American Water Works Company, Inc. · NYSE:AWK
American Water Works — Q4 2023 Earnings Presentation
35 slides from American Water Works's earnings presentation, Feb 15, 2024
Slide 1: 2023 Fourth Quarter & Year-End Earnings Conference Call
2023 Fourth Quarter & Year-End Earnings Conference Call February 15, 2024
Slide 2: Aaron Musgrave
Aaron Musgrave Vice President, Investor Relations 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial resu
Slide 4: M. Susan Hardwick
M. Susan Hardwick President and Chief Executive Officer 4
Slide 5: Strong 2023 Results: Executing the Plan
Strong 2023 Results: Executing the Plan EPS Growth Driven by Regulatory Execution, Favorable Weather Earnings Per Share 2023 Highlights $4.90 Achieved our planned EPS growth for the year on a weather $4.51 normalized basis $0.13 $0.06 New rates effective in PA, IL, VA and MO $4.77 $4.45 Invest
Slide 6: Delivering Excellent Value to Shareholders
Delivering Excellent Value to Shareholders AWK Outperforms on Total Shareholder Return AWK’s Strong and Consistent Dividend Growth 280% ($ rounded) 211% $2.78 $2.57 133% 144% $2.36 107% $2.15 $1.96 58% $1.78 41% 29% American Philadelphia Proxy Peer S&P Water Utility Index Group 500 (AWK) (UTY) 10-Ye
Slide 7: Long-Term Targets Affirmed
Long-Term Targets Affirmed Strong and Sustainable Growth Outlook for the Future Long-Term Financial Targets Drivers of Sustainable Shareholder Return • EPS Growth 7-9% • Dividend Per Share Growth 7-9% • Customer Affordability + • ESG Leadership + Additional Supportive Targets • Dividend Payout R
Slide 8: Cheryl Norton
Cheryl Norton Executive VP & Chief Operating Officer 8
Slide 9: Investments Drive Continued Rate Base Growth
Investments Drive Continued Rate Base Growth Foundational to Overall Growth Regulated Capital Investments Estimated Rate Base* ~8-9% CAGR (Includes Acquisitions) (Includes Acquisitions) for Rate Base $ in billions $ in billions 2024E 2023 2022 $19.7 $17.8 $15.0 $16.3 $3.1 $12.5 $13.7 $2.6 $2.7 $11.6
Slide 10: General Rate Case and Legislative Updates
General Rate Case and Legislative Updates Rate Cases in Progress Completed Rate Cases in 2023 • Rate case filed 1/25/24 • Capital Investment of ~$557 million • General Rate Case • Rates expected to be effective early 2025 • Additional authorized revenues of $11 million • Rate case filed 1/19/24 • Ef
Slide 11: Annualized Revenue from Rate Proceedings
Annualized Revenue from Rate Proceedings ($ in millions) Rate Filings Requested Revenue in Completed* Pending Rate Proceedings Effective since January 1, 2023 $669 $1 $670 $390 $31 $273 $359 $117 $31 $86 Rate Cases Infrastructure Total Rate Cases** Infrastructure Total (Includes Charges Step Increas
Slide 12: Lead Service Lines Remain in Focus
Lead Service Lines Remain in Focus Review of U.S. EPA’s Proposed Lead and Copper Rule Improvements On November 30, 2023, the United States Environmental Protection Agency (EPA) announced proposed Lead and Copper Rule Improvements (LCRI). American Water submitted oral and written comments to the
Slide 13: 2024-2028 Capital Investment Plan – same as Nov. 2023
2024-2028 Capital Investment Plan – same as Nov. 2023 Significant Capital for PFAS and Lead; In-House Expertise Remediating Both Proposed Federal PFAS Rule Recap PFAS Litigation Update March 2023: The United States EPA proposed American Water is a party to the Multi-District Litigation (MDL) dri
Slide 14: John Griffith
John Griffith Executive VP & Chief Financial Officer 14
Slide 15: Reconciliation of 2023 EPS Results Compared to 2022
Reconciliation of 2023 EPS Results Compared to 2022 1.49 (0.54) (0.24) 0.07 $4.90 (0.38) (0.08) 0.13 $4.51 (0.06) FY 2022 Actual Weather in Weather in Revenue O&M Depreciation LT Financing * ST Debt Financing Other, net FY 2023 Actual 2023 2022 Investment Growth *Includes $(0.29) of share count dilu
Slide 16: Strong Outlook for Acquisitions; $589M Under Agreement
Strong Outlook for Acquisitions; $589M Under Agreement Pipeline Balanced Across Many States Growing Opportunity for Growing Opportunity for Closed Over Five- Customer Connections Under Agreement AcquisitionOver Customer Connections Activity Five-Last 5 Year Outlook As of December 31, 2023 As of Dece
Slide 17: Raising 2024 EPS Guidance to $5.20 to $5.30
Raising 2024 EPS Guidance to $5.20 to $5.30 Increase of $0.10 per share due to legacy note receivable restructuring 2024 Growth Drivers • Revenue growth in base rates and in infrastructure mechanisms from capital investment • Focus on customer affordability by continuing to drive effective and effic
Slide 18: Continued Strong Balance Sheet and Credit Ratings
Continued Strong Balance Sheet and Credit Ratings AWK Long-Term Senior Unsecured Ratings Total Debt to Total Capital S&P Global Moody’s A Baa1 As of Long-Term (Stable Outlook) (Stable Outlook) December 31, 2023 Target 55% <60% Ratings and StableOutlook Low risk business profile affirmed at S&P / M
Slide 19: Q&A Session
Q&A Session 19
Slide 20: Investor Relations Contacts
Investor Relations Contacts Aaron Musgrave, CPA Jack Quinn, CPA Vice President, Investor Relations Senior Manager, Investor Relations aaron.musgrave@amwater.com jack.quinn@amwater.com Janelle McNally Kelley Uyeda Senior Manager, Investor Relations & ESG Analyst, Investor Relations & ESG janelle.mcna
Slide 21: Appendix
Appendix 21
Slide 22: Forward-Looking Statements
Forward-Looking Statements Certain statements made, referred to or relied upon in this presentation including, without limitation, 2024 earnings guidance, the Company’s long-term financial, growth and dividend targets, the ability to achieve the Company’s strategies and goals, customer affordability
Slide 23: Non-GAAP Financial Information
Non-GAAP Financial Information This presentation includes adjusted regulated O&M efficiency ratios, both historical and forward-looking, which exclude from their calculation (i) estimated purchased water and other revenues and purchased water expenses, (ii) the impact of the Freedom Industries chemi
Slide 24: End of Year Highlights
Es Es END OF YEAR HIGHLIGHTS sees THE WORLD'S MOST TRUSTWORTHY CUSTOMER CONNECTIONS THROUGH NEWSWEEK'S INAUGURAL LIST OF OS 0 NEARLY 40,000 NEW WATER AND WASTEWATER COMPANIES (O° ACQUISITIONS AND ORGANIC GROWTH AS A PUBLICLY TRADED INFRASTRUCTURE FORTUNE'S MODERN CELEBRATED 15 YEARS 2G $2.6 BILLION
Slide 25: Reconciliation of Fourth Quarter 2023 EPS Results Compared to 2022
Reconciliation of Fourth Quarter 2023 EPS Results Compared to 2022 0.34 (0.21) 0.03 $0.88 (0.07) 0.06 0.02 $0.81 (0.10) Dec QTD Weather in Revenue O&M Depreciation LT Financing * ST Debt Financing Other, net Dec QTD 2022 Actual Q4 2023 2023 Actual Investment Growth *Reflects $(0.06) per share of sha
Slide 26: Review of Sale of Homeowner Services (HOS) and February 2024 Amendment to Secured Seller Note
Review of Sale of Homeowner Services (HOS) and February 2024 Amendment to Secured Seller Note Review of Dec. 2021 Sale of HOS to Funds Advised by Apax Partners and Amendment to Secured Seller Note • American Water sold the former HOS business for $1.2B in Dec. 2021; potential $75M earn-out by 12/31/
Slide 27: Reconciliation of Estimated Rate Base
Reconciliation of Estimated Rate Base ($ in billions) Estimated Rate Base* As of 12/31/2023 Net Utility Plant $25.3 Less Advances for Construction $0.3 CIAC – Contributions in Aid of Construction $1.5 Net Deferred Income Taxes $3.8 $5.6 Total Estimated Rate Base $19.7 * An approximation of rate base
Slide 28: Five-Year Capital Plan: Investments to Support System Needs, Including ~$1 Billion for PFAS
Five-Year Capital Plan: Investments to Support System Needs, Including ~$1 Billion for PFAS Capital Plan ($ in billions) 10 Year Capital Increase: ~$4B* 5 Year $34 - $38 $30 - $34 Capital Regulated $4 - $5 Increase: $3 - $4 Acquisitions ~$2B* $16 - $17 $14 - $15 $3.1 $1.5 - $2.0 $1.5 - $2.0 $27 - $3
Slide 29: Continued Focus on Customer Affordability
Continued Focus on Customer Affordability Values around Affordability Monthly Water Bill as % of $ Median Household Income* Focused on keeping customer bills affordable compared to income (wallet share) Supportive of consolidated tariffs that allow customers to benefit from efficiencies of scale
Slide 30: Closed Acquisitions
Closed Acquisitions December 31, 2023 NUMBER WATER CUSTOMER CONNECTIONS WASTEWATER CUSTOMER CONNECTIONS STATE TOTAL CUSTOMER CONNECTIONS OF SYSTEMS Missouri 8 1,600 1,500 3,100 Illinois 3 1,400 1,300 2,700 New Jersey 3 1,600 5,200 6,800 West Virginia 3 3,700 900 4,600 Iowa 2 200 100 300 Indiana 2 20
Slide 31: Acquisitions Under Agreement
Acquisitions Under Agreement December 31, 2023 NUMBER STATE WATER CUSTOMER CONNECTIONS WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER CONNECTIONS OF SYSTEMS Pennsylvania 12 7,700 29,600 37,300 Illinois 4 500 32,100 32,600 California 3 1,300 - 1,300 New Jersey 2 2,300 2,300 4,600 Virginia 2 1,400 1,4
Slide 32: Rates Effective Since…
Rates Effective Since… January 1, 2023 January 1, 2024 ($ in millions) Infrastructure Date Annualized Revenue Date Annualized Revenue Rate Cases & Step Date Annualized Revenue Infrastructure Charges Charges Effective Increases Effective Increases Increases Effective Increases Illinois (QIP) 1/1/2024
Slide 33: Pending Rate Case Filings
Pending Rate Case Filings ($ in millions) Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base California (a) Case No. A.22-07-001 7/1/2022 $37 NA $921 Indiana (b) Cause No. 45870 3/31/2023 43 10.60% 1,614 West Virginia (c) Docket No. 23-0383-W-42T 5/1/20
Slide 34: Regulatory Information – Top 10 States
Regulatory Information – Top 10 States CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $667,632(g) $1,642,200 $1,182,170 $443,654 $2,318,849(c) ROE 10.20%(a) 9.78% 9.80% 9.70% 9.75%(d) Equity 57.04%(a) 49.00% 53.41%(b) 48.90% 50.00%(e) Effective Date of Rate Case 1/1/2021(g) 1/1/
Slide 35: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY FY 2010 2013 2016 2019 2022 2023 (A Non-GAAP Unaudited Number) ($ in millions) Total operations and maintenance expense $1,291 $1,289 $1,504 $1,544 $1,589 $1,720 Less: Operations and ma
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