Suburban Propane Partners Q3 2026 Earnings Call Transcript

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August 6, 2026

Key Takeaways

  • Negative Sentiment: Third-quarter results weakened year over year: Adjusted EBITDA fell to $18 million from $27 million, while the adjusted net loss widened to $17.7 million, or $0.27 per common unit, from $10.8 million, or $0.17 per unit.
  • Negative Sentiment: Retail propane volumes declined 1.8% to 70.6 million gallons, primarily because April temperatures were unusually warm; total gross margin decreased 2.4% and operating and G&A expenses rose 3.8%.
  • Positive Sentiment: RNG growth initiatives are nearing completion: The Upstate New York anaerobic digester is now online, the Columbus, Ohio facility is expected to begin pipeline-quality RNG injections in the fourth quarter, and annual injection is projected to reach 750,000–800,000 MMBtus in fiscal 2027.
  • Positive Sentiment: Management cited improving environmental credit prices and regulatory support as potential RNG tailwinds, while the partnership reduced revolver borrowings by $36.2 million during the quarter and maintained strong trailing-12-month distribution coverage of 2.07 times.
AI Generated. May Contain Errors.
Earnings Conference Call
Suburban Propane Partners Q3 2026
00:00 / 00:00

Transcript Sections

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Operator

Hello. Thank you for standing by. My name is Lacey. I will be your conference operator today. At this time, I would like to welcome everyone to Suburban Propane Partners' Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call [audio distortion] D'Ambrosio, Vice President and Treasurer. Please go ahead, sir.

Davin D'Ambrosio
Davin D'Ambrosio
VP and Treasurer at Suburban Propane Partners

Thank you, Lacey. Good morning. Thank you for joining us for our fiscal 2026 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Centeno, Senior Vice President of Operations. This morning, we will review our third quarter results, along with our current outlook for the business. Once we've 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, related to the partnership's future business expectations and predictions, financial condition, and results of operations. These forward-looking statements involve certain risks and uncertainties.

Davin D'Ambrosio
Davin D'Ambrosio
VP and Treasurer at Suburban Propane Partners

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 their entirety by such cautionary statements. Our Form 10-Q for the quarter period ending June 27th, 2026, which will be filed by the end of business today, contains additional disclosures regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call.

Davin D'Ambrosio
Davin D'Ambrosio
VP and Treasurer at Suburban Propane Partners

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 8-K, which was furnished to the SEC this morning. The Form 8-K will be available through a link in the investor relations section of our website. At this time, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Thanks, Davin. Good morning. Thank you all for joining us today. Following a solid first half, we experienced sustained cold weather in the eastern half of the U.S. and extremely warm weather in the west. The third quarter started out slow. Near record warm temperatures across our footprint during the shoulder month of April reduced heat-related demand, while residential customer tank levels entering the third quarter were elevated through the timing of deliveries in the second quarter, when demand was particularly strong. Despite the slow start, volumes for the quarter benefited from continued growth in our counter-seasonal customer base, which substantially offset the impact of warmer weather as volumes in both May and June exceeded prior year levels.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

As always, our operating personnel did an outstanding job delivering exceptional customer service to our customers, managing selling prices in a rising and volatile commodity price environment, maintaining discipline over operating costs. In our renewable natural gas operations, average daily RNG injection for the third quarter was essentially flat compared to the prior year, as increases in manure-based D3 injections were offset by lower food waste D5 injections. Revenues from RNG injection benefited from higher prices for environmental attributes, including a 31% year-over-year increase in California LCFS credit prices and an 8% year-over-year increase in D3 RIN prices. Subsequent to the end of the third quarter, we placed our new anaerobic digester facility in Upstate New York into service, which is expected to add approximately 100,000 MMBtus of annual D3 RNG injection.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Following the completion of our RNG upgrade project at our Columbus, Ohio, biogas facility, we expect to be injecting pipeline quality RNG from that facility during the fourth quarter, which is expected to add another nearly 200,000 MMBtus of annual D5 RNG injection. As a result, we will enter fiscal year 2027 with all three of our RNG facilities operational and an anticipated level of annual injection in the range of 750,000 to 800,000 MMBtus. We are also focused on opportunities for organic growth and production through continued capacity optimization and increased feedstock intake. During the quarter, we also recognized a benefit of $1.1 million from production tax credits earned under Section 45Z of the Inflation Reduction Act for D3 injections at our Stanfield, Arizona, facility.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

The facility's significant negative carbon intensity score of approximately -380, together with compliance with the prevailing wage and apprenticeship requirements, allows us to maximize the available credit value under the regulations. With the facility in Upstate New York now online, we expect to earn additional PTCs from RNG injection at that facility in addition to investment tax credits on the capital deployed for construction of the facility. With the New York facility now online and our Ohio facility soon to be online, we will have completed the major capital investments for our existing RNG facilities. As we have stated on a number of occasions, since owning this portfolio of assets, we have been focused on stabilizing production at our Arizona facility, where we had some operational challenges in the early years of ownership.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Driving operational excellence across the platform, improving plant design to increase the conversion of feedstock to RNG, deploying capital for the new facility in New York and the upgrade equipment in Ohio, and building the team to support the long-term growth of the platform. These initiatives were undertaken during a period when our environmental credit prices were significantly depressed. With California LCFS credits declining into the low $40 range due to the buildup of excess credits in the market. As we get ready to enter fiscal 2027 with all three facilities online, we are encouraged to see credit prices continuing to improve following regulatory actions taken in California that are driving more aggressive emissions targets and helping to rebalance the market. We believe this improving price environment presents a good tailwind for revenue enhancement in our RNG platform.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

With all of these set efforts over the past three-plus years, we have also maintained our focus on strengthening the balance sheet and allocating capital in a disciplined manner. Following the strong first-half performance, cash flow generation in the fiscal third quarter benefited from the seasonal collection of receivables. During the quarter, we used excess cash flows, supplemented by proceeds from the issuance of common units under our ATM equity sales program to reduce debt by more than $36 million. However, at this point, I'll turn the call over to Mike Kuglin to discuss the third quarter results in more detail. Mike?

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, I discuss our third quarter results and excluding the impact, both unrealized mark-to-market adjustments on our commodity hedges, which resulted in unrealized gain of $700,000 in the third quarter for fiscal 2026, compared with unrealized loss, $2.9 million in the prior year third quarter, along with certain other non-cash items. Given the seasonal nature of our business, we typically experience the net loss in the third quarter of our fiscal year. With that said, adjusted net loss for the third quarter was $17.7 million, or $0.27 per common unit, compared to adjusted net loss of $10.8 million or $0.17 per common unit in the prior year. Adjusted EBITDA for the third quarter was $18 million, compared to $27 million in the prior year.

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

Retail propane gallons sold in the third quarter were 70.6 million gallons, a decrease of 1.8% compared to the prior year, primarily due to the impact of seasonally warm weather in April on heat-related demand, which was substantially offset with customer base growth in our agricultural, industrial, and national accounts customer segments. With respect to the weather, average temperatures across our service territories during the third quarter were 17% warmer than normal and 3% warmer than the prior year third quarter. For the month of April, average temperatures were 24% warmer than normal and 11% warmer than April 2025, and ranked as the second warmest April on record. From a commodity perspective, U.S. propane inventories remained strong during the quarter, with June 2026 inventory levels approximately 21% above both June 2025 and historical averages for this time of year.

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

Despite elevated inventory levels, wholesale propane prices were volatile and traded between $0.70 and $0.90 per gallon basis Mont Belvieu due to geopolitical tensions in the Middle East and strong export demand. Overall, average wholesale prices for the quarter increased 3.6% compared to the prior year third quarter. In the early part of the fourth quarter, wholesale prices have generally been in the $0.70-$0.75 per gallon range, which is flat compared to the same time last year. Excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margins for the third quarter were $159.6 million, a decrease of 2.4% compared to the prior year, primarily due to lower volume sold as propane unit margins remained steady.

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

With respect to expenses, combined operating and G&A expenses of $141.4 million for the third quarter were $5.2 million or 3.8% higher than the prior year. The increase was primarily attributable to higher payroll and benefit-related expenses and higher fuel and vehicle maintenance costs, partially offset by lower variable compensation costs, the benefit of $1.1 million from Production Tax Credits earned for the current year quarter from RNG injections. Operating expenses for the third quarter of fiscal 2025 include a $2 million gain from insurance recovery related to Hurricane Helene, reduced prior year operating expenses, and a pension settlement charge of $500,000, which was excluded from adjusted EBITDA.

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

Net interest expense of $18.8 million for the third quarter was flat to the prior year as lower benchmark interest rates on borrowings under our revolving credit facility were offset by a higher interest rate for a tranche of senior notes that were refinanced in the first quarter of fiscal 2026. Total capital spending for the quarter was $21.4 million, which included $15.1 million of growth capital. Capital spending increased $6.8 million compared to the prior year, primarily due to construction efforts at our Columbus, Ohio and upstate New York RNG facilities. On a year-to-date basis, our total growth CapEx for our RNG facilities was $28.7 million, and our full-year capital spending estimate for the existing RNG projects is approximately $35 million, which is at the low end of the previously communicated range of $35 million-$40 million.

Mike Kuglin
Mike Kuglin
CFO at Suburban Propane Partners

Turning to our balance sheet, during the third quarter, we utilized cash flows from operating activities and net proceeds of $6.6 million from the issuance of common units under our ATM program to repay $36.2 million of borrowings under the revolver. Our consolidated leverage ratio for the trailing 12-month period into June 2026 was 4.35 times, which was flat compared to June 2025. With a significant portion of capital spending on the RNG platform launched and complete, we expect to generate increasing financial flexibility. We will remain focused on utilizing excess cash flows and proceeds received from the ATM program to further strengthen the balance sheet and, as opportunities arise, to fund strategic growth. With that, I turn the call back to Mike.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Thanks, Mike. As announced on July 23rd, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our third quarter of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on August 11th to our unit holders of record as of August 4th. Our distribution coverage continues to remain very strong at 2.07 times for the trailing 12 months ended June 2026. Just to close it out, through the first nine months, fiscal 2026 has been another great year for Suburban Propane, as our personnel in the eastern half of our propane operations did an amazing job responding to a surge in demand from some of the most sustained cold weather and harsh storms that we've seen during the heart of the heating season in over a decade.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

While our teams in the west continued to focus on the areas they can control, growing our customer base and managing expenses. With all three of our RNG production facilities approaching full operations, the platform has benefited from our efforts to drive operational and safety discipline, production stability, and capacity optimization plans, all at a time in which we see tailwinds for the RNG platform in the form of improving environmental credit pricing, continued regulatory support for clean energy production pathways, and exponential growth in power demand. Taken together, the strength and stability of our core propane business, combined with the investments we have made to build a renewable energy platform, position Suburban Propane for long-term growth as we continue to support the evolution of energy to a lower carbon future and approach our 100-year anniversary in 2028.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Finally, I want to take a moment to thank the more than 3,200 employees at Suburban Propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. Thank you all for everything you do all day. As always, we appreciate your support and attention this morning and would now like to open the call up for questions. Lacey, could you help us with that?

Operator

At this time, I would like to remind everyone, if you would like to ask a question, please press star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. There are no questions at this time.

Mike Stivala
Mike Stivala
President and CEO at Suburban Propane Partners

Okay, thank you, Lacey. Thank you all for joining us, and I hope you enjoy the rest of your summer. As always, please be safe. We'll talk to you in November.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Executives
    • Davin D'Ambrosio
      Davin D'Ambrosio
      VP and Treasurer
    • Mike Stivala
      Mike Stivala
      President and CEO
    • Mike Kuglin
      Mike Kuglin
      CFO
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