Q2 2025 Star Group L.P. Earnings Call
Speaker Change: [music].
Operator: Page 1 of 18 Good day, and welcome to the Star Group Fiscal 2025 Second Quarter Results Conference Call. 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.
Good day and welcome to the Star Group fiscal 2025 second quarter results Conference call.
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.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, please press star then 2.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Operator: Please note, this event is being recorded.
Please note this event is being recorded.
Chris Witty: I would now like to turn the conference over to Chris Witty, Investor Relations Advisors. Please go ahead. Thank you and good morning.
Speaker Change: I would now like to turn the conference over to Chris Witty Investor Relations Advisors. Please go ahead.
Speaker Change: Thank you and good morning with me on the call today are Jeff Wisdom, President and Chief Executive Officer, and Rich and Barry Chief Financial Officer, I would now like to provide a brief safe Harbor statement. This conference call May include forward looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties.
Chris Witty: 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. This conference call may include forelooking 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. All statements other than the statements of historical facts included in this conference call are forward-looking statements. 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. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, 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.
Speaker Change: May cause the company's actual performance to be materially different from the performance indicated or implied by such statements.
Speaker Change: All statements other than statements of historical facts included in this conference call.
Speaker Change: Forward looking statements, 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.
Speaker Change: Factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call. The company's annual report on Form 10-K for the fiscal year ended September 30th 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.
Speaker Change: 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 unless otherwise required by law. The company undertakes no obligation to publicly update or revise any forward looking statements, whether a result of new information future events or otherwise after the date of this conference call.
Chris Witty: Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise, after the date of this conference call.
Jeffrey Woosnam: I'd now like to turn the call over to Jeff Woosnam. Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our second quarter and fiscal year-to-date results. Our performance this quarter was positively impacted by recent acquisitions and weather that, while 4.5 percent warmer than normal, was almost 13 percent colder than in fiscal 2024. This led to a nearly 23 percent increase in home heating oil and propane volume and a 32 million dollar improvement in adjusted EBITDA versus the prior year period.
Jeff Wisdom: I'd now like to turn the call over to Jeff who is now Jeff.
Jeff Wisdom: Thanks, Chris and good morning, everyone. Thank you for joining us to discuss our second quarter and fiscal year to date results. Our performance. This quarter was positively impacted by recent acquisitions and whether that while 4.5% warmer than normal was almost 13% colder than in fiscal 2020 for.
Jeff Wisdom: This led to a nearly 23% increase in home heating oil and propane volume and a $32 million improvement in adjusted EBITDA versus the prior year period.
Jeff Wisdom: We've been rather busy on the acquisition front this year as a matter of fact since February one 2024, we've completed $126 $5 million of transactions some of which were acquired during our current heating season, and therefore are not fully reflected in our results our pipeline of opportunities remains active.
Jeffrey Woosnam: We've been rather busy on the acquisition front this year. As a matter of fact, since February 1, 2024, we've completed $126.5 million of transactions, some of which were acquired during our current heating season and therefore are not fully reflected in our results. Our pipeline of opportunities remains active, and we closed on two businesses during the quarter, as well as a very small transaction in April. All of these companies are within our existing operating footprint and serve to further strengthen our presence in these respective markets. Along with strategically using capital to grow the business, we recently raised our annual dividend by 5 cents to 74 cents.
Jeff Wisdom: And we closed on two businesses during the quarter as well as a very small transaction in April.
Jeff Wisdom: All of these companies are within our existing operating footprint.
Jeff Wisdom: And serve to further strengthen our presence in these respective markets.
Jeff Wisdom: Along with strategically using capital to grow the business. We recently raised our annual dividend by <unk> to 74 cents per unit increasing value for our shareholders. All of this is consistent with our goal of allocating capital in ways that maximize returns for our investors.
Jeffrey Woosnam: increasing value for shareholders. All of this is consistent with our goal of allocating capital in ways that maximize returns for our investors. Let me add that it was quite rewarding to see how our team responded to the added demand brought on by colder temperatures. Our frontline employees once again prove themselves, working tirelessly to provide our customers with the best service possible. I simply couldn't be more proud of their efforts.
Jeff Wisdom: Let me add that it was quite rewarding to see how our team responded to the added demand brought on by colder temperatures.
Jeff Wisdom: Our frontline employees once again prove themselves working tirelessly to provide our customers with the best service possible I simply couldn't be more proud of their efforts.
Jeffrey Woosnam: As we come to the end of the heating season, we continue to focus on operational execution and efficiency, as well as the ongoing expansion and improvement of our HVAC system. We are pleased with our results year-to-date and look forward to the opportunities that summer brings to further invest in our people and advance various business development initiatives.
Jeff Wisdom: As we come to the end of the heating season, we continue to focus on operational execution and efficiency as well as the ongoing expansion and improvement of our HVAC business.
Jeff Wisdom: We are pleased with our results year to date and look forward to the opportunities that summer brings to further invest in our people and advanced various business development initiatives with that I'll turn the call over to rich to provide additional comments on the quarter's results rich thanks, Jeff and good morning, everyone for the second quarter, our home heating oil and propane volume rose by <unk>.
Richard Ambury: With that, I'll turn the call over to Rich to provide additional comments on the quarter's results. Rich? Thanks, Jeff. And good morning, everyone. For the second quarter, our home heating oil and propane volume rose by 27 million gallons or 23% to 144 million gallons as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors. Temperatures for the fiscal 2025 second quarter were 13% colder than last year, but still 4.5% warmer than normal. Our product gross profit increased by $52 million, or 25%, to $258 million due to an increase in home heating oil and propane volumes sold, higher home heating oil and propane per gallon margins, and an increase in gross profit from other petroleum products.
Rich: 7 million gallons or 23% to 144 million gallons as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors temperatures for the fiscal 2025 second quarter were 13% colder than last year, but still four and a half.
Rich: Percent warmer than normal our product gross profit increased by $52 million or 25% to $258 million due to an increase in home heating oil and propane volumes sold higher home heating oil and propane per gallon margins and an increase in gross profit from other petroleum products.
Rich: We continue to make strides in our service and installation business, which contributed to an increase in adjusted EBITDA of $1 $6 million delivery branch and G&A expenses increased by $22 million year over year of which $9 6 million was attributable to our web.
Richard Ambury: We continue to make strides in our service and installation business, which contributed an increase in adjusted EBITDA of $1.6 million. delivery, branch, and G&A expenses increased by $22 million year-over-year, of which $9.6 million was attributable to our weather hedging program. In the second quarter of fiscal 2025, we recorded an expense of $3.1 million under our contract due to the colder weather, compared to a benefit of $6.5 million recorded in the second quarter of fiscal 2024, reflecting warmer temperatures last year. Recent acquisitions accounted for an increase of $7 million in expenses, while expenses in the base business rose by $5 million, or 4.5%, largely due to the related 12% increase in volume in the base For more information visit www.stargroup.com We posted net income of $86 million in the second quarter of fiscal 2025, or $18 million higher than the prior year period, reflecting a $32 million increase in adjusted EBITDA and a non-cash unfavorable change in the fair value of derivative instruments of $6 million, more than offsetting higher income tax expense.
Our hedging program.
Rich: In the second quarter of fiscal 2025, we recorded an expense of $3 $1 million under our contract due to the colder weather compared to a benefit of six and a half million dollars recorded in the second quarter of fiscal 2024, reflecting warmer temperatures last year right.
Rich: Recent acquisitions accounted for an increase of $7 million in expenses, while expenses in the base business rose by $5 million or 4.5% largely due to the related 12% increase in volume in the base business. We posted net income of 86 million in the second.
Rich: Quarter of fiscal 2025 or $18 million higher than the prior year period, reflecting a 32 million dollar increase in adjusted EBITDA and a noncash unfavorable change in the fair value of derivative instruments of $6 million more than offsetting higher income tax expense.
Richard Ambury: Adjusted EBITDA rose by $32 million to $128 million due to higher home heating oil and propane volume sold in the base business, the impact of adjusted EBITDA attributable to acquisitions, and an increase in home heating oil. and propane per gallon margins in the base business and improvement in service and installation profitability. Now turning to the results for the first half of fiscal 2025, our home heating oil and propane volume increased by 29 million gallons or 14.7% to 226 million gallons, again reflecting colder temperatures and the additional volume provided from acquisitions more than offsetting net customer attrition and other factors.
Rich: Adjusted EBITDA rose by $32 million to $128 million due to higher home heating oil and propane volumes sold in the base business the impact of adjusted EBITDA attributable to acquisitions and an increase at home heating oil.
Rich: And propane per gallon margins in the base business and improvement in service and installation profitability.
Rich: Now turning to the results for the first half of fiscal 2025, our home heating oil and propane volume increased by 29 million gallons or 14, 7% to 226 million gallons again, reflecting colder temperatures and the additional volume provided from acquisitions more than offsetting net customer attrition and other factor.
Rich: Temperatures in star's geographic areas of operation.
Richard Ambury: Temperatures in Star's geographic areas of operation during the fiscal year to date were 9.4% colder than the prior year, but still, again, 6.8% warmer than normal. Our product gross profit rose by $58 million, or 17%, to $409 million due to an increase in the volume of home heating oil and propane sold, higher home heating oil and propane per gallon margins, and again, an increase in gross profit from other petroleum products. As previously mentioned, improvements in our service and installation business profitability continued to, as an increase in, provided an increase in adjusted EBITDA of 4.1 million during the six months of fiscal 2025.
Rich: During the fiscal year to date were nine 4% colder than the prior year, but still again six 8% warmer than normal our product gross profit rose by $58 million or 17% to $409 million due to an increase in the volume of home heating oil and propane sold.
Rich: Higher home heating oil and propane per gallon margins and again, an increase in gross profit from other petroleum products as previously mentioned improvements in our service and installation business profitability continued to as an increase in adjusted provided an increase in adjusted EBITDA of $4 1 million during the <unk>.
Rich: Six months of fiscal 2025 delivery branch and G&A expenses rose by $27 million year over year of which $10 6 million was attributable to our weather hedging program in fiscal 2025, we recorded a net expense of $3.1 billion under our weather hedge compare.
Richard Ambury: Delivery, branch, and G&A expenses rose by $27 million year over year, of which 10.6 million was attributable to our weather hedging program. In fiscal 2025, we recorded an expense of $3.1 million under our weather hedge compared to a benefit of $7.5 million recorded in fiscal 2024, reflecting weather conditions in both periods. Recent acquisitions accounted for an increase of $13 million, and expenses in the base business rose by $3.7 million, or just 1.7%, largely due to a 5% increase in volume in the base business.
Rich: To a benefit of seven and a half million dollars recorded in fiscal 'twenty 'twenty, four reflecting weather conditions in both periods.
Rich: Recent acquisitions accounted for an increase of $13 million and expenses in the base business rose by $3 $7 million of just 1.7% largely due to a 5% increase in volume in the base business net income.
Net Income. posted was $119 million for the six months of fiscal 2025, or $37 million than the prior year period, largely due to an increase in adjusted EBITDA of $34.6 million in the after-tax impact of a non-cash favorable change in the fair value of derivative instruments of $19 million. Adjusted EBITDA rose by $34.6 million to $180 million due to an increase in home heating oil and propane volume sold in the base business, an increase in adjusted EBITDA from recent acquisitions, higher home heating oil and propane per gallon margins in the base business, and an improvement in service and installation profitability.
Rich: Posted was $119 billion for the six months of fiscal 2025 or $37 million in the higher than the prior year period, largely due to an increase in adjusted EBITDA of $34 6 million in the after tax impact of a noncash favorable change in the fair value of <unk>.
Rich: Derivative instruments of $19 million adjusted EBITDA rose by $34 6 million to $180 million due to an increase in home heating oil and propane volumes sold in the base business an increase in adjusted EBITDA from recent acquisitions and higher home heating oil and propane per.
Rich: Gallon margins in the base business and an improvement in service and installation profitability.
Rich: Please know that for fiscal 2026, we have put in place $15 million of weather hedges with similar terms to those in 2025 and also note that while we did benefit from the winter profits of the recent acquisitions. These acquisitions will also have losses, and theyre not heating season, which will temper.
Speaker Change: These profits and with that I'd like to turn the conversation back to Jeff.
Jeff Wisdom: At this time, we're pleased to address any questions. You may have operator, please open the phone lines for questions.
Jeff Wisdom: We will now begin the question and answer session to ask a question. Please press star one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Jeff Wisdom: Anytime you question has been addressed and you would like to withdraw your question. Please press star two.
Speaker Change: The first question comes from Tim Mullen from loyalty management. Please go ahead.
Jeff Wisdom: Hey, Thanks for taking my questions.
Speaker Change: First I was just curious.
Jeff Wisdom: Given the lack.
Jeff Wisdom: Buybacks that have occurred in the past couple of months I'm. Just curious if there's any changes to that program and the recent acquisitions, but given their size had any impact on that program.
Jeff Wisdom: There's really been no change to the program is still operating you know as we as we have it in place that's it.
Jeff Wisdom: This is the strike price that we have in place with it.
Jeff Wisdom: With J P. Morgan.
Jeff Wisdom: I mean, it's okay. It's on automatic pilot, we don't we don't enter the market every day and it's a buy sell or buy buy buy we were out of it is on automatic pilot.
Jeff Wisdom: Understood.
Jeff Wisdom: And then switching gears.
Jeff Wisdom: The in terms of the acquisition pipeline.
Jeff Wisdom: Are you looking at any better in the each back installation and servicing business or was this really just more on the distribution side.
Jeff Wisdom: It's more on the distribution side primarily.
Jeff Wisdom: Primarily heating oil and propane businesses. We we are undertaking this initiative on a limited basis to try to build out our own HVAC business internally organically.
Speaker Change: Okay, great. Thanks, and if I could just ask one last one.
Speaker Change: In terms of just the consumer it didn't seem like there was much in terms of changes to various allowances.
Speaker Change: For credit losses, but I was just curious just qualitatively are you seeing any difference in terms of customers' ability to pay.
Speaker Change: Timeliness that kind of thing.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Historically and I've been here for 42 years.
Speaker Change: You know our bad debt rate has been you know three tenths of 1% or sales are pretty close to that on an annual basis.
Speaker Change: It has been cold and.
Speaker Change: When people need home heating oil to heat their homes. So they they will pay that bill during the winter. So we'll have to see how the all that kind of settles up at the end of the summer when when they don't really don't really need it so to speak because there won't be any deliveries, but historically, that's been our bad debt rate for almost ever.
Speaker Change: Thanks.
Speaker Change: As a reminder, if you have a question please press star one.
Speaker Change: The next question comes from Michael <unk> from 10-K capital. Please go ahead.
Speaker Change: Yeah morning, guys and congrats.
Speaker Change: Congratulations.
Speaker Change: No to the entire team of terrific execution.
Speaker Change: Just a couple of questions.
Speaker Change: One is do you anticipate any impact from tariffs on heating oil prices in your markets.
Speaker Change: Then secondly on the acquisition front.
Speaker Change: I'm just wondering is there.
Speaker Change: Is there anything that happened.
Speaker Change: Hum.
Speaker Change: Tax wise or otherwise.
Speaker Change: Otherwise.
Speaker Change: Do you think increased.
Speaker Change: Availability is acquisitions and do you feel like you have sufficient firepower right now to execute on the opportunities in front of you. Thanks.
Speaker Change: So Michael in regards to tariffs.
Speaker Change: Obviously, it's a it's a fluid situation as I think everybody can understand.
Speaker Change: We have experienced some price increases lay on the HVAC side of our business with parts and equipment.
Speaker Change: No that ranges anywhere from three 3% to 15% roughly is what we've seen so far Fortunately.
Speaker Change: Vendors provide.
Speaker Change: Provided us enough notice.
Speaker Change: In order to adjust and adjust our pricing so that's kind of what we're experiencing right now.
Speaker Change: It's where we are on that.
Speaker Change: The acquisition front.
Speaker Change: I don't know that we've seen any any difference you know related to taxes or anything like that I would say that we.
Speaker Change: We had some pent up demand.
Speaker Change: Going into the heating season, and we had you know obviously a busy busier season overall we.
Speaker Change: We had heard from various sources that they were going to be.
Speaker Change: Additional opportunities hitting the market after the season concluded.
Speaker Change: It's pretty much what we're saying right now.
Speaker Change: Okay.
Speaker Change: Okay, great keep up the good work congratulations.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Again, if you have a question please press star one.
Speaker Change: At this point, there's no further questions in the queue I'd like to turn the call back over to Mr. Woodman for closing remarks.
Woodman: Okay. Thanks.
Speaker Change: Have you taken the time to join US today and your ongoing interest in Star Group, We look forward to sharing our 2025 fiscal third quarter results in August have a great summer.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.