American Water Works Q1 2023 Earnings Call Transcript

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Provided by Quartr
April 27, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to American Water's First Quarter 2023 Earnings Conference Call. As a reminder, this call is being recorded and is also being 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.

Operator

Musgrave, you may begin.

Speaker 1

Thank you, Betsy. Good morning, everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. Let me first go over some Safe Harbor language. Today, we will be making forward looking statements that represent our expectations Regarding our future performance or other future events, these statements are predictions based on our current expectations, estimates and assumptions.

Speaker 1

However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties and factors, as well as a more detailed analysis of our financials and other important information is provided in the Q1 earnings release And in our March 31, Form 10 Q, each filed yesterday with the SEC. And finally, all statements during this presentation related to earnings and earnings per share Refer to diluted earnings and diluted earnings per share. Susan Hardwick, our President and CEO, will share highlights of results, 2023 EPS guidance and longer term targets and the proposed PFAS rule recently announced by the U. S.

Speaker 1

EPA. John Griffith, our Executive Vice President and CFO, will cover our Q1 financial results in more detail, discuss our successful equity issuance And we'll close with an update on sizable acquisitions announced so far this year. Cheryl Norton, our Executive Vice President and COO, will then discuss our capital investment plan and active general rate cases and conclude with a few regulatory updates, including details of the EPA's proposed PFAS rule. We'll then close by answering your questions. With that, I'll turn the call over to American Water's President and CEO, Susan Hardwick.

Speaker 2

Thanks, Erin, and good morning, everyone. As we announced yesterday, we're off to a good start in 2023 with strong financial results. As shown on Slide 5, earnings were $0.91 per share for the quarter compared to $0.87 per share last year. The increased results were as expected and put us on track to achieve our full year earnings guidance, which we're pleased to affirm. Here you can also see a recap of some of our other key accomplishments so far in 2023 and John and Sheryl will add to these in their remarks.

Speaker 2

As we announced in March, we completed a very successful upsized equity issuance of $1,700,000,000 of American Water common stock. This delivered on the highest priority in our 2023 financing plan. We also invested well over $500,000,000 of capital structure in the quarter. In addition, we secured 2 large acquisitions so far this year, which puts us at over $550,000,000 of acquisitions under We did all of this while keeping customer bills affordable and staying true to our high value of quality service. The other significant news in the Q1 for us and the water industry as a whole came from the U.

Speaker 2

S. Environmental Protection Agency when they released proposed national standards for PFAS. We support the EPA's efforts to protect drinking water quality. These contaminants are among the multiple challenges in And a provider of solutions to these challenges. Providing safe, clean, reliable and affordable water and wastewater service to customers American Water's mission for over 130 years.

Speaker 2

We will continue to work cooperatively with the EPA and with Congress, regulators and policymakers in support of water quality standards that protect customers and communities, balanced with affordability. Cheryl will elaborate further on the PFAS proposal and our response to it, but I want to assure our customers, regulators, investors and other stakeholders American Water has the expertise and the will to tackle this issue head on and to advocate for reasonable policies and outcomes related to this very important topic. Turning to Slide 6, as I mentioned, we are affirming our 2023 EPS guidance range of $4.72 to $4.82 per share as well as our long term targets. We believe our strong regulatory and operational is a positive differentiator from our peers. As we've done in the past, we expect to consistently deliver on our annual and long term plans, Growing earnings and dividends at a top tier pace over the next 5 years and beyond.

Speaker 2

Moving on to Slide 7, as we announced yesterday, our Board of Directors increased We have grown our dividend at a compounded annual growth rate of 9.7% over the last 5 years, significantly outpacing most of our utility peers. Looking ahead, we continue to expect to grow our dividend at 7% to 9% per year on average, which is in line with our compelling 7% to 9% EPS growth target. Our Board and management team understand and appreciate how important the dividend component of our total shareholder return is to many of our investors. And with that, let me turn it over to John to cover some Q1 highlights and financial results in more detail. John?

Speaker 3

Thank you, Susan, and good morning, everyone. Turning to Slide 9, I'll start by reviewing the equity issuance completed in March, Really the first primary offering of meaningful size for American Water since 2,009. As we've said, our plan was to issue in 2023 A significant portion of the $2,000,000,000 of expected equity needed in our current 5 year plan that goes through 2027. We were pleased to see very strong demand for the offering, which was upsized and the Green Shoe fully exercised for proceeds of $1,700,000,000 The remaining portion of the $2,000,000,000 of our currently planned equity is expected to be issued near the end of this 5 year plan. We used the proceeds to bring our commercial paper balance down to 0 by quarter end with a modest amount of cash left over.

Speaker 3

With the equity issuance, to capital ratio, which at year end was just above our target of 60% or less, has decreased meaningfully to 54% as of quarter end. With our growth plan, this metric will rise somewhat over the next few years until we reset again as we receive in late 2026 the no proceeds from our sale of HOS and issue the remaining equity that is in our current 5 year plan. So to wrap up on equity, we believe the execution of this issuance Is another indicator that the American Water investment thesis is strong, led by our compelling growth story and the leadership role we play in the utility sector. I'd like to take a moment to thank our treasury, legal, IR and many other teams at American Water as well as our external advisors who worked diligently to prepare us to be ready to execute this transaction early in the year when the window of opportunity emerged. Turning our attention to Slide 10, I'll provide some further insights into our financial results for the quarter.

Speaker 3

Earnings were $0.91 per share for the quarter, up $0.04 per share versus the same period in 2022. As you know, we have completed rate cases recently in our larger states and are seeing the increased revenues as a result. These additional revenues are driven by the significant investments we are making in our infrastructure, including the acceleration of spend made possible by the proceeds from the sales of New York American Water and Homeowner Services. As we've said consistently since the sales, it takes time to reinvest the sales proceeds and we are beginning to see those impacts. And looking at operating costs, higher pension expense of about $0.03 per share and inflationary pressure on chemical, fuel and power costs of about $0.04 per share were largely mitigated by the higher revenues.

Speaker 3

Our proactive strategy last year to seek rate case recovery to limit the bottom line impact of those higher costs in 2023. As with the rate case we just filed in Indiana, we will be looking to recover higher operating costs in other jurisdictions over the next year through earning a full return on though earning a full return on rate based investments and acquisitions continues to be the key driver of our general rate cases. Next, depreciation increased 0 point $0.04 per share due to the $800,000,000 senior note issuance from last May, both supporting our investment growth. Interest expense in the quarter also reflected about $0.04 per share from higher short term interest rates. I would also note that the EPS impact of the higher share count From our equity issuance was essentially neutral to EPS when considering the avoided interest cost in the Q1 by paying off commercial paper.

Speaker 3

We expect dilution from the higher share count, net of avoided interest expense, to be approximately neutral to EPS for the full year as well. Finally, other net consists primarily of favorable post close adjustments recorded in the Q1 of 2022 from the sale of HOS and additional earnings in 2023 from our new military services group contract with Naval Station Mayport in Florida that we were awarded last summer. Turning to Slide 11, you'll see that we are set up for strong growth through acquisitions in 2023 and beyond. We had 27 transactions Under agreement across 9 states through the end of March, including the Butler Area Sewer Authority Wastewater System in Pennsylvania we previously announced, As well as the Talamenson Township Wastewater System in Pennsylvania, we are purchasing for $104,000,000 as announced in March as part of an agreement to assume that asset purchase agreement from NextEra. Then just a few weeks ago, we were pleased to announce The purchase of the wastewater treatment plant in Granite City, Illinois for $83,000,000 which puts us at over $550,000,000 of acquisitions under contract.

Speaker 3

We hope to close on Granite City by the end of 2023 and expect to close on Talamenson by mid year 2024, both pending regulatory approval, and we look forward to serving those customers. Of course, as we close on transactions, the work to build and refill the acquisition Pipeline is continuous across our footprint. Our pipeline of over 1,300,000 customer connections is a strong leading indicator that supports this piece of our earnings growth triangle. Before I turn it over to Cheryl, I'll echo Susan's comment that we're off to a very good start to the year. I'm confident in our ability to achieve our 2023 EPS guidance of $4.72 to $4.82 per share.

Speaker 3

Looking ahead, I am pleased that we have the right fundamentals in place, including our newly strengthened balance sheet to achieve our long term financial targets, which we are also affirming today. With that, I'll turn it over to Cheryl to talk more about our capital investment, rate case and other regulatory updates. Cheryl?

Speaker 4

Thanks, John, and good morning, everyone. Slide 13 shows that our state and corporate leaders and their teams did a great job in the Q1 executing on our increased capital plan. It required significant effort to safely and efficiently deliver the dozens of projects that improved our systems and drove capital investment higher by nearly $100,000,000 in the quarter compared to the same period last year. This result keeps us on pace to hit our goal of approximately $2,900,000,000 of capital investment spending in 2023. To show the magnitude of our regulatory execution efforts and timely recovery of these investments, you can see on Slide 14 That we already have $279,000,000 in annualized new revenues and rates since January of 2023.

Speaker 4

This includes $229,000,000 from general rate cases and step increases and $50,000,000 from infrastructure surcharges. We also have $144,000,000 of total annualized revenue request pending, including 2 infrastructure surcharge proceedings. Moving on to our regulatory strategy on Slide 15. Our theme here is around timely, consistent recovery of investments and operating costs. We have consistently engaged with policymakers and regulators to find the best ways to invest in water and wastewater infrastructure and achieve timely recovery.

Speaker 4

When we achieve timely and consistent recovery, it levels out bill increases to our customers, making those bills more manageable. The pie chart on the right side of the page also speaks to timely recovery of our investments across our footprint. Through capital recovery mechanisms and forward test years, we can reduce regulatory lag and lessen the reliance on general rate cases. This enables us not only to earn our allowed return, but also to mitigate the size of general rate increases for our customers. We expect about 75% of capital investments over the next 5 years to be recoverable through infrastructure mechanisms and through the use of forward test years, which is the key to unlocking a more consistent annual earnings growth pattern for the long term.

Speaker 4

The ability to execute our regulatory strategies is a critical and we will continue to focus on We'll continue to focus on constructive regulatory and legislative outcomes to help us work through those challenges. Let's go to Slide 16 and cover the latest regulatory activity in our states. Shown on the slide is a summary of our pending general rate cases with some key facts for each. In the appendix, you'll also find some details related to infrastructure charges as well as a snapshot of the key outcomes from the most recent general rate cases in our top 10 states. At the end of March, we filed a general rate case in Indiana, reflecting $875,000,000 in water and wastewater system investments to be made through 2025 to continue providing safe and reliable service.

Speaker 4

The revenue request also includes an increase in the cost of chemicals and other operating costs that we continue to see. We are seeking to increase revenues over a phased 3 step process through May 2025 that would result in $87,000,000 of additional annual revenue when fully implemented. In California, our case was filed in July of last year and is progressing as expected so far. We're seeking increased revenues of approximately $95,000,000 over a phased 3 step process with rate changes expected to be effective in 2024 2025 in 2026. We're also still awaiting a ruling from the commission on the pending cost of capital case.

Speaker 4

In Missouri, on March 3rd, we were pleased to file a settlement agreement with the Missouri Public Service Commission. The settlement reflects an increase of $95,000,000 in annualized revenues, including $51,000,000 for previously approved infrastructure surcharges. A final decision on this matter is expected in the Q2 of 2023. And finally, earlier this week, the Virginia State Corporation Commission approved the settlement of our rate request, authorizing a total annualized revenue increase of approximately $11,000,000 Outside of general rate cases, There were a few notable developments since our Q4 2022 call. In California, related to the Monterey water supply project, We signed the Pure Water Monterrey expansion agreement following an order issued by the CPUC.

Speaker 4

We are now Allowed to standard rate making treatment for the construction funding of the pumps and pipes that were built to support the expansion. Together with the desalination and water reuse projects in process and aquifer storage and recovery online, We believe that a secure water future for the Monterey Peninsula is now possible once the approval process is complete. On the legislative front, in Indiana, Senate Bill 180 passed the State House and Senate with bipartisan support and is awaiting the Governor's signature where it will become effective immediately. This bill allows for consolidated rates in wastewater systems through Indiana's Service Enhancement Improvement Recovery mechanism. Turning to PFAS, I'll expand on Susan's earlier comments on EPA's proposed rulemaking.

Speaker 4

While American Water has long been anticipating and preparing for the rulemaking, our analyses were primarily based on a federal PFAS standard that would be more in line with the higher treatment limits set by several states. We are carefully reviewing the EPA's proposed drinking water regulation to assess the 4 parts per trillion limits for PFOA and PFOS and the application of the hazard index approach for several other chemicals. Our review will assess impacts to our capital and operating expense plan as well as our needed financing. It's logical to assume that the One of our early concerns is that EPA's cost estimates are materially understated. Our analysis continues and upon completion of our preliminary assessment, We'll submit comments on the proposal to the EPA by May 30.

Speaker 4

As the EPA develops its final rule, which is expected by the end of 20 aimed at keeping harmful PFAS out of drinking water supplies and communities. In addition to the comments we intend to provide on the proposed rule itself, We also expect to provide comments to the EPA and others on many related issues, including the following. We'll ask for an exemption of water and wastewater from financial liability for PFAS under CERCLA. We'll also ask to ensure all water and wastewater utility providers, regardless of ownership, Have equal access to any and all federal and or state funding related to treating PFAS. In addition, we'll request Reliable and Affordable Water is American Water's business.

Speaker 4

We'll continue to work productively with the EPA, Congress, regulators and policymakers to ensure that the implementation of any final standards protect customers, communities and the general public. So with that, I'll turn it back over to our operator to begin Q and A and take any questions you might have.

Operator

We will now begin the question and answer session. The first question today comes from Richard Sunderland with JPMorgan. Please go ahead.

Speaker 5

Hi, good morning and thank you for the time today. Appreciate all the commentary on the PFOS side, but just wanted to dig in there a little bit more. Any way to frame the magnitude of capital versus O and M, that's particularly levered to an outcome here. At a minimum, is this more of a capital opportunity Then an expense concern or you're kind of flagging both as potential impacts to rates on a go forward basis?

Speaker 2

Hey, good morning, Rich. Yes, it's a great question. Obviously, as Cheryl indicated, we have a lot of analysis to do with this Proposed rule, at these treatment limits that are proposed. And you know, Rich, how this works. I mean, there's a process to be worked here in terms of comments and feedback to the EPA about the proposed rule.

Speaker 2

And as Cheryl said, obviously, we're quite supportive of What they're trying to accomplish here and in fact, even at the 4 parts per trillion, we don't have huge issue with that. I think the issue is around As Cheryl said, our early expectations here are that the EPA estimates around costs are understated. So I think that will be Part of the response that the industry generally provides back to the EPA. For us, as I said and Cheryl We're continuing to evaluate the impacts. And as you know, we've talked about this many times.

Speaker 2

We use a risk based approach to our capital planning. So as we work these projects into our capital plan, it could very well change that risk profile and move other projects out. So as we think about Changes to our overall plan, we still got a lot of work to do to determine that. Specific to your question though around capital versus O and M, we think there A fair amount of both that will be necessary at this level. So there will be capital requirements to We have facilities that are able to facilitate the treatment and then of course there'll be an ongoing operating cost associated with the treatment itself.

Speaker 2

So Lots to be learned yet on this and again direct impacts to our plan yet to be determined.

Speaker 5

Okay, understood. That's very helpful context. I guess sticking with the cost side, we A lot of time last year discussing chemicals costs and it came up in the walk this year in terms of the rate recovery of those higher costs. Can you speak a little bit more to the recent trends you're seeing there and maybe bridge that back to your expectations last fall when you laid out the latest plan? How do you think about these expenses impacting customer bills over the next few years?

Speaker 2

Yes, Rich, Good question. And Cheryl and John certainly can weigh in on this too. But we have seen, I'd say, a continuation of the impacts We started seeing really in the Q2 of last year. While some of the increases in certain costs may have started to level loud a bit, they still are all elevated and we expect that to continue for some time. I think the real key here and you touched on it is the work we did in the regulatory arena to Address these costs early on, and we've estimated that roughly 75% of the costs we'll experience in 2023, We've got fully baked into rates as a result of those cases we did last year.

Speaker 2

And as Cheryl mentioned or maybe John did in the prepared remarks, in the Indiana case We've addressed it there too. So we think we have done as good a job as could be done to address these costs early on so They don't have bottom line impact, but we continue to see a fair amount of pressure here on the cost side.

Speaker 5

Okay, great. I appreciate all the detail there as well and thank you for the time today.

Speaker 2

Sure. Thanks, Rich.

Operator

The next question comes from Angie Storodynski with Seaport. Please go ahead.

Speaker 6

Thank you. So first, maybe like the presentation question. So you no longer show us the breakdown of earnings by Segment, right, there's no bridge for regulated earnings, market base and corporate. Can you give us this breakdown for the quarter?

Speaker 2

Well, I think the waterfall that you have there probably is as good as there is. The impact From the market based business, which is now just military, is very small and on a year over year basis, just not much of a variation. The other segment, I think we highlighted the primary driver there, which would have been the gain, the sort of true up gain on the HOS sale in the Q1 of last year.

Speaker 6

Okay. So I mean, I tried to actually apply it from the 10 I couldn't, but anyway, okay. Moving on to, you did mention the weather as a factor in earnings. That's, I think, something that we've seen on the electric side and a couple of your water peers have also highlighted as a drag on the quarter. Was that a driver at all?

Speaker 2

Yes. 1st quarter for us is not much of a weather impact year. Cheryl, you want to just talk about seasonality or?

Speaker 4

Yes. Our biggest weather impacts are going to be in 2nd and third quarter. Sometimes it will spill over into the 4th quarter. Typically, the Q1, unless the weather is really, really severe In one direction or another, we won't see any weather impact at all. And this year, I think the weather was not that dramatic for us to see that impact.

Speaker 4

So I think we're pretty solid.

Speaker 6

Okay. And then lastly, I noticed that you are pursuing an appeal of that A denial of the acquisition adjustment related to the Shorelands acquisition, it looks like a decision This will be issued sometime in 2023. So can you again, I haven't followed it closely, but can you give us a sense of Is this still a long shot? I mean, how important is it for any future growth aspirations you might have? And I know that, that The transaction itself is only $29,000,000 so that's not that big a deal as far as the goodwill impact.

Speaker 6

But again, any implications related to this pending case.

Speaker 2

Yes, really no implications of any materiality, but Sheryl, you want to comment on status here?

Speaker 4

Yes. Angie, it's, yes, the issue is still kind of hanging out there, but there's going to be no real impact to us from a financial perspective. And in all honesty, we found other ways of doing deals so that we're not so worried about the precedence that this decision sets For us, we still believe like we have a strong case, but in the grand scheme of things, it really has little to no impact.

Speaker 6

Okay. And then just going back to PFAS, I'm sorry. So I looked at these rules, pretty strict requirements with penalties. Then again, I think the problem we've seen over the last, I think, couple of decades is that EPA hasn't been really and imposing those penalties or really going after the systems that have been non compliant with the regulations. So I'm just wondering if how big a difference would there be with this one as far as, for example, your Municipal grow, municipal M and A or any sort of additional pressure that that should exert on privately or municipally owned systems, again, because EPA hasn't been particularly diligent in imposing other rules.

Speaker 2

Yes, I think it's a fair observation, Angie, and it's obviously one of the things that we'll address in our comments. We think that these rules should apply obviously to all And that EPA should use its authority to enforce the rules. There is a track record here, so we'll have to again sort of comment on that. As it relates to our views on acquisition potential, John, you want to There's your potential. John, you want to comment on that.

Speaker 2

We think there could be some opportunity, but I think you've hit on the key issue.

Speaker 3

Yes, Angie, I'd just say that we look at this issue as another reason on the list for why Municipals may choose to sell to us in the future.

Speaker 6

Okay. Thank you.

Speaker 4

Thanks, Angie.

Operator

The next question comes from Paul Zimbardo with Bank of America. Please go ahead.

Speaker 7

Hi, good morning team.

Speaker 2

Good morning.

Speaker 7

Congrats on the successful equity offering. Just curious, Did you consider placing the full $2,000,000,000 of equity for the full plan to just take it out of the way given the strong demand? And I believe I heard you say that you expect the equity offering to be EPS neutral on full year 2023 versus plan. Was that correct?

Speaker 2

John, you want to comment here?

Speaker 3

Sure. Yes, on the first part of the question, we tried to remain consistent with The messaging that we had provided to investors in the past, so as we thought about the magnitude of the issuance, We wanted to stay within that range and we did so. With regards to dilution, that's correct. We expect that Just given our ability to pay off debt and with where interest rates are and given how we trade from a valuation perspective, We look at the issuances as EPS neutral.

Speaker 7

Okay, great. And then Switching topics, I noticed that Indiana legislation as well. Does that influence higher any of the prospective capital or acquisition priorities in the state?

Speaker 2

John, you want to comment on that? This is yes, the question really, Paul, is around this consolidated rate issue, that legislation you're referring to?

Speaker 7

And the additional mechanism from the new legislation that was enacted, it seems like it could help reduce regulatory lag, respectively?

Speaker 2

Yes, I think that's probably fair. And I do think it probably creates opportunity around acquisitions. Again, I think it gives us Use that consolidated revenue mechanism to lessen the bill impact on customers. I think it's a very important piece of legislation from that Perspective to again sort of facilitate growth.

Speaker 7

Okay, great. Thank you team. Appreciate it.

Speaker 2

All right. Thanks,

Operator

Paul. The next question comes from Greg Orrill with UBS. Please go ahead.

Speaker 8

Yes. Thank you. Congratulations.

Speaker 2

Good morning, Greg.

Speaker 8

Good morning. I was wondering if I could Ask your view on sort of Florida as a market for acquisitions. I think there's legislation that's progressing there on fair value. And then just how you're thinking about the pursuit of litigation regarding the PFAS rules Help pay and sort of the how that would get folded in versus the timeline for compliance? Thank you.

Speaker 2

Well, those are 2 big topics, Greg. First, maybe on Florida, let me just comment there. I think And obviously, we're following developments there, as we do sort of across the nation, around legislative actions, Regulatory actions, etcetera. But I'd say our answer is the same as it always is on potential growth into other states. We really have to see An opportunity to grow substantially in a particular state.

Speaker 2

We look at regulatory environment, legislative environment, those types of things, And we're constantly looking at opportunities, but all of the parts have to sort of come together, I think, for us To do anything significant beyond our existing footprint, which of course we like a lot. We think we have optimized our footprint. We like The environments that we're in, we have great opportunities for growth in our existing jurisdictions. And obviously, that's where our focus continues to be. On your second question around PFAS and litigation and impacts there, as Cheryl mentioned, there is litigation And our goal here, I think the industry's goal Is to, well, we feel responsible for helping to solve the problem and we are best Position to do the treatment, we do think it's important that those that are responsible for the production of the chemicals Also be held responsible.

Speaker 2

So we are our states are actively involved in that litigation, and will continue to be. And we do think that's an important part of this overall equation That has to be worked through. And again, customer affordability is at the heart of that. We don't think it's necessary or appropriate for customers to pay for things that they really aren't responsible So we'll be actively pursuing that litigation along with the rest of the industry.

Speaker 8

Okay. Thanks for your comments.

Speaker 2

Sure. Thank you.

Operator

The next question comes from Jonathan Reeder with Wells Fargo. Please go ahead.

Speaker 7

Hey, good morning team. I just wanted to build a little bit on Angie's earlier question, Just regarding kind of the segment breakdown a little bit, can you give us some directional guidance? I don't think your full year was We've broken out by the 2 segments and with kind of other being recast to include what's left of market based And the other historical parent and other segment, I think full year 2022 was $0.19 from that segment, but that included, I think it was a $19,000,000 pretax gain. So how should we be thinking about, I guess, Full year 2023 kind of overall drag there?

Speaker 2

Boy, Jonathan, we're going to have to go back and look at those numbers. Those numbers don't sound right to me for the prior year. We had some true up Activity related to the HOS sale, and maybe that's getting confused a bit here, but All that's remaining is our military services group. And the earnings year over year really not much of a variance. And it's a relatively small part of the overall earnings contribution anyway.

Speaker 2

But we can follow back up On that reconciliation, the numbers that you're quoting, because again, I don't think that's reflective of the size of the business. Okay.

Speaker 7

So but I mean, it sounds like if we just strip out maybe that $19,000,000 pretax true up gain or whatever that you're kind of thinking The other part of the business is kind of flattish when we look at it from 2022 to 2023?

Speaker 2

Yes, certainly the military services group operations year over year relatively flat. We'll need to verify that $19,000,000 Pretax number you're quoting there. That doesn't ring a bell to me. I mean, I know there's a number there. I just don't recall it being That, so we'll just we'll have Aaron follow back up with you on that just to make sure we got the right numbers there.

Speaker 7

Okay. All right, great. Thanks. I appreciate it.

Speaker 2

Sure. No problem.

Operator

This concludes our question and answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.

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