Chesapeake Utilities(CPK) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.96 for the second quarter and $3.04 year-to-date, reflecting a 10.5% growth compared to the previous year [20][21] - Adjusted gross margins increased by approximately $8 million for the quarter and $16.8 million for the first half of the year [21][22] - Net income for the second quarter was $17.1 million, with a year-to-date increase of $5.7 million over the same period last year [21][22] Business Line Data and Key Metrics Changes - The Regulated Energy segment saw adjusted gross margin up 6.3% for the quarter and 5.8% year-over-year, driven by pipeline expansions and organic growth [25] - The Unregulated segment experienced a 21.2% increase in adjusted gross margin compared to last year's second quarter, primarily due to contributions from Diversified Energy and increased margins in propane distribution [26] Market Data and Key Metrics Changes - Customer growth in the Delmarva territory was 5.7%, while Florida saw 4.1% year-over-year growth, both above the national average [14] - The company surpassed 100,000 customer connections in Delmarva and is close to achieving the same milestone in Florida [12] Company Strategy and Development Direction - The company is focused on long-term sustainable growth, with significant opportunities for investment and earnings growth in its capital projects pipeline [12][43] - The company is pursuing renewable natural gas (RNG) investments to meet customer demand and support sustainability efforts [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation and supply chain constraints but remains optimistic about future investment opportunities [10][13] - The company adjusted its capital expenditure expectations for 2022 to a range of $140 million to $175 million due to project delays, but this is not seen as a negative outlook [39][41] Other Important Information - The company welcomed two new members to its Board of Directors, enhancing its leadership team [7][38] - The company has filed a rate case in Florida seeking a permanent increase of approximately $24.1 million, with interim rates approved [32] Q&A Session Summary Question: Insights on propane distribution business margins - Management indicated that higher margins are due to a combination of expanded fees from new customers and a diversified supply portfolio [46][48] Question: Impact of natural gas prices on customer conversions - Management noted that conversions from community gas systems to natural gas have not been significantly impacted, with challenges primarily related to homeowner agreements [49] Question: Breakdown of CapEx reduction between regulated and nonregulated - The most significant shifts relate to pipeline projects, with a larger decline in transmission side due to delays [52][53] Question: Customer growth breakdown in Delmarva - Management stated that significantly greater than 50% of customer growth comes from new home construction rather than conversions [57] Question: Accounting for interim rates in Florida - Management will evaluate the probability of permanent rates exceeding interim rates before booking earnings [61] Question: Regulatory strategy regarding inflationary pressures - Management is proactive in considering mechanisms to address inflationary pressures in their regulatory strategy [63][65]