All right, I'm slowly going to get started here as you take your seat. Thank you all very much for joining us today, both in person and on the webcast. We're really excited to be sharing this presentation with you today. A lot has gone into it, and we're really excited and hope you are too. For those of you who I haven't met, I'm Chris Lichtenheld. I joined the company last fall as Vice President of Investor Relations. We will be making some forward-looking statements this morning, so I'd encourage you to review that content at some point. In terms of agenda this morning, Allan will make some opening remarks, and then you'll hear from each of the leaders in our propane business over the course of the morning. We'll then take a break, a short break.
After that, we'll regroup and we'll go through Soteris, some of our interesting technology initiatives, and Grier will wrap up with some financial conclusions. After that, Allan will have some closing remarks, and then we've got a Q&A session, and we've left a fair bit of time for Q&A. If you don't mind just holding your questions till the end so we can get through everything on time, that would be great. After that, for those of you in the room, we will be having lunch. Thank you all again very much for being here, and I hope it's a great morning. Before I pass it to Allan, we have a short video we'd like to share with you, and then we'll kick it off.
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For over 75 years, Superior Plus has been more than an energy provider. We've been a trusted partner, delivering the fuel that keeps businesses thriving and communities moving forward. Every day, we power progress, delivering propane, compressed natural gas, and renewable energy to more than 750,000 customers across North America safely, reliably, and efficiently. With 4,500 dedicated employees and 650 locations across Canada and the United States, we reach businesses and homes wherever energy is needed, backed by a relentless commitment to service and reliability. Safety isn't just a priority; it's our foundation. We challenge ourselves to do better every day, building world-class teams and operations to drive our success. We are on a bold journey to become North America's best-in-class energy solutions provider, driving innovation, expanding our customer reach, and setting new standards for service. This is our mission, our momentum, our future. Superior Plus, powering what's next.
Good morning, everyone. Thanks so much for coming here today. It's so good to see you all. A long-anticipated investor day for Superior Plus. I would be remiss if I didn't thank you for your patience. I know you've been looking forward to this day as much as we have. The more time you have, the more time you use to plan. It's been a long couple of months for us, and it'll be good to see you tomorrow. You can tell from the video, this is a company with a lot of history, both in Canada and on all the companies that make up Superior Plus across the whole continent. We've got a team of people that are incredibly proud of what they do, and so they should be. It's really nice to see.
I have to laugh because we talk a lot about propane in the agriculture sector, and I grew up on a farm. The farmer that I worked for at the dairy farm did not believe in heating the milking shed like our customers do today, and I wish he had. We are really excited to share our vision with all of you today and the strategy we have to execute for Superior for the next generation. What we are really talking about today is this transformation to sustainable, profitable growth for our company, how we are using our existing assets to perform better, how we are creating a new operating model, and positioning Superior Plus for growth and incremental profitability for many years to come. Now, having a great team is central to your success in an endeavor like this and running any successful company.
The people leading this organization are as passionate a bunch as I've ever met. They're the future of Superior Plus, and the role they play is incredibly important. We have a team made up of people from outside the industry that have a long history of transformation, who are change agents, and a group of people from within the industry who bring decades of experience and understanding of just how the propane and CNG sectors work. Like I said, they're as committed to our success as a group I've ever worked with. Today, you're going to hear from Steve Quinn, our Chief Transformation Officer. Steve's going to outline Superior Delivers and the transformation that we're undergoing. We've got big ambitions, and we're executing with discipline and a data-driven approach. Tommy Manion's going to come up after Steve, our Chief Operating Officer for Propane. Tommy's a 30-year industry veteran.
He's thinking differently, and he's challenging traditional operating models in how propane works across North America. Rick Caron is going to talk to you about our plans to grow organically. Rick's our Chief Commercial Officer, and he's going to talk about how we're investing in tools to acquire more customers, retain them longer, and transition to driving customer lifetime value. Sean Vaman is the President of Wholesale, and he's going to give us an overview of the Wholesale division and how that strengthens Superior's role as a leader in the propane sector. After that, in a break, you're going to get to meet Dale Winger, our new President of Soteris.
There's a tremendous future for CNG, and Dale is the right leader for this new era, how we're going to be capturing growth, focusing on operations, and maintaining our position as the market leader in compressed natural gas, renewable natural gas, and hydrogen. Following Dale, Ash Rajendra is going to come up, our Chief Information Officer, and talk about how we're investing in technology to make all of this possible. Finally, Grier Colter, our Chief Financial Officer, is going to walk through the financial implications of our strategy and how we're setting new expectations for financial performance for Superior Plus from this day onward. Before Steve, let's talk about this great company and why I'm so confident in our journey. Starting with purpose, vision, and mission, a lot of people would say that's table stakes. For us, that's our guiding light.
We got together as a team early last year and spent a few days evaluating where we were, what the challenges were in front of us, and we wanted to set a stake in the ground for how we were going to focus and how we were going to work together as a team. Our purpose, mission, and vision are really about how we work, what we value, and what would be required to build the Superior that our investors expect: sustainable financial performance and profitable growth. Our vision is interesting to be recognized as North America's best-in-class energy solution provider. Two words there or turns of phrase that are really important. One is recognized, and the other is best-in-class. That's in the eyes of our stakeholders, our customers, our investors, and our employees. They get to decide. It's their expectations that we have to live up to.
It's a high bar, but it forced us to focus long-term, gave us the courage to challenge everything, and the obligation to stay focused and never be distracted and never think short-term. Our mission is what we value and how we work. I'm hoping that you'll see these themes throughout the day: our relentless focus on safety, how we challenge ourselves every day to achieve that high bar that's set by our stakeholders, that we've built a world-class team and identified that that's imperative in terms of our success, and that above all else that we're retaining, attracting, and knowing our customers because they're at the heart of everything that makes us successful. Why did we choose this path, and how are we executing on our vision to make it a reality? Superior Plus is a unique company.
Every year, we make 2 million deliveries across Canada and the U.S., making us one of the top three propane providers in North America. We have 500 locations and a fleet of 2,100 delivery vehicles. Superior operates in the most coveted markets on the continent, serving over 750,000 customers a year. We deliver critical energy services to businesses, farms, and homes in communities from St. John's, Newfoundland, to Vancouver, British Columbia, Bangor, Maine, to Bakersfield, California. With CNG, we have a fleet of 850 MSUs and over 20 hubs. We deliver almost 30 million MMBTUs a year, and we are the standalone leader in over-the-road CNG, RNG, and hydrogen. Soteris pioneered over-the-road CNG and created solutions for industrial companies to safely and reliably adopt CNG beyond the pipeline, reducing their cost to operate and their carbon output. Soteris changed the game, and it's just the beginning.
Superior is in a position of strength both in propane and CNG, and we see a world of opportunity. In propane, seasonality, weather, and market trends have led many to believe this is a market in decline. The reality is quite the opposite. Despite conservation and electrification efforts, our research, our history, and PERC data—PERC is the Propane Education & Research Council, sorry—are affirming that propane is and will remain an essential low-carbon energy solution beyond the pipeline for years to come. This is a unique market. 71% of the share in propane is in the hands of independent retailers, and it is growing. There is no clear market leader, no innovator, no disruptor. That is our opportunity. We are in a position of strength.
We can capitalize on our scale, invest in the tools and capabilities to be that disruptor, to increase our share, which, despite our size, is only 6%: 750,000 customers in a market of 50 million households and businesses that use propane across the continent. With CNG, it's about growth. Demand for industrial energy is increasing across all sectors. With almost 50% share, Soteris is uniquely positioned. We have the fleet and reach to continue to grow with the market and provide energy solutions to more customers in more verticals, but we'll be diligent, maintaining our focus on operating efficiency, being smart with our capital investments, and growing with the market, not ahead of it. Let's talk about our strategy to take advantage of these impressive assets and market conditions to create a high-performing company. Shareholder value at Superior Plus will come from these three pillars.
First, operating efficiency: unlocking incremental profitability, reinventing our operating model, modernizing our tools and processes, embracing data, and reshaping our teams. This will all result in lowering our operating costs so we can deliver more energy with more efficient routes, with fewer trucks and fewer locations. Second is growing the business. We're in attractive markets and the best geographies, but we haven't been acquiring customers organically. We've underinvested in the marketing and the capabilities to continue to grow. Today, we're thinking differently. We're focusing on capturing a bigger share of those 50 million homes and businesses. Our third pillar is our financial performance. Over the past two years, we've been working hard to establish a solid financial base for Superior Plus, stabilizing our financial foundation so we can think long-term and invest in this transformation. What you're going to see today, I think, speaks for itself.
Superior Plus will be delivering substantial free cash flow from here forward. Why are we convinced these markets hold this value? You're going to hear a lot more from the team about the opportunities in the segments, but this industry is so often overlooked or misunderstood. In CNG, it's obvious our customers have grown dramatically. They've created a new industry for over-the-road CNG, and they've got strong unit-level economics. You're going to hear from Dale that we remain the market leader. Our scale, our fleet, and our hub network, along with our safety record, mean we're perfectly positioned to grow profitably as the CNG market expands with existing verticals and into new geographies and industries. Propane customers represent a very attractive opportunity for us, but you have to think about customer lifetime value. Seasonality and weather cloud the value proposition within the propane customer base.
This is a stable base that has a very high cost to switch. It could be very profitable if we stay focused on retention, offering competitive pricing, and creating an excellent customer experience. Like many direct-to-customer businesses, density is the key here. The value proposition, the price, and the cost to serve all depend on density. Let's look at why large propane companies haven't captured this true potential within the industry. This is what we call the negative value cycle. Now, large propane companies, Superior included, have failed to capitalize on this market and let independents take more share. Why? There's a vicious cycle that's befallen us and others. Weather, inflation, seasonality, and declining share have put pressure on these organizations to deliver the results, especially public companies with quarterly growth expectations.
A normal reaction that's too often used is monetizing your customer base, responding with raising prices to offset this financial pressure. As you raise prices, you drive churn. Churn is incredibly costly to this business. Churn creates lower density. Lower density means less efficient routes, underutilized assets, excess capacity, higher cost per customer to serve, and ultimately, further lowering your margins. The further financial pressure on results means the cycle repeats itself. The impact of this negative virtuous cycle is perhaps most felt in the long term. Companies in this cycle are too distracted with short-term performance and cost pressure to invest in the capabilities to break free. They've underinvested in things like customer acquisition and retention. I can tell you firsthand, this was our experience. Our marketing budget was incredibly low, and until 2024, we had no leader of customer retention at Superior Plus.
In fact, we did not have a means to even measure it accurately. The customer experience investment that is required to continue to serve your customers well, to share information, and to engage them is in decline. You underinvest in other tools like the capabilities to operate more efficiently at scale, especially if, like us, you have grown through mergers and acquisitions. In the end, the result is the operating model becomes static. It becomes outdated, with every passing year less and less effective. Now, we are in an attractive industry. It is very stable. We have a profitable customer base, but we are not growing or capturing the true value. As an industry, we are losing share to independents. Ask yourself how many other industries are in a similar position. The answer is very few. The only solution here, only solution, is to break that cycle. You have to transform.
You have to reinvent yourself, and you have to capture the opportunity in this market. If we don't do it, someone else will. That's what Superior Delivers is all about. It's not a cost reduction exercise. Although addressing cost is important, this is a transformation. We're building an industry-leading cost to serve using new capabilities to deliver more energy more efficiently with lower costs and fewer assets. It's about growing our share, putting those lower costs to use by investing in lowering prices, capturing share, and creating a customer experience beyond anything our competitors offer today.
It is about acting like the company we are, from source to home or business, using our world-class wholesale business as a competitive advantage, really for the first time, procuring propane at the source and having to supply where we need it, when we need it, without incurring the costs that third parties charge our competition for that same capability. Superior Delivers, ultimately, is about breaking that negative value cycle, modernizing our model, lowering our costs, and being obsessed with customer lifetime value, not being distracted with short-term results that come at the cost of the future of the company. It is about getting serious about investing and growing our share well beyond 6%. At Soteris, we have different opportunities. From 2022 to 2023, we went through a period of incredible growth. The team accepted that challenge. They captured the growth in the market, building incredible market share.
They did a great job investing in the business and building a world-class operation. Excellent job. Soteris is the market leader in over-the-road CNG today with over 20 hubs and a fleet of 850 MSUs and an impressive 44% share. Now market growth is normalizing, and we have to adjust accordingly, and we will. As Dale's going to outline, Soteris is in a very attractive market, but it's one in its infancy. As demand for energy grows, so too will Soteris if we stay focused, focused on what's been key to our success: continuing to be the market leader, growing with the industry, establishing new geographies and verticals, and innovating engineering and logistics solutions as we've done in the past.
It also means focusing on our operations, being as efficient as possible so we can maintain the advantage of scale, something that was forsaken, really, in the propane business. We can't make that mistake. Finally, being patient with our capital, growing as the market grows, investing with returns and timing in mind, not getting ahead of the market. It's an exciting time for Superior Plus. You can probably tell I get pretty passionate about this stuff. We've been very impatient, as you could probably imagine, but we had to temper that anxiety because true transformation takes time. It has to be thoughtful. It has to be well-planned and diligently executed. The journey we're on is incredibly serious and complex, and we have to make sure we're building the right team to take on this challenge.
We knew it wasn't going to be quick or easy, but we also knew we had the right assets, the right people, and the plan to change the course for Superior, and we are definitely on the right track. We announced today that we're raising our target for Superior Delivers from CAD 50 million plus by a further CAD 20 million to CAD 70 million plus in incremental EBITDA by 2027. This is nothing more than a testament to our confidence in the strategy and the path forward to unlock value that exists within this enterprise. Our plan changes the trajectory for Superior Plus. We're looking at a very different financial future.
We're projecting EBITDA growth of 25% between now and 2027, free cash flow increasing by nearly 200%, and a 300 basis points improvement in our return on invested capital, all while managing our leverage and reinvesting in our company by buying back shares. Most importantly, though, beyond all of that, we're creating a future where Superior has the cash and equity to continue to grow for a generation to come. It is a big day for us. I can't thank you enough for your patience and for joining us today. We're very, very excited to walk you through all the details of this plan. Not only are we excited about where we're going, but it's been quite a journey in terms of how we're going to get there. Let's get started. With that, let me hand things over to Steve Quinn to talk to you about Superior Delivers.
Thank you.
Thank you, sir. Good morning, everyone. I'm glad to be here with all of you today. Definitely glad to be the first one to speak after the CEO. I think we got some great advice from Allan yesterday on this presentation, given that many of us, it's our first time having a chance to address the investment community. And he said to me specifically, "Steve, it's only your job at stake. Don't worry about it." I think we're all ready to go is, I think, the important thing here. Let me get started. I'd like to just share that I've been at Superior for just under a year. I spent my career in industry and in consulting working on value creation and strategy work and P&L performance activity for companies as small as CAD 30 million and as large as CAD 30 billion.
Most recently, I was the Chief Transformation Officer executing the largest retail transformation in Canada, delivering over CAD 300 million in incremental profit. Now, why did I join Superior? I saw a fantastic opportunity in an under-the-radar part of the energy market to reinvent a business model and create a lot of shareholder value. I do not know about all of you, but that kind of stuff excites me. That is why I am glad to be here today. Three topics to cover with you today. Superior Delivers is transforming our propane business from top to bottom to allow us to capture the untapped potential we have in this market. Secondly, we are laser-focused on our virtuous cycle, which is our reinforcing flywheel for winning in the long term in propane. We want to show you our shift to performance management and performance outcomes using real data and accountability.
Let's start at the start, kind of the origin story of Superior Delivers. We have three pillars in Superior Delivers. Each one has 20-40 initiatives inside. Each is led by an executive sponsor that you'll hear from today. We have a total of over 100 initiatives with business cases, roadmaps, and milestone plans. Sixty, a little bit more than sixty, are in execution today. How did we even know we needed transformation in the first place? In 2024, we took a sober, clinical look at our business. It was almost a year in the making, an empirical assessment of the business challenging all of the assumptions about our business and our industry. Who are our customers? How do we price them? Why do they leave? What's our cost base look like? What are our unit costs? What's our productivity?
What duplication exists in our business? Honestly, what advantages do we have? What we found was that there are a wealth of gaps in the business, and actually, those have turned into our opportunities. At a high level, we know that our shareholder returns have not been good enough for the last few years. We know that our M&A strategy historically has not produced the kind of profit growth that we would like and all of you would like. We knew that our asset base was large, but it was not advantaged. We had to change that. Here is the good news. The insights from this assessment led us to our new business model, the virtuous cycle. More on that in a moment.
For now, we've begun to tackle these opportunities, simple things like a single active customer definition for all of our propane businesses so that we can measure and monitor our customers, like implementing a new capital framework so that when we invest in our business, we know that that dollar will deliver stronger returns. We have complex initiatives to tackle, like improving the pricing and volume relationship with our customers, where the correlation has not been as strong as we'd like in the past, diving deep into local customer economics and addressing the large variance in our asset-based productivity market by market. We have some markets where we invest a dollar, and it creates double the profit of another market, and so we need to address that. We've also found that there's lots of work to do to shift our leadership culture to focus on performance management.
These are must-haves for transformation because Superior Delivers is preparing our company to fully execute on our virtuous cycle over the next few years. Now, let's talk about that virtuous cycle. This is about an uncompromising focus on lowering our costs. We're attacking our costs, our trucks, their operating costs, our bulk plants, our labor profile, our tanks. We're looking at all of it. This allows us, by looking at all this and lowering our costs, this allows us to improve our value proposition and have better pricing, more competitive pricing for our customers, which in turn allows us to acquire more customers and retain our existing ones. As Allan mentioned, once we do that, as we do that, we increase our density in all of our local markets, which creates a marginal cost advantage for us.
We're back to the start of our virtuous cycle where we're looking at our costs once again. Now, managing our costs and pricing is a very complex ecosystem of data. It requires millions, if not billions, of computations: 2.1 million deliveries, 750,000 customers. We need to know how much fuel is in each of their tanks, how long does it take to get to the customer, what's the distance between the customers, what type of customer are they, what do they expect from us, and many, many more variables. This is difficult, if not impossible, to do manually. Building scale in the virtuous cycle means we must move to real-time cost data. We have to have new tools to analyze that data, and we need to have a performance management system that brings the whole thing together.
This allows us to gather, sort, understand our data, and connect it to pricing and operations. Geo-targeting customers is one example for density purposes, which we're doing today, where all of this has to come together. Now I'd like to talk about one more quick example of the virtuous cycle, and actually, this one's my favorite. It's about customers. Customers are our lifeblood. We can't treat our customers like my daughter, who's nine years old, treats her piggy bank, which is very short-term. If you take a look at the left side of the page, historically, we've offered a teaser to our customers to attract them, whether that be a low introductory price or free fills or otherwise. This offer, it's time-bound. It expires. Then we move to market pricing, and in some cases, higher while you're in a negative value cycle.
This is to cover your initial costs and some of your ongoing cost inflation. Historically, this has resulted in just too much churn a lot of times in the second and third year of a customer relationship before you break even. Now you have to acquire another customer to replace the first one and incur all of the costs of marketing, acquisition, and setup once again. If we take that same customer and we look at the right-hand side and we think through it from the perspective of the virtuous cycle, we offer the customer a competitive price, and we maintain that price for a longer period of time. We do that by managing costs and managing density, which is our job. We keep the customer for a very long period of time. The customer goes from having a negative customer lifetime value to almost CAD 1,000.
For each successive year, past year eight in this chart, you obviously have incremental profit on that customer. You may be thinking now, "Steve, I get it. What are you actually going to do in Superior Delivers?" Let's talk about the first pillar: customer or, sorry, cost to serve. This is led by Tommy, and we expect more than CAD 35 million in incremental EBITDA. Historical acquisitions and less focus on operational performance management has led to a significant opportunity for us to lower every cost line in our business and at the customer level. Some of the opportunities from our assessment that we're converting to value through Superior Delivers include things that are related to inefficient delivery movements. A few examples: 6% of our deliveries historically are zero fill or no fill.
This means we drove to a customer's site, and we didn't put any fuel in their tank. In one difficult example, we went to a customer three times in seven days and didn't put any fuel in their tank. This is a huge opportunity for us. It's the kind of example that's really low-hanging fruit. Another example is when a customer tank falls below 30%, it triggers us to schedule that customer for a delivery within about three or four days. This isn't very flexible for delivery purposes as we may end up in the same neighborhood or driving the same street twice in the same week. What about their burn rate? That customer, when they're below 30%, the fuel in their tank may last a week. It may last a month. Sometimes the seasonal customer, it lasts a whole year.
We do not need to go to see them within three days. We have to align consumption rates of the customer to when we make deliveries so that we have a better use of our assets. Speaking of asset efficiency, our cost base is just plainly overbuilt. Some of that is due to historical M&A, and some of it is due to us building for the peak of winter, an 8- to 12-week period where we have the maximum operational activity. Tommy is going to talk to you a little bit more about what we are doing to shave the peak. What else are we doing in this pillar? We have built a cost-to-serve model to attribute cost at the local and customer level marginally for cost management and ultimately pricing purposes.
We're rolling out world-class analytical tools to optimize our 2.1 million deliveries using actual customer consumption data to determine how to reduce the distance traveled, reduce the visit frequency, and maximize fill percentage for every visit. We're expanding our tank refurbishment program so that we have a capital lightweight to deploy to new customers. We're simplifying and deduplicating processes in a single operating model for speed and efficiency. We're addressing cost to serve. Obviously, the next question is, how are you going to grow your customers in margin? Our second pillar is customer growth. This is all about understanding customers from the perspective of lifetime value. It's led by Rick, and we expect more than CAD 30 million in incremental EBITDA. When I joined, I saw this as an exciting opportunity. We hadn't modernized any of our go-to-market capabilities.
Opportunities we're converting in this area from our assessment are things like 5%-10% of our customers historically were unprofitable. 50% of our existing customer contracts had fees that we had not enforced. We can be better with add-on products to create stickiness like autopay and equal payment plan. In our largest customer segment, which is our US residential customers, we have less than 15% penetration of these products. Allan mentioned our churn rates, which have been mid to high single digits historically. We had no one accountable for churn. Can you imagine a bank or a telecom or any other company that has a large installed base with nobody responsible for retention? We're changing that. As we've said, we've added a proactive retention function using our own proprietary data and propensity models to identify and determine when customers may churn and intervene.
We're redesigning our products to make them simple and modular. We're building a pricing capability that's tied to customer-specific economics. This is all part of the virtuous cycle. Rick is building an unmatched organic growth engine by expanding outreach channels, including outbound calling and digital capabilities, and managing the full cycle of commercial customer relationships. This leads us to our final pillar. Certainly, the question may be, how does wholesale fit into all of this? We expect an incremental CAD 5 million or more from this pillar. It's led by Sean, and this is our wholesale advantage. Wholesale is an advantage for us over every one of our competitors, whether they are scaled or independent. This is all about securing advantage supply, better cost, and risk across all of our geographies. Opportunities we're converting here.
Historically, our US supply team was separated from our mature wholesale business platform in Canada. We were duplicating some of the hedging risk and supply activities. We had internal pricing models between wholesale and retail that were just plainly inefficient. We were spending more time talking internally than facing the external market and looking for value. We have brought together our supply function across North America. It is a CAD 1 billion-gallon leading wholesale management platform integrated with our retail business. In one quick example, our US group had three intermediaries supplying the same bulk plant for us. Sean's team's taken a look at it and quickly figured out that we can eliminate those three intermediaries and go directly from terminal to bulk plant ourselves within our own system. We are also automating tools in this area for both logistics and margin.
Sean will talk more about this, but this is about managing North American cost and risk all the way from gas plant to customer tank. Now, what's the payoff of all of this work? As Allan mentioned, this all adds up to CAD 35 million or more in achieving industry-leading cost to serve, more than CAD 30 million from customer-based growth, retention, and margin management, and more than CAD 5 million from our wholesale advantage platform. In total, the incremental EBITDA opportunity is more than CAD 70 million from Superior Delivers. This is an 8% compounded growth rate through 2027, including our organic base. We also expect capital productivity improvement throughout the timeframe. Again, the good news, hopefully you've heard a little bit and you'll hear more today. There's a lot of low-hanging fruit here. I and we are really excited about this opportunity.
Now that I've covered the what of transformation, let me briefly cover the how. Cultural expectations are a must-have in transformation for leaders, for employees, and for execution accountability. In my transformation experience, you have to change the cadence of the organization and accelerate the speed of decision-making. One week has to become one day. Decision commitments have to be closed-loop in nature, and you have to measure everything with financial and operational KPIs. This started over a year ago for us. We're bringing the best talent into the right roles. We're setting very high expectations for performance, and we have an executive line leader that owns every one of our 100-plus initiatives directly. We will not compromise on accountability in this transformation. There are no points for trying, and only the results matter. Let's look at operational performance management really briefly in the new elements to our approach.
Just want to share a couple of examples. Monthly performance reviews of our business and weekly, if not daily, reviews of our Superior Delivers initiatives to accelerate decision speed, make sure things are happening and moving them forward. This is a big change for our organization. We're automating business intelligence so that we have hundreds of KPIs at the field level, up to the executive team and across the organization quickly. We've got disciplined measurement of value creation in all of our activities. You'll often hear me or one of my colleagues asking the team, "Does this add value, this activity?" If the answer is yes, the second question is, "Tell me where it shows up in the P&L or the balance sheet. Show me." We are finding opportunities in our business that we didn't even know existed. Some areas are performing much higher than expected.
In other cases, we're just learning something new that we can analyze, understand, and tackle as we try to build the best propane business in North America. In recap, Superior Delivers is going to reposition our platform from top to bottom with the virtuous cycle in mind. We have a singular focus for this year and for next year, and that's results. Next, I'd like to introduce Tommy, my favorite Chief Operating Officer of propane from Kentucky, to share more detail on our cost-to-serve pillar. First, let's look at how Superior is improving directly from our field team.
My name is Graham. I'm a service technician with Superior Propane. As a guy that's been in this business for a number of years, I'm very happy to say that we have evolved. With the new technologies of today, we are able to maximize our routes.
We are able to see and monitor tank levels on all our tanks. It allows us to schedule our deliveries better and figure out when we're going to go to see a customer. It makes it so that the customer doesn't have to think about when they're going to get their next delivery. We're going to take care of it for them.
I'm Logan, and I'm a propane specialist here at the Superior location in Dansville, New York. Propane has a real impact on people around here. People really depend on propane to be able to heat their homes, cook their meals. Dairy farms really rely on it for the milkhouses, being able to get hot water, keeping the cattle warm. When a Superior Propane truck shows up, you know you're in good hands.
My name is Krista. I am the Field Operations Manager for Barrier Muskoka.
Having reliable propane delivery is certainly critical to our customers. It helps residential, home heat, and off-grid locations. It helps construction stay warm throughout the winter. It really services the community in every aspect. Over my time with Superior, I have certainly seen a phenomenal growth in technology. With our tank monitoring, routing efficiency, and online easy web platform, we're delivering propane more safely and efficiently than ever before.
As most folks know, propane is a volatile product. It can be very dangerous if it's not handled correctly. Safety is number one, and that's why I'm here.
We have implemented something called a Bivvy Stick technology, which helps our drivers in remote locations reach out to emergency services.
We do have a technology called Samsara now in our units, which helps protect our drivers and our customers with both in and outer cab facing cameras to really enhance our safety features, as well as affinity grouping, which ties in with tank sensors. Overall, it helps lower any type of cost associated to the customer so we can service them better and lower the price per liter certainly as well.
Customers trust Superior Propane. They depend on us, and we take that responsibility very seriously. We've been delivering propane for decades.
We've earned their trust.
I knew I'd forget one thing. One of the reasons I came over to Superior in 2019 was just the desirable geography and the markets that they were operating in. They were targeting high-value companies for acquisitions. They were some of the best companies with a very valuable customer base.
Due to that early growth through acquisition too, we ended up creating natural gaps in our geography, allowing additional space for us to grow in those high-value markets. When you couple that with the great coupling, this great footprint with the market-leading cost-to-serve tools is very powerful for us and strengthens our company. We plan to execute on these initiatives to improve efficiencies through a data-driven approach, an injection of technology using various tools which enable us to improve scheduling and better utilization of our assets, allowing us, of course, to have a lower cost to serve. Imagine all that work we're doing on the operation side to lower cost to serve, Rick's doing all the work over on the commercial side to grow our business.
As we integrate those two work streams together, it allows us to do what no other has done within our space: filling two legs of the virtuous cycle that Steve talked about earlier, lowering our cost to serve and growing our business. Once we start that, it'll be perpetual and magnified. Let's level set on the landscape of our company. The blue highlights the states and provinces that we currently have retail operations. As you can see, we have enviable coverage in the population areas and high-value markets. Let's take a look at some of our 2024 data. In US propane, we produced CAD 219 million in EBITDA. Canadian propane, we produced CAD 82 million in EBITDA. We have over 4,000 dedicated employees across North America, 861 delivery vehicles in the US, and 399 in Canada.
All of this underpinned by 750,000 customers and 500 locations in both divisions. We have a very strong foundation, and we have scale. As Allan mentioned earlier, we're North America's largest propane retailer and Canada's largest propane retailer. Most importantly, behind all that, we have a tenured and talented leadership team. These individuals are excited to leverage our existing scale while executing on cost-to-serve and the growth initiatives. They know that we have an opportunity to methodically grow, increase density, and lower our cost-to-serve, ultimately delivering value to our customers and our stockholders. Before we get into the cost-to-serve, though, I want to talk a bit to you about driving customer safety at Superior. We're committed to creating a safe work environment for our customers and our employees. Safety is a core value to us, and it's a priority.
We've established a really good safety culture at Superior, and we've done that through individual ownership by our employees. For instance, when an incident occurs at one of our facilities, we stop work, we reflect upon the incident, and we determine root cause through an investigation to ensure that it doesn't happen again. Secondly, all of our employees are empowered and have the authority to stop work when they feel an unsafe condition exists or if they feel that they're not properly trained to do the job. These are just examples of actions that we're using to build a strong safety culture and are furthering our journey to zero harm. We have aggressive goals for 2025, but the ambition is that everyone goes home in the same condition they came to work.
We've established high expectations for our contractors and how we maintain our facilities and our equipment through our supplier code of conduct and our asset integrity program. All of this for the safety of our customers, our employees, our communities, and the environment. Additionally, we're leveraging technology like the Samsara Collision Avoidance and Severity Reduction System to prevent collision, also using AI to identify potential driver fatigue. Samsara, of course, is a forward- and backward-looking camera that we install on all of our vehicles and allows timely coaching of all of our drivers. We also use it, though, to reward safe behaviors because Samsara scores our drivers and to help them promote safe driving habits. Our drivers with a 100% safety score have driven over 2.8 million miles, and I'm proud to say we've decreased our DOT rate by 41% in 2024.
We're also using other technology like Intellect Software, which allows timely incident management and is a clearinghouse for our data collection, which will use that data to identify trends for future improvement. Lastly, we're improving our training programs. For example, we're using HAZMAT online training and technology training tools to improve all of our safety and ensure compliance with our drivers. We're doing the right things for the safety of our employees and our customers. Let's get back to cost-to-serve. As Steve mentioned earlier, we're currently on track to increase EBITDA by CAD 35 million through 2027 and these three improvement levers. First is our dynamic route planning. That's our customer delivery efficiency.
We use this technology to reduce inefficient fills and zero fills and to deliver at the right time to the right customers, which reduces our trips per year to that customer and improves our overall customer satisfaction. Two, we're optimizing our scheduling. That's our customer delivery efficiency. We use this technology to reduce inefficient fills and zero fills to deliver at the right time and right customers. Third is right-sizing our asset footprint, which we inherited our current asset footprint due to acquisitions. This tool analyzes the work, allowing better management of assets, identifying potential redundancies, and allowing us to capitalize on opportunities to improve. We have the scale, and now we have the data analytics capabilities to better manage our business. Ultimately, these three levers will reduce our cost-to-serve and improve our value prop.
Let me take you through some examples of pilots and projects that we're currently having progress. As we go through these, just keep in mind these are just a few initiatives out of 130 initiatives that we currently have on our slate. My first example pertains to route optimization. This is a very powerful example here. On the left, we have a legacy route evaluating customer A, in red, with the cost-to-serve of CAD 3. On the right, we have an optimized route evaluating the same customer A, resulting in CAD 1.50. Moving customer A from one route to another through optimization reduces cost-to-serve of that customer by half. That's 50%. What a difference. Keep in mind that this improvement cascades and magnifies in real time as we optimize all customers.
Again, the example is just for illustration, but know that highly efficient routes are not obvious without this technology. In smaller companies without scale, route optimization is seen as necessary but is not seen as necessary due to overall magnitude versus a company of our size. We deliver over 2 million; we make over 2 million deliveries a year. That means we need to get this right, and it equates to substantial savings. Ash and his IT team are enabling this tool and other tools through data-driven insights. He will speak to this a bit later. These insights enable us to competitively, through real cost savings and the technology, increase our capabilities to optimize routes at scale and drive density, ultimately relieving our cost-to-serve. This tool is built and is currently in place, being used in a pilot that we are running in Southern Ontario.
Miles per delivery and gallons per delivery are the metrics we're using to measure the pilot performance. For each, we've established a baseline, which is based upon their historical performance. We've established targets, which were determined through initial modeling that, if achieved, would mean the success of the pilot. As you can see, the early results are encouraging, surpassing our targets in both metrics. Miles per delivery target was set at -8%, and the gallons per delivery at +6%. This pilot is just one example of how we're approaching transformation. It's a continuous improvement mindset. It's a data-driven approach where we test, learn, make changes, and continue to focus on targets, measuring outcomes for a sustainable improvement. From our early results in this pilot, we'll apply that same continuous improvement mindset and continue to strive for additional progress in this pilot.
By optimizing scheduling and delivery, we promote more efficient fills, reduce miles driven, and reduce number of deliveries, all while delivering the same or better gallon production. We're a seasonal and weather-dependent business that creates peaks and valleys in our demand. While certainly some of our customers must fit within this demand curve, it's not necessarily true for all the customers. In this project, we shift deliveries from our first and fourth quarter peaks into our second and third quarter valleys where we have latent capacity. This is a non-traditional approach in the propane industry, as we generally just staff up during the peaks. The data displayed represents 2024 gallons by quarter segmented into three customer categories. Listed first and on the bottom of each category is the not flexible category. It's in gray, and these customers must be delivered to within that quarter.
There's a requirement of that customer that they need the gallons within that quarter, so they can't be moved. The next is a semi-flexible category denoted in green. These customers require one to six deliveries per year. We'll use the tool to determine the amount of customers to move from the first and fourth to the second and third quarters. That's the primary use of the tool. Lastly is a fully flexible denoted in blue. These customers only require one delivery or less per year and represents 12% of our deliveries. Obviously, all of these can be moved into the second and third quarter. By making these shifts, using the tool, the gold delivery schedule, we end up with the gold delivery schedule represented by the blue line, which will mean we'll have better labor management and more efficient asset usage.
This reduces the peak staffing and truck needs during the first and fourth quarters, allowing our existing resources to take up the slack in the second and third quarters, of course, reducing our cost-to-serve. I mentioned several times we're built through acquisition. In this, we end up with a lot of over and underutilized assets. There's a clear opportunity for us to considerably simplify and rationalize that footprint if we use a more data-driven approach. Steve mentioned earlier our geo-analytical team evaluated this US region, looking at every plant's fixed costs, which includes the capital lease, utilities, other associated costs for that plant, and then weighted those fixed costs against the increased variable costs of making the same delivery from another bulk plant. As you can see, this also is not a very simple process and requires technology to achieve.
The bulk rationalization tool uses a balanced approach between location costs and delivery costs to the customer. This example displayed using the tool illustrates substantial legacy network overlaps due to past acquisitions. On this map, the green denotes plants to keep, red denotes the plants suggested to close, and the light blue represents the customer footprint. Through plant rationalization in this region, we expect to shed 35% of the plants, reduce location costs by 50%. Now, our delivery costs will go up because we're moving plants, but we still realize net savings of 10%. Historically, we lacked this capability, but the plant rationalization tool allows us to reduce our cost-to-serve. Additionally, these new analytics enable us to identify areas to target for growth to increase our customer density, which Rick will talk to you about later.
In summary, through optimized scheduling and delivery, by 2027, we expect a 10% capacity reduction due to reduced miles and number of deliveries. Optimized scheduling and delivery has three focus areas in which we change the way we work: route optimization, which is simply minimizing the distance traveled; optimized scheduling, which is simply increasing fill rates on each delivery; and then balancing seasonality, which is lowering deliveries during our peaks. By doing the work, injecting the technology, and using data analytics, we reduce costs. Optimizing delivery routes and scheduling improves efficiency and enhances our customer service. Just through better scheduling and routing, we plan to reduce costs by 10%. In closing, I'm definitely excited about the future of the company. We have tools that we never had, empowering efficient operations. As a matter of fact, I wish this technology had been around over my 34 years.
It would have made my job a lot easier. The team's energized to execute and drive results. We have positive momentum. We have successful pilots so far, and we're encouraged about what we're going to achieve now and over the next three years. It's really a great time to be at Superior. In addition to reducing the cost-to-serve through the tools and processes I just described, we also have an opportunity to capitalize on growth through the work being done by the commercial team. Let me introduce Rick Caron, our Chief Commercial Officer, to describe the plan to grow our business.
Great job, buddy. You did really good. It's great having a partner like Tommy doing all the hard work, so I get all the glory. How about that propane weather this morning?
I'd love to say we had something to do with it.
Of course, we didn't, but we love it.
Thank you, Tommy. I'm Rick Caron. I'm the Chief Commercial Officer for North American Propane. Just a little bit of background about me: 20 years as an executive in multi-industries, from consumer packaged goods to telecom to software, but more importantly, the lion's share of my experience is in energy. I've shaped and rejuvenated go-to-market strategies. I've led growth initiatives in many roles in my career. I couldn't be more excited to be doing that with Superior. Allan and Steve, Tommy talked about the importance of profitable growth, really growing our customer base while maximizing lifetime value is the path that we're on. We're excited about this renewed commitment. We have a tremendous, tremendous opportunity. The past eight years have largely been focused on M&A, which is where we got our growth from.
Alan talked about historically we've underinvested in growth and retention. Those days are over. We're transforming to organic growth. The video showed the passion of our employees this morning. They see tanks going out to be installed versus reading about an acquisition. This is tangible evidence for our employees that we're changing. My material today, all things customer. Expanding our knowledge with data-driven insights, attracting desirable customers with innovative offers, and I'll spend some time on that. Proactively securing customers with consistent long-term pricing with clear terms and conditions, and providing that exceptional level of service, growing our customer base while maximizing lifetime value. Tommy shared the work that his team's doing. He's building capacity for our organization. He's creating a cost-to-serve advantage as part of that virtuous cycle.
Lowering our costs gives us the opportunity to have a competitive price, more attractive offers, which gives us the ability to compete with big and small competitors no matter where they are, which fuels our growth opportunity. Proactive retention. We're really upping our game and taking control. As a few of our speakers mentioned this morning, we have 750,000 customers across North America. We need to pay attention to that. Targeted customer acquisition versus in the past, national, broad-reaching campaigns that were the same for everyone. We're going to drive a more targeted acquisition strategy in the desirable markets and regions that both Allan and Tommy talked about. Deepening our customer intimacy and knowledge, really modernizing and leveraging the insights we get from our own data. This will be a differentiator for us. As the commercial leader, I see so many opportunities in our business.
I'm energized to tackle this opportunity, and I can tell you our employees are fired up about Superior Delivers. I've yet to talk to an employee that doesn't see opportunity in our business, no matter what they do, from the drivers that you saw on the screen today to people working on our accounts payable department. It's awesome. Okay. Tommy shared some factoids about our North American business. I'm really going to just set the tone. We are unmatched by any other retailer in North America. Allan talked about capitalizing on our scale, leveraging those attractive markets and the customers that we serve. In Canada, we operate in all provinces and territories, and we're active in 23 states in the US, as Tommy mentioned. The numbers on the chart are impressive. We're very proud of our presence. I will note some differences.
You'll see on the bottom of the green chart, about 71% of our gross profit comes from residential customers in the U.S. On the flip side, same stat, 70% or so of our gross profit comes from commercial customers in Canada. That gives us a unique comparison opportunity where we can take best practices in both segments and leverage across our business. In 2024, we delivered 580 million gallons to customers across North America. You can see at the top of the chart, the total addressable market is exponentially higher than that. What a great opportunity. Just look at what we could do there. We have several advantages to grow our market share. First, and Tommy highlighted this, safety. Safety is a core value of ours. It's our cornerstone, and frankly, customers expect that.
We have 500-plus distribution points that we can service all types of customers and deliver to the needs that they have. We have 170-plus dedicated professional salespeople covering customers across the entire continent, sharing our value proposition, making sure we understand what their needs are. Our technical and engineering knowledge is our reputation. We bring value to our large customers. Lastly, maybe not something that's terribly obvious, Soteris as being part of the Superior Plus family gives us a unique opportunity to provide a low-carbon, multi-energy solution to large wellsite and industrial customers. Our customers have asked us about this. Nobody else in North America can do that. We have a clear line of sight. As Steve talked about, there's great opportunity in the customer side. We see a clear line of sight to CAD 30 million-plus of incremental EBITDA. We have dozens and dozens of commercial initiatives.
Let me really summarize the levers that we're going to pull in commercial. Simplified, consistent pricing, making it easy for our customers to understand. Creative product offerings. No, we're not going to add all sorts of other products, but I'm going to describe to you how we're going to offer solutions to customers. Focused, proactive retention. We haven't done it as much as we should have in the past. We're going to do a whole bunch of that going forward well before we get that termination call. Targeted growth, optimizing customer density. We talked about the importance of that, driving down our overall costs and our delivery routes, and pursuing best-in-class through the eyes of our customer, the level of service that we give them. These levers support the virtuous cycle that Steve introduced to us.
Lower costs equals an increased value proposition, equals our ability to grow, which improves our density, and so on. All right. Let's talk about pricing strategies. I could spend the entire morning on this. I'm going to show you why. We're illustrating the point with the distribution curves on the left-hand side. The concept is pretty simple. The black line shows you where we're coming from. There are some customers that were priced incorrectly. Sorry, were priced incorrectly. This makes us less competitive and increases the risk of churn. On the other side of the black line, we have some customers that we lose money on. We didn't have accurate cost-to-serve data at the customer level. We bought companies without an understanding of what that cost-to-serve was. Neither of these scenarios for us or the customer is a good place to be. The red curve is where we're headed.
A narrow distribution of customer pricing with overall better returns. The Superior Propane of the future, competitive pricing tied to customer economics, underpinned by cost-to-serve at the customer level, and intimate information about what the needs of that customer is. We'll use data to drive how we structure products and product offerings that are competitive and create stickiness with our customers. Now, here's where I'm going to get excited. Bear with me. It's a pretty common place right now, and this is how we're being disruptive. Customers are seeing their electricity sources going down, brownouts are happening, power outages occur. Backup or a standby solution is an opportunity for us. In the past, we would have just sold that customer through a national marketing campaign and hoped that we got some consumption out of them because their consumption is very variable. It's all over the place.
Depends on what happens with weather. We launched a product called Superior Standby, and it's exactly what it sounds. It's a standby product that's subscrition -based. We charge the customer a nominal monthly fee. They get their tank filled up at the beginning. We monitor that tank, and we fill it when it needs to be filled. All the customer has to do is pay the monthly subscription fee. Why is that different? Because it gives us a clear economic return on that investment with that monthly subscription. It's easy for the customer to manage that standby product. More importantly for us, we get a committed monthly recurring revenue stream. Disruptive, important, different. We want to reduce the triggers of churn. Let me give you another example. Like I said, I could spend a lot of time on this slide.
Let's talk about a budget-conscious family who gets three deliveries per year. Let's say each delivery is about CAD 800. That's a big bill to swallow, CAD 800 at a time. This could be a trigger for them. What if we charge them CAD 200 per month on an equal payment plan? We took that worry away from them on, "How am I going to pay that CAD 800 bill?" What if we took it even further? What if we billed them just for what they used? That's not done in the propane industry today, but it could be. We have the technology to do that. It's something that we're exploring. Now, that's being disruptive. Disruptive in this case is good, not like when I was in high school and being disruptive. This is a great thing for our customers, and it'll change our industry.
We want customers for life, so engaging regularly with them on what's important, rewarding them for their loyalty is crucial. All right. Churn, we talked about it this morning. Ash and his team are helping us build a churn prediction tool. Why is that important? Why do customers churn? There's usually an event that happens. Could be a big bill, like I talked about earlier. Could be price change. Could be an out-of-gas situation. Could be an error on their bill or a missed delivery. The customer will investigate. They'll determine that the price they pay is premium to the service that they perceive to be getting, and they look for alternatives. Our approach, first step, all about that product offering that I talked about.
The next step is being more proactive, though, and predicting that the risk side, customers that may be disenchanted, we're mining customer data, customer events, and proactively reaching out with purpose to address the issue or offer a better value to that customer. Finally, we'll develop a personal offer specifically for them. That's the punchline. One that will resonate value for them in the long term. You can see a quote on the screen, and I'll tell you why we got that. Prior to last year, we really didn't proactively reach out to customers, as we talked about earlier. Early in 2024, I had a team pull together some customers that we thought were at risk, and we mined a whole bunch of data, and we looked for those event triggers that I talked about. There's about 2,200 of them. We did a pilot. Called them.
We fessed up to something that may have happened, but more importantly, we offered a resolution to that. That quote on the screen is from a customer that said, "Wow. There was a reason you called me. I've never had that before." Not just a telemarketer reaching out going, "Hey, how are you doing?" It's actually, "Hey, this happened. Here's what we want to do about it. We hope that makes you happy." Going forward, this is a big opportunity to scale, and we need a tool to be able to automate this, look at data rapidly, put information in the hands of our call center people, and develop an automated churn prediction tool, giving us the insights to those customers that we deem to be at risk. All right. I'm going to show you a simple example of how we're going to target our marketing and growth activity.
Let me really walk you through this. This is in Georgia. What this diagram shows is the green dots are our bulk plants, and the larger circles are what we call delivery zones. Delivery zone number one is a high-density area. We have a cost-to-serve advantage, and we can offer competitive, aggressive offers in that area. Zone number two, a little bit less dense. The benefit of adding customers will drive down our overall costs. We will target that group of customers with specific offers to get them to convert from their current provider. Zone number three, a little further away. We will leverage our cost-to-serve and density data. We will work on developing critical mass, adding customers, and then develop a business case to potentially add another distribution point. The red zone at the bottom of the screen would be deprioritized.
It's got less density, far from our distribution points, not a priority for us. This is a really basic example, but it underpins the targeted approach versus a broad national marketing growth initiative campaign that does not have customer centricity built into it. Here's a practical example. I think Steve talked about this a little bit. Southern Ontario, or Tommy did. In December 2024, we looked at the density map. We called the Guelph area a green zone. We had an opportunity to be aggressive with our pricing structure and speak directly to those customers. We put together a targeted lead campaign, and we went aggressively with our salesforce to get customers. I can tell you, double-digit growth since then in that area. We're proving out that concept, and we know we can scale this. Better data, better insights around customer costs and returns sets us up for profitable growth.
We talked about the customer experience and how that is so crucial to us. The bottom line is customers want peace of mind. They want access to account information 24 by 7. They want a competitive price. They want assurances that the delivery will come, and they want confirmation when that delivery or service happens. Pretty simple. What we need to do is to be able to support our internal folks that are focused on customer by giving them access to the entire customer record in a 360 view. Really what that means is instead of having to navigate through five, six, seven screens to understand what that customer is all about, they can do it through one view. The days of us hunting for information are behind us.
Day in and day out, our drivers, our technicians, our frontline employees, and those on the phone are the face of our company. They live and work in the communities we serve, and we see that in our customer satisfaction surveys and our net promoter scores. Our frontline employees get called out all the time in a positive way. Overall, we think we're positioned very well in our industry with our scale, our digital capabilities, and our focus on improving and providing an outstanding customer experience. We want to be consistent. No matter where you're located as a customer, this will be the building block for us around growth and retention. Here are the things I want you to take away. We're leveraging the capacity created from operational excellence. We're accelerating our targeted growth activities, and we're ensuring that we're protecting the lifetime value of our customers.
We're transforming this industry through innovative offers. We're capturing value from mining data. We're retaining high-value customers while targeting and acquiring similar customers across North America. We will be best in class in customer experience. I've been with Superior for almost 14 years. Can't believe that. There's not been any other time that we've been so focused and committed on driving organic growth. Our customers, our commercial teams, our leadership group, we're excited on the future. Now with that, I'm happy to pass it over to Shawn Vamman, who will talk about our wholesale advantage. Thank you.
All right. Good morning. I was just thinking I'm in a pretty high-pressure situation here. I'm following all these great speakers, and then I'm followed by the coffee break. I really got to work hard here to keep you excited. Good morning, everybody. I'm Sean Vaman.
I lead the wholesale division, and we focus on supply, logistics, risk management, and third-party sales. Now, I've been in my current role a little over 10 years, and with Superior coming up on 17 years. I've had various roles in the LPG industry for over 30 years. I like to say that this industry and the market is always evolving, but that's what makes it exciting. I hope you can feel some of that excitement today with some of the things that we're talking about and what's going on. Today, I'm going to give you some insights into our division and how we play an important role in achieving the goals and the ambitions you're hearing about today.
Our organization has a great footprint in North America, and it does provide us with an advantage when it comes to the supply and logistics function within the company. Now, our scale, it not only helps to provide supply security to our customers during the busy winter months, it also gives us insights into how we can continue to drive more effective and efficient supply costing. The third point, similar to what the other speakers have talked about, I'm going to touch on some of the things we're doing within our group as part of Superior Delivers to drive innovation, reduce costs, and grow data-driven capabilities. In 2024, we moved 669 million gallons of propane to internal and external customers throughout North America.
As Steve mentioned, this is going to grow to over 1 billion gallons for 2025 as we integrate the US retail supply into our group. Our total volume is made up of deliveries to our internal retail needs in Canada and the US, as well as to third-party customers spread out throughout both those countries. Because of our size, we utilize many of the supply points in Canada and the US, as well as our own terminal assets to provide reliable and cost-effective propane to our customer base. This is one of the differentiating factors for us in this industry. You can see on the map that we have supply points and terminal assets in key locations in Canada and the East and West Coasts of the United States.
This gives good access to supply in all the areas we're focused and in some of the largest propane-consuming states and provinces in North America. I want to give you some insights into what our division does within the Superior Plus organization. I'm not going to go through all these points. I want to speak to some of the highlights. We use the term wholesale. I know that can cause some confusion or questions, but really, we are the supply and logistics optimization group for our internal retail needs. We also use that scale to make significant sales to other propane users, whether it's other retail companies or larger industrial commercial-type customers. In 2024, 57% of the propane we procured was for those third-party sales. Because of our size, we purchase directly from most of the available supply points throughout North America.
We have term agreements with gas plants, refineries, and we also have multiple propane storage positions where we store over 30 million gallons, which ensures we keep our customers supplied and allows us to facilitate fixed-price offers. Also, given the large volume of propane we're buying and transporting in the domestic market, this creates strategic partnerships with our suppliers and our logistics providers to drive better value and reliability for our customers. All of this gives us a good understanding of what's going on in the domestic propane market, and it also allows us to take advantage of arbitrage opportunities that open up due to price differentials from one market to the next. It gives us more options to rebalance our physical positions to match the changing demand. A great example of this was the winter of 2022.
Now, I don't know if many of you remember that, but we had a really good market condition in California where we've got a really good footprint. It was cold down there. There were supply challenges. We were able to take supply that was destined to go to the eastern markets and redirect it down to the West Coast. This kept us supplied with propane when our competitors were struggling, but it also allowed us to capture some really advantageous margins, and it resulted in one of our best quarters for our division. It was a great example of how we can use that scale and breadth to not only keep our customers supplied, but take advantage of opportunities when they arise.
Lastly, through the use of creative risk management tools, we're able to manage the price risk with our inventories, and we're also able to bring different pricing offers to our customers to better fit their business needs. As both Allan and Steve mentioned earlier, we're working to improve how we do our business in every area. Similar to what Rick and Tommy just highlighted, we do believe that by bringing better data tools and focus to this aspect of the business, we can generate additional value for the organization, which in turn allows us to be more competitive. Through these improvements, we have a line of sight to bring over CAD 5 million of incremental EBITDA to the organization by 2027.
This is through enhancing our supply and logistics tools, expanding our third-party sales, and by offering our customers new pricing products to differentiate ourselves from our competitors. As Steve mentioned earlier, starting in 2025, we've consolidated all the US retail supply and primary logistics into our supply and logistics group. This is creating opportunities where we can remove intermediaries from the supply process and go directly to the supply points. This is reducing costs within the organization. We're also finding ways we can leverage our broader scope to move product where it's needed, both for supply security and for value capture. This past winter, we were able to shift supply back and forth between Ontario and New York as the regions were changing due to the changing weather patterns.
It really does open up opportunities for us to make those kinds of adjustments as we go through the winter. It has been a great advantage to us to keep our customers supplied and move product where it is needed. Also, this is going to open the door to utilizing our own assets more to sell to third parties, which is enhancing our wholesale volumes, particularly in the large East Coast market. I know this looks like an air traffic map you find in the back of your airline magazine, but it shows our deliveries over the past year in Canada. It is a great illustration of the complexity of our business. It also emphasizes how if we can make better choices on a daily basis, it can add significant value to our organization.
We schedule more than 50,000 shipments a year by truck and rail. This does require a group of experienced people who are focused on this function day in and day out. It also is an advantage for a company our size because we can do this where the competitors do not have that same in-house expertise. This is a data-heavy process. Historically, we have relied on spreadsheets and intuition to drive these decisions. Having a tool that gives the real-time information at our fingertips will drive better decisions and enhance cost savings. On that note, similar to the other groups, we are developing a supply optimization tool that will allow our logistics team to pick the most cost-effective supply point on any given day and to measure the improvement over our older manual methods.
As a company that is now more focused on continuous improvement, these daily improvements compound over time and will result in a significant value gain, especially with our scale. This type of investment is not something a smaller company would do, nor would they even have the optionality of the various supply points to make these kinds of decisions. Again, another example of where our scale and size can bring us advantage over the smaller competitors. To wrap up, a company with our size and footprint in North American propane gives us a unique advantage over our competitors in that we gain insights into supply and logistics advantages, which helps to drive lower propane cost procurement, keeps our retail business competitive, and allows us to expand sales to external parties.
Now, this is another touchpoint in the virtuous cycle where we can help to improve competitiveness through cost-effective supply. Equally important, it also brings assurance of product supply for all of our customers when they need it the most. When we execute this function better than our competitors, it gives us one more advantage as we move to become the industry leader. Thank you. I hope I did okay in my time block between the speakers and the coffee break. We're now going to start a 15-minute break. Followed by that will be Dale Winger, who's going to talk about our CNG business. Thank you.
Looking back on the track for a little greenback. Got to find just the kind or losing my mats. Out of sight in the night, out of sight in the day. Looking back on the track, gotta do it my way.
Out of sight in the night, out of sight in the day. Looking back on the track, gotta do it my way. Looking back. Looking for some happiness, but that is all we're loneliness to buy. Turn to the left, turn to the right. Looking upstairs, looking behind. Looking for some happiness, but that is all we're loneliness to buy. Turn to the left, turn to the right. Looking upstairs, looking behind. Looking back on the track for a little greenback. Got to find just the kind or losing my mats. Out of sight in the night, out of sight in the day. Looking back on the track, gotta do it my way. Looking back on the track for a little, little greenback. Got to find just the kind or losing my mats. Looking for some happiness, but that is all we're loneliness to buy.
Turn to the left, turn to the right. Looking upstairs, looking behind. Looking for some happiness, but that is all we're loneliness to buy. Turn to the left, turn to the right. Sometimes I go out by the hill and I look across the water. I think of all the things what you're doing. In my head, I paint a picture. Since I come on home, my body's been the maggot. I miss your ginger hair and the way you like to jag it. Why don't you come on over? Stop making a fool out of me. Why don't you come on over, Valerie? Valerie. Valerie. Did you have to go to jail? But your house isn't up for sale. Did you get a good lawyer? I hope your dinner catch a team.
I hope you find the right man who'll fix it for you. Now you're sobbing and anywhere takes the color off your hair. Are you busy? Did you have to pay that fine that you were dodging all the time? Are you still dizzy? Since I come on home, my body's been the maggot. I miss your ginger hair and the way you like to jag it. Why don't you come on over? Stop making a fool out of me. Why don't you come on over, Valerie? Valerie. Valerie. Sometimes I go out by myself and I look across the water. I think of all the things what you're doing. In my head, I paint a picture. Since I come on home, my body's been the maggot. I miss your ginger hair and the way you like to jag it.
Why don't you come on over? Stop making a fool out of me. Why don't you come on over, Valerie? Valerie. Valerie. Valerie. Valerie. Valerie. Why don't you come on over, Valerie? I'll just keep on falling in love until I get it right. Right now, I'm like a wounded bird hungry for the sky. If I try my wings long enough, I'm bound to learn how to fly. I'll just keep on falling in love until I get it right. My door to love has opened out more times than air. I'm either fool enough or wise enough to open it again. 'Cause I'll never know what's beyond the mountain till I've reached the other side. I'll just keep on falling in love until I get it right. If practice makes perfect, then I'm just about as perfect as I'll ever be in my life.
I'll just keep on falling in love until I get it right. I've got to get it right until I get it right. I just keep on falling in love until I get it right. I've got to keep on falling in love until I get it right. I've got to keep on falling in love, keep on falling in love until I get it right. I'll just have to keep on. Though you may not drive a great big Cadillac, gangster white wall, TV antennas in back, you may not have a car at all. Just remember, brothers and sisters, you can still stand tall. Just be thankful for what you've got. Though you may not drive a great big Cadillac, diamond in the back, sunroof top, digging the sea with a gangster link, gangster white wall, TV antennas in back.
You may not have a car at all. Remember, brothers and sisters, you can still stand tall. Just be thankful for what you've got. Though you may not drive a great big Cadillac, gangster white walls, TV antennas in the back. You may not have a car at all. Remember, brothers and sisters, you can still. If you don't mind taking your seat, everyone will get started in about a minute. Diamond in the back, sunroof top, digging the sea with a gangster link. Diamond in the back, sunroof top, digging the sea with a gangster link. Diamond in the back, sunroof top, digging the sea with a gangster link. Diamond in the back, sunroof top, digging the sea with a gangster link.
Yeah, I learned that Dave used to do it on his own before. If I don't follow Dallas, I'm going to Salt Lake area.
I'm going to go out there and do the video every night. I even have him do some of the stuff. What am I missing here? You know, that type of thing. Cool.
All right. We're going to get going again with the next portion. If you don't mind just grabbing your seat. Up next is Dale, as Sean mentioned. Before we get to Dale, we've just got a brief video we want to share with you on Soteris, the CNG business. Without further ado.
Superior Plus' compressed natural gas division, operating under the brand name Soteris, leads the way as North America's largest provider of on-road low-carbon energy solutions. Safely delivering compressed natural gas, renewable natural gas, and hydrogen, we're here to power industries across Canada and the United States, especially those beyond the pipeline's reach.
Our fleet of mobile storage units and custom-designed pressure reduction systems delivers safe, reliable energy tailored to our customers' exact needs. Whether through fixed or mobile compression setups, our services are designed to be as flexible as they are dependable, meeting energy needs anytime, anywhere. We help keep a variety of industries running, including agriculture, mining, power generation, utility support, and oil and gas, providing heat, power, and emergency outage support. Our centralized logistics team operates around the clock, monitoring and managing fuel supplies, ensuring timely replenishments. Safety is our first core value, backed by state-of-the-art equipment, cutting-edge on- and off-road technology, and our highly trained, experienced team. Soteris, delivering energy solutions wherever customers need us, safely, efficiently, and without compromise. All right.
Good morning. It is great to be with you here.
It's been exciting to meet you this morning and I look forward to more introductions as we go on throughout the day. I'm really excited to tell you about the Soteris business. Of course, I'm Dale Winger, the new President of the organization, and recently joined following more than two decades of commercial and strategic and leadership experience in the chemical and oilfield services sectors. I'm really grateful to be a part of the Soteris winning team that's built the industry's most formidable energy delivery and services platform. We'll talk more about that today. As I've had an opportunity to start meeting and working with the Soteris team, one question that I get a lot is, "Why did you take the role?" If it's okay, let's start with that. First of all, the business. Soteris is an actual unicorn.
We all know most startups don't achieve market leadership and a strategic acquisition within their first decade. It's really a special team and culture that focuses on customers and has a track record of innovating and winning with simple and reliable solutions. It's an incredibly capable, values-driven organization whose best days are ahead. Who wouldn't want to be a part of that? Secondly, the market. Natural gas is an essential and growing fuel for heat and power in North America for the rest of our working careers. There's good reasons for that. Number one, there's an abundance of economical feedstock. It's energy dense. It's lower emissions than most alternatives. The technology required across the value chain from production of natural gas to consumption is developed and scalable.
Importantly, for Soteris, there has been a persistent underinvestment in both pipeline and grid transmission infrastructure that requires mobile energy solutions to meet growing needs. Third, the situation, as you are going to hear more, and I learned more throughout the diligence materials prior to joining and several discussions with Allan and Grier, the business is at an important inflection from building valuation with rapid growth and expansion to using this platform that has been built with invested capital to generate returns and cash flow while continuing to drive growth and targeted expansion. The opportunity was a great fit with my experience, and I am excited to work with the team to build the future. Importantly, what we will share today is not a strategy that has been developed since my arrival.
I'm going to share with you the organization has built a set of capabilities that's led to the establishment of an advantaged industry position. We will discuss those in more detail and how we will use those investments to drive capital-efficient growth and increase cash flow generation from here. There are four important themes to understand how Soteris is uniquely positioned to drive value. First, building upon our leadership position. We will share how the business has distinct competitive advantages to drive customer loyalty and continued growth. Second, operational efficiency. The largest market position enables economies of scale on technology such as equipment instrumentation and data analysis to inform real-time decisions that reduce cost and maximize asset utilization. Third, targeted expansion. The Soteris business has been built on the experience and capability to enter new markets, to bring new customers, new options to reduce fuel costs and emissions while maximizing uptime.
Finally, we'll discuss our plans to deliver attractive returns and increase cash flow. Notably, the investments that have been made in recent years into a market-leading hub network and a fleet of mobile equipment to drive increased utilization and allocate those existing assets to the highest return opportunities. The Soteris story begins with market leadership. Let's start with the financials. CAD 431 million of revenue in 2024 and CAD 148 million of adjusted EBITDA, with more than 80% of the business in the U.S. Soteris's 20-hub footprint is four times that of our nearest competitor. And Soteris's 842 mobile storage units is more than three times the next closest. What this means for our customers is the ability to provide cost-effective solutions in more places where they need us, even as those needs evolve and expand, including large opportunities that our competitors are not built to handle.
What this means for our investors is we have the most opportunities at the top of our sales funnel and the most operational experience with the most customer types, allowing us a unique perspective to win opportunities and allocate equipment to the best returns. How does Soteris operate? We start with safety. It's important to provide a great place to work for our people. Of course, it's important to most of our customers that we are contributing to and advancing their own safety culture. Let's share some stats that measure the progress on this journey. In 2024, the organization had a total recordable incident rate of 1.33, a 12% improvement over the three-year average. Our DOT recordables were 0.31, a 54% improvement from the three-year average. Importantly, let's look at how we do it and how we drive it forward from here.
I want to start with technology. In 2024, Soteris and our third-party drivers drove nearly 25 million miles to bring mobile energy solutions to our customers. 25 million miles. If context is helpful to conceptualize 25 million miles, that is the equivalent of 100 one-way trips to the moon. Our drivers spend a lot of time on the highway, and highway safety is critically important to us. All Soteris vehicles are equipped with cloud-based AI dash cams with inward and outward-facing video. These vehicle monitoring systems include detection of distracted driving behavior, collision avoidance, and AI fatigue monitoring. Our drivers are measured by a score that quantifies their performance along with opportunities to earn incentives, much like the program that Tommy shared with you earlier.
Looking ahead, we are beginning the rollout of a proprietary smart trailer system, which will provide early warning incident prevention with real-time mobile notifications to drivers to mitigate brake fires and tire blowouts. Now, in addition to technology, we're also improving the culture through an investment in training. Training helps our team members identify and prevent hazards, assess risks, promote proper use of equipment, and learn procedures. To put it short, we empower employees to improve workplace safety. Notably, Soteris employees completed over 19,000 hours of in-person and instructor-led training in 2024. That's approximately 25 hours of training per team member. These are just a few notable highlights of how Soteris uses technology and training to advance our safety culture. Let's move next to Soteris's competitive advantages and how those are built to deliver a unique and durable value proposition to our customers. Why do customers hire Soteris?
How has this market share been built? We provide safe, simple, turnkey solutions that integrate easily into customers' operations to reduce fuel costs and emissions while maximizing uptime. Our competitive advantages are designed to consistently deliver customer value. To earn and keep business, we first must be the most reliable provider. How do we do reliability? First, Soteris designs and operates a proprietary and connected fleet of equipment that allows us to provide unmatched reliability. Continued equipment innovation ensures that we can serve a diverse set of customers in even the harshest and most remote operating environments. Our advanced logistics platform includes next-generation IoT devices to enable real-time visibility and remote control capability so that we can view fill levels at customer locations and optimize replenishment deliveries. Next is responsiveness.
Having the largest hub network and equipment fleet means we are in a position and ready to quickly mobilize to meet customers' needs. The third component of our distinctive advantage is efficiency. Soteris builds custom software and workflows to support the dynamic requirements of our business. We prioritize the collection of high-quality data sets from our operations, and our approach to efficiency is based on the understanding that anything that can be measured can be improved, and data is very important to our decision-making. With over 1 billion data records collected and analyzed daily, we have the industry's best data set on cost to serve different types of work. This provides a unique capability to drive efficiency improvements for every job and every asset. The final pillar of this distinct advantage is experience. No player has more experience across more applications, more customer types, and more geographies than Soteris.
This provides a unique capability when customers need a partner to collaborate on the unique requirements of a new mobile energy solution. Taken together, these four, Soteris has invested in an industry-leading set of differentiators aligned to what customers value. Let's talk about market segments. As you saw in the earlier slide, the well-site business generates two-thirds of Soteris's profitability. To be sure, we are committed to be the preferred provider to this segment of customers and have built the industry's best business to serve their unique requirements. While the growth in this segment has moderated from double-digit year-on-year levels, we still expect mid to high single-digit growth driven by continued favorable economics of diesel substitution and the ongoing importance of hydraulically fractured energy resources to the North American energy mix.
In 2024, nearly 40% of the hydraulic fracturing fleet was diesel-powered, leaving a substantial addressable market for substitution ahead of us. As these diesel-pumping assets reach end of life, they will be replaced by natural gas-fired and electric equipment. Both of these ongoing trends will drive market expansion for well-site-delivered CNG. Importantly, we have business and relationships with the largest customer players in these markets and a hub and equipment footprint aligned to their needs. The next piece of Soteris's capital-efficient growth is targeted expansion into new markets and geographies. Let's first discuss the utility resiliency market. Importantly, it's currently our second-largest segment, and we are a double-digit share player with good returns in a 30 million MMBTU a year market. What's exciting about this market is the growth outlook.
We forecast the utility resiliency market opportunity to grow at a mid-teens compounded rate driven by load growth, especially during peak seasons, as well as the ongoing impact of aging infrastructure. Specifically, we are targeting expansion in this segment with bulk trailer leasing agreements with major utility clients and supplemental gas supplies for planned outages. Another area for targeted expansion is renewable natural gas, or RNG. There are ongoing capacity build-outs in RNG supported by durable policies at the state level that lead to an expected 20% compounded annual growth rate through 2030. There are actually 36 state-level programs in 23 states supporting RNG usage, and these are concentrated in the US West and Northeast. Soteris has a high share in the RNG segment. While these projects do take longer to develop, these have attractive longer-term contracts.
They offer dedicated trailer utilization and do not require new hub infrastructure capital aligned with our capital-efficient growth objectives. In addition, our breadth of experience is a valuable differentiator to collaborate with customers developing these projects, especially in comparison to smaller regional competitors. In particular, we are pursuing stranded landfill projects that cannot easily or cost-effectively be connected to a sales gas pipeline. Our expertise in RNG compression and transportation of high-pressure gases enables RNG developers a pathway to market their product. We are also seeing early interest in new feedstocks in new geographies such as food waste and livestock feedlots. In summary, Soteris is well-positioned with experience, footprint, and capabilities to capture attractive growth and returns in the utility and RNG segments. Taken together, Soteris has a great trajectory to deliver capital-efficient growth and increased cash flow.
We mentioned earlier that we will employ our scale advantages to drive growth. We have the most visibility into customer opportunities across North America. We have a robust hub network and large and flexible mobile asset base we can deploy to the highest returning opportunities. We have the most data and the most experience to inform project pricing and service terms to maximize returns. Efficiency is part of our advantage, and we have several actions being driven by team members across the organization to achieve a 12% cost reduction of non-product cost per unit delivered. A few of the major items include reducing loads by third-party carriers, increasing Soteris driver utilization, and our planning and reliability are driving improvements in fill per load, which increased 5% in 2024 and remains a priority efficiency improvement for the organization.
Finally, through a combination of increased EBITDA and reduced capital expenditures, we'll generate an increased CAD 65 million of cash for the company through these targeted expansion opportunities and efficiency improvements. In summary, we are enthused about the future as we transition from building growth with building valuation through rapid growth and expansion to a business that generates high returns and increased cash flow while continuing to drive growth and targeted expansion enabled by North America's leading CNG delivery platform. We have the industry's best team and quality assets positioned to deliver reliable, responsive, and efficient mobile energy solutions to customers. We look forward to sharing more progress as we go forward. It's been great to meet you all today. It is now my pleasure to invite forward Ash Rajendra, Vice President and Chief Information Officer, to share more about our data analytics journey.
Thanks very much, Dale. Welcome again to the company. We're all looking forward to partnering and working with you.
Thank you.
All right. Before we get started, let me tell you a little bit about myself. I've had an opportunity to work businesses ranging from early-stage startups and emerging markets to dual-exchange-listed global firms across a series of verticals, life sciences, CPG, and energy, and finally this organization. I'm really, really excited to tell you about what attracts me to this company and this industry. It's the art of the possible. When you look at many other industries, if you're in automotive and you're chasing production quality, you're going to see a Toyota nameplate in front of you. If you dare to launch rockets, odds are Mr. Musk and SpaceX have a head start. When you look at this particular industry, nobody has pole position. We get to do that as a team. What a great canvas for a technologist.
I spent the last couple of years really focusing on integrating the high-quality assets that Tommy talked about. They're fantastic. They're all a little bit different. They now operate on common platforms in modern data centers that are elastic that allow us to scale. We're able to use our size and mass when it comes to contracting and bring cost efficiency back into the whole. We take customer security and our corporate security very, very seriously. All this is protected by a modern cybersecurity infrastructure. I'm really excited to talk to you about the new tools we'll be bringing to this industry that I think will be revolutionary and game-changing. We're going to unpack that on the next couple of slides. The great thing about digital assets is marginal cost to scale. They scale extremely well. We are a growth-focused company, so that matters.
Let's spend a minute to talk about system technology architecture. The great thing about this journey is it's not just technology. It is nested in performance management and results orientation. That is exactly the way we're looking at things. We're looking at leveraging things like pricing data, demand forecasting, routing. These are near and dear to any asset-rich business. Let's talk a little bit about the approach. I'm going to unpack a little bit about the industry for you. Remember that 70% of the market that is independent. They all use one of a half of a dozen software packages specially built for this industry. The great thing about software packages is they focus on the mass. The problem here is the mass is the 70%. The problems and challenges and opportunities that independents have are very, very different compared to the size and scale of our organization.
They're often county and state-bounded. We've got a trove of data relative to them that we can mine for performance excellence. When it comes to that, it means we have to innovate at the edge. It means we're bringing and building capabilities that this industry has not seen before, and we're doing that in a manner that is scalable, highly scalable. I'm now going to focus in on a couple of really, really neat tools that we're bringing to the market. You have heard my colleagues talk about this. Let's talk about marginal cost to serve first. Our next speaker, our CFO, is super excited about this one. We get cost granularity down to the customer level. We're not looking at things in terms of averages. We're doing that in real time. This is a set of integrated tools that talk to each other.
As route densities increase, as bulk plant locations change, as commodity and weather curves change, we have the ability to leverage that and understand exactly how it affects our operation dynamics. With that, we can feed the data back in and make some really, really intelligent decisions. Let's talk about scheduling and delivery optimization. I'll take a moment here to walk you through how the industry does this. Remember that 70% of independents out there. Again, they're bounded by geographics and don't have the same opportunities that we do. What does that look like? It looks like a series of people getting into assets, driving around routes, and topping off tanks. It's the kind of efficiency they need at their level. Take it up one step more and look at a larger player in the market. Those larger players are adding a little bit of technical sophistication.
They're not going to the same place twice. They're driving an efficient route on a day, but they're looking at a limited number of variables and route combinations. Let's look at how we're doing this. I have 2 million decision variables at my disposal, and I'm literally looking at billions of route combinations in real time to pick the exact perfect combination of routes and assets at the customer level to deliver operational efficiency. Let's move on to Sean's world. Sean, with the wholesale group, is really about efficiency at the penny level. That's how wholesale works. The beauty about it is if you can capture those pennies, they translate to dollars on the balance sheet.
Sean, in his business, has to choose between does he store, does he route, does he use rail, does he use third party, does he use our internal groups, and all of those dynamics in near real time. You throw weather and commodity curves on top of that, and you get a ton of complexity. Excel only has about 36,000 rows. It's not the right solution for that class of problem. Crunching that in real time allows us to unlock additional opportunity and value in the book. The next three elements are all about Rick's world. He gets three because he's a sales guy, and they're all kind of prima donnas in my experience, but super fun to work with. He is growth-oriented. He has a propane-powered car that only has two accelerators and no brake. Why does understanding your customer matter?
Because churn in this industry is deadly. We've talked about that a little bit. When we churn a customer, it means we have to deploy an asset to go pick up an asset, haul it back to a yard, and then find that N plus one customer. That is a ton of work. Wouldn't it be awesome if you could use predictive algorithms to understand what are the nuances on the customer journey that cause undesirable activity and then put digital tools in front of it to make faster decisions to get in front of that customer and intercept that catch, if you will, and bring it home? That's, in fact, what we're doing. It's the same with lifetime value estimators. We're very, very interested in understanding the lifetime value of a customer because we treat customers differently based on their margin opportunity.
That does not mean we do not deliver safely to everybody. It does not mean we do not offer phenomenal service, but it is a little bit one out of the Amex playbook. Some customers might be more valuable than others, and how do we double down on those? In conclusion, I think this journey is very, very believable because it is grounded, in fact, in reality. We have a sustainable, solid infrastructure. Those are heavy investments we made across the past two years, and that has allowed us to consolidate systems and now be able to shift it to focusing on weaving the tapestry of the possible in this business. The tools we are bringing to this industry are groundbreaking and I think first in market in many cases and will be differentiated. You can hyperscale them. We want to continue to grow.
We want to continue to establish a marginally reduced cost to scale as we continue to fuel that virtuous cycle. Better at targeting creates density. Density creates the opportunity to reduce an operating cost footprint. Reducing an operating cost footprint creates optionality in the product stack. Some people think energy retail products are not very interesting. I'm going to give you something else to think about when it comes to that. Nobody buys our products and services for the sake of housing molecules. You're not calling up your friends and saying, "Hey, I just got some new molecules. Want to come over and check them out?" It's not how it works. However, we are an experience-based good. You have individual needs, each one of you, when it comes to your energy consumption. You have an individual presence.
You have an individual physical location that has unique thermodynamic properties, and you have unique behavioral characteristics. Those are the perfect ingredients to start structuring hyper-accretive products. Rick spoke a little bit about that. The more efficient you get, the more accretive it allows you to be. With that, it's my pleasure to introduce you to our next speaker, our CFO. I sometimes refer to him as Master of Coin. He's always packing something. It's usually a calculator. Grier Colter.
Thanks, Ash.
You're welcome.
Good. Good morning, everyone. I think I know quite a few of you in the room, but for those who do not know me, I am Grier Colter. I am the CFO of Superior Plus. I have been part of the team here for about 18 months. Let me try to bring everything together here, put some numbers on it, all with a focus on stronger financial performance here, top and bottom line, a focus on greater capital discipline and how that all translates to value for our shareholders. Alan earlier walked through our high-level strategy, and I will provide detail on our three-year financial targets momentarily. You heard from our propane team how we are going to drive accelerated performance and financial results from these businesses.
Dale has laid out our plan for continued growth in our CNG business in attractive core markets and expansion in other select markets, but also very focused on free cash flow generation in this business. This all ties in very well to our overall capital allocation strategy. One, driving capital-efficient growth in EBITDA and free cash flow. Secondly, strengthening our balance sheet to provide increased financial flexibility. Lastly, a relentless focus on shareholder returns. Let's get into it. Here we have the core of the numbers, which is the growth in EBITDA. We're showing during our outlook period 2025 to 2027, growth in EBITDA from CAD 455 million to CAD 570 million in 2027. I'll go through the bars and just kind of tell you how we're getting there. The first bar is the base propane business. That's really two pieces.
The first is some weather tailwinds. You'll recall in 2024, we had a very warm year. As we move into our outlook, we're assuming normal weather, and that represents roughly half of that CAD 20 million. The other half comes on the tail end of the plan, more towards 2027. Once we have the final platform from Superior Delivers, we believe we can grow this business kind of low single digits. That's kind of the other half of that CAD 20 million, which, as I say, will occur in 2027. The next bar is Superior Delivers. You've heard a lot about that today. Hopefully, that has been very helpful. That will add CAD 70 million. Just to be clear, we anticipate leaving 2026 with a full run rate of CAD 70 million.
That CAD 70 million will occur in year 2027 as the work and the initiatives will be complete by the end of 2026. Continuing to move across to the right, our CNG business. You heard from Dale. Our continued growth, we expect not at the same levels historically, but at more of a mid-single digit level. Around 5% is what we've assumed as we continue to add to our MSU fleet at more modest levels and, of course, drive additional efficiency out of the business. Beyond 2027, we expect these businesses to continue to grow organically. I'll mention, while it is not our focus today, this retooled propane platform, we believe, will position us very well, obviously, for organic growth, but also for inorganic growth in what is a very fragmented industry. A little more detail. Again, this all bridges off the EBITDA growth.
I'll move deeper in and just kind of move left to right. I've walked through the adjusted EBITDA bridge, which takes us from CAD 455 million to CAD 570 million by 2027. That represents a compounded annual growth rate of 8%. Our adjusted EBITDA per share metric is also on that graph on the left. We are seeing that increase from CAD 1.27 per share to CAD 2.05 a share. That's 17% CAGR. It is accelerated by, of course, being a slightly smaller base, but also accelerated by share repurchases and debt reduction. This EBITDA per share measure is a key metric for us. We use it in our short-term compensation program. It is the biggest driver in how we're compensated from a short-term standpoint. We believe it is aligned very well with our shareholders. Moving to the next set of numbers, free cash flow.
We see free cash flow over the outlook period going from CAD 93 million in 2024 to CAD 240 million in 2027. That is a compounded annual growth rate of 40%. That is driven by EBITDA growth, higher capital efficiency in the business, lower debt levels. Of course, this is off a smaller base, so you get more accretion. Free cash flow per share, which is also on that same chart, going from CAD 0.38 in 2024 to CAD 1.10 in 2027. That is a CAGR of 45%. That you see benefiting, obviously, from the growth in free cash flow, but also benefiting from the share repurchases that are in our plan. Moving across to adjusted net income, moving from CAD 39 million in 2024 to CAD 145 million in 2027.
That is a CAGR of 55%, again, driven fundamentally by the higher EBITDA and a flat depreciation curve as we move away from acquisitions. Adjusted earnings per share is growing from CAD 0.16 to CAD 0.65. That is 4X. Again, you are seeing the leverage from buybacks and, of course, the movement in adjusted net income. Return on invested capital is the last set of charts on the right. I will just acknowledge it is insufficient historically. This is driven by an acquisition-based approach, which historically has yielded lower returns. That is not an easy metric for us to turn overnight, but we anticipate an increase of 300 basis points in this measure over the outlook period. We have also provided another metric on the same chart, which is overlaid. This is an adjusted returns metric.
All we've really done is we've removed goodwill from the calculation, and we're trying to highlight the return on hard assets. This metric increases from 7.5% to 15%, so doubling over the outlook period. We think this better represents our organic returns-focused approach going forward. Just some base assumptions. We've assumed flat interest rates, minimal working capital investment, conversion of our prep shares to common equity in 2027, and continuing to buy back shares at a similar pace as what we committed to in our 2025 guidance. A lot here, but in summary, we are expecting significant improvements to our financial performance and significant value creation for our shareholders. Moving to our capital allocation strategy, a significant difference in the way that we're approaching capital allocation from the historic approach. The left circle is our approach over the last five years, so 2020 to 2024.
The circle on the right represents the way we see it for the outlook period. Just point out some major differences here. Just this M&A-focused growth, historically a significant dividend payout, and then repeated capital raises funding that strategy of M&A growth. Looking to the outlook, what we have going forward, our capital allocation approach, organic growth-focused, as you heard from the team today, a reduced dividend payout, which we made that change at third quarter of last year. Significant share repurchases. Over the outlook period, we plan to repurchase CAD 400 million, which is basically on the same path as our 2025 guidance, and a focus on leverage reduction, estimating to take out about CAD 275 million US in debt. All at the same time, and this would be consistent with both circles, continuing to invest in our business.
That is consistent, but I will say, and hopefully you heard that from the team today, the focus is so different on returns. I can tell you in the year and a half that I've been at the company, the way the team talks about returns is completely different than when I walked in the door. That is a big part of this. Overall, our disciplined approach to capital allocation is a very key input into our overall shareholder value creation. Moving to the balance sheet and talking about our debt. Overall, a very favorable debt profile, and we will continue to improve leverage and financial flexibility. We have no near-term maturities in the debt stack, and therefore no immediate refinancing risk. I will just talk about the—this is the top chart. I will talk about the three bars, kind of what is in there.
The first that's appearing at 2027, this is our credit facility, matures in 2027. Current cost is around 5.5%. It's on a floating basis, so far in CORA-based plus 170 basis points. This is provided by a syndicate of large Canadian and US banks who are very supportive. You can expect us to just continue to naturally move that maturity out over time. The right two bars are bonds. The 2028 bar is a Canadian bond, CAD 500 million. It's got a coupon of 4.25%, matures in 2028. The blue bar on the far right is a US bond, notional CAD 600 million. It's a coupon of 4.5%, and it matures in 2029. Extremely attractive coupons and three to four years of tenor left. Moving to the bottom chart, we have a plan to reduce our leverage to below 3X in 2027.
We'll cross through that probably mid-2027 and end the year lower than 3X. This is obviously being driven by higher EBITDA. There's an increase of CAD 115 million of EBITDA over the outlook period. As I said, outright debt reduction of CAD 275 million, which will provide additional financial flexibility for the company. We're committed to a strong balance sheet, and we have sufficient liquidity to execute the strategic plan. As I conclude, I'd like to reiterate our excitement for the plan. Quite frankly, this is why I'm here. As we grow our adjusted EBITDA by over CAD 100 million to CAD 570 million, we will see our free cash flow more than double to CAD 240 million, and our adjusted EPS grows 4X. At current levels, share repurchases are an excellent use of capital for us. Our shares are trading at four times 2027 free cash flow.
At current levels, we'll take out 8-10% of our float per year. We have in our plans assumed share appreciation, share price appreciation. In our models and the per share numbers, we actually plan to take out 15-20% of the float by 2027. We've been really consistent about the importance of a strong balance sheet and financial flexibility, and we're on track for leverage at investment-grade levels by 2027. Our strategy is based on driving performance from our high-quality asset base and a relentless focus on capital allocation. This sets the stage for meaningful returns for our shareholders. With that, I'm going to turn it back to Allan, who will make a few closing remarks.
Thanks, Grier.
Wow, what a morning, hey? You wanted to hear what was going on. You heard what was going on.
Look, I can't thank you enough for your time and attention this morning. We're going to switch over to Q&A here in a few minutes. As I reflect on what you heard from the team today, it's really interesting. We contemplated when to talk about Superior Delivers and when to have this investor day. This transformation of the organization is so encompassing. It's not just redefining our expectations for financial performance, it's redefining how the propane business actually works. We wanted to give you some insight into that negative value cycle that you've seen with so many people in this industry where constant cost pressure causes you to go after margin in the short term, which decreases density, increases your costs, and puts you in a hole that's really hard to get out of because you have to invest to get out of it.
This is an ecosystem. That's why I've often said it's not a cost reduction exercise. It really is a transformation. You can't address one aspect of that virtuous cycle and expect magic results. You can't just lower your cost. You have to improve your customer experience. You can't just have individual pricing without that reinvention of your IT infrastructure and your data capabilities. You can't just improve your route efficiency. You got to address density. These all came into play. One of the reasons that we've been so diligent about this journey was it was going to take a world-class team with great tools and a really solid plan to make it all come together. We wanted you to meet the team today to see who the people are that are behind this.
When you hear Tommy talk about how he's transforming the organization, you realize there's a wealth of opportunity to get at the cost structure of this business. When you apply that to that virtuous cycle, you say, "If you can get costs out, it gives you pricing capability that you just didn't have before." What we didn't tell you, there's a lot of slides on the cutting room floor, I can assure you. We've been very busy for the last couple of months. That example that Tommy used where you take a customer that's CAD 3 a gallon to deliver. Through route optimization, you drop that to CAD 1.50. Think about that in the context of margin. If your margin was CAD 0.50, you've just increased your margin by three times. That's an incredible impact.
Now, this is just one example, but it's indicative of the types of opportunities we have in front of us. The part we didn't show you is we did the math, and if you added another customer that was next to that dot that went from CAD 3 to CAD 1.50, your incremental cost to serve that customer is 10 cents a gallon. Think about the capability. Think about the opportunity that creates to acquire more customers more competitively. Again, it's an ecosystem. To do that, you got to build a marketing team. You got to have the EBITDA, the cash available to invest in marketing. You got to discover how you get lead generation, what marketing tools you should be using. It all comes together. We're moving from that negative value cycle to that virtuous cycle by completely transforming how we work.
On the Soteris side, you saw this is a great company that works really well within the Superior family. Under Dale's leadership, we're going to be disciplined and focused. We're going to drive growth, but we're going to grow with the market. It's a new day. It's an exciting industry, but it requires a different type of discipline. Great market development, great business development, but also a focus on making sure you get the timing of your capital investments right and that you're getting maximum utilization for your assets. We're perfectly positioned to do exactly that. Ash talked about the IT implications of this. We couldn't do this two years ago. Ash has all kinds of IT terms of phrase that I love and sometimes drive me crazy, like digital cement and technical debt.
Digital cement and technical debt, when you unpack them, they're a harbinger for a company like us because you can't do any of this if you have operating systems that are constantly failing, that are outdated, that need to be replaced or need to be constantly updated. You have to have a solid foundation. Ash and his team did an amazing job building that so we have a foundation to grow from. He's exactly the type of leader who loves this visionary way of thinking. He's putting tools in the hands of our leaders that we never had before. Finally, you heard from Grier what he and I have been saying all along. We're going to grow organically. We have the assets. We have the people. We're in the markets to do it.
We're going to be responsible in how we allocate capital. We're creating a solid foundation for Superior with the financial flexibility to be able to continue to invest and to capture that lifetime value so we're not finding ourselves in a position where we're held hostage by quarter-over-quarter results that cause us to try to monetize our customer base and go back into that negative value cycle. The results that you've seen in front of us, in front of you today, are real.
We wanted to make sure that Superior Delivers and that the transformation at Soteris were all underway before we unveiled it to you so we could get up here and speak very confidently about the progress we're making and not about what we think or what might happen one day, but the trials that are actually in place, how we're getting an impact in the market, how these tools are already, in some cases, developed and in use. Hopefully today, despite the amount of time we asked from you, gave you a really good insight into how we're running the organization and how the investments we've been making in the team and in the capabilities are really clearing a new path for the company going forward. With that, my sincerest thanks. We're now going to just break for 30 seconds, put some chairs up on the stage.
We're going to invite everybody to come on up, and we'd be more than happy to take your questions. Thank you very, very much. That was safety first of mind. I got to make sure I don't fall off the stage.[Audio distortion]
Yes, if you raise your hand, we'll bring in Mike. Adam, I think Ben's got a question right. Do we have enough chairs? Oh, sorry, Rob's. Okay. I don't know if you want to. I can. I don't need to go outside. Do we have enough chairs? There are? Oh. Yeah, you're welcome to stand. We had a lot of plans underway, so we didn't get everyone perfectly. So we're one chair short. Yep. We're going to ask you to use the mics because, and look, thanks to the audience that's joined us via our webcast.
For all of you, we really appreciate you taking the time to be here today. But we got to use the mics so that the folks online can hear you. Yeah, go ahead, Rob. Hey. Good morning. By the way, could you introduce yourselves when you're talking?
Absolutely. Rob Dorran, CIBC Capital Markets. Thank you very much for the presentation today, especially those medium-term targets that you put out. I do have a couple of capital allocation questions here. The first one, I'll just start with what you're thinking in terms of the pace and the sequencing of the share repurchases versus deleveraging.
I mean, I'm going to let Grier jump in here too, but it's always a balance. You want to get it right.
When you look at where the shares are right now, we think it's great timing and we're at a good juncture to continue to invest. As we move forward, we'll see what the opportunities are based on those returns, really, is how we're doing it. It's going to be quite a dynamic process. You might have something.
Yeah, maybe just really quickly. I think the share repurchases will be pretty consistent. Our view is we made a change to the dividend. We're reallocating that to share repurchases. We'll continue to kind of go along that pace, plus or minus. I would expect that to be pretty consistent. The delevering will probably increase over time as the cash flow generation increases. That's kind of the way I would think about it. The share repurchase will probably be relatively flat.
Okay, just to follow up on the capital allocation, you mentioned you have some pretty good organic growth for the first few years, and it sort of flattens a bit. The message I took back is maybe you'll consider M&A once your house is in order at that time and all that sort of stuff. I just can't help but wonder, as you look to diversify Soteris a little bit, if there's not an opportunity to use M&A as a way to accelerate the diversification strategy there.
Sorry. Don't read anything into my cough. I'm trying to get out of here. Yes to your first question in terms of M&A opportunities. Look, when it comes to M&A today with the propane business, I mean, we're fully consumed with Superior Delivers.
That's not something we're going to contemplate until we have confidence that our operating model is well entrenched, that it doesn't require the time and attention of the entire team. We'll evaluate whether or not we can apply that to other assets and generate growth. From Soteris, I mean, it's not something that is immediately apparent in terms of good adjacencies. We've done a lot of looking to say, "Look, is there a natural adjacency?" Power generation is the obvious one that comes to mind. We've looked at it very carefully. It's not right for Superior. It's very, very capital intensive. As the industry evolves, we'll obviously always be looking to make sure that if there's a way to accelerate the growth that makes sense for us, we'll look at it.
Thank you. Okay. Good morning.
Hi, it's Ben Isaacson from Scotiabank.
Can we just go to page 13 on the slide deck if that's possible? It talks about all of the underinvestment that has been made.
Give us a sec. We'll go there yet. Sure. We got a ways to go. Okay.
Sure, sure. You talk about underinvestment in customer acquisition, underinvestment in technology, in data analytics. People are rational. Why have the returns not been there? Why has there been underinvestment? Why are the returns going to be there now with your investment? That's kind of part A. Part B to the same question, I didn't hear what the spend is going to be or what the investment is going to be to generate the CAD 70 million.
Can you talk about why the returns are there and why they were not there in the past and what the timing and the shape of the CapEx spend is to get to that CAD 70 million? I will have a follow-up after it.
Thank you. Okay. Let me give you a couple of examples, or at least one, maybe, that articulate that point. One of the frustrations I felt when I came into the role was we used sort of regional pricing to create price in the market. It was rudimentary for 2025, but not for the time. It kind of anchored in what the competitor price is. The competitor price is, in some cases, relevant, in some cases, not. When you go to a regional price, we do not really ever have a regional cost. Our cost is very customer-specific.
In order to understand if we were pricing effectively for two reasons, one, to be able to make sure that we're making a margin on the customers that we serve, but also to make sure that we're competitive enough to be able to acquire more customers, you really have to understand what your cost per customer is. That, for us, was quite elusive. We were using kind of average costs. While there are customers that behave the same, all customers are not created equal. In some cases, you have home heat customers, which are burning a lot of fuel, and there's a volume-based pricing that makes a lot of sense. In other cases, there are customers like the one that Rick was talking about that are seasonal or maybe using backup power. Their volumes are actually quite low.
To use one pricing mechanism, and then you factor in how far they are, there's a lot of variables: how far, how frequent, how much volume. It's really hard to understand whether you're pricing for acquisition and profitability. The capabilities that we're building, if I use that example, are really that ecosystem: understanding your routing efficiency, understanding the customer and what kind of dynamics they have, and then being able to price dynamically so that you're able to say, "We can really provide this customer with a really attractive value proposition because we know exactly what their cost to serve is based on who they are." That all has to happen in real time. This is where the challenge of scale, when you talk about scale in broad terms, it makes sense.
As you get bigger and bigger as a propane company, scale can actually work against you because we have to do that with 750,000 customers. If you're a small regional player and you and I started a propane company and we had one truck, we'd know what the routes are. We'd know where they're delivering. We'd know the prices. It's when you get bigger and bigger and bigger that you lose that visibility. The investment that we're making and where we've underinvested is not having that capacity. Does that give you a bit of an insight?
Maybe I'll jump on this. I'll get the second part of your question, Ben. I think Steve Quinn had a great slide that talked about the life of a customer. I think part of this also is the lack of patience that the industry has had.
You make the investment, you have a new customer, and then you almost, in mining terms, you high-grade the customer. Right? I think the lifetime value, that requires some patience, right, to get at it and get the lifetime value out of it and takes longer. I think that's probably a factor, particularly when you look at it in the light of public companies and quarters and all this kind of stuff, right? The cost to get at this, I think I said on the last quarterly call that the cost for 2025 would be CAD 10 million-CAD 15 million. It's probably a similar number again in 2026. As I said, the program will be complete at the end of 2026. Yeah, the full run rate will be achieved, but there wouldn't be any costs in 2027.
Think about it kind of 10-15 in 2025. Again, same thing. This would be a combination of consulting costs, costs for us to build tools, and some of this will be and even some costs to make these changes, whether they're investments into the changes. That's all in. Some of it will be CapEx. Too early to tell how the accounting is going to work on it. Yeah, just think of that as the total bucket, 10-15 in those two years, and that's the total cost. We'll obviously articulate more detail kind of as we go.
Great. Thank you. Just a very quick follow-up. CAD 240 million, I think, of free cash in 2027 out of CAD 570 million of EBITDA. That's a 40% free cash flow conversion rate. I think you did 20% last year.
Is 40% kind of where you want to be? Is that a target of yours? Is that kind of what you think run rate could be going forward?
Yes. You want me to go? Yeah, I'll start if you want to jump on this. I think it depends, right? I think we're looking at this right now. We see there's two big changes, really, in getting at that growth. The first is obviously just the growth and the profitability of the business and getting at Superior Delivers. The second is our capital allocation approach. You look at the difference in how we spent capital in 2023 and 2024 at Soteris and what we see in 2025.
It is more of a kind of a balanced approach, like instead of taking all the cash flow and reinvesting it into MSUs and growing the business to, yeah, let's continue to buy some MSUs, grow in select markets, but also shift and have a cash flow return. How will this change over time? I mean, I think I would say it this way. I do not think we have any magic target about what the free cash flow yield is. I think if there were opportunities, as Dale kind of gets into this business and sees maybe other opportunities to maybe grow in certain segments, I think we will look at those. I think for me, anyways, it is all anchored on return. I think for us, if we see great opportunities for return, there is no magic to that.
I think we would certainly take free cash flow down a little bit, maybe, to take the returns up. That's the way I would answer it. I don't know if you guys—
No, that's perfect. That's exactly right. I mean, it's incumbent upon us, I think, to continue to look for opportunities to invest in the way that's going to create the most shareholder value. I think one of the things you can take away from today is we're having a very disciplined approach about it, and we have options. Thank you.
T hanks.
Oh, we have a question right here.
Yeah. So Gary Ho from Desjardins, Rick, got a question for you. You can nerd out on your pricing model again. When I think about a high-density area, if you're going to add an incremental customer, will you give them preferential pricing as a result?
Over time, when you reduce your cost to serve, any thoughts on maybe reducing pricing in that whole area to keep it competitive? Just want to talk about that a little bit.
Want me to take that? Yeah, I mean, yeah, go ahead, Rick. I'll add something. Mike Hahn?
Y eah, thanks. Absolutely. I think being competitively priced in a market based on customer-specific economics is our path forward. What we're not going to do is revert back to introductory pricing, change that the year after, change it potentially the year after that. That creates an event like I talked about this morning. We are going to be more consistent using customer economics, being competitive based on the markets that we serve, much more strategic and surgically focused than we have been in the past.
Yeah, what I'd add to that, I think, is in a data-driven world, you start to look at your customers completely differently. Rather than thinking of them as a home heat customer or a suburban customer or a cottage country customer, you start to look at the data will start to create customer cohorts that act and behave very similarly. When you overlay that with where we have an inherent advantage, whether it be because of capacity or cost to serve, you want to find that pricing equilibrium point where your prices are low enough that you're able to acquire customers cost-effectively, but high enough that you're maximizing your margin. You can maintain them, like that slide that Steve had up, so that you can maintain for lifetime value. It's really what we're targeting is finding that equilibrium point.
This is where the data transformation plays such a big role. We have to do it on an individual customer basis. Think of the cohort like everybody on Third Street. That is within 3 kilometers from our bulk plant that has home heat as their primary consumption mechanism. They are going to all behave very similarly. We create that as a cohort, and we have very specific targeting for them. We have 750,000 customers. When you start to apply that kind of logic, now you are talking about all 50 million. You are trying to be very targeted with who you are going after, and you can invest more to acquire them because you know the lifetime value is higher.
Yeah, Allan, I'd just add one more quick thing, just an example from this morning, is maybe not all customers need to be priced on a per-gallon or per-liter basis. Maybe that subscription model is better suited for that customer. We're going to change the dynamic in our industry by offering different solutions to different customers based on their needs.
Okay. My second question, I'm a big believer of what gets measured, gets done. Grier talked about EBITDA per share, short-term comp. Just curious if there's any changes, compensation structure, or guys at the field to motivate them to hit some of these targets. Thank you.
We've made some changes to the management team for exactly that reason, which you know. It's funny you ask. We're in the process right now of developing a couple of company-wide incentive programs based on customer acquisition.
When you look at our cost to acquire, if your cost to acquire is CAD 200 on average, that's a pretty big margin you have to play with to create incentives for employees. What we're doing is thinking if we're happy to pay our digital partners like Google or Instagram CAD 200 to acquire a customer, I'm making this number up. Please don't write it down. That gives you a pretty good sum to work with to create incentives for employees to do the same. We're being very guerrilla about this. We're in the works right now of actually rolling out a pilot to do exactly that. Yes, this is a short answer.
Hey, good morning. Daryl Young from Stifel. Hey, Daryl. Just wanted to keep harping on the pricing question. Do you have examples of markets where you've rolled this out already?
I'm thinking about the competitive response. When you've got this many small mom-and-pop operators in the market and potential for irrational behavior and lower return hurdles by those competitors, is that something you can speak to?
Yeah, obviously, something we're very conscious of. It's part of that cohort discussion. We're changing our mindset away from regional and just trying to focus on the areas where we have an inherent cost advantage. If we have an inherent cost advantage, then we don't need to go in and reprice a market. We may be very targeted in individuals and say to a customer, "You're really attractive to us because three of your neighbors are already customers of ours. So we can offer you a particular incentive that we may not offer someone five streets over." We're being very conscious of the presence that we create in the market.
Look, we deal with some great competitors, and we learn a lot from them. They do a great job in the markets they serve. For us, it's about driving density and being able to really just attract the customers that are right for Superior. Do we expect a competitor response? Of course. We are not being irresponsible and starting to blanket markets with this. That would be the worst thing we could do. You go in and you blanket a market with an area-wide pricing scheme that's going to reprice the market, and then you find you inherit a lot of customers that are not profitable. We really want to avoid that. It is about targeted growth.
Just one follow-up.
As an industrials analyst, I don't get real fired up about the IT stack very often, but it does seem like it's going to be pretty powerful for you guys. Is this something that's in place already that you're executing on day-to-day, or do you really have to get behavioral aspects going inside the organization today to get everyone on board with using these tools and trained up and using them?
I'll let Ash jump in here from the technology standpoint, but the first step in this was culture. Because you've got to put a team of people together who are prepared to engage in this and to think differently. We have a saying internally that, "Don't say what you think, say what you know." And that's really anchoring people in data-driven decisions.
When we start to talk about hypotheses like, "Oh, you're going to reprice the market," you go, "Show me the data." It's all about show me the data. I totally agree with you. What gets measured gets managed. Everything that we're doing, as you heard from Steve, is metrics-driven. We've got religion about saying, "If we think that creating an incentive for this cohort with this investment is going to drive this kind of customer growth, we got to measure every aspect of it or we don't do it." It's that simple. Culturally, I mean, the first big lift of this was that sort of data and metrics-driven culture of accountability and responsibility, and then having to put those metrics in place. It was a big culture shift for the organization. Creating Superior Delivers was all data-driven.
The business cases seem to be like Steve's mantra. That in itself created a massive culture shift for the organization. We are already through the first wave of it. I am really, really pleased with the progress. Ash may have some comments on the infrastructure we have.
Yeah, absolutely. Thank you very much for your question. I think Allan's bang on. You get the culture, and you get the operating rhythm of the business in place first. In terms of the infrastructure we are using to build this out, I would say a fair bit of it is actively being piloted. We have got result from that. It is really now a question of scaling, and we are being very intelligent and picky about our deployment. This is not a big bang approach.
As we get into a market, the tools effectively get smarter as they ingest more data, and then we unleash them on the N+1 market. I do not think there is really any drilling for unobtainium, if you will. The stacks are built out. The elasticity is there. Now it is just a question of moving on through the target list and refining the toolsets.
Chris, did you have a question from? Oh, okay.
It is Nelson Ng from RBC Capital Markets. First question is more big picture about the guidance. Obviously, some management teams are conservative, and they like to beat and raise. Other management teams are pretty optimistic, and they have very ambitious plans.
From your perspective and your approach, should we think of this as you're going to hit your numbers and you have very high confidence, or maybe it's more like you'll hit your numbers if most of the things go according to plan, or does everything need to be firing on all cylinders? What was your approach in general?
Grier and I don't get often accused of being overly optimistic.
Particularly me.
I would say they're quite serious. I mean, we're not in the business of making promises we don't think we can keep. We don't control the weather, but you've heard me say that we're going to be very disciplined about not coming off our plan because of any kind of short-term anomalies, whether it be great tailwinds or the type of headwinds we've faced in the last couple of years.
We wanted to demonstrate the reality of Superior Delivers. When we come out with the first target of CAD 50 million, we had to risk factor a lot of elements of it because it was six months ago, five months ago, whatever it was. Today, we have better line of sight. We have more confidence. We were able to take some of that risk factoring off the table. I think you can rely on that as a solid number. No one can promise it's going to come in quarter by quarter, year by year, exactly the way you think it's going to. You're going to have some tailwinds, and you're going to have some headwinds. Our confidence level is really high.
I think what I would hope all of you would take away is we waited to now to unveil this, and we went to the level of detail we did because it's real, it's underway, and we're very, very serious about it. That hopefully will give you some confidence that we have good line of sight. Would you add anything to that?
I would have said it similarly. I think we've done a lot of work here, and we're confident in the numbers.
Just to follow up on that, so there's over 100 initiatives, and was it roughly 60 is in place? In delivery, yeah. In delivery. If you just execute on the 60, does that deliver the majority of the CAD 70 million-plus improvement?
Maybe before Steve goes, I'll answer it this way, I mean, I look at this as almost similar to sales pipelines, right?
Where you've got whatever number of prospects, and you kind of work them down, and then you've got how many of them do I think I'll get and all that. It's very similar. You've got this funnel we're working with. We've not counted everything in the funnel, but the same thing I would say is we're not going to get everything in the funnel, right? We've got this list. Some have higher confidence, some have less confidence. We've filtered it down, and we've come up with kind of what we think is very realistic. Steve, I don't know if you would.
I don't think there's too much to add to that. I wanted to give you a sense for how many of them we've already started that. It's not just one or two. 60-plus is the number I gave, and Grier said it correctly.
Some of them are timing-related. You'd like to implement some of the more operational things as we head out of our winter season, and we're testing and learning on a few of them. Some of them we want to do through the spring so that we have time to get them really right before we get back into a heavier season. Some of them we time them that way on purpose. It's not to say that 40 of them aren't ready to go. It's just, and also trying to measure the impact on the organization and the amount of change you can handle at one given time.
Yeah, I mean, we have a real-life example. I mean, transitioning the supply to the US retail from third parties to wholesale means you got to shift 500 million gallons of delivery.
If you do that in October, you're a fool. I mean, you want to get through your busy season when all the product's flowing and be able to do it in a deliberate, methodical way. It is not that we had less confidence in that, but it is complex, and you want to be able to do it when the time is right for the business. You get some of that in there too.
Okay. You guys talked about customer retention. Can you just give a bit more color on churn historically? You do not have to give exact numbers, but can you talk about the churn on the base business, churn on the businesses and customers you have acquired through all that M&A, and how you see that churn going forward?
You can use X as a reference point or whatever, but can you just talk about how has churn moved and how you expect it to move going forward?
The biggest insight we've had on churn is understanding it better. It's fascinating to me because when I came in, having a telecom background for a dozen years, churn is a big number there. You can see it in real time. When I started to work with the team to unpack and understand churn, the way that we looked at it, and this goes back to Ben's under-investment question, you'd see, we think of customers in terms of active customers. The customer's got a delivery in the last 12 months. Your customer base goes down by 5%.
You think, "Oh my God, that's terrible." Then a little bit of cold weather comes, and it goes up. You think, "What's going on? I thought we lost these customers." You go, "No, they went inactive." That is just an arbitrary tag that we assign to them. In fact, you may have cottage country customers that only require delivery once every two years. Or you may have an ice storm like the one we just had, are still experiencing in north of the northern GTA, where customers that are using backup power are now consuming and have been activated again because they need deliveries. Really understanding the true churn is important versus active versus inactive. We have done a lot of work on that, so we are getting a lot better insights. Our inactive customers that we are investigating would total in the tens of thousands.
That work's largely been completed. The second piece is the timing of churn. This is where predictive models become super important. If you take a delivery in April, and for some reason you get some sticker shock, or the delivery was late, or you were dissatisfied for one reason or another, and you decide to leave Superior or another company in favor of a competitor, that transaction may not happen for 8-12 months. It depends on your consumption. You want to burn down the fuel that you have. We may not even know for another 12 months after that because you may not call us and say, "By the way, I've disconnected your tanks. Can you come get them, please?" You have that inactive measurement that you'll want to have real-time data on.
Then you also have trying to correlate the cause of the churn and the actual event. This is where understanding that data and getting predictive models in place really help. The third component of that is a much more sort of prevalent rollout of tank monitoring. We can see consumption levels, and when they start to become erratic, we can intervene by, first of all, understanding it and not having someone have to go in manually and have a call center agent spend 45 minutes trying to understand what's going on, have that all done automatically, prompt a call. Someone from Rick's team reaches out to the customer and says, "Hey, is everything okay? Is there anything we can do?
We've seen some changes in behavior. It could be something as simple as, "Yeah, we bought a house in Florida, and we're down there now, so we turned the heat in the house down," or, "Yeah, we've been really dissatisfied with the last delivery, in which case we can intervene." To bring that all back to your question about churn, our first challenge was understanding it, being able to identify it, and now it's to intervene. We think there's double-digit improvement potential in improving our churn rate. Sorry, that was a long answer, but it's a complicated topic.
Pat Kennedy, National Bank. Maybe just back to some of the headwinds. We're hearing a lot about this big build-out in natural gas infrastructure over the next, say, 10 years.
Have you guys taken a look and figured out how many of your commercial customers or even residential might be exposed to connections that might come their way on the gas side?
Yeah, hey, Pat, that's a good question. As it stands right now, we're looking at 750,000 customers in a market of 50 million. All of our sort of trending data and all of our research data is really predicting that to remain relatively static. Excuse me. You'll always have some customer churn because of conservation, heat pump replacement. Although we're seeing that trend kind of normalize, which is good with incentives being removed and stuff. We see the addressable market as being really attractive.
The stability in propane is interesting and important, but just the sheer size of the unaddressed market that we haven't gone after presents such a great opportunity that we think we can still improve our churn rate and grow the business. I don't know. You guys may have some comments on that.
I think you nailed it on.
I guess maybe just on the Canadian propane business. The profitability metrics have always been a little bit lower than the US, and density being a big part of that, but also the customer mix being more commercial. I'm just curious, is there an opportunity to close the gap on those profitability metrics just through targeted acquisitions on residential areas or by improving the margins on the commercial side? Just your comments on the overall strategy there.
Rick, you want to go ahead?
Sure. Is my mic working?
Yes.
Okay. Absolutely opportunity to grow our residential segment. We'll take some best practices from our US counterparts, invest in marketing, really identify those high-value customers. I think Allan said it earlier, is not all customers are equal. We'll target customers that make sense for us to acquire in that area, like a whole home heat customer in a dense area. That's great for us. I think our commercial presence and our expertise is unmatched, and we will continue to have runway to grow that segment at the same time in Canada, but also in the US. I think there's lots and lots of opportunity for us to manage margin, find profitable customers, and scale our business organically.
Last one for Grier maybe just, I know if all goes well, the preferred shares likely get converted in mid-2027.
Can you just walk us through again what happens if they do not get converted, what the options are, and how that changes things on the leverage ratio front?
Yeah. One of two things is going to happen here, right? We have assumed in our numbers that they convert, and we have assumed that the share price will accelerate as we put these numbers on the board. To the extent that that does not happen, actually the numbers are a little bit more favorable. The first alternative is, yeah, there is a conversion to common equity. It is 30 million shares. I think all the details are pretty well understood. If that does not happen, then Superior Plus would take them out at par. It is CAD 260 million notional.
I mean, if we're headed towards that type of an event, then we'll adjust probably some of the capital allocation to prepare for that moment. Maybe some of it is a little bit of financing. We'll address that. Yeah, I mean, maybe you get to the point, maybe the share purchases adjust a little bit. Maybe the debt reduction adjusts a little bit. Maybe you do finance it with a little bit of bank debt. These things are probably pretty hard to fully factor right now. Yeah, I mean, the two alternatives are that, right? I mean, it's going to be one of those two things. There are a bunch of other mechanisms in it. We can convert it at a higher price. That's not going to happen. We can continue to keep the instrument in, and there's step-up and coupons. That's not going to happen.
I'd say it's highly unlikely that's going to happen. It's one of those two things. Yeah, to get at leverage ratios and all that stuff, I mean, there are a few moving pieces that you can pull out of a few things. It'll depend a lot on kind of where the shares are trading, where our leverage is sitting, where the cash flows are looking. There's a lot of pieces there. As I say, I think the way we've modeled it with a conversion to equity is actually a harsher picture if you look at us taking out that bond or that preferred at kind of a notional value. It's actually more favorable for shareholders in the long run, obviously assuming that you get to a same-end share price, right? Is that remotely helpful? Okay.
It's funny because when you think about that eventuality today versus two years ago, we're in a position where we'll just handle it. Two years ago when cash flow is an issue and your leverage is an issue and your growth is an issue, that becomes a much more sort of critical and concerning eventuality than today. As Grier just mentioned, there are a couple of scenarios. We can handle both quite easily. The worst case is factored into the numbers. Life goes on. It is a different day for us.
I can't see any hands at the moment. Feel free to ask some more if you have them. I'll read, in the meantime, a question from online.
Aaron McNeil from TD Securities asks, "Given the utility resiliency is the largest growth driver for Soteris, will you communicate contract awards going forward so we can track your success in capturing this market vertical?"
That's a good question. I mean, and thanks, Aaron, for joining remotely. We don't have a history of announcing big contracts at Soteris. There's a couple of reasons for that. One, we're not always at liberty to, depending on if the customer agrees or not. We have had the discussion where we wanted to announce some contracts, and customers were reluctant to do so. The second piece would be, historically at Soteris, a lot of these contracts, though they may be big, they're short-term. They may be for three months. They may be for six months, which really isn't as nearly as material as bigger long-term contracts.
For long-term material contracts, we're certainly open to sharing those with the public if it makes sense.
Great. Any more? One more from anonymous investors asked, "How do you balance optimizing the markets you're in versus building out new markets in the propane business?"
I asked that question myself. When you do a presentation like this and you talk a lot about operating efficiency and excess capacity and the value of density, the first thing you want to do is build more density. We're in some fantastic markets where we have a lower share than is optimal, and we want to really focus on building that density. When you add a new customer to a region, bear in mind the cost to serve every other customer on that route drops. It's got this exponential impact. Density is really, really important for us.
I'd say a secondary expansion discussion we've had is with this excess capacity, do we want to move into adjacent either geographies or communities? The short answer is there aren't a lot of real-life examples to say that should be our top priority. We're very quickly, within the next couple of years, going to be faced with the question of, "Okay, where do you grow from here?" You've got an operating model that's working really well. You're building your density. You're continuing to acquire. Surely now that Superior Delivers is behind you, you can do more. That'll have to be a combination of that type of geographic expansion and then maybe something inorganic, if that makes sense at that point.
It's Nelson Ng again. Quick question on Soteris.
Given that most of the EBITDA is earned at the well site, and I know some of the other energy services companies are becoming more vertically integrated, providing a broader range of services, does that give them a competitive advantage to take share? Can you just talk about, obviously, Soteris is much larger on the CNG side, but the other energy services companies are providing a broader range of services. Can you talk about the competitive dynamics there?
Why don't I talk to it specifically, and then I'll see if Dale wants to chime in. It is a week and a half of experience at Soteris, but 20 years' experience in that sector.
As a leader in CNG, you look at it and say, "Is this something that you'd want to in-house, in-source?" Based on the complexity, the capital profile, it doesn't immediately lend itself to being something that you want to do internally. When you think about the competition for capital, a lot of these other oil services companies that you're referring to have a lot of demands on their capital. Where they're putting their capital, if it's power generation, that's their differentiator, not the fuel supply. To invest in the fuel supply is going to come at the cost of expanding their business and their core business.
We are continually seeing organizations that say, "Look, this is something we'd rather partner with someone to do than do it ourselves." The last piece I'll say is the difference between doing this in-house and doing it at scale dramatically trains the economics. It's like an airline. The more density the propane business, the more density you have, the more flexibility with your fleet, the more reallocation you can do. If you have it internally, you got to keep those MSUs running. You have enough demand to keep every MSU utilized fully, and that's really hard to do in-house. Dale, you may have some.
No, I think that's all well said. It is a different competitive environment, and that's why we kind of focus some of those investment areas around making sure that we are the best at that particular piece of the value chain.
Whether it's the footprint or the efficiency drive or the reliability that we offer customers, if we can continue to be the best in that segment, yeah, there will be competition and integration and some things like that. Also, we can provide a distinct value proposition that others that are trying to sort of take other roles in the value chain, it is more difficult for them to specialize and excel.
Just one last question. I know data centers have been a hot topic for the past year or so, and the need for gas, the need for power. Are data centers a good opportunity to chase based on what you've seen?
No.
And here's why. Take two examples, a mine and a data center. With a mine, you're going to go where the ore is.
Obviously, you all know this, but the ideal customer for Soteris is a customer that uses a tremendous amount of energy in a single location that makes delivering energy in these quantities a real benefit to them. CNG obviously provides a massive benefit over other forms like diesel. Because the mine is going to be located where the ore is, it does not get to determine its geographic location. The chances of it being on a pipeline in the short term are usually pretty remote. With a data center, energy is by far their largest or one of their largest costs, and they are all greenfield for the most part. If you are locating data centers, you are looking at robust electrification infrastructure, and you are looking at a robust secondary fuel source, which is typically the natural gas pipeline.
What we are seeing is a lot of data centers are locating with energy solutions in mind. Trucked energy in any form really does not fit the profile. At least that is what we are seeing today. Will there be short-term opportunities? Invariably, there will. Will there be conversion opportunities where you have existing data centers that are going to convert? Yes, that will happen too. As an industry so far—and by the way, we have not seen there are not that many data centers that have actually opened—we are seeing other opportunities. That is why we laid out the view that we have for Soteris the way that we did.
Thanks.
We have a question here.
Hi. Just maybe a question on Soteris. Sorry to interrupt.
Would you mind introducing yourself for everybody on the phone?
Yeah, sorry. Eric Gibouleau from Dorchester Wealth Management.
Just curious to know, in terms of Soteris, there's been a lot of leadership changes over the last two years. Maybe for Dale, do you feel that right now you have the team in place to be able to deliver some of the objectives you have? Do you feel that the leadership changes that happened in the past have been impacting the consumer relationship in some sense? Yeah.
Let me start, then Dale can pick up. When you build a company up over 10 years and then you go through a transaction, invariably, there's going to be leadership changes. I mean, it's part of the natural course. We've been very mindful of working as hard as we can to plan that.
The business is changing both in terms of the way that it's run and the way that it's growing such that some of these changes are really important to make sure you have the right experience set and the right skill set for not only where you are but where you're going. That is most especially true with Dale joining. We've got members of the Soteris team in the room here today who've been through the transaction, who've been a big part in building it, and are a big part of our future. I'd say that the changes we've had, some of them were normal course of just a transaction. Some of them were us retooling the team to make sure we had the right skills. We've also had the great benefit of having a lot of continuity in Soteris.
We should not forget, this is a company that three years ago had 200 people and is now up to 5,600. It has been growing. It has been through a lot of churn. Of course, having a big installed base in the oil patch, you get churn in the early days. I would say there is more stability now at Soteris than there has been, despite a few changes that, of course, would be a little bit more newsworthy. We absolutely have the right team. We have a great group of individuals, and we are really lucky to have them. Dale, you have been meeting people over the last week and a half. What are your thoughts?
Yeah, that is all well said. As Allan referenced, early innings of getting out to all of our locations and meeting all the team members, it is a very fun culture.
You can see what they've built. I mean, it's a winning-oriented organization that measures, has goals, collaborates well, is very customer-focused. It's been a lot of fun to engage with them and a lot of potential in the organization, very capable. I mean, put a human face on it. Dale sent me a text on his second day of a cake that said, "Welcome, Dale." I'm like, "A cake? I didn't get a cake when I joined." You got a pretty warm reception. It's that kind of culture and it's that kind of team. We're in a good place. Credit to the Calgary team.
All right. It looks like we've answered all your questions, which is an impossible task to even aspire to do. We're going to take a little break now. We've got some lunch set up. The team's going to hang around.
Look, again, I can't thank you enough for everything that you've all done, not only for spending the time to be here with us today, but the patience in letting us tell you our story in the best way that we know how. Your continued patience and belief in the organization on the journey we've been through for the last two years is not lost on any of us. We take that responsibility and obligation incredibly seriously. When we have meetings internally and talk about how we should think about churn or how we should think about acquisition, we really try to do it through the lens of how you think about it. Not what would be better, not how we could improve marginally, but what your expectations of us are.
I hope you saw a reflection of that today, but I can absolutely assure you you're going to continue to see us run the organization with that light, with that mindset, and that our aspirations will always be as high as yours for what comes from Superior. Thank you all very, very much. It's been a real pleasure to see you today. Thanks.