Superior Plus Corp.

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Good day and thank you for standing by. Welcome to the Superior Plus 2022 fourth quarter and full year results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rob Doran, Vice President of Capital Markets. Please go ahead.

Thank you, Victor. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2022 annual and fourth quarter results. On the call today from Superior Plus are Luc Desjardins, President and CEO, Beth Summers, Executive VP and CFO, and Darren Rebar, Senior Vice President and Chief Legal Officer. For this morning's call, Luke and Beth will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on CDAR and Superior's website yesterday for further details. Dollar amounts discussed on today's call are expressed in Canadian dollars unless otherwise noted. I'll now turn the call over to Luke.

Well, thank you, Rob, and good morning, everyone. Thanks for joining the call to discuss our 2022 annual and fourth quarter results. I'm pleased to say we've achieved a record fourth quarter. posting adjusted EBITDA of $182.6 million. We also achieved full-year adjusted EBITDA of $449.8 million, which was $51.4 million increase from the 2021 and above the midpoint of our 2022 adjusted EBITDA guidance range. I'm so proud of the Superior team and their ability to achieve this result in an unprecedented year that saw challenges related to the continued public health restrictions earlier this year, rising inflation and labor costs in a volatile commodity pricing environment. Our financial and operational results are a testament of our resilient business model in the propane distribution businesses and our superior way forward strategic initiatives, which saw us close eight acquisitions in 2022 for a total of $519 million and announce a transformative acquisition of Certiris. The eight property acquisitions were complete in 2022, were geographically diverse, including business in U.S., Northeast, Southeast, Upper Midwest, and the California. And we also had one small acquisition in Ontario, Canada. In March 2022, we closed the acquisition of Camps and Kiva, which provide us with a platform for future growth in the attractive California Western U.S. market. The acquisition completed in 2022 increased our customer base in the U.S. and Canada, and we expect to generate significant synergy from these acquisitions consistent with our historical experience of improving propane distribution business we acquire. So maybe I'm repeating myself a little bit here, but over 20 deals, and each of those 20 companies we've acquired have improved the bottom line by 25%. So, the Sertaris acquisition announced in December 2022 has the complementary high-growth, low-carbon fuels, compressed natural gas, renewable natural gas and hydrogen to superior extensive distribution platform. To the use of mobile storage unit, MSU, Sertaris delivers low-cost and low-carbon intensity energy alternative to its customer. Sotiris MSU are interchangeable between CNG, RNG, hydrogen, giving Sotiris flexibility to service its customer across North America as they transition away from diesel and other distilled. Sotiris provides a virtual pipeline to its customer that do not have infrastructure in place or require backup to support existing infrastructure. From 2020 to 2022, Sir Terrace has more than doubled its adjusted EBITDA, driven by continued volume and efficiency improvement, and the benefits from diversification to their end-use customer segments. I'm also happy to share that Sir Terrace and its best month in December 2022, only to be surpassed by another record month in January 2023. The Sir Terrace business is starting the year well, and we expect they will achieve adjusted bidder in the range of $140 to $150 million during the year 2023. The shareholders of Ceteris have voted in favor of our acquisition of Ceteris, so there is no fiduciary out related to the deal, and we are only awaiting regulatory approval in Canada. In the U.S., the 30 days awaiting period required under HSR filing has expired, so we are only waiting for the regulatory approval in Canada. But more important, while we are awaiting approval from the Canadian regulator, all economic benefits being generated by our Sertaris business is accruing to us. We are including the full year results of the Sertaris business and our 2023 adjusted EBITDA guidance range of $585 million to $635 million because the cash generated in the business is ours based on our terms and our arrangement agreements. We're excited to welcome the experienced Certiris management team to the Superior family and to continue to grow the combined companies after close. Certiris is a high-growth business. We expect to generate attractive financial return, including double-digit accretion to Superior, distributable cash flow per share, and 2023. Superior expects to achieve $1.9 billion acquisition target at the close of the satirist acquisition, which is three years ahead of our expectation. Superior also expects to achieve the superior way forward, EBITDA from operation target range $700 to $750 million by the end of 2024, which is then two years ahead of expectation. I will now turn the call over to Beth to discuss financial results and more details.

Thank you, Luc, and good morning, everyone. As Luc mentioned, Superior's fourth quarter adjusted EBITDA of $182.6 million was a record for us in the fourth quarter and was an increase of $40.4 million compared to the prior year quarter, primarily due to higher EBITDA from operations, partially offset by higher corporate costs, and a realized loss on foreign currency hedging contracts compared to a gain in the prior year quarter. The full year 2022 adjusted EBITDA was $449.8 million, which was $51.4 million higher than the 2021, primarily due to an increase in EBITDA from operations partially offset by higher corporate costs and a realized loss on foreign currency hedging contracts compared to a gain in the prior year. The fourth quarter earnings from continuing operations was $63 million, an increase of $49.2 million compared to the prior year quarter, the primary driver for the higher earnings, with higher gross profit and a gain on derivatives and foreign currency translation of borrowings compared to a loss in the prior year quarter, partially offset by higher SD&A, income passes, and finance expense. Full year net loss from continuing operations of $87.9 million decreased, by $105.1 million compared to the prior year primarily due to a loss on derivatives and foreign currency translation of borrowings and higher SDNA partially offset by higher gross profit, lower finance expense and lower income tax expense. Turning now to the individual business results, US propane adjusted EBITDA for the fourth quarter was $116.7 million, an increase of $36.8 million compared to the prior year quarter, primarily due to the impact of acquisitions completed in the current year, and to a lesser extent, increased prices to offset inflation and the impact of the weaker Canadian dollar on the translation of US denominated transactions. Full year adjusted EBITDA in 2022 for US propane was $284.9 million, an increase of $58.7 million compared to 2021, primarily due to the impact of acquisitions completed in the current and prior year, and to a lesser extent, higher unit margins, the impact of the weaker Canadian dollar on the translation of US denominated transactions, and the increased costs due to inflation. Canadian propane adjusted EBITDA was $58.3 million. This was an increase of $4.7 million compared to the prior year quarter, primarily due to higher prices to offset the impact of inflation. Full-year adjusted EBITDA in 2022 for Canadian propane was $144.8 million, a decrease of $15.4 million compared to 2021, primarily due to the impact of the FUSE benefit recorded in the prior year, lower sales of carbon offset credits, and increased costs due to higher commodity prices and inflation, partially offset by higher sales volumes and unit margins. Wholesale propane adjusted EBITDA was $22.7 million, an increase of $13.1 million compared to the prior year quarter. This was primarily due to the impact of the Kiva acquisition. Full year adjusted EBITDA in 2022 for wholesale propane was $48.7 million, an increase of $25.2 million compared to 2021. This was primarily due to the impact of the Kiva acquisition and to a lesser extent, stronger propane wholesale market fundamentals compared to the prior year. Turning to corporate results, the adjusted EBITDA guidance and leverage. Corporate administrative costs for the fourth quarter were $11 million, an increase of $6.4 million compared to the prior year quarter, primarily due to higher insurance costs, professional fees, the impact of inflation, and higher incentive plan costs. Superior realized the loss on foreign currency hedging contracts of $4.1 million compared to a gain of $3.7 million in the prior year quarter due to lower average hedge rates relative to changes in exchange rates. On a full year basis, corporate administrative costs were $25.9 million, an increase of $1.8 million compared to 2021. This was primarily due to higher self-insurance claims partially offset by lower incentive plan costs due to the decline in Superior's share price compared to the prior year. For 2022, Superior realized a loss on foreign currency hedging contracts of $2.7 million. This compared to a gain of $12.6 million in the prior year due to lower average hedge rates relative to changes in exchange rates. Superior's total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended December 31, 2022, with 4.1 times. which is slightly above our target range of 3.5 times to 4 times. The higher average leverage ratio was primarily due to the impact of higher U.S. CAD rate on U.S. denominated debt. Superior is maintaining its targeted leverage ratio at 3.5 to 4 times while it continues to focus on integrating acquisitions and executing on the Superior Way Forward initiatives. including achievement of the anticipated organic growth in the Sertaris business. Superior expects to be in the target range of three and a half to four times at the close of the acquisition of Sertaris. As Liz mentioned, we achieved our 2022 adjusted EBITDA guidance range of $425 million to $465 million, with adjusted EBITDA of $449.8 million coming in above the midpoint of that range. This extends our streak of achieving the adjusted EBITDA guidance we set each year and demonstrates the resiliency of our business. For 2023, we're introducing our pro forma adjusted EBITDA guidance range of $585 million to $635 million. Based on the midpoint of the 2023 pro forma adjusted EBITDA guidance range, This is a 36% increase compared to the full year 2022 adjusted EBITDA of $449.8 million. The increase is due to the expected contribution from the Sertaris acquisition, the first quarter contribution from Camps, Keevan, Quarles acquisitions completed in 2022, being partially offset by the warmer weather experienced at the start of 2023. The 2023 pro forma adjusted EBITDA guidance range includes estimated full-year Sertaris adjusted EBITDA in the range of $140 million to $150 million. This guidance assumes average weather for the remainder of 2023 to be consistent with the five-year average. As for our capital allocation priorities in 2023 and going forward, the Sertaris acquisition presents us with a great opportunity to invest capital in high organic growth. We will continue to evaluate M&A targets in the propane space, but growth capex for Sotaris is currently our view of the near-term priority. We also have the ability to repurchase shares through the normal course issuer bid we announced in 2022 if that opportunity generates the appropriate level of returns. We're focused on creating long-term shareholder value and will only allocate capital to our most accretive opportunities. With that, I'll turn the call over to Q&A.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question comes from the line of Ben Isaacson from Scotiabank. Your line is open.

Thank you very much and good morning everyone and congrats on the quarter. Just a question on your guidance. If you strip out the Sartoris, the acquisition where you've called for 140 to 150 million of adjusted EBITDA, can you talk about the change from 22 to 23 for the rest of the business How much of that is the normalization of volume due to weather? How much of that is organic growth? And then how much of that is the realization of synergies from some of the smaller acquisitions that you made? Thank you.

Okay. I'm just going to break.

Yeah, yeah, I can. So what I'll do is at a high level here, just sort of call out some of the pieces. So the first one, and maybe I'll talk about it from a division perspective. So if you think about the U.S. propane division, on a year-over-year basis, you know, basically think of it as sort of a $20 to $25 million increase. And that's being driven by sort of the impact of the M&A. So you've got the Kiva and the Quarles acquisitions, so you're going to have Q1, but there is a weather impact or there was headwinds from a weather perspective in January, and think of that in sort of a $10 to $15 million range. So you have a bit of an offset there as well. From a Canadian propane perspective, well, there's going to be sort of volume and margin growth in that business and a little bit from the McRobert acquisition. What you are seeing on a year-over-year basis is we're expecting, you would have seen in the disclosure carbon credit sales. So from a carbon credit sale perspective, we would anticipate some lower carbon credit sales moving into 2023 versus 2022, as well as there'll be no wage subsidy or the FUSE benefit on a year-over-year basis. So net overall, think of that as a negative headwind on that business in and around a range of, say, around $5 million. Those are really, I'm going to say, sort of the key changes that would take you in the base business from that $20.22 of the $4.49 that you would have seen up in that range. Yeah, boat flat. The rest of the business you've got ups and downs.

Yeah. So on the running rate with normal weather, Let's say the sixth M would probably be 620 to 625. It wasn't for the start of the year with such warm weather.

Perfect. And then just to follow up on that one, for the big acquisition that you made in December, on your slide deck at the time, you talked about the virtual pipeline providing you with optionality. Can you talk about what that could look like, that optionality? And can you also just remind us what the synergies are from this acquisition?

Thank you.

Yeah, I'll start with the synergy, and Bess will talk about the question. No, there's really not much synergy. This is a division with its own products selling to industrial. They can take the equipment and use CNR or RNG, so the flexibility is you could have different liquid that goes into those trailers, which is great because you can move them, they're mobile, and you can use different products. Overall, this is a business that has a fantastic management team, very good assets, it's a pretty new industry with big roles, and we intend to run it totally separately What we like to do, and we'll be doing in 2023 for sure, and I hope even after me, it's always the priority because I always said in my career, I've probably done over 100 deals, and there's nothing more profitable than internal growth. So compared to acquisition, we make acquisition, say, in the seven, eight, let's say in the eight multiple, and after we've done our superior way execution, we get down to six. So it's worthwhile and it's good, but when you look at internal growth, a better return than that. Great business. We'll be run totally separately, same management team, and we're there to help and support them in their growth. So not much energy in that regard.

Great. Thank you very much.

Yeah, just to answer the optionality portion of the question, are you referring to the optionality to the customer and the ability to move to lower carbon fuels using the virtual pipeline where primarily they'd be using Dinslits now? Are you talking about it from a capital allocation perspective in the business?

No, the first one, the first one.

Oh, okay. Yeah, so, I mean, fundamentally we're, you know, The virtual pipeline provides that lower carbon option. In particular, if diesel is being used for generating energy, etc., what it does is it allows the customer to now use either renewable natural gas, in the instances where that's available, or natural gas. which is lower carbon intensity than diesel, which is typically what it's replacing. And then on top of that, there's also opportunities from a hydrogen perspective as well as we go forward. If there's anything more specific you want, I'm happy to answer. Okay, thank you.

One moment for our next question. And our next question comes from Gary Ho from Desjardins Capital Markets. Your line is open.

Thanks, and good morning. Maybe more of a high-level question just on the CEO announcement. The wording from the press release identifies internal growth, operational improvement, and excluding accretive tuck-in acquisitions. So it feels like the larger platform-type deals were not mentioned, and I know you've completed several larger ones recently, including Satiris. So am I reading into that correctly? You know, strategy will be more inward-focused, organic growth, and smaller tuck-ins. Does that make sense?

I think for the short term, it makes sense because we want to allocate more of the overall capital to Sertaris, and then we still intend to do some small tuck-in. The tuck-in, I've talked earlier about 8-turn. We buy the small tuck-in around 6, 7 would be the high number that we would pay. And there's often the return are more than 25% improvement, they're more than the 30, 35 range of improvement of the small token. So we intend to do small token 2023, and then Sertaris more capital for that internal growth opportunity. What happens after that? I think it's a good way to look at 23 and 24, 25. It's all a question of four-time leverage. We don't want to go over that. So we'll be able to, of course, there's a lot of opportunity in the propane in the States and some in Canada, and we intend to continue to do that, but always taking in consideration what's our leverage ratio. So I can tell you more specifically, 23, I just did. After that, it remains to be seen, but yes, we intend in time to continue to do propane acquisition. They're very accretive as well.

Okay, maybe just follow on to that to see, make sure I understand. So outside of the growth capex, essentially slowing down M&A, may that lead to ability to kind of pay down debt quicker? Is that an increased emphasis perhaps?

Yeah, I mean, I think we'll always look at it and make a decision on how we want to allocate capital so it drives the highest shareholder returns. And the reality is there'll be times when it makes sense to pay down debt and net overall. I mean, I think where Luke's comments coming from on the 2023 is when you look at it as we've sort of discussed, we're towards the top end of our three and a half to four times. So in looking at all the financial metrics, we have to be more prudent and focused on where we're going to allocate that capital and As you move out and as the synergies are delivered in the M&A transactions that we've completed and they start rolling through, it frees up more free cash. As the organic growth delivers more free cash, there is more room to look at more potential acquisitions or, frankly, more potential internal organic growth. As I said before, we'll always look at it and allocate the capital to the highest returns. But as you start moving out in the future year, as the business has always, and we've talked about, as those acquisitions are fully integrated and the synergies realized, we very quickly deleaver the business, so it provides that opportunity to continue to grow or allocate that capital either to internal growth, to M&A transactions, to potentially share buybacks, or, frankly, reducing debt.

Okay. Makes sense. And then just one more question, just on the scarce, can you give us an update on the closing of the transaction, especially on the Canadian Commission Bureau side, maybe a more narrow range than first half of 23 that you've disclosed? And as a related question, the lockup of management and larger shareholders, have you chatted with them, their intentions to hold on to the stock after the lockup? That's been a bit of an overhang for investors, I've documented.

Maybe I'll start with one point, and I'll ask you, Beth, and Darren is here, Chief Legal Officer, to add some detail if necessary. So the U.S. business, we're good to go. That's 80% of the business and more growth there, so very pleased about that. Canadian, it's a work in progress, and it's hard to predict the date. They're asking questions, and we want to be very straight to giving them all the answers they have. So I'll turn to them, and he's with Lars in discussion on a regular basis, so I'll turn to him for the rest.

Sure, thanks, Luke. Yeah, I think, you know, as Luke said, in the U.S., the waiting period under the HSR Act expired February 13th. We've got a final order, so the only thing really, the only condition left to closing is receipt of approval from the Canadian Competition Bureau. Their review is still ongoing, and we expect they may need some additional time to conclude that review, which is why we've extended the expected timing to the first half of 2023. Our view on that, I guess we would say, look, the businesses are highly complementary, not in the same product market, so we expect we'll be able to get that regulatory clearance in the first half of 2023. But the reason we pushed it out is we think the Bureau is going to likely need a little more time to get there.

Okay, and any feedback on the lockup?

Yeah, I'll jump in on the lockup and just sort of walk through at the highest level. So at the highest level, roughly 45% is subject to lockup. And that split by roughly 36% of that would be after six months. And then roughly 9% would be after three months. And then the rest of that would be tradable on day one.

Okay. Great. Those are my questions. Thanks very much.

Thank you. One moment for our next question. And our next question comes from Nelson Ng from RBC Capital Markets. Your line is open.

Great. Thanks, and congrats on a strong quarter. So just on capital allocation, I think in the MD&A, the guidance was for $200 to $240 million for, I guess, maintenance capex, non-recurring capex, and leases. Can you provide a breakdown of that and also how much of that $200 to $240 million is going to Sataris?

Yep. Okay. So, first of all, Nelson, maybe the best way is to split it into the broad categories first. So, of the 2 to 240, think of the maintenance CapEx in the range of 75 to 80 million. And so, that would be split roughly 30 million Canada, you know, in that, and these are rough ranges, but 25 in the U.S. and then Sataris maintenance CapEx would be roughly 15 million. for 2023. Then as you look at capital leases, think of those in roughly 30 to 40 million range. And then looking at the growth in non-recurring, that's the 105 to sort of 115. So, Sertaris of that, think of that, and this is for the nine months going forward, that sort of 40 to 50 million. And then Canada sort of in the 20 range, the U.S. in about a 40 million range.

So just to clarify, so the actual amount invested, so that $40 to $50 for Sotaris, that's for the nine months. So for the full year, it would obviously be a bit higher than that, right?

Yeah, think of it for the full year in the range of $100 million. Yeah. Yeah, exactly. It's obviously depending when that CAPEX, when you're thinking it for the full year, and maybe that's the best way to think about it in the full year, because it's going to depend when, in particular, the deliveries of the MSUs occur, right?

Well, let's say, call it $100 million for the year.

Okay. All right. That's fair. So $100 just for the trucks and trailers and before leases and before maintenance CAPEX? Yes. Yeah. Okay, that's great. And then the next question is, I think, Luke, you mentioned that Sotaris will operate on a standalone basis and there's limited synergies. But I guess longer term, do you see... I guess you'll be retiring soon, so that's probably not your decision. But do you see... the benefits of putting the two together in terms of, I guess, Sataris is headquartered in Calgary, but most of their operations are in the U S and then Superior Plus is headquartered in Toronto. So I guess from a corporate perspective, um, there should be some synergies there.

No. So we have a division with SGL in Calgary. We have a division with the U S business. and we have the Canadian business located in Mississauga and Ontario. That business will be located in Calgary. We're a North America business and we have divisions that are spread out between North America. I probably forgot one thing on Synergy. I'm a strong believer that 80% of their business is in the States with big industrial companies, but those big industrial companies And they're replacing diesel. But those big industrial companies also use propane. So I think we're in time, and within the next year as we work together, we'll look at helping each other to sell more product. As you know, Superior Canada, I don't know if there's a big industrial company we don't do business with. It's probably all of them. And what Soterios is replacing is mainly diesel. So can we take those accounts and those relationships and say, hey, as a terrorist team, let's introduce you to those big industrial customers in Canada and see if you can replace the diesel with your product 100%. So there are some synergies. I thought the question was more on cost synergy. There's not much there, if nothing. But on the growth synergy, absolutely. We're going to touch base with all of their customers in the states we don't have. They're in the Middle East. Big industrial, as you know, today what we do in the States is like 90-plus percent residential. And then in Canada, we're big industrial. We're at pretty much in Canada on big industrial, and we want to make sure that those contact relationships develop more internal growth business for both businesses. And that will happen, I'm very convinced.

Okay, that's useful. So it's more on the cross-selling side where you see the value add. And then just one last question. This is one last question in terms of like inflation and staff and wage pressures. I guess you've been through the worst of it by now, but are you still seeing any, like how's the labor market in terms of finding seasonal drivers? And can you just touch base on wages?

Yeah. Many times during COVID and during all the, a lot of people, you know, changing position these days, I have a lot of exposure on that, and I think we're lucky. I think we're lucky because we have over 85% of our employees are responding that we're at least 85% happy to work with us, the way we treat them, the way we communicate, the way we have them participate in the business. It's a very high-quality culture and values that we've built, and what we've learned from CETAVR is with the multi-time we met and travel with them, it's the same. It's just a perfect fit on culture value, very human. And so we're lucky. And I always add to that from the truck drivers and their propane business, you know, if they're a small truck and the driver goes out during the day, does his thing, come back home. There's a ton of truck drivers that have larger truck and larger miles that they do and they go away from home, which is much harder. So I wouldn't say it's easy, what our truck drivers do. Wintertime gets very rough at many times in many areas. But we don't have real difficulty of finding good truck drivers. And once they work for us, I would call a lot of our employees our kind lifers. They're well-treated, they love to work, they're superior, appreciate our success and our communication style. It's really very proud and very pleased of the overall thousands of employees appreciate working here, and we want to treat them very well, and they deserve it.

Great. Thanks for the color, Luke.

It's all about people.

One moment for our next question.

Our next question comes from Stephen Hansen from Raymond James. Your line is open.

Mr. Hansen.

Good morning, everyone. Just a quick one again to go back to Sakaris. The previous owner had been spending quite aggressively on the fleet to grow the top line, I think logically. If I'm not mistaken, that included a large inflow of new units in the back half of last year. You spoke briefly, Luca, earlier to the CapEx profile going forward, but I just wanted to get a sense for what kind of untapped utilization you have available today with the units that came in last year. How quickly do you need to replenish or add new units to the year? And ultimately, what kind of organic growth do you think is sustainable over the next couple of years for the top line for this business or maybe from an EBITDA perspective? Thanks.

Yeah, and I'll be pleased that the next call I probably won't be here, but I'd be pleased that we could invite Curtis, who's the president and his team, so that they can answer a lot of those specific questions. So I think from organic growth, and correct me, Beth and Darren, if you think the number is not exactly what we've talked about, but we certainly think at least 10% growth a year, internal growth. I hope it could be more. From your first question on CapEx, I think we're continuing to spend as much as they spent in the past, if not more, with the $100 million in 2023. So I think we're not slowing down their progress and their opportunity to develop new business. If more cash flow comes in, I think we hopefully can push more their way, but for the moment, from a budget and where we stand today, it looks more like $100 million. Beth, anything else you think I missed?

Yeah, I mean, I think what I would add is, you know, along your question of for the new units that came in, whether they're being utilized and whether they're ramped up, I mean, the beauty of the business is that there's much more demand for mobile storage units than there is supply. So, for those units, they're very quickly being used to supply customers and, frankly, generating that EBITDA. So as you look at it, I think with that business, it's really more getting the MSUs produced, purchased, and then in they can quickly be generated to generate EBITDA. And so from that perspective, they would all be being utilized. And, again, from a sales perspective, there's more customers than there's MSUs.

That's great. And maybe just to follow up, and maybe this is too far into the weeds for now, but I'll just ask anyway. So just around sort of the hub and spoke strategy as it relates to sort of, are they in all the regions they need to be? Luke, you had referenced some cross-selling earlier. I'm just trying to get a sense for whether this is a density, densification strategy at this point and, you know, ability to reap incremental high margin return opportunities as opposed to sort of greenfielding new hubs that might be a little bit less than you know, margin accretive, you know, where are they in that strategy, life set of evolution, I guess, thus far?

I'll answer from what we know, and I always preface those answers with next quarter. The real people that know it very well can answer more specifically. My understanding is there's such a growth in this industry and those three products that we talked about that they can supply, that the... The number of hubs will continue to grow, and there will be more. I think the intent is to have three to four more hubs every year. And if you look at – they've done a big study with McKinsey that shows the growth in those three products. And I won't give you the number because there are totally – there are billions and billions of growth in those industries. So they're in the best position in North America to be the one that grows – with their position and their team that they built and the equipment they've already put in place. So I would say three to four hubs continuously for years to come and continue to grow. And I don't see that if there's one thing and the result can help having a good year, I think they can grow more than 10%. We say that because we want to be conservative and not giving you other numbers than what we're sure about. But there's growth there that could be in the 15% a year for sure.

That's great. Appreciate the color. Sounds like a great addition. Thanks.

And as a reminder, that's star 1-1 for questions. Star 1-1. One moment. And I'm not showing any further questions in the queue. I'd like to turn the call back over to Luke Desjardins, President and CEO, for closing remarks.

So I'll wrap up this call. I would like to take this opportunity to thank all of you for being there and for all the 12 years you've followed this company and many of you following us and supporting Superior. It has been a pleasure and a privilege to share with you this incredible journey of growth and the transformation of Superior, which we've gone through over the years. Many of you remember multi-business we have. Now we're focused in energy, big time, North America. I'm proud of all the employees and what's been accomplished. We have a super great management team. I'm confident that I'm leaving this company in an exceptional position to pursue its growth. I want to mention my appreciation to everyone, every stakeholder, team, employee, management, board, everybody that's really worked hard to make this situation happen over the years. And I really have told that to people internally in the last four or five months, and maybe more in the last three. With the Sataris deal, when you think of our platform, the number of customers we have, which is in the millions, and then you think of Sataris, what they bring as a new Entry with internal growth. I mean, I'm leaving this company and better shape than it was Even as we ended up just being in propane. It was good and we built and we improve every business 25% Now we're just going to the next level and this is the transformation that is happening and very very proud of everybody and very pleased that I'm leaving with this and new gain and new opportunity for super great canadian company so with that i wish you all the best thank you for your support and hopefully the question was luke you're retiring uh i don't know what retiring is i will not retire i'll be working probably not at the same pace as a full ceo but doing something uh of a scale of to keep busy because i love business and it's my passion and and in my life so wish you all the best Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day. Bye. Thank you. Thank you. Thank you. Thank you. you

Good day and thank you for standing by.

Welcome to the Superior Plus 2022 fourth quarter and full year results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rob Doran, Vice President of Capital Markets. Please go ahead.

Thank you, Victor. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2022 annual and fourth quarter results. On the call today from Superior Plus are Luke Desjardins, President and CEO, Beth Summers, Executive VP and CFO, and Darren Rebar, Senior Vice President and Chief Legal Officer. For this morning's call, Luke and Beth will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on CDAR and Superior's website yesterday for further details. Dollar amounts discussed on today's call are expressed in Canadian dollars unless otherwise noted. I'll now turn the call over to Luke.

Well, thank you, Rob, and good morning, everyone. Thanks for joining the call to discuss our 2022 annual and fourth quarter results. I'm pleased to say we've achieved a record fourth quarter, posting adjusted EBITDA of $182.6 million. We also achieved full-year adjusted EBITDA of $449.8 million, which was $51.4 million increase from the 2021 and above the midpoint of our 2022 adjusted EBITDA guidance range. I'm so proud of the superior team and their ability to achieve these results in the unprecedented year that saw challenges related to the continued public health restrictions earlier this year, rising inflation and labor costs in a volatile commodity pricing environment. Our financial and operational results are a testament of our resilient business model in the propane distribution businesses and our superior way forward strategic initiatives. which saw us close eight acquisitions in 2022 for a total of $519 million and announce a transformative acquisition of Sir Tyrus. The eight propane acquisitions were complete in 2022, were geographically diverse, including business in U.S., Northeast, Southeast, Upper Midwest, and the California. And we also had one small acquisition in Ontario, Canada. In March 2022, we closed the acquisition of Camps and Kiva, which provide us with a platform for future growth in the attractive California Western U.S. market. The acquisition completed in 2022 increased our customer base in the U.S. and Canada, and we expect to generate significant synergy from these acquisitions consistent with our historical experience of improving propane distribution business we acquire, so Maybe I'm repeating myself a little bit here, but over 20 deals, and each of those 20 companies we've acquired have improved the bottom line by 25%. So the Sertarius acquisition announced in December 2022 has the complementary high-growth, low-carbon fuels, compressed natural gas, renewable natural gas, and hydrogen to superior extensive distribution platforms. To the use of mobile storage unit, MSU, Sertaris delivers low-cost and low-carbon intensity energy alternative to its customer. Sertaris MSU are interchangeable between CNG, RNG, ArgoGen, giving Sertaris flexibility to service its customer across North America as they transition away from diesel and other distilled. Sertaris provides a virtual pipeline to its customer that do not have infrastructure in place or require backup to support existing infrastructure. From 2020 to 2022, Sir Terrace has more than doubled its adjusted EBITDA, driven by continued volume and efficiency improvement and the benefits from diversification to their end-use customer segments. I'm also happy to share that Sir Terrace in its best month in December 2022 only to be surpassed by another record month in January 2023. The Sartaris business is starting the year well, and we expect they will achieve a adjusted bid on the range of $140 to $150 million during the year 2023. The shareholders of Sartaris have voted in favour of our acquisition of Sartaris, so there is no fiduciary out related to the deal, and we are only awaiting regulatory approval in Canada. In the U.S., the 30 days awaiting period required under HSR filing has expired, so we are only waiting for the regulatory approval in Canada. But more important, while we are awaiting approval from the Canadian regulator, all economic benefits being generated by our sartorius business is accruing to us. We are including the full year results of the sartorius business and our 2023 adjusted EBITDA guidance range of $585 million to $635 million because the cash generated in the business is ours based on our terms and our arrangement agreements. We're excited to welcome the experienced Sir Tyrus management team into the Superior family and to continue to grow the combined companies after close. Sir Tyrus is a high growth business. We expect to generate attractive financial return including double digit accretion to Superior distributable cash flow per share and 2023. Superior expects to achieve $1.9 billion acquisition target at the close of the Satiris acquisition, which is three years ahead of our expectation. Superior also expects to achieve the superior way forward EBITDA from operation target range $700 to $750 million by the end of 2024, which is then two years ahead of expectation. I will now turn the call over to Beth to discuss financial results and more details.

Thank you, Luke, and good morning, everyone. As Luke mentioned, Superior's fourth quarter adjusted EBITDA of $182.6 million was a record for us in the fourth quarter and was an increase of $40.4 million compared to the prior year quarter, primarily due to higher EBITDA from operations, partially offset by higher corporate costs, and a realized loss on foreign currency hedging contracts compared to a gain in the prior year quarter. The full year 2022 adjusted EBITDA was $449.8 million, which was $51.4 million higher than the 2021, primarily due to an increase in EBITDA from operations partially offset by higher corporate costs and a realized loss on foreign currency hedging contracts compared to a gain in the prior year. The fourth quarter earnings from continuing operations was $63 million, an increase of $49.2 million compared to the prior year quarter, the primary driver for the higher earnings, with higher gross profit and a gain on derivatives and foreign currency translation of borrowings compared to a loss in the prior year quarter, partially offset by higher SD&A, income passes and finance expense. Full year net loss from continuing operations of $87.9 million decreased by $105.1 million compared to the prior year, primarily due to a loss on derivatives and foreign currency translation of borrowings, and higher SDNA, partially offset by higher gross profit, lower finance expense, and lower income tax expense. Turning now to the individual business results, U.S. propane adjusted EBITDA for the fourth quarter was $116.7 million, an increase of $36.8 million compared to the prior year quarter, primarily due to the impact of acquisitions, completed in the current year, and to a lesser extent, increased prices to offset inflation and the impact of the weaker Canadian dollar on the translation of US denominated transactions. Full year adjusted EBITDA in 2022 for US propane was $284.9 million, an increase of $58.7 million compared to 2021, primarily due to the impact of acquisitions completed in the current and prior year, and to a lesser extent, higher unit margins, the impact of the weaker Canadian dollar on the translation of U.S. denominated transactions, and the increased costs due to inflation. Canadian propane adjusted EBITDA was $58.3 million. This was an increase of $4.7 million compared to the prior year quarter, primarily due to higher prices to offset the impact of inflation. Full year adjusted EBITDA in 2022 for Canadian propane with $144.8 million, a decrease of $15.4 million compared to 2021, primarily due to the impact of the FUSE benefit recorded in the prior year, lower sales of carbon offset credits, and increased costs due to higher commodity prices and inflation, partially offset by higher sales volumes and unit margins. Wholesale propane adjusted EBITDA was $22.7 million, an increase of $13.1 million compared to the prior year quarter. This was primarily due to the impact of the Kiva acquisition. Full year adjusted EBITDA in 2022 for wholesale propane was $48.7 million, an increase of $25.2 million compared to 2021. This was primarily due to the impact of the Kiva acquisition and to a lesser extent, stronger propane wholesale market fundamentals compared to the prior year. Turning to corporate results, the adjusted EBITDA guidance and leverage. Corporate administrative costs for the fourth quarter were $11 million, an increase of $6.4 million compared to the prior year quarter, primarily due to higher insurance costs, professional fees, the impact of inflation, and higher incentive plan costs. Superior realized the loss on foreign currency hedging contracts of $4.1 million compared to a gain of $3.7 million in the prior year quarter due to lower average hedge rates relative to changes in exchange rates. On a full year basis, corporate administrative costs were $25.9 million, an increase of $1.8 million compared to 2021. This was primarily due to higher self-insurance claims partially offset by lower incentive plan costs due to the decline in Superior's share price compared to the prior year. For 2022, Superior realized a loss on foreign currency hedging contracts of $2.7 million. This compared to a gain of $12.6 million in the prior year due to lower average hedge rates relative to changes in exchange rates. Superior's total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended December 31, 2022, with 4.1 times. which is slightly above our target range of 3.5 times to 4 times. The higher average leverage ratio was primarily due to the impact of higher U.S. CAD rate on U.S. denominated debt. Superior is maintaining its targeted leverage ratio at 3.5 to 4 times while it continues to focus on integrating acquisitions and executing on the Superior Way Forward initiatives. including achievement of the anticipated organic growth in the Sertaris business. Superior expects to be in the target range of three and a half to four times at the close of the acquisition of Sertaris. As Liz mentioned, we achieved our 2022 adjusted EBITDA guidance range of $425 million to $465 million, with adjusted EBITDA of $449.8 million coming in above the midpoint of that range. This extends our streak of achieving the adjusted EBITDA guidance we set each year and demonstrates the resiliency of our business. For 2023, we're introducing our pro forma adjusted EBITDA guidance range of $585 million to $635 million. Based on the midpoint of the 2023 pro forma adjusted EBITDA guidance range, This is a 36% increase compared to the full year 2022 adjusted EBITDA of $449.8 million. The increase is due to the expected contribution from the Sertaris acquisition, the first quarter contribution from Camps, Keevan, Quarles acquisitions completed in 2022, being partially offset by the warmer weather experienced at the start of 2023. The 2023 pro forma adjusted EBITDA guidance range includes estimated full-year Sertaris-adjusted EBITDA in the range of $140 million to $150 million. This guidance assumes average weather for the remainder of 2023 to be consistent with the five-year average. As for our capital allocation priorities in 2023 and going forward, the Sertaris acquisition presents us with a great opportunity to invest capital in high organic growth. We will continue to evaluate M&A targets in the propane space, but growth capex for Sotaris is currently our view of the near-term priority. We also have the ability to repurchase shares through the normal course issuer bid we announced in 2022 if that opportunity generates the appropriate level of returns. We're focused on creating long-term shareholder value and will only allocate capital to our most accretive opportunities. With that, I'll turn the call over to you and A.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question comes from the line of Ben Isaacson from Scotiabank. Your line is open.

Thank you very much and good morning everyone and congrats on the quarter. Just a question on your guidance. If you strip out the Sartoris, the acquisition where you've called for 140 to 150 million of adjusted EBITDA, can you talk about the change from 22 to 23 for the rest of the business How much of that is the normalization of volume due to weather? How much of that is organic growth? And then how much of that is the realization of synergies from some of the smaller acquisitions that you made? Thank you.

Okay. I'm just going to break.

Yeah, I can. So what I'll do is at a high level here, just sort of call out some of the pieces. So the first one, and maybe I'll talk about it from a division perspective. So if you think about the U.S. propane division, on a year-over-year basis, you know, basically think of it as sort of a $20 million to $25 million increase. And that's being driven by sort of the impact of the M&A. So you've got the Kiva and the Quarles acquisitions, so you're going to have Q1, but there is a weather impact or there was headwinds from a weather perspective in January, and think of that in sort of a $10 million to $15 million range. So you have a bit of an offset there as well. From a Canadian propane perspective, well, there's going to be sort of volume and margin growth in that business and a little bit from the McRobert acquisition, What you are seeing on a year-over-year basis is we're expecting, you would have seen in the disclosure carbon credit sales. So from a carbon credit sale perspective, we would anticipate some lower carbon credit sales moving into 2023 versus 2022, as well as there'll be no wage subsidy or the FUSE benefit on a year-over-year basis. So net overall, think of that as a negative headwind on that business in and around a range of, say, around $5 million. Those are really, I'm going to say, sort of the key changes that would take you in the base business from that $20.22 of the $4.49 that you would have seen up in that range. Yeah, boat flat. The rest of the business you've got ups and downs.

Yeah. So on the running rate with normal weather, Let's say the sixth M would probably be 620 to 625, if it wasn't for the start of the year with such warm weather.

Perfect. And then just to follow up on that one, for the big acquisition that you made in December, on your slide deck at the time, you talked about the virtual pipeline providing you with optionality. Can you talk about what that could look like, that optionality? And can you also just remind us what the synergies are from this acquisition?

Thank you.

Yeah, I'll start with the synergy and then we'll talk about the question. No, they're really not much synergy. This is a division with its own products selling to industrial. They can take the equipment and use CNR or RNG, so the flexibility is you could have different liquid that goes into those trailers, which is great because you can move them, they're mobile, and you can use different products. Overall, this is a business that has a fantastic management team, very good assets, it's a pretty new industry with big roles, and we intend to run it totally separately What we like to do, and we'll be doing in 2023 for sure, and I hope even after me, it's always the priority because I always said in my career, I've probably done over 100 deals, and there's nothing more profitable than internal growth. So compared to acquisition, we make acquisition in the seven, eight, let's say in the eight multiple, and after we've done our superior way execution, we get down to six. So it's worthwhile and it's good, but when you look at internal growth, a better return than that. Great business. We'll be run totally separately, same management team, and we're there to help and support them in their growth. So not much energy in that regard.

Great. Thank you very much.

Okay. Yeah, just to answer the optionality portion of the question, are you referring to the optionality to the customer and the ability to move to lower carbon fuels using the virtual pipeline where primarily they'd be using distillates now? Are you talking about it from a capital allocation perspective in the business?

No, the first one, the first one.

Oh, okay. Yeah, so, I mean, fundamentally we're, you know, The virtual pipeline provides that lower carbon option. In particular, if diesel is being used for generating energy, etc., what it does is it allows the customer to now use either renewable natural gas in the instances where that's available or natural gas. which is lower carbon intensity than diesel, which is typically what it's replacing. And then on top of that, there's also opportunities from a hydrogen perspective as well as we go forward. If there's anything more specific you want, I'm happy to answer. Okay, thank you.

One moment for our next question.

And our next question comes from Gary Ho from Desjardins Capital Markets. Your line is open.

Thanks, and good morning. Maybe more of a high-level question just on the CEO announcement. The wording from the press release identifies internal growth, operational improvement, and excluding accretive tuck-in acquisitions. So it feels like the larger platform-type deals were not mentioned, and I know you've completed several larger ones recently, including Satiris. So am I reading into that correctly? You know, strategy will be more inward focus, organic growth, and smaller tuck-ins. Does that make sense?

I think for the short term, it makes sense because we want to allocate more of the overall capital to Sertaris, and then we still intend to do some small tuck-in. The tuck-in, I've talked earlier about 8-turn. We buy the small tuck-in around 6, 7 would be the high number that we would pay. And there's often the return are more than 25% improvement, they're more than the 30, 35 range of improvement of the small token. So we intend to do small token 2023, and then Sertaris more capital for that internal growth opportunity. What happens after that? I think it's a good way to look at 23 and 24, 25. It's all a question of four-time leverage. We don't want to go over that. So we'll be able to, of course, there's a lot of opportunity in the propane in the States and some in Canada, and we intend to continue to do that, but always taking in consideration what's our leverage ratio. So I can tell you more specifically, 23, I just did. After that, it remains to be seen, but yes, we intend in time to continue to do propane acquisition. They're very accredited as well.

Okay, maybe just follow on to that to see, make sure I understand. So outside of the growth capex, essentially slowing down M&A, may that lead to ability to kind of pay down debt quicker? Is that an increased emphasis perhaps?

Yeah, I mean, I think we'll always look at it and make a decision on how we want to allocate capital so it drives the highest shareholder returns. And the reality is there'll be times when it makes sense to pay down debt and net overall. I mean, I think where Luke's comments coming from on the 2023 is when you look at it as we've sort of discussed, we're towards the top end of our three and a half to four times. So in looking at all of the financial metrics, we have to be more prudent and focused on where we're going to allocate that capital. As you move out and as the synergies are delivered in the M&A transactions that we've completed and they start rolling through, it frees up more free cash. As the organic growth delivers more free cash, there is more room to look at more potential acquisitions or, frankly, more potential internal organic growth. As I said before, we'll always look at it and allocate the capital to the highest returns. But as you start moving out in the future year, as the business has always, and we've talked about, as those acquisitions are fully integrated and the synergies realized, we very quickly deleaver the business. So it provides that opportunity to continue to grow or allocate that capital either to internal growth, to M&A transactions, to potentially share buybacks, or frankly, reducing debt.

Okay. Makes sense. And then just one more question, just on the scarce, can you give us an update on the closing of the transaction, especially on the Canadian Commission Bureau side, maybe a more narrow range than first half of 23 that you've disclosed? And as a related question, the lockup of management and larger shareholders, have you chatted with them, their intentions to hold on to the stock after the lockup? That's been a bit of an overhang for investors, I've documented.

Maybe I'll start with one point, and I'll ask you, Beth, and Darren is here, Chief Legal Officer, to add some detail if necessary. So the U.S. business, we're good to go. That's 80% of the business and more growth there, so very pleased about that. Canadian, it's a work in progress, and it's hard to predict the date. They're asking questions, and we want to be very straight to giving them all the answers they have. So I'll turn to Daman for, he's with lawyers in discussion on a regular basis, so I'll turn to him for the rest.

Sure, thanks, Luke. Yeah, I think, you know, as Luke says, in the U.S., the waiting period under the HSR Act expired February 13th. We've got a final order. So the only thing really, the only condition left to closing is receipt of approval from the Canadian Competition Bureau. Their review is still ongoing, and we expect they may need some additional time to conclude that review, which is why, you know, we've extended the expected timing to the first half of 2023. Our view on that, I think, you know, I guess we would say, look, the businesses are highly complementary, not in the same product market, so we expect we'll be able to get that regulatory clearance in the first half of 2023. But the reason we pushed it out is we think the Bureau is going to likely need a little more time to get there.

Okay, and any feedback on the lockup?

Yeah, I'll jump in on the lockup and just sort of walk through at the highest level. So at the highest level, roughly 45% is subject to lockup. And that split by roughly 36% of that would be after six months. And then roughly 9% would be after three months. And then the rest of that would be tradable on day one.

Okay. Great. Those are my questions. Thanks very much.

Thank you. One moment for our next question. And our next question comes from Nelson Ng from RBC Capital Markets. Your line is open.

Great. Thanks, and congrats on a strong quarter. So just on capital allocation, I think in the MD&A, the guidance was for $200 to $240 million for, I guess, maintenance capex, non-recurring capex, and leases. Can you provide a breakdown of that and also how much of that $200 to $240 million is going to Sataris?

Yep. Okay, so first of all, Nelson, maybe the best way is to split it into the broad categories first. So of the 2 to 240, think of the maintenance CapEx in the range of 75 to 80 million. And so that would be split roughly 30 million Canada, you know, in that, and these are rough ranges, but 25 in the U.S. and then Sataris maintenance CapEx would be roughly 15 million. for 2023. Then as you look at capital leases, think of those in roughly $30 to $40 million range. Then looking at the growth in non-recurring, that's the $105 to $115. So, Sertaris of that, think of that, and this is for the nine months going forward, that's $40 to $50 million. Then Canada in the $20 range, the U.S. in about a $40 million range.

So just to clarify, so the actual amount invested, so that 40 to 50 for Sotaris, that's for the nine months. So for the full year, it would obviously be a bit higher than that, right?

Yeah. Think of it for the full year in the range of $100 million.

Yeah.

Yeah. It's obviously depending when that CAPEX, when you're thinking it for the full year, and maybe that's the best way to think about it in the full year because it's going to depend when, in particular, the deliveries of the MSUs occur, right?

Well, let's say, call it $100 million for the year.

Okay. All right. That's fair. So $100 just for the trucks and trailers and before leases and before maintenance CAPEX. Okay, that's great. And then the next question is, I think, Luke, you mentioned that Sataris will operate on a standalone basis and there's limited synergies. But I guess longer term, do you see... I guess you'll be retiring soon, so that's probably not your decision. But do you see... the benefits of putting the two together in terms of, I guess, Sataris is headquartered in Calgary, but most of their operations are in the US and then Superior Plus is headquartered in Toronto. So I guess from a corporate perspective, there should be some synergies there.

No. So we have a division with SGL in Calgary. We have a division with the US business. and we have the Canadian business located in Mississauga and Ontario. That business will be located in Calgary. We're a North America business and we have divisions that are spread out between North America. I probably forgot one thing on Synergy. I'm a strong believer that 80% of their business is in the States with big industrial companies, but those big industrial companies And they're replacing diesel. But those big industrial companies also use propane. So I think we're in time, and within the next year as we work together, we'll look at helping each other to sell more product. As you know, Superior Canada, I don't know if there's a big industrial company we don't do business with. It's probably all of them. And what Soterios is replacing is mainly diesel. So can we take those accounts and those relationships and say, hey, as a terrorist team, let's introduce you to those big industrial customers in Canada and see if you can replace the diesel with your product 100%. So there are some synergies. I thought the question was more on cost synergy. There's not much there, if nothing. But on the growth synergy, absolutely. We're going to touch base with all of their customers in the states we don't have. They're in the Middle East. Big industrial, as you know, today what we do in the States is like 90 plus percent residential. And then in Canada, we're big industrial. We're it pretty much in Canada, big industrial. And we want to make sure that those contact relationships develop more internal growth business for both businesses. And that will happen, I'm very convinced.

Okay, that's useful. So it's more on the cross-selling side where you see the value add. And then just one last question. Just one last question in terms of like inflation and staff and wage pressures. I guess you've been through the worst of it by now, but are you still seeing any, like how's the labor market in terms of finding seasonal drivers? And can you just touch base on wages?

Yeah. Many times during COVID and during all the, a lot of people, you know, changing position these days, I have a lot of exposure on that, and I think we're lucky. I think we're lucky because we have over 85% of our employees are responding that we're at least 85% happy to work with us, the way we treat them, the way we communicate, the way we have them participate in the business. It's a very high-quality culture and values that we've built, and what we've learned from Citavis with the multi-time we met and traveled with them, it's the same. It's just the perfect fit on culture value, very human, and so we're lucky. And I always add to that from the truck drivers in our propane business, you know, they're a small truck, and the driver goes out during the day, does his thing, come back home. There's a ton of truck drivers that have larger truck and larger miles that they do, and they go away from home, which is much harder. So I wouldn't say it's easy, what our truck drivers do. Wintertime gets very rough many times in many areas. But we don't have real difficulty of finding good truck drivers. And once they work for us, I would call a lot of our employees our kind lifers. They're well-treated, they love to work, they're superior, appreciate our success and our communication style. It's really very proud and very pleased of the overall thousands of employees appreciate working here, and we want to treat them very well, and they deserve it.

Great. Thanks for the call, Luke.

All of our people.

One moment for our next question.

Our next question comes from the line of Steven Hansen from Raymond James. Your line is open.

Mr. Hansen.

Good morning, everyone. Just a quick one again to go back to Sotiris. The previous owner had been spending quite aggressively on the fleet to grow the top line, I think logically. If I'm not mistaken, that included a large inflow of new units in the back half of last year. You spoke briefly, Luca, earlier to the CapEx profile going forward, but I just wanted to get a sense for what kind of untapped utilization you have available today with the units that came in last year. How quickly do you need to replenish or add new units a year? And ultimately, what kind of organic growth do you think is sustainable over the next couple of years for the top line for this business or maybe from an EBITDA perspective? Thanks.

Yeah, and I'll be pleased that the next call I probably won't be here, but I'd be pleased that we could invite Curtis, who's the president and his team, so that they can answer a lot of those specific questions. So I think from organic growth, and correct me, Beth and Darren, if you think the number is not exactly what we've talked about, but we certainly think at least 10% growth a year, internal growth. I hope it could be more. From your first question on CapEx, I think we're continuing to spend as much as they spent in the past, if not more, with the $100 million in 2023. So I think we're not slowing down their progress and their opportunity to develop new business. If more cash flow comes in, I think we hopefully can push more their way, but for the moment, from a budget and where we stand today, it looks more like $100 million. Beth, anything else you think I missed?

Yeah, I mean, I think what I would add is, you know, along your question of for the new units that came in, whether they're being utilized and whether they're ramped up, I mean, the beauty of the business is that there's much more demand for mobile storage units than there is supply. So for those units, they're very quickly ramped being used to supply customers and, frankly, generating that EBITDA. So as you look at it, I think with that business, it's really more getting the MSUs produced, purchased, and then in they can quickly be generated to generate EBITDA. And so from that perspective, they would all be being utilized. And, again, from a sales perspective, there's more customers than there's MSUs.

that's great and maybe just a follow-up and maybe this is too far into the weeds for now but i'll just ask anyways just just around sort of the hub and spoke strategy as it relates to service are they in all the regions they need to be luke you'd reference some cross-selling earlier i'm just trying to get a sense for whether this is a density densification strategy at this point and you know ability to reap incremental high margin return opportunities as opposed to sort of greenfielding new hubs that might be a little bit less than you know, margin accretive, you know, where are they in that strategy, life set of evolution, I guess, thus far?

I'll answer from what we know, and I always preface those answers with next quarter, the real people that know it very well can answer more specifically. My understanding is there's such a growth in this industry and those three products that we talked about that they can supply, that the... the number of hubs will continue to grow and there'll be more. I think the intent is to have three to four more hubs every year. And if you look at, they've done a big study with McKinsey that shows the growth in those three products. And I won't give you the number because they're totally, there are billions and billions of growth in those industries. So they're in the best position in North America to be the one that grows most. with their position and their team that they built and the equipment they've already put in place. So I would say three to four hubs continuously for years to come and continue to grow. And I don't see that. If there's one thing and the result can help having a good year, I think they can grow more than 10%. We say that because we want to be conservative and not giving you other numbers than what we're sure about. But there's growth there that could be in the 15% a year for sure.

That's great. Appreciate the call, Art. Sounds like a great addition. Thanks.

And as a reminder, that's star 11 for questions. Star 11. One moment. And I'm not showing any further questions in the queue. I'd like to turn the call back over to Luke Desjardins, President and CEO, for closing remarks.

So I'll wrap up this call. I would like to take this opportunity to thank all of you for being there and for all the 12 years you've followed this company and many of you following us and supporting Superior. It has been a pleasure and a privilege to share with you this incredible journey of growth and the transformation of Superior, which we've gone through over the years. Many of you remember multi-business we have. Now we're focused in energy, big time, North America. I'm proud of all the employees and what's been accomplished. We have a super great management team. I'm confident that I'm leaving this company in an exceptional position to pursue its growth. I want to mention my appreciation to everyone, every stakeholder, team, employee, management, board, everybody that's really worked hard to make this situation happen over the years. And I really have told that to people internally in the last four or five months, and maybe more in the last three. With the Sotiris deal, when you think of our platform, the number of customers we have, which is in the millions, and then you think of Sotiris, what they bring as a new Entry with internal growth. I mean, I'm leaving this company and better shape than it was Even as we ended up just being in propane. It was good and we built and we improve every business 25% Now we're just going to the next level and this is the transformation that is happening and very very proud of everybody and very pleased that I'm leaving with this and new gain and new opportunity for super great Canadian company. So with that, I wish you all the best. Thank you for your support. And hopefully, the question was, Luke, you're retiring. I don't know what retiring is. I will not retire. I'll be working probably not at the same pace as a full CEO, but doing something of a scale to keep busy because I love business and it's my passion and in my life. So wish you all the best.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.