Southwest Gas Holdings, Inc.

The Southwest Gas Holdings fourth quarter and year-end 2023 earnings conference call. Today's call is being recorded and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. If you would like to ask a question at that time, please press star 1 on your phone. I will now turn the call over to Justin Forsberg, Vice President of Investor Relations of Southwest Gas Holdings. Please go ahead.

Thank you, Rocco, and hello, everyone. We appreciate you joining our call. This morning, we issued and posted to Southwest Gas Holdings' website our fourth quarter and full year 2023 earnings release and the associated Form 10-K. The slides accompanying today's call are also available on Southwest Gas Holdings' website. We'll refer to those slides by number throughout the call today. Please note that on today's call, we will address certain factors that may impact this year's earnings and provide some longer-term guidance. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions on what the future holds, but are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. This cautionary note, as well as a note regarding non-GAAP measures, is included on Slides 2 and 3 of this presentation, today's press release, and our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from the statements made today. We caution you against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statements. As shown on slide four, on today's call we have Karen Holler, President and CEO of Southwest Gas Holdings, Rob Stefani, Chief Financial Officer of Southwest Gas Holdings, Justin Brown, President of Southwest Gas Corporation, and Bill Furman, President and CEO of Century Group, along with other members of the management team available to answer your questions during the Q&A portion of the call today. I'll now turn the call over to Karen.

Thanks, Justin. Thank you for joining us today to discuss the Southwest Gas Holdings fourth quarter and full year results. Turning to slide five, we are making good progress on our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility. We achieved significant milestones throughout 2023 to position the utility for strength and success. while also advancing the separation of century into a stand-alone utility infrastructure services leader. Notably, we made progress on the regulatory strategy at Southwest during the year and delivered record full-year results which were above our expectations. Customer growth and demand remained strong, and the entire Southwest gas team is acutely focused on safely addressing the needs of our customers, investing in the communities we serve, and delivering value for our shareholders. We are strategically deploying capital and investing in our operations so that we can meet the demand for safe, reliable, and affordable energy solutions, while also working constructively with our regulators and legislators to complement our strong organic rate-based growth. We are confident in our momentum at Southwest which delivered an 8.2% ROE in 2023, a 220 basis point improvement over 2022. Our confidence is also demonstrated by our expected 10 to 12% net income growth rate from 2024 to 2026. While the nature of expected revenue increases from rate cases will cause net income growth to be nonlinear over the forecast period, we are confident in our guidance. We expect to benefit from our refreshed rate structures to catch up with the historic inflationary environment we have experienced and the significant system investments we have made for the benefit of our customers over the past few years. Our confidence in our future is further demonstrated by an increase in our expected rate-based CAGR over the same period in the range of 6.5% to 7.5%. and our commitment to maintaining a strong investment-grade balance sheet and competitive dividend. Additionally, Century has seen improved margins throughout the year as the team executed on their core utility infrastructure services lines of business and overcame much of the previous cost and supply chain headwinds that had been faced during 2022. As you can see on slide six, We made excellent progress on our 2023 strategic priorities, and we are on track to achieve our 2024 priorities. 2023 was a year of achieving milestone after milestone, starting with the closing of the Mountain West sale a year ago and the completion of our RAS-RES process with the credit rating agencies. The successful execution of our financing plan To get us through the balance sheet impacts of historic natural gas prices at the utility, along with eventual regulatory approvals to collect those costs from customers, were significant achievements. Also at the utility, we filed a rate case in Nevada and worked through a considerable effort to identify and prioritize initiatives to build an optimization playbook. And finally, we made substantial progress toward the separation of sentries. We have already made notable strides in 2024, and with the onboarding of new Sentry leadership, our plan to separate Sentry into an independent utility infrastructure services company remains on track as we seek to unlock value for Southwest Gas shareholders. As you can appreciate, we are in a quiet period with respect to the intended IPO, and we are not in a position to provide specific details on our process. However, we are continuing to make progress. Following execution of the expected IPO, Southwest Gas Holdings may ultimately separate the business through a series of sell-downs or share exchanges, or depending on market conditions, we could distribute the balance of century shares to Southwest Gas Holdings shareholders through a spin. Any of these would follow any required lock-up period associated with an IPO. Because the successful execution of an IPO with sell-downs or share exchange is contingent on market and other conditions, we continue to preserve the potential for a tax-free spin, but we expect our significant net operating loss balance could serve as an offset to taxable transaction. We remain committed to separating Sentry, and we believe we have taken the appropriate steps and actions that will benefit all shareholders. At the utility, we continue to execute on our business plan and regulatory strategy. We are nearing the end of the process for establishing new rates in Nevada, which we expect to be in place in April. We have filed to refresh rates in Arizona, and we'll be filing with the FERC for Great Basin shortly, and to refresh rates in California later this year. We also continue our focus on utility optimization, as we have prioritized identified initiatives and are executing our plans. We are very pleased with our continued progress and our strategic plan is on track. On slide seven, we highlight our strong 2023 performance at Southwest and at Sentry. We are proud to announce that we delivered record performance across the utility. We experienced another year of strong customer growth, adding more than 40,000 new meter sets in 2023. while continuing to make additional investments to ensure our system remains safe and reliable for the benefit of our customers. We also achieved several constructive regulatory outcomes during the year. And I'm pleased to highlight that for the fourth consecutive year, Southwest ranks number one in customer satisfaction among business and large residential gas utilities in the West by J.D. Power. I'm so proud of our team for their excellent effort every day that has led to these achievements. At Sentry, we announced strong full-year revenue and adjusted EBITDA, which resulted in adjusted EBITDA of approximately $283 million. This solid performance was driven by an increase in electric infrastructure services revenues, including storm restoration services as well as sustainable energy projects. As Bill will discuss later, Century continues to win new business based on the strength of its relationships and capabilities and is well positioned to play a critical role in replacement of aging electric and gas infrastructure and the continuing energy transition. Turning to slide eight, we have challenged our employees to identify opportunities for improvement and optimization. After evaluating initiatives across the organization, we have identified several initiatives that we believe will drive value and long-term improvement. This includes near-term investments in systems, technology, and processes such as insourcing and fleet optimization, and longer-term initiatives such as modernizing our capitalization policy and our work management system, deploying advanced mobile leak detection, and storage optimization. I'll detail our forward-looking guidance later on this call, but we currently expect our optimization efforts to lead to a flat O&M per customer spending trend over the next forecast period. For now, I'll turn the call over to Rob, who will review our financial performance for the year.