Suburban Propane Partners, L.P.

Good morning and welcome to the Suburban Propane Partners second quarter earnings conference call. All participants will be in a listen-only mode. If 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. If you 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, VP and Treasurer. Please go ahead.

Thanks, Chad. Good morning, everyone. Thank you for joining us this morning for our fiscal 2023 second quarter earnings conference call. With 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 second 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 condition and results of operations. These forward-looking statements involve certain risks and uncertainties. We've 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. While 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 March 25, 2023, 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. 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 8K, which was furnished to the SEC this morning. The Form 8K 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 comments. Mike?

Thanks, Devin. Good morning. Thank you all for joining us today. The fiscal 2023 second quarter was dominated by near record warm temperatures throughout much of the quarter, particularly in the eastern half of the United States, which limited customer demand for heating purposes. In fact, during January and February, the most critical months for heat-related demand, average temperatures were 16% warmer than normal, and that two-month stretch was reported as one of the warmest on record. Our West Coast operations experienced colder-than-normal temperatures, coupled with historic levels of snowfall and precipitation in certain areas. Customer demand in those territories responded well, which helped offset some of the volume shortfall in our eastern operating territories. The second quarter ended with a late burst of cooler temperatures at the end of March, which has created some momentum for customer demand into the early part of the fiscal third quarter. Therefore, when you look at the 2022-2023 heating season in its entirety, Aside from colder than normal temperatures in the latter half of December 2022 and cooler temperatures at the end of March, the majority of the heating season was unseasonably warm and in many areas of our footprint near record warm. However, our operating personnel have managed through these warmer weather scenarios before and do an excellent job managing the things they can control, providing outstanding service, managing selling prices, and controlling expenses. And with the success of our customer-based growth and retention initiatives over the past several years, we have stabilized our customer base, which helps support our overall volume performance. As a result of overall softness in demand, volumes in the quarter were 9.4% below the prior year second quarter, and adjusted EBITDA was down 13.6%. Despite the challenging second quarter as a result of the weather, The strength of our first quarter performance, which was up $3.5 million compared to the prior year, coupled with cooler than normal temperatures to start the third quarter, will help mitigate some of the earnings shortfall experienced in the second quarter. On the strategic front, as mentioned in detail during our first quarter earnings announcement, at the beginning of the second quarter, we expanded our renewable energy platform with the acquisition of renewable natural gas, or RNG, producing assets in Stanfield, Arizona and Columbus, Ohio for $190 million. These assets, when combined with the previously announced RNG facility to be constructed at Adirondack Farms in upstate New York, creates a platform that is expected to produce a run rate capacity of approximately 850,000 MMBTUs per year once expansion and upgrade plans are completed over the next 18 months or so. Since closing the acquisition at the end of December, We've been focused on integrating certain functions into the suburban platform, including back office activities such as cash management, accounting and financial reporting, and certain operational management functions. Equilibrium Capital, the seller, has agreed to provide ongoing operational management and transitional support to suburban under a management services agreement that extends through December 2025. This allows suburban to continue to benefit from the deep knowledge and expertise of the equilibrium management team in operating these assets during the transition. At the Stanfield facility, we have substantially completed the capital expansion efforts that were ongoing at the time of the acquisition. And since the beginning of March, have exceeded our expectations for daily pipeline injection. Stanfield facility generates revenues from a combination of RNG sales, LCFS credits in California, D3 and D5 RINs, tipping fees, and fertilizer sales. The Columbus facility is one of the main sources for 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. We will be deploying additional capital to install gas upgrade equipment at the facility in order to upgrade the biogas into pipeline quality RNG. At which time, we will be able to earn additional revenue from sales of RNG, D5 RINs, LCFS credits, and fertilizer sales. We expect to reach run rate earnings capacity for the Columbus facility around the third quarter of fiscal 2024. Therefore, while there will be an immediate contribution to EBITDA in our fiscal 2023, The acquired facilities are expected to achieve run rate EBITDA once gas upgrade equipment is installed at the Columbus facility, with potential upside as earnings from both facilities benefit from efficiency gains, incremental production capacity, potential increases in LCFS and RIN credit values, as well as additional incentives from the Inflation Reduction Act. 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. Under the joint venture agreement, the parties have agreed to invest up to $155 million 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. We have a number of additional RNG projects and opportunities in varying stages of analysis under this joint venture partnership. In a moment, I'll come back for some closing remarks and provide additional color on our strategic initiatives. However, at this point, I'll turn it over to Mike Coughlin to discuss the second quarter in more detail. Mike?