Q3 2026 UGI Corp Earnings Call

August 6, 2026

Operator: Good day. Thank you for standing by. Welcome to the UGI Corporation Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tameka Morris. Please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to the UGI CORPORATION Q3 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #1: After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone; you will then hear an automated message advising your hand is raised.

Operator: To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tameka Morris. Please go ahead.

Speaker #1: To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tameka Morris.

Speaker #1: Please go ahead.

Speaker #2: Good morning, everyone. Thank you for joining our fiscal 2026 third-quarter earnings call. With me today are Bob Flexon, president and CEO, and Sean O'Brien, CFO.

Tameka Morris: Good morning, everyone. Thank you for joining our fiscal 2026 Q3 earnings call. With me today are Robert Flexon, President and CEO, and Sean O'Brien, CFO. On today's call, we will review our Q3 and year-to-date financial results, along with other key business highlights before concluding with a question and answer session. Before we begin, let me remind you that our comments today include certain forward-looking statements which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures.

Tameka Morris: Good morning, everyone. Thank you for joining our fiscal 2026 Q3 earnings call. With me today are Bob Flexon, President and CEO, and Sean O'Brien, CFO. On today's call, we will review our Q3 and year-to-date financial results, along with other key business highlights before concluding with a question and answer session. Before we begin, let me remind you that our comments today include certain forward-looking statements which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict.

Speaker #2: On today's call, we will review our third quarter and year-to-date financial results, along with other key business highlights, before concluding with a question-and-answer session.

Speaker #2: Before we begin, let me remind you that our commence today includes certain forward-looking statements, which management believes to be reasonable as of today's date only.

Speaker #2: Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report for an extensive list of factors that could affect results.

Tameka Morris: Please read our earnings release and our annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures are available within our presentation. Now I'll turn the call over to Bob.

Speaker #2: We assume no duty to update or revise forward-looking statements, to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures.

Speaker #2: Reconciliations of these measures to the comparable GAAP measures are available within our presentation. And now I'll turn the call over to Bob.

Tameka Morris: Reconciliations of these measures to the comparable GAAP measures are available within our presentation. Now I'll turn the call over to Bob.

Speaker #3: Thanks, Tameka, and good morning. Fiscal 2026 continues to be a year of discipline execution against the strategic priorities we laid out at the start of the year.

Robert Flexon: Thanks, Tameka. Good morning. Fiscal 2026 continues to be a year of disciplined execution against the strategic priorities we laid out at the start of the year. That focus is reflected in our financial performance, where solid operational results have absorbed the impact of portfolio actions, unfavorable weather, and slower growth in our domestic propane business. On a year-to-date basis, UGI delivered reportable segments EBIT of $1.2 billion, modestly ahead of the prior year period. This improvement resulted from growth at our utilities, which more than offset roughly $40 million in year-over-year decline from the previously announced LPG divestitures and the effects of warmer weather across our LPG service territories. Importantly, the fundamentals of each of our businesses remain intact, and the operational and financial progress we've made this year continues to strengthen the foundation of the company and support our long-term value creation strategy.

Bob Flexon: Thanks, Tameka. Good morning. Fiscal 2026 continues to be a year of disciplined execution against the strategic priorities we laid out at the start of the year. That focus is reflected in our financial performance, where solid operational results have absorbed the impact of portfolio actions, unfavorable weather, and slower growth in our domestic propane business. On a year-to-date basis, UGI delivered reportable segments EBIT of $1.2 billion, modestly ahead of the prior year period. This improvement resulted from growth at our utilities, which more than offset roughly $40 million in year-over-year decline from the previously announced LPG divestitures and the effects of warmer weather across our LPG service territories. Importantly, the fundamentals of each of our businesses remain intact, and the operational and financial progress we've made this year continues to strengthen the foundation of the company and support our long-term value creation strategy.

Speaker #3: That focus is reflected in our financial performance, where solid operational results have absorbed the impact of portfolio actions unfavorable weather and slower growth in our domestic propane business.

Speaker #3: On a year-to-date basis, UGI delivered reportable segments EBIT of 1.2 billion dollars, modestly ahead of the prior year period. This improvement resulted from growth at our utilities which more than offset roughly 40 million dollars in year-over-year decline from the previously announced LPG divestitures and the effects of warmer weather across our LPG service territories.

Speaker #3: Importantly, the fundamentals of each of our businesses remain intact, and the operational and financial progress we've made this year continues to strengthen the foundation of the company and support our long-term value creation strategy.

Speaker #3: Year-to-date, we directed approximately 76% of total capital expenditures to our natural gas businesses, advancing our commitment to pipeline safety reliability and modernization while adding more than 8,500 new heating customers across our regulated utilities service territories.

Robert Flexon: Year-to-date, we directed approximately 76% of total capital expenditures to our natural gas businesses, advancing our commitment to pipeline safety, reliability, and modernization, while adding more than 8,500 new heating customers across our regulated utilities service territories. Of note, we completed our cast iron replacement commitment several months ahead of schedule, reflecting our continued focus on safety. On 31 July, the administrative law judges recommended approval of UGI Utilities' joint petition for settlement of our gas rate case without modification. Pending approval by the Pennsylvania Public Utility Commission, the settlement would permit a two-step rate increase of $65 million with approximately $40 million effective in October 2026 and approximately $25 million in October 2027, with a stay-out provision through January 2029.

Bob Flexon: Year-to-date, we directed approximately 76% of total capital expenditures to our natural gas businesses, advancing our commitment to pipeline safety, reliability, and modernization, while adding more than 8,500 new heating customers across our regulated utilities service territories. Of note, we completed our cast iron replacement commitment several months ahead of schedule, reflecting our continued focus on safety. On 31 July, the administrative law judges recommended approval of UGI Utilities' joint petition for settlement of our gas rate case without modification. Pending approval by the Pennsylvania Public Utility Commission, the settlement would permit a two-step rate increase of $65 million with approximately $40 million effective in October 2026 and approximately $25 million in October 2027, with a stay-out provision through January 2029.

Speaker #3: Of note, we completed our cast iron replacement commitment several months ahead of schedule, reflecting our continued focus on safety. On July 31st, the administrative law judges recommended approval of UGI utilities joint petition for settlement of our gas rate case without modification.

Speaker #3: Pending approval by the Pennsylvania Public Utility Commission, the settlement would permit a two-step rate increase of 65 million dollars with approximately 40 million dollars effective in October 2026 and approximately 25 million dollars in October 2027, with a stay-out provision through January 2029.

Speaker #3: The terms of the settlement provide the company with a revenue needed to continue investing in its system including maintaining its accelerated replacement of vintage materials while protections to customers.

Robert Flexon: The terms of the settlement provide the company with the revenue needed to continue investing in its system, including maintaining its accelerated replacement of vintage materials while providing substantial benefits and protections to customers. As an example, the settlement includes a pilot that extends meaningful debt relief to a group of vulnerable customers who have historically fallen through the cracks, specifically individuals earning between 150% and 300% of the federal poverty level. These are households that don't qualify under the existing program, the pilot will help customers experiencing trouble paying their bills by providing an avenue to maintain service and manage their bills while mitigating bad debt risk for UGI.

Bob Flexon: The terms of the settlement provide the company with the revenue needed to continue investing in its system, including maintaining its accelerated replacement of vintage materials while providing substantial benefits and protections to customers. As an example, the settlement includes a pilot that extends meaningful debt relief to a group of vulnerable customers who have historically fallen through the cracks, specifically individuals earning between 150% and 300% of the federal poverty level. These are households that don't qualify under the existing program, the pilot will help customers experiencing trouble paying their bills by providing an avenue to maintain service and manage their bills while mitigating bad debt risk for UGI.

Speaker #3: As an example, the settlement includes a pilot that extends meaningful debt relief to a group of vulnerable customers who have historically fallen through the cracks specifically individuals earning between 150% and 300% of the federal poverty level.

Speaker #3: These are households that don't qualify under the existing program, and so the pilot will help customers experiencing trouble paying their bills by providing an avenue to maintain service and manage their bills.

Speaker #3: While mitigating bad debt risk for UGI. Combined with our increased contributions to operation share, where the company will ensure that a minimum of 1.5 million dollars is available every year we believe this settlement reflects a balanced outcome that strengthens the long-term relationship between the utility and the communities we serve.

Robert Flexon: Combined with our increased contributions to Operation Share, where the company will ensure that a minimum of $1.5 million is available every year, we believe this settlement reflects a balanced outcome that strengthens the long-term relationship between the utility and the communities we serve. Beyond our regulated utilities, we also continue to position the midstream business for growth with several well pad expansions planned on the UGI Appalachia system to increase throughput. These investments position us to capitalize on rising natural gas demand across the region, driven by continued economic development and the growing energy needs of data centers and power generation, ensuring we have the capacity in place to serve our customers and support long-term growth. Turning to slide five. At AmeriGas, the transformation is taking hold, driving improved volume retention and favorable trends across several leading indicators.

Bob Flexon: Combined with our increased contributions to Operation Share, where the company will ensure that a minimum of $1.5 million is available every year, we believe this settlement reflects a balanced outcome that strengthens the long-term relationship between the utility and the communities we serve. Beyond our regulated utilities, we also continue to position the midstream business for growth with several well pad expansions planned on the UGI Appalachia system to increase throughput. These investments position us to capitalize on rising natural gas demand across the region, driven by continued economic development and the growing energy needs of data centers and power generation, ensuring we have the capacity in place to serve our customers and support long-term growth. Turning to slide five. At AmeriGas, the transformation is taking hold, driving improved volume retention and favorable trends across several leading indicators.

Speaker #3: Beyond our regulated utilities, we also continue to position the midstream business for growth with several well-pad expansions planned on the UGI Appalachia system to increase throughput.

Speaker #3: These investments position us to capitalize on rising natural gas demand across the region, driven by continued economic development and the growing energy needs of data centers and power generation ensuring we have the capacity in place to serve our customers and support long-term growth.

Speaker #3: Turning the slide five, at Amerigas, the transformation is taking hold. Driving improved volume retention and favorable trends across several leading indicators, the team continues to strengthen the foundation of the business, materially improving trends in retail volume sold when compared to pre-fiscal 2025 levels, as well as the balance sheet and free cash flow generation capabilities.

Robert Flexon: The team continues to strengthen the foundation of the business, materially improving trends in retail volume sold when compared to pre-fiscal 2025 levels, as well as the balance sheet and free cash flow generation capabilities. When compared to fiscal 2024, on a year-to-date basis, lost time injuries are down 50%, recordable injuries are down 44%, out of gas events are down 21%, and zero fills are down 17%, while our average Net Promoter Score is up 63%. This is meaningful and measurable progress. With our call centers now back in the US, we are ramping up sales and marketing efforts, expanding our sales channels, and targeting new residential and B2B customers. These improvements all demonstrate that AmeriGas is now well-positioned for the anticipated return of distributions to UGI Corporation in fiscal 2027. Moving to UGI International.

Bob Flexon: The team continues to strengthen the foundation of the business, materially improving trends in retail volume sold when compared to pre-fiscal 2025 levels, as well as the balance sheet and free cash flow generation capabilities. When compared to fiscal 2024, on a year-to-date basis, lost time injuries are down 50%, recordable injuries are down 44%, out of gas events are down 21%, and zero fills are down 17%, while our average Net Promoter Score is up 63%. This is meaningful and measurable progress. With our call centers now back in the US, we are ramping up sales and marketing efforts, expanding our sales channels, and targeting new residential and B2B customers. These improvements all demonstrate that AmeriGas is now well-positioned for the anticipated return of distributions to UGI Corporation in fiscal 2027. Moving to UGI International.

Speaker #3: When compared to fiscal 2024, on a year-to-date basis, lost time injuries are down 50%, recordable injuries are down 44%, out of gas events are down 21%, and zero fills are down 17%, while our average net promoter score is up 63%.

Speaker #3: This is meaningful and measurable progress. We remain focused on executing our active work streams across multiple focus areas and with our call centers now back in the US, we are ramping up sales and marketing efforts expanding our sales channels and targeting new residential and B2B customers.

Speaker #3: These improvements all demonstrate that AmeriGas is now well positioned for the anticipated return of distributions to UGI Corporation in fiscal 2027. Moving to UGI International, this year the team has done a tremendous job to offset the impact of non-core divestitures, delivering comparable year-to-date EBIT on a year-over-year basis, all while delivering a strong 23% EBITDA margin, which speaks to the quality and resilience of this business.

Robert Flexon: This year, the team has done a tremendous job to offset the impact of non-core divestitures to deliver comparable year-to-date EBIT on a year-over-year basis, all while delivering a strong 23% EBITDA margin, which speaks to the quality and resilience of this business. With a leading market position across our remaining geographies, over 90% tank ownership, and a strong track record of operational excellence, the business continues to experience long-standing customer relationships, strong customer retention rates, top-tier return on capital employed, and attractive free cash flow conversion rates. The embedded value and market potential of UGI International was recently underscored by an announced take-private transaction in Europe involving one of our primary competitors, a company with a similar business and a comparable footprint across our key markets. The valuation implied by that announcement reinforces the significant value in our international platform and the opportunity that lies ahead.

Bob Flexon: This year, the team has done a tremendous job to offset the impact of non-core divestitures to deliver comparable year-to-date EBIT on a year-over-year basis, all while delivering a strong 23% EBITDA margin, which speaks to the quality and resilience of this business. With a leading market position across our remaining geographies, over 90% tank ownership, and a strong track record of operational excellence, the business continues to experience long-standing customer relationships, strong customer retention rates, top-tier return on capital employed, and attractive free cash flow conversion rates. The embedded value and market potential of UGI International was recently underscored by an announced take-private transaction in Europe involving one of our primary competitors, a company with a similar business and a comparable footprint across our key markets. The valuation implied by that announcement reinforces the significant value in our international platform and the opportunity that lies ahead.

Speaker #3: With a leading market position across our remaining geographies over 90% tank ownership and a strong track record of operational excellence, the business continues to experience long-standing customer relationships strong customer retention rates, top-tier return on capital employed, and attractive free cash flow conversion rates.

Speaker #3: The embedded value and market potential of UGI International was recently underscored by an announced take private transaction in Europe involving one of our primary competitors, a company with a similar business and a comparable footprint across our key markets.

Speaker #3: The valuation implied by that announcement reinforces the significant value in our international platform and the opportunity that lies ahead. As we move forward, the team is focused on achieving organic growth through multiple initiatives including heating oil to LPG conversion where the market is roughly four times the size of the addressable LPG market.

Robert Flexon: As we move forward, the team is focused on achieving organic growth through multiple initiatives, including heating oil to LPG conversion, where the market is roughly four times the size of the addressable LPG market. Additionally, we will look to further optimize our operations to improve margins while maintaining the reliability and service our customers expect. With that, I'll hand the call over to Sean to walk through the financial results in more detail.

Bob Flexon: As we move forward, the team is focused on achieving organic growth through multiple initiatives, including heating oil to LPG conversion, where the market is roughly four times the size of the addressable LPG market. Additionally, we will look to further optimize our operations to improve margins while maintaining the reliability and service our customers expect. With that, I'll hand the call over to Sean to walk through the financial results in more detail.

Speaker #3: Additionally, we will look to further optimize our operations to improve margins while maintaining the reliability and service our customers expect. And with that, I'll hand the call over to Sean to walk through the financial results in more detail.

Speaker #2: Thanks, Bob, and good morning. I'll now provide more details on our financial performance. For the third quarter, UGI delivered total reportable segment EBIT of 58 million, compared to 72 million in the prior year period.

Sean O'Brien: Thanks, Bob, good morning. I'll now provide more details on our financial performance. For Q3, UGI delivered total reportable segment EBIT of $58 million, compared to $72 million in the prior year period. The year-over-year change reflects warmer weather across the US, primarily in April, lower growth at AmeriGas, partially offset by continued strength at our utilities. The utility segment was up $10 million, reflecting higher gas base rates that went into effect in October 2025. Midstream & Marketing was up $3 million, driven by higher total margin from capacity management activities. UGI International was down $2 million, as lower retail volumes from the previously announced non-core divestitures were partially offset by higher unit margins. AmeriGas was down $25 million, reflecting lower retail propane volumes from warmer weather and continuing customer attrition, along with lower fee income.

Speaker #2: The year-over-year change reflects warmer weather across the US, primarily in April, and lower growth at Amerigas, partially offset by continued strength at our utilities.

Speaker #2: The utility segment was up 10 million, reflecting higher gas base rates that went into effect in October 2025. Midstream and marketing was up 3 million, driven by higher total margin from capacity management activities.

Speaker #2: UGI International was down 2 million as lower retail volumes from the previously announced non-core divestitures were partially offset by higher unit margins. And Amerigas was down 25 million, reflecting lower retail propane

Speaker #1: In volumes from warmer weather and continuing customer attrition , along with lower fee income Turning to the quarterly results for each reportable segment at the utilities , Ebit was up $10 million versus the prior year period as increased margin from higher gas base rates was partially offset by increased depreciation and amortization expense , reflecting the effects of continued investment in pipeline replacement activity at the midstream and marketing segment .

Sean O'Brien: Turning to the quarterly results for each reportable segment. At the utilities, EBIT was up $10 million versus the prior year period, as increased margin from higher gas base rates was partially offset by increased depreciation and amortization expense, reflecting the effects of continued investment in pipeline replacement activity. At the Midstream & Marketing segment, EBIT increased $3 million on a year-over-year basis. Total margin increased $13 million, largely due to the timing of capacity margin and the recovery of higher pipeline costs, as previously anticipated. Operating and administrative expenses were $8 million higher, primarily due to LNG and renewable energy projects placed in service last year. Turning to the global LPG businesses. At UGI International, EBIT was $41 million for the quarter, compared to $43 million in the prior year period. Retail volumes were 10% lower, driven by the recent LPG divestitures in Austria and Eastern Europe.

Speaker #1: Ebit increased $3 million on a year over year basis Total margin increased $13 million , largely due to the timing of capacity margin and the recovery of higher pipeline costs .

Speaker #1: As previously anticipated , operating and administrative expenses were $8 million higher , primarily due to LNG and renewable energy projects placed in service last year .

Speaker #1: Turning to the global LPG businesses at GE international , Ebit was $41 million for the quarter compared to $43 million in the prior year period Retail volumes were 10% lower , driven by the recent LPG divestitures in Austria and Eastern Europe Total margin decreased 6 million , primarily reflecting the lower retail volumes sold , which were partially offset by higher average unit margins and the translation effects of a stronger foreign currencies operating and administrative expenses were lower , reflecting the impact of the aforementioned divestitures and lower personnel expenses , substantially offset by the translation effects of stronger foreign currencies .

Sean O'Brien: Total margin decreased $6 million, primarily reflecting the lower retail volumes sold, which were partially offset by higher average unit margins and the translation effects of stronger foreign currencies. Operating and administrative expenses were lower, reflecting the impact of the aforementioned divestitures and lower personnel expenses, substantially offset by the translation effects of stronger foreign currencies. At AmeriGas, EBIT was down $25 million over the prior year period, largely due to the decrease in total margin stemming from lower volumes. Retail gallons decreased 10%, reflecting April temperatures, which were 16% warmer than the prior year, as well as continuing customer attrition. On a weather-adjusted basis and excluding the Hawaii divestiture, retail gallons decreased 6% versus the prior year period and 2% on a year-to-date basis when compared to the prior year.

Speaker #1: At AmeriGas , Ebit was down 25 million over the prior year period , largely due to the decrease in total margin stemming from lower volumes .

Speaker #1: Retail gallons decreased 10% , reflecting April temperatures , which were 16% warmer than the prior year . As well as continuing customer attrition on a weather adjusted basis and excluding the Hawaii divestiture Retail gallons decreased 6% versus the prior year period , and 2% on a year to date basis when compared to the prior year While the seasonally weak third quarter pressured near-term earnings .

Sean O'Brien: While the seasonally weak Q3 pressured near-term earnings, the continuing operational improvement actions at AmeriGas better positions the business for the upcoming heating season. Turning to the fiscal year-to-date performance. Total EBIT from our reportable segments was $1.187 billion, up $3 million over the prior year period. As higher Pennsylvania gas base rates and increased LPG unit margins more than offset the impact of lower production volumes in the Appalachian region, warmer weather, several LPG divestitures, and continuing low single-digit customer attrition at AmeriGas. On a per-share basis, year-to-date adjusted diluted EPS was $3.17, compared to $3.55 in the prior year period. The year-over-year decline in adjusted EPS was largely driven by the absence of investment tax credits realized last year and higher interest expense, as previously anticipated.

Speaker #1: The continuing operational improvement actions at AmeriGas better positions the business for the upcoming heating season Turning to the fiscal year to date performance .

Speaker #1: Total Ebit from our reportable segments was 1.187 billion , up 3 million over the prior year period , as higher Pennsylvania gas base rates and increased LPG unit margins more than offset the impact of lower production volumes and the Appalachian region .

Speaker #1: Warmer weather . Several LPG divestitures and continuing low single digit customer attrition at AmeriGas on a per share basis . Year to date , adjusted diluted EPS was $3.17 , compared to $3.55 in the prior year period .

Speaker #1: The year over year decline in adjusted EPS was largely driven by the absence of investment tax credits realized last year , and higher interest expense , as previously anticipated .

Speaker #1: In addition, the business saw approximately $0.05 of weather headwind across all segments when compared to the prior-year period, and $0.11 when compared to normal weather patterns.

Sean O'Brien: In addition, the business saw approximately $0.05 of weather headwind across all segments when compared to the prior year period, and $0.11 when compared to normal weather patterns. As we look ahead to close fiscal 2026, we are reaffirming our adjusted diluted EPS guidance range of $2.75 to $2.90. The fundamentals of our business remain intact, and the strategic actions and operational progress we have made this year underscore our confidence in the long-term growth trajectory of the company. Moving to the balance sheet, we continue to make strong progress against our objectives, building financial strength and flexibility. This year, we've completed several strategic debt transactions to extend our maturity profile and reduce borrowing costs by approximately $30 million on an annualized basis, this included transactions at AmeriGas, UGI International, and UGI Energy Services.

Speaker #1: As we look ahead to close fiscal 2026 , we are reaffirming our adjusted diluted EPS guidance range of $2.75 to $2.90 . The fundamentals of our business remain intact , and the strategic actions and operational progress we have made this year underscore our confidence in the long term growth trajectory of the company Moving to the balance sheet , we continue to make strong progress against our objectives .

Speaker #1: Building financial strength and flexibility This year , we've completed several strategic debt transactions to extend our maturity profile and reduce borrowing costs by approximately $30 million on an annualized basis .

Speaker #1: And this included transactions at AmeriGas , GE international , and UGI Energy Services . To give you a few highlights at AmeriGas , our most recent transaction enabled us to issue debt at 6.875% and take out its 2027 maturity , as well as a portion of their 2028 senior notes that had a coupon of 9.375% .

Sean O'Brien: To give you a few highlights, at AmeriGas, our most recent transaction enabled us to issue debt at 6.875% and take out its 2027 maturity, as well as a portion of their 2028 senior notes that had a coupon of 9.375%. Through these transactions, we reduced net debt at AmeriGas by approximately $270 million versus the prior quarter. Additionally, we amended UGI Energy Services' term loan credit agreement to reduce its applicable interest rate margin, saving approximately $4 million on an annualized basis. We closed the quarter with consolidated leverage of 3.8x, and AmeriGas Propane's leverage was at 4.3x. The lowest point in 10 years, reflecting the continued de-leveraging and capital structure actions underway across our global LPG platform.

Speaker #1: Through these transactions , we reduced net debt at AmeriGas by approximately $270 million versus the prior quarter Additionally , we amended UGI Energy Services term loan credit agreement to reduce its applicable interest rate , margin saving approximately $4 million on an annualized basis .

Speaker #1: We closed the quarter with consolidated leverage of 3.8 times and AmeriGas propane leverage at 4.3 times . The lowest point in ten years , reflecting the continued deleveraging and capital structure .

Speaker #1: Actions underway across our global LPG platform . And with that , I'll turn the call over to Bob for his closing remarks

Sean O'Brien: With that, I'll turn the call over to Bob for his closing remarks.

Speaker #2: Thanks , Sean . Before we move to Q&A , I want to leave you with a few key takeaways . As you see on the slide , our diversified energy footprint is a platform for creating sustainable , long term shareholder value .

Robert Flexon: Thanks, Sean. Before we move to Q&A, I want to leave you with a few key takeaways. As you see on the slide, our diversified energy footprint is a platform for creating sustainable long-term shareholder value. Our regulated natural gas businesses deliver weather-hedged earnings with a long runway of organic growth opportunities as regional demand for gas continues to increase. At UGI International, we remain the number one distributor in key markets, generating attractive returns and approximately 95% free cash flow conversion. We also have tangible growth levers ahead. For instance, the heating oil to LPG conversion opportunity alone addresses a market several times the size of where we compete today. I point to the progress we've made at AmeriGas. Over the past two years, this team has done meaningful work to stabilize the business with improvements in customer service and retention, and a more disciplined operating model.

Bob Flexon: Thanks, Sean. Before we move to Q&A, I want to leave you with a few key takeaways. As you see on the slide, our diversified energy footprint is a platform for creating sustainable long-term shareholder value. Our regulated natural gas businesses deliver weather-hedged earnings with a long runway of organic growth opportunities as regional demand for gas continues to increase. At UGI International, we remain the number one distributor in key markets, generating attractive returns and approximately 95% free cash flow conversion. We also have tangible growth levers ahead. For instance, the heating oil to LPG conversion opportunity alone addresses a market several times the size of where we compete today. I point to the progress we've made at AmeriGas. Over the past two years, this team has done meaningful work to stabilize the business with improvements in customer service and retention, and a more disciplined operating model.

Speaker #2: Our regulated natural gas businesses deliver weather hedged earnings with a long runway of organic growth opportunities . As regional demand for gas continues to increase .

Speaker #2: At GE international , we remain the number one distributor in key markets , generating attractive returns and approximately 95% free cash flow conversion We also have tangible growth levers ahead for instance , the heating oil to LPG conversion opportunity alone addresses a market several times the size of where we compete today And I point to the progress we've made at AmeriGas over the past two years .

Speaker #2: This team has done meaningful work to stabilize the business with improvements in customer service and retention , and a more disciplined operating model Our focus is on finishing fiscal 2026 strong .

Robert Flexon: Our focus is on finishing fiscal 2026 strong. As you know, this is a highly seasonal business where winter matters, a lot of the team's energy is focused on operational and winter preparedness to deliver through the upcoming heating season. Thank you for your time with us today, and we will open the line for questions.

Bob Flexon: Our focus is on finishing fiscal 2026 strong. As you know, this is a highly seasonal business where winter matters, a lot of the team's energy is focused on operational and winter preparedness to deliver through the upcoming heating season. Thank you for your time with us today, and we will open the line for questions.

Speaker #2: As you know , this is a highly seasonal business where winter matters . So a lot of the team's energy is focused on operational and winter preparedness to deliver through the upcoming heating season .

Speaker #2: Thank you for your time with us today , and we will open the line for questions

Speaker #3: Thank you . At this time , we will conduct the question and answer session . As a reminder to ask a question , you will need to press star one .

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Konstantin Lednev with Wells Fargo Securities. Konstantin, your line is now open.

Speaker #3: One on your telephone and wait for your name to be announced . To withdraw your question , please press star one . One again .

Speaker #3: Please stand by while we compile the Q and roster Our first question comes from the line of Constantine Lednev with Wells Fargo Securities Constantine , your line is now open .

Speaker #4: Hi , team . Good morning . It's actually Whitney on for Constantine

[Analyst] (Wells Fargo Securities): Hi, team. Good morning. It's actually Whitney with Telema on for Konstantin.

Whitney Mutalemwa: Hi, team. Good morning. It's actually Whitney with Telema on for Konstantin.

Speaker #5: Morning .

Sean O'Brien: Morning.

Speaker #2: Hi .

Robert Flexon: Hi, Whitney.

Bob Flexon: Hi, Whitney.

Speaker #4: Hon . Midstream on midstream . The guidance cut was primarily tied to delays in growth , investments and lower Appalachian production volumes You're now showing Well-padded expansions on the system as well as that growth plan .

[Analyst] (Wells Fargo Securities): On midstream, the guidance cut was primarily tied to delays in growth investments and lower Appalachian production volumes. You're now showing well-padded expansions on the system as well as that growth plan. Has that delay been resolved, or does it push into fiscal year 2027? Just as a follow-on, does that change your confidence in the five to seven consolidated EPS taper through 2029?

Whitney Mutalemwa: On midstream, the guidance cut was primarily tied to delays in growth investments and lower Appalachian production volumes. You're now showing well-padded expansions on the system as well as that growth plan. Has that delay been resolved, or does it push into fiscal year 2027? Just as a follow-on, does that change your confidence in the five to seven consolidated EPS taper through 2029?

Speaker #4: , has that delay been resolved or does it push into fiscal year 27 ? And just a follow on , does that change your confidence in the 5 to 7 consolidated EPS ?

Speaker #4: Key through 29 .

Robert Flexon: Thanks, Whitney. What we're seeing is more production coming out of the Appalachia Basin. We have a couple of well pad expansions, one that starts early in fiscal 2027, a second one that starts towards the latter part of fiscal 2027. We have the Auburn pipeline that's going to be FERC-regulated that we expect also towards the end of 2027 as well. We're seeing a good return of production to the territory from what we saw in the current year. We feel good about the growth prospects for our midstream business. You add to that the demand for power generation that'll come later in the decade. We're seeing a good funnel of opportunities for our midstream business.

Bob Flexon: Thanks, Whitney. What we're seeing is more production coming out of the Appalachia Basin. We have a couple of well pad expansions, one that starts early in fiscal 2027, a second one that starts towards the latter part of fiscal 2027. We have the Auburn pipeline that's going to be FERC-regulated that we expect also towards the end of 2027 as well. We're seeing a good return of production to the territory from what we saw in the current year. We feel good about the growth prospects for our midstream business. You add to that the demand for power generation that'll come later in the decade. We're seeing a good funnel of opportunities for our midstream business.

Speaker #2: Thanks , Whitney . So what we're seeing is more production coming out of the Appalachian Basin . So we have a couple of well pad expansions , one that starts , , early in fiscal 27 .

Speaker #2: A second one that starts towards the latter part of fiscal 27 . , we have the Auburn pipeline that's going to be regulated that we expect also towards the end of , of 27 as well .

Speaker #2: So we're seeing , , a good return of production to , , to the territory from what we saw in the current year .

Speaker #2: So we feel good about the growth prospects for , for our midstream business . And you add to that the demand for power generation that will come later in the , , in the decade , we're seeing a good funnel of opportunities for our midstream business .

Speaker #1: And Whitney , this is Sean , maybe in terms of the 5 to 7 , I'll give you a little bit of color , but we'll give more .

Sean O'Brien: Whitney, this is Sean. Maybe in terms of the five to seven, I'll give you a little bit of color, we'll give more obviously at the end of the year when we give guidance. The five to seven remains intact. There are moving pieces. We've seen some of the business units, even since we gave that guidance with stronger outlooks. I would say Midstream, in the long run, the outlook still remains very strong based on the comments Bob made and even as we think about potential opportunities in the future, which they have a pretty good pipeline. I do think that Midstream is still. If I was looking at their long-term growth, it's a little more mid to back-end loaded than it would have been.

Speaker #1: Obviously , at the end of the year when we give guidance . But , , the 5 to 7 remains intact . , there's , there are moving pieces .

Speaker #1: , you know , we've , we've seen some of the business units even since we gave that guidance with , , stronger outlooks , I would say midstream in the long run , the outlook still remains very strong based on the comments Bob made and even , you know , as we think about potential opportunities in the future , which they have a pretty good pipeline .

Speaker #1: But I do think midstream is still if I was looking at their long term growth , it's a little more mid to back end loaded than it would have been .

Speaker #1: But for the company we have , , you know , and again , more guidance down the road . Other divisions that have , you know , probably make up some of that in the interim

Sean O'Brien: For the company, we have, and again, more guidance down the road, other divisions that probably make up some of that in the interim.

Speaker #4: I see , thank you . And then just a tiny question . If I could squeeze in just on AmeriGas performance , can you help us reconcile that with the improving volume retention that you're describing ?

[Analyst] (Wells Fargo Securities): I see. Thank you. Then just a tiny question, if I could squeeze in. Just on AmeriGas's performance, can you help us reconcile that with the improving volume retention that you're describing? Is this quarter's result solely weather, or are there more moving pieces to consider?

Whitney Mutalemwa: I see. Thank you. Then just a tiny question, if I could squeeze in. Just on AmeriGas's performance, can you help us reconcile that with the improving volume retention that you're describing? Is this quarter's result solely weather, or are there more moving pieces to consider?

Speaker #4: Is this quarter's results solely weather, or are there more moving pieces to consider?

Speaker #2: The way that I think about it , Whitney , is that I look at what's going on on a year to date basis , year to date , our net attrition of lost customers is about 2% , which is about the lowest it's been for a very long time .

Robert Flexon: The way that I think about it, Whitney, is that I look at what's going on on a year-to-date basis. Year-to-date, our net attrition of lost customers, about 2%, which is about the lowest it's been for a very long time. We're in the planning process for AmeriGas now. I think we've positioned the business very well for this coming winter. Next week, I'm on the road visiting our different sales channels that we're pursuing. Our goal for this coming winter is to take it from net attrition to net growth. I'm optimistic from the standpoint our attrition is getting much better. That's what's driving it down. As we approach the winter, when we see customers coming online, that should start using the volume lever as well.

Bob Flexon: The way that I think about it, Whitney, is that I look at what's going on on a year-to-date basis. Year-to-date, our net attrition of lost customers, about 2%, which is about the lowest it's been for a very long time. We're in the planning process for AmeriGas now. I think we've positioned the business very well for this coming winter. Next week, I'm on the road visiting our different sales channels that we're pursuing. Our goal for this coming winter is to take it from net attrition to net growth. I'm optimistic from the standpoint our attrition is getting much better. That's what's driving it down. As we approach the winter, when we see customers coming online, that should start using the volume lever as well.

Speaker #2: So we're in the planning process for AmeriGas now . I think we've positioned the business very well for this coming winter and next week I'm on the road visiting our our sales , different sales channels that we're pursuing .

Speaker #2: So , you know , our goal for this coming winter is to , you know , take it from that attrition to net growth .

Speaker #2: And , , I'm optimistic from the standpoint of our attrition is getting much , much better . That's what's driving it down . And as we winter , when we see customers coming online , that should , , you know , start using the volume lever as well .

Speaker #2: So , you know , between March and April and April being both March , end of March and April , at the beginning of considerably warmer than normal , there's some , you know , volumes that kind of straddle the end of a quarter , but that's why I look at things on a , on a year to date basis .

Robert Flexon: Between March and April, and April being both March, end of March and April at the beginning being considerably warmer than normal, there's some volumes that kind of straddle the end of a quarter. That's why I look at things on a year-to-date basis and I think showing that we have a net attrition of 2% reinforces that we have absolutely stabilized this business. You take a look at a lot of the things that I view as leading indicators, safety being one. Certainly our Net Promoter Scores, if I compare to where we were in July 2024, significantly better at 63% uptick. If I look at a year earlier than that, a July 2023 year-to-date versus where we are today, four and a half times better.

Bob Flexon: Between March and April, and April being both March, end of March and April at the beginning being considerably warmer than normal, there's some volumes that kind of straddle the end of a quarter. That's why I look at things on a year-to-date basis and I think showing that we have a net attrition of 2% reinforces that we have absolutely stabilized this business. You take a look at a lot of the things that I view as leading indicators, safety being one. Certainly our Net Promoter Scores, if I compare to where we were in July 2024, significantly better at 63% uptick. If I look at a year earlier than that, a July 2023 year-to-date versus where we are today, four and a half times better.

Speaker #2: And I think showing that we have a net attrition of 2% reinforces that we have absolutely stabilized this business . And you take a look at a lot of the things that I view as leading indicators , safety being one , certainly our net promoter scores , if I compare to where we were in July of 2020 for a significantly better 63% uptick , if I look at , you know , a year earlier than that , a July 23rd year to date versus where we are today , four and a half times better .

Speaker #2: So with the call centers back in the US , , safety better , we're ahead where we were last year on having sufficient drivers .

Robert Flexon: With the call centers back in the US, safety better, we're ahead where we were last year on having sufficient drivers, and we're actively preparing our drivers for the coming winter. I feel so much better going into this winter than I did last winter, and last winter, we were in better shape than the prior. I think we've positioned it well, and I think the net 2% decline, I'm certainly not happy with that, but glad to see the attrition is definitely slowing down. We're targeting volume growth for the winter. We'll see what happens. We're working on the processes that will deliver that.

Bob Flexon: With the call centers back in the US, safety better, we're ahead where we were last year on having sufficient drivers, and we're actively preparing our drivers for the coming winter. I feel so much better going into this winter than I did last winter, and last winter, we were in better shape than the prior. I think we've positioned it well, and I think the net 2% decline, I'm certainly not happy with that, but glad to see the attrition is definitely slowing down. We're targeting volume growth for the winter. We'll see what happens. We're working on the processes that will deliver that.

Speaker #2: And we're , you know , actively preparing our drivers for the coming winter . I feel so much better going into this winter than I did last winter .

Speaker #2: And last winter, we were in better shape than the prior year. So I think we positioned it well. And I think the net 2% decline—I'm certainly not happy with that, but I'm glad to see the attrition is definitely slowing down.

Speaker #2: And then we're targeting volume growth for the winter . So we'll see . See what happens . But we're working on the processes that will deliver that .

Speaker #4: Well said . Thank you Bob . Thank you Sean .

[Analyst] (Wells Fargo Securities): Well said. Thank you, Bob. Thank you, Sean.

Whitney Mutalemwa: Well said. Thank you, Bob. Thank you, Sean.

Speaker #2: Thanks , Whitney .

Robert Flexon: Thanks, Lindsay.

Bob Flexon: Thanks, Lindsay.

Speaker #3: Thank you . Our next question comes from the line of Julian Dumoulin-smith of Jefferies . Julien , your line is now open .

Operator: Thank you. Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. Julien, your line is now open.

Speaker #6: Hey , good morning guys . , Luke , finger on for Julien . , you highlighted recent take private activity among European LPG peers as evidence of value in your international platform Any change in how you think about potential divestitures within international , or should we assume , you know , the portfolio pruning is largely complete at this point ?

Luke Fenker: Hey, good morning, guys. Luke Fenker on for Julien. You highlighted recent take-private activity among your European LPG peers as evidence of value in your international platform. Any change in how you think about potential divestitures within international, or should we assume the portfolio pruning is largely complete at this point? Thanks.

Speaker #6: Thanks

Speaker #2: Well , it's a good question , Luke . I kind of expected this one because of the , , the light that can shine on our main competitor .

Robert Flexon: Well, that's a good question, Luke, and I kind of expected this one because of the light that's been shined on our main competitor. The international business is a very good business and very proud of our team over based in France on how they've kind of changed the paradigm there from a shrinking business to one with growth as we look to expand into the heating oil market. We constantly will look and evaluate our portfolio on what's the best thing to do for the overall portfolio for the company and what drives the most shareholder value. I wouldn't say now the direction what we would do. Certainly, we're focused on having that business prepared as we go into the winter and expanding the growth.

Bob Flexon: Well, that's a good question, Luke, and I kind of expected this one because of the light that's been shined on our main competitor. The international business is a very good business and very proud of our team over based in France on how they've kind of changed the paradigm there from a shrinking business to one with growth as we look to expand into the heating oil market. We constantly will look and evaluate our portfolio on what's the best thing to do for the overall portfolio for the company and what drives the most shareholder value. I wouldn't say now the direction what we would do. Certainly, we're focused on having that business prepared as we go into the winter and expanding the growth.

Speaker #2: , the international business is a very good business and very , very proud of our team over , over based in France on how they've kind of changed the paradigm there from a shrinking business to one with growth as we look to expand into the heating oil market , we constantly will look and evaluate our portfolio .

Speaker #2: , on what's the best thing to do for the overall portfolio for the company and what drives the most shareholder value . So I wouldn't say now the direction , what we would , we would do , certainly we're focused on having that business prepared as we go into the winter and expanding the growth .

Speaker #2: But it is a very valuable franchise , and I , I would also say that because of what's happened with our main competitor over there , that , , you know , we do get some , some calls as well .

Robert Flexon: It is a very valuable franchise, and I would also say that because of what's happened with our main competitor over there, that we do get some calls as well, because people are recognizing the value of the franchise over there and the stability of the business, the strength of the business, and the model is very efficient over there, over in Paris, and our team runs it very well. Again, just to summarize, we always want to look at our portfolio to see what's the best way to drive our shareholder value. The international, the value of that has been somewhat hidden in the proposed transaction with DCC, highlighted recently with KKR and ECP, which are both two fabulous investors and companies. A lot of smart minds sees the value of this business. DCC is a good competitor.

Bob Flexon: It is a very valuable franchise, and I would also say that because of what's happened with our main competitor over there, that we do get some calls as well, because people are recognizing the value of the franchise over there and the stability of the business, the strength of the business, and the model is very efficient over there, over in Paris, and our team runs it very well. Again, just to summarize, we always want to look at our portfolio to see what's the best way to drive our shareholder value. The international, the value of that has been somewhat hidden in the proposed transaction with DCC, highlighted recently with KKR and ECP, which are both two fabulous investors and companies. A lot of smart minds sees the value of this business. DCC is a good competitor.

Speaker #2: , because there's just people are recognizing that the value of the franchise over there , the stability of the business , the strength of the business , and the model is very efficient over there over in Paris .

Speaker #2: And our team runs it very well . So again , just to summarize , I mean , we always want to look at our portfolio to see what's the what's the best way to drive our shareholder value .

Speaker #2: And the international , you know , the value of that has been somewhat hidden in the proposed transaction with DCC highlighted , recently with KKR and ECP , which are both two fabulous investors and companies .

Speaker #2: A lot of smart money sees the value of this business . DCC is a good competitor , run very well . And , , yeah , it's , , it's good to see the value being shown for what this business is really worth and how well our team runs it over there

Robert Flexon: It run very well, yeah, it's good to see the value being shown for what this business is really worth and how well our team runs it over there.

Bob Flexon: It run very well, yeah, it's good to see the value being shown for what this business is really worth and how well our team runs it over there.

Speaker #6: Totally . Yeah . Thank you . And then maybe on utilities , , with the gas settlement , including a stay out through January 29th , how important is using the disc , as you a sort of bridge recovery in 28 and 29 ?

Luke Fenker: Totally. Yeah. Thank you. Maybe on utilities. With the gas settlement including a stay-out through 29 January, how important is using the DSIC as sort of bridge recovery in 2028 and 2029? Is there any potential for maybe changing CapEx during the stay-out? Thanks.

Speaker #6: Is there any potential for maybe changing CapEx during the stay out ? Thanks

Speaker #2: Well , I think you hit it right on the nail , right on the head on that look , it is it is important in the latter part of the year for the disc to , , to kick in .

Robert Flexon: Well, I think you hit it right on the nail right on the head on that, Luke. It is important in the latter part of the years for the DSIC to kick in. It's been structured that way where we've got the two-stage increase, but after the second tranche kicks in, we'll be relying in the third year on the DSIC.

Bob Flexon: Well, I think you hit it right on the nail right on the head on that, Luke. It is important in the latter part of the years for the DSIC to kick in. It's been structured that way where we've got the two-stage increase, but after the second tranche kicks in, we'll be relying in the third year on the DSIC.

Speaker #2: And so it's been structured that way where we've got , you know , the two stage increase , but after the second tranche , , kicks in , then we'll be relying in the third year on the disc

Luke Fenker: Makes sense. Thanks, guys. We'll leave it there.

Speaker #6: Makes sense . Thanks , guys . I'll leave it there

Robert Flexon: Great. Thank you.

Bob Flexon: Great. Thank you.

Speaker #2: Thank you .

Speaker #3: Thank you . As a reminder to ask a question , you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question , please press star one one again , our next question comes from the line of Gabriel Moreen of Mizuho .

Operator: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question comes from the line of Gabriel Moreen of Mizuho. Gabriel, your line is now open.

Speaker #3: Gabriel, your line is now open.

Speaker #7: Hey , good morning everyone . , I just had a quick follow up . Hey , just a quick follow up question on Apu .

Gabriel Moreen: Hey, good morning, everyone.

Robert Flexon: Hey, Gabe.

Bob Flexon: Hey, Gabe.

Gabriel Moreen: I just had a quick follow-up. Hey, morning. Just a quick follow-up question on APU. I think, Bob, you had mentioned the expectation that AmeriGas would be in position to distribute cash upstairs to UGI in 2027. Can you talk about how that may work? Would that be a formula to the extent that AmeriGas' leverage is 4 times or lower, I guess, given the variability in AmeriGas' results even from things like weather? Also, as a follow-up to that, your view on whether you'd need to put any growth capital into AmeriGas as results hopefully continue to improve there?

Speaker #7: I think, Bob, you mentioned the expectation that AmeriGas would be in position to be the distribution—to distribute cash upstairs to UGI in '27.

Speaker #7: , you know , can you talk about how that may work ? Would that be a formula to the extent that AmeriGas has leverage is four times or lower ?

Speaker #7: I guess , given the variability in AmeriGas , a result , even from things like weather and then also as a follow up to that , your view on whether you need to put any growth capital into a , , you know , as a result , hopefully continue to improve their

Speaker #2: Thanks , Gabe . And , , I'll make a quick comment . I'll turn it to Sean . I'm glad you I'm glad you asked that question because it really shows that we have stabilized this business .

Robert Flexon: Thanks, Gabe. I'll just make a quick comment, and I'll turn it to Sean. I'm glad you asked that question because it really shows that we have stabilized this business. We plan on having meaningful cash distributions to the parent in 2027, which is something that hasn't been done for some time. Let me turn it to Sean to give you a little bit more color.

Bob Flexon: Thanks, Gabe. I'll just make a quick comment, and I'll turn it to Sean. I'm glad you asked that question because it really shows that we have stabilized this business. We plan on having meaningful cash distributions to the parent in 2027, which is something that hasn't been done for some time. Let me turn it to Sean to give you a little bit more color.

Speaker #2: We plan on having meaningful cash distributions to the parent in 2027 . And which , you know , which is something that hasn't been done for , for some time .

Speaker #2: But let me turn it to Sean to give you a little bit more color .

Speaker #1: Yeah , maybe to reiterate what Bob said , you know , in my tenure here , this would be that would be the first time .

Sean O'Brien: Maybe to reiterate what Bob said, in my tenure here, that would be the first time the dividends are going from AmeriGas to the parent. Gabe, a couple of things. In terms of the formulaic nature, obviously we have, and we'll share more at the end of the year, we have an outlook. I'll point out AmeriGas is generating meaningful cash this year. Over $100 million of free cash flow this year. We're utilizing that still one more year to delever. I think a couple of things to keep in mind, and we've given you some indicators. We're very confident the leverage is going to be sub 4. We got closer in Q3. We think by the end of the year, we have a shot to be sub 4. We'll be really close, and that's that key milestone.

Speaker #1: , you , you know , the dividends are going from AmeriGas to the parent . So gave a couple of things . , in terms of the formulaic nature , you know , obviously we , we have , and we'll share more at the end of the year .

Speaker #1: We have an outlook . , you know , I'll point out AmeriGas is generating , , meaningful cash this year , over $100 million of free cash flow this year .

Speaker #1: But we're utilizing that still one more year to deliver . , so I think a couple of things to keep in mind . And we've told you , we've given you some indicators .

Speaker #1: We think the leverage , we're very confident the leverage is going to be sub four . , we got closer in Q3 . We think by the end of the year , we have a shot to be sub four .

Speaker #1: We'll be in will be really close . And that's a key milestone . And then I think that continues to build as we go into next year .

Sean O'Brien: I think that continues to build as we go into next year, and we continue to approach even the mid to low 3s at some point. I feel very comfortable with the outlook we have on the leverage side, that it's time to start returning distributions. You mentioned weather. We always have that as a lever. That doesn't just apply to AmeriGas, that applies to International, to Energy Services. If one is having a really tough weather year, we can always look at where we're pulling the distributions from. With a very modest weather outlook, I think we still feel pretty comfortable that we're going to be pulling distributions out of AmeriGas in 2027.

Speaker #1: And we continue to approach even the mid to low threes at some point . So I feel very comfortable with the outlook we have on the leverage side .

Speaker #1: , that that it's time to start returning distributions . you mentioned whether we always have that as a lever that doesn't just apply to AmeriGas .

Speaker #1: That applies to international , the services , you know , if one is having a really tough weather year , we can always look at where we're pulling the distributions from .

Speaker #1: , but with a , you know , very modest weather outlook , I think we still feel pretty comfortable that we're going to be pulling , , distributions out of AmeriGas in 2027 .

Speaker #2: And Gabe , on your other question regarding CapEx , when I think about allocating capital to AmeriGas , I think of it this way .

Robert Flexon: Gabriel, on your other question regarding CapEx. When I think about allocating capital to AmeriGas, think of it this way: we want to continue to bring the average age of our delivery fleet down. We continue to do that each year, and we're making good progress with that. Also, I want AmeriGas to be the gold standard out there of propane companies, and I want our facilities to look good. I want to make sure that we're making the right investment into how we appear towards the public. We're a local business. We're becoming more local and doing what we need to do to drive efficiency in the business. There's no big spikes in CapEx that I'd expect at all in AmeriGas. It's just a continued modest level of investment to get AmeriGas back to where it should be.

Bob Flexon: Gabriel, on your other question regarding CapEx. When I think about allocating capital to AmeriGas, think of it this way: we want to continue to bring the average age of our delivery fleet down. We continue to do that each year, and we're making good progress with that. Also, I want AmeriGas to be the gold standard out there of propane companies, and I want our facilities to look good. I want to make sure that we're making the right investment into how we appear towards the public. We're a local business. We're becoming more local and doing what we need to do to drive efficiency in the business. There's no big spikes in CapEx that I'd expect at all in AmeriGas. It's just a continued modest level of investment to get AmeriGas back to where it should be.

Speaker #2: We want to continue to bring the average age of our delivery fleet down . So we continue to do that each year , and we're making good progress with that .

Speaker #2: And then also , I want AmeriGas to be the gold standard out there of , of propane companies . And I want our facilities to look good .

Speaker #2: I want to make sure we're making the right investment into , , how we appear towards the public . We're a local business .

Speaker #2: We're becoming more local and doing what we need to do to drive efficiency in the business . There's no big spikes in CapEx that I'd expect at all in AmeriGas .

Speaker #2: It's just kind of a continued , you know , modest level of investment to get AmeriGas back to where it should be . And again , we'll just keep doing that day in and day out , along with driving how we perform in our processes every single day to get that business better .

Robert Flexon: Again, we'll just keep doing that day in and day out, along with driving how we perform and our processes every single day to get that business better. There's some physical improvements that we'll make as well to some of our delivery equipment and our facilities, our storage facilities, and the like, but nothing extraordinary, nothing that really stands out as significant. Just the continued focus on that business to let it be what it can be.

Bob Flexon: Again, we'll just keep doing that day in and day out, along with driving how we perform and our processes every single day to get that business better. There's some physical improvements that we'll make as well to some of our delivery equipment and our facilities, our storage facilities, and the like, but nothing extraordinary, nothing that really stands out as significant. Just the continued focus on that business to let it be what it can be.

Speaker #2: There's some physical improvements that will make as well to some of our delivery equipment and our facilities , our storage facilities and the like .

Speaker #2: But nothing extraordinary . Nothing that's , really stands out as But just to continued focus on that business , to let it be what it can be .

Speaker #7: Got it . Appreciate the answer , Bob and Sean , thank you so much .

Gabriel Moreen: Got it. Appreciate the answer, Robert and Sean. Thank you so much.

Speaker #2: Thanks .

Robert Flexon: Thanks, Gabriel.

Bob Flexon: Thanks, Gabriel.

Speaker #5: Thanks , Gabe .

Sean O'Brien: Thanks, Gabe.

Speaker #3: I'm showing no further questions at this time . I would now like to turn it back to Bob Flexon for closing remarks .

Operator: I'm showing no further questions at this time. I would now like to turn it back to Robert Flexon for closing remarks.

Speaker #2: Thank you , Olivia , and I just want to focus on a couple of things . First and foremost , that AmeriGas , which certainly gets a lot of attention .

Robert Flexon: Thank you, Olivia. I just want to focus on a couple of things. First and foremost, AmeriGas, which certainly gets a lot of attention. We've done an awful lot over the past year and a half to two years on improving the outlook for this business. I feel very good in terms of our winter preparation. I've been talking about that a lot to our investors over the past year. We're ready. We've got the call centers back. Our call centers, the employees trained. We're becoming a local business again like we should be. Our customer Net Promoter Scores are surging. Our safety is dramatically better. We're listening to our customers. We're fixing the things that tended to be irritations to them. We're really focused on driving the processes in that business.

Bob Flexon: Thank you, Olivia. I just want to focus on a couple of things. First and foremost, AmeriGas, which certainly gets a lot of attention. We've done an awful lot over the past year and a half to two years on improving the outlook for this business. I feel very good in terms of our winter preparation. I've been talking about that a lot to our investors over the past year. We're ready. We've got the call centers back. Our call centers, the employees trained. We're becoming a local business again like we should be. Our customer Net Promoter Scores are surging. Our safety is dramatically better. We're listening to our customers. We're fixing the things that tended to be irritations to them. We're really focused on driving the processes in that business.

Speaker #2: We've done an awful lot over the past year and a half to two years on . On improving the outlook for this business .

Speaker #2: I feel very good in terms of our winter preparation . I've been talking about that a lot to to our investors over the past year .

Speaker #2: , we're ready . We've got the call centers back . Our call centers , the employees trained , we're becoming a local business again .

Speaker #2: Like we should be our customer net promoter scores are surging . Our safety is dramatically better . We're listening to our customers . We're fixing the things that tended to be , you know , irritations to them .

Speaker #2: So we're really focused on driving the processes in that in that business . , as Gabe just asked and Sean and myself answered , we expect meaningful cash distributions to the parent in 2027 , something as Sean highlighted , it's not something he's seen since he's been here .

Robert Flexon: As Gabe just asked and Sean and myself answered, we expect meaningful cash distributions to the parent in 2027. Something as Sean highlighted, it's not something he's seen since he's been here, and he's been here longer than me. I appreciated also the question on international. Again, excited about international with the mindset over there shifting from we're no longer shrinking. We have an opportunity to grow. We have a diesel heating market, a heating oil market that is significantly larger than the LPG market, and the LPG market offers environmental advantages over there and even more price stability. We see some really good opportunities to grow that business. With a return on capital employed in the mid-teens, an EBITA margin in the low to mid-20s, a free cash flow conversion of 95%, it's a stellar business.

Bob Flexon: As Gabe just asked and Sean and myself answered, we expect meaningful cash distributions to the parent in 2027. Something as Sean highlighted, it's not something he's seen since he's been here, and he's been here longer than me. I appreciated also the question on international. Again, excited about international with the mindset over there shifting from we're no longer shrinking. We have an opportunity to grow. We have a diesel heating market, a heating oil market that is significantly larger than the LPG market, and the LPG market offers environmental advantages over there and even more price stability. We see some really good opportunities to grow that business. With a return on capital employed in the mid-teens, an EBITA margin in the low to mid-20s, a free cash flow conversion of 95%, it's a stellar business.

Speaker #2: He's been here longer than me . I appreciated also the question on on international up again , excited about international with the mindset over there shifting from we're no longer shrinking .

Speaker #2: We have an opportunity to grow . We have a diesel heating market , heating oil market that is significantly larger than the LPG market .

Speaker #2: And the LPG market offers environmental advantages over there . And an even more price stability . So we see some really good opportunities to grow that business .

Speaker #2: And there's a return on capital employed in the mid-teens , an EBITDA margin in the low to mid 20s , free cash flow conversion of 95% .

Speaker #2: It's a stellar business . And then finally , on the natural gas side , we have the utilities in for the the rate case settlement .

Robert Flexon: Finally, on the natural gas side, we have the utilities in for the rate case settlement. We expect the PUC to take that up in end of September, early October. We've tried to be sensitive and thoughtful on that rate case to listen to what the governor is saying about affordability and supporting households that need the support. We've tried to be very thoughtful on this rate case and listen to what the governor and governor's team have to say. We're optimistic that that comes through. Finally, on midstream business, again, we see the need for power within the state of Pennsylvania over the coming years for general power demand consumption. You see the capacity clears of PJM keep clearing at the max. You got, obviously, data centers, and our midstream business is right in the center of all of that.

Bob Flexon: Finally, on the natural gas side, we have the utilities in for the rate case settlement. We expect the PUC to take that up in end of September, early October. We've tried to be sensitive and thoughtful on that rate case to listen to what the governor is saying about affordability and supporting households that need the support. We've tried to be very thoughtful on this rate case and listen to what the governor and governor's team have to say. We're optimistic that that comes through. Finally, on midstream business, again, we see the need for power within the state of Pennsylvania over the coming years for general power demand consumption. You see the capacity clears of PJM keep clearing at the max. You got, obviously, data centers, and our midstream business is right in the center of all of that.

Speaker #2: We expect the PUC to take that up and , , end of September , early October . We've tried to be sensitive and thoughtful on that rate case to , , listen to what the governor is saying about affordability and supporting , , you know , households that need the support .

Speaker #2: So we've tried to be very thoughtful on this rate case and , and listen to what the governor and governor's team has to say , , so we're optimistic that that comes through .

Speaker #2: And finally , on midstream business , , again , we see the need for power within the state of Pennsylvania over the coming years for general power demand consumption .

Speaker #2: We see the capacity clears at Penn , keep clearing at the max . You've got obviously data centers and our midstream business is right in the center of all of that .

Speaker #2: So we've got a pretty large funnel of opportunities . And I think as Sean highlighted , why a lot of that tends to be a little bit later in our planning horizon , because we've got to get , , the power generation and the like needs to , , go through their permitting processes and interconnection processes .

Robert Flexon: We've got a pretty large funnel of opportunities that I think as Sean highlighted, why a lot of that tends to be a little bit later in our planning horizon because we've got to get the power generation and the like needs to go through their permitting processes and interconnection processes. We're very well-positioned within our midstream business to really benefit that in the years to come. I'm very bullish on the outlook, very excited where we are, and we are absolutely focused on having a great winter. With that, Libby, I will conclude the call and thank everyone for dialing in, listening, and the questions that we received.

Bob Flexon: We've got a pretty large funnel of opportunities that I think as Sean highlighted, why a lot of that tends to be a little bit later in our planning horizon because we've got to get the power generation and the like needs to go through their permitting processes and interconnection processes. We're very well-positioned within our midstream business to really benefit that in the years to come. I'm very bullish on the outlook, very excited where we are, and we are absolutely focused on having a great winter. With that, Libby, I will conclude the call and thank everyone for dialing in, listening, and the questions that we received.

Speaker #2: We're very well positioned within our midstream business to really benefit that in the years to come . So I'm very bullish on the outlook .

Speaker #2: Very excited where we are . And we are absolutely focused on having a great winter . And with that , I will conclude the call and thank everyone for dialing in , listening and the questions that we receive

Speaker #3: Thank you for your participation in today's conference . This does conclude the program . You may now disconnect

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Goodbye.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Q3 2026 UGI Corp Earnings Call

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