Q1 2024 Chesapeake Utilities Corporation Earnings Call
I appreciate your patience and please continue.
[music].
Okay.
Please standby your program is about to begin.
You need assistance during your conference today, Please press Star zero.
Welcome to the Chesapeake Utilities Corporation first quarter 2024 earnings conference call.
At this time, all participants have been placed on a listen only mode and the floor will be open for your questions. Following the presentation.
If you would like to ask a question at that time. Please press star one on your telephone keypad.
If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
So others can hear your questions clearly, we ask that you pick up your handset for best sound quality.
Lastly, if you should require operator assistance, please press star zero.
I would now like to turn the call over to Lucia Dempsey head of Investor Relations.
Lucia Dempsey: Thank you and good morning, everyone. My name is Lucia Dempsey and I'm thrilled to have joined Chesapeake Utilities Corporation last month as the new head of Investor Relations.
Lucia Dempsey: I'm looking forward to meeting many of you at a G. A next week or at other opportunities in the coming weeks and months.
Lucia Dempsey: Today's presentation can be accessed on our website under the investors page and events and presentations section. After our prepared remarks, we will open up the call for questions.
Lucia Dempsey: With me today are Jeff householder chair of the board President and Chief Executive Officer.
Lucia Dempsey: Beth Cooper Executive Vice President Chief Financial Officer, Treasurer, and assistant corporate Secretary.
Lucia Dempsey: And Jim Moriarty Executive Vice President General Counsel, corporate Secretary, and Chief policy and risk Officer.
Lucia Dempsey: Unfortunately, we saw our typical disclaimers, while I remind you that matters discussed in this conference call May include forward looking statements that involve risks and uncertainties.
Lucia Dempsey: Forward looking statements and projections could differ materially from our actual results.
Lucia Dempsey: The safe Harbor for forward looking statements section of our 2023 annual report on Form 10-K provides further information on the factors that could cause such statements to differ from our actual results.
Lucia Dempsey: Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin.
Lucia Dempsey: Net income and adjusted earnings per share and the accompanying information includes the appropriate disclosures in accordance with the Sec's regulation G.
Lucia Dempsey: A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release, and our first quarter Form 10-Q.
Lucia Dempsey: Now it is my distinct pleasure to turn the call over to Jeff.
Jeffry M. Householder: Thank you Lucy good morning, and thanks to all of you for joining our call today I'll begin with slide four.
Jeffry M. Householder: This quarter our team once again executed on our long standing strategic growth plan over the past several years, we've been focused on three fundamental drivers to support earnings growth first we work hard to identify and prudently deploy investment capital that meets the service demands created by a significant customer growth are.
Jeffry M. Householder: Geographic footprint is an advantage here our service territories continued to experience our customer growth rate that is more than double the industry average second we proactively manage our regulatory agenda to support the approval and cost recovery of our capital projects, you'll hear us describe in a moment satellite projects currently.
Jeffry M. Householder: And for all state and federal regulators.
Jeffry M. Householder: And basketball well over $200 million.
Jeffry M. Householder: And then third and perhaps most important of our strategic growth drivers is the continued business transformation of our company, which is focused on our people processes technology and organizational structure.
Jeffry M. Householder: Our continuous improvement initiatives enable us to manage an ever expanding business.
Jeffry M. Householder: Turning to slide five.
Jeffry M. Householder: This morning, you will hear us touch on our service delivery to customers and other operational accomplishments the FCB acquisition integration process.
Jeffry M. Householder: Capital project execution regulatory advances and a number of efficiency improvements I'm.
Jeffry M. Householder: I'm happy to report that two of the more significant concerns facing our company and our industry whether in interest rates have been at least through the first quarter.
Jeffry M. Householder: It's impactful to earnings than what we experienced in 2023.
Jeffry M. Householder: The 2024, where it was more than the other one our service areas, we've been able to manage through it.
Jeffry M. Householder: Consumption increase in the first quarter compared to Q1 of 2023 and as we all know interest rates appear to have at least stabilized with no increase so far this year.
Jeffry M. Householder: Our regulated natural gas transmission and distribution businesses continue to grow we will mentioned today several system expansions, which are in various stages of approval permitting or construction.
Jeffry M. Householder: And our nonregulated businesses, we realized contributions from increased propane consumption as well as increased propane margin and service fees. This serve to offset much of the warmer than normal weather impact.
Jeffry M. Householder: Our Florida City gas integration plan is on track and on schedule and importantly, <unk> business deliver incremental margin in line with our expectations. This.
Jeffry M. Householder: This quarter, we immediately recognize the positive impact from our integration efforts and didn't Miss a beat with our accelerated capital investment plans across our larger footprint.
Jeffry M. Householder: We're now even more confident about our opportunities to propel future earnings growth in Florida, including through four projects and an expansion of the safe program, which are all currently filed for approval with the Florida Public Service Commission.
Jeffry M. Householder: Across our enterprise, we are steadily advancing the capital investment projects regulatory filings and business transformation initiatives that will support future growth and optimize our operations within our larger footprint.
Jeffry M. Householder: We are particularly pleased to have just received approval from the Florida Public Service Commission on Tuesday for three new transmission expansion projects that support increased customer demand.
Jeffry M. Householder: We remain confident in our ability to achieve our 2024 adjusted EPS guidance of $5 33 to.
Jeffry M. Householder: The $5 45.
Jeffry M. Householder: And our longer term outlook for 2025, and 28 as we continue to drive shareholder value by delivering on the attractive opportunities throughout our businesses.
Jeffry M. Householder: I will now turn to slide six which covers results for the quarter.
Jeffry M. Householder: Adjusted earnings per share was $2 10 in the first quarter of this year. We also generated adjusted gross margin of $165 million, a $35 million increase over the first quarter of last year.
Jeffry M. Householder: F C. G represented $25 million and adjusted gross margin in Q1. This was driven by an incremental contribution from the 2023 rate case as well as continued customer growth.
Jeffry M. Householder: Our legacy businesses contributed another $10 million of adjusted gross margin growth driven by contributions from incremental transmission expansion projects and organic growth in our natural gas distribution businesses.
Jeffry M. Householder: Contributions from our regulated infrastructure programs in Florida, natural gas base rate proceeding higher customer consumption increases and aspire energy gathering fees and higher propane consumption margins per gallon and fees.
Jeffry M. Householder: Turning now to slide seven we remain intently focused on achieving synergies optimizing operations across the enterprise and accelerating capital investment opportunities. We're taking a good look at our operations and processes, taking a best of both approach to things like customer care and project management.
Jeffry M. Householder: In places, where our legacy business processes, we're stronger, we're bringing that strength of Florida city gas and vice versa.
Jeffry M. Householder: Our work so far has been encouraging there are a lot of commonalities to our approaches and cultures and our teams have been really engaged to learn from each other.
Jeffry M. Householder: And while the integration work continues we are now operating as one company and our efforts to leverage our greater footprint optimize efficiencies and invest in growth are being applied across the whole enterprise.
Jeffry M. Householder: Slide eight shows the major projects and initiatives that are driving approximately $16 million of incremental adjusted gross margin growth. We have submitted 11 pipeline projects to the Florida Public Service Commission, representing approximately a $152 million of capital invest one seven.
Jeffry M. Householder: Seven of these have now been approved and four are under review with decisions expected. This summer. This is a record number of project filings and approvals for us it demonstrates our ability to accelerate investment.
Jeffry M. Householder: The combined business. It also speaks to the magnitude of future growth opportunities in Florida, one of the key reasons. The <unk> acquisition was important to our strategy.
Jeffry M. Householder: This quarter, we added two new Peninsula pipeline company transmission projects to the table Boynton Beach in New Smyrna Beach reps.
Jeffry M. Householder: Representing a combined $5 million and adjusted gross margin for 2025.
Jeffry M. Householder: These extension projects will support F to use distribution systems, and the Boynton and new Smyrna Beach communities.
Jeffry M. Householder: Those expansions are driven by the need for increased natural gas supply to coastal portions of the state that are experiencing significant population growth.
Jeffry M. Householder: On the infrastructure replacement side, we have a number of programs well underway, including the guard safe and storm protection programs in Florida, and a capital surcharge program on the eastern shore. These programs support our ability to maintain safe and reliable service for our customers and will contribute to margin growth over the.
Jeffry M. Householder: The next 10 years as new projects are developed and receive approval there'll be added to this table.
Jeffry M. Householder: As shown on slide nine we've hit the ground running in 2024 with our capital investments, we've ramped up spending considerably to take advantage of both the magnitude of the growth opportunities before us and the scale benefits that bolster our ability to execute.
Jeffry M. Householder: I'd like to emphasize that was $70 million of Capex spend in the first quarter were wasting no time executing on the opportunities to drive growth and margin that provided the basis for our Florida City gas acquisition and that are abundant throughout our larger organization.
Jeffry M. Householder: We're also delivering on business transformation projects that are bringing enterprise wide efficiencies.
Jeffry M. Householder: Our investment projects are laying important ground work for long term growth, we are bolstering the safety and reliability of our systems and investing in the pipelines and Interconnects that are meeting customer demand, while also creating and reinforcing our pathways to market.
Jeffry M. Householder: I'll now turn the call to Beth.
Beth W. Cooper: Thanks, Jeff and good morning, everyone. It is great to catch up with you today, we had another successful quarter with adjusted EPS of $2 10 per share six cents higher than the first quarter of last year, driven by solid performance across all our businesses.
Beth W. Cooper: As you can see on slide 10, our recent acquisitions, largely Florida City gas contributed 84, and adjusted EPS are Florida City gas unit achieved solid customer growth and benefited from its 2023 rate case outcome.
Jeffry M. Householder: Our legacy businesses also generated strong earnings delivering 26 cents of incremental EPS. This year and we had six cents of contribution from increased customer consumption due to colder weather I want to point out that while temperatures were colder than last year they were still above.
Jeffry M. Householder: 10% to 12% warmer than normal temperatures calculated using a 10 year average and both our Delmarva and Ohio Service territory.
Jeffry M. Householder: As always we are prudently managing expenses, especially our payroll and travel and entertainment expenses and optimizing our operations, which drove an eight cent benefit to adjusted EPS This quarter.
Jeffry M. Householder: These gains were balanced by a few factors a five cent offsets from depreciation amortization and property tax.
Jeffry M. Householder: A 34% offset from acquisition related expenses, and an approximate 70, <unk> offset related to the Florida city gas financing cost.
Jeffry M. Householder: Turning now to slide 11, adjusted gross margin increased by 27% to approximately $165 million.
Jeffry M. Householder: Operating income increased by $25 million or 45% to approximately $80 million, excluding transaction and transition related expenses operating income increased by $26 million or 47%.
Jeffry M. Householder: We are proud of the strong gross margin improvement and most importantly, almost all of this improvement fell to net income.
Jeffry M. Householder: As a result, our adjusted net income improved by 29% to $47 million.
Jeffry M. Householder: This is a significant accomplishment and demonstrates the diligence of our teams as we continue to optimize our operations.
Jeffry M. Householder: <unk> collaboration across our businesses and drive efficiencies.
Jeffry M. Householder: Moving to slide 12, our adjusted gross margin for our regulated energy segment improved by 36% over last year and operating income improved by 57%, excluding nonrecurring transaction and transition costs.
Jeffry M. Householder: This improvement was the result of Florida City gas as earnings contribution.
Jeffry M. Householder: Organic growth in our natural gas distribution operations, including several minor propane community gas system conversions pie.
Jeffry M. Householder: Pipeline expansion by our natural gas transmission entities.
Jeffry M. Householder: Permanent rate changes associated with our Florida legacy natural gas base rate proceeding and finally incremental margins from our regulated infrastructure programs.
Jeffry M. Householder: I want to point out that we achieved four 2% and three 6% organic natural gas distribution growth on Delmarva and in Florida, respectively.
Jeffry M. Householder: As shown on slide 13, our unregulated energy segment delivered an 8% adjusted gross margin improvement and a 24% operating income improvement the biggest driver was higher propane consumption driven by the colder weather.
Jeffry M. Householder: We also saw higher propane margins and service fees, including from our recent J T. Lee in Sun's acquisition.
Jeffry M. Householder: Finally, we benefited from an increase in rate gathering margins and consumption from aspire energy.
Jeffry M. Householder: Turning to slide 14, our team is driven by our commitment to safety accountability and dependability.
Jeffry M. Householder: It's collaborative culture enables our tireless pursuit of top quartile earnings performance, driven by prudent capital investments and regulatory initiatives with our earnings growth, we are able to reinvest 50% to 55% of our earnings back into the business to support our capital investments.
Jeffry M. Householder: Well also generating top tier dividend growth.
Jeffry M. Householder: Our financing and reinvestment strategy aligns to a target dividend payout of 45% to 50% and we are committed to this range through 2028.
Jeffry M. Householder: Given the strength of our performance and our confidence in our capital investment strategy. We are reiterating our 2024 adjusted EPS guidance of $5 33 to $5.45.
Jeffry M. Householder: Our 2025 guidance of $6 15 to $6 35 per share and our 2028 guidance of $7 75 to $8 per share.
Jeffry M. Householder: Our top financing priority is to maintain a strong balance sheet to support our growth plans and we continue to execute on a financing plan consistent with an investment grade ratings profile in the first quarter of this year stockholders equity increased by $35 million as a.
Jeffry M. Householder: <unk> of our retained earnings at the end of the first quarter of 2024, we had an equity to total capitalization ratio of over 48% versus 47% at the end of 2023.
Jeffry M. Householder: We continue to target an equity to total capitalization ratio of 50% by 2028 at the latest cut.
Jeffry M. Householder: Customarily, we dribble out smaller amounts of equity over time to manage to our target capital structure. We will continue to do that as we carry out our five year capital plans.
Jeffry M. Householder: On slide 16, we show our strong history of consistent dividend growth.
Jeffry M. Householder: We are proud to have a 10 year dividend CAGR of approximately 9% through year end 2020 for.
Jeffry M. Householder: This quarter, we announced a significant eight 5% dividend increase of five cents per share to <unk> 64 cents per share per quarter. Our board made this decision in line with our balanced capital allocation strategy to reflect the strength of our performance.
Jeffry M. Householder: And our confidence in our future growth prospects, while also allowing for a high level of earnings reinvestment to fund future capital investment.
Jeffry M. Householder: Hi dilution of about a dollar per share due to the equity issuance completed to finance, the Florida City gas acquisition.
Jeffry M. Householder: Moving to slide 18, I want to provide a few highlights from our integration accomplishments as well as some detail on our incremental opportunities to drive earnings growth.
Jeffry M. Householder: This quarter, we were focused on seamlessly welcoming and orienting our new team members to our organization and culture, which is very much aligned with Florida City gas. We conducted an employee engagement survey. So that we have a solid baseline of sentiment upon which we can build and grow.
Jeffry M. Householder: We'd also completed our rebranding which helps to solidify our one team approach we acted on additional margin opportunities with our service agreements working to reduce our reliance on the transition service agreements with the Nextera.
Jeffry M. Householder: We are in the process of leveraging the Florida City gas after hours call center for our whole enterprise, which will standardized and enhance the customer experience. We're also integrating our cyber security protocols in order to maintain our consistent secure risk profile.
Jeffry M. Householder: Importantly, we're also making steady progress on our infrastructure projects in Florida, which Jim will touch on shortly and we're ramping up our capital spend we are moving forward with new projects, including three projects that will connect locally produced landfill Orangy to Florida City gas this system.
Jeffry M. Householder: Successfully executing on our business transformation projects, such as our technology improvement initiative remains a high priority. We're also continuing to manage our cost prudently across the business and.
Jeffry M. Householder: In summary, our initiatives to remain on track and we are very excited about our progress and the opportunities ahead now I'd like to turn the call over to Jim.
James F. Moriarty: Very few books.
James F. Moriarty: Good morning, everyone.
James F. Moriarty: I'll begin would slide learned team, where we presumed or read case initiatives and infrastructure programs.
James F. Moriarty: In Florida, we've been operating at our new effective rage for nearly a year and our Florida public utilities, and Florida City jails jurisdictions with a loud <unk>, 10.25% in between 8.5 and 10.5% respectively.
James F. Moriarty: 2024 will be our first full year with these increased rates.
James F. Moriarty: As we've discussed on our last call we filed a joint application for natural gas rape case with the Maryland D. S C.
James F. Moriarty: January 2024.
James F. Moriarty: Our applications seeks approval for tariff changes, including a new technology cost recovery writer.
James F. Moriarty: Proposed underserved area, right, which will enable expansions to meet demand.
James F. Moriarty: As well as the program for evaluating extensions to multifamily projects.
James F. Moriarty: We also filed a separate depreciation study associated with our Maryland utilities we.
James F. Moriarty: We are continuing to have a productive engagement with our regulators and are optimistic about our continued path to constructive alcohol.
James F. Moriarty: As Jeff mentioned, we are making significant headway with our infrastructure programs in Florida, which are designed to continually improve the safety and reliability of service.
James F. Moriarty: April 2024, we filed a petition with the Florida PSC to more closely align the safe and guard programs. Specifically, we requested modifications that will enable us to accelerate remediation on the pipes that needed the most.
James F. Moriarty: As well as facilities that have obsolete or exposed pipe.
James F. Moriarty: We expect these modifications to add about $50 million in Capex associated with this age program.
James F. Moriarty: When combined with the guard program. This represents approximately $460 million of natural gas distribution infrastructure investments over the next 10 years.
James F. Moriarty: Turning to slide 20, which shows numerous Florida transmission projects driven by customer growth.
James F. Moriarty: I'll take a moment to highlight a few recent updates.
James F. Moriarty: First we have seven approved projects, which total about $106 million in capital expenditures and.
James F. Moriarty: In April 2024, the Florida, PSC approved or Newberry expansion project, which secondarily included the acquisition and conversion of propane community gas systems in Newberry.
James F. Moriarty: This is expected to begin in the second quarter of this year.
James F. Moriarty: We have delivered service via the community gas system for many years and the timing is now appropriate to convert those systems over and bring natural gas service to the area to support future expansion.
James F. Moriarty: We have successfully executed conversions like this many times in the past and we are excited to bring both the transmission and distribution infrastructure to this area.
James F. Moriarty: For our wildlife pipeline expansion project, where we have now received phase one and phase two approvals growth continues at a record pace.
James F. Moriarty: We are now ready to construct phase two which involves the installation of two new steel pipelines segments.
James F. Moriarty: In March of 2024, the Florida PSC approved two new Peninsula pipeline East coast transmission projects.
James F. Moriarty: There we are constructing natural gas transmission extensions to support our distribution system growth in Boynton Beach, and New Smyrna Beach, which Jeff talked about earlier.
James F. Moriarty: On Tuesday, we received approval for $42 million in additional expansion projects, which include extensions to support recent and expected population growth and the Saint cloud plant City in Lake Matti communities in Florida.
James F. Moriarty: And finally, we have four projects under PSC review, including the pioneer supply header pipeline project, which will enhance natural gas available availability in southeast, Florida, and our trio of RMG projects, representing $46 million of Capex.
James F. Moriarty: Which will connect three landfill RMG projects to R. F CG distribution system.
James F. Moriarty: Moving now to slide 21, which covers are eastern shore Wister resiliency upgrade project.
James F. Moriarty: Which will be in approximately 80 million dollar liquefied natural gas storage project in Maryland.
James F. Moriarty: This initiative, which will provide critical energy service to customers during the peak winter heating season will help protect against weather related disruptions keeping energy prices affordable.
James F. Moriarty: This is especially important as we are dealing with an increasing number of extreme weather events across the country.
James F. Moriarty: On April 26, <unk> issued a positive environmental assessment report for this project.
James F. Moriarty: A major milestone that our entire team can be proud of.
James F. Moriarty: We remain optimistic about our continued progress as we proceed to our anticipated and service date in the third quarter of 2025.
James F. Moriarty: Turning now to slide 22, I would like to cover some of our sustainability initiatives and other recent innovations and awards.
James F. Moriarty: In April we were proud to publish our safety and reliability report the first in our series of micro sustainability reports.
James F. Moriarty: In the coming months, we will release, our second micro report covering our environmental stewardship efforts.
James F. Moriarty: We're also very proud to launch a first of its kind energy efficiency program in Delaware This year.
James F. Moriarty: The program includes three residential initiatives, which we anticipate will reduce consumption by the equivalent of 1055 households annual energy usage.
James F. Moriarty: Innovative program builds on our long standing energy efficiency and conservation efforts that go back many decades.
James F. Moriarty: At full circle dairy.
James F. Moriarty: We continue to progress towards completion of our first full scale RMG production facility.
James F. Moriarty: And we expect our first injection of RMG produced there in the first half of 2024.
James F. Moriarty: This project is anticipated to capture and redirect more than 1100 metric tons of methane per year, the equivalent of the emissions from powering 3500 homes annually.
James F. Moriarty: I would also like to commend our employee resource groups led by the Green DRG for coordinating our recent Earth day in Arbor day activities.
James F. Moriarty: As an example, we partnered with the Arbor Day Foundation on an energy saving trees program.
James F. Moriarty: Where our team members could request a locally appropriate tree to plant on their property the.
James F. Moriarty: The Arbor day foundations resources than help them determine an optimal planting site for the greatest energy and money saving benefits.
James F. Moriarty: In January we supported the food bank of Delaware with a 50000 dollar donation and donated as well a number of park benches made from recycled plastic pipe we.
James F. Moriarty: We plan to donate similar benches to other nonprofit organizations municipalities parks and trails within our service areas.
James F. Moriarty: Later this month, we will celebrate receiving the Torch award for ethics from the Delaware better business Bureau.
James F. Moriarty: This distinction is given to companies that put integrity into action and we are incredibly honored to receive this award.
James F. Moriarty: As you can see our team is excelling in all areas of the business and beyond make.
James F. Moriarty: Making life better for our employees customers and communities remains Paramount and everything we do.
James F. Moriarty: With that I will turn the call to Jeff for concluding remarks.
Jeffry M. Householder: Thank you for this year, we are off to a very strong start mark by a steady execution of our Florida City gas integration strong investments and growth in technology advancements in our regulatory initiatives and prudent expense management.
Jeffry M. Householder: Our newly combined team in Florida is working collaboratively and efficiently with none of the integration speed bumps that can sometimes occur with acquisitions.
Jeffry M. Householder: We are excited about what we will accomplish together.
Jeffry M. Householder: We're well positioned to deliver on the significant and attractive opportunities across our enterprise and to continue our track record of driving top quartile earnings performance. The projects on our plan will enable us to continually improve the customer experience reach new customers and explore new pathways to save.
Jeffry M. Householder: Reliable energy delivery and by leveraging our deep expertise and experience we are executing our strategy in a way that is valuable to our team our communities our customers and our shareholders. We remain intently focused on sustaining our history of superior performance and we look forward to sharing.
Jeffry M. Householder: [noise] our progress.
Speaker Change: With that we will take your questions operator.
Speaker Change: The floor is now open for questions at.
Speaker Change: At this time, if you have a question or comment please press star one on your telephone keypad.
Speaker Change: If at any point. Your question is answered you may remove yourself from the queue by pressing star Teal.
Speaker Change: Again, we ask that you pick up your handset when posing questions to provide optimal sound quality. Thank you.
Tate H. Sullivan: Our first question is coming from <unk> Sullivan with Maxim.
Tate H. Sullivan: Hi, good morning, Thank you.
Tate H. Sullivan: To follow up on the comments on the liquefied natural gas storage facility in Maryland is that not yet in your incremental gross margin table.
Sullivan: My first question.
Sullivan: That is correct paid we're waiting for the final approval and then at that point in time. We will include Alcoranist Martin Aston ninth, but you know as we indicated in in the update as you heard we're really pleased we're on schedule nice recently with the environmental assessment being issued.
Sullivan: And has a site work started on that project will construction start aplomb upon the work.
Sullivan: Order and and its construction timeline next estimated based on a table about nine months it seems sort of fast.
Speaker Change: Is that correct, we have already begun preparing for this site by having some of the work done related to the tank manufacturing. So that is well under way. We've also basically contracted for the purchase of the land once we get the appropriate approval. So.
Sullivan: That's why once the final approval for the project is receive we can work pretty quickly to get everything constructed and be ready to go next year.
Sullivan: Okay.
Speaker Change: Thank you and last for me is for Florida City gas is customer growth right is it is it still is expected to be similar to your natural gas operations that you had before acquiring Florida City gets.
Speaker Change: It is it's a little bit more and metropolitan areas said the growth relative can somewhere like in the Jacksonville area may not be quite as high but still it's relatively in a good strong customer growth that we continue to experienced parents Wow.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you <unk>.
Speaker Change: Okay. Our next question comes from Paul Fremont with Ladenburg.
Paul Basch Michael Fremont: Great Congratulations on a great corner.
Paul Basch Michael Fremont: Can you talk about sort of margin improvement and pro pain and gathering can you tell us where the margins are today and.
Paul Basch Michael Fremont: And what they were previously.
Paul Basch Michael Fremont: Sure I mean, we don't typically disclose the actual margin level itself, but certainly as you are coming through Paul the first quarter. You know, there's a lot of volume that happened primarily in that first quarter and some of the margin expansion that we saw was the result of leather still still stay.
Paul Basch Michael Fremont: <unk> above above normal and so we've provided a calculation in where we talk about the weather impact to the tune of about a million and a half or five per share in terms of what our results would have been if weather had been normal I can tell you you know in.
Paul Basch Michael Fremont: Propane business that we've had the benefit for the last several years five years, plus where in periods, where we have experienced warmer than normal temperatures you know the rate increases the margin increases have been somewhat of a natural hedge I can also tell you that as we've come out of the first quarter.
Paul Basch Michael Fremont: <unk> had stayed a little higher than normal, but keep in mind or volumes cut down significantly in the second and third quarters, because you're not in the seating fee than on the aspire side. We've you know we've worked really hard in terms of our rate design and so you've seen us be able to adjust our right.
Paul Basch Michael Fremont: To also compensate for some of the weather impact and so that that's what you're also seeing come through the numbers in the first quarter.
Paul Basch Michael Fremont: Great.
Speaker Change: And are you in a position yet to sort of indicate what type of cost savings you're expecting in Florida post acquisition.
Speaker Change: We are not at this point coming out with specific dollar amounts I mean, you can see that if you look in our results for the quarter and you actually you know we've talked about in the past our operating expenses exclusive depreciation and amortization of property taxes as a percentage of gross margin and relative to.
Speaker Change: To what we look like in 2023, there is certainly an improvement in that metric and you know we're gonna continue you know to fully integrate the business make sure that we're accomplishing everything that we set out to do I think if you looked it up we've we've evaluated ourselves in the past relative to our peers, we've had a real.
Speaker Change: Focus on cost management and that that's going to continue but the real story around for the city gas for US is not so much just cost management, but it's also the opportunity to capitalize on the growth opportunities and also some various regulatory strategies that we think we can do.
Speaker Change: Floyd there and so right out of the gate and hopefully this came through in the slides we were pretty happy to report right that we've got seven projects that we've gotten approval for not all of those we have Martin estimates out for because three just got approved this week in Florida, We've got another four in the pipeline.
Speaker Change: You'll hear more about in the future three of which are projects for Florida City gas. One is an app that also you know our project that's associated with them. So there's a lot going on Paul we've actually stepped up as we had anticipated and you see that ramp and so that's really exciting to us and what we can do there and then.
Speaker Change: Again, the regulatory strategy. So we're down a path on all of those and again if you look at that metric I think that'll give you. Some comfort that we are achieving synergies, we're just not coming out with a lot of specifics because again, we're one quarter and we're we're trying to accomplish a lot of different things on many fronts, but stay tuned.
Speaker Change: Lee again like you said you know things continue as planned it started out bright again for the first quarter.
Speaker Change: And then last question, you've given a sort of an equity the total capitalization target of sort of 45% to 50% sort of near term.
Speaker Change:
Speaker Change: What does that equate to potentially in terms of F. S. O did that and can you give us any insight into plan to equity issuance over the course of your forecast period.
Speaker Change: Sure. So uhm first let me start with the first part of it so our target.
Speaker Change: Equity that total capitalization is actually 50% to 60% and yeah, we're actually in about 48% as of the end of the first quarter slightly ahead of where we actually thought we might be in some of our projections, but you know over the next five years, you're gonna see is moved back to you.
Speaker Change: Our target capital structure at 50% to 60% equity. What you also heard of talk about was the fact that we are reinvesting back into the business somewhere between 50% to 55% of our earnings right now our dividend payout is in the upper forties and so that enabled.
Speaker Change: To put a strong amount of earnings back into the business and infuse equity that's very competitively priced and so for the quarter you actually saw inject about 35 million into our equity from retained earnings in regards to as we look out certainly we're looking at.
Speaker Change: F F O did that we don't put a lot of metrics out on that but as we did the transaction. We wanted to make sure. We stayed at an an investment grade level. You know that was important to us and so you're gonna see S. B well into the teams on our F. F O did that mid teens to upper teens as we look at it and then fine.
Speaker Change: <unk> from a financing we will access the capital market says needed we have historically dribbled out equity over time, I think with a strong cash flow that's coming from our larger enterprise and you know looking at the cash with cash while I certainly for the first quarter you can see it we will.
Speaker Change: Need some small equity infusions, but there's a lot of cash that's going to be able to be reinvested back into the business, you'll see us doing some get refinancings at the appropriate time, but you won't see any heavy heavy equity lips, certainly like you know you would have seen with the transaction or anything like.
Speaker Change: That small dribbling amounts over time, and if I missed anything please let me know Paul.
Paul Basch Michael Fremont: No just does that equity issuance include this year or not.
Paul Basch Michael Fremont: Well see as the year Progressive you know certainly you know it could be some very small amounts, but nothing that would be deemed significant.
Speaker Change: Great I think that's it you've covered everything thank you so much. Thank you.
Speaker Change: Once again, if you do have a question you May press star one on your telephone keypad at this time.
Speaker Change: It appears we have no further questions at this time I will now turn the program back over to Jeff household or for closing remarks.
Jeffry M. Householder: Thank you again for joining today's call. We are very pleased with our first quarter performance, including the many capital projects that we've initiated.
Jeffry M. Householder: We look forward to seeing many of you with the O J financial Forum, that's coming up.
Speaker Change: Goodbye.
Jeffry M. Householder: Thank you. This concludes Chesapeake utilities corporations first quarter 2024 earnings conference call.
Speaker Change: Please disconnect. Your line at this time and have a wonderful day.
Speaker Change: Mhm Mhm mhm.
Speaker Change: Mmm Mmm Mmm Mmm.
Speaker Change: Mmm Mmm Mmm Mmm Mmm.
Speaker Change: Mm mm mm mm.
Speaker Change: Mmm.
Speaker Change: Mmm.
Speaker Change: Mhm.
Speaker Change: Mm Hmm.
Speaker Change:
Speaker Change: Mmm Mmm Mmm Mmm.
Speaker Change:
Speaker Change: Mmm Mmm Mmm Mmm.
Speaker Change: Mmm Mmm mmm.
Speaker Change: Uh-huh.
Speaker Change: [noise] [noise] [music].
Speaker Change: Mmm.
Speaker Change: [music] Mmm mmm.
Speaker Change: Mmm.
Speaker Change: Mmm Mmm Mmm Mmm Mmm Mmm.
Speaker Change: [music] mhm.