Suburban Propane Partners, L.P.

Good day and welcome to the Suburban Propane Partners first quarter earnings conference call. All participants will be in a 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 touchtone 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 Davin D'Ambrosio, Vice President and Treasurer. Please go ahead.

Thanks, Chad. Good morning, everyone. Thank you for joining us this morning for our fiscal 2023 first quarter earnings conference call. Joining me this morning are Mike Stavala, our President and Chief Executive Officer, Mike Coogland, Chief Financial Officer and Chief Accounting Officer, and Steve Boyd, our Chief Operating Officer. This morning we will review our first quarter financial 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, relating to the partnership's future business expectations and predictions, and financial conditions 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 their entirety by such cautionary statements. Our annual report on Form 10-K for the fiscal year ended September 24, 2022, and Form 10-Q for the period ended December 24, 2022, 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 the SEC. 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 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the Investor Relations section of our website. At this point, I will turn the call over to Mike Stavala for some opening remarks. Mike?

Great. Thanks, Davin. Good morning, and thank you all for joining us today. Let me start with some color on our first quarter performance, and then I will give you some details on the acquisition that we closed on December 28th, just after the end of our fiscal first quarter. Looking at the first quarter, the positive momentum from our strong performance in fiscal 2022 carried into the first quarter of fiscal 2023. Results benefited from a combination of continued positive trends in our customer-based growth and retention initiatives, cooler average temperatures, and excellent management of selling prices and expenses in a challenging economic backdrop. Propane volumes increased more than 3% and adjusted EBITDA improved by more than 4% to $90 million for the fiscal 2023 first quarter. Our operating personnel continue to do an outstanding job delivering exceptional service to our customers and the communities we serve while continuing to drive efficiencies and effectively managing the things they can control. Weather is certainly a positive factor in the first quarter, particularly in the latter half of December 2022, which presented heat and degree days that were 26% cooler than normal. But we believe that it's our best-in-class operating model and the hard work and dedication of our people that sets us apart from the competition in our core propane business and allows us to continually adapt to the business circumstances that we face, whether that's volatile commodity prices, inflationary factors, or erratic weather patterns. Now let me comment on the progress toward our long-term strategic growth plans, and specifically the continued build-out of our renewable energy platform. As announced on December 28, 2022, we took a significant step to immediately and meaningfully increase the scale of our renewable energy portfolio. and created a platform for visible growth in this rapidly developing market for renewable natural gas distribution. So to highlight some of the details of the acquisition and the newly formed joint venture, through our wholly owned subsidiary, Suburban Renewable Energy, we acquired two RNG production and distribution facilities from Equilibrium Capital Group for $190 million plus transaction fees and expenses. This was funded with borrowings of approximately $112 million under our existing revolver, and the assumption of approximately $80 million of green bonds that were associated with the assets. One facility located in Stanfield, Arizona, is one of the largest dairy manure to RNG facilities in the United States, processing dairy manure from seven local dairies with a total of 55,000 dairy cows. With the completion of expansion and plant optimization plans over the next 12 months, It is expected to have a run rate capacity of approximately 525,000 mm BTUs of RNG annually for injection into an interstate pipeline interconnect nearby. Revenues are generated from a combination of RNG sales, LCFS credits, D3 and D5 RINs, tipping fees, and fertilizer sales. The second facility, located in Columbus, Ohio, is currently the main source of receiving and processing municipal waste as well as food waste from several large food and beverage providers in the Columbus area. The facility earns tipping fees for accepting and processing approximately 100,000 tons of waste into biogas and fertilizer and will earn additional revenue from sales of RNG, D5 RINs, and fertilizer upon completion of an active development project to upgrade the biogas into pipeline quality RNG, which is expected to be completed over the next 18 to 24 months. Once completed, the facility is expected to have a run rate capacity of approximately 225,000 MMBTUs of RNG per year. Therefore, the platform, once current expansion and upgrade plans are completed, is expected to produce a run rate capacity of about 750,000 MMBTUs per year And while there will be an immediate contribution to EBITDA in fiscal 2023, the acquired facilities are projected to be accretive to our overall distributable cash flow per unit in fiscal 2024 as earnings benefit from the upgrades, expansion, and efficiency gains. Under the purchase agreement, equilibrium could earn additional consideration based on a multiple of EBITDA that is earned for the two-year period from January 1, 2024 through December 31, 2025, but only after EBITDA exceeds a certain minimum threshold. The maximum earn-out potential is $45 million and will be paid in fiscal 2026 if earned. The EBITDA threshold was established at a level that would reduce the overall transaction multiple and significantly enhance the accretion of the deal. even after making any additional payments under the earn-out provision. Additionally, Equilibrium has agreed to provide ongoing operational, management, and transitional support to Suburban under a management services agreement that extends through December 2025. This will allow Suburban to continue to benefit from the deep knowledge and experience of the Equilibrium management team in operating these assets during the transition and ensure that the parties' interests are well aligned for the future optimization of the earnings potential of these assets through the earn-out mechanism. In addition to the acquired facilities, Suburban Renewable Energy and Equilibrium have formed a partnership to serve as a long-term growth platform for the identification, development, and operation of additional RNG projects, which includes an existing pipeline of identified RNG projects that are in various stages of development. Under the joint venture agreement, The parties have agreed to invest up to $155 million to develop additional RNG projects over the next three years or so, of which Suburban will fund $120 million and Equilibrium will fund $35 million. Suburban Renewables will own approximately 70% of the joint venture once capital has been fully committed and deployed. Established in 2008, Equilibrium is a leading sustainability-driven asset management firm that has developed deep expertise in the development and operation of waste-to-energy projects and that is supported by a well-established network of operators, engineering and construction providers, and off-takers. We are extremely excited to be partnering with the team at Equilibrium because we believe that our cultures have aligned so well And we could bring together Equilibrium's knowledge and more than a decade of experience in this rapidly growing RNG space with our deep knowledge of end-use energy markets, logistics, and distribution expertise. So, as you can see, this acquisition and the formation of the partnership with Equilibrium was a highly strategic and meaningful step forward in the support and execution of our long-term strategic goals. This, combined with our previous investments in renewable DME through our 38% equity stake in Oberon Fuels, as well as in hydrogen production and distribution through our 25% equity stake in Independence, and our first investment in the RNG production market through our previously announced agreement with Adirondack Farms in upstate New York. These have all greatly supported our efforts to diversify our business and develop what we call an interconnected portfolio of renewable energy assets. In a moment, I'll come back with some closing remarks and provide added color on our strategic initiatives. However, at this point, I'll turn the call over to Mike Coogland to discuss the first quarter results in some more detail. Mike?