question in.
Speaker Change: You mentioned being the lowest cost operator.
Speaker Change: Who do you believe is the lowest cost operator in the propane business today, and what sort of delta in margins like a basis point Delta in margins do you think you need to achieve to get to become the lowest cost operator.
Speaker Change: It's a really interesting market to make that kind of comparison to if you look at 70% of the industry being private.
Speaker Change: And the remaining sort of national's each with their own unique challenges. So I'm not sure that's necessarily going to be our baseline.
Speaker Change: For us.
Speaker Change: The question that we've been contemplating is what's the benefit of scale, where does scale give you an advantage.
Allan MacDonald: Where does scale give you an... And we think that we have to be better than other companies when it comes to acquiring customers. being a low-cost provider. You know, it all speaks to the profitability it generates. We think we need to be able to price better. Um I would say that, you know, where economies of scale come in place is really about density and asset utilization. So when we look at, you know, how we're going to structure the business, we need to attract customers that are net, that make, you know, that actually contribute to lowering our expense as opposed to increasing.
Speaker Change: And we think that we have to be better than other companies when it comes to acquiring customers.
Speaker Change: Being a low cost provider.
Speaker Change: It also speaks to the profitability. It generates we think we need to be able to price better.
Speaker Change: So I would say that.
Speaker Change: Where economies of scale come in place is really about density and asset utilization. So when we look at.
Speaker Change: How we're going to structure the business, we need to attract customers that.
Speaker Change: Our net debt.
Speaker Change: Thats actually contribute to lowering our expense as opposed to increasing and let me give you an example.
Allan MacDonald: And let me give you an example. You have a customer that you acquire that's on a route that you're already delivering that's within five kilometers of your bulk plant, and you do that really specifically because they disproportionately contribute profit because they incur much lower expense in terms of acquisition costs. In another example, you take on a new customer who's 25 kilometers away from your boat plant on a route that you're not serving. Those types of decisions are being made every day in this industry, and using data analytics and better insights, we're going to stop. That, you know, that's where we think lowest cost operations is really going to come in.
Speaker Change: Do you have a customer that you acquired Thats on a route that you are already delivering that's within five kilometers up your bulk plant and you do that really specifically because they disproportionately contribute profit profit because they incur much lower expense in terms of cost of acquisition costs.
Speaker Change: Sure.
Speaker Change: And another example, you take on a new customer who has 25 kilometers.
Speaker Change: Above plan on a route that youre not serving today.
Speaker Change: Those types of decisions are being made every day in this industry and using data analytics and better insights, we're going to stop making them.
Speaker Change: That.
Speaker Change: That's where we think lowest cost operations is really going to come in it's not necessarily.
Allan MacDonald: It's not necessarily the, you know, we're not looking to pay our drivers differently. We're looking at being much more efficient and having much more density and building the capabilities to be able to do that every day, all across. So. That kind of answers your question I think, but you know more to come on that and we'll give you specifics in terms of how we Fair enough.
Speaker Change: We're not looking to pay our drivers differently, we're looking at being much more efficient and having much more densely and building the capabilities to be able to do that every day all across North America.
Speaker Change: So.
Speaker Change: <unk>.
Speaker Change: That kind of answers your question I think but more to come on that and we'll give you specifics in terms of how we think about the cost base.
Speaker Change: Fair enough, thanks, guys I'll turn it back.
Grier Colter: Thanks, guys.
Nelson Ng: Thank you. And our next question comes from the line of Nelson Ng from RBC Capital Markets. Your question please. Great, thanks. I had a quick question on Superior Delivers. I know a few years back with the previous management team, there was this Superior Way Forward initiative, and that obviously included some organic growth, some efficiencies, I think adding sensors to tanks and things like that. And I think the EBITDA improvement back then was also a roughly $50 million Canadian EBITDA improvement over a smaller base, but I think being realized over a slightly longer period. So I think when you put the Superior Delivers initiative together, I guess based on your discussions with the various employees in the propane side, How did the...
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Nelson <unk> from RBC capital markets. Your question. Please.
Speaker Change: Great. Thanks, I had a quick question on superior de levers I know a few years back with the previous management team. There was this superior way forward initiative and.
Speaker Change: Obviously included.
Speaker Change: Some organic growth.
Speaker Change: Efficiencies I think adding sensors to tags and things like that and I think the EBITDA improvement back then it was also a roughly $50 million Canadian E comm improvement over a smaller base, but I think being realized over a slightly longer.
Speaker Change: Period.
Speaker Change: So I think when you put the superior delivers initiative together I guess based on your discussions with.
Speaker Change: With the various.
Speaker Change: Our employees and the propane side.
Speaker Change: And how did the.
Allan MacDonald: A previous initiative, the Superior Way Forward, what were some of the things that went well and didn't go so well and what are you doing differently this time? What a good question, I know, um, okay. We took a completely different approach and really didn't look at, you know, obviously we're familiar with Superior Way Forward. We did an examination of the business from the ground up. to say where is value created in selling a commodity product? that generates, you know, a healthy. should have low churn. Are we acquiring customers? And by the way, since day one, Grier and I have both said organic growth.
Speaker Change: Previous initiatives the superior way forward.
Speaker Change: What were some of the things that went well and didn't go so well and what are you doing differently.
Speaker Change: At this time.
Speaker Change: But a good question.
Speaker Change: It's Alan.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: We took a completely different approach and really Didnt look at obviously, we're familiar with the superior way forward.
Speaker Change: But we did an examination of the business from the ground up.
Speaker Change: To say, we're where is value created and selling a commodity product.
Speaker Change: That generates.
Speaker Change: A healthy return and should have low churn.
Speaker Change: Are we acquiring customers and by the way since day, one we fear and I, both said organic growth.
Allan MacDonald: These assets have to perform. So we looked at what the potential was. How are we doing in each of those key elements? Are we acquiring customers well? Are we retaining them? Are we efficient in terms of our operations? And through the course of that, we've identified substantial. So where Superior Plus, or where Superior, the Superior Way Forward may or may not have gotten the organization is kind of inconsequential. We looked at the operating model, made the determination that it's dated. that it wasn't data driven near to the degree that it should be. We could do better with our availability of insights and the decisions that we're making every day.
Speaker Change: These assets helped perform better so we looked at what the potential was how are we doing in each of those key elements are requiring customer as well as retaining them or we efficient in terms of our operations and through the course of that we've identified substantial opportunities. So we're superior plus where superior the superior.
Speaker Change: Forward may or may not have gotten the organization has kind of inconsequential.
Speaker Change: We looked at the operating model, we made the determination that its <unk>.
David: It's David.
Speaker Change: That it wasn't data driven near to the degree that it should be.
Speaker Change: We could do better with our availability of insights and the decisions that we're making every day.
Allan MacDonald: And when you put those all together, this truly is a transformation. When I say we acted like a regional propane I can tell you that in parts of our business, pricing is set, you know, regionally. is set based on the interpretation of competitive. It's not set based on understanding our cost to serve and our lifetime value and the impact it has on churn. So when you take those apart, you go, what a fantastic. We're going to be able to be more targeted. We're requiring customers and we can price them so we're optimizing the profitability, but also making sure we're not.
Speaker Change: And when you put those all together.
Speaker Change: <unk>.
Speaker Change: This truly is a transformational model.
Speaker Change: When I say, we acted like a regional propane company.
Speaker Change: I can tell you that in parts of our business pricing is set.
Speaker Change: Each line.
Speaker Change: Based on competitive.
Speaker Change: Interpretation of competitive pricing.
Speaker Change: Not set based on understanding our cost to serve.
Speaker Change: And our lifetime value and the impact it has on churn.
Speaker Change: So when you take those are pretty good what a fantastic opportunity we're.
Speaker Change: We're going to be able to be more targeted and we're requiring customers and we can price them. So we're optimizing the profitability, but also making sure we're not sharing all with a view to giving everyone. In the organization are clear visibility and what their true costs are so we can make sure that we're pricing profitably and not leaving money on the table for adding in profit on profit.
Allan MacDonald: All with a view to giving everyone in the organization a clear visibility in what their true costs are, so we can make sure that we're pricing profitably and not, you know, leaving money on the table or, you know, adding in unprofitable costs. So it's a new day, is what I'm really trying to say. And the Superior Way Forward, largely, it really didn't factor into our thinking. We're starting from scratch with the company that we got 18 months ago, not anything. And I will tell you, though, last point. A lot of people that were part of the organization.
Speaker Change: Customers two arms of our business so.
Speaker Change: It's a new day is what I'm really trying to say in a superior way forward largely.
Speaker Change: It really didn't factor into our thinking we're starting from scratch with the company that we got 18 months ago, not anything that was before that and I will tell you the last point.
Speaker Change: A lot of people that were part of the organization.
Allan MacDonald: in those days are still part of the organization. They're leading this. The list of 100 plus initiatives that I've been talking about, and the feedback we're getting from them is a tremendous amount of excitement that we're going to be part of this transformation, but they see a company that has a lot of opportunity. and that's really energizing for the team. And to be honest, I'd say they're energized to the point that I hadn't seen in a couple of years.
Speaker Change: In those days.
Speaker Change: Are still part of the organization.
Speaker Change: They are leading this.
Speaker Change: List of 100, plus initiative that <unk> been talking about.
Speaker Change: And the feedback we're getting from them is a tremendous amount of excitement.
Speaker Change: We're going to be part of this transformation, but they see a company that has a lot of opportunity in front of it and Thats really energizing for the team.
Speaker Change: And to be honest I'd say, they're energized at the point that I hadn't seen in a couple of years. So.
Allan MacDonald: So, you know, we're really excited about where we're going.
Speaker Change: We're really excited about where we're at.
Nelson Ng: That's great, Keller, Allan, and we'll look forward to more details in April.
Speaker Change: That's great color Alan.
Speaker Change: We will look forward tomorrow details in April.
Allan MacDonald: So just switching gears a bit in terms of Sotaris, obviously, the oil and gas sector is a big focus for everyone. Can you guys just talk about the competitive dynamics you're seeing in the oil and gas sector? For example, are many of the energy service providers Are they all adding, or are many of them? buying MSUs and kind of vertically integrating it and rolling it into their product mix. No, we're not, we're, um... We haven't seen any. any change really in terms of the composition of the industry. There were some big players like us that are coming into the segment.
Speaker Change: Just switching gears a bit in terms of sitars, obviously, the oil and gas sector is a big focus for everyone.
Speaker Change: Can you guys just talk about the competitive dynamics, you're seeing in the oil and gas sector are like for example are many of the energy service providers.
Speaker Change: Are they all adding or are many of them.
Speaker Change: Buying MSU, then kind of vertically integrating it and rolling it into their product mix.
Speaker Change: No we're not we're.
Speaker Change: We haven't seen any.
Speaker Change: Any change really in terms of the composition of the industry. There were some big players like us that are coming into the segment.
Allan MacDonald: There were some small. who continue to operate. We don't see them. Looking back, looking at investments from an individual to a corporation, I can see somemores of partnerships, some of the actions that happened in restaurants and different businesses especially as to what we've done in our last friendship efforts. I will tell you that We're the leader in terms of investing outside of the oil and gas sector and have done the most work. Some other companies are looking at, you know, adjacent verticals, power generation, but we're not seeing, you know, a big uptake in MSU production by non-traditional Okay, and I think last year, there was a supply constraint on MSUs and I presume, and then they increased their production capacity.
Speaker Change: There were some small.
Speaker Change: Some small players who.
Speaker Change: Who continue to operate we don't see them.
Speaker Change: We aggressively invest in Capex and expanding the fleet.
Speaker Change: And there were some companies that had this as an adjacency that they were in a related business and added some issues.
Speaker Change: I will tell you that.
Speaker Change: We're the leader in terms of investing.
Speaker Change: Outside of the oil and gas sector and have done the most work there.
Speaker Change: Some other companies are looking at adjacent verticals like power generation.
Speaker Change: But we're not seeing.
Speaker Change: <unk>, a big uptake in MSU production by non traditional competitors at this point.
Speaker Change: Okay, and I think last year there was a.
Speaker Change: A supply constraint on atmosphere I presume and then they.
Speaker Change: Increase their production capacity, so I presume youre not seeing a supply constraint so.
Allan MacDonald: So I presume you're not seeing a supply constraint. So anyone who wants to buy MSUs can, but I think what I'm hearing from you is There hasn't been a... big increase in MSUs. from the market perspective, right? In terms of, you're not just seeing a whole bunch of people buy MSUs and trying to deploy them into the sector. No. I mean, if you unwrap that a little bit, are we seeing supply constraints? No. There's not an empty lot of MSUs for sale, but I mean, no, we're not seeing what we've seen in recent years. I think you'd have to, if you were getting into the business, you'd have to say, well, it's not just buying an MSU and rolling it out into an underserved market that has 200% over-subscription like it was two years ago.
Speaker Change: Anyone who wants to buy MSG as can but I think what I'm hearing from you is.
Speaker Change: There hasn't been a.
Speaker Change: Big increase in Msas.
Speaker Change: From a.
Speaker Change: From that from the market perspective in terms of you're not just seeing a whole bunch of people buy atmospheres and tried to deploy them into the into the sector.
Speaker Change: No.
Speaker Change: To add a little bit.
Speaker Change: Are we seeing supply constraints no.
Speaker Change: Theres not a empty lot of msu's per sale, but I mean, no. We're not seeing what we've seen in recent years I think you'd have to if you were getting into the business you'd have to say well, it's not just buying an MSU and rolling it out into an underserved market that has 200% of our subscription like it was two years ago.
Allan MacDonald: You got to get compression. You got to get decompression. You've got to build a hub, and if you're going to go into the oil and gas sector, you've got to go into a competitive market. If you're going to go into an emerging market augmenting power generation, let's say, well, now you got a greenfield, you got to build sales organizations. So you have to turn it into an actual So I think what you're seeing is the early opportunistic entrants are, you know, have made some money. That's good. They had a small presence in the market, and now they're, you know, reviewing that presence.
Speaker Change: You've got a you've gotta get compression you've gotta get decompression.
Speaker Change: You got to build the hub and if youre going to go into the oil and gas sector Gotta go into a competitive market.
Speaker Change: If youre going to go into an emerging market.
Speaker Change: <unk> power generation, let's say well now you got to you got a greenfield build sales organization. So you have to turn it into an actual business. So I think what youre seeing is the early opportunistic entrants are.
Speaker Change: Uh huh.
Speaker Change: I've made some money that's good.
Speaker Change: They had a small presence in the market and now their.
Allan MacDonald: Now, I can't speak on their behalf, but we're not seeing the degree of small market entrance that you would have seen five years ago.
Speaker Change: Reviewing that presence now I can't speak on their behalf, but we're not seeing the degree of up small market entrants that you would've seen some five years ago.
Allan MacDonald: This is a, you know, it's becoming a...
Speaker Change: This is <unk>.
Speaker Change: Becoming a.
Aaron MacNeil: Allen MacDonald, Aaron MacDonald, Grier Colter, Darren Hribar, Allan MacDonald, Aaron MacDonald, And then just one last question. I'm still focused on the oil and gas drilling fracking side. Do you have a sense of what portion of the or in terms of the energy mix? How much is natural gas versus diesel? And how do you see that changing? Or how has that changed over the last few years? And how do you see that changing over the over the next few years? Because obviously, I think it's a bit of a buffer in terms of I think the natural gas equipment is more efficient and lower cost and and I think your business will fluctuate.
Speaker Change: Expanding sort of sector and to enter it is requires much more than investing in half a dozen that Massachusetts.
Speaker Change: Okay, and then just one last question.
Speaker Change: Still focus on the oil and gas drilling fracking side.
Speaker Change: Do you have a sense of what portion of the bar in terms of the energy mix, how much is natural gas.
Speaker Change: Versus diesel and how do you see that changing or how has that changed over the last few years and how do you see that change over that.
Speaker Change: The next few years because obviously.
Speaker Change: I think it's a bit of a buffer in terms of I think the natural gas equipment is more efficient and lower cost and.
Speaker Change: And I think your business will fluctuate.
Grier Colter: less than I think the activity that you could see in the market in terms of the ups and downs. Nelson, it's Grier. Just to make sure I understand the question, you're, you're one, like, if you look at the the frack spreads, you kind of have diesel only, you got dual fuel, which can take diesel or nat gas, or you've got kind of the e-frack, which obviously is, is powered by natural gas, but it's accompanied by, you know, power generation assets. Are you kind of asking like, of those kind of three categories, how we see them evolving?
Speaker Change: Less than I think the activity that you could see in the market in terms of the ups and downs.
Speaker Change: Announcements career.
Speaker Change: Just to make sure I understand the question, you're you're one Blake if you look at the Frac spreads and kind of how diesel only you got dual fuel I wish can take diesel or Nat gas or <unk> got kind of a <unk> frac, which obviously is is powered by natural gas, but it's accompanied by.
Speaker Change: Power generation assets are you kind of asking way.
Speaker Change: Kind of three categories, how we see them evolving.
Grier Colter: Yes, that's right. So in terms of the like, obviously, it's diesel versus natural gas, and some of them use fuel, which is a mix of mix of both. But do you have a sense of how, like, what the, I guess, natural gas share versus diesel share is and how that's changing? So I don't have exact numbers in front of me, and maybe we can dig those up. My understanding is that the diesel market is shrinking. Obviously, the economics are quite different on those, and my understanding, and this is fairly far removed from what I do every day, but the experience for workers, they don't really want to work on diesel equipment, as I understand it.
Speaker Change: Yes, that's right. So in terms of the it looks like obviously its diesel versus natural gas and some of them used to all which is the mix of mix of both but do you have a sense of how like what the I guess natural gas share versus these those shares and how that's changing.
Speaker Change: So I don't have exact numbers in front of me and maybe we can take those.
Speaker Change: Pick those up by my my understanding.
Speaker Change: Yes.
Speaker Change: The market is shrinking.
Speaker Change: Obviously, the economics are quite different on those and my understanding of it is to suggest.
Speaker Change: Fairly far removed from what I do every day, but the experience for workers that they don't really want to work on diesel equipment as I understand it but my understanding is that the.
Grier Colter: My understanding is that the market for diesel equipment is shrinking. It's been taken up by the EFRAC and dual fuel space, so it's definitely moving towards NAC gas. I don't know the exact growth rate between these, but yeah, that would be, I think it's, yeah, a declining market, two growth markets. And I don't know, relative to EFRAC, whether the dual fuel is growing faster or not, I don't know. But let us, let us dig in, but that's probably the... That's maybe what I would say. I mean, so obviously, we're going after the dual fuel, and then we...
Speaker Change: The market for diesel equipment is shrinking.
Speaker Change: That's been taken up by the Frac and dual fuel space. So it's definitely moving.
Speaker Change: Of course, not gosh, I don't know the exact growth rate between.
Speaker Change: But yes that would be I think it's got a declining market to growth markets and I don't know relative to E. Frac, whether the dual fuel is growing faster or not I don't know, but let us let us dig in but.
Speaker Change:
Speaker Change: Maybe what I would say I mean, so obviously we're.
Speaker Change: Going after the dual fuel and then.
Grier Colter: We do go out to the EFRAC market as well, and you would do that with either the oil service, the owner of the EFRAC spread would maybe have their own power generation assets, or you could partner, we could partner with a third party to provide the power, or they break it up and kind of source it or contract it on a micro basis. But we kind of go out both those spaces, but that is where the growth is, no doubt about it. Yeah, it's complicated numbers to get, Nelson, but we'll just let us look. Obviously, You know, gas power is on the increase, diesel is on the decline.
Speaker Change: We do go out the Frac market as well and you would do that with either.
Speaker Change: The oil services.
Speaker Change: Owner of the.
Speaker Change: The frac spread would maybe have their own power generation assets or you could partner.
Speaker Change: We could partner with a third party to provide the power or they break it up in kind of source that are contracted on a micro basis, but we kind of go out both of those spaces.
Speaker Change: But that is where the growth is no doubt about it.
Speaker Change: Yes.
Speaker Change: It's complicated numbers to get also but we will.
Speaker Change: Let us look obviously.
Speaker Change: Gas power is on the increased deal is on the decline is it 70 30 today is.
Grier Colter: Is it 70-30 today? Is it 50-50?
Speaker Change: Is it 50 50.
Grier Colter: Let's do some work. And it's going to be it's going to be different in Texas than it is in Alberta than it is in Oklahoma. Well, we'll see.
Speaker Change: Some work and come back to you on that and it's going to be it's going to be different.
Speaker Change: Texas than it is in Alberta than it is in Oklahoma. So we'll see if we can get up.
Grier Colter: Alright, thanks.
Operator: I'll leave it there.
Speaker Change: Alright, Thanks, I'll leave it there okay.
Allan MacDonald: Okay.
Operator: And this does conclude the question and answer session of today's program.
Speaker Change: Thank you and this does conclude the question and answer session of today's program I'd like to hand, the program back to Alan Macdonald, President and CEO for any further remarks.
Allan MacDonald: I'd like to hand the program back to Allan MacDonald, President and CEO, for any further remarks. Look, what I'd like to do is thank each and every one of you for dialing into the call today and for listening to what we think is a pivotal and incredibly important time in our history. You know, we made some big decisions over the course of this quarter. It's great to be able to finally give you some insight into Superior Delivers. We appreciate your patience, and it's always hard to do that in an hour-long conversation. But hopefully we've given you some insights into how we're thinking about the business for the long term.
Alan Macdonald: Look what I'd like to do is thank you each and every one of you for dialing into the call today and for listening to what we think is a pivotal an incredibly important time in our in our history.
Speaker Change: We made some big decisions over the course of this quarter.
Speaker Change: It's great to be able to finally give you some insight into superior delivers we appreciate your patience and it's always hard to do that in an hour long conversation, but hopefully we've given you some insights into how we're thinking about the business for the long term and look forward to our next call in February and then seeing you shortly.
Allan MacDonald: And I look forward to our next call in February and then seeing you shortly after that for a more fulsome discussion on the Investor Day. So thank you all very, very much.
Speaker Change: After that firm.
Speaker Change: More fulsome discussion on the Investor day. So thank you all very very much.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Operator: Good day. Thanks for taking the time to watch!
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.