Q4 2024 Star Group LP Earnings Call
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Speaker Change: Good day, and welcome to the STAR Group Fiscal 2024 Fourth Quarter Results Conference Call.
Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Please go ahead.
Chris Witty: Thank you and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer, and Rich Ambury, Chief Financial Officer.
Chris Witty: I would now like to provide a brief Safe Harbor Statement.
Chris Witty: This conference call may include four looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements.
Chris Witty: All statements other than statements of historical facts included in this conference call are forward-looking statements.
Chris Witty: Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.
Chris Witty: Important factors that could cause actual results to differ materially from the company's expectations are enclosed in this current scall, the company's annual report on Form 10-K for the fiscal year ended September 30, 2024, and the company's other filings with the SEC.
Chris Witty: All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements.
Chris Witty: Unless otherwise required by law, the company undertakes an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this conference call.
Speaker Change: I would now like to turn the call over to Jeff Woosnam. Jeff?
Jeff Woosnam: Thanks Chris and good morning everyone. Thank you for joining our fourth quarter conference call. It's amazing how time passes so quickly and here we are concluding another fiscal year and starting in a new heating season. It's a great opportunity to reflect on STAR's performance over the past 12 months.
Jeff Woosnam: Notably, temperatures in fiscal 2024 were 15 percent warmer than normal, but roughly flat year over year.
Jeff Woosnam: Total revenue fell modestly due to slightly lower volumes in selling prices.
Jeff Woosnam: However, full-year adjusted EBIT arose by $14.7 million versus fiscal 2023, reflecting an increase in home heating oil and propane per gallon margins and higher service and installation profitability.
Jeff Woosnam: We continue to be laser focused on cost containment and operating efficiency, and I believe the benefits of those efforts are evident in our improved EBITDA results this year.
Jeff Woosnam: At the same time, we remain vigilant in working to address net customer attrition, which at 4.2% in fiscal 2024, was up slightly year over year.
Jeff Woosnam: While our internal customer satisfaction indicators and loss rates continue to improve, we observed a lower level of real estate activity in the marketplace, which impacted new customer additions.
Jeff Woosnam: There were also no prolonged periods of cold or major storms during the year, which often drives customers to our higher quality, faster response service operations.
Jeff Woosnam: Our acquisition program remains an important component of our growth strategy and in total we completed five separate transactions during fiscal 2024 adding just over 20,000 customers and 23 million gallons of heating oil and propane volume annually.
Jeff Woosnam: We continue to have an active pipeline of opportunities in various stages of review, and our recently completed credit facility, including a $400 million revolver and a $210 million term loan, provides additional liquidity for acquisitions and general corporate purposes.
Thank you. Thank you.
Jeff Woosnam: This leaves us well-positioned to complete some near-term opportunities currently under review.
Speaker Change: I'm proud of the way our team has navigated through what ended up being another mild year. As we enter the heating season, we believe the company is well prepared to respond to anything Mother Nature throws our way while providing our customers with superior customer service.
Rich Ambury: With that, I'll turn the call over to Rich to provide additional comments on the quarter and year-end results.
Rich Ambury: Thanks, Jeff. And good morning, everyone. For the fiscal 2024 fourth quarter, our home heating oil and propane volume decreased by 300,000 gallons, or about 1.5% to 18.5 million gallons.
Rich Ambury: as the additional volume provided from acquisitions was more than offset by the impact of net customer attrition and other factors. However, our product gross profit increased by $4 million or roughly 10% to $42 million largely due to higher home heating oil and propane margins.
Rich Ambury: In addition, our net service and installation gross profit rose by $3 million to almost $16 million.
Rich Ambury: Delivery, branch, and G&A expenses increased by $6 million or about 7% to $88 million.
Rich Ambury: Of that increase, approximately $2 million of that increase was related to recent acquisitions.
Rich Ambury: Our net loss increased by $15 million during the quarter to $35 million.
Rich Ambury: as an unfavorable non-cash change in the fair value of derivative instruments of $28 million was only partially offset by a $1.7 million decrease in the adjusted EBITDA loss, $1 million lower net interest expense, and a $9 million increase in the income tax benefit.
Rich Ambury: The adjusted EBITDA loss decreased by $1.7 million to approximately $30 million in the quarter, reflecting higher home heating oil and propane per-gallon margins, an increase in service and installation profitability, and additional EBITDA from acquisitions, which more than offset an increase in
operating expenses.
Rich Ambury: Moving over to the full year for 2024, our home heating oil and propane volume decreased by 6 million gallons or 2% to 253 million gallons, again, as the additional volume provided from acquisitions and other factors was more than offset by net customer attrition.
Rich Ambury: Temperatures in our geographic areas of operations were less than one-tenth of one percent warmer than the prior year period.
Our product growth profit increased by approximately $21 million.
or 5% through...
Rich Ambury: $468 million as an increase in home heating oil and propane margins more than offset the impact from a decline in liquid products sold. In addition, our net service and installation gross profit increased by $10 million to $34 million.
Rich Ambury: Delivery, branch, and G&A expenses increased by $15 million to $395 million compared to $379 million in fiscal 2023.
Rich Ambury: During fiscal 2024, the company recorded a benefit under its weather hedge of $7.5 million compared to a benefit of $12.5 million during fiscal 2023, accounting for a $5 million increase in expense.
Rich Ambury: The year-over-year change also reflects $6 million of expenses associated with recent acquisitions, along with a $4 million increase in base business expenses.
Rich Ambury: Net income rose by $3 million to $35 million as a $14.7 million increase in adjusted EBITDA and a $4 million decrease in net interest expense was largely offset by an unfavorable change in the fair value of derivative instruments. Again, that's non-cash of $17 million.
Jeff Woosnam: and Propane Volume in the base business, a $5 million reduction in the company's weather hedge benefit, and an increase in base business operating expenses. That concludes my discussions on the financial results. Jeff?
Jeff Woosnam: Thanks, Rich. At this time, we're pleased to address any questions you may have. Betsy, please open the phone lines for questions.
Thank you.
We will now begin the question and answer session.
Jeff Woosnam: To ask a question, you may press star then 1 on your touch-tone phone.
Jeff Woosnam: If you are using a speakerphone, please pick up your handset before pressing the key.
Jeff Woosnam: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Thank you very much.
Thank you.
Thank you. Thank you.
Speaker Change: The first question today comes from Michael Prouting with 10K Capital. Please go ahead.
Hey guys, good morning.
Morning, Michael. Morning, Michael.
Speaker Change: Hey, just a couple of questions. I'll ask them all at once.
Speaker Change: as far as the upcoming fiscal year and, in particular, the potential for some larger deals.
Michael, can you repeat your first
Oh yeah, of course. I just wanted to get your...
Speaker Change: What are your thoughts on what kind of weather you might be expecting for the upcoming heating season based on the professional weather forecasting services that you guys subscribe to?
Speaker Change: Yeah, we try not to look too far out, you know, it's it's difficult to To rely on long-term weather forecasts as you probably know the first
Speaker Change: You know, two months of the fiscal year of 2025 have been October and November.
Speaker Change: has been a little bit mild than normal. November came in about 20%.
Speaker Change: more mild than normal. Obviously, December is starting off more favorably, so we'll just have to see how the quarter ends up. But getting past that, I'm not a weather man, so I'm not necessarily going to make any strong predictions. We plan on normal.
Put it that way. Okay. Fair enough.
Speaker Change: In terms of, you know, just overall customer attrition, and as I said in my remarks, and if you recall, we really started in 2024, in fiscal 2024, we kind of started off slow. Losses have, our customer losses and overall churn rates.
Speaker Change: have remained in really good shape and continued to improve as have all of our internal customer satisfaction indicators, our net promoter scores, all the things that we look at to ensure that we're doing the right things and are focused on the right things.
Speaker Change: But just as a result of just a lower level of overall market activity, a lot of which related to the real estate markets.
Speaker Change: did impact our gain rates for the year, and particularly in that first quarter. And then we really didn't have any weather events.
Speaker Change: You know, we're dealing with in 2024, I think it's probably the fourth warmest winter in history coming off the third warmest winter in history in 23. And that's certainly, you know.
Speaker Change: impacts and reduces kind of service disruptions and other things that tend to attract customers to our full-service brands. So that has an impact.
year
Right, no, that totally makes sense.
And on the acquisition front.
Our pipeline remains strong. It's encouraging. The team has been...
Extremely busy. We closed five acquisitions in 2024.
Speaker Change: And most recently, we had another acquisition close in October, a smaller deal. We made a larger acquisition transaction in September, right at the end of 2024, which was very encouraging. And we've got...
Speaker Change: several opportunities right now currently under review some of them in later later stages of review read that you know read into that what you what you may but we're very optimistic moving forward we'll just have to see everything works out but
The Acquisition Pipeline certainly looks encouraging.
Speaker Change: Okay, that's great news. Well keep up the good work on the cash conversion cycle and look forward to joining you in a couple of months.
You bet. Thank you, Mike.
Speaker Change: With reminder, if you have a question, please press star, then one, to be joined into the question queue.
Thank you very much.
Speaker Change: At this time, there appear to be no further questions in the queue.
Speaker Change: I'd like to turn the call back to Mr. Woosnam for any closing remarks.
Jeff Woosnam: Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2025 fiscal first quarter results in February. In the meantime, have a wonderful holiday season. Thank you.
Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.