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Q1 2024 Ferrellgas Partners LP Earnings Call

Participants

Tamria A. Zertuche; President & CEO; Ferrellgas Partners, L.P.

Michael E. Cole; CFO; Ferrellgas Partners, L.P.

Presentation

Operator

Good day, and thank you for standing by, and welcome to the Ferrellgas Partners First Quarter Fiscal 2024 earnings conference call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tamria A. Zertuchei, Chief Executive Officer, and President of Ferrellgas. Please go ahead.

Tamria A. Zertuche

Welcome to our First Quarter Fiscal 2024 for earnings call. My name is Tamria A. Zertuchei, and I am the Chief Executive Officer and President of Ferrellgas. It is a privilege for me to represent the employee owners of Ferrellgas and their great work on this call today. Our full focus for the quarter was activities in support of exciting key growth initiatives and preparation for our core business peak season ahead.
In the first quarter, our Blue Rhino brand, the nation's number one brand in tank exchange, increased capacity in its production facilities by between 15% and 20% for supportive volume growth related to new and existing customers. Additionally, we made investments in the fleet distribution yards and micro-fulfillment centers, which will help in increasing throughput, which we measure as cylinders per hour and decreasing overall freight costs.
Our strategic initiatives in the retail business have been highlighted in our results over the past three years and no different for this quarter. The activities our teams executed in the first quarter. They place us perfectly for our peak logistics season ahead. Our employee owners delivered the infrastructure changes and resources needed to meet the Company's strategic growth goals. I could not be more proud of how our sales teams, our customer service representatives, managers, and our drivers across the country helped to deliver results each and every day.
I will now turn the floor over to our Chief Financial Officer, Mike Cole, to go over the financial results for the quarter. Mike?

Michael E. Cole

Thank you, Miles, and thank you all for joining us on today's call. I'd like to remind everyone that some statements made during this call may be considered forward looking and that various risks, uncertainties and other factors could cause actual performance to differ materially from anticipated performance. These factors are discussed in our Form 10-K filed on September 29th, 2023, and other documents filed from time to time with the Securities and Exchange Commission. Additionally, we note that the purpose of this call is to discuss the results of our operations for the first fiscal quarter ended October 31st, 2023.
I'll now get into our consolidated results. Wholesale propane prices during the first quarter 2024 were much lower relative to prices in the prior year period, and this led to a decrease in our revenues and cost of sales. Revenues were $42.3 million lower, which was largely offset by a decrease of $41.2 million in cost of product as compared to the prior year period. As a result, gross profit decreased $1 million or 0.5% for the first fiscal quarter 2024 compared to the prior year period. Our wholesale product sales price per gallon, partially correlates to the change in the wholesale market price of propane. The wholesale market price at our two major supply points averaged 28.6% and 30.6% less in the first fiscal quarter of 2024 compared to the prior year period. As previously noted, these decreases impacted both the revenue and cost of product changes for the period, margin per gallon was flat at $1.20 per gallon. For both periods, we recognized a net loss attributable to Ferrellgas Partners LP of $17.5 million and $4.5 million in the first fiscal quarter of 2024 and 2023, respectively. Operating expense as a percent of total revenue increased $14.9 million or 11% for the first fiscal quarter, primarily due to an increase of $5 million from the company, increasing personnel for growth projects, including increased acquisitions in the expansion by Blue Rhino into both self-service vending and new customer growth. In addition to $3 million related to the timing of benefit payments, the remainder of the increase in operating expense was primarily driven by a $3.9 million increase in vehicle costs as trucks were refurbished to support new customer growth in blue BlueLine. The Company is also in the midst of an ERP implementation and other IT system upgrades. These investments in technology are designed to improve our processes and ultimately the customer experience as a data driven logistics company. This is just another facet to our long term strategic initiatives, focusing on strategic growth, operational excellence and leveraging technology. Adjusted EBITDA, a non GAAP financial measure decreased by $16.8 million or 34% to $32.9 million in the first fiscal quarter compared to $49.7 million in the prior year quarter. The change was primarily due to the $13 million increase in net loss attributable to Ferrellgas Partners LP, as noted previously, and a $3.9 million EBITDA adjustment for legal fees related to non-core businesses I'll now turn the call back to Tamara for an operational update.

Tamria A. Zertuche

Thank you, Michael. And in addition to my opening statements, I want to highlight that in the first fiscal quarter Ferrellgas employee owners were very active at the state and national levels, working with various associations to carry the positive message of propane propane, which is clean. It's portable, affordable, abundant notice this great energy provides benefits to millions of customers across the United States and Ferrellgas will remain active in the state and national associations. We also partnered with operation warm again, a national nonprofit organization that provides new coats and shoes for children in need across the country. We are in our 3rd year of this partnership now as a company that supplies propane to heat millions of American Homes supporting operation and warm it's a natural fit for us. Every child deserves to feel warm and safe. And I think this truly makes a difference for so many children. It's just one more way that Ferrellgas fuels life simply for families. We are proud to support our employee owners and their families and very, very proud of this one for the third consecutive year, Ferrellgas has elected to absorb all additional costs and not pass on the increased cost of benefits to our employees. We invest in our workforce and just like Mike spoke about above in terms of our investment in technology, this is the way in which we invest in our workforce so that they can deliver results and in the end, their work it benefits our customers, which is our primary focus. We did receive some questions in our Investor Relations mailbox, and I'm going to turn it back to Mike, so that he can talk through a couple of those.

Michael E. Cole

Thank you, Tamara. One of the questions that we've been asked is has anything fundamentally changed with your business operations to impact EBITDA, there have been no fundamental changes to our business operations.
There are a couple of key takeaways from our financial results from this fiscal quarter. First, in this fiscal quarter, there were fewer heating degree days versus prior year period, yet our volumes and margins remained relatively flat. This is a testament to the performance of our sales and pricing teams and the benefits of our operational and geographical diversification we believe are diversification. Geographic tank exchange and customer segments within our retail operations reduces our dependency on cold winters and propane heating for financial performance.
The second key takeaway is that our expenses were higher relative to the prior period, which was which has been addressed in our earlier comments. Some of the increases in expenses were attributable to specific actions taken to better position the Company to execute on its growth initiatives and market opportunities. It is important to note that these expenses are largely within management's control and were not unexpected outcomes from our financial performance. We will continue to be diligent in managing our expenses while continuing to provide quality service at a competitive price. This will help ensure satisfied customers and continued financial performance.
Another question we continue to get relates to our capital structure and the path forward specifically relating to our Class B units. We will continue to analyze our capital structure to identify the best path forward. The Class B units represent our highest cost of capital, and as a result, we continue to evaluate alternative approaches that help reduce our costs. There have been no changes to our capital structure at this time that we could publicly disclose, and we'll continue to update the public when appropriate on any forthcoming changes to the capital structure that are all the questions that we have received. And Tamara, I'll turn the call back to you.

Tamria A. Zertuche

Thank you, Mike. This was an exciting first quarter, we were very focused on our growth initiatives and all of the outcomes that they will provide. But this time I will now turn the call back to our moderator. But before I do that, as mentioned in the announcement for this call, any additional questions may be submitted via our Investor Relations e-mail box at investor relations at Ferrellgas.com. Thank you all for joining.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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