SPIRE INC Q2 FY2025 earnings call

• Scott Doyle, newly appointed President and CEO, thanked Steve Lindsey and emphasized the strategy remains unchanged, focusing on organic growth, infrastructure investment, and continuous improvement. - Acknowledged employees' dedication during winter challenges where the natural gas system performed well. - Discussed regulatory matters, including progress in Missouri rate case, staff recommendation of $19 million revenue increase in ISRIS request, and Senate Bill 4 passage in Missouri. - Highlighted capital investments, with utility capex up 27% YTD, Midstream capex $84 million YTD, and FY 2025 capex target increased to $840 million.

In the second quarter, Spire Inc. reported adjusted earnings of $3.60 per share compared to $3.45 per share a year ago. The Utility segment had earnings of approximately $195 million in Q2, over $7 million higher than the previous year, driven by higher contribution margin at Spire Missouri and new rates at Spire Alabama, partially offset by lower Spire Alabama usage net of weather mitigation. The Midstream segment saw strong earnings growth due to new contracts, higher rates on renewals, and asset optimization. The Marketing segment had strong earnings but was slightly lower than the prior year due to reduced market volatility. Year-to-date, utility capex increased nearly 27% and Midstream capex totaled $84 million, with a planned increase in FY 2025 capital investment to $840 million.

• Reaffirmed long-term EPS growth target of 5% to 7%. - Firming FY 2025 adjusted earnings guidance range to $4.40 to $4.60 per share. - Lowered gas utility range by $11 million due to weather-related margin headwinds. - Raised gas marketing range by $4 million and Midstream earnings outlook by $8 million. - Increased corporate and others loss range by $4 million due to higher interest expense.

• Uncertainties in regulatory outcomes, particularly with the weather mechanism in the Missouri rate case. - Weather-related margin impacts on the utility segment, with approximately $9 million of lower margins from residential customers due to ineffectiveness of weather adjustment.

Q: Digging into the results a little bit in finer detail, some moving pieces on the segment guidance. Can you speak a little bit about 1H trends and then where you're trending on a full year basis given all these moving pieces?

A: Adam Woodard mentioned margin weakness in Missouri was taken down, midstream exceeded expectations and is trending well, and marketing is felt good about.

Q: Understood. So it sounds like the sort of weather at the utility is obviously unfortunate. Is that really the sole deviation on the utility side? I think you referenced $9 million of customer margin. Just trying to understand the weather versus where else you're having difficulty forecasting the utility.

A: Adam Woodard stated the main driver is weather-related margin, with a few other small pieces.

Q: And then with the midstream guidance, that $8 million increase, is it solely a one-off for 2025 or are you seeing a higher run rate for the business going forward?

A: Adam Woodard said there's some optimization and indicates some run rate lift over time but not a complete lift.

Q: The higher capex for Midstream, is that impacting your return expectations for the storage expansion project?

A: Adam Woodard said no, the project continues to exceed return expectations.

Q: I was curious just maybe on the weather mechanism. Could you elaborate a bit more on kind of what you see as the path forward here within the rate case, just prospects and where that could go?

A: Adam Woodard said it's front and center in the rate case, a big focus, and Scott Doyle added they proposed options like decoupling or updating weather time horizon.

Q: Your latest thinking on the prospects for a settlement within the rate case?

A: Scott Doyle said there's still a lot of work to do, with community meetings and hearings upcoming, and willingness to entertain settlement discussions.

Q: I know it's a little premature to ask about subsequent rate cases in Missouri given that you're still involved in the midst of one right now. But as far as SB 6 and its passage, can you talk about timing on future rate cases?

A: Scott Doyle said July 2026 is the first time to file based on future test year, and efforts are focused on current case.

Q: I guess my question would be just on the guidance modification. I guess listening to some of the answers and the earlier questions, it kind of sounds like the takeaway is that to the extent you can fix the weather norm mechanism in the context of this rate case, the earnings power of the utility business hasn't really changed. And then maybe you're seeing some slight structural uplift in the marketing and midstream businesses. So can you just -- am I reading that right or just how are you framing this guidance revision?

A: Adam Woodard said it's a fair assumption, expecting constructive outcome on weather mechanism and seeing structural uplift in midstream, and Scott Doyle added about macro-level momentum and capital pull-through.