Welcome to the UGI Corporation Q4 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Tameka Morris. Please go ahead.

Good morning, everyone. Thank you for joining our fiscal 2024 fourth quarter earnings call. With me today are Mario Longhi, UGI's Board Chair; Bob Flexon, President and CEO; and Sean O'Brien, CFO. On today's call, we will review our fiscal 2024 financial results and key accomplishments as well as the strategic priorities and financial outlook for fiscal 2925 before concluding with a question-and-answer session. Before we begin, let me remind you that our comments today include certain forward-looking statements, which management believes to be reasonable as of today's date only. Actual results may differ significantly because of risks and uncertainties that are difficult to predict. Please read our earnings release and our annual report for an extensive list of factors that could affect results. We assume no duty to update or revise forward-looking statements to reflect events or circumstances that are different from expectations. We will also describe our business using certain non-GAAP financial measures. Reconciliation of these measures to the comparable GAAP measures are available within our presentation. And with that, I'll turn the call over to Mario.

Thank you, Tameka, and good morning, everyone. Fiscal 2024 was a pivotal year for UGI as we embarked on a multi-year journey to enhance our financial profile. Strong execution against our strategy led to the company realizing the highest adjusted diluted EPS in its history. We took decisive actions to strengthen the leadership team, create greater operational efficiencies, and improve our balance sheet. I'm proud of our people who have come together and worked diligently to achieve these results. Now, I'm pleased that Bob has taken the role as President and CEO of UGI. Bob brings strong leadership, extensive experience, and in-depth knowledge of the energy industry. He has a proven track record of leading companies to create significant value. And with his leadership, I'm confident that UGI can be better positioned to meet the needs of our stakeholders. And now, I'll hand the call over to Bob so he can share his opening remarks.

Thanks, Mario. And good morning to all of you. Let me start by saying that I'm honored to rejoin UGI with its rich history and a solid reputation for integrity, excellence, and a deep commitment to customers and the communities in which we serve. I also want to express my gratitude to Mario for his strong leadership and contribution as Interim President and CEO, and for the effective and efficient transition that has taken place. Over the past few weeks, I have been getting up to speed by engaging, listening, and learning more about our customers, our operations, and strategies for each of our businesses. Post our call today, I hold the opportunity to engage more closely with our business partners and shareholders to gain alignment as we drive the company forward, focusing on what matters, leveraging our competitive advantages and to generate greater shareholder value. Later in the call, I will share with you the strategic priorities for the current year. But now I'll hand it over to Sean to cover UGI's fiscal 2024 accomplishments.

Thanks, Bob, and good morning. As Mario mentioned, UGI had a strong fiscal 2024, delivering record adjusted EPS of $3.06 and a five-year EPS CAGR of 6%. Three of our business segments delivered their strongest EBIT on record due to higher margins and sustainable cost savings. These benefits helped offset the impact of lower financial results at AmeriGas as the business continue to experience volume decline. Earlier in the year, we shared several key areas of focus with you. One was to achieve permanent cost savings of $70 million to $100 million by the end of fiscal 2025. As noted on the slide, we achieved a $75 million reduction in operating and administrative expenses this year, accelerating the previously anticipated timeline. These cost savings were achieved through right-sizing operations and driving efficiencies within our business processes. Next, a key priority was to realign our capital allocation model to the business strategy. In fiscal 2024, we returned approximately $320 million to shareholders through dividend payments, building a 140-year history of consecutively paying dividends. Over the past 10 years, UGI has provided a dividend CAGR of 6%. We were disappointed deploying capital. Of the roughly $900 million of capital, 80% was allocated to the natural gas businesses. Specifically, at our regulated utilities, we deployed approximately $500 million, primarily in infrastructure replacement and betterment, where we replaced roughly 109 miles of pipe and made noteworthy updates to our infrastructure. At the midstream businesses, we completed construction of the Moody Project, which is expected to produce up to 300 MMCF of RNG per year, once fully operational. The team also began construction of the [Carlisle] (ph) LNG storage and vaporization facility that is expected to come online at the end of calendar 2025. The facility is backed by a 15-year contract with the gas…

Thanks, Sean. Before we open the line for questions, I want to highlight our key priorities for fiscal 2025. When I look at the pathway to improving UGI's overall performance, at the core is understanding our talent and acting on identified gaps. We need to establish the environment or culture that drives the desired performance and outcomes. We must be relentless in the accountability for executing against the strategy. This will likely result in assessing and redesigning our core business processes, our ways of working, to drive operational excellence, strategic alignment, and greater efficiencies. At AmeriGas, fundamental change is needed to reduce customer churn, win back customers, and drive performance in that business, assuring we remain customer focused. We must get back to where customers want to do business with us, and we are their propane provider of choice. While the company is taking action in some of these areas, we are in the early stages, and so fiscal 2025 will be an important year to drive stability and subsequently better business performance. Next is focusing on optimizing our overall LPG portfolio, pursuing opportunities where the economics make sense to monetize assets, and moving the company to become more heavily weighted to natural gas. With the execution of these priorities and the continued focus on right sizing our balance sheet, the intent is to improve UGI's financial profile for the benefit of our stakeholders. In closing, I'm excited for this opportunity in driving the company forward. There's a lot of work to do, but the progress is well underway, and I look forward to providing more updates as we progress. We appreciate your time with us today, and now we will open the line for questions.

Certainly. [Operator Instructions] One moment for our first question, which will come from Julien Dumoulin-Smith of Jefferies, your line is open Julien.

Hey, good morning, team. Thank you guys very much. Hope you guys are all well and Bob, congratulations again on the role. Nice to see you back in the seat here.

Yes, thanks.

Absolutely, nice to chat with you guys. So maybe just following up on a couple things here. I mean, obviously you continue to highlight some of the challenges of AmeriGas. Maybe just to kick it off there first, how do you think about your mandate in coming into the firm here, specifically as it pertains to the strategic direction of AmeriGas? I mean, obviously, there was perhaps a former strategy here, how is that -- how did your point and then how do you think about the opportunity exists within AmeriGas at this point?

Thank you, Julien. And then focusing specifically just on AmeriGas on your question, that the immediate action for AmeriGas is really to solidify the business, bring stabilization to it. We've had a good running start of fixing a lot of the past practices that were contributing to the churn of customers. Long way to go, but we've got teams mobilized and there'll be some supplemental talent coming in as well, but right out of the gate, what we need to do is to stabilize that business. I operate under the principle that from a capital allocation standpoint, each business needs to support itself. So AmeriGas needs to support itself. You're not going to see funds going from the parent company down to AmeriGas. So AmeriGas has to perform. AmeriGas has to work on their balance sheet. And a AmeriGas has to work on providing excellent customer service and really fix our business processes that have gone array over the past few years. So that's where I see spending a lot of my time will be on AmeriGas to really focus on those things and getting the performance up stabilization and driving the cash flow there.

Right. So it sounds -- just to make sure I'm hearing that right, so no further equity going into AmeriGas at this point, and no specific timeline on any kind of strategic action to potentially review for an investment at this point. Sounds like more internal focus, turn around the metrics first before going back to any kind of conversation about what to do with it, right?

Yeah, so I'll reiterate that. So no equity going down to AmeriGas. It has to support itself. It has to manage its own balance sheet and that's -- I can really expand that to the entire LPG business and then I would also say that what we can control right now is to make that business perform better. Strategic spots and actions and opportunities may arise and I’m not ruling anything out in that from that standpoint but what we can control right now is making that business perform better and that's where the focus is to do that. I think that will drive the most value for our shareholders to get this thing stabilized as quickly as we can. And like I said, a lot of good things have been happening over the past year, and we're going to keep that momentum going and expand the improvements.

Awesome. Excellent. Thank you. And then just, if I can follow up more strategically -- more holistically here rather, as you think about the balance of the businesses here, how do you think about the opportunity for more of a review from a cost perspective or otherwise strategically around the balance of businesses here?

Well, Julian, when you take a look at -- and I know you know this quite well. When you take a look at the utility and the overall natural gas business with energy services as well, I mean the utility, particularly when you benchmark it across the country, it's the best-in-class. And you know I look at our trading multiple of 8 times and you think where the UGI utility natural gas business, where that multiple should be dramatically higher. It should be best-in-class given the construct of the regulatory environment in Pennsylvania, the low risk, the pretty deep capital program that provides plenty of opportunity for investment. So that's really just a top-desk style utility in this country. And Energy Services brings great synergy to that business. It's a great customer and supplier to the utility. And when you think about the demand of what's happening in PGM for natural gas and the opportunities that energy services has to be involved in that given the footprint of that business, the demand for power, the demand for additional natural gas is going to provide opportunities for energy services. So the overall natural gas business is really sitting in just a fabulous situation. When I was here back in 2011, energy services did not have the physical assets behind it like it does today. So it's really a dramatically -- it dramatically evolved business that has great synergies not only for the utility, but then also allows you to experience excellent upside with market demand whether that's for additional power that's coming via the investment in data centers or weather driven when you have spikes in cold weather. So it really is a strong franchise on the natural gas side. So I think that actually -- they run very well. They've got great opportunities. So, again, when I think of allocating my own time, it's got to be to make sure that we're running the LPG side of the business really, really well, and we'll think about opportunities how to maximize value longer term.

Awesome. All right. I'll leave it there, guys. Thank you so very much. Best of luck to you and the team, okay?

Thank you, Julian.

[Operator Instructions] Our next question will be coming from Gabriel Moreen of Mizuho. Your line is open.

Good morning, everyone, and welcome, Bob. Look forward to working with you. A couple questions if I could maybe on guidance both near and near long term. Just around AmeriGas, I know you're assuming normal weather, but can you speak to maybe what you're assuming around stemming customer attrition going into fiscal 2025, how that may compare year-on-year?

Yes, I can take that Gabe. AmeriGas going into 2025 on the volume metric side, there's still work to be done, if you listen to some of Bob's comments. So we are assuming continued volume declines from 2024 to 2025 as the team really works on turning that business around and stabilizing it. So you would expect if you're modeling that to see volume declines continue. On the positive side, if you looked at the 2024 results on the AmeriGas side of the equation, there was -- we were able to drive some efficiencies in costs. I think costs were down $17 million. And then on the capital conservation side regarding AmeriGas, I believe capital was down about $50 million. So we're trying to make sure that we're controlling the levers while the business is really focused on volumes and really getting that under, as you said, you heard Bob say stabilized. So for 2025, continued volume declines as the business stabilizes. We're pulling all the levers we can to make sure that the variable nature of cost and capital that we see those efficiencies as we continue to turn the business around.

Great. Thanks, Sean. And then maybe if I can ask on midstream, and I appreciate some of the additional disclosures in this morning's presentation. One, [indiscernible] guide for next year. When you think about some of the marketing uplift you experienced in 2024, I'm wondering kind of what you are not slotting in for 2025? And then also kind of thinking bigger picture longer term to Bob's comments earlier about, I think some of the value in these midstream services. Can you just talk to how you're pricing these services currently? And whether you think over the medium to long term there will just be a natural uplift maybe in terms of some of the pricing behind some of these peaking services in particular?

Yeah, sure. The first one – I'll cover the first one on the -- I mean, when you look at Q2, Gabe, Q2 was incredibly strong, right? We saw some pockets, and Bob was alluding to it earlier, where you had some cold weather spikes, and our capacity business that takes advantage of various basis points and our access to gas had an incredibly strong Q2, if you go back and look at it, it really stood out. So we would not -- in a normal forecast, a normal budget, we would take that back down to normal levels. But it's a great opportunity if we continue -- this year we see similar opportunities like that for that business to really set up well for those types of opportunities. In terms of growth, maybe I'll just highlight some of the growth that we have in play. We've got two LNG facilities, Carlisle and Manning. I think Carlisle comes online in Q1 of 2026. Manning will be Q3 of this year. So it'll have some impact on this year, but we are -- even though we've been very capital disciplined, we have applied capital to that midstream energy services business. On the RNG front you have three facilities coming in fiscal year 2025, one in Q2 and Q1 and one in Q3. So we have kept a little bit of the growth engine going there. In terms of future opportunities, I think Bob hit it. You've got PJM really looking to control power costs and to add some increased generation, which will drive gas demand. You have the potential. We're in a very good spot in Pennsylvania and West Virginia for data centers. So all this should have some favorable impact on future contract and future pricing. And I think we're set up very well to play a role in that increased demand as it goes forward. But in 2025, I'll be clear, we don't have -- outside of the growth I mentioned, there is none of that in the forecast. So that would be post 2025 potential upside for the company.

Thanks, Sean. Appreciate it.

And I would now like to turn the call back to Bob Flexon, President and CEO for closing remarks.

Thank you, LaTonya. I appreciate the attendance at the call today. I'm thrilled to be back at UGI. I want to thank Mario for the work that he's done over the past year on stabilizing the company and getting improvements launched underway. So this is a handoff in flight. So we have great progress already and that will be certainly my focus over the balance of the new fiscal years to bring that stabilization and improvements to the business so we can generate the right level of cash flow, get the right valuation on our stock, which seems to be dramatically undervalued given the multiple that we trade at. And we have lots of opportunity here. And like I said, I'm thrilled to be back and look forward to engaging with all of you as we go forward. And with that, LaTanya, we'll end today's call.

Certainly. This concludes today's conference. Thank you for participating. You may now disconnect.