Unitil Company (UTL) Q2 2023 Earnings Name Transcript

Unitil Company (NYSE:UTL) Q2 2023 Earnings Convention Name August 1, 2023 10:00 AM ET

Firm Members

Todd Diggins – Chief Accounting Officer and Controller

Tom Meissner – Chairman, President and CEO

Daniel Hurstak – SVP, CFO and Treasurer

Convention Name Members

Operator

Good day and thanks for standing by. Welcome to the Unitil’s Second Quarter 2023 Earnings Convention Name. At the moment all participant are in a listen-only mode. After the speaker’s presentation there will likely be a question-and-answer session. [Operator Instructions] Please be suggested that at this time’s convention is being recorded.

I’d now like at hand the convention over to your speaker at this time, Todd Diggins, Chief Accounting Officer. Please go forward.

Todd Diggins

Good morning and thanks for becoming a member of us to debate Unitil Company’s second quarter 2023 monetary outcomes. Talking on the decision at this time will likely be Tom Meissner, Chairman and Chief Govt Officer; and Dan Hurstak, Senior Vice President, Chief Monetary Officer and Treasurer. Additionally with us at this time is Bob Hevert, President and Chief Administrative Officer.

We are going to talk about monetary and different info on this name. As we talked about within the press launch asserting at this time’s name, we now have posted info together with a presentation to the Buyers part of our web site at unitil.com. We are going to seek advice from that info throughout this name.

Shifting to Slide 2, the feedback made at this time about future working outcomes or occasions are forward-looking statements beneath the protected harbor provisions of the Non-public Securities Litigation Reform Act of 1995. Ahead-looking statements inherently contain dangers and uncertainties that may trigger precise outcomes to vary materially from these predicted. Statements made on this name must be thought-about along with cautionary statements and different info contained in our most up-to-date annual report on Type 10-Okay and different paperwork we now have filed with or furnished to the Securities and Alternate Fee. Ahead-looking statements converse solely as of at this time, and we assume no obligation to replace them.

This presentation accommodates non-GAAP monetary measures. The accompanying supplemental info extra totally describes these non-GAAP monetary measures and features a reconciliation to the closest GAAP monetary measures. The corporate believes these non-GAAP monetary measures are helpful in evaluating its efficiency.

With that, I’ll now flip the decision over to Chairman and CEO, Tom Meissner.

Tom Meissner

Thanks, Todd. And good morning, everybody. Thanks for becoming a member of us at this time.

Starting on Slide 4, at this time we introduced web earnings of $4.2 million or $0.25 per share for the second quarter of 2023. By the primary half of 2023, web earnings was $28.3 million or $1.76 per share, representing a rise of $0.11 or roughly 7% over the identical interval in 2022. Earnings progress was achieved by way of execution of our regulatory agenda and are centered on price management.

Decoupled price buildings, which now apply to the vast majority of our prospects assist assist and stabilize income by way of the primary six months of the 12 months. Our disciplined method to price administration has resulted in decrease operation and upkeep bills relative to the primary half of 2022, a noteworthy accomplishment contemplating the present inflationary surroundings. We consider that for the stability of the 12 months O&M bills will stay in keeping with 2022 ranges.

As we’ll talk about in larger element, our regulatory agenda stays lively with the bottom price case for Northern utilities important division presently underway. Charge instances are additionally being ready for a Massachusetts Electrical and Gasoline divisions. We proceed to see robust monetary and operational efficiency by way of the primary half of 2023, which is in keeping with our investor worth proposition of low threat, sustainable progress, and we once more reaffirm our long run earnings steerage of 5% to 7%.

Turning to Slide 5, I might like to the touch on the underlying financial energy in our service areas. In Could, New Hampshire’s unemployment price was tied for the bottom within the nation, at a document low of 1.9%. As well as, each Maine and Massachusetts have decrease unemployment charges within the nationwide common. Sturdy labor markets are seemingly one of many causes that the areas we serve are constantly cited as a number of the most fascinating locations to stay within the nation. The robust economies inside our territories have continued to drive the demand for housing in areas which can be already experiencing tight provide.

This dynamic has led to buyer progress that was barely trailed historic traits, however building employment and new housing permits are on the rise to assist meet the robust housing demand. Extra particular to Unitil, the native economies in areas we serve have held up effectively by way of latest financial situations. Just like different components of the nation, our prospects have skilled increased than regular vitality costs. Though vitality provide prices are a cross to expense for the corporate, we’re effectively conscious of the elevated vitality burden on our prospects.

In earlier calls, you’ve got heard me reward our customer support efforts as mirrored in our robust buyer survey outcomes. We take a proactive method to speaking with our prospects and providing help, together with finances billing, fee plans, arrearage, administration plans, and knowledge on different obtainable help applications. Our continued give attention to customer support and communication, together with the robust native financial situations in our service areas are mirrored in decrease buyer account write offs in 2023 in comparison with prior years.

With that, I will now cross it over to Dan who will present larger element on the quarterly in 12 months thus far outcomes. Dan?

Daniel Hurstak

Thanks, Tom. Good morning, everybody. I will start on Slide six.

As Tom talked about, at this time, we introduced second quarter earnings per share of $0.25. For the primary six months of the 12 months, web earnings elevated $1.9 million or $0.11 per share, in comparison with the identical interval in 2022. This earnings per share progress is the results of increased gross sales margins, and decrease operational upkeep expense, partially offset by increased different working bills.

As a reminder, the second quarter and first half outcomes for 2022 included the popularity of recruitment quantities associated to the corporate’s New Hampshire price case orders, which positively affected margin by roughly $2.4 million. Recoupment refers back to the regulatory follow in Hampshire, whereby everlasting price case awards are reconciled again to the efficient date of the non permanent price award.

By the primary six months of 2023, our decoupled price buildings in Massachusetts and New Hampshire have offered income stability, and supported earnings by roughly $0.25 per share. Our outcomes for the primary half of 2023 are in keeping with the quarterly earnings per share distribution chart that we offered earlier this 12 months. And we count on the outcomes for the rest of 2023 will even be in keeping with this chart.

Turning to Slide seven, I’ll talk about our electrical and gasoline adjusted gross margins. I’ll begin with our electrical operations. Electrical adjusted gross margin was $50.9 million for the six months ended June 30 2023, a rise of $2.7 million in comparison with the corresponding interval in 2022. This enhance in electrical margin displays increased distribution charges and buyer progress. Electrical unit gross sales have been down for each residential and business industrial lessons, because of hotter than regular winter climate and decrease common utilization partially offset by buyer progress.

The corporate’s electrical distribution revenues are considerably decoupled, which eliminates the dependency of distribution income on the quantity of electrical energy gross sales. By the primary six months of 2023, we estimate income decoupling assist electrical margin by $0.06.

As we talked about over the past name, year-over-year, electrical meter progress was barely decrease than historic traits resulting from a mass meter conversion that successfully changed roughly 200 residential meters with only some business meters. This conversion was included in the latest Unitil vitality programs price case settlement, and had no impact on distribution income. Absent this meter conversion, electrical buyer progress was largely according to historic progress price.

Shifting to our gasoline operations, gasoline adjusted gross margin was $84.2 million {dollars} for the six months ended June 30 2023, a rise of $4 million in comparison with the identical interval in 2022. This enhance in gasoline margin displays increased charges and buyer progress, partially offset by the unfavorable results of hotter winter climate in our Maine service space. Based mostly on climate knowledge collected within the firm’s gasoline service areas, on common, there have been roughly 9% fewer efficient diploma days within the first six months of 2023 in comparison with the identical interval in 2022.

In Maine, our solely non-decoupled service space climate normalized gross sales elevated 2.1% within the first six months of 2023 in comparison with the corresponding interval in 2022. We’ve got added roughly 800 new gasoline prospects in comparison with the identical interval in 2022. By the primary six months of 2023, we estimate that income decoupling supported gasoline margin by roughly $0.19 per share.

On Slide 8, we offered an earnings bridge evaluating year-to-date 2023 outcomes to the identical interval in 2022. For the primary half of 2023, adjusted gross margin elevated mixed $6.7 million, primarily ensuing from increased distribution charges in buyer progress, partially offset by hotter winter climate. As a reminder, the outcomes for the six months ended June 30 2022, included the popularity of recruitment quantities associated to the corporate’s New Hampshire price case orders, which positively affected margin by roughly $2.4 million.

Operation and upkeep bills decreased $0.5 million, largely resulting from decrease labor prices {and professional} charges partially offset by increased utility working prices. The decrease labor prices primarily mirror decrease retirement advantages, service prices, and decrease restricted inventory compensation expense. Depreciation and amortization expense elevated by $3 million, reflecting increased ranges of utility planning service, and better amortization of price case prices and different deferred prices.

Taxes apart from earnings taxes elevated by $0.6 million resulting from increased property taxes on increased utility planning service and better payroll taxes. Curiosity expense elevated $1.6 million, reflecting increased curiosity expense on brief time period borrowings, partially offset by decrease curiosity expense on long run debt and better curiosity earnings on regulatory belongings. Different bills decreased by $1.4 million, largely resulting from decrease retirement profit prices.

And lastly, earnings taxes elevated $1.5 million, reflecting increased pretax earnings in 2023, in addition to increased circulation again of extra amassed deferred earnings taxes within the first half of 2022 because of the corporate’s New Hampshire Electrical and Gasoline price case orders.

Shifting to Slide 9, I want to present an replace on our Northern utilities Maine division base price case continuing, which is progressing as deliberate. In Could, we filed a price request of roughly $11.8 million reflecting proposed price base of roughly $320 million, an fairness layer of 52% and a return fairness of 10.35%. The submitting contains an attrition adjustment, which appears to be like to the anticipated income deficiency based mostly on price 12 months ended January 2025.

We consider the speed software balances the wants of all stakeholders, together with each prospects and buyers. Technical conferences have been held in June to deal with the corporate’s pre filed testimony. An intervening testimony was filed in July, with extra technical periods scheduled in August. We are going to present further updates throughout our subsequent earnings name.

Turning to Slide 10. We’re presently making ready face price filings for the Fitchburg electrical and gasoline divisions. The notices of intent have been filed on June 30 2023 and we count on to file each price instances this August. Just like the bottom price continuing in Maine, we are going to present further updates concerning our Fitchburg price instances throughout our subsequent earnings name.

Shifting to Slide 11, our funding outlook stays robust and capital spending has elevated in 2023 by $12.3 million as in comparison with 2022. The 2023 capital spending stage is in keeping with our capital funding plan. Over the previous three years, regardless of labor shortages and provide chain constraints, our price base progress has been roughly 7.1% which is inside our anticipated long term price base progress price of 6.5% to eight.5%. I additionally need to point out that the Kingston Photo voltaic venture is progressing as anticipated, and we lately finalized the contract with the positioning developer.

Turning to slip 12, our stability sheet stays robust and credit score metrics proceed to assist our funding grade credit score scores. In July, we issued $25 million of senior unsecured notes at our Fitchburg gasoline and electrical subsidiary. The proceeds of this debt providing have been used to refinance brief time period borrowings and for different basic company functions.

We primarily depend on our credit score facility to search out building work in progress and dealing capital necessities, equivalent to buy energy. Though our borrowings beneath the credit score facility have elevated, we now have a number of offsets for brief time period curiosity expense, together with the allowance for funds used throughout building, and curiosity earnings generated by varied regulatory belongings ensuing from beneath collected regulatory mechanisms, a lot of which earn curiosity are prime price or a brief time period borrowing price.

I will now flip the decision again over to Tom.

Tom Meissner

Nice. Thanks, Dan. Ending on Slide 13, midway by way of the 12 months, we proceed to ship strong outcomes we’re centered on operational and monetary excellence. Our dividend yield coupled with robust earnings progress affords a pretty complete return for our shareholders. We consider the continued execution of our strategic plan, together with investments associated to the Clear Power Transition, will place us to ship sustainable worth for all stakeholders for a few years to return.

With that, I will flip the decision again over to Todd.

Todd Diggins

Thanks, Tom. That wraps up the fabric for this name. I’ll now flip the decision over to the operator who will coordinate questions.

Query-and-Reply Session

Operator

[Operator Instructions] And I am presently displaying no questions at the moment. This does conclude at this time’s convention name. Thanks all for collaborating. You could now disconnect.