Q2 2026 Suburban Propane Partners LP Earnings Call

May 7, 2026

Operator: At this time, I would like to welcome everyone to the Suburban Propane Second Quarter Earnings Conference Call. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. The floor is yours.

Speaker #2: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Speaker #2: I would now like to turn the conference over to Davin D'Ambrosio. Vice President and Treasurer. The floor is yours. Morgan, thank you. Good morning, everyone.

A. Davin D'Ambrosio: Morgan, thank you. Good morning, everyone. Thank you for joining us this morning for our fiscal 2026 Q2 earnings conference call. Joining me this morning are Mike Stivala, our president and chief executive officer; Mike Kuglin, chief financial officer; and Alex Centeno, senior vice president of operations. This morning, we will review our Q2 financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties.

Davin D'Ambrosio: Morgan, thank you. Good morning, everyone. Thank you for joining us this morning for our fiscal 2026 Q2 earnings conference call. Joining me this morning are Mike Stivala, our president and chief executive officer; Mike Kuglin, chief financial officer; and Alex Centeno, senior vice president of operations. This morning, we will review our Q2 financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties.

Speaker #2: Thank you for joining us this morning for our fiscal 2026 second quarter earnings conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Santeno, Senior Vice President of Operations.

Speaker #2: This morning, we will review our second quarter financial results along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions.

Speaker #2: Our conference call contains forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934 as amended relating to the partnership's future business expectations and predictions and financial condition and results of operations.

Speaker #2: These forward-looking statements involve certain risk and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements.

A. Davin D'Ambrosio: We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10-K for the fiscal year ended 27 September 2025, and our Form 10-Q for the period ending 28 March 2026, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting partnership or SEC. Certain non-GAAP measures will be discussed on this call.

Davin D'Ambrosio: We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10-K for the fiscal year ended 27 September 2025, and our Form 10-Q for the period ending 28 March 2026, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting partnership or SEC. Certain non-GAAP measures will be discussed on this call.

Speaker #2: Which are referred to as cautionary statements and are earnings press release. Which can be viewed on our website at suburbanpropane.com. I'll subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements.

Speaker #2: Our annual report on Form 10-K for the fiscal year ended September 27th, 2025, and our Form 10-Q for the period ended March 28th, 2026, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors.

Speaker #2: Copies may be obtained by copy contacting partnership or SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of why these measures, as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning.

A. Davin D'Ambrosio: We have provided a description of why these measures, as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the investor relations section of our website. At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Davin D'Ambrosio: We have provided a description of why these measures, as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the investor relations section of our website. At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Speaker #2: Form 8-K will be available through a link in the Investor Relations section of our website. At this point, I will turn the call over to Mike Stivala for some opening remarks.

Speaker #2: Mike. Thanks, Davin. Good morning. Thank you all for joining us today. The fiscal 2026 second quarter was another solid quarter for Suburban Propane. Our core propane business performed extremely well in a very challenging heating season.

Michael A. Stivala: Thanks, Davin. Good morning. Thank you all for joining us today. The fiscal 2026 Q2 was another solid quarter for Suburban Propane. Our core propane business performed extremely well in a very challenging heating season. We made great progress stabilizing production and advancing our expansion projects in our renewable natural gas business. With our excess cash flows from operations, we continued to reduce our total outstanding debt. With respect to our propane operations, this year's heating season was a tale of 2 halves. The eastern half of our footprint experienced some of the most sustained colder temperatures in the heart of the heating season than we have experienced in decades, along with several harsh winter storms. Our western half, on the other hand, reported near record warm temperatures throughout most of the winter.

Mike Stivala: Thanks, Davin. Good morning. Thank you all for joining us today. The fiscal 2026 Q2 was another solid quarter for Suburban Propane. Our core propane business performed extremely well in a very challenging heating season. We made great progress stabilizing production and advancing our expansion projects in our renewable natural gas business. With our excess cash flows from operations, we continued to reduce our total outstanding debt. With respect to our propane operations, this year's heating season was a tale of 2 halves. The eastern half of our footprint experienced some of the most sustained colder temperatures in the heart of the heating season than we have experienced in decades, along with several harsh winter storms. Our western half, on the other hand, reported near record warm temperatures throughout most of the winter.

Speaker #2: We made great progress stabilizing production and advancing our expansion projects in our renewable natural gas business. And with our excess cash flows from operations, we continue to reduce our total outstanding debt.

Speaker #2: With respect to our propane operations, this year's heating season was a tale of two halves. The eastern half of our footprint experienced some of the most sustained colder temperatures in the heart of the heating season than we've experienced in decades.

Speaker #2: Along with several harsh winter storms, our western half, on the other hand, reported near-record warm temperatures throughout most of the winter. Where we got weather, customer demand surged, and our teams worked tirelessly to safely and reliably meet the needs of our customers.

Michael A. Stivala: Where we got weather, customer demand surged, and our teams worked tirelessly to safely and reliably meet the needs of our customers, many times in some very harsh weather with challenging road conditions. Volumes in our eastern territories were approximately 3% higher than the prior year Q2 on average heating degree days that were 3% colder than the same period. In the west, volumes were approximately 10% lower on average heating degree days that were 17% warmer. As always, our operating personnel were well prepared to manage the surge in demand in our eastern markets, supplemented by resources redeployed from certain locations in our western territories to provide the additional support. I am so proud of how our teams responded to meet our customers' needs under these conditions, while also maintaining their focus on our customer base growth and retention initiatives.

Mike Stivala: Where we got weather, customer demand surged, and our teams worked tirelessly to safely and reliably meet the needs of our customers, many times in some very harsh weather with challenging road conditions. Volumes in our eastern territories were approximately 3% higher than the prior year Q2 on average heating degree days that were 3% colder than the same period. In the west, volumes were approximately 10% lower on average heating degree days that were 17% warmer. As always, our operating personnel were well prepared to manage the surge in demand in our eastern markets, supplemented by resources redeployed from certain locations in our western territories to provide the additional support. I am so proud of how our teams responded to meet our customers' needs under these conditions, while also maintaining their focus on our customer base growth and retention initiatives.

Speaker #2: Many times in some very harsh weather, with challenging road conditions. Volumes in our eastern territories were approximately 3% higher than the prior year's second quarter, on average heating degree days that were 3% colder than the same period.

Speaker #2: In the west, volumes were approximately 10% lower on average heating degree days that were 17% warmer. As always, our operating personnel were well-prepared to manage the surge in demand in our eastern markets, supplemented by resources redeployed from certain locations in our western territories to provide the additional support.

Speaker #2: And I am so proud of how our teams responded to meet our customers' needs under these conditions, while also maintaining their focus on our customer-based growth and retention initiatives.

Speaker #2: In addition to solid volume performance, we effectively managed selling prices amid a volatile commodity price environment influenced in March by the conflict in the Middle East.

Michael A. Stivala: In addition to solid volume performance, we effectively managed selling prices amid a volatile commodity price environment influenced in March by the conflict in the Middle East, while also maintaining disciplined expense control. In our renewable natural gas operations, average daily D3 RNG injections during the Q2 of fiscal 2026 increased 16% compared to the prior sequential quarter and more than 12% compared to the prior year Q2, driven by improved facility uptime and the benefits of our capital investments and process improvements that we have implemented since our acquisition of our anaerobic digester facility in Stanfield, Arizona.

Mike Stivala: In addition to solid volume performance, we effectively managed selling prices amid a volatile commodity price environment influenced in March by the conflict in the Middle East, while also maintaining disciplined expense control. In our renewable natural gas operations, average daily D3 RNG injections during the Q2 of fiscal 2026 increased 16% compared to the prior sequential quarter and more than 12% compared to the prior year Q2, driven by improved facility uptime and the benefits of our capital investments and process improvements that we have implemented since our acquisition of our anaerobic digester facility in Stanfield, Arizona.

Speaker #2: While also maintaining disciplined expense control. In our renewable natural gas operations, average daily P3 RNG injections during the second quarter of fiscal 2026 increased 16% compared to the prior sequential quarter and more than 12% compared to the prior year's second quarter.

Speaker #2: Driven by improved facility uptime and the benefits of our capital investments and process improvements that we have implemented since our acquisition of our anaerobic digester facility in Stanfield, Arizona.

Speaker #2: Additionally, with our new anaerobic digester facility in upstate New York, and our gas upgrading system at our facility in Columbus, Ohio—both of which remain on schedule for completion during the second half of fiscal 2026—we expect to add approximately 200,000 MMBtus of annual production to our RNG platform.

Michael A. Stivala: Additionally, with our new anaerobic digester facility in upstate New York and our gas upgrading system at our facility in Columbus, Ohio, both of which remain on schedule for completion during the second half of fiscal 2026, we expect to add approximately 200,000 MMBtus of annual production to our RNG platform. We are also pursuing opportunities to increase feedstock intake for both manure and food waste at the Stanfield facility in order to take advantage of additional production capacity at the plant. While environmental credit values, particularly California LCFS prices, have been depressed over the past couple of years, we are encouraged by the regulatory steps taken by the California Air Resources Board to create a better balance in the supply-demand equation for environmental credits, which is starting to favorably impact LCFS credit values.

Mike Stivala: Additionally, with our new anaerobic digester facility in upstate New York and our gas upgrading system at our facility in Columbus, Ohio, both of which remain on schedule for completion during the second half of fiscal 2026, we expect to add approximately 200,000 MMBtus of annual production to our RNG platform. We are also pursuing opportunities to increase feedstock intake for both manure and food waste at the Stanfield facility in order to take advantage of additional production capacity at the plant. While environmental credit values, particularly California LCFS prices, have been depressed over the past couple of years, we are encouraged by the regulatory steps taken by the California Air Resources Board to create a better balance in the supply-demand equation for environmental credits, which is starting to favorably impact LCFS credit values.

Speaker #2: We are also pursuing opportunities to increase feedstock intake for both manure and food waste at the Stanfield facility in order to take advantage of additional production capacity at the plant.

Speaker #2: While environmental credit values particularly California LCFS prices have been depressed over the past couple of years, we are encouraged by the regulatory steps taken by the California Air Resources Board to create a better balance in the supply-demand equation for environmental credits.

Speaker #2: Which is starting to favorably impact LCFS credit values. We are also pleased to see the Treasury release draft regulations in February 2026 that favorably addressed ambiguities in previous guidance related to the eligibility to earn production tax credits, or PTCs, under Section 45(z) of the Internal Revenue Code as promulgated in the Inflation Reduction Act.

Michael A. Stivala: We are also pleased to see the Treasury release draft regulations in February 2026 that favorably addressed ambiguities in previous guidance related to the eligibility to earn Production Tax Credits, or PTCs, under Section 45Z of the Internal Revenue Code as promulgated in the Inflation Reduction Act. The One Big Beautiful Bill Act also extended the window for PTCs by 2 years until December 2029. During the Q2 of fiscal 2026, we recognized three and a half million dollars of PTCs earned on D3 RNG injections at our Stanfield facility for the period from January 2025 through March 2026. We continue to earn PTCs on production going forward. As D3 production at our upstate New York facility comes online, we expect to be eligible to earn PTCs for RNG injected from that facility as well.

Mike Stivala: We are also pleased to see the Treasury release draft regulations in February 2026 that favorably addressed ambiguities in previous guidance related to the eligibility to earn Production Tax Credits, or PTCs, under Section 45Z of the Internal Revenue Code as promulgated in the Inflation Reduction Act. The One Big Beautiful Bill Act also extended the window for PTCs by 2 years until December 2029. During the Q2 of fiscal 2026, we recognized three and a half million dollars of PTCs earned on D3 RNG injections at our Stanfield facility for the period from January 2025 through March 2026. We continue to earn PTCs on production going forward. As D3 production at our upstate New York facility comes online, we expect to be eligible to earn PTCs for RNG injected from that facility as well.

Speaker #2: The one big beautiful bill act also extended the window for PTCs by two years until December 2029. During the second quarter of fiscal 2026, we recognized 3.5 million dollars of PTCs earned on D3 RNG injections at our Stanfield facility for the period from January 2025 through March 2026.

Speaker #2: And we continue to earn PTCs on production going forward. As D3 production at our upstate New York facility comes online, we expect to be eligible to earn PTCs for RNG injected from that facility as well.

Speaker #2: So for the second quarter of fiscal 2026, adjusted EBITDA of $175.3 million was essentially flat to the prior year, and combined with our fiscal first quarter results, adjusted EBITDA totaled $258.7 million for the first half of the fiscal year.

Michael A. Stivala: For the Q2 of fiscal 2026, adjusted EBITDA of $175.3 million was essentially flat to the prior year. Combined with our fiscal Q1 results, adjusted EBITDA totaled $258.7 million for the H1 of the fiscal year. That's an increase of $8.4 million or 3.4% compared to the first 2 quarters of the prior year. With another quarter of strong operating performance and with capital expenditures for our RNG facilities that are nearing completion, we used excess cash flow generated during the Q2 to reduce our total outstanding debt by more than $64 million.

Mike Stivala: For the Q2 of fiscal 2026, adjusted EBITDA of $175.3 million was essentially flat to the prior year. Combined with our fiscal Q1 results, adjusted EBITDA totaled $258.7 million for the H1 of the fiscal year. That's an increase of $8.4 million or 3.4% compared to the first 2 quarters of the prior year. With another quarter of strong operating performance and with capital expenditures for our RNG facilities that are nearing completion, we used excess cash flow generated during the Q2 to reduce our total outstanding debt by more than $64 million.

Speaker #2: That's an increase of 8.4 million, or 3.4%, compared to the first two quarters of the prior year. And with another quarter of strong operating performance and with capital expenditures for our RNG facilities that are nearing completion, we used excess cash flows generated during the second quarter to reduce our total outstanding debt by more than $64 million.

Speaker #2: We remain disciplined in our capital allocation balancing investments in the growth of our core propane business and renewable energy platform with preserving balance sheet strength and flexibility in support of our long-term strategic growth initiatives and for enhancing unit holder value.

Michael A. Stivala: We remain disciplined in our capital allocation, balancing investments in the growth of our core propane business and renewable energy platform with preserving balance sheet strength and flexibility in support of our long-term strategic growth initiatives and for enhancing unitholder value. In a moment, I'll come back for some closing remarks. However, let me turn the call over to Michael A. Kuglin to discuss the Q2 results in more detail. Michael A. Kuglin.

Mike Stivala: We remain disciplined in our capital allocation, balancing investments in the growth of our core propane business and renewable energy platform with preserving balance sheet strength and flexibility in support of our long-term strategic growth initiatives and for enhancing unitholder value. In a moment, I'll come back for some closing remarks. However, let me turn the call over to Michael A. Kuglin to discuss the Q2 results in more detail. Michael A. Kuglin.

Speaker #2: In a moment, I'll come back for some closing remarks. However, let me turn the call over to Mike Kuglin to discuss the second quarter results in more detail.

Speaker #2: Mike. Thanks, Mike. And good morning, everyone. To be consistent with the previous reporting, as I discussed our second quarter results, I may exclude any impact of unrealized marked market adjustments on our commodity hedges, which resulted in unrealized loss of $1.4 million for the second quarter, compared to an unrealized gain of $700,000 in the prior year's second quarter.

Michael A. Kuglin: Thanks, Mike Kuglin. Good morning, everyone. To be consistent with previous reporting, as I discuss our Q2 results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of $1.4 million for Q2, compared to an unrealized gain of $700,000 in the prior year Q2. Excluding these and certain other non-cash items, adjusted net income for Q2 was $139.3 million or $2.09 per common unit, compared to adjusted net income of $136.9 million or $2.11 per common unit in the prior year Q2. Adjusted EBITDA for Q2 was $175.3 million, which was flat compared to the prior year Q2.

Mike Kuglin: Thanks, Mike Kuglin. Good morning, everyone. To be consistent with previous reporting, as I discuss our Q2 results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of $1.4 million for Q2, compared to an unrealized gain of $700,000 in the prior year Q2. Excluding these and certain other non-cash items, adjusted net income for Q2 was $139.3 million or $2.09 per common unit, compared to adjusted net income of $136.9 million or $2.11 per common unit in the prior year Q2. Adjusted EBITDA for Q2 was $175.3 million, which was flat compared to the prior year Q2.

Speaker #2: Excluding these and certain other non-cash items, adjusted net income for the second quarter was $139.3 million, or $2.09 per common unit, compared to adjusted net income of $136.9 million, or $2.11 per common unit in the prior year's second quarter.

Speaker #2: Adjusted EBITDA for the second quarter was $175.3 million, which was flat compared to the prior year's second quarter. Recap propane gallons sold in the second quarter were $161.6 million gallons, essentially unchanged compared to the prior year.

Michael A. Kuglin: Retail propane gallons sold in Q2 were 161.6 million gallons, essentially unchanged compared to the prior year as the impact of colder temperatures across much of the eastern half of the country on heat-related demand, together with contributions from our recent acquisitions, were offset by considerably warmer temperatures in the western half. With respect to the weather, average temperatures across our service territories during Q2 were 6% warmer than normal and 1% warmer than the prior year. In the eastern half of the US, average temperatures were slightly warmer than normal and 3% colder than the prior year Q2. Whereas average temperatures in the west were 22% warmer than normal and 17% warmer than the prior year Q2.

Mike Kuglin: Retail propane gallons sold in Q2 were 161.6 million gallons, essentially unchanged compared to the prior year as the impact of colder temperatures across much of the eastern half of the country on heat-related demand, together with contributions from our recent acquisitions, were offset by considerably warmer temperatures in the western half. With respect to the weather, average temperatures across our service territories during Q2 were 6% warmer than normal and 1% warmer than the prior year. In the eastern half of the US, average temperatures were slightly warmer than normal and 3% colder than the prior year Q2. Whereas average temperatures in the west were 22% warmer than normal and 17% warmer than the prior year Q2.

Speaker #2: And the impact of colder temperatures across much of the eastern half of the country on heat-related demand together with contributions from our recent acquisitions were all set by considerably warmer temperatures in the western half.

Speaker #2: With respect to the weather, average temperatures across our service territories during the second quarter were 6% warmer than normal, and 1% warmer than the prior year.

Speaker #2: In the eastern half of the US, average temperatures were slightly warmer than normal, and 3% colder than the prior year's second quarter. Whereas average temperatures in the west were 22% warmer than normal, and 17% warmer than the prior year's second quarter.

Speaker #2: For a commodity perspective, propane inventory levels in the US experienced a seasonal decline during the second quarter, but remained well above historical averages for this time of year.

Michael A. Kuglin: From a commodity perspective, propane inventory levels in the US experienced a seasonal decline during Q2, but remained well above historical averages for this time of year. At the end of Q2, US propane inventories were at 77 million barrels, which were 75% higher than March 2025 levels and 47% higher than the 5-year average for March. Given the increase in inventories and other factors, average wholesale propane prices for the quarter of $0.69 per gallon, basis Mont Belvieu, decreased 23% compared to the prior Q2. Although average propane prices for Q2 were lower than the prior year, prices have been volatile and have recently begun to rise due to the conflict in Iran and resulting disruption to global energy markets.

Mike Kuglin: From a commodity perspective, propane inventory levels in the US experienced a seasonal decline during Q2, but remained well above historical averages for this time of year. At the end of Q2, US propane inventories were at 77 million barrels, which were 75% higher than March 2025 levels and 47% higher than the 5-year average for March. Given the increase in inventories and other factors, average wholesale propane prices for the quarter of $0.69 per gallon, basis Mont Belvieu, decreased 23% compared to the prior Q2. Although average propane prices for Q2 were lower than the prior year, prices have been volatile and have recently begun to rise due to the conflict in Iran and resulting disruption to global energy markets.

Speaker #2: At the end of the second quarter, US propane inventories were at 77 million barrels, which were 75% higher than March 2025 levels, and 47% higher than the five-year average for March.

Speaker #2: Given the increase in inventories and other factors, average wholesale propane prices for the quarter of $69 per gallon faces Mount Bellevue decreased 23% compared to the prior year's second quarter.

Speaker #2: Although average propane prices for the second quarter were lower than the prior year, prices have involved and have recently begun to rise due to the conflict in Iran and the resulting disruption of global energy markets.

Speaker #2: At the end of February, just before the start of the conflict, bot propane prices were in the mid-60 cents per gallon range. Whereas most recently, spot prices have risen to the 90 cents per gallon range.

Michael A. Kuglin: At the end of February, just before the start of the conflict, spot propane prices were in the mid $0.60 per gallon range, whereas most recently, spot prices have risen to the $0.90 per gallon range. Excluding the impact of the non-cash mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margins of $345.1 million for Q2 increased $500,000 compared to the prior Q2, primarily due to the slight increase in propane unit margins of $0.03 per gallon or 1.7%.

Mike Kuglin: At the end of February, just before the start of the conflict, spot propane prices were in the mid $0.60 per gallon range, whereas most recently, spot prices have risen to the $0.90 per gallon range. Excluding the impact of the non-cash mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margins of $345.1 million for Q2 increased $500,000 compared to the prior Q2, primarily due to the slight increase in propane unit margins of $0.03 per gallon or 1.7%.

Speaker #2: Excluding impact of the non-cash marked market adjustments on our commodity hedges that I mentioned earlier, total gross margins of $345.1 million for the second quarter increased $500,000 compared to the prior year's second quarter, primarily due to a slight increase in propane unit margins of 3 cents per gallon, or 1.7%.

Speaker #2: As Mike mentioned, following this publication of proposed treasury regulations in February 2026, which provided sufficient clarity for us to conclude that production and sale of our RNG qualifies for production tax credits under Section 45(c), we recognize 3.5 million dollars of PTCs earned on D3 RNG injections at our Stanfield, Arizona facility for the period from January 2025 through March 2026.

Michael A. Kuglin: As Mike mentioned, following the publication of proposed treasury regulations in February 2026, which provided sufficient clarity for us to conclude that the production and sale of our RNG qualifies for Production Tax Credits under Section 45Z, we recognized $3.5 million of PTCs earned on D3 RNG injections at our Stanfield, Arizona facility for the period from January 2025 through March 2026. The benefit was reported as a reduction to operating expenses and included a catch-up adjustment of $2 million for credits related to fiscal 2025 and $800,000 related to the Q1 of fiscal 2026.

Mike Kuglin: As Mike mentioned, following the publication of proposed treasury regulations in February 2026, which provided sufficient clarity for us to conclude that the production and sale of our RNG qualifies for Production Tax Credits under Section 45Z, we recognized $3.5 million of PTCs earned on D3 RNG injections at our Stanfield, Arizona facility for the period from January 2025 through March 2026. The benefit was reported as a reduction to operating expenses and included a catch-up adjustment of $2 million for credits related to fiscal 2025 and $800,000 related to the Q1 of fiscal 2026.

Speaker #2: The benefit was reported as a reduction to operating expenses and included a catch-up adjustment of $2 million for credits related to fiscal 2025 and $800,000 related to the first quarter of fiscal 2026.

Speaker #2: With that said, combined operating energy and expenses of $169.5 million for the quarter were flat compared to the prior year's second quarter, as higher payroll and benefit-related expenses along with higher fuel and vehicle maintenance costs driven by elevated activity levels to meet stronger customer demand in the eastern territories and an increase in accruals for self-insurance matters were offset by the recognition of production tax credits and a 2.9 million insurance recovery related to the partial settlement of certain claims associated with our RNG acquisition December 2022.

Michael A. Kuglin: With that said, combined operating and G&A expenses of $169.5 million for Q2 were flat compared to the prior year Q2 as higher payroll and benefit related expenses, along with higher fuel and vehicle maintenance costs, driven by elevated activity levels to meet stronger customer demand in the eastern territories and an increase in accruals for self-insurance matters were offset by the recognition of production tax credits and a $2.9 million insurance recovery related to the partial settlement of certain claims associated with our RNG acquisition December 2022. Net interest expense of $19.7 million for Q2 decreased 4.2% compared to the prior year Q2, resulting from a lower level of average outstanding borrowings under our revolving credit facility and lower benchmark interest rates on revolving borrowings.

Mike Kuglin: With that said, combined operating and G&A expenses of $169.5 million for Q2 were flat compared to the prior year Q2 as higher payroll and benefit related expenses, along with higher fuel and vehicle maintenance costs, driven by elevated activity levels to meet stronger customer demand in the eastern territories and an increase in accruals for self-insurance matters were offset by the recognition of production tax credits and a $2.9 million insurance recovery related to the partial settlement of certain claims associated with our RNG acquisition December 2022. Net interest expense of $19.7 million for Q2 decreased 4.2% compared to the prior year Q2, resulting from a lower level of average outstanding borrowings under our revolving credit facility and lower benchmark interest rates on revolving borrowings.

Speaker #2: Net interest expense of 19.7 million dollars for the quarter decreased 4.2% compared to the prior year's second quarter, resulting from a lower level of average outstanding borrowings under our revolving credit facility and lower benchmark interest rates on our revolving borrowings.

Michael A. Kuglin: Total capital spending for the quarter of $24.7 million was $5.4 million higher than the prior year Q2, primarily due to the construction efforts at our Columbus, Ohio and Upstate New York RNG facilities. On a year-to-date basis, our total growth CapEx for our RNG facilities totaled $90 million and our full year capital spending estimate for the existing projects is $35 to $40 million. Turning to our balance sheet. During the Q2, we utilized excess cash flows from operating activities to repay $64.3 million in borrowings under the revolver.

Mike Kuglin: Total capital spending for the quarter of $24.7 million was $5.4 million higher than the prior year Q2, primarily due to the construction efforts at our Columbus, Ohio and Upstate New York RNG facilities. On a year-to-date basis, our total growth CapEx for our RNG facilities totaled $90 million and our full year capital spending estimate for the existing projects is $35 to $40 million. Turning to our balance sheet. During the Q2, we utilized excess cash flows from operating activities to repay $64.3 million in borrowings under the revolver.

Speaker #2: Total capital spending for the quarter of $24.7 million was 5.4 million dollars higher than the prior year's second quarter, primarily due to the construction efforts at our Columbus, Ohio, and upstate New York RNG facilities.

Speaker #2: On a year-to-date basis, our total growth capex for our RNG facilities totaled $19 million, and our full-year capital spending estimate for the existing projects is $35 to $40 million.

Speaker #2: Turning our balance sheet, during the second quarter, we utilized excess cash flows from operating activities to repay $64.3 million in borrowings under the revolver.

Speaker #2: Our consolidated leverage ratio for the trailing 12-month period ended March 2026, improved to 4.34 times, compared to 4.54 times from March 2025. We would increase an adjusted EBITDA of $6 million and total debt reduction of $32.3 million.

Michael A. Kuglin: Our consolidated leverage ratio for the trailing twelve-month period ended March 2026 improved to 4.34 times compared to 4.54 times for March 2025, due to an increase in adjusted EBITDA of $6 million and total debt reduction of $32.3 million. We have now moved through our historically high period of seasonal working capital needs into the fiscal quarters we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet as opportunities arise to fund strategic growth, including the remaining growth capital for our RNG platform. We have more than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. With that, I turn it back to Mike.

Mike Kuglin: Our consolidated leverage ratio for the trailing twelve-month period ended March 2026 improved to 4.34 times compared to 4.54 times for March 2025, due to an increase in adjusted EBITDA of $6 million and total debt reduction of $32.3 million. We have now moved through our historically high period of seasonal working capital needs into the fiscal quarters we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet as opportunities arise to fund strategic growth, including the remaining growth capital for our RNG platform. We have more than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. With that, I turn it back to Mike.

Speaker #2: We've now moved through our historically high period of seasonal working capital needs and into the fiscal quarters we're expected to generate excess cash flows.

Speaker #2: We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet and as opportunities arise to fund strategic growth, including the remaining growth capital for our RNG platform.

Speaker #2: We have more than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. With that, let's circle back to Mike.

Speaker #1: Thanks, Mike. As announced on April 23rd, our Board of Supervisors declared our quarterly distribution of $32.5 cents per common unit in respect of our second quarter fiscal 2026.

Michael A. Stivala: Thanks, Mike. As announced on 23 April, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our Q2 of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on 12 May to our unit holders of record as of 5 May. Our distribution coverage continues to remain strong at 2.2 times for the trailing 12-month period ended March 2026. Just a few closing remarks. The management team here at Suburban Propane has been together for decades now. We've built our core propane business to be recognized as best in class with our hyperlocal operating model.

Mike Stivala: Thanks, Mike. As announced on 23 April, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our Q2 of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on 12 May to our unit holders of record as of 5 May. Our distribution coverage continues to remain strong at 2.2 times for the trailing 12-month period ended March 2026. Just a few closing remarks. The management team here at Suburban Propane has been together for decades now. We've built our core propane business to be recognized as best in class with our hyperlocal operating model.

Speaker #1: That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on May 12th to our unit holders of record as of May the 5th.

Speaker #1: Our distribution coverage continues to remain strong at 2.2 times for the trailing 12-month period ended March 2026. So just a few closing remarks. The management team here at Suburban Propane has been together for decades now.

Speaker #1: We've built our core propane business to be recognized as best-in-class with our hyper-local operating model. As evidenced by our performance in this year's heating season, our business and our outstanding personnel are very well situated to adapt and handle whatever weather conditions come our way.

Michael A. Stivala: As evidenced by our performance in this year's heating season, our business and our outstanding personnel are very well situated to adapt and handle whatever weather conditions come our way. When others in our industry may struggle to keep up in high demand scenarios, our hardworking and dedicated teams across the country rise to the occasion. I'm super proud of their efforts in the face of some very challenging operating conditions this past winter. They've also done a great job executing on our customer base growth and retention initiatives, especially meeting growing demand for propane in certain unique applications, such as EV charging stations, powering port equipment, power generation for data center construction, backup power generation, and multipurpose agricultural uses.

Mike Stivala: As evidenced by our performance in this year's heating season, our business and our outstanding personnel are very well situated to adapt and handle whatever weather conditions come our way. When others in our industry may struggle to keep up in high demand scenarios, our hardworking and dedicated teams across the country rise to the occasion. I'm super proud of their efforts in the face of some very challenging operating conditions this past winter. They've also done a great job executing on our customer base growth and retention initiatives, especially meeting growing demand for propane in certain unique applications, such as EV charging stations, powering port equipment, power generation for data center construction, backup power generation, and multipurpose agricultural uses.

Speaker #1: When others in our industry may struggle to keep up in high-demand scenarios, our hard-working and dedicated teams across the country rise to the occasion.

Speaker #1: I'm super proud of their efforts in the face of some very challenging operating conditions this past winter. They've also done a great job executing on our customer-based growth and retention initiatives, especially meeting growing demand for propane in certain unique applications.

Speaker #1: Such as EV charging stations, powering port equipment, power generation for data center construction, backup power generation, and multi-purpose agricultural uses. We're also proud of our expanded sponsorship with NASCAR and Speedway Motorsports as the official propane of NASCAR.

Michael A. Stivala: We're also proud of our expanded sponsorship with NASCAR and Speedway Motorsports as the official propane of NASCAR, which has given us the opportunity to showcase the power and versatility of propane in a very high performance setting. At 28 races throughout virtually every weekend of the NASCAR Cup Series. In the meantime, we have taken a measured and disciplined approach toward the execution of our long-term strategic growth plans as we continue to build out our renewable energy platform to support the evolving clean energy needs of our customers. As I mentioned in my opening remarks, we've been focused on stabilizing production levels, building a team, and increasing the scale of our RNG platform, a process that we call suburbanizing the platform, to deliver the same operational discipline and excellence that we have been known for within the propane space.

Mike Stivala: We're also proud of our expanded sponsorship with NASCAR and Speedway Motorsports as the official propane of NASCAR, which has given us the opportunity to showcase the power and versatility of propane in a very high performance setting. At 28 races throughout virtually every weekend of the NASCAR Cup Series. In the meantime, we have taken a measured and disciplined approach toward the execution of our long-term strategic growth plans as we continue to build out our renewable energy platform to support the evolving clean energy needs of our customers. As I mentioned in my opening remarks, we've been focused on stabilizing production levels, building a team, and increasing the scale of our RNG platform, a process that we call suburbanizing the platform, to deliver the same operational discipline and excellence that we have been known for within the propane space.

Speaker #1: Which has given us the opportunity to showcase the power and versatility of propane in a very high-performance setting at 28 races throughout virtually every weekend of the NASCAR Cup series.

Speaker #1: In the meantime, we have taken a measured and disciplined approach toward the execution of our long-term strategic growth plans as we continue to build out a renewable energy platform to support the evolving clean energy needs of our customers.

Speaker #1: As I mentioned in my opening remarks, we've been focused on stabilizing production levels building a team and increasing the scale of our RNG platform.

Speaker #1: A process that we call suburbanizing the platform. To deliver the same operational discipline and excellence that we have been known for within the propane space.

Speaker #1: We have made tremendous progress, and we believe that the market for RNG is still in the early stages. With tailwinds that will provide positive support for long-term growth potential, given the ultra-low carbon qualities and its blending or drop-in replacement capabilities, which traditional natural gas.

Michael A. Stivala: We have made tremendous progress, we believe that the market for RNG is still in the early stages, with tailwinds that will provide positive support for long-term growth potential given the ultra-low carbon qualities and its blending or drop-in replacement capabilities with traditional natural gas. As we are coming up on our 100-year anniversary in 2028, we view the build-out of our renewable energy platform as truly long-term strategic investments to help set Suburban Propane up for its next century of success. In closing, I wanna once again thank the more than 3,300 dedicated employees of Suburban Propane for their unwavering commitment to safety and outstanding customer service during a very challenging winter heating season and during a time when our customers needed us most. Thank you.

Mike Stivala: We have made tremendous progress, we believe that the market for RNG is still in the early stages, with tailwinds that will provide positive support for long-term growth potential given the ultra-low carbon qualities and its blending or drop-in replacement capabilities with traditional natural gas. As we are coming up on our 100-year anniversary in 2028, we view the build-out of our renewable energy platform as truly long-term strategic investments to help set Suburban Propane up for its next century of success. In closing, I wanna once again thank the more than 3,300 dedicated employees of Suburban Propane for their unwavering commitment to safety and outstanding customer service during a very challenging winter heating season and during a time when our customers needed us most. Thank you.

Speaker #1: And as we are coming up on our 100-year anniversary in 2028, we view the build-out of our renewable energy platform as truly long-term strategic investments to help set Suburban Propane up for its next century of success.

Speaker #1: In closing, I want to once again thank the more than 3,300 dedicated employees of Suburban Propane for their unwavering commitment to safety, and outstanding customer service during a very challenging winter heating season.

Speaker #1: And during a time when our customers needed us most. Thank you. As always, we appreciate your support and attention this morning, and will now open the call for questions, and Morgan, if you could help us with that.

Michael A. Stivala: As always, we appreciate your support and attention this morning, and we'll now open the call for questions. Morgan, if you could help us with that.

Mike Stivala: As always, we appreciate your support and attention this morning, and we'll now open the call for questions. Morgan, if you could help us with that.

Speaker #2: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and join the queue.

Operator: Thank you. We will now begin the question-and-answer session. It appears there are no questions at this time. I would like to turn the conference back over to Michael A. Stivala for any further remarks.

Speaker #2: If you would like to withdraw your question, simply press star then the number one again. One moment while we compile the Q&A roster. If you would like to ask a question at this time, simply press star then the number one on your telephone keypad.

Speaker #2: It appears there are no questions at this time. I would like to turn the conference back over to Mike Stivala for any further remarks.

Speaker #1: Great. Thanks, Morgan. And thank you all again for joining us. I hope you have a great summer. We look forward to talking to you again in August as we close out our third quarter results.

Michael A. Stivala: Great. Thanks, Morgan. Thank you all again for joining us. I hope you have a great summer. We look forward to talking to you again in August as we close out on our Q3 results. Thank you again, and please be safe.

Mike Stivala: Great. Thanks, Morgan. Thank you all again for joining us. I hope you have a great summer. We look forward to talking to you again in August as we close out on our Q3 results. Thank you again, and please be safe.

Speaker #1: So thank you again, and please be safe.

Operator: This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.