Star Group [SGU] Conference call transcript for 2025 q4
2026-02-05 00:00:00
Fiscal: 2026 q1
Operator: Good day, and welcome to the Star Group Fiscal 2026 First Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead.
Chris Witty: Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer; and Rich Ambury, 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 and 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. 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 disclosed in this conference call, the company's annual report on Form 10-K for the fiscal year ended September 30, 2025, 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'd now like to turn the call over to Jeff Woosnam. Jeff?
Jeffrey Woosnam: Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our first quarter results. Fiscal 2026 has started off very well as our performance benefited from recent acquisitions, physical supply and per gallon margin management, the continued focus on service and installation profitability and last but not least, temperatures that were almost 19% colder than last year and 6% colder than normal. The confluences of these factors, even given the operational challenges associated with persistent cold temperatures resulted in an increase of adjusted EBITDA of $16.5 million or 32% year-over-year, net of a $5 million charge to our weather hedge program. At the same time, net customer attrition was modest during the period. Improvement efficiency and operational execution have been specific areas of focus for us, so it's quite rewarding to see our work have a meaningful impact on bottom line results. The cold weather has continued thus far into the second quarter and, in fact, January finished 2% colder than last year and 9% colder than normal. I'm very proud of the way our employees have responded to the added demand and the challenges of making deliveries in snow and ice conditions. They've worked tirelessly at times through difficult conditions to provide our customers with the level of service and responsiveness they have come to expect. While we did not close on any acquisitions in the first quarter, we did complete one purchase of a small heating oil business just a few days ago. It's not at all unusual to experience a slight lull in prospect activity, during a busy heating season, but we still have several opportunities under various stages of review. And I anticipate that we will see new ones presented as we get closer to spring. Although it's too early to say how fiscal 2026 will play out, we remain vigilant in providing excellent customer service, keeping costs down and growing our service and installation profitability. I believe we are well prepared to address whatever challenges or opportunities might present themselves over the remainder of the heating season. With that, I'll turn the call over to Rich to provide additional comments on the quarter's financial results. Rich?
Richard Ambury: Thanks, Jeff, and good morning, everyone. For the quarter, our home heating oil and propane volume rose by 11.5 million gallons or 14% to approximately 94 million gallons as the additional volume provided from acquisitions and colder temperatures was reduced by net customer attrition and other factors. Temperatures in our geographic areas of operations for the 3 months ending December 31, 2025, were 19% colder than the 3 months ending December 31, 2024, and 6% colder than normal. Our product gross profit increased by $29 million or 19% to approximately 179 million gallons due to an increase in home heating oil and propane volumes sold and higher per gallon margins. We realized a combined gross profit from service and installations of $5.6 million for the 3 months ending December 31, 2025, compared to gross profit of $6.9 million for the 3 months ending December 31, 2024. While installation gross profit increased by $1.4 million, the service gross profit loss did increase by $2.7 million due to the high demand for service relating to the 19% colder temperatures and the additional costs attributable to an increase in our propane tank sets. Delivery, branch and G&A expenses rose by $11 million in the first quarter of fiscal 2026 versus the prior year period. The company's weather hedge contracts accounted for $5 million of the increase as temperatures experienced from November through December of 2025 were colder than the contract strike price. In addition, delivery expenses rose by $3.8 million or 13%, largely due to the 14% increase in home heating oil and propane volumes sold. The remaining operating costs increased by just $2.2 million or approximately 2%. During the first quarter of fiscal 2026, we recorded a $5 million noncash charge related to the change in the fair value of our derivative instruments. By comparison, in the first quarter of fiscal 2025, we recorded a $5 million credit. Net income increased by $3 million in the quarter to $36 million as an increase in adjusted EBITDA of $16.5 million was reduced by the unfavorable noncash change in the fair value of derivative instruments, as I just mentioned, was $10 million year-over-year. In addition, net income was also negatively impacted by higher depreciation and amortization expenses and net interest expense due solely to our higher acquisition program and that totaled $1.7 million in aggregate, along with higher income tax expense of $1.3 million. Adjusted EBITDA increased by $16.5 million to $68 million, primarily due to a $16.8 million increase in adjusted EBITDA in the base business and a $4.8 million increase in adjusted EBITDA from recent acquisitions which was partially offset by the $5 million increase in expense relating to the company's weather hedge contracts. And with that, I'll turn the call back over to Jeff.
Jeffrey Woosnam: Thanks, Rich. At this time, we're pleased to address any questions you may have. Operator, please open the phone lines for questions.
Operator: [Operator Instructions] The first question comes from Tim Mullen with Laurelton Management.
Timothy Mullen: Just wondering if you had any commentary given we're now a month in -- a little over a month into the second quarter for the fiscal year, given obviously this cold weather has persisted in terms of how it's going operationally or any other kind of general commentary you can provide?
Jeffrey Woosnam: Sure, Tim. Yes. I mean, obviously, January was colder than normal. February is starting off that way, and we've got a pretty strong forecast in front of us. And we've been dealing with some storms. So conditions have definitely been a challenge for us. But frankly, this is what we're built for as a full-service provider, and this is what we plan for. So I'm just always amazed at how our employees really just step up and get a lot of satisfaction out of taking care of our customers. So I feel very good about our current position right now, given some very difficult conditions.
Timothy Mullen: Congrats on a good quarter.
Operator: [Operator Instructions] At this point, there are nobody in the queue. So I'll turn it back to Jeff Woosnam for any closing remarks. Please go ahead.
Jeffrey Woosnam: Well, thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2026 fiscal second quarter results in May. Thanks, everybody.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
