SGU

• Overall Quarterly Performance

  • Q3 FY2026 is a non-heating season period, and results aligned with expectations, reflecting seasonal net customer attrition consistent with prior year non-heating periods
  • While Q3 temperatures were 16% colder than the prior year, shoulder month (April/May) cold had minimal impact on heating fuel sales, leading to lower overall sales volume than the prior year
  • The company reported a Q3 FY2026 net loss of $28 million, a $11.4 million larger loss than the prior year, driven by higher insurance costs and an unfavorable non-cash derivative fair value change, partially offset by a larger tax benefit
  • Year-to-date (nine months) FY2026 net income was $116 million, $14 million higher than the prior year period, with adjusted EBITDA up $20 million to $189 million

• Strategic Growth Initiatives

  • The company's core growth strategy focuses on expanding value-added products and services to existing customers, and growing the HVAC business beyond the traditional customer base, which is already showing early progress
  • No acquisitions were completed during Q3, but a small heating oil dealer acquisition closed shortly after the quarter end, and the company maintains an active pipeline of attractive acquisition targets

• Operational Preparation

  • The company is using the summer off-season to strengthen operations, streamline processes, and prepare for the upcoming winter heating season
  • The company continues to invest in the service and installation business, which management identifies as having significant remaining room for revenue growth

Management did not release explicit numerical full-year guidance or formal upward/downward revisions in this call. Management reaffirmed that STAR Group remains well-positioned and on track to deliver strong financial performance for the full fiscal year 2026.

1. Home Heating Oil & Propane: In Q3 FY2026, sales volume decreased 9.4% (3.4 million gallons) to 33 million gallons. Gross profit for the product segment remained virtually flat year-over-year at $72 million, as higher per-gallon margins and gains from other petroleum products offset the lower sales volume. For the nine-month fiscal 2026 year-to-date period, sales volume increased 3.3% (8.6 million gallons) to 271 million gallons, and segment gross profit increased 10% ($48 million) to $529 million, driven by colder winter weather, acquisition volume gains, and higher per-gallon margins. This segment contributed ~82% of total Q3 gross profit and ~97% of total nine-month gross profit. 2. Service & Installation: In Q3 FY2026, the segment delivered gross profit of $15.6 million, which is $1.4 million higher than the prior year Q3. For the nine-month fiscal 2026 year-to-date period, installation gross profit increased by $2.5 million, partially offset by a $5.7 million increase in service gross loss, driven by elevated demand from severe winter weather and higher propane tank set activity. This segment contributed ~18% of total Q3 gross profit.

• Elevated operating costs: Insurance expenses increased materially in Q3, driven by adverse developments on existing claims, leading to an $8.7 million year-over-year increase in total operating expenses
• Weather volatility: Colder than normal winter weather increased operating and service-related costs in the first half of FY2026, while non-heating season temperatures have minimal impact on revenue
• Net customer attrition: Ongoing customer attrition has offset a portion of volume gains from acquisitions in both the third quarter and full year-to-date period
• Geopolitical price impacts: Tensions related to Iran have raised current wholesale product prices, which may impact customer timing of price protection plan enrollment for the upcoming heating season

Q: Given ongoing geopolitical tensions related to Iran, what risks does STAR Group see for product availability, competitive dynamics, or customer behavior ahead of the upcoming heating season? / A: Management stated that as of the call, there are no product availability issues. The company is already on track to secure wholesale supply contracts for the coming heating season. Higher current product prices are expected to impact customer behavior, as some customers on price-protected plans may delay committing to a fixed or ceiling price to wait for market declines, though customers will need to finalize their plan selections by October.

Q: Can management characterize the current acquisition pipeline, specifically is there any potential for transformational acquisitions in the near term? / A: Management noted that STAR Group has completed two smaller acquisitions so far in FY2026, and continues to assess multiple attractive prospective targets. None of the deals in the current pipeline are categorized as transformational, and the company has not changed its long-standing acquisition approach. Management added that acquisitions sometimes close in batches, and the company will progress with opportunities as they develop.