Q2 2025 Atmos Energy Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Atmos Energy Corporation fiscal 2025 second quarter earnings Conference call.
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Atmos Energy Corporation fiscal 2025 second quarter earnings conference call. All lines have been placed on mute to prevent any background noise.
All lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star followed by the number one. As a reminder, today's call is being recorded.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time press star followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star followed by the number one.
As a reminder, today's call is being recorded.
Daniel Meziere: I will now hand today's call over to Dan Meziere, Vice President of Investor Relations and Treasurer. Please go ahead, sir. Thank you, Tamika.
Speaker Change: I'll now hand, todays call over to Dan measure Vice President of Investor Relations and Treasurer. Please go ahead Sir.
Tamika: Thank you tamika.
Kevin Akers: Good morning, everyone, and thank you for joining our fiscal 2025 second quarter earnings call.
Tamika: Good morning, everyone and thank you for joining our fiscal 2025 second quarter earnings call.
Daniel Meziere: With me today are Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the investor relationship. As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange.
Tamika: With me today.
Kevin Akers: Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer.
Kevin Akers: Our earnings release and conference call Slide presentation, which we will reference in our prepared remarks are available at Atmos energy Dot com under the Investor Relations tab.
Kevin Akers: As we review these financial results and discuss future expectations. Please keep in mind that some of our discussion might contain forward looking statements within the meaning of the Securities Act and the Securities Exchange Act.
Daniel Meziere: Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on slide 29 and are more fully described in our SEC file.
Kevin Akers: Forward looking statements and projections could differ materially from actual results.
Kevin Akers: The factors that could cause such material differences are outlined on slide 29 and are more fully described in our SEC filings with that I will turn the call over to Kevin Akers, our president and CEO Kevin.
Kevin Akers: With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin? Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal 25 net income of $837 million, or $5.26 per diluted share. We updated our fiscal 25 earnings per share guidance to a range of $7.20 to $7.30. This performance continues to reflect the commitment, dedication, focus, and effort of all Atmos Energy employees to successfully modernize our natural gas distribution, transmission, and storage systems. while safely providing reliable natural gas service to 3.4 million customers across 1,400 communities in eight states.
Kevin Akers: Thank you Dan and good morning, everyone. We appreciate your interest in Atmos energy.
Kevin Akers: Yesterday, we reported year to date fiscal 'twenty, five net income of $837 million or $5.26 per diluted share.
Kevin Akers: We updated our fiscal 25 earnings per share guidance to a range of $7 22.
Kevin Akers: $207 30.
Kevin Akers: This performance continues to reflect the commitment.
Kevin Akers: Dedication focus and effort of all Atmos energy employees to successfully modernize our natural gas distribution transmission and storage systems.
Kevin Akers: While safely providing reliable natural gas service to three 4 million customers across 1400 communities.
Kevin Akers: <unk>.
Kevin Akers: For the quarter, we continue to experience robust growth driven by continually favorable employment trends in tech. For the 12 months ended March 31, 2025, we added nearly 59,000 new customers with almost 46,000 of those new customers located in Texas. The Texas Workforce Commission reported in April that seasonally adjusted number of employed reached a new record high at over 14.3 million. Texas again added jobs at a faster rate than the nation over the last 12 months, ending March, adding nearly 192,000 jobs, representing a 1.4% annual growth. Commercial customer growth remains solid as well, with approximately 850 customers connecting to the system during the second quarter and nearly 2,000 customers connecting to the system fiscal year to date.
Kevin Akers: For the quarter, we continued to experience robust growth driven by continually favorable employment trends in Texas for the 12 months ended March 31, 2025, we added nearly 59000, new customers with almost 46000 of those new customers located in Texas.
Kevin Akers: Yeah.
Kevin Akers: The Texas Workforce Commission reported in April that seasonally adjusted number of employed reached a new record high at over $14 3 million.
Kevin Akers: Texas again added jobs at a faster rate than the nation over the last 12 months ending March adding nearly 192000 jobs, representing a one 4% annual growth rate.
Kevin Akers: Commercial customer growth remained solid as well with.
Kevin Akers: With approximately 850 customers connecting to the system during the second quarter and nearly 2000 customers connecting to the system fiscal year to date.
Kevin Akers: Industrial demand for natural gas in our service territories also remains strong. During the second quarter, we added nine new industrial customers with an anticipated annual load of approximately 8 BCF once they are fully operational. Fiscal year to date, we've added 20 new industrial customers with an anticipated annual load of approximately 11 BCF once they're fully operational. on a volumetric basis that is equivalent to adding approximately 204,000 residential customers. This growth continues to highlight the value and vital role natural gas plays in economic development across our service territory.
Kevin Akers: Industrial demand for natural gas in our service territories also remained strong during the second quarter, we added nine new industrial customers with.
Kevin Akers: With an anticipated annual load of approximately eight bcf once they are fully operational.
Kevin Akers: Fiscal year to date, we've added 20, new industrial customers with an anticipated annual load of approximately 11 Bcf once they are fully operational.
Kevin Akers: On a volumetric basis that is equivalent to adding approximately 204000 residential customers.
Kevin Akers: This growth continues to highlight the value and vital role natural gas plays in economic development across our service territories.
Kevin Akers: In APT, we continue our work on several projects that will enhance the safety, reliability, versatility, and supply diversification of our system, as well as support the continued growth we are seeing in the local distribution companies behind the APT system. During the quarter, work started on Phase 2 of APT's Line WA loop. This project will install approximately 44 miles of 36-inch pipe to the west of Fort Worth to support growth in the northwestern portion of the DFW metroplex. This phase is expected to be completed by the end of the calendar year. Work continues on APT's Bethel-to-Grosbeck project as well.
Kevin Akers: In <unk>, we continue our work on several projects that will enhance the safety reliability versatility and supply diversification of our system as well as support the continued growth we are seeing in the local distribution companies.
Kevin Akers: <unk> <unk> system.
Kevin Akers: During the quarter work started on phase two of Apt's line Debbie a loop. This project, we will install approximately 44 miles of 36 inch pipe to the west of Fort worth and support growth in the northwestern portion of the DFW Metroplex. This phase is expected to be completed by.
Kevin Akers: At the end of the calendar year.
Kevin Akers: Work continues on Apt's battled a groesbeck project as well as a reminder, this project will install approximately 55 miles of 36 inch pipe from our Bethel storage facility to our gross bad compressor station to provide additional pipeline capacity to the growing DFW metroplex until.
Kevin Akers: As a reminder, this project will install approximately 55 miles of 36-inch pipe from our Bethel storage facility to our Grosbeck compressor station to provide additional pipeline capacity to the growing DFW Metroplex and to the Interstate 35 corridor. This project is scheduled to be placed in service late calendar year 2025. APT completed two more interconnect projects during the quarter. Fiscal year to date, APT has added over one BCF of additional gas supply that will enhance supply reliability and versatility to support APT's LDC customers. During the second quarter, our customer support associates and service technicians once again received a 98% satisfaction rating from our customers.
Kevin Akers: The Interstate 35 corridor.
Kevin Akers: This project is scheduled to be placed in service late calendar year 2025.
Kevin Akers: <unk> completed two more interconnect projects during the quarter.
Kevin Akers: Fiscal year to date <unk> has added over one bcf of additional gas supply that will enhance supply reliability and versatility to support Apd LDC customers.
Kevin Akers: During the second quarter, our customers support associates and service technicians. Once again received a 98% satisfaction rating from our customers.
Kevin Akers: reflecting the exceptional customer service they provide each and every day. Our customer advocacy team and customer support agents continue their outreach efforts to energy assistance agencies and customers during the first six months of the fiscal year. Through those efforts, the team helped nearly 32,000 customers receive over $10 million in funding assistance. Our results for the first half of Fiscal 25 reflect the hard work and dedication of all Atmos Energy employees as we continue to safely deliver reliable and efficient natural gas to homes, businesses, and industries to fuel our energy needs now and in the future.
Kevin Akers: Reflecting the exceptional customer service they provide each and every day.
Kevin Akers: Our customer advocacy team and customer support agents continue their outreach efforts to energy assistance agencies and customers. During the first six months of the fiscal year.
Kevin Akers: Through those efforts the team to help nearly 32000 customers receive over $10 million and funding assistance.
Kevin Akers: Our results for the first half of fiscal 'twenty five reflect the hard work and dedication of all Atmos energy employees as we continue to safely deliver reliable and efficient natural gas to homes businesses and industries to appeal, our energy needs now and in the future.
Christopher Forsythe: I will now turn the call over to Chris for his... Thank you, Kevin, and good morning, everyone. Thank you for joining us today. As Kevin mentioned, diluted earnings per share for the first six months of the fiscal year is $5.26, which represents a 6.7% increase over the prior year period. Operating income increased to $1.1 billion, or $14.6 billion.
Chris: I will now turn the call over to Chris for his update.
Chris: Thank you Kevin and good morning, everyone. Thank you for joining us today as Kevin mentioned diluted earnings per share for the first six months in the fiscal year was $5 26 represents a six 7% increase over the prior year period.
Chris: Operating income increased to $1 $1 billion or 14, 6% for the first six months of the fiscal year.
Christopher Forsythe: for the first six months of the fiscal year.
Christopher Forsythe: I'll highlight a few key drivers of our financial performance. Rate increases in both of our operating settings, so $185 million. Residential Commercial Customer Growth in our distribution segment combined with higher industrial load increased operating income by an additional $14.4 million. Revenues in our pipeline and storage segment increased to $11.4 million, reflecting a 10% increase in volumes transported across our combined with wider spreads between the WAHA header and the western end of the APT system.
Chris: I'll highlight a few key drivers of our financial performance.
Chris: Rate increases in both of our operating segments totaled $185 million.
Chris: Residential commercial customer growth in our distribution segment combined with higher industrial load increased operating income by an additional $14 4 million.
Chris: Revenues in our pipeline and storage segment increased $11 4 million, reflecting a 10% increase in volumes transported across our system environment wider spreads between the Oaxaca header in the western and the ACC system and delivered points on the eastern and southern hand edit system.
Christopher Forsythe: and delivered points on the eastern end and southern end of... APT also experienced an $8 million increase due to higher capacity contracted by tariff-based customers.
Chris: HPT also experienced an $8 million increased due to higher capacity contracted by tariff based customers due to their growing peak day demand.
Christopher Forsythe: to their growing heat data.
Christopher Forsythe: Consolidated O&M expense increased $74 million. This increase is driven by several factors. Employee-related costs increased approximately $27 million primarily due to increased head count and overtime to support company growth. Additionally, that expense increased to $15 million.
Chris: Consolidated O&M.
Chris: <unk> increased $74 million. This increase was driven by several factors.
Chris: Employee related costs increased approximately $27 million.
Chris: Primarily due to increased head count overtime to support company growth.
Chris: Additionally, bad debt expense increased $15 million as a reminder, we recognize a $14 million nonrecurring reduction in bad debt expense last fiscal year resulted from a regulatory change in how we recover our bad debt expenses specific.
Christopher Forsythe: As a reminder, we recognized a $14 million non-recurring reduction in bad debt expense last fiscal year, resulting from a regulatory change in how we recover our bad debt expenses. We also experienced a $14 million increase in O&M associated with higher levels of line locating, pipeline inspection, and system monitoring activities. Finally, we experienced a $9.4 million increase in APT system safety and integrity.
Chris: We also experienced a $14 million increase in O&M associated with higher levels of line locating pipeline inspection and system monitoring activities.
Chris: Finally, we experienced a $9 $4 million increase in ATC systems safety and integrity expense, which is offset by a corresponding increase in revenue, resulting in no impact to operating income.
Christopher Forsythe: is offset by a corresponding increase in revenue, resulting in no impact to operations. From a regulatory perspective, we've implemented approximately $153 million in annualized regulatory outlays. and we currently have over $389 million in progress.
Chris: From a regulatory perspective, we have implemented approximately $153 million annualized regulatory outcomes.
Chris: And we currently have over $389 million in progress.
Christopher Forsythe: Of this amount, we anticipate implementing between $175 million and $180 million in annualized operating income increases in Fiscal 2025, with the remainder expected to be implemented in the first quarter of 2021.
Chris: Of this amount, we anticipate implementing between $175 million to $180 million in annualized operating income increases in fiscal 'twenty five with remainder expected to be implemented in the first quarter of fiscal 'twenty six.
Christopher Forsythe: Included in this amount is $39.2 million requested in our West Texas General Rate On April 25th, the Administrative Law Judge issued a Proposal for Decision with the following key recommendations. a 9.8% return on equity. Actual cavern structure, which reflects a 60.97% equi-layer. approval of a rate base totaling $1.2 billion. Approval to capitalize cloud computing costs as fixed assets recovered over a 15-year period, which essentially treats these costs as a capital expenditure rather than O&M line-up.
Chris: Included in this amount is $39 $2 million requested in our West, Texas General rate case on.
Chris: On April 25th administrative law Judge issued a proposal for decision with the following key recommendations.
Chris: A nine 8% return on equity.
Chris: Actual capital structure, which reflects a 69, 7% equity layer.
Chris: Approval of our rate base totaling $1 2 billion.
Chris: Approval of capitalized cloud computing causes fixed assets recovered over 15 year period, which essentially treat these costs as a capital expenditure rather than O&M line item.
Christopher Forsythe: and the authorization of two regulatory asset tracts. The first is the System Safety Integrity Regulatory Asset that will allow us to defer O&M incurred after June 30, 2024 in excess of $3.5 million related to system safety integrity regulations adopted by the Railroad Commission. These costs be considered for recovery in a future rate. The second provides for regulatory asset or liability treatment to capture the effects of changes in federal and state income tax.
Chris: And the authorization of two regulatory asset trackers.
Chris: But first as assistant safety integrity regulatory asset that will allow us to defer O&M incurred after June 32020 for in excess of $3 $5 million.
Chris: Related system safety integrity regulations adopted by rail Commission incentive.
Chris: These costs be considered for recovery in future rate filings.
Chris: The second provides for regulatory asset or liability treatment to capture the effects of changes in federal and state income taxes, including the corporate alternative minimum tax.
Christopher Forsythe: including the Corporate Alternatives Ministry.
Chris: The proposal for decision is scheduled to be considered by the Railroad Commission on May 13th.
Christopher Forsythe: The proposal for decision is scheduled to be considered by the Railroad Commission on May 13th. If approved as filed, the settlement would result in a $30.6 million increase in annual operating costs.
Chris: If approved as filed the settlement would result in a $36 million increase in annual operating income.
Chris: In our mid Tex Division the two general rate cases, we filed last fall with the ATM cities coalition.
Christopher Forsythe: In our mid-tax division, the two general rate cases we filed last fall for the ATM Cities Coalition and our Environs customers were consolidated into one general rate case during our second fiscal quarter. As a reminder, this consolidated case represents approximately 15% of the MidTechs division.
Chris: Aaron's customers were consolidated into one general rate case during the second fiscal quarter.
Chris: As a reminder, this consolidated case represents approximately 15% of the mid Tex Division customer base.
Christopher Forsythe: On April 30th, we filed with the Administrative Law Judge a proposed settlement on this consolidated case. The key terms of the proposed settlement, ROE, capital structure, and the accounting treatments I just described are the same as what is included in the West Texas proposal. Additionally, the recommendation includes approval of a rate base allocable to these customers for approximately $1.1 billion. If the Administrative Law Judge recommends a settlement for approval, we anticipate the settlement will be scheduled for consideration by the Rural Commission on June 10th. If approved as filed, the settlement will result in a $6.7 million increase in annual operating costs.
Chris: On April 30, we filed with the administrative law judge a proposed settlement on this consolidated case.
Chris: The key terms of the proposed settlement Roe.
Chris: Capital structure and the accounting treatments I. Just described are the same as what is included in the West Texas proposal for decision.
Chris: Additionally, the recommendation includes approval rate base allocable to these customers are approximately $1 1 billion.
Chris: If the administrative law judge recommended set of a per approval, we anticipate the sale will be scheduled for consideration by the Royal Commission on June 10th.
Chris: If approved as filed the settlement result is $6 $7 million increase in annual operating income.
Chris: Additionally, expect the road condition will also consider Apt's 2020 for grip filing for 2000 <unk> for $77 2 million at June 10th meeting.
Christopher Forsythe: Additionally, we expect the Railroad Commission will also consider APT's 2024 grid filing for $77.2 million at its June 10th meeting.
Christopher Forsythe: Finally in Kentucky, we completed a hearing this week before the Public Service Commission regarding our general rates. We anticipate a final order during our fiscal fourth. Our balance sheet and financial position continue to remain strong. Our equity capitalization as of March 31st was 61%, and we do not any short-term debt outlay. During the second quarter, we extended our four credit facilities to over $3.1 billion. At quarter end, we had $5.3 billion in available equities to support our operation. Included in this amount is $1.7 billion in net proceeds available from our ATM activities. which is expected to satisfy the remainder of our anticipated fiscal 25 equity needs and all of our anticipated equity needs.
Chris: Finally in Kentucky, we completed hearing this week before the public service Commission regarding our general rate case.
Chris: We anticipate a final order during our fiscal fourth quarter.
Chris: Our balance sheet and financial position to remain strong.
Chris: Equity capitalization as of March 31 was 61% and we do not any short term debt outstanding.
Chris: During the second quarter, we extended our four credit facilities totaling $3 1 billion.
Chris: At quarter end, we had $5 3 billion in available liquidity to support our operations.
Chris: Included in this amount is $1 $7 billion in net proceeds available from our ATM activities.
Chris: Which is expected to satisfy the remainder of our participated in fiscal 'twenty five equity needs and all of our anticipated equity needs for fiscal 'twenty six.
Christopher Forsythe: Our fiscal year-to-date performance gives us confidence to increase our Fiscal 25 Earnings Reassured Guidance from a range of $7.05 to $7.25 to a new range of $7.20 to $7.75. We expect the remaining contributions to Fiscal 2025 earnings per share to be recognized somewhat evenly by quarter in the back half of the fiscal year. They increased their guidance for the larger complexity strength of APT's through system business during the first half of the fiscal year and their expectations for this part of APT's business for the remainder of the fiscal year. As a reminder, following a strong Fiscal 24 performance, we entered Fiscal 25 assuming a return to our normalized three-system marking.
Chris: Our fiscal year to date performance gives us confidence to increase our fiscal 25 earnings per share guidance from a range of $7, 5% to 725% to a new range of $7 20 to $7 30.
Chris: We expect the remaining contribution to fiscal 2025 earnings per share to be recognized somewhat evenly by quarter in the back half of the fiscal year.
Chris: We increased our guidance for large reflects the strength of apt's through system business. During the first half of fiscal year and our expectations for this part of Apt's business for remainder of the fiscal year.
Chris: As a reminder, following a strong fiscal 'twenty four performance, we entered fiscal 'twenty five assuming a return to more normalized through system market conditions. As a result of increased takeaway capacity in the Permian basin.
Christopher Forsythe: as a result of increased takeaway capacity in the permanent. Now we currently expect APT's three-system business to perform just slightly less than the prior year. However, the timing of these revenues in Fiscal 25 is suspected to be different than in Fiscal 24. through March 31st, about half of the expected contribution for fiscal 2025 from this portion of AP. has already been in the prior year, 80% of agencies. was recognized in the second half.
Chris: Now we currently expect Apt's through system business performed just slightly less than the prior year.
Chris: However, the timing of these revenues in fiscal 'twenty five is expected to be different in fiscal 'twenty four.
Chris: March 31 about half the expected contribution for fiscal 2025 from this portion of the equities business is already recognized in.
Chris: In the prior year nearly 80% of agencies through system business was recognized in the second half of the fiscal year.
Christopher Forsythe: Additionally, we anticipate our adequate warm taxes to be lower than planned, and have increased our O&M spending to stay ahead of compliance work to further enhance the safety and reliability We will also perform some additional maintenance this summer to prepare for the upcoming winter heating season. We now anticipate our O&M, excluding bad debt, should be in the range of $860 to $880 million. A significant portion of the year-over-year increase has already been recorded. We anticipate O&M in the back half of Fiscal 25 to be just slightly higher than the same period in the prior. Finally, our capital spending guidance remains on track to be approximately $3.7 billion.
Chris: Additionally, we anticipate our AD valorem taxes to be lower than planned and have increased our O&M spending to stay ahead of compliance work to further enhance the safety and reliability of our system.
Chris: We will also perform some additional maintenance of summer to prepare for the upcoming winter heating season.
Chris: We now anticipate our O&M, excluding bad debt expense to be in the range of $860 million to $880 million <unk>.
Chris: A significant portion of that year over year increase has already been recognized we anticipate O&M in the back half of fiscal 'twenty five we just slightly higher than the same period in the prior year.
Chris: Finally, our capital guidance capital spending guidance remains on track to be approximately $3 $7 billion we.
Operator: We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions. At this time, if you would like to ask a question, press star followed by the number 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number 1.
Chris: We appreciate your time this morning, and your interest in Atmos Energy will now open up the call for questions.
Chris: At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.
Chris: If your question has been answered and you would like to remove yourself from the queue Press star followed by the number one.
Richard Sunderland: Your first question is from a line of Richard Sunderland with J.P. Morgan. Hey, good morning. Thank you for the time today. Good morning. Appreciate all the commentary here.
Speaker Change: Your first question is from the line of Amit <unk> with Jpmorgan.
Amit: Hey, good morning, Thank you for the time today.
Speaker Change: Good morning.
Speaker Change: I appreciate all the commentary here wanted to start with guidance.
Kevin Akers: Wanted to start with guidance. It sounds like AT&T through system activity certainly contributing to some of the upside here. Is the higher guidance for 2025 a fair base to think about growth going forward or does some of that normalization that you had originally anticipated for 2025 need to be factored in for growth for 2026 and beyond? Yeah, it's a good question, Richie. So we'll still figure, looking at what will happen for the rest of the summer. As you know, conditions are very volatile in the market right now. And as we set our fiscal 26 plans, we'll take a snapshot of market conditions, probably late summer, early fall, prior to us releasing our fiscal 26 guidance, an updated five-year plan to really reflect what we think will be truly reflective of that business.
Speaker Change: Sounds like Apt's through system activity, certainly contributed to some of the upside here is the higher guidance for 2025, a fair base to think about growth going forward or does some of that normalization that you had originally anticipated for 2005, we need to be factored in for growth from 2006 and beyond.
Richie: Yes. It gets good question Richie said, we'll still figure looking at what will happen for the rest of the summer.
Richie: As you know conditions are very volatile in the market right now and as we set our fiscal 'twenty six plans, we will take a snapshot of market conditions, probably late summer early fall prior to us releasing our fiscal 'twenty six guidance and updated five year plan to really.
Richie: Reflect what we think will be truly reflective of that business set for the next fiscal year.
Richie: Okay got it sounds like more to come.
Kevin Akers: Okay, got it. Sounds like more to come.
Kevin Akers: Again, similarly on the O&M, it seemed like some of the higher O&M for 25 is a pull forward from 26. Is that a fair characterization? How are you thinking about the higher O&M this year and any efforts to de-risk 26 on that front? Yeah, a couple of things. There's certainly an opportunity to pull forward, as I described, with the closing plan and the warm expense vis-à-vis our expectations. Also, we've talked many, many times. We are not a just-in-time company from an O&M for spending perspective. So if we have opportunities to further stay ahead of our compliance deadlines, or if we see opportunities coming out of the winter heating season this last six months, to get ready for the next six months, we'll perform some additional maintenance in the summer months when our crews and folks are available.
Richie: Again, similarly on the O&M it seemed like some of the higher O&M for 25 is a pull forward from 2006.
Richie: That a fair characterization and how are you thinking about the higher O&M this year and any efforts to de risk 26 on that front.
Richie: Yes, a couple of things there is certainly an opportunity to pull forward as I described with the lower than planned AD valorem expense vis vis our.
Richie: Patients.
Richie: Also we've talked many many times, we're not a just in time company from an O&M for spending perspective, so if we have opportunities.
Richie: To further say ahead of our compliance deadlines or if we see opportunities coming.
Richie: Coming out of the winter heating season. This last six months to get ready for the next six months will perform some additional maintenance in the summer months when that our crews and folks are available. So it's a little bit of both it's just from kind of opportunistic based upon the operating conditions of the system at this point in time as well as taking advantage of opportunities to pull forward.
Kevin Akers: So it's a little bit of both. It's just kind of opportunistic based on the operating conditions of the system at this point in time, as well as taking advantage of opportunities to pull forward a little bit from Yeah, the only thing I'll add to that is that again, with the blessing we have of being in growth properties right now, we had an increase in the number of line locates from the previous year, and we'll continue to see that probably going forward, just given the economic conditions that I discussed earlier in my remarks. So that's the other part of that O&M, if you will, is sometimes with growth, people don't see that you'll have increased line locating expenses.
Richie: A little bit from future periods.
Richie: The only thing I'll add to that is that again with the last thing we have are being in gross properties right. Now we had an increase in the number of line locates from the previous year.
Richie: We'll continue to see that probably going forward just given the economic conditions that I discussed earlier in my remarks. So that's the other part of that O&M. If you will is sometimes with growth people don't say that youll have increased line locate expense as well.
Kevin Akers: Got it. That's very helpful.
Speaker Change: Got it Thats very helpful. Just a quick follow up on the O&M discussion there it sounded like in the Texas Trc's.
Kevin Akers: Just a quick follow-up on the O&M discussion there. It sounded like in the Texas GRCs that there is some retroactive component to the REG asset tracker you were referencing. I may not be understanding all the puts and takes here, but just wanted to clarify, if you get the final orders in line with settlement, is that upside from that retroactive component? And I mean upside versus 25 guidance, to be clear. At this point, we've reflected in our guidance our expectations for O&M, both the cloud computing treatment as well as the SSI intercurrent.
Speaker Change: Some retroactive component to the Reg asset tracker you were referencing.
Speaker Change: May not be understanding all the puts and takes there but just wanted to clarify if you get the final orders in line with settlements is that upside from that retroactive component I mean upside versus 25 guidance to be clear.
Speaker Change: At this point, we reflected in our guidance our expectations for O&M.
Speaker Change: Cloud computing of treatment as well as the Ssi and our current guidance.
Richard Sunderland: Great. Thank you so much for the time. Thank you.
Speaker Change: Great. Thank you so much for the time.
Speaker Change: Thank you.
Fei She: Your next question comes from the line of Nick Cappanella with Barclays. Hi, good morning team. This is actually Fei for Nick today, and thanks for taking my question. I just want to quickly follow up on financing. It seems like year-to-date equity issuance is slightly higher than year-to-date 2024. Again, I think with higher capital plan, higher rate-based growth, can you update us on the equity financing for the rest of the year, if there is any changes from the messaging from the last quarter, and also kind of seeing the interest rate swap to be in a similar spot as last quarter?
Speaker Change: Your next question comes from the line of Nick Campanella with Barclays.
Speaker Change: Hi, Good morning team. This is actually say for Nick Nick today, and thanks for taking my questions.
Speaker Change: I just want to quickly follow up on financing.
Speaker Change: Seems like year to date equity issue and slightly higher than year to date 2024.
Speaker Change: Again, I think with higher capsule planned higher rate base growth can you update us on the equity financing for the rest of the year. If there is any changes from the messaging from last quarter and also kind of seeing the interest rate swap.
Speaker Change: To be in a similar spot. This last quarter, just generally can you speak to the strategy of managing the cost.
Christopher Forsythe: Just generally, can you speak to strategy managing the cost over there as well? Thanks. Sure.
Speaker Change: Costs over there as well thanks.
Christopher Forsythe: This is Chris Fei. So, I mean, our financing strategy hasn't changed since prior quarter or really for the last several years. We'll continue to finance the corporation in a balanced fashion using a combination of equity and long-term debt with equity coming through the ATM. We talked about it having $1.7 billion on the page now that's been priced to reflect our equity needs, our anticipated equity needs for Fiscal 25 as well as 2026. And we'll draw that down as the cash needs of the corporation dictate when we need to use that. Additionally, from a long-term debt perspective, you know, the swap that we have in place, that's, again, tied to our anticipated debt issuance in the fall for anticipating a 30 year issuance at this point in time.
Chris: Sure. This is Chris space, So our financing strategy.
Chris: <unk> Hasnt changed since prior quarter really for the last several years will continue to.
Chris: Finance Corporation in a balanced fashion using a combination of equity long term debt with equity coming through the ATM, we talked about that had a $1 7 billion on the page now thats been priced.
Chris: Our equity needs, our anticipated equity needs for fiscal 'twenty, five as well as 2026, and we'll draw that down has the cash needs of the corporation.
Chris: Dictate when we need to use that.
Chris: Additionally from a long term debt perspective, you know the swap that we have in place.
Chris: Again tied to our anticipated debt issuance in the fall FERC anticipating a 30 year issuance at this point in time. So at this point, we don't see it.
Fei She: So, at this point, we don't see any changes in executing that particular debt transaction and utilizing that swap for the benefit of our customers. Got it. That's very helpful.
Chris: Any changes in executing that particular debt transaction.
Chris: And utilizing that swap for the benefit of our customers.
Chris: Got it that's very helpful and I just wanted to follow up on economic development and seeing the tremendous growth in Texas, driven by us and our customers.
Kevin Akers: And I just want to follow up on economic development and seeing the tremendous growth in Texas driven by DNI customers. Could you talk about, first of all, definitely generally a gas need in the region, and obviously you're adding a large quantity of new gas demand each quarter.
Chris: Customers.
Chris: Could you talk about first of all that definitely generally need gas needs in the region and obviously you are adding large quantity of new guys demand each quarter.
Kevin Akers: I guess at this point, is there any pipeline of projects you're working on or if there's any quantifiable backlog that you can discuss? I'll leave it there. Yeah, I'm not sure about your question about BICLOG. We don't have a BICLOG, per se. I talked about the two high-priority projects for APT, the WA Loop and Bethel-to-Grosbeck project right now. Additionally, we're finishing up work on our third salt dome cavern that's part of our integrity maintenance program. We anticipate that to be wrapping up sometime in the next nine to 12-month period that's out there. Everything else is all scheduled work that we have lined out on a one, three, and five-year basis according to either reliability, supply, versatility, and or our risk model safety concerns or direction that way.
Chris: I guess at this point is there any pipeline of projects Youre working on or if there is any quantifiable backlog that you can discuss.
Chris: I'll leave it there.
Chris: Yeah, I'm not I'm not sure about your question about backlog, we don't have a backlog per se I talked about the two high priority projects, where apta <unk> loop and battle to grow spec project right now.
Chris: Ashley we're finishing up work on our third salt dome cavern Thats part of our integrity maintenance program, we anticipate that to be ramping up sometime in the next nine to 12 month period. That's out there everything else is all scheduled work that we have lined out on a one three and five year basis. According to.
Chris: The reliability.
Chris: Supply versatility and or our risk model safety concerns or direction that way as.
Operator: As we have in our slide deck, we point to 85% investment on capital for safety and reliability for the fiscal year to date. Understood, understood. That's helpful, Collar. Thanks again. Thank you. As a reminder, to ask a question, press star 1 on your telephone keypad.
Chris: As we have in our slide deck, we point to 85% investment on capital for safety reliability for the fiscal year to date.
Chris: Understood understood. That's helpful color. Thanks again.
Chris: Thank you.
Speaker Change: As a reminder to ask a question press star one on your telephone keypad.
Christopher Jeffrey: Your next question is from the line of Julian DeMaule-Smith with Jeffreys. Hey, this is Spark for Julian. Just really quick legislatively, I'm just wondering what are some of the key bills you guys are monitoring and what potential benefits or implications do they carry for your business? Like, for example, we noticed there's HB 4384 regarding the standalone depreciation tracker for gas LDCs. Do you see that as a potential benefit for your business? Just any comment on that front would be helpful.
Speaker Change: Your next question is from the line of Julien Dumoulin Smith with Jefferies.
Speaker Change: Hey, this is spark for Julian just a really quick legislatively Im just wondering what are some of the key bills to you guys a monetary and.
Speaker Change: What potential benefits of implications do they carry for a business like for example, we noticed terrace HB for 384 regarding the Standalone depreciation tracker for gas ldcs.
Speaker Change: Do you see it as a potential benefits for new business as any color on that front would be helpful. Thank you.
Kevin Akers: Thank you. Yeah, we continue to monitor all the sessions across our eight states. We have two that are currently closed or concluded their session, Mississippi and Kentucky. Don't want to get too far ahead of the work that's continued to go on going on across our legislative bodies right now. But we do see some bills out there that have our interest right now, but we think it needs to go through the final steps of the legislative process. And then if they're related to the utility side of the business, they'd have to go to that particular jurisdiction's commission to see how it folds into either tariffs or rules or action upon for that company.
Speaker Change: Yes, we continue to monitor all of the sessions across our eight states. We have two that are currently closed or concluded their session, Mississippi in Kentucky don't want to get too far ahead of the work has continued to go win going on across our legislative bodies right now.
Speaker Change: But we do see some bills out there that have our interest right now, but we think it needs to go through the final steps of the legislative process and then if they are related to the utility side of the business.
Speaker Change: Perhaps though to that particular jurisdictions commission to see how it folds into either tariffs or rules or action upon for that company. So I don't want to get too far out in front of what the legislator legislatures going to do for the remaining session, but again, we're keeping our eye on everything that's out there.
Kevin Akers: So don't want to get too far out in front of what the legislature is going to do for the remaining session. But again, we're keeping an eye on everything that's out there.
Christopher Jeffrey: Thank you, that's very clear. And maybe just another housekeeping question. So since you raised the FY25 EPS guidance, so the new guidance midpoint is now seven. 725, $7.25, should we use the new EPS Guidance Me point as the new EPS base? When you say new to EPSA, what do you mean there? is for calculating the five-year CAGR. At this point, I think that's pretty safe. Got it.
Speaker Change: Thank you that's very clear and maybe just another housekeeping question. So since you raised the FY 'twenty five EPS guidance, so the new Guy.
Speaker Change: Guidance midpoint is now seven.
Speaker Change: $725 $7 25 should we use the new EPS guidance midpoint, Aster, new EPS base.
Speaker Change: Okay. When you say EPS base, what you made there.
Speaker Change: As for calculating the five year CAGR.
Speaker Change: At this point I think thats, a pretty safe assumption.
Speaker Change: Got it thank you.
Christopher Jeffrey: Thank you.
Paul Fremont: Your next question is from the line of Paul Fremont with Lindenburg-Bellman. Thank you very much. Congratulations on a strong quarter, and my question has been answered. Thank you.
Speaker Change: Your next question is from the line of Paul Fremont with Linda Linda.
Speaker Change: Lindenberg Thalmann.
Paul Fremont: Thank you very much congratulations on a strong quarter and my question has been answered. Thank you.
Paul Fremont: Okay. Thank you.
Speaker Change: Your next question is from the line of Christopher Jefferies Jeffrey with Mizuho Securities.
Christopher Jeffrey: Your next question is from the line of Christopher Jeffrey with Mizzou Homeland Security. We can't hear you on this end. Sorry, is that better? That's better. Thank you. Okay.
Speaker Change: Hi, everyone.
Speaker Change: All right.
Yeah.
Speaker Change: We can't hear you on this end.
Speaker Change: Sorry is that better.
Speaker Change: Thats better thank you.
Kevin Akers: Just a couple quick ones from me. I just noticed the timing for the Colorado rate case expectation got pushed back a bit. Just any kind of thoughts on timing there and expectations for when you get to that case? No, that's something we're always looking at, what we have going on in the jurisdiction, what we have going on in other jurisdictions. Ongoing conversation with our regulatory jurisdictions. So I wouldn't read a lot into that at this point. Great.
Speaker Change: Just a couple quick ones from me.
Speaker Change: I just noticed the timing for the Colorado rate case expectation got pushed back a bit.
Speaker Change: Just any kind of thoughts on timing, there and expectations for when you get to that case.
Speaker Change: No that's something we're always looking at what we have going on in the jurisdiction, where we have going on in other jurisdictions ongoing conversation with our regulatory jurisdiction. So I wouldn't read a lot into that at this point.
Speaker Change: Great and then maybe just on the West Texas.
Kevin Akers: And then maybe just on the West Texas, the cloud computing costs that you mentioned, Kevin, in the opening remarks, just kind of expectations for that to be implemented more wholesale across Texas or any other states? Does that kind of change how you're approaching, you know, thinking about those types of costs within rate-based? I would just kind of view this as a continuation of our ongoing regulatory strategy of seeking to reduce lag where we can. Oftentimes we'll start with an individual jurisdiction who will include something into their regulatory construct. We then try to seek to replicate that in other states to the best of our ability.
Speaker Change:
Paul Fremont: The cap the cloud computing costs. So you mentioned, Kevin in the opening remarks, just kind of expectations for that to be implemented more wholesale across Texas or any other states does that kind of changed how you're approaching.
Paul Fremont: So thinking about those types of costs within rate base.
Paul Fremont: I would just kind of view this as a continuation of our ongoing regulatory strategy youre seeking to reduce lag where we can.
Paul Fremont: Oftentimes, we will start with an individual jurisdiction who will.
Paul Fremont: <unk> something into their regulatory construct we then try to seek to replicate that in other states to the best of our ability.
Kevin Akers: So we'll see where the Railroad Commission's vote comes down next week. And then after that, from the May 13th for West Texas, and again from Mid-Tex on June 10th. And then we'll see if it makes sense for us to bring that to other jurisdictions within the act. Got it. Thanks. And just to clarify, so that would be the first jurisdiction that that type of cost is included? Correct. Great.
Paul Fremont: So, we'll see where the railroad Commission's vote comes down next week and then after that.
So they may 13th to West, Texas, then again from mid Tex.
Paul Fremont: On June 10, and then we'll see if it makes sense for us to bring that to other jurisdictions within the enterprise.
Paul Fremont: Got it thanks, and then just to clarify so that would be the first jurisdiction that that type of cost is included.
Paul Fremont: Correct.
Christopher Jeffrey: All right. Well, thanks again, and have a great day. Thank you.
Paul Fremont: Great Alright, well, thanks, again have a great day.
Paul Fremont: Thank you.
Ryan Levine: Your next question is from the line of Ryan Levine with Citigroup.
Speaker Change: Your next question is from the line of Ryan Levine with Citigroup.
Ryan Levine: Good morning, everybody. Just a quick one in terms of APT expansion projects, you know, if business continues to grow pretty materially, what are the underlying growth assumptions that embed the expansion projects that you have underway and what conditions would merit further expansion or upside to your existing plan? It's all part of our planning process. Again, it's based on what the city models are and what they're seeing for growth, population increases across the service territories. What we're seeing for demand, anticipated capacity requirements off of that growth, we put those in our models, then try and forecast out when we expect that demand to show up and make sure we have the pipe and the supply already there to meet those anticipated demands.
Ryan Levine: Good morning, everybody.
Ryan Levine: Quick one just a quick one in terms of AP key expansion projects business continues to grow.
Ryan Levine: Pretty materially what are the underlying growth assumptions that embeds. The expansion projects that you have underway and in what conditions would merit further expansion or upside to your existing plants.
Ryan Levine: It's all part of our planning process again, it's based on what the city models are what they are seeing for growth population increases across the service territories, while we're seeing for demand anticipated capacity requirements off of that growth, we put those in our models.
Ryan Levine: Try and forecast out when we expect that demand to show up and make sure we have the pipe in the supply.
Ryan Levine: Already there to meet those anticipated demands that's something we'd go through several times a year and then reaffirm again with our customers what their AMD queues are as we head into winter then post winter on AT&T.
Kevin Akers: That's something we go through several times a year and then reaffirm again with our customers what their MDQs are as we head into winter. Then post-winter on APT, we'll review what actual MDQs they achieved and we'll reset on a go-forward basis. That drives our modeling for the next several years. So given the winter is largely behind us, you know, has that a refresh already occurred for this calendar year so that we wouldn't expect any material changes until a review post-winter 2026 of expansion opportunities. The review is ongoing at this point. We continue to have conversations with those LDCs behind our city gate there on APT.
Ryan Levine: Review, what actual ENB cues, they achieved and we'll reset the go forward basis that drives our modeling for the next several years.
Ryan Levine: So given the winner is largely behind us.
Ryan Levine: It has added <unk>.
Ryan Levine: Refresh already occurred for this calendar year.
Ryan Levine: So that we wouldn't expect any.
Ryan Levine: Zero changes until every view post winter 2026.
Ryan Levine: <unk> of expansion opportunities.
Ryan Levine: The review is ongoing at this point, we continue to have conversations with those ldc's behind.
Ryan Levine: Our city gate there on AEP.
Kevin Akers: And we'll look to make sure those are reset prior to heading into next meeting. if any adjustments at all are required. Okay, great. Thanks for taking my questions.
Ryan Levine: And we will look to make sure those are reset prior to heading into next heating season, if any adjustments at all are required.
Ryan Levine: Okay, great. Thanks for taking my questions.
Ryan Levine: Sure.
Ryan Levine: Okay.
Operator: At this time, there are no further questions.
Ryan Levine: At this time there are no further questions I will now hand todays call back over to the president for closing remarks.
Operator: I will now hand today's call back over to the presenters for closing remarks. We appreciate your interest in Atmos Energy, and thank you again for joining us today. A recording of this call is available for replay on our website through June 30th.
We appreciate your interest in Atmos energy and thank you again for joining US today, a recording of this call is available for replay on our website through June 30.
Operator: Have a good day. This does conclude today's call. Thank you for joining. You may now disconnect your line.
Ryan Levine: Have a good day.
Ryan Levine: This does conclude today's call. Thank you for joining you may now disconnect your lines.
Ryan Levine: [music].
Ryan Levine: Yes.
Ryan Levine: Sure.
Ryan Levine: Yeah.
Ryan Levine: Okay.
Ryan Levine: Sure.
Ryan Levine: Okay.
Ryan Levine: Yes.
Ryan Levine: Yes.
Ryan Levine: Okay.
Ryan Levine: Okay.
Ryan Levine: Okay.
Ryan Levine: Yeah.
Ryan Levine: Yes.
Ryan Levine: [music].
Ryan Levine: Sure.
Ryan Levine: Thanks.
Ryan Levine: Okay.
Ryan Levine: Yes.
Ryan Levine: [music].
Ryan Levine: Okay.
Ryan Levine: Yes.