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SG

STAR GROUP, L.P. (SGU)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue declined 7.6% YoY to $488.1M as lower petroleum prices offset modest volume growth; diluted EPS rose to $0.79 on higher per‑gallon margins and a favorable $24.3M swing in derivative fair value, lifting net income to $32.9M .
  • Adjusted EBITDA increased 5.8% YoY to $51.9M, supported by recent acquisitions and improved service/installation profitability; base-business gallons fell, but per‑gallon margins expanded .
  • Management highlighted a colder start to Q2 (January ~20% colder YoY; ~7% colder vs normal), implying a favorable early-quarter demand backdrop; distribution maintained at $0.1725 per unit for the December quarter, paid Feb 5 .
  • Post-quarter, SGU closed a ~$68M acquisition that further strengthens propane presence in its footprint—an ongoing capital allocation lever alongside distribution decisions typically reviewed after heating season (April) .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA improved to $51.9M (+$2.8M YoY), driven by acquisitions and higher per‑gallon margins; service/installation gross profit improved to ~$6.9M from $4.4M YoY .
  • Volumes modestly higher: home heating oil/propane gallons +2.8% YoY to 82.4M; temperatures 4.1% colder YoY aided consumption; management noted better productivity and efficiency in the base business .
  • Strategic M&A momentum: completed ~$68M acquisition in January, strengthening propane presence and expanding scale within existing footprint .

What Went Wrong

  • Revenue fell 7.6% YoY to $488.1M, pressured by an 18.4% decline in wholesale product cost (−$0.4969/gal), which lowered selling prices despite volume gains .
  • Base-business volume softness: within the base, home heating oil/propane gallons decreased by 3.8M, partially offset by acquisitions; net customer additions remained “sluggish” in the quarter (warmer‑than‑normal backdrop) .
  • Working capital headwind typical of seasonality: net cash used in operating activities was $(64.6)M in Q1, reflecting receivables/inventory builds and lower customer credit balances QoQ .

Financial Results

Summary P&L and Margins vs Prior Two Quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($M)$331.64 $240.33 $488.06
Net Income ($M)$(11.04) $(35.09) $32.88
Diluted EPS ($)$(0.31) $(1.00) $0.79
EBIT/Operating Income ($M)$(12.29) $(48.56) $49.22
EBITDA ($M)$(5.05) $(40.44) $57.12
Net Income Margin (%)−3.3% −14.6% 6.7%
EBIT Margin (%)−3.7% −20.2% 10.1%
EBITDA Margin (%)−1.5% −16.8% 11.7%

Notes: Margin percentages calculated from cited revenue and profit figures.

Q1 2025 vs Q1 2024 (YoY)

MetricQ1 2024Q1 2025YoY Δ
Revenue ($M)$528.10 $488.06 −7.6%
Net Income ($M)$12.98 $32.88 +$19.90
Diluted EPS ($)$0.32 $0.79 +$0.47
Adjusted EBITDA ($M)$49.04 $51.86 +$2.82
HH Oil & Propane Gallons (M)80.1 82.4 +2.3

Segment/Revenue Mix and KPIs

MetricQ1 2024Q1 2025
Product Sales ($M)$448.55 $399.46
Installations & Services ($M)$79.55 $88.60
HH Oil & Propane Gallons (M)80.1 82.4
Other Petroleum Products (M gallons)32.4 30.7
Total All Products (M gallons)112.5 113.1
Temperatures vs PY—4.1% colder YoY
Temperatures vs Normal—10.5% warmer than normal
Product Gross Profit ($M)~145.4 (derived)~151.0
Service & Installation Gross Profit ($M)$4.4 $6.9
Change in Derivative FV ($M)$(19.0) +$5.3 (credit)

Notes: Product gross profit Q1 2025 from CFO commentary; prior-year product gross profit approximated by subtracting costs from revenue; derivative fair value change per income statement (credit negative line item) .

Cash Flow and Balance Sheet Snapshot (Q1 2025)

  • Net cash used in operating activities: $(64.6)M; investing: $(4.7)M; financing: +$0.7M .
  • Cash and cash equivalents: $48.8M; Long-term debt: $182.7M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Financial GuidanceFY25None issuedNone issuedMaintained (no formal guidance)
Distribution per Common UnitQ1 FY25 (Dec quarter)$0.1725$0.1725 (record 1/27; paid 2/5)Maintained
Operating Environment (Weather)Q2 FY25 to date—January ~20% colder YoY; ~7% colder vs normalPositive backdrop commentary
M&A ExecutionPost Q1 close—~$68M deal completed (Jan 10)Strategic capacity expanded

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 FY24; Q-1: Q4 FY24)Current Period (Q1 FY25)Trend
Weather/SeasonalityQ3: 25% volume uplift but still warmer than normal; Q4: loss quarter ahead of heating season Colder YoY in Q1; early Q2 notably colder, supportive of demand Improving seasonal tailwind
Pricing/Wholesale CostsQ3: Higher selling prices; Q4: lower selling prices and derivative headwind Selling prices down with −$0.4969/gal wholesale cost; derivative became a credit Price headwind easing; derivative swing favorable
Service & Installation MixQ3/Q4: rising services revenue/profitability $6.9M gross profit vs $4.4M prior; base productivity initiatives Structural improvement
AcquisitionsQ3: announced definitive agreement; Q4: continued focus Closed ~$68M acquisition; propane presence strengthened Active, accretive
Customer Churn/RetentionQ3: net attrition stable to improving; Q4: FY net attrition 4.2% Losses “in check”; gains sluggish; January showing rebound Stabilizing with early-Q2 improvement
Capital AllocationOngoing cost control, eyeing acquisitions Distribution reviewed post-heating season; weigh M&A vs buybacks Balanced, flexible

Management Commentary

  • “The first quarter was a busy one for Star due to acquisition-related activities combined with slightly colder temperatures… we continued to improve the performance and contribution of our service and installation business.” — Jeff Woosnam, CEO .
  • “January finished 20% colder than last year and 7% colder than normal… our employees have been working tirelessly to keep pace with the added demand.” — Jeff Woosnam, CEO .
  • “Product gross profit increased by $5.6 million… we realized a combined gross profit from service and installation of $6.9 million vs $4.4 million in the prior year.” — Rich Ambury, CFO .
  • “We completed a sizable strategic acquisition after the quarter ended… further strengthened our propane presence.” — Jeff Woosnam, CEO .

Q&A Highlights

  • Service/installation drivers: Improvement reflects both recent acquisitions and base-business productivity initiatives, alongside cross-sell programs to existing customers .
  • Customer credit: No notable deterioration; lower product costs reduced customer bills despite slightly colder weather and higher volumes .
  • Capital allocation: Board typically reviews distribution after heating season; balancing “replacement” acquisitions, growth M&A, and unit repurchases based on returns and timing .
  • Customer churn: Losses “in check,” one of better quarters in years on a gross loss basis; new customer additions were sluggish in Q1 but rebounded in cold January .

Estimates Context

  • S&P Global consensus estimates for Q1 FY25 could not be retrieved at time of analysis due to provider rate limits; therefore, we cannot present beat/miss vs consensus for revenue/EPS/EBITDA. Values retrieved from S&P Global were unavailable at the time of this analysis.

Key Takeaways for Investors

  • Mix/resiliency: Despite a 7.6% revenue decline from pricing, SGU grew Adjusted EBITDA and EPS via higher per‑gallon margins, improved service/installation profitability, and acquisition contributions—a pattern supportive of operating leverage into peak heating months .
  • Weather tailwind entering Q2: Early-quarter colder temperatures offer a near-term catalyst for volumes and fixed-cost absorption in the core business .
  • Strategic M&A execution: The ~$68M acquisition deepens propane exposure and scale within the footprint; integration should underpin margins and EBITDA in coming quarters .
  • Base-business focus: Management’s productivity push is appearing in stable branch/G&A in the base and improved service margins; monitoring customer additions remains key as warmer-than-normal periods can slow gross adds .
  • Derivative volatility: The quarter benefited from a favorable swing in derivative fair value (credit vs prior charge); underlying cash trends still reflect seasonal working capital build, so watch Q2 cash conversion .
  • Capital returns: Distribution held at $0.1725 per unit for the December quarter; Board to reassess post-heating season, balancing unit repurchases and growth M&A based on returns .
  • Risk watchlist: Warmer-than-normal weather, ongoing net attrition, and wholesale cost swings remain the core variables for volumes, pricing, and margins .