Ferrellgas Partners, L.P.

Good day, and thank you for standing by. Welcome to the Farrell Gas Partners' fourth quarter fiscal 2023 earnings conference call. At this time, all participants are on a listen-only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jim Farrell, Executive Chairman of Farrell Gas. Please go ahead.

Thank you very much, Shannon. Welcome to our fourth quarter fiscal 2023 earnings call. We're happy you joined us. It's always been my responsibility to ensure that this company has a long future. And right now, I'm here to tell you that as you probably already know, we have a new CEO, Tamria Zartucci. We've worked together for several years. Me as CEO, Tamria as COO. It is Tamria... who has actually made this company into what you see today over the last several years. I'm very pleased to announce that she is now the CEO, effective August 1, and I'm going to turn this call over to her now.

Thank you, Jim. I appreciate those kind words and I look forward to building on the legacy that you've cultivated over the 80-year history of Ferrell Gas. As president and CEO, I'm privileged to lead the high-performing employees of this company into the future. We are a technology-enabled logistics company, and my background in information technology and 19 wonderful years with Ferrell Gas have prepared me well for this new leadership role. We are very proud of the results this fiscal year. We know it is our people who deliver the first-class service that created the success we had this year. As you know, we are a national logistics company with experienced leadership, second to none, that shows up in the way our customers are served and in our financial results. For employees who might be listening, I say thank you. I will now turn the floor over to our CFO, Mike Holtz. to go over the financial results for the quarter. Mike?

Thank you, Tamaria, and thank you all for joining us. Before we begin our discussion of fiscal 2023 results, I would like to remind everyone that some statements made during this call may be considered forward-looking and that various risks, uncertainties, and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our Form 10-K, filed on September 29th, 2023, and other documents filed from time to time with the Securities and Exchange Commission. Additionally, we note that the purpose of this call is to discuss the results of operations for the fourth fiscal quarter and full year ended July 31st, 2023. FerroGas continues to deliver results as the company ended fiscal 2023 with another year of financial improvements, representing continued EBITDA growth and positive financial metrics compared to fiscal year 2022. FerroGas continues to execute its long-term strategic initiatives focusing on growth and profitability. Gross profit increased 9.6 million, or 5%, for the fourth fiscal quarter, and 79.2 million, or 9%, for fiscal 2023 compared to the respective prior year periods. The positive change was primarily driven by favorable margins and partially offset by a decrease in wholesale gross profit attributable to an increase in cost of sales related to Blue Rhino, our tank exchange business, which was impacted by higher transportation costs. Revenues decreased 45.7 million or 12% for the fourth fiscal quarter related to lower overall cost of product as compared to the prior year period. For fiscal 2023, revenues decreased 88.1 million or 4%. Right time deliveries and warmer weather trends drove a 3% decrease in gallons sold both for the fourth fiscal quarter and fiscal 2023, yet margin per gallon increased 12 cents or 10% in the fourth fiscal quarter and 13 cents or 12% in fiscal 2023. We recognized a net loss attributable to Ferro Gas Partners LP of 29.1 million and 19.4 million in the fourth fiscal quarter of fiscal 23 and 2022, respectively. In fiscal 2023 and 2022, we had net earnings attributable to Ferro Gas Partners LP of $136.9 million and $148 million, respectively. Operating expenses as a percent of total revenue increased 27% for the fourth fiscal quarter and 12% for fiscal 2023. primarily due to growth projects from acquisitions and expansions of Blue Rhino into self-serving vending. Adjusted EBITDA, a non-GAAP financial measure, decreased by $5.2 million or 15% to $29 million in the fourth fiscal quarter compared to $34.2 million in the prior year quarter. The change was primarily due to a $9.7 million increase in net loss attributable to FerroGas Partners LP, as noted above, and favorable EBITDA adjustments for asset sales and disposals. Business transformation costs and legal fees related to a non-core business, which aggregated to $6.1 million. Adjusted EBITDA increased. 20.1 million or 6% to 360.2 million for fiscal 2023 compared to 340.1 million in fiscal 2022. This was primarily the result of EBITDA adjustments of 13.8 million in legal fees and settlements related to non-core business, 14.4 million of non-recurring costs, including the implementation of an ERP system, in addition to an increase of $3.5 million in depreciation and amortization expense. These increases were partially offset by a decrease of $11.4 million in operating income. I'll now turn the call over to Tamria, who will cover some of the operational and company highlights. Tamria?

Thank you. One of several fiscal 2023 strategic initiatives was growth. organically and through targeted acquisitions. With seven acquisitions in recent history, we continue to expand our nationwide footprint as accretive opportunities become available. Our customers may rely on us to supply their clean fuel requirements, both on a routine basis but definitely during critical events, as we ship on all major supply routes and have great relationships with more than 100 carriers. We use technology to maximize operating efficiencies. It's that simple. And it's in all aspects of our operations. From next generation mobile technology in which drivers capture data and tank monitoring notifications to technology platforms that allow us to route and schedule customer deliveries efficiently. to the support of our customers being self-sufficient and everything that this adds up to is fueling life simply for our customers. We have received some questions to our investor relations mailbox. Mike and I will move through those. The first question, I'll take that one, is it's really about my recent announcement as CEO and how does this impact the company in terms of philosophy or strategic direction? And really ever since our restructuring in 2021, and Jim spoke about it at the beginning of the call, he and I have been working side by side on the goals of this company. So in many ways, it's business as usual. With the change in the structure, there's really no material changes to our expected financial or operating philosophies or our strategic direction. Listen, we grow our business through operational excellence, consolidation, and strategic growth, we will remain quite active in our acquisition strategy.

Another, and I'll handle the next question, Tamria. Another question that has come into our investor inbox relates to our EBITDA performance. Specifically, the question is around, over the last several years, FerroGas has been outperforming its peers in terms of EBITDA growth. And the question is, what has been the key to the company's success? We believe that the main driver of our success over the last couple of years has been our focus on two key items, customers and profitability. In terms of our customers, providing quality service at a competitive price helps ensure satisfied customers. Satisfied customers who seek out our product will drive greater profitability. Rather than solely focusing on gallons or number of tanks, our focus has been to serve customers profitably. Now, a related question to that actually goes to our capital structure and specifically the Class B units, and I will handle that question as well. So the question is, what is the path forward as it relates to the capital structure, specifically the Class B units? You know, I spoke on the prior Q&A about our EBITDA growth. One of the advantages of our recent strong EBITDA performance is that it provides us with opportunities. We continue to analyze our capital structure to identify the best path forward. The Class B units represent our highest cost of capital, and as a result, we continue to evaluate alternative approaches that can help reduce our costs. Tamria, there's a question here for you about our record EBITDA on fiscal 2023.

That's an easy question. However, one part of it, which most logistics companies probably are not asked about how weather impacts their business, we really believe that our diversification, which is our geographic footprint, tank exchange line, our customer segments within our retail operations, This reduces our dependency on cold winters and propane heating for financial performance. We are proud of our employee owners. They continue to find ways to drive growth and diversification through our core competencies. With that, I'll now turn the call back to our moderator. But before I do that, as mentioned in the announcement for this call, Any additional questions may be submitted via our investor relations email box at investorrelationsatferralgas.com. Now back to you, Shannon. Thank you. This concludes today's conference call.

Thank you for participating. You may now disconnect.