American Water Works Company, Inc. · NYSE:AWK
American Water Works — FY2019 Earnings Presentation
38 slides from American Water Works's earnings presentation, Feb 18, 2020
Slide 1: 2019 Fourth Quarter and Year-End Earnings Conference Call
2019 Fourth Quarter and Year-End Earnings Conference Call We keep life flowing®
Slide 2: Forward-Looking Statements
Forward-Looking Statements Ed Vallejo Vice President, Investor Relations We keep life flowing® 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: Strategy Overview
Strategy Overview Susan Story President and Chief Executive Officer We keep life flowing® 4
Slide 5: Strong Full Year Adjusted Results
Strong Full Year Adjusted Results Adjusted earnings per share* $3.61 9.4% $3.30 $0.73 $0.69 2019 Regulated Investment 2019 Market-Based Businesses • ≈$1.9 billion total capex Regulated invested Homeowner Services $2.88 Acquisitions • Organic growth ≈14,000 • Continued strong $2.61 customer connectio
Slide 6: Our Strategy Continues to Drive Growth
Our Strategy Continues to Drive Growth 2020-2024 Plan* 7-10% EPS CAGR Range Market Based Grow EPS long-term CAGR of 7-10%*… Businesses … One of the fastest growing utilities in the nation 1-2% Grow dividends at high end of 7-10%* EPS range**… … Top quartile utility dividend growth Regulated … Pa
Slide 7: Doing Well by Doing Good
Doing Well by Doing Good Notable ESG related indexes Awards and Recognitions American Water ranked #22 on Barron’s 100 American Water recognized among the top 100 Most Sustainable Companies Best for Vets employers by Military Times American Water Honored by Forum of American Water earns 2020 Militar
Slide 8: The Regulated Businesses
The Regulated Businesses Walter Lynch Chief Operating Officer We keep life flowing® 8
Slide 9: Regulated Business Activity
Regulated Business Activity 2019 Pending Rate Cases Indiana Rate Case – Rates Effective July 1, 2019 New Jersey Rate Case – Filed December 16, 2019 • Capital Investment of ≈$542 million • Capital Investment of ≈$1 billion • ROE ≈9.80% with Equity of 53.41% • Requested ROE 10.5% • Issued final order
Slide 10: Disciplined Focus on Expenses
Disciplined Focus on Expenses 46.1% Regulated O&M Efficiency Ratio* 41.0% 39.1% 36.6% 35.6% 2024 Target 34.5% ** 31.3% 2010 2012 2014 2016 2018 2019 Adjusted O&M Expenses* ($ in millions) While 2010 2012 2014 2016 2018 2019 2010-2019 adding $966 $980 $943 $948 $1,015 $1,020 0.6% CAGR ≈270,000*** cus
Slide 11: Regulated Acquisitions Update
Regulated Acquisitions Update Under Agreement* Agreement Process ≈ 44,200 Customer Connections 28 Acquisitions CA: 5 IL: 11 NJ: 1 Regulatory HI: 1 IN: 1 PA: 5 Approval to IA: 1 MO: 2 TN: 1 Close * As of 2/19/2020; does not reflect the announced pending sale of NYAW 2019 Closed ≈ 53,100** Customer Co
Slide 12: A Disciplined Approach toward Acquisitions
A Disciplined Approach toward Acquisitions Past Growth Future Growth Closed & Pending Acquisitions by Year* (Customer Connections) Opportunities over 5 years 120,000 100,000 ≈695,000 80,000 Customer Connections 60,000 40,000 Enablers 20,000 - 2015 2016 2017 2018 2019 2020 Closed Pending Fair Market
Slide 13: Financial Results & Long-Term Outlook
Financial Results & Long-Term Outlook Susan Hardwick Chief Financial Officer We keep life flowing® 13
Slide 14: Continued Execution of Company Strategy
Continued Execution of Company Strategy Contribution by Business Three Months Ended Three Months Ended 12/31/2019 12/31/2018 Change Q4 Regulated Market Based $0.84 $0.10 $0.71 $0.07 $0.13 $0.03 2019 Parent & Other Total Adjusted EPS* Re-measurement from Tax Reform ($0.21) $0.73 ($0.09) $0.69 ($0.12)
Slide 15: Full Year 2019 Adjusted EPS Detail by Business
Full Year 2019 Adjusted EPS Detail by Business* 0.49 0.04 0.03 0.08 $3.61 (0.04) (0.03) (0.07) (0.01) $3.30 (0.14) (0.04) Regulated $0.28* MBB $0.12* Parent ($0.09)* 2018 EPS Revenue Weather** O&M Depreciation/ HOS MSG/ Legacy Interest, Employee American Water 2019 EPS (Adjusted)* Interest/Other Oth
Slide 16: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Requested Revenue 2019 Rate Filings Completed* Awaiting Final Order $2 $126 $124 $53 $98 $45 Rate Cases Infrastructure Total Rate Cases Infrastructure Total Charges Charges *Annualized Revenue Increase for Rates Effective Since January
Slide 17: Affirming 2020 EPS Range and Long-Term Guidance
Affirming 2020 EPS Range and Long-Term Guidance Grow EPS long-term CAGR of 7-10%** 2020 – 2024 Long-Term EPS CAGR Guidance** … One of the fastest growing utilities in the nation 2020 EPS Guidance 7-10% ** 2019 CAGR Affirm 2020 EPS Guidance Adjusted EPS (GAAP EPS $3.43)* $3.79 - $3.89 2018 Adjusted
Slide 18: Summary – Creating Customer and Shareholder Value
Summary – Creating Customer and Shareholder Value Capital Investment Cash Flow from Operations AWK Shareholder Value (in billions) (in billions) Adjusted Consolidated Return on Equity* $20 - $22 Regulated Wt Avg 10.6% Other $1.4 $1.4 10.1% authorized ROE is 9.8% Pivotal $2.0 $1.9 Reg Acquisition Reg
Slide 19: Accomplishments During Susan's Tenure
Accomplishments During Susan’s Tenure… Safety Metrics Total Shareholder Return Market Capitalization (As of 12/31/2019) (in billions) OSHA Injuries Serious Injuries $22.2 $25.1 Three Six 63% 72% One Year Year Year $8.6 Reduction Reduction American 3.03 Water 37.8% 80.1% 230.8% May 2019 February 2014
Slide 20: Q&A Session
SE American WATER Q&A Session
Slide 21: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Ralph Jedlicka Vice President, Investor Relations Director, Investor Relations edward.vallejo@amwater.com ralph.jedlicka@amwater.com Abbey Barksdale Manager, ESG abbey.barksdale@amwater.com We keep life flowing® 21
Slide 22: Appendix
x AMERICAN WATER Appendix
Slide 23: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation, including, without limitation, with respect to: earnings per share guidance; dividend growth guidance; the outcome of pending or future acquisition activity; the amount and allocation of future capital investments and expenditures;
Slide 24: 2019 Fourth Quarter Revenue Breakdown
2019 Fourth ($ in millions) Quarter Revenue Breakdown 12 8 $902 39 (5) (2) $850 Regulated $54m Fourth Regulated Acquisitions Demand* Regulatory Market- Fourth Quarter Rate & Organic Liability Based & Quarter 2018 Actual Recovery Growth (TCJA) Other 2019 Actual * Includes $3m impact of weather 24
Slide 25: 2019 Fourth Quarter O&M Expense Breakdown
2019 Fourth ($ in millions) Quarter O&M Expense Breakdown 14 $412 6 3 $394 3 (8) Regulated $4m Fourth Production Employee- Operating Other O&M Market- Fourth Quarter costs related Supplies & Expenses Based & Quarter 2018 Actual costs Services Other 2019 Actual 25
Slide 26: 2019 Revenue Breakdown
2019 Revenue ($ in millions) Breakdown 20 60 $3,610 132 (23) (2) (17) $3,440 Regulated $110m 2018 Actual Regulated Acquisitions Demand* Other Regulatory Market- 2019 Actual Rate & Organic Revenues, net Liability Based & Recovery Growth (TCJA) Other *Includes $10m impact of unusually wet weather 26
Slide 27: 2019 O&M Expense Breakdown
2019 O&M ($ in millions) Expense Breakdown 42 $1,544 10 11 $1,479 4 (2) Regulated $23m 2018 Actual Production Employee- Operating Other O&M Market- 2019 Actual costs related Supplies & Expenses Based & costs Services Other 27
Slide 28: Rate Base Calculation
Rate Base ($ in millions) Calculation* $13.7 Estimated Rate Base* $12.5 As of 12/31/2019 $11.7 Net Utility Plant $18.6 Less $10.7 Advances for Construction $0.2 $10.0 CIAC – Contributions in Aid of Construction $1.4 Net Deferred income taxes*** $3.2 $4.8 Total Estimated Rate Base $13.7 As of As of A
Slide 29: Rates Effective Since…
Rates Effective Since… January 1, 2019 January 1, 2020 Annualized Revenue Annualized Revenue Rate Cases & Step Increases Date Effective Infrastructure Charges Date Effective Increases Effective in 2019 Increases Effective in 2020 West Virginia (DSIC) 1/1/2020 $3 Maryland 2/5/2019 $1(a) Pennsylvania
Slide 30: Rate Filings Awaiting Final Order
Rate Filings Awaiting Final Order Requested Revenue ROE Rate Cases Filed Company Docket/Case Number Date Filed Rate Base Increase Requested Virginia Case No. PUR-2018-00175 11/2/2018 $5(a) 10.8% $196 California Case No. A. 19-07-004 7/1/2019 26(b) 689 California (Step Increase) Case No. A. 16-07-002
Slide 31: Regulatory Information
Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,061,192 $443,654 $1,249,293(b) Authorized ROE 9.20%(a) 9.79% 9.80% 9.70%(e) 10.00%(e) Authorized Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 52.80%(d) Effective Date of Rate Case 1/1/2018(a)
Slide 32: Closed Acquisitions
Closed Acquisitions* As of December 31, 2019 Water Customer Wastewater Customer State Number of Systems Total Customer Connections Connections Connections California 1 500 - 500 Illinois** 4 500 29,700 30,200 Indiana 2 6,200 - 6,200 Kentucky 2 400 200 600 Missouri 5 - 200 200 New Jersey 1 - 1,800 1,
Slide 33: Acquisitions Under Agreement as of February 19, 2020
Acquisitions* Under Agreement as of February 19, 2020 Number of Water Customer Wastewater Customer Total Customer State Systems Connections Connections Connections California 5 7,700 - 7,700 Hawaii 1 - 200 200 Iowa 1 100 - 100 Illinois 11 5,400 18,800 24,200 Indiana 1 - 500 500 Missouri 2 - 100 100
Slide 34: American Water's Historical Adjustments to GAAP
American Water’s Historical Adjustments to GAAP Recurring transactions typically included in our annual guidance, Five Year History of Adjustments, where material, to GAAP some of which can result in annual variability: results for reporting purposes: * Acquisition related expenses * Gain/Loss on sa
Slide 35: Reconciliation Table: Consolidated Adjusted Earnings Per Share
Reconciliation Table: Consolidated Adjusted Earnings Per Share* For the Three Months For the Twelve Months For the Three Months For the Nine Months Ended December 31, Ended December 31, Ended September 30, Ended September 30, Consolidated Adjusted EPS Consolidated Adjusted EPS 2019 2018 2019 vs. 201
Slide 36: Reconciliation Table: Adjusted Earnings Per Share by Segment
Reconciliation Table: Adjusted Earnings Per Share by Segment* For the Three Months For the Twelve Months Ended December 31, Ended December 31, Regulated Businesses Adjusted EPS 2019 2018 2019 vs. 2018 Percentage 2019 2018 2019 vs. 2018 Percentage Diluted earnings per share (GAAP): Net income attribu
Slide 37: Reconciliation Table: Adjusted Return on Equity
Reconciliation Table: Adjusted Return on Equity LTM LTM December 31, 2018 December 31, 2019 Net Income $567 $621 Adjustments: Freedom Industries Insurance Settlement (20) 0 Freedom Industries liability reduction - (4) Keystone Sale - 44 Keystone Impairment 54 0 Contract Services Gain on Sale (14) 0
Slide 38: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY FY (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 2019 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,544 Less: Operations and ma
American Water Works Company — FY2019 Earnings Presentation on 6ix