Spire Q1 2025 Earnings Report

Spire EPS Results

• Actual EPS: $1.34
• Consensus EPS: $1.42
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: N/A

Spire Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $796.11 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Spire Announcement Details

• Quarter: Q1 2025
• Date: 2/5/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, February 5, 2025
• Conference Call Time: 10:00AM ET

Spire (NYSE:SR), together with its subsidiaries, engages in the purchase, retail distribution, and sale of natural gas to residential, commercial, industrial, and other end-users of natural gas in the United States. The company operates through three segments: Gas Utility, Gas Marketing, and Midstream. It is also involved in the marketing of natural gas and related services; and transportation and storage of natural gas. In addition, the company engages in the operation of propane through its propane pipeline, risk management, and other activities. The company was formerly known as The Laclede Group, Inc. and changed its name to Spire Inc. in April 2016. Spire Inc. was founded in 1857 and is based in Saint Louis, Missouri.

Spire Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to Spire's Fiscal twenty twenty five First Quarter Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Megan McPhail, Managing Director, Investor Relations.

[Operator]

Please go ahead.

[Megan McPhail, Managing Director of Investor Relations at Spire Inc]

Good morning, and welcome to Spire's fiscal twenty twenty five first 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 is a slide presentation that accompanies our webcast, which can be downloaded from our website under Investors and then Events and Presentations. Before we begin, let me 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.

[Megan McPhail, Managing Director of Investor Relations at Spire Inc]

Although our forward looking statements are based on 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 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 Scott Doyle, Executive Vice President, COO and Acting CEO and Adam Waters, Executive Vice President and CFO.

[Megan McPhail, Managing Director of Investor Relations at Spire Inc]

With that, I will turn the call over to Scott Doyle. Scott?

[Scott Doyle, EVP & COO at Spire Inc]

Thank you, Megan, and good morning, everyone. Thank you for joining us today for a review of our fiscal first quarter results and an update on recent developments and outlook. Before we dive into results, we were pleased to announce earlier this week that Steve Lindsey, Spire's President and Chief Executive Officer will return to work on February 10 after taking a leave of absence. He's eager to get back to the office and we're looking forward to his return next week. I would also like to take this opportunity to thank our employees for their continued effort and dedication to maintaining safe and reliable gas delivery service for our customers as we entered the winter heating season.

[Scott Doyle, EVP & COO at Spire Inc]

While we experienced a warmer than normal first quarter in both Missouri and Alabama, we began to see much colder sustained weather patterns in early January. In fact, this past January was among the coldest in recent years throughout our service territories. The preparedness of our employees and past investments in our systems ensured reliable energy delivery for the communities we serve. Turning now to our first quarter results, this morning we announced adjusted earnings of $1.34 per share compared to $1.47 a share a year ago. Our results reflect growth in our Gas Utility and Midstream segments and lower earnings in our Gas Marketing segment.

[Scott Doyle, EVP & COO at Spire Inc]

Key drivers of our results include our investments to modernize our natural gas infrastructure and our continued focus on cost management. Adam will provide more detail on our results and outlook in a moment. Turning to regulatory matters starting with Missouri. Last November, we filed a rate case with the Public Service Commission or PSC for new rates effective by October of this year. In addition, in January, we filed a new infrastructure system replacement surcharge or ISRIS request with the PSC for additional revenues of $19,000,000 This is our fifth request since our last general rate case and includes the timely recovery of eligible investment for the September 2024 through February 2025 period.

[Scott Doyle, EVP & COO at Spire Inc]

New rates are anticipated to be effective by July 2025 And if approved, the increase would bring our revenues in the rider to an annualized rate of $72,600,000 Moving to our Alabama operations. The fiscal twenty twenty five budgets for Spire Alabama and Spire Gulf were approved by the Alabama Public Service Commission and rates are now effective under the Rate Stabilization and Equalization Mechanism or RSE. This annual rate setting framework is very constructive as we are granted recovery of our costs based on a forecasted budget and earn a return upon our average common equity. Our goal is to achieve consistent and constructive regulatory outcomes in all of our jurisdictions, leading to a more sustainable financial performance trajectory. Looking ahead, our ten year CapEx plan remains $7,400,000,000 We are also reaffirming our long term EPS growth target of 5% to seven percent and our fiscal twenty twenty five earnings guidance of $4.4 to $4.6 per share.

[Scott Doyle, EVP & COO at Spire Inc]

As we indicated on the call in November, we anticipate improving our earned returns in Missouri in FY 2026 to help us achieve our targeted growth rate. We are committed to achieving our financial and operational goals as we execute our strategy to grow organically, invest in infrastructure and drive continuous improvement. Turning to Page five for an update on capital investments. During the first quarter, our CapEx totaled $260,000,000 with the majority of the spend taking place at our gas utilities. Year over year, utility CapEx increased nearly 25% with an emphasis on upgrading distribution infrastructure and connecting more homes and businesses to save reliable and affordable natural gas.

[Scott Doyle, EVP & COO at Spire Inc]

During fiscal twenty twenty five, we plan to invest a total of $790,000,000 with the focus on reliability, system modernization, new service connections and advanced meter installations. Remember, approximately 98% of our ten year capital expenditure plan is targeted utility spend, driving our growth in rate base. Moving to Page six, in late November twenty twenty four, we filed a request with Missouri PSC to increase revenues $289,500,000 The drivers of our requested increase include significant capital investments in our delivery system as well as the inflationary impacts on our cost of service since our last rate case, which was completed in December 2022. The request includes a 10.5% return on equity, a 55% equity ratio and an estimated rate base of $4,400,000,000 with a May 31 true update. This filing is also inclusive of discrete adjustments of known and measurable items that will occur beyond the true update, but before new base rates are implemented.

[Scott Doyle, EVP & COO at Spire Inc]

We believe this represents a more accurate snapshot of our costs when new rates take effect. These updates include items such as capital investments and changes to leases, payroll and call center expenses for example. We are also seeking to improve recovery of volumetric revenue including the impacts of both weather and conservation. If approved as requested, when rates become effective, the average customer bill is expected to increase approximately 15% or $14 per month. However, when paired with the PGA decrease approved and implemented in November 2024, average customer bills are expected to be lower or unchanged compared to average bills in 2024 when final rates are approved.

[Scott Doyle, EVP & COO at Spire Inc]

The Missouri PSC approved the procedural schedule last month and we expect an order and new rates effective by October. I'll now turn the call over to Adam for a financial review and update on guidance and outlook. Adam?

[Adam Woodard, EVP & CFO at Spire Inc]

Thanks, Scott, and good morning, everyone. I'll begin by addressing our quarterly results, which are detailed on Pages seven and eight of our presentation.

[Adam Woodard, EVP & CFO at Spire Inc]

During the first quarter, we reported adjusted earnings of $81,100,000 or $1.34 per share compared to $82,700,000 or $1.47 per share a year ago. The results were driven by earnings growth at the Gas Utility and Midstream segments offset by lower earnings at Marketing and Other. Gas Utility earnings were higher reflecting increased earnings at Spire Alabama and Spire Gulf, partially offset by lower Spire Missouri earnings. Contribution margin increased across all utilities. We benefited from higher interest revenues in Missouri and new rates and usage at Spire Alabama net of weather mitigation offset in part by lower Missouri usage which was not fully mitigated.

[Adam Woodard, EVP & CFO at Spire Inc]

Utility earnings also reflected lower run rate O and M expense and higher depreciation expense. We saw strong earnings growth in our midstream segment driven by new contracts on additional capacity and higher rates on contract renewals of existing capacity at Spire Storage and the acquisition of Mogas in January of last year. Our marketing segment was lower than the prior year due to reduced market volatility combined with higher transportation storage fees. I would like to note that we expect marketing to deliver within its originally expected guidance range during the fiscal year. Lastly, other corporate costs were higher primarily due to the absence of a $6,300,000 after tax benefit of an interest rate hedge settlement that occurred in the prior year coupled with higher interest expense this year.

[Adam Woodard, EVP & CFO at Spire Inc]

I will briefly touch on a couple of drivers of our results. We experienced another warm start to the winter in both Missouri and Alabama. From a heating degree day perspective, Missouri was 18% warmer than normal. Although this was in line with last year, usage by residential customers was down approximately 4%, resulting in lower volumetric margins of $3,400,000 Alabama was 25% warmer than normal and also warmer than last year. However, temperature sensitive margins were effectively mitigated.

[Adam Woodard, EVP & CFO at Spire Inc]

We remain focused on cost management and we expect run rate operation and maintenance expense at the gas utility to remain flat relative to fiscal twenty twenty four levels. During the quarter, utility run rate O and M expense was lower by $1,600,000 when compared to last year. Turning now to our growth outlook on Page nine, as Scott mentioned, we are reaffirming our long term adjusted earnings per share growth target of 5% to 7%. This growth is supported by 7% to 8% rate base growth in our largest utilities, Spire Missouri, and continued timely recovery investment of investments eligible for dis risks. Continued equity growth in the Southeast coupled with annual RRC resets, our ten year CapEx plan of $7,400,000,000 and a consistent focus on cost management.

[Adam Woodard, EVP & CFO at Spire Inc]

We remain committed to executing on our strategy and are affirming our FY '20 '20 '5 adjusted earnings guidance range of $4.4 to $4.6 per share. Moving to Slide 10, our three year financing plan remains unchanged from what we laid out in November. We expect our ATM program to fulfill our remaining equity needs through 2027. At the beginning of this fiscal year, we had a total of $75,000,000 of outstanding forward sales agreements. We settled $32,000,000 at the December and we plan to settle the remaining $43,000,000 by the March.

[Adam Woodard, EVP & CFO at Spire Inc]

Our long term debt financing plan through 2027 includes issuances for the refinancing of maturities and incremental debt of approximately $600,000,000 to fund our capital plan. Our FFO to debt and dividend payout ratio targets remain unchanged. In summary, we are executing in line with our plans and continue to feel positive about our financial position going forward. With that, let me turn it back over to you, Scott.

[Scott Doyle, EVP & COO at Spire Inc]

Thank you, Adam.

[Scott Doyle, EVP & COO at Spire Inc]

To wrap up, I want to remind everyone of our fiscal twenty twenty five priorities to build a more resilient, efficient and sustainable company that delivers value for our customers and shareholders. First and foremost, we are committed to delivering natural gas safely and reliably. During the year, we expect to achieve our capital plan. We are engaging with key stakeholders to realize constructive regulatory outcomes for customers and shareholders. Furthermore, we're focused on delivering on our fiscal twenty twenty five EPS guidance range and maintaining the strength of our balance sheet.

[Scott Doyle, EVP & COO at Spire Inc]

Executing on these objectives remains a priority in fiscal twenty twenty five and beyond. This concludes our prepared remarks and we're now ready to take questions.

[Operator]

We will now begin the question and answer session. The first question comes from Gabe Moreen with Mizuho. Please go ahead.

[Gabriel Moreen, Managing Director at Mizuho Financial Group, Inc.]

Hey, good morning, everyone. First of all, Scott, sorry to hear your moment in the spotlight here might be a little bit shorter than you But with that, let me just ask about the weather impact for the quarter. Is there any way you make up some of the warmer than normal weather and the impact on customer classes, whether it's residential or C and I with a colder than normal 2Q. Obviously, you mentioned the weather in January. So I'm just curious whether that might have reversed a little bit in 2Q?

[Adam Woodard, EVP & CFO at Spire Inc]

No. Dave, I think you point out we are early in winter and I think that's a fair thing. We did include quite a bit of detail on in the appendix on Page 18 around the different classes and the performance over the quarter. But it's the first quarter. We're not even in the heart of winter yet.

[Adam Woodard, EVP & CFO at Spire Inc]

So to your point, there's a lot of winter to go and I think your observation is a good one and you are correct.

[Gabriel Moreen, Managing Director at Mizuho Financial Group, Inc.]

Thanks, Adam. And then maybe if I can just follow-up, you mentioned, Adam, that you still are confident that marketing can hit its guidance for the year despite I guess the 1Q result. Can you just talk about how marketing has been doing given some of the volatility that you've we've seen here in wholesale markets in January and also to what extent some of that volatility may or may not have extended also to the storage segment as well?

[Adam Woodard, EVP & CFO at Spire Inc]

Absolutely. And we don't think of marketing as having a completely normalized run rate on a quarter to quarter basis. So not anything we're as we said in our prepared remarks, we're very comfortable with where they're at. To your observation, the second quarter really started out with a constructive backdrop. So we feel very comfortable about where they're headed.

[Adam Woodard, EVP & CFO at Spire Inc]

Yes, there would be we continue to see where midstream is operating and are hopeful there. We're We're liking the pull through that we see there as those assets have come online and we're getting a full year under our belt. But that's we were very comfortable with the guidance range and where we're moving from here.

[Gabriel Moreen, Managing Director at Mizuho Financial Group, Inc.]

Great. Thanks, Adam. Appreciate that.

[Operator]

The next question comes from Richard Sunderland with JPMorgan. Please go ahead.

[Richard Sunderland, Analyst at JPMorgan Chase]

Hey, good morning. And also want to say great to hear that Steve is coming back and thank you for the time today.

[Scott Doyle, EVP & COO at Spire Inc]

Thanks Rich.

[Richard Sunderland, Analyst at JPMorgan Chase]

Picking up some of the guidance questions, so if marketing returns to its original trajectory as you kind of laid out with the January cold snap, are kind of across factors here, are you looking at still trending towards the midpoint? I guess I'm trying to parse the utility weather and how much you need to recapture there after 1Q to hit the midpoint of guidance?

[Adam Woodard, EVP & CFO at Spire Inc]

Yes. I don't want to leave an impression that we need extra weather for marketing to hit its goals. We feel very comfortable regardless of where weather is at any given months that we're comfortable with the plan that we laid out and the second guidance that we gave. So that's I just want to leave that there for marketing. I know that's the question.

[Adam Woodard, EVP & CFO at Spire Inc]

But to the overall kind of recapture, clearly, we lost a little margin in Missouri in the first quarter and but I would regard that as something that is as we talked about with Gabe's question, I think that's something that's achievable and retrievable over the course of the year.

[Richard Sunderland, Analyst at JPMorgan Chase]

Understood. Thank you for that. And then turning to the rate case, how are you thinking about strategy overall given this new element of pursuing discrete adjustments beyond the true period? I don't know if there's any way to

[Richard Sunderland, Analyst at JPMorgan Chase]

rank order priorities or just

[Richard Sunderland, Analyst at JPMorgan Chase]

how your strategy around settlement and whatnot up

[Scott Doyle, EVP & COO at Spire Inc]

a level up a level from maybe that specificity and just say, we're pleased with the progress on the rate case as it's moving along. It's moving along as expected. We have a couple of good things that have occurred of late. One is the procedural schedule being laid out that that has rates being effective in October or contemplated being effective in October of this year. And then to your point about discrete adjustments, we're encouraged by the order that has been placed in this case that allows for the proposal of discrete adjustments.

[Scott Doyle, EVP & COO at Spire Inc]

And just as a reminder to those listening, the discrete adjustments are balanced and that they are both puts and takes as we update capital, but we also update the depreciation expense associated with it. And we have certain costs that are going up, certain costs that will be moderated during that period. So it works to balance those out and we see that as a positive as we move forward in the case. So all in too early to call out strategy or settlement parameters or anything like that. It really is is progressing as it should and we look forward to the continued efforts in that case.

[Richard Sunderland, Analyst at JPMorgan Chase]

Great. I'll leave it there. Thank you.

[Scott Doyle, EVP & COO at Spire Inc]

Thanks, Rich.

[Operator]

The next question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Hey guys, how are you doing?

[Scott Doyle, EVP & COO at Spire Inc]

Hey. Good morning, Shar.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Good morning. So just real quick on the rate case question. I guess if we're looking for a settlement, should we be looking for a settlement prior to the August hearings? Is that kind of the data point we should be looking at?

[Scott Doyle, EVP & COO at Spire Inc]

No, no, no. I would just look to the procedural schedule and just key off of the dates that are in there for key waypoints along the path. Too early to have any discussions around that.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Got it. So if there I guess what I'm trying to ask is if there isn't a settlement announced before the August hearings, there still could be a settlement post the hearings?

[Scott Doyle, EVP & COO at Spire Inc]

Oh, yes. Yes. No, there's those within the context of the rate case, there's always opportunity to talk.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Got it. Okay. And then just real quick on Missouri legislation, just any updated thoughts there? How are you thinking about some of the more utility focused bills? And can you speak a little bit more broadly of how that could impact the current case?

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

I have to make an assumption it doesn't, but how are you focused on the utility side of it, including forward test years? Thanks.

[Scott Doyle, EVP & COO at Spire Inc]

Yes, sure, Shar. So maybe a little bit of update that's recent as of yesterday afternoon, yesterday evening. So maybe just answer your first question around impacts to this case. It has no impact on this case, this legislation that we have or that's proposed. And maybe just to level set, the legislation that's proposed is around future test year.

[Scott Doyle, EVP & COO at Spire Inc]

It would not take effect or would not be effective till July of twenty twenty six for rate cases filed after that date. So a lot of rulemaking that would need to be put in place as it's currently proposed for that to be something that we would be able to utilize in the context of a rate case. But maybe just a little bit of what's happening in the legislature. Yesterday, the bill was brought to the Senate floor and the kind of the style of the bill has been modified from its original proposal, which we had proposed in Senate Bill four. It's now been combined with other utility legislation.

[Scott Doyle, EVP & COO at Spire Inc]

All of the wording that was in the original Senate Bill four has survived inside of what is now Senate substitute Bill four. There was some floor debate. We're looking forward to some additional debate a couple of weeks from now and for that bill to continue moving forward. So maybe a way to think about that is that we're pleased with the progress today and look forward to the continued dialogue with parties as we help move that further along. But if you're tracking a particular bill, the new bill to track now is the Senate substitute bill forward.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Got it. And then just lastly on this and there's a perception that this is an electric issue and the electrics are taking the lead. How vested is Spire in this process?

[Scott Doyle, EVP & COO at Spire Inc]

Yes, fully vested. Spire is fully vested in the process. And the future test year is what's our component or at least the gas utility component. Electric has some other issues that are non future test year, but have some maybe some similarities associated with it, whether it's PISA for plant and service associated with their gas plants. But if you read through the bill, there are specific provisions in it that are unique to gas utilities and that's what we're advocating for in there.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Fantastic. Thank you guys. I appreciate it.

[Scott Doyle, EVP & COO at Spire Inc]

Thanks, Charlie.

[Adam Woodard, EVP & CFO at Spire Inc]

Thanks,

[Operator]

Charlie. The next question comes from David Carcara with Morgan Stanley. Please go ahead.

[David Arcaro, Analyst at Morgan Stanley]

Hey, thanks so much. Good morning.

[Scott Doyle, EVP & COO at Spire Inc]

Hey, David.

[Adam Woodard, EVP & CFO at Spire Inc]

Good morning.

[David Arcaro, Analyst at Morgan Stanley]

Hey, great to hear the news about Steve. Really wish him all the best. Great to see him coming back in action.

[Scott Doyle, EVP & COO at Spire Inc]

Thank you, Steve.

[David Arcaro, Analyst at Morgan Stanley]

Yes, absolutely. Question for me on the rate case. I was just wondering if you could frame the size of the customer bill increase that is being requested here and maybe more broadly kind of how you think that might trend over time after this one time bump? Obviously, this reflects multiple years since your last base rate case, but how do you see that evolving maybe beyond just this increase?

[Scott Doyle, EVP & COO at Spire Inc]

Yes. So maybe as we shared in our remarks, the customer impact is $14.15 dollars on a monthly basis on an average bill. However, that's the all in increase based on our proposal. As we mentioned late in the year calendar year last year, we lowered rates as a result of our gas costs coming down. That reduction allows for if these rates are to be implemented, we basically return average customer bills to what they were prior to the reduction in gas costs.

[Scott Doyle, EVP & COO at Spire Inc]

So a different way to think about it is our customers are receiving the benefit now of lower gas costs over the time period of the rate case being contemplated. So we feel really good about kind of how this is impacting our customers. We worked hard to maintain our O and M flat. That's how we're trending so far this year as well. When we think about future projections, this is really a function of the modernization program that we have in place associated with our capital investment in our systems and serving our customers more reliably and safely as we make those investments in those.

[Scott Doyle, EVP & COO at Spire Inc]

That's what will have the impact on customer bills going forward.

[David Arcaro, Analyst at Morgan Stanley]

Yes. Okay, great. Thanks for that. And then I was just wondering if you could update us on what on the level of inflationary pressures you're seeing on O and M, confidence in keeping O and M flat for this year, maybe just given we're seeing inflation kind of stickier in the broader economic backdrop?

[Adam Woodard, EVP & CFO at Spire Inc]

Sure. No, we're witnessing we're certainly seeing some continued cost pressures, but having I think we're having a showing a pretty good run rate of keeping that under control as well. So it's something that we're focused on continually, but certainly things came in. We don't expect it to be necessarily a quarter to quarter phenomenon, but we continue to feel very comfortable with our guide around O and M being flat at the utilities for the year.

[David Arcaro, Analyst at Morgan Stanley]

Okay, sounds good. Great. Thanks so much.

[Scott Doyle, EVP & COO at Spire Inc]

Hey, David, thank you for your comments about Steve and others as well. We're excited about him coming back. So we're looking forward to that.

[Operator]

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

[Megan McPhail, Managing Director of Investor Relations at Spire Inc]

We'd like to thank you for joining the call this morning and appreciate your interest in Spire. Have a great day.

[Operator]

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

Participants

Executives

• Megan McPhail, Managing Director of Investor Relations
• Scott Doyle, EVP & COO
• Adam Woodard, EVP & CFO

Analysts

• Gabriel Moreen, Managing Director at Mizuho Financial Group, Inc.
• Richard Sunderland, Analyst at JPMorgan Chase
• Shar Pourreza, Senior Managing Director at Guggenheim Partners
• David Arcaro, Analyst at Morgan Stanley