Good morning. And welcome to the Suburban Propane Partners, Second Quarter Earnings Conference Call. All participants will be in listen-only mode. . After today's presentation, there will be an opportunity to ask questions. . Please note today's event is being recorded. I would now like to turn the conference over to Davin D'Ambrosio, Vice President & Treasurer. Please go ahead, sir.

Good morning, everyone. Let me start with the safe harbor language. This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the partnership's future business expectations and predictions in financial conditions and results of operations. These forward-looking statements involve certain risks and uncertainties. Partnership has listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as a cautionary statement in this earning's press release, which can be viewed on the company's website, also, written and oral forward-looking statements attributable to the partnership or persons acting on behalf are expressly qualified in their entirety by such cautionary statements. Joining me this morning Is Michael Stivala, our President and Chief Executive Officer, Michael Kuglin, Chief Financial Officer and Chief Accounting Officer, and Steve Boyd, our Chief Operating Officer. This morning we will review our Second Quarter financial results along with our current outlook for the business. Once we concluded our prepared remarks, we will open the session to questions. Our annual report on Form 10-K for the fiscal year ended September 25th, 2021. And Form 10-Q for the period ended March 26, 2022, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. For non - GAAP measures will be discussed on this call, we have provided a description of those measures, as well as the discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the Investor Relations section of our website at suburbanpropane.com. At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Great. Thanks, Davin. Good morning. Thank you all for joining us today. The second fiscal quarter was another outstanding quarter for Suburban Propane on a number of fronts. We delivered solid operating results. We made further progress on the execution of our long-term strategic initiatives toward the build-out of a renewable energy platform. And we continue to drive improvements in our key financial metrics. Despite a challenging operating environment resulting from an erratic weather pattern, historically high commodity prices and inflationary factors impacting expenses, we were able to expand our customer base and effectively manage margins and expenses to deliver an improvement in adjusted EBITDA compared to the prior year second quarter. And when you combine that with the improvement from our first quarter, we have now reported a $7 million or nearly 3% increase in adjusted EBITDA through the first six months of the fiscal year. On the strategic front, we made a number of moves during the quarter. First, in March we acquired a 25% equity stake in Independence Hydrogen, which is a better and owned and operated start-up company, focused on developing a hydrogen ecosystem from production to distribution which will deliver locally sourced, clean hydrogen to local markets with initial focus on the material handling and backup power applications. This is a real strategic investment for us. We believe in the role that hydrogen will play in the coming years as society moves toward de - carbonization across many sectors of the economy that may prove difficult to address with alternative renewable energy sources. Second, we committed additional capital to support our investment in Oberon Fuels as we collectively get closer to commercialization of our new product offering called Propane Plus rDME. This blended product combines the versatile, clean, and portable benefits of propane with the…

Thanks, Mike. And good morning, everyone. To be consistent with previous reporting as I discuss our second quarter results and excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $33 million for the second quarter compared to an unrealized gain of $1.6 million in the prior year. The large unrealized gain on our commodity hedges reflects the fair value of open positions as of at the end of the second quarter, partially offset by the reversal of unrealized net gains at the end of the first quarter as a portion of those unrealized net gains. were realized during Q2. The contracts associated with the open commodity hedges at the end of the second quarter are expected to mature over the course the next nine months. And evaluation of the hedges are subject to change as commodity prices fluctuate. Excluding these items, as well as the non-cash equity earnings of Oberon Fuels, which is an unconsolidated subsidiary accounted for under the equity method, and a non-cash pension settlement charge in the prior year, net income for the second quarter was $142.8 million or $2.26 per common unit, compared to net income of $126.3 million or $2.1 cents per common unit in the prior year. Adjusted EBITDA of $172.5 million for the second quarter, improved by $0.5 million compared to the prior year. As Mike mentioned, the earnings for the quarter were driven by several factors, but most significantly from solid margin management, sustainable impact of our commodity hedging, and a risk management strategy in a period of dramatically rise in commodity prices, and the benefits from continued positive trends in customer base growth. These factors more than offset the impact of soft volumes resulted from customer conservation, lower heat-related demand from warmer…

Thanks, Mike. As announced on April 21st, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our second quarter of fiscal 2022, that equates to an annualized rate of $1.30 per common unit. The quarterly distribution will be paid on May 10th to our unit holders of record as of May 3rd. Looking back on the most recent heating season, we are extremely proud of how our operations personnel have continued to stay focused on delivering upstanding service to our customers, adhering to the highest standards for safety, and executing on our customer base growth and retention initiatives to help drive net customer base growth. All in the face of the significant challenges that continue to play the economy. Namely, historically high commodity prices, inflationary factors creeping into so many aspects of our business and expenses, shifting work behaviors and hiring challenges in a post-COVID phase, and customer conservation efforts resulting from the challenges consumer face in managing their own spending budgets in this inflationary environment. And our supply and risk management team continues to do an outstanding job managing propane supplies, as well as the volatility in commodity prices. With the improvement in adjusted earnings EBITDA, coupled with prudent management of capital expenditures and the benefits of nearly $10 million in interest savings in the trailing 12-month period, our distribution coverage remains strong at 2.56 times. Our leverage is trending lower at 3.87x compared to 3.95 at the end of March 2021. And we're continuing to position the business both operationally and financially for long-term growth and sustainability. Leveraging our strengths as an organization, we will continue to look for opportunities to make strategic investments in the build-out of our renewable energy platform and support the country's ongoing energy transition toward lower carbon future while also fostering the growth of our core propane business, both through acquisitions and strategic markets and through our greenfield market expansion efforts, and also bringing down leverage toward our mid 3x target range. For all of the reasons discussed today, we feel that we offer a very compelling story of a business that has a more than 90-year tradition of safely meeting the energy needs of its customers and local communities around the country, with a best-in-class operating model that is leveraging its expertise to help support the country's ongoing energy transition to a low carbon economy, and is positioned to competitively grow the business for the next 90-plus years. Finally, despite these challenging times, the foundation of our ongoing success continues to be rooted in our more than 3,100 employees at Suburban Propane and their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. I'm extremely proud of all of their efforts. As always, we appreciate your support and attention today, and would now like to open the call for questions. Rocco, could you help us with that?

Yes sir. If you were using a speakerphone, we ask that you please pick up your handset before pressing the keys. . We'll pause momentarily to assemble our roster. And today's first question comes from Ned Baramov with Wells Fargo. Please go ahead.

Hi. Good morning. Thanks for taking the questions. Could you talk a little bit more about margin management specifically? Could you provide additional details on your selling price management initiatives and maybe any thoughts on the gross margin trajectory going forward? Much appreciate it.

Sure, Ned. Thanks again for your interest. Obviously in commodity environment like we're experiencing right now, it's a real challenge out there. Not only for our customers that have to contend with higher energy bills, but also, we operate in a very competitive market. So, managing prices in this environment is no easy task. But I think what we've experienced over the many, many years that we've been running the business, we do a heck of a job managing, selling prices through any commodity cycle. And and I think that's what you're seeing in our field operations. Ability to manage the increasing prices. On top of that, you have to understand that when people talk about the ability to expand margins, I say, with inflation creeping in as much as it is in so many aspects of our expense base, like fuel costs, maintenance costs. We're investing heavily in our people so payroll costs are up. Margin sort of have to expand in order to keep up with the rising expense base. And then the last comment I'd make just on overall margins is we do a heck of a job with our risk management activities to try to insulate the business as best we can to the volatility that we're experiencing in the market. And so, you have a combination of good solid margin management at the field level, good risk management of a very volatile commodity price environment to deliver a very strong performance across the board in overall margins. But it's no easy task for sure when commodity prices have gotten to the level that as Mike pointed out in our opening remarks, a $1.63 on a basis Mont Belvieu is something we haven't seen in a very, very long time.

That's helpful. And maybe on that last point, I guess, lighter volumes in the quarter were largely due to weather but in the press release you also pointed out to customer conservation given that high commodity price. So maybe if you could expand a little bit on this point and quantify the impact from customer conservation in the quarter and also if you could talk about the price of propane on a wholesale basis that triggers conservation patterns among your customer base.

Yeah, I'll take the second point first which is we've historically seen that when prices at Belvieu start to get above a $0.25 or so, or close to a $1.50, you really start to see a different behavior in the customer base. And so right now today, or at least yesterday, Belvieu closed at about a $1.28. So, you're sort of stuck in that range and we've been in that above $1.25 now for quite a bit of time. And when you get up to a $1.63 or a $1.50 you certainly experience a level of conservation that you don't otherwise experience when you're, say, in the $1.85 range, I mean, Belvieu has been as low as $0.25 since I've been with the company for the last 20 years but -- so certainly I think that the level that we're at now is the level that we typically have seen the impact of conservation. As far as quantifying it, it's kind of tough to put an exact impact on volumes. Volumes overall were down 6% year-over-year in the quarter and I would say probably a couple of percentage of that is probably due to conservation but it's not an exact science. But for sure you could tell the customer behavior; you could see the usage per customer is down a bit trying to figure out how much of that is just pure weather versus conservation is not an exact science but it's all of those factors coming together Ned.

Understood. Thank you.

Gentlemen. As a reminder, We'll pause momentarily to assemble our roster. And it looks like we have a follow up from Ned Baramov with Wells Fargo. Please go ahead.

Thanks again, just one more. So, we seen the fiscal second quarter distribution complete to full-year of higher distributions after the 8.3% step-up in last year. So, could you maybe talk about the board's most recent view on distribution increases going forward?

Yeah, Ned. I think what we've said all along is we obviously take a very hard look every quarter as to how to allocate capital. I think what we're excited about right now is the opportunities that we see in front of us with respect to deploying capital towards the build-out of our renewable platform. We have a number of exciting things that we're continuing to look at in continuing to support that effort and as well as propane opportunities that, as you come out of the heating season, a lot more businesses come to market and we're starting to see that activity pick up again as normal. So, it's a balance. We're fortunate that we have the excess cash flow generating capacity that this business is generating. If you look at our trailing 12 months, we're generating over a $100 million of excess cash flow and as we've demonstrated in the second quarter, we really take a balanced approach towards deploying capital, investing in growth, but also still getting to a point where we get to our target level of leverage which is in the mid three-time. So, we're still -- we still have some work to do on debt reduction. We still have opportunities that are really on the horizon for the build-out of our renewable platform as well as propane opportunities. So we have a period of time here where clearly there's opportunities to deploy capital that we'll have long-term strategic and growth implications, and obviously as that comes to fruition, not only do we ensure the long-term sustainability of this business for the next 90 years, but also provide growth opportunities for our unit holders that can stay with us through this transition of migrate into business from a long term propane distributor to a diversified propane and renewable energy distributor for the long-term, and participating in the low-carbon economy that is upon us. So, it's a long way to saying that there's lots of great opportunities ahead of us that we feel very, very good about, and we have to be disciplined in how we think about capital deployment and long-term view.

Thank you.

Ladies and gentlemen, this concludes today's question-and-answer session. I'd like to turn the conference back over to Mike Stivala for the closing remarks.

Great, . Thanks for your help today and thank you all for joining us and for your interest. We look forward to talking to you again in relation to our third quarter earnings in August. In the meantime, I wish you all a very happy start to the summer season and stay healthy and safe. Thank you.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.