Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Q2 2023 Earnings Presentation
37 slides from Southwest Gas's earnings presentation, Aug 9, 2023
Slide 1: Earnings Conference Call Second Quarter 2023
Earnings Conference Call Second Quarter 2023 August 9, 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 per share, (ii) Southwest Gas adjusted net income, (iii)
Slide 4: Speakers and Agenda
SPEAKERS Speakers and Agenda KAREN HALLER ROB STEFANI JUSTIN BROWN PAUL DAILY THOMAS MORAN PRESIDENT AND CEO CFO PRESIDENT PRESIDENT AND CEO GENERAL COUNSEL/ SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION CENTURI GROUP, INC. CORPORATE SECRETARY SOUTHWEST GAS HOLDINGS PRESENT
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: 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) ✓ 1Q 2023 SWG Bond (~$300 million) Complete ✓ 1Q 2023 SWX Term Loan (~$550 million) ✓ 2Q 2023 Centuri Spin IRS Private Letter Ruling
Slide 7: Delivering Strong Results and Advancing Strategy
Delivering Strong Results and Advancing Strategy $65 million (~30%) year-over-year increase in LTM second $21.4 million year-over-year increase in second quarter net income quarter adjusted EBITDA – LTM adjusted EBITDA of $285 million1 $65 million storm restoration services revenue earned in the fir
Slide 8: 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 Evaluation and Prioritization of Initiatives to Execute of Potential Opportunities Key
Slide 9: 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 Estimated 2023 – 2025 ~20k First-Time Met
Slide 10: Financial Update
Financial Update
Slide 11: 2Q 2023 SWX Results
2Q 2023 SWX Results Financial Highlights GAAP SWX 2Q 2023 EPS Results1 Adj. SWX 2Q 2023 EPS Results1 • Consolidated second quarter adjusted $0.47 net income of ~$33.8 million resulting $0.40 in adjusted earnings per share of ~$0.47 $0.23 0.27 0.26 • SWG recorded its highest second quarter net income
Slide 12: 2Q 2023 Southwest Net Income (Loss)
2Q 2023 Southwest Net Income (Loss) Year-over-year net income drivers include: (parenthesis indicate unfavorable net income drivers) NATURAL GAS DISTRIBUTION SEGMENT favorable impact unfavorable impact Operating Margin1 • $16 million – Recovery/return of regulatory account balances GAAP Net Income (
Slide 13: 2Q 2023 Centuri Adjusted EBITDA and Net Income
2Q 2023 Centuri Adjusted EBITDA and Net Income Year-over-year drivers include: (parenthesis indicate unfavorable net income drivers) UTILITY INFRASTRUCTURE SERVICES SEGMENT favorable impact unfavorable impact Adjusted EBITDA Contribution1 ($ in millions) Revenues EBITDA Contribution $7.1 $91.4 $2.3
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 $0.0
Slide 16: Business Update
Business Update
Slide 17: Southwest Regulatory Update
Southwest Regulatory Update Rate Case Activity Anticipated Timing of Future Rate Case Filings 3Q 2023 1Q 2024 3Q 2024 1Q – 2Q 20251 Notes: 1 Great Basin must file by May 2025 (FERC Docket No. RP19-1291-005) August 9, 2023 | 17
Slide 18: Southwest Regulatory Update
Southwest Regulatory Update Other Regulatory Activity Arizona PGA Filing Great Basin 2024 – Expansion Project Received ACC approval to increase the Gas Cost Balancing Application filed with FERC in April 2023 seeking Account rate (for up to two years) to facilitate timely an order to abandon and rep
Slide 19: Legislative Activity - Nevada
Legislative Activity - Nevada Focus Executive Order 2023-07 • Supports an all-of-the-above approach to energy in the state Outlines the state’s energy priorities • Emphasizes the importance of affordability and reliability of energy for consumers and policy objectives for the next • Protects the use
Slide 20: Centuri: Strategic Utility Infrastructure Services Leader
Centuri: Strategic Utility Infrastructure Services Leader Service Territory High-Quality Utility Customer Base Gas Electric Combination GAS GROUP POWER GROUP CANADA GROUP August 9, 2023 | 20
Slide 21: Centuri: Proven Performance Track Record
Centuri: Proven Performance Track Record Centuri LTM Adjusted EBITDA1 LTM Revenue LTM Business Mix by Service Type ($ in millions) ($ in millions) Revenues Legacy Centuri Incremental Riggs Distler $285 $2,989 17% $256 $2,496 $742 $428 53% Gas 30% $228 $219 $217 Electric $2,068 $2,247 Gross Profit Ot
Slide 22: Centuri: Execution on 2023 Projects
Centuri: Execution on 2023 Projects Consistent Growth Clean Energy Projects Expansion Restoration Services Completed contracted work for South Fork Wind (components for 12 New Awards & Value-Enhanced Crews responded to restore power to positions) and delivered to customer for installation, marking t
Slide 23: Centuri: Strong Tailwinds Across Infrastructure End Markets
Centuri: Strong Tailwinds Across Infrastructure End Markets Support Long-Term Growth Electric Utility Distribution Gas Utility Distribution Aging Electric Infrastructure(1) Growing CapEx Spend(2) Aging Gas 5% 2% 9% 15% 13% 16% 21% 19% Distribution infrastructure age relative North American Distribut
Slide 24: Guidance and Outlook
Guidance and Outlook
Slide 25: Southwest and Centuri Guidance
Southwest and Centuri Guidance 2023 CapEx: 2023 Revenue: $700 - $720 million* $2.8 - $3.0 billion 2023 Net Income1: 2023 Adjusted EBITDA3 $205 - $215 million Margin: 9.5% - 11.0% 3-year Rate Base CAGR2: 5% - 7% 2023 – 2026 Adjusted EBITDA3 CAGR: 3-year Total Capex2: 9% - 11.0% $2.0 billion Notes: *
Slide 26: 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 27: Appendix
Appendix
Slide 28: Maintaining a Competitive Dividend
Maintaining a Competitive Dividend Upon completion of the spin 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 $2.48 • Southwest Gas Ho
Slide 29: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Balance and Recovery Mechanism Summary Mar. 2023 Jun. 2023 Gas Cost Rate State Receivable Balance Receivable Balance Carrying Cost Rate Adjustment ($ in millions) ($ in millions) Frequency Estimated Cash Recovery of Gas Cost4 ($ in millions)
Slide 30: Sustainable Energy Investments
Sustainable Energy Investments Renewable Natural Gas (RNG) Projects1 Fort Irwin Expansion Project California Hydrogen Demonstration Project Fort Irwin’s remote desert location provides an Filed for approval of a hydrogen-blending RNG projects opportunity to enhance energy reliability, resilience, de
Slide 31: Proven Performance Track Record
Proven Performance Track Record ($ in millions) Revenues Adjusted EBITDA1 CAGR2 CAGR2 17.4% 14.6% $285 $2,989 $2,760 $228 $213 $214 $2,159 $176 $1,948 $1,751 $142 $1,522 $1,246 $110 $115 $100 $1,009 $1,139 $78 $97 $651 $740 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LTM 2Q 2013 2014 2015 2016
Slide 32: Top 20 Customers
Top 20 Customers 1 1 1 Last Twelve Months Ended June 30, 2023 August 9, 2023 | 32
Slide 33: 2Q 2023 Financial Results
2Q 2023 Financial Results CONSOLIDATED Three months ended Six months ended Twelve months ended Results of Consolidated Operations June 30, June 30, June 30, (in millions, except per share items) 2023 2022 2023 2022 2023 2022 Natural gas distribution income (loss) $ 19.1 $ (2.3) $ 153.8 $ 109.5 $ 198
Slide 34: Summary of Operating Results
Summary of Operating Results NATURAL GAS DISTRIBUTION SEGMENT Three months ended Six months ended Twelve months ended Results of Natural Gas Distribution June 30, June 30, June 30, (in thousands of dollars) 2023 2022 2023 2022 2023 2022 Regulated operations revenues $ 487,866 $ 377,942 $ 1,402,745 $
Slide 35: Summary of Operating Results
Summary of Operating Results UTILITY INFRASTRUCTURE SERVICES SEGMENT Results of Utility Infrastructure Services Three Months Ended June 30, Twelve Months Ended June 30, (in thousandsofofdollars) (Thousands dollars) 2023 2022 2023 2022 Revenues $ 805,779 $ 706,090 $ 2,989,432 $ 2,496,028 Cost of sale
Slide 36: Non-GAAP Measures
Three m onths ended Tw elve m onths ended June 30, June 30, SWX Adjusted Net Incom e and Adjusted EPS 2023 2022 2023 2022 SWX net income (loss) $ 28,878 $ (6,575) $ (218,104) $ 147,970 Non-GAAP Measures Legal reserve Riggs Distler transaction costs Goodw ill impairment and loss on sale 397 - - - - -
Slide 37: Non-GAAP Measures (continued)
Non-GAAP Measures (continued) ($ in thousands, except per share amounts) Adjusted Centuri income and adjusted EPS for the three and twelve months Three m onths ended Tw elve m onths ended ended June 30, 2023, include strategic review costs, including the Centuri spin. June 30, June 30, Adjusted Cent
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