AWK - Earnings call transcript Q1 2024 | American Water Works Company, Inc.

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Operator

Good morning, and welcome to American Water's First Quarter 2024 Earnings Conference Call.

As a reminder, this call is being recorded and is also being live webcast with an accompanying slide presentation through the company's Investor Relations website. The audio webcast archive will be available for 1 year on American Water's Investor Relations website.

I would now like to introduce your host for today's call, Aaron Musgrave, Vice President of Investor Relations. Mr. begin. may you Musgrave,

Aaron Musgrave

questions. Good today's and of call. will for remarks, Betsy. joining our you us we your call the for At open morning, you, thank everyone, for prepared Thank the end

we Let me first performance expectations making our over predictions some or our expectations, other statements represent and our These current will statements based language. that are safe forward-looking regarding be harbor go Today, assumptions. future future estimates events. on

subject with may by deal the known future to statements to these are and that numerous or such unknown they factors be since cause uncertainties risks, implied However, results indicated from and events, results statements. materially other different actual

and this first earnings XX and Form Additional and share with uncertainties as statements factors then information March And more well quarter in finally, these your all is close our filed during per by each earnings diluted as and risks, to to provided presentation prepared in important referred After earnings answering share. other information the remarks, related our our release the detailed we'll per earnings yesterday diluted regarding financials SEC. XX-Q, questions. a and analysis earnings of

the turn With that, and Water's American Susan President over I'll call Hardwick. to CEO,

M. Hardwick

Thanks, Aaron. Good morning, everyone.

started As results. we solid with we announced yesterday, financial XXXX

on $X.XX us on pleased to shown put are The year. last increased earnings to to for Slide expected guidance, results full compared and year As X, as we quarter earnings share were achieve per affirm. the which were we our $X.XX track

in from earn-out $XX amendment rate February the the call. HOS, the $X.XX and the which interest detailed included per reflected our XXXX as million seller results the sale of of to share interest XXXX successful we consideration the quarter income of additional contingent of First note higher related February

so these key you XXXX, our remarks. see add in far Cheryl will to of also accomplishments a some and Here, other their can John in recap of and

in of in late announced delivered successful debt a issuance highest we priority XXXX February, our long-term plan. This billion. the As $X.X financing completed we on

over infrastructure also in capital well quarter. invested We $XXX of million this

this and while a earning investments general rate our in bills of keeping which all on high we and In cases and affordable a the addition, process accordance acquisition in in this operations, have states value true staying return quality on customer disclosures our early of the with in to we made. traditional sustainable We for published capital we completed several as noted we highlighted slide. did filed large April service

many locations fully support has the And final chemicals. PFAS and issue again EPA's water but to XXXX to that standards, news assure The far in primary drinking to whole the EPA for further Cheryl Water our expertise water when quality this the other elaborate the will significant us American investors have PFAS national in a announced protect in want water for regulators, on time demonstrated head came we stakeholders regulations we that want for efforts reiterate so I tackle other fact, on. water drinking customers, the April and that industry now. I to some the on as XX X quality.

Turning X. to Slide

from is at our growth and are, both we growth we strong again, capital X%. plan positive top-tier upon differentiator This dividend and to long-term execution operational I X% believe quarter, based again -- is regulatory for peers. our and affirmation our targets earnings a clear that affirming This

years an the and done to we've we growing next industry-leading over and in on earnings annual plans, our deliver X past, As beyond. and consistently at the expect long-term dividends pace

X. Slide to on Moving

X.X% increase. share we the increase company's from per cash share, quarterly in to $X.XXXX an Directors approved dividend an announced our yesterday, As $X.XXX Board of per

XX%. consistently We years, utility ratio outpacing while less the all consistent grown virtually than X our payout have maintaining of over a our dividend peers, significantly of last

to Looking to is EPS ahead, our expect we line to X% compelling per dividend on in target. year X% grow continue with growth our at X% to average, which X%

management team understand appreciate and dividend of investors. the our is shareholder important component return total Board Our and how to our

me And with updates, that, base talk over more to and let Cheryl? recent turn to it PFAS, rate affordability regulatory Cheryl about growth.

Cheryl Norton

everyone. Thanks, morning, Susan, good and

April. U.S. Let drinking me Slide to PFAS published the start on and reviewing rule EPA's by X turning water in

and we stated, water U.S. quality. to remain regarding steadfast protect quantity our multiple Susan water that be a quality, fully was these a EPA's reliability. limit wastewater the rule industry X are of parts trillion challenges. and per unchanged drinking efforts and commitment the terms in As support among faces EPA's These contaminants We of in water the challenges and leader to the final PFOA to PFOS. water water for industry the provider drinking in solutions of

The years systems X to now compliance have However, final the capital improvements. would in the to water allowed extension to states X the comply rule. grant from includes the years was federal that federal been X-year for window timeline extended

$X to As analysis stringent anticipate specific of estimate up contaminant estimate of PFAS our related more adopt billion state guidelines. expenses our upon any $XX including capital will implementing don't annually rule guidance this currently with limits, any not comply and with always, Based and work we to we change rule. the to of do operating level of the to new rule, preliminary of maximum to our incorporate state regulators federal our states assuming additional new million

compounds X by the not also for additional limits estimates. do We currently new expect these the PFAS to impact set EPA

as rule-making substances in and hazardous also CERCLA. designated PFOS EPA PFOA U.S. April, under separate a Through

provide systems the actively and PFAS. that lawsuit. liability to federal water X MDL a disclosed advocate multi-district and support bipartisan settlements we legislation remained XM or Previously, litigation, and DuPont coming of out a As PFAS continue party under far we for would as protections of CERCLA receivers reminder, to so passive that we've wastewater with

dollars path and of DuPont most manufacturers XM the each an from to is As of The The manner PFAS be in we respectively. MDL settlements its final in proceeds the approval possible pending. recouping issued still received our to believe and for this amount February March Court expedient the from of customers. best settlement shared, year, we is this

the annualized Slide an latest activity XX. Virginia, an I'll states. to additional XX. issued effective Turning our authorizing in cover order in February Commission regulatory In $XX West million the revenues

using month. water affordability. million rate provides water X,XXX be is a effective Commission additional we cost will $XX incomes typical the order This change example an at of also lower annualized fixed volume phased American of one X. authorizing a gallons residential are in addressing additional that request, related X,XXX per that order to XXXX. DSIC this on an the We for the customers. May allow monthly X-step They water a cost gallons our $X will issued customer. usage charge over to residential for customer of Indiana received provide The customers through With just change, the process use basic revenues typical of effective $XX In March new the customer for Indiana, many no all low-cost million service fixed than water approximately additional for the also water above innovative revenue approved ways design an customer

cases. active to Turning

jurisdictions. see progress in general in X rate You we have can cases

made will are to these in cases investments these of centered around the capital and continue make we've All states.

our our the California, by in and well expected. day in be story the Illinois, intervenor in followed February implemented to Jersey for milestones and X. rates rebuttal In now In testimony as in Jersey, May, the an case on and the in Kentucky deadline and the will Virginia, July, testimony in will Commission any milestones rebuttal case as staff evidentiary Illinois staff cases is in followed were October. in progressing June. New New September expect Our order intervenor we act In Kentucky, X. next May are by Interim the hearings next be in

In next filed driven in order milestones are that August for of we May decision effective last proposed and in case expected billion likely vital case in $X a to July. the capital the be the in new Pennsylvania, ALJ we The investment. from year expect was by a rates final

for the in midyear. Tennessee. last just and with a yesterday, And for Commission expect on benefit capital cases rate reflects Service of Iowa Pennsylvania's a we And we of customers. long-standing filed outcome investment infrastructure the finally, needed improves that case notice that support general the We plan constructive front, the to that filed State we case rate week, Missouri Public file by

new magnitude rate cases of and service $XX maintenance. On This the million Slide we step general annualized of on that XX total, help water incrementally regulatory surcharges. includes and approval $XXX efforts, passed of of we January. see revenues since execution in in areas request acquisitions legislative in have can were smaller bills signed line In in annualized million from states that $XX front, total hydrant rates $XX have pending. million replacements, expediency the million of the revenue show from and utilities To infrastructure will fire lead those increases you state our X and

customer us to about Moving every topic cover you've and just affordability. heard a quarter, XX Slide

and As we've are balancing said, system focused we the investments very of magnitude customer affordability needed. are on the that

share. in terms Our very positions wallet or industry are good company and relative in affordability our of

U.S. will month. median of levels geographies plan target Our to is consolidated us we of bills specific to That to we project system-wide these stay our water household for household serve by The allow less in per Census in average residential communities. analysis that income income. water $XX customer supported have place rising the data of median bill or X% is $XX investment Bureau within residential

to time, example. who design continue with with assist doing we're affordability, customers our I described earlier, we realize must and in programs involve an Indiana strategies as as around the same to rate what challenged our we are At

to month, Water American Rescue relief funds. customers $XX $X California another last financial faced the million in Plan comes total under through additional Act California Water California American for that challenged This just As funding million the for customers due announced program. pandemic. to utilizes bill example, benefit a Federal who hardship This an the program COVID-XX brings American

to We permanent advocate similar continuing for place improvement for management demand electric regulatory gas customer in of what's customers. federally deliver increased efficiencies as and rule cost are for And technology, to also and and program, years copper affordability capital focus scale PFAS proposed many such lead as water a our low-income strongly especially been to the continue the on final funded utility needs. on we and rule assistance

capital Lastly, corporate to the that investment and safely higher their on XXXX. state capital efficiently capital leaders teams on drove footprint. goal The the shows across a great last plan. projects page compared of year. our our to $XXX billion the period first significant the the quarter, our on job almost deliver quarter, timely and keeps and effort our investment in million This in by of increased Slide the our executing of that hit to pie required XX approximately in did systems It charts improved result and our same and nature to of us side speak investments recovery right of the pace $X.X hundreds

driven As is a on spending we share with a affordability. focus by strategy, regulators and risk-based balanced legislators, capital our by

pipe, infrastructure includes us, line of basics the related replacements. service includes proactively to replacing standards meeting lead but For our it damaged older also renewal

the the times believe our for over reduce health years, time cases. but Through recovery general the reliance of to capital This to rate of many mechanisms the forward our we risk said have size regulatory the customers. rate seek right thing we also to allowed lag and and service of lines customers. us earn we on not safety return, and general firmly is can increases mitigate lessen helps for lead do removing As only our to before, test

X investments and consistent next pattern which test more earnings capital modest the the to the We infrastructure term. recoverable through years, long to growth a bill be use years at and of XX% of key increases unlocking forward is mechanisms for expect least through over annual driving the to

to John and to further over our plans financial it results detail. John? hand cover I'll that, With in

John Griffith

and Cheryl, everyone. you, morning, good Thank

XX, $X.XX the further quarter. Earnings insights were Slide I'll the quarter, share XXXX. to results Turning up provide into versus our same $X.XX some period per financial share per for the in for

looking and As addition at year seeing Virginia completed from chemicals as O&M a result. recently rate rate costs And and achieved Cheryl as well as caused increased to $X.XX share. cases to West last Indiana increased mentioned, we in power employee-related increase outcomes fuel, are costs revenues production per in and increased we have O&M,

from to nonoperating Short-term share Susan note $X.XX both share, we June share Long-term in convertible we net $X financing of the HOS. the as we on senior had share, expected a of items billion primarily billion year-over-year. the seller our on February the of as net March. quarter. long-term issued $X.X from per the with $X.XX investment last related along increased held consists during financing $X.XX interest provided and the $X.XX dilution reserves $X.XX amendment earned unfavorable costs equity include interest onetime sale per the increased of depreciation billion Next, mentioned, financing benefit of and long-term per in last per costs cash we $X.X the Other issued issued support note growth. February related finally, And of XXXX income interest additional to note of of

able quarterly, of additional interest strategy the break We income. this our to be Water will this continue American track core from will so regulated our growth investors ongoing without to out

XX, we in to Slide the serve. This will Granite that see customers Illinois we in you'll help the City provide Plant closed on acquisition first Granite can the Treatment successfully Wastewater quarter. On high-quality service already ensure City, we acquisition

customers end. up and this over to opportunities by broad-based customer footprint are over Butler over quarter acquisitions million $XXX under includes the which country. We in Public in Wastewater Pennsylvania. Many Of in signed State XX,XXX XX,XXX our growth be Area mirrors to contributing or progress acquisition Commission. been set already as through have for with the customers across represented Sewer BASA This of continue agreement in nearly connections by states strong agreements, pipeline we have the the Utility Authority, total, XX,XXX the XX,XXX System approved of the

BASA and fair completed closed We XXXX. acquisition customers. week continue also we which second our under Charles, and marked value close last Virginia's in to in forward This Cape We the wastewater to Charles water near Cape new law look includes expect systems to future. Virginia, just in serving market the enacted the

the As lay related is slide, environment undergoing in as we ultimately positive. necessary we've before discussed and and this which on we Pennsylvania acquisitions is think out change, to

the value and is XX, principles law, Pennsylvania current have We will place market more original clear, of remain are very confident since that pending infrastructure. in much to the usual, likely the still consolidation fair will good Act continue in so core support in needed confident meantime, address our but to than are acquisition Pennsylvania In closing underinvestment the be of we pipeline. take transactions time to in

the to upgrading continuing by acquisition Pennsylvania for regulated in communities and reliable We wastewater are the invest opportunities and service. in deserve and safe for water consolidation driven of who all system need benefit

and X.XX%. XX-year for debt of was Slide X.XX% our summarizes $XXX in The notes long-term notes at $X.X completed successful and billion offering financing XX million of February. $XXX included at million XX-year

we challenging, outstanding will main interest which These had quarter financing our interest fronts were a proceeds fund Our growth the treasury used the a end. and at senior of zero team paper are to environment. executing job amidst in for position the year challenge. with in did commercial challenging on maturing rate a balance our note we Though number businesses' dealing on proactively a a off and plan environment strength pay a rate very higher current of nice is objective regulated of

and holding and of the remain and at issuing the debt risk strategy to we a shareholders. company our and us take Our debt proactive to capital pricing low of level our of of in advantage will customers cost scale benefit achieving managing allows issuances,

strong rating affirmed stable outlook In and is A followed of in which debt S&P March, our a us outlook Moody's ratio, noted our to of And FFO improved our and credit for single XX condition. finally, investment-grade and financial solid affirmation its continued summary Slide January. rating

our FFO to continue confident current ratings. ratio are We support credit will debt to our

is long-term XX%. is ratio on XX our our Our hand as cash target $XXX within of than total XX%, debt-to-capital of March which of less of million net comfortably

should you've familiar. closing, very today In what heard sound

leadership includes business and is to proudly these separate and our continue XX military by utilities. highly rewarded efforts from outstanding on industry-leading all execution and We EPS We by will Military investors. ESG valued aspects our dividend focus be in believe serve the at growth of level. Our execution believe every other our the us strategy to Services our And footprint. Group our installations and

With that, back over questions and turn have. you it to operator may I'll our take any

Operator

from first Sunderland Instructions] Richard today [Operator comes JPMorgan. The question with

Richard Sunderland

me? hear you Can

M. Hardwick

can. Yes, we

Richard Sunderland

Great.

the Pennsylvania to I start on want front. First,

then case, And the path close the just X.XX if value With about that on an rate willingness you cap the curious sell to Pennsylvania, forward still all? settlement see or is out? to fair separately, if path market do the and litigating at limiting option revisions, is

M. Hardwick

Yes. Good questions, Rich.

on And some process. is rate first case, would then think, at think summer. probably next are the in the as the probably we'll where by in expect the outlined, I I activity say several and wrap up we the I'd Commission probably say unlikely just settlement here would we I weeks, case in stage. that this Cheryl, later

So again, case. with this the at we're I that we pleased point. are settle process expect And to related to don't where in

we'll activities. on, made. market there, going to changes any watch get On potential those And fair involved obviously, in that value, may and lots around discussions obviously we're continue

may have wait just in what think on and in selling, some think those impact I of terms see. community's of changes I it's interest

on the and ability of our for them. do many to the our focus to that. I communities, is solution quite think And help, communities so these I we're and continue with coming always right help we'll think need these confident in up

in legislators and work certainly to by respect. framework provided that we'll with this whatever regulators us So is

Richard Sunderland

these we thinking then or the view how around the new Got under separately, anything liability classifications designations, you latest Slide that should be litigation you new about these given around circular there. curious X, it. referenced? the And front, litigation Appreciate on on risk protections commentary also the the commentary

M. Hardwick

here certainly Cheryl And too. in weigh Yes. can

view to also here we'll our get resolution be to rules. to already. ability confident be continue a designation. doing CERCLA jurisdictions our here in to in our it been some our think many is with plan time proactive just we're I of for But trying to in the We've execute compliant

So huge and be this our you anything in to want plans confident a we're Cheryl, add? don't to risk us. for expect quite

Cheryl Norton

legislative language continue we're we'll with lots that and and not a I the front Yes, the of their We've get is protected but really so that had add on down will CERCLA be that, hard from continue comfortable those are that for working rules, conversations EPA those to this, conversations by solution would all that just really path. we intent around impacted us get until we with. we're to fixed to

Operator

The comes with Angie Seaport. from next Storozynski question

Agnieszka Storozynski

in I'm Pennsylvania cases, to any it in wondering that filings to capital that seeing seen often other how how about strategy we've understand if guys by a mean but Again, especially a of seem think issues Pennsylvania. that the of mentioned I going on often change -- smoothly, like just you these level Pennsylvania. of do case. don't a there's ever investments, are impact be cases, I these back but want go thoughts still the of around are rate rate file to the itself I if you mean number the file about I I in intervenors, in commission ROE? the raised comments you there allowed any many you're sensitivity rate just of it, cases there number rate

M. Hardwick

of we're that it's the State we a in Pennsylvania. how there the question. of regulatory in our jurisdictions remain Pennsylvania the and Yes, as that process State in And tremendous that very in the of in doing There's we of plans, just need the them in. both work confident execute terms supports many is Angie, we again, good operate

to investment on is continue focus work. infrastructure need do for around our the So really and improvement that we'll

will Pennsylvania the spent to standards it's all we is and is over the necessary infrastructure renewal appropriate in to spent that. replacement and work rate done can and water example Pennsylvania and base think consistently be $X up bring the great on that over case, billion all systems State I growth. focused to have or case these safe service. that of $X so in We provide billion on of a focused It reliable

very the pace to ability there this remain spend. bit we're of So may and And course, these different with you look in observation cases, our of and by the it's our the not it again, line I of pace. And our which around regulatory -- competitor we're again, not but other a think is be Pennsylvania. navigate the terms really at confident of much tied of the state, really is, spend, we of level some plan directly We've the speed filing than state increased case, in the arena. really just our than driven need. water We ahead by peers much when in the time nearest in to by

improve I again, that the we're service the to it's driven so in unusual. work investment of think And of all doing State the and quality need And the Pennsylvania. by don't for that it's

Agnieszka Storozynski

Okay. just rate then is I mentioned of the thought in other happened case. that, that the point, is a past. one in that's And inclusion being acquisition pending which

that wondering to if to little And that I'm is happening being bit has a the do this I'm a anything are that this So Act is with point XX. raised. surprised changes

could approved in being for again, going acquisitions. to referenced these expect raised how that take that But be some guys in those assuming rate I'm get questions in deals pending just you regulatory response And rates? approvals many to or do it reflected wondering, to longer I'm actually of is case. this for You these forward, that,

M. Hardwick

Yes.

during case this a we be rate of case, we getting that a acquisitions to into sort in to is close changes potential bit. The tied I it's around probably of in that fair included to bit I do legislative over this time. fair spill analysis market period clear, assumption landscape say all value, think the And of a have expected together. this approved the think, and

and to findings obviously, sorts those the take as of that, their case, which expect so we And through to do. the consideration got the into them fully acquisitions would in they've status commission

we think really I on a expect be rate future in cases. wouldn't acquisitions go-forward to change we how in any there consider basis,

Operator

The Gregg comes with Orrill from next UBS. question

Gregg Orrill

in discussions these question a general many just but with of center around so and have and before, growth of are has covered how More your might any that your just on days, the sort on data that, of this presence constraints that business? impact impacts

M. Hardwick

it's you preliminary to a Cheryl, Yes, good have large talk about these any we of potential about want thoughts data question. water usage some in moves. center

Cheryl Norton

haven't Yes, the in the big to amount uptake a are customers moves asking of related at our center water Gregg, we seen for that all. data

So our that's peers. us thinking electric utility minimal impact for we're unlike a

Operator

comes Gandhi from [Operator Instructions] question next The Research. with Wolfe Aditya

Aditya Gandhi

you me? hear Can

M. Hardwick

We can.

Aditya Gandhi

on taking explain PFAS color steps on you support as to that just sort there? legislation attached could of also you're relates And related give it's milestones aisle for bills? secure both on you're And us Just if whether for, what of then advocating it legislation. should there's some sort sides to any to you be the other could watching of we the

M. Hardwick

want to that? do Yes. Sure. Cheryl, take you

Cheryl Norton

Yes, sure.

the on been Act. that has both side the there legislation So Water Liability it's Systems Senate filed the PFAS and House

sides you them of to educate for the also the real some forward. committee, conversations and us with watch Senate, the our so issues a the are We've help On the Senate push a on out number, on side, don't I to to some floor aisle protect legislators things and in of can the on getting forward all both think hopeful connect the continue passive that that industries And we -- great really hard the Hill hand. and act with move will along trying key at so and this house this time I'm still we just as and would receiver House XXXX like this the vote. have had it's really see other I would work but both getting

things so continue as in forward And there. and unfold update these that calls push we'll you to

M. Hardwick

nothing right? defined. stand-alone, There's else is it Cheryl, And

Cheryl Norton

Yes. It's liability. to to to receivers else or anything try users not protect tied except this passive from passive

Aditya Gandhi

X Right. That's which not? there by helpful. follow-up to going this just by thing pass And expecting either Is should when to particular legislation by whether when -- or this or you're know maybe timeline is we a pass there.

Cheryl Norton

Yes.

the couple I timeline. much would really to be completed all think process of is it's The it anticipate take impossible challenging could political will months, at longer. We by but to next love times. say the it

we and got we'll timeline continue for as but support, on as good no So push think there's just to we it we've fast can, it.

M. Hardwick

bit particular angle some it do been published. rule the helps We've that rules this for even on We think we final have now the time out. working quite probably before a final was

not So think the If address not reasons of their removed of was eliminates an of excuse now that up. I take that one to that's this sort to didn't waiting legislators from final issue is here, that want list to issue, to they rule and the were this why was, move. reason see been what final sort rule

continued helps, that we'll see and hopefully, movement So here.

Cheryl Norton

be want And that said to discretion. EPA Yes. the able they in addition, to use

substances by discretionary some to hazardous utilities. it wastewater is compounds intend apply as not did flexibility this that of and because would part water they for these So designating them

protection we use to have a planning discretion, they're to So but much think this legislation. it's tighter

addition we'll working So pursue EPA. to continue to that in with

Operator

This concludes today's call our our question-and-answer today. That for attending session. concludes you Thank conference presentation.

disconnect. now may You

American Water Works (AWK) 2 May 242024 Q1 Earnings call transcript