American Water Works Company, Inc.

Good morning and welcome to American Water's third quarter 2022 earnings conference call. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the company's investor relations website. The audio webcast archive will be available for one year on American Water's Investor Relations website. I would now like to introduce your host for today's call, Aaron Musgrave, Vice President of Investor Relations. Mr. Musgrave, you may begin.

Thank you, Sarah. Good morning, everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. Let me first go over some safe harbor language. Today, we will be making forward-looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based on our current expectations, estimates, and assumptions. However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties, and factors, as well as a more detailed analysis of our financials and other important information, is provided in the earnings release and in our September 30th Form 10-Q, each filed yesterday with the SEC. And finally, all statements during this presentation related to earnings and earnings per share refer to diluted earnings and earnings per share. Susan Hardwick, our President and CEO, will discuss third quarter and year-to-date highlights and touch on 2023 guidance and our long-term targets. John Griffith, our Executive Vice President and CFO, will cover our financial results in more detail, provide an update on active general rate cases and acquisition activity, and will close with further details on our 2023 and longer-term outlook, including the overall financing plan. Cheryl Norton, our Executive Vice President and COO, will then discuss our capital investment plan, rate-based growth expectations, and our focus on affordability. Cheryl will then conclude with a review of some important new operating goals and disclosures that align with our focus on ESG. We'll then close by answering your questions. With that, I'll turn the call over to American Water's President and CEO, Susan Hardwick.

Thanks, Aaron, and good morning, everyone. As Aaron said, we have a lot to discuss this morning in addition to third quarter results. And specifically, we also want to cover today our outlook for 2023 and our longer-term targets. As you know, last year at this time, we shared some significant news when we sold our homeowner services business to transition to a pure play regulated water and wastewater utility. In that update, we announced a new five-year plan, an acceleration of capital investments, and some adjustments to our financial targets. The updates that we'll share today are largely an affirmation of last year's plan and targets, with adjustments primarily reflecting the shift out to 2027 in our five-year outlook. We will also share additional thoughts and plans around our continuing ESG journey. So let's dive in and turn to slide number five, where I'll start by covering some highlights of 2022 to date. In the first nine months of 2022, earnings were $3.70 per share compared to $3.40 per share in the same period of 2021. Strong organic growth and increased earnings from infrastructure investments continue to be our year-over-year drivers for the quarter and year-to-date periods. Favorable weather also added to results in the third quarter. Though we, generally like others, are experiencing a higher cost environment, our team continues to deliver on our financial and operating plans. This includes staying on track to achieve our total capital investment goal of $2.5 billion in 2022, and executing on significant regulatory activities, including constructive settlements in two of our outstanding general rate cases. Further, we continue to effectively manage and mitigate cost increases and have been successful in recent regulatory efforts to further lessen the impact of inflationary pressures into the future. These regulatory solutions are very important to our ability to manage inflationary headwinds as we move into 2023. So I'm pleased that we've successfully executed our plans so far this year in a challenging and very active period. John and Cheryl will provide additional details on financial, operating, and regulatory results later in today's call. But before I move on, let me comment about how excited we were to sign an agreement a few weeks ago to serve the nearly 15,000 customers of the Butler Area Sewer Authority in western Pennsylvania. This is another great example of how partnerships with municipalities can lead to positive outcomes for customers, employees, and the community at large. Our team worked very hard to understand the community's objectives and created an opportunity that we believe benefits all stakeholders. Turning to slide six, as announced yesterday, we affirmed our 2022 earnings guidance. We continued on track to meet our expectations for the year as we've indicated throughout the year. And in addition, we have had the incremental contribution from weather this quarter. Also yesterday, we initiated our 2023 earnings guidance and $4.72 to $4.82 per share. This near-term plan, as well as our longer-term plan, remains very strong. And with our record of execution, we are confident in our ability to achieve our earnings expectations for 2023. Later, John will talk more about the drivers of our growth in 2023, but our expected growth builds on the accelerated CapEx plan we put forth last year. As we've said many times, the full effect on earnings growth from the increasing capital spending will ramp up over time. John will talk further about our updated financing plan, but this plan reflects our prior discussion that the growing investment plan will result in regular access to equity capital. As we've illustrated on this slide, we expect our investments in infrastructure and regulated acquisitions to drive significant earnings growth through 27 and beyond. Finally, on slide seven, I want to make a few comments about our purpose here at American Water and how that drives our growth strategy, our operating plans, and our company's targets and goals. Our mission is to provide safe, clean, affordable, and reliable water and wastewater services to the communities across the country. Our services are vital to sustaining life. So while much is said in the news about the clean energy transition that's happening, what drives us every day is an equally important need in our country. We believe that everyone should have access to safe, clean, affordable and reliable drinking water and wastewater services and that communities are stronger because American water has the privilege to serve them. It's true that we have many similarities to other utilities, and we embrace the knowledge sharing and best practices that can come with those similarities. In fact, we joined EEI as a strategic partner a few years ago because of common values around customer service, safety, and cybersecurity, to name just a few. And as many of you know, I've spent most of my career in the gas and electric industry, so I have a deep appreciation for the utility industry as a whole. However, the water industry and American water also have some important differences from other utilities. Our capital projects, for example, are much smaller on average than those in the electric and natural gas industries, even though they add up to a similar and very significant investment need. Another difference is our greenhouse gas emissions footprint, which is very small compared to most other publicly traded electric and gas utilities. That said, we are seeing the impacts that climate variability can have through more extreme droughts or more severe floods. We strongly believe we must do our part to reduce overall greenhouse gas emissions. We have now set ambitious greenhouse gas reduction goals, including achieving net zero by 2050. Along with our goals for system resiliency and water use and efficiency, we see our greenhouse gas reduction goals as part of our commitment to provide superior and affordable service to our customers. We believe American water is the leader in a clean water and wastewater transition in the United States. For the communities we already serve and the communities we hope to serve in the future, the capital investment needs that are required to deliver more sustainable water and wastewater services are immense. It's up to us to find ways to balance those CapEx needs with the affordability of services for our customers. That's why we've added a customer affordability target to our list of key drivers you see here. As a company, we also continue to raise the bar on our efforts to create a fair and equitable place to work, in addition to making sure our operations align with the spirit of environmental justice. Two recent examples of our broad focus were the recognition through the 2022 WaterSense Excellence Award from the Environmental Protection Agency and the 2022 Leading Disability Employer by the National Organization on Disability. Cheryl will provide some examples later of the good things we are doing internally in these areas. Finally, on this slide, you can see we are affirming our long-term earnings growth targets, and most of our other long-term financial targets remain unchanged. During our planning process this fall, we decided to narrow our long-term dividend growth target to 7 to 9 percent, which maintains our position in the top tier of dividend growth and payout ratio in the industry. Our long-term dividend growth target now fully aligns with our compelling EPS growth target of 7 to 9 percent and the significance of our capital investment plan and related financing. This minor adjustment rounds out our strong long-term plan and will help us achieve our other important financial targets over time. In summary, we believe the combination of our EPS dividend growth supported by significant and yet low-risk capital investment plan as well as our ESG leadership premium and constructive position on affordability will continue to be rewarded by investors. Based on the long-term plan and our history of executing on our strategies, we expect to continue to deliver a very competitive, sustainable shareholder return for many years to come. And with that, I'll turn it over to John to cover more detail on our 2022 financial results, our 2023 and longer-term outlook, and our financing plans.