Hello. My name is Jamie and I will be your conference facilitator. At this time, I would like to welcome everyone to the MDU Resources Group 2024 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer period. [Operator Instructions] The webcast can be accessed at www.mdu.com under the Investors heading select Events & Presentations and click Q2 2024 Earnings Conference Call. After the conclusion of the webcast, a replay will be available at the same location. I would now like to turn the conference over to Jason Vollmer, Vice President, Chief Financial Officer and Treasurer of MDU Resources Group. Thank you. Mr. Vollmer, you may begin your conference.

Thank you, Jamie, and welcome everyone to our second quarter 2024 earnings conference call. You can find our earnings release and supplemental materials for this call on our website at www.mdu.com under the Investors tab. Leading today's discussion with me is Nicole Kivisto, President and CEO of MDU Resources. Also, with us today to answer questions following our prepared remarks are: Stephanie Sievert, Vice President Chief Accounting Officer and Controller of MDU Resources; Jeff Thiede, President and CEO of Everus; Rob Johnson, President of WBI Energy; and Garret Senger, Chief Utilities Officer. During our call, we will make certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations are based on reasonable assumptions, actual results may differ materially. For more information about risks and uncertainties that could cause our actual results to vary from any forward-looking statements, please refer to our most recent SEC filings. We may also refer to certain non-GAAP information. For a reconciliation of any non-GAAP information to the appropriate GAAP metric, please reference our earnings release. I will provide consolidated financial results later during the call. But first, I'll turn the call over to Nicole for her formal remarks. Nicole?

Thank you, Jason and thank you everyone for spending time with us today and for your continued interest in MDU Resources. I'm pleased to share our second quarter results with all of you. These results directly reflect the exceptional efforts and dedication of our employees and I want to express my gratitude for their hard work. We continue to make great progress towards finalizing the tax-free spin of our Construction Services business Everus. During the quarter we announced the management team who will lead Everus following the spin. This team possesses the experience and expertise necessary to drive Everus' growth well into the future. We are on track to complete the spin-off later this year and we will continue to provide updates as we reach future milestones. As we look ahead, we will remain focused on our core strategy with our pure-play regulated energy delivery businesses and we are well positioned for growth into the future. Our current long-term guidance forecasts $2.7 billion of regulated capital investment, driving 7% compound annual growth rate on our utility rate base with an anticipated customer growth of 1% to 2% annually. We expect this to lead to long-term EPS growth of 6% to 8% and we are targeting a 60% to 70% annual dividend payout ratio with no anticipated equity needs until 2027. Our second quarter results maintain the positive momentum we have experienced in preceding quarters. Notably, our utility business has demonstrated solid results despite unfavorable weather, driven by strategic rate adjustments and expanding infrastructure investments. Meanwhile, our pipeline segment achieved unprecedented second quarter earnings, driven by record-breaking transportation volumes and increased storage revenues. Additionally, Everus experienced record second quarter earnings and all-time record backlog. All of these achievements across our businesses underscore our unwavering commitment to delivering safe and reliable service…

Thanks Nicole, and I'm pleased to share the details of our results for the second quarter. This morning, we announced second quarter earnings of $60.4 million or $0.30 per share on a GAAP basis compared to second quarter 2023 GAAP earnings of $130.7 million or $0.64 per share. Second quarter income from continuing operations was $60.6 million or $0.30 per share compared to $147.6 million or $0.72 per share in 2023. It's important to note that we completed the spin-off of Knife River on May 31 last year. So Knife River results and other related impacts are reported as discontinued operations in our GAAP-based results for the prior year. In addition, we experienced an unrealized gain on the retained stake of Knife River shares in the second quarter of 2023. This gain was $90.8 million net of tax and was reported in continuing operations in 2023. With the completion of the Knife River spin-off and we're continuing on the Everus spin-off, we are also reporting adjusted income from continuing operations to provide financial results to more closely correlate with and better outline the strength of our ongoing business operations. For more information on these adjustments, please reference our earnings release. We experienced solid results from all of our businesses in the second quarter with adjusted income from continuing operations of $65.2 million or $0.32 per share, compared to second quarter 2023 adjusted income from continuing operations of $60 million or $0.29 per share. Turning to our individual businesses. Our utility business reported earnings of $10.5 million for the quarter, compared to earnings of $13.1 million in the second quarter of 2023. The Electric Utility segment reported second quarter earnings of $15.5 million, compared to $16.3 million for the same period in 2023. The decrease was largely the result of lower…

Thank you. [Operator Instructions] Your first question will come from the line of Brent Thielman with D.A. Davidson.

Hi. Thank you. Just had a question in regards to Everus and maybe a discussion by quality of the backlog being added at that business maybe how the mix of what you're doing has shifted a couple of years ago and to what degree that's influencing the margin profile you expect going forward?

Yes absolutely. I'll ask Jeff to take that question Jeff?

Thanks for the question Brent. Yes. The data center work is one of the most significant largest areas of our backlog. We don't really break down our backlog or market sector levels. But if you take a look at our list as I have in front of me it's very diversified. So data centers, semiconductors, industrial work is all contributing to our record levels of backlog. As far as our margins we're still seeing a competitive market but margins are comparable and we look for that margin uplift through executing these projects and exercising our operational excellence initiatives that we have to be able to continue our growth.

And -- I appreciate that Jeff. Maybe just as a quick follow-up maybe to what degree are some of the other sectors of the construction economy working against you obviously data centers and industrial are strong. I imagine utility is as well. Are you seeing more slack in other areas of the economy that sort of booking against you? Or are you able to navigate that?

We really do a good job with pivoting from one market to the next. If you take a look at our commercial area, in the hospitality area in the country most notably Las Vegas. We had a white hot market and we anticipated some of those projects coming to successful completion. So we've deployed some of those resources into other areas of the country. And most notably we been able to pick up some additional data center work with those key performers in our business.

Okay. Thank you.

[Operator Instructions] Your next question comes from the line of Ryan Levine with Citi. Please go ahead.

Hi, everybody.

Good afternoon, Ryan.

Good. How are you?

Good.

Maybe sort of on Everus. What do you – what’s causing some of the timing delay for revenues in the quarter? And is that targeted in certain segments of the business or certain geographic locations?

Yes, go ahead, Jeff.

Thanks for the question Ryan. Primarily in our Electrical and Mechanical segments some of our new project starts haven’t perfectly aligned with large project completions mostly in the commercial hospitality market. Las Vegas related. Project timing is the key. Nevertheless, we have several significant projects that are in preconstruction with some of those same people that came off of those projects in that White – Las Vegas market. And these people have been redeployed and mobilized on site. We’ve started some initial construction phases and we’re in final stages of completing some final budgets that are going to result in increases to our contract values and therefore our backlog. Our data center, our manufacturing, our healthcare. our solar work, our institutional projects are all areas of focus. And as these projects build momentum we’ll see results reflected in future quarters. I am confidence in our guidance ranges, especially given our record backlog and coming off of a record Q2 performance and really the market availability for our projects that fit right into our wheelhouse and backed up by some of the funding that we’ve seen from the IIJA, IRA and the Chips Act.

Given that response what’s enabling to be a higher margin profile for the current year if there is these type of issues?

That comes down to project execution. A lot of our projects we do an exhaustive job of planning. And when we get good favorable weather and we get a schedule that helps support our production rates. And of course safety is always at the top of our list when it comes to planning. Those contribute to favorable margins going forward.

Okay. And then specifically to the Ohio data center opportunity is the upcoming PJM workshops related to the Amazon ISA having any impact on the pace of your Ohio data center growth?

Not specifically. But I’ll tell you we have so much data center work there. We’re also looking at a semiconductor facility to be able to capitalize on the other three regions in the country where we support this confidential client. So to answer your question specifically we haven’t seen any of that impacting our current and our future workload. We’re very strong in that market. We’ve got a great company and we’ve been able to grow that part of our business at a very fast rate.

And then last question in terms of the targeted spin next quarter, given that we’re only a few months away, do you have any updated thoughts around if MDU plans to retain any equity stake in the potential spin co? Or any updated thoughts around financing into that event?

Yeah. Ryan this is Jason. I can feel that question. Certainly we're excited about the progress we're making on the future spin of the Everus business here. Things are going along well in that regard. We are planning a late 2024 spin as you indicated here. So kind of think fourth quarter timeframe for that. We will be out at an Investor Day as Jeff and Nicole mentioned here a little bit as well prior to that. So stay tuned for dates and times are well. We'll put those out publicly here so we get those held in the future. But overall as we think about how we look to structure this business, we want to make sure that Everus is well capitalized and able to compete well within its space and also ensure that the MDU Resources companies left behind here will be strong and be able to continue to grow without any left liabilities from that business. So we're excited about the opportunity for both of these businesses. With the Knife River transaction as you mentioned we have retained a stake in that business. We are maintaining flexibility here to ensure that both businesses are setup to be very strong going forward. But we've not made a final decision on that at this point yet. We will as we finalize our Form 10 and make that public document later this year have pro forma financial statements. They will walk through the capital structure for the Everus business and certainly would address any retained stake potential in that document as well. But that's not something that we have made a final decision at disclosed publicly at this point in time yet.

Thanks for the time.

Thank you.

Yeah.

[Operator Instructions] The webcast can be accessed at www.mdu.com under the Investors heading select Events & Presentations and click Q2 2024 Earnings Conference Call. After the conclusion of the webcast, a replay will be available at the same location. At this time there are no further questions. I would now like to turn the conference back over to management for closing remarks.

All right. Thank you. And I'd like to thank all of you for taking the time to join us on our second quarter conference call. We are certainly optimistic about our growth opportunities in our future regulated energy delivery projects and excited about the strong demand and performance of Everus, as we look to spin that business later this year. We thank you again for your interest and support of MDU Resources. And with that, I'll turn the call back over to you, operator.

Thank you. This concludes today's MDU Resources Group conference call. Thank you for your participation. You may now disconnect.