Southwest Gas Holdings, Inc. · NYSE:SWX
Southwest Gas — Q1 2024 Earnings Presentation
32 slides from Southwest Gas's earnings presentation, May 8, 2024
Slide 1: Earnings Conference Call First Quarter 2024 Results
Earnings Conference Call First Quarter 2024 Results May 8, 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 PRESIDENT AND CEO CFO SOUTHWEST GAS HOLDINGS SOUTHWEST GAS HOLDINGS PRESENTATION AGENDA Strategic and Business Update Financial Update Guidance and Outlook
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: Executed Centuri IPO
Executed Centuri IPO Initial Public Offering (“IPO”) Details » On April 17, 2024 SWX priced an IPO of Centuri Holdings stock, selling approximately 19% of Centuri at a price of $21.00 per share » SWX retained ~81% interest in Centuri Holdings stock. Centuri’s market Centuri Holdings 1Q 2024 Investor
Slide 7: Advancing SWX's 2024 Strategic Priorities
Advancing SWX’s 2024 Strategic Priorities Centuri Separation CEO onboarding Complete ✓ 1Q 2024 Public Filing of S-1 Complete ✓ 2Q 2024 Centuri Deleveraging/Refinancing Complete ✓ 2Q 2024 IPO Execution Complete ✓ 2Q 2024 Complete Separation Pending 2024 Financing Plan SWX Equity issuance under ATM pr
Slide 8: 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 9: Delivering Strong Results and Advancing Strategy
Delivering Strong Results and Advancing Strategy GAAP Net income of ~$136 million, $1 million year-over-year Completed initial public offering with proceeds used to partially increase in 1Q 2024 net income de-lever Centuri Approximately 40,000 new meter sets added during the last 12 First quarter co
Slide 10: Financial Update
Financial Update
Slide 11: 1Q 2024 SWX Results
1Q 2024 SWX Results GAAP SWX 1Q 2024 EPS Results Adj. SWX 1Q 2024 EPS Results1 Financial Highlights • Consolidated first quarter 2024 adjusted net income of $98.5 million $1.77 resulting in adjusted earnings per $0.67 0.19 share of $1.37 $1.22 $1.37 • Southwest margin improved as a result of custome
Slide 12: 1Q 2024 SWX Adjusted Earnings Per Share Walk
1Q 2024 SWX Adjusted Earnings Per Share Walk Financial Highlights • Southwest benefited from higher Adjusted Earnings Per Share ($ in millions) margin which was partially offset by Favorable Unfavorable increased D&A and reductions in interest income $1.77 $0.02 • Centuri EPS lower due to lower stor
Slide 13: 1Q 2024 Southwest GAAP Net Income
Year-over-year net income (loss) drivers include: (parentheses indicate unfavorable net income drivers) 1Q 2024 Southwest GAAP Net Income favorable impact unfavorable impact NATURAL GAS DISTRIBUTION SEGMENT Operating Margin1 • $10 million – Combined rate relief stemming from plant investment • $5 mi
Slide 14: 2024 Financing Plan
2024 Financing Plan Assumptions Sources & Uses Sources & Uses ($ in billions)1 ($ in billions)1 » Centuri consolidated $1.6 $1.6 » Significant cash from collection of PGA at CTRI IPO CTRI Debt Southwest $1.1 $1.1 Net Proceeds $0.3 $0.3 Paydown Working » Cash flow from operations anticipated to Short
Slide 15: Balance Sheet Strength
Balance Sheet Strength SWX and SWG are committed to maintaining an investment grade profile Net Debt1 ($ in billions) Credit Ratings and 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 16: Guidance and Outlook
Guidance and Outlook SOUTHWEST GAS
Slide 17: Southwest 2024 and Forward-Looking Financial Guidance
Southwest 2024 and Forward-Looking Financial Guidance 2024 Guidance Affirmed Net Income1 $228 - $238 million Following the conclusion of CapEx ~$830 million the Nevada rate case and advancement of our disciplined business management approach across Forward-Looking Guidance Southwest, we are expectin
Slide 18: 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 19: 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 May 8, 2024 | 19
Slide 20: Appendix
Appendix
Slide 21: 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 $2.48 • Sout
Slide 22: Utility Optimization Progress
Utility Optimization Progress In 2023 Southwest boosted its culture of continuous improvement and optimization by identifying opportunities to generate long-term benefits for all stakeholders Value Driver Examples Anticipating Results Initiative Playbook » Near-term Initiatives: outside » Increase O
Slide 23: Summary of Gas Cost Balances and Recovery Mechanisms
Summary of Gas Cost Balances and Recovery Mechanisms PGA1 Receivable Balance and Recovery Mechanism Summary Dec. 2023 March 2024 Gas Cost Rate State Receivable Balance Receivable Balance Carrying Cost Rate Adjustment ($ in millions) ($ in millions) Frequency AZ $251.4 $135.9 1-Year Treasury Rate Mon
Slide 24: 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 25: 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 26: Regulatory Update – GBGTC and California
Regulatory Update – GBGTC and California Rate Case Activity GBGTC Filing Summary Filed GBGTC rate case on March 6, 2024 requesting a revenue increase of approximately $16 million with rates anticipated to become effective September 1, 2024, subject to refund. Target Equity Ratio 56% Return on Equity
Slide 27: 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 28: 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 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: 1Q 2024 Financial Results
1Q 2024 Financial Results CONSOLIDATED Three Months Ended Twelve Months Ended Results of Consolidated Operations March 31, (in millions, except per share items) 2024 2023 Natural gas distribution income $ 135.8 $ 134.7 Utility infrastructure services loss (36.2) (11.9) Pipeline and storage loss - (1
Slide 31: Summary of Operating Results
Summary of Operating Results NATURAL GAS DISTRIBUTION SEGMENT Three Months Ended Twelve Months Ended Results of Natural Gas Distribution March 31, (in thousands of dollars) 2024 2023 Regulated operations revenues $ 1,052,933 $ 914,879 Net cost of gas sold 629,997 501,169 Operating margin 422,936 413
Slide 32: Non-GAAP Measures
Three months ended March 31, SWX Adjusted Net Income and Adjusted EPS 2024 2023 Non-GAAP Measures SWX net income Goodwill impairment and loss on sale Nonrecurring stand-up cost associated with $ 87,737 - $ 45,911 72,688 ($ in thousands, except per share amounts) integrating MW - 2,856 Strategic revi
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