Star Group (SGU) Q3 2024 earnings summary

Executive summary

• Net income for the nine months ended June 30, 2024 increased $18.6 million year-over-year to $70.3 million, driven by higher Adjusted EBITDA, improved derivative results, and lower interest expense.

• Adjusted EBITDA for the nine months rose $13.0 million to $141.3 million, reflecting stronger per-gallon margins, improved service and installation profitability, and contributions from acquisitions.

• Q3 net loss narrowed by $12.9 million to $11.0 million, with higher volumes, better margins, and lower interest expense.

• Announced a definitive agreement to acquire a fuel oil dealer for $35 million, expected to add 19 million gallons annually and close in Q4; marks the fifth acquisition this fiscal year.

• Net customer attrition for Q4 remained stable and slightly down year-over-year, indicating improved customer retention.

Financial highlights

• Q3 home heating oil and propane volume rose 25% year-over-year to 38 million gallons, driven by acquisitions.

• Q3 product gross profit increased 37% to $75 million, with service and installation gross profit up $3.5 million to $13.5 million.

• Q3 Adjusted EBITDA loss decreased by $18.9 million to $4.1 million, reflecting higher volumes and margins.

• Nine-month revenue was $1.53 billion, down from $1.69 billion year-over-year, reflecting lower product sales and volumes.

• First nine months: product gross profit up $17.6 million to $426 million; net income of $70.3 million, $18.6 million higher year-over-year.

Outlook and guidance

• Anticipates closing the $35 million acquisition in Q4, with an active pipeline for future deals.

• Maintenance capital expenditures for the remainder of fiscal 2024 are estimated at $2.0–$3.0 million, with an additional $0.5–$1.0 million planned for propane operations.

• Weather hedge for fiscal 2025 allows a maximum $15 million benefit, with a $5 million annual payment cap if degree days exceed threshold.

• Quarterly distribution of $0.1725 per unit declared for Q3 2024, with similar levels expected if cash flow and covenants allow.