UGI Corporation Q3 FY2025 earnings call

• Capital deployment: Over $600 million of capital deployed year-to-date, with more than 80% directed to regulated Utilities and UGI energy services.
• Utilities segment: Sustained customer growth of approximately 9,000 residential heating and commercial customers this fiscal year, and progress on the Pennsylvania Gas Utility rate case with a joint petition for $69.5 million in revenue increase.
• LPG divestitures: Entered into definitive agreements for asset sales expected to generate approximately $150 million in total proceeds during fiscal 2025, exiting the wholesale LPG business which had little earnings contribution.
• AmeriGas: Customer focus improvement initiatives progressing, including procurement, routing and delivery, call-center reshoring, and focusing on profitable customer segments, with substantial improvement in safety performance in the third quarter.

For the Utilities segment, EBIT was $30 million for the third quarter compared to $39 million in the prior year period. Year-to-date, Utilities EBIT was up $12 million primarily due to a 10% increase in core market volumes from favorable weather conditions. The Midstream & Marketing segment had EBIT of $27 million in the third quarter, down $16 million from the prior year, with a year-to-date EBIT decline of $22 million reflecting lower minimum volume commitments and a 2024 power generation asset sale. UGI International's EBIT was $43 million in Q3 compared to $57 million in the prior year, with a year-to-date EBIT decrease of $9 million largely due to the absence of the Swiss business divested in Q3 last year but offset by reduced operating and administrative expenses. AmeriGas had an operating loss of $28 million in the third quarter, fairly consistent with the prior year, with year-to-date EBIT up $18 million due to higher total margins and disciplined expense management. In terms of revenue contribution, details weren't explicitly given for each segment's percentage contribution, but the overall performance of each segment was discussed in detail.

• Expect to be at the top end of the fiscal 2025 adjusted earnings per share guidance range of $3 to $3.15.
• Potential benefits from the One Big Beautiful Bill Act, including retroactive removal of valuation allowance on interest deductibility, potential use of bonus depreciation, R&D credits, and strengthening of 45Z position going forward.

• Seasonal weakness in third and fourth quarters, as these are typically weaker periods for the business.
• Impact of regulatory changes and market uncertainties on financial results.
• Risks associated with divestitures and operational changes, such as potential impact on earnings from exiting certain LPG business segments.

Q: Could you unpack the potential disclosure benefit from the One Big Beautiful Bill Act?

A: The biggest initial impact will be retroactively removing valuation allowance on interest deductibility, especially at AmeriGas, and going forward, potential use of bonus depreciation, R&D credits, and strengthening of 45Z position.

Q: Can you frame the investment opportunity set for the Pennsylvania Midstream business?

A: There are substantial NDAs with potential generators and other opportunities to utilize infrastructure for natural gas or LNG, with multiple counterparties and ongoing discussions.

Q: What metrics is AmeriGas focused on going into the winter heating season?

A: Focus on safety (substantial improvement in Q3), customer service statistics (Net Promoter Scores, time on hold), routing and delivery efficiency (8%-10% improvement launched nationwide by October 1), and free cash flow generation.

Q: Any notable contract expiries on the Midstream side over the next 12-18 months?

A: No significant notable contract expiries anticipated where there's a significant shift; re-ups are expected to be generally in line with current levels.