Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Q3 2024 Earnings Presentation
35 slides from Southwest Gas's earnings presentation, Nov 6, 2024
Slide 1: Earnings Conference Call Third Quarter 2024 Results
Earnings Conference Call Third Quarter 2024 Results November 6, 2024
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 current and former consolidated subsidiaries, whi
Slide 3: 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 (loss) per share, (ii) Southwest Gas adjusted net income
Slide 4: Speakers and Agenda
SPEAKERS Speakers and Agenda KAREN HALLER ROB STEFANI JUSTIN BROWN PRESIDENT AND CEO CFO PRESIDENT SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION PRESENTATION AGENDA Strategic and Business Update Regulatory and Economic Update Financial Update Guidance and Outlook November 6
Slide 5: SWX: Becoming a Premier, Fully Regulated Natural Gas Utility
SWX: Becoming a Premier, Fully Regulated Natural Gas Utility Positioned for Continued Growth and Success » Safely delivering reliable, sustainable and affordable energy solutions to growing, high-demand service territories » Clear strategic focus on optimizing utility performance Committed to Delive
Slide 6: Advancing SWX's 2024 Strategic Priorities
Advancing SWX’s 2024 Strategic Priorities Centuri Separation Public Filing of S-1 Complete ✓ 2Q 2024 Centuri Deleveraging/Refinancing Complete ✓ 2Q 2024 Initial Public Offering (“IPO”) Execution Complete ✓ 2Q 2024 Hire Centuri CEO Complete ✓ 4Q 2024 Advance Separation Pending 2024 Financing Plan SWX
Slide 7: Delivering Strong Results
Delivering Strong Results GAAP Net income of ~$0.6 million, $3.8 million year-over-year increase in 3Q 2024 net income Southwest Gas no longer expects to issue any equity in 2024, and Approximately 41,000 new meter sets added during the last 12 months continues to expect limited capital markets need
Slide 8: Regulatory and Economic Update
Regulatory and Economic Update
Slide 9: Current Rate Case Activity
Current Rate Case Activity Southwest remains committed to a purposeful regulatory strategy intended to limit regulatory lag Nevada Arizona California Requested Requested Requested Requested Docket # 23-09012 Docket # G-01551A-23-0341 Docket # RP24-514-000 Docket # A2409001 Filing Date 9/11/2023 Fili
Slide 10: Regulatory Update - Arizona
Regulatory Update - Arizona Rate Case Activity Arizona Rate Case Filing Summary In February 2024, Southwest filed a rate case1 requesting a revenue increase of approximately $126 million with rates anticipated to become effective April 2025 Requested1 Staff Testimony1 Proposed System Improvement Mec
Slide 11: Regulatory Update - California
Regulatory Update - California Rate Case Activity California Rate Case Filing Summary In September 2024, Southwest filed a rate case1 requesting a revenue increase of approximately $50 million with rates anticipated to become effective January 2026 Target Equity Ratio 50% Requested ~$285 million Ret
Slide 12: Economic Impact of Semiconductor Manufacturing and Data Centers
Economic Impact of Semiconductor Manufacturing and Data Centers » Arizona and Nevada are high-potential areas for data center growth » How might Southwest stand to benefit from additional data center economic activity? We believe that in Arizona and Nevada » Regulatory framework exists to support th
Slide 13: Financial Update
Financial Update
Slide 14: 3Q 2024 SWX Earnings Per Share Results
3Q 2024 SWX Earnings Per Share Results GAAP SWX 3Q 2024 Diluted EPS Results Adj. SWX 3Q 2024 Diluted EPS Results1 Financial Highlights • Consolidated third quarter 2024 adjusted net income of $6.8 million resulting in adjusted earnings per share of $0.091 • Southwest margin improved as a $0.17 resul
Slide 15: 3Q 2024 SWX Adjusted Diluted Earnings Per Share Walk
3Q 2024 SWX Adjusted Diluted Earnings Per Share Walk Adjusted Earnings Per Share1 Financial Highlights Favorable Unfavorable • Southwest benefited from higher margin from rate relief, customer growth, and $0.03 higher COLI results; which was partially $0.17 offset by increases in O&M, D&A, and inter
Slide 16: 3Q 2024 Southwest GAAP Net Income
Year-over-year net income (loss) drivers include: (parentheses indicate unfavorable net income drivers) 3Q 2024 Southwest GAAP Net Income favorable impact unfavorable impact NATURAL GAS DISTRIBUTION SEGMENT Operating Margin1 • $16 million – Combined rate relief • $2 million – Customer growth • $3 mi
Slide 17: 2024 Financing Plan
2024 Financing Plan Assumptions Sources & Uses Sources & Uses » Centuri IPO completed 2Q 2024; ($ in billions)1 ($ in billions)1 consolidated throughout 2024 » Significant cash from collection of PGA at $1.5 $1.5 CTRI Debt Southwest CTRI IPO $0.3 Paydown $1.0 $1.0 » Cash flow from operations anticip
Slide 18: Balance Sheet Strength
Balance Sheet Strength SWX and SWG are committed to maintaining an investment grade profile Net Debt1 ($ in billions) Credit Ratings and Outlook3 Total PGA2 Net Debt Moody’s Standard and Poor’s Fitch Cash Net Debt less Debt Balance PGA Ratings Outlook Ratings Outlook Ratings Outlook $0.7 $0.0 $0.7 n
Slide 19: Guidance and Outlook
Guidance and Outlook SOUTHWEST GAS
Slide 20: Southwest 2024 and Forward-Looking Financial Guidance
Southwest 2024 and Forward-Looking Financial Guidance 2024 Guidance Current Net Income1 $233 - $243 million CapEx ~$830 million Southwest expects 2024 full-year utility net income to Forward-Looking Guidance finish within the top half of 2024 – 2026 base yr 2024 the guidance range Current Net Income
Slide 21: Positioned to Unlock Significant Stockholder Value
Positioned to Unlock Significant Stockholder Value Strengthening strategic flexibility through the Positive regulatory developments and strong separation of Centuri organic rate base growth Optimizing the utility to deliver value through Maintain balance sheet flexibility and financial discipline, o
Slide 22: Contact Information
Contact Information Investors & Analysts Justin S. Forsberg Vice President of Investor Relations & Treasurer (702) 364-3135 justin.forsberg@swgas.com Media Sean Corbett Manager, Corporate Communications (702) 364-3310 corpcomms@swgas.com November 6, 2024 | 22
Slide 23: Appendix
Appendix
Slide 24: Maintaining a Competitive Dividend
Maintaining a Competitive Dividend Upon completion of the separation 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 Holdings is committed to paying a competitive dividend $2.48 $2.48 $2.48 • Sout
Slide 25: Utility Optimization Progress
Utility Optimization Progress In 2023 Southwest boosted its culture of continuous improvement and optimization by identifying opportunities to generate long-term benefits for all stakeholders Accelerating our Pursuit of Excellence: Striving to be a leader in safety, quality, customer service, operat
Slide 26: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Receivable Balance and Recovery Mechanism Summary June 2024 Sept. 2024 Gas Cost Rate Receivable (Payable) Receivable (Payable) State Carrying Cost Rate Adjustment Balance Balance Frequency ($ in millions) ($ in millions) AZ $31.5 $(17.4) 1-Ye
Slide 27: Southwest Net Income Drivers and Assumptions
Southwest Net Income Drivers and Assumptions Drivers 2024 2025 2026 Nevada rates effective April 2024 Arizona rates effective California rates Rate Relief GBGTC rates effective April 2025 effective January 2026 September 2024 (subject to refund) Assumes rate case filings and outcomes in li
Slide 28: Regulatory Update - Nevada
Regulatory Update - Nevada Rate Case Activity Nevada Rate Case Outcome Summary Dollars in millions Proposed Revenue Increase1 $73.9 ~98% of request after Depreciation Expense ($6.8) depreciation adjustment and Authorized $59 million Cost of Service Adjustment ($1.6) before adjustments Stipulated Rev
Slide 29: Regulatory Update – GBGTC
Regulatory Update – GBGTC Rate Case Activity GBGTC Filing Summary Filed GBGTC rate case on March 6, 2024 requesting a revenue increase of approximately $16 million. Motion rates go into effect September 6, 2024, subject to refund. Target Equity Ratio 56% Return on Equity 13.05% Rate Base $206 millio
Slide 30: Strong Demand Dynamics Supporting Value Creation
Strong Demand Dynamics Supporting Value Creation Strong Economic Growth Projected Across Service Areas • From 2024 to 2029, projected population growth of 3.52% in Arizona and 2.61% in Nevada, compared to the 2.40% average growth in the US1 $2.4B 6.5 – 7.5% Capital Investment Rate Base Growth • Cont
Slide 31: Southwest Regulatory Update
Southwest Regulatory Update Other Regulatory Activity Nevada Service Territory Expansion Great Basin 2023 Mainline Replacement Application Project In response to customer demand, the Company filed FERC issued an order in February 2023 granting a an application with the Public Utilities Commission of
Slide 32: 3Q 2024 Financial Results
3Q 2024 Financial Results CONSOLIDATED Three Months Ended Nine Months Ended Twelve Months En Results of Consolidated Operations September 30, September 30, (in millions, except per share items) 2024 2023 2024 2023 Natural gas distribution income (loss) $ 0.6 $ (3.3) $ 164.0 $ 150.6 Utility infrastru
Slide 33: Summary of Operating Results
Summary of Operating Results NATURAL GAS DISTRIBUTION SEGMENT Three Months Ended Nine Months Ended Twelve Months Ended Results of Natural Gas Distribution September 30, September 30, (in thousands of dollars) 2024 2023 2024 2023 Regulated operations revenues $ 359,131 $ 394,603 $ 1,922,157 $ 1,797,3
Slide 34: Non-GAAP Measures
Non-GAAP Measures ($ in thousands, except per share amounts) Three months ended Nine months ended September 30, September 30, Adjusted SWX income and adjusted EPS for the three and nine months ended SWX Adjusted Net Income and Adjusted EPS 2024 2023 2024 2023 September 30, 2024, adjusts for accounts
Slide 35: Non-GAAP Measures
Non-GAAP Measures ($ in thousands, except per share amounts) Three months ended Nine months ended September 30, September 30, There were no adjustments at MW for the three and nine months ended MW Adjusted Net Income and Adjusted EPS 2024 2023 2024 2023 September 30, 2024 or the three months ended S
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