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spk03: Good afternoon and thank you for joining Northwestern Corporation's financial results webcast for the quarter ending March 31st, 2022. My name is Travis Meyer. I'm the Director of Corporate Finance and Investor Relations Officer for Northwestern. Joining us today to walk through the results and provide an overall update are Bob Rowe, Chief Executive Officer, Brian Byrd, President and Chief Operating Officer, Crystal Lael, Vice President and Chief Financial Officer, as well as other members of management in the room with us. All participant lines are currently muted. After the presentation, we have allowed time for our Q&A session. I'll provide instructions for asking questions at that time. However, if you intend to ask a question and are joining us by computer, please set your Zoom identity to your first and last name and firm name so we can call on you by name to let you know when your line is open. Northwestern's results have been released, and this release is available on our website at northwesternenergy.com. We also released our 10Q pre-market this morning. Please note that the company's press release, this presentation, Comments by presenters and responses to your questions may contain forward-looking statements. As such, I'll direct you to the disclosures contained within our SEC filings and safe harbor provisions included on the second slide of this presentation. Also note this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions, and reconciliations also included in the presentation. This webcast is being recorded. The archive replay of the webcast will be available for one year beginning at 6 p.m. Eastern today and can be found in the financial results section of our website. With that, I'll hand it over to Northwestern CEO, Bob Rohn.
spk01: Thank you, Travis, and thank you all for joining us. We're meeting this week in Butte, America, where we're having yet another good heavy late season snowstorm very much needed. We're continuing to build up snowpack across Montana, which is great. The board came in a day early, which was an opportunity to get them out meeting quite a lot of our employees and visiting some key facilities in the Butte area, our local distribution center, grid control, the new distribution operations center that we've been standing up in stages now for a number of years, and also real-time trading desk, our cybersecurity team, and then we had a fantastic community reception as well. As you know, we had an online annual shareholders meeting earlier this morning, and there were a lot of good questions as part of that, which we also very much appreciated. In terms of recent highlights, our financial results are in line with expectations for the quarter. That income of $59.1 million, which is $1.08 diluted EPS, and the non-GAAP EPS 59.5 million or a dollar nine diluted eps uh our expected long-term annual eps eps growth rate is in the three to six percent range and we're reaffirming full year non-gap guidance of three dollars and twenty cents to three dollars and forty cents uh per diluted share uh we've been doing a tremendous amount of work and seeing real results in the whole area of uh esg and that's i think been very well received across the board a significant milestone there has been releasing our commitment to net zero carbon emissions by 2050 and really thank brian for taking taking the lead on that it's a serious plan it's one we believe we can achieve and it's notable because it is a company-wide uh commitment for scope one and scope two whereas previously we had focused on our montana electric supply We're nearing completion of the 58 megawatt generating station project in South Dakota. That's been a great project and will really provide value to our customers. And site work is now underway at the 175 megawatt generating station near Billings, Montana. Again, a very important project came out of an RFP that also identified a hydro-based contract and our first supply level battery uh investment so good work being done there and uh we are uh our ongoing commitment uh to a sustainable dividend will be reflected this year in a quarterly this quarter and a dividend of uh 63 cents per share payable on june 30th for owners uh as of 6 15 22. and with that i will turn it over to crystal and she will then pass the hot potato on to brian
spk00: thank you bob i'll cover our financial results for the first quarter here i'm looking at slide four of the deck that you should have available to you as bob mentioned net income for the quarter of 59.1 million which is lower than the prior year first quarter of 63.1 million diluted earnings per share of a dollar rate versus the dollar 24 in the prior period and on a non-gap basis a dollar nine If you take a look at the EPS bridge, I'll walk you through some of the key elements of that. Really favorable performance at the margin line offset by higher OING, which was as expected for us. And then, of course, the equity dilution that we've talked about before and the headwinds that we see for 22 in that regard of $0.09. You can see that laid out on this slide as well. But importantly, these are in line with our expectations for the quarter. And I'll provide a little bit more detail on margin and OANG in the next couple of slides. Margin, slide six, a couple of key elements on that. The slide lays out the drivers of improvement at that line. Overall, it's 2.8 million improvement that falls to the bottom line. We continue to see strong residential and commercial and industrial growth overall, 1.6% on the electric side and 1.2% on natural gas, but really kind of flat customer usage from a first quarter basis versus prior year. From an overall winter weather perspective, it was warmer than normal. However, it was just a tiny bit colder than the prior year in that you really see reflected in kind of the flat performance here I would note that we continue to see a bit of incremental improvement on the transmission revenue side here as well. Overall, a $2.8 million improvement at the margin line that falls to net income. From an operating expense perspective, we have laid out our expectations for the year of a bit of increase at that line. Overall, you'll see here a $5.8 million increase in operating costs that falls to the bottom line. Again, these are in line with our expectations that we've laid out with our 2022 guidance you'll see key elements there higher depreciation of course reflecting the amount of infrastructure investment we've made in the system and we'll be looking to recover higher uncollectible accounts i would remind you that last year's that prior year number was reflected by collecting uh and reduced by amounts we were collecting for the prior period before so a bit of that is returning back to a more normal level of uncollectible accounts we continue to invest in technology in the system you'll see that there higher labor and benefits costs and some pressure on the insurance costs offset a small amount by property taxes being slightly lower. Again, this gives you the detail of that consistent with our guidance range and consistent with our expectations for the quarter. Again, $5.8 million on the operating side. Next slide, slide eight. And this is where we walk you through the non-GAAP adjustment. So you can see $59.1 million of net income, as I alluded to, $1.08 on the left-hand side of this slide on a GAAP basis. The only adjustment here that adjusts on a net income basis is the unfavorable weather add back of about $600,000 for the quarter, getting us to $59.5 million on a non-GAAP basis or $1.09. You see how this compares to prior year. I mentioned that weather was overall warmer than normal, but a little bit colder than last year. You see the equivalent of last year. We added back $1.3 million of unfavorable weather, getting us to $64.1 million or $1.26 million. again i would mention the diluted share impact of our equity issuance and where that's driving performance from a comparable quarter over quarter basis slide nine from a cash flow perspective we saw significant improvement in operating cash flows and working capital really that's driven by the collection of prior year supply costs i'll remind you in q1 last year i think you all know that winter storm yuri occurred and we had significant gas costs in the south dakota and nebraska side That continued to see higher overall costs on the supply front, both electric and gas, as the year continued into Q3 and Q4. So we are collecting some of those back to see favorable cash flows from that perspective. Also, in the first quarter of 21, we had a couple of refunds in there, totaling around $30 million. The absence of those obviously leads to improved cash flow performance for quarter over quarter as well. With that, I'll take you to slide 10, which is we are reaffirming 22 guidance of 320 to 340. Again, with performance coming out of Q1 here in line with our expectations, we've talked about before what's driving a down year from a guidance perspective as to our performance from 21 to 2020, really driven by some improvement at the margin line offset by a little bit higher operating costs and then, of course, the impact of that equity dilution, but we continue to see a direct path to our guidance for 22 with no changes noted in this slide. And with that, I will turn it over to Brian for an operating update.
spk02: Thanks, Crystal. On slide 11, we're talking about our capital investment. On the left-hand side of the page, you can see the investment of approximately $1.8 million over the last five years. It resulted in a 12% kegger, if you will, Looking forward, the next five years, we're increasing that investment to $2.4 billion, so a substantial increase, approximately about $500 million a year of an investment. I would tell you that if you look at it, you can see that two-thirds of that's primarily from a T&D perspective, and in addition to just maintaining our system,
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