C HESA PEA KE U TIL ITIES C O R PO R ATIO N
First Quarter 2024
Earnings Conference Call
May 9, 2024
1
Today's Presenters
Jeff Householder
Chair of the Board, President, and Chief Executive Officer
Beth Cooper
Executive Vice President, Chief Financial Officer, Treasurer,
and Assistant Corporate Secretary
Jim Moriarty
Executive Vice President, General Counsel, Corporate
Secretary, and Chief Policy and Risk Officer
Lucia Dempsey
Head of Investor Relations
2
Safe Harbor for Forward-Looking Statements
Safe Harbor Statement
Some of the statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable law. Such forward--looking statements may be identified by the use of words, such as "project," "believe," "expect," "anticipate," "intend," "plan," "estimate," "continue," "potential," "forecast" or other similar words, or future or conditional verbs such as "may," "will," "should," "would" or "could." These statements represent our intentions, plans, expectations, assumptions and beliefs about our future financial performance, business strategy, projected plans and objectives. These statements are subject to many risks and uncertainties and actual results may materially differ from those expressed in these forward-looking statements. Please refer to Chesapeake Utilities Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC and other SEC filings concerning factors that could cause those results to be different than contemplated in this presentation.
Non-GAAP Financial Information
This presentation includes non-GAAP financial measures including Adjusted Gross Margin, Adjusted Net Income and Adjusted Earnings Per Share ("EPS*"). A "non-GAAP financial measure" is generally defined as a numerical measure of a company's historical or future performance that includes or excludes amounts, or that is subject to adjustments, so as to be different from the most directly comparable measure calculated or presented in accordance with GAAP. Our management believes certain non-GAAP financial measures, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period.
The Company calculates Adjusted Gross Margin by deducting the purchased cost of natural gas, propane and electricity and the cost of labor spent on direct revenue-producing activities from operating revenues. The costs included in Adjusted Gross Margin exclude depreciation and amortization and certain costs presented in operations and maintenance expenses in accordance with regulatory requirements. The Company calculates Adjusted Net Income and Adjusted EPS by deducting costs and expenses associated with significant acquisitions that may affect the comparison of period-over-period results. These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures. The Company believes that these non-GAAP measures are useful and meaningful to investors as a basis for making investment decisions and provide investors with information that demonstrates the profitability achieved by the Company under allowed rates for regulated energy operations and under the Company's competitive pricing structures for unregulated energy operations. The Company's management uses these non-GAAP financial measures in assessing a business unit and Company performance. Other companies may calculate these non-GAAP financial measures in a different manner.
See Appendix for a reconciliation of Gross Margin, Net Income and EPS, all as defined under GAAP, to our non-GAAP measures of Adjusted Gross Margin, Adjusted Net Income, and Adjusted EPS for each of the periods presented.
*Unless otherwise noted, EPS and Adjusted EPS information is presented on a diluted basis.
3
Executing On Our Long-Term Growth Plan
Growth in earnings to support dividend growth and increased shareholder value
Prudently | Proactively | Continually | ||
deploy | manage | execute on | ||
investment | regulatory | business | ||
capital | agenda | transformation | ||
Foundation of operational excellence across the organization
4
Q1 2024 Highlights: Continuing to Build Momentum
Operational Accomplishments | Strategic Capital Investments | |
• Increasing margin contributions from continued transmission expansions | ||
• | Reaffirmed 2024 capital | |
• Regulated natural gas distribution customer growth of 2x national average | ||
investment guidance of $300M | ||
• Realized meaningful contribution from non-regulated businesses | to $360M | |
• Weather was colder than last year, but warmer than normal | • | Multiple regulatory initiatives |
• Prudently managing expenses amid impact of FCG financings and challenging | ||
approved supporting natural gas | ||
economic environment | ||
demand | ||
Florida City Gas (FCG) Integration | ||
• | Multiple expansions of | |
• Delivered incremental margin contributions from FCG | transmission systems under | |
• Executing capital investment plan consistent with acquisition expectations | construction to support strong | |
customer growth | ||
• Realized efficiencies by leveraging enterprise-wide processes including management | ||
of SAFE & GUARD programs | • | Continuing our business |
• Filed three new RNG projects with the Florida Public Service Commission (PSC) | transformation initiatives to | |
and one supply header project to support demand for natural gas service | support our larger footprint and | |
• Filed for a $50 million increase in the SAFE program with the Florida PSC | achieve operational efficiencies | |
Remain on track to achieve 2024 Adjusted EPS guidance of $5.33-$5.45 and longer-term 2025 and 2028 outlook
1 See appendix for GAAP to non-GAAP reconciliation for adjusted diluted earnings per share. | 5 |
2 Excludes TCJA impact in 2017; 2023 excludes transaction-related costs associated with the FCG acquisition. |
Q1 2024 Strong Financial Performance
Adjusted Diluted
Earnings Per Share1
+3% | $2.10 |
$2.04 | |
Q1 2023 | Q1 2024 |
Key Adjusted Gross Margin Drivers
$25.4M $3.5M $2.8M
Contribution from | Pipeline Expansions | Regulated |
FCG and other | and Natural Gas | Infrastructure |
acquisitions | Organic Growth | Programs |
and Recovery | ||
Mechanisms |
$1.9M | $1.0M | $0.6M | ||
Changes in | Increased Gathering | Higher Propane | ||
Customer | Fees for Aspire | Margins per Gallon | ||
Consumption | Energy | and Fees | ||
1 Diluted Earnings Per Share Growth from Continuing Operations; 2024 excludes transaction and transition-related costs associated with the FCG acquisition. | 6 |
FCG Integration Fully On-Track
Achieving
Synergies
- Reviewing operational efficiencies
- Consolidating processes and resources
- Analyzing technology enhancements
Optimizing
Operations
- "Best of Both" approach to customer care, project management and operations
- Sharing resources and insight between legacy and FCG businesses
Accelerating
Investment
Opportunities
- Identifying capital projects to drive growth as one combined company
- Leveraging regulatory expertise to accelerate project reviews and approvals
7
Major Projects and Initiatives Driving Adj. Gross Margin Growth
Our projects and initiatives underway will continue to drive adjusted gross margin growth while
new projects and regulatory initiatives will increase earnings across our guidance period
Three Months ended | Year Ended | Estimate for | ||||||||||||||
Project/Initiative | March 31, | December | Fiscal | |||||||||||||
(in thousands) | 2024 | 2023 | 2023 | 2024 | 2025 | |||||||||||
Pipeline Expansions: | ||||||||||||||||
Southern Expansion | $ | 586 | $ | - | $ | 586 | $ | 2,344 | $ | 2,344 | ||||||
Beachside Pipeline Extension | 603 | - | 1,810 | 2,451 | 2,414 | |||||||||||
North Ocean City Connector | - | - | - | - | 494 | |||||||||||
St. Cloud / Twin Lakes Expansion | 146 | - | 264 | 584 | 584 | |||||||||||
Wildlight | 199 | 26 | 471 | 2,000 | 2,038 | Peninsula Pipeline Company | ||||||||||
Lake Wales | 114 | - | 265 | 454 | 454 | |||||||||||
East Coast Transmission Projects | ||||||||||||||||
Newberry | - | - | - | 862 | 2,585 | |||||||||||
Boynton Beach | - | - | - | - | 3,342 | Capex: $35.8 million | ||||||||||
New Smyrna Beach | - | - | - | - | 1,710 | |||||||||||
Total Pipeline Expansions | 1,648 | 26 | 3,396 | 8,695 | 15,965 | 2025 Gross Margin: $5.1 million | ||||||||||
Full-Year Annualized Margin: $6.3 million | ||||||||||||||||
CNG/RNG/LNG Transportation and Infrastructure | 3,435 | 3,521 | 11,181 | $ | 12,500 | $ | 13,969 | |||||||||
Regulatory Initiatives: | • Boynton Beach and New Smyrna Beach | |||||||||||||||
Florida GUARD Program | 589 | - | 353 | 3,231 | 5,602 | to increase supply capability and enhance | ||||||||||
FCG SAFE Program | 412 | - | - | 2,683 | 5,293 | reliability for FPU's distribution systems | ||||||||||
Capital Cost Surcharge Programs | 831 | 720 | 2,829 | 3,979 | 4,374 | |||||||||||
Florida Rate Case Proceeding1 | 5,595 | 4,097 | 15,835 | 17,153 | 17,153 | |||||||||||
Maryland Rate Case Proceeding2 | - | - | - | TBD | TBD | |||||||||||
Electric Storm Protection Plan | 630 | 206 | 1,326 | 2,433 | 3,951 | |||||||||||
Total Regulatory Initiatives | 8,057 | 5,023 | 20,343 | 29,479 | 36,373 | |||||||||||
Total | $ | 13,140 | $ | 8,570 | $ | 34,920 | $ | 50,674 | $ | 66,307 | ||||||
Year-Over-Year Change | $ | 15,754 | $ | 15,633 | ||||||||||||
1 | Includes adjusted gross margin during 2023 comprised of both interim rates and permanent base rates which became effective in March 2023. | 8 |
2 | Rate case application and depreciation study filed with the Maryland PSC in January 2024. |
2024 Capital Investment On Track to Drive Margin Growth
Q1 Capital Spend Progress
21%
in Q1
79% in Q2 - Q4
Quarter-to-date capital expenditures on track, with $70.6M in spending on strategic growth opportunities and technology transformation
$300 - $360M 2024E Capital Expenditures
General Corporate CapEx: $4 - $6M
Unregulated Energy CapEx: $31 - $36M
- Propane Distribution: $13 - $15M
- Energy Transmission: $5 - $6M
- Other Unregulated: $13 - $15M
Regulated Energy CapEx: $265 - $318M
- Natural Gas Distribution: $150 - $170M
- Natural Gas Transmission: $90 - $120M
- Electric Distribution: $25 - $28M
We remain on track for 5-Year CapEx Plan of
$1.5 - $1.8B
2024E Capex | 9 |
Key Drivers of Performance - Three Months Ended March 31, 2024
Our core business performance, strong customer demand and recent acquisition of Florida City Gas drove increased
earnings per share, only partially offset by financing costs related to the FCG acquisition.
Adjusted Diluted Earnings Per Share1
Q1
2023
Increase in | Lower | Depreciation, | ||
legacy | ||||
legacy | amortization | |||
business | ||||
business | and property | |||
Legacy | operating | |||
customer | tax costs2 | |||
expenses | ||||
business | consumption | Florida City | ||
growth | (excluding | Gas | ||
(Excluding | FCG) | acquisition3 | ||
weather | Interest | |||
and other | ||||
& FCG) | ||||
changes | ||||
Contribution | shares | |||
Absence of | outstanding | |||
from recent | due to | |||
Reduction | acquisitions | equity | ||
in state tax | offerings | |||
rate |
Q1
2024
1 See appendix for GAAP to non-GAAP reconciliation for adjusted diluted earnings per share.
2 Includes a benefit from RSAM of $3.4 million, pre-tax, or $0.11 per share. | 10 |
3 Does not include RSAM benefit, which is included in depreciation expense. | |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Chesapeake Utilities Corporation published this content on 09 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2024 11:33:50 UTC.