Atmos Energy (ATO) Q3 2026 earnings call transcript

I will now hand the conference over to Dan Mazzir, Vice President of Investor Relations and Treasurer. Dan, please go ahead. Thank you, Lucas. Good morning everyone and thank you for joining our fiscal 2026 third quarter earnings call. With me today are Kevin Acres, President and Chief Executive Officer and Chris Forsyth, Senior Vice President and Chief Financial Officer.

Our earnings release and conference call slide presentation, which we will reference in our 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, and good morning everyone. We appreciate your interest in happiness energy. Yesterday, we reported year-to-day fiscal 26 net income of $1.2 billion or $7.33 per diluted chair, and we reaffirmed our earnings per shared guidance in a range of $8.40 to $8.50. Our capital expenditures for the fiscal year total $3.1 billion, with over 87 percent 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, but nearly 39,000 of those new customers located here in Texas. During the third quarter, we added 600 commercial customers and over 2,500 commercial customers fiscal year-to-day. Additionally, we added five new industrial customers during the third quarter and 12 new industrial customers fiscal year-to-day. 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 in vital road, natural gas plays, and economic development across our Atlas Energy Service territory. 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. And in 2026, Texas added three Fortune 500 companies, bringing the total number of Fortune 500 companies to 57, the most in the nation at the 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 company behind APT systems.

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 to 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's Shell Place to our Bethel and Tri-City storage facility, 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 S2 pipeline.

Finally, we are working on the final phase of the WALOOT project to support growth in the northwestern portion of the Metroplex. This final phase will install 15 miles of 36-inch pipe, and 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 ref tariff seeking to reflect 160-165 million in revenue credits for LDC customers on the system between November 1st, 2026, and October 31st, 2027. This amount is approved as filed. These customers will have received over $300 million in savings through the rider ref 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.

Finally, 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, and thank you to everyone for joining this morning. As Kevin mentioned, earnings could share for the first nine months of fiscal year for $7.33, which represents a 14.5% increase over the prior year period. Our unit results include $132 million or 63 cents on the distribution segment, and the remaining $61 million is 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 acceptance told $227 million. Operating increase can increase by an additional $41 million due to residential and commercial customer growth and increased customer growth. APT's through system revenues, net a brighter rev, increased about $34 million or 16 cents.

This increase continues to request the Smith Wing Hire spreads realized that during fiscal 26, compared with fiscal 25, that we've been discussing this entire fiscal year. During the first nine months of fiscal 26, the spreads be captured to average $4.66 compared with $1.77 in the prior period, affecting rising associated gas production, considering takeaway capacity, and lower demand due to unsivvy warm weather during the past winter hitting season.

Finally, consolidated O&M decreased $14 million, reflecting higher employee compliance and sacred spending in our distribution segment, higher maintenance spending and APT, all offset by the impact of the implementation of the House Bill 4384 to furls. From a regulatory perspective, since beginning of the fiscal year, we have implemented $396 million in annualized operating income increases. 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 short-term debt outstanding. At quarter end, we had $4.6 billion in available liquidity to support our operations. This includes approximately $937 million, and that proceeds available under existing forward celebrations, which is expected to satisfy the remainder of our anticipated fiscal 26 equity needs and the significant portion of our anticipated equity needs for fiscal 27.

As we reported last night, we reaffirmed our fiscal 26 earnings for shared guidance in the range of $8.40, $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 in line, some sooner than expected. Additionally, ONM spending in fiscal 26 is trending slightly higher. We now expect fiscal 26 ONM, excluding that debt expense, be in the range $875,885 million.

Finally, we remain on track to spend approximately $4.2 billion in capital expenditures for fiscal 26. We appreciate your time this morning and your interest in that and this energy will now open up the call for questions.

Yeah, well, good morning again. As you mentioned, we've reaffirmed our guidance in the range of $8.00 from 40 cents to $8.50. As I mentioned, APT's performance in the third quarter was in line with our expectations. But as I also highlighted, we are seeing a significantly narrower spreads, beginning in the latter half of the third quarter and continuing that through today as a result of additional takeaway capacity coming online, which was coming online sooner than expected. A couple of different pipes, expected to go online in the fourth quarter of the calendar year.

And they came on one in late June and one year in late July. And they're beginning to ramp up, which has had a causing and compression of the spread. So all in all, we are standing by our $8.40 to $8.50 range of EPS for $5.26. And we will see where the fourth quarter takes this in terms of spread opportunities and other operational factors for the remainder of the fiscal year.

I understand your question correctly. In terms of if you're talking about APT, we certainly had mentioned before that we will continue to reflect in our base plan that we will roll forward in the fall and amount coming from APT's three-system business in line with the benchmark that we have established at roughly $107 million with respect to O&M, you know, in our five-year guidance that we have out there right now, we anticipated 4% of O&M increase per year. And we'll refresh that when we roll up when we roll forward the five-year plan and let it fall.

Yeah, Richard. Thanks for the call. Thanks for the question this morning. As you mentioned, we did pick up the 8 cents in the third quarter with the tightening of the spreads. I would say that we're probably going to be in the lower end of that range at this point in that 8 to 12. So we'll see. I think again, we'll have to continue to see what happens with maintenance on some of this, you know, this takeaway capacity where the summer heat load is going or winter cooling load, excuse me. And we'll just see where we go from that. But I think the lower end of that range is more appropriate.

Yeah, as typical at this time of year, it's more related to ongoing activity across the Metroplex and other areas with the growth that we're seeing line locate activities, ongoing compliance and maintenance activities in that area. But that's what we normally see around this time of the year.

Good morning. You know, fiscal 26 is a step year change as a result of the implementation of 77-102. And as we've said, going forward, we expect that, you know, year over year to be more in line with what we've experienced in the past with respect to, say, at Rule 8209. So as we said at the end of the second quarter, you know, we are anticipating of launching 6 to 8 percent earnings for sure grow off of our current range or guidance range of $8.40 and $8.50. So that's the flex that is more of a moderation effect going forward. Now that we've got a full year's impact of the Rule under a bell at this point.

And then maybe just wanted to see the latest timing and your confidence level around the mid-tech cities, RRM, and maybe like how you see yourself positioned on customer bill or affordability in Texas more broadly? Yeah, if you look at our deck that's out there, particularly our May investor deck, I think it's slides 18 through 21 or 22, we have good information out there about affordability, both from a customer bill perspective where we remain the lowest bill in the house. You want to look at it on an energy comparison basis, kill a lot to kill a lot of BTU to BTU. Across our service territories, we range from 2 to 4 percent lower than electricity on a household basis.

Then you're going to look at wallet share both from a low income and immediate income perspective. We range from 1 to 1.2 percent of the wallet with only electric side ranging at about 2 to almost 3 times wallet shares. So we think our team continues to do an excellent job of keeping the affordability top of mind, focusing on things we can control and being an official provider.

Well, as we said, Chris, Chris just highlighted where we think we're going to be on the guidance he gave before at the lower end of the 8 to 12 cent range. Again, we budget the benchmark for rider ref and we'll continue to monitor what we see over the next few months as we head into the fall and the heating season. Definitely know Crystal Balls here. We're not going to try and guess what's going to be going on in that period. We'll just have to see what the rest of the summer cooling load looks like. And then as we move into the fall, the winter and fall show up early and cause a spike in demand.

What does that look like? So again, pretty much back to basics as we do every year, year in and year out. We're going to budget the benchmark and then we'll see what comes our way from there.

We appreciate your interest in atmosphere and thank you again for joining us this morning. The recording of this call is available for replay on our website through September 30th, 2026. Have a good day.