Q3 2025 Spire Inc Earnings Call
Good morning and welcome to the Spire Q3 2025 earnings conference call.
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I will now like to turn the conference over to Megan, Maxwell managing director investor relations. Please go ahead.
Good morning and welcome to spire's fiscal 2025 third quarter earnings call.
On the call with me today is Scott Doyle president and CEO and Adam were Executive Vice President and CFO.
We issued an earnings news release this morning and you may access it on our website. It's fire energy.com under Newsroom.
There's a slide presentation that accompanies our webcast, which can be downloaded from our website under Investors and then Events and Presentations.
Before we begin, let me cover our Safe Harbor statement and use of non-gaap earnings measures.
Today's call including responses to questions may contain 4 looking statements within the meaning of the private Securities. Litigation report, 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.
In our comments, we will be discussing non-gaap measures used by management when evaluating governments and results of operations.
Now, here's Scott, who will start on page 4 of the presentation.
Thank you and good morning. We are pleased to have you join us today on our fiscal third quarter earnings conference call for an update on recent developments, in a review of our quarterly performance Outlook,
Before we dive into results, I want to take a moment to recognize and thank our employees, for their unwavering commitment to safety and service. Throughout the quarter, especially in the aftermath of the devastating tornadoes, that struck the St. Louis Community on May 16th.
our team Rose to the occasion in extraordinary ways, we received nearly 1300 emergency calls and responded to more than 620 emergency orders during the days that followed
Beyond restoring service, our employees supported Disaster, Response, and Recovery efforts by volunteering their time and talents to ensure neighborhoods were safe and accessible.
Through our customer relief, initiatives Assistance, programs, and Community Support. We demonstrated what it means to care for the people in places, we serve. I'm incredibly proud of what we accomplished together and I want to thank each of you for your dedication and resilience and compassion.
Our commitment to service and operational excellence also positions us for long-term growth.
The clear example is our recently announced acquisition of the Piedmont Natural, Gas Tennessee, business from Duke Energy, a Strategic investment. I'll expand on shortly.
But first, let's discuss our quarterly results on page 4.
This morning, we announced adjusted earnings of 1 cent per share compared to a loss of 14 cents per share a year ago.
The year-over-year increase reflects growth across all of our business segments.
Our performance was driven by infrastructure Investments to modernize our natural gas systems.
Ongoing commitment to disciplined cost management.
We continue to make meaningful progress managing our expenses through a focused cost reduction in efficiency initiative while capturing onm benefits from Capital Investments.
These efforts are delivering benefits to our customers and we remain focused on unlocking additional value on their behalf.
Atom will provide a more detailed breakdown of our results in his remarks.
Now for an update on regulatory matters, we have continued to work closely with key stakeholders in our Missouri rate case.
We are pleased to report that a unanimous stipulation and agreement has been filed for an annual revenue increase of 210 million.
This resolves all aspects of the case and is pending approval by the Missouri Public Service Commission.
in addition in May the PSC approved, a
18 million.
Renew increase.
Infrastructure system replacement search charge or Israeli's request brings total annualized revenues recovered through the writer to $72.6 million. These revenues are included in the recently settled rate case.
After new base rates, take effect. This October the Israelis writer will be available again to recover investments in system modernization.
We remain focused on achieving consistent and constructive regulatory outcomes in all of our jurisdictions leading to a more sustainable financial performance. Trajectory
In Alabama, we are pleased to welcome President Almond as the new president of the state's Public Service Commission and look forward to collaborating with her and the entire commission and staff in the future.
We extend our sincere. Thanks to president Kavanagh for her dedicated service to the commission.
Her leadership and commitment to Fair regulation. Have made a lasting impact on Alabama's Energy Future.
Looking ahead. We are reaffirming our long-term EPS growth Target of 5 to 7%.
This is supported by our tenure, 7.4 billion, capital investment plan, and we expect to deliver within our fiscal, 2025 earnings guidance of $4.40 to $4.60 per share.
we'll provide updates to our 10 year capital investment plan and long-term EPS expectations, incorporating Tennessee on our year-end call in November
We are committed to delivering strong results in fiscal 2025 and Beyond and are well, positioned to achieve our financial and operational goals. As we work to grow organically, invest in infrastructure and drive continuous Improvement.
Let's turn now to page 5 in our recently, announced acquisition of the Piedmont Natural Gas business in Tennessee.
This is a strategic and accretive acquisition that meaningfully increases our scale and expands our regulated utility footprint into a high-quality high growth jurisdiction.
Tessy offers a constructive regulatory environment that supports long-term investment in natural gas infrastructure and aligns well with our disciplined growth strategy.
Service territory further diversifying our regulated utility portfolio.
And reducing overall business risk while remaining squarely within our core competency of regulated Gas Distribution.
We bring a strong track record of successfully integrating other companies, having completed 3 prior gas utility acquisitions.
Leveraging our mature shared services platform, we're confident in our ability to integrate this business efficiently.
The Tennessee business will add an incremental, 900 million to our 5-year Capital plan, and for a combined 4.4 billion dollars of investment opportunities focused on S System. Modernization, customer growth and infrastructure resilience.
From a financing perspective, we've secured a bridge facility to fund the transaction and are pursuing a permanent capital structure and includes a balanced mix of debt equity and hybrid security.
We are also evaluating the sale of non-utility assets, such as natural gas storage facilities, as a potential source of funds.
Our approach is designed to maintain credit quality, while supporting long-term adjusted EPS growth of 5 to 7% and continued dividend growth reinforcing our commitment to delivering sustainable value for shareholders.
The map on the right side of the page, illustrates our expanded footprint, including the newly acquired Tennessee territory, adjacent to our existing infrastructure, in Missouri, Alabama and Mississippi.
As you can see, this is a natural fit in our existing utility footprint.
We expect to file for regulatory approval, with the Tennessee Public Utility Commission within 45 days of the announcement and anticipate closing in the first quarter of calendar 2026,
Let's turn to page 6 for an update on our Missouri rate case.
Following a collaborative and constructed regulatory process. We are pleased with the unanimous stipulation and agreement reached yesterday with all parties involved.
This agreement supports an annual revenue increase of $210 million, of which $72.6 million is already being recovered through the Israelis.
The increase is based on a $4.4 billion rate base; however, the agreement does not specify an allowed return on equity or capital structure.
The objective of this case is the refinement of our weather normalization adjustment mechanism, or WN, as the agreement incorporates. An updated 30-year weather period and revised coefficients will more accurately reflect weather-driven usage.
Additionally, the small general service class has now been included in the w r mechanism further, strengthening its effectiveness.
We are confident that these updates will materially reduce the impact of weather on our volumetric revenues. We've experienced since our last rate case,
the stipulation and agreement is pending approval by the Missouri, Public Service Commission.
If approved, new rates, will take effect on October 24th 2025.
The outcome of this case under scores are continued focus on regulatory. Transparency, customer affordability and long-term investment in safe, reliable infrastructure.
I'll now turn the call over to Adam for a financial review and update on guidance and Outlook Adam.
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 third quarter, we reported adjusted earnings of 4.1 million dollars. An increase of over 8 million dollars compared to last year, the gas utility segment had an adjusted loss of 10 million dollars in the third quarter, 1 million dollars better than prior year.
This reflects higher contribution margin as far in. Missouri driven by an increase in interest revenues partially offset by lower spy Missouri usage net of whether mitigation
Utility earnings also reflected higher onmed expense and higher depreciation expense.
On a year-to-date basis, our own and run rate is less than 1% higher than the prior year period.
Earnings in the Gas marketing segments were higher by over 4 million dollars as the business was well, positioned to create value.
During the quarter, we continue to see strong earnings growth in our Midstream segment driven by additional capacity and asset optimization at fire storage partially offset by higher operating costs from higher activity.
Lastly, other corporate costs were slightly lower primarily due to higher Returns on non-qualified benefit plans. Partially offset by higher interest expense.
Starting to page 9. We continue to make Capital Investments to improve, reliability, resiliency, and safety for the benefit of our customers.
the majority of the spending taking place at our Gas Utilities,
Year-over-year, utility capex, increased nearly 20% 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 total 99 million year to date largely for the expansion of spy Storage West.
Expansion is now complete and the Returns on the project are exceeding our expectations.
Our capital investment Target for fiscal. 2025 has increased to 875 million reflecting, a 10 million dollar increase in Midstream and a 25 million increase.
In fire, Missouri.
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 driving our growth and rate base.
Turning. Now, to our growth outlook on page 10, 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. That's 5, Missouri and steady sustained Equity. Growth that spy Alabama, coupled with efficient recovery mechanisms
we remain committed to executing on our
strategy. And our affirming, our fiscal 2025 adjusted earnings guidance range of 440 to 460 per share.
Our adjusted earnings targets by segments, remain the same as provided on the call last quarter.
Incorporated results from the third quarter. We expect utulei needs to be lower in the range in Midstream earnings to be higher in the range.
Further our dividend growth is supported by our long-term adjusted, EPS growth targets and we facilitate our Equity needs for fiscal 2025.
Looking ahead, we'll provide an update on our long-term financing strategy during our year-end call in November.
At that time, we'll introduce our fiscal 2026 earnings guidance. And provide an update on our long-term adjusted earnings per share growth expectations.
We expect to close on the acquisition of the Piedmont Natural Gas Tennessee business in the first calendar quarter of 2026.
As a result of closing mid year, we expect to exclude net income related to the business from 2026, adjusted earnings and adjusted earnings per share.
Importantly, with new rates in Missouri and the ability to earn closer to our allowed return on Equity. We anticipate adjusted earnings at our utility segment, to be meaningfully higher in 2026 compared to recent years.
This reflects the strength of our regulatory framework and our continued focus on delivering sustainable earnings growth.
With that, let me turn it back over to you Scott.
Thanks, Adam. As we look to the remainder of fiscal 2025. Our priorities are clear.
Operationally, our top priority remains, delivering safe, reliable, natural, gas service to our customers.
We're executing on our 875 million Capital plan, which is focused on system modernization and long-term infrastructure resilience.
At the same time, we're maintaining a strong focus on customer affordability, through discipline cost management.
On the regulatory front, we're working to achieve constructive outcomes across our jurisdictions.
Strengthening our regulatory recovery mechanisms remains essential to ensuring timely cost recovery and supporting continued investment in our systems.
From a financial perspective, we are reaffirming our full year adjusted EPS, guidance of $4.40 to $4.60 per share.
We remain committed to maintaining a strong balance sheet which supports both our growth strategy and our long-term shareholder value proposition. And finally, we're making progress on our recently announced acquisition of the Tennessee. T m natural gas business. We're actively pursuing regulatory approvals in advancing integration planning.
Together, these priorities position us to deliver strong. Operational performance, Financial discipline and long-term growth
For confident in our path forward and excited about the opportunities ahead. Thank you for your continued support and interest inspire.
Thank you.
We will now begin the question and answer session.
to ask a question, you may press star then 1 on your touchtone phone,
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At this time, we will pause momentarily to assemble our roster.
The first question comes from Richard, Sunderland with JP Morgan, please go ahead.
Hey, good morning, thank you for the time today.
Hey, Rich more rich.
Just, uh, just 1 for me. I'm curious about, uh, the F photo debt targets. You previously outlined of 15 to 16%, is that still the right framework to think about going forward? Thank you.
Thanks Rich. Yeah, it's Adam uh, those definitely are still the right uh targets to keep in mind, probably a little bit uh through the transition period of the acquisition. Probably a little bit slower uh, to get to get to those targets but that's, that's still what we're aiming for.
Great. That's all from me. Thank you.
Thank you.
The next question comes from Christopher, Jeffrey from mizuho Securities, please go ahead.
Everyone, congratulations on the strong quarter, uh, just the point of clarification just wondering in the Midstream results. How much of that is, how much is the expansion of storage reflected in the full quarter? Um, and maybe kind of just going forward, should be of this core as a, you know, reasonable run rate for the business.
Yeah, hey, hey, Chris, it's Adam. Uh, we did, uh, you know, we we I on the Midstream segment. In particular, we did see, uh, very strong year-over-year growth. Uh, obviously with, uh, storage coming on about about 90% of the increase in storage year-over-year was attributable. Uh, or in Midstream is attributable to storage. Uh, that would, that would cut on a net income basis. 75% to 25% storage to pipeline.
Okay, great. Um, and then maybe just sticking on the Midstream, just curious more on the pipeline side. Um, just maybe given some Trends we're seeing in Missouri, uh, comments from the electric utilities there in terms of opportunities, just in terms of, you know, capacity on on various Pipelines.
Yeah. Chris, hey, this is Scott. Uh, yes, that, uh, as we see what's taking place, uh, in Missouri, particularly around the IRPs associated with the electric, uh, businesses. Uh, those are creating some opportunities for us that are in future years. Uh, our ability to serve them, uh, is good, uh, and, uh, low capex needs associated with serving those needs at this time.
Great. Uh, and maybe just 1 more if I could just, um, results in the quarter and maybe as we think of 4 q, can we expect the same seasonal strong, um, you know, end of the fiscal year there? Or should we kind of think of those results as being pulled into 3 q a bit?
Hey, hey Chris. It's, it's Adam good. I the, uh, you know, I think they were very well positioned, uh, uh, coming into this quarter. It tends to be a little little quieter, uh, quarter as you get into the summer. I really know. No comment on what we see going into into, uh, the fourth quarter. But you know, we we feel pretty good about the the operations of that business and and what they're what they're doing and and hitting their hitting the targets that we've outlined for the for year end.
Okay, great. Thanks, everyone.
Thank you.
to ask a question, you may press star then 1 on your touchtone phone,
Again, if you have a question, please press star, then 1.
The next question comes from Thailand, Leno from ladenburg Talman. Please go ahead.
Hey guys. Congrats, I know a really good quarter.
Thank you. Good morning.
Good morning. I just want to kind of piggyback off of 1 of Chris's. Um, questions about the storage segment. Um, maybe if you guys can discuss, um, you know, year-over-year changes in margins at the storage business, that might be driving. Uh, you know, um, Revenue up for you guys.
Yeah. Hey hey, it's Adam uh
Shortly.
Gotcha.
Um, and then when it just comes to, you know, even on the pipes from, you know, last year in 2024, should we, you know, assume that they're kind of unchanged going forward into 2025?
For the midstream business and the pipeline, it should be.
Yeah, no it should be pretty straight forward.
Good observation.
Great. That's all I got. Thank you very much, guys.
Thank you.
The next question comes from Barry. Klein from McQuarrie. Please go ahead.
Hey there, thanks for taking my call.
Morning.
I just wanted to be clear: does your long-term 5% to 7% growth rate include the impacts of the recent Missouri rate case settlement and future test year legislation that has been enacted?
Hey Barry. It's Adam
So the 5 to 7 is really keyed off of our Capital deployment. I I think there's a there's a realization on the fact that we have been behind on our recovery in Missouri. Uh and so there there would certainly be some catch up there that would be in addition to the 5- 7%. Uh but the 5 5 to 7 really keys off of our rate based long-term rate based growth.
Okay, so not doesn't have anything to do with if you're able to improve the returns.
Just clarifying. All right, thank you very much for taking my question.
Thank you. The next question comes from Salman akhil from stifel. Please. Go ahead.
Thank you. Good morning. Um, just real quick for me. Yeah, on the owner of you guys have done a great job and I'm just kind of curious how you see that line evolving going forward.
Yeah, good morning, Salman. Thank you. Yeah. Our our Target is to be at or or below the rate of inflation in any given year and just really maybe that headline for us. Year to date is we are below 1% year to date on on, on M in the quarter. You know, there was a comparison there from this quarter versus last quarter. There was a 1 time benefit in the quarter last year and a 1 time expense in the quarter this year that traded against us along with some other things. But all then we feel good about where we're headed you know and them story
Excuse me.
All right. Thank you very much.
Thanks.
Thank you.
This concludes our question and answer session, I would like to turn the conference back to Megan mcfield for closing remarks.
Thank you for joining us on the call today.
Near future, have a good day.
The conference has now concluded, thank you for attending today's presentation. You may now disconnect. Thank you.