Spire(SR) - 2024 Q3 - Quarterly Results

Overview of Fiscal 2024 Third Quarter Results Financial Highlights For Q3 FY2024, Spire reported reduced net and net economic losses across all segments, though full-year net economic earnings guidance was lowered, while nine-month consolidated net income and net economic earnings increased year-over-year Q3 FY2024 Key Financial Metrics (in Millions, except per share data) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Loss | $(12.6)M | $(21.6)M | Improved | | Diluted Loss Per Share | $(0.28) | $(0.48) | Improved | | Net Economic Loss (NEE)* | $(4.3)M | $(18.6)M | Improved | | NEE Per Share* | $(0.14) | $(0.42) | Improved | - Fiscal 2024 net economic earnings (NEE) guidance was lowered to a range of $4.15–$4.25 per share, down from the previous range of $4.25–$4.45 per share[24][35] Nine Months FY2024 Key Financial Metrics (in Millions, except per share data) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $276.8M | $248.6M | +11.3% | | Diluted EPS | $4.76 | $4.51 | +5.5% | | Net Economic Earnings (NEE)* | $275.0M | $265.7M | +3.5% | | NEE Per Share* | $4.73 | $4.83 | -2.1% | Management Commentary The CEO highlighted improved Q3 results and a new customer affordability initiative, but full-year guidance was lowered as the initiative's benefits will not fully offset earlier fiscal year challenges - A customer affordability initiative was launched to lower the overall cost structure and improve operational efficiency, with benefits expected to be realized in 2025 and 2026[10][16] - The reduction in FY2024 guidance is attributed to the inability of the new initiative's benefits to fully offset the impacts of lower Spire Missouri margin and higher interest expenses experienced earlier in the year[16] Segment Performance Analysis Third Quarter Results (Three Months Ended June 30) In Q3, Spire's net economic loss narrowed to $4.3 million from $18.6 million year-over-year, reflecting improved performance across all segments, with Gas Utility loss decreasing, Gas Marketing turning profitable, and Midstream earnings growing significantly Q3 Net Economic Earnings (Loss) by Segment (in Millions) | Segment | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Gas Utility | $(11.0) | $(12.3) | | Gas Marketing | $1.0 | $(2.5) | | Midstream | $13.9 | $3.6 | | Other | $(8.2) | $(7.4) | | Total | $(4.3) | $(18.6) | Gas Utility - The Gas Utility segment's net economic loss improved to $11.0 million from $12.3 million year-over-year, primarily due to new rates at Spire Alabama and increased usage, which were partially offset by higher depreciation and bad debt expenses[18][35][37] - Operation and maintenance expenses were impacted by a $4.4 million charge related to the new customer affordability initiative[12] Gas Marketing - The Gas Marketing segment reported NEE of $1.0 million, a significant improvement from an NEE loss of $2.5 million in the prior year, driven by asset optimization that resulted in improved transportation margins[19] Midstream - The Midstream segment's NEE grew substantially to $13.9 million from $3.6 million year-over-year. This was driven by higher storage earnings from additional capacity, new contracts at higher rates, and the inclusion of the MoGas and Salt Plains acquisitions[39] Other - Other activities reported a slightly larger NEE loss of $8.2 million compared to $7.4 million in the prior year, as $3.4 million in higher interest expense was mostly offset by lower corporate costs[40] Year-to-Date Results (Nine Months Ended June 30) For the first nine months of FY2024, net economic earnings increased to $275.0 million from $265.7 million year-over-year, driven by Gas Utility and Midstream growth, partially offset by a decline in Gas Marketing earnings Nine Months Net Economic Earnings by Segment (in Millions) | Segment | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | | Gas Utility | $252.8 | $234.5 | | Gas Marketing | $23.7 | $45.0 | | Midstream | $20.1 | $11.6 | | Other | $(21.6) | $(25.4) | | Total | $275.0 | $265.7 | Gas Utility - Gas Utility NEE grew due to new rates, but results were tempered by lower weather-driven usage in Missouri, as well as higher interest, bad debt, and depreciation costs[41] Gas Marketing - Gas Marketing NEE was significantly lower than the prior year because the highly favorable market conditions experienced during Winter 2023 did not repeat[22] Midstream - Midstream NEE improved due to higher storage earnings from additional capacity and new contracts, along with the inclusion of MoGas and Salt Plains results[42] Other - The loss from other activities narrowed, reflecting the settlement of an interest rate hedge and lower corporate costs, which more than offset higher interest expense[23] Guidance and Outlook Guidance and Outlook Spire lowered its fiscal 2024 NEE per share guidance due to year-to-date headwinds, yet maintains long-term growth targets supported by an increased capital expenditure forecast for fiscal 2024 FY2024 NEE Guidance per Share (in Dollars) | Guidance | Amount | | :--- | :--- | | Prior Range | $4.25 - $4.45 | | New Range | $4.15 - $4.25 | - The company remains confident in its long-term NEE per share growth target of 5-7%, driven by an expected 7-8% annual utility rate base growth[7] - The capital expenditure forecast for fiscal 2024 has been increased from $800 million to $830 million, primarily for increased deployment of advanced meters[44] Conference Call and Webcast Information Conference Call and Webcast Information Spire held a conference call and webcast on July 31, 2024, to discuss its fiscal 2024 third-quarter results, with replay details provided until August 31, 2024 - The conference call was held on Wednesday, July 31, at 8 a.m. CT (9 a.m. ET)[25][26][45] - A replay of the call is available through August 31, 2024, with access code 2598655[46] Non-GAAP Financial Measures Non-GAAP Financial Measures The report uses non-GAAP measures like Net Economic Earnings (NEE) and Contribution Margin, which exclude specific adjustments and non-recurring items to offer a clearer view of ongoing operational performance - Net economic earnings (NEE) is a non-GAAP measure that excludes items such as fair value and timing adjustments, acquisition and restructuring costs, and other unusual items from GAAP net income[8][17] - Contribution margin is a non-GAAP measure that adjusts revenues by removing costs that are directly passed on to customers, specifically the wholesale cost of natural gas and gross receipts taxes[8] Financial Statements Condensed Consolidated Statements of Income For the nine months ended June 30, 2024, Spire's operating revenues slightly decreased to $2.30 billion, but reduced natural gas costs led to increased operating income of $468.5 million and net income of $276.8 million, or $4.76 per diluted share Nine Months Ended June 30 (in Millions, except per share data) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Operating Revenues | $2,299.2 | $2,355.9 | | Total Operating Expenses | $1,830.7 | $1,933.4 | | Operating Income | $468.5 | $422.5 | | Net Income | $276.8 | $248.6 | | Diluted Earnings Per Share | $4.76 | $4.51 | Condensed Consolidated Balance Sheets As of June 30, 2024, Spire's total assets increased to $10.71 billion from $10.31 billion at fiscal year-end 2023, primarily due to growth in Net Utility Plant and total shareholders' equity reaching $3.33 billion Balance Sheet Highlights (in Millions) | Account | June 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Total Assets | $10,710.9 | $10,313.6 | | Total Current Liabilities | $1,709.8 | $1,755.4 | | Long-term debt | $3,422.3 | $3,554.0 | | Total Shareholders' Equity | $3,333.2 | $2,917.3 | | Total Capitalization and Liabilities | $10,710.9 | $10,313.6 | Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2024, net cash from operating activities significantly increased to $829.5 million, while cash used in investing activities rose, and financing activities resulted in a net cash outflow of $19.6 million Cash Flow Summary - Nine Months Ended June 30 (in Millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $829.5 | $404.1 | | Net cash used in investing activities | $(802.0) | $(516.4) | | Net cash (used in) provided by financing activities | $(19.6) | $116.8 | | Net Increase in Cash | $7.9 | $4.5 | Reconciliation of Non-GAAP Measures Net Economic Earnings and Reconciliation to GAAP This section reconciles GAAP Net Income (Loss) to Net Economic Earnings (NEE) for both three-month and nine-month periods, showing Q3 2024 GAAP net loss of $12.6 million adjusted to an NEE loss of $4.3 million, and nine-month GAAP net income of $276.8 million adjusted to an NEE of $275.0 million Q3 2024 Reconciliation: GAAP Net Loss to NEE (in Millions) | Description | Amount | | :--- | :--- | | Net Loss [GAAP] | $(12.6) | | Fair value and timing adjustments, pre-tax | $6.2 | | Acquisition and restructuring activities, pre-tax | $4.8 | | Income tax effect of adjustments | $(2.7) | | Net Economic Loss [Non-GAAP] | $(4.3) | Nine Months 2024 Reconciliation: GAAP Net Income to NEE (in Millions) | Description | Amount | | :--- | :--- | | Net Income [GAAP] | $276.8 | | Fair value and timing adjustments, pre-tax | $(9.2) | | Acquisition and restructuring activities, pre-tax | $6.7 | | Income tax effect of adjustments | $0.7 | | Net Economic Earnings [Non-GAAP] | $275.0 | Contribution Margin and Reconciliation to GAAP This section details the calculation of the non-GAAP Contribution Margin by adjusting GAAP Operating Income for specific operating expenses and natural gas costs, resulting in a consolidated Contribution Margin of $1.137 billion for the nine months ended June 30, 2024 - For the three months ended June 30, 2024, the consolidated Contribution Margin was $250.8 million, reconciled from a GAAP Operating Income of $30.7 million[53] - For the nine months ended June 30, 2024, the consolidated Contribution Margin was $1,137.0 million, reconciled from a GAAP Operating Income of $468.5 million[53]