Q4 2024 Spire Inc Earnings Call
Speaker Change: Good morning, everyone, and welcome to the Spire, Inc. Q4 Fiscal Year 2024 Earnings Conference Call.
Speaker Change: All participants will be in a listen only mode. Should you need assistance, please say no or comfort specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation there will be an opportunity to ask questions. To ask a question you may press star and then 1 using a touch-turned telephone. To withdraw your questions you may press star and 2.
Speaker Change: Please also note today's event is being recorded. At this time I'd like to turn the floor over to Megan McPhail, Managing Director Investor Relations. Please go ahead.
Megan Mcphail: Good morning and welcome to SPIRE's Fiscal 2024 4th Quarter Earnings Column. We issued an earnings news release this morning and you may access it on our website at www.spireenergy.com under newsroom. There is a slide presentation that accompanies our webcast and you may download it from either the webcast site or from our website under investors and then events and presentations.
Megan Mcphail: Before we begin, let me cover our Safe Harbor Statement and use of non-GAAP earnings measures.
Megan Mcphail: Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Megan Mcphail: Although our forward-looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated.
Megan Mcphail: These risks and uncertainties are outlined in our quarterly and annual filings with the SEC.
Megan Mcphail: In our comments, we will be discussing non-GAP measures used by management when evaluating our performance and results of operations.
Megan Mcphail: Explanations and reconciliations of these measures to their GAP counterparts are contained in both our news release and slide presentation.
Megan Mcphail: I would like to note, going forward, the non-GAAP measures we previously referred to as net economic earnings and net economic earnings per share will be referred to as adjusted earnings and adjusted earnings per share.
Megan Mcphail: On the call today is Steve Lindsey, President and CEO, and Steve Rasche, Executive Vice President and CFO. Also in the room today is Scott Doyle, Executive Vice President and COO, and Adam Woodard, Vice President and Treasurer.
Speaker Change: With that, I will turn the call over to Steve Lindsey. Steve?
Steve Lindsey: Thanks, Megan, and good morning, everyone. Thank you for joining us for an update on SPIRE's fiscal 2024 year-end results, outlook, and other developments across our businesses.
Steve Lindsey: Before I begin, I want to take this opportunity to acknowledge and thank our Chief Financial Officer, Steve Rasche. After 15 years of service, Steve will step down from his role as CFO on January 1st and will continue to serve as Senior Advisor until his retirement this spring.
Steve Lindsey: Steve has been instrumental to Spyro's success over the years and he leaves behind a tremendous legacy.
Steve Lindsey: The dedication and leadership have driven transformation across the organization and scaled the company you see today.
Steve Lindsey: I know I speak on behalf of all of our co-workers when I extend my gratitude and say congratulations and Steve, we wish you nothing but the best.
Steve Lindsey: I'm pleased to say that Adam Woodard, our current Vice President, Treasurer, and CFO of GATS Utilities, will succeed Steve as the new CFO.
Steve Lindsey: Many of you know that Steve and Adam have worked closely over the last several years ensuring a seamless transition. Adam has a deep understanding of the company, industry, and financial markets and has played a key role in developing our strategy since joining SPIRE in 2018.
Steve Lindsey: We are confident Adam's ability to lead us in this new role.
Steve Lindsey: Turning now to slide four, where I'll walk through three key categories, financial and operational performance, regulatory, and outlook.
Steve Lindsey: This morning, we reported fiscal 2024 adjusted earnings of $4.13 per share, an increase of $0.08 per share compared to a year ago.
Steve Lindsey: This improvement reflects higher earnings to gas utility and midstream segments, partially offset by lower earnings in our gas marketing segment.
Steve Lindsey: Our results for the fourth quarter were below expectations as a result of headwinds created by natural gas market fundamentals and higher expenses at corporate.
Steve Lindsey: But again, 2025, I can assure you, we are striving to deliver consistent financial results in the future.
Steve Lindsey: Steve will provide a deeper dive into our results and outlook in a moment.
Steve Lindsey: Recognizing confidence in our long-term growth plan, the Board of Directors recently approved an increase to our common dividend of 4%, bringing the annualized rate to $3.14 per share. This is our 22nd consecutive year of dividend increases, which we have continuously paid since 1946.
Steve Lindsey: The bottom part of this confidence is our ability to execute successfully on our capital expenditure plan.
Steve Lindsey: This past year, we invested $861 million across the gas utilities and gas-related businesses to further enhance safety and reliability for our customers.
Steve Lindsey: From a regulatory perspective, we are engaged with key stakeholders to strengthen recovery mechanisms in our jurisdictions. Our goal is to achieve more consistent and constructive regulatory outcomes, leading to a more sustainable financial performance.
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Well, that key message pertains to our financial outlook.
Steve Lindsey: Today, we rolled out our 10-Year Capital Expenditure Plan 4 to 2034 and it increased to $7.4 billion. We also reaffirmed our long-term EPS growth target of 5 to 7% and launched fiscal 2025 earnings guidance to $4.40 to $4.60 per share.
Steve Lindsey: Looking ahead, we have visibility into improving our earned returns in Missouri during FY26, which we anticipate will help us achieve our targeted growth range.
Steve Lindsey: We remain focused on delivering this driven by our strategy to grow our businesses, invest in infrastructure, and drive continuous improvement to deliver value.
Steve Lindsey: Turn to slide 5 for an update on our capital investment plan.
Steve Lindsey: The long-term driver of our earnings growth remains investment focused on modernizing infrastructure at our gas utilities.
Steve Lindsey: During fiscal 2024, our capital investment totaled $861 million, with over 80% invested in the gas utility segment.
Steve Lindsey: $295 million dollars was spent to upgrade infrastructure An additional $111 million dollars was spent connecting new homes and businesses
Steve Lindsey: We also accelerated our deployment of advanced meters to residential customers, investing $184 million in FY24.
Steve Lindsey: During the year, we installed 350,000 advance meters, bringing the total number of customers benefiting from this technology to over 850,000.
Steve Lindsey: The investment in our mid-stream segment over the year totaled $170 million, largely for the storage expansion, and we remain on track for the additional withdrawal capacity to come online next month.
Steve Lindsey: Here in fiscal year 25, we plan to invest $790 million, representing an incremental $100 million to spend to gas utilities compared to our prior forecast.
Steve Lindsey: This capital plan is once again focused on reliability, new service connections, and completion of Spire Missouri's advanced meter installations.
Steve Lindsey: Lastly, our robust 10-year CAPEX plan is now $7.4 billion with approximately 98% at the gas utilities, driving 7-8% rate-based growth at our largest utility, Spire, MO.
Steve Lindsey: Turning to slide 6 for an update on our gas utilities.
Steve Lindsey: Throughout the year, our employees continue to deliver for our customers, providing them energy safely and reliably with a focus on excellent service and affordability. Investments made during the year are driving benefits for customers, shareholders, and the communities that we serve.
Steve Lindsey: On our call in July, we discussed with you the launch of a customer affordability initiative to lower our overall cost structure and improve operational efficiency across the organization.
Steve Lindsey: We are realizing benefits of this initiative and continue to expect to see cost savings and improved efficiencies to support our growth expectations.
Steve Lindsey: In fiscal year 2024, our gas utility segment benefited from lower run rate O&M expenses that were 3% better compared to the prior year, and we expect FY25 run rate O&M at the utilities to be flat compared to FY24 as we continue to benefit from our cost management initiatives.
Steve Lindsey: However, we will continue to maintain our focus on the safety and reliability of our natural gas system.
Steve Lindsey: For example, our average leak response time in 2024 was nearly 4 minutes or 13% faster than it was in 2021.
Steve Lindsey: On the regulatory front, constructive mechanisms across our jurisdictions are essential to ensure that we receive timely recovery of our costs associated with delivering natural gas safely and reliably.
Steve Lindsey: To that end, we expect to file a rate case in Missouri by the end of the month to recover costs incurred for investment in infrastructure and technology upgrades to better serve our customers.
Steve Lindsey: Our top priorities in the case remain updating our cost of service.
rate base, and rate of return.
Steve Lindsey: We're looking at options to improve recovery of volumetric revenue, including the impact of both weather and conservation.
Steve Lindsey: We anticipate that the request, paired with last week's approval to lower our purchase gas adjustment, will result in an overall bill decrease for the average residential customer. We look forward to working with key stakeholders throughout the process.
Steve Lindsey: I'm pleased to say that the Missouri Public Service Commission recently approved a $16.7 million annual increase for our infrastructure, or ISRS, which allows us to recover revenues for certain eligible projects in between rate cases.
Steve Lindsey: The increase was effective earlier this month and brings our revenues reflected in this rider to an annualized rate of 53.6 million dollars.
Steve Lindsey: Further, in Missouri this week we filed our first Integrated Resource Plan, or IRP, with the Commission.
Steve Lindsey: The IRP provides a blueprint for how Spire Missouri's energy will support our customers and communities in the state over the next 20 years, with the primary goal being to ensure our customers' energy needs are met.
Moving now to regulatory update for Alabama operations.
Steve Lindsey: As a reminder, our rates in the state are updated annually and are set using a forecasted budget. We are currently in the RSE rate setting process and are working closely with the Public Service Commission staff to update rates.
Steve Lindsey: To sum up, we are well positioned for success as we execute on our robust capital investment plan to support the growth and performance of our utilities and our gas-related businesses.
Speaker Change: We believe in the ability of our experience management team and employees to successfully lead us into the future. I will now hand the call over to Steve to provide a financial update.
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Steve Lindsey: Thanks Dave and good morning everyone. Let's review our fiscal year 24 results and our guidance for 2025 and beyond.
Steve Lindsey: For the year ended September 30, 2024, we reported adjusted earnings of nearly $247 million, 8% ahead of last year.
Steve Lindsey: On a per share basis, our earnings of $4.13 were $0.08 higher than last year.
Steve Lindsey: These results include our fourth quarter loss of just under $28 million, or $0.54 per share, reflecting the seasonality of our businesses.
Steve Lindsey: Those adjusted earnings were $10 million or 24 cents better than last year but fell below our expectations coming into the quarter due to weak market conditions impacting our marketing segment combined with slightly higher holding company interest expense.
Steve Lindsey: Now I'll focus my remaining remarks today on the full fiscal year.
Looking at our business segments.
Steve Lindsey: Our gas utilities earned $221 million, up 10% or $20 million from last year, as new customer rates in both Missouri and Alabama were offset by partial weather mitigation in Missouri and higher interest expense.
Steve Lindsey: Midstream delivered earnings of $34 million, up $19 million, as we are seeing pull through from our Salt Plains and Mogadishu acquisitions, as well as earnings associated with our storage expansion.
Steve Lindsey: Gas marketing earned 23 million dollars as strong market conditions last winter were offset by lower basis volatility over the last six months.
Steve Lindsey: As a reminder, marketing delivered solid results this year and was slightly above our initial expectations, but these results were well below last year due to the significantly favorable market conditions in FY23 that did not recur this year.
And finally, other corporate costs were $30 million.
Steve Lindsey: on nearly $4 million or 11% improvement over last year, reflecting the benefit of an interest rate hedge and lower corporate costs, offset in part by whole co-interest expense.
Steve Lindsey: For your reference, a detailed variance analysis of our fiscal year and fourth quarter results is included in the appendix to this presentation.
Speaker Change: Thanks for watching. I'm Steve Doyle. We'll see you next time.
Speaker Change: Turning to our outlook, as Steve mentioned earlier, we are reaffirming our long-term adjusted earnings per share growth target of 5% to 7%, retaining the midpoint of our original fiscal year 24 guidance range of $4.35 per share as a base.
Speaker Change: This growth is driven by, first, 7 to 8 percent rate-based growth and continued timely recovery via the ISFRIS mechanism in Missouri, coupled with a reasonable outcome in the soon-to-be-filed rate case, with new rates targeted to be effective in fiscal year 26.
Speaker Change: Second, equity growth in the southeast coupled with annual IRC resets.
And finally, continued focus on cost efficiency.
Speaker Change: We are launching our fiscal year 25 adjusted earnings range at between four dollars and forty and four dollars and sixty cents per share.
Speaker Change: At the midpoint, this is a 9% growth from our actual results in 2004, but falls a bit short of our growth target range at the midpoint as we work through the Missouri rate case.
Speaker Change: With a reasonable outcome and expected improvements in our earned ROE, we anticipate moving fully back into the target range for FY26 and beyond.
Turning to our business unit guidance.
Speaker Change: We anticipate our gas utilities will earn between $238 and $258 million next year.
Speaker Change: reflecting the combined benefits of incremental Missouri IFAS revenues and the return of normal weather. New rates in Alabama engulf under the ERC mechanism.
and no increase in run rate O&M cost.
Speaker Change: As Steve noted earlier, our fiscal year 24 operations and maintenance expenses, excluding bad debts, were 3% below last year, and our goal in fiscal year 25 is to lock in those savings.
Speaker Change: and offset the impacts of other inflationary increases in wages, insurance, third-party costs among others with our cost efficiency initiatives.
We also expect net interest expense to be lower.
Speaker Change: Turning to gas marketing, we anticipate adjusted earnings of 21 to 25 million dollars, reflecting an increase from our initial 24 expectations due to organic growth.
Speaker Change: Midstream adjusted earnings are targeted between 40 and 46 million dollars reflecting the growth in both storage and pipelines. In the storage business we expect to see full year benefit of the storage contracts we commenced in fiscal year 24 combined with bringing the rest of the Spire Storage West capacity online in fiscal year 25.
Speaker Change: These benefits will be offset, in part, by higher operating costs, interest expense, and depreciation.
Speaker Change: On the pipeline side, we will see the full year benefit from the MOGAST acquisition.
Speaker Change: We anticipate the resulting midstream business mix to be roughly 55% storage and 45% pipelines in fiscal year 25.
Speaker Change: Corporate and other principal interest costs is anticipated to be in the range of negative 30 to 36 million dollars down from last year's run rate of roughly 36 million dollars after adjusting for the interest rate hedge benefit that is not expected to recur in fiscal year 25.
Speaker Change: We've also updated our three-year financing plan as outlined on slide 10.
Speaker Change: After a very busy fiscal year 24, our equity needs going forward drop to a much lower level that we'll manage with our AGM program.
Speaker Change: I would note that at 930, we had $75 million of forward equity sales that will settle in fiscal year 25.
Speaker Change: And turning to our long-term debt needs, our three-year financing plan assumes refinancing and maturities and incremental debt of roughly $600 million to fund our capital plan.
A debt maturity table is included in the appendix.
Speaker Change: And finally, no change to our credit metric or payout targets.
Speaker Change: In summary, we have a solid plan heading into fiscal year 25 and will remain focused on delivering against those goals.
and Steve.
I appreciate your kind words on my retirement next spring.
Speaker Change: I can assure you that I fondly say goodbye to 6 a.m. flights and the 30-plus years of preparing for investor meetings, with the acknowledgement that I always walked away from those meetings smarter due to your questions and suggestions.
Speaker Change: What I will truly miss are the great friends across our industry, and here at Spire.
Speaker Change: I look forward to seeing you all over the next few months as we roll into fiscal year 25 and rest assured as shareholder I will be tracking SPIRE's progress and success going forward.
Steve Lindsey: With that, let me turn it back over to you, Steve.
Thanks, Steve.
Steve Lindsey: I'd like to finish with our priorities for the coming year on slide 11 as we are laser focused to achieve our targets for fiscal year 25 and beyond.
Steve Lindsey: Our priorities for this year are aligned in building a more resilient, efficient, and sustainable company that delivers value for our customers and shareholders.
Steve Lindsey: First and foremost, we're committed to delivering natural gas safely in our lives.
Steve Lindsey: During the year, we expect to deploy $709 million of capital primarily at the gas utilities.
Steve Lindsey: and we are engaged with key stakeholders to achieve constructive regulatory outcomes for customers and shareholders while strengthening regulatory recovery mechanisms.
Steve Lindsey: And lastly, we're focused on delivering our fiscal year 2025 EPS guidance range and maintaining the strength of our balance sheet.
Steve Lindsey: We look forward to updating you on our progress throughout the year. Thank you for joining us today, and we will now take your questions.
Thank you for watching. Bye. Bye.
Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then one on your touch-tone telephones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality.
To withdraw your questions, you may press star and two.
Speaker Change: And first in line we have Richard Sunderland from JPMorgan. Please go ahead with your question.
Hey, good morning, and thanks for the time today.
Hey Rich, I'm rich.
Speaker Change: And I guess before my questions, Steve and Adam, congratulations to both of you on the announcements and Steve, best of luck in your retirement year.
Thanks, Brian.
Speaker Change: Let's see, first and foremost, you know, the 2025 segment drivers, I'm hoping you can parse those in some finer detail, particularly midstream, where it looks like you're expecting to exceed the year-over-year growth previously indicated there.
Speaker Change: and I guess marketing as well. So, for both of those, is this really the baseline going forward? And I guess that baseline is just ratcheted up a little bit versus what you've guided to previously. Any details there would be helpful.
Yeah, Rich, great question and thanks again. Marketing is
Yeah, there's a problem.
Speaker Change: consistent with how we've handled previous years, we go back to
Speaker Change: the organic growth strategy for the marketing business at John Brent and the team.
Speaker Change: drive and, you know, we'll hopefully be positioned to take advantage of market opportunities, but that's why we anchored back to the original guidance for last year, which we were actually able to beat in 24. So that's kind of the normal organic step that we would expect in every business because we expect every business to grow.
Speaker Change: starting to see the benefits of the contracts, many of which started on April 1st of this year. And I think we have better clarity now into how that business is growing into the investment returns that we've talked about with you and the rest of the investors previously. So I think...
Speaker Change: The expectation is that we're getting close to where that run rate would be for that business. Clearly, we're going to work through the rest of the expansion as far as West and some of that capacity. We're coming online in December of this year, and then contracts generally renew in the industry overall, as you know, on 4.1, so we'll continue to manage that going forward. You're right, it's a pretty good step up from where we originally guided, but a lot of that is due to us getting a better fix and clarity in the business mix. And we also, just to help out, did clarify where we see the business mix for 2025 to help you as you're doing your modeling.
Great, got it, that was helpful and then
Speaker Change: picking up the other side of that piece with the utilities.
Speaker Change: I realize the Missouri rate case filing is not out there yet, coming shortly, but you had some commentary around how the rate case gets you back into the range for 2026 against that 5-7% growth.
Speaker Change: Could you just be clear on some of that commentary from the rate case? It sounded like you were saying a reasonable outcome returns you to 5-7%. Was it just the outcome gets you there or you need an uplift in the authorized ROE as well? I just want to make sure I understand the drivers there.
Speaker Change: No, it's really, we're looking for a straightforward recovery, cost of service recovery, we're behind there. And as we've talked about before, we...
Speaker Change: We are under-earning in Missouri, so just bringing that back up closer to authorized, we feel very, you know, one, encouraged by our dialogue with stakeholders coming into the case, but also confident in our...
Speaker Change: in our filing of the case that we can reach a reasonable outcome for Spire and Spire Missouri. But we're not expecting anything, you know,
We're not, we're just counting on rate of return, our
returning
Speaker Change: Capital return and cost of service return to get us into that range.
Speaker Change: Okay, understood. And then just one final one for me, you know there's been attention on some of the weather impacts in recent years. It looks like in slide nine you're saying a return to normal weather for 2025, so just want to confirm one, in 2025 the outlook assumes normal weather across the utilities, and two, just curious how weather has been trending to date since the start of your fiscal year.
Speaker Change: Yeah, so yes, that is the assumption is normalized whether we have in a functioning
Speaker Change: weather normalization mechanism. You know, we do, we, that is something that we've, as Steve mentioned.
Speaker Change: and its remarks is something that we're focused on in the filing to fine-tune that mechanism for more straightforward recovery, but yeah, we are assuming normalized weather.
Speaker Change: So far this year, the fall has started on a warmer than normal basis. No comment on the mechanism, how the mechanism has worked thus far.
Speaker Change: Okay, great. Well, thank you for the time there, and congrats again to everyone. Thank you.
Thank you very much. Thank you.
Speaker Change: Our next question comes from Julian Demelin-Smith from Jefferies. Please go ahead with your question.
Speaker Change: Hey guys, it's James Ward on for Julian. I just wanted to join in. Hey, how are you?
Speaker Change: I just wanted to join in first on wishing you all the best, Steve, in retirement and your future endeavors, and also to say congratulations, Adam, on your new role. Well deserved, and I look forward to continuing to work with you here.
Alright, that's it.
Hmm
Speaker Change: So, on the debt front, the weather mechanism question was asked there earlier and then some of the segment elements we were interested in as well, so appreciate the color there.
Speaker Change: As we look at refinancings given the recent cuts, as I said,
Speaker Change: and Assumption heading into 2025 now that we've got an election outcome, understanding limitations on potential impacts there as well in terms of leadership. What are you guys assuming in terms of interest rates and your guidance?
Speaker Change: relative to 2024 levels or I guess I should say relative to current levels both next year and then beyond.
Yeah, sure. Jameson's a high level.
Yeah, no, absolutely. And Jameson, this is Adam.
Speaker Change: On the short-term side, obviously you observed, we all observed the Fed has started to cut. That is something that we didn't assume would happen on the short-term side. You know, we would expect in our plans to see two to three more cuts before the end of next year.
Speaker Change: But, you know, your guess is as good as mine as far as windows occur. And I think there's been some uncertainty around that. But I think a couple more cuts would be expected. On the long-term side, we don't have a lot to do in the next 12 months.
Speaker Change: But, you know, we are pretty comfortable with the current level of longer-term rates that we're seeing right now.
terrific that's that's extremely helpful and
Speaker Change: Any additional color just in terms of, obviously you mentioned the incremental $600 million, you've got refinancings, just any color around FFO to debt. You obviously have a lot of cushion relative to, you know, like S&P's threshold and so on.
That would be our final question there.
Speaker Change: Absolutely, great question. We do continue to see progress there. I think really getting fully up in that target in a sustainable way. We're above that target with Moody's now, but on a sustainable basis.
Speaker Change: I think we'll certainly see that coming out of the rate case.
Speaker Change: Yeah, okay. That's what we're looking at with the projections. It seems like you're going to have a lot of questions. Okay. Thank you so much, guys. Really appreciate it. And congrats to everyone. Thank you.
Thank you.
Speaker Change: And our next question comes from Christopher Jeffrey from Mizzou Host Securities. Please go ahead with your question.
Speaker Change: Hi everyone, thanks for taking my question and congrats to Adam and Steve.
Speaker Change: Maybe just touching on the outlook for the legislative session upcoming in Missouri. There seem to be a few utility-focused bills that could have some impacts for SPIRE. Can you speak about those more broadly and whether those would impact the timing of your rate case filing or any of the asks therein?
Speaker Change: Hey, Christopher, this is Scott Doyle. I'll answer your last question first. It won't impact the timing.
Speaker Change: or kind of how we proceed with the rate case. What we are working through this legislative session is clarifying future test year availability for gas utilities.
Speaker Change: As you may recall, legislation made its way through in the last session earlier this year, and so we worked to work on the progress that was made in that legislation and advance that topic as we move through this legislative session.
Speaker Change: Okay, great, thanks. And then maybe just looking at the updated CAPEX guide.
Speaker Change: Just kind of curious, you know, it seems like we're kind of putting in more CapEx for 24 and 25, just how you're looking about maybe the run rate for 26 and beyond, and kind of the drivers on those decisions.
Speaker Change: Chris, it's Adam. A lot of that is driven, obviously, by a lot of our CapEx is driven by Missouri. And, you know, I think we have talked before about there, in particular, maybe a little bit out of run rate.
Speaker Change: specifically, we see that getting done in 25 and getting back into kind of a more normalized, you know, 7 to 8 percent rate-based growth, but probably a little bit higher than that over the last 18 months or so, just getting the meters done. You don't want to spread that out too far out into, out over time.
Speaker Change: And Chris, Steve, the last thing I would say is, as we're winding down the deployment of capital into the storage expansion, I think we talked earlier about roughly 98% is dedicated to the utilities for the next 10 years, and really it goes well beyond that. We're giving you a 10-year outlook right now, but we've got a long, long line of sight from a capital deployment perspective, and we have good regulatory mechanisms in Missouri as well as in Alabama, which is pretty much real-time rate making. So we feel very good about our capital planned in the utilities.
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Great. Super helpful. Thanks, Steven and Adam.
Thanks Chris.
Speaker Change: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2.
Speaker Change: Our next question comes from Bill Apicelli from UBS. Please go ahead with your question.
Speaker Change: Hi, good morning, and congrats to Steve and Adam. I echo everyone else's sentiments there. Just wanted to dig into the, I guess the Q4 results a bit. You guys have guided down for your earnings.
Speaker Change: last quarter, and then he came in a little bit light of the lower expectations.
Speaker Change: for the full year. So I guess what happened there was it was a gas marketing was that you had modified that outlook to 27 to 31 million for the full year and you came in at 23. So was that what fell short of expectations in Q4 or can you share a little more color on that please?
Steve Lindsey: Yeah, Bill, and thanks for your well wishes. This is Steve.
Steve Lindsey: you know, kind of meh, to use a more current term, the low commodity prices, low basis differential that doesn't give us a lot of opportunity to create value. And that surprised us on the negative side. And we step back.
Steve Lindsey: if you think about marketing overall, they achieved their goal for the year, actually overachieved our expectations for the year that we started the year with. We just had some assumption of a more normalized rate of demand coming into the fourth quarter, and it didn't materialize. So, you know, we're still very pleased with where we ended up, but it clearly surprised us on the downside, and we own that one.
The other segment was probably a couple million dollars.
Steve Lindsey: And I think we've got our arms around the interest expense going forward, but that also surprised us a little bit. And surprisingly, the other two, the big business segments, the majority of our business, actually performed very well this quarter. And I think that sets us up well as we think about 25 going forward.
Steve Lindsey: Hey Bill and this is Steve. I'll follow up on Steve's comments. You got to go back to the root word in marketing is market. And there's opportunity there some years and sometimes there might not be as much, but over the last five years they've done an unbelievable job of creating results that have allowed us to invest in our utilities and not have to go to the market for equity. So I think we think about this in the long term. And so some years and some quarters you might have some ups and downs, but if you think about the way we're structured from a utility perspective, from a midstream perspective, and that's a combination of storage and pipelines and marketing, I think we're very comfortable with the business mix that we have.
Speaker Change: Okay, great. And then just a follow-up question on the O&M. I think, you know, prior conversations, there was some expectation of cost savings that were going to show up in Q3 and Q4.
Bye.
But
Speaker Change: I guess, you know, you did actually, you know, achieve, you know, better overall O&M profile in 24, and now you're saying run rate O&M in line with 24 for 25. So is there more sort of cost-saving opportunity, or maybe just sort of address the cadence of the cost reductions and how they've showed up relative to your expectations?
Speaker Change: Yeah, hey Bill, this is Scott. Yeah, just real quick on O&M and I'll give maybe some color on what's driving it and hand it back off to Adam on...
Speaker Change: the guide as well, but you know that savings the initial savings and even some of the longer term savings are coming from Kind of a mix of labor reductions and our corporate support functions as well as our utility leadership structure And then even within that we're optimizing both our internal and external
Speaker Change: labor's strategy across you know our full operations whether you're talking about
Speaker Change: our construction and service activities, and delivering our service, or even
Speaker Change: in our call centers, how we optimize our labor strategy there as well.
Speaker Change: And then we're beginning to see some of the efficiency gains associated with technology spend that we've made here recently in the form of the meters that we're deploying as we're getting that system fully deployed and fully active. As Adam mentioned earlier, we'll have that system fully deployed in the St. Louis market area mid-next year. And so we have, you know, opportunities coming in front of us associated with that deployment.
Speaker Change: and Adam, you might just want to comment on the guide. Yeah, Bill, on the guide, we're very pleased to be able to guide flat O&M at the utility. Clearly, we made some progress last year that's extending into this year.
Adam Woodard: But given the headwinds that we're all seeing from a cost perspective, it's something that we feel very good about. And we typically have, over time, have managed below inflation, but this is kind of an extra step below that.
All right, great. Thank you all very much.
Thank you all. Thanks, pal.
Bye!
Speaker Change: And ladies and gentlemen, at this time, in showing no additional questions, I'd like to turn the floor back over to Megan McPhail for any closing remarks.
Megan Mcphail: Thank you all for joining the call this morning. We look forward to speaking with many of you later today and in the coming weeks. Have a great day.
Thank you. Thank you.
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