Suburban Propane Partners Q2 2025 Earnings Report

Suburban Propane Partners EPS Results

• Actual EPS: $2.10
• Consensus EPS: $2.21
• Beat/Miss: Missed by -$0.11
• One Year Ago EPS: N/A

Suburban Propane Partners Revenue Results

• Actual Revenue: $587.66 million
• Expected Revenue: $548.00 million
• Beat/Miss: Beat by +$39.66 million
• YoY Revenue Growth: N/A

Suburban Propane Partners Announcement Details

• Quarter: Q2 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 9:00AM ET

Suburban Propane Partners (NYSE:SPH), through its subsidiaries, engages in the retail marketing and distribution of propane, renewable propane, fuel oil, and refined fuels in the United States. The company operates through four segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, and All Other. The Propane segment is involved in the retail distribution of propane for space heating, water heating, cooking, and clothes drying for use as a motor fuel in internal combustion engines to power over-the-road vehicles, forklifts, and stationary engines, as well as to fire furnaces as a cutting gas to the industrial customers; and for tobacco curing, crop drying, poultry brooding, and weed control in the agricultural markets. It also engages in the wholesale distribution of propane to industrial end users. Its Fuel Oil and Refined Fuels segment engages in the retail distribution of fuel oil, diesel, kerosene, and gasoline to residential and commercial customers for use in primarily as a source of heat in homes and buildings. The Natural Gas and Electricity segment markets natural gas and electricity to residential and commercial customers in the deregulated energy markets in New York and Pennsylvania. The All Other segment sells, installs, and services a range of home comfort equipment, including whole-house heating products, air cleaners, humidifiers, and space heaters. The company serves residential, commercial, industrial, and agricultural customers primarily in the east and west coast regions of the United States, as well as portions of the Midwest region of the United States and Alaska. Suburban Propane Partners, L.P. was founded in 1945 and is based in Whippany, New Jersey.

Suburban Propane Partners Q2 2025 Earnings Call Transcript

Key Takeaways

• Strong winter weather drove retail propane volumes up 15.5% year-over-year, contributing to a 19.1% increase in adjusted EBITDA to $175 million in Q2.
• Renewable natural gas (RNG) production at the Stanfield facility was slightly down due to cold temperatures and lower credit prices, but operational upgrades and the upcoming Columbus and Adirondack projects are expected to boost long-term output.
• The $53 million acquisition of a New Mexico/Arizona propane business was integrated smoothly, with early performance exceeding expectations and a growing M&A pipeline.
• Launched an At-the-Market equity program to raise up to $100 million, netting $8.8 million this quarter to repay revolver debt, reducing leverage to 4.54× and maintaining a 2.17× distribution coverage ratio.
• Became the official propane partner of NASCAR, supplying propane for new track dryers and on-site services at 19 tracks to support sustainability initiatives and enhance the fan experience.

Presentation

[Operator]

Morning, ladies and gentlemen, and welcome to the Suburban Propane Partners Second Quarter Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, 05/08/2025. I would now like to turn the conference over to David Niembrocco, Vice President and Treasurer. Please go ahead.

[Davin D'Ambrosio, Vice President & Treasurer at Suburban Propane Partners]

Thank you, John. Good morning, everyone. Thank you for joining us this morning for our fiscal twenty twenty five second quarter earnings conference call. Joining me this morning are Mike Savala, our President and Chief Executive Officer Mike Kuglin, Chief Financial Officer and Alex Centeno, Senior Vice President, Operations. This morning, we will review our second quarter financial results along with the current outlook for the business.

[Davin D'Ambrosio, Vice President & Treasurer at Suburban Propane Partners]

Once we have concluded our prepared remarks, we will open the session to questions. Our conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in there entirely by such cautionary statements.

[Davin D'Ambrosio, Vice President & Treasurer at Suburban Propane Partners]

Our annual report on Form 10 k for the fiscal year ended 09/28/2024 and our Form 10 Q for the period ended 03/29/2025, which will be filed by the end of business today, contain additional disclosure regarding forward looking statements and risk factors. Copies may be obtained by contacting the partnership or SEC. Certain non GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form eight ks, which was furnished to the SEC this morning. The Form eight ks will be available through a link in the Investor Relations section of our website.

[Davin D'Ambrosio, Vice President & Treasurer at Suburban Propane Partners]

At this point, I will turn the call over to Mike Stivalo for some opening remarks. Mike?

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Thanks, Davin. Good morning. Thank you all for joining us today. Fiscal twenty twenty five second quarter was an outstanding quarter for suburban propane. Our business experienced some of the most sustained winter weather in the heart of our footprint throughout January and February, the most critical months for heat related demand.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

The kind of consistent weather conditions we haven't seen in nearly a decade. I'm extremely proud of how our field personnel at every level worked tirelessly to meet the surge in demand when our customers needed us most, while also opportunistically taking on new business when others were unable to keep up. This was a real testament to the preparation by our operations teams and the flexibility of our operating model to ramp up when demand dictates. And with safety as our highest priority, I'm extremely proud of the way our people maintain their focus on the highest operating standards for safety during a prolonged stretch of high activity levels and some tough operating conditions. As a result of the surge in demand, propane volumes for the quarter increased 15.5 compared to the prior year's second quarter.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

In fact, during the month of January 2025, we delivered the highest propane volume since 2018. The strong volume performance, combined with effective margin management during a rising commodity price environment and good expense discipline, contributed to a $28,000,000 or 19.1% increase in adjusted EBITDA compared to the prior year second quarter. In our renewable natural gas operations, average daily RNG injection for the second quarter improved from the first quarter, and was down slightly compared to the prior year's second quarter due to extremely cold ambient air temperatures in the Arizona area that impacted anaerobic digestion and RNG production at our Stanfield facility. Coupled with a short period of planned downtime to install enhancements to heating capacity. While revenues at the Stanfield facility have faced headwinds from lower prices for California LCFS credits and more recently D3 RIN prices, we continue to implement enhancements to RNG production and injection, safety protocols, feedstock intake practices, and overall plant efficiency in order to improve the long term performance and returns from the facility.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

We are also progressing well with the capital projects at our Columbus, Ohio and Upstate New York facilities, which will increase our overall RNG sales once those facilities are fully operational. Additionally, during the quarter we made great progress integrating the propane business that we acquired in the first quarter of fiscal twenty twenty five for approximately $53,000,000 with operations in New Mexico and Arizona, our largest single propane acquisition since 2012. The performance of the acquired business has exceeded our expectations in the early part of our ownership. Finally, in late February, we launched an At the Market, or ATM, equity sales program to sell up to $100,000,000 of newly issued common units. Under the program, we may sell common units from time to time at prevailing market prices through registered placement agents acting on behalf of suburban propane in a controlled and disciplined manner.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

As we have consistently messaged, our long term strategic growth plan is to foster the growth of our core propane business, make strategic investments in lower carbon renewable energy alternatives, while maintaining balance sheet flexibility. Over the course of the past five years, we have utilized a combination of strong free cash flows and borrowings under our revolving credit facility to fund the execution of our long term growth strategy. The purpose of the ATM program is to provide additional capital to support our ongoing pursuit of opportunistic growth, while reinforcing the strength of our balance sheet. During the second quarter, we raised net proceeds of $8,800,000 under the program, were used to repay outstanding debt under our revolver. Therefore, we continued to advance our long term strategic growth plans, while maintaining our focus on strengthening our balance sheet and financial metrics to drive long term value for all of our key stakeholders.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

In a moment, I'll come back for some closing remarks, but at this point I'll turn it over to Mike Kuglin to discuss our second quarter results in more detail. Mike?

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

Thanks Mike, and good morning everyone. To be consistent with previous reporting, as I discuss our second quarter results, I am excluding the impact of unrealized mark to market adjustments on our commodity hedges, which resulted in an unrealized gain of $700,000 for the second quarter compared to an unrealized gain of $5,900,000 in the prior year's second quarter. Excluding these and certain other non cash items, net income for the second quarter was $136,900,000 or $2.11 per common unit compared to net income of $110,300,000 or $1.71 per common unit in the prior year second quarter. Adjusted EBITDA for the quarter was $175,000,000 an increase of $28,000,000 or 19.1% compared to the prior year second quarter. Retail propane gallons sold in the quarter were 162,000,000 gallons, which was 15.5% higher than the prior year second quarter, primarily due to the impact of sustained widespread cooler temperatures on heat related demand during January and February and the contributions from our recent propane acquisitions.

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

Average temperatures across our service territories during the second quarter were 5% warmer than normal and 9% cooler than the prior year's second quarter. During January and February, which were the most critical months for heat related demand during the second quarter, average temperatures were comparable to normal and 13% colder than the same period last year. From a commodity perspective, propane inventory levels in The US experienced a strong seasonal decline during the second quarter due to a surge in domestic demand and continued strength in exports. At the end of the second quarter, U. S.

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

Propane inventories were up 44,100,000 barrels, which were 15% lower than March 2024 levels and 6% lower than the five year average from March. Given the decline in inventories and other factors, average wholesale propane prices for the quarter of $0.90 per gallon and spaces Mont Belvieu increased 7.2% compared to the prior year second quarter. Excluding the impact of the non cash mark to market adjustments on our commodity hedges that I mentioned earlier, total gross margin of $344,600,000 for the second quarter increased $42,500,000 or 14.1% compared to the prior year second quarter, primarily due to higher propane volumes sold. Propane unit margins for the quarter were flat compared to the prior year second quarter as we effectively managed selling prices to offset the impact of higher product costs. With respect to expenses, combined operating and G and A expenses of $169,300,000 for the quarter increased $14,900,000 or 9.7% compared to the prior year's second quarter, primarily due to higher payroll and benefit related expenses, including overtime, and other variable operating costs to support the increase in customer demand, as well as higher variable compensation expense associated with the increase in earnings.

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

Net interest expense of $20,600,000 for the quarter increased 3.3 compared to the prior year second quarter, resulting from a higher level of average outstanding borrowings under our revolving credit facility, partially offset by lower benchmark interest rates for borrowings under the revolver. Total capital spending for the quarter of $19,300,000 was $4,800,000 higher than the prior year's second quarter, primarily due to advancing construction efforts at our Columbus and Adirondack facilities. And turning to our balance sheet. During the second quarter, we utilized cash flows from operating activities and net proceeds of $8,800,000 from the issuance of common units under our ATM program to repay $10,100,000 in borrowings under the revolver. As a result of the debt repayment and increase in earnings, our consolidated leverage ratio for the trailing twelve month period ended March 2025 improved to 4.54 times compared to 4.99 times at the end of the first quarter.

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

We have now moved through our historically high period of seasonal working capital needs and into the fiscal quarters we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows and any proceeds received from the ATM program to strengthen the balance sheet and as opportunities arise to fund strategic growth, including the growth capital for our RNG platform. We have more than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. I have one other topic to discuss before turning the call back to Mike. In January 2025, the U.

[Michael Kuglin, Chief Financial Officer & Chief Accounting Officer at Suburban Propane Partners]

S. Treasury Department issued a Notice of Proposed Regulations for production tax credits eligible to be earned under the Inflation Reduction Act for the production and sale of low emission transportation fuels, including RNG. Under the proposed regulations, there is ambiguity as to whether RNG production and sales from our Stanfield facility will qualify for PTCs, and as a result, we did not recognize any income from PTCs during the second quarter. Since the proposed regulations seem inconsistent with the original intent of the IRA, we, along with numerous others, are seeking clarification from the IRS in the final rules, particularly as it relates to qualifying sales and the measurement of carbon intensity for orange juice produced from dairy cow manure and food waste feedstocks. Once final regulations are issued by the IRS, we will revisit the matter. With that, I'll turn the call back to Mike.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Thanks Mike. As announced on April 24, our Board of Supervisors declared our quarterly distribution of $0.03 $25 per common unit in respect of our second quarter of fiscal twenty twenty five. This equates an annualized rate of $1.3 per common unit. Our quarterly distribution will be paid on May 13 to our unitholders of record as of May 6. Our distribution coverage continues to remain strong at 2.17 times for the trailing twelve month period ended March 2025.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Just a few closing remarks. During the second quarter, we officially launched our multi year sponsorship of NASCAR and Speedway Motorsports at the Daytona five hundred race in February. We are now the official propane partner of NASCAR. Under this partnership, Suburban Propane will provide propane for new propane powered track dryers that NASCAR has added to its fleet to replace kerosene fired dryers as part of NASCAR's sustainability initiatives. Suburban Propane is also providing propane to the concessions and on-site services for campers during NASCAR event weekends at 19 tracks during 28 races throughout the NASCAR season to enhance the fan experience.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

We are extremely proud to partner with such an iconic American spectator sport. Their trust in suburban propane is a testament to our commitment to safety, our national reach, our reliability, our commitment to local communities, and our shared commitment to sustainability. We look forward to a long and rewarding relationship, and the opportunity to engage with fans at every race. Now just a quick comment on something that has dominated the news and markets over the course of the last several weeks, and that's tariffs. As a domestic energy distributor, we source the vast majority of the products and equipment, whether for resale or operational use, in The United States, and only a small portion of propane from Canada.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Therefore, we believe that for the time being we are substantially insulated from the impact of tariffs. Recently, we have seen propane price volatility, given potential uncertainty with Chinese demand for propane from The US, which could result in incremental domestic propane supplies remaining in The US, and in turn propane prices have come down. Lower costs of domestic energy would be a positive development for consumers here in The United States. Ultimately, we believe that markets will find a balance. And with some of the regulatory relief in energy markets, the conversation about the future of energy is taking on a more balanced focus on energy resiliency, security, affordability and sustainability, as opposed to an outsized focus on sustainability that was beginning to drown out the first three critical factors previously.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

As a result, propane can benefit from the recognition of its already low carbon attributes and its ability to provide energy on demand. It will continue to be relied upon by millions of Americans across many sectors of the economy because of its availability, versatility and affordability. Suburban propane is very well positioned to meet the energy needs of local communities, to drive increased propane use in certain applications that can benefit immediately from its lower carbon footprint, and to innovate with the introduction of even lower carbon renewable energy alternatives. Through the execution of our long term strategic growth plans, Suburban Propane remains committed to advancing propane as a long term low carbon solution, while leveraging our core competencies in safety, customer service, and logistics expertise to grow the markets for renewable fuels such as renewable propane and renewable natural gas and clean hydrogen well into the future. In closing, I want to take a moment to thank the more than 3,300 dedicated employees at Suburban Propane for their unwavering commitment to safety and outstanding customer service during a very challenging winter heating season, and during a time when our customers needed us the most.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Thank you. As always, we appreciate your support and attention this morning, and now I'd like to open the call questions. And John, if you wouldn't mind helping us with that, I'd appreciate it.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You. Your first question comes from the line of Christopher Jeffrey from Mizuho Securities. Please ask your question.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Hi, good morning everyone. Thanks for the update and congratulations on the strong quarter. Mike, maybe just to pick up yes, sure. Maybe to pick up where you kind of ended as far as volatility in the propane price market. Could you just kind of maybe talk about how Suburban is positioning yourselves ahead of during this non heating season?

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Any kind of changes to the plan for the next heating season?

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

No, honestly, we've been through different commodity cycles over the last several decades. We know how to manage the supply of propane very, very well. Our product supply team does an amazing job. We have great relationships with our suppliers. In fact, I think with the expectation that there's going to be more propane trapped here in The United States, all that can change overnight, currently I think there's a view that there may be a higher inventory of propane here and prices are going to reflect that.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

The average price of propane in Bellevue was about 90¢ in the second quarter. It's down closer to 70¢ as of yesterday. You're starting to see the impact of that, but that doesn't really change the way we're thinking about how to source and set ourselves up for next year's heating season.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Got it, thanks. And then just wondering if you could kind of give us a high level view of Suburban's view of the propane M and A landscape kind of coming out of this heating season. I know that tends to be where the activity picks up.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

It's a great question, Chris. The interesting thing I think is the propane M and A landscape has changed dramatically in the sense that the number of buyers has significantly diminished. Think part of that is there's just less majors than there were say ten, fifteen years ago that were aggressively going after trying to consolidate the industry. And the other aspect is some of our peers have different challenges that may force them to stay on the sidelines for a bit while they sort of focus internally. We're viewing this as a great opportunity for suburban propane.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

There's a very promising future, I think, with respect to propane. Different than it was, I would say, even two, three years ago. I think some of the challenges that the propane, or frankly the energy landscape has experienced over the last several years, whether it was COVID, whether it's been some of the natural disasters, has really started to highlight what we've been saying all along is that propane is such a powerful on demand energy source. So we see a very bright future for propane, which is why our strategic growth initiatives is balanced. We're continuing to invest in our core propane business and we're focusing on the long term future to position ourselves well in the renewable energy landscape.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

But as far as propane goes, we're really excited about some of the new uses that we're finding for propane, some of the new respect we're finding for propane, and frankly, when it comes to M and A, we are in the best position of anybody to take on good quality businesses in attractive markets and our pipeline of opportunities is building quite nicely as we come out of the heating season now. I think with some more discipline in the market, multiples are probably getting back to where they should have been all along to be much more reasonable and practical with a limited number of undisciplined buyers left in the marketplace.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Got it, thank you. And then maybe just one on the renewable side of things. Maybe any kind of expanding on the comments as far as whether it's federal regulations, state level regulations, any kind of timelines we should be looking out for? And then maybe longer term, just do these different outcomes change the way you might be operating or thinking about Adirondack, Columbus, or any kind of future investment in the space?

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Yeah, know, on the RNG side, I think one of the things that is going to develop over time, and that's more of a state related regulatory framework. And their LCFS program, they are very much focused on creating a better balance in the credit markets, the environmental attribute markets. Some of the amendments that have been proposed by CARB to create that better balance to drive higher values for credit prices are certainly opportunities that we see are going to take shape as those amendments get finalized, hopefully in the coming weeks or months. Because what you see in the environmental attribute market is as soon as there is an adoption or a change to the LCFS program, even that gets announced, you see movement. And then when those amendments had to get pulled back for technical reasons, you see movement back downward and sort of values getting stuck where they are right now.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

But I think what we see is the regulators are interested in ensuring that the incentives that are there were envisioned from the beginning to drive lower carbon fuels are continuing to drive the behavior and the investment into that space, they are very much focused on getting credit values up. So I think when we see LCFS amendments actually get implemented in California, think we're going to see a rebound in LCFS credit values, which is going to be a welcome sign for anybody in the renewable fuels markets and certainly for our RNG platform. In the meantime, we're very much focused on just operational excellence. That's who we are. That's what we've been known for in propane and we're driving that mindset in the RNG platform.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

And so as the Columbus and Adirondack opportunities come online and at the tail end of this calendar year, maybe into the early part of next year. We expect that will be at a time when we'll see better pricing in the environmental attribute markets and we'll will stay the course with our plan because renewable natural gas is a direct drop in replacement for traditional natural gas and it's a great opportunity to decarbonize large sectors of the economy. We think in the long term it's a good place to be invested. At the same time, the rest of our renewable platform is really developing in terms of really driving and finding where we see the economy for lower carbon fuels heading that will benefit most from what I said earlier is our three core competencies, and that's safety, customer service, and logistics. There are going to be newer, cleaner fuels that develop, whether that's hydrogen, whether it's renewable propane, but the reality is those fuels will need to be distributed locally and who better to do that than suburban propane?

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

That's the way we're looking at the transition of energy in the long term. And whether that's two, three, five, ten years from now, we're going to be positioned be able to move other products.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Got it. Very helpful. Thanks for the time today.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Great. Thank you, Chris.

[Operator]

There are no further questions at this time. I would like to turn the call over to Mike Stivalla for closing comments. Sir, please go ahead.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

Great. Thanks for your help today, John, and thank you all for your interest and your attention today. Again, it was a fantastic quarter for Suburban Propane. It's what we're built for, is to be able to meet the demand when comes, and I think this quarter demonstrated that. We look forward to talking with you again at the end of our third quarter in the summer.

[Michael A. Stivala, President, CEO & Supervisor at Suburban Propane Partners]

In the meantime, please remember at all times, please be safe. Thank you.

[Operator]

This concludes today's conference call. Thank you very much for your participation. You may now disconnect.

Participants

Executives

• Davin D'Ambrosio, Vice President & Treasurer
• Michael A. Stivala, President, CEO & Supervisor
• Michael Kuglin, Chief Financial Officer & Chief Accounting Officer

Analysts

• Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities