Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Q1 2023 Earnings Presentation
36 slides from Southwest Gas's earnings presentation, May 9, 2023
Slide 1: Earnings Conference Call First Quarter 2023
Earnings Conference Call First Quarter 2023 May 9, 2023
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements Unless context otherwise requires, in this presentation, references to “we”, “us” and “our” are to Southwest Gas Holdings, Inc. (NYSE: SWX) (“Southwest Gas” or the “Company” or “SWX”) together with its consolidated subsidiaries, which include, among o
Slide 3: Non-GAAP Measures
Non-GAAP Measures Non-GAAP Measures. This presentation contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP measures include (i) Southwest Gas adjusted earnings per share, (ii) Southwest Gas adjuste
Slide 4: Speakers and Agenda
SPEAKERS Speakers and Agenda KAREN HALLER ROB STEFANI JUSTIN BROWN PAUL DAILY THOMAS MORAN PRESIDENT AND CEO SVP/CFO PRESIDENT PRESIDENT AND CEO VP/GENERAL COUNSEL/ SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION CENTURI GROUP, INC. CORPORATE SECRETARY SOUTHWEST GAS HOLDINGS
Slide 5: SWX: Becoming a Premier, Fully Regulated Natural Gas Utility
SWX: Becoming a Premier, Fully Regulated Natural Gas Utility Utility Positioned for Continued Growth and Success • Delivering safe, reliable, sustainable and affordable energy solutions across our footprint Committed to Delivering Value for SWX Stockholders • Significant population growth & strong d
Slide 6: Executing SWX's 2023 Strategic Priorities
Executing SWX’s 2023 Strategic Priorities MW Sale Complete Closed ✓ 1Q 2023 RAS/RES Complete Ratings Analyses ✓ 1Q 2023 2023 Financing Plan Complete SWX Equity (~$250 million) ✓ 1Q 2023 SWG Bond (~$300 million) ✓ 1Q 2023 SWX Term Loan (~$550 million) ✓ 2Q 2023 Centuri Spin On Track IRS Private Lette
Slide 7: First Quarter 2023 Operational Highlights
First Quarter 2023 Operational Highlights $23 million year over year increase in first quarter net income $28 million year over year increase in first quarter adjusted EBITDA 42,000 new meter sets added during the last 12 months Reduced LTM net debt/EBITDA by ~0.5x from prior quarter Arizona general
Slide 8: Utility Optimization Progress
Utility Optimization Progress Executing a multi-step evaluation process to optimize utility performance and deliver value to all stakeholders 1Q 2023 2Q 2023 3Q 2023 4Q 2023 Comprehensive Review and Identification Evaluation and Prioritization of Initiatives to Execute of Potential Opportunities Key
Slide 9: Strong Demand Dynamics Supporting Value Creation
Strong Demand Dynamics Supporting Value Creation Strong Economic Growth Across Service Areas • From 2023 to 2028, projected population growth of 3.76% in Arizona and 3.95% in Nevada1 • Between 2018 to 2022 First-Time Meter Sets increased: $2B Capital Investment 29%⇧ 54%⇧ 23%⇧ Estimated 2023 – 2025 i
Slide 10: Financial Update
Financial Update
Slide 11: 1Q 2023 SWX Results
1Q 2023 SWX Results GAAP SWX 1Q 2023 EPS Results1 Adj. SWX 1Q 2023 EPS Results1 Financial Highlights $1.69 $1.74 • Consolidated adjusted net income of $1.58 $0.67 0.19 ~$116 million resulting in adjusted 0.28 0.39 earnings per share of ~$1.69 • SWG recorded highest quarterly net income on record 1.9
Slide 12: 1Q 2023 Southwest Net Income
1Q 2023 Southwest Net Income NATURAL GAS DISTRIBUTION SEGMENT Year over year net income drivers include: (parenthesis indicate unfavorable net income drivers) favorable impact to adj. net income unfavorable impact adj. to net income Net Income ($ in millions) Operating Margin Favorable Unfavorable •
Slide 13: 1Q 2023 Centuri Adjusted EBITDA and Net Income (Loss)
1Q 2023 Centuri Adjusted EBITDA and Net Income (Loss) Year over year drivers include: UTILITY INFRASTRUCTURE SERVICES SEGMENT (parenthesis indicate unfavorable net income drivers) favorable impact to adj. net income unfavorable impact adj. to net income Adjusted EBITDA Contribution1 ($ in millions)
Slide 14: 2023 Financing Plan Complete
2023 Financing Plan Complete SWX Total Sources SWX Total Uses SWG Total Sources SWG Total Uses $1,875 MM $1,875 MM $830 MM $830 MM ~$5501 MM $5301 MM $530 MM $830 MM Term Loan Issuance Equity Contribution to SWG Equity Contribution Term Loans and April 17 April 17 from SWX Credit Facility Paydown ~$
Slide 15: Business Update
Business Update
Slide 16: Southwest Regulatory Update
Southwest Regulatory Update Rate Case Activity Arizona Rate Case Results Summary Anticipated Timing of Future Rate Case Filings The ACC approved SWG’s most recent rate case, authorizing the largest revenue increase in SWG history ($54 million) with rates effective February 1, 2023 Test Year Twelve m
Slide 17: Southwest Regulatory Update
Southwest Regulatory Update Other Regulatory Activity Great Basin 2023 – Mainline Replacement Project Great Basin 2024 – Expansion Project FERC issued order in February 2023 granting a certificate of Application filed with FERC in April 2023 seeking public convenience and necessity (CPCN) for the co
Slide 18: Legislative Activity - Nevada
Legislative Activity - Nevada Focus Executive Order 2023-07 • Supports an all-of-the-above approach to energy in the state Outlines the state’s energy priorities • Emphasizes the importance of affordability and reliability of energy for consumers and policy objectives for the next • Protects the use
Slide 19: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Balance and Recovery Mechanism Summary Mar. 2023 Dec. 2022 Gas Cost Rate Receivable State Receivable Balance Carrying Cost Rate Adjustment Balance ($ in millions) ($ in millions) Frequency Estimated Cash Recovery of Gas Cost4 ($ in millions)
Slide 20: Centuri Overview: Strategic Utility Infrastructure Services Leader
Centuri Overview: Strategic Utility Infrastructure Services Leader Service ~13,2501 Territory employees supporting North American gas and High-Quality Utility Customer Base electric utilities Gas Electric Combination GAS GROUP POWER GROUP CANADA GROUP Notes: 1 Peak employee headcount based on Decemb
Slide 21: Centuri Execution on 2023 Projects
Centuri Execution on 2023 Projects Achieving Growth Clean Energy Projects Expansion Restoration Services New Awards & Value-Enhanced ▪ $47.5 million revenue recorded for sustainable wind energy Crews responded across the Gulf Coast and Contracts projects during 1Q 2023 and projecting ~$250 million f
Slide 22: Proven Performance Track Record
Proven Performance Track Record Centuri LTM Adjusted EBITDA1 LTM Revenue LTM Business Mix by Service Type ($ in millions) ($ in millions) Revenues Legacy Centuri Incremental Riggs Distler $256 17% $228 $220 $686.1 54% Gas $217 29% $277.7 $207 Electric $2,040.9 $2,203.6 Gross Profit Other LTM 1Q 2022
Slide 23: Guidance and Outlook
Guidance and Outlook
Slide 24: On Track to Achieve 2023 Company Guidance
On Track to Achieve 2023 Company Guidance 2023 CapEx: 2023 Revenue: $665 - $685 million $2.8 - $3.0 billion 2023 Net Income1: 2023 Adjusted EBITDA3 $205 - $215 million Margin: 9.5% - 11.0% 3-year Rate Base CAGR2: 5% - 7% 2023 – 2026 Adjusted EBITDA3 CAGR: 3-year Total Capex2: 9% - 11.0% $2.0 billion
Slide 25: Maintaining a Competitive Dividend
Maintaining a Competitive Dividend Upon completion of the spin of Centuri, Southwest Gas Holdings plans to target a dividend payout ratio in line with gas utility peers SWX Annual Dividend Per Share • Southwest Gas is committed to paying a competitive dividend $2.48 $2.48 • Southwest Gas has paid a
Slide 26: Positioned to Unlock Significant Stockholder Value
Positioned to Unlock Significant Stockholder Value Enhancing SWX credit profile Positive regulatory developments and strong Transitioning to a through the sale of organic rate base growth standalone world-class MountainWest and utility infrastructure strengthening capital and Optimizing the utility
Slide 27: Appendix
Appendix
Slide 28: Investment Grade Credit Ratings
Investment Grade Credit Ratings SWX and SWG are committed to maintaining an investment grade profile Credit Ratings and Outlook Pro Forma1 Net Debt ($ in billions) Moody’s Standard and Poor’s Fitch Ratings Outlook Ratings Outlook Ratings Outlook Total Debt Cash Net Debt Rating Baa2 Stable BBB- Posit
Slide 29: Sustainable Energy Investments
Sustainable Energy Investments Renewable Natural Gas (RNG) Projects1 Fort Irwin Expansion Project California Hydrogen Demonstration Project Fort Irwin’s remote desert location provides an Filed for approval of a hydrogen-blending RNG projects opportunity to enhance energy reliability, resilience, de
Slide 30: Proven Performance Track Record
Proven Performance Track Record ($ in millions) Revenues Adjusted EBITDA1 CAGR2 CAGR2 17.5% 13.7% $256 $2,760 $2,890 $228 $213 $214 $2,159 $176 $1,948 $1,751 $142 $1,522 $1,246 $110 $115 $100 $1,009 $1,139 $78 $97 $651 $740 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LTM 1Q 2013 2014 2015 2016
Slide 31: Top 20 Customers
Top 20 Customers 1 LTM Mar 2023 $ 2,204 $ 686 Centuri Total $ 2,890 Revenue (USD) 1 Last Twelve Months Ended March 31, 2023 May 9, 2023 | 31
Slide 32: 1Q 2023 Financial Results
1Q 2023 Financial Results CONSOLIDATED Three months ended Twelve months ended Results of Consolidated Operations March 31, March 31, (in millions, except per share items) 2023 2022 2023 2022 Natural gas distribution income $ 134.7 $ 111.8 $ 177.3 $ 180.2 Utility infrastructure services income (11.9)
Slide 33: Summary of Operating Results
Summary of Operating Results NATURAL GAS DISTRIBUTION SEGMENT Three months ended Twelve months ended Results of Natural Gas Distribution March 31, March 31, (in thousands of dollars) 2023 2022 2023 2022 Regulated operations revenues $ 914,879 $ 676,539 $ 2,173,409 $ 1,676,397 Net cost of gas sold 50
Slide 34: Summary of Operating Results
Summary of Operating Results UTILITY INFRASTRUCTURE SERVICES SEGMENT Results of Utility Infrastructure Services Three Months Ended March 31, Twelve Months Ended March 31, (Thousands of dollars) 2023 2022 2023 2022 Revenues $ 653,293 $ 523,877 $ 2,889,743 $ 2,318,563 Cost of sales (1) 1 611,344 509,3
Slide 35: Non-GAAP Measures
Three months ended Twelve months ended March 31, March 31, Non-GAAP Measures SWX Adjusted Net Income and Adjusted EPS SWX net income (loss) Legal reserve $ 2023 45,911 - $ 2022 96,178 - $ 2023 (253,557) - $ 2022 179,664 5,000 ($ in thousands) Riggs Distler transaction costs - - - 14,000 Nonrecurring
Slide 36: Non-GAAP Measures (continued)
Non-GAAP Measures (continued) ($ in thousands) Adjusted Centuri income and adjusted EPS for the three and twelve months Three months ended Twelve months ended ended March 31, 2023, include strategic review costs. Adjusted Centuri income and March 31, March 31, adjusted EPS for the twelve months ende
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