Southwest Gas Holdings, Inc.

Welcome to Southwest Gas Holdings' third quarter 2024 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 Frostberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings.

Thanks, Dion, and hello, everyone. We appreciate your interest in Southwest Gas. This morning, we issued and posted to Southwest Gas Holdings' website our third 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 discuss 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 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, Rob Stefani, Chief Financial Officer of Southwest Gas Holdings, and Justin Brown, President of Southwest Gas Corporation, as well as 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 results and outlook. Starting with slide five, Southwest Gas continues to press forward on our transformational strategy of becoming a premier fully regulated natural gas utility. Following the successful Century IPO last April, we continue to monitor market conditions with respect to our separation strategy options and look forward to completing the separation of Century. During the quarter, we continue to make progress positioning the utility for long-term success and growth. As Justin Brown will address in more detail in a few minutes, we filed our general rate case in California in September, advanced our Arizona rate case, and following the completion of our general rate case in Nevada, we are seeing the positive impact associated with the recovery of our investments to enhance safety and reliability and meet the needs of our growing customer base. Additionally, we finished the third quarter with the extension of record operating margin performance on a trailing 12-month basis. Customer growth and demand remains strong, and the entire Southwest Gas team is intensely 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 that has been invested for the benefit of our customers. Southwest Gas has strong momentum heading to the end of 2024, and we now expect full-year utility net income to finish within the top half of the guidance ranges. $233 to $243 million. We are reaffirming our other guidance estimates. We expect our revenue to benefit from our refreshed rate structures, which reflect the significant investments we have made for the benefit of our customers over the past few years. As demonstrated with the constructive regulatory outcome in Nevada, we believe the nature of expected revenue increases from rate cases will provide net income growth. We expect this growth to be nonlinear over the forecast period as a result of rate case timing. Our confidence in our future is further demonstrated by a reaffirmed expected rate base compounded annual growth rate over the 2024 to 2026 period in the range of 6.5% to 7.5%. as well as our commitment to maintaining a strong investment-grade balance sheet and competitive dividend. As you can see on slide six, we have made excellent progress on this year's strategic priorities, and we are on track to achieve them all. As it relates to Sentry's full separation, we are recently out of the post-IPO lockup period and typical quiet period associated with the quarterly earnings cycle. We have been focused on placing a permanent CEO at Sentry. As you likely saw yesterday, Sentry announced Chris Brown will become Sentry's CEO on December 3rd. Chris brings expertise in leading large, complex organizations through significant evolution and growth in the energy and industrial sectors. He has a wealth of leadership experience and has a proven track record of success. We continue to evaluate century exit options in conjunction with market conditions and will provide further updates on timing and structure when available. We may ultimately separate the business through a series of sell-downs or share exchanges or some combination thereof. The successful execution of a sell-down or share exchange is contingent on favorable market conditions, so we continue to preserve the alternative of a tax-free spend but we expect our significant net operating loss balance could serve as an offset to a taxable transaction. We remain committed to separating Sentry, and we are confident that we have taken the appropriate steps and actions to preserve flexibility, thereby allowing us to separate in an efficient manner for shareholders in any scenario. Justin Brown will discuss our regulatory progress in more detail in a moment, but I will note that we are pleased with our progress so far this year and are on track to achieve all of our regulatory and operational priorities. As noted on slide seven, at the end of the third quarter, we had more than $450 million of cash on hand. We have adequate liquidity to honor our commitments and execute our strategy in 2024, and we no longer expect to issue equity this year. Our financing plan continues to show limited financing needs through 2025. Additionally, we are executing on our planned utility optimization initiatives and our rate case progress, and our cost discipline efforts reinforce our confidence that we are well positioned moving forward. I want to point out a few achievements of those highlighted on slide seven. At the utility, we continue to see very strong growth as a result of economic activity that is driving significant in-migration with about 41,000 new meter sets added during the last 12 months. And our strong balance sheets are providing us the flexibility to be thoughtful in our approach to capital investments and our efforts to deliver shareholder value. We are excited about the future of the company. Go ahead, Justin. Thanks, Karen.