Superior Plus Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 11 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Superior Plus Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Kernick, Manager of Corporate Finance and Investor Relations. Please go ahead.

Speaker 1

Thank you, Shannon. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2023 Third Quarter Results. On the call today are Alan McDonald, President and CEO Greer Coulter, CFO And Curtis Fillipon, President of Certarus. For this morning's call, Alan and Grier will begin with their prepared remarks, And then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward looking in nature and are based on Superior's current expectations, estimates, judgments, projections and risks.

Speaker 1

Further, some of the information provided refers to non GAAP measures. Please refer to Superior's continuous disclosure documents Available on SEDAR Plus and Superior's website for further details. Dollar amounts discussed on today's call are expressed in Canadian dollars, unless otherwise noted. I'll now turn the call over to Alan.

Speaker 2

Thanks, Adam. Good morning, everyone. Please bear with me. I had a bit of a cold today. I'm very pleased to be meeting with you here today to discuss our results for Q3, Traditionally, a smaller quarter in financial terms, but a significant one this year as it's our 1st full quarter including Seterus following the close of the acquisition back in May.

Speaker 2

We're also welcoming some new members of the team this quarter following our management changes that we announced in September. As we continue to refine our strategy and 2024 operating objectives, we felt it was imperative to ensure that we have the right skills and experiences To lead the transformation of Superior Plus. I'm very happy to have Greer Coulter, our new CFO joining me today with all of you. Now many of you know Greer by reputation, but his previous experience will be a huge asset for us as we work together to deliver a plant that will drive incremental growth And shareholder value here at Superior. Greer's initial focus in the role will be to understand our opportunities to improve operating efficiencies And focus on capital allocation across the board.

Speaker 2

Now there's a lot of work to be done, but we have significant opportunities in both regards. Today, we're also welcoming Kirsten Olson, our new Chief Human Resource Officer, who joined in late October. At Superior, we are deliberate and focused when it comes to building a strong team and Kirsten will make a significant impact in terms of how we continue To attract, retain and develop world class talent. Now as we go into a busy winter season, I'm very pleased with the strength of our management team. Greer and Kirsten are welcome additions to a strong leadership group with especially talented operational leaders At Superior Propane and Seterus.

Speaker 2

Before I offer a few comments on the quarter and turn things over to Grier, I should reaffirm our priorities as I laid the mode on our last call. We are continuing to be committed to driving shareholder value in our existing businesses. Superior has a world class set of assets and leadership teams at both operating divisions are committed to delivering incremental organic growth. At Superior Propane, Andy and his team are focused on setting new standards of performance for what is arguably already one of the most successful propane companies in North America. They're continuing to innovate new ideas for building our customer base organically, optimizing our pricing structure And setting new industry standards for asset utilization and productivity.

Speaker 2

At Seterus, Curtis and his team are managing To meet the needs of their customers in a very busy period of expansion and growth. As they add new MSUs, they're serving existing markets, while also adding new customers, industry verticals and geographies, all while keeping a watchful eye on financial performance, cost and profitability. Over the last 2 months, Grier and I have been meeting with investors and analysts to share our vision for the organization. We believe we have the right assets to become the foremost energy distribution company in North America and the transformation from a propane company To a multi solution energy provider is behind us. Today, Superior is firmly established As one of the foremost companies leading the transformation of the energy sector, we are enabling efficient carbon reduction every day, while ensuring safety of supply for our customers.

Speaker 2

In our meetings with investors, we've also been reaffirming our commitment to organic growth, Maintaining our dividend, reducing leverage and effective and efficient capital allocation. Before I turn the call over to Grier for an update on the financial results, I have a few comments of my own on the quarter. Although Q3 is seasonally the smallest quarter for Superior, I'm very pleased with the results. We saw a strong performance across each of our operating business units in Canada and the U. S.

Speaker 2

And improvements over Q3 of last year, especially in the U. S. Propane distribution business where some cost savings initiative help improve profitability in the slower summer months. I was also pleased with the improvements in some key measures we've identified as priority measures, including EBITDA per share and our leverage ratio. So with that, let me turn the call over to Grier for the Q3 results.

Speaker 2

Grier?

Speaker 3

Thank you, Alan, and good morning, everyone. I'd like to start by saying that my first couple of months here at Superior have confirmed the opportunity that I thought was here to grow this business and create value for our shareholders. We've got work to do, but we are starting with a very strong asset base and a rare organic growth engine in Sertaris. As we execute on our operational plans and bring a renewed focus to capital allocation, I'm confident that the Superior story will become clearer to the market and I'm excited to Moving into results for the quarter. Overall, Superior delivered a strong 3rd quarter With adjusted EBITDA of $25,800,000 this represents an increase of $34,600,000 compared to the prior year quarter, driven from the contribution from Seterus And higher adjusted EBITDA from the propane distribution businesses, partially offset by higher corporate costs.

Speaker 3

Our 3rd quarter net loss of $107,800,000 compares to a net loss of $206,900,000 in the prior year quarter. Similar to our growth in EBITDA year over year, The primary driver for the improvement here was higher gross profit. We also saw better result on derivatives and foreign currency translation Turning now to the individual business results. Sotterus achieved record adjusted EBITDA in the Q3 of 35,500,000 Growing at approximately 19% over the prior year comparative. The growth was primarily driven by a larger MSU fleet versus prior year And better utilization of the MSUs.

Speaker 3

We continue to add MSUs and expect to end the year with over 700 in the fleet, approximately 4 times that of our nearest competitor. The U. S. Propane business produced adjusted EBITDA Q3 of negative $5,800,000 which was an increase of $5,100,000 compared to the prior year quarter. The business achieved higher average unit margins in the quarter, partially offset by lower sales volumes.

Speaker 3

The Canadian propane business produced $4,300,000 of adjusted EBITDA in the 3rd quarter, modestly higher than the prior year quarter. The increase was primarily due to higher average unit margins similar to the U. S. Business, partially offset by lower sales volumes. And recall that weather variances are less impactful in the Q3 due to lack of heating demand.

Speaker 3

Wholesale propane generated adjusted EBITDA of $1,500,000 in the 3rd quarter, a decrease of $3,600,000 compared to the prior year, driven by higher freight and to a lesser extent the impact of a weaker Canadian dollar on the translation of U. S. Denominated transactions. So overall, we are very pleased with the performance of our businesses in the quarter. Turning to corporate results, leverage and guidance.

Speaker 3

Corporate administration costs for the Q2 were $10,100,000 an increase of $3,900,000 compared to the prior year quarter due to higher insurance costs And higher long term incentive plan costs related to the change in share price in the prior year quarter. Superior realized a gain on foreign exchange Hedging contracts of $400,000 modestly higher than the loss in the prior year quarter as Superior's average hedge rates were higher relative to the U. S. Dollar Rate in the current quarter. Our leverage ratio for the trailing 12 months ended September 30 was 3.7 times, which is significantly lower than 4.3 times than the prior year.

Speaker 3

And while this number will move around somewhat Quarter to quarter due to seasonal nature of this business, our objective is to continue to improve this metric over time to ensure the company has the financial flexibility to run the business and take advantage of opportunities from a capital allocation standpoint. We are maintaining our 2023 pro form a adjusted EBITDA guidance range at $630,000,000 to $670,000,000 which includes Sertaris On a full year adjusted EBITDA basis in the range of $185,000,000 to 1.95. You'll notice that we have introduced a new metric in our 3rd quarter results, adjusted EBITDA per share, which is consistent Our goal of providing simpler shareholder metrics, adjusted EBITDA per share for the Q3 was $0.09 compared to negative $0.04 in the prior year quarter. We have also filed our notice of intention to commence an NCIB with the TSX, which will start on November 10 and provide us with another year of optionality to opportunistically And lastly, the Board has approved a quarterly dividend of $0.18 per share. And with that, I'd like to turn the call over for Q and A.

Operator

Thank Please stand by while we compile the Q and A roster. Our first question comes from the line of Gary Ho with Dave Jarden. Your line is now open.

Speaker 4

Thanks. Good morning. Maybe just a follow-up on your comments here, Greer, just on the NCIB That was renewed. Just wondering your thought process on the repurchases, how active you'll be just given the dividends that you have and the growth CapEx Commitments?

Speaker 3

Yes. Hi, Gary. It's a good question. I think at this point, What I would say more generally is we see a lot of value in the shares. We see it as a top capital allocation priority.

Speaker 3

To be fair, we're still fine tuning our capital plan for 2024 and as a result, it's hard for us to give out specific numbers. But As I say, we look at this as a top priority. And if you look at that aside, investing in our business Organically, which is also a top priority in managing our balance sheet and looking at leverage, those are also there with it. But to be fair, we just haven't done all the work to figure out on the organic CapEx side, which obviously would have an impact on how much we would be able to buy back. So That's what I'd say, but it's up there as a top priority is maybe the summary.

Speaker 4

Okay. And then maybe just follow on, on that high level question Hey, for both Alan and yourself. If you look out to 'twenty four, just thoughts on updating the Street on any strategy shifts So changes in capital allocation priorities, perhaps an investor event, any glimpse into kind of what you and Board are looking at?

Speaker 2

So Gary, Alan, the short answer is no. There's not going to be any changes in the strategic shifts, if I understand your question right. We're going to be coming out with more a more detailed version of the strategy we've been talking to all of you about In late winter post most likely post February results. But Our vision right now is very consistent with what we've been talking about. It's driving organic growth, looking at operational effectiveness in propane, Investing the capital we have, getting the balance sheet even more conservative.

Speaker 2

So no, you shouldn't expect any abrupt changes. I can tell you categorically, we're not planning any abrupt changes to that The world could turn, obviously. If it does, we'll respond, but that's where we're at right now. Can you hear me okay, by the way, Gary?

Speaker 4

Yes, I can. Yes. And then maybe just the last question for Curtis perhaps, maybe some line. Maybe give us an outlook on the hub Build out over the next 12 months. Maybe geographically, what are you looking at, maybe targeting any certain client segments?

Speaker 5

Hey, Gary. We are I won't give specific locations. We've got Couple of sites underway, under development right now. But strategically, the way we think about it is we target to Add or increase capacity at existing sites about 4 times in a year. And so we're actively always out there looking at developing a number of different sites And sort of open up new markets.

Speaker 5

In particular, we're looking at sort of on the East and West Coast of the U. S. Are sort of the priorities right now. But yes, we got more to come in a future call on that.

Speaker 4

Okay. Thanks very much. Those are my questions.

Speaker 2

Thanks, guys.

Operator

Thank you. Our next question comes from the line of Aaron MacNeil with TD Cowen. Your line is now open.

Speaker 6

Good morning and thanks for taking my questions. Alan, you sort of referenced it in the prepared remarks, but it looks like there's been some Pretty encouraging propane unit margin improvements in the quarter across all the propane segments. I'm just wondering if this is a function of some of the Organizational effectiveness and price optimization efforts that you've spoken about in the past? And If it is, how long far along are you on that initiative?

Speaker 2

I would say hey, Aaron. You know what, let's I would chalk that up to 2 fold. I think it's a little bit of opportunism. And you always have to think about the margin too in the context of the mix between wholesale, consumer and industrial because Those will create fluctuations. But careful so primarily a little bit of mix and just And the other pricing management, of course.

Speaker 2

But the other is, it's very early days In terms of driving operational changes, these things take a lot of time because they're really on the back of new capabilities. But some of the earlier signs that you see that you're having an attention and focus on things like cost management, being conservative around Retaining high value customers and being less aggressive in just acquiring volume and low value customers. So I think you're seeing an increase in discipline, which is having a contribution, but also some of the normal fluctuations in the business.

Speaker 6

Understood. So I guess not to put words on your mouth, but more to come on that front.

Speaker 2

Yes. And look, I don't want to promise massive volume no massive margin changes. Think of it at the highest level in terms of overall growth, because there's some volume These 2 that we'd like to pursue. So but again, it's early days.

Speaker 6

Makes sense. Curtis, just wanted to Get your take on the large order of MSUs since you announced post Q2. Just could you give us a sense of your line of sight in terms of finding work for that equipment? And maybe also just how that equipment will make its way into the fleet over the next 12 months?

Speaker 5

Sure. Yes. So for everybody on the call, we announced that we placed a significant order It's hexagon for a new product line that they've launched, it's effectively their MAXIMUS trailer. So it's What I expect will become the new standard of our fleet, the larger volume trailer that we've got a lot of experience Working with Hexagon on developing a great product. And so we're pretty excited about that.

Speaker 5

And so we've got by the end of next year, we'll have Roughly 150 of those MAXIMUS units in the Sertares fleet. So it's pretty exciting to see that we've actually Just got the very first ones of that product type arriving into our operations here over the last couple of weeks. So we're excited to see that and the impact it will have on our efficiencies in the business. So that's the significance of that. And Part of the large scale of this order is talks to the benefits I think for Sotiris now being part of Superior that in our past we were probably More apps to place are smaller orders and joining the team here now, there's a view.

Speaker 5

Let's make sure we lock up A consistent steady supply of MSUs coming into the business and make it a little less chunky. And so you'll see that large Quarter we placed sort of coming in over next year evenly over the year.

Speaker 6

But presumably you have visibility to work for that

Speaker 5

Absolutely. We're struggling right now in a sold out situation trying to Keep customers happy and not turn down too many people, but we're definitely we're in an oversold situation right now. There's just tremendous demand For low carbon energy solutions, it's across a whole bunch of different verticals. And so we're having to make some tough decisions on where we go deploy Equipment to try and satisfy that. So yes, the team is excited to get their hands on this equipment.

Speaker 5

It is definitely Ready to go to work.

Speaker 6

Makes sense. Thanks, everyone. I'll turn it back.

Speaker 2

Thanks, John.

Operator

Thank you. Our next question comes from the line of Steven Hansen with Raymond James. Your line is now open.

Speaker 7

Yes. Thanks for the time, guys. Can you piggyback off the last answer and just maybe ask about the pricing dynamics CC in the market right now being in a sold out situation is obviously a positive position to be in, but I know that you're still also looking to gain scale and So how do you think about pricing in the current backdrop and perhaps into 2024 as it stands today?

Speaker 5

Yes. It's a good pricing environment for Sotera right now. We've received really strong demand and then we often price against The alternative fuel typically against diesel pricing and so both from a strong demand perspective as well as looking forward I see a real strong diesel price going forward as well. That provides an opportunity for us to offer a significant discount to customers, But still generate a strong margin for Sutaris.

Speaker 7

Okay, helpful. Thank you. And just going back to your comments on the leverage ratio continuing to make improvements there. I mean, have you thought about where you think the optimal level is At this point, you referenced that you'll expect it to continue to improve, bounce around a little bit, but improving is the trend. But again, how do you balance that To some of the other priorities you said, where do you feel like the optimal level needs to be, so you can pursue some of the other levers more aggressively?

Speaker 3

Yes. Hi. It's Greer here. It's a great question. I think, yes, I would say stay tuned.

Speaker 3

To be fair, We're working through our 2024 plan looking at the what we want to do is make sure that we commit the right amount of capital to The propane business and the Sotteris business and that is of paramount importance to us. And then with that maintain and improve on To strengthen our balance sheet and also look at other capital allocation priorities like share buybacks, so nothing prescriptive. The merits A lower leverage balance sheet are not lost on us. They're very clear. But I think to come out with some type of prescriptive approach on the target And the time line at this stage would probably be a little bit premature, but just stay tuned on it because I think we'll give you more as time goes on here.

Speaker 2

We have the challenge of having Several very compelling capital allocation opportunities. So we're just working through it.

Speaker 7

Okay. I appreciate it, guys. Thanks. Thanks.

Operator

Thank you. Our next question comes from the line of Nelson Ng with RBC Capital Markets. Your line is now open.

Speaker 8

Great. Thanks and good morning everyone. First question is for Curtis. On Simparis, can you just Comment about the seasonality impacts and the utilization of trucks during Q3. I know you mentioned that you guys are sold out and there's a shortage of trucks.

Speaker 8

But Can you just comment on the seasonality? Like obviously Q1 and Q4 is the highest. I think that National Grid contract is quite profitable, but can you just provide a bit more color?

Speaker 5

Sure. Thanks. Thanks, Nelson. The definitely we have some seasonality in our business. So in Q2 and Q3, You see us do more road construction type work and some renewable natural gas opportunities as well That we have to get a little bit more active on in those Q2 and Q3 months.

Speaker 5

In Q1 and Q4, we have some great utility work that we do As well as fairly significant heating heat related opportunities in sort of the Northern U. S. And in Canada. So You always get this bit of unique dynamic on the tail end of Q3 and the early part of Q4, where you have a bit of a pivot in How the MSUs are deployed and so you're coming off of some of that road construction type work and going into some of these heat related work And the utility work. And so there's a bit of a transition period through the back end of September or October as you're getting into that.

Speaker 5

And so We're starting to see the sort of true winter numbers starting to come out, which is always our busiest time of year. And You really see that in Q1 for us and that you get sort of a full quarter running at that peak rate.

Speaker 8

Okay, thanks. And then in terms of maybe it's for Grier, but so growth CapEx, I think it was about $28,000,000 in Q3. That's up from $15,000,000 last year. So I presume most of the increase, if not all, is that's due to Sutaris growth CapEx. And is will Q4 look like Q3?

Speaker 3

I mean, the CapEx will be, I think, Certainly higher for Seterus in Q4. The MSU deliveries in Q3 were pretty low as a result of the ordering schedule and The way they'll be produced, so you could expect the Seterus CapEx to be quite a lot higher in Q4. It will represent the majority of the growth CapEx in Q4.

Speaker 8

Okay. Got it. And then just one last question for Curtis. In terms of the MSU is deployed. Are you seeing I guess, in the last year and your expectation next year, Are you seeing any specific areas or industries where you're going to be allocating more MSUs going forward?

Speaker 8

Or do you think that the mix will stay roughly the same?

Speaker 5

Yes. I think the mix for us This changed a bit over time. Historically, Stateris started with almost entirely an oil and gas customer base and That continues to be a great part of our business that's growing quite strongly. But we made a shift A few years back to say we recognized the real importance of diversifying the business into a number of different verticals and just grow the overall Opportunities set out there and we've been sort of paying our dues growing these different industry verticals. And to the point now over the last 3 years, The majority of the capital that we've deployed has been going into these beyond the well site type applications.

Speaker 5

And so I think You're seeing some really interesting growth opportunities. Within oil and gas, it's a great business. We're going to still see growth within that, but we're also seeing some really impressive growth In the utility segment, there's just a lot of infrastructure challenges right across North America that utilities are struggling with and we can help them bridge those gaps. We're seeing a tremendous amount of growth on the renewable natural gas side of the business where there's a lot of capital being deployed into renewable natural gas Project development and the bulk of those projects are not pipeline connected. And so they need a way to go actually get that gas to the pipeline and Sotera Software is a great solution to do that.

Speaker 5

And so we're starting to see more of those projects come online and that's becomes a pretty significant deployment of MSUs for us. And the biggest one potentially that I think we're still really early on is we look at remote power generation as being Tremendous growth lever for us that there's a significant diesel remote power generation market out there today. And I expect over the next Few years as you look at that that you're going to see a migration of that over away from diesel towards natural gas generation that I think is going to create a Tremendous growth. We're seeing some great projects out of that already today, but I think we're just really early start to that. And so Hence the strategy to deploy, keep on growing all segments of this, but we've been consistently sort of putting more than half of our capital needs beyond the well site applications in

Speaker 8

Thanks, Curtis. I'll just squeeze one more question in. It might be for Alan or Grier, but The 8 propane sites in Northern Ontario, I think the MD and A indicated that you're expecting to divest those assets In Q4 of this year, can you just provide a quick update as to where you are? Is it just paperwork now And those sites will get sold?

Speaker 3

Yes. It's Greer here. So you can expect this to happen in the 4th quarter And we'll provide a bit more information on it. But yes, it's yes, I guess as you say, it's paperwork. It's kind of It's highly likely that this will happen at the levels that you see in the financials.

Speaker 8

Great. Thanks. I'll leave it there.

Speaker 2

Thanks, Nelson.

Operator

Thank you. Our next question comes from the line of Ben Isaacson with Scotiabank. Your line is now open.

Speaker 9

Thank you very much and good morning everyone. Two questions. First one for Alan. Alan, you said that you have been meeting with investors and analysts Over the last couple of months, what are the key messages that you've received from the investment community? And in their perception rightly or wrongly, what's working and what's not working?

Speaker 8

Great question. Hey, Ben.

Speaker 2

It's interesting. I think so what we've been hearing is, I would think 2 things resoundingly that investors are pleased That they see a company with a strong asset base and a runway or a pathway to A very

Speaker 5

profitable

Speaker 2

and successful future, because We've now got the ability to expand into an emerging market with energy transformation on the back of a cash generation engine at Superior, Which I think arguably is quite well run-in their view and a growth engine at Ceteris. What's so I think what's working is Well, the bones of this organization are really strong. I think that the investors and we see this with our institutional investors. We have a very, very patient Investors. We have very, very patient investor group, which probably reflects the volume liquidity that we have on a the trading volume on a day to day basis.

Speaker 2

But There's a bit of wait and see where this new organization in its current form you get a new management team, A history of some strategic surprises. So I think more than anything else, Investors saying, hey, can you give us continuity? Can you continue to talk about this strategy? Can you deliver on your promises? Can you give us a level of And we're more than happy to come along in the journey with you.

Speaker 2

And I don't know Curtis and Greer and they've been in these meetings too, but I got to tell you they're very positive. And I hate to use the phrase wait and see because I think it's much more positive than that. But I think our investors are looking for some time of continuity and consistency from us.

Speaker 9

That makes a lot of sense. Thank you for that. And then just second question, which is an operational one on Ceteris. I'm just looking at Page 17 of your MD and A, which is The Zetaras results. And I see that your EBITDA went down to about $54,000 per MSU In Q3 versus about 74,000 since acquisition.

Speaker 9

And when I scroll up, I see that it's really revenue that has declined per MSU. Why is that? And how should we think about revenue per MSU going forward or in a steady state type of environment? Thank you so much.

Speaker 5

Sure. I think the one thing to watch when you look at the revenue number is just know that we by the nature of our Contracts, we don't take natural gas commodity risk exposure. And so the revenue number will go up and down at times depending on what the natural gas Price is doing and how much gas price are flowing through. And so Q3 last year had a significantly higher natural gas price that we're flowing through versus this year. But you'll See that on actual sort of EBITDA per MMBtu delivered, pretty consistent.

Speaker 5

And that's So we've we focus much more on what is the what's the EBITDA generated per MSU in the fleet and per MMBtu delivered is We're focusing on versus the revenue numbers that one can bounce around with the quantity price. From an EBITDA per MSU perspective, so for the quarter, Q3 is a quieter quarter for Seterus and so That is there is some seasonality to this. So you'll see the quarterly EBITDA per MSC number has been stronger in our Q1 in particular and Q4 as well.

Speaker 9

Have you talked about what the run rate should be On EBITDA per MSU over the course of the year?

Speaker 5

We do. Like we target that we in very simple terms, the way we like to think about our business is that our MSUs have We have a DOT 50 in your life and we target to pay back our MSUs, our direct MSUs in under 3 years. So that's what we look at our business. So the direct MSUs of a payback of under 3 years, there's some ancillary capital that goes Around to be able to support the business, you need the tractors to pull the MSUs, you need the compression stations and the decompression units. And so If you fully load up all the other capital around that you need to support the MSUs, we target effectively a sub 5 year payback on capital that we And then give sort of effectively 10 years of free cash flow on those assets when you factor in a 15 year life.

Speaker 5

And so That's how we look at the business. And so that means you end up with a sort of EBITDA generated per MSU. I believe we're in that 270 Some $1,000 range this year and we sort of somewhere in the mid-two 100s to high-two 100s is where we've seen the number.

Speaker 9

Great. Thanks so much. Appreciate it.

Speaker 2

Thanks, Matt.

Operator

Thank you. Our next question comes from the line of Robert

Speaker 10

Most of my questions are answered, so I'm down to nitpicking here. So can you give a little more clarity on to why you dropped the AOCF metric?

Speaker 3

Yes. Maybe I'll take that one, Robert. It's Pierre. This really, I mean, this is a very simple calculation, Super straightforward. You basically subtract two numbers.

Speaker 3

So I think when I was having a look at it and just looking at all the extra disclosure In the press release, but more so in the MD and A, there is a ton of pages really that were there primarily because of this metric, which as I say, is very easy to calculate. So that was kind of the primary reason for it. It's a non industry standard metric. If you look at the competitive set, how we want to define that, I guess, we could debate, but There's no one really that uses this metric. So really those two reasons were the number one.

Speaker 3

The objective here is for us To be simpler in the way we report, make it easier for everybody to understand what it is that we're doing and what we're focused And not hiding by anything. As I said, you can clearly take these numbers off the face of the financials. The adjusted AOCF For this quarter, it was negative 19.4%. If you compare that to the prior year, it was negative 32.9%. So it is an improvement.

Speaker 3

And as I say, the interest and taxes number, you can pull it off the face of the statement. So, yes, I mean, it was a long winded answer, But bottom line is for us to just get more streamlined and simple and make it easier for everyone to understand what it is we're trying to do.

Speaker 10

Okay. And just one more detailed question here. There's commentary in MD and A about some distillate customer Attrition, can you just give a description of what's happening there?

Speaker 2

Well, this is just Let me offer a comment or 2 Rob and then Grier will open it. We got the remnants of some small distillate business that is obviously Declining at a faster rate than the propane business and really is non core to us. And it's really a hangover From a past life, if you will, it's non core. We're managing it very, very carefully, obviously. But for us, it's a business that We'll see an exit to at some point and be opportunistic in terms of the journey from here to there and making sure We don't invest anymore in it, but also maximize the value.

Speaker 2

So for us, really, it's a very, very small part of the business, but no great surprise. It's Steady decline. I don't know, Greer, if you want to add anything to that. I don't

Speaker 3

know, Guy, I thought you said it well. Yes, it's a business that declines faster Then it declines. The other like I said, Terrus obviously is a great growth business. I think the propane business is more like a Yes, we'll see what we can do with it, but it's more of a flattish type business. The distillate business is a decline business.

Speaker 3

And as Alan said, it's a small percentage of the business. I mean, it might represent Ron, just I think around 10% or something like this is the U. S. Business. Yes.

Speaker 3

It's only here. So it's not huge, but Yes. That's what it is. It's just a it's a different market dynamic for that business. So obviously, not an area of focus for us as we look forward.

Speaker 10

Right. So it's just secular decline in that specific product then?

Speaker 2

Yes, that's right. Yes, exactly.

Speaker 10

Okay. You

Speaker 2

don't fight it because it's market driven. Sorry, go ahead. Go ahead. Go ahead.

Speaker 10

Final question for you, Alan. I wonder if you had any updates in terms of your plans of aligning incentives With your targets, I'm thinking in terms of stock ownership requirements and any other incentives that might help you Just the line activities with your ultimate goal of bringing more out of existing assets?

Speaker 2

Sorry, you're talking about executive compensation?

Speaker 10

Yes. Yes. Just how you're aligning all the incentives across the organization, particularly stock ownership at the executive level?

Speaker 2

Yes. Yes. Okay. Well, a couple of updates there. Kirsten is joining us 2 weeks ago with We've already kicked off a review of our executive compensation.

Speaker 2

And the not generally speaking in terms of its competitiveness, But it's alignment to the aspirations to drive significant shareholder value via appreciation of the share price And which is not a simple thing when you talk about a high yield stock like ours and that is our kind of liquidity and trading volume. So we're In the middle innings of that review, additionally, we've also made a decision in the last couple of weeks That Seterus as a private company had a history of share ownership that was really deep and It was a point of pride, but also I think one of the differentiators that made the team at Seterus just so engaged in doing the right Thank you for the customers and for the company all the time. Bringing that kind of a comp structure in a public company isn't easy, And it requires a lot of adjustments in terms of how we think about comp. But over the last few weeks, We've made the decision and announced it internally that we're actually going to maintain share ownership as part of incentive for the entire team at And that was part of that program, which would be sort of the top twothree of the organization, if you will.

Speaker 2

So we're really committed to making sure that everybody that works at Superior has every opportunity to be a participant in shareholder value creation. It is our number one, and one could argue our only objective, is long term shareholder value creation. These are the owners of the company, and we need to deliver for them. We want our employees to be part of that community, whether it's through share ownership programs or through share based incentives. And we want our executives to be remunerated based on the success that they deliver for our shareholders.

Speaker 2

So we're really committed to this. You're seeing it at the operating level. You'll see it at the executive level, but likely not until the management information circular next year. Does that answer your question?

Speaker 10

Yes, it does. Thank you. That's a good

Speaker 4

answer. Thanks.

Speaker 2

Thanks for the question.

Operator

Thank you. And I'm showing no further questions at this time. I'd like to hand the call back over to Alan McDonald for closing remarks.

Speaker 2

Well, thanks, everyone. Look, it's always a pleasure to talk to you all, whether it be on this quarterly call or in our meetings in the intervening weeks. I can't thank you enough For your interest in the organization, for your questions and for your feedback. I want you to know that We've got thousands of people here at Superior who are showing up to work every day, really excited about the opportunities in front of us. The team at Seterus and the team at The propane division have been working really well together.

Speaker 2

We're excited about the future. And we're just Really, really pleased to be able to tell this story. We think that Q3 is a real turning point and successful one for us for a whole bunch of reasons operationally and strategically. And we're looking forward to Q4 and speaking to you all again in February. So thank you very, very much.

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Earnings Conference Call
Superior Plus Q3 2023
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