Suburban Propane's Q4 2025 Earnings Call: Contradictions Emerge on Propane Demand, Insurance Recovery, and Debt Management Strategies

Date of Call: November 13, 2025

Financials Results

• EPS: $1.97 per Common Unit for fiscal 2025, compared to $1.68 prior year; Q4 net loss $0.54 per Common Unit (flat vs prior year)
• Gross Margin: $866.4M for fiscal 2025, up $46.8M or 5.7% YOY

Guidance:

• Propane capital spending for fiscal 2026 expected to be $40M–$45M.
• RNG project capital spending expected to be $30M–$35M, concentrated in H1 FY2026.
• Upstate NY RNG facility expected to qualify for a 30% investment tax credit, equating to ~$7M–$9M of credits when placed in service.
• Management expects ample revolver capacity to fund planned projects and strategic growth.

Business Commentary:

* Propane Volume and Revenue Growth: - Suburban Propane reported a nearly 6% increase in propane volumes for fiscal 2025 compared to the prior year, leading to a $28 million or 11.2% increase in adjusted EBITDA. - The growth was driven by strong propane demand due to normal winter weather during critical months, hurricanes in the Southeast, and successful acquisitions.

• Profitability and Financial Performance:
• Net income for fiscal 2025 was $128.4 million or $1.97 per Common Unit, up from $107.7 million or $1.68 per Common Unit in the prior year.

• This improvement was due to effective margin management during rising commodity prices, good expense discipline, and strategic acquisitions.

• Slide into Renewable Energy and Strategic Acquisitions:

• Suburban Propane invested $25 million in growth projects for their RNG business, secured incremental supply of renewable propane, and surpassed 2 million gallons of renewable propane sales.

• These initiatives and strategic acquisitions, such as the $53 million purchase of a propane business in the Southwest, are aimed at expanding their presence in renewable energy and growing their core propane business.

• Capital Expenditures and Financial Flexibility:

• Total capital spending for fiscal 2025 was $72 million, with plans to qualify $7 million to $9 million of tax credits under the Inflation Reduction Act.

• The company used excess cash flows and proceeds from an At-the-Market equity program to support growth and debt reduction, ending the year with a leverage ratio of 4.29x, a significant improvement from 4.76x the previous year.

• Technological Modernization and Customer Service:

• Suburban Propane launched a multiyear technology modernization initiative and invested in a sales and business development team focused on propane verticals with less weather sensitivity.
• These investments aimed to simplify operations, consolidate systems, and improve tools for serving customers, enhancing their hyperlocal business model.

Sentiment Analysis:

Overall Tone: Positive

• Management called fiscal 2025 "another outstanding year"; adjusted EBITDA rose $28M (11.2%); retail propane volumes +5.9% YOY; gross margin $866.4M (+5.7% YOY); consolidated leverage improved to 4.29x from 4.76x; executed acquisitions and ATM raises to fund growth.

Contradiction Point 1

Propane Demand and Strategic Acquisitions

It involves differences in the reported drivers for propane demand and the impact of strategic acquisitions, which are critical for understanding company performance and growth strategies.

Can you provide an overview of fiscal 2025 results and the business outlook? - A. D'Ambrosio (Suburban Propane)

20251113-2025 Q4: Fiscal 2025 was another outstanding year for Suburban Propane. Propane demand was strong due to normal winter weather, increased demand in Southeast operations, and acquisitions. - Michael A. Stivala(CEO)

Have there been any recent M&A transactions or developments at Suburban? - Christopher Francis Jeffrey (Mizuho Securities USA LLC, Research Division)

2025Q3: During the second quarter, we completed the heavily accretive acquisition of a propane distribution business in Ohio, which is expected to generate annualized synergies of approximately $3 million. - Michael A. Stivala(CEO)

Contradiction Point 2

Insurance Recovery and Inflation Expectations

It involves the impact of insurance recovery on financial results and expectations for future inflation, which are crucial for financial planning and forecasting.

What are the fiscal 2025 results and business outlook? - A. D'Ambrosio (Suburban Propane)

20251113-2025 Q4: Strong volumes, effective margin management, and expense discipline contributed to an $28 million or 11.2% increase in adjusted EBITDA. - Michael A. Stivala(CEO)

Can you quantify the benefit from the insurance payout and how you expect O&M SG&A trends to evolve? - Christopher Francis Jeffrey (Mizuho Securities USA LLC, Research Division)

2025Q3: Insurance recovery offset inflation impacts. Forward inflation expected at roughly 3%. - Michael A. Kuglin(CFO)

Contradiction Point 3

Propane Demand and Market Conditions

It impacts the understanding of market demand and pricing dynamics, which are crucial for investor expectations and strategic planning.

Can you provide an overview of the fiscal 2025 results and business outlook? - A. D'Ambrosio (Suburban Propane)

20251113-2025 Q4: Fiscal 2025 was another outstanding year for Suburban Propane. Propane demand was strong due to normal winter weather, increased demand in Southeast operations, and acquisitions. - Michael A. Stivala(CEO)

How is the system handling colder weather operationally, and how are propane prices and unit margins adjusting? - Christopher Jeffrey (Mizuho Securities)

2025Q1: The system is well-prepared to handle the increased demand from colder weather. Suburban Propane's platform is designed for such conditions, and the company is effectively managing selling prices in response to higher commodity prices, maintaining a range of $0.85 to $0.90 per gallon basis Mont Belvieu. - Mike Stivala(CEO)

Contradiction Point 4

Leverage Increase and Debt Management

It affects the understanding of the company's financial strategy and ability to manage debt, which is crucial for investors.

Can you provide an overview of the fiscal 2025 results and business outlook? - A. D'Ambrosio (Suburban Propane)

20251113-2025 Q4: Fiscal 2025 was another outstanding year for Suburban Propane. Propane demand was strong due to normal winter weather, increased demand in Southeast operations, and acquisitions. - Michael A. Stivala(CEO)

What are the drivers behind the leverage increase and how will production tax credits and debt management strategies be timed? - Christopher Jeffrey (Mizuho Securities)

2025Q1: Leverage increase is due to capital deployment for growth and some carryover from last year's challenges. Growth projects will naturally reduce leverage as they begin generating earnings. - Mike Stivala(CEO)