Star Group Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
December 5, 2024

There are 5 speakers on the call.

Operator

Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Advisor.

Operator

Please go ahead.

Speaker 1

Thank you and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer and Rich Anbury, Chief Financial Officer. I would now like to provide a brief Safe Harbor statement. This conference call may include forward looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties that may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward looking statements.

Speaker 1

Although the company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are enclosed in this conference call, the company's Annual Report on Form 10 ks for the fiscal year ended September 30, 2024 and the company's other filings with the SEC. All subsequent written and oral forward looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this conference call. I would now like to turn the call over to Jeff Woosnam.

Speaker 1

Jeff?

Speaker 2

Thanks, Chris, and good morning, everyone. Thank you for joining our Q4 conference call. It's amazing how time passes so quickly and here we are concluding another fiscal year and starting in a new heating season. It's a great opportunity to reflect on STAAR's performance over the past 12 months. Notably, temperatures in fiscal 2024 were 15% warmer than normal, but roughly flat year over year.

Speaker 2

Total revenue fell modestly due to slightly lower volumes and selling prices. However, full year adjusted EBITDA rose by $14,700,000 versus fiscal 2023, reflecting an increase in home heating oil and propane per gallon margins and higher service and installation profitability. We continue to be laser focused on cost containment and operating efficiency, and I believe the benefits of those efforts are evident in our improved EBITDA results this year. At the same time, we remain vigilant in working to address net customer attrition, which at 4.2% in fiscal 2024 was up slightly year over year. While our internal customer satisfaction indicators and loss rates continue to improve, we observed a lower level of real estate activity in the marketplace, which impacted new customer additions.

Speaker 2

There were also no prolonged periods of cold or major storms during the year, which often drive customers to our higher quality, faster response service operations. Our acquisition program remains an important component of our growth strategy. And in total, we completed 5 separate transactions during fiscal 2024, adding just over 20,000 customers and 23,000,000 gallons of heating oil and propane volume annually. We continue to have an active pipeline of opportunities in various stages of review and our recently completed credit facility, including a $400,000,000 revolver and a $210,000,000 term loan provides additional liquidity for acquisitions in general corporate purposes. This leaves us well positioned to complete some near term opportunities currently under review.

Speaker 2

I'm proud of the way our team has navigated through what ended up being another mild year. As we entered the heating season, we believe the company is well prepared to respond to anything Mother Nature throws our way, while providing our customers with superior customer service. With that, I'll turn the call over to Rich to provide additional comments on the quarter and year end results. Rich?

Speaker 3

Thanks, Jeff, and good morning, everyone. For the fiscal 2024 Q4, our home heating oil and propane volume decreased by 300,000 gallons or about 1.5% to 18,500,000 gallons as the additional volume provided from acquisitions was more than offset by the impact of net customer attrition and other factors. However, our product gross profit increased by $4,000,000 or roughly 10% to $42,000,000 largely due to higher home heating oil and propane margins. In addition, our net service and installation gross profit rose by $3,000,000 to almost $16,000,000 Delivery, branch and G and A expenses increased by $6,000,000 or about 7% to $88,000,000 Of that increase, approximately $2,000,000 of that increase was related to recent acquisitions. Our net loss increased by $15,000,000 during the quarter to $35,000,000 as an unfavorable non cash change in the fair value of derivative instruments of $28,000,000 was only partially offset by a $1,700,000 decrease in the adjusted EBITDA loss, $1,000,000 lower net interest expense and a $9,000,000 increase in the income tax benefit.

Speaker 3

The adjusted EBITDA loss decreased by $1,700,000 to approximately $30,000,000 in the quarter, reflecting higher home heating oil and propane per gallon margins, an increase in service and installation profitability and additional EBITDA from acquisitions, which more than offset an increase in operating expenses. Moving over to the full year for 2024, our home heating oil and propane volume decreased by 6,000,000 gallons or 2 percent to 253,000,000 gallons, again as the additional volume provided from acquisitions and other factors was more than offset by net customer attrition. Temperatures in our geographic areas of operations were less than 1 10th of 1% warmer than the prior year period. Our product gross profit increased by approximately $21,000,000 or 5 percent to $468,000,000 as an increase in home heating oil and propane margins more than offset the impact from a decline in liquid products sold. In addition, our net service and installation gross profit increased by $10,000,000 to $34,000,000 Delivery, branch and G and A expenses increased by $15,000,000 to $395,000,000 compared to $379,000,000 in fiscal 2023.

Speaker 3

During fiscal 2024, the company recorded a benefit under its weather hedge of $7,500,000 compared to a benefit of $12,500,000 during fiscal 2023 accounting for a $5,000,000 increase in expense. The year over year change also reflects $6,000,000 of expenses associated with recent acquisitions along with a $4,000,000 increase in base business expenses. Net income rose by $3,000,000 to $35,000,000 as a $14,700,000 increase in adjusted EBITDA and a $4,000,000 decrease in net interest expense was largely offset by an unfavorable change in the fair value of derivative instruments, again that's non cash, of $17,000,000 Adjusted EBITDA rose by $14,700,000 to $111,600,000 as higher home heating oil and propane per gallon margins, an increase in service and installation profitability and the additional adjusted EBITDA from acquisitions more than offset an $11,000,000 decrease in home heating oil and propane volume in the base business, a $5,000,000 reduction in the company's weather hedge benefit and an increase in base business operating expenses. That concludes my discussions on the financial results. Jeff?

Speaker 3

Thanks, Rich. At this time, we're pleased to address any questions you may have. Betsy, please open the

Speaker 2

phone lines for questions. We

Operator

will now begin the question and answer session. The first question today comes from Michael Prouty with 10 ks Capital. Please go ahead.

Speaker 4

Hey guys, good morning.

Speaker 2

Good morning, Michael. Good morning, Michael.

Speaker 4

Hey, just a couple of questions. I'll ask them all at once. First, Jeff, I'm wondering what your weather forecasting services might be telling you to expect as far as the upcoming heating season? 2nd, I was curious to get your read on current customer retention. And third question, just wanted to get your read also on the acquisition environment.

Speaker 4

It looks like you were able to put a decent amount of capital to work in the prior fiscal year. Just wondering what your expectations might be as far as the upcoming fiscal year and in particular the potential for some larger deals? Thanks.

Speaker 2

Michael, can you repeat your first question for me please? I'm sorry.

Speaker 4

Oh, yes, of course. Just wanted to get your thoughts on what kind of weather you might be expecting for the upcoming heating season based on professional weather forecasting services that you guys subscribe to?

Speaker 2

Yes. We try not to look too far out. It's difficult to rely on long term weather forecasts as you probably know. The first two months of the fiscal year of 2025 have been October November, has been a little bit mild than normal. November came in about 20%, more mild than normal.

Speaker 2

Obviously, December is starting off more favorably. So we'll just have to see how the quarter ends up. But getting past that, I'm not a weatherman, so I'm not necessarily going to make any strong predictions. We plan on normal, put it that way.

Speaker 4

Okay, fair enough. Okay.

Speaker 2

In terms of just overall customer attrition and as I said in my remarks, and if you recall, we really started in 2024 in fiscal 2024, we kind of started off slow. Losses have our customer losses and overall churn rates have remained in really good shape and continued to improve as have all of our internal customer satisfaction indicators, our net promoter scores, all the things that we look at to ensure that we're doing the right things and are focused on the right things. But just as a result of just a lower level of overall market activity, a lot of which related to the real estate markets, did impact our gain rates for the year and particularly in that Q1. And then we really didn't have any weather events and we're dealing with in 2024, I think it's probably the 4th warmest winter in history, coming off the 3rd warmest winter in history in 2023. And that certainly impacts and reduces kind of service disruptions and other things that tend to attract customers to our full service brands.

Speaker 2

So that has an impact in the fiscal year.

Speaker 4

Right. No, that totally makes sense.

Speaker 2

And on the acquisition front, our pipeline remains strong. It's encouraging. The team has been extremely busy. We closed 5 acquisitions in 2024 and most recently we had another acquisition close in October, a smaller deal. We made a larger acquisition transaction in September of right at the end of 2024, which was very encouraging.

Speaker 2

And we've got several opportunities right now currently under review, some of them in later stages of review, read that read into that what you may, but we're very optimistic moving forward. We'll just have to see how everything works out, but the acquisition pipeline certainly looks encouraging.

Speaker 4

Okay. That's great news. We'll keep up the good work on the cash conversion cycle and look forward to joining you in a couple of months.

Speaker 2

You bet. Thank you,

Operator

At this time, there appear to be no further questions in the queue. I'd like to turn the call back to Mr. Woosnam for any closing remarks.

Speaker 2

Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2025 fiscal Q1 results in February. In the meantime, have a wonderful holiday season. Thank you.

Powered by Quartr
Earnings Conference Call
Star Group Q4 2024
00:00 / 00:00