Star Group(SGU) - 2025 Q3 - Quarterly Results

Executive Summary Star Group experienced a challenging Q3 with decreased revenue and increased net loss due to warmer weather, while the first nine months showed overall revenue growth and improved profitability driven by colder temperatures and strategic acquisitions Fiscal 2025 Third Quarter Highlights Star Group reported a decrease in total revenue and an increased net loss for Q3 FY2025, primarily due to lower product sales volume influenced by warmer weather and net customer attrition, with Adjusted EBITDA also showing a larger loss | Metric | Q3 FY2025 | Q3 FY2024 | Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :-------------- | :-------- | | Total Revenue | $305.6 Million | $331.6 Million | -$26.0 Million | -7.8% | | Home Heating Oil & Propane Volume | 36.2 Million gallons | 37.7 Million gallons | -1.5 Million gallons | -3.8% | | Net Loss | $16.6 Million | $11.0 Million | +$5.6 Million | +50.9% | | Adjusted EBITDA Loss | $10.6 Million | $4.1 Million | +$6.5 Million | +158.5% | - Warmer temperatures in Star's operating areas were 2.0% warmer year-over-year and 19.3% warmer than normal, contributing to lower volume. Selling prices also decreased due to a 14.3% decline in wholesale product costs[2] Fiscal 2025 Nine Months Highlights For the first nine months of fiscal 2025, Star Group saw a modest rise in total revenue, driven by higher sales volumes due to colder temperatures and acquisitions, despite declining selling prices, with net income and Adjusted EBITDA significantly increasing | Metric | 9M FY2025 | 9M FY2024 | Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :-------------- | :-------- | | Total Revenue | $1.537 Billion | $1.526 Billion | +$11.0 Million | +0.7% | | Home Heating Oil & Propane Volume | 262.6 Million gallons | 234.9 Million gallons | +27.7 Million gallons | +11.8% | | Net Income | $102.2 Million | $70.3 Million | +$31.9 Million | +45.4% | | Adjusted EBITDA | $169.5 Million | $141.3 Million | +$28.2 Million | +19.9% | - Year-to-date temperatures were 8.2% colder than the prior-year period but 8.3% warmer than normal. Acquisitions contributed positively to volume and Adjusted EBITDA[6][8] Management Commentary CEO Jeff Woosnam acknowledged the negative impact of warmer Q3 temperatures and attrition on volume but highlighted improvements in service and installation performance, noting positive Adjusted EBITDA contributions from recent acquisitions, particularly in less seasonal propane assets, as the company pursues a strategy to diversify and become more resilient to weather conditions, with net customer attrition remaining roughly flat year-over-year - Q3 was negatively impacted by lower volume due to warmer temperatures and net attrition, but service and installation performance improved[5] - Acquisition-related Adjusted EBITDA positively contributed to the quarter and year-to-date, reflecting the quality of less seasonal propane assets[5] - Star Group is positioning itself as a fully diversified energy provider, aiming for greater resilience to varied weather conditions, and net customer attrition was roughly flat year-over-year[5] Company Information This section provides an overview of Star Group's business as a leading home heating oil and propane distributor and clarifies the definitions and limitations of non-GAAP financial measures like EBITDA and Adjusted EBITDA About Star Group, L.P. Star Group, L.P. is a full-service provider specializing in home heating products and services, including heating oil, propane, and HVAC equipment, also selling diesel, gasoline, and heating oil on a delivery-only basis, and is believed to be the nation's largest retail distributor of home heating oil, serving customers primarily in the Northeast and Mid-Atlantic U.S. regions - Star Group is a full-service provider of home heating products and services (heating oil, propane, HVAC equipment) to residential and commercial customers[11] - The company also sells diesel, gasoline, and home heating oil on a delivery-only basis[11] - Star Group is believed to be the nation's largest retail distributor of home heating oil by sales volume, serving customers in the Northeast and Mid-Atlantic U.S. regions[11] Non-GAAP Financial Measures (EBITDA and Adjusted EBITDA) EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management and external users to assess Star's financial position, performance, and ability to generate cash, with Adjusted EBITDA further excluding certain non-cash and non-operating charges, and the company emphasizes that these measures have limitations as analytical tools and should be considered in conjunction with GAAP measurements - EBITDA and Adjusted EBITDA are non-GAAP measures used by management and external users to assess financial performance, compliance with debt covenants, operating performance, cash generation, and viability of acquisitions[9][12] - Adjusted EBITDA excludes items like changes in fair value of derivatives, other income/loss, multiemployer pension plan withdrawal charges, and goodwill impairment from EBITDA[9] - These non-GAAP measures have limitations, such as not reflecting cash used for capital expenditures, working capital changes, interest/principal payments, or taxes, and should not be viewed in isolation[10][12] Financial Results - Three Months Ended June 30, 2025 This section details Star Group's financial performance for the third quarter of fiscal 2025, highlighting a decrease in total revenue and sales volume, an increased net loss, and a larger Adjusted EBITDA loss, primarily due to warmer weather and lower selling prices Total Revenue and Sales Volume Total revenue decreased by 7.8% to $305.6 million, primarily due to a 3.8% decline in home heating oil and propane volume sold, with this volume decrease attributed to warmer weather, net customer attrition, and lower selling prices driven by reduced wholesale product costs Total Sales (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | Change | % Change | | :------------------------ | :-------- | :-------- | :------- | :-------- | | Product Sales | $216,158 | $249,001 | -$32,843 | -13.2% | | Installations and Services | $89,460 | $82,639 | +$6,821 | +8.3% | | Total Sales | $305,618 | $331,640 | -$26,022 | -7.8% | Sales Volume (in thousands of gallons) | Metric | Q3 FY2025 | Q3 FY2024 | Change | % Change | | :-------------------------------- | :-------- | :-------- | :------- | :-------- | | Home Heating Oil & Propane | 36,200 | 37,700 | -1,500 | -3.8% | | Other Petroleum Products | 32,000 | 32,900 | -900 | -2.7% | - Warmer weather (2.0% warmer YoY, 19.3% warmer than normal) and net customer attrition were key factors for volume decline, alongside a 14.3% decrease in wholesale product costs[2] Net Loss and Operating Income Star Group's net loss increased by $5.6 million to $16.6 million in Q3 FY2025, primarily driven by a higher Adjusted EBITDA loss, increased depreciation and amortization, and higher net interest expense, partially offset by a greater income tax benefit and a favorable change in derivative fair value, with operating loss also widening significantly Operating and Net Loss (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :-------------------------- | :-------- | :-------- | :------- | | Operating Income (Loss) | $(19,177) | $(12,291) | $(6,886) | | Net Loss | $(16,629) | $(11,044) | $(5,585) | | Net Loss per Limited Partner Unit | $(0.48) | $(0.31) | $(0.17) | - The increase in net loss was due to a $6.5 million greater Adjusted EBITDA loss, $2.0 million higher depreciation and amortization, and $0.9 million increased net interest expense, partially offset by a $2.3 million higher income tax benefit and $1.6 million favorable derivative fair value change[3] Adjusted EBITDA The Adjusted EBITDA loss for Q3 FY2025 increased to $10.6 million from $4.1 million in the prior-year period, with this larger loss mainly due to slightly lower per-gallon margins in the base business and decreased volume from warmer weather, partially offset by lower base business operating expenses and positive Adjusted EBITDA from recent acquisitions EBITDA and Adjusted EBITDA (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :-------------- | :-------- | :-------- | :------- | | EBITDA | $(9,980) | $(5,048) | $(4,932) | | Adjusted EBITDA | $(10,583) | $(4,064) | $(6,519) | - The increased Adjusted EBITDA loss was attributed to slightly lower home heating oil and propane per-gallon margins in the base business and decreased volume due to warmer weather and other factors[4] - This negative impact was partially offset by lower base business operating expenses and positive Adjusted EBITDA contributions from recent acquisitions[4] Financial Results - Nine Months Ended June 30, 2025 This section presents Star Group's financial performance for the first nine months of fiscal 2025, showing a modest increase in total revenue and sales volume, a significant rise in net income, and improved Adjusted EBITDA, primarily driven by colder weather and strategic acquisitions Total Revenue and Sales Volume Total revenue for the first nine months of fiscal 2025 modestly increased by less than 1.0% to $1.537 billion, driven by an 11.8% increase in home heating oil and propane volume sold, primarily due to colder temperatures and acquisitions, which offset a decline in selling prices Total Sales (in thousands) | Metric | 9M FY2025 | 9M FY2024 | Change | % Change | | :------------------------ | :---------- | :---------- | :------- | :-------- | | Product Sales | $1,280,722 | $1,292,849 | -$12,127 | -0.9% | | Installations and Services | $256,004 | $232,919 | +$23,085 | +9.9% | | Total Sales | $1,536,726 | $1,525,768 | +$10,958 | +0.7% | Sales Volume (in thousands of gallons) | Metric | 9M FY2025 | 9M FY2024 | Change | % Change | | :-------------------------------- | :---------- | :---------- | :------- | :-------- | | Home Heating Oil & Propane | 262,600 | 234,900 | +27,700 | +11.8% | | Other Petroleum Products | 91,600 | 95,400 | -3,800 | -4.0% | | Total All Products | 354,200 | 330,300 | +23,900 | +7.2% | - Colder temperatures (8.2% colder YoY) and additional volume from acquisitions more than offset net customer attrition and declining selling prices[6] Net Income and Operating Income Net income for the first nine months of fiscal 2025 increased by $31.9 million to $102.2 million, with this improvement primarily due to higher Adjusted EBITDA and a favorable change in derivative fair value, partially offset by increased income tax provision, depreciation and amortization, and net interest expense, and operating income also saw a substantial increase Operating and Net Income (in thousands) | Metric | 9M FY2025 | 9M FY2024 | Change | | :-------------------------- | :---------- | :---------- | :------- | | Operating Income (Loss) | $155,414 | $109,661 | +$45,753 | | Net Income | $102,166 | $70,309 | +$31,857 | | Net Income per Limited Partner Unit | $2.45 | $1.66 | +$0.79 | - The increase in net income was primarily driven by $28.2 million higher Adjusted EBITDA and a $20.2 million favorable change in derivative fair value[7] - These gains were partially offset by a $12.4 million higher income tax provision, $2.6 million increase in depreciation and amortization, and $1.4 million greater net interest expense, largely due to acquisitions[7] Adjusted EBITDA Year-to-date Adjusted EBITDA increased by $28.2 million to $169.5 million, driven by higher Adjusted EBITDA in the base business ($21.1 million) and from recent acquisitions ($17.7 million), but partially offset by a $10.6 million expense related to weather hedge contracts as temperatures were colder than strike prices EBITDA and Adjusted EBITDA (in thousands) | Metric | 9M FY2025 | 9M FY2024 | Change | | :-------------- | :---------- | :---------- | :------- | | EBITDA | $181,426 | $133,038 | +$48,388 | | Adjusted EBITDA | $169,464 | $141,300 | +$28,164 | - Higher Adjusted EBITDA in the base business was due to increased per-gallon margins, higher volume from colder weather, and improved service and installation profitability[8] - A $10.6 million expense was recorded for weather hedge contracts due to colder temperatures, compared to a $7.5 million credit in the prior-year period[8] Condensed Consolidated Financial Statements This section presents the condensed consolidated balance sheets and statements of operations, detailing asset and liability changes, and revenue, cost, and profitability trends for both the three-month and nine-month periods Condensed Consolidated Balance Sheets As of June 30, 2025, Star Group's total assets increased to $963.8 million from $939.6 million at September 30, 2024, primarily driven by increases in property and equipment, goodwill, and intangibles largely due to acquisitions, while total liabilities decreased and partners' capital significantly increased Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | Sept 30, 2024 | Change | | :-------------------------- | :------------ | :------------ | :------- | | Total Assets | $963,799 | $939,611 | +$24,188 | | Total Current Assets | $233,495 | $281,469 | -$47,974 | | Property and equipment, net | $127,024 | $104,534 | +$22,490 | | Goodwill | $293,350 | $275,829 | +$17,521 | | Intangibles, net | $130,091 | $98,712 | +$31,379 | | Total Liabilities | $626,231 | $675,796 | -$49,565 | | Total Partners' Capital | $337,568 | $263,893 | +$73,675 | - Significant changes in assets include a decrease in cash and cash equivalents by $89.253 million and an increase in receivables by $34.286 million[16] - Current liabilities decreased by $42.326 million, mainly due to a significant reduction in customer credit balances by $48.103 million and a decrease in fair liability value of derivative instruments[17] Condensed Consolidated Statements of Operations The statements detail revenue, costs, and profitability for both the three-month and nine-month periods, showing that for Q3, product sales decreased while installation and service sales increased, and for the nine-month period, total sales saw a modest increase with product sales slightly down and installation/service sales up, resulting in a widened net loss in Q3 but a significantly increased net income for the nine-month period Statements of Operations Summary (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------------------- | :-------- | :-------- | :---------- | :---------- | | Total Sales | $305,618 | $331,640 | $1,536,726 | $1,525,768 | | Cost of product | $144,521 | $174,285 | $800,170 | $867,017 | | Cost of installations and services | $75,240 | $69,108 | $233,115 | $214,807 | | Operating income (loss) | $(19,177) | $(12,291) | $155,414 | $109,661 | | Net income (loss) | $(16,629) | $(11,044) | $102,166 | $70,309 | - Depreciation and amortization expenses increased for both periods, reflecting the impact of acquisitions[3][7][18] Supplemental Financial Data This section provides supplemental financial data, including detailed reconciliations of net income/loss to EBITDA and Adjusted EBITDA, along with key cash flow metrics for both the three-month and nine-month periods Reconciliation of EBITDA and Adjusted EBITDA (Three Months) This section provides a detailed reconciliation of net loss to EBITDA and Adjusted EBITDA for the three months ended June 30, 2025 and 2024, also including key cash flow metrics and gallons sold for the quarter Reconciliation and Cash Flow (in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------------- | :-------- | :-------- | | Net loss | $(16,629) | $(11,044) | | EBITDA | $(9,980) | $(5,048) | | Adjusted EBITDA | $(10,583) | $(4,064) | | Net cash provided by operating activities | $72,502 | $77,546 | | Net cash used in investing activities | $(13,100) | $(1,984) | | Net cash used in financing activities | $(49,822) | $(41,924) | - Operating cash flow decreased by $5.044 million, while cash used in investing activities significantly increased by $11.116 million, and cash used in financing activities increased by $7.898 million[21] Reconciliation of EBITDA and Adjusted EBITDA (Nine Months) This section presents the reconciliation of net income to EBITDA and Adjusted EBITDA for the nine months ended June 30, 2025 and 2024, along with year-to-date cash flow metrics and total gallons sold Reconciliation and Cash Flow (in thousands) | Metric | 9M FY2025 | 9M FY2024 | | :-------------------------------- | :---------- | :---------- | | Net income | $102,166 | $70,309 | | EBITDA | $181,426 | $133,038 | | Adjusted EBITDA | $169,464 | $141,300 | | Net cash provided by operating activities | $56,543 | $72,367 | | Net cash used in investing activities | $(99,507) | $(31,201) | | Net cash used in financing activities | $(46,289) | $(40,656) | - Operating cash flow decreased by $15.824 million, while cash used in investing activities significantly increased by $68.306 million, and cash used in financing activities increased by $5.633 million[23] Forward-Looking Information This section serves as a disclaimer, outlining that the news release contains forward-looking statements subject to various risks and uncertainties, including geopolitical events, product price volatility, inflation, weather conditions, customer retention, acquisitions, litigation, regulatory changes (e.g., climate change), labor issues, and new technologies, with the company cautioning that actual results may differ materially from expectations and undertaking no obligation to update these statements - The report contains forward-looking statements regarding future events, expectations, and beliefs, identified by words like "believe," "anticipate," "plan," "expect," "seek," "estimate"[14] - These statements are subject to risks and uncertainties, including geopolitical events, product cost volatility, inflation, weather, customer patterns, gross profit margins, customer acquisition/retention, acquisitions, litigation, natural gas conversions, electrification, pandemics, economic conditions, union relations, governmental regulations (climate change, environmental, health, safety), employee retention, creditworthiness, cyber-attacks, supply chain issues, labor shortages, and new technology[14] - Actual results may differ materially from projections, and the company undertakes no obligation to update or revise forward-looking statements[14]