Good day, and welcome to the Essential Utilities Inc.'s Full Year 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian Dingerdissen. Please go ahead, sir.

Thank you, Madison. Good morning, everyone, and thank you for joining us for Essential Utilities' 2021 Full Year Earnings Call. I am Brian Dingerdissen, Head of Investor Relations. If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website at essential.co. The slides we will be referencing and a webcast of this event can also be found there. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risks, uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K and other SEC filings for a description of such risks and uncertainties. During this call, reference may be made to certain non-GAAP financial measures. A reconciliation of these non-GAAP to GAAP financial measures is included at the end of the presentation and also posted in the Investor Relations section of the company's website. For our agenda for today's call, we will start with Chris Franklin, our Chairman and CEO, who will discuss the highlights from 2021 and provide a company update. Next, Dan Schuller, our CFO, will discuss our financial results. Chris will then provide an update on our growth strategy, a summary of our guidance and finally conclude the presentation portion before opening the call for questions. With that, I will turn the call over to Chris Franklin.

Thanks, Brian, and good morning, everyone. I know today is a busy day with a lot of news in the market, so I'm going to get right to it. Let's start with a quick look at our 2021 highlights. We had another strong year and I'm happy to report earnings per share of $1.67 in 2021, which was the midpoint of our 2021 guidance. This represents growth really in line with our 5% to 7% long-term guidance that we've provided. Our water and natural gas segments were both focused on infrastructure improvements. Combined, we replaced over 470 miles of main and invested over $1 billion in infrastructure improvements. In a moment, I'll talk about another example of the importance of this continued investment in infrastructure. Our municipal acquisition strategy remains strong. We announced the closing of two acquisitions last year, adding $36.3 million in rate base. In 2021 alone, we signed asset purchase agreements for six deals totaling $141.5 million in purchase price. We are now working diligently on the closing and integration of plans for the eight pending acquisitions that total over $471 million in purchase price. Our total rate base increased by 7.6% from $8 billion in 2020 to over $8.6 billion in 2021. I'm pleased to inform you that last year, we continued to make significant progress on our ESG initiatives while also receiving strong public recognition for our important work. I will give you more detail on this in the upcoming slides. This slide has dramatic looking. In 2021, there was a national focus on infrastructure. Our industry and our company continue to play a critical role in the renewal of water, wastewater, and natural gas infrastructure. We recognize that it's our responsibility to provide our customers and communities with well-maintained infrastructure that is critical for safety and reliability. You might recall in previous calls, we've talked about some of the operational challenges brought on by external events. If you think about the outages in Texas as a result of winter storm Uri and the flooding of our plant and our facilities from Hurricane Ida in Southeastern Pennsylvania. I was very proud that in each of those instances, our operations teams met each of those challenges and overcame them. Recently, a bridge collapsed in the Pittsburgh area, which was right inside our natural gas service territory. As President Biden visited the site of the collapse, I am really happy to report that our quick response and isolation of the impacted section of the gas main resulted in only minimal disruption to a very small group of our customers. Importantly, there were no injuries associated with the damaged gas main. I continue to be impressed with the professionalism of our team that acted so quickly to ensure public safety while allowing our system to continue serving the rest of our customers. Even though some weather-related issues were out of our control, we continuously work to improve our systems and make them safer, stronger, and more resilient. In 2021, we replaced over 470 miles of gas and water main and anticipate that over the next three years, we're going to replace about 1,400 miles of pipeline. Earlier this month, we reaffirmed our ESG commitments. As of year-end 2021, the company made strong progress in aligning the racial makeup of our workforce with that of our customer base. We ended 2021 with people of color making up 15% of our overall workforce, with a three-year goal to achieve a target of 17%. Last year, nearly 11% of our spending on goods and services was through the use of diverse suppliers with a goal to achieve 15% over the next three years. The company remains on track to make progress toward substantially reducing our Scope 1 and Scope 2 greenhouse gas emissions largely through the extensive gas pipeline replacement program and our renewable energy purchases. We have already achieved an estimated 7% reduction in Scope 1 and Scope 2 emissions from the 2019 baseline, working towards our overall commitment of a reduction of 60% by 2035. We reaffirmed our industry-leading multiyear plan to ensure finished water quality sent to our customers does not exceed 13 parts per trillion of PFOA, PFOS and PFNA compounds across all states served. We were pleased to make the Newsweek and Statista's America's most responsible companies list for 2022, which continues to add credibility to our already strong ESG profile. MSCI upgraded Essential from BBB to A, while Sustainalytics made a major upgrade for us, giving us a score stronger than many of our peers. CDP maintained our B minus grade, even after incorporating our gas utility for the first time. Our ISS scores remain the best overall in our proxy peer group, resulting from our strong focus on ESG. The company's work in ESG is tied to incentive compensation and highlighted in our award-winning ESG microsite. Lastly, we filed an 8-K last week, which amended our corporate bylaws adding a notice requirement for shareholders. Our Board took this action after our annual review of governance policies. This amendment aligns our shareholder notice policy with over 80% of companies in the S&P 500. With that, let me turn it over to Dan to talk about our financial results.

Thanks, Chris, and good morning, everyone. Before we dive into the full year, let's take a few minutes to review the fourth quarter highlights. We had revenues of $535.7 million, up $61.7 million from $474 million last year. Our regulated water segment contributed $243.8 million, and our regulated natural gas segment contributed $280.5 million. The largest contributors to the increase in revenues for the quarter were the recovery of higher purchased gas costs, fourth quarter 2020 rate credits, and additional revenues from customer growth, along with rates, surcharges, and volume from our regulated water segment. O&M increased slightly to $158.6 million, up less than 1% from $157.2 million in the fourth quarter of last year, primarily due to employee-related costs. Fourth quarter net income increased year-over-year by 13.4% from $102.7 million to $116.5 million, while GAAP EPS was up from $0.40 to $0.44. Adjusted income was $116.5 million compared to $116.2 million for the same period of 2020, and adjusted income per share decreased from $0.46 to $0.44. Next, let's discuss the full year financial highlights. As Chris emphasized earlier, 2021 was another strong year for Essential. I'll start by reminding everyone that the prior year figures include operating results from our Natural Gas segment subsequent to the closing date of the Peoples acquisition on March 16, 2020; approximately 9.5 months of gas in 2020 compared to a full 12-months in 2021. We ended the year with nearly $1.88 billion in revenue, up 28.4% from $1.46 billion last year. O&M increased by 4.2% from $528.6 million to $550.6 million. Net income was up 51.5% from $284.8 million to $431.6 million, and GAAP EPS increased to $1.67, which is just above the midpoint of our guidance range of $1.64 to $1.69 for last year. In 2020, adjusted income of $322.1 million and adjusted income per share of $1.27 excluded Peoples-related transaction expenses and transaction-related rate credits. Compared to the adjusted income in 2020, earnings per share in 2021 increased 31.5% to $1.67. In 2021, revenues increased to nearly $1.88 billion on a GAAP basis. The main driver was the additional $315.8 million from the first full quarter of gas revenue in 2021 compared to the partial first quarter in 2020. The recovery of higher purchased gas costs, rates, surcharges, 2020 rate credits, and growth from our regulated water segment provided an additional $115.5 million towards the revenue increase, offset slightly by decreased volumes in both our water and gas segments. Let's review water consumption by customer class on the next slide. Overall water usage in 2021 was neutral when compared to last year, and 2021 consumption was less than 1% higher than 2019 levels. With this return to normalcy, residential consumption has returned to its 2019 level, and commercial consumption has risen to its pre-pandemic level as well. Weather has a direct impact on gas consumption and associated revenue. In 2021, the first quarter ended between the 5- and 10-year heating degree day averages, while the fourth quarter was warmer than normal, resulting in a total of 5,139 heating degree days, similar to the 5,162 heating degree days in 2020. Year-to-date weather through February 15, 2022, was 10.8% colder than normal, favorably compared to the previous winter's 0.9% colder than normal. Thus far in 2022, heating degree days were 9.3% higher than during the same period last year. Next, let's move on to the operations and maintenance waterfall. Operations and maintenance expenses were $550.6 million for the year compared to $528.6 million in 2020. The main driver was the additional $42.9 million from the full first quarter of expenses for the gas business in 2021 compared to the partial first quarter in 2020. Other expenses, employee-related costs growth, and production in our regulated water segment contributed another $23.2 million for the year, offset by $25.4 million related to the Peoples acquisition, an $18 million reduction in COVID-19 costs, and a small amount of nonrecurring expenses from 2020. Now, regarding earnings per share, GAAP EPS for 2020 was $1.67, which was just above the midpoint of our guidance range. Building from there, the regulated natural gas segment added $0.414 compared to the previous year's GAAP EPS. Rates and surcharges added $0.071, while growth in our regulated water segment added another $0.024. These were offset by lower volumes for both our regulated natural gas and regulated water segments, resulting in the GAAP EPS of $1.67 for the year. Lastly, we completed rate cases or surcharges in seven of our eight water states and two of our three natural gas states with a combined total annualized revenue increase of $30.1 million in 2021. So far in 2022, we've completed rate cases or surcharges in four water states with a total annualized revenue increase of $8.2 million, as well as a rate base in one of our natural gas states with annualized incremental revenue of $5.2 million. We currently have base rate cases underway for our regulated water segment subsidiaries in Ohio and Pennsylvania. In our Pennsylvania water rate case, the administrative law judge provided a recommended decision last week on February 18. Our primary objection to this recommended decision is the suggested 8.9% ROE. We simply don't believe the ALJ's stance is in alignment with long-standing precedent decisions on this matter. You'll recall, for data points, American had a black box settlement estimating an ROE of 9.9% in their most recent case in Pennsylvania. The published quarterly DSIC ROE is currently at 9.8%. We expect to file exceptions that will be included in the materials considered by the commissioners while drafting their order. We anticipate this case to be on the May 12 commission agenda, with implementation of new rates in May of 2022. And with that, I'll hand it back over to Chris to discuss the municipal acquisition program.

Thanks, Dan. I appreciate it. Each year, we supplement our base strategy of investing in infrastructure with an acquisition strategy to buy water and wastewater municipal systems. This slide shows the acquisitions we closed in 2021 for our regulated water segment. The two acquisitions include the Commons Water System in Texas and the Village of Bourbonnais wastewater system in Illinois. Together, these acquisitions added about 7,700 customers and about $63.3 million in rate base. Combined with organic growth, the company increased its customer base by over 21,000 customers in 2021. Since 2015, we've added over 94,000 customers and $361 million in rate base through our water and wastewater growth through acquisition program. We have eight signed asset purchase agreements pending which will add nearly 235,000 customers or customer equivalents and total over $471 million in purchase price. This includes the Southern Oaks Water acquisition announced earlier this month. These signed agreements are expected to generate approximately $23.5 million of incremental annual income once they are fully earning. We continue to remain confident that we will close the DELCORA transaction. The litigation with Delaware County regarding the enforceability of our asset purchase agreement was heard by the Pennsylvania Commonwealth Court panel last October. We are awaiting that decision, which could come any day. We are also hopeful that we can still reach a settlement with the county to help accelerate this transaction's closing. Our pipeline of municipal opportunities remains healthy and strong. Currently, we are actively pursuing approximately 415,000 potential water and wastewater customers. There are number of contributors that get us to this strong pipeline: fair market value legislation in all states where we have water utilities, operating in states that have fair regulatory environments, our ability to offer strong low-cost capital solutions, and our industry expertise and long-term rate stability provided over the years. Regarding Chester Water Authority, you might recall that last fall, the Pennsylvania Commonwealth Court ruled that the city of Chester is the rightful owner of the Chester Water Authority. This was immediately followed by the Chester City Council unanimously passing a public ordinance declaring Aqua as the winner of its RFP process and requesting the receiver to expeditiously provide consent to sell the Chester Water Authority to Aqua. Given the city council's action, we find the confusion in the market regarding the city's preference to partner with us going forward unclear. In 2021, we overcame significant external obstacles, and we had a very successful record-breaking year. We now look forward to building on our successes in 2022 and remain focused on integration, growth, and operational excellence this year. Our plan is to ensure that we seamlessly onboard customers and employees to our world-class platform. Excluding DELCORA, we expect to add close to $200 million in rate base this year or early next year based on expected regulatory approval timelines. Additionally, we expect to sign agreements for at least another $100 million of acquisitions and potentially much more in 2022. We'll invest another $1 billion in infrastructure, which requires sophisticated planning and day-to-day effort to complete. We will continue our ongoing progress on ESG commitments to maintain our leadership position among our peers. Lastly, we expect to resolve the Aqua Pennsylvania rate case before the Pennsylvania Public Utility Commission. To conclude, for 2022, we expect earnings to be between $1.75 and $1.80 per share. We're confident in our three-year earnings per share growth of 5% to 7% through 2024, while being respectful of our regulators and ongoing rate activity. On CapEx, we expect to spend approximately $1 billion annually to rehabilitate and strengthen our water, wastewater, and natural gas systems through 2024. Rate base will continue to grow between 6% and 7% for water and between 8% and 10% for natural gas. Customer growth is expected between 2% and 3% on average for water and stable for gas. We remain committed to our environmental stewardship, sustainable business practices, employee safety, diversity and inclusion, customer experience and community engagement, and are always happy to reaffirm our ESG commitments while sharing progress toward our targets. With that, I'll conclude my formal remarks and take some questions. Madison, let me turn it back to you.

Thank you very much. We'll now take our first question from Durgesh Chopra with Evercore ISI.

Hey, Durgesh.

Hey, Chris. Good morning. Thanks for the update. Can you remind us what sort of equity or financing needs are embedded into your 2022 guidance plan? I'm thinking base business plus acquisitions, any color there?

Yes. As we've stated a number of times on these calls, we intend to support our credit metrics in order to maintain our credit ratings. We will be investing, as you know, about $1 billion a year. We are making a number of municipal acquisitions. From time to time, we will issue equity to keep our credit metrics in balance. In terms of specifics for 2022 and beyond, we're waiting for more clarity on our larger transactions before we provide much additional color. However, I will say we're likely to announce an ATM program at some point later this year to raise equity as needed.

Got it. That's helpful. Just one more high-level strategic thought. We've seen a ton of transactions in the marketplace. Just any updated thoughts on your portfolio of assets and how some of your peer utilities are making opportunistic moves to recycle capital back into the business?

Yes. Natural gas is a topic in the news today whether it's internationally with the events in Russia and Ukraine or transactions in the market. We know the value of our gas utility; it's a valuable entity in both the general and the private market. Having said that, we want to consider public market multiples this year. We like the company; it's operating above all of our financial, safety, and operational projections. Therefore, we're going to continue to move forward, knowing we have options in the future, but we're taking a patient stance.

Understood. Thank you, guys. I will jump back in the queue and let others ask. Appreciate your time.

You bet.

Thanks, Durgesh.

And we'll go ahead and take our next question from Insoo Kim with Goldman Sachs.

Hey, Insoo.

First question on the CapEx through 2024. Just wondering why no dollar amount increase this year?

We believe spending $1 billion a year is right for the size of our company. As we continue to do acquisitions, particularly those of size with follow-on capital, there might be other opportunities; however, we will assess each unit individually. That's how we generally think about it.

Absolutely right, Chris. The only CapEx we include is associated with acquisitions that have already been signed and approved.

That makes sense. Regarding the Pennsylvania Aqua Pennsylvania case, it seems like the ALJ's recommendation mainly concerns ROE.

The ALJ's ROE selection seemed to be straightforward from one of the statutory advocates and not in line with historical precedent in Pennsylvania. We will vigorously advocate for a more appropriate ROE in our exceptions being filed shortly.

The ALJ referenced the pandemic effect in his recommendation, which we believe overreaches.

Got it. Thank you for that color.

You bet.

Thank you. Take care.

And we'll go ahead and take our next question from Ryan Connors with Boenning & Scattergood.

Good morning, Ryan.

Hey, Ryan.

Thanks for taking my questions on the natural gas market. Do you get approached on potential sales?

We've been clear that we're not pursuing natural gas growth by acquisition and haven't been approached hard due to our public position. Our position is firm for now, but the water market remains strong, and we’re continuing to perform well.

Speaking of water growth, are there any potential deals where you could create overlap between gas and water?

The city of Pittsburgh would be an obvious opportunity, given their needs for a solution. There are opportunities for growth and solutions provided in that region, which would allow us to integrate our gas and water utilities effectively.

Got it. There was a house bill in Pennsylvania floated last October related to limiting fair market value. Do you have any updates on that?

That bill hasn't gained traction. Leaders are not interested in limiting municipal governments' tools for rate increases. There may be some chatter from opposing authorities, but I don't see it going anywhere.

Thank you for your time.

You bet.

Take care, Ryan.

And we'll go ahead and take our next question from Ryan Greenwald with Bank of America.

Hey, Ryan.

In terms of financing, how should we view the percent of additional acquisitions financed with equity?

You should think of each transaction as financed roughly half equity and half debt going forward, as we need to maintain our credit metrics post the Peoples acquisition.

Got it. On the gas business, with the recent transaction at 2x rate base, how does that affect your strategy regarding the public market?

We're being patient in our stance. We’ll continue to observe the public market's response throughout this year. We value our gas utility highly and want to see how the market evolves before making any decisions.

Thank you. Any updates on timings for DELCORA or Chester transactions?

Chester is complex; the receiver needs to disclose his position publicly. We're waiting for that, but we believe there will be developments soon.

Great. I will leave it there. See you guys soon.

Thanks, Ryan.

Take care, Ryan.

And we'll go ahead and take our next question from Travis Miller with Morningstar.

Hey, Travis.

If inflation stays elevated, what does that do to your water acquisition strategy?

Sustained inflation would prompt municipals to consider rate increases. That may lead to more opportunities for acquisitions since municipal authorities are generally reluctant to raise rates.

Great. That makes sense.

Thank you, Travis.

Take care, Travis.

We'll go ahead and take our next question from Jonathan Reeder with Wells Fargo.

Hey, Jonathan.

What is the process for the PaPUC determining the DSIC rate?

It's calculated and published publicly each quarter. I can follow up to provide more detail on that.

Yes, and we agree that it's a strong reference point.

Thanks for that.

Thank you, Jonathan.

Thank you. Take care.

It appears there are no further questions at this time. Mr. Franklin, I would like to turn the conference back to you for any additional or closing remarks.

Thanks, everybody, for joining us today. As always, we're available for follow-up, and I look forward to talking to you. Thanks so much.

And this concludes today's call. Thank you all for your participation. You may now disconnect.