Ferrellgas Partners, L.P.

Good morning, ladies and gentlemen, and welcome to the Ferrell Gas Partners LPQ1 2026 earnings conference call. At this time, all lines are in a listen-only mode. I would now like to turn the call over to Michelle Magai, Vice President, Corporate Affairs. Please go ahead, Michelle.

Thank you. Good morning, everyone. Thank you for joining us today for our first quarter 2026 earnings conference call. We released this morning pre-market our earnings, and if you haven't seen it yet, you can find it on our website under the Investor Relations tab at ferragas.com. With me today is Tamria Zertucci, our President and Chief Executive Officer, and Nick Hymer, Ferragas' Controller. Today's call includes prepared remarks, where Tamria and Nick will go over our first quarter results for fiscal 2026, concluding with responses to submitted questions. Please note that this call may contain forward-looking statements as determined by federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. These statements may be affected by important factors set forth in our filing for the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in any forward-looking statement. We undertake no obligation to publicly update any forward-looking statements except to the extent required by law. In addition, please refer to the 8 earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also available for replay via our website. With that, I will turn the call over to Tamria. Thank you, Michelle.

And thank you to all joining our call today. I'm proud to share a result, a strong first quarter reflecting the dedication of our 4,000 employee owners who provide not only warmth and energy to our customers coast to coast, but also the solid financial and operational results that position us for sustainable long-term growth. Throughout the quarter, our team stayed focused on what matters most, serving our customers safely, and efficiently. Our mission to grow the business continues in FY2026 through several key strategic priorities. Most notable are safely building a profitable customer base through both organic growth and acquisitions, increasing operational efficiencies, and improving margin performance. A key component in achieving our strategic priorities occurred in October 2025. when we strengthened Ferrell Gasses Financial Foundation with a few essential moves. We retired 650 million of senior notes due in 2026 and replaced them with 650 million of new notes maturing in 2031, extending our debt timeline and improving flexibility. We also expanded our revolving credit facility, giving us even more opportunity to grow. These actions set us up to invest confidently in the business and to capture new growth. Against this backdrop, we're also encouraged by the national shift in the energy conversation, which increasingly recognizes propane as an affordable, versatile, and essential component of a long-term national energy strategy. Turning to safety for a moment, we continued to focus on our safety investments. This quarter, we continued our NCAB safety technology investment, enhancing the driving skills of our professional drivers. We also took a leading role in the industry and successfully transitioned to the new PERC education program. This is a function-based, modular, and more targeted approach to employee safety and technical training. These programs, among others, are important factors to lowering our recordable injuries. Feral Gas stands out in a highly fragmented market thanks to our nationwide footprint in our unmatched customer service. This quarter, we had several key drivers to our performance. In the retail business line, we secured seven new national contracts and renewed five existing ones. Together, those represent about 3.5 million gallons, highlighting our ability to win and retain large nationwide customers. At the same time, demand in our auto gas division is rising as customers, such as school districts, appreciate the lower carbon footprint of propane versus diesel. The tailwind of electric vehicle subsidies is tapering off, opening new growth opportunities in this segment of the business. A further focus was on our temp heat market, where our strategy resulted in a 37% increase in tank sets over prior year. The wholesale team also successfully executed in the first quarter. Blue Rhino was prepared for a robust hurricane season, but quickly adjusted to lower storm-related demand by performing well on controllable metrics of efficient routing, flexing labor to the demand, and upgrading production facilities to meet our future growth. Ferro Gas remains deeply committed to making a meaningful difference in the communities we serve In the first quarter, we strengthened this commitment by expanding our partnerships with organizations such as Operation Warm and Operation Barbecue Relief. Working with Operation Warm, we provided coats to children in Indianapolis, and through Operation Barbecue Relief, we helped deliver hot meals to first responders across St. Paul, Kansas City, and Tampa. Our focus on community extends to our people. as we celebrated customer service week and driver appreciation week and awarded feral gas scholarships and recognized outstanding performance through our flame and golden rhino awards. Beyond these efforts, feral gas employee owners supported community, veterans, first responders, and youth initiatives nationwide. I will now turn the call over to Nick Hymer, our controller, to review our first quarter financial accomplishments. Nick?

Thanks, Tamria. Turning to our first quarter results, performance was in line with our expectations, despite, as Tamria said, not seeing the volume we have historically experienced in the first quarter due to the lack of landfall hurricanes. For the first fiscal quarter, adjusted EBITDA, a non-GAAP financial measure, decreased by $6.5 million, or 18%, to $29.3 million compared to $35.8 million in the prior year quarter. After EBITDA adjustments primarily related to the prior year first quarter $125 million Eddystone litigation settlement, this quarter's decrease was primarily driven by increases of $5.6 million in operating expense and $2.1 million in general and administrative expense. The $5.6 million increase in operating expense was due to increases of $4.1 million in personnel costs, $900,000 in vehicle expense, and $600,000 in plant and other. The $4.1 million increase in personnel costs primarily related to the increases of $5.5 million in workers' compensation accruals and $2.8 million in payroll costs. The increase in payroll costs reflects planned merit increases for both field and corporate support employees and in field-related headcount to address customer demand. These expenses were partially offset by a $3.3 million decrease in medical and pharmacy claims expense. The $2.1 million increase in general administrative expense was driven by $1.3 million in compensation costs related to the vesting of fiscal 2025 phantom plan grants for non-employee directors, as well as the timing of adjustments to incentive accruals. Gross profit was flat with $100,000 change compared to the prior year quarter, which is typical in the first quarter as the company prepares for the upcoming winter season. Margin per gallon increased 6% in the first fiscal quarter, And a revenue decrease of $8.9 million or 2% was offset by a cost of product decrease of $8.8 million or 5%. The company recognized a net loss attributable to Ferro Gas Partners LP of $26.9 million and $146.7 million in the first fiscal quarter of fiscal 26 and 25 respectively. As noted above, the first fiscal quarter of fiscal 2025 included the $125 million Eddystone litigation settlement. Back to you, Tamria.

Thank you, Nick. We are confident that by safely delivering the best customer experience in the propane industry, we will continue to attract new customers and expand our market share. Our strategy rooted in disciplined growth, operational excellence, and a strong customer focus positions us to perform well in today's evolving energy landscape and to stand out from the competition. Each quarter, we are strengthening our track record of steady improvement, and I remain confident in our ability to achieve sustained long-term growth. Finally, I want to once again thank our employee owners for their dedication in delivering a strong quarter and preparing us for another successful winter heating season. Thank you for joining us today and for your continued interest in Ferrell Gas. We did receive several questions through the investor relations inbox at Ferrell Gas. Thank you for those. Really, they could be best moved into maybe four categories, so I'll just tackle the first one. The first question really involves plans regarding potential future distributions. So as discussed this morning, we are very pleased to have successfully completed the refinancing of our notes that we're doing 26 and the amendment and extension of our evolving credit facility. We really believe that these transactions together, they improve our credit rating and with our operational results, they really afford us the flexibility to make the best decisions for our company and our stakeholders. So thank you to our bank group and to all who follow and invest in our story. We appreciate the questions that we've received regarding the Class B units as well. But as a reminder, we do not comment on our distribution policy and we will continue to evaluate all our strategic opportunities. If you have specific questions around the technicals of the Class B units, you may find really a complete overview in our public documents. We did receive several questions around Safran advisors and Andy Safran and his role with FerrellGas. Safran in particular is doing a fantastic job of guiding us through the different pieces of our capital structure. First through the refinancing and now looking at strategic opportunities for the company. I'm fortunate to have Andy with me representing the great work of our employee owners that, you know, quarter after quarter, They performed, so it's an easy story for Andy and us to tell. Nick, there is a question here around our acquisition strategy. Would you like to take that one?

Yeah, sure, Tamria. Happy to take that. I'd say Ferragas has a very strong M&A team with Richard Mayberry running point for that group. We've always maintained a healthy pipeline of opportunities, which is under continual evaluation. During the winter season, a lot of that M&A activity tends to pause, but we certainly do see opportunity to continue delivering on our track record to strategically acquire where appropriate, where we can generate higher returns.

The next question is around and kind of explain where we are on that and what's left of that matter.

Yeah, sure. Happy to speak on that one, too. We will be making our final payment of $37.5 million on the Eddystone settlement January 15th. That amount is currently secured by a letter of credit, so with that LC removed, we will be net neutral from an available liquidity perspective within our credit agreement.

Thank you, Nick. I think that wraps up the questions that we received on quarter one. Thank you to everyone for joining the call and your continued support of the company. I will now hand it back over to the moderator.

Thank you, ladies and gentlemen. This does conclude today's presentation. Thank you for your participation. You may now disconnect and have a wonderful day.