Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Atmos Energy Corporation Fiscal 2025 First Quarter 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 would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Dan Mazir, Vice President, Investor Relations and Treasurer. Please go ahead.

Thank you, Regina. Good morning, everyone, and thank you for joining us. 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 our 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 27 and are more fully described in our SEC filings. I will now turn the call over to Kevin.

Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy. Let's begin today's call by thanking all 5,300 Atmos Energy employees for their focus and dedication to safely serving our customers during very challenging weather conditions. And thank you for all that you do every day for our customers and our community. You are truly the heart and soul of Atmos Energy. Yesterday, we reported first quarter net income of $352 million or $2.23 per diluted share. And our first fiscal quarter capital spending was $891 million to support continued system modernization and growth across our service territory. Customer growth continued to be solid. As for the 12 months into December 31st, 2024, we added over 59,000 new customers with over 46,000 of those located here in Texas. The Texas Workforce Commission reported in January that the seasonally adjusted number of employees reached a new record high at over 14.3 million. Texas once again added jobs at a faster rate than a nation over the last 12 months. adding nearly 284,000 jobs in calendar 2024, representing a 2% annual growth rate. Commercial customer growth remains solid as well, with nearly 1,100 commercial customers connecting to the system during the first quarter. And we added 11 new industrial customers, which when fully operational, we anticipate utilizing 2.3 BCF of gas annually. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development in fueling the energy demand across our service territory. In APT, we completed several projects that will enhance the safety, reliability, versatility, and supply diversification of our system and support the continued growth we see in the local distribution companies behind the APT system. The final phase of our 36-inch line S2 project was placed into service in December 2024, and we are now flowing additional supply from the Haynesville and Cotton Valley Shell place to the east side of the growing Dallas-Fort Worth metroplex. APT's Bethel to grow spec project has started. This project will install approximately 55 miles of 36-inch pipe from our Bethel storage facility to our gross bed compressor station, which will provide additional pipeline capacity to transport gas from our Bethel storage facility to the growing DFW Metroplex and the Interstate 35 corridor. To enhance supply reliability and system versatility, APT completed two interconnect projects during the quarter one on our line s2 near carthage and the second near our growing service territory outside austin our customer support associates and service technicians satisfaction ratings remain high for the quarter at 98 and our customer advocacy team and customer support agents continue their outreach efforts to energy assistance agencies and customers during the first quarter helping over 16,000 customers receive $4 million in funding assistance. Our employees' focus on customer service and process improvement was recognized in December when, for the third consecutive year, J.D. Power ranked Atmos Energy number one in customer satisfaction among mid-sized gas utilities in the Midwest. Atmos Energy is well-positioned to continue safely delivering reliable and efficient natural gas to homes, businesses, and industry to fuel our energy needs now and in the future. I'll now turn the call over to Chris for his update.

Thank you, Kevin, and good morning, everyone. As Kevin mentioned, our Fiscal 25 first quarter diluted earnings per share was $2.23, which represents a 7.2% increase over the prior year quarter. Consolidated operating income increased 15% to $459 million in the first quarter. This performance is driven by several factors. rate increases in both of our operating segments told 69 million dollars residential commercial customer growth combined with higher industrial load increased operating income by an additional 10 APT through system revenues increased by 8 million dollars given by both an increase in fruit these market conditions are largely driven by capacity constraints experienced primarily in the first due to maintenance and some unplanned attitudes since that time spreads have returned to more normal historical norms but partially offsetting these increases with a $41 million increase in consolidated O&M, driven by several factors. Bad debt expense increased $15 million. As a reminder, we recognize a $14 million non-recurring reduction in bad debt expense resulting from a regulatory change in how we recover our bad debt expenses. Employee-related costs increased approximately $11 million, primarily due to increased headcount to support company growth and higher overtime and standby costs driven by increased service work. We also experienced an $8 million increase in compliance and safety related spending associated with increased leak survey work within our distribution segment and time of the in-line inspection work in our pipeline storage and other segments. Finally, we experienced a $5 million increase in APT's system safety and integrity expense, which is offset by a corresponding increase in revenue as a result of APT's new system safety and integrity mechanism. Therefore, this increase had no impact to operating income. We are off to a good start from a regulatory perspective. Since the beginning of the fiscal year, we have implemented $152 million in annualized operating income increases in our distribution segment. Of this amount, $117 million relates to the implementation of our two annual rate revenue mechanisms in Texas, and $28 million relates to the implementation of our two annual filings. Currently, we have seven filings in progress seeking approximately $126 million in annualized operating income increases. Included in this filed-for amount is approximately $90 million in Texas from four filings. The first is a $40 million system-wide general rate case in our West Texas distributions that we filed last fall. As a reminder, this is a required filing that affects all of our customers in West Texas based on the settlement we reached in 2020. Additionally, we are required to refresh our rates following five years of grit filings for portions of our West Texas Division. During the first fiscal quarter, we filed two new cases in our mid-tax division, seeking $20 million, as the five-year grit filing cycle had ended for these jurisdictions. And in January, we filed our annual filing mechanism with the City of Dallas, seeking a $30 million increase in annualized operating income. Finally, we have a general rate case in Congress in Kentucky, seeking approximately $34 million. These filings are proceeding as planned, and we anticipate completing all of them by late spring of 2025. We plan to make additional filings this fiscal year seeking approximately $300 million in annualized operating income increase. During the quarter, we completed over $1 billion in long-term debt and equity financing, highlighted by the $650 million long-term debt financing we completed in October 2024. Additionally, we settled $380 million in equity capitalization as of December 31st as 60 percent and we did not have any short-term debt outstanding we also had 5.2 billion dollars in available liquidity this includes approximately 1.5 billion dollars in net proceeds available under existing forward sales agreements which is expected to satisfy the remainder of our anticipated fiscal 25 equity needs and almost all of our anticipated equity needs our first quarter results have positioned us as well to achieve the fiscal 25 price per share and in the range of seven dollars and 5 cents, and we would remain on track to achieve our capital spending plan of $3.7 billion. Thank you for your time this morning. I will now open up the call for questions.

At this time, I'd like to remind everyone, in order to ask a question, simply press star, followed by the number one on your telephone keypad. We'll take our first question from the line of Julian DeMullen-Smith with Jeffries. Please go ahead.

Hi, guys. Good morning. You've got James Ward here on for Julian. How is everyone? good morning thank you good to hear from you terrific um we uh we're looking for a little bit more color pardon me uh i'm a bit under the weather so uh hopefully uh i'm still uh clear enough to hear but um essentially what we're looking for is uh a bit more color on so the higher capex plan announced last last quarter looking at rate lags earned roe trajectory moving forward it's a little more strategic a little bit more high level just looking to get some incremental color as we sort of build in some of those uh you know the potential of what could be into uh into our models the art of the possible so to speak as our leader here likes to say

yeah let's start with the first part of your question there around the the capital plan for this year. As we said at our last quarterly call that reflects the growth across our system, our system modernization strategy, supporting our pipeline replacement programs, continue to be out in front of the growth that we just talked about on this call as well. We also heard some of the interconnects on this call that APT is putting into place, as well as some of the storage enhancements that we have going out there. So it's a continuation of what we had the last several years, more of a roll forward, if you will, as we continue to identify projects and growth areas across the system or areas that need additional system modernization. So a continuation of the same strategy.

Gotcha. Gotcha. Just wanted to clarify there. That's very helpful. I think you kind of covered most of what we'd actually set here as questions and prepared remarks. So we really appreciate you guys giving that color. Anything Anything else you could speak to just on the customer growth target? I know you addressed it initially, but just anything more color on sort of large scale industrial generation projects and so on. That would be our follow-on and we'll hop back in the queue.

Okay. As we said on this call here, we continue to see good growth across all sectors, residential, commercial, industrial. On the industrial side, 11 new coming on this quarter alone with about 2 to 2.5 BCF of anticipated load there. We continue to have prospects, but, again, we're not going to get into the depth of the prospects until we have actual customers sign agreements with the company. We know for sure that they're going to be a customer. But, again, the economy, feedback from builders, developers, commercial developers as well continues to be strong across the entire service territory. So, again, it's a continuation of what we've seen the last several years and continue to hear from those folks that things are looking positive across our service territory.

Thank you very much.

Our next question comes from the line of Richard Sunderland with J.P. Morgan. Please go ahead.

Good morning. Thank you for the time today.

Good morning.

Within that $1.5 billion under the equity forward for 2025 and most of the 26, how much equity should we be modeling for 2025 specifically, and should we assume that ATM is ratable?

So, we've traditionally talked about, again, equity long-term debt being issued in a balanced fashion throughout the fiscal year. So we have traditionally run in the 600 to 800 million dollar range. I think that's a good range to plan on for fiscal 2025. In terms of drawing it down, we talked about drawing down the 380 million in the first quarter. The remainder of the fiscal year will just depend on our cash flow needs and just where we see our balance sheet on any given point in time during the year. So So, we'll try to do it, you know, around those needs. It could be rateable. It could be a little bit more quarter Pacific, but it just depends on how the year goes.

Okay, got it. So, the 600 to 800 is helpful for 25, but then, you know, basically, as we roll forward through the years in your plans, you'll be expecting that number to tick up annually. Is that the right way to think about it?

Yeah, that's correct. You know, as the capital continues to grow, kind of going back to the other question, you know, we've got 24 billion. Again, in the five-year plan, we're about $3.7 billion this year. That will continue to grow somewhat ravely over the next few years. And the long-term financing will grow commensurately with that, again, in a balanced fashion, using long-term debt equity, with equity being through the ATM. Got it.

Very clear. And then for APT spread benefit on the quarter, you're recognizing it's early in the year, but does this move you higher within the guidance range? Any other thoughts on sort of that benefit relative to guidance assumptions?

Yeah, as we had talked about, we saw that spread widen early in the quarter and then come back to more normal, what we've traditionally seen this time of year. And we'll just have to keep an eye on it as we move forward. It's going to depend on, again, what weather shows up the remainder of this heating season, what does the cooling load look like this summer, the power gen load, those sort of So again, I think we're just going to have to watch the market and see what it does as we head into the rest of the fiscal year right now and not try and predict or get too far out in front of that.

Thank you. Thank you.

Our next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.

Oh, hey, thanks. Good morning. Good morning. Let me see. You had a question on the power plant side of things. We've been hearing more about micro grids and new gas-fired power plants looking for long-term contracts for gas supply.

So I guess I was wondering, are any of those 11 new industrial customers, power plants, and then maybe more broadly, are you seeing more opportunities on the customer side of things from power generation? uh let's let's take the uh middle part of your your question there first no these 11 are not new power facilities they're a variety of industries from distilling to manufacturing the battery plants to automotive again i think that's the strength of our service territories we've got exceptional diversification of low from residential commercial which we see a lot of here and Texas to industrial through Kentucky, Tennessee, Virginia, Mississippi, a good balance across the system of large load and diversified load. As well, some of those industrial loads are more medical in nature as well, supporting the medical industry. As we've seen with those larger industrial loads, we continue to have inquiries across all eight states. But again, don't want get into specifics or speculate at this point until we actually have customers that have signed a contract and are ready to make announcements at this point. Other than that, we'll continue to work with Economic Development, Chambers of Commerce, customers that want to talk about, think about, or seek opportunities for natural gas supply in various locations, and we'll continue to answer their questions and wait until we get to an actual signature on a contract.

Okay, understood. Yeah, thanks for that color. That makes sense. And then maybe on the rate cases in Texas, I guess Mid-Tex and West Texas, just wondering if there's any anticipated areas of focus in terms of challenges or any issues that you think with getting the grip re-upped now that you're getting into the next iteration of those longer-term programs there.

Yeah, David, I would characterize these red cases, again, coming to the end of the five-year grid cycle or being stipulated by a prior settlement, just really focused on the, I'm going to call it the blocking and tackling of the regulatory mechanisms of refresh the R. We cap structure, you know, we've got a couple of items where we're asking for, you know, various riders being similar to SSI or what other utilities in the state have previously received. So, yeah, these are not maybe potentially new to Atmos, but certainly not new in terms of concepts that have been discussed within the regulatory framework. Again, our team is doing a great job in working through the regulatory process. And as I mentioned, we're hopeful to have all these wrapped up by the end.

Okay, got it. Good to hear. Thanks so much. I appreciate it. Thank you. Thank you.

Our next question comes from the line of Basie with Barclays. Please go ahead.

Hi, good morning team. Thanks for taking my question and congrats on another successful quarter. I just really have one follow-up regarding balance sheet to support both capital plan and the credit metrics.

Could you comment on the Moody's rating outlook since it's been a year, almost a year that we had the last credit update and with higher equity issuance just in the first quarter this year you reported and the colors you just provided on equity plan on an annualized basis how should we think about ff of the deck a metric going forward thanks sure yeah this is chris uh so um you know as you mentioned uh moody's to put us on the negative outlook uh back in uh april of last year they typically take about 12 months uh to refresh their outlook and their their whole management process we've been in communication with them on a regular basis uh since april uh provided them you know obviously updates that's sort of what we provided to the investing community around the new five-year plan, taking a look at the FFO to depth. And we'll see where they come out probably by the end of March, early part of April, based upon the timing. But again, as we think about our financing strategy, we really like the equity capitalization where it is today. It's benefited us many, many times over the last five years through pandemics, you know, economic volatility, winter storm Uri and the like, and we feel like that's a very comfortable position to be in. And so, we'll see where Moody's comes out on that, but we have factored in various alternatives within our planning cycle depending on how the, you know, how the rating checks out. But ultimately, you know, if it's a one-notch downgrade, perhaps, it probably should not have much of an impact on our financing costs at all.

Perfect. Thanks for the colors. Appreciate it.

Again, to ask a question, press star one on your telephone keypad, and our next question will come from the line of Ryan Levine with Citi. Please go ahead.

Good morning.

I guess, given all the headlines at federal level around tariffs and wanted to uh to hear your comments around impact of chinese and potentially uh mexican tariffs around onm and capex i assume it's small but any color you could share yeah right we continue to watch that i'll start with saying uh we're we're very pleased to see the support both with some of the executive orders and through press conferences for the oil and natural gas industry what we do but the men and women of the oil and natural gas industry do every day to fuel this energy demand and provide for national security very proud of what our folks continue to do it's good to see and hear that recognition we continue to watch as executive orders come out. We continue to communicate with our key stakeholders at the federal level as well. On the tariff piece of it, to that part of your question, just saw recently where those were put on pause. So we're going to continue to work with our vendors and suppliers, manufacturers, to see which of any components that we currently have sourced are either fully made overseas or all made here or parts brought here. and assembled here in the United States. So right now, I would say they'd probably be on the lower end, if at all, but we're continuing to work with our vendors and suppliers to put a handle on that and anticipate what that may look like as we go forward.

If there were to be an upward pressure on costs, can you remind us around the regulatory mechanisms across your service territory to allow for recovery on the capital side?

Yeah, again, we have annual mechanisms in just about every jurisdiction. The only place we'll have traditional cases are the ones Chris mentioned today, like Kentucky, like a Virginia or Kansas. Those would be the ones where we'd go in to recover any of those costs should they show But at this point, again, continue to work and identify with our suppliers and vendors if there is anything that would show itself as we continue to move.

Thanks. And then on the similar vein in terms of federal announcements around Stargate and some potential developments in Aveline, the extent there's added growth in generation and gas consumption in that region, would that have any impact on your business?

Well, again, if a customer was to sign a contract and come on to our system, it'd more than likely be on the ATT system there. And as you know, we have that 75-25% sharing mechanism with the customers behind APT system, and that would be on available capacity on an interoperable basis. So we would share of any upside that would come through from that customer being on with those customers at a 75% rate.

Thank you.

And that will conclude our question and answer session. I will now hand the call back over to Dan Mazzeer for any closing remarks.

We appreciate your interest in Atmos Energy and thank you again for joining us this morning. The recording of this call will be available for replay on our website through March 31st. Have a great day.

Everyone, that will conclude today's call. Thank you all for joining. You may now disconnect.