Atmos Energy Corporation 2026 Q3 Earnings Call

Good morning, everyone, and thank you for joining our fiscal 2026 third quarter earnings call. With me today are Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab. As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on slide 32 and are more fully described in our SEC filings. With that, I will turn the call over to Kevin.

Thank you, Dan. Good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal 2026 net income of $1.2 billion or $7.33 per diluted share, and we reaffirmed our earnings per share guidance in the range of $8.40-$8.50. Our capital expenditures for this fiscal year total $3.1 billion, with over 87% of these investments focused on enhancing the safety and reliability of our distribution, transmission, and underground storage systems. Across our service territories, we continue to see steady, diversified customer growth. For the 12 months ending June 30, 2026, we added nearly 51,000 new customers, with nearly 39,000 of those new customers located here in Texas. During the third quarter, we added 600 commercial customers and over 2,500 curb commercial customers fiscal year to date.

Additionally, we added five new industrial customers during the third quarter and 12 new industrial customers fiscal year to date. The 12 new industrial customers are anticipated to use approximately 950,000 Mcf per year once they are fully operational. That is volumetrically equivalent to adding 18,000 residential customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our Atmos Energy service territories. The Texas Workforce Commission reported that Texas once again added jobs at a faster rate than the nation over the last 12 months ending June 2026. In 2026, Texas added three Fortune 500 companies, bringing the total number of Fortune 500 companies to 57, the most in the nation and highest level in Texas since 2010.

In APT, we continue to work to enhance the safety, reliability, versatility, and supply diversification of our system, as well as support the continued growth we are seeing in the local distribution companies behind APT's system. APT is currently working on two separate projects to the southeast of the DFW Metroplex that will install a total of 29 miles of 36-inch pipeline to connect two adjacent compressor stations to our Tri-City storage facility. These projects enhance system reliability and capacity for gas transported from the Haynesville and Cotton Valley shale plays to our Bethel and Tri-City storage facilities, all to support the growing DFW Metroplex. To the east of the Metroplex, we began construction of a bilateral compressor station in Carthage, Texas, that will increase the capacity of our 36-inch Line S-2 pipeline.

Finally, we are working on the final phase of the WA Loop Project to support growth in the northwestern portion of the Metroplex. This final phase will install 15 miles of 36-inch pipe, it will complete a 92-mile, 36-inch pipeline loop. All of these projects are currently scheduled to be placed into service by the end of the calendar year. This month, APT will submit its annual Rider REV tariff, seeking to reflect $160 million-$165 million in revenue credits for LDC customers on the system between November 1st, 2026, and October 31st, 2027. If this amount is approved as filed, these customers will have received over $300 million in savings through the Rider REV mechanism from November 2023 through October 2027.

Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings in excess of 97% for the first nine months of this fiscal year. During the first nine months of the fiscal year, our customer advocacy team helped nearly 49,000 customers receive about $16.2 million in funding assistance. I'll now turn the call over to Chris for his update.

Thank you, Kevin, thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the first nine months of the fiscal year was $7.33, which represents a 14.5% increase over the prior year period. Our year-to-date results include $132 million or $0.63 on the impact of House Bill 4384, $71 million was recognized in our distribution segment, the remaining $61 million was recognized at APT.

In addition to the impact of House Bill 4384, I wanted to highlight a few other drivers of our financial performance for the fiscal year-to-date period. Rate increases in both of our operating segments totaled $227 million. Operating income increased by an additional $41 million due to residential and commercial customer growth and increased customer load. APT's through system revenues, net of Rider REV, increased about $34 million or $0.16. This increase continues to reflect the significantly higher spreads realized during fiscal 2026 compared to fiscal 2025 that we've been discussing this entire fiscal year. During the first nine months of fiscal 2026, the spreads we captured averaged $4.66 compared with $1.77 in the prior period, reflecting rising associated gas production, constrained takeaway capacity, and lower demand due to unseasonably warm weather during the past winter heating season.

Consolidated O&M decreased $14 million, reflecting higher employee compliance and safety-related spending in our distribution segment, higher maintenance spending at APT, all offset by the impact of the implementation of the House Bill 4384 deferrals. From a regulatory perspective, since the beginning of the fiscal year, we have implemented $396 million in annualized operating income increases. Of this amount, $260 million was implemented during our third and fourth fiscal quarters. Currently, we have seven filings in progress, seeking nearly $334 million in annualized operating income increases. We expect to implement most of this amount in the first quarter of fiscal 2027. Our equity capitalization as of June 30th was 60%, and we do not have any short-term debt outstanding. At quarter end, we had $4.6 billion in available liquidity to support our operations.

This includes approximately $937 million in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal 2026 equity needs and a significant portion of our anticipated equity needs for fiscal 2027. As we reported last night, we reaffirmed our fiscal 2026 earnings per share guidance in the range of $8.40 to $8.50. APT's through system business during the third fiscal quarter was in line with our expectations. Beginning in June, spreads have narrowed significantly now that additional takeaway capacity has come online, some sooner than expected. Additionally, O&M spending in fiscal 2026 is trending slightly higher. We now expect fiscal 2026 O&M, excluding bad debt expense, to be in the range of $875 million-$885 million. We remain on track to spend approximately $4.2 billion in capital expenditures for fiscal 2026.

We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions.