Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Q3 2023 Earnings Presentation
36 slides from Southwest Gas's earnings presentation, Nov 8, 2023
Slide 1: Earnings Conference Call Third Quarter 2023
Earnings Conference Call Third Quarter 2023 November 8, 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 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 PRESIDENT AND CEO ROB STEFANI CFO JUSTIN BROWN PRESIDENT PAUL DAILY PRESIDENT AND CEO SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION CENTURI GROUP, INC. PRESENTATION AGENDA Strategic Update Financial Update Business Update Guidance a
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 • Delivering safe, reliable, sustainable and affordable energy solutions across our footprint Committed to Delivering Value for • Significant population growth and strong demand across service te
Slide 6: Centuri Separation Update
Centuri Separation Update • Confidentially submitted draft Registration Statement on Form S-1 for a potential initial public offering (“IPO”) • Announced actions to help preserve Company’s ability to effectuate a tax-free separation of Centuri as additional separation alternatives are considered • C
Slide 7: Executing SWX's 2023 Strategic Priorities
Executing SWX’s 2023 Strategic Priorities MW Sale Closed Complete ✓ 1Q 2023 RAS/RES Ratings Analyses Complete ✓ 1Q 2023 2023 Financing Plan SWX Equity (~$250 million) and SWG Bond (~$300 million) ✓ 1Q 2023 Complete SWX Term Loan (~$550 million) ✓ 2Q 2023 2023 Utility and Regulatory Strategy Arizona
Slide 8: Delivering Strong Results and Advancing Strategy
Delivering Strong Results and Advancing Strategy ~$82 million (~38%) year-over-year increase in LTM third quarter ~$19 million year-over-year increase in third quarter earnings adjusted EBITDA – LTM adjusted EBITDA of ~$299 million1 ~$83 million storm restoration services revenue earned year to More
Slide 9: 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 Initiative Development and Prioritization to of Potential Opportunities Establish
Slide 10: Financial Update
Financial Update
Slide 11: 3Q 2023 SWX Results
3Q 2023 SWX Results Financial Highlights GAAP SWX 3Q 2023 EPS Results1 Adj. SWX 3Q 2023 EPS Results1 • Consolidated third quarter adjusted net income of $7.5 million resulting in adjusted earnings per share of $0.10 • SWG recorded its lowest seasonal 0.18 0.04 0.25 0.10 third quarter net loss on rec
Slide 12: 3Q 2023 Southwest Net Income (Loss)
3Q 2023 Southwest Net Income (Loss) Year-over-year net income (loss) drivers include: (parentheses indicate unfavorable net income drivers) NATURAL GAS DISTRIBUTION SEGMENT favorable impact unfavorable impact Operating Margin1 GAAP Net Income (Loss) ($ in millions) • $14 million – Combined increase
Slide 13: 3Q 2023 Centuri GAAP Net Income
3Q 2023 Centuri GAAP Net Income Year-over-year drivers include: (parentheses indicate unfavorable net income drivers) UTILITY INFRASTRUCTURE SERVICES SEGMENT favorable impact unfavorable impact Revenues • ~$16 million – Total increase • $45 million – Increased offshore wind GAAP Net Income ($ in mil
Slide 14: 2023 Financing Plan Complete
2023 Financing Plan Complete SWX Total Sources SWX Total Uses SWG Total Sources SWG Total Uses $1,875 million $1,875 million $830 million $830 million ~$5501 million $5301 million $530 million $830 million Term Loan Issuance Equity Contribution to SWG Equity Contribution Term Loans and April 17 Apri
Slide 15: Balance Sheet Strength
Balance Sheet Strength SWX and SWG are committed to maintaining an investment grade profile Net Debt1 ($ in billions) Credit Ratings and Outlook Total PGA2 Net Debt Moody’s Standard and Poor’s Fitch Cash Net Debt less Debt Balance PGA Ratings Outlook Ratings Outlook Ratings Outlook Rating $0.6 $0.0
Slide 16: Business Update
Business Update
Slide 17: 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 • Strong YTD 2023 increase in First-Time Meter Sets: $2B Capital Investment to Support Growth ~30k First-Time Meter S
Slide 18: Southwest Regulatory Update
Southwest Regulatory Update Rate Case Activity Nevada Rate Case Filing Summary In September of 2023, SWG filed a rate case requesting a revenue increase of approximately $70 million with rates anticipated to become effective April 2024 Anticipated Timing of Future Rate Case Filings Target Equity Rat
Slide 19: Centuri: Strategic Utility Infrastructure Services Leader
Centuri: Strategic Utility Infrastructure Services Leader Service Territory High-Quality Utility Customer Base Gas Electric Combination GAS GROUP POWER GROUP CANADA GROUP November 8, 2023 | 19
Slide 20: Centuri: Proven Performance Track Record
Centuri: Proven Performance Track Record Centuri LTM Adjusted EBITDA1 LTM Revenue LTM Business Mix by Service Type ($ in millions) ($ in millions) Revenues $299 $285 18% $256 52% Gas $228 30% $217 $3,006 $2,622 Electric Gross Profit Other 8% LTM 3Q 2022 LTM 4Q 2022 LTM 1Q 2023 LTM 2Q 2023 LTM 3Q 202
Slide 21: Guidance and Outlook
Guidance and Outlook
Slide 22: Southwest and Centuri Guidance
Southwest and Centuri Guidance 2023 CapEx: $720 - $740 million* 2023 Net Income1: 2023 Revenue: $215 - $225 million* $2.8 - $3.0 billion 2023 Adjusted EBITDA3 3-year Rate Base CAGR2: Margin: 5% - 7% 9.5% - 11.0% 3-year Total Capex2: $2.0 billion Notes: * Indicates guidance ranges updated in the thir
Slide 23: Positioned to Unlock Significant Stockholder Value
Positioned to Unlock Significant Stockholder Value Enhancing SWX credit profile Positive regulatory developments and strong Transitioning into a through the sale of organic rate base growth standalone world-class MountainWest and utility infrastructure strengthening capital and Optimizing the utilit
Slide 24: Contact Information
Contact Information Investors & Analysts Justin S. Forsberg Vice President of Investor Relations (702) 364-3135 justin.forsberg@swgas.com Media Sean Corbett Manager, Corporate Communications (702) 876-7219 sean.corbett@swgas.com November 8, 2023 | 24
Slide 25: Appendix
Appendix
Slide 26: 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 $2.48 • Southwest
Slide 27: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Balance and Recovery Mechanism Summary Jun. 2023 Sept. 2023 Gas Cost Rate State Receivable Balance Receivable Balance Carrying Cost Rate Adjustment ($ in millions) ($ in millions) Frequency Estimated Cash Recovery of Gas Cost4 ($ in millions)
Slide 28: Southwest Regulatory Update
Southwest Regulatory Update Other Regulatory Activity Arizona PGA Filing Great Basin 2024 – Expansion Project Received ACC approval to increase the Gas Cost Balancing Application filed with FERC in April 2023 seeking Account rate (for up to two years) to facilitate timely an order to abandon and rep
Slide 29: 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 30: Proven Performance Track Record
Proven Performance Track Record ($ in millions) Revenues Adjusted EBITDA1 CAGR2 CAGR2 17.0% 14.8% $3,006 $299 $2,760 $2,159 $228 $213 $214 $1,948 $1,751 $176 $1,522 $142 $1,246 $115 $1,009 $1,139 $97 $110 $100 $651 $740 $78 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LTM 3Q 2013 2014 2015 2016
Slide 31: Top 20 Customers
Top 20 Customers 1 1 1 Last Twelve Months Ended September 30, 2023 November 8, 2023 | 31
Slide 32: 3Q 2023 Financial Results
3Q 2023 Financial Results CONSOLIDATED Three Months Ended Nine Months Ended Twelve Months Ended Results of Consolidated Operations September 30, September 30, September 30, (in millions, except per share items) 2023 2022 2023 2022 2023 2022 Natural gas distribution income (loss) $ (3.3) $ (22.2) $ 1
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, September 30, (in thousands of dollars) 2023 2022 2023 2022 2023 2022 Regulated operations revenues $ 394,603 $ 303,9
Slide 34: Summary of Operating Results
Summary of Operating Results UTILITY INFRASTRUCTURE SERVICES SEGMENT Three Months Ended Nine Months Ended Twelve Months Ended Results of Utility Infrastructure Services September 30, September 30, September 30, (Thousands of dollars) 2023 2022 2023 2022 2023 2022 Revenues $ 774,889 $ 758,466 $ 2,233
Slide 35: Non-GAAP Measures
Non-GAAP Measures Three months ended Nine months ended Twelve months ended ($ in thousands, except per share amounts) September 30, September 30, September 30, SWX Adjusted Net Income and Adjusted EPS 2023 2022 2023 2022 2023 2022 Adjusted SWX income (loss) and adjusted EPS for the three, nine, and
Slide 36: Non-GAAP Measures (continued)
Non-GAAP Measures (continued) ($ in thousands, except per share amounts) Three months ended Nine months ended Twelve months ended September 30, September 30, September 30, Adjusted Centuri income and adjusted EPS for the three, nine, and twelve Centuri Adjusted Net Income and Adjusted EPS 2023 2022
Southwest Gas Holdings — Q3 2023 Earnings Presentation on 6ix