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Date
Aug. 7, 2025 at 3 p.m. ET
Call participants
President and Chief Executive Officer — Jeff Woosnam
Chief Financial Officer — Rich Ambury
Investor Relations Adviser — Chris Witty
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Risks
Rich Ambury reported, "product gross profit decreased by $3,000,000 or 4% to $72,000,000 due to both lower home heating oil and propane volumes sold, as well as lower per gallon margins driven in part by the mix of volume associated with recent acquisitions."
Net loss (GAAP) increased by $5,600,000 to $16,600,000 for the fiscal third quarter ended June 30, 2025, reflecting a $6,500,000 increase in adjusted EBITDA loss, higher depreciation and amortization, and increased acquisition-related financing costs.
Delivery, branch, and G&A expenses rose by $4,300,000 year over year, "reflecting additional operating costs associated with acquisitions of $5,800,000, partially offset by lower costs in the base business of $1,500,000, or approximately 1.6%."
Takeaways
Home heating oil and propane volume-- Decreased by 1,500,000 gallons, or 3.8%, to 36,000,000 gallons, as additional volume from acquisitions was more than offset by warmer weather and net customer attrition.
Temperature impact-- Temperatures were 2% warmer than the prior year and nearly 20% above normal for the non-heating season period.
Product gross profit-- Decreased by $3,000,000, or 4%, to $72,000,000, driven by lower sales volume and lower per-gallon margins from the recent acquisition mix.
Service and installation gross profit-- Increased by $600,000 to $14,000,000, attributed to operational focus on improved service and cost controls.
Expenses-- Delivery, branch, and G&A expenses grew $4,300,000, with $5,800,000 from acquisitions, offset by a $1,500,000 base business cost reduction.
Depreciation and amortization-- Increased $2,000,000 over the prior year's quarter, mainly due to the impact of recent acquisitions.
Net loss-- Reached a net loss (GAAP) of $16,600,000. Net loss increased by $5,600,000 compared to the prior year period, reflecting increased adjusted EBITDA loss, higher non-cash expenses, and elevated acquisition-related financing costs.
Adjusted EBITDA loss-- Adjusted EBITDA loss increased by $6,500,000 to $10,600,000, as base business volume and margins declined, despite positive contribution from acquisitions.
Acquisition activity-- Four acquisitions closed in the fiscal year, including a sizable propane deal, with ongoing active deal pipeline.
Operational initiatives-- Management emphasized investments in sales and technical training, and continued expansion of HVAC offerings beyond the traditional customer base.
AI adoption-- CEO Jeff Woosnam stated the company has instituted artificial intelligence in its customer interface, while prioritizing a service-first philosophy and balancing technology with human interaction.
Summary
The company's home heating oil and propane volume increased by 28,000,000 gallons, or 12%, to 263,000,000 gallons for the first nine months of fiscal year 2025, reflecting colder temperatures and acquisitions more than offsetting customer attrition. Product gross profit rose 13% to $480,000,000 because of higher sales volume, improved per-gallon margins, and gross profit contributions from other petroleum products. Adjusted EBITDA rose by $20,000,000 to $170,000,000, benefiting from a $21,000,000 increase in adjusted EBITDA in the base business and a $17,000,000 increase from acquisitions, partially offset by a $10,600,000 increased weather hedge expense. Net income (GAAP) reached $102,000,000, driven by the rise in adjusted EBITDA and a $20,000,000 favorable non-cash change in derivative fair value, despite a higher $12,000,000 income tax expense. Expenses related to delivery, branch, and G&A rose by $31,500,000, with acquisitions and the weather hedge program comprising most of the increase.
Gross profit from service and installation improved by $4,800,000, split between $2,700,000 from acquisitions and $2,100,000 from internal initiatives.
Depreciation and amortization increased by $2,600,000, and net interest expense rose by $1,400,000, both largely attributed to acquisitions.
Management said, "we are positioning Star as a fully diversified energy provider that over time will be more resilient and adaptable to varied weather conditions."
Industry glossary
Weather hedge: A financial contract used by energy companies to mitigate the earnings impact of atypical weather patterns affecting fuel sales volume.
Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring or non-operational items, used to assess core operating performance.
Full Conference Call Transcript
Operator: Good day and welcome to the Star Group Fiscal 2025 Third Quarter Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, the Investor Relations Adviser. Please go ahead.
Chris Witty: Thank you, and good morning. With me on the call today are Jeff Woosnam, President and Chief Executive Officer, and Rich Ambury, Chief Financial Officer. I would now like to provide a brief Safe Harbor statement. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements.
Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call, the company's annual report on Form 10-Ks for the fiscal year ended 09/30/2024, and the company's other filings with the SEC. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements.
Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this conference call. I'd now like to turn the call over to Jeff Woosnam. Jeff?
Jeff Woosnam: Thanks, Chris, and good morning, everyone. Thank you for joining us to discuss our third quarter and fiscal year-to-date results. While outside of our core heating season, the third quarter was still negatively impacted by lower volume due to slightly warmer temperatures than last year, along with net customer attrition and other factors. That said, we were pleased with our continued improvement in service and installation performance. Adjusted EBITDA from recent acquisitions positively contributed to the quarter as well as the year-to-date period. We believe we are on track for strong financial performance in fiscal 2025. As I've shared on previous calls, we are dedicated to providing our customers with superior service to improve retention and drive additional revenues.
Consistent with that objective, we continue to look at ways to sell more value-added products and services to our existing customers while also expanding HVAC offerings in select markets beyond our traditional heating oil and propane account base to gain access to a larger audience. To support this initiative, we have made an investment in additional training for our sales and technical teams. Fundamentally, Star is a service provider, and any effort to improve what truly differentiates us from our competition is a sound investment. We are pleased with the way our team has responded and become engaged in what we are trying to accomplish.
And although there is so much work to be done, I'm encouraged with our progress to date. As we pursue a strategy that includes growing our heating oil and propane customer base through acquisitions, while at the same time improving service and installation profitability, we believe we are positioning Star as a fully diversified energy provider that over time will be more resilient and adaptable to varied weather conditions. With that, I'll turn the call over to Rich to provide additional comments on the quarter's results.
Rich Ambury: Thanks, Jeff, and good morning, everyone. For the third quarter, our home heating oil and propane volume decreased by 1,500,000 gallons, 3.8%, to 36,000,000 gallons as the additional volume provided from acquisitions was more than offset by warmer weather, net customer attrition, and other factors. In terms of weather conditions, temperatures for the fiscal 2025 third quarter were 2% warmer than last year and almost 20% warmer than normal during this non-heating season period. Our product gross profit decreased by $3,000,000 or 4% to $72,000,000 due to both lower home heating oil and propane volumes sold as well as lower per gallon margins driven in part by the mix of volume associated with recent acquisitions.
We realized a combined gross profit from service and installation of $14,000,000 or $600,000 higher than the prior year's comparable quarter as we continue to focus on improving service and controlling expenses. Delivery, branch, and G&A expenses increased by $4,300,000 year over year, reflecting additional operating costs associated with acquisitions of $5,800,000, partially offset by lower costs in the base business of $1,500,000 or approximately 1.6%. Depreciation and amortization rose by $2,000,000, and net interest expense increased by about $1,000,000 year over year. These changes were largely due to the impact of recent acquisitions.
We posted a net loss of $16,600,000 in 2025, or $5,600,000 more than the prior year period, reflecting a $6,500,000 increase in our adjusted EBITDA loss, higher depreciation and amortization expense of $2,000,000, and higher acquisition-related financing costs of $1,000,000, partially offset by a $2,300,000 greater income tax benefit and a non-cash favorable change in the fair value of derivative instruments of $1,600,000. The adjusted EBITDA loss increased by $6,500,000 to $10,600,000 as the additional positive adjusted EBITDA from acquisitions and lower operating costs in the base business was more than offset by lower home heating oil and propane volumes in the base business and slightly lower per gallon home heating oil and propane per gallon margins.
The positive adjusted EBITDA realized from acquisitions during this historical loss quarter was due in part to our recent propane acquisition. Now turning to the results for the first nine months of fiscal 2025. Our home heating oil and propane volume increased by 28,000,000 gallons or 12% to 263,000,000 gallons, reflecting colder temperatures and the additional volume provided from acquisitions more than offsetting net customer attrition and other factors. Temperatures in our geographic areas of operation fiscal year-to-date were 8% colder than the prior year period but still 8% warmer than normal.
Our product gross profit rose by $55,000,000, 13%, to $480,000,000 due to an increase in the volume of home heating oil and propane sold, higher home heating oil and propane per gallon margins, and a slight increase in gross profit from other petroleum products. As previously mentioned on prior calls, we've successfully improved our service and installation business, which contributed to an increase in gross profit of $4,800,000 year-to-date, with $2,700,000 attributable to acquisitions and $2,100,000 due to initiatives in the base business. Delivery, branch, and G&A expenses rose by $31,500,000 year over year, of which $10,600,000 was attributable to our weather hedging program.
As a reminder, in fiscal 2025, we recorded an expense of $3,100,000 under our weather hedge compared to a benefit of $7,500,000 recorded in fiscal 2024, reflecting weather conditions in both periods. Aside from this, recent acquisitions accounted for an increase in expenses of $18,700,000 year over year, while expenses in the base business rose by just $2,200,000 or 0%. Depreciation and amortization rose by $2,600,000, and net interest expense increased by $1,400,000. These changes were largely attributable to the impact of recent acquisitions.
We posted net income of $102,000,000 year-to-date, or $32,000,000 in the prior year period, largely due to an increase in adjusted EBITDA of $28,000,000 and a non-cash favorable change in the fair value of derivative instruments of $20,000,000, more than offsetting higher income tax expense of $12,000,000 and other factors. Adjusted EBITDA rose by $20,000,000 to $170,000,000, primarily due to a $21,000,000 increase in adjusted EBITDA in the base business and a $17,000,000 increase in adjusted EBITDA from acquisitions, partially offsetting a $10,600,000 increase in expense relating to the company's weather hedge contracts, which apply to both the base business and the recent acquisitions, as I just previously discussed.
And with that, I'd like to turn the call back to Jeff.
Jeff Woosnam: Thanks, Rich. At this time, we're pleased to address any questions you may have. Chad, please open the phone lines for questions.
Operator: Thank you. We will now begin our question and answer session. And our question is from Michael Prouting from Ten Ks Capital. Please go ahead.
Michael Prouting: Just a couple of questions. Firstly, Jeff, I was wondering if you could update us on the acquisition pipeline. And then secondly, I just thought I'd have to ask a question, but curious as to whether you see any applications for AI in the business. It seems like the obvious would be customer service. But just kind of curious to get your feedback on that. Thanks.
Jeff Woosnam: You bet, Michael. So in terms of active acquisitions, obviously, we've closed on four transactions so far this fiscal year. Our last one was in April. The team remains very busy with opportunities. We just, you know, never know how that's gonna end up coming out, but we're extremely pleased with what we've had in our pipeline, what we've been able to close. Over the last fourteen months, some sizable deals, and again, we just continue to push forward. There's plenty of activity in the marketplace right now. In terms of AI, yeah, we have certainly instituted some of that technology into our customer interface.
You know, the one thing we always want to keep in mind is we want to remember that, you know, we're a service business first. And to the degree that AI can assist with that and allow us to serve our customers in a way that they prefer, but we always like and prefer that, you know, that personal touch and allowing them to be able to talk to an employee that can provide them, you know, appropriate assistance and, you know, a comfort level that we're gonna react and respond as they need us to. So we always have to kind of strike that balance, but there's certainly opportunity there for us in the future.
Michael Prouting: Okay. Great. Yeah. Thanks for the updates. And you know, definitely hear what you're saying as far as the human touch. So, yep, thanks for the updates.
Operator: You bet. And as a final reminder, if you'd like...
Operator: And at this time, there appears to be no further questions. So I'd like to return the conference to Mr. Woosnam for any closing remarks.
Jeff Woosnam: Well, thank you for taking the time to join us today. For your ongoing interest in Star Group. We look forward to sharing our 2025 fiscal fourth quarter results in December. Thanks, everyone.
Operator: And thank you, sir. The conference has now concluded. Thank you for joining today's presentation. You may now disconnect.