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Star Group(SGU) - 2024 Q4 - Earnings Call Transcript
SGUStar Group(SGU)2024-12-05 18:58
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Financial Data and Key Metrics Changes - Total revenue decreased modestly due to slightly lower volumes and selling prices, while full year adjusted EBITDA increased by 14.7millioncomparedtofiscal2023,drivenbyhigherhomeheatingoilandpropanemarginsandimprovedserviceandinstallationprofitability[8][18]−Netcustomerattritionroseto4.214.7 million compared to fiscal 2023, driven by higher home heating oil and propane margins and improved service and installation profitability [8][18] - Net customer attrition rose to 4.2% in fiscal 2024, slightly up year-over-year, despite improvements in internal customer satisfaction indicators [9][28] - The net loss for the quarter increased by 15 million to 35million,primarilyduetoanunfavorablenon−cashchangeinthefairvalueofderivativeinstruments[16]BusinessLineDataandKeyMetricsChanges−HomeheatingoilandpropanevolumeforQ4decreasedby300,000gallons,orabout1.535 million, primarily due to an unfavorable non-cash change in the fair value of derivative instruments [16] Business Line Data and Key Metrics Changes - Home heating oil and propane volume for Q4 decreased by 300,000 gallons, or about 1.5%, to 18.5 million gallons, with acquisitions offset by net customer attrition [14] - Product gross profit increased by 4 million, or roughly 10%, to 42million,largelyduetohighermargins[15]−Forthefullyear,homeheatingoilandpropanevolumedecreasedby6milliongallons,or242 million, largely due to higher margins [15] - For the full year, home heating oil and propane volume decreased by 6 million gallons, or 2%, to 253 million gallons, with product gross profit increasing by approximately 21 million, or 5%, to 468million[17][18]MarketDataandKeyMetricsChanges−Temperaturesintheoperationalareaswere15468 million [17][18] Market Data and Key Metrics Changes - Temperatures in the operational areas were 15% warmer than normal but roughly flat year-over-year, impacting customer demand [7][17] - The company recorded a weather hedge benefit of 7.5 million in fiscal 2024, down from 12.5millioninfiscal2023,contributingtoincreasedexpenses[17]CompanyStrategyandDevelopmentDirection−Theacquisitionprogramisakeygrowthstrategy,withfivetransactionscompletedinfiscal2024,addingover20,000customersand23milliongallonsofheatingoilandpropanevolumeannually[11]−Thecompanyhasastrongacquisitionpipelinewithseveralopportunitiescurrentlyunderreview,indicatingoptimismforfuturegrowth[30]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthechallengesposedbyamildwinterandlowerrealestateactivityaffectingcustomeradditions,butexpressedconfidenceinthecompany′sabilitytoprovidesuperiorservice[10][12]−Themanagementremainsfocusedoncostcontainmentandoperationalefficiency,whichcontributedtoimprovedEBITDAresults[8]OtherImportantInformation−Thecompanycompletedacreditfacilitythatincludesa12.5 million in fiscal 2023, contributing to increased expenses [17] Company Strategy and Development Direction - The acquisition program is a key growth strategy, with five transactions completed in fiscal 2024, adding over 20,000 customers and 23 million gallons of heating oil and propane volume annually [11] - The company has a strong acquisition pipeline with several opportunities currently under review, indicating optimism for future growth [30] Management's Comments on Operating Environment and Future Outlook - Management noted the challenges posed by a mild winter and lower real estate activity affecting customer additions, but expressed confidence in the company's ability to provide superior service [10][12] - The management remains focused on cost containment and operational efficiency, which contributed to improved EBITDA results [8] Other Important Information - The company completed a credit facility that includes a 400 million revolver and a $210 million term loan, enhancing liquidity for acquisitions and corporate purposes [12] Q&A Session Summary Question: What does the weather forecasting indicate for the upcoming heating season? - Management indicated that the first two months of fiscal 2025 have been milder than normal, with November being about 20% more mild than usual, but they refrain from making strong predictions [26] Question: How is customer retention currently? - Management reported that customer losses and churn rates have improved, but lower market activity, particularly in real estate, impacted customer gain rates [28] Question: What is the outlook for the acquisition environment? - Management expressed optimism about the acquisition pipeline, having closed five acquisitions in 2024 and currently reviewing several opportunities [30]