Good day, and welcome to the Suburban Propane Partners Fiscal 2023 Full Year and Fourth Quarter Results Conference Call. [Operator Instructions] Please note today's event is being recorded. I'd now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead, sir.

Great. Thank you. Good morning, everyone. Thank you for joining us this morning for our fiscal 2023 fourth quarter and full year earnings conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Steve Boyd, our Chief Operating Officer. This morning, we will review our fiscal 2023 fourth quarter and full year financial results, along with our current outlook for the business. Once we concluded our prepared remarks, we will open the session to questions. Our 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 and financial condition and results of operations. These forward-looking statements involve certain risk and uncertainties. We have 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 cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10-K for the fiscal year ended September 30, 2023, which contains additional disclosure regarding forward-looking statements and risk factors, will be filed on or about November 22. Once filed, copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a 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 this time, I'll turn the call over to Mike Stivala for some opening remarks. Mike?

Great. Thanks, Davin, and thank you all for joining us this morning. Fiscal year 2023 was another great year for Suburban Propane. In addition to overcoming a challenging weather pattern, with some of the warmest temperatures on record during the most critical months for heat-related demand, that's namely January and February, as well as a persistent inflationary cost environment to deliver strong earnings, we succeeded in accomplishing a number of significant goals in fiscal 2023 that provide further support for our long-term strategic growth initiatives. So let me highlight a few noteworthy accomplishments for fiscal 2023. Through our wholly owned subsidiary, Suburban Renewable Energy LLC, we acquired a platform of RNG production assets from Equilibrium Capital Group, a leading sustainability-driven asset management firm. These assets included a large-scale RNG production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and interconnect with an interstate pipeline on-premise; an operating facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas; and we have an active development project to upgrade the biogas into pipeline-quality RNG for sales. We formed a partnership with Equilibrium to serve as a long-term platform for the identification, development and operation of additional RNG projects and currently have a pipeline of potential RNG projects to invest in that are in various stages of evaluation. We have advanced the engineering and construction activities for our anaerobic digester pursuant to an agreement with Adirondack Farms, which is a family-owned dairy farm in Upstate New York, to produce RNG from dairy cow manure, which we expect to be up and running in fiscal 2025. Once all three of these renewable natural gas facilities are operating at…

Thanks, Mike, and good morning, everyone. I'll start by focusing on our full year results, which included 53 weeks of operations in fiscal 2023 compared to 52 weeks in the prior year and give some color on the fourth quarter toward the end of my remarks. To be consistent with previous reporting, I'm excluding the impact of unrealized noncash mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of $3.7 million in fiscal 2023 compared to an unrealized loss of $27.9 million in the prior year, along with certain other noncash items and acquisition-related transaction costs. Excluding these items, net income for fiscal 2023 was $138.4 million or $2.17 per common unit compared to $171.1 million or $2.71 per common unit in the prior year. Adjusted EBITDA for fiscal 2023 was $275 million compared to $291 million in the prior year. As Mike mentioned, our earnings for the fiscal year were impacted by lower heat-related demand resulting from extremely warm weather during the most critical months of the heating season and from the continued impact of inflationary pressures on our expenses. Although those headwinds presented operating challenges, our earnings for the year benefited from organic growth in our customer base, propane unit margin expansion and contribution from the RNG facilities acquired in December. Retail propane gallons sold in fiscal 2023 were 396 million gallons, which is 1.2% lower than the prior year, primarily due to the impact of warm and inconsistent temperatures throughout the heating season, partially offset by favorable customer base trends. With respect to the weather, average temperatures for fiscal 2023 were 8% warmer than normal and 2% colder than the prior year. Although we experienced an overall increase in heating degree days compared to the prior year, the weather pattern was characterized by extremely…

Great. Thanks, Mike. As mentioned in our October 26 press release, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of the fourth quarter of fiscal 2023, which equates to an annualized rate of $1.30 per common unit. The quarterly distribution is payable on November 14 to our unitholders of record as of November 7. So just a few closing remarks regarding our long-term strategy. Our success in longevity as an organization is due to the hard work and dedication of our people. They are guided by our three corporate pillars: the Suburban Commitment to excellence in safety and customer service, our devotion to giving back to the local communities through our SuburbanCares platform and our innovation for the future through the Go Green with Suburban Propane pillar. Throughout our 95-year history, we have expanded our role as a trusted local provider of energy with our commitment to the highest standards for safety, exceptional customer satisfaction and reliability. Suburban Propane is continuing its legacy as the true pioneer in the U.S. propane industry through our comprehensive growth strategy that builds on the low-carbon attributes of propane and our investments in innovative renewable energy products and technologies through our Suburban Renewable Energy subsidiary. All across the energy sector, we are seeing a shift toward cleaner energy alternatives. While propane will continue to be relied upon as a versatile, affordable and available clean energy source that is produced domestically, Suburban Propane will continue to build off of our well-established legacy and core strengths to solidify our place in the localized energy distribution network by making strategic investments in both the propane sector and into renewable energy alternatives for businesses and local communities across the country. We are committed to delivering solutions to help mitigate the long-term effects of climate change, positioning Suburban Propane for long-term growth and sustainability, enhancing the career development opportunities for our valued employees and creating long-term value for all of our key stakeholders. Finally, I want to thank the more than 3,300 employees for helping make fiscal 2023 another very successful year for Suburban Propane. Of course, I hope you and your families remain safe and healthy and wish everyone a very happy holiday season. We appreciate your support and attention this morning, and we'll now open the question for -- the call for questions. So Rocco, would you mind helping us with that?

[Operator Instructions] Today's first question comes from Gabe Moreen with Mizuho. Please go ahead.

Good morning, guys.

Good morning, Gabe.

Quick question -- a couple of questions for me, if I can. One is just on your expectations for O&M growth. Appreciating that last year's 9%-ish plus or minus growth was partially inorganic. Just wondering what you're seeing out there and expectations for FY '24 on the O&M and G&A side.

So with inflation continuing to be an ongoing factor across the country, I do expect -- we do expect expenses to continue to trend upward. However, if you look at the decline, and we talked about this a bit on the last call, the percentage increase certainly is starting to moderate a bit, but it's certainly not going away. So volumes, of course, are going to have a big impact on what our operating expenses are ultimately going to be. But I do expect the net increase to be less than what we've experienced over the last couple of years, but ultimately, expenses are going to be driven by what volumes are going to be.

Great. Thanks Mike. And then I think there was a pretty decent step-up in your equity earnings this quarter. Can you just speak to that a little bit about whether that was Oberon, Independence Hydrogen, maybe where that was coming from?

Yes. It was related to Oberon, nothing unusual, just us picking up our equity and earnings of the sub.

Thanks Mike. And maybe if I can just ask a bigger question. Think you talked about investing in both propane and RNG. Clearly, there's one of your competitors out there that's undergoing a strategic review of its propane operations. Can you just talk about interest in scaling and propane versus making more of those RNG investments and how you think about kind of allocating capital on both sides, particularly with some of the stuff out there that might be out there in the market at the moment?

Sure, Gabe. No, look, our long-term strategy is clear. We are totally committed to our core propane business. And we've done a couple of small acquisitions in each of the last couple of years, and that is done in very strategic markets and at very good valuations. But we're also very much focused on the energy transition as, I think, has been evidenced by the past couple of years of investments, not only in the RNG platform but the stakes that we've taken in Independence Hydrogen to get involved in clean hydrogen production and distribution, with Oberon and some other opportunities that we see. And we do believe that the long -- for the long term of this company, we're focused on building a growth platform, okay? Propane is a great business. It is the engine that provides the excess cash flow to be able to make the investments that we're doing. And it's been a great business. We run it, as you know, really, really well. And we've all been here for decades. And we really do have great things ahead of us for the propane industry. But the propane industry has always struggled with headwinds around weather volatility and a highly mature competitive market that doesn't have tremendous growth opportunities. And so our strategic growth is to transition to create a growth platform and set this business up for the next 95 years, with propane being a significant piece of that because I really don't honestly see propane losing out in the transition to cleaner energy because it is a clean energy source. But I do see alternatives clearly going to develop, like the renewable natural gas, like hydrogen. Obviously, the government just committed billions of dollars to hydrogen hubs around the country. So I think our focus is a combination of continuing to foster the growth of propane while setting the business up and creating a growth platform, and our growth platform as we execute is going to generate growth that we expect to be able to deliver increased returns through -- for our unitholders in the form of distribution growth as well as perhaps as we create a more -- a different growth profile, perhaps a rerating of the risk profile that the market perhaps perceives in the propane industry, and that can be a 2-way approach to creating long-term value for our shareholders. So that is our strategy. I'm not really going to comment on your other question about the strategic direction that one of our competitors is going to take. I think they've been pretty clear about their intentions. And I think they've also been pretty clear about some of the challenges that they've faced in their business over the past several years. So I'll just leave it at that.

Appreciate it. Thanks Mike.

Thanks Gabe.

[Operator Instructions] And everyone, that concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Great. Thanks, Rocco. I appreciate your help today. And again, appreciate everybody's support and attention. I really do wish you all a happy holiday season. We look forward to talking with you again in early February after our first quarter results. Thank you.

Thank you. 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.