Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — FY2023 Earnings Presentation
39 slides from Southwest Gas's earnings presentation, Feb 28, 2024
Slide 1: Earnings Conference Call Full Year 2023 Results
Earnings Conference Call Full Year 2023 Results February 28, 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 PRESIDENT AND CEO ROB STEFANI CFO JUSTIN BROWN PRESIDENT Bill Fehrman PRESIDENT AND CEO SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS SOUTHWEST GAS CORPORATION CENTURI GROUP, INC. PRESENTATION AGENDA Strategic Update Financial Update Business Update Guidance
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 Committed to Delivering Value for » Significant population growth and strong demand across service SWX Stockholders terr
Slide 6: Focused on Executing Our Strategic Priorities
Focused on Executing Our Strategic Priorities SWX 2023 Strategic Priorities SWX 2024 Strategic Priorities MountainWest Sale 2024 Financing Plan Closed Complete ✓ 1Q 2023 SWX Equity issuance under ATM3 program (less than $100M) 1Q – 4Q 2024 SWX $550M Term Loan Extension 2Q/3Q 2024 RAS/RES 2024 Utilit
Slide 7: Delivering Strong Results and Advancing Strategy
Delivering Strong Results and Advancing Strategy GAAP Net income of ~$242 million, an ~$88 million (57%) year-over- ~$55 million (24%) year-over-year increase in 2023 adjusted year increase in 2023 earnings; adjusted net income of $249 million EBITDA – adjusted EBITDA of ~$283 million1 $86 million s
Slide 8: 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 Value Driver Examples Anticipating Results Initiative Playbook » Near-term Initiatives: outside » Increase O
Slide 9: Financial Update
Financial Update
Slide 10: FY 2023 SWX Results
FY 2023 SWX Results GAAP SWX FY 2023 EPS Results Adj. SWX FY 2023 EPS Results Financial Highlights $2.13 $3.36 • Consolidated full year 2023 adjusted $3.00 0.18 0.28 0.31 net income of $238.4 million resulting 1.22 in adjusted earnings per share of 0.03 0.05 $3.36 3.41 3.50 • Southwest recorded its
Slide 11: FY 2023 Southwest GAAP Net Income
Year-over-year net income (loss) drivers include: (parentheses indicate unfavorable net income drivers) FY 2023 Southwest GAAP Net Income favorable impact unfavorable impact NATURAL GAS DISTRIBUTION SEGMENT Operating Margin1 • $56 million – Combined rate relief stemming from investment • $14 million
Slide 12: FY 2023 Centuri GAAP Net Income
FY 2023 Centuri GAAP Net Income Year-over-year net income (loss) drivers include: (parentheses indicate unfavorable net income drivers) UTILITY INFRASTRUCTURE SERVICES SEGMENT favorable impact unfavorable impact Revenues GAAP Net Income ($ in millions) • ~$139 million – Total increase • $212 million
Slide 13: 2024 Financing Plan
2024 Financing Plan Highlights Sources & Uses Sources & Uses ($ in billions)1 ($ in billions)1 » Centuri included for full year 2024 $1.3 $1.3 Short term $0.1 Working » Expect continued significant cash from borrowings $0.1 Capital Needs $0.1 collection of PGA Equity $0.1 Acquisition of $1.1 $1.1 is
Slide 14: Balance Sheet Strength
Balance Sheet Strength SWX and SWG are committed to maintaining an investment grade profile Net Debt1 ($ 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 Rating $0.6 $0.0
Slide 15: Business Update
Business Update
Slide 16: 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 Nevada1, compared to the 2.40% average growth in the US $2.4B • Strong 2023 increase in First-Time Meter Sets: Capi
Slide 17: Regulatory Update - Nevada
Regulatory Update - Nevada Rate Case Activity Nevada Rate Case Filing Summary Southwest filed a rate case requesting a revenue increase of approximately $74 million with rates anticipated to become effective April 2024 Settlement A stipulation was reached with Regulatory Operations Staff of the Publ
Slide 18: Regulatory Update - Arizona
Regulatory Update - Arizona Rate Case Activity Arizona Rate Case Filing Summary In February 2024, Southwest filed a rate case requesting a revenue increase of approximately $126 million with rates anticipated to become effective April 2025 Proposed System Improvement Benefit (SIB) Mechanism Encompas
Slide 19: Regulatory Update – GBGTC and California
Regulatory Update – GBGTC and California Rate Case Activity Expected GBGTC Filing Expect a GBGTC rate case filing in the first week of March requesting a revenue increase of approximately $16 million with rates anticipated to become effective September 1, 2024, subject to refund. Target Equity Ratio
Slide 20: Centuri Strategic Framework and 2024 Objectives
Safe Work » Focus on enhancing and improving Centuri’s world-class Environment safety performance Targeted » Engagement with utility leaders on business development Revenue » Enhance coordinated storm response offering Growth » Regular interaction with developers Centuri Strategic Focus on » Direct
Slide 21: Centuri: Strategic Utility Infrastructure Services Leader
Centuri: Strategic Utility Infrastructure Services Leader High-Quality Utility Customer Base Service Territory Gas Electric Combination GAS GROUP POWER GROUP CANADA GROUP February 28, 2024 | 21
Slide 22: Centuri: Proven Performance Track Record
Centuri: Proven Performance Track Record Centuri Full-Year Adjusted EBITDA1 Full-Year Revenue Full-Year Business Mix by Service Type ($ in millions) ($ in millions) Revenues $283 2% 45% 53% Gas $228 $214 Electric $2,899 Gross Profit $2,760 Other 1% 2021 2022 2023 2022 2023 42% Twelve Months Ended De
Slide 23: Guidance and Outlook
Guidance and Outlook SOUTHWEST GAS
Slide 24: Southwest 2024 and Forward-Looking Financial Guidance
Southwest 2024 and Forward-Looking Financial Guidance Forward-Looking Net Income2 (CAGR) 10.0% - 12.0% 2024 Net Income1 $228 - $238 million Guidance 2024 – 2026 Rate Base2 (CAGR) 6.5% - 7.5% Guidance CapEx ~$830 million CapEx3 $2.4 billion base yr 2024 FY 2023 – 2024 Net Income Guidance Walk Custome
Slide 25: 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 strengthening capital organic rate base growth standalone world-class and strategic flexibility by utility infrastructure separation of Centuri Opt
Slide 26: 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 February 28, 2024 | 26
Slide 27: Appendix
Appendix
Slide 28: 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 $2.48 • Sout
Slide 29: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Receivable Balance and Recovery Mechanism Summary Sept. 2023 Dec. 2023 Gas Cost Rate State Receivable Balance Receivable Balance Carrying Cost Rate Adjustment Estimated Cash Recovery of Gas Cost4 ($ in millions) ($ in millions) Frequency ($ i
Slide 30: 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 Assumes rate case filings and outcomes in line with historical c
Slide 31: Southwest Regulatory Update
Southwest Regulatory Update Other Regulatory Activity Arizona PGA Filing Great Basin 2023 Mainline Replacement Project Received ACC approval to increase the Gas Cost Balancing Account rate (for up to two years) to FERC issued order in February 2023 granting a facilitate timely recovery of an approxi
Slide 32: 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 33: Proven Performance Track Record
Proven Performance Track Record ($ in millions) Revenues Adjusted EBITDA1 CAGR2 CAGR2 16.1% 13.8% $283 $2,899 $2,760 $228 $213 $214 $2,159 $176 $1,948 $1,751 $142 $1,522 $110 $115 $1,009 $1,139 $1,246 $97 $100 $78 $651 $740 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2
Slide 34: Top 20 Customers
Top 20 Customers 1 1 1 TTM Ended December 31, 2023 February 28, 2024 | 34
Slide 35: 4Q 2023 Financial Results
4Q 2023 Financial Results CONSOLIDATED Three Months Ended Twelve Months Ended Results of Consolidated Operations December 31, December 31, (in millions, except per share items) 2023 2022 2023 2022 Natural gas distribution income $ 91.7 $ 67.1 $ 242.2 $ 154.4 Utility infrastructure services income (l
Slide 36: Summary of Operating Results
Summary of Operating Results NATURAL GAS DISTRIBUTION SEGMENT Three Months Ended Twelve Months Ended Results of Natural Gas Distribution December 31, December 31, (in thousands of dollars) 2023 2022 2023 2022 Regulated operations revenues $ 702,216 $ 576,644 $ 2,499,564 $ 1,935,069 Net cost of gas s
Slide 37: Summary of Operating Results
Summary of Operating Results UTILITY INFRASTRUCTURE SERVICES SEGMENT Results of Utility Infrastructure Services Three Months Ended December 31, Twelve Months Ended December 31, (Thousands of dollars) 2023 2022 2023 2022 Revenues $ 665,315 $ 771,894 $ 2,899,276 $ 2,760,327 Cost of sales (1) 611,407 6
Slide 38: Non-GAAP Measures
Three months ended Twelve months ended December 31, December 31, SWX Adjusted Net Income and Adjusted EPS 2023 2022 2023 2022 SWX net income (loss) $ 72,869 $ (280,584) $ 150,889 $ (203,290) Non-GAAP Measures Goodwill impairment and loss on sale Nonrecurring stand-up cost associated with integrating
Slide 39: Non-GAAP Measures (continued)
Non-GAAP Measures (continued) ($ in thousands, except per share amounts) December 31, December 31, Centuri Adjusted Net Income and Adjusted EPS 2023 2022 2023 2022 Adjusted Centuri net income (loss) and adjusted EPS for the three and twelve months ended December 31, 2023 and December 31, 2022, adjus
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