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Atmos Energy (ATO) - 2024 Q1 - Earnings Call Transcript
ATOAtmos Energy (ATO)2024-02-07 16:29
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Financial Data and Key Metrics - Q1 2024 net income was 311million,or311 million, or 2.08 per diluted share, representing an 8.9% increase from 1.91pershareintheprioryearquarter[7][14]−Consolidatedoperatingincomeincreasedby241.91 per share in the prior year quarter [7][14] - Consolidated operating income increased by 24% to 399 million in Q1 2024, driven by rate increases, customer growth, and lower O&M expenses [14] - Capital spending in Q1 2024 was 770million,supportingsystemmodernizationandgrowth[7]−Thecompanyaddedover58,000newcustomersinthe12monthsendedDecember31,2023,with44,000locatedinTexas[8]−11newindustrialcustomerswereadded,expectedtoconsumeapproximately2.5Bcfofgasannually,equivalentto45,000residentialcustomers[9]BusinessLinePerformance−IntheAPTsegment,severalprojectswerecompletedtoenhancesystemsafety,reliability,andsupplydiversification,includingtheLinePCandLineS2projects[10][11]−TheLineWALoopproject′sfirstphasewascompleted,adding24milesof36−inchpipelinetofortifytheAPTsystemservingtheDallas−FortWorthMetroplex[12]−Customersatisfactionremainedhighat98770 million, supporting system modernization and growth [7] - The company added over 58,000 new customers in the 12 months ended December 31, 2023, with 44,000 located in Texas [8] - 11 new industrial customers were added, expected to consume approximately 2.5 Bcf of gas annually, equivalent to 45,000 residential customers [9] Business Line Performance - In the APT segment, several projects were completed to enhance system safety, reliability, and supply diversification, including the Line PC and Line S2 projects [10][11] - The Line WA Loop project's first phase was completed, adding 24 miles of 36-inch pipeline to fortify the APT system serving the Dallas-Fort Worth Metroplex [12] - Customer satisfaction remained high at 98% in Q1 2024, and the company assisted nearly 17,000 customers with over 5 million in funding assistance [12] Market Performance - Texas added nearly 370,000 jobs in 2023, representing a 2.7% annual growth rate, outpacing the national average [9] - The Texas Workforce Commission reported a record high of over 14.1 million seasonally adjusted employees in January 2024 [8] Strategic Direction and Industry Competition - The company continues to focus on modernizing its natural gas distribution, transmission, and storage systems to become the safest provider of natural gas services [7] - Regulatory filings have resulted in 167millioninannualizedoutcomes,withadditionalfilingsplannedtoseek167 million in annualized outcomes, with additional filings planned to seek 340 million to 370 million in annualized operating income increases [17] - The company remains committed to organic growth and system modernization, with limited interest in M&A due to strong organic growth and favorable regulatory constructs [50] Management Commentary on Operating Environment and Future Outlook - Management highlighted the challenging weather conditions and praised employees for their dedication to customer service [7] - The company expects fiscal 2024 EPS to be in the range of 6.45 to 6.65,inclusiveofthefavorableimpactofpropertytaxlegislationchangesinTexas[19]−Managementremainsconfidentinthecompany′sabilitytosustainsuccessthroughoperational,financial,andregulatoryexecution[19]OtherImportantInformation−ThecompanyiscooperatingwiththeNationalTransportationSafetyBoardininvestigatinganincidentinJackson,Mississippi,thatresultedinonefatality[13]−Thecompanycompletedover6.65, inclusive of the favorable impact of property tax legislation changes in Texas [19] - Management remains confident in the company's ability to sustain success through operational, financial, and regulatory execution [19] Other Important Information - The company is cooperating with the National Transportation Safety Board in investigating an incident in Jackson, Mississippi, that resulted in one fatality [13] - The company completed over 1.1 billion in long-term debt and equity financing in Q1 2024, maintaining a strong balance sheet with 60% equity capitalization and 3.2 billion in available liquidity [18] Q&A Session Summary Property Tax Impact - The property tax legislation in Texas is expected to reduce property tax expenses by 20 million to 22millioninfiscal2024,withanEPSimpactof22 million in fiscal 2024, with an EPS impact of 0.09 to 0.11 [24][25] - The benefit is temporary and will be returned to customers over the next two and a half years [42] Customer Growth Expectations - Customer additions are expected to pick up in the spring, driven by strong demand in the Dallas-Fort Worth Metroplex and diversified industrial growth [27][28] Rate Cases - General rate cases in West Texas and MidTex are expected to be routine, with no contentious issues anticipated [30] O&M and Inflation - The company remains comfortable with its O&M expense range of 3% to 3.5%, despite inflationary pressures [35] Winter Storm Performance - The company performed well during a historic winter storm, with natural gas meeting 85% of energy demand during the period [37][38] M&A Philosophy - The company remains focused on organic growth and system modernization, with no plans for M&A due to strong growth and favorable regulatory constructs [50] Legislative Updates - The company is monitoring legislative sessions but has no significant updates at this time [53] Bad Debt Expense - The 14 million reduction in bad debt expense in Q1 2024 was reflected in the company's guidance and is not expected to impact future periods [58]