Southwest Gas Holdings, Inc.

Welcome to Southwest Gas Holdings first quarter 2024 earnings conference call. Today's call is being recorded and our webcast is live. Our 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. If you would like a question and answer session, we'll follow the prepared remarks. If you would like to ask a question at that time, please press star one on your phone. I will now turn the call over to Justin Forsberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings. Please go ahead.

Thank you, John, and hello, everyone. We appreciate you joining our call. This morning, we issued and posted to Southwest Gas Holdings website our first quarter 2024 earnings release and the associated Form 10-Q. 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 two and three 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 statements made today. We caution 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 Haller, President and CEO of Southwest Gas Holdings, and Rob Stefani, Chief Financial Officer of Southwest Gas Holdings, along with Justin Brown, President of Southwest Gas Corporation and other members of the management team who are 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 first quarter results. Turning to slide five, the successful clothing of the Century IPO in April marked a significant milestone in our transformational strategy of returning Southwest Gas to its core foundation as a premier fully regulated natural gas utility. We were pleased with the market's reception of the offering and we look forward to completing the separation of century in a timely manner. During the quarter, we continued to make progress, positioning the utility for long-term success and growth. We started the year by executing on our regulatory strategy at Southwest with filings in Arizona and Great Basin, and we received approval of our Nevada case, which was a constructive regulatory outcome. Additionally, we finished the first quarter with another quarter of record operating margin over the last 12 months. 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 encouraged by the strong momentum underway. We are affirming our 2024 to 2026 guidance estimates and expect 2024 utility net income toward the upper half of our range. The expected revenue increases from rate cases will provide net income growth, which as a result of Reiki's timing will continue to be nonlinear over the forecast period. We expect our refreshed rate structures to benefit us in catching up with the historic inflationary environment we have experienced and the significant system investments we've made for the benefit of our customers over the past few years. Our confidence in our future is further demonstrated by an affirmed expected rate-based compounded annual growth rate over the same period in the range of 6.5% to 7.5% and our commitment to maintain a strong investment-grade balance sheet and competitive dividend. An overview of the closing of the Century IPO is included on slide 6. We are pleased that the IPO priced at the top end of the announced price range with an initial price of $21 per share of Century common stock. The IPO netted approximately $329 million of net cash proceeds, which went directly to Century and were used to reduce its debt by $316 million. This result strengthens credit metrics and the balance sheets at both Century and Southwest Gas Holdings. Inclusive of the base offering, the over allotment that was exercised in full by the underwriters and the private placement, Southwest Gas now holds an 81% interest in Century as its majority stockholder. The overall success of the transaction reinforces our team's commitment to the separation strategy. I want to thank the team for their focus and hard work and to congratulate Bill Furman and the entire team at Century on their successful launch public markets. On this slide, you will find links to Sentry's investor materials for the first quarter of 2024, which are also available on Sentry's investor website. Sentry is not scheduling an investor call this quarter, but expects to begin investor calls following the release of their second quarter 2024 financial results later this summer. As you can see on slide 7, We have already made excellent progress on our 2024 strategic priorities, and we are on track to achieve them all. With regard to the century separation path, following the successful execution of the IPO, Southwest Gas Holdings may ultimately separate the business through a series of sell downs or share exchanges. Or depending on market conditions, we retain the ability to distribute the balance of century shares to Southwest Gas Holdings stockholders through a spin. Any of these strategies need to follow the six-month lockup period that was required in the 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 a partial offset to a taxable transaction. We remain committed to separating Sentry and we believe we have taken the appropriate steps and actions to benefit all stockholders. Our 2024 financing plan includes issuing a modest amount of equity under an ATM program and extending the existing $550 million term loan at Southwest Gas Holdings to allow us the flexibility to pay down or refinance that facility. These plans are dependent upon the century separation process and timing in 2024. In terms of our utility and regulatory strategy for 2024, we've already made notable strides. I'll discuss the Nevada rate case outcome in a minute, but we filed 126 million revenue increase requests in Arizona in February, which includes a capital tracker. followed by a rate case at Great Basin in March, and we are on track to file a case in California in the third quarter of this year. You can see details of some of this regulatory activity on slides 25 and 26 in the appendix to this presentation. Rate case progress and our cost discipline efforts reinforce our confidence in our net income guidance for 2024. We anticipate the outcomes of all of these regulatory proceedings will result in an increase in our authorized rate base by 20 to 25%. We are very pleased with the progress we are making on our strategic priorities and are confident in our ability to deliver on our objectives in 2024. Turning to slide 8, you can see on the slide we provide an update for our Nevada rate case filing, which was approved last month by the Nevada Commission. The Commission authorized an overall $59.1 million annualized revenue increase across our Nevada service areas that became effective in early April of this year. We see the results of the case as a positive outcome and represents settlement of several issues with interveners and staff that were ultimately stipulated in the revenue increase. Cost of capital difference between the stipulated revenue increase on the slide and the authorized revenue increase represents the difference in our requested return on equity and the 9.5% that was authorized. This updated ROE is 10 basis points higher than what had been authorized previously. We're appreciative of the strong relationship we have with key stakeholders in Nevada and are pleased that we were able to work with them in a constructive way to finalize the Nevada rate case. We are now recovering nearly $300 million of the over $1 billion in rate base that we are requesting in this rate case cycle, which includes the Nevada, Arizona, Great Basin, and forthcoming California rate cases. The Nevada outcome represents 80% of the original request, which is a significant improvement over prior cases. On slide 9, We highlight our strong first quarter 2024 performance at Southwest and at Sentry. The utility is off to a good start for the year with a $1 million increase in net income over the first quarter of last year. We continue to experience strong customer growth, adding more than 40,000 new meter sets over the past 12 months. While continuing to make additional investments to ensure our system remains safe, and reliable for the benefit of our customers. And, as I noted, we also achieved a positive regulatory outcome in Nevada and advanced our strategy in other jurisdictions. Our operations and maintenance expenses were flat compared to the first quarter of 2023, and our balance sheet is strong, having now collected the majority of the deferred purchase gas cost balance. Balance has been reduced by more than $770 million since Q1 2023 and is reflected in the more than $400 million cash balance as of the end of March 2024. And you can see Sentry's key highlights on the slide as well, which includes deleveraging through the IPO. Again, we're pleased with Sentry's progress and would refer you to its 10Q and earnings press releases. that was issued earlier today for more detail on its first quarter performance. With that, I'll turn the call over to Rob, who will review our financial performance for the year.