Q1 2021 American Water Works Company Inc Earnings Call
[music].
Good morning, and welcome the American water first quarter 2021, the earnings conference call.
Reminder of this call is being recorded and is also being webcast with an accompanying slide presentation through the company's Investor Relations website.
Following the earnings conference call of an audio archive of the call will be available through May 11 2021.
Callers may access the audio archive toll free by kind of like one 877 three for for 75 to nine.
International callers may listen by dialing one for 123170088.
The access code for the replay is 10155150.
A webcast archive will be available for one year on American water's Investor Relations website at IR Doc AAM water Dot com slash of events I would now like to introduce your host for today's call. Mr. Ed Vallejo, Vice President of Investor Relations with the really Oh, you may begin.
Thank you Nick and good morning, everyone and thank you for joining us for today's call and at the end of our prepared remarks as usual, we will open the call up for your questions.
Now during this conference call both in our prepared remarks and answers for your questions.
May make forward looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based upon our current expectations estimates and assumptions however, since.
These statements deal with future events, they are subject to numerous known and unknown risks uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements and.
Additional information regarding these risks uncertainties and factors as well as a more detailed analysis of our financials and other important information is provided in the earnings release and in our May three 2021 form 10-Q, each as filed with the SEC.
Reconciliations for non-GAAP financial information related to O&M efficiency ratio and return on equity can be found in our earnings release and in the appendix of the slide deck for this call also this slide deck has been posted to our Investor relations page of our website.
All statements in this call related to earnings and earnings per share refer to diluted earnings and earnings per share and.
And for purposes of the anchor year on long term EPS growth guidance. The anchor is weather adjusted 2020 EPS of $3 84.
And with that I'll turn the call over to American water's, President and CEO Walter Lynch. Thanks, Good morning, everyone and thanks for joining us before we move to quarter results. Let me speak for a moment about our recent growth news.
As you know a key part of our strategies to operating states, where we can best serve customers drive efficiencies and continue to grow of regulated business.
Recall that earlier in the year, we announced the sale of our Michigan operation and as you know in late 2019, we announced the sale of our New York Operation. This slide shows what our new regulated service territory will look like after the announced transactions are completed.
Moving to slide six we recently announce what will be the largest municipal acquisition in Pennsylvania American water is history.
On April six we signed an agreement to acquire the wastewater treatment and collection system for the City of York, Pennsylvania disagreement will add an equivalent customer connection total of more than 45000 as.
As part of the agreement, Pennsylvania American water will also continue to provide contracted wholesale wastewater treatment and disposal for seven surrounding communities of New York We.
We look forward to developing strong relationships that meet the needs of all customers, including those outside the city.
This is yet another example of our strategy to grow where we can add value.
It was also executed under act 12 of 2016, which allows municipalities to sell their water and wastewater systems for a price based on the fair market value of the facilities.
<unk> Michael held for exact quote this is a new day for York, one filled with an unwavering optimism as our residents and businesses can finally breathe a sigh of relief for the first time in decades and quote.
Turning to slide seven New Jersey American water announced an agreement during the first quarter to acquire the water and wastewater assets of the egg Harbor City New Jersey.
Municipally owned water and wastewater system serves approximately 3000 customer connections. The agreement is notable as it's the first sale of being an executed through new Jersey's water infrastructure Protection Act or with the.
Net loss facilitates the sale of lease of municipally owned water or wastewater systems that meet certain criteria such as significant noncompliance egg Harbor city Mayor of Lisa <unk> said this sale will mean better infrastructure stable water rates of millions in funds for the city.
Additionally, Virginia American water signed an agreement to acquire the drinking water assets of the town of Waverly. This municipally owned water system serves approximately 900 customer connections and is our first agreement signed on the new fair market value of legislation in the Virginia Commonwealth.
To date this year, we've added approximately 45 on our customer connections through closed acquisitions and organic growth, we have under agreement more than 86000 customer connections, including the city of York.
In total the acquisitions closed so far this year and all of those under agreement represent approximately $440 million of additional rate base and an estimated $115 million of follow on additional capital expenditures over the next five years and.
And our growth pipeline remains strong with more than $1 2 million customer connection opportunities.
Lastly, I would like to provide an update on the sale of New York of American water.
In late March 2021, the New York State Department of Public Service Special Council released the findings of their municipal <unk> study as expected. The study focused primarily on the need for tax relief for customers, including recommendations to eliminate the special franchise tax. The study also focused on the feasibility of municipal Ization.
These findings were not addressed in the Governor's recently released budget on.
New York subsidiary continues to work constructively with the New York State Department of public service, including through ongoing settlement discussions with all parties and we remain confident that the sale will be completed we are working diligently to close the transaction.
Assuming progress continues as expected we believe that the net impact from New York results on 2021 results won't impact our 2021 guidance range. Further we don't anticipate any impact on the expected timing of our previously discussed future equity needs.
Let's move to slide eight and cover our first quarter results.
Our first quarter 2021 earnings per share of <unk> 73.
We're up seven 4% compared to the first quarter 2020.
We invested capital of $342 million in the first quarter as we continue the balance of that investment by focusing on operating and capital efficiencies constructive regulatory outcomes and by leveraging the size and scale of our business. As a reminder, we've challenged ourselves with the new O&M efficiency target of 34%.
2025.
With this strong start to 2021 and continued execution of our strategies. We are affirming today, our 2021 earnings guidance range of $4 18 to.
The $4 28 per share. We're also affirming our long term EPS compound annual growth rate in the 7% to 10% range.
Turning to slide nine let's go through some of the regulatory and legislative highlights of the first quarter of 2021.
In February the Pennsylvania Public utility Commission unanimously approved the previously filed settlement agreement between Pennsylvania American water and the PUC Bureau of investigation and enforcement of the request was driven by $164 billion of investment from 2019 through 2022.
Pennsylvania American water was authorize additional annualized revenues of $90 million over a two year period, excluding an agreed to reduction in revenues for tax savings pass back the customers as a result of the tax cuts and jobs Act of 2017 on.
On April seven the Missouri Public Service Commission approved an agreement reached by the parties in Missouri American water is request for a rate adjustment.
The rate order includes approximately $620 million on water and wastewater system improvements made since the end of 2017 rates will be effective on May 28, 2021, and will result in additional annualized water and wastewater revenue of $22 million, excluding the reduction in revenue for tax savings passed back to customers.
<unk> also result of T C J.
We also of a pending rate case in Iowa, which is moving on schedule and we filed a rate case in West Virginia on April 30.
Additionally, as we've reported previously, California American water filed for new rates in July 2019. The case covers 2021 of through 2023 in January 2021, California American water submitted to the commission of comprehensive settlement with the public advocates office and several intervenors if the.
Global settlement is adopted by the commission without changes revenues will increase by $33 $5 million over three years with the green capital investments of $165 million in 2021 and 2022.
And just yesterday, California American water filed its cost of capital application with the commission as part of the application, California American water requested an authorized cost of equity of 10, 75% cost of debt of $4 three 5% an overall rate of return of 8%, which is sufficient to provide California American.
Water with the opportunity to earn a reasonable return on its investments. The case covers 2022 through 2020 for with the revised cost of capital to be effective January one 2022.
Regarding the Monterey Peninsula water supply project as a reminder, California American water re filed its application to the coastal Commission on November six 2020.
On December three 2020, the coastal commission sent a notice requesting additional information needed to consider the application complete in March 2021, California American water provided the request of responses and one staff deemed the application complete by statute. The coastal commission would have 180 days the process.
Moving the state legislation on slide 10, we continue to see states take action to help address water and wastewater challenges.
In Kentucky, the Governor signed into law on New acquisition adjustment legislation. This law allows systems to be acquired above net book value when certain criteria are met.
The law also establishes a timeline for of PSC decision on an acquisition, which is within 60 to 150 days of application approval.
And Indiana. There are two pieces of legislation that have been signed into law that will benefit our current and future customers Act.
At 12, 87 creates a mechanism that reduces the required upfront cost of new customers for of water and wastewater utility to extend service to underserved areas.
And at $3 49 establishes the tax rider for water and wastewater utilities based upon any change in state or federal income tax law.
On the national level, we're pleased to see that water and wastewater infrastructure is included in both the administration's build back better plan as well as introduced in the state legislature federal legislation.
There continues to be of significant need to invest in water and wastewater infrastructure not just within our system for broadly across the United States.
We think the proposed funding to state revolving funds for drinking water and the possible expansion of of water Lockheed program will directly benefit our customers. The administration's plan also includes the tax package and Susan will talk about that in a moment.
Moving to slide 11.
Customers remain at the center of every decision we make.
This means smart investments balanced by efficient operations and capital deployment for.
For the 12 month period, ending March 31, 2021, our O&M efficiency ratio was 34, 1% of decrease from 34, 5% for the 12 month period ended March 31 2020.
As we note each quarter, our adjusted O&M expenses are slightly higher today than they were in 2010.
Since then we've added approximately 327000 customer connections while expenses only increased at a compound annual growth rate of one 1%.
Before I turn the call over to Susan Let me cover a few additional items.
You may have seen in our 10-Q of discussion around of matter related to the HOS and.
And likely you saw of note from a rating agency commenting on that disclosure as noted in the 10-Q I want to remind you that this is a matter of it relates to a subpoena received by AWS <unk> and American water subsidiary that operates a portion of the HOS the.
The subpoena seeks information related only to Hos's Metropolitan New York City operations.
As we noted in the 10-Q AWS cooperating fully with the investigation, while it is impossible to predict the outcome at this point, we do not believe it will result in any material impact on overall operations or financial results.
As a final note on the business I'd like to congratulate Mark Mcdonough, who was recently named President of New Jersey American water and Steve Curtis, who will replace Mark as President of our military services group.
These are great examples of how we build and leverage the deep bench strength of American water, both Mark and Steve have had increasing roles of responsibility throughout their careers on American water in our models of our values.
And I'll end with the thank you to our employees for their continued response to COVID-19.
We continue to execute our preparedness plans as we look to reintegrate those employees who've been working remotely.
As always safety is our top priority.
This past March we were very pleased that it was our first month in our history with no Osha recordable incidents occurred throughout our entire company.
Our commitment to zero injuries and incentives will continue because no injury is ever acceptable to us.
With that I'll turn the call over to Susan.
Thanks, Walter and let's start on slide 13, with a bit more detail on results.
As Walter highlighted first quarter 2021 earnings were <unk> 73 per share compared to 68 per share in the first quarter of 2020.
Results for the regulated business segment were <unk> 74 per share an increase of <unk> <unk> per share primarily driven by continued growth from infrastructure investment acquisition and organic growth.
Results for the market based business for <unk> per share a decrease of <unk> <unk> per share as we saw an increase in claims in the homeowner services group the <unk>.
Like the weather related events parent company results improved <unk> <unk> per share on the first quarter of 2021 as compared to the same period in 2020.
Moving on to slide 14 regulated results increased <unk> <unk> per share as I said, we saw on 19 cent per share increase in revenues from new rates in effect as well as earnings from acquisitions O&M expense increased by <unk> <unk> per share and somewhat offsetting with an increase in depreciation of <unk> <unk> per share in support of growth in the business.
<unk>.
As previously mentioned the market based business results increased or decreased <unk> <unk> per share in the first quarter of 2021 as compared to the first quarter of 'twenty the.
The lower results were due to increased claims expense, which was driven by extreme cold weather, primarily in Texas, and Illinois, and the continuation of stay at home activities as we saw throughout most of 2020 due to the pandemic.
The parent results improved <unk> <unk> per share on the first quarter of 2021 compared to the first quarter of last year the <unk>.
<unk> results were largely driven by a number of small items that increased expenses in the first quarter of 2020 offset by higher interest expense to support growth in the regulated business.
While I'm on the subject of results I'd also like to discuss the company's lower effective income tax rate in the quarter. This was primarily due to an increase in the amortization of excess accumulated deferred income taxes from the settlement of general rate cases in New Jersey, and Pennsylvania that improve the timing and method by which the excess deferred taxes are returned to come.
Customers the increased amortization of excess deferred taxes lower tax expense and is largely offset dollar for dollar with lower revenue, resulting in no impact to earnings we.
We will continue to see this impact and the resulting lower effective tax rate is the amortization continues in these states and others as similar provisions are put in place.
And as a reminder of the excess accumulated deferred income taxes resulted from the federal rate being lowered from 35% to 21% as part of the tax cuts and jobs Act as Walter mentioned.
Moving on to slide 15, the continued successful execution of our regulatory strategy is a key element of our ability to consistently deliver financial results.
To date, the regulated businesses have received $123 million in annualized new revenues. In 2021. This includes the $92 million from the Pennsylvania and of Missouri rate cases discussed earlier, excluding the agreed reduction in revenues for tax savings passed back to customers.
$31 million from infrastructure surcharges and.
In addition, the Pennsylvania rate case includes the second step increase of $20 million effective January of 2022.
We have also filed requests and are awaiting final orders on three rate cases totaling an annualized revenue request of $61 million.
And as Walter mentioned, we are also closely following present items tax proposal and evaluating the impact that the current proposal would have on our long term growth strategy.
While there are many proposed provision that need further analysis of our early indications are that there will be minimal impact to our plan.
And finally moving on to Slide 16 on April 28 of 2021 of our board of Director Board of Directors increased the company's quarterly cash dividend payment from 55.
The 60 in one quarter cents per share.
We continue to be of top leader in dividend growth, we of ground our dividend at a compound annual growth rate of about 10% over the last five years.
Significantly outpacing our peers in the Dow Jones until the average and the Philadelphia until the index.
We expect to continue our dividend growth at the high end of the 7% to 10% range. As we know that is very important to many of our shareholders.
Also we continue to target a dividend payout ratio of 50% to 60% of earnings.
As this quarter's results demonstrate we continue to consistently deliver on our earnings commitment regulatory execution, along with the results from our market based businesses allows us to continue that performance. We believe the delivering on results combined with our strong earnings growth and superior dividend growth expectation provides.
Excellent value for our shareholders as we continue to outperform our peers.
And with that let me turn the call back over to Walter for a few closing remarks. Thanks, Susan before we move on to your questions. In April we were very proud of the issue our first annual inclusion of diversity report.
This report highlights the efforts, we've undertaken and the strides we've made advancing our commitment to inclusion and diversity.
<unk> is the journey and our <unk> reported another way the shows how we're constantly striving. Thanks for the contributions of every employee to build an inclusive of mutually respectful workplace.
The launch just report internally, we were honored to have Mr. Urban Magic Johnson joined us virtually for a conversation on inclusion and diversity and on ally ship.
Additionally, we had an incredible community of healing discussion with our employees to provide a chance for even more open and honest dialogue on inclusion.
We believe that accompanies strength is its people and the diversity of our workforce makes us even stronger with that we're happy to take your questions.
Yeah.
Well now begin the question and answer session. That's a good question for Mike Press Star then one on your thoughts on phone.
I mean, there isn't a speakerphone please pick up your handset before pressing the gains with all of your question. Please press Star then to the time, we'll pause momentarily to assemble thereafter.
First question comes from <unk> Chopra.
For all of Evercore ISI. Please go ahead.
Hey, good morning, Walter and Susan.
Good morning, good morning <unk>.
Thanks for taking my question. Good morning, just I have a couple of years first of all Walter just to clarify the New York American sales process.
I know a lot of moving pieces, but are we still targeting at this year close is that the current plan.
Yes, that's right your cash.
We're still working through with as I said in prepared remarks still working through with.
Staff and others, and we were hoping to be expecting this year.
Understood. Thank you and then just on the subpoena.
Can I just clarify that this is related to specifically homeowner services within American water resources business and the information that you might be sharing is that just new York specific or are there other states.
Walt in the subpoena.
Yes, it's specific to our New York City Metropolitan operations in HOS, that's exactly right for guests.
Got it and then obviously there is no set timeline here as to all of this matter gets resolved.
Now on that at this point again, we continue to work on it.
Cooperating investigation.
Okay understood.
Just one the big picture then.
Walter just your thoughts on the bite and sort of of the American jobs plan.
Can you talk about several hundred billion dollars of investment.
On the lead and then water and wastewater assets one of the implications to your existing business and then just your regulated acquisition growth strategy.
Yes, So let me start with we're really happy that the administration is focusing on water and wastewater as part of the infrastructure plan. So we like the attention of the industry is getting and we think that the plan will benefit our customers primarily by having access to.
The low interest financing that's part of the plan and so we want to re access of right now on the water side, we want to get access on the wastewater side, that's a growing segment of our business and we want our customers the benefit like others from the low interest loans.
Overall, we are very.
I'm excited about the the.
Program, and we want to participate like like the municipalities do on the wastewater zone.
Perfect and just does it how does it mean.
Does it increase your sort of.
Footprint on the recognition of acquisition side or sort of since there'll be a lot of aid.
Given to sort of systems across the country.
It doesn't derail your your regulated acquisition growth strategy, how would you how would you sort of characterize that.
Well you know Theres size, we've said and I've said in my remarks, there's significant needs out there on the water and wastewater side.
For us, it's not going to change our plan our pipeline continues to grow we're going to continue to provide meaningful solutions for communities and we're committed to our plan and we don't see any change the we're planning going forward.
Understood perfect. Thanks, guys much appreciate the time.
Thanks for your guys. Thanks again.
Thank you and the next question is from Julien Dumoulin Smith of Bank of America. Please go ahead.
Hey, good morning team. Thanks for the time of the opportunity.
Maybe to kick things off right. After the gas at the question here can I follow up on ask you guys about your latest thinking on the.
And just around the <unk> fast regulation.
The hazardous determinations, there and just obviously, there's a lot of different pieces that could move here.
At least preliminary thoughts on where things could go in and more specifically how that could impact your business.
Yes, Julian Thanks for the question, we think theres going to be a lot more focus on P. Fast on this administration I know they form the task force of and we've always last week to look at what are the next steps to establishing the mcl right now Theres. The health advisory limit of 70 parts per trillion and we think that there's going to be a lot more focus on it.
So we're off the wait and see but you know the.
On the EPA is really science driven.
And they want to make sure. It's based on on Science and I think there's you know there's going to be.
Coming together of the science and the need to establish an mcl and we look forward to participating in working with the administration to establish that.
Got it and hazardous determination thats, just part of the broader context here right.
That's right. That's all part of this work that's going to be going on.
Got it alright, excellent and then sort of a little bit more nuanced here.
You think about.
The impacts here in the quarter on the.
The the non the market based business here.
Youre, probably still broadly within plan on the year and have them off the just can you speak to that obviously the payoffs on the warranties et cetera, obviously the elevated here just if you can speak to that of a little bit on on the offsets et cetera, and how youre tracking.
Maybe I forget what the with the HOS business, we're seeing higher claims on the wastewater side.
People are spending more time in their homes and that's key.
Housing apparently additional breaks that we're having to repair and then on the partnership side, we have seen a little bit of a slowdown in those partnerships yet we still have of really good pipeline of opportunities, but those of the two areas I think that had been somewhat impacted by the pandemic.
You know our business going forward.
Julian I might just add on that point. In addition to what Walter said, we did see a little bit higher claims in the quarter from these weather related events, we did see some water.
Claims, particularly in Texas, Illinois, and a few other parts of the country.
Really driven by the extreme weather that occurred and we would expect of course that to now sort of be over some of the the wastewater claims that Walter is talking about as long as we continue this.
On a bit more of the stay at home, we may see elevated claims there, but I think the exposure to the weather related we have isolated in this quarter.
Okay got it so how do you think about that relative to the full year I mean, obviously of the wastewater continues a little bit elevated.
Offsets et cetera, probably not the material right.
It's really not too material now I mean, we saw roughly a penny or so of that impact related to the stay at home activities in this quarter.
And.
As you can see across the country.
The states are starting to loosen up so there'll be some return. So I certainly think we will see the start to mitigate and in any event.
See it is material for the year.
Excellent guys. Thank you all very much of a nice day.
Thanks, Joanne Thanks Julien.
Thank you and the next question for Michael Kim of Goldman Sachs. Please go ahead.
Okay.
Thank you just.
Couple of for me the first of all island with the the recently.
Announced Pennsylvania, and New Jersey transactions, how do you think about the potential cadence of magnitude of the equity kind of for you gave at the analyst day, just thinking through 'twenty, one 'twenty two.
If the kind of split up.
Or are we still assuming kind of a.
A bulk number in one year.
Well first let me talk about the growth and we're really excited for these two acquisitions in our two biggest states.
It's all part of what we're doing in providing solutions for communities with the city of York on the wastewater side and then the egg Harbor city.
And the first with the that's really important the first with the acquisition and we're hopeful many of our communities are going to see the benefits of that and continue to.
The solar systems to New Jersey American water in Pennsylvania American water, but it's really about providing meaningful solutions and again as we've talked about having consolidated of tariffs and the ability to spread those costs across our big customer base over 700000 customer connections really helps those communities to mitigate and minimize customer bill impacts. So that's.
The competitive advantage of ours.
Part of our strategy to make sure that these communities understand the value of that we can bring to them through investment and I wanted to spotlight the follow on investment and how significant that is to our growth and to providing solutions for communities. So we're really excited about these two acquisitions on how theyre going to play in the future growth in Pennsylvania, New Jersey.
And then maybe let me just comment on the equity needs.
That was the follow on part of your question I think.
We built our plan and laid out our financing plan over the five years, we anticipated.
An increase in our growth from acquisition and we reflected that at analyst day.
Now whether or not.
These specific transactions.
Question, but we had.
Dissipated a step up in growth and built our plan accordingly.
The long answer to your question I don't see any change from these specific acquisitions that we've now highlighted any change to our equity financing timing or any of other our financing plans over the course of the five years.
Got it.
Just on the timing perspective is there a possibility that we could see some of that equity in the 'twenty one type of framework that more but beyond 'twenty one.
No it's beyond 'twenty, one at Analyst day, I think we indicated that it's still it's about $700 million of equity in the five years and it's still roughly in sort of the middle of that five year timeframe.
So no no I would not anticipate anything in 2021.
Got it and then my second question I guess, maybe for Walter is obviously these two acquisitions in the states that had favorable systems in place for such a growth.
With the pending New York sale, and then the recently announced Michigan divestiture as well when you just look across your footprint on the different states.
You don't have to name any but are there opportunities.
Fully monetize so on.
The other states to concentrate more on the the jurisdictions.
There are sections of that offer the.
Better systems for organic and inorganic growth.
Yes, we do of constant assessment of where we're operating the.
Where can we provide the best value for customers and where can we grow our systems and we will continue to evaluate our footprint but.
We're really happy where we are right now and then.
We continue to grow if you look at our pipeline, where we're growing we have eight states, where we have 32 agreements. So it's not just in one or two or three states, it's really across our footprint and we will continue to provide solutions again for communities across our footprint.
Understood. Thank you both.
Okay.
Okay.
Thank you next question comes from Steve Fleishman of Wolfe Research. Please go ahead.
Hey, good morning.
So just a question on the pay.
Hey, Walter on the.
The.
Disclosure of this subpoena and the homeowner services.
I guess it doesn't say I think in your.
And your <unk>.
Release, just if the company has done its own investigation.
If they are determined.
Anything was done wrong. The do you have any color information on that.
Yes, Steve and given that it's an ongoing investigation, we really can't comment any more on it other than what we haven't in the disclosure.
Okay.
Alright.
And then Walter on your year end call you had kind of hinted at a larger acquisition.
For more growth coming in.
And your tuck in acquisitions and the like.
Should I assume that was the York deal that ended up officially getting announced or or is that still kind of relevant for something else.
Well, let me let me approach it from this we continue to build our pipeline. We continue to again provide solutions for communities and if you look over the last year, we've almost doubling of our pipeline. We've done the biggest acquisition in Pennsylvania American water history. So we're we're going to keep doing much of the same story.
Okay.
Great and then just on the New York American sale, if I, if I understood you correctly it sounds like neither of your forecast nor your equity timing.
Should be impacted at all by whatever happens with the the outcome of the sale.
Yes, that's correct Steve.
Great that was very clear thank you.
Okay, Steve Thank you.
Thank you and again if the other question. Please press Star then one.
The next question comes from Richard <unk> Jpmorgan. Please go ahead.
Hi, good morning.
Maybe following up on that last point real quick the the sale timing.
Would it impact I guess, where you land within the range of your 'twenty, one guidance or free cash.
Currently you have some timing assumption associated with closed presumably baked in.
You disclosed what that assumption is in.
What a quarter of two difference may do too where you land in the range.
Hey, rich it's Susan.
Probably not going to add much more detailed on that I would just echo what Walter said in his prepared remarks and it is the answer.
Minute ago, we just don't see it having any impact on 2021.
Fair enough. Thank you and we'll just separately curious at a high level in terms of your O&M efficiency ratio what impact you've seen on your efforts where over the past year under the Panther on making what that May mean for sort of progress on efficiencies going for.
As we reopen.
Okay.
Yes, it's been a big focus for US as you know rich and we're going to continue to focus on every area of our business, where we can drive efficiencies. We've improved it from 34, 5% to $34. One as I said in my remarks, and we are confident that we can hit our goal in 2025 of 34. So we're going to continue to do the things.
We've been doing focusing on technology, leveraging our supply chain and really leveraging our culture of looking for every dollar that we can safe and continue to provide the service of our customers expect so that's the journey. We're on we're going to continue to execute on that and we're confident in our goal in 2025.
Great. Thanks for taking my questions.
Thank you thanks rich.
Thank you. The next question from the very Mitchell of HSBC. Please go ahead.
Hi, Good morning, everyone and I just got another couple of high level question about geography, which is something I'm always interested in and when I look at your end.
Coverage across the many states testified in proposal change.
The theme of your opportunities across the state I mean, you've already said that takes on want to change the growth trajectory.
And you won't see that and I don't have in.
In terms of what we see the intensive nature of regulatory mechanisms in states now that you would like to see.
Thank you.
Yeah, Hello, Verity Walter here.
For the the administration's proposed plan does not change our outlook at all on acquisitions again, we continue to build our pipeline of opportunities.
We are providing meaningful solutions and really when you look at the size of our business how long we've been in business since 18, 86, and the and the expertise that we have and the ability to share costs across the customer base, we bring tremendous value to communities when they realize that and that's why they're talking to us about potentially selling the water and wastewater systems.
Yeah, So I'll just go.
Thanks, Jim Shaw at kit.
Pencil.
Great new opportunities and to take care of stake.
I'm not sure of it and create new opportunities.
The great thing is that it really talks about water and wastewater where before we were always left out.
And I think there's a realization in this country that there's so much fragmentation in so many improvements that need to be made that the private sector of American water can play a really integral role in moving that forward and that's what we're excited about.
Alright.
We think in the what would you like a debt free.
And in terms of SAP on you touched on.
On it.
Yeah, we continue to work with states.
Yes, and we continue to work with states on fair market value of legislation as I said, Kentucky is now the 11th state within our footprint to have fair market value of legislation, it's really an affirmation of the value of that we provide in the I think the recognition of the legislature and the governor is that they want us to play a role on consolidating the market and adding our expertise to many of the.
The small systems that don't quite have the expertise. So we do have in the appendix.
An overview of fair market value by state and the specific.
Parts of the fair market value so.
Refer to that and you can see again 11 out of our of our 16 states have fair market value of legislation and we're going to continue to work with states that don't have it and continue to work.
To tell our story about the value we can provide.
Great. Thanks.
Thank you Bernie.
This.
For a question Ram for the platform knowledge, the kind of account for the back over to Mr. Walter Lynch for closing remarks. Please go ahead.
Thank you for joining our call today, we appreciate and value of your participation in the work you do on behalf of your clients. We hope are open and transparent discussions give me confidence on our company and the investment of our stock.
As a reminder, our virtual annual shareholder meeting will be held next week on May 12 at 10, a M. Eastern daylight time, we hope that you'll join us in the meantime, if you have any additional questions. Please call. The IR team will be happy to answer them, thanks, again and be safe.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.