MDU Resources (MDU) 4 May 232023 Q1 Earnings call transcript

Hello. My name is Margery and I’ll be your conference facilitator. At this time, I’d like to welcome everyone to the MDU Resources Group 2023 First Quarter Conference Call. [Operator Instructions] The webcast can be accessed at www.mdu.com under the Investor Relations heading select Events & Presentations and click Q1 2023 earnings conference call. After the conclusion of the webcast, a replay will be available at the same location.

to and conference MDU Chief like Vollmer, to Resources now President Vice Financial would turn over the Jason Group. I Officer of you. Thank Mr. you begin. Vollmer, may

joining quarter Thank on everyone and you, for Margery our earnings XXXX first conference call. thanks, us

and earnings on at the find under for tab. Relations website materials release can this supplemental You www.mdu.com Investor our call our

following are Gray, with Leading CEO CEO of and CEO Utility Group. and Services Barth, President today’s Group; Goodin, Resources, Nicole us to Chief of and Dave today River Brian Construction President Accounting and discussion of remarks along our Controller be President with Hastings, and our answer President, and and CEO Corporation; Vice President Jeff President of Thiede, questions Resources. Stephanie Trevor MDU WBI me Also prepared will Knife Officer MDU of CEO Energy; of Kivisto, MDU

within of XXXX. During forward-looking certain our of statements Act of meaning we Exchange XXE will call, Securities the Section make the

its Although reasonable materially. the company believes may expectations and actual results assumptions, are differ on based beliefs that

could more that risks recent please filings. to most about our actual from the forward-looking and refer our uncertainties to statements, information SEC any results For vary cause

refer You non-GAAP may to information. also certain

will announced any companies. we an our previously be of River time of Knife spin-off on For a Directors progress on details MDU for in of later It’s as publicly more two call that metric, This River pure-play objective MDU information the appropriate separation provide the morning, exciting towards Resources traded creating announced the reference and GAAP accessed Knife additional information May the our website. and can reconciliation both non-GAAP our to please we release. of Dave XX. earnings Resources’ approved effective Board

GAAP strategic call I will our for his $XX.X earnings basis, and $XX.X with announced quarter per comments, handing share provide forward-look per to GAAP financial first on $X.XX or to million update the or the on This our $X.XX compared $X.XX results first or a initiatives. share of morning, earnings Goodin million of million before adjusted XXXX $XX.X Dave of per share. earnings over for we quarter quarter consolidated first

With Knife reporting and strategic continue costs earnings our related that Construction the we of review work of business, to on the Services River adjusted initiatives. strategic to separation announcement are exclude these

the compared Our non-qualified rate on relief combined XXXX. coal-fired was associated returns of to largely quarter $XX.X of utility plans. The of Business the compared business quarter and million in for result increase the reported earnings quarter for million XXXX. the to segment X and the million experienced higher earnings closure generating period at Heskett $XX.X The Station expense electric operation X for and $XX.X Montana reported same of in utility first in first of million and XXXX. $XX.X early interim units with investment also in Dakota maintenance North lower benefit earnings

partially The benefit higher plans mechanisms Washington partially operation of net expense. as maintenance utility in non-qualified Our to and decoupling the and quarter on primarily of natural benefited offset weather classes expense mechanism a in rate approved million compared weather. and reported returns gas due volumes segment Revenues to in earnings increase million higher by increased business sales gas result of investment quarter all the first cost impacts and the a and $XX.X by increased to sharing retail relief offset Weather X.X% in colder normalization from customer Oregon. during were quarter first XXXX. $XX.X interest also

well as in placed North benefit February from of of contracted year. the by The The as commitments its a quarter revenue, first volume $X.X improvement full Bakken pipeline service quarter business increased to $X.X expansion driven ‘XX. earned project was was quarter to that largely in million the of the compared XXXX first transportation in first higher in due starting February of this million

transportation business FERC fees expense with quarter cost record The to experienced rate part and by increase operation due pending higher associated volumes. first payroll-related case. the The was legal in and maintenance offset

and in In record Bakken addition, revenue expense first increased quarter interest million and largely the first $XXX.X quarter of of million expense $XXX.X depreciation to quarter year. compared period revenue million Services earnings Construction XXXX. increased same of to reported project. $X.X related of the expansion $XX.X all-time North the to quarterly in for last $XX.X million million and earnings the EBITDA compared in first

institutional storm revenue work and lower workloads. due commercial, Transmission partially and to saw projects. year-over-year increased revenues electrical primarily particular mechanical for transportation distribution slightly in offset street were workloads, Business and industrial increased lighting and increased to related by

the and equipment. a costs higher in revenues to decrease related business increased, including subcontractors margins While costs, experienced largely pressures, to operating overall for due inflationary labor,

were losses margins projects. by addition, impacted In on certain

diesel. be gas higher and the loss Finally, across regions to for in quarter compared decreased EBITDA of selling $XX.X loss across inflation, $XXX asphalt. inflation revenue and million Northwest some Increased which labor, impacts offset response million and weather continues volumes and seasonal our average higher concrete Pacific unfavorable region. certain weather product increased the its demand in regions from has including to quarter and and region, most reported to ready-mix first particular impacts, all in quarter the In in lines, revenue first contributed year increased to $XX with the Construction due million a the resulting impacted largest to $XXX.X Business business average was $X.X products, The prices seasonal raised Materials impacted business prior XXXX. million business of aggregate across compared of margins the natural margins. to in by negatively a of by and revenue largely first million. of pricing cement, product

variance the investment approximately were Results at in to fluctuations basis first plans. positively was earnings returns or XXXX. businesses change per benefit compared quarter first in a positive quarter. non-cash investment each by million the impacted non-qualified on of our $X.X in is higher markets. on first Collectively, due financial the for highlights financial to summarizes share the $X.XX This That returns quarter of the

over And now, Dave? the will formal to I Dave remarks. for turn his call

you, time for thank with and everyone MDU and in spending us Resources. today continued your Thank Jason for you interest

first with We strong our quarter are results. pleased

natural due and businesses gas perform in of utility utility continue and to regions. impacted Our colder pipeline its positively natural relief well. volumes The many weather rate by gas was business higher to

first colder parts. and the While start workloads services materials in from benefit work, experienced to of experienced the was our which businesses delayed businesses many our the a regulated the throughout storm-related season construction unfavorable quarter, construction weather increased construction weather

the increases is which inflationary offset price pressures. to beginning see benefits helping are from We

or Our construction have the that cycle. projects to quarter secured first replace reported businesses combined record backlog. their projects been businesses completed backlog have project life of end nearing The additional

To summer. we facility company volumes quarter Unit reported higher businesses. relief expect XX-megawatt electric summarize an by sales by increased Natural just the this for start with across natural were activity and segment, in river, on be sales electric rate business retail and constructing electric The were the volumes gas-fired Dakota first jurisdictions. Utility natural a X, basis X.X% Mandan, combined this to is quarter, X.X% regulated higher North operational energy near certain generating I’ll gas than last off retail earnings delivery the Heskett our driven gas and the year.

annually the investments base rate X primarily driven system gas safely recovery grow to to X% rate regulatory over and between meet for X% continue and also and the reached natural expect next with settlements We continues to infrastructure to service business years, replacements in associated customer demand. our customer Idaho upgrades This to in seek and and growing compounded gas the natural North base. cases Dakota providing our safe Electric electric and investments reliable by

we first quarter transportation At our volumes. pipeline record business, had

service noted, We transportation full recorded increased which volume in Bakken XXXX. benefit which to the was revenues here project, of business in from Jason placed our this higher February of XXXX. As recently February commitments, due expansion quarter and began of North largely first into

on January new in rate FERC rates, take is a Federal transportation Commission X. the which August will in of pending anticipated its and that company Regulatory to for company approval add storage XX Energy The feet case filed on The the services. XXXX. The These it with cubic will seeking X in gas increases in expansion effect expects be in million incremental second rate are capacity. per day quarter later projects XXX natural be service to approximately construction pipeline

$XXX Our guidance earnings million. regulated the delivery to businesses energy for the first be in reaffirming in to well we performed of quarter million $XXX are businesses the range regulated and

our I’d like to to move construction businesses. on Now

construction Our Construction Services work of high-tech had and for demand revenues record quarter. electrical an services experienced in and We the strong quarterly increase for approximately hospitality-related an specifically related all-time during mechanical XX%, with revenue. Group

we and rates with interest employees quarter higher to labor record ended Margins well are exceeding with were results. quarter retain first our now and workforce efficiently ability by impacted across Construction and higher impacting these complete footprint. backlog X,XXX Services projects attract a safely skilled the to costs positioned our negatively

guidance Given end $X.X billion. the on both at top XXXX $X to $XX the we revenue and increasing now range, strong are bottom our to the million start billion the year, be to

$XXX our expect the We range to $XXX EBITDA million. XXXX margins in million and compared between higher slightly to

majority EBITDA experienced At XXXX. when same of unfavorable weather materials delays the $X.X business increased markets. our River’s here from business, to million the The across in period construction we compared Knife conditions

quarter partially same contracting pricing the product backlog The company offset delays. last first services higher increasing approximately a time since record reported year. However, XX% these

XXXX XXXX. backlog are Given here and the in between to range affirming $X.X revenue with $X.X process, the guidance we the bidding margins higher compared billion strong be and successful billion to

EBITDA the expected $XXX million also is We our between to in and that million. $XXX note be range

positioned increased construction both forward, businesses our from of well bidding benefit opportunities. to are Looking

the steady demand businesses, our already customer by robust ongoing and for our in construction look a electric and service we system as from see in the businesses along pipeline services, gas work of for XXXX ahead, with natural Act along for will high excel funding, doing. growth demand, Jobs in Overall, our projects With Inflation and are they our Act, pipeline Infrastructure the I’ve set business. as we the growth increased encouraged with opportunities construction for funding demand Reduction additional and state Investment noted, and beyond

We of separation Knife of River. share are the news Directors Board today Resources the approved to MDU excited the that

to on X Resources as be for XX, a MDU tax will is purposes. distribution The of Stockholders expected stock. to at expected share of shares receive retain owned tax-free record Resources date May distribution. for of River stock May XX. which stock Resources of U.S. we Knife XXXX, spin-off stockholders XX, current MDU the Eastern May Time of the And X The completed income is their federal for is MDU distribution on will every Daylight for shares XX:XX be p.m.

on highlights, Stock separation the details under investment way Knife Management growth along for symbol for session. distribution, May York Upon regular the will present also XX. the a In Knife Day, the operations, visit planned MDU presentation River with the separation along MDU symbol trade Knife NYSE River’s MDU Stock XX under be financial more ticker completion Knife in with Please of our and question-and-answer performance, with May at Exchange of Investor the New will webcast. for this the again, River Investor The will along on on River continue the anticipated to Exchange. also the prospects Day and website with will trade is connection River ticker way planned Knife Resources the in KNF. regular our

public our November objective pure-play our In that strategic announced addition to achieve undertaking the business. creating of River Resources a the was to year we MDU in construction two Knife of review and service last companies, separation also

the We in here are to this quarter complete second review XXXX. track of on

Directors quarter. June a of $X.XXX company’s to stockholders the dividend on the We also Board The record share, dividend payable announced declared common July on per of of previous the is quarterly from stock today X unchanged XX.

not Knife River, to July dividend on companies. to apply to here from review impact our X. of MDU practice result future regulated with and expects peer changes quarterly periods will with Directors of Board Any payout dividend paid spin-off align the intent energy the Resources the earnings to be will the to that relative pure-play Following review delivery

The any River dividend future practice Board Knife of for Directors will be for for Knife responsible River. developing

your with customers to essential and America of delivering commitment strong value As safely always, integrity superior providing to safe our mission place we focus continue shareholder your Resources to MDU and while and Resources with provide on we a open and is interest appreciate a committed to on great the questions. I and services work. MDU lines building operating Operator? our as that now in to a being to ask

first our ahead. Thank Citi. much. We will you take go Instructions] from question [Operator Please Ryan very Levine from

everybody. Hi,

Ryan. Hi,

questions. construction that? there I light color for noticed few in what were Thanks performance I Or it as all detail of of mix Was some the the ready to terms were quarter. versus Any that volumes a during the were materials the other One, at factors history. today. weather? guess play? drove

weather River Knife perfect have did a detailed negative give though. to Brian I’ll Gray operations. on Yes. ask Ryan, question. Certainly, that a our on effect color more

thanks, Ryan. down about weather like XX% and volumes in mix. that. on ready mentioned, Dave, Thanks, were big Yes, you had our a impact And

rain in record an Dakota, impact North Our that. Bismarck snowfalls had California, in Minnesota, the or on all Montana,

year, down thing other into that plays there of we sold at a Texas. end that that ready-mix our in is operations the facility last The Beaumont and was

the ready-mix is And the softening really, our had business the is last the residential of thing And market impacting so most. that impact. the

So things, really Ryan. three those

then to Does to the a decision end of the part construction you And asset portfolio? monetize the include that. could a terms the months? of service continued prepared imply in that couple decision reach the keeping quarter. of of as Or strategic it alternatives, within Appreciate by expectations you’re highlighted that next

what is really, quarter. what Ryan, in here we expect be to we’ve the that review I’ll it’s completed reinforce second Yes, said the today and

And there. ahead quarter get conclusions be But so with I or go some what think before second won’t to an release. probably there. hypotheticals expect on/or our you’re update earnings I I could jumping some

some level hold suggest of filing Knife equity go-forward filings. will Okay. a that itself, about How right Then in the longer-term? than for thinking equity the what then MDU seems spin the previous position in MDUs of of you interim the terms the retained and smaller River to are entity recent in the

maybe The we’ve Spot maybe Yes. balance. XX% to Ryan. as there. little give so about is But far short little shares color more a indicated answer ask Yes, detail. a Jason, retained I’ll Jason, at on, MD.

in Yes. filing Thanks. mentioned, had David we Ryan, good we recent reflected talked which catch yes, approximately earlier as with XX, versus stake Form have the that. retained of up about to you. XX% within But most our XX.X%,

you for to capital spin, build when really the May, balance spin as being of that working the the capital, timing the the about their sheet basis. Knife of the But seasonal incurred construction Knight after and towards here again, cash So at get on it cycle of And the River complete right be end think resources will out gets River obviously, here. peak that under of working a back they the its work now customers to MDU through benefit flowing projects and that process. is

MDU So it’s have sheet balance both post ability these after both capital River to spin and to their really this. for continue about sure businesses balancing prospects that a of the structure Resources strong and Knife make growth strong a appropriate

more So than anything really mechanism balancing that it’s of else. on a it is

me. last Okay. for question And then

the undergrounding service, geographies? for look are work construction of of the utilities certain we around pursuing acceleration opportunities selective throughout initiate country terms more In is opportunities in country, or hearing to undergrounding, more MDU

weigh I’ll to Yes. Jeff Ryan. ask on in Thanks, that. Thiede

fact probably which to the the in on there backlog is of question. Jeff, services across group. billion $X.X You’ll specific Ryan’s But undergrounding, our

high question. Yes. on in this been be and and have one for we’re Ryan, decades, for our particular their Thanks, the we prequalified utility rate we customers, of with experience seeing the We’ve customer packages KPIs. for working and released,

quite So a positioned, bit expect of we’re well and to work. very we get this

are gas undergrounding and some the work also, forward. of past as certainly seeing services, power, Northwest And see and of of right of ways have And available, we able Southern into some falls sight. we’ve we’re future. in are undergrounding we that work as those line some to the packages in wheelhouse expect doing an of are we Pacific of engineering increase communications, gets opportunities in We with our that successful in the get those be what done that well, California this going what of completed, right our and to in we

the Appreciate you. Thank color.

you, Ryan. Thank

our from take question will Brian from we next Russo And Sidoti.

afternoon. Good Hi.

Brian. Hi

Just the on focus utility.

also Dakota in You a if reached me you but electric did settlement. I the am wrong, you well? say noted North as Idaho settlement Correct

That is Nicole? correct.

Yes.

You did that hear correctly.

that an settlement we have file. there we So, will all-party

with would be that hope filed commission this yet not of have the the front to file for We it We so in it approval. commission, week.

in… a We have settlement

other Great. Dakota gas another Okay. and to gas plans Washington. think several cases filed, Dakota both I North had a And in for case think I and in then electric gas rate you case also be in South then in and

what those wondering status the are Just four of cases?

You hit exactly it right.

here So, on all still XXXX. are of radar the those for

mentioned be would those to to expect out you there case. I in add XXXX. would multiyear we is get So, what filings Washington a Washington,

then about pushed the delayed, contracting maybe on a River, involved just but Okay. the in Knife that canceled, projects dollar year? actively not involved into that were side the weather then services amount of any restoration? talk And on in storm business, also were just you could Great. maybe or you gets the later And impact

Yes. Brian, Brian. this is

a a had so biggest So, in had – California, impact. rain of yes, the lot that we and probably huge

a year, inch last last had of drought for of always we of on. inches construction they typically, rain had first of in slow because they California going soil Coast, geographic revenue footprint. are inches. quarter, to in the quarter that XX XX than the than on conditions and first year is year. us the less West amount work the and The had, they able because more They rain for This had our But an

Wyoming, Montana, months. And lost are our to so those down that specifically, Central the XX% typically weather. in region, they due services in days about we contracting North do the of Dakota, could Minnesota, California terms of we North revenue, In

in California. the really, came So from impact

of work. is snow from books are that with material have will some of of see I to temperatures on flooding to this amount think now weather benefit some that and be there as we our flood is – that in some fully expecting seeing, up We that’s far hot repair area there anything restoration is are repairs and some going the and don’t that expect the right now, type come. we but storm We as

Great. Okay.

on… Lastly

But of our far am work backlog record have just we – at as get we done, sorry, the looked as didn’t far as the a backlog. million. It’s as $XXX that I

West start crews have the we capacity have And any normal Coast so the get the North our we even that we see on backlog and Definitely, start Central the have work and a cancellations we regions. backlog and did though slow to done, projects. in of of did that not

see Okay. Great. lower And saw just have the most move generating – margin you of or the to do rapid as services as margins business? throughout March, backlog that in you through we XXXX? So, we throughout inflation and projects could then the that burned improvements year-over-year due on construction were quarterly of year, completed forward the we

ahead. take can that Go one? Jeff, you

Certainly.

the So, of we have materials, some had issues, pressures course, subcontractors. on inflationary labor with and

a on, for adjustment future challenges on and projects entitlement that and well in had we projects, equitable of working recovery couple but those had are have on underway well periods. could We which bode

our are record We backlog. building

a consistency markets of were versus seeing in XXXX are how lot XXXX. We our in

and contains and mission-critical. is our strongest, entertainment, commercial Our market hospitality the which gaming

our those areas. We services demand are seeing incredible in for

car Kansas Our to and projects a a street increased a City. two is transportation XX has backlog, percentage Expressway market extension project project. also in our key U.S. largely of as There due

top And backlog, lane a of of X-mile And a companies. two are probably take got five XX have list, our if list hospitality in We look of come you XX Mid-Atlantic. project from our to projects mission-critical, and project, was and our in we top our their projects course, last entertainment they acquired at airport the we gaming, expansion. two an government contribution mostly that see are those company data projects expected, center And grow. healthcare as in and starting a a from services recently as project, are involved

we some improve as chain, supply have inflation are should had pandemic with So, going and we forward and challenges well. these through that and pulling margins our of

Okay. Great. Thank very much. you

Brian. you, Thank

Thank will Brent from D.A. Davidson. next we you. And to Thielman go

all congrats and the you on here. Hi. Thank strategic progress the on changes

much very Brent. Yes. Thank you

what CSG more Dave. Thanks like in future new the selective. I wondering really build be am relative added. to I are may just demand issues inflation I to CSG, seeing just that you kind you are to how able just come are thoughts question, on in and of of where guess contracts counteract the Yes. about, of those supply the within you group? quality be to first of if It seems work kind any potential negotiations able high contingencies would on chain think better levels going

Jeff?

You bet. Yes.

to be We and a delays reconstruction, with contractor we to continue materials. involved with lot potential architects, suppliers were on equipment, closely commodities, with the the get these and jobs. we engineers, our involved As work the the able these availability of of with general issues mitigate

selective And for on so to our been going levels tough can but it’s upon have levels, as these grow and continue our be to to we backlog we and calculated take say and some us, grow record to we opportunities, our available in see record to our performance projects very build so we are And XXXX. continue record risks still selective. no grow business, those more employment

your really potential, Maybe just the renewables institutional piece I of on the more of business. be more thoughts maybe it you the slide, in seems thoughts road, results growth that are a down business like Okay. the pieces I much pie of there? carefully, commercial, managing your appreciate the and that just for the overall the a curious could industrial, and strong little but important growth terms guess

we that out have in we and customers us project installing in got exciting of a got to people and products Midwest the XXX our really of projects of Vegas are we working our couple out that in that and on. another come have renewable over companies help We Las underway have on asked one

charging experience in got EV have vehicle electric facilities, We manufacturing the stations.

future position the in We going have this and going renewable projects, to contract momentum. of IRA done that’s our solar put to good contribute work, hundreds for as to mentioned, those. course, awards, a us IIJA of is I And

I appreciate Jeff. that, Okay.

on backlog majority quarter. interested works markets could be River, I if more maybe other non-residential to public this play been pushed increases. think just There I the And one out Knife end lot and is would in has can lever work in were I geographies still mean in? infrastructure substantial uptick how a you that work, there the this guess price due here I control your lastly, of Just year. in you then to customers whether related that’s if a the you receptiveness this market the

Yes. Brent, I will take. This is Brian.

yes, over works our and to XX% record backlog million right of our so now at has XX%. services contracting it public year, funded. of the This And backlog continues is towards And grow billion that the backlog. that so of that a work $XXX year, we been did, was projects $X.X public of last

are the – And sources of that from the so benefiting multiple seeing just public we different and grow funding. infrastructure

our been that improved we can on that’s which backlog, and has because more backlog. so have are And seeing selective we that’s be record good that. margins our We

did price at of several the increases, had from a price and this implementing increases year. last top see on As that’s and as increases far year, success we new good very

aggregate our XX% and are was asphalt of lot we asphalt, XX%. a quarter-over-quarter, year-over-year. XX% those even do though about didn’t Ready-mix prices, up up are in prices production so And prices up about

price our increases some see definitely with traction the market. so in And

Okay. all. Thanks Appreciate Thanks Brian. it.

you, Thank Brent.

for speakers And I questions, [Operator further no our would any to remarks. having closing to back turn Instructions] like it

us and first you call. to on taking Thank the all earnings quarter time join our operator, for here thank you,

along We and as progress interest encouraged again, as of as and through will and appreciate turn our look I regulated forward energy optimistic, again have you Thank with that, our performance projects Resources. and construction demand support XXXX. we upon are growth you We heard, MDU continued With our connecting with strong the opportunities you operator. by to business, to the your services delivery back again. future of we it

that Thank day. conclude today’s and We have a and conference. participation you. gentlemen, appreciate does your And ladies wonderful