Star Group Q2 2025 Earnings Report

Star Group EPS Results

• Actual EPS: $2.01
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Star Group Revenue Results

• Actual Revenue: $743.05 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Star Group Announcement Details

• Quarter: Q2 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 11:00AM ET

Star Group (NYSE:SGU), together with its subsidiaries, provides home heating oil and propane products and services to residential and commercial customers in the United States. It offers gasoline and diesel fuel; and installs, maintain, and repairs heating and air conditioning equipment. As of September 30, 2023, the company served approximately 402,200 full service residential and commercial home heating oil and propane customers and 52,400 customers on a delivery only basis. It also sells gasoline and diesel fuel to approximately 26,600 customers. The company was formerly known as Star Gas Partners, L.P. and changed its name to Star Group, L.P. in October 2017. Star Group, L.P. was incorporated in 1995 and is based in Stamford, Connecticut.

Star Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Star Group’s home heating oil and propane volumes rose 23% year-over-year to 144 million gallons, driving a $32 million increase in adjusted EBITDA versus the prior period.
• Since February 1, 2024, the company completed $126.5 million of acquisitions within its existing operating footprint, further strengthening its market presence and maintaining an active deal pipeline.
• The board raised the annual dividend by $0.05 to $0.74 per unit, reflecting management’s focus on maximizing shareholder returns.
• Delivery, branch and G&A expenses increased by $22 million year-over-year, including $9.6 million from the weather-hedging program and a 4.5% rise in base business costs due to higher volumes.
• Star Group recorded a $3.1 million expense under its weather-hedging contract in Q2, compared to a $6.5 million benefit last year, underscoring a potential volatility in earnings tied to weather variations.

Presentation

[Operator]

Good day, and welcome to the Star Group Fiscal 2025 Second Quarter Results Conference Call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Please go ahead.

[Chris Witty, Investor Relations Advisor at Star Group]

Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer, and Rich Ambury, Chief Financial Officer. I would now like to provide a brief safe harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

[Chris Witty, Investor Relations Advisor at Star Group]

Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10-K for the fiscal year ended September 30, 2024, and the company's other filings with the SEC. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise, after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff?

[Jeff Woosnam, President and CEO at Star Group]

Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our second quarter and fiscal year-to-date results. Our performance this quarter was positively impacted by recent acquisitions and weather that, while 4.5% warmer than normal, was almost 13% colder than in fiscal 2024. This led to a nearly 23% increase in home heating oil and propane volume and a $32 million improvement in adjusted EBITDA versus the prior year period. We've been rather busy on the acquisition front this year. As a matter of fact, since February 1st 2024, we've completed $126.5 million of transactions, some of which were acquired during our current heating season and therefore are not fully reflected in our results. Our pipeline of opportunities remains active, and we closed on two businesses during the quarter, as well as a very small transaction in April.

[Jeff Woosnam, President and CEO at Star Group]

All of these companies are within our existing operating footprint and serve to further strengthen our presence in these respective markets. Along with strategically using capital to grow the business, we recently raised our annual dividend by $0.05 to $0.74 per unit, increasing value for our shareholders. All of this is consistent with our goal of allocating capital in ways that maximize returns for our investors. Let me add that it was quite rewarding to see how our team responded to the added demand brought on by colder temperatures. Our frontline employees once again proved themselves, working tirelessly to provide our customers with the best service possible. I simply couldn't be more proud of their efforts. As we come to the end of the heating season, we continue to focus on operational execution and efficiency, as well as the ongoing expansion and improvement of our HVAC business.

[Jeff Woosnam, President and CEO at Star Group]

We are pleased with our results year to date and look forward to the opportunities that summer brings to further invest in our people and advance various business development initiatives. With that, I'll turn the call over to Rich to provide additional comments on the quarter's results. Rich?

[Rich Ambury, CFO at Star Group]

Thanks, Jeff, and good morning, everyone. For the second quarter, our home heating oil and propane volume rose by 27 million gal, or 23%, to 144 million gal, as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors. Temperatures for the fiscal 2025 second quarter were 13% colder than last year, but still 4.5% warmer than normal. Our product gross profit increased by $52 million, or 25%, to $258 million due to an increase in home heating oil and propane volume sold, higher home heating oil and propane per gallon margins, and an increase in gross profit from other petroleum products. We continue to make strides in our service and installation business, which contributed to an increase in adjusted EBITDA of $1.6 million.

[Rich Ambury, CFO at Star Group]

Delivery, branch, and G&A expenses increased by $22 million year-over-year, of which $9.6 million was attributable to our weather hedging program. In the second quarter of fiscal 2025, we recorded an expense of $3.1 million under our contract due to the colder weather, compared to a benefit of $6.5 million recorded in the second quarter of fiscal 2024, reflecting warmer temperatures last year. Recent acquisitions accounted for an increase of $7 million in expenses, while expenses in the base business rose by $5 million, or 4.5%, largely due to the related 12% increase in volume in the base business.

[Rich Ambury, CFO at Star Group]

We posted net income of $86 million in the second quarter of fiscal 2025, or $18 million higher than the prior year period, reflecting a $32 million increase in adjusted EBITDA and a non-cash unfavorable change in the fair value of derivative instruments of $6 million, more than offsetting higher income tax expense. Adjusted EBITDA rose by $32 million to $128 million due to higher home heating oil and propane volume sold in the base business, the impact of adjusted EBITDA attributable to acquisitions, and an increase in home heating oil and propane per gallon margins in the base business, and improvement in service and installation profitability.

[Rich Ambury, CFO at Star Group]

Now turning to the results for the first half of fiscal 2025, our home heating oil and propane volume increased by 29 million gal, or 14.7%, to 226 million gal, again reflecting colder temperatures and the additional volume provided from acquisitions, more than offsetting net customer attrition and other factors. Temperatures in Star's geographic areas of operation during the fiscal year to date were 9.4% colder than the prior year, but still, again, 6.8% warmer than normal. Our product gross profit rose by $58 million, or 17%, to $409 million due to an increase in the volume of home heating oil and propane sold, higher home heating oil and propane per gallon margins, and again, an increase in gross profit from other petroleum products.

[Rich Ambury, CFO at Star Group]

As previously mentioned, improvements in our service and installation business profitability continued to, as an increase in adjusted, provided an increase in adjusted EBITDA of $4.1 million during the six months of fiscal 2025. Delivery, branch, and G&A expenses rose by $27 million year-over-year, of which $10.6 million was attributable to our weather hedging program. In fiscal 2025, we recorded an expense of $3.1 million under our weather hedge compared to a benefit of $7.5 million recorded in fiscal 2024, reflecting weather conditions in both periods. Recent acquisitions accounted for an increase of $13 million, and expenses in the base business rose by $3.7 million, or just 1.7%, largely due to a 5% increase in volume in the base business.

[Rich Ambury, CFO at Star Group]

Net income posted was $119 million for the six months of fiscal 2025, or $37 million more than the prior year period, largely due to an increase in adjusted EBITDA of $34.6 million and the after-tax impact of a non-cash favorable change in the fair value of derivative instruments of $19 million. Adjusted EBITDA rose by $34.6 million to $180 million due to an increase in home heating oil and propane volume sold in the base business, an increase in adjusted EBITDA from recent acquisitions, higher home heating oil and propane per gallon margins in the base business, and an improvement in service and installation profitability.

[Rich Ambury, CFO at Star Group]

Please note that for fiscal 2026, we have put in place $15 million of weather hedges with similar terms to those in 2025, and also note that while we did benefit from the winter profits of the recent acquisitions, these acquisitions will also have losses in the non-heating season, which will temper these profits. With that, I'd like to turn the conversation back to Jeff.

[Jeff Woosnam, President and CEO at Star Group]

Thanks, Rich. At this time, we're pleased to address any questions you may have. Operator, please open the phone lines for questions.

[Operator]

We will now begin the question and answer session. To ask a question, please press star one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star two. The first question comes from Tim Mullen from Laurelton Management. Please go ahead.

[Tim Mullen, Analyst at Laurelton Management]

Hey, thanks for taking my questions. First, I was just curious, given the lack of buybacks that have occurred the past couple of months, I was curious if there's any changes to that program and if the recent acquisitions, given their size, had any impact on that program?

[Rich Ambury, CFO at Star Group]

There's really been no change to the program. It's still operating as we have it in place at the strike price that we have in place with JPMorgan. I mean, it's on automatic pilot. We don't enter the market every day and say, "Buy, sell," or, "Buy, buy, buy." We're out of it. It's on automatic pilot.

[Tim Mullen, Analyst at Laurelton Management]

Understood. Switching gears, in terms of the acquisition pipeline, are you looking at any that are kind of in the HVAC installation servicing business, or is this really just more on the distribution side?

[Jeff Woosnam, President and CEO at Star Group]

It's more on the distribution side, primarily heating oil and propane businesses. We are undertaking an initiative on a limited basis to try to build out our own HVAC business internally, organically.

[Tim Mullen, Analyst at Laurelton Management]

Okay, great. Thanks. If I could just ask one last one? In terms of just the consumer, it did not seem like there was much in terms of changes to various allowances for credit losses. I was just curious, just qualitatively, if you have seen any difference in terms of customers' ability to pay, timeliness? That kind of thing. Thanks.

[Rich Ambury, CFO at Star Group]

Historically, and I've been here for 42 years, our bad debt rate has been three tenths of 1%, or sales are pretty close to that on an annual basis. Now, it has been cold, and people need home heating oil to heat their home, so they will pay that bill during the winter. We will have to see how all that kind of settles up at the end of the summer when they do not really need it, so to speak, because there will not be any deliveries. Historically, that has been our bad debt rate for almost ever.

[Tim Mullen, Analyst at Laurelton Management]

Thanks.

[Operator]

As a reminder, if you have a question, please press star one. The next question comes from Michael Prouting from 10K Capital. Please go ahead.

[Michael Prouting, Analyst at 10K Capital]

Yeah, morning, guys. Congratulations to the entire team. Terrific execution. Just a couple of questions. One is, do you anticipate any impact from tariffs on heating oil prices in your markets? Secondly, on the acquisition front, I'm just wondering, is there anything that's happened tax-wise or otherwise to, do you think, increase the availability of acquisitions? Do you feel like you have sufficient firepower right now to execute on the opportunities in front of you? Thanks.

[Jeff Woosnam, President and CEO at Star Group]

Michael, in regards to tariffs, obviously, it's a fluid situation, as I think everybody can understand. We have experienced some price increases particularly on the HVAC side of our business with parts and equipment. That ranges anywhere from 3%-15%, roughly, is what we've seen so far. Fortunately, our vendors have provided us enough notice in order to adjust and adjust our pricing. That's kind of what we're experiencing right now. That's where we are on that. On the acquisition front, no, I don't know that we've seen any difference related to taxes or anything like that. I would say that we had some pent-up demand going into the heating season, and we had, obviously, a busier season overall.

[Jeff Woosnam, President and CEO at Star Group]

We had heard from various sources that there were going to be additional opportunities hitting the market after the season concluded, and that's pretty much what we're seeing right now.

[Michael Prouting, Analyst at 10K Capital]

Okay, great. Keep up the good work. Congratulations.

[Jeff Woosnam, President and CEO at Star Group]

Thank you.

[Operator]

Again, if you have a question, please press star one. At this point, there's no further questions in the queue. I'd like to turn the call back over to Mr. Woosnam for closing remarks.

[Jeff Woosnam, President and CEO at Star Group]

Okay. Thank you for taking the time to join us today and your ongoing interest in Star Group. We look forward to sharing our 2025 fiscal third quarter results in August. Have a great summer.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Jeff Woosnam, President and CEO
• Chris Witty, Investor Relations Advisor
• Rich Ambury, CFO

Analysts

• Tim Mullen, Analyst at Laurelton Management
• Michael Prouting, Analyst at 10K Capital