Earnings call: Superior Plus outlines strong Q4 results, eyes growth in 2024

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Earnings call: Superior Plus outlines strong Q4 results, eyes growth in 2024
Credit: © Reuters.

Superior Plus Corp. (TSX: SPB) has announced a robust finish to the 2023 fiscal year, with a significant increase in its fourth-quarter earnings. The company reported a record adjusted EBITDA of $213.6 million for Q4, marking a $31 million rise from the same period in the previous year. This performance is attributed to the resilience of the propane division and the impressive growth of Certarus. Looking ahead, Superior Plus anticipates approximately 5% growth in adjusted EBITDA for 2024, with optimistic projections for both Certarus and the propane businesses. The company also plans to transition to reporting in US dollars starting January 2024 to mitigate foreign exchange volatility.

Key Takeaways

  • Superior Plus reports record Q4 adjusted EBITDA of $213.6 million, up $31 million year-over-year.
  • Propane division remained robust despite warm temperatures.
  • Certarus saw a 21% increase in EBITDA in Q4 compared to the previous year.
  • 2024 projections include 5% overall EBITDA growth, with 15-20% for Certarus and 1-5% for propane businesses.
  • Company to begin reporting in US dollars from January 1, 2024, to reduce foreign exchange impact.
  • Focus on margin management, customer acquisition, and reducing churn.
  • No plans to hedge Canadian dollar exposure; leverage ratio target is 3.0x in the long term.

Company Outlook

  • Superior Plus expects $7 million in growth for the retail business and $10 million for the wholesale business in 2024.
  • Anticipated corporate operating costs stand at $25 million, with capital expenditures around $230 million.
  • Certarus to account for more than half of the capital expenditures.

Bearish Highlights

  • The company does not plan to hedge against the Canadian dollar due to its diminished significance.
  • No plans for asset sales at this time.

Bullish Highlights

  • Certarus is exploring longer-duration contracts, particularly in the renewable natural gas space.
  • The majority of Certarus' business is in oil and gas, but significant growth is noted in other segments.

Misses

  • The guidance provided by Superior Plus is based on the five-year average weather and has been adjusted for the warmer weather experienced to date.

Q&A Highlights

  • The company emphasized its shift from M&A integration to marketing, customer acquisition, and effective pricing strategies.
  • Superior Plus is focused on building its customer base organically and taking market share from competitors.
  • The CEO highlighted the importance of a healthy customer base for positive financial outcomes and margin management.
  • Certarus discussed the potential for long-term contracts and diversification of its business segments.
  • Both Superior Plus and Certarus aim to achieve a leverage ratio of 3 times within approximately three years, primarily through EBITDA growth.

Superior Plus Corp. has demonstrated resilience in its propane division, overcoming challenges posed by warmer temperatures, and has seen Certarus contribute significantly to its financial success. With a strategic focus on organic customer growth and market share acquisition, Superior Plus is positioning itself for sustained profitability. The company's commitment to reporting in US dollars reflects its intention to minimize the impact of currency fluctuations and underscores its forward-looking financial strategy. As Superior Plus continues to navigate the market, it remains dedicated to achieving its long-term leverage ratio target without the need for asset sales, indicating a strong confidence in its operational growth and financial management.

Full transcript - Superior Plus (SPB) Q4 2023:

Operator: Good day and thank you for standing by. Welcome to the Superior Plus Fourth Quarter 2023 Results Conference Call. At this time, all participants are in 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'll now like to hand the conference over to your speaker today, Adam Kornick, Manager of Corporate Finance and Investor Relations. Please go ahead.

Adam Kornick: Thank you, Shannon. Good morning everyone, and welcome to Superior Plus conference call on webcast to review our 2023 fourth quarter and full year results. On the call today are Allan MacDonald, President and CEO; Grier Colter, CFO; and Curtis Philippon, EVP at Superior Plus and President of Certarus. For this morning’s call, Allan and Grier will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today maybe forward-looking in nature and are based on Superior’s current expectations, estimates, judgments, projections and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior’s continuous disclosure documents available on SEDAR+ and Superior’s website for further details. Dollar amounts discussed on today’s call are expressed in Canadian dollars unless otherwise noted. I’ll now turn the call over to Allan.

Allan MacDonald: Thanks, Adam. Let me start by saying just how proud I am to be speaking with all of you today about Superior Plus. Over the past three quarters, I've been speaking with you about our priorities and our vision for Superior Plus. We stated categorically that we were transitioning away from growth through acquisition and towards organic growth through operational excellence. We spoke to you about the importance of having the right team in place to lead Superior Plus. The team makes all the difference. Smart, skilled, and inspired leaders will always find a way to evolve to new models and deliver sustainable growth. We told you we value the relationships with our customers, and we would be focusing on building a bigger base of profitable customers, challenging traditional ways of doing business, delivering incremental growth and profitability from our existing businesses, all while continuing to reduce our costs and improve returns from our capital investments. Well, in Q4, I'm proud to say we made progress on all these fronts. The strength of our team, our focus on operational excellence and challenging ourselves to reduce costs. Transforming a company as complex as Superior is a journey, and it takes time to see the fruits of our labor. But thanks to the hard work and commitment of the entire team, we're making progress every day. And we believe we have a very sustainable strategy. As you'll see in our 2024 outlook, the propane division is capable of delivering very consistent returns. With our renewed focus on operational excellence and having put the right team in place, we're confident we'll deliver growth in propane, while generating strong cash flow. The addition of Superior in 2023 created a new engine for growth for Superior Plus, and with the integration behind us, we are more focused than ever on building this business. As we look forward to 2024, we're optimistic that Certarus will continue to demonstrate its potential to become a significant competitor in an emerging and quickly growing segment. With all that we accomplished in 2023, Superior Plus has undergone a significant transformation. And today, Superior stands as one of the best positioned companies in the industry. So let me offer a few comments about our Q4 results before I hand things over to Grier. The underlying strength of our propane business was seen in our strong Q4 results. Despite record warm temperatures across North America, our propane division has managed to post consistent financial returns. This is a testament to the hard work and commitment of our local teams, the stability of our customer base, good management of customer churn and investing our resources wisely. I'm very proud of our team and I applaud their commitment to our focus on operational excellence. In Q4, Certarus continued to execute well on its growth strategy with an impressive 21% growth in EBITDA versus Q4 '23. Having '22, sorry, having reached a new high of 729 MSUs, at the end of the quarter, Certarus is well positioned for a successful 2024. The team very effectively balanced demand and MSU utilization, while at the same time staying on strategy, investing in new high growth segments like RNG and expanding beyond the wellsite with capital investments. So with that, let me turn things over to Grier to walk you through Q4 and provide some thoughts on 2024.

Grier Colter: Thanks, Allan, and good morning, everyone. We were very pleased with the performance of the businesses in the fourth quarter. The weather conditions were a bit challenging, but the results demonstrated great resilience despite this. As Allan mentioned, fourth quarter adjusted EBITDA of $213.6 million was a record Q4 for us and represents an increase of $31 million versus Q4 2022, primarily due to the contribution from Certarus which had a great quarter. Full year 2023 adjusted EBITDA was $552 million, $102 million higher than fiscal 2022 due to the addition of Certarus and an increase in EBITDA from our propane businesses year-over-year, partially offset by higher corporate costs and losses on foreign currency hedges. Our fourth quarter net earnings of $78 million compared to net earnings of $63 million in the prior year quarter. Full year net earnings were $77 million compared to a net loss of $88 million in the prior year. Similar to our growth in EBITDA year-over-year, the primary driver for the improvement here was the addition of Certarus. Earnings per share attributable to Superior was $0.23 in 2023 compared to a loss per share of $0.58 in the prior year. The increase in earnings per share is due to higher net earnings in the period, partially offset by the increase in average shares outstanding. Now turning to the businesses. Certarus achieved record adjusted EBITDA in the fourth quarter of $47.2 million growing 21% versus Q4 '22. The growth is reflective of the larger available fleet in 2023, where the average number of MSUs increased to 661 in 2023 versus 580 in 2022. On a full year basis, adjusted EBITDA was $187 million which met our elevated guidance that we issued along with our Q2 results. The U.S. propane business produced adjusted EBITDA for the fourth quarter of $113.8 million which was a decrease of $2.9 million compared to the prior year quarter. The business saw lower volumes due to the impact of warmer weather, partially offset by higher average unit margins. Average weather in the U.S. for Q4 was 9% warmer than the prior year quarter and 11% warmer than the 5-year average. Full year adjusted EBITDA in 2023 for U.S. Propane was $302.5 million an increase of $17.6 million, compared to 2022, primarily due to the impact of acquisitions, higher unit margins and the impact of weaker Canadian currency on the translation of U.S. Dollar EBITDA, partially offset by the impact of warmer weather on sales volumes. The Canadian Propane business produced $50.2 million of adjusted EBITDA in the fourth quarter, which was a decrease of $8.1 million, compared to the prior year quarter. Similar to the U.S., the decrease was primarily due to lower volumes from warmer weather and to a lesser extent the impact of divesting the Northern Ontario assets, which was partially offset by higher average unit margins to offset the impact of inflation. You'll recall as part of the closing of the Certarus transaction, we were required by the Canadian Competition Bureau to divest our various propane assets in Northern Ontario, which were sold in November 2023. In Canada, average weather for Q4 was 13% warmer than the prior year and 13% warmer than the 5-year average. Full year adjusted EBITDA in 2023 for Canadian Propane was $133.9 million, a decrease of $10.9 million, compared to 2022, primarily due to lower volumes due to warmer weather, the impact of divesting the Northern Ontario business and the impact of inflation on expenses, which was offset by higher unit margins. The wholesale propane business generated adjusted EBITDA of $16.3 million in the fourth quarter, a decrease of $6.4 million compared to the prior year quarter, which was primarily due to weaker market differentials compared to the prior year quarter. Full year adjusted EBITDA in 2023 for Wholesale Propane was $63.4 million an increase of $14.7 million compared to 2022, which was primarily due to the impact of the Kiva acquisition and exceptionally strong market fundamentals compared to the prior year. Turning to corporate results and leverage. Corporate administration costs for the fourth quarter were $8.0 million, which was a decrease of $3.0 million compared to the prior year quarter, primarily due to lower incentive plan costs with the lower share price and also lower insurance provisions. Superior realized a higher loss on foreign currency hedging contracts of $5.9 million versus a loss of $4.1 million in the prior year quarter. Of course, these hedges offset favorability in our U.S. dollar cash flows. On a full year basis, corporate administration costs were $34.3 million an increase of $8.4 million, compared to 2022, primarily due to costs related to the on boarding of new management. For the full year, superior realized losses on foreign currency hedging contracts of $9.2 million compared to $2.7 million in the prior year. Our leverage ratio for the trailing 12 months ended December 31, 2023 was 3.8 times, an improvement from 4.1 times a year earlier. While this number will continue to move around somewhat from quarter-to-quarter due to the seasonal nature of the business, our objective is to continue to improve this metric with a long-term target of 3.0x. Before I turn to the outlook for 2024, the Board has approved a quarterly dividend of $0.18 per share. So looking ahead to 2024, the company is expecting adjusted EBITDA growth in 2024 of approximately 5% compared to the 2023 pro forma adjusted EBITDA of $643.3 million or $475.5 million. Included in the expected growth, we are assuming 15% to 20% EBITDA growth for Certarus and 1% to 5% EBITDA growth for each of our U.S. Canadian and wholesale propane businesses. Note that in the case of the Canadian propane business, that we have normalized the sale of the Northern Ontario assets in the prior year, comparative number to calculate the range, and that's about US$7 million. And in the case of the wholesale business, we have normalized the impact of the unusual market differentials experienced in 2023 to calculate the growth range, and that's about US$10 million. Lastly, we are anticipating approximately $25 million of corporate operating costs and expect capital expenditures to be approximately US$230 million with Certarus making up just over half that amount. Lastly, effective January 1st, 2024 Superior will begin reporting results in US dollars. Converting the reporting currency to US dollars will reduce foreign exchange volatility as approximately two thirds of our out of data and over half our debt is denominated in US dollars. Historical comparative financial information in US dollars can be found in our 2023 fourth quarter MD&A. And with that, I'd like to turn the call over for Q&A.

Operator: [Operator Instructions] Our first question comes from the line of Gary Ho with Desjardins Capital Markets.

Gary Ho: Maybe just on the first question, you had pretty strong margins this quarter. Just wondering if you can share the competitive landscape just on the ground. Are your competitors also maintaining higher prices still a rational market? Maybe talk about the different regions. And Allan, you mentioned, in your prepared remarks, your team is managing churn pretty well. Maybe you can elaborate on this, and how are your attrition rates looking versus previous years?

Allan MacDonald: Hey, Gary. Thanks and good morning. I want to be careful about giving up too much specificity or specific data when it comes to our customer numbers, but I'll tell you we're managing our margins with the view to the impact it has on customer acquisition to our ability to grow our customer base. And then of course, how well we're managing our churn so we're not going to the well on margin to and driving customers away. And I can say overall, I'm really pleased. In pricing optimization as we looked at making sure that we're capturing the impacts of inflation, prices sometimes go up, but when you are managing it with a view to acquiring customers and not turning them, you're in the right spot. So by default, we're doing really well competitively. So I'm feeling pretty good about where we are.

Gary Ho: Okay, great. And then Curtis, couple questions for you. Just first on the MSU ads seems like pretty healthy growth for 2024. How does your backlog look? Do you anticipate any delays putting those MSU to work? And then second, last year you guys benefited a bit from -- in early ‘23 due to lower net gas prices. Seems like we're going through that again. Just want to get your views on that.

Curtis Philippon: Yes, thanks Gary. From an MSU ad perspective, you'll see us adding MSU correlated with the 15% to 20% growth that Grier talks about. So expecting consistent profitability of [Indiscernible] we're adding, the team is pretty confident on getting those deployed. We've got a backlog of projects waiting for us right now and it's more a factor of just timing of getting them from the suppliers. We're in a sold out situation here right now and just looking forward to getting these back into the fleet. One comment I'd make on the additions of the MSUs this year is we had a fairly back end year loaded for adding MSUs last year, the law that came in at the back end of the year just due to the timing of getting the deal closed and things like that. In 2024, we would expect a more even add of MSUs through the year.

Allan MacDonald: And Curtis, can you maybe talk about the lower net gas prices? Are you is that going to benefit kind of Q1 results?

Curtis Philippon: Yes, it's good. So the most part of that gas prices are effectively a pass through with our customers. And so whether we're somewhat indifferent on ups and downs, there are a few unique situations where there's some margin opportunity with low net gas prices. And so we have seen some of that in particular on West Texas [indiscernible] pricing when it gets quite low there's some interesting opportunities for margin on that. But I'd say in the overall impact of it is not really material overall. It's a pretty small part of the number.

Gary Ho: And then just my last question, Grier, just on your 0.2 current deleveraging target for 2024, maybe walk me through kind of components to get there. Any debt repayment there at all or driven or is this primarily driven by your projected EBITDA growth? And are you assuming any buybacks in that leverage reduction?

Grier Colter: Yes. Okay. So I think the delevering, Gary, is the most part it will be driven by EBITDA growth from the business. So it will be less from outright debt reduction. We're also looking into managing the working capital of the business very carefully and maybe some of it will come from that. With regards to buyback, I would say that our priority here is to make sure that the businesses have the right amount of capital to grow and to maximize medium and long-term value. And we're obviously we've got our deleveraging as a very high priority. And I think those really sit really high for us in terms of our priorities. And so the reality is buybacks, if any, will be pretty minimal because from a prioritization standpoint, they come after those things, if that makes sense.

Operator: Our next question comes from the line of Aaron MacNeil with TD Cowen.

Aaron MacNeil: Allan, this one is similar to Gary's question. You obviously made a big change at the top of the propane division this quarter. You've spoken about the optimization. So where exactly are you in this process? I mean, are you just at the stage where you're getting the right people in the right place? Is Q4 margins an indication of things you've already done? Or is there something specific you can point to that you've changed that we'll see flow through in the next few quarters?

Allan MacDonald: We didn't hear it. Sorry, our line dropped, Aaron. Could you repeat it?

Aaron MacNeil: Yes. No problem. So this one's for Allan, focused on the propane division. You've obviously made some changes there. You've spoken about optimization in the past. So could you just give us a bit of a sense of where you're at in this in the process? I mean, is the focus so far on getting the right team in place? Is Q4 an indication of improving margins from optimization efforts? Or is there something specific that you can point to that Superior's changed to improve profitability that we'll see flow through in the next few quarters?

Allan MacDonald: I would say that Q4 is really our starting point. I mean, we've been focused on, understanding what the opportunities are in the business and the best way to get at them and then having the right team in place to make that possible. Can you hear me okay by the way?

Aaron MacNeil: Yes, loud and clear.

Allan MacDonald: So, early days. What we've done really now is set ourselves up to say, we know what our priorities are. And they're going to be very straightforward like I talked about in the call. So that we've got a great team on this propane organization, great team. And what they need from us is a clarity around what our priorities are, and the resources to help to extract the value that we own what was there. And that's just really doing the basic blocking and tackling really well, acquiring customers, optimizing the pricing and managing your churn, all while you're keeping an eye to really good decisions around capital investment and managing your costs. So with the work that we did in Q4, I would say that the business is very, very stable. The team is really engaged, which is really good news. We've got line of sight into where those opportunities lie and now it's just about blocking and tackling, just getting in there and doing the work. So what you're going to see I think is first stability, then improvement and then a continued new level of performance expectation for us. We think this business has a lot of legs. There's lots and lots of opportunities. So it's incumbent upon us to execute well, be really focused, be mindful of not having too many things to do, and investing wisely. So no big bangs and but also I'd say this is the starting point, certainly not the finish line.

Aaron MacNeil: The next one is for Curtis. Maybe just ignoring demands, which seems pretty robust. What do you see as the governors to your growth from an internal perspective? Like is it supply chain, people, infrastructure? And I can appreciate that you've grown more in percentage terms in the past. It sounds like you're pretty confident that all the growth this year will go to work at good economics. But do you start to worry that you'll see inefficiencies in the business either through utilization or profitability, just given how large the growth is in absolute terms this year?

Curtis Philippon: From an overall growth percentage, this is not one of the bigger growth years. For Superior, we've had bigger percentage increases in previous years and so the organization is quite used to a growth mindset. When I look at what we've got in front of us and where is the opportunity and where is the challenges, the biggest bottleneck to growth is just the time it takes to build up teams to go support the equipment. So we have a highly engaged differentiated workforce that's outdelivered in CNG and RNG and hydrogen for us. And it take time to build up those teams in different regions and to scale up to support the new equipment coming out. So that's where we spend the majority of our time.

Operator: [Operator Instructions] Our next question comes from the line of Robert Catellier with CIBC Capital Markets.

Robert Catellier: I just wanted to follow up Allan on the propane business, and how you plan to ring out more efficiencies there. You talked about the blocking and tackling, so it sounds like there's a number of things thereafter, but what are the measurable operating or financial metrics that you're most closely following to measure your success there? Does it really just come down to unit margins or is there something else that we should be tracking?

Allan MacDonald: Hey, Rob. Look, unit margins are a funny indicator when it comes out because, we need to be focused on profitable businesses and profitable customers, not necessarily volume. And to be honest, volume's going to fluctuate, obviously with weather and the quality of the customer that we take on. So for us, it's -- let's build a really strong customer base. When we talk about organic growth, what that really means is acquiring more customers, but doing it with an item profitability. So for us it's -- if we can continue to build our base organically and let's be clear, this is about taking care. It's a modestly growing segment, but we think with the right focus really, really well positioned to take share from our competitors. We've got great assets. So transformation from an M&A focused organization, as you'd expect means all our -- a lot of our expertise and our focus has been on integration synergies. And now that's got to shift to being about doing great marketing, being great at acquiring customers, being great at pricing effectively. Making sure that our customers are profitable, managing churn. So a very long-winded way of saying the size and the help of the customer base is what I'm most concerned with, and that's going to translate into great financial results, effective use of capital and good margin management. So that's all I'm thinking about.

Robert Catellier: Okay. That’s helpful. I have a number of financial questions here and I don't want to -- the call down too much, so if, we have to take some of these offline, that's fine. Grier, I just wanted to talk about the guidance. I assume your guidance is based on the five year average weather. Can you please confirm that?

Grier Colter: Yes, good question, Rob. So it is based on the five year average weather. However, we did adjust it for year-to-date warmer weather than we've seen. We've obviously seen it warmer so far this year, relative to the five year. So we adjusted that up to the release date, essentially. It's been kind of brought current, but for the remainder of the year. So from this point forward, yes, it would be based on a five year average.

Robert Catellier: Okay. That's very helpful context. And then, I just want to talk about the plan to report U.S. dollars. First of all, what are you going to do with your hedging, what's the plan for there for currency hedges, and is there a possibility that you monetize some of the unrealized currency gains?

Grier Colter: Yes, obviously, the exposure goes down pretty significantly. Looking up from the US dollar sample, obviously you got exposure on the Canadian side. It's now kind of a third roughly of our EBITDA, of course. Then we get into a conversation about whether you actually had EBITDA. So if you actually look at our cash flows, after debt costs and taxes, we actually don't have as significant an exposure certainly if you look at it relative to EBITDA. So our thinking at this moment is our economic exposure is not that significant, and we probably will not do hedging. I mean, this may change and we'll continue to evaluate it. But we're no longer thinking we'll hedge EBITDA, which was a previous practice. So, A, we got lower exposure. B, the concept of hedging out of, it's probably not something we'll do. We'll be more focused on economic or cash flow hedging or balance sheet hedging, if we do it at all. But at this point, there's no hedging on there's no positions on to hedge the Canadian exposure as we are sitting here. So we had some hedges on from the legacy U.S. Dollar exposure when we were a Canadian dollar reporter. We crystallized those the first of the year. And there, I don't have the number in front of me exactly. It's order of magnitude roughly $10 million of losses that were crystallized that would have been running through. But, obviously, these hedges were no longer relevant, so we crystallized them and put that behind us.

Robert Catellier: Last question and I'm getting into the weeds here a bit, but what is the impact to adjusted EBITDA no longer including the hedge contracts in adjusted EBITDA or segment profit? Presumably, you've already adjusted the guidance to take that into consideration?

Allan MacDonald: Yes, I mean, so if you look at the way we had it before, kind of like in the last quarter is probably the best example, you've got hedge losses, but of course, there's higher earnings coming through the EBITDA in the business lines. And so there's an offset going forward. There would not be hedges and then we're exposed obviously to now the Canadian dollar. So obviously, the Canadian dollar is stronger than our results. All things equal would be a little bit better, right, in U.S. dollars. So there'd be no offset from the hedge, but it's not hedge.

Operator: Our next question comes from the line of Daryl Young with Stifel.

Daryl Young: Just a quick one around Certarus. And I'm just wondering if you can give us a bit of color on the customer mix and specifically which end markets are absorbing the new incremental MSD? And I guess the background would be wondering if the utilities are taking a bigger slug and if the cold snap in January had any impact on utilities appetite for backup sources?

Allan MacDonald: Thanks, Daryl. I think the big, one of the big customer segments we look at is that utility space and LTCs right across Canada and the U.S. are facing challenges with infrastructure that they've got gaps in their infrastructure. And one of the biggest growth areas for Certarus is helping these LDCs bridge those gaps in their infrastructure. So I wouldn't say that we necessarily had a specific weather impact spike in the last few months related to that, but more just an ongoing challenge that all these LDCs face and that we're not building new infrastructure at the base that's needed for energy demand. And they're needing to find creative ways to bridge gaps in their infrastructure. And increasingly as Certarus gets to be more well known for that, we're being called to be brought in on a very large scale projects, they're high profile, but also just a lot of smaller situations that virtually every LDC in North America faces, where there is they need some sort of reinforcing in their natural gas pipeline networks, either short-term or long-term to sort of make sure customers are getting their energy. So increasingly that's a very significant part of our business and it will be one of the biggest growth areas for us next year.

Operator: Our next question comes from the line of Patrick Kenny with National Bank Financial.

Patrick Kenny: Maybe just a follow-up on the customer mix question there for Certarus, but specifically the Curtis, the 20% plus ROIC that you've been generating here. Wondering how you're thinking about potentially trading higher returns for, say, longer duration contracts with, for example, the LDCs and whether or not over the next couple of years we might see a slight shift in your cash flow quality profile?

Curtis Philippon: I think you'll see that over time as you get into more contracted products. I think the one prime example of that would be the renewable natural gas space and that typically those RNG projects that we're getting into, they're looking for long-term contract commitments and that is a different economic structure for those types of contracts. We have sort of 5-year and potentially longer than 5-year contract terms on those, but they can be structured a little bit differently and ensure the returns we're looking for. But you obviously price it a little differently than you would say a spot deal.

Patrick Kenny: And sorry if I missed it, but the current percentage of customers that are oil and gas based and maybe where that's headed over the next say 1 to 3 years?

Curtis Philippon: Yes. It's still the majority of our business is just over half is in the oil and gas drilling and completions activity, but we've seen significant growth in those other segments. And I like to always keep reminding people that over the last couple of years, we've been deploying the majority of our capital into these beyond wellsite applications just to make sure we're continuing to diversify the business. And expect to see that again in 2024 with the majority of the capital going into the beyond wellsite applications. In saying that, our oil and gas business is a great business. It will continue to grow. We just know long-term that there is a real benefit to make it clear. We've got a very diverse spine portfolio.

Patrick Kenny: And then maybe just for Grier, on the leverage target, achieving your 3 times ratio mainly from growing the EBITDA, but wondering your thoughts around asset sales as potentially being part of the plan to accelerate that time line to reach your target level?

Allan MacDonald: So currently, our target to get to 3 times, we think we can do this in roughly 3 years, and we don't, we wouldn't need to rely on asset sales, I think. So there are no plans. I think we like the businesses we have. We like the footprints. There's nothing that we're actively looking to sell. Obviously, like at certain prices anything is for sale, which kind of goes without saying, but as I say, there's nothing that we have on the path and don't need to do that to achieve our objectives.

Operator: I'm currently showing no further questions at this time. I'd like to hand the call back over to Allan MacDonald for closing remarks.

Allan MacDonald: Well, thanks very much everybody. We appreciate obviously your time and engagement on our business here. And I'd like to take the opportunity to thank of our employees at Superior for their continued contribution, our success, their focus on safety and reliably serving our customers. It wasn't for our employees. None of this would be possible. Thanks for your participation, and look forward to speaking with you all through the course of the next quarter. Have a great day, everyone. Over to you, operator.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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