Superior Plus Corp. Announces Record First Quarter Results and Increases 2023 Adjusted EBITDA Guidance
TORONTO–(BUSINESS WIRE)–Superior Plus Corp. (“Superior”) (TSX: SPB) today released its first quarter results for the period ended March 31, 2023. Unless otherwise expressed, all financial figures are expressed in Canadian dollars.
- Record First Quarter 2023 Adjusted EBITDA1 of $272.1 million, a 9% increase from the prior year
- First Quarter net earnings of $147.1 million, an increase of $6.1 million from the prior year
- Superior is increasing its 2023 Pro Forma Adjusted EBITDA1 guidance range to $620 million to $660 million, with a midpoint of $640 million, which includes the expected full twelve months of Certarus 2023 Adjusted EBITDA in the range of $175 million to $185 million. The full economic benefit of Certarus’ expected 2023 Adjusted EBITDA will be retained in the business
- Certarus also achieved record First Quarter Adjusted EBITDA of $62.8 million, a $35.0 million or 126% increase from the prior year quarter
1 Adjusted EBITDA and Pro Forma Adjusted EBITDA are Non-GAAP Financial Measures. See “Non-GAAP Financial Measures and Reconciliations” section below.
In announcing these results, Allan MacDonald, President and Chief Executive Officer of Superior said, “I would like to congratulate the Superior and Certarus Ltd. (“Certarus”) teams on delivering solid results to start 2023. The Superior team delivered a strong first quarter consistent with management expectations, even with significantly warmer weather in most regions compared to the prior year and the five-year average. The first quarter Adjusted EBITDA of $272 million was a $22 million increase from 2022, and a record first quarter for Superior. The Certarus business continues to perform well ahead of expectations, delivering record first quarter EBITDA of $63 million.”
“We are also increasing the 2023 Pro Forma Adjusted EBITDA guidance range driven by higher expected results for Certarus, which we now expect to deliver 2023 Adjusted EBITDA in the range of $175 million to $185 million,” continued Mr. MacDonald. “I look forward to working with the Superior organization and welcoming the Certarus team to our organization in 2023.”
FIRST QUARTER HIGHLIGHTS
- Net earnings of $147.1 million in the first quarter compared to $141.0 million in the prior year quarter driven by higher revenue and gross profit, partially offset by higher selling, distribution and administrative expenses (“SD&A”), a lower gain on derivatives and foreign currency translation of borrowings, higher income tax expense and finance expense.
- Basic and diluted earnings per share attributable to Superior was $0.63 per share, a decrease of $0.05 per share from the prior year quarter due to the impact of the higher amount of weighted average shares outstanding, partially offset by higher net earnings.
- Adjusted EBITDA for the first quarter was $272.1 million, an increase of $21.7 million compared to the prior year quarter as a result of higher EBITDA from operations2, partially offset by higher corporate costs2 and a realized loss on foreign currency hedges compared to a realized gain in the prior year quarter. EBITDA from operations increased primarily due to higher Adjusted EBITDA in North American wholesale propane distribution (“Wholesale Propane”) and U.S. retail propane distribution (“U.S. Propane”), partially offset by modestly lower Canadian retail propane distribution (“Canadian Propane”) Adjusted EBITDA.
- U.S. Propane Adjusted EBITDA for the first quarter was $175.9 million, an increase of $13.0 million from the prior year quarter of $162.9 million due to the impact of acquisitions completed in the prior year and, to a lesser extent, higher average margins related to increased prices to offset inflation and the impact of the weaker Canadian dollar on the translation of U.S. denominated transactions, partially offset by lower volumes related to the significantly warmer weather and higher operating costs2 related to inflation and labour costs.
- Canadian Propane Adjusted EBITDA for the first quarter was $65.8 million, a decrease of $3.8 million from the prior year quarter of $69.6 million as a result of higher operating costs, partially offset by higher gross profit. Operating costs increased due to higher costs associated with inflation and the impact of the Canadian Emergency Wage Subsidy recorded in the prior year quarter. Gross profit increased driven by higher average margins related to increased sales prices to offset the impact of inflation, partially offset by lower sales volumes related to warmer weather.
- Wholesale Propane Adjusted EBITDA for the first quarter was $40.2 million, an increase of $21.1 million from the prior year quarter of $19.1 million primarily due to contribution from the acquisition of Kiva Energy, Inc. (“Kiva”) and strong wholesale market fundamentals related to colder weather and lower propane inventories in the Western U.S.
- Corporate costs for the first quarter were $5.7 million compared to $2.7 million in the prior year quarter due to higher incentive plan costs related to the change in the share price in the prior year quarter. Superior realized a loss on foreign currency hedging contracts of $4.1 million compared to a gain of $1.5 million in the prior year quarter due to lower average hedge rates relative to changes in USDCAD exchange rates.
- Superior’s Leverage Ratio2 for the trailing twelve months (“TTM”) ended March 31, 2023, improved to 3.9x, which is within Superior’s targeted range of 3.5x to 4.0x and is expected to remain within Superior’s targeted range upon the closing of the Certarus transaction. The improvement from 4.1x at December 31, 2022 was a result of lower debt levels.
2 EBITDA from operations is a Non-GAAP Financial Measure. Leverage Ratio is a Non-GAAP ratio. See “Non-GAAP Financial Measures and Reconciliations” section below. Operating costs and corporate costs are supplementary financial measures.
CERTARUS UPDATE
As previously communicated, the waiting period under the Hart-Scott-Rodino Act in the United States, where over 85% of Certarus’ revenues are generated, expired on February 13, 2023. Superior and Certarus have now each complied with the Supplementary Information Request from the Canadian Competition Bureau, and the Canadian Competition Bureau continues its review of the transaction. Superior expects the acquisition will close in the second quarter.
In the first quarter of 2023, Certarus achieved record Adjusted EBITDA of $62.8 million, which was a $22.4 million improvement compared to the previous record quarter set in the fourth quarter of 2022, and a $35.0 million or 126% improvement from the prior year quarter. The growth in Adjusted EBITDA was driven by contribution from a new utility support contract, improved pricing, lower product costs, an increase in average mobile storage units (“MSUs”) for the quarter, increased efficiencies and strong demand for Certarus’ low carbon energy offering. Average daily sales volume was 71,723 MMBtu per day, a 17% increase compared to the prior year quarter. Average MSUs for the first quarter were 646, an 18% increase compared to the prior year quarter as a result of MSU purchases made in the past twelve months. As a result of the record quarter and expectations for the remainder of the year, Certarus now expects to achieve 2023 Adjusted EBITDA in the range of $175 million to $185 million.
“We are proud of the continued strong execution by the Certarus team to start 2023”, said Curtis Philippon, President and CEO of Certarus. “The success of the regional and industry diversification initiatives has driven strong year over year organic growth across our compressed natural gas (“CNG”), renewable natural gas and hydrogen platform. We continue to improve MSU operating efficiencies and utilization, and in the first quarter, we added 10 more MSUs taking our total MSU count to 650 at March 31, 2023. We are excited about joining the Superior Plus team once the transaction closes, and look forward to working together to continue to organically grow the Certarus business.”
Certarus continues to be a leader in the distribution of hydrogen in North America and has supported more than 40 hydrogen projects. Recently, through a collaboration with ATCO, Certarus provided a 20% hydrogen and natural gas blend to the Edmonton Convention Centre that was used to power the Canadian Hydrogen Conference. At the conference, Certarus was also the proud recipient of the Hydrogen Delivery Award.
Capital Allocation
Capital Expenditures
- Maintenance capital expenditures were $13.4 million in the quarter, compared to $7.3 million in the prior year quarter related to the timing of expenditures.
- Efficiency, process improvement and growth-related capital expenditures were $16.7 million compared to $7.9 million in the prior year quarter due to the timing of tank purchases for new customers, integration activity and the impact of the weaker Canadian dollar on U.S. denominated capital expenditures.
- Investment in leased vehicles and other leased assets was $9.0 million compared to $6.0 million in the prior year quarter related to the timing of renewing property leases, partially offset by the timing of delivery of leased vehicles.
Tuck-in Acquisitions
- On February 1, 2023, Superior acquired all the issued and outstanding shares of ACME Propane, Inc. (“ACME”), a residential and commercial retail propane distributor in Lincoln, California for an aggregate purchase price of approximately US$3.3 million (C$4.4 million) before adjustments for working capital.
Quarterly Dividend
- Superior is declaring a quarterly common share dividend of $0.18 per share, payable to shareholders of record as of June 30, 2023. The common share dividend will be payable on July 17, 2023.
Normal Course Issuer Bid
- On October 11, 2022, the TSX accepted Superior’s notice of intention to establish a new normal course issuer bid program (the “NCIB”). The NCIB permits the purchase of up to 10.1 million shares of Superior’s common shares, representing approximately 5% of the issued and outstanding common shares as of September 30, 2022, by way of normal course purchases effected through the facilities of the TSX and/or alternative Canadian trading systems.
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Financial Overview |
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Three Months Ended |
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March 31 |
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(millions of dollars, except per share amounts) |
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2023 |
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2022 |
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Revenue |
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1,255.4 |
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1,170.4 |
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Gross Profit |
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541.2 |
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393.9 |
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Net earnings |
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147.1 |
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141.0 |
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Net earnings attributable to Superior per share, diluted (3) |
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$0.63 |
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$0.68 |
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EBITDA from operations (1) |
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281.9 |
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251.6 |
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Adjusted EBITDA (1) |
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272.1 |
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250.4 |
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Net cash flows from operating activities |
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350.1 |
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121.8 |
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Net cash flows from operating activities per share, diluted (3) |
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$1.52 |
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$0.59 |
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AOCF before transaction and other costs (1)(2) |
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242.5 |
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232.4 |
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AOCF before transaction and other costs per share, diluted (1)(2)(3) |
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$1.05 |
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$1.13 |
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AOCF (1) |
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234.9 |
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225.3 |
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AOCF per share, basic and diluted (1)(3) |
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$1.02 |
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$1.09 |
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Cash dividends declared on common shares |
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36.1 |
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31.7 |
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Cash dividends declared per common share |
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$0.18 |
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$0.18 |
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| (1) EBITDA from operations, Adjusted EBITDA, AOCF before transaction, restructuring and other costs, and AOCF are Non-GAAP financial measures. See “Non-GAAP Financial Measures and Reconciliations” section below. (2) Transaction, restructuring and other costs are related to acquisition activities and the restructuring and integration of acquisitions. See “Transaction, restructuring and other costs” in the First Quarter MD&A for further details. These expenses are included in SD&A and are disclosed in Note 21 of the audited consolidated financial statements as at and for the three months ended March 31, 2023 and 2022. (3) The weighted average number of shares outstanding for the three months ended March 31, 2023 was 230.7 million (three months ended, March 31, 2022 was 206.0 million). The weighted average number of shares assumes the exchange of the preferred shares into common shares. There were no other dilutive instruments with respect to AOCF per share and AOCF before transaction, restructuring and other costs per share for the three months ended March 31, 2023 and 2022. |
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Segmented Information |
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Three Months Ended |
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March 31 |
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(millions of dollars) |
2023 |
2022 |
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EBITDA from operations(1) |
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U.S. Propane Adjusted EBITDA(1) |
175.9 |
162.9 |
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Canadian Propane Adjusted EBITDA(1) |
65.8 |
69.6 |
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Wholesale Propane Adjusted EBITDA(1) |
40.2 |
19.1 |
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281.9 |
251.6 |
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(1) EBITDA from operations and Adjusted EBITDA are Non-GAAP financial measures. See “Non-GAAP Financial Measures and Reconciliations” section below. Comparative figures have been restated to present the separate results of the Wholesale Propane and Canadian Propane segment in 2021. See the “Overview of Superior and Basis of Presentation” in the 2022 Annual MD&A for more information about the change in segment reporting. |
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MD&A and Financial Statements
Superior’s MD&A, the unaudited Consolidated Financial Statements and the Notes to the unaudited Consolidated Financial Statements as at and for the quarter ended March 31, 2023 provide a detailed explanation of Superior’s operating results. These documents are available online on Superior’s website at www.superiorplus.com under the Investor Relations section and on SEDAR under Superior’s profile at www.sedar.com.
2023 First Quarter Conference Call
Superior will conduct a conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2023 first quarter financial results will be held at 10:30 AM EDT on Wednesday, May 10, 2023. To listen to the live webcast, please use the following link: Register Here. The webcast will be available for replay on Superior’s website at: www.superiorplus.com under the Events section.
Annual General Meeting
We are holding our annual meeting in a virtual-only format so shareholders may attend and participate in the annual meeting via live webcast on Tuesday, May 9, 2023 at 4:00 PM EDT. Please see Superior’s website at www.superiorplus.com for detailed instructions.
About Superior
Superior is a leading North American distributor and marketer of propane and distillates and related products and services, servicing approximately 936,000 customer locations in the U.S. and Canada.
About Certarus
Certarus is the North American leader in providing on-road low carbon energy solutions through a fully integrated CNG, renewable natural gas and hydrogen platform. Certarus safely delivers clean burning fuels to energy, utility, agricultural and industrial customers not connected to a pipeline. By displacing more carbon intensive fuels, Certarus is leading the energy transition and helping customers lower operating costs and improve environmental performance. With the largest fleet of mobile storage units in North America, Certarus is uniquely positioned to meet the growing demand for low and zero emission energy distribution. For more information, visit www.certarus.com or contact: Curtis Philippon, President & CEO, Tel: (403) 852-1070, or Dan Bertram, Vice President, Corporate Development, Tel: (403) 830-4262.
Non-GAAP Financial Measures and Reconciliation
Throughout this news release, Superior has identified specific terms that it uses that are not standardized measures under International Financial Reporting Standards (“Non-GAAP Financial Measures”) and, therefore may not be comparable to similar financial measures disclosed by other issuers. Reconciliations of these Non-GAAP Financial Measures to the most directly comparable financial measures in Superior’s annual financial statements are provided below. Certain additional disclosures for these Non-GAAP Financial Measures, including an explanation of the composition of these financial measures, how they provide helpful information to an investor, and any additional purposes management uses for them, are incorporated by reference from the “Non-GAAP Financial Measures and Reconciliations” section in Superior’s 2022 Annual MD&A dated February 16, 2023, available on www.sedar.com.
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For the Three Months Ended March 31, 2023 |
U.S. Propane |
Canadian Propane |
Wholesale Propane |
Results from operations |
Corporate |
Total |
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Earnings (loss) before income taxes |
143.4 |
47.1 |
48.2 |
238.7 |
(30.0) |
208.7 |
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Adjust for: |
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|
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Amortization and depreciation included in SD&A |
47.0 |
17.9 |
4.4 |
69.3 |
0.2 |
69.5 |
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Finance expense |
2.3 |
0.8 |
0.1 |
3.2 |
23.1 |
26.3 |
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EBITDA |
192.7 |
65.8 |
52.7 |
311.2 |
(6.7) |
304.5 |
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Gain on disposal of assets and other |
(0.1) |
(0.2) |
(0.1) |
(0.4) |
– |
(0.4) |
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Transaction, restructuring and other costs |
5.5 |
0.2 |
0.1 |
5.8 |
1.8 |
7.6 |
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Unrealized gain on derivative financial instruments |
(22.2) |
– |
(12.5) |
(34.7) |
(4.9) |
(39.6) |
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Adjusted EBITDA |
175.9 |
65.8 |
40.2 |
281.9 |
(9.8) |
272.1 |
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Adjust for: |
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Current income tax expense |
– |
– |
– |
– |
(4.8) |
(4.8) |
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Transaction, restructuring and other costs |
(5.5) |
(0.2) |
(0.1) |
(5.8) |
(1.8) |
(7.6) |
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Interest expense |
(1.6) |
(0.8) |
(0.2) |
(2.6) |
(22.2) |
(24.8) |
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AOCF |
168.8 |
64.8 |
39.9 |
273.5 |
(38.6) |
234.9 |
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For the Three Months Ended March 31, 2022 |
U.S. Propane |
Canadian Propane |
Wholesale Propane |
Results from operations |
Corporate |
Total |
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Earnings (loss) before income taxes |
128.2 |
52.9 |
16.2 |
197.3 |
(10.2) |
187.1 |
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Adjust for: |
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Amortization and depreciation included in SD&A |
32.9 |
16.8 |
1.7 |
51.4 |
0.2 |
51.6 |
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Finance expense |
1.3 |
0.8 |
0.1 |
2.2 |
13.8 |
16.0 |
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EBITDA |
162.4 |
70.5 |
18.0 |
250.9 |
3.8 |
254.7 |
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Loss (gain) on disposal of assets and other |
0.2 |
(1.1) |
(0.1) |
(1.0) |
– |
(1.0) |
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Transaction, restructuring and other costs |
3.9 |
0.2 |
– |
4.1 |
3.0 |
7.1 |
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Unrealized loss (gain) on derivative financial instruments |
(3.6) |
– |
1.2 |
(2.4) |
(8.0) |
(10.4) |
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Adjusted EBITDA |
162.9 |
69.6 |
19.1 |
251.6 |
(1.2) |
250.4 |
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Adjust for: |
|
|
|
|
|
|
|
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Current income tax expense |
– |
– |
– |
– |
(1.7) |
(1.7) |
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Transaction, restructuring and other costs |
(3.9) |
(0.2) |
– |
(4.1) |
(3.0) |
(7.1) |
|
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Interest expense |
(0.9) |
(0.8) |
(0.1) |
(1.8) |
(14.5) |
(16.3) |
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AOCF |
158.1 |
68.6 |
19.0 |
245.7 |
(20.4) |
225.3 |
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Leverage Ratio and Pro Forma Adjusted EBITDA
Superior’s Total Net Debt to Adjusted EBITDA Leverage Ratio is a non-GAAP ratio as its components are Non-GAAP Financial Measures. Adjusted EBITDA for the Total Net Debt to Adjusted EBITDA Leverage Ratio is defined as Adjusted EBITDA calculated on a 12-month trailing basis giving pro forma effect to acquisitions and dispositions adjusted to the first day of the calculation period (“Pro Forma Adjusted EBITDA”). Pro Forma Adjusted EBITDA is used by Superior to calculate its Total Net Debt to Adjusted EBITDA Leverage Ratio.
To calculate the Total Net Debt to Adjusted EBITDA Leverage Ratio divide the sum of borrowings before deferred financing fees and lease liabilities by Pro Forma Adjusted EBITDA. The Total Net Debt to Adjusted EBITDA Leverage Ratio is used by Superior and investors to assess its ability to service debt.
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(in millions) |
March 31, 2023 |
December 31, 2022 |
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Current borrowings |
14.6 |
14.8 |
|
Current lease liabilities |
49.2 |
47.3 |
|
Non-current borrowings |
1,668.0 |
1,911.3 |
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Non-current lease liabilities |
171.1 |
175.7 |
|
|
1,902.9 |
2,149.1 |
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Add back deferred financing fees and discounts |
19.0 |
19.9 |
|
Deduct cash and cash equivalents |
(80.7) |
(58.4) |
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Deduct Vendor Note(1) |
– |
(128.0) |
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Net debt |
1,841.2 |
1,982.6 |
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|
|
|
|
|
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Adjusted EBITDA for the year ended 2022 |
449.8 |
449.8 |
|
Adjusted EBITDA for the year ended March 31, 2022 |
(250.4) |
– |
|
Adjusted EBITDA for the year ended March 31, 2023 |
272.0 |
– |
|
Pro-forma adjustment |
1.1 |
35.8 |
|
Pro-forma Adjusted EBITDA for the trailing-twelve months |
472.5 |
485.6 |
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|
|
|
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Leverage Ratio |
3.9x |
4.1x |
|
(1) Superior received the proceeds from the sale of the Vendor Note in January 2023. |
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Forward-Looking Information
Certain information included herein is forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information may include statements regarding the objectives, business strategies to achieve those objectives, expected financial results (including those in the area of risk management), economic or market conditions, and the outlook of or involving Superior and its businesses. Such information is typically identified by words such as “anticipate”, “believe”, “continue”, “estimate”, “expect”, “plan”, “forecast”, “future”, “outlook, “guidance”, “may”, “project”, “should”, “strategy”, “target”, “will” or similar expressions suggesting future outcomes.
Forward-looking information in this document includes: Superior’s future financial position, expected 2023 Adjusted EBITDA pro forma the completion of the acquisition of Certarus, expected Adjusted EBITDA of Certarus for 2023, the completion and timing of the acquisition of Certarus, and expected Leverage Ratio in the range of 3.5x to 4.0x at the closing of the acquisition of Certarus.
Forward-looking information is provided to provide information about management’s expectations and plans for the future and may not be appropriate for other purposes. Forward-looking information herein is based on various assumptions, and expectations that Superior believes are reasonable in the circumstances. No assurance can be given that these assumptions and expectations will prove correct. Those assumptions and expectations are based on information currently available to Superior, including information obtained from third-party industry analysts and other third-party sources, and the historic performance of Superior’s businesses and businesses it plans to acquire or has acquired. Superior cautions that the assumptions used to prepare such forward-looking information, including Superior’s estimated Adjusted EBITDA pro forma the acquisition of Certarus and Certarus’ estimated 2023 Adjusted EBITDA could prove to be incorrect or inaccurate.
In preparing the forward-looking information, Superior considered numerous economic and market assumptions regarding foreign exchange rates, competition, expected average weather and economic performance of each region where Superior and Certarus operate, including key assumptions listed under the heading in this news release and under the heading “Financial Outlook” in Superior’s 2023 First Quarter MD&A.
Additional key assumptions or risk factors with respect to the forward-looking information include, but are not limited to, the satisfaction of the conditions, including receipt of required regulatory approvals, to the acquisition of Certarus, without significant changes to the terms or anticipated timing of the transaction; no material divestitures; anticipated financial performance; current business and economic trends; and the amount of future dividends paid by Superior.
Other particular, key assumptions and expectations underlying Superior’s pro forma Adjusted EBITDA guidance range include a Certarus average MSU count of 668 trailers in 2023; Adjusted EBITDA per average MSU of approximately $270,000; and Superior corporate costs consistent with historical levels.
The forward-looking information is also subject to the risks and uncertainties set forth below. By its very nature, forward-looking information involves numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, Superior’s actual performance and financial results may vary materially from those estimates and intentions contemplated, expressed or implied in the forward-looking information. These risks and uncertainties include risks relating to satisfaction of the conditions to, and completion of the acquisition of Certarus on the anticipated timeline, incorrect assessments of value when making acquisitions, failure to realize expected cost-savings and synergies from acquisitions, increases in debt service charges, colder average weather than anticipated, the loss of key personnel, fluctuations in foreign currency and exchange rates, fluctuations in commodity prices, increasing rates of inflation, inadequate insurance coverage, liability for cash taxes, counterparty risk, compliance with environmental laws and regulations, reduced customer demand, operational risks involving our facilities, force majeure, labour relations matters, our ability to access external sources of debt and equity capital, and the risks identified in (i) our MD&A under the heading “Risk Factors” and (ii) Superior’s most recent Annual Information Form.
Contacts
Beth Summers
Executive Vice President and Chief Financial Officer
Phone: (416) 340-6015
Rob Dorran
Vice President, Capital Markets
Phone: (416) 340-6003
Toll Free: 1-866-490-PLUS (7587)
