Good day, and welcome to the Star Group Fiscal 2018 Fourth Quarter Results Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I'd now like to turn the conference over to Mr. Steven J. Goldman, Chief Executive Officer. Please go ahead, Sir.

Good morning and thank you for joining us today. With me today is Star's Chief Financial Officer, Rich Ambury. After some brief remarks, Rich will review our fourth quarter financial results. We will then take your questions. Before we begin, Chris Witty of our Investor Relations firm, Darrow Associates, will read the safe harbor statement. Please go ahead, Chris.

Thanks, Steve, and good morning. This conference call may include forward-looking statements that represent the company's expectations and beliefs concerning future events that involve risks and uncertainties and may cause the company's actual performance to be materially different from the performance indicated or implied by such statements. All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations are disclosed in this conference call and in the company's annual report on Form 10-K for the fiscal year ended September 30, 2018. All subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the company undertakes no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events or otherwise after the date of this conference call. I'd now like to turn the call back over to Steve Goldman. Steve?

Thanks, Chris. Good morning, everyone, and thanks for joining our year-end conference call. It's amazing how time flies by and here we are back at the start of another winter season. During the fourth quarter, our bottom line performance was negatively impacted by lower volumes of home heating oil and propane by acquisitions completed after the heating season and investment in our service initiatives and certain one-time expenses such as severance as Rich will review in a moment. Well, we took some strategic actions that better position the company for future growth during this time. Most notably, we sold our small security business for net proceeds of $7 million. We came to the conclusion that this was not a prudent area for us to be concentrating our efforts on or spending capital and thus made the decision to sell this operation. At the same time, we eliminated 18 small brand names of the company to improve overall marketing efficiency. We believe taking such steps leaves us more focused streamline as an enterprise dedicated to our core heating, cooling, and other HVAC-related markets. As always, we continue to look at transactions that can strengthen or grow our customer base. For fiscal 2018 as a whole, we completed six acquisitions that brought in an aggregate of approximately 17,000 new accounts to Star across several product categories and we're actively looking at additional opportunities as we speak. It's exciting to watch the expansion of our geographic footprint as well as the increasing array of products and services we're now able to provide our customers. For the year, our net attrition was 3.2%. While up from last year, attrition for the prior five years averaged around 2.5%. We believe this past year largely reflected customers' frustration with extreme weather conditions we suffered in early January, [indiscernible] although we dedicated to reducing net attrition in the quarter. As we start the winter season I'd like to again thank our employees for their tremendous effort this past fiscal year. We faced numerous challenges related to extreme weather and we believe we're better prepared today if similar conditions were to arise. Even though we're a very large enterprise, we need to remain nimble and very customer service oriented. I believe the measures undertaken this fiscal year will help us do just that leaving us well positioned for solid financial performance in the quarters to come. With that, I'll turn the call over to Rich Ambury to provide some comments on the quarter's results.

Thanks Steven, and good morning, everyone. For the quarter, our home heating oil and propane volumes sold decreased by 3 million gallons or 15% to 19 million gallons as the additional volume provided from acquisitions of around 0.75 million gallons was more than offset by the impact of a delivery variance in net customer attrition. Sales volume of other petroleum products, however, did rise by about 13 million gallons or 45% to 42 million gallons, largely due to acquisitions. Our product gross profit increased by $0.5 million or 1.5% as higher per gallon margins and an acquisition-related increase in gross profit from other petroleum products mitigated the impact of a decline in home heating oil volume in the base business. Our operating expenses increased by $9.5 million or 13% to $18 million during the quarter. Acquisitions accounted for $4.4 million of the increase while in the base business, expenses rose by $5.1 million or 7%. The major drivers of the expense increase included higher bad debt expense and credit card fees of $1.3 million, an expansion of the company's Concierge program for about $1.6 million, and there were some rebranding expenses of $6 million as well. We also took a charge of $0.5 million for severance during the fourth quarter of fiscal 2018 as 11 positions were eliminated, which should save the company well over $2 million in fiscal 2019. Separately, as Steve mentioned, we sold our small security business and recorded a gain of $7 million in the quarter. The company's net loss increased by $3.8 million or 21% to $21.5 million as the gain on the sale of the security business was more than offset by the net loss attributable to the acquisitions completed after the heating season, a widening of the adjusted EBITDA loss in the base…

Thanks, Rich. And at this time, we'd be pleased to address any questions you may have. Operator, please open the phone lines for questions.

Thank you, Sir. [Operator Instructions] And today's first question comes from Andrew Gadlin of Odeon Capital Group. Please go ahead.

Hi. Thank you. I was wondering if you could talk about the M&A pipeline a little bit.

Yeah sure. It's been relatively consistent, the last six, eight months, we've been steadily looking at numerous potential acquisitions both larger and small in the range that we tend to look at things across our footprint, not external to our footprint for the most part. We're seriously looking at a couple of potential mixed product businesses that we're still in the relatively early stages. So we don't know as always if they’ll come to fruition, and we got a lot of external interest, and we always have conversations going end to end in our footprint of potential possible acquisitions that may be presented later during the next 6 to 12 months. So, from our perspective, what's in front of us looks pretty normal, and we're optimistic that we'll wind up with probably the similar type behavior as our past, that we will have some opportunities close on some acquisitions in the next 12 months.

Okay. Thank you very much.

And our next question today comes from Michael Prouting of 10K Capital. Please go ahead.

Hi. Good morning, guys. Thanks for taking my question. Steve, I was wondering if you could give us some metrics around Concierge business.

I would say, I think the most important, Rich talked a little bit about additional spending, and I’d characterize additional spending for the most part was in the form of marketing, advertising, and promotions to try to establish the branding of the product in a piece of our footprint. We're probably offering, I say probably because it is hard to specifically tell you the exact percentage of population of customers because they are our first target audience. Our internal customers, although where ever we're targeting internal customers, will looking at external customers as well. So, we're probably looking at a footprint, which is equal to about 8% to 12% of our company footprint from a marketing standpoint. Getting just the base formulation of the product was -- out into the marketplace was sort of expensive. We're trying to measure some of that, so we're a bit more cautious about how we'll spend with that product going forward. So I don't think, I guess my point is, what we've spent on some start-up cost and marketing probably isn’t reflective of the same rate going forward. We're going to do it pretty carefully, and part of that is we're trying to establish a new concept in our marketplace, which is personalized extended Concierge level service for people who primarily are heating oil or propane customers, but we're going to help them manage all the other services for their home. We have, I think it’s easiest to characterize as we have a few thousand paying customers paying for membership at this point, and that's our strategy that we're going to have either a monthly or annual membership to help offset some of the staffing costs to have the people that can answer the phones and provide this human touch type service. It's growing…

Okay. Great. And I would also assume too that the churn rate amongst customers who are signing up to the concierge service is likely to be much, much lower than nonconcierge customers, right?

We hope that. We don't know that factually, at this point. Right now, there's not enough data or time to -- that has lapsed to give us certainty in that. We'll probably know that in the 9 months. A better measure is a full 12-month period.

Yes. No, of course. Yes. And just to delve back on the acquisition side of things, any potential for some much larger, transformative acquisitions in the foreseeable future?

Anything we're looking at right now is pretty much within the difficult bandwidth of the size of acquisitions that we've been looking at before, a couple million up to few tens of millions, in that range. There's nothing transformative, as I say. I'd say a couple of them, if they were to take place, could be very healthy and a benefit to us because of the overlap and what the long-term synergies would be. So there's a couple or really a few that we're looking at that if we can get them to work for us and the sellers that we'd be pretty happy to have as additions. But we never know if that really works out for us in the long term. So I think the -- again, the key part is moving healthily in the same steady path we've been moving, but nothing that's going to make Star Group look very different in the next couple of years that we see right now on the horizon.

Okay, thanks for the update there. And then finally, in terms of the usual question on capital allocation, any update to what's unit repurchases versus dividend, etcetera?

We're in the market every day, buying units back to the extent that we can buy them back. And we'll still keep on -- probably, the distributions will probably go along as they have been in the past.

Okay. Terrific. Good news, thanks.

And ladies and gentlemen our next question comes from Ed Olson, a private investor. Please go ahead.

Hey guys. A little more specificity on the buyback. You announced $5.5 million, I think, on August 28. What have you bought against that?

Yes, that's a -- yes, just let me look that up. Hold on a second.

Okay. And while you're doing that, I just -- a elaboration on the propane business?

Propane is growing at a healthy pace, kind of the similar pace to what we've seen for the last 4 years. The account growth has been steadily over 10% that we're happy about, and that's pretty much the blend over all the geographies. There's some smaller groups that are growing better than that. There are some larger, more mature groups of propane that are growing just about at 10%. What we haven't been able to enjoy consistently is all the volume we've been hoping for. We've gotten growth in volume and it's been in line with prior years. But because we've spread out the geographical reach of the propane business, we've seen some very unevenness of how customers are using propane, and some of it has been kind of disappointing. Especially as you get down south, the weather effect on propane consumption to the weather-sensitive piece of the propane business has been kind of more on and off as opposed to gradient as with the heating oil components in the north.

Well, if it'll help you, in even South Carolina, we have a frost this morning.

Well, that does help. And honestly, what -- if it's going to be prolonged, we'll probably see better volumes this year down there. And what's happened in the last couple of years, we've had relatively late onset of colder periods, and then it's evacuated relatively rapidly above 50 degrees. And all of a sudden, we lose the draw in volume. So if we do have the benefit of cold, and it stays a while, I think we'll be pretty pleased with those volume numbers because I think our propane businesses have been not only growing reliably, but it's been pretty healthy. So we're pretty happy about that.

To answer your question on the unit buyback, in the fourth quarter, the quarter ending September 30, we bought back 430,000 units. And in October, we bought back 151,000 units. In November, we bought back 182,000 units. So ballpark, it looks like, on average, we're buying back between 130,000 and 150,000 units a month.

And then what is the total against the $5.5 million? What's left?

Well, as the end of November, it's a -- the total units that we can buy back is 5.026 million.

I'm not sure if I understand that, though. The $5.5 million was announced in August, and you still got 5.026 million open?

Well, there is a public part of the plan, which is 2.5 million units, and then there's -- around 2.5 million is still left for the public plan.

Okay. So has anything been done on the private side?

Nothing was done on the private side, right.

Okay. All right. Now I understand. Thank you.

You're welcome. Enjoy South Carolina.

[Operator Instructions] There appear to be no further questions. So I'd like to turn the conference back over to Mr. Goldman for any closing remarks.

Thank you, Rocco. And thank you, everybody, for taking the time for joining us today and for your ongoing interest in Star Group. We look forward to sharing our 2019 fiscal first quarter results with you in February.

Thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.