Chesapeake Utilities Corporation

Greetings and welcome to the Chesapeake Utilities Corporation results for first quarter 2022 earnings 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. Should you require operator assistance at any time, please press star 0. As a reminder, This call is being recorded today, Wednesday, May 4th, 2022. And I'd now like to turn the conference over to Alex Whitelum, head of investor relations. Please go ahead, sir.

Thank you, Dave, and good afternoon, everyone. We know it's late in the day. I appreciate everyone joining us. We're excited for you guys to see the results for the first quarter of 2022. As you saw in our press release issued yesterday, the company reported solid financial performance at the beginning of the year, demonstrating our continued ability to deliver long-term sustainable growth for our stakeholders. As shown on slide two, participating with me on the call today are Jeff Householder, President and Chief Executive Officer, Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Corporate Secretary, and Jim Moriarty, Executive Vice President, Federal Chemical 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 and Events and Presentations subset. After our prepared remarks, we will open the call up for questions. Moving to slide three, I'd 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 2021 form 10-K provides further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on the metric adjusted gross margin and has provided the appropriate disclosures in accordance with the FTC Regulation G. The reconciliation of GAAP gross margin to non-GAAP adjusted gross margin provided the appendix for this presentation in our earnings release. Now I'll turn the call over to Jeff to provide some opening remarks on the company's first quarter results and the key drivers of our performance. Jeff?

Thank you, Alex. Good afternoon, and thank you for joining our call today. I'd like to start by thanking all of my colleagues across the company for their continued hard work and dedication to our energy delivery mission. For the second consecutive year, we were recognized as a top workplace USA for midsize companies. I think that recognition speaks to the effort by our entire team to sustain a work environment that reflects our core values of care, integrity, and excellence. But an interesting quarter. Despite inflationary pressures, variable weather conditions across our footprint, and ongoing supply chain and market challenges, our team produced another great quarter. Chesapeake Utilities delivered solid financial results with both adjusted gross margin and earnings growth in the quarter, took significant steps to address important ESP considerations, and remain focused on our business transformation continuous improvement objectives. As usual, Beth will provide a more detailed overview of our financial results in just a moment, but on slide four, I wanted to highlight a couple of our recent key accomplishments. First, earnings were $2.08 per share for the first quarter, up 6.1% over the same period in 2021. This resulted from an incremental $8.8 million in adjusted gross margin for the quarter, really solid top-line and bottom-line growth. We remain on track to deploy $175 to $200 million in new capital investment this year. It's been something of a challenge to keep individual projects on schedule given supply issues, contractor manpower difficulties, and protracted regulatory processes. Although we saw a reduction to our month-by-month capital deployment forecast in Q1, the effective projects are viable and remain in our investment queue. And our ongoing robust business development process continues to bring us opportunities for future investments. We're confident in our long-term capital guidance. Supporting the investments we have already made, we issued $15 million of senior notes in March at an attractive rate of 2.95%. We also completed a number of sustainable energy delivery projects during the quarter. We opened our CNG fueling station near the port of Savannah to supply the trucking and vehicle markets that serve the port. We designed the station to receive and distribute renewable natural gas to further help our customers achieve their emission reduction sustainability goals. The station will also serve as a logistics center for our Marlin gas services business, providing a refueling site for our expanding southeastern market. We hosted a groundbreaking ceremony where many local, political, corporate, and utility officials came to see the capabilities of the new station firsthand. We're excited about the future expected throughput of this facility. This week, we also announced the North Ocean City Connector Pipeline Project. We'll dive into greater details on this in just a moment. As we briefly introduced in our year-end call, we also completed our first test of a hydrogen and natural gas blend in our Eight Flags combined heat and power plant in January. And in late February, we received the positive results from this testing. This was an important first step in introducing hydrogen blends in our power generation system, but also provides a hands-on hydrogen demonstration for other industrial gas users. We're going to Continue to do further testing later this year, building off our pilot tests and results when AFLAG completes its previously scheduled turbine replacement. Finally today, the board announced an 11.5% increase to our annualized dividend per share. This level of dividend growth aligns with our recent earnings growth. Our plan over time to migrate through a 45% dividend payout ratio and speak to the long-term growth pathway we continue to see for the company. All that said, it was another great quarter with solid financial results, a number of exciting announcements that will positively impact the future. I can also say that we have several projects that we are finalizing and look forward to announcing those in the near term as the details are finalized. As we have in the past, I wanted to touch briefly on our five growth platforms on slide five. Our natural gas distribution businesses continue to grow organically. a level significantly above the national average. In the first quarter, our Delmarva and Florida service territories generated 5.3% and 4.0% residential customer growth, respectively. This growth continues to present investment opportunities, and we are partnering with developers to attract new customers, either from new developments or build-outs of existing projects. Given the inflationary environment and rising interest rates, we also continue to closely monitor market factors impacting new home builds. But at this time, we're not seeing a slowdown on Delmarva or in Florida. We continue to invest in our pipeline systems, primarily to support the growth I just spoke of in our distribution system. As I mentioned and we'll discuss further in just a moment, earlier this week we announced the North Ocean City Connector Project, reaching new customers along the Delaware-Maryland coastal border and adding capacity to support the customer growth we're seeing in Ocean City and the surrounding areas. We continue to find attractive propane expansion opportunities in the Mid-Atlantic and Southeast. Propane is an important non-regulated contributor to our earnings and long-term ability to achieve overall Chesapeake Return on Equity above 11%. The diversified energy acquisition in North Carolina and Pennsylvania made a significant contribution in its first full quarter as part of the Chesapeake Utilities family, adding approximately $4 million of incremental adjusted gross margin. The integration of this business into our company has gone well, and we are excited about the opportunities that this platform provides. in regards to expanding our services and programs like Autogas, ProCat, Smart Club, and many others in the Carolinas. Marlin Gas Services and their virtual pipeline systems continue to provide growth opportunities, and we're seeing solid margin growth as a result, and Marlin began providing temporary renewable natural gas transport services this quarter to a customer in Florida. Finally, I'd like to remind our stakeholders of the sustainability report we published in late February. It's been quite a discussion nationally over the past few weeks on furthering ESG disclosure. We believe the efforts we've taken thus far are great first steps, but we have much more to do. We will continue to take additional steps that will help reduce our emissions even further and will continue to enhance our disclosures around important ESG initiatives. Slide six reaffirms our efforts to expand our service territory with our sustainable energy delivery solutions. And with that, I'll turn it over to Beth to discuss our results and more depth. Beth?