Chesapeake Utilities Corporation

We stand by. We're about to begin. Good morning, everyone, and welcome to Chesapeake Utilities Corporation's fourth quarter and full year 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you please pick up your handset for best sound quality. Lastly, if you should require operator assistance at any time, please press star zero. I would now like to turn the call over to Ms. Lucia Dempsey, Head of Investor Relations. Please go ahead, ma'am.

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. On slide two, we show our typical disclaimers while I remind you that matters discussed on 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 our 2024 Annual Report on 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 certain non-GAAP measures, including adjusted gross margin, adjusted net income, and adjusted earnings per share. And the information presented today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, in our earnings release, and in our 2024 Annual Report on Form 10-K. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here with a moment on heart health as highlighted on slide three. February is not quite over, and so it's still a great time to celebrate American Heart Month by refocusing on our heart and cardiovascular health. Heart disease affects more than 1.5 million Americans and millions more around the world. However, there is so much we can do to improve our heart health, so we encourage you to take a step today and every day to strengthen your heart The only side effects will be improved physical and mental health overall. I'll now introduce our presenters today. Jeff Householder, chair of the board, president, and chief executive officer, will provide an update on the many ways we delivered with purpose throughout 2024, including executing on our core growth strategy. Beth Cooper, executive vice president, chief financial officer, treasurer, and assistant corporate secretary, will discuss our full year of financial results, strong balance sheet, and dividend and earnings growth trajectory. And Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer will review our active regulatory agenda, key project updates, and summarize our community engagement work in 2024. With that, it is my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning, and thanks to all of you for joining our call today. 2024 was a pivotal year for Chesapeake Utilities. We were persistent in our mission to deliver energy that makes life better for the communities we serve, and we successfully positioned the company to be a much larger, more scalable enterprise. Our theme for this year's annual report, Delivering with Purpose, Reaching New Heights, isn't just a marketing phrase. It's an embodiment of how we operate each and every day at all levels across the company. So let me start by telling you how we delivered in 2024. Turning to slide six, adjusted diluted earnings per share for the fourth quarter was $1.63, bringing our full year 2024 EPS to $5.39 at the midpoint of our guidance range. This is a significant accomplishment. In light of our efforts to integrate the FCG acquisition, warmer than normal temperatures, our decision to accelerate the return to our target capital structure and a delay in the finalization of our Maryland rate case. As I'll go into more detail shortly, we invested $356 million of capital in 2024, which is a record level of capital investment, and at the upper end of our annual guidance range of $300 to $360 million, and well on the way toward our five-year capital forecast of $1.5 to $1.8 billion through 2028. As Jim will discuss in more detail, we were very active on the regulatory front, including filing three rate cases, two depreciation studies, receiving approval for 12 projects filed with the Florida Public Service Commission, and completing additional regulatory filings related to consolidating and expanding our infrastructure reliability and energy conservation programs. We also implemented 1CX, our company-wide SAP customer billing system, rolled out a new safety data management system, and made a number of organizational and process improvements related to our customer care, construction services, technology, and risk management areas. And finally, as Beth will discuss later, we accelerated the return to our target capital structure and completed several key financings. Starting on slide seven, at this time a year ago, the company was embarking on its next phase of transformation. We had just completed the acquisition of Florida City Gas, a transaction that grew our asset base by nearly 50%. What excited us about this transaction was the ability to leverage our capabilities to meet the growing demand in FCG's markets and the need for additional natural gas supply in southern Florida. One year later, I'm pleased to report the significant progress we've made. Our FCG operations contributed nearly $89 million in 2024 adjusted gross margin. We filed and received approval for nine growth capital projects related to the FCG service area. And our investment and reliability improvements under the SAFE program generated $3.8 million in full-year adjusted gross margin. Most importantly, 93% of FCG teammates that transitioned to Chesapeake Utilities are still with the company today, which I hope indicates their satisfaction with the transition and integration efforts and a recognition of the commitment we made to continue to invest in the FCG system. In many companies, integrating such a large acquisition would have been the only major priority for the year. At Chesapeake Utilities, this acquisition launched our strategic intentions for 2024, integrate FCG operationally as well as culturally, and move forward as one company to sustain top quartile performance by advancing the three pillars of our core business strategy. One, prudently allocate capital. Two, proactively manage our regulatory strategy. And three, continually transform our business operations as shown on slide eight. On slide nine, let me start with the foundation that underlies our core business strategy, operational excellence in our high growth service areas. You've likely heard us say that we are the beneficiaries of our geography. This is a privilege that we take very seriously as our customers rely on us to operate safely, fuel their homes, and power their businesses every single day. Throughout 2024, we continued to see rapid growth across our regulated businesses. In Delmarva, we added over 4,000 new customers, driving residential growth by 4%. and commercial growth by 1.6% over 2023 levels. We continue to see population growth in Delaware and Maryland as new communities are developed to serve demand from retirees and families looking for additional space while remaining close to the metro areas of Philadelphia, Baltimore, and Washington, D.C. In Florida, the story is largely the same. Above average customer growth and demand for natural gas enabled us to expand distribution service in our existing areas and invest in our newly acquired FCG service areas. Across the state, we added 6,700 new customers, driving residential and commercial growth of 3.9% and 1.2% respectively. Florida continues to lead the nation in population growth. In 2024, Florida was number one for net in-migration and new resident net income growth, which drives demand for new communities across the state. Throughout 2024, we saw growth in many areas of Florida served by our distribution system. We've also completed the next phase of expansion in Newberry and broke ground on projects in St. Cloud, Lake Wales, Lake Maddie, Plant City, New Smyrna Beach, and Boynton Beach. This organic growth is the core driver of our record level of capital investment in 2024, as shown on slide 10. As I mentioned earlier, we invested $356 million of capital throughout 2024. Approximately 90% of that was spent on our regulated businesses as we invested in our Florida and Delmarva transmission and distribution systems and upgraded technology across the enterprise. Our regulated capital spend included $83 million of investment in the Guard, SAFE, and SPP infrastructure reliability programs to upgrade and strengthen our system, enabling us to maintain safe and consistent energy delivery. These programs operate under approved regulatory mechanisms that provide for immediate recovery for investments, driving a 2024 adjusted gross margin contribution of nearly $9 million. Our accelerated capital deployment throughout 2024 and continued customer and demand growth have set us up for an increased level of capital spend in 2025. As shown on slide 11, we're initiating 2025 capital expenditure guidance of $325 to $375 million, driven primarily by investments in our natural gas transmission and distribution businesses. As you can see on slide 12, construction continues on a number of transportation infrastructure projects to serve new communities across our service areas. There are two project updates I'd like to highlight specifically. In January, we were pleased to receive FERC approval for our $80 million Worcester Resiliency Upgrade LNG storage project. Later on this call, Jim will provide additional detail on our construction progress. And in February, we received approval from the Florida Public Service Commission for our Miami Interloop series of projects filed late last year. Totaling approximately $40 million, these transportation projects will expand natural gas infrastructure and support future growth across FCG's distribution system in Miami. The investments underway will be a meaningful contributor to our 2025 performance, generating at least $22 million of incremental margin in 2025. Given this increasing level of capital, we are reaffirming our five-year capital investment plan of $1.5 to $1.8 billion, as shown on slide 13. With the addition of the Miami Interleave projects, we have now identified at least $1.4 billion of this total. Of this amount, more than 70% requires no additional regulatory approval. Before I turn the call over to Beth, I'd like to give an update on our business transformation efforts as shown on slide 14. This third pillar in our growth strategy ensures that we are positioning the company to operate effectively as we rapidly scale. The acquisition of FCG and the implementation of our 1CX customer billing system in 2024 provided us an opportunity to assess our internal organizational structures and identify improvement opportunities to better operate under our one company approach. This resulted in the consolidation, centralization, and standardization of a number of functions, including customer care, construction services, enterprise health and safety, and business information systems. However, this is just the beginning. Looking ahead to 2025, we have a number of initiatives underway to continue this transformational work. we are preparing to transition our FCG operations to the new SAP customer billing system, which has also driven a number of related process standardization efforts. We're also in the early stages of assessing an enterprise resource planning or ERP implementation, which represents a multi-year overhaul of a number of cross-functional systems, including accounting, finance, procurement, asset management, and human resources, among others. We're also strengthening our technology systems and security through investments in operational programs, artificial intelligence, and cybersecurity. We will continue empowering our teammates to identify and implement operational changes that improve the accuracy, efficiency, and effectiveness of their work, ensuring seamless operations, whether we are a $3 billion or a $6 billion company. With that, I'll now turn the call to Beth to discuss our financial results in more detail.