Q2 2026 Atmos Energy Corp Earnings Call

May 7, 2026

Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Atmos Energy Corporation Fiscal 2026 Q2 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question again, press the star and 1. I would now like to turn the call over to Jennifer Wernecke, Director of Investor Relations and Assistant Treasurer. You may begin.

Operator: Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Atmos Energy Corporation Fiscal 2026 Q2 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star and one. I would now like to turn the call over to Jennifer Wernicki, Director of Investor Relations and Assistant Treasurer. You may begin.

Speaker #3: any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. like to withdraw your question, again, press the star and 1. now like to turn the call over to Jennifer Wernicke, Director of Investor Relations and Assistant Treasurer. begin.

Speaker #3: Relations and Assistant Treasurer. You may

Jennifer Wernecke: Thank you, Kayla. Good morning, everyone, and thank you for joining our fiscal 2026 Q2 earnings call. 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 Relations tab. 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. 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 filings. With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin?

Jennifer Wernicki: Thank you, Kayla. Good morning, everyone, and thank you for joining our fiscal 2026 Q2 earnings call. 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 Relations tab. 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. 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 filings. With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin?

Speaker #2: Kayla. Good morning, everyone, and thank you for joining our fiscal 2026 second quarter earnings call. With me today are Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer.

Speaker #2: Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab.

Speaker #2: 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.

Speaker #2: 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 filings.

Speaker #2: With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin?

Speaker #3: Thank you, Jennifer, and good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal '26 net income of $985 million, or $5.92 per diluted share.

Kevin Akers: Thank you, Jennifer. Good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal 2026 net income of $985 million or $5.92 per diluted share. We updated our earnings per share guidance range to $8.40 to $8.50. Our capital expenditures for H1 of the fiscal year totaled $2 billion, with over 89% of those investments focused on enhancing the safety and reliability of our distribution, transmission, and underground storage systems. Across our service territories, we continue to see steady customer growth. For the 12 months ending 31 March 2026, we added over 51,000 new customers, with over 39,000 of those new customers located here in Texas.

Speaker #3: And we updated our earnings per share guidance range to $8.40 to $8.50. Our capital expenditures for the first half of the fiscal year totaled $2 billion, with over 89% of those investments focused on enhancing the safety, reliability of our distribution, transmission, and underground storage systems.

Speaker #3: Across our service territories, we continue to see steady customer growth, with a 12-month ending March 31, 2026. We added over 51,000 new customers, with over 39,000 of those new customers located here in Texas.

Speaker #3: And during the second quarter, we added over 800 commercial customers, and four new industrial customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our service territories.

Kevin Akers: During Q2, we added over 800 commercial customers and 4 new industrial customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our service territories. In APT, we continue to work to 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 APT system. During Q2, we completed phase 2 of the Line WA project. This project installed approximately 44 miles of 36-inch pipeline to the west of Fort Worth to support growth in this area of the DFW Metroplex. Additionally, APT enhanced supply optionality, reliability, and system versatility with the completion of 5 interconnect projects and adding nearly 100,000 Mcf a day of additional natural gas supply to the APT system.

Speaker #3: In APT, we continue to work to 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 APT's system.

Speaker #3: During the second quarter, we completed phase two of the Line WA project. This project installed approximately 44 miles of 36-inch pipeline to the west of Fort Worth to support growth in this area of the DFW Metroplex.

Speaker #3: Additionally, APT enhanced supply optionality reliability and system versatility with the completion of five interconnect projects and adding nearly 100,000 MCF a day of additional natural gas supply to the APT system.

Speaker #3: These investments further enhance APT's ability to serve the LDC customers behind their city gates. These LDC customers also benefit from APT's rider-rev tariff, which shares approximately 75% of APT's other revenue billed that is above a specified benchmark.

Kevin Akers: These investments further enhance APT's ability to serve the LDC customers behind their city gates. These LDC customers also benefit from APT's Rider REV tariff, which shares approximately 75% of APT's other revenue build that is above a specified benchmark. As a reminder, these revenues vary from year to year based upon available capacity on our pipeline and natural gas pricing dynamics in Texas. Over the last three years, these customers have received approximately $150 million in total as credit from the Rider REV tariff. As you'll hear from Chris in a few minutes, natural gas pricing dynamics have positively impacted APT's other revenue build in the H1 of fiscal 2026 and are expected to favorably impact our financial results for the remainder of the fiscal year.

Speaker #3: As a reminder, these revenues vary from year to year based upon available capacity on our pipeline and natural gas pricing dynamics in Texas. Over the last three years, these customers have received approximately $150 million in total as credit from the rider-rev tariff.

Speaker #3: As you'll hear from Chris in a few minutes, natural gas pricing dynamics have positively impacted APT's other revenue billed in the first half of fiscal 2026 and are expected to favorably impact our financial results for the remainder of the fiscal year.

Speaker #3: Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings of 97% for the first six months of the fiscal year.

Kevin Akers: Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings of 97% for H1 of the fiscal year. Truly outstanding work by this team. Additionally, during H1 of the fiscal year, our customer advocacy team helped over 33,000 customers receive approximately $9.5 million in funding assistance. Recently, we were named to the Forbes list of America's best large employers, ranking as one of the top 100 employers overall and placing second among all utilities. This is the sixth consecutive year Atmos Energy has been named to this list. This recognition reflects the continued dedication, focus, and effort of all Atmos Energy employees to safely deliver reliable and efficient natural gas to homes, businesses, and industries to fuel our energy needs now and in the future.

Speaker #3: Truly outstanding work by this team. Additionally, during the first half of the fiscal year, our customer advocacy team helped over 33,000 customers receive approximately $9.5 million in funding assistance.

Speaker #3: And recently, we were named to the Forbes list of America's best large employers. Ranking as one of the top 100 employers overall and placing second among all utilities.

Speaker #3: This is the sixth consecutive year Atmos Energy has been named to this list. This recognition reflects the continued dedication, focus, and effort of all Atmos Energy employees 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: Their commitment has us well-positioned for the remainder of the fiscal year. Now, I'll turn the call over to Chris for his update.

Speaker #3: Their commitment has as well positioned for the remainder of the fiscal year. Now I'll turn the call over to Chris for his update.

Speaker #4: Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the first six months of the fiscal year was $5.92, which represents a 12.5% increase over the prior year period.

Christopher T. Forsythe: Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the H1 of this fiscal year was $5.92, which represents a 12.5% increase over the prior year period. Our year-to-date results include $94 million or $0.43 from the impact of Texas House Bill 4384. Of this amount, $44 million was recognized in our distribution segment, and the remaining $50 million was recognized at APT. During Q2, the Texas Railroad Commission completed its final rulemaking to codify Texas House Bill 4384 into Rule 77.102.

Chris Forsythe: Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the H1 of this fiscal year was $5.92, which represents a 12.5% increase over the prior year period. Our year-to-date results include $94 million or $0.43 from the impact of Texas House Bill 4384. Of this amount, $44 million was recognized in our distribution segment, and the remaining $50 million was recognized at APT. During Q2, the Texas Railroad Commission completed its final rulemaking to codify Texas House Bill 4384 into Rule 77.102.

Speaker #4: Our year-to-date results include 94 million dollars or 43 cents from the impact of Texas House Bill 4384. Of this amount, 44 million was recognized in our distribution segment, and the remaining 50 million was recognized at APT.

Speaker #4: During the second quarter, the Texas Railroad Commission completed its final rulemaking to codify Texas House Bill 4384 into Rule 77102. As you know, this rulemaking reduces lag in taxes by permitting gas utilities to defer post-and-service carrying costs to depreciation and ad valorem taxes associated with non-eligible Rule 8209 capital investments such as new customer growth and system expansion.

Christopher T. Forsythe: As you know, this rulemaking reduces lag in Texas by permitting gas utilities to defer post and service carrying costs, depreciation, and ad valorem taxes associated with non-eligible Rule 8.209 capital investments such as new customer growth and system expansion. Since adopting Rule 77.102 in late fiscal 2025, we've been presenting the deferral of post and service carrying costs as a reduction to interest expense, consistent with Texas Rule 8.209. With the new rule now final, we have determined it is most appropriate to present the deferral of post and service carrying costs in the income statement line items where the incurred costs are classified, O&M and interest expense. This updated presentation has been reflected in our fiscal Q2 and fiscal year-to-date results, which reduced reported O&M for the first six months of the fiscal year by $41 million.

Chris Forsythe: As you know, this rulemaking reduces lag in Texas by permitting gas utilities to defer post and service carrying costs, depreciation, and ad valorem taxes associated with non-eligible Rule 8.209 capital investments such as new customer growth and system expansion. Since adopting Rule 77.102 in late fiscal 2025, we've been presenting the deferral of post and service carrying costs as a reduction to interest expense, consistent with Texas Rule 8.209. With the new rule now final, we have determined it is most appropriate to present the deferral of post and service carrying costs in the income statement line items where the incurred costs are classified, O&M and interest expense. This updated presentation has been reflected in our fiscal Q2 and fiscal year-to-date results, which reduced reported O&M for the first six months of the fiscal year by $41 million.

Speaker #4: Since adopting Rule 77102 in late fiscal '25, we have been presenting the deferral of post-and-service carrying costs as a reduction to interest expense to be consistent with Texas Rule 8209.

Speaker #4: With the new rule now final, we have determined it is most appropriate to present the deferral of post-and-service carrying costs in the income statement line items where the incurred costs are classified.

Speaker #4: O&M and interest expense. This updated presentation has been reflected in our fiscal second quarter and fiscal year-to-date results, which reduced reported O&M for the first six months of the fiscal year by 41 million dollars.

Speaker #4: Our year-to-date performance was influenced by several additional factors. Rate increases in both of our operating segments totaled 171 million dollars. Operating income increased by an additional 32 million dollars due to residential and commercial customer growth and increased customer load.

Christopher T. Forsythe: Our year-to-date performance was influenced by several additional factors. Rate increases in both of our operating segments totaled $171 million. Operating income increased by an additional $32 million due to residential and commercial customer growth and increased customer load. Finally, APT's through system revenues, net of Rider REV, increased about $16 million or $0.08. The assumption all of this increase reflected higher spreads realized during fiscal 2026 compared with fiscal 2025. During the first H1 of fiscal 2026, the spreads we captured averaged $4.35 compared to $1.80 in the prior year period, reflecting rising associated with gas production, constrained takeaway capacity, and lower demand due to unseasonably warm weather during this past winter heating season.

Chris Forsythe: Our year-to-date performance was influenced by several additional factors. Rate increases in both of our operating segments totaled $171 million. Operating income increased by an additional $32 million due to residential and commercial customer growth and increased customer load. Finally, APT's through system revenues, net of Rider REV, increased about $16 million or $0.08. The assumption all of this increase reflected higher spreads realized during fiscal 2026 compared with fiscal 2025. During the first H1 of fiscal 2026, the spreads we captured averaged $4.35 compared to $1.80 in the prior year period, reflecting rising associated with gas production, constrained takeaway capacity, and lower demand due to unseasonably warm weather during this past winter heating season.

Speaker #4: Finally, APT's through system revenues net of rider-rev increased about 16 million dollars or 8 cents. This answered all of this increase reflected higher spreads realized during fiscal '26 compared with fiscal '25.

Speaker #4: During the first six months of fiscal '26, the spreads we captured averaged $4.35 compared with $1.80 in the prior year period. Reflecting rising associated gas production, constrained takeaway capacity, and lower demand due to unseasonably warm weather during this past winter heating season.

Speaker #4: Excluding the impact of Rule 77102 deferrals consolidated O&M increased 27 million dollars, reflecting higher employee compliance and safety-related spending in our distribution segment and higher maintenance spending at APT.

Christopher T. Forsythe: Excluding the impact of Rule 77.102 deferrals, consolidated O&M increased $27 million, reflecting higher employee, compliance, and safety-related spending in our distribution segment and higher maintenance spending at APT. From a regulatory perspective, since the beginning of the fiscal year, we have implemented $136 million in annualized operating income increases in our distribution segment. Currently, we have 13 filings in progress, seeking nearly $600 million in annualized operating income increases. We expect to implement approximately 40% of this amount primarily during our Q3 fiscal quarter. The largest filing we expect to implement during the H2 of the fiscal year, APT's GRIP filing seeking $112 million in annualized operating income increases, is scheduled to be considered by the Texas Railroad Commission next Tuesday, 12 May.

Chris Forsythe: Excluding the impact of Rule 77.102 deferrals, consolidated O&M increased $27 million, reflecting higher employee, compliance, and safety-related spending in our distribution segment and higher maintenance spending at APT. From a regulatory perspective, since the beginning of the fiscal year, we have implemented $136 million in annualized operating income increases in our distribution segment. Currently, we have 13 filings in progress, seeking nearly $600 million in annualized operating income increases. We expect to implement approximately 40% of this amount primarily during our Q3 fiscal quarter. The largest filing we expect to implement during the H2 of the fiscal year, APT's GRIP filing seeking $112 million in annualized operating income increases, is scheduled to be considered by the Texas Railroad Commission next Tuesday, 12 May.

Speaker #4: From a regulatory perspective, since the beginning of the fiscal year, we have implemented 136 million dollars in annualized operating income increases in our distribution segment.

Speaker #4: Currently, we have 13 filings in progress seeking nearly $600 million in annualized operating income increases. We expect to implement approximately 40% of this amount primarily during our third fiscal quarter.

Speaker #4: The largest filing we expect to implement during the second half of the fiscal year APT's grip filing seeking $112 million in annualized operating income increases is scheduled to be considered by the Texas Railroad Commission next Tuesday, May 12th.

Speaker #4: Our equity capitalization as of March 31st was 61%, and we did not have any short-term debt outstanding. During the second quarter, we extended our full credit facilities that provide $3.1 billion in total liquidity.

Christopher T. Forsythe: Our equity capitalization as of 31 March was 61%, and we did not have any short-term debt outstanding. During Q2, we extended our 4 credit facilities that provide $3.1 billion in total liquidity. At quarter-end, we had $4.1 billion in available liquidity to support our operations. This amount includes approximately $890 million in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal 2026 equity needs and a portion of our anticipated equity needs for fiscal 2027. As we reported last night, we have increased our fiscal 2026 EPS guidance from an original range of $8.15 to $8.35 to a new range of $8.40 to $8.50.

Chris Forsythe: Our equity capitalization as of 31 March was 61%, and we did not have any short-term debt outstanding. During Q2, we extended our 4 credit facilities that provide $3.1 billion in total liquidity. At quarter-end, we had $4.1 billion in available liquidity to support our operations. This amount includes approximately $890 million in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal 2026 equity needs and a portion of our anticipated equity needs for fiscal 2027. As we reported last night, we have increased our fiscal 2026 EPS guidance from an original range of $8.15 to $8.35 to a new range of $8.40 to $8.50.

Speaker #4: At quarter-end, we had $4.1 billion in available liquidity to support our operations. This amount includes approximately $890 million in net proceeds available under existing Ford sale agreements which is expected to satisfy the remainder of our anticipated fiscal '26 equity needs and a portion of our anticipated equity needs for fiscal '27.

Speaker #4: As we reported last night, we have increased our fiscal '26 earnings per share guidance from an original range of $8.15 to $8.35 to a new range of $8.40, $8.50.

Speaker #4: We expect the remaining contribution to fiscal '26 earnings per share to be recognized somewhat evenly by quarter in the back half of the fiscal year.

Christopher T. Forsythe: We expect the remaining contribution to fiscal 2026 EPS to recognize somewhat evenly by quarter in H2 of the fiscal year. Two key items are driving the increase in our fiscal 2026 guidance. First, our guidance reflects our expectations for the performance of APT's through system business for H2 of the fiscal year. As we have mentioned before, going into a fiscal year, we base our assumptions for this line of APT's business, assuming revenues in line with our benchmark based on historical norms for available capacity on our system and pricing. Although we have recently seen some modest improvement at Waha, we anticipate natural gas pricing into Kermit will remain challenging for the remainder of our fiscal year. As I mentioned earlier, this part of APT's business added $0.08 period-over-period.

Chris Forsythe: We expect the remaining contribution to fiscal 2026 EPS to recognize somewhat evenly by quarter in H2 of the fiscal year. Two key items are driving the increase in our fiscal 2026 guidance. First, our guidance reflects our expectations for the performance of APT's through system business for H2 of the fiscal year. As we have mentioned before, going into a fiscal year, we base our assumptions for this line of APT's business, assuming revenues in line with our benchmark based on historical norms for available capacity on our system and pricing. Although we have recently seen some modest improvement at Waha, we anticipate natural gas pricing into Kermit will remain challenging for the remainder of our fiscal year. As I mentioned earlier, this part of APT's business added $0.08 period-over-period.

Speaker #4: Two key items are driving the increase in our fiscal '26 guidance. First, our guidance reflects our expectations for the performance of APT's through system business for the second half of the fiscal year.

Speaker #4: As we have mentioned before, going into a fiscal year, we base our assumptions for this line of APT's business assuming revenues in line with our benchmark, based on historical norms for available capacity on our system and pricing.

Speaker #4: Although we have recently seen some modest improvement at Waha, we anticipate natural gas pricing in the Permian will remain challenging for the remainder of our fiscal year.

Speaker #4: As I mentioned earlier, this part of APT's business added 8 cents period over period. We currently anticipate that APT's through system business will add an additional 8 to 12 cents for fiscal '26 results during the second half of the fiscal year.

Christopher T. Forsythe: We currently anticipate that APT's through system business will add an additional $0.08 to $0.12 for our fiscal 2026 results during the H2 of the fiscal year. Secondly, with final rulemaking completed and improved visibility into the timing of our capital spending in Texas for the remainder of the fiscal year, we believe the impact of implementing Rule 77.102 will be higher than originally planned. We estimate this impact will range from $155 to 165 million for the entire fiscal year, including the deferral of incurred post and service carrying costs, depreciation, and ad valorem taxes. We still anticipate our O&M to be in the range of $865 to 885 million.

Chris Forsythe: We currently anticipate that APT's through system business will add an additional $0.08 to $0.12 for our fiscal 2026 results during the H2 of the fiscal year. Secondly, with final rulemaking completed and improved visibility into the timing of our capital spending in Texas for the remainder of the fiscal year, we believe the impact of implementing Rule 77.102 will be higher than originally planned. We estimate this impact will range from $155 to 165 million for the entire fiscal year, including the deferral of incurred post and service carrying costs, depreciation, and ad valorem taxes. We still anticipate our O&M to be in the range of $865 to 885 million.

Speaker #4: Secondly, with final rulemaking completed and improved visibility into the timing of our capital spending in Texas for the remainder of the fiscal year, we believe the impact of implementing Rule 77102 will be higher than originally planned.

Speaker #4: We estimate this impact will range from $155 million to $165 million for the entire fiscal year, including the deferral of incurred post-and-service carrying costs, depreciation, and ad valorem taxes.

Speaker #4: We still anticipate our O&M to be in the range of 865 million to 885 million dollars. We have reflected the estimated impact of Rule 77102 deferrals on in our O&M guidance.

Christopher T. Forsythe: We have reflected the estimated impact of Rule 77.102 deferrals in our O&M guidance. However, we anticipate this decrease to be substantially offset by higher system monitoring, compliance, and employee costs. We anticipate our interest expense to be in a new range of $155 million to $160 million. This increase is solely due to the reclassification of the 77.102 deferrals from interest into O&M that I mentioned earlier. Finally, we remain on track to spend approximately $4.2 billion in capital expenditures for fiscal 2026. We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions.

Chris Forsythe: We have reflected the estimated impact of Rule 77.102 deferrals in our O&M guidance. However, we anticipate this decrease to be substantially offset by higher system monitoring, compliance, and employee costs. We anticipate our interest expense to be in a new range of $155 million to $160 million. This increase is solely due to the reclassification of the 77.102 deferrals from interest into O&M that I mentioned earlier. Finally, we remain on track to spend approximately $4.2 billion in capital expenditures for fiscal 2026. We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions.

Speaker #4: However, we anticipate this decrease to be substantially offset by higher system monitoring compliance and employee costs. And we anticipate our interest expense to be in a new range of 155 million to 160 million dollars.

Speaker #4: This increase is solely due to the reclassification of the 77102 deferrals from interest into O&M that I mentioned earlier. Finally, we remain on track to spend approximately $4.2 billion in capital expenditures for fiscal '26.

Speaker #4: We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions.

Speaker #3: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.

Operator: Your first question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open.

Speaker #3: Your first question comes from the line of Julianne Dimulian Smith with Jefferies, your line is open.

Operator: Your first question comes from the line of Julien Dumoulin-Smith with Jefferies. Your line is open.

Speaker #4: Hi, good morning, team. It's Paul Zimbardo on for Julianne. Thanks for taking the time.

Paul Zimbardo: Hi, good morning, team. It's Paul Zimbardo on for Julien. Thanks for taking the time.

Speaker #5: Thank you.

Christopher T. Forsythe: Good morning.

Chris Forsythe: Good morning.

Christopher T. Forsythe: Good morning.

Chris Forsythe: Good morning.

Speaker #6: Good morning.

Speaker #4: Yeah, no, thank you. The first I had was just on the dividend increase, the roughly 15%, again, quite impressive and even better than where you've been trending in the past.

Paul Zimbardo: You know, thank you. The first I had was just on the dividend increase, the, like, roughly 15%, again, quite impressive and even better than where you've been trending in the past. Just any thoughts on kind of how it's sustainable? Do you intend to kinda keep increasing above trend? Just overall thoughts on the dividend perspectively would be useful.

Speaker #4: Just any thoughts on kind of how sustainable do you intend to kind of keep increasing above trend and just overall thoughts on the dividend perspectively would be useful.

Speaker #6: Yeah, I think we stated for a while now that we're going to grow the earnings per share at a 6 to 8 percent range and commensurally grow the dividend.

Kevin Akers: Yeah. I think we stated for a while now that we're gonna grow the earnings per share at a 6% to 8% range and commensurately grow the dividend, and that's where we're gonna continue to go as we move forward.

Speaker #6: And that's where we're going to continue to go as we move forward.

Speaker #5: Yeah, and as a reminder, that 15% year over year is reflective of the dividend being rebased in addition to rebasing the earnings per share because of the expected impact from Texas Rule 77102.

Christopher T. Forsythe: Yeah. As a reminder, that 15% year-over-year, is reflective of the dividend being rebased in addition to rebasing the earnings per share because of the expected impact from Texas Rule 77.102.

Chris Forsythe: Yeah. As a reminder, that 15% year-over-year, is reflective of the dividend being rebased in addition to rebasing the earnings per share because of the expected impact from Texas Rule 77.102.

Speaker #4: Okay, so kind of converging back to where you were before after the rebase. Okay.

Paul Zimbardo: Okay. You're kind of converging back to where you were before after the rebase. Okay.

Speaker #5: Yeah.

Christopher T. Forsythe: Yeah. Yeah.

Chris Forsythe: Yeah. Yeah.

Speaker #6: Yeah.

Paul Zimbardo: The other was just, could you unpack a little bit more? I know you gave some detail on kinda the shift between O&M and interest expense. If you could give a little more details and just confirming that is kind of a, basically a one-for-one change, not a net earnings impact there.

Speaker #4: And then the other was just could you unpack a little bit more? I know you gave some detail on the kind of the shift between O&M and interest expense.

Speaker #4: If you could give a little more details and just confirming that is kind of a basically a one-for-one change, not a net earnings impact there.

Speaker #5: Correct. It is not a net earnings impact. It is a reclassification in how we present the deferral of the post-and the incurred post-and-service incurred service carrying costs.

Christopher T. Forsythe: Correct. It is not a net earnings impact. It's a reclassification in how we present the deferral of the incurred post and service carrying costs at the end of the day. Originally, we had all of that in the interest expense line item. With the final rulemaking, we looked at the proper classification of that. You know, incurred post and service carrying costs reflects all costs associated with the gas plant in-investment that has been subject to the rulemaking that has not yet been reflected in rates. That includes O&M interest and other costs to be elected to represent that deferral in the line item of the income statement where the costs were originally incurred and reported, if that makes sense.

Chris Forsythe: Correct. It is not a net earnings impact. It's a reclassification in how we present the deferral of the incurred post and service carrying costs at the end of the day. Originally, we had all of that in the interest expense line item. With the final rulemaking, we looked at the proper classification of that. You know, incurred post and service carrying costs reflects all costs associated with the gas plant in-investment that has been subject to the rulemaking that has not yet been reflected in rates. That includes O&M interest and other costs to be elected to represent that deferral in the line item of the income statement where the costs were originally incurred and reported, if that makes sense.

Speaker #5: At the end of the day. So originally, we had all of that in the interest expense line item. The final rulemaking we looked at the proper classification of that, incurred post-and-service carrying costs reflects all costs associated with the gas plant investment that has been subject to the rulemaking that has not yet been collected in rates that includes O&M, interest, and other costs.

Speaker #5: So we elected to present that deferral in the line item of the income statement where the costs were originally incurred and reported, if that makes sense.

Speaker #4: Okay. No, that does make sense. And then if I can sneak in the last one quick. You mentioned that there's been a pretty dramatic move in Waha.

Paul Zimbardo: Okay. No, that does make sense. Then if I can sneak in last one quick. You mentioned that there's been a pretty dramatic move in Waha. Just any way that you would frame that kind of beyond 2026 for customers?

Speaker #4: Just any way that you would frame that kind of beyond 2026 for customers?

Speaker #5: No, I mean, obviously, we don't have a crystal ball out there. We'll continue to watch what happens over the next six months. We're not even into the real heat here in Texas so the power gen load hadn't kicked in yet as well.

Kevin Akers: No, I mean, obviously, we don't have a crystal ball out there. We'll continue to watch what happens over the next 6 months. We're not even into the real heat here in Texas, the power gen load hadn't kicked in yet as well. As Chris said earlier, we have seen some moderation from some of the historic highs at Waha and the basis differential. We're gonna continue to monitor as we go through the next 6 months. We'll keep you updated on these calls as we move forward.

Speaker #5: As Chris said earlier, we have seen some moderation from some of the historic highs that Waha and the basis differential. So we're going to continue to monitor as we go through the next six months.

Speaker #5: We'll keep you updated on these calls as we move forward.

Speaker #4: Okay. Thank you very much, team.

Paul Zimbardo: Okay. Thank you very much, team.

Speaker #5: Thank you.

Christopher T. Forsythe: Thank you.

Chris Forsythe: Thank you.

Speaker #3: And your next question comes from the line of Richard Sunderland with Truist Securities, your line is open.

Operator: Your next question comes from the line of Richard Sunderland with Truist Securities. Your line is open.

Richard Sunderland: Hey, good morning. Thank you for the time today.

Speaker #7: Hey, good morning. Thank you for the time today.

Speaker #5: Good morning. How are you?

Christopher T. Forsythe: Good morning. How are you?

Chris Forsythe: Good morning. How are you?

Speaker #7: Great. Thank you. It's turning to the guidance raise. I know you parsed two different pieces there. How do you think about that as a base for growth going forward?

Richard Sunderland: Great. Thank you. Turning to the guidance raise, I know you parsed 2 different pieces there. How do you think about that as a base for growth going forward? Obviously, that clarification on rulemaking for Texas Rule 77.102, you know, sounds like a new long-term view. Is, you know, that $8.40 to $8.50 a good clean base for the 6% to 8%?

Speaker #7: Obviously, that clarification on rulemaking for Texas 77102 sounds like a new long-term view, but is that 840 to 850 a good, clean base for the 6 to 8 percent?

Speaker #5: Yeah, at this point, we think that's a pretty good base. To think about fiscal 27 beyond as a launch point within that range.

Christopher T. Forsythe: Yeah. At this point, we think that's a pretty good base to think about fiscal 2027 beyond as a launch point within that range.

Chris Forsythe: Yeah. At this point, we think that's a pretty good base to think about fiscal 2027 beyond as a launch point within that range.

Speaker #7: Great. Thank you for that. And then on the ATM, I think if I'm reading the disclosures correctly, you didn't price anything on the quarter.

Richard Sunderland: Great. Thank you for that. On the ATM, I think if I'm reading the disclosures correctly, you didn't price anything on the quarter. I know you're a little bit ahead with having part of 2027 addressed, you know, how are you thinking about activity there? Was there any, you know, hang up on the quarter specifically and just your timing overall of ATM activities?

Speaker #7: I know you're a little bit ahead with having part of 27 addressed, but how are you thinking about activity there? Was there any hang-up on the quarter specifically and just timing overall of ATM activity?

Speaker #5: No, on the ATM activity, you're correct. We didn't price anything during the second quarter. As you mentioned, we were fully priced for fiscal 26.

Christopher T. Forsythe: No. The on the ATM activity, you're correct. We didn't price anything during the Q2. As you mentioned, we were fully priced for fiscal 2026. Got a pretty good portion already established for fiscal 2027. We just wanted to kind of see what the market was doing. As you know, there was a lot of volatility in the in the Q2 with geopolitical events and economic news and whatnot. We decided to sort of keep our powder dry for the quarter. We'll evaluate as we move forward pricing opportunities, so we can get ahead further ahead on fiscal 2027's equity needs, you know, at the right time.

Chris Forsythe: No. The on the ATM activity, you're correct. We didn't price anything during the Q2. As you mentioned, we were fully priced for fiscal 2026. Got a pretty good portion already established for fiscal 2027. We just wanted to kind of see what the market was doing. As you know, there was a lot of volatility in the in the Q2 with geopolitical events and economic news and whatnot. We decided to sort of keep our powder dry for the quarter. We'll evaluate as we move forward pricing opportunities, so we can get ahead further ahead on fiscal 2027's equity needs, you know, at the right time.

Speaker #5: Got a pretty good portion already established for fiscal 27. So we just wanted to kind of see what the market was doing. As you know, there was a lot of volatility in the second quarter with geopolitical events.

Speaker #5: And economic news and whatnot. So we decided to keep our powder dry for the quarter but we'll evaluate as we move forward. Pricing opportunities.

Speaker #5: So we can get ahead further ahead on fiscal 27's equity needs at the right time.

Richard Sunderland: Great. Thank you for all that.

Speaker #7: Great. Thank you for all that.

Speaker #5: Thank you.

Christopher T. Forsythe: Thank you.

Chris Forsythe: Thank you.

Speaker #3: Again, if you'd like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Ryan Levine with Citi, your line is open.

Operator: Your next question comes from the line of Ryan Levine with Citi. Your line is open.

Speaker #4: Good morning. And thanks for taking my questions. Yeah, I appreciate the disclosure around the commodity price movements in Waha. If you were going to break out what the earnings contribution was this quarter and any early indications of what you were seeing last month?

Ryan Levine: Good morning, and thanks for taking my questions.

Christopher T. Forsythe: Good morning.

Chris Forsythe: Good morning.

Ryan Levine: You know, appreciate the disclosure around the commodity price movements in Waha. If you were gonna break out what the earnings contribution was this quarter and any early indications of what you were seeing last month?

Speaker #5: Breaking out the earnings for the quarter on just the APT3 system business?

Christopher T. Forsythe: Breaking out the earnings for the quarter on just the APT3 system business?

Chris Forsythe: Breaking out the earnings for the quarter on just the APT3 system business?

Speaker #4: Correct.

Ryan Levine: Correct.

Speaker #5: Well, as I said, I looked at more on a year-over-year basis because we really just look at our performance on totality on a full fiscal year basis.

Christopher T. Forsythe: Well, as I said, I look at it more on a year-over-year basis because we really just look at our performance on totality, on a full fiscal year basis. That was $16 million or about $0.08 year-over-year.

Chris Forsythe: Well, as I said, I look at it more on a year-over-year basis because we really just look at our performance on totality, on a full fiscal year basis. That was $16 million or about $0.08 year-over-year.

Speaker #5: And that was 16 million dollars or about 8 cents year over year.

Speaker #4: Okay. And would you and given what we saw last month, would the monthly benefit be trending higher given some of the commodity spread movements that we've seen?

Ryan Levine: Okay. Given what we saw last month, would the monthly benefit be trending higher, given some of the commodity spread movements that we've seen?

Speaker #5: Well, as I mentioned, kind of in wrapping up my comments around the guidance, we're anticipating another 8 to 12 cents in the second half of this fiscal year, which contemplates the activity you saw in the month of April.

Christopher T. Forsythe: Well, as I mentioned, kind of in wrapping up my comments around the guidance, we're anticipating another $0.08 to $0.12 in the H2 this fiscal year, which contemplates the activity you saw in the month of April.

Chris Forsythe: Well, as I mentioned, kind of in wrapping up my comments around the guidance, we're anticipating another $0.08 to $0.12 in the H2 this fiscal year, which contemplates the activity you saw in the month of April.

Speaker #4: Great. And then lastly, just in terms of the Dallas-Fort Worth area growth dynamics, what are you seeing on the ground in terms of kind of just customer growth and expansion of volumes across your footprint?

Ryan Levine: Great. Lastly, just in terms of the Dallas-Fort Worth area growth dynamics, what are you seeing on the ground in terms of kind of just customer growth and expansion of volumes across your footprint?

Speaker #5: Again, as we talked about in my opening remarks, of the 53,000 or so we added for the last 12 months ending March, about 39,000 plus or so of that was here in Texas.

Kevin Akers: Again, as we talked about in my opening remarks, of the 53,000 or so we added for the last 12 months ending March, about 39,000 plus or so of that was here in Texas. Again, we continue to see good growth across all areas, good residential growth across Texas. Again, with on our opening remarks there, good commercial growth as well with what we've added year to date. The industrial side continues to show good positive results as well across the footprint, adding new industrial accounts, Kentucky, Tennessee, Virginia area as well.

Speaker #5: So again, we continue to see good growth across all areas. Good residential growth across Texas. And again, with our opening remarks there, good commercial growth as well with what we've added year to date.

Speaker #5: And the industrial side continues to show good positive results as well across the footprint, adding new industrial accounts, Kentucky, Tennessee, Virginia area, as well.

Speaker #4: Appreciate the time.

Ryan Levine: Appreciate the time.

Speaker #5: Thank you.

Christopher T. Forsythe: Thank you.

Chris Forsythe: Thank you.

Speaker #3: And your next question comes from the line of Adita Gandhi with Wolfe Research. Your line is open.

Operator: Your next question comes from the line of Aditya Gandhi with Wolfe Research. Your line is open.

Speaker #8: Hi, good morning. Thank you for taking my questions.

Aditya Gandhi: Hi. Good morning. Thank you for taking my questions.

Speaker #5: Good morning.

Christopher T. Forsythe: Good morning.

Chris Forsythe: Good morning.

Speaker #8: I wanted to start on your comment about 840 to 850, the updated guidance range being a good base or launchpad for 6 to 8 percent growth 2027 and beyond.

Aditya Gandhi: I wanted to start on your comment about $8.40 to $8.50, the updated guidance range being a good base or launchpad for 6% to 8% growth 2027 and beyond. Just can you maybe speak to how you're thinking about APT spreads, you know, maybe normalizing when you get back out to 2027 and how we should think about that impact in 2027 and beyond? Is that sort of contemplated within sort of your 6% to 8% growth view off of the updated guidance range?

Speaker #8: Just, can you maybe speak to how you're thinking about APD spreads maybe normalizing when you get back out to 2027, and how we should think about that impact in '27 and beyond?

Speaker #8: Is that sort of contemplated within sort of your 6 to 8 percent growth view off of the updated guidance range?

Speaker #5: Yeah, at this point, I would encourage us to let's get through the next six months and just see what the world brings. Again, we've seen where the spreads have been the previous six months.

Christopher T. Forsythe: Yeah. At this point, I would encourage us to let's get through the next six months and just see what the world brings. We've seen where the spreads have been the previous six months. We've got a short window into what it looks like here in the next few weeks. We haven't even gotten into the heating season yet here. We're gonna let the market move through the next six months. We'll see what it presents itself. As we get closer to the end of 2026 and we're ready to talk about 2027, we'll let you know what we think about the market and where the market currently stands and how we incorporate that into 2027 and forward.

Chris Forsythe: Yeah. At this point, I would encourage us to let's get through the next six months and just see what the world brings. We've seen where the spreads have been the previous six months. We've got a short window into what it looks like here in the next few weeks. We haven't even gotten into the heating season yet here. We're gonna let the market move through the next six months. We'll see what it presents itself. As we get closer to the end of 2026 and we're ready to talk about 2027, we'll let you know what we think about the market and where the market currently stands and how we incorporate that into 2027 and forward.

Speaker #5: We've got a short window into what it looks like here in the next few weeks. But again, we haven't even gotten into the heating season yet here.

Speaker #5: So we're going to let the market move through the next six months. We'll see what it presents itself. And as we get closer to the end of 26 and we're ready to talk about 27, we'll let you know what we think about the market and where the market currently stands.

Speaker #5: And how we incorporate that into 27 and forward.

Speaker #8: Understood. Thank you. And my second question is regarding your comment about the benefit from the Texas legislation now the final rulemaking being higher than originally planned.

Aditya Gandhi: Understood. Thank you. My second question is regarding your comment about the benefit from the Texas legislation, now the final rulemaking being higher than originally planned, sort of in that $155 to 165 million range for fiscal year 2026. Can you, one, clarify, is that a pre-tax or post-tax amount? It seems significantly higher than, you know, the original sort of maybe $0.40 annual run rate that you had pointed to. How should we think about that benefit sort of beyond 2026? Should we see a similar maybe even growing benefit as your capital plan grows in the out years?

Speaker #8: Sort of in that 155 to 165 million range for fiscal year 26. Can you one clarify, is that a pre-tax or post-tax amount? And it seems significantly higher than the original sort of maybe 40-cent annual run rate that you had pointed to.

Speaker #8: How should we think about that benefit, sort of beyond '26? Should we see a similar, maybe even growing benefit as your capital plan grows in the Altos?

Speaker #5: Yeah, so to clarify, the 155 to 165 impact from, as we said, 102 for the full fiscal year is a pre-tax number. And as I mentioned earlier, kind of going into the fiscal year, the rule was fairly new when we were establishing our budget and guidance.

Christopher T. Forsythe: To clarify, the $155 to 165 amount impact from 77.102 for the full fiscal year is a pre-tax number. As I mentioned earlier, you know, kind of going into the fiscal year, you know, the Rule was fairly new when we were establishing our budget and guidance. There was certainly rulemaking that was going on that actually modified the Rule a little bit from our original thinking. We've got a better handle on that going forward now. Also visibility into our spending, as I mentioned.

Chris Forsythe: To clarify, the $155 to 165 amount impact from 77.102 for the full fiscal year is a pre-tax number. As I mentioned earlier, you know, kind of going into the fiscal year, you know, the Rule was fairly new when we were establishing our budget and guidance. There was certainly rulemaking that was going on that actually modified the Rule a little bit from our original thinking. We've got a better handle on that going forward now. Also visibility into our spending, as I mentioned.

Speaker #5: There was certainly rulemaking that was going on that actually modified the rule a little bit from our original thinking. So we've got a better handle on that going forward now.

Speaker #5: Also, visibility into our spending, as I mentioned. So this is basically, as we talked about at the beginning of the fiscal year, a rebasing year because we're now layering in the impact of the new rule to all of APT spending and the remainder of the distribution spending in Texas that didn't qualify under Rule 8209.

Christopher T. Forsythe: You know, this is basically, as we talked about at the beginning of the fiscal year, a rebasing year, because we're now layering in the impact of the new rule all of APT spending and the remainder of the distribution spending in Texas that didn't qualify under Rule 8.209. Going forward, we are still guiding in that 6% to 8% off of, as you mentioned earlier, a new range of $8.40 to $8.50. The impact is in our 5-year guidance is reflective of that as well. We feel you know, we're not gonna see another rebasing going into fiscal 2027. It's gonna be more steady state as we move forward.

Chris Forsythe: You know, this is basically, as we talked about at the beginning of the fiscal year, a rebasing year, because we're now layering in the impact of the new rule all of APT spending and the remainder of the distribution spending in Texas that didn't qualify under Rule 8.209. Going forward, we are still guiding in that 6% to 8% off of, as you mentioned earlier, a new range of $8.40 to $8.50. The impact is in our 5-year guidance is reflective of that as well. We feel you know, we're not gonna see another rebasing going into fiscal 2027. It's gonna be more steady state as we move forward.

Speaker #5: So going forward, we were still guiding in that 6 to 8 percent off of, as you mentioned earlier, a new range of 840 to 850.

Speaker #5: So the impact is in our five-year guidance is reflective of that as well. So we feel we're not going to see another rebasing going into fiscal 27.

Speaker #5: It's going to be more steady state as we move forward.

Aditya Gandhi: Got it. Thank you for clarifying that.

Speaker #8: Got it. Thank you for clarifying that.

Speaker #3: And once again, I'd like to remind everyone in order to ask a question, press stars, and the number one on your telephone keypad. We'll pause for just a moment to see if any further questions, enter the queue.

Operator: Once again, I'd like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We'll pause for just a moment to see if any further questions enter the queue. There are no further questions at this time. Jennifer Wernecke, I turn the call back over to you.

Speaker #3: And there are no further questions at this time. Jennifer Wernicke, I turn the call back over to you.

Speaker #9: We appreciate your interest in Atmos Energy and thank you for joining us. A recording of this call is available for replay on our website through June 30th, 2026.

Jennifer Wernecke: We appreciate your interest in Atmos Energy, and thank you for joining us. A recording of this call is available for replay on our website through 30 June 2026. Have a good day.

Jennifer Wernicki: We appreciate your interest in Atmos Energy, and thank you for joining us. A recording of this call is available for replay on our website through 30 June 2026. Have a good day.

Speaker #9: Have a good day.

Operator: This concludes today's conference call. You may now disconnect.