Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total active service connections increased by 4.7% to 63,889 as of September 30, 2024, indicating strong organic growth.
- The company invested $19.2 million into infrastructure improvements, enhancing service reliability and safety.
- Zero significant compliance events were reported for the quarter, maintaining a seven-year streak of compliance.
- The multifamily housing unit permits in the city of Maricopa increased by 281% year-over-year, indicating strong demand and growth potential.
- Adjusted EBITDA increased by 7.2% to $8.2 million in Q3 2024, reflecting improved financial performance.
Negative Points
- Total revenue for Q3 2024 decreased by 1.5% compared to Q3 2023, primarily due to non-recurring ICFA revenue.
- High inflation and other cost drivers are impacting earnings growth.
- The company is facing increased costs without new rates to address these, as the last rate test year was in 2019.
- Operating expenses, although decreased, still reflect challenges in managing costs effectively.
- The Tucson acquisition approval process is ongoing, with closure not expected until the first quarter of 2025, indicating potential delays in growth initiatives.
Q & A Highlights
Q: How do you view the political landscape changes and their impact on the greater Phoenix area and your operations?
A: Ron Fleming, CEO, noted that the economic development investment in Arizona, particularly in industrial manufacturing, has been increasing significantly. He believes the political changes will add more momentum to this trend, benefiting areas like the inland port project and the city of Maricopa due to factors like land availability, housing affordability, and power supply infrastructure.
Q: Can you provide details on the Buckeye premium for this quarter?
A: Michael Liebman, CFO, reported that the Buckeye premium was just under $920,000 for the quarter, up from about $730,000 in 2022, marking a 25% increase. Year-to-date, it stands at approximately $2.2 million, up over 35% from the previous year, reflecting strong performance due to affordability compared to metro Phoenix.
Q: What are the key factors driving growth in your service areas?
A: Ron Fleming, CEO, highlighted the booming economy and net immigration in Arizona, which necessitate more housing and industrial projects. The shift towards large-scale multifamily housing and commercial developments in areas like Maricopa is notable, alongside ongoing industrial manufacturing growth, including significant investments from companies like TSMC and Intel.
Q: How are you addressing the impact of high inflation and cost drivers on earnings growth?
A: Ron Fleming, CEO, acknowledged the impact of high inflation but emphasized that 2024 is a test year for their largest utilities. They plan to file for new rates to address cost increases and significant investments made over the past five years, which will support future earnings growth.
Q: What is the status of your regulatory activities and strategic initiatives?
A: Christopher Krygier, COO, provided updates on regulatory activities, including the Tucson acquisition approval process and ongoing rate cases. The company is preparing to file a rate case for its largest utilities in the first half of 2025, with an expected commission order approximately one year after filing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
