Chesapeake Utilities Corporation

2021 Third Quarter Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded today, Thursday, November 4th, 2021. I would now like to turn the conference over to Alex Whitelum, Head of Investor Relations. Please go ahead.

Thank you, Grant. Good afternoon, everyone. It is a great honor to join all of you for the first time. I'm very excited to lead Chesapeake Utilities' Investor Relations team. We know it's late in the day and we appreciate you joining us to review our third quarter and year-to-date performance through September 30th, 2021. Yesterday, we announced our financial results, which demonstrated how we continue growing and operating effectively, serving our customers, identifying and executing our new investment projects, and keeping our employees as safe as possible in this ever-changing but exciting marketplace. As shown on slide two, participating with me on the call today are Jeff Householder, President and Chief Executive Officer, Seth Hooper, Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary, and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer. We also have other members of our management team joining us virtually. Today's presentation can be accessed on our website under the Investors page in the Advanced Presentation subsection. After our prepared remarks, we will open the call up for questions. Moving to slide three, I would like to remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of the company's 2020 annual report on Form 10-K and our first, second, and third quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results. Additionally, we continue to highlight some of our key environmental, social, and governance initiatives in our quarterly reports. Now I'll turn the call over to Jeff to provide some opening remarks on the company's third quarter and year-to-date results, and the key drivers of our performance. Jeff?

Thank you, Alex, and good afternoon, and thank you for joining our call today. Let me start, as usual, with an update on COVID-19 and our continuing efforts to manage through the ongoing pandemic. The Delta variant drove a surge in COVID cases throughout the third quarter, including in our service territories and our company. Over the past couple of weeks, we've seen reductions in our positive cases and the number of employees reporting exposure to the virus. We continue to encourage employee vaccination with time off for both the shots and downtime to deal with any vaccine side effects. As are most utilities, we're working to identify the applicability and potential impact that may result from vaccination mandates or COVID testing requirements. under the President's Executive Order or the OSHA Emergency Rule. We're also following the various state legal challenges that could impact the application and timing of the federal vaccination mandate initiatives. On many companies, we were hoping to return our remote workers to the office sometime this fall. However, we slowed that process as the delta variant cases increased. You may recall that well over 50% of our total team, those providing field operations services, have continued to report to their office locations throughout the pandemic. Our entire team, both field services and those assigned to work remotely, have performed well during the pandemic. We've substantially upgraded our technology capabilities to support our current work environment and have no reason to rush back to the office. In fact, we believe there will be significant future savings as we rebalance our long-term facility needs. As you would expect, we will approach any end of the pandemic organizational changes in a well-planned, disciplined manner with the goal of ensuring the safety of our employees and customers and the reliability of our services. One of our objectives during the pandemic has been to ensure communications with our team members remained a high priority. Prior to the pandemic, one of the various ways we communicated internally was through quarterly team meetings with all employees to review our performance, discuss future plans, and provide opportunities to exchange ideas. We've been holding frequent virtual meetings and conducting an all-employee call since the beginning of the pandemic. Those calls were conducted weekly for the first 16 weeks and are now held each month. And for the last two weeks and continuing this week, myself and other members of the senior leadership team have been conducting in-person town hall meetings accompanying locations across our service territories. These are the first in-person team meetings we've held since 2020, early 2020. In most locations, we've been meeting outside under a tent, socially distanced, and wearing masks. Re-engaging with the team personally and having the ability to thank each and every one of them for their dedication and contribution to our continued success has been rewarding for me. As part of these meetings, we're introducing our recently refreshed mission, vision, and value statements. employees through various surveys and focus groups for instrumental in developing these statements. And I think we've laid out simple declaratory statements that demonstrate our continuing interest in advancing our existing energy delivery businesses, as well as pursuing an active leadership role in developing sustainable energy opportunities that contribute to a lower carbon future. I remain proud of our team members as they continue to operate in a remarkably effective way, delivering high levels of customer care and executing our plans for sustainable growth. We had a notably strong third quarter with high quality earnings. As shown on slide four, earnings per share were 71 cents, an increase of 15 cents or 26.8% compared to the 56 cents reported in the third quarter of 2020. As highlighted on slide four, gross margin increased approximately half a million dollars over the third quarter of 2020. However, and as we reminded everyone during our previous calls, our results in last year's third quarter included a cumulative adjustment from the Hurricane Michael regulatory settlement. The rates from Q1 and Q2 were recognized in the third quarter. After the Hurricane Michael timing difference, gross margin increased by 6 million, or 8.1% year-over-year. Some of the key margin drivers for the quarter included pipeline expansion projects, organic growth in our natural gas distribution systems, the pipeline replacement program in Florida, contributions from the acquisitions of Elkton Gas, Electric Natural Gas, and the Escambia Meter Station, and increased margins for our propane businesses as well as Aspire Energy. We also rely on the net reduction expenses related to the COVID-19 pandemic and established regulatory assets for COVID-19 expenses as authorized by the various public service commissions. Year-to-date 2021 earnings per share were $3.45, an increase of 48 cents, or 16.2%, compared to $2.97 for the first nine months of 2020. This growth was driven by all the factors mentioned previously, in addition to a return to more normal weather and growth for Marlin Gas Services. Net income year to date was $60.8 million. Our net income for the first nine months of 2021 exceeds our total annual net income in 2018, just three years ago. Over that time, our growth has been largely achieved in expansion of our transmission pipelines into new territories, organic growth within our natural gas distribution systems, and successfully integrating acquisitions into our portfolio. We're fortunate to provide energy delivery services to communities that are experiencing significant growth. Since 2018, we've added more than 26,000 natural gas distribution residential and commercial customers. and approximately 9,000 propane customers. This customer growth is a real testament to our business development and operation teams executing our growth strategy. I'm happy to report that in all of our service areas, the demand for natural gas, propane, and electricity remains high. Those opportunities to serve new customers was the primary driver of our capital investment of $151 million through the first nine months of the year. driven by our residential customer growth rates of 5% in Florida and 4.1% on the Delmarva Peninsula. Our projected capital investment range for 2021 is now $185 million to $200 million. We continue to be fortunate to serve communities that appreciate and value the energy we deliver. I'll add more about our continued growth initiatives and capital investment projects across our business units in just a few minutes. But let me turn the call over to Beth for further discussion regarding our performance. Beth?