Good day and welcome to the Spire Fiscal 2024 Second Quarter Earnings Call. Please note this event is being recorded. I would now like to turn the conference over to Megan McPhail, Managing Director of Investor Relations. Please go ahead.

Good morning and welcome to Spire's Fiscal 2024 Second Quarter Earnings Call. We issued an earnings news release this morning. And you may access it on our website at spireenergy.com, under Newsroom. There's a slide presentation that accompanies our webcast. You may download it either from the webcast site or from our website, under Investors and then Events & Presentations. Before we begin, let me quickly cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward-looking statements are based upon reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing net economic earnings and contribution margin, which are both non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. On the call today is Steve Lindsey, President and CEO; Scott Doyle, Executive Vice President and COO; and Steve Rasche, Executive Vice President and CFO. Also in the room today is Adam Woodard, Vice President and Treasurer. With that, I will turn the call over to Steve Lindsey. Steve?

Thanks, Megan. And good morning, everyone. Thank you for joining us today for a review of our second quarter performance and an update on recent developments and outlook. Let's start with our quarterly results. This morning, we reported fiscal second quarter net economic earnings of $3.45 per share compared to NEE of $3.70 per share a year ago. The year-over-year decrease was driven by a few key items, including lower usage in Missouri due to significantly warmer-than-normal weather and higher interest expense. Scott and Steve will discuss our results in more detail in a moment. Our results reflect our dedication and commitment to serve our customers and communities safe and reliable energy. And we continue to execute on our strategy to grow our businesses, invest in infrastructure and drive continuous improvement to deliver value over the long term. Having a diverse portfolio of natural gas businesses enhances our ability to provide value. Further, consistent with our Board of Directors' focus on strong oversight and governance, last month, we announced the election of Sheri Cook as the newest addition to our Board. Her extensive business experience and leadership in human resources, along with her background in economics and finance, will be vital as we execute our strategy. Her presence and involvement throughout our Alabama service territory further ensures we remain connected to the communities we serve. And I look forward to working closely with her in the future. Before I wrap up, I would like to highlight the important role that natural gas plays and will continue to play as part of America's sustainable energy future. Approximately 200 million Americans and businesses use natural gas because it is affordable, reliable and safe. In fact, according to the American Gas Association, households that use natural gas for heating, cooking and clothes drying save over $1,100 on average per year compared to homes using electricity. Together, natural gas utilities across the country, including Spire, continue to invest billions of dollars of capital each year to enhance the natural gas distribution and transmission systems. As an industry, we can be proud of the important work we've done in modernizing infrastructure and deploying technology that have led to increased safety, efficiency and reliability for natural gas customers. To sum up. We are well positioned for success in the second half of fiscal year '24 and over the long term as we execute on our robust capital investment plan to support the growth and performance of our utilities and our gas-related businesses. Spire is a strong and well-positioned company with a proven growth strategy. We have confidence in that strategy and in the ability of our experienced management team and employees to successfully lead us into the future. With that, I'll now turn the call over to you, Scott.

Thank you, Steve. And good morning, everyone. I'd like to begin by thanking our employees for their hard work and continued focus on maintaining safe and reliable natural gas service to our customers through the winter heating season. I am extremely grateful and proud to be a part of the Spire team. Turning now to an update on the Gas Utility segment. Our commitment to strong operations and continued modernization of our system was visible when we were well positioned to deliver safe, reliable and affordable natural gas energy for our customers and communities who depend on this resource as a critical energy need. We remained focused on driving efficiencies throughout the organization, including streamlining systems and processes and maintaining an unwavering commitment to operational excellence. On the regulatory front, in Missouri we were pleased with the constructive outcome in our recent filing for an updated ISRS, our semiannual capital recovery infrastructure rider. Last week, the Missouri Public Service Commission approved $16.8 million in new revenues for recovery of system upgrade investments made September 2023 through February 2024, bringing our annualized ISRS revenue to $36.9 million. Rates are expected to be effective later this month. In Alabama, the rates that were effective January 1 were the result of working alongside the public service commission staff during our annual rate-setting process. As you may recall, our rates in Alabama are set using a forecasted budget. Our second quarter results reflect the benefits of these constructive regulatory mechanisms we have in each state, as earnings benefited from new rates in Alabama and previously approved Missouri ISRS revenues. During the quarter, we experienced warm temperatures across all of our service territories; Alabama temperatures were approximately 10% warmer than normal. I'm glad to say, as a result of our efforts with the Alabama PSC to incorporate more accurate customer usage patterns into rates, the weather normalization mechanism in Alabama continues to be effective. However, in our Missouri service territory, severe fluctuations in temperatures throughout the quarter resulted in the weather normalization adjustment rider or WNAR being less effective than last year. The lost weather-related margins in our residential customer class during the quarter were only partially mitigated. Overall, weather for the quarter was 15% warmer than normal. Combined, the months of February and March were nearly 32% warmer than normal. During these months, we saw periods of extremely warm days followed by periods of more normal temperatures. These significant fluctuations in weather can cause usage to be lower than what the degree days would imply. We look forward to working with the Missouri PSC staff to evaluate how to better recover lost weather-related margin in the future. As a reminder: The WNAR does not apply to the less weather-sensitive commercial, industrial and transportation customer classes. Slides 15 and 16 in our appendix include further information on weather and customer usage for the quarter and year-to-date. During the quarter, interest costs increased. And O&M costs were also slightly higher than last year's second quarter, increasing $2.3 million or approximately 2%. However, year-to-date, our O&M expenses remain below last year. Let me assure you we are laser focused on navigating these headwinds. On the cost side, we continue to control our O&M expenses. We believe that, going forward, controlling O&M increases will enable our utility financial performance to further improve fiscal 2024. We are working to improve efficiencies and reduce costs across the organization. We are targeting elements of our cost structure that can be reduced based on enhancements in technology that have occurred or will occur in the coming years. In addition, we are working to ensure our shared services are efficiently aligned and supportive of our capital investment programs. Moving to Slide 5 and an update on our capital investment plan. We continued to invest significant amounts of capital focused on modernizing our gas utilities. Fiscal year-to-date, our CapEx totaled $409 million, which was primarily at our gas utilities. Year-over-year, our Gas Utility CapEx increased 7% to $311 million, with an emphasis on upgrading distribution infrastructure and connecting more homes and businesses. We continue to install advanced meters for residential customers across our service territory. Fiscal year-to-date, we have installed over 120,000 advanced meters, bringing the total number of customers benefiting from this technology to 660,000. Investment in our Midstream segment totaled $98 million fiscal year-to-date, largely for the expansion of Spire Storage West. Looking ahead, the expected fiscal year '24 capital investment at the Gas Utility segment remains unchanged. However, we are increasing our total fiscal year '24 capital investment target by $35 million to $800 million in support of our storage expansion project. I will now hand the call over to Steve Rasche to discuss this project in more detail and provide a financial update.

Thanks, Scott. And good morning, everyone. Let's start with our Midstream segment. As you know, we closed the acquisition of MoGas and Omega in January of this year. And we are pleased with both our progress and integration as well as the solid performance of the system this winter. We've also updated our expansion plan at Spire Storage West, supporting our targeted completion in fiscal year '25. Here are a few key points. During the quarter, we completed our open season and re-contracting activities for the capacity that is coming online in fiscal years '24 and '25. Consistent with the higher demand we've been seeing in the Western U.S., we were able to lock in rates well above our initial estimates and for contract terms consistent with the current market of 3 to 5 years. We also increased our total targeted investment by $55 million to $250 million, with $35 million of that investment falling in fiscal year '24. This increase was driven by expanded scope of the project, including enhancing the power supply, line heating and maintenance capabilities; higher drilling costs for the injection and withdrawal wells; and increased construction costs, especially for electrical, equipment and labor, reflecting the high demand across the energy sector and the market overall. Combining these factors, the returns on the project have improved from our original target. To put this in perspective: The total impact of the Spire Storage West expansion and a full year of MoGas is expected to increase our Midstream earnings by $10 million to $12 million in fiscal year '25. Now turning to our results. Earlier today, we reported fiscal second quarter net economic earnings of $197 million, down $2.6 million from last year. Looking at the segments. Our Gas Utility had earnings of $188 million, an increase of $4 million from last year. As Scott just touched on, higher rates and effective weather mitigation in Alabama were offset in large part by lower usage and only partial mitigation in Missouri. Both Gas Marketing and Midstream had very tough comps from the prior year, and as we guided earlier, we did not expect those highly favorable market conditions to recur this year. We did benefit from the cold snap in January, and both segments were well positioned to capture value. For marketing, that value is reflected in the second quarter results. Midstream also captured value, and we anticipate seeing that showing up in the back half of this year. And lastly, lower corporate costs were offset by higher interest expense. On a per share basis, we reported net economic earnings of $3.45 per share compared to $3.70 last year, with most of the decline attributed to the impact of higher share count this year as a result of our forward sale that settled in December and the equity unit conversion in March. Slide 8 provides detail on key variances. Hitting a couple of the highlights: As I just mentioned, Gas Utility margins were higher overall. And the volumetric component, net of weather mitigation, was $10.3 million higher in Alabama and $8.6 million lower in Missouri. Gas Marketing margins, net of fair value adjustments, were lower, as I just touched on. And Midstream was higher as a result of the addition of MoGas and Salt Plains. Looking at operations and maintenance expenses. Gas Utility expenses increased by $2.3 million, as lower operational costs and third-party spend were offset by higher employee-related costs. I would also echo the point that, for the first half of our fiscal year, our utility O&M costs are actually down $900,000 compared to last year. Marketing and Midstream costs moved up consistent with the underlying business drivers. And interest expense was higher by $5 million, driven mostly by higher long-term and short-term interest rates this quarter. Turning to our outlook. We remain confident in our long-term net economic earnings per share growth target of 5% to 7%, starting from the midpoint of our fiscal year '24 guidance range. Our growth is driven by our utility rate base investments, a key component of our 10-year CapEx target of $7.3 billion. Despite the headwinds faced in the first half of the year, we are reaffirming our fiscal year '24 net economic earnings range of $4.25 to $4.45 per share. We are updating our business segment targets to reflect our first half results and expectations for the rest of the year. We are lowering our Gas Utility range by $10 million, as we expect to offset some of the headwinds we discussed earlier by cost management. We've raised the range for Gas Marketing by $5 million on stronger-than-expected earnings in the first half of the year. We've also increased the range for Midstream by $4 million to reflect the pull-through of new storage rates and the value created during the winter. And corporate costs moved up by $2 million to reflect higher interest expense. Moving to Slide 10. Our 3-year financing plan is unchanged from last quarter, and this year's financing needs are now largely complete. On the equity side, we completed both a forward sale settlement and an equity units conversion. And our ATM program placed $12 million in forward settlements this quarter. This leaves very modest equity needs through 2026. And with the $350 million note placement by Spire Inc., our long-term debt needs are also largely satisfied. And the remaining long-term debt financing in our plan is largely tied to future refinancing activity. I would also note that we funded a short-term $200 million loan in January, and this loan will be fully repaid in early May. And we continue to target FFO-to-debt at 15% to 16% on a consolidated basis. So in summary. We are well positioned to continue growing and delivering strong overall performance for our customers, communities and investors. Thank you for your continued interest in Spire. And we look forward to seeing many of you at the AGA Financial Forum later this month. Operator, we're now ready to take questions.

Please note this event is being recorded. The first question comes from Richard Sunderland with JPMorgan.

Can you hear me? Great. A couple of ones on the weather, to start. I guess, looking across the business and given these weather headwinds, where are you trending in the guidance range of the segment revisions? I think, on my thumb math, it's maybe a 1% decline old to new, so is it fair that that's putting you in the bottom half of the range? And then I'm also curious kind of where FFO-to-debt stands currently given this weather headwind as well.

We can.

Yes. Rich, let me start on that. Yes, we have a range. And I can't argue with the logic that you put forward. If you look at the individual business units, it would show a little bit of degradation in total. And it's weather in the utility and a little bit of interest rates at the corporate. What I would say is that, as you think about this half year and then play it forward as we think about next year, the beauty of the weather headwinds, if there's any bright side to that cloud we've dealt with, is that we would expect that to normalize and mitigation to return next year, which is essentially what we had in Missouri last year. If you look at the material, and we did, in the appendix to the presentation, provide a lot more granular information on the weather, it would point to a rebound of 18%. So if you think about how to model the rest of this year, but then what does that look like as you rebase this year going forward, we're very confident that we're still on track. Adam?

Yes, Rich. And I think that's a good question on FFO-to-debt, connecting that to our weather pull-through. As you know, given the volumes that we count on for cash flow, those lower volumes have negatively impacted that cash flow growth trajectory, so while we still see very steady progress to that target range, we do now expect that to happen after year-end '24. On the bright side, we do see deferred gas costs almost completely recovered here at the end of the quarter and hope to be completely recovered shortly.

Got it, got it. Very helpful color all around. And then I think you unpacked this in the script but did want to revisit in terms of how this weather impact is showing up. You were mentioning extreme fluctuations and that there's a greater usage impact relative to what the degree days are. Is that effectively the difference between your 2Q results now and 1Q? I'm just trying to think about where the degree days were light on both sides but the weather impacting your results is actually really showing up this quarter. If you could help parse kind of 2Q versus 1Q, that would be helpful.

Richard, this is Scott Doyle. Maybe I can help with that a little bit. Start with the response and tie back to the quarter last year. This quarter, we were 2% warmer than the quarter last year. If you look at last year, we had good weather mitigation with the same mechanism in place. When you look at this quarter, really February and March were much warmer than normal, and it was variable weather, so much so that there was no real consistent weather pattern across those two months. What we saw, as we've been analyzing the data, is that customer usage was off significantly during those months and was not correlated to what the HDDs would show for that same time period. On balance, what that tells us is there's some work we need to do relative to that mechanism to get better correlation. That's work we have to do with PSC staff. The timing of that will be rate case, which is the forum in which that takes place, but dialogue can certainly take place in advance of that as well. Look for us to dig more deeply into that with staff as we work to enhance and improve that mechanism.

Understood. And then just one last one, if I could. I know you reiterated the growth outlook here. We've also had a couple of quarters now with some interest rate commentary and rate impacts on results. Just curious what you're assuming now on a forward basis for interest rates given the latest market backdrop and then relative to your plan and outlook here.

Yes, no, Rich, great question. We have continued to take a higher-for-longer tack. The interest rate forecasts are moving as well. I think a lot of the extra interest expense we're seeing is more balance-based rather than rate-based. So it's again going back to the volumetric pull-through. That's probably having more of a stubbornly long impact than our actual interest rate forecasts.

Got it. Well, I'll leave it there.

The next question comes from Shar Pourreza with Guggenheim.

It's Jamieson Ward on for Shar. So Richard had some good questions there that a couple of the ones I had, but I did want to delve a little bit more into the weather. You mentioned a rate case will be the proper avenue to make adjustments to the mechanism and that there's a lack of correlation in Missouri between degree days and the amount of mitigation. Has the cause of that been identified? Is it something that needs to be studied? I'm trying to get a sense of where we're at. Is there a solution in mind and you're just waiting for the next rate case to tack it on? Or does it require more modeling to figure out why they're not connecting the way you would expect them to, and the way they are working properly in other jurisdictions you have? How should we think about the work to be done to get them to match up? And then a follow-up would be timing of when we might see a new mechanism take effect.

Jamieson, Scott Doyle again. Thank you for your question. The simple answer is yes, this will require a little more study and more modeling to see if there's an opportunity to correlate this particular weather pattern. Just recall this weather pattern was unique in that it doesn't follow the norms perhaps within the mechanism. We need to take a deeper dive looking at that alongside the PSC staff as we do that. On timing of the rate case: As a result of us using the ISRS mechanism, we have a must-file date by May of 2026, but expect our rate case to be filed sooner than that as we work to reduce regulatory lag associated with our significant capital investment program that we have underway right now.

Perfect, very clear. Really appreciate the color.

The next question comes from Christopher Jeffrey with Mizuho Securities.

Maybe turning to Midstream and the storage in particular. It looks like the guidance there was raised for the new storage rates like Steve was talking about. Just curious how we should think about is there any more room for expansion, any spare capacity there? And how should we think about the fees expected after the capacity expansion in '25. Are those locked in at the current rates right now?

All right, Chris, let me take a shot at that. You had a number of things there. If I missed something, just ping me. If you think about the Midstream business overall broadly, let's start broad. We're stepping into the new scale that we will operate at as we finish the expansion of Spire Storage West in the back half of this year, in '25 and '26. The reason you should expect to see that step-up over the next 2.5 years is that the physical dynamics of storage are that you bring the storage online, and then as the wells and the cavern season over time, the team gets comfortable with operations and we get a better feel for how we can optimize the use of that cavern capacity over time. This is standard in the space. It takes a couple of years to work through that, so expect the Midstream segment to step up over the next 2.5 years. We've given guidance for this year for the Midstream business and a preview for '25. Will we continue to look for opportunities to optimize? Absolutely. But remember the Midstream business is one where the rates we charge are driven by commodity volatility. The actual monetization of that volatility is often left for our customers, but it supports higher rates. As we mentioned in the prepared remarks, we completed the open season and re-contracting for the capacity that is online and that actually just started injection in April but will come online as we get into the next winter and injection season next spring. We are extremely pleased that the rates we got were well above our estimates. They're in the mid-20s range, which is where that segment of the market is right now. Contract terms are between 3 and 5 years; our contracting falls right in that range, with an average around 4 years. So while some legacy contracts will roll over the next couple of years, we're in a good position to capture fixed storage value and get it under contract. On additional expansion opportunities: it's something the team has considered, but right now we are laser focused on completing integration for MoGas, locking down operations there, ensuring Salt Plains continues to perform well, and completing the expansion of Spire Storage West. Those are our current priorities. Once we've completed those and gotten through the next winter — that's when the rubber meets the road for Spire Storage West — we'll start looking at other opportunities. At this juncture, I wouldn't recommend modeling additional expansion, but we do have a clear path to step growth over the next 2.5 years.

Great. That's super helpful. And then maybe just last one for me, in terms of the reiterated guidance for '24. If I compare that expectation for the second half of the year to last year's second half, it implies a decent amount of improvement. In that context of year-over-year, what are you expecting to be the driver of that trend improvement?

Yes, that's a broad question. Let me focus on the utility and the corporate side because we've been clear on the drivers in Midstream and Marketing. Last year, we had some outsized one-off costs on the corporate side in the last fiscal quarter of last year. We don't expect those to recur, so from a cost perspective, you should expect to see overall O&M lower. As Scott mentioned, we're focused on keeping costs in line and have a history of doing this successfully. Our actual costs in the utility are lower than they were last year, and we'll continue to ensure the right cost structure to meet customers' needs and support growth. Secondly, now that we have largely recovered all of our deferred gas costs — I think we can expect, with April bills and how they flow through, to get the rest of that deferred gas cost recovered. The headwinds on balances and short-term debt should mitigate and may turn into a tailwind. Although we view the market as higher for longer on rates, getting those balances down should create some uplift when you compare this year versus last.

This concludes our question-and-answer session. I would like to turn the conference back over to Megan McPhail for any closing remarks.

Thank you for joining us on the call today. We look forward to talking to you later today and in the coming weeks at AGA. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.