Suburban Propane Partners, L.P. Common Units (SPH) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings report shows a mix of positive and negative factors. While there are strong financial metrics, including increased EBITDA and net income, concerns arise from weather-related challenges, increased operating expenses, and commodity price volatility. The absence of questions in the Q&A session suggests no major concerns from analysts. Despite strong distribution coverage, increased borrowing raises financial risk. The company's strategic investments in RNG and renewable energy are positive but come with execution risks. Considering the market cap, the stock is likely to remain stable, resulting in a neutral stock price prediction over the next two weeks.
Key Financial Performance
Adjusted EBITDA $83.4 million, an increase of $8.1 million or 10.8% compared to the prior year. The increase was driven by higher propane volumes sold, coupled with an increase in propane unit margins of $0.08 per gallon or 4%, and to a lesser extent, higher contribution from RNG operations due to increased RNG injection.
Net Income $46.6 million or $0.70 per common unit compared to $38 million or $0.59 per common unit in the prior year. The increase was attributed to higher propane volumes sold and improved margins.
Retail Propane Gallons Sold 110.2 million gallons for the first quarter, an increase of 4.2% compared to the prior year. The increase was driven by colder temperatures across much of the eastern half of the U.S., positive contributions from organic customer base growth, and recent propane acquisitions.
Total Gross Margin $238.6 million, an increase of $16.1 million or 7.2% compared to the prior year. The improvement was driven by higher propane volumes sold, an increase in propane unit margins, and higher contribution from RNG operations.
Operating and G&A Expenses Increased by $5 million or 3.4% compared to the prior year. The increase was primarily due to higher payroll and benefit-related costs, overtime, and other variable operating costs to support increased activities associated with incremental customer demand, plus higher variable compensation expense associated with the increase in earnings.
Average Wholesale Propane Prices $0.66 per gallon, representing a 14% decrease compared to the prior year first quarter. This was influenced by higher U.S. propane inventories, which were 34% higher than a year ago and 28% above historical averages for this time of the year.
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Operating Highlights
Renewable Natural Gas (RNG) Operations: Average daily RNG injection increased year-over-year due to operational enhancements at the Stanfield, Arizona facility. Commissioning of a new anaerobic digester facility in Upstate New York began in December 2025, and progress was made on gas upgrade equipment at the Columbus, Ohio facility. RNG injection is scheduled to begin in the second half of the fiscal year.
Propane Business Expansion: Acquired two propane businesses in California for $24 million, contributing to customer base growth and increased propane volumes.
Operational Performance: Colder weather in the eastern U.S. boosted heat-related demand, leading to a 4.2% increase in propane volumes sold and an 11% increase in adjusted EBITDA compared to the prior year. Operational teams managed harsh weather conditions effectively.
Financial Metrics: Net income for the first quarter was $46.6 million, up from $38 million in the prior year. Adjusted EBITDA increased by $8.1 million to $83.4 million. Retail propane gallons sold totaled 110.2 million gallons, a 4.2% increase year-over-year.
Strategic Investments: Invested $7 million in growth capital expenditures during the quarter, focusing on RNG projects. Refinanced 2027 senior notes at an attractive rate with a 10-year maturity to maintain financial flexibility.
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Risk or Challenges
Weather-related challenges: Harsh weather conditions in the Northeast, Mid-Atlantic, and Midwest have posed operational challenges for the company's personnel, potentially impacting service delivery and operational efficiency.
Geographic temperature disparities: Warmer-than-normal temperatures in the western U.S. have offset heat-related demand increases in the eastern regions, creating uneven demand patterns that could affect overall performance.
Commodity price volatility: Wholesale propane prices have decreased by 14% compared to the prior year, which could impact revenue and profit margins.
Increased operating expenses: Higher payroll, benefits, overtime, and variable operating costs have increased expenses, potentially affecting profitability.
Leverage and borrowing: The company borrowed $115.4 million under its revolving credit facility to meet seasonal working capital needs, which could increase financial risk if cash flows do not materialize as expected.
RNG project execution risks: The company is investing heavily in renewable natural gas (RNG) projects, with significant capital expenditures planned. Delays or issues in project execution could impact financial returns and strategic objectives.
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Guidance & Outlook
RNG Capital Projects: The RNG capital projects are on track for completion towards the end of the second fiscal quarter with RNG injection scheduled to begin in the second half of the fiscal year.
Growth Capital Expenditures: Investing nearly $7 million in growth CapEx in the quarter, with full-year capital spending estimate for RNG projects remaining unchanged at $30 million to $35 million, concentrated in the first and second quarters.
Strategic Growth Plans: The company remains committed to growing its core propane business while leveraging its competencies to expand markets for alternative, lower carbon renewable fuels.
Balance Sheet and Financial Flexibility: The company plans to utilize excess cash flows to strengthen the balance sheet and fund strategic growth opportunities, with ample borrowing capacity under its revolver to support growth capital and strategic initiatives.
Distribution Coverage: Quarterly distribution declared at $0.325 per common unit, equating to an annualized rate of $1.30 per common unit, with a strong distribution coverage of 2.19x for the trailing 12-month period ended December 2025.
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Shareholder Return Plan
Quarterly Distribution: The Board of Supervisors declared a quarterly distribution of $0.325 per common unit for the first quarter of fiscal 2026, equating to an annualized rate of $1.30 per common unit. The distribution will be paid on February 10 to unitholders of record as of February 3.
Distribution Coverage: The distribution coverage ratio remains strong at 2.19x for the trailing 12-month period ended December 2025.
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Key Q&A
Q:Were there any questions asked during the Q&A session?
A:No, there were no questions in the queue during the Q&A session.
Q:Review of Unclear Management Responses
A:There were no questions asked during the Q&A session, so management did not have the opportunity to avoid or provide unclear answers.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Atlantic Midwest
BDC Suburban
California capital
Capital BDC
East inventory
Financial Instructions
Golub Capital
Great Vice
Helene Southeast
Helene personnel
Hurricane Helene
Instructions pleasure
Mid Atlantic
Midwest territory
Northeast Mid
Ohio RNG
Partners Financial
President statement
Propane Partners
RNG project
Suburban Propane
capital need
conference today
contribution
customer base
digester facility
income unit
increase propane
month period
note
price gallon
start
temperature West
volume increase
SPH Transcript
Suburban Propane Partners, L.P. Common Units (SPH) Q1 2026 Earnings Call Transcript
Unknown2-5
The earnings report shows a mix of positive and negative factors. While there are strong financial metrics, including increased EBITDA and net income, concerns arise from weather-related challenges, increased operating expenses, and commodity price volatility. The absence of questions in the Q&A session suggests no major concerns from analysts. Despite strong distribution coverage, increased borrowing raises financial risk. The company's strategic investments in RNG and renewable energy are positive but come with execution risks. Considering the market cap, the stock is likely to remain stable, resulting in a neutral stock price prediction over the next two weeks.
Suburban Propane Partners, L.P. Common Units (SPH) Q4 2025 Earnings Call Prepared Remarks Transcript
Unknown11-13
The earnings call presents a mix of positive and negative factors. While there are strong financial metrics such as increased propane volumes, EBITDA, and net income, there are concerns about higher operating costs, regulatory risks, and a high leverage ratio. The Q&A section does not provide additional clarity or sentiment change. Given the company's market cap, the stock price is likely to remain stable, resulting in a neutral prediction for the next two weeks.
Suburban Propane Partners, L.P. Common Units (SPH) Q3 2025 Earnings Call Transcript
Unknown8-7
The earnings call presents a mixed outlook. While propane volumes and adjusted EBITDA remain stable, challenges such as unseasonably warm temperatures, volatility in propane prices, and operational downtime in RNG facilities raise concerns. The net loss has increased, and uncertainties in regulatory credits persist. However, strategic growth plans, such as acquisitions and partnerships, provide some optimism. The market cap suggests moderate sensitivity to these factors. Overall, the balance of positive and negative aspects leads to a neutral sentiment, with potential for slight stock price movement within the -2% to 2% range.
Suburban Propane Partners, L.P. Common Units (SPH) Q2 2025 Earnings Call Transcript
Unknown5-8
The earnings call presents a mixed outlook. Financial performance shows growth in EBITDA and net income, but challenges exist in RNG production and competitive pressures. The Q&A reveals management's confidence in propane supply and M&A opportunities, but lacks clarity on regulatory impacts. Despite positive distribution coverage and leverage improvements, uncertainties in RNG market and supply chain may offset gains. With a market cap of $1.2 billion, the stock's reaction is likely muted, resulting in a neutral sentiment.
SPH Report
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