Financial Data and Key Metrics Changes - For the full year 2025, net income totaled $264 million, or $4.37 per diluted share, compared to $223 million and $3.91 in 2024, representing a year-over-year increase of approximately 18.4% in net income and 11.8% in EPS [6][10] - Adjusted net income for the fourth quarter was $90 million, or $1.48 per diluted share, compared with $78 million and $1.35 in the same period in 2024, indicating a 15.4% increase in adjusted net income and 9.6% in adjusted EPS [9][10] - Capital expenditures totaled $760 million for the year, reflecting the company's commitment to growth and infrastructure investment [6][15] Business Line Data and Key Metrics Changes - The company completed $760 million worth of capital investment projects during 2025, with $170 million dedicated to serving its growing customer base [15] - The operational and maintenance (O&M) expense for the full year was up approximately 5% over 2024, slightly above the 4% compound annual growth rate (CAGR) guidance [11] Market Data and Key Metrics Changes - The company serves approximately 2.3 million customers, with a consistent addition of about 23,000 new residential customers each year, which helps spread costs more efficiently [16][17] - The company increased its storage capacity to over 60 billion cubic feet (BCF), enhancing reliability and reducing the impact of price fluctuations on customers [4] Company Strategy and Development Direction - The company is focused on disciplined execution of its capital plan, which supports growth while aligning with affordability, safety, and reliability commitments [15] - The introduction of non-GAAP adjustments to financial reports aims to provide a clearer view of performance within the Texas regulatory model, reflecting the returns allowed by regulators [6][10] - The company plans to leverage its competitive advantages in regulatory transparency and existing assets to secure new projects [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or surpassing the midpoint of initial EPS guidance for the 12th consecutive year, indicating strong operational performance [5] - The company anticipates long-term adjusted net income growth of 7%-9% and adjusted EPS growth of 5%-7% over the next five years [10][11] - Management highlighted the importance of legislative support in Kansas for more efficient capital recovery, which could enhance future earnings [14][35] Other Important Information - The company received a final order in the Texas rate case, approving a $14.4 million revenue increase and a 9.8% return on equity [14] - S&P and Moody's affirmed the company's credit ratings, indicating a stable outlook and strong balance sheet [12] Q&A Session Summary Question: Inquiry about non-GAAP adjustments and their impact on capital structure - Management explained that the adjustments were introduced following the finalization of Texas legislation and would not significantly impact capital structure or cash flow initially [24][26] Question: Discussion on growth opportunities and competitive landscape - Management noted that competitive advantages are assessed early in project opportunities, with regulatory transparency often serving as a tiebreaker against midstream providers [27][28] Question: Potential benefits from proposed Kansas legislation - Management indicated that the proposed legislation would expand the types of capital that qualify for recovery, potentially increasing customer impact from $0.80 to $1.35 per month [34][35] Question: Clarification on guidance assumptions related to Texas rate case - Management confirmed that the guidance for adjusted EPS includes the latest Texas rate case outcome and reflects the embedded cost of capital [45] Question: Inquiry about treasury market conditions - Management noted that current treasury market conditions are slightly favorable compared to previous guidance expectations [47]

Financial Data and Key Metrics Changes - For the full year 2025, net income totaled $264 million, or $4.37 per diluted share, compared to $223 million and $3.91 in 2024, representing a year-over-year increase of approximately 18.4% in net income and 11.8% in EPS [6][10] - Adjusted net income for the fourth quarter was $90 million, or $1.48 per diluted share, compared with $78 million and $1.35 in the same period in 2024, indicating a 15.4% increase in adjusted net income and 9.6% in adjusted EPS [9][10] - Capital expenditures totaled $760 million for the year, with O&M expenses up approximately 5% over 2024, slightly above the 4% CAGR guidance [6][11] Business Line Data and Key Metrics Changes - The company completed $760 million worth of capital investment projects during 2025, with $170 million dedicated to serving a growing customer base [16] - The company added about 23,000 new residential customers each year, which helps spread costs more efficiently and maintain affordability [17] Market Data and Key Metrics Changes - The company delivered over 3 billion cubic feet of gas to customers during Winter Storm Fern, with over 80% of the gas supply shielded from temporary price increases due to strategic investments [4][5] - The Texas Railroad Commission approved a $14.4 million revenue increase, a 9.8% return on equity, and a 59.9% equity ratio [14] Company Strategy and Development Direction - The company is focused on disciplined execution of its capital plan to support growth while ensuring affordability, safety, and reliability [16] - The introduction of non-GAAP adjustments to financial reports aims to provide a clearer view of performance within the Texas regulatory model [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting or surpassing EPS guidance for the 12th consecutive year, with long-term adjusted net income growth expected at 7%-9% and adjusted EPS growth at 5%-7% [5][10] - The company anticipates a $12 million variance in adjusted net income due to the impact of Texas House Bill 4384, which will be reflected in future financial reports [9] Other Important Information - The company has broken ground on a project to serve an advanced manufacturing plant outside of El Paso, expected to be in service by the third quarter of this year [17] - The company is also supporting proposed legislation in Kansas to allow for more efficient recovery of capital investments [15] Q&A Session Summary Question: Inquiry about non-GAAP adjustments and their impact on capital structure - Management explained that the timing of the adjustments was influenced by the finalization of Texas legislation and that it does not significantly affect capital market plans initially [25][27] Question: Competitive landscape regarding growth opportunities - Management highlighted the importance of having a competitive advantage in serving facilities and noted that regulatory transparency often serves as a tiebreaker against midstream providers [28][30] Question: Potential benefits from proposed Kansas legislation - Management indicated that the proposed bill would expand the types of capital included in filings, potentially increasing customer impact from $0.80 to $1.35 per month [36][39] Question: Guidance assumptions regarding Texas rate case outcomes - Management confirmed that the guidance for adjusted EPS levels incorporates the latest Texas rate case outcome [45] Question: Cash component of regulatory adjustments - Management clarified that while the accrual and deferral do not directly translate to cash, they will lead to larger cash flow items once included in future filings [46]

Core Insights - The company is focused on a disciplined capital plan aimed at high-growth regions, adding approximately 23,000 new residential customers annually to maintain affordability through cost-spreading [1] - Texas House Bill 4384 has expanded the scope of capital expenditures eligible for depreciation deferral, creating a structural delta between GAAP and regulatory accounting [2] - Strategic gas supply management has increased storage capacity by 20%, protecting over 80% of supply from price spikes during extreme weather [3] Financial Performance - The company has achieved its 12th consecutive year of meeting or exceeding initial EPS guidance midpoints, supported by solid operational execution and benefits from Texas legislation [2] - Long-term financial targets through 2030 project adjusted net income growth of 7% to 9% and adjusted EPS growth of 5% to 7%, with a target adjusted EPS midpoint of approximately $6 by 2030 [3] - Financial guidance for 2026 assumes no further Federal Reserve rate cuts, although any future cuts would benefit the bottom line [3] Operational Efficiency - An aggressive in-sourcing program has driven operational efficiency, reducing excavation damages by 14% despite an 8% increase in locate request volumes [1] - Performance during Winter Storm Fern validated infrastructure investments, providing a 25% increase in winter peak capacity [3] - O&M expense growth is projected to stabilize at a 3% to 4% CAGR long-term, following a temporary 5% increase in 2025 due to accelerated project execution [3] Capital Projects - The 5-year capital plan includes major projects such as a $120 million pipeline for Western Farmers Electric Cooperative, expected to deliver over 100 Bcf of gas annually [3]