SUBURBAN PROPANE PARTNERS LP Q2 FY2025 earnings call

• Suburban Propane faced sustained winter weather in January and February 2025, with field personnel meeting the surge in demand. - Propane volumes increased 15.5%, and adjusted EBITDA rose $28 million or 19.1% due to strong volume performance, margin management, and expense discipline. - In the renewable natural gas segment, there were challenges in Arizona but progress on capital projects in Ohio and New York. - The acquired propane business in the first quarter of fiscal 2025 has exceeded expectations. - Suburban Propane launched an at-the-market equity sales program, raising $8.8 million in the second quarter. - The long-term strategic growth plan focuses on core propane growth, renewable energy investment, and balance sheet flexibility. - Suburban Propane launched a multiyear sponsorship of NASCAR.

Propane segment: Propane volumes for the quarter increased 15.5% compared to the prior year second quarter. During January 2025, Suburban Propane delivered the highest propane volume since 2018. The strong volume performance, combined with effective margin management and expense discipline, contributed to a $28 million or 19.1% increase in adjusted EBITDA compared to the prior year second quarter. Renewable natural gas segment: Average daily RNG injection for the second quarter improved from the first quarter but was down slightly compared to the prior year second quarter due to extremely cold ambient air temperatures in the Arizona area impacting anaerobic digestion and RNG production at the Stanfield facility, along with a short period of planned downtime. Revenues at the Stanfield facility have faced headwinds from lower prices for California LCFS credits and more recently D3 RIN prices. However, Suburban Propane is progressing well with capital projects at its Columbus, Ohio, and Upstate New York facilities, which will increase overall RNG sales once operational.

• Suburban Propane will utilize excess cash flows and proceeds from the ATM program to strengthen the balance sheet. - The company expects to generate excess cash flows in the fiscal quarters ahead and use them to fund strategic growth, including for the RNG platform.

• Uncertainty in federal regulations regarding production tax credits for RNG and LCFS credit prices in California could impact RNG operations. - Tariffs could potentially affect the business, although currently Suburban Propane is substantially insulated. - Propane price volatility due to potential Chinese demand for propane from the US and inventory changes.

Q: Talk about how Suburban is positioning itself ahead of the non-heating season and plan for the next heating season.

A: Suburban has been through different commodity cycles. Currently, there is a view that there may be a higher inventory of propane in the US, and prices are reflecting that. But this doesn't change the way they are thinking about sourcing and setting up for next year's heating season.

Q: Give a high-level view of Suburban's view of the propane M&A landscape coming out of this heating season.

A: The propane M&A landscape has changed dramatically with fewer buyers. Suburban sees this as a great opportunity, with a promising future for propane. The pipeline of M&A opportunities is building, and multiples are getting more reasonable.

Q: Expand on Suburban's view of renewable regulations, timelines, and impact on Adirondack, Columbus investments.

A: On the RNG side, California's LCFS program amendments are important and expected to rebound credit values. Suburban is focused on operational excellence in RNG. Projects at Columbus and Adirondack are set to come online, and in the long term, renewable natural gas is seen as a good investment.