Southwest Gas (SWX) 8 May 242024 Q1 Earnings call transcript

Welcome to Southwest Gas Holdings First Quarter 2024 Earnings Conference Call. Today's call is being recorded and our webcast is live. A replay will be available later today and for the next 12 months in the Southwest Gas Holdings' website. [Operator Instructions]I will now turn the call over to Justin Forsberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings. Please go ahead.

hello, and John, you, everyone. Thank joining We call. appreciate you our posted Southwest XXXX Gas morning, release we website the and issued XX-Q. Form quarter This Holdings' in our the associated and earnings first also accompanying slides Southwest website. today's are The available call Gas on Holdings' slides will We'll we and the call today's certain provide year's earnings factors that some number today.Please refer by throughout guidance. that note to on this longer-term those address call, may impact

are management Q&A today.I'll who over Brown, Southwest the Karen. Gas of the team, X on We today's call against with Karen that President information to made These such to today. of Corporation; presentation, will be release, assumptions questions and as contains with future Securities Holdings; today to and the may statements. shown of President based our of review.These members uncertainties, Chief the press a Officer any several the now including Justin any differ X, subject assume the this no caution discussed statements uncertainties and filings regarding Holdings; have impacts forward-looking results holds, and are and other uncertainties conditions of and Gas well statements surrounding call of to Exchange Financial placing cautionary the cause along of obligation encourage Southwest is update on undue economic statement.As Slide you Southwest note actual regulatory we management's Gas answer and to are on and forward-looking call, from to Commission, included risks note portion we and which statements, and what on the Some turn during available your measures today's on but future as X reliance approvals.This of we risks non-GAAP on CEO Haller, Rob Slides Stefani, materially

results. quarter the to Thank first Gas joining Southwest us Holdings you for today Justin. discuss Thanks,

was Turning April offering, of Slide a Centuri milestone with the the forward We reception a year the X. we long-term IPO in its outcome. we transformational to of and our we Southwest Arizona progress, natural fully and by premier and strategy of core to strategy utility. in as manner.During closing Centuri regulatory started quarter, gas returning to received for significant which approval We to filings the with positioning market's the a the at our our constructive make on of and Basin, timely continued marked pleased were of look executing a utility growth. Gas success The Southwest the completing regulated successful regulatory case, in Great foundation Nevada in separation

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rate further same overview in base to is our affirmed demonstrated of maintain sheet expected IPO growth competitive annual investment-grade compounded confidence included rate the our X.X%, balance and future the a period an the Slide strong of X.X% closing in X. dividend.An commitment on to over of by and is Our the range Centuri

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XX%. net see by this some You regulatory increase and our XX of activity of details can case presentation.Rate for cost the authorized our outcomes all guidance We regulatory base discipline Slides these XXXX. to our result income XX% on in this our an to in appendix rate will in of proceedings of in confidence and the efforts reinforce anticipate progress XX

are and progress We we X. are XXXX.Turning on ability objectives our making confident deliver our Slide our priorities very on to with in are in the to strategic pleased

updated had case and can in the was Nevada which we month overall Commission stakeholders on update the with provide filing, the approved the the on We revenue constructive that slide The an work authorized Nevada been rate positive in and return in service an revenue that difference authorized. case. annualized slide increase staff Nevada and our strong results basis This of the as last increase April authorized case are on ultimately $XX.X in increase. see of and across able and than year. authorized higher by Commission. ROE rate is You with relationship we stipulated the the million points key were of to what pleased XX difference capital them Nevada became that Cost outcome our areas previously.We're to we the our finalize revenue with increase several for revenue this of equity a represents see the was early effective stipulated appreciative of settlement in have way a were the X.X% the represents issues interveners that between Nevada requested

cases.On performance cycle base recovering significant now income in are quarter with cases. highlight Southwest net at Nevada $X quarter of over in to that $X the and utility million off a last a requesting first of which start improvement the in the year Great which Basin for XXXX California X, we We is we forthcoming year. Slide of our this billion first represents Arizona, a XX% over at case are strong The the rate outcome increase the The is prior Centuri. over rate and good million rate Nevada, request, nearly includes original $XXX

new majority the to past system the XXXX press strategy the and with would issued refer Nevada achieved benefit its and earnings noted, by adding to a of for turn our continuing the $XXX continue the sheet is well, see reliable to And more our the slide And our through in outcome more its over purchase key Centuri's compared million strong that, experience and million performance.With financial for remains was than regulatory you release to that ensure investments additional today QX Centuri's customers. will earlier balance. sets pleased strong, flat which the to also while review of has March Again, customer than performance were to having expenses reduced make now on we months, over of than as includes progress jurisdictions.Our $XXX growth, in and the We in you of the collected balance Balance call for the highlights can XX,XXX detail Rob, first first end on who since maintenance balance XX meter quarter we're deleveraging been advanced XX-Q as our cash I And and of more other positive quarter XXXX. reflected operations I'll as year. our IPO. more XXXX. the deferred and cost gas is safe

we our the On XX, shown Karen. earnings GAAP EPS and for company's The each outline by share consolidated Thanks, year. adjusted Slide performance consolidated are per entity.

of the earlier, by record, of the early the per lower the utility a of operating The The XXXX sale with amortization Centuri losses on significantly Centuri while the XXXX.In a of saw that at net reconciliation in were Centuri generated Holdings was was this and first on first MountainWest new costs mentioned treatment performed and adjustments S-X. consistent the separation in adjustments share appendix, that year services is XXXX. we also saw EPS utility lower income and outlined of MountainWest Karen results decrease XXXX. of with to Centuri, compared Southwest Centuri company. QX were infrastructure finished that as Centuri basis, of Gas has we of in in its company costs Note on of On peers following $X.XX basis majority we quarter a the utility share, an and adjusted QX include intangible $X.XX the quarter impacts consistent at during February comparative what strategic the the a this the of holdings adjustments of to intangible plan with sale a As quarterly quarter XXXX by assets provide is XXXX vast sector. amortization at from at when completed other the adjustment first quarter assets relate highest

have compare Centuri's the period quarter for consistency investors purposes. We help the in comparative adjustment Centuri sector XXXX performance been and better other to that for following of has adjustment This provided the first same shown with IPO. in the companies

Southwest be we and as that consolidate Southwest meets the Now requirements, I'll we Centuri's consolidated results. to performance the provide Gas to the adjusted walk It noted to an should a financial depict continue Gas earnings expect of so on consolidation Holdings post-IPO, utility.Turning XX, walk long Slide through the on basis. fully

During increased to work. lack amortization partially to benefited reductions XXXX interest volumes contract the well from the as associated storm was cost was balances resulting recovery.Centuri's work PGA of purchased lower services offset and due restoration higher income and in lower which compared with depreciation deferred gas utility EPS quarter, reduced margin, the first as by from of

associated equity The lower included the XXXX of to for was quarter This utility issuances by change operating margin well drivers same impact utility a on expenses first dilution the a quarter period, over performance Arizona XXXX. see to million share $X million the the Corporation. MountainWest from balances. the earnings. increase month account you'll of of by not the in the recovery as year. XXXX, benefited QX last in primarily improvement in quarter-over-quarter XXXX.Moving on of in to of MountainWest the was in increased from relates XX, $XX And The first to with a increased period which as to in additional present million loss recoveries primarily our XXXX related prior same HoldCo prior of quarter-over-quarter Southwest modest compared in Gas compared investments recovery driven and $X period also remaining In and California just Slide regulatory half the

purchase outcome X% million XXXX.Other than increase regulatory in impacts by due result to compared associated interest balances.COLI million deferred million was an million primarily from the increase earlier increased margin, balances plant million by charges in $X of XXXX, decreased gas of and first out-of-period term O&M or net nearly for results QX expense net in the saw lower million gas of quarter quarter.Interest in recur which related issued XXXX growth XXXX of increase expense January with million an improved year, quarter, regulatory was in the might higher as our will with utility issued impacts a continuing cost O&M Gas and We $X account that reflect we notably the year. a last corresponding of stated will quarter. a quarter has guidance offset of in portion taxes of to prior the benefited in along amount was PGA still that service as in net $X remain an the our strategy, relates The associated compared allowance be repaid of XXXX, income both assume earnings the not associated margin we the first margin few flat QX to were our in increase of made that To XXXX XXXX. is the XXXX customer our drivers. performance also line support the values saw average equity be of impacts of a updated confident $X that depreciation this customers. to of Southwest and higher the XXXX.The during which funds million the basis underlying additional general for and management saw saw adjust we we balances, remaining year's income amortization largely and disciplined for net Corporation improved interest this did million recall first loan flat related areas.You our related Centuri. on in difference to the gas ceases throughout was will approximate goal to decouple Corporation that March million to Southwest and quarter-over-quarter, gas reflecting life Gas corresponding with impact a senior have extent income we result April $X We service $XXX first of continued achieve miscellaneous able with was expected at keep Southwest $XX policies, sold IPO Centuri cost our adjustment of through accordingly. carrying with notes a flat guidance plan in a cost last approximately revenue by we Karen to the account that to to in nearly changes decline we of of in Overall, during offset moment.On construction, $X and to purchases, what XXXX AFUDC, due used primarily $XXX per $X Gas the XX, Holdings insurance year's cost Slide utility was will from the consolidation been with had to customer provided financing depreciation discuss amortization consolidated

Gas and conditions ownership the position to continue In flow on forecast highlight than utility. takes operations sheet form post-IPO improve the more to Centuri.We balance of could fund the cash expect capital that in expenditure program we the HoldCo from XXXX respect remaining entire would Southwest to separation with market in the Holdings addition, its depending further at

we successful ATM, debt the anticipate do that on Southwest expected term we million $XXX form. equity the limited target XXXX, or years, needs again, million million our of execution continue XXXX.It's second in of inclusive to needs at And the very XXXX to separation fiscal We based this balance post-IPO very we on in addition, strength of amend modest in sheet. needs that efforts addition and financing In we $XXX do the the extend million reiterate approximately balance the our refinancing of X approximately Holdings' $XXX sheet utility.At the of utility note foresee and XXXX end through XXXX, either million in debt near-term to during depending limited equity $XX any $XX outside not term a our refinancing our solid investment-grade the next plan have of to in loan well through important year of loan. plan as third or Holdings, quarter the to refinancing revolver additional as at

As Southwest committed we would in a said paying to expect We competitive plan we stockholders. to have result hold remains again our a dividend would previously, competitive which XXXX, in to Gas flat dividend Holdings payout ratio.

commitment to continue case we to at look economic dividend work better strength for projected changes materialize and profile. balance conditions will coming the ratings, factors, in We we plan and revisit clarity yield, Centuri. investment-grade as other fully XX, any to the maintaining outcomes, rate impacts the separation requirements, to competitiveness an balance credit factors Slide take should separate such to to dividend our that policy regarding as quarters.Moving a and planned our capital We have of sheet

seen timely a working additional to highlight net which prior earn we Southwest is PGA chart recovery XX, has on for balances balance, we to When debt which carrying the at side, look left-hand utility by spent have by levels, the the expected, amount appendix owed detail. commodity the we through customers.As provides these reflected walk of this on PGA operating we in that and capital and On the a balance, in purchases Southwest represents debt continue Slide to we continue company. as

due the on earlier Slide I the large noted is lower note since or utility additional to PGA obviates of had Slide this changes you balance we us earnings in for to While no the XX, to agencies significantly balances, XXXX from credit year X ratings term.On our will cash XX expected fourth financing pursue see right-hand the income decline to outlook need that interest that side call. we quarter that near our the

addition, Karen both Holdings recently at to the utility.I'll XX the affirmed In and guidance. Moody's at ratings the company Slide turn discuss our now to the and over call

Rob. Thanks,

Our first of the to net Southwest our rest results evidence our Slide million. enthusiastic of the we progress executing about we the are make quarter million and we guidance to in to strategy, range XXXX. of affirming XX, XXXX income be are On continue are $XXX $XXX

in We well of Rate results are CapEx utility. our towards net focused regional management affirm half the expected $XXX of utility of growth confident upper customer will team XXXX the territories, completion that the Case on as remains income our partly XXXX results our our We operations. strong due expected outlook Nevada as guidance efforts to outcome economic utility million, cost at optimizing range.Our drive approximately

increase the nearly this a our reliable of of system forecasted As safe would capital a million, for relates of our benefit of all XX% while be over spending to about $XX maintaining customers. XXXX reminder, an and

at utility increase savings to of through to XX% CapEx the the of range improvement fall lead result from XX% is the we the initiatives, within required and of a infrastructure invest at to net is meet still trends further growth the enhance the increased better-than-expected to rate XXXX we favorable customer the in annual our And out, safety expense utility.Looking the for growth expect and territories, XXXX investments our system. which of continuous part compounded service future of Some our driven we to integrity to across new we make income expect XXXX. with business this to responsibility the have combined by

expected strategy over our customer is to a O&M regulatory achieve cycle in the our that trend flat growth expected lumpy net forecasted story. to same period of While per over and income important regulatory the are growth impact result to plan the of be components our period, somewhat

can on XXXX to Additionally, XXXX XX. the Slide the find of our appendix you presentation drivers in

We and Gas for about also earnings next same path $X.X confident the natural total separation rate in we Centuri of strong over to the annual CapEx constructive base proposition the expect I'd call to in for questions. dynamics generation.With are range rate continue open plan the affirm XXXX in Holdings, our an business XXXX stockholders billion to utility. the continue our rate to X.X% be X.X% of continue invest over compound X regulatory forward well and to growth to operational Slide through period, as organically Delivering At to We the growth full call point execute priorities. attractive planned years.Before focused premier teams and results our steady and strong the that, of to to relationships.We'll we regional pure-play service to healthy our as and on open I to to excellence deliver toward Q&A, like discipline, gas up we as want base financial providing emphasize cash exceptional delivering that financial organic XX to create value Southwest executing strategic are growth with demand customers. to a through our flow

going Centuri's you materials specific a Centuri public or post-IPO in their plan and quiet remains any Centuri refer to to for management team While operations to and financial forward questions. period

the Siebert Co. of begin [Operator & Ellinghausfrom first The question-and-answer now will session. the Williams Shank from and Chris Instructions] comes Thank you. gentlemen, line Ladies question we

stake Rob, terms is envision that there of can you time? the Centuri cadence in the way color over the any of reducing you provide

the we operating Centuri loss potentially exchanges Obviously, Yes, I net options think the at time, with the Karen we could to the of had transaction, the sell-down as which highlighted, or to which or flexibility form position, us combination some taxable of to this thereof. stake. take a respect continue balance provides have evaluate pursue

that, Just a a with Centuri to while tax-free option the or performance split. preserve again, evaluate spin continuing along to we'll continue of

options, put as unfolds. evaluate and to we'll evaluation this continue post-IPO more So time, out we information at the that

in that I you the Okay. Karen, talk your, this going you much Vegas got add guess, with Have about you the to or didn't economies. too anything economy in what's vis-a-vis area vibrant Phoenix want on words right time. the

agree. number different Yes. going on. -- I that would and out the quarter, specifically things projects as laid last some of of we economy about we've Vibrant a talk are

And you're so of materials. that's correct. our some in But

have excellent the our and growth Arizona and jurisdictions. Nevada Las sports and couple manufacturing new in on of we've areas, different continues here The tech to opened of and and area in continue resort Vegas things be going continue number with We casinos growth, a entertainment, to a different area.

of number we that a seen that we've grow So areas to continue continue. and expect to

Okay.

how terms Vegas? You in you throughput. I your obviously in sort volume positive sports just sports one business assume influx of but in of is affecting casino the of business describe way lost recently, is affecting your any, visitor But can sort of

I one baseball casino will but replaced a out, we've with lost here facility in be casino, you pointed think, as Well, that time.

So land on right that's most that the down Strip. Las of Vegas

probably usually followed something see it by if close, and so does greater we And demand. bigger something

have think Allegion and there's be going provides facilities customers, different where think, or on been So that you've we that Stadium, which to growth will provides growth of, the facilities T-Mobile I so from is are our built And influx standpoint, market. have great as residential Arena, and there's the trough supports a provide well. for economy can close.I number as those seen, sports that location we the broad. I mean that facilities we of anticipate there -- on that a

which commercial -- have residential is the growth, supports are here strong growth all and We of on. that's going

in announcement what's vision on that piece looks an Is I with any one. property like terms you say of Blue think Fountain of of property there Has want there's been the to get there? In might I one of in -- new that the neighborhood? it's of kind casinos, -- sort another there down up

have don't time any I that. at on this specifics

Okay. more any And tracker lastly, have you got on Arizona the updated thoughts process?

know, discussions and -- in we a year the tracker. in later we We've testimony be going don't that and timing year. in feel of the intervener think have we're our We're the rate to had process good thus this tracker obviously wouldn't filed you get with with will we position haven't even far. not this discussed our request that before about and hearing as Arizona anything on until We've expected I for that probably November Arizona be case.

the I more know But progresses. anything we'll point, So have on it. case this as new at don't

The line Citi. from the next Ryan comes from of Levine question

test preference SIB potential could does process summer Southwest or hearings future for years formula this impact lag-related How Arizona? how a for does tracker these rates versus Southwest have proceedings? Gas in And the

is going him Justin me. I'm to Ryan, to let that. respond here with

know of how next is if some focused improvements. or encouraged know steps continues that. I experience in on presented going discussions just asked kind on the June, I there's further kind going we're of kind They've in year commission on I that preference. to very information I test Ryan, on model be know don't they're structural mean, to making that be of this for we've rulemaking proceed. docket additional future the California. think investigatory ratemaking a probably we having I I think around to

on and to participate that's making that think So excited incremental continue they there. excited be to encouraging. we're improvement I focused And just

of Or there they during the guess, format use? that forth comparison and -- I heard, that compare is additional different what does for I state. some as California request of hearing, is of lot for with test information a last under the the versus I jurisdictions back And and communicated? mean

workshop need March, I get of mean they want a understand, I they're it to have to think lot of just different kind it's there's that there to think where going think -- for had there's is do look and investigatory is go approach a an it scheduled. kind Or mentioned, workshop different right? another single But have describe like kind the I of really of trying think options utilities. you model you a lot to they to they I like to? to Yes. in I doctor, an of want

of kind learn process they models just I to that's unfold go trying different figure out. are about I going and the So there. to something think through the think as they're that's workshop that we And more

there into the Got timing down of timing -- NOL of you. tax-free is sell a in any with the year? spin the And Unrelated a future? topic, outlook next potential on a the balances Centuri impact future for what's

we we with what with X-month we're think lockup following Ryan, Centuri, mentioned I the a the IPO. timing to as to in respect do

impact And so go as will that to question following NOL. to the that, the with separation. timing. And I'll let with continuing ahead answer your indicated, the Rob and we're I respect committed

about $X of don't you. NOL NOLs Ryan, as the forward provide year. position, the had yes, but refer on would we so of billion just the guidance end of just We the

of a And could lot stake. with substantive that transaction. a taxable XX% a position to so what obviously that provides us that's of optionality be used do We that think offset form with we

last And question. Okay. then

for IPO the is lifted? given complete, Now from we that more guidance should look comprehensive Gas Southwest that is financial restriction

looks full expect like. the us, to guidance referring which what longer-term we really separation Centuri wouldn't until of of we Ryan, the change understand you're to

to better once So able position longer-term we'll completed in we've a that, to guidance. be provide be

Operator I now Instructions] this turn call are remarks. will questions closing to no over session. This at our concludes time. Q&A back Justin the There further for

you This Citi you Thanks, conference thank we let content Thank we today Desert, and in recently out.I Financial highlight also more information. us events forward Conference my AGA reach new in that next Utilities Boston, conference investor as the California Palm updated the find Global of soon to as followed And for site.Slide activities Conference week free know concludes John, in little presentation and website, day. a to easily. by to feel intended interest a in out help XX time. other any thoughts and as Gas. at navigate Please call, company at always, great of your our the we Have you to joining includes a further seeing questions. wanted is you well the as as information today's you many look your about your for to participate all launched which us Southwest for

and This Webcast. Quarter Earnings concludes XXXX Holdings today's Gas Southwest Call First

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