American Water Works Company, Inc. · NYSE:AWK
American Water Works — Q2 2019 Earnings Presentation
38 slides from American Water Works's earnings presentation, 2019
Slide 1: 2019 Second Quarter Earnings Conference Call
2019 Second Quarter 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 Financial Performance and Growth
Strong Financial Performance and Growth Adjusted Earnings Growth Quarter Highlights • Exceptionally strong growth despite unusually wet weather $1.55* $1.42* • Closed on the acquisition of the City of Alton, $1.26** Illinois’ regional wastewater system $0.94 • Finalized two general rate cases: Kentu
Slide 6: Our Regulated Business Remains the Foundation of our Long-Term Growth Strategy
Our Regulated Business Remains the Foundation of our Long-Term Growth Strategy 2019-2023 Plan* 7-10% EPS CAGR Top Half of Range 2019 YTD 2019 First Half Regulated Acquisitions Market-Based Businesses • Closed 30,700 customer Market Based Homeowner Services connections, including • Continued strong B
Slide 7: Long-term Earnings Per Share Outlook
Long-term Earnings Per Share Outlook 2019 – 2023 7-10%(a) Grow EPS long-term CAGR at top half of 7-10%(a) Long-Term EPS CAGR Guidance(a) CAGR Top Half through 2023… … One of the fastest growing utilities in the nation Of Range Invest $8.0-8.6 billion in capital investment… … continued focus on cus
Slide 8: The Regulated Businesses
The Regulated Businesses Walter Lynch Chief Operating Officer We keep life flowing® 8
Slide 9: Regulated Business Impacted by Wet Weather
Regulated Business Impacted by Wet Weather 2018 Second Quarter 2019 Second Quarter Average Precipitation Average Precipitation (Period: 1895-2018) (Period: 1895-2019) Note: Picture of VP of Regulatory Services’ grandson Note: Weather impact represents $0.01 from second quarter 2018 and $0.04 from se
Slide 10: Regulatory Activity
Regulatory Activity 2019 Pending Kentucky Rate Case – Rates Effective June 28, 2019 Virginia Rate Case – Filed November 2, 2018 • Capital Investment of ≈$100 million • Capital Investment of ≈$98 million • ROE ≈9.70% with Equity of 48.90% • Requested ROE 10.8% • PSC approved implementation of a Quali
Slide 11: Regulated Acquisitions Update
Regulated Acquisitions Update Signed & Pending ≈ 38,200 Agreement Process Customer Connections 29 Signed/Pending Acquisitions Regulatory CA: 5 IA: 1 IN: 2 PA: 3 Approval HI: 1 IL: 10 MO: 5 WV: 2 2019 Closed* ≈ 30,700** Customer Connections Close & Customers Served 2019 Highlights at Initial Rates Al
Slide 12: Disciplined focus on Expenses
Disciplined focus on Expenses 46.1% Regulated O&M Efficiency Ratio* 41.0% 39.1% 36.6% 35.6% 35.4% 31.5%** 6/30/2019 2023 Target 2010 2012 2014 2016 2018 LTM Adjusted O&M Expenses* ($ in millions) 6/30/2019 2010 2012 2014 2016 2018 2010-2019 LTM LTM $966 $980 $943 $948 $1,015 $1,020 0.6% CAGR * Non-G
Slide 13: Resiliency Protection: Davenport, Iowa
Resiliency Protection: Davenport, Iowa “We are operating normally and continually monitoring the water quality. The plant is operating under normal conditions and well-protected by the flood wall.” – Randy Moore, President - Iowa American • Constructed flood wall at treatment plant after the 1993 fl
Slide 14: Financial Results & Long-Term Outlook
Financial Results & Long-Term Outlook Susan Hardwick Chief Financial Officer We keep life flowing® 14
Slide 15: Solid Quarter Results and Highlights
Solid Quarter Results and Highlights Contribution by Business Three Months Ended Three Months Ended Adjusted for Q2 Regulated Market Based 6/30/2019 $0.87 $0.12 6/30/2018 $0.86* $0.07 Change $0.01 $0.05 % Change 1.2% 71.4% Weather, Increased 2019 Parent & Other Total Adjusted EPS* Freedom Industries
Slide 16: Strong Second Quarter Results
Strong Second Quarter Results Adjusted EPS Increased 13.3% quarter over quarter, even with unusually wet weather 0.04 $0.94 0.10 0.03 (0.02) 0.01 0.01 0.03 (0.05) (0.01) $0.83 (0.03) Market-Based Regulated $0.01 Businesses $0.05 Parent $0.05 Jun Q2 Revenue Weather** O&M Depreciation/ HOS MSG/ Other
Slide 17: Strong First Half Results
Strong First Half Results Adjusted EPS Increased 9.2% year over year, even with unusually wet weather 0.17 0.03 $1.55 0.02 (0.05) 0.06 0.01 (0.01) $1.42 (0.03) (0.07) Market-Based Regulated $0.02 Businesses $0.09 Parent $0.02 Jun YTD Revenue Weather** O&M Depreciation/ HOS MSG Other Sale of a Legacy
Slide 18: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Requested Revenue Rate Filings Completed* Awaiting Final Order $39 $84 $45 $31 $8 $39 Rate Cases Infrastructure Total Rate Cases Infrastructure Total Charges Charges *Annualized Revenue Increase for Rates Effective Since January 1 18
Slide 19: Affirming EPS Guidance
Affirming EPS Guidance Grow EPS long-term CAGR at top half of 7-10%* 2019 – 2023 Long-Term EPS CAGR Guidance** through 2023… … One of the fastest growing utilities in the nation 2019 Adjusted EPS Guidance (GAAP EPS $3.55 - $3.65) 7-10%** CAGR Top Half 2018 Of Range 2019 EPS Guidance Adjusted EPS (
Slide 20: Creating Shareholder Value
Creating Shareholder Value (b) Dividend Growth Target dividend growth CAGR at High End (d) of 7-10% with a (c) $1.96 Payout Target of $1.62 $1.78 50-60% $1.47 $1.21 $1.33 2014 2015 2016 2017 2018 2019 E 2023 AWK Shareholder Value (a) Total Shareholder Return Adjusted Consolidated Return on Equity (P
Slide 21: Strategy Overview
Strategy Overview Susan Story President and Chief Executive Officer We keep life flowing® 21
Slide 22: What Do Investors Value?
What Do Investors Value? Traditional Utility Investors Conservative Wealth Builders High alpha, low beta – “Pensioner” retirees Steady EPS growth Long-lived, dependable company Strong fundamentals Stable, consistent dividend as income Understand company story, investment thesis Dividend
Slide 23: Q&A Session
¥ AMERICAN WATER Q&A Session
Slide 24: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Ralph Jedlicka Vice President, Investor Relations Director, Investor Relations edward.vallejo@amwater.com ralph.jedlicka@amwater.com Abbey Barksdale Manager, ESG abbey.barksdale@amwater.com We keep life flowing® 24
Slide 25: Appendix
x AMERICAN WATER Appendix
Slide 26: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation including, without limitation, with respect to earnings per share guidance, dividend growth guidance; the outcome of pending or future acquisition activity; the amount and allocation of future capital investments and expenditures; es
Slide 27: 2019 Second Quarter Revenue Breakdown
2019 Second Quarter Revenue Breakdown ($ in millions) 30 18 $882 $853 (13) (6) Regulated $11m Second Regulated 2019 Lower Demand Market- Second Quarter Rate Weather & Other Based & Quarter 2018 Actual Recovery Impact Other 2019 Actual 27
Slide 28: Rate Base Calculation
Rate Base Calculation* ($ in millions) $13.0 Estimated Rate Base* $12.5 As of $11.7 6/30/2019 Net Utility Plant $17.6 $10.7 Less $10.0 Advances for Construction $0.2 CIAC – Contributions in Aid of Construction $1.3 Net Deferred income taxes*** $3.1 $4.6 Total Estimated Rate Base $13.0 As of As of As
Slide 29: Rates Effective since January 1, 2019
Rates Effective since January 1, 2019 Annualized Revenue Rate Cases & Step Increases Date Effective Increases Effective in 2019 Maryland 2/5/2019 $1(a) West Virginia 2/25/2019 19(b) New York 4/1/2019 4(c) California 5/11/2019 4(d) Kentucky 6/28/2019 13 Indiana 7/1/2019 4(e) $45 Infrastructure Charge
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) 10.80% $196 California Case No. A. 19-07-xxx 7/1/2019 26(b) 689 $31 $885 Infrastructure Charges Filed Tennessee
Slide 31: Regulated Utilities: Rate Base & Authorized Return on Equity
Regulated Utilities: Rate Base & Authorized Return on Equity 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) Ef
Slide 32: 2019 Closed Acquisitions as of July 31st
2019 Closed Acquisitions* as of July 31st Number of Water Customer Wastewater Customer Total Customer State Systems Connections Connections Connections California 1 500 - 500 Illinois** 1 - 23,000 23,000 Indiana 1 2,900 - 2,900 Kentucky 2 400 200 600 Missouri 3 100 100 200 New Jersey 1 - 1,800 1,800
Slide 33: Pending Acquisitions as of July 31st
Pending Acquisitions* as of July 31st Number of Water Customer Wastewater Customer Total Customer State Systems Connections Connections Connections California 5 11,500 - 11,500 Hawaii 1 - 200 200 Iowa 1 100 - 100 Illinois 10 1,600 8,800 10,400 Indiana 2 3,300 500 3,800 Missouri 5 - 100 100 Pennsylva
Slide 34: Reconciliation Table: Consolidated Adjusted Earnings Per Share
Reconciliation Table: Consolidated Adjusted Earnings Per Share* For the Twelve Months Ended December 31, Consolidated Adjusted EPS 2018 2017 2018 vs. 2017 Percentage Diluted earnings per share (GAAP): Net income attributable to common shareholders $ 3.15 $ 2.38 $ 0.77 Adjustments: Contract Services
Slide 35: Reconciliation Table: Consolidated Adjusted Earnings Per Share
Reconciliation Table: Consolidated Adjusted Earnings Per Share* For the Three Months For the Six Months Ended June 30, Ended June 30, Consolidated Adjusted EPS 2019 2018 2019 vs. 2018 Percentage 2019 2018 2019 vs. 2018 Percentage Diluted earnings per share (GAAP): Net income attributable to common s
Slide 36: Reconciliation Table: Adjusted Earnings Per Share Guidance Range
Reconciliation Table: Adjusted Earnings Per Share Guidance Range* For the Three Months For the Six Months Ended June 30, Ended June 30, Regulated Businesses Adjusted EPS 2019 2018 2019 vs. 2018 Percentage 2019 2018 2019 vs. 2018 Percentage Diluted earnings per share (GAAP): Net income attributable t
Slide 37: Reconciliation Table: Adjusted Return on Equity
Reconciliation Table: Adjusted Return on Equity LTM LTM June 30, 2018 June 30, 2019 Net Income $470 $582 Adjustments: Freedom Industries activities (42) (4) Early Debt Extinguishment at Parent 6 - Keystone Impairment - 54 Contract Services Gain on Sale - (14) Tax Impact for items above 11 (11) Re-me
Slide 38: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY LTM (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 6/30/2019 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,520 Less: Operations
American Water Works Company — Q2 2019 Earnings Presentation on 6ix