Welcome to Southwest Gas Holdings First Quarter 2025 Earnings Conference Call. Today's call is being recorded, and our webcast is live. A replay will be available later today and for the next 12 months on the Southwest Gas Holdings website. All participants are currently in a listen-only mode. A question-and-answer session will follow the prepared remarks. [Operator Instructions] I will now turn the call over to Justin Forsberg, Vice President of Investor Relations and Treasurer of Southwest Gas Holdings. Please go ahead.

Thanks, and hello, everyone. Thanks for joining the call today. This morning, we issued and posted to Southwest Gas Holdings website our first quarter 2025 earnings release and the associated Form 10-Q. The slides accompanying today's call are also available on Southwest Gas Holdings website. We'll refer to those slides by number throughout the call today. Please note that on today's call, we will address certain factors that may impact 2025 earnings and discuss longer-term guidance. Information that will be discussed today contains forward-looking statements. These statements are based on management's assumptions on what the future holds that are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. This cautionary note as well as a note regarding non-GAAP measures is included on Slides 2 and 3 of this presentation, in today's press release and in our filings with the Securities and Exchange Commission, which we encourage you to review. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement. As shown on Slide 4, on today's call, we have Karen Haller, President and CEO of Southwest Gas Holdings; and Rob Stefani, Chief Financial Officer of Southwest Gas Holdings; as well as Justin Brown, President of Southwest Gas Corporation; and other members of the management team available to answer your questions during the Q&A portion of the call today. I'll now turn the call over to Karen.

Thanks, Justin. Thank you for joining us today to discuss the Southwest Gas Holdings results and outlook. We want to briefly address the delay in the timing of our earnings announcement and call. Centuri has an issue arise late in the process of finalizing its financial statements for the quarter that caused a delay in the process of issuing the Centuri financial statements. That delay caused a corresponding delay for us as Centuri remains a consolidated subsidiary. The issue has now been resolved and we do not intend to go into any further detail on this topic. We look forward to discussing our Q1 results with you today. Starting with Slide 5. During the first quarter, we continued to make considerable progress positioning Southwest Gas for long-term success and growth. We advanced our regulatory strategy with constructive outcomes in our Arizona and Great Basin rate cases, and we continue to work collaboratively with our regulators to implement regulatory frameworks that support the significant growth we are experiencing in the communities we serve. We continue to see tangible benefits from our utility optimization strategy. Southwest Gas finished the quarter with record net income and slightly lower quarter-over-quarter O&M expenses and remains committed to its culture of continuous improvement and optimization. With the Arizona rate case decision now behind us, we are confident in reaffirming each of Southwest Gas' previously communicated guidance ranges including our net income range of $265 million to $275 million for the full year. We continue to expect robust capital spending driven by the need for safety and reliability, as well as economic activity in our service territories. I will discuss guidance in more detail later. Following two consecutive years of a return on equity of over 8%, we finished the quarter with a trailing 12-month ROE of…

Thanks, Karen. On Slide 9, you'll see an overview of the progress we've made on our regulatory strategy as well as it remains open for this year. Rates became effective in Nevada early in the second quarter last year after a positive outcome on our rate case. The commission authorized an increase of nearly $300 million in rate base and a revenue increase of approximately $59 million, which represented 98% of our request after consideration to proposals on depreciation expense and cost of capital. At Great Basin, refresh rates that went into effect last September, were later adjusted in November to reflect settlement rates and a final decision was issued this past March. I'll discuss our completed Arizona general rate case and our pending California rate case in more detail on the next few slides. But I'm pleased with the progress we've made on refreshing rates and minimizing regulatory lag in each of our jurisdictions as we remain steadfast in our commitment to working collaboratively with our regulators on constructive outcomes that benefit all parties. Before moving to Slide 10, I wanted to mention a couple of other noteworthy initiatives that we're currently pursuing in Nevada. First, at Great Basin in response to inquiries about available capacity and the increased demand for natural gas Great Basin posted a notice of binding open season for potential 2028 system expansion. This open season will remain open through May 2028, so we can determine the level of interest of existing and potential new shippers. At Southwest Gas, we are working with policymakers on legislation that supports the use of alternative forms of ratemaking that would allow the use of formula rates, multiyear rate plans or performance-based rates. This bill referred to as SB 417 was recently passed out of the unanimously and will…

Thanks, Justin. On Slide 15, we provide an adjusted consolidated earnings walk. During the first quarter, the utility Southwest Gas benefited from rate relief in each of our jurisdictions. Nevada rates, as you'll recall, went into effect in April 2024 and Arizona rates went into effect in March 2025. We also saw continued customer growth, along with slightly lower O&M expense, all of which contributed to higher net income. These benefits were partially offset by increased depreciation and amortization as a result of investment in our system as well as higher interest expense and lower other income, both of which were primarily driven by changes in regulatory balances associated with the PGA mechanism and separately COLI. I'll provide more detail on Southwest Gas in a moment. Centuri's results for the quarter benefited from a higher volume of work under master services agreements, increased bid work and storm-related activity. Additionally, lower interest expense contributed positively to the quarter. These improvements were partially offset by a reduction in offshore wind project revenues compared to the prior year. Centuri's net income results for the quarter at the consolidated Southwest Gas Holdings level differ from Centuri's reported stand-alone net income results on an interim basis, primarily due to the impacts of non-controlling interest. Southwest Gas Holdings stand-alone results for the quarter also reflect lower overall operating expenses and reduced interest expense on outstanding borrowings. Moving on to Slide 16, we provide a bridge of quarter-over-quarter performance drivers for Southwest Gas. In the first quarter of 2025, utility operating margin increased by $38.9 million, this improvement was primarily driven by the benefits of $27 million of combined rate relief throughout our service jurisdictions. Customer growth drove an additional $5 million of margin as approximately 40,000 new meter sets were added over the past 12 months.…

Thanks, Rob. We are pleased with our first quarter results and aim to carry this momentum through the rest of 2025. On Slide 20, we reaffirm our 2025 utility net income guidance range of $265 million to $275 million with the completion of the Arizona rate case and strong regional economic outlook in our service area, we remain confident in our previously stated range. Additionally, for 2025 and further out, we reaffirm all of our other guidance metrics. While we continue to expect impacts from the regulatory cycle to result in nonlinear net income growth over the forecast period, our regulatory strategy and our plan to achieve a flat O&M per customer trend over the same period are expected to be important components of our growth story going forward. You can find additional long-term drivers in the appendix of our presentation on Slide 27. As a reminder, each of our forward-looking forecasts compounded annual growth rates are calculated off a 2025 base year. Before we open the call up to Q&A, I want to point to Slide 21 and emphasize that our team is focused on executing our strategic priorities, delivering strong financial results and providing exceptional service to our customers. At Southwest Gas Holdings, we are confident in our path forward as a premier pure play natural gas utility. We plan to continue delivering steady organic rate base growth through strong regional demand dynamics as well as earnings growth through financial discipline, operational excellence and constructive regulatory relationships. We'll continue to execute the next steps to fully separate Centuri to create a more attractive value proposition for stockholders. With that, I'd like to open the call for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] One moment please, for your first question. Your first question comes from the line of Ryan Levine from Citi. Please go ahead.

Good morning. Hi…

Good morning, Ryan.

Hey. What's the current status of your plans to exit Centuri? And more specifically, has there been any change to interest levels from potential investors in the recent weeks?

With respect to Centuri, I think that our plan continues to be – what we've indicated before, we're committed to the separation of Centuri. We have several options there. I think as I noted earlier, we have the ability to file an S-3 now that we're a year past the IPO, which allows us – will allow us to execute in the market without the delays previously we would have had. And so we will continue to monitor those conditions and look at our options, whether that be a sell-down or exchange or some combination thereof.

Okay. And then what are the financial implications of the SIM if the settlement is approved relative to your longer-term EPS growth target?

Hi Ryan, it's Justin. I think part of it is we need to wait until it's actually approved. What we've proposed and what the settlement parties agreed to, basically as we've indicated represents about 40% of our non-revenue producing infrastructure investment in the stake each year. And so once we get that approved, we'll have better clarity around kind of the timing and what projects are actually approved for 2025 and we can probably provide future guidance at that time or as part of our annual earnings guidance that we do in February as well because as we've indicated previously, our current plan does not include anything associated with approval of the SIM.

Okay. And then on the PGA, the balance has moved down pretty substantially in recent quarters. And you highlighted in the prepared remarks, the opportunity in Nevada to return some of that capital. Is there any meaningful impact to your ATM issuance need as a result of the outcome of that Nevada proceeding or the faster recovery of the PGA balance?

Hey Ryan, this is Rob. As we talked about, I think if we end up returning that cash more rapidly, we have the cash balances on hand right now to support that. The – and just with respect to the ATM usage, that would just continue to reiterate any ATM usage would be impacted by kind of the form of the next separation step that we take at Centuri. Obviously, if we execute a sell-down, and we're bringing cash into the company and that may obviate the need for the ATM usage.

Okay. And then last question for me. I appreciate the comment about the accounting issue. To the extent you're able to answer, has there been any change to Southwest Gas's internal controls or accounting processes in recent quarters or anything to highlight? Because I think it was the first time that the company is over – had a delay in earnings call in decades?

Yes, Ryan, as I mentioned before, an issue arose late in the process at Centuri, which impacted Southwest Gas since we are consolidated. But there have been no changes in controls with Southwest Gas that were related to that or need for those as results.

Okay. Appreciate the time.

Thank you.

Thank you. [Operator Instructions] Your next question comes from the line of Dylan Lipner from Ladenburg. Please go ahead.

Hey, good morning team. Congrats on a great quarter.

Thank you.

Thank you.

So – with the influx of data centers and semiconductor manufacturing into Arizona, can you guys speak to the, the incremental CapEx, investment opportunities demand presents and potentially how you're engaging with regulators to ensure timely recovery and alignment with long-term rate base growth.

Hey Dylan, it's Justin. Yes, I think from our perspective we have kind of structures in place to deal with these options. Whether it's with Great Basin and kind of the open season process or at the state level, we have line extension policies and practices that the commissions have supported that we believe would address anything. I think, a lot of the stuff that we're seeing right now isn't necessarily built into our guidance as we haven't had any kind of material changes to what we were forecasting in terms of our rate base and CapEx spend and rate base growth over our guidance period. But we'll continue to monitor that. And as we get greater interest or kind of firm commitments, we'll obviously note that and make those adjustments as well.

Great. Appreciate it, guys. Thanks.

Thank you. And your next question comes from the line of Richard Sunderland from JPMorgan. Please go ahead.

Hey, good morning. Thanks for the time today. Just apologies if you just hit this because I was cutting out for a minute. The Great Basin open season, is that binding? And then how much CapEx would be associated with that and over what time frame? Thank you.

Yes, Rich, it's Justin. Yes, so that is a binding open season. It's open through the end of the month. So at that point in time, we'll have a better indication of, what to expect in terms of kind of future CapEx changes to the guidance that we've already provided.

Okay. Got it. So no sense at this point of how much incremental capital could flow through Great Basin?

No, that's a confidential process until that open season closes.

Okay, understood. That's all for me. Thank you.

Thank you. [Operator Instructions] There are no further questions at this time. I would now hand the call back to Mr. Justin Forsberg for any closing remarks.

Thanks, and thanks everyone for joining us today and for your questions. This concludes our conference call. We appreciate your interest in Southwest Gas Holdings and we'll see many of you soon at the AGA Financial Conferences and other conferences.

Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.