Q2 2025 Spire Inc Earnings Call

Unknown Executive: Good day and welcome to the Spire Inc Q2 FY25 Earnings Conference. All participants will be in the Sonoma If you need assistance, please email a conference specialist or pressing the star key, followed After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad.

Good day amongst of the spire, Inc, Q2, FY 'twenty five earnings conference call.

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Unknown Executive: Please note, this event is I would now like to turn the conference over to Megan McPhail, Managing Director of Investor Relations. Please go ahead.

Speaker Change: I'd now like to turn the conference over to Megan Mcphail, managing director of Investor Relations. Please go ahead.

Megan Mcphail: Morning and welcome to Spire's fiscal 2025 second quarter earnings call.

Speaker Change: Good morning, and welcome to expire in fiscal 2025 second quarter earnings call.

Megan Mcphail: On the call with me today is Scott Doyle, President and CEO, and Adam Woodard, Executive Vice President and CFO. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There is a slide presentation that accompanies our webcast, which can be downloaded from our website under Investors and then Events and Presentations.

Speaker Change: On the call with me today is Scott Doyle, President and CEO and Adam what are executive Vice President and CFO.

Speaker Change: We issued an earnings news release. This morning, you may access it on our website higher energy dot com and our new term.

Speaker Change: There's a slide presentation that accompanies our webcast, which can be downloaded 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 metrics. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. 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. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC.

Speaker Change: Before we begin let me cover our safe Harbor statement and use of non-GAAP earnings measures.

Speaker Change: Today's call, including responses to questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Speaker Change: 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. These risks and uncertainties are outlined in our quarterly and annual filings with the S. E T.

Megan Mcphail: In our comments, we will be discussing non-GAAP measures used by management when evaluating performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation.

Speaker Change: In our comments, we will be discussing non-GAAP measures used by management when evaluating the performance and results of operation Excellence.

Speaker Change: Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation.

Scott Doyle: Now here's Scott, who will start on page four of the presentation. Thank you, Megan. Good morning, everyone. And thank you for joining us today for our fiscal second quarter earnings conference call.

Scott Doyle: I'm here, Scott, who will start on page four of the presentation.

Scott Doyle: Thank you Meghan good morning, everyone and thank you for joining us today for our fiscal second quarter earnings Conference call.

Scott Doyle: I am honored to address you today as the newly appointed president and CEO of Spire. I'd like to express my gratitude to Steve Lindsey for his dedicated service and commitment to Spire over the years. Under his leadership, the company made significant strides and built a strong foundation for the future. Steve is assisting me over the next several months, ensuring we have a seamless transition.

Speaker Change: I am honored to address you today as the newly appointed President and CEO of spire.

Speaker Change: I'd like to express my gratitude to Steve Lindsey for his dedicated service and commitment to aspire over the years under his leadership the company made significant strides and built a strong foundation for the future.

Speaker Change: Steve is assisting me over the next several months, ensuring we have a seamless transition.

Scott Doyle: I want to assure you, our strategy remains unchanged. We'll continue to focus on organic growth, infrastructure investment, and continuous improvement. This includes modernizing our systems to benefit our customers. Advancing our regulatory engagement and maximizing value for our customers and other stakeholders while keeping the safety of our employees, customers, and communities at the center of it all.

Speaker Change: I want to assure you our strategy remains unchanged, we will continue to focus on organic growth infrastructure investment and continuous improvement.

Speaker Change: This includes modernizing our systems to benefit our customers advancing our regulatory engagement and maximizing value for our customers and other stakeholders, while keeping the safety of our employees customers and communities at the center of it all.

Scott Doyle: Before I dive into results, I would like to express my gratitude to our employees for their dedication to providing safe and reliable gas service for our customers. Despite challenges of extreme cold at times throughout the winter, our natural gas system performed exceptionally well, thanks to their hard work and commitment.

Speaker Change: Before I dive into results I would like to express my gratitude to our employees for their dedication to providing safe and reliable gas service for our customers.

Speaker Change: Despite challenges of extreme cold at times throughout the winter, our natural gas system performed exceptionally well thanks to their hard work and commitment.

Scott Doyle: Turning to our performance for the quarter. This morning we announced adjusted earnings of $3.60 per share compared to $3.45 per share a year ago. The year-over-year increase reflects strong growth in our utility and midstream site. partially offset by slightly lower results in gas markets. Our performance is driven by strategic infrastructure investments to modernize our natural gas system. Coupled with our ongoing commitment to disciplined cost management.

Speaker Change: Turning to our performance for the quarter. This morning, we announced adjusted earnings of $3 60 per share compared to $3 45 per share a year ago.

Speaker Change: The year over year increase reflects strong growth in our utility and midstream segments, partially offset by slightly lower results in gas marketing.

Speaker Change: Our performance was driven by strategic infrastructure investments to modernize our natural gas systems, coupled with our ongoing commitment to disciplined cost management.

Adam Woodard: Adam will provide a more detailed breakdown of our results and share insights into our outlook.

Speaker Change: Adam will provide a more detailed breakdown of our results and share insights into our outlook.

Scott Doyle: Now for an update on regulatory. Since our last earnings call, we have worked closely with key stakeholders in our ongoing Missouri rape We will continue to collaborate in the coming months to ensure a constructive outcome. In addition, earlier this month, the Missouri Public Service Commission staff recommended a $19 million revenue increase in our Infrastructure System Replacement Surcharge, or ISRS, request. This is our fifth such request since our last general rate case, and if approved, we bring our revenues in the rider to an annualized rate of $72.6 million.

Adam: Now for an update on regulatory matters since our last earnings call.

Adam: We have worked closely with key stakeholders and our ongoing Missouri rate case.

Adam: We will continue to collaborate in the coming months to ensure a constructive outcome.

Adam: In addition earlier this month, the Missouri Public Service Commission staff recommended a $19 million revenue increased and our infrastructure system replacement surcharge for interest request.

Adam: This was our fifth such requests since our last general rate case, and if approved would be.

Adam: Our revenues in the rider to an annualized rate of $73 $6 million.

Adam: Okay.

Scott Doyle: On the legislative front, we are pleased that Missouri Governor Kehoe signed Senate Bill 4 into law, marking a significant advancement for the state's utility. This constructive legislation introduces a future test year rate setting model that is forward looking, allowing natural gas and water utilities to set rates based on projected costs rather than historical expenses. By attracting investment in energy infrastructure, the bill aims to enhance system reliability and drive economic growth across Missouri. The bill allows utilities to file a rate case based on a future test year starting in July of 2026.

Adam: On the Legislative front, we are pleased that Missouri Governor signed Senate Bill four into law, marking a significant advancement for the state's utilities.

Adam: This constructive legislation introduced as a future test year rate setting model that is forward looking.

Adam: Power natural gas and water utilities to set rates based on projected cost rather than the historical expenses.

By tracking investment in energy infrastructure, Bill aims to enhance system reliability and drive economic growth across Missouri.

Adam: The Bill allows utilities to file a rate case based on a future test year starting in July of 2026.

Scott Doyle: We continue to be focused on achieving consistent and constructive regulatory outcomes in all of our leading to a more sustainable financial performance trajectory. Looking ahead, we are reaffirming our long-term EPS growth target of 5 to 7 percent. This is supported by our 10 year $7.4 billion capital investment plan. We expect to deliver within our fiscal 2025 earnings guidance of $4.40 to $4.60 per share. We are committed to delivering strong results in the second half of the year and beyond, with a focus on executing our capital investment plan, driving operational excellence, and strengthening the performance of our utilities and gas-related businesses.

Adam: We continue to be focused on achieving consistent and constructive regulatory outcomes in all of our jurisdictions, leading to a more sustainable financial performance trajectory.

Adam: Looking ahead, we are reaffirming our long term EPS growth target of 5% to 7%.

Adam: This is supported by our 10 year seven $4 billion capital investment plan, and we expect to deliver within our fiscal 2025 earnings guidance of $4 40 to $4 60 per share.

Adam: We are committed to delivering strong results in the second half of the year and beyond.

Adam: Focus on executing our capital investment plan driving operational excellence and strengthening the performance of our utilities and gas related businesses spire is poised for sustainable growth.

Scott Doyle: Spire is poised for sustainable growth.

Scott Doyle: In St. Louis, we're excited about the growth opportunities ahead. The labor market has now fully recovered, reaching pre-pandemic employment levels. In addition, Boeing recently was selected to build the next generation fighter aircraft for the United States Air Force, driving growth of high quality jobs in the St. Louis area, strengthening Missouri's economy and securing a prosperous future for our community.

Adam: In St. Louis we're excited about the growth opportunities ahead. The labor market is now fully recovered reaching pre pandemic employment levels.

Adam: In addition, Boeing recently was selected to build the next generation fighter aircraft for the United States Air Force driving growth of high quality jobs in the St. Louis area, strengthening miseries economy, and security and a prosperous future for our community.

Scott Doyle: I would also like to highlight that last week, we renewed our labor agreement with our local 548 union representing employees in our Alabama service team. This three year agreement is a win win as it provides stability to our workforce and allows us to focus on operational We are well positioned to achieve our financial and operational goals as we execute our strategy to grow organically, invest in infrastructure, and drive continuous improvement. Turning to page five, we continue to make capital investments to improve reliability, resiliency, and safety for the benefit of our customers. Year-to-date, our CapEx totaled $479 million, with a majority of the spend taking place at our gas utility.

Adam: I'd also like to highlight that last week, we renewed our labor agreement with our local $5 48 Union represented employees at our Alabama service territory.

Adam: This three year agreement as a win win as it provides stability to our workforce and allows us to focus on operational excellence.

Adam: We are well positioned to achieve our financial and operational goals as we execute our strategy to grow organically invest in infrastructure and drive continuous improvement.

Adam: Yeah.

Adam: Turning to page five we continue to make capital investments to improve reliability resiliency and safety for the benefit of our customers year to date, our capex totaled $479 million because the.

Adam: 40 of the spend taking place at our gas utilities.

Scott Doyle: Year over year, utility CapEx increased nearly 27% as we focus on upgrading distribution infrastructure and connecting more homes and businesses to safe, reliable, and affordable natural gas. Investment in our midstream segment totaled $84 million year-to-date, largely for the expansion of Spire Storage West. The expansion is now substantially complete, and we are pleased with the returns on the project. We expect to have the final components placed in service by the end of this summer.

Adam: Year over year utility Capex increased nearly 27% as we focus on upgrading distribution infrastructure connecting more homes and businesses to safe reliable and affordable natural gas.

Adam: Investment in our midstream segment totaled $84 million year to date largely from the expansion of spire storage West. The expansion is now substantially complete and we are pleased with the returns on the project.

Adam: We expect to have the final components placed in service by the end of this summer.

Scott Doyle: Looking ahead, we are increasing our fiscal 2025 capital investment target by $50 million to $840 million. The higher CapEx includes a $15 million increase at Spire, Missouri, and a $35 million increase at Midstream, primarily for the storage expansion project. As a reminder, our long term investment plan is focused on organic growth of utilities.

Adam: Looking ahead, we are increasing our fiscal 2025 capital investment target by $50 million to $840 million. The higher Capex includes a $15 million increase at spire, Missouri, the $35 billion increase in midstream primarily for the storage expansion project.

Adam: As a reminder, our long term investment plan is focused on organic growth at the utilities approximately 98% of our 10 year capital expenditure plan is targeted utility spend and driving our growth in rate base.

Scott Doyle: Approximately 98% of our 10 year capital expenditure plan is targeted utility spend driving our growth and rate Moving to page six for Missouri rate case update. Last week, PSC staff proposed a $246 million annual revenue increase in our Spire Missouri rate case. This increase amount is made up of two parts, approximately $205 million included in the staff's direct testimony. and staff's estimated $42 million true up through May 31st, 2025. The proposed revenue increase differs from our requested increase of $290 million, primarily due to staff's proposed 9.63% return on equity and 53.19% equity loss. compared to our requested return on equity of 10.5% and 55% equity layer in discrete adjustments, which we expect to be addressed in subsequent You may recall our requested increase reflects an estimated rate base of $4.4 billion, inclusive of discrete adjustment.

Adam: Yeah.

Adam: Moving to page six for our Missouri rate case update.

Adam: Last week, the PSC staff proposed a 246 million dollar annual revenue increase and our spire, Missouri rate case. This increase amount is made up those two parts approximately $205 million included in the SaaS direct testimony and staff estimated $42 million true up through May 31, two.

Adam: 25.

Adam: The proposed revenue increase differs from a requested increase of $290 million, primarily due to the staff's proposed 963% return on equity and $53, one 9% equity layer compared to our requested return on equity of 10, 5%.

Adam: 5% equity layer and discrete adjustments, which we expect to be addressed and subsequent testimony.

Adam: You may recall, our requested increase reflects an estimated rate base of $4 $4 billion inclusive of discrete adjustments.

Scott Doyle: We expect future testimony to address the weather mechanism and other elements of the case.

Adam: We expect future testimony to address the weather mechanism and other elements of the case.

Scott Doyle: Evidentiary hearings are scheduled to begin on August 4th and in order from the commission and new rates expected to be effective by October. We appreciate the constructive engagement thus far and remain committed to working closely with stakeholders throughout the remainder of the process.

Adam: Evidentiary hearings are scheduled to begin on August 4th and an order from the commission and new rates expected to be effective by October.

Adam: We appreciate the constructive engagement, thus far and remain committed to working closely with stakeholders throughout the remainder of the process.

Adam Woodard: I'll now turn the call over to Adam for a financial review and update on guidance and outlook. Thanks, Scott. And good morning, everyone. I'll start with a review of our quarterly results, which are detailed on pages 7 and 8 of our presentation. During the second quarter, we reported adjusted earnings of over $214 million, an increase of almost $18 million compared to last year. The gas utility segment had earnings of approximately $195 million in the second quarter, over $7 million higher than last year. The increased results reflect higher contribution margin at Spire, Missouri, driven by an increase in business revenues and usage net of weather mitigation, as well as new rates at Spire, Alabama.

Adam: Now I'll turn the call over to Adam for a financial review and update on guidance and outlook Adam.

Adam: Thanks, Scott and good morning, everyone I'll start with a review of our quarterly results, which are detailed on pages seven and eight of our presentation.

Adam: During the second quarter, we reported adjusted earnings of over $214 million, an increase of almost $18 billion compared to last year.

Adam: The gas utility segment had earnings of approximately $195 billion in the second quarter over $7 million higher than last year due to increased results reflect higher contribution margin at spire, Missouri, driven by an increase in <unk> revenues.

Adam: And you said, it's not a weather mitigation as well as new rates at spire, Alabama.

Adam Woodard: These favorable items were partially offset by lower Spire, Alabama usage net of weather mitigation. Excluding bad debt, utility earnings also reflected lower run rate O&M expense and higher depreciation expense. During the quarter, we continue to see strong earnings growth in our midstream segment driven by new contracts on additional capacity, higher rates on contract renewals, and asset optimization at Spire Storage. Earnings in our marketing segment were strong, but slightly lower than the prior year due to reduced market volatility. Lastly, other corporate costs were higher primarily due to higher borrowing balance. In both Missouri and Alabama, we experienced colder temperatures the last year and slightly colder than normal temperatures.

Adam: These favorable items were partially offset by lower spire, Alabama usage net of weather mitigation.

Adam: Excluding bad debt utility earnings also reflected lower run rate O&M expense and higher depreciation expense.

Adam: During the quarter, we continued to see strong earnings growth in our midstream segment, driven by new contracts on additional capacity higher rates on contract renewals and asset optimization at spire storage.

Adam: Earnings in our marketing segment were strong, but slightly lower than the prior year due to reduced market volatility.

Adam: Lastly, other corporate costs were higher primarily due to higher borrowing balances.

Adam: In both Missouri, and Alabama, we experienced colder temperatures in the last year and slightly colder than normal temperatures.

Adam Woodard: Our volumetric margins in Missouri for the quarter were higher by nearly $7 million, but short of our expectations. This adjustment is highly dependent on the relationship between heating degree days and customer usage set in the previous rate proceeding. The weather mitigation adjustment in Missouri was not effective as revenues were not aligned with usage over the course of the quarter. Looking out at Alabama, while we experienced a higher than anticipated adjustment under the weather mitigation mechanism during the quarter, the year-to-date results are largely in line with expectations. We're focused on cost management and continue to expect run rate O&M expense at the gas utility to be flat relative to fiscal 2024 levels.

Adam: Our volumetric margins in Missouri for the quarter were higher by nearly $7 million was short of our expectations.

Adam: This adjustment is highly dependent on the relationship between heating degree days and customer usage, sending the previous rate proceeding.

Adam: The weather mitigation adjustment in Missouri was not effective as revenues were not aligned with usage over the course of the quarter.

Adam: Looking at our Alabama, while we experienced a higher than anticipated adjustment under the weather mitigation mechanism during the quarter and year to date results are largely in line with expectations.

Adam: Okay.

Adam: We're focused on cost management and continue to expect run rate O&M expense at the gas utility flat relative to fiscal 2024 levels.

Adam Woodard: During the quarter, gas utility run rate O&M expense was lower by $800,000 when compared to last year.

Adam: During the quarter gas utility run rate O&M expense was lower by $800000 when compared to last year.

Adam Woodard: Turning now to our growth outlook on page 9. We are confident that our long term adjusted earnings per share growth target of 5 to 7%. This is reinforced by 7 to 8% rate based growth at Spire Missouri and steady sustained equity growth at Spire Alabama, coupled with efficient recovery mechanisms. We remain committed to executing on our strategy and are affirming our FY 2025 adjusted earnings guidance range of 440 to 460 per share. Weighted average shares for FY25 are expected to be approximately 58.5 million, slightly lower than our previously anticipated 59 million shares. providing the benefit and expected adjustment earnings per share for the year.

Adam: Turning now to our growth outlook on page nine.

Adam: We are confident that our long term adjusted earnings per share growth target of 5% to 7%. This is reinforced by 78% rate base growth at spire, Missouri.

Adam: Steady sustained equity growth aspire, Alabama, coupled with efficient recovery mechanisms.

Adam: We remain committed to executing on our strategy and are reaffirming our FY 2025, adjusted earnings guidance range of $4 40 to 460 per share.

Adam: Weighted average shares for FY 'twenty five are expected to be approximately $58 5 million.

Adam: Lower than our previously anticipated 59 million shares.

Adam: Providing the benefit than expected adjusted earnings per share for the year.

Adam Woodard: We are updating our adjusted earnings targets by business segment to reflect first staff results and expectations for the remainder of the year. We're lowering the gas utility range by $11 million, primarily due to weather-related margin headwinds experienced year-to-date. As a result of the ineffectiveness of the weather adjustment and usage, we anticipate approximately $9 million of lower margins for residential customers. We are raising the range for gas marketing by $4 million on stronger than expected earnings in the first half of the year, and we are increasing our midstream earnings outlook by $8 million to reflect the realization of higher rates and capacity and optimization of our storage assets during the first half of the year.

Adam: We are updating our adjusted earnings targets by business segment to reflect first half results and expectations for the remainder of the year.

Adam: We're lowering the gas utility range by $11 million, primarily due to weather related margin headwinds experienced year to date.

Adam: As a result of the ineffectiveness of the weather adjustment that usage, we anticipate approximately $9 billion, but lower margins from residential customers.

Adam: We are raising the range for gas marketing by $4 billion on stronger than expected earnings in the first half of the year and we are increasing our midstream earnings outlook by $8 million to reflect the realization of higher rates and capacity and optimization of our storage assets during the first half of the year.

Adam Woodard: The range for corporate and others loss was increased by $4 million primarily due to higher interest expense from higher short term balance.

Adam: The range for corporate and others loss was increased by $4 million, primarily due to higher interest expense from higher short term balances.

Adam Woodard: Moving to slide 10 for a financing update, our three-year financing plan is unchanged. To support our equity needs, we settled approximately $43 million of forward sales during the quarter. Looking ahead, we anticipate using our ATM program for planned equity issuances through 2027.

Adam: Moving to slide 10 for a financing update our three year financing plan is unchanged.

Adam: To support our equity needs, we settled approximately $43 million of forward sales during the quarter.

Adam: We anticipate using our ATM program for planned equity issuances through 2027.

Adam Woodard: In April, we priced $150 million of Spire Missouri first mortgage bonds that we expect to fund on May 1st. Our financing plan includes additional issuances in 2026 and 2027 to refinance maturities and incremental debt of approximately $500 million to fund our capital plan. Our FFO-to-debt target remains at 15 to 16 percent.

Adam: In April we priced $150 million of spire, Missouri first mortgage bonds that we expect to fund on day one.

Adam: Our financing plan includes additional issuances in 2026, and 2027 to refinance maturities and incremental debt of approximately $500 million to fund our capital plan.

Adam: Our <unk> to debt target remains at 15% to 16% in summary, we are executing our financing plan effectively and are confident that our financial position going forward.

Adam Woodard: In summary, we are executing our financing plan effectively and are confident in our financial position going forward.

Scott Doyle: With that, let me turn it back over to you, Scott. Thanks, Adam. As you've heard today, we have made significant progress towards achieving our priorities for the year, strengthening our position as a more resilient, efficient and sustainable company that creates value for both customers and shareholders. Our unwavering commitment to delivering natural gas safely and reliably remains at the core of our effort. We are executing on our capital investment plan while actively collaborating with key stakeholders to secure constructive regulatory outcomes that benefit both our customers and shareholders. Additionally, we are focused on meeting our fiscal 2025 adjusted earnings per share guidance range and preserving the strength of our balance sheet.

Scott Doyle: With that let me turn it back over to you Scott.

Speaker Change: Thanks, Adam as you've heard today, we have made significant progress towards achieving our priorities for the year strengthening our position as a more resilient efficient and sustainable company that creates value for both customers and shareholders.

Speaker Change: Our unwavering commitment to delivering natural gas safely and reliably remains at the core of our efforts.

Speaker Change: We are executing on our capital investment plan, well actively collaborating with key stakeholders to secure a constructive regulatory outcomes that benefit both our customers and shareholders. Additionally, we are focused on meeting our fiscal 2025 of adjusted earnings per share guidance range and preserving the strength of our balance sheet.

Scott Doyle: Executing on these objectives is not just a focus for FY 2025, but a long-term commitment to driving success and delivering meaningful results in the years to come.

Speaker Change: Executing on these objectives, it's not just a focus for FY 2025, but a long term commitment to driving success delivering meaningful results in the years to come.

Scott Doyle: Thank you for your ongoing support of Spire, and we look forward to seeing many of you at the AGA Financial Forum in a few weeks.

Speaker Change: Thank you for your ongoing support of aspire and we look forward to seeing many of you at the a G. A financial forum in a few weeks, we're now ready to take questions.

Unknown Executive: We're now ready to take questions. Yes, thanks. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone. you are using a speaker.

Speaker Change: Yes. Thank you we will now begin the question and answer session.

Speaker Change: Ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Unknown Executive: Please pick up your hands up before. At any time your question has been addressed and you would like to withdraw it, please press star 1. At this time, we will pause momentarily until someone...

So anytime you question has been addressed seem to like you withdraw it. Please press star then two.

Speaker Change: At this time, we will pause momentarily to assemble the roster.

Speaker Change: And the first question comes from Richard Sunderland with Jpmorgan.

Richard Sunderland: And the first question comes from Richard Sunderland with J.P. Hey, good morning. And Scott, congrats on your new leadership of the company. Morning, Rich. Thank you. And digging into the results a little bit in finer detail, you know, some moving pieces on the segment guidance, I realize share count is tweaked as well.

Speaker Change: Hey, good morning, and Scott Congrats on your new leadership of the company.

Speaker Change: Good morning, rich thank you.

Speaker Change: Okay.

Digging into the results a little bit in.

Speaker Change: And finer detail some moving pieces on the segment guidance I realize share count is tweaked as well can you speak a little bit about onex trends and then where are you trending on a full year basis, giving all these moving pieces.

Adam Woodard: Can you speak a little bit about one age trends and then where you're trending on a four year basis, giving all these moving pieces?

Adam Woodard: Hey, Rich, it's Adam. You know, we that, you know, we wanted to take, stop and take a minute and, and really took, we saw the margin weakness in Missouri and had elected to take that guidance down. Now, fortunately, the midstream, you know, midstream had exceeded our expectations and were able to move that, move that up. So, I mean, from a trend line perspective, obviously, obviously, we're moving into the summer months and, you know, you won't, we won't see a lot of performance out of the gas utilities, but we do see, we do see the midstream trending well into the end of the year.

Adam: Hey, rich, it's it's Adam.

Adam: You know that we wanted it to stop and take a minute and.

Adam: And really we saw the the margin weakness and in Missouri in.

Adam: Had elected to take that guidance down now Unfortunately, the midstream.

Adam: You know midstream that exceeded our expectations and were able to move that move that up.

Adam: So from a trend line perspective.

Adam: Obviously, we're moving into the summer.

Adam: Summer months.

Adam: You know you won't we won't see a lot of performance out of the gas utilities, but we do.

Adam: See we do see the midstream.

Adam: Turning well into the end of the year and as I had mentioned on the last call MIT marketing and we feel very good about where they're at and where they're going into the year.

Adam Woodard: And as I mentioned on the last call, you know, marketing, we feel very good about where they're at and where they're going through the year. understood so it sounds like you know the the sort of weather at the utility is obviously unfortunate is that really the sole deviation on the utility side I think you referenced nine million of customer margin so it looks like there should be a few other small pieces in there too just trying to understand the weather versus where else you're having difficulty forecasting the utility That's the main driver. As you mentioned, there's a few other pieces, but the main driver really is the weather-related market.

Adam: Understood so it sounds like.

Adam: The sort of weather at utility use obviously unfortunate is that really the sole deviation on the utility side I think you referenced 9 million of customer margin. So it looks like there should be a few other small pieces in there to just trying to understand the weather versus where else you're having difficulty forecasts.

Adam: And the utility.

Adam: But that's the main driver there.

Adam: As he mentioned there's a there's a few other pieces, but that's the main driver really is the weather related margin.

Adam Woodard: Okay, okay, understood. And then with the midstream guidance, that $8 million increase, is that solely a one off for 2025? Or are you seeing a higher run rate for the business going forward?

Adam: Okay, Okay understood and then with the midstream guidance that $8 million increase is that solely a one off for 2025 or are you seeing a higher run rate for the business going forward.

Adam Woodard: That's a great question. There's a little bit of, we mentioned optimization there. One, we are seeing relative to where we started the year, feeling better about kind of where we're at on capacity and pricing, but a piece of that's optimization.

Adam: That's a great question.

Adam: There's a little bit about the window, we mentioned optimization. There that there is one we are seen a relative to where we started the year I'm feeling better about kind of where we're at on capacity or pricing, but a piece of that optimization. So.

Adam Woodard: And so this would indicate some run rate lift over time, but I want to stress that it's not a complete lift on run rate. There is some optimization in there around. circumstances or where our volatility that we saw in the first couple quarters. Okay, understood.

Adam: This is this would indicate some run rate lift over time, but I want to stress that it's not complete.

Adam: Complete lift on run rate there is some optimization in there around circumstances are where our volatility that we saw in the first couple of quarters.

Adam: Okay understood and sorry, just one last one on midstream over on that.

Adam Woodard: And sorry, just one last one on midstream while we're on that. The higher capex for midstream is it impacting your return expectations for the storage expansion project?

Adam: Capex for midstream is that impacting your return expectations for the storage expansion project.

Adam Woodard: Yeah, it's Adam again. No, it's not that, you know, we, we did, we did see some higher capital costs go into that. And really, it continues to exceed our return expectation. Great. I'll leave it there.

Adam: Yeah, It's Adam again.

Adam: No. It's not that we we did we did see some higher capital costs go into that and really it continues to exceed our.

Adam: Return expectations.

Adam: Great I'll leave it there thank you.

Unknown Executive: Thank you.

Adam: Okay.

Speaker Change: Thank you and the next question comes from David Arcaro with Morgan Stanley.

David Arcaro: And the next question comes from David Arcaro with Morgan Stanley. Hey, good morning. Thanks so much.

David Arcaro: Hey, good morning, Thanks, so much a best wishes to Steve and congratulations Scott.

David Arcaro: Hey, best wishes to Steve and congratulations, Scott. Thank you, David. Appreciate that.

Scott Doyle: Thank you David I appreciate that.

David Arcaro: Yeah absolutely.

Adam Woodard: Absolutely, I was curious just maybe on the weather mechanism, could you elaborate a bit more on kind of what you see as the path forward here within the rain case, just prospects and where that could go? Yeah, thanks, David. It's Adam. You know, obviously, it's front and center in the rate case, and it's something beyond the normal kind of cost of service, cost of capital reviews that we're going through is really one of the main issues for us. And we do feel like we're in a good position to have that conversation with staff and the Commission and other stakeholders.

Speaker Change: Was curious just maybe on the weather mechanism could you elaborate a bit more on kind of what you see as the path forward here within the rate case, just a prospects and where that could go.

Adam: Yeah, Thanks, David It's Adam.

Speaker Change: Obviously, it's a it's front and center in the rate case that it's it's something beyond the normal kind of cost of service cost of capital reviews that we're going through is really really really these are one of the main issues for us and we do.

Speaker Change: I feel like we're in a good position to have that conversation with with staff and the commission and other stakeholders, but there clearly we need to you know there's something that we need to get fixed here, we realize that and its a big focus for us.

Scott Doyle: But clearly, there's something that we need to get fixed here. We realize that, and it's a big focus for us.

Scott Doyle: Yeah, and David, I'll just add, we've proposed in this current case a couple of different options that we want to work with Commission staff on and all the stakeholders as we get into the next elements of this case. And it ranges from decoupling to updating the weather time horizon that's used as the comparison as well. So a lot of detail that we've got provided in the case, but clearly some work to be done there. And we look forward to those discussions going forward. Got it. Makes sense. Thanks.

David Arcaro: David I'll just add.

David Arcaro: He'd been proposed in this current case a couple of different options that we want to work with commission staff on and all the stakeholders as we get into the next elements of this case.

David Arcaro: It ranges from decoupling to updating the weather on a time horizon that uses the comparison as well so a lot of detail that we got provided in the case, but clearly some work to be done there and we look forward to those discussions going forward.

Speaker Change: Yeah got it makes sense. Thanks, and then I was just curious your latest thinking on the prospects for settlement within the rate case.

Scott Doyle: And then I was just curious, your latest thinking on the prospects for a settlement within the Yeah, hey, great, great question. And we still have a lot of work to do. So we're that's a little early in the process, maybe just kind of lay out the process what where we are in these stages, we do have The community meetings that take place that are coming up here very shortly. Then we have the public hearing or the commission hearing later this summer. There'll be opportunity that's built into the schedule for settlement discussions and those settlement talks can take place, you know, both prior to and after The commission hearing as well.

Speaker Change: Yeah, Hey, a great great question, and we still have a lot of work to do so we're it's a little early in the process, maybe just kind of lay out the process, where we are in these stages, we do have.

Speaker Change: The community meetings that take place that are coming up here very shortly and then we have the public hearing or the commission hearing later this summer.

Speaker Change: The opportunity that's built into the schedule for settlement discussions and those settlement talks can take place you know both prior to and after the commission hearing as well the commission at least that we're just watching that over the last 12 to 18 months as it appears to be working towards settlement. So we're certainly willing to entertain those types of disk.

Scott Doyle: The commission, you know, at least if we're just watching over the last, you know, 12 to 18 months has Appears to be working towards settlement. So we're certainly willing to entertain those types of discussions as well. So look forward to collective and collaborative discussions going forward. Okay, excellent. I appreciate the color.

Speaker Change: <unk> as well so look forward to collective and collaborative discussions going forward.

Speaker Change: Okay excellent I appreciate the color. Thanks.

Unknown Executive: Thanks.

David Arcaro: Thank you David.

Unknown Executive: Thank you.

Unknown Executive: Thanks David.

Unknown Executive: Thank you.

Speaker Change: Thank you and the next question comes from Gabe Moreen with Mizuho.

Gabriel Moreen: And the next question comes from Gabriel Moreen with Mizzou. Hey, good morning. And congrats, Scott, as well.

Gabe Moreen: Hey, good morning, and congrats Scott as well I would just ask kind of always a little premature to ask about subsequent rate cases in Missouri, given that you're still involved in the midst one right now, but just as far as SB six centers passage can you talk about timing on future rate cases, do you have to wait until that's implemented before you even start on.

Scott Doyle: I would just ask, I know it's a little premature to ask about subsequent race cases in Missouri, given that you're still involved in the midst of one right now. But as far as SB 6, in its passage, can you talk about timing on future rate cases? Do you have to wait until that's implemented before you even start another rate case? So I'm just curious in terms of timing and how that may or may not influence your thoughts about future regulatory activity in Missouri. Yeah.

Speaker Change: Another rate case.

Speaker Change: Just curious in terms of timing and how that may or may not influence your thoughts about our future regulatory activity in Missouri.

Scott Doyle: Yeah, hey, Dave, good morning, and thank you for the question. Yeah, maybe that's, and you set it up very well. Clearly, our focus is this case right now, and that's where our minds attention is. If you look at Senate Bill 4 and see what's laid out there, July of 26 is the first time that either a gas or water utility can file based on a future test year basis for their rate case, and so it won't be until that time before we clearly would be able to file, but we have an interest in working under that new paradigm for Missouri, and so more to come in that space as we move forward, but clearly our efforts right now are focused on this case and getting it to conclusion.

Speaker Change: Yeah, Hey, Dave Good morning, and thank you for the question Yeah, maybe it's best in and you set up very well clearly our focus is this case right now and that's where our minds attention is.

Speaker Change: If you look at the Senate Bill four and see what's laid out their July of 26 is the first time that either a gas or water utility can file based on a future test year basis for their rate case, and so it won't be until that time before we clearly would be able to file but we have.

Speaker Change: Have an interest in.

Speaker Change: Working under that.

Speaker Change: New paradigm for Missouri, and so more to come in that space as we move forward, but clearly our efforts right now are focused on this case and getting it to conclusion.

Gabriel Moreen: Thanks, Scott.

Speaker Change: Thanks, Scott, maybe if I could just.

Scott Doyle: I mean, if I could just add a follow on on Missouri regulation. I know you're trying to reform the weather mechanism in this rate case here. And I think staff's going to opine sometimes soon on that. Is that a negotiation? Is it sort of a thumbs up, thumbs down? I'm just curious how you envision that sort of shaking out within the rate case. Yeah, good question. I think, I think, you know, as in all cases, these are things that both parties clearly take sides and then work together. And it's something that could be worked on together to get to the right solution that, you know, addresses both the needs of the customer, but as well as the company as well.

Speaker Change: I had a follow on on Missouri regulation, I know, you're trying to reform the weather mechanism in this rate case here.

Speaker Change: And I think staffs can opine, sometimes soon on that it's not a negotiation or is this sort of a thumbs up thumbs down I'm. Just curious how you envision that sort of shaking out within the rate case.

Speaker Change: Yeah, Yeah. Good question I think I think.

Speaker Change: In all cases these are things that both parties clearly take sides and then worked together and it's something that could be.

Speaker Change: Worked along together to get to the right solution that addresses both the needs of the customer, but as well as the company as well and I think that's the posture. We're gonna take as we work through this as well so just like in all cases, there's opportunity for both sides to bring the issues to the table and work together to get to a constructive solution. That's what we're working towards.

Scott Doyle: And I think that's the posture we're going to take as we work through this as well. So just like in all cases, there's opportunity for both sides to bring the issues to the table and work together to get to a constructive solution. That's what we're working towards. Understood. Thanks, Scott. Appreciate it.

Speaker Change: Understood. Thanks, Scott appreciate it.

Speaker Change: Yeah.

Speaker Change: Thank you and the next question comes from Stephen <unk> with Ladenburg Thalmann.

Unknown Executive: Thank you.

Steven D'Ambrizzi: And the next question comes from Steven D'Ambrizzi with Lautenberg. Hey guys, thanks very much for taking my question. Scott, congratulations on the new role and best of luck leading the company. Thank you so much. Good morning.

Stephen: Hey, guys. Thanks, very much for taking my question Scott Congratulations on the new role and best of luck, leaving the company.

Speaker Change: Thank you Sal and good morning.

Speaker Change: Just I.

Steven D'Ambrizzi: I guess my question would be just on the guidance modification. I guess listening to some of the answers and the earlier questions, it kind of sounds like the takeaway is that to the extent you can fix the weather norm mechanism in the context of this rate case, the earnings power of the utility business hasn't really changed. And then maybe you're seeing some slight structural uplift in the marketing and midstream businesses.

Speaker Change: I guess my question would be just on the guidance modification you know.

Speaker Change: Listening to some of the answers in the earlier questions.

Speaker Change: You know it kind of sounds like the takeaway is that to the extent you can fix the weather norm Mecca mechanism in this context of this rate case the earnings power of the business of the utility business hasn't really changed.

Speaker Change: And then maybe you're seeing some slight.

Structural uplift in the marketing and midstream businesses. So can you just am I reading that right or just how are you framing this guidance revision.

Adam Woodard: So can you just, am I reading that right? Or, you know, just how are you framing this guidance revision?

Adam Woodard: Yeah, hi Steve, it's Adam, and I'll give you my point of view and let Scott chime in as well. I think that's a fair assumption. It is, we are, you know, we do expect to get to a constructive outcome on the weather mechanism, weather mitigation mechanism, and we do see some, obviously with how I characterize the midstream guidance revision, you know, we do see some structural uplift there relative to our earlier expectations. So I think that's a fair assumption.

Speaker Change: Yeah, Hi, Steve, It's Adam and I'll I'll give you give you my point of view and let Scott chime in as well I think that's a fair assumption I'm at it is we are you know, we do expect to get to a constructive outcome on the on the weather.

Speaker Change: Mechanism, whether mitigation mechanism and we we do see some.

Speaker Change: And obviously with the with how I characterize the midstream.

Speaker Change: Guidance revision.

Speaker Change: We do see some structural uplift there relative to our earlier expectations. So I think that's I think that's a fair assumption.

Scott Doyle: Yeah, and and Steven, I think what I'd add, maybe just take it up a level is just think about what's happening at the macro level within our company. And it's the things we laid out in the script. And also just kind of what's been happening, you know, in particular, as we've been working through this case, but it really is about building momentum. As we are finishing out this fiscal year going into 26. Clearly, you can see the pull through of our customer affordability project that we implemented last year. Those expenses, we're seeing the benefit of those expenses staying where they need to be in the right places.

Steve: Yeah and Steve.

Steve: But I think what I would add maybe just take it up a lot.

Steve: Level is just think about what's happening at the macro level within our company and it's the things we laid out in the script and also just kind of what's been happening.

Steve: Particular, as we've been working through this case, but it really is about building momentum.

Steve: We are finishing out this fiscal year going into 'twenty six.

Steve: Nearly we are you can see the pull through of our customer for portability project that we implemented last year are those expenses are.

Steve: Our we're seeing the benefit of those expenses staying where they need to be in the right places I think if you look a little deeper into the numbers you can see.

Scott Doyle: I think if you look a little deeper into the numbers, you can see we're down in administrative in general, but slightly up in our field activities. And that means we're putting the money to the places that benefit our customers. So then coming out of that, if you think about the pull through of capital across both midstream and our utilities, that's what we're working on right now. You're seeing the project, the storage projects coming to life, and we're seeing the pull through of the returns there. And then as we're updating our capital recovery in this instant case that we have before the commission right now, those are things that are providing momentum to us to get us back to the returns that we expect in this business.

Steve: On the down and administrative in general, but slightly up and our field activities and that means we're putting the money to the places there's benefit our customers. So then coming out of that if you think about the pull through of capital across both midstream and our utilities. So that's what we're working on right now you're seeing the.

Project, the storage projects coming to life and we're seeing the pull through of the returns there and then as ware.

Steve: Updating our capital recovery and this.

Steve: Instant case that we have before the commission right now are those are things that are providing.

Steve: Momentum to us to get us back to the returns that we expect in this business. So we feel good about the future and that's what we're what we're focused on right now.

Scott Doyle: So we feel good about the future, and that's what we're focused on right now.

Steven D'Ambrizzi: Okay, that sounds great. Thank you.

Steve: Okay that sounds great. Thank you and then just one follow up just on implementation I guess the best before I know you guys have a rate case, you're prosecuting and Theres. Some time here, but do you expect the commission did they need to do a rulemaking or will there be some type of process that gets done and does that go concurrently or is there anything that needs to get done from a regulatory.

Scott Doyle: And then just one follow up just on, you know, implementation, I guess, before I know you guys have a case you're prosecuting, and there's some time here, but do you expect the commission, do they need to do a rulemaking? Or will there be some type of process that gets done? And does that go concurrently? Or is there anything that needs to get done from a regulatory perspective before you know, you guys are actually able to file with a future test year? Thanks. Yeah, so maybe just I'll just point to the bill, how it's laid out in the bill, the bill does allow for a case to be filed after or in July of 26.

Steve: Before you go.

Speaker Change: We're actually able to file with a.

Steve: Future test year.

Steve: Yes, so maybe just I'll just point to the bill how it's laid out in the bill the Bill does allow for a case to be filed.

Steve: After Joe her in July 26, or later.

Scott Doyle: Or later, it speaks to some rulemaking that has to be completed by a certain date, which is July of the following year. But what we anticipate, I don't want to get ahead of our commission or kind of how they're thinking on it is, is once they start up, the rulemaking will be active in and we'll certainly work within the confines of the legislation, as we think about the timing of our next case. Okay, that's great. Thank you very much for the time. Appreciate it. Thanks, Steve.

Steve: Speaks to some rulemaking that has to be completed by a certain date, which is July of the following year.

Steve: But what we anticipate and I don't want to get ahead of our commission or kind of how they're thinking on it is is once they start up the rulemaking will be active in that and we will certainly work within the confines of the legislation as.

Steve: As we think about the timing of our next case.

Speaker Change: Okay. That's great. Thank you very much for the time I appreciate it.

Steve: Thanks, Steve.

Unknown Executive: Thank you and once again please press star then 1 if you would like to ask a question.

Speaker Change: So once again please press star then one if you'd like to ask any question.

Megan Mcphail: Alright, well this does conclude our question and answer session, so I would like to turn the floor back over to Megan McPhail for any closing comments. I'd like to thank you for joining the call today.

Speaker Change: This does conclude our question and answer session I would like to turn the floor back over to make them feel for any closing comments.

Speaker Change: Thank you. Thank you for joining the call today have a great day.

Megan Mcphail: Have a great day. Thank you so much. Thank you for attending today's presentation.

Speaker Change: Thank you so much. Thank you for attending today's presentation. The conference has now concluded and you may now disconnect your lines.

Unknown Executive: The conference is now concluded and you may now disconnect your line.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Hum.

Unknown Executive: The end

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change:

Speaker Change: Yeah.