American Water Works Company, Inc. · NYSE:AWK
American Water Works — Q1 2020 Earnings Presentation
33 slides from American Water Works's earnings presentation, May 7, 2020
Slide 1: 2020 First Quarter Earnings Conference Call
2020 First Quarter Earnings Conference Call May 7, 2020
Slide 2: Ed Vallejo, Vice President, Investor Relations
Ed Vallejo Vice President, Investor Relations 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial resu
Slide 4: Walter Lynch, President and Chief Executive Officer
Walter Lynch President and Chief Executive Officer 4
Slide 5: American Water's COVID-19 Response
American Water’s COVID-19 Response Employees Customers • Suspended all work-related air and rail travel as of March 3 & • Suspended billing-related service shutoffs and restored suspended participation in sponsored events and public service to customers who were previously shut off for non- gatherin
Slide 6: Strong First Quarter Results
Strong First Quarter Results Regulated Investment • ≈$457 million total capex invested Adjusted earnings per share • Organic growth ≈3,300 customer connections • 34.5%** O&M efficiency ratio LTM • Deployed and developed technology to improve customer service $0.67* & reliability $0.61* Regulated Acq
Slide 7: In This Environment, The Execution of Our Strategy Continues
In This Environment, The Execution of Our Strategy Continues Long-term EPS growth expected in the 7-10%* target range Clear investment thesis provides confidence in EPS CAGR guidance through 2024 long-term strategy Decades of investment needed Market Based Businesses 1-2% Line of sight to $20 - $22
Slide 8: 2020 First Quarter Regulated Business Update
2020 First Quarter Regulated Business Update Regulatory Legislative Indiana • Establishes an appraisal process for non-municipal utilities to establish fair value • Rate Case filed April 29, 2020 • Rate Case filed December 16, 2019 • Authorizes recovery without full rate case for service • Capital I
Slide 9: Disciplined Focus on Expenses
Disciplined Focus on Expenses Regulated O&M Efficiency Ratio* 46.1% 2024 O&M Efficiency Target of 31.3%** 41.0% 39.1% Adjusted O&M Expenses from 36.6% 35.6% 35.5% 2010-LTM 2020 increased only 34.5% 0.7% CAGR Added ≈276,000*** customer connections since 2010 2010 2012 2014 2016 2018 LTM LTM 3/31/2019
Slide 10: Regulated Acquisitions Update
Regulated Acquisitions Update Agreement Process Under Agreement* ≈ 45,800** Customer Connections 26 Acquisitions CA: 5 IL: 9 PA: 6 Regulatory HI: 1 MO: 1 TN: 1 Approval to Close IA: 2 NJ: 1 * As of 5/6/2020; does not reflect the announced pending sale of NYAW. ** This includes two IL acquisitions, w
Slide 11: Susan Hardwick, Chief Financial Officer
Susan Hardwick Chief Financial Officer 11
Slide 12: Continued Execution of Company Strategy
Continued Execution of Company Strategy Adjusted EPS increased 9.8% quarter over quarter EPS Contribution by Business Three Months Ended Three Months Ended 03/31/2020 03/31/2019 Change Q1 Regulated Market Based $0.68 $0.12 $0.60 $0.11 $0.08 $0.01 2020 Parent Interest & Other Total GAAP EPS Freedom I
Slide 13: First Quarter Adjusted EPS Detail by Business
First Quarter Adjusted EPS Detail by Business* 0.14 0.03 0.01 0.67 (0.06) (0.02) 0.61 (0.03)* (0.01) Regulated $0.08 MBB Parent ($0.03) Mar QTD Revenue O&M Depreciation Pension and Other HOS Interest Other Mar QTD 2020 * 2019 (Adjusted) Benefits Expense (Adjusted)* * Adjusted EPS is a non-GAAP Measu
Slide 14: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Rate Filings Requested Revenue Completed* Awaiting Final Order $13 $224 $211 $35 $53 $18 Rate Cases Infrastructure Total Rate Cases Infrastructure Total (Step Increases) Charges Charges *Annualized Revenue Increase for Rates Effective S
Slide 15: Thoughts on Implications of COVID-19 Pandemic
Thoughts on Implications of COVID-19 Pandemic Regulated Businesses Operating Revenue Capital Investment Other Thoughts/Factors by Type and Customer Class as of 12/31/2019 ($ in millions) Wastewater Reg Investment Reg Acquisition Other Industrial water 4% 5% Other operating ** 1% $457 • Too early to
Slide 16: Strong Liquidity
Strong Liquidity Total Liquidity Available Liquidity Details ($ in millions) $2,802 Term Loan Facility: $250 • Entered into $750m 364-day term loan facility on March 20th • Response to recent COVID related volatility, liquidity, and pricing pressure in the Commercial Paper Market $1,839 Term Loan Av
Slide 17: 2020 EPS and Long-Term Guidance
2020 EPS and Long-Term Guidance 2020 Performance 2020 – 2024 Long-Term EPS CAGR Guidance** 2020 GAAP EPS $3.85 - $3.95 EPS Guidance (GAAP EPS Range $3.85 - $3.95)* 7-10%** $0.06 2019 CAGR Adjusted EPS (GAAP EPS $3.43)* $3.79- 2018 $3.89* Adjusted EPS (GAAP EPS $3.15)* $3.89 GAAP EPS $0.68 $0.01 $3.7
Slide 18: Delivering Value
Delivering Value AWK Shareholder Value Value Drivers Adjusted Consolidated Return on Equity* 10.6% Regulated Wt Avg authorized • Consistent Earnings Growth 10.0% ROE is 9.8% • Smooth Capital Deployment LTM March 31, 2019 LTM March 31, 2020 • Disciplined Approach to Acquisitions Dividend Growth** • S
Slide 19: Thanks To Our Employees
Thanks To Our Employees We want to give a shout out to-our employees who continue to keep the water flowing for | customers duri these unpreced times. THANKS! JK awenican WATER 19
Slide 20: Q&A Session
Q&A Session 20
Slide 21: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Vice President, Investor Relations edward.vallejo@amwater.com Ralph Jedlicka Director, Investor Relations ralph.jedlicka@amwater.com Abbey Barksdale Manager, ESG abbey.barksdale@amwater.com 21
Slide 22: Appendix
Appendix 22
Slide 23: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation, including, without limitation, with respect to: earnings per share guidance; dividend growth guidance; the timing and outcome of pending or future acquisition activity and the completion of the announced sale of New York American Wa
Slide 24: Closed Acquisitions
Closed Acquisitions* As of May 6, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 1 4,800 - 4,800 Illinois 2 600 - 600 Indiana 1 - 500 500 West Virginia 1 300 - 300 Total 5 5,700 500 6,200 * Customer Connections are rounde
Slide 25: Acquisitions Under Agreement as of May 6, 2020
Acquisitions* Under Agreement as of May 6, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 5 7,700 - 7,700 Hawaii 1 - 200 200 Iowa 2 300 - 300 Illinois** 9 5,900 18,800 24,700 Missouri 1 - 100 100 New Jersey 1 - 2,800 2,80
Slide 26: Rate Base Calculation
Rate Base Calculation* ($ in millions) $14.1 $13.7 $12.5 Estimated Rate Base* $11.7 As of 3/31/2020 $10.7 Net Utility Plant $18.9 Less Advances for Construction $0.3 CIAC - Contributions in Aid of Construction $1.4 Net Deferred income taxes $3.2 $4.9 As of As of As of As of As of 12/31/2016 12/31/20
Slide 27: Rates Effective Since January 1, 2020
Rates Effective Since… January 1, 2020 Annualized Revenue Increases Rate Cases & Step Increases Date Effective Effective in 2020 California (Step Increase) 1/1/2020 $5 Indiana (Step Increase) 5/1/2020 13 (a) $18 Infrastructure Charges West Virginia (DSIC) 1/1/2020 $3 Pennsylvania (W-DSIC) 1/1/2020 9
Slide 28: Rate Filings Awaiting Final Order
Rate Filings Awaiting Final Order Requested Revenue Rate Cases Filed Company Docket/Case Number Date Filed ROE Requested Rate Base Increase Virginia Case No. PUR-2018-00175 11/2/2018 $5(a) 10.8% $196 California Case No. A. 19-07-004 7/1/2019 26(b) 689 New Jersey Case No. WR-19121516 12/16/2019 88(c)
Slide 29: Regulatory Information
Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,061,192 $443,654 $1,249,293(b) Authorized ROE 9.20%(a) 9.79% 9.80% 9.70%(e) 10.00%(e) Authorized Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 52.80%(d) Effective Date of Rate Case 1/1/2018(a)
Slide 30: Pension/OPEB Plans Adequately Funded as of December 2019
Pension/OPEB Plans Adequately Funded as of December 2019 Asset Allocations At December 31, 2019 Pension Plans Pension Plans •GAAP Funding Percentage: 81% •Plan Assets: $1.747 billion 7% Equity •Expected 2020 Contributions = $40m securities 45% Fixed Income Other Post-Employment Benefit Plans (OPEB)
Slide 31: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY FY FY FY LTM LTM (A Non-GAAP Unaudited Number) 2010 2012 2014 2015 2016 2017 2018 2019 3/31/2019 3/31/2020 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350
Slide 32: Reconciliation Table: Adjusted Earnings per Share
Reconciliation Table: Adjusted Earnings per Share* For the Three Months For the Three Months Ended March 31, Ended March 31, Consolidated Adjusted EPS Regulated Businesses Adjusted EPS 2020 2019 2020 vs. 2019 Percentage 2020 2019 2020 vs. 2019 Percentage Diluted earnings per share (GAAP): Diluted ea
Slide 33: Reconciliation Table: Adjusted Return on Equity
Reconciliation Table: Adjusted Return on Equity LTM LTM March 31, 2019 March 31, 2020 Net Income $574 $632 Adjustments: Freedom Industries activities (24) - Depreciation related to assets held for sale - (3) Keystone Sale - 44 Keystone Impairment 54 - Contract Services Gain on Sale (14) - Tax Impact
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