STAR GROUP, L.P. Q2 FY2025 earnings call

• Recent acquisitions: Since February 1, 2024, $126.5 million of transactions completed, with pipeline of opportunities active. Closed 2 businesses during the quarter and a small transaction in April.
• Dividend increase: Raised annual dividend by $0.05 to $0.74 per unit.
• Team performance: Frontline employees responded well to added demand from colder temperatures.
• Focus areas: Continue to focus on operational execution and efficiency, and expansion/improvement of HVAC business.
• Financials: Second quarter net income was $86 million, $18 million higher than prior year; year-to-date net income was $119 million, $37 million higher than prior year.

In the second quarter of Fiscal 2025, home heating oil and propane volume rose by 27 million gallons or 23% to 144 million gallons. Product gross profit increased by $52 million or 25% to $258 million. The service and installation business contributed an increase in adjusted EBITDA of $1.6 million. For the year-to-date (first half of Fiscal 2025), home heating oil and propane volume increased by 29 million gallons or 14.7% to 226 million gallons. Product gross profit rose by $58 million or 17% to $409 million. The service and installation business provided an increase in adjusted EBITDA of $4.1 million during the 6 months.

• For Fiscal 2026, put in place $15 million of weather hedges with similar terms to 2025.
• Recent acquisitions will have losses in the nonheating season, which will temper winter profits.

• Weather hedging: Expenses related to weather hedging, with $9.6 million attributable to weather hedging in second quarter and $10.6 million year-to-date.
• Tariffs: Potential impact on HVAC parts and equipment prices, with price increases of 3% to 15% seen so far.
• Nonheating season losses: Recent acquisitions will have losses in nonheating season, affecting overall profits.

Q: Given the lack of buybacks in the past couple of months, any changes to the buyback program and impact of recent acquisitions on it?

A: No change to the program; it's still operating as in place with JPMorgan at the strike price.

Q: Looking at acquisition pipeline, any in HVAC installation servicing business?

A: More on distribution side, primarily heating oil and propane businesses; undertaking limited initiative to build out HVAC business internally organically.

Q: Qualitatively, any difference in customers' ability to pay?

A: Historically low bad debt rate; cold weather means customers will pay heating oil bills during winter, but will see at end of summer when no deliveries.

Q: Anticipated impact of tariffs on heating oil prices?

A: Tariffs are fluid; seen price increases of 3% to 15% on HVAC parts/equipment, vendors provided notice to adjust pricing.

Q: Any tax-related or other factors increasing acquisition availability? Sufficient firepower?

A: No difference related to taxes; pent-up demand going into heating season, busier season overall, with additional opportunities hitting market after season concluded