Star Group, L.P. Reports Fiscal 2024 Third Quarter Results

Rhea-AI Summary

Star Group, L.P. (NYSE:SGU) reported financial results for its fiscal 2024 third quarter ended June 30, 2024. Total revenue increased by 10.5% to $331.6 million, driven by higher volumes sold and increased selling prices for petroleum products. The volume of home heating oil and propane sold rose by 25.3% to 37.7 million gallons. Net loss decreased by $12.9 million to $11.0 million. The company reported an Adjusted EBITDA loss of $4.1 million, compared to a $22.9 million loss in the prior-year period.

For the nine months ended June 30, 2024, Star reported a 9.5% decrease in total revenue to $1.5 billion. Net income increased by $18.6 million to $70.3 million. Year-to-date Adjusted EBITDA increased by $13.0 million to $141.3 million. The company also announced plans to acquire a fuel oil dealer for approximately $35 million, expected to close in the fourth quarter.

Positive

• Total revenue increased by 10.5% to $331.6 million in Q3 2024
• Volume of home heating oil and propane sold rose by 25.3% to 37.7 million gallons in Q3 2024
• Net loss decreased by $12.9 million to $11.0 million in Q3 2024
• Adjusted EBITDA loss improved from $22.9 million to $4.1 million in Q3 2024
• Net income increased by $18.6 million to $70.3 million for the first nine months of fiscal 2024
• Year-to-date Adjusted EBITDA increased by $13.0 million to $141.3 million
• Planned acquisition of a fuel oil dealer for $35 million, expected to add 19 million gallons of heating oil annually

Negative

• Total revenue decreased by 9.5% to $1.5 billion for the nine months ended June 30, 2024
• Volume of home heating oil and propane sold decreased by 2.3% to 234.9 million gallons for the first nine months of fiscal 2024
• Temperatures were 15.1% warmer than normal, potentially impacting demand

Insights

Financial Analyst

Star Group's fiscal 2024 third quarter results reveal a mixed but generally positive picture. The company reported a 10.5% increase in total revenue to $331.6 million, driven by higher volumes and increased selling prices for petroleum products. Notably, the volume of home heating oil and propane sold rose by 25.3% to 37.7 million gallons, largely due to acquisitions.

While the company still reported a net loss, it decreased by $12.9 million to $11.0 million. The improvement in Adjusted EBITDA is particularly striking, with the loss narrowing from $22.9 million to $4.1 million. This significant improvement can be attributed to higher per-gallon margins, increased volume and improved service and installation profitability.

Looking at the nine-month period, despite a 9.5% decrease in total revenue, net income increased by $18.6 million to $70.3 million. Year-to-date Adjusted EBITDA also improved by $13.0 million to $141.3 million.

The announced acquisition of a fuel oil dealer for approximately $35 million, expected to add 19 million gallons of heating oil annually, could further bolster Star Group's market position and potentially contribute to future earnings growth.

However, investors should note the company's exposure to weather-related risks, as evidenced by the impact of warmer-than-normal temperatures on sales volumes. The company's ability to maintain margins and manage costs in the face of volume fluctuations will be important for sustained profitability.

Market Research Analyst

Star Group's latest results offer intriguing insights into the home energy distribution sector. The 25.3% increase in home heating oil and propane volume is particularly noteworthy, as it outpaces the overall revenue growth of 10.5%. This suggests that while the company is expanding its market share, possibly through acquisitions, it may be facing pricing pressures or strategic volume-based growth initiatives.

The company's improved financial performance, despite warmer-than-normal temperatures, indicates effective cost management and margin optimization strategies. The reduction in net loss and significant improvement in Adjusted EBITDA demonstrate the company's resilience in challenging market conditions.

Star Group's focus on customer retention is paying off, with net attrition remaining stable and even slightly improving year-over-year. This is important in a competitive market where customer loyalty can significantly impact long-term profitability.

The pending acquisition of a fuel oil dealer is a strategic move that aligns with the company's growth strategy. By targeting a business within its existing operational footprint, Star Group can potentially realize synergies and economies of scale, further enhancing its market position.

However, the company's performance remains heavily influenced by weather patterns, as evidenced by the impact of warmer-than-normal temperatures on sales volumes. This underscores the importance of diversification and weather risk management strategies in the home energy distribution sector.

STAMFORD, Conn., July 31, 2024 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2024 third quarter, the three month period ended June 30, 2024.

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
For the fiscal 2024 third quarter, Star reported a 10.5 percent increase in total revenue to $331.6 million compared with $300.1 million in the prior-year period, reflecting higher volumes sold and an increase in selling prices for petroleum products. The volume of home heating oil and propane sold during the fiscal 2024 third quarter rose by 7.6 million gallons, or 25.3 percent, to 37.7 million gallons, as the additional volume provided from acquisitions and other factors was only slightly offset by the impact of net customer attrition. Temperatures in Star's geographic areas of operation for the three months ended June 30, 2024 were 0.5 percent colder than the three months ended June 30, 2023 but 17.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net loss decreased by $12.9 million in the quarter, to $11.0 million, as an $18.9 million decrease in Adjusted EBITDA loss and a $0.7 million decrease in interest expense, was partially offset by a $5.1 million decrease in income tax benefit and an unfavorable change in the fair value of derivative instruments of $2.0 million.

The Company reported a third quarter Adjusted EBITDA loss (a non-GAAP measure defined below) of $4.1 million, versus a $22.9 million Adjusted EBITDA loss in the prior-year period, reflecting higher home heating oil and propane per-gallon margins, a 25.3 percent increase in the volume of home heating oil and propane sold, an increase in service and installation profitability and additional EBITDA from acquisitions that more than offset an increase in operating expenses.

“As the summer progresses, we continue to post solid results, benefitting from both higher volumes and improved per gallon gross margins in the recent quarter versus fiscal 2023,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “In addition, I am pleased to announce that we have entered into a definitive agreement to purchase a very high quality fuel oil dealer for approximately $35 million before working capital adjustments. The business, which is expected to deliver nineteen million gallons of heating oil annually, is located within our existing operating footprint, and we anticipate closing on the transaction in the fourth quarter. Our net attrition for the quarter remained stable – and was down slightly year-over-year – reflecting our ongoing focus on excellent customer service and strategies to elevate retention rates going forward. Given our investments in our operations and our people, we look forward to the return of winter over the coming months.”

Nine Months Ended June 30, 2024 Compared to the Nine Months Ended June 30, 2023
For the nine months ended June 30, 2024, Star reported a 9.5 percent decrease in total revenue to $1.5 billion compared with $1.7 billion in the prior-year period, reflecting a decrease in total volume sold and a decline in selling prices in response to lower wholesale product costs. The volume of home heating oil and propane sold during the first nine months of fiscal 2024 decreased by 5.5 million gallons, or 2.3 percent, to 234.9 million gallons as the additional volume provided from acquisitions and other factors was more than offset by net customer attrition. Temperatures in Star’s geographic areas of operation fiscal year-to-date were less than 0.1 percent warmer than during the prior-year period but 15.1 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income increased by $18.6 million for the first nine months of fiscal 2024, to $70.3 million, primarily due to $13.0 million higher Adjusted EBITDA, a favorable change in the fair value of derivative instruments of $11.4 million and a $2.9 million decrease in interest expense that was partially offset by an $8.5 million increase in the income tax expense and a $0.3 million rise in depreciation and amortization expenses.

Year-to-date Adjusted EBITDA increased by $13.0 million, to $141.3 million, compared to the prior-year period as an increase in home heating oil and propane per-gallon margins, an increase in service and installation profitability and the additional EBITDA from acquisitions more than offset the 5.5 million gallon decrease in home heating oil and propane volumes and a $5.0 million reduction in the Company’s weather hedge benefit.

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of the Company’s financial statements, such as investors, commercial banks and research analysts, to assess Star’s position with regard to the following:

• compliance with certain financial covenants included in our debt agreements;
• financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
• operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
• ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
• the viability of acquisitions, capital expenditure projects and the overall rates of return of alternative investment opportunities.
  

The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations, as analytical tools and so should not be viewed in isolation but in conjunction with measurements that are computed in accordance with GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are as follows:

• EBITDA and Adjusted EBITDA do not reflect cash used for capital expenditures;
• although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;
• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital;
• EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on indebtedness; and
• EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.
  

REMINDER:
Members of Star's management team will host a webcast and conference call at 11:00 a.m. Eastern Time tomorrow, August 1, 2024. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 888-346-3470 (or 412-317-5169 for international callers).

About Star Group, L.P.
Star Group, L.P. is a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. We believe Star is the nation's largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast and Mid-Atlantic U.S. regions. Additional information is available by obtaining the Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.com, where unit holders may request a hard copy of Star’s complete audited financial statements free of charge.

Forward Looking Information
This news release includes "forward-looking statements" which represent the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth under the heading "Risk Factors" and "Business Strategy" in our Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2023. Important factors that could cause actual results to differ materially from the Company’s expectations ("Cautionary Statements") are disclosed in this news release and in the Company’s Form 10-K and our Quarterly Reports on Form 10-Q. 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 update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this news release.

(financials follow)

STAR GROUP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
	June 30,				September 30,
(in thousands)		2024				2023
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	45,701			$	45,191
Receivables, net of allowance of $10,028 and $8,375, respectively		128,565				114,079
Inventories		40,911				56,463
Fair asset value of derivative instruments		—				10,660
Prepaid expenses and other current assets		28,571				28,308
Total current assets		243,748				254,701
Property and equipment, net		104,457				105,404
Operating lease right-of-use assets		85,452				90,643
Goodwill		268,360				262,103
Intangibles, net		77,508				76,306
Restricted cash		250				250
Captive insurance collateral		73,698				70,717
Deferred charges and other assets, net		12,043				15,354
Total assets	$	865,516			$	875,478
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable	$	29,700			$	35,609
Revolving credit facility borrowings		4,396				240
Fair liability value of derivative instruments		2,744				118
Current maturities of long-term debt		16,500				20,500
Current portion of operating lease liabilities		17,968				18,085
Accrued expenses and other current liabilities		132,274				115,606
Unearned service contract revenue		65,141				63,215
Customer credit balances		62,375				111,508
Total current liabilities		331,098				364,881
Long-term debt		115,117				127,327
Long-term operating lease liabilities		72,147				77,600
Deferred tax liabilities, net		23,582				25,771
Other long-term liabilities		16,019				16,175
Partners' capital
Common unitholders		324,857				281,862
General partner		(5,019	)			(4,615	)
Accumulated other comprehensive loss, net of taxes		(12,285	)			(13,523	)
Total partners' capital		307,553				263,724
Total liabilities and partners' capital	$	865,516			$	875,478

STAR GROUP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended June 30,								Nine Months Ended June 30,
(in thousands, except per unit data - unaudited)		2024				2023				2024				2023
Sales:
Product	$	249,001			$	223,565			$	1,292,849			$	1,462,706
Installations and services		82,639				76,556				232,919				223,219
Total sales		331,640				300,121				1,525,768				1,685,925
Cost and expenses:
Cost of product		174,285				169,097				867,017				1,054,457
Cost of installations and services		69,108				66,596				214,807				211,450
(Increase) decrease in the fair value of derivative instruments		984				(1,036	)			8,262				19,622
Delivery and branch expenses		86,540				83,075				284,989				276,953
Depreciation and amortization expenses		7,243				7,684				23,377				23,147
General and administrative expenses		7,423				6,065				21,331				19,619
Finance charge income		(1,652	)			(1,774	)			(3,676	)			(4,857	)
Operating income (loss)		(12,291	)			(29,586	)			109,661				85,534
Interest expense, net		(2,663	)			(3,365	)			(9,719	)			(12,602	)
Amortization of debt issuance costs		(247	)			(245	)			(746	)			(832	)
Income (loss) before income taxes	$	(15,201	)		$	(33,196	)		$	99,196			$	72,100
Income tax expense (benefit)		(4,157	)			(9,290	)			28,887				20,426
Net income (loss)	$	(11,044	)		$	(23,906	)		$	70,309			$	51,674
General Partner's interest in net income (loss)		(101	)			(216	)			637				468
Limited Partners' interest in net income (loss)	$	(10,943	)		$	(23,690	)		$	69,672			$	51,206
Per unit data (Basic and Diluted):
Net income (loss) available to limited partners	$	(0.31	)		$	(0.67	)		$	1.96			$	1.43
Dilutive impact of theoretical distribution of earnings		—				—				0.30				0.20
Basic and diluted income (loss) per Limited Partner Unit:	$	(0.31	)		$	(0.67	)		$	1.66			$	1.23
Weighted average number of Limited Partner units outstanding (Basic and Diluted)		35,274				35,603				35,470				35,725

SUPPLEMENTAL INFORMATION STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (Unaudited)
	Three Months Ended June 30,
(in thousands)		2024				2023
Net loss	$	(11,044	)		$	(23,906	)
Plus:
Income tax benefit		(4,157	)			(9,290	)
Amortization of debt issuance costs		247				245
Interest expense, net		2,663				3,365
Depreciation and amortization		7,243				7,684
EBITDA		(5,048	)			(21,902	)
(Increase) / decrease in the fair value of derivative instruments		984				(1,036	)
Adjusted EBITDA		(4,064	)			(22,938	)
Add / (subtract)
Income tax benefit		4,157				9,290
Interest expense, net		(2,663	)			(3,365	)
Provision for losses on accounts receivable		3,273				3,742
Decrease in accounts receivables		66,478				116,224
Decrease in inventories		22,382				18,142
Increase in customer credit balances		11,099				26,283
Change in deferred taxes		261				2,095
Change in other operating assets and liabilities		(23,377	)			(32,925	)
Net cash provided by operating activities	$	77,546			$	116,548
Net cash used in investing activities	$	(1,984	)		$	(1,481	)
Net cash used in financing activities	$	(41,924	)		$	(80,006	)
Home heating oil and propane gallons sold		37,700				30,100
Other petroleum products		32,900				35,900
Total all products		70,600				66,000

SUPPLEMENTAL INFORMATION STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (Unaudited)
	Nine Months Ended June 30,
(in thousands)		2024				2023
Net income	$	70,309			$	51,674
Plus:
Income tax expense		28,887				20,426
Amortization of debt issuance costs		746				832
Interest expense, net		9,719				12,602
Depreciation and amortization		23,377				23,147
EBITDA		133,038				108,681
(Increase) / decrease in the fair value of derivative instruments		8,262				19,622
Adjusted EBITDA		141,300				128,303
Add / (subtract)
Income tax expense		(28,887	)			(20,426	)
Interest expense, net		(9,719	)			(12,602	)
Provision for losses on accounts receivable		6,945				8,510
Increase in accounts receivables		(21,231	)			(8,540	)
Decrease in inventories		16,909				29,751
Decrease in customer credit balances		(50,516	)			(15,485	)
Change in deferred taxes		(2,495	)			(10,284	)
Change in other operating assets and liabilities		20,061				3,488
Net cash provided by operating activities	$	72,367			$	102,715
Net cash used in investing activities	$	(31,201	)		$	(5,580	)
Net cash used in financing activities	$	(40,656	)		$	(54,609	)
Home heating oil and propane gallons sold		234,900				240,400
Other petroleum products		95,400				104,700
Total all products		330,300				345,100

CONTACT:
Star Group, L.P.	Chris Witty
Investor Relations	Darrow Associates
203/328-7310	646/438-9385 or cwitty@darrowir.com

FAQ

What was Star Group's (SGU) revenue for Q3 2024?

Star Group (SGU) reported total revenue of $331.6 million for Q3 2024, a 10.5% increase from the prior-year period.

How did Star Group's (SGU) home heating oil and propane volume change in Q3 2024?

Star Group's (SGU) volume of home heating oil and propane sold increased by 25.3% to 37.7 million gallons in Q3 2024 compared to the same period last year.

What was Star Group's (SGU) Adjusted EBITDA for Q3 2024?

Star Group (SGU) reported an Adjusted EBITDA loss of $4.1 million for Q3 2024, compared to a $22.9 million loss in the prior-year period.

Has Star Group (SGU) announced any acquisitions in their Q3 2024 report?

Yes, Star Group (SGU) announced plans to acquire a fuel oil dealer for approximately $35 million, expected to close in the fourth quarter and add 19 million gallons of heating oil annually.