American Water Works Company, Inc. · NYSE:AWK
American Water Works — Q3 2019 Earnings Presentation
38 slides from American Water Works's earnings presentation, 2019
Slide 1: 2019 Third Quarter Earnings Conference Call
2019 Third Quarter Earnings Conference Call We keep life flowing®
Slide 2: Forward-Looking Statements
Forward-Looking Statements Ed Vallejo Vice President, Investor Relations We keep life flowing® 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial resu
Slide 4: Strategy Overview
Strategy Overview Susan Story President and Chief Executive Officer We keep life flowing® 4
Slide 5: Strong Financial Performance and Growth
Strong Financial Performance and Growth Adjusted Earnings Growth** Highlights • Achieving solid business results consistently $2.88* • Continuing regulated business growth fueled $2.61* by infrastructure investments and regulated $2.34* acquisitions $1.33 • Delivering strong results from Market-Base
Slide 6: Long-Term Growth Strategy
Our Regulated Business Remains the Foundation of our Long-Term Growth Strategy 2019-2023 Plan* 2019 YTD Regulated Acquisitions 7-10% EPS CAGR Top Half of Range Market-Based Businesses • Closed 46,900 customer as of September 30, 2019 connections Market Based Homeowner Services • Signed and pending 2
Slide 7: The Regulated Businesses
The Regulated Businesses Walter Lynch Chief Operating Officer We keep life flowing® 7
Slide 8: Regulated Business Experienced Normal Weather in the Third Quarter
Regulated Business Experienced Normal Weather in the Third Quarter 2019 Third Quarter 2019 Third Quarter Average Precipitation (Period: 1895-2019) • No Weather impact overall Above average precipitation in MO offset by below average precipitation in NJ 2019 Second Quarter • $0.05 EPS unfavorable i
Slide 9: Regulated Business Activity
Regulated Business Activity Pending Rate Cases Legislative Update Virginia Rate Case – Filed November 2, 2018 Indiana Legislation • HEA 1406 – Water Infrastructure Funding (effective 7/1/19) • Capital Investment of ≈$98 million • SEA 4 – Strengthening Indiana’s Water Commitment • Requested ROE 10.8%
Slide 10: Regulated Acquisitions Update
Regulated Acquisitions Update Signed & Pending ≈ 26,400 Agreement Process Customer Connections 24 Signed/Pending Acquisitions Regulatory CA: 6 IL: 8 NJ: 1 WV: 1 Approval HI: 1 IN: 1 PA: 1 IA: 1 MO: 3 TN: 1 2019 Closed* ≈ 46,900** Customer Connections Close & 19 acquisitions in 8 states Customers Ser
Slide 11: Disciplined Focus on Expenses
Disciplined Focus on Expenses 46.1% Regulated O&M Efficiency Ratio* 41.0% 39.1% 36.6% 35.6% 35.0% 2023 Target ** 31.5% 9/30/2019 2010 2012 2014 2016 2018 LTM Adjusted O&M Expenses* ($ in millions) While 2010 2012 2014 2016 2018 9/30/2019 LTM 2010-2019 LTM adding $966 $980 $943 $948 $1,015 $1,016 0.6
Slide 12: Customer myWater available in All Regulated States
Customer “myWater” available in All Regulated States Benefits Allows our Customer Service Representatives to improve customer engagement through more customer usage data Increased transparency to customers Improved customer experiences 12
Slide 13: Financial Results & Long-Term Outlook
Financial Results & Long-Term Outlook Susan Hardwick Chief Financial Officer We keep life flowing® 13
Slide 14: Solid Quarter Results and Highlights
Solid Quarter Results and Highlights Contribution by Business Three Months Ended Three Months Ended Q3 Regulated Market Based 9/30/2019 $1.30 $0.12 9/30/2018 $1.18 $0.12* Change $0.12 - 2019 Parent & Other Total Adjusted EPS* Keystone Impairment ($0.09) $1.33 - ($0.10) $1.20 ($0.22) $0.01 $0.13 CSG
Slide 15: Strong Third Quarter Results
Strong Third Quarter Results Adjusted EPS Increased 10.8% quarter over quarter 0.02 0.03 $1.33 0.11 (0.01) $1.20 (0.02) Regulated $0.12 Parent $0.01 Sep Q3 Revenue O&M Depreciation/ Interest/Other Income Sep Q3 2018 EPS Interest/Other Taxes 2019 EPS (Adjusted)* (GAAP) * Adjusted EPS is a non-GAAP Me
Slide 16: Continued Strong Year-to-Date Results
Continued Strong Year-to-Date Results Adjusted EPS Increased 10.3% year over year, even with unusually wet weather in Q2 0.29 0.03 0.03 $2.88 0.02 0.02 0.05 (0.03) (0.05) (0.01) $2.61 (0.08) Market-Based Regulated $0.15* Businesses $0.09 Parent $0.03 Sep YTD Revenue Weather** O&M Depreciation/ HOS M
Slide 17: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Requested Revenue Rate Filings Completed* Awaiting Final Order $48 $93 $45 $10 $41 $31 Rate Cases Infrastructure Total Rate Cases Infrastructure Total Charges Charges *Annualized Revenue Increase for Rates Effective Since January 1 17
Slide 18: Narrowing 2019 EPS Guidance
Narrowing 2019 EPS Guidance Grow EPS long-term CAGR at top half of 7-10%* 2019 – 2023 Long-Term EPS CAGR Guidance** … One of the fastest growing utilities in the nation 2019 Adjusted EPS Guidance (GAAP EPS $3.57 - $3.65) 7-10% ** 2018 CAGR Narrowed 2019 EPS Guidance Adjusted EPS (GAAP EPS $3.15)*
Slide 19: Creating Shareholder Value
Creating Shareholder Value (b) Dividend Growth Target dividend growth CAGR at High End (d) of7-10% with a (c) $1.96 Payout Target of $1.62 $1.78 50-60% $1.47 $1.21 $1.33 2014 2015 2016 2017 2018 2019 2023 AWK Shareholder Value Total Shareholder Return Adjusted Consolidated Return on Equity (a) (Pric
Slide 20: Concluding Remarks
Concluding Remarks Susan Story President and Chief Executive Officer We keep life flowing® 20
Slide 21: Water's Impact on Health and Environment
Water’s Impact on Health and Environment PFAS/PFOA Lead “Before DuPont and 3M hearing in Congress, “Worries over lead contaminated drinking water activists highlight companies’ history with PFAS” in Newark, NJ” August 28, 2019, The Philadelphia Inquirer August 22, 2019, Windermere Sun “EPA floats tw
Slide 22: Q&A Session
¥ AMERICAN WATER Q&A Session
Slide 23: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Upcoming Events Vice President, Investor Relations [email protected] EEI Financial Conference November 10-12, 2019 Orlando, FL Ralph Jedlicka American Water 2019 Investor Day Director, Investor Relations December 11, 2019 [email protected] Loc
Slide 24: Appendix
x AMERICAN WATER Appendix
Slide 25: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation, including, without limitation, with respect to: earnings per share guidance; dividend growth guidance; the outcome of pending or future acquisition activity; the amount and allocation of future capital investments and expenditures;
Slide 26: 2019 Third Quarter Revenue Breakdown
2019 Third Quarter Revenue Breakdown ($ in millions) 6 11 $1,013 26 $976 (6) Regulated $26m Third Regulated Acquisitions Lower Demand Market- Third Quarter Rate & Organic & Other Based & Quarter 2018 Actual Recovery Growth Other 2019 Actual 26
Slide 27: 2019 Third Quarter O&M Expense Breakdown
2019 Third Quarter O&M Expense Breakdown ($ in millions) 9 $395 3 $390 (3) (2) (2) Regulated ($4m) Third Production Operating Customer Other O&M Market- Third Quarter costs Supplies & Billing & Expenses Based & Quarter 2018 Actual Services Accounting Other 2019 Actual 27
Slide 28: Rate Base Calculation
Rate Base Calculation* ($ in millions) $13.2 Estimated Rate Base* $12.5 As of 9/30/2019 $11.7 Net Utility Plant $18.0 Less $10.7 Advances for Construction $0.2 $10.0 CIAC – Contributions in Aid of Construction $1.3 Net Deferred income taxes*** $3.2 $4.8 Total Estimated Rate Base $13.2 As of As of As
Slide 29: Rates Effective since January 1, 2019
Rates Effective since January 1, 2019 Annualized Revenue Rate Cases & Step Increases Date Effective Increases Effective in 2019 Maryland 2/5/2019 $1(a) West Virginia 2/25/2019 19(b) New York 4/1/2019 4(c) California 5/11/2019 4(d) Kentucky 6/28/2019 13 Indiana 7/1/2019 4(e) $45 Infrastructure Charge
Slide 30: Rate Filings Awaiting Final Order
Rate Filings Awaiting Final Order Requested Revenue ROE Rate Cases Filed Company Docket/Case Number Date Filed Rate Base Increase Requested Virginia Case No. PUR-2018-00175 11/2/2018 $5(a) 10.80% $196 California Case No. A. 19-07-xxx 7/1/2019 26(b) 689 $31 $885 Infrastructure Charges Filed West Virg
Slide 31: Regulated Utilities: Rate Base & Authorized Return on Equity
Regulated Utilities: Rate Base & Authorized Return on Equity CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,061,192 $443,654 $1,249,293(b) Authorized ROE 9.20%(a) 9.79% 9.80% 9.70%(e) 10.00%(e) Authorized Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 52.80%(d) Ef
Slide 32: 2019 Closed Acquisitions as of October 30, 2019
2019 Closed Acquisitions* as of October 30, 2019 Number of Water Customer Wastewater Customer Total Customer State Systems Connections Connections Connections California 1 500 - 500 Illinois** 3 500 23,500 24,000 Indiana 2 6,200 - 6,200 Kentucky 2 400 200 600 Missouri 4 100 100 200 New Jersey 1 - 1,
Slide 33: Pending Acquisitions as of October 30, 2019
Pending Acquisitions* as of October 30, 2019 Number of Water Customer Wastewater Customer Total Customer State Systems Connections Connections Connections California 6 12,500 - 12,500 Hawaii 1 - 200 200 Iowa 1 100 - 100 Illinois 8 1,100 8,600 9,700 Indiana 1 - 500 500 Missouri 3 - 100 100 New Jersey
Slide 34: American Water's historical adjustments to GAAP
American Water’s historical adjustments to GAAP Recurring transactions typically included in our annual Five Year History of Adjustments, where material, to GAAP guidance, some of which can result in quarterly variability: results for reporting purposes: * Acquisition related expenses * Gain on Sale
Slide 35: Reconciliation Table: Consolidated Adjusted Earnings Per Share
Reconciliation Table: Consolidated Adjusted Earnings Per Share* For the Three Months For the Nine Months For the Three Months For the Nine Months Ended September 30, Ended September 30, Ended September 30, Ended September 30, Consolidated Adjusted EPS Consolidated Adjusted EPS 2019 2018 2019 vs. 201
Slide 36: Reconciliation Table: Adjusted Earnings Per Share Guidance Range
Reconciliation Table: Adjusted Earnings Per Share Guidance Range* For the Three Months For the Nine Months Ended September 30, Ended September 30, Regulated Businesses Adjusted EPS 2019 2018 2019 vs. 2018 Percentage 2019 2018 2019 vs. 2018 Percentage Diluted earnings per share (GAAP): Net income att
Slide 37: Reconciliation Table: Adjusted Return on Equity
Reconciliation Table: Adjusted Return on Equity LTM LTM September 30, 2018 September 30, 2019 Net Income $454 $635 Adjustments: Freedom Industries activities (20) (4) Keystone Impairment 54 - Contract Services Gain on Sale (14) - Tax Impact for items above (6) 1 Re-measurement from Tax Reform 125 12
Slide 38: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY LTM (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 9/30/2019 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,526 Less: Operations
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