Suburban Propane Partners, L.P.

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. However, 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 MMVTUs of annual D3 RNG injections. and 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 MMVTUs 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 MMVTUs. 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 the 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. The facility's significant negative carbon intensity score of approximately negative 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 only in 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, 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 upgraded equipment in Ohio, and building the team to support the long-term growth of the platform. These initiatives were undertaken during a period when 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 improved price environment presents a good tailwind for revenue enhancement in our RNG platform. With all of these 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. In a moment, I'll come back for some closing remarks. However, at this point, I'll turn the call over to Mike Kuglin to discuss the third quarter results in more detail. Mike?

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, I discussed our third quarter results and excluded the impact Those unrealized market adjustments on our commodity hedges, which resulted in unrealized gain of $700,000 in the third quarter of fiscal 2026, compared to an unrealized loss of $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 for 27 cents per common unit compared to adjusted net loss of $10.8 million for 17 cents per common unit in the prior year. Adjusted EBITDA for the third quarter was $18 million compared to $27 million in the prior year. 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 will substantially offset the 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 inventory remained strong during the quarter, with June 2026 inventory levels approximately 21% above both June 2025 and historical averages for this time of year. Despite elevated inventory levels, post-it propane prices were volatile and traded between 70 and 90 cents per gallon, based in Montbellevue, 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 70 to 75 cents 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 their prior year, permanently due to lower volume sold, as propane unit margins remain steady. 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 and a benefit of $1.1 million from production tax credits earned through the current year quarter from R&D injections. Operating expenses for the third quarter of fiscal year 2025 included a $2 million gain from insurance recovery led to Hurricane Eileen, reduced prior year operating expenses, and a pension settlement charge of $500,000, which was excluded from adjusted EBITDA. Net interest expense of $18.8 million for the third quarter was flat for the prior year. as lower benchmark interest rates on borrowings under a 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 R&G facilities. On a year-to-date basis, our total growth CapEx for our R&G facilities was $28.7 million, and our full-year capital spending estimate for the existing R&G projects is approximately $35 million, which is at the low end of the previously communicated range of $35 to $40 million. 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 limit ratio for the trailing 12-month period into June 2026 was 4.35 times, which is flat compared to June 2025. With a significant portion of capital spending on the R&D platform largely 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'll turn the call back to Mike.

Thanks, Mike. As announced on July 23rd, our Board of Supervisors declared our quarterly distribution of 32.5 cents 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 12 months ended June 2026. So 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 heaving season in over a decade, while our teams in the west continue to focus on the areas they can control, growing our customer base and managing expenses. And with all three of our R&G 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. 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. And Lacey, could you help us with that?

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.

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

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