New Jersey Resources (NJR) Q3 2026 earnings call transcript

Hello everyone, thank you for joining us and welcome to the New Jersey Resources Fiscal 2026, Quarter 3, and Year-To-Date webcast and conference call. My name is Matthew and I will be your moderator today. Please note that today's call will be recorded. After today's proposed remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again.

I will now hand the conference over to Adam Pryor, Director of Investor Relations. Adam, please go ahead.

Thank you. Welcome to New Jersey Resources Fiscal 2026, third quarter and year-to-day conference call and webcast. I am joined here today by Steve Westhoven, our President and CEO, Roberto Vell, our Senior Vice President and Chief Financial Officer, as well as other members of our Senior Management Team. Certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities laws.

We wish to caution listeners of this call that the current expectations, assumptions, and beliefs forming the basis for our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to materially differ from our expectations as now on slide 2. These items can also be found in the forward-looking statements section of yesterday's earnings release, furnished on Form 8K, and in our most recent Form 10K and 10Q, as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced here and in light of future events.

We will also be referring to certain non-gap financial measures, such as net financial earnings or NFE. We believe that NFE, net financial loss, utility gross margin, financial margin, adjusted EBITDA, adjusted funds from operations, and adjusted debt provide a more complete understanding of our financial performance. However, these non-gap measures are not intended to be as substituted for GAP. Our non-gap financial measures are discussed more fully in item 7 of our 10K.

The slides for today's presentation are available on our website and we're furnished on our Form 8K filed yesterday. Steve will start with his quarters highlights in a business unit overview beginning on slide 5, Reverter will then review our financial results. Then we'll open it up for your questions.

With that said, I'll turn the call over to our president and CEO, Steve Westhoven. Please go ahead, Steve.

Thanks, Adam. NJR delivered a solid performance for this quarter driven by disciplined execution across our complementary businesses. At New Jersey Natural Gas, we've taken important steps to balance affordability for our customers while continuing to invest in the reliability of our system. We reached a key regulatory milestone at S&T. Receiving the FERC certificate for our expansion at Weave River ahead of schedule, allowing us to advance the project and support the growth opportunities we see ahead. At Clean Energy Ventures, we continue to add in-service capacity and advance a deep pipeline of investment options.

While maintaining the flexibility to deploy capital, where it generates the best returns. Overall, the consistent execution you're seeing across our businesses supports our outlook for the and positions us well for continued growth.

With that, I'll turn to New Jersey Natural Gas. As we think about our role as a utility, our objective is to deliver the most affordable energy possible for our customers while also investing to ensure the continued reliability and resilience of our system. That philosophy is reflected in the filings we submitted to the BPU on June 1. Taving together, these filings are designed to provide our customers with meaningful bill relief ahead of this upcoming winter, while also supporting the long-term investments necessary to serve our customers safely and reliably. Importantly, we structured these filings as a cohesive package. Combining adjustments to our gas supply, conservation, and energy efficiency programs alongside our base rate case. From an overall bill perspective, the goal is straightforward.

Providing stability for our customers with bills expected to remain nearly flat once all elements of the filings are implemented. So when you step back, this is all about balance. Delivering affordability today while continuing to make investments required to serve our customers over the long term. From there, I'll turn to storage and transportation on the next slide.

At S&T, the drivers of the business remain consistent with what we've discussed previously. In the near term, S&T's performance is supported by favorable re-contracting, which provides strong visibility into earnings and reinforces the stability of the business.

Looking ahead, we expect this uplift to support a doubling of earnings from fiscal 2025 to 2027. At the same time, we are making progress on future growth opportunities at Leaf River. Our capacity expansion project remains on track. We recently received our FERC certificate. A significant regulatory milestone that supports our expected development timeline.

Overall, this is a business where we see a combination of near term certainty and long-term growth, supported by both strong market fundamentals and disciplined execution through the investment and organic growth opportunities.

With that, I'll turn to clean energy ventures on slide eight. At CEV, we continue to make steady progress with additional capacity in place to serve. At the same time, we're focused on maintaining a portfolio that maximizes the value of our existing interconnections. Position us well to help address growing capacity needs. Our project pipeline provides a broad set of investment opportunities with multiple ways to deploy capital, whether through new project development or by enhancing and optimizing existing sites.

That flexibility is intentional. It allows us to remain disciplined in how we invest, while maintaining the ability to adapt to evolving market conditions, regulatory changes, and opportunities. So overall, we feel very good about both the progress we've made and the strength of the platform we're continuing to build. I'll turn the call over to Roberto for a financial review and then return for a few closing remarks. Roberto?

Thanks, Steve. Turn to slide 10. Based on performance for the first $3.52 to $3.52 per share, narrowing the range while increasing the midpoint.

This update reflects greater visibility into full-year results and the ongoing benefit of our diversified model. With that context, let me walk through the quarter in more detail on slide 11.

Fiscal 2026, third quarter, consolidated net financial earnings were $11.3 million or 11 cents per share, an increase over the $6.2 million or 6 cents per share reported in the third quarter of fiscal 2025. Results for the quarter reflect improved contributions across several businesses. With higher earnings, actually, many ventures as additional projects have been placed into service, along with continued updates that stores in transportation, driven by favorable CV simply reflects last year's one-time gain resulting from the sale of our residential solar business.

With that, let's turn to our capital plan on the next slide. We deployed approximately $6.30 million across our businesses year to date. New years in national gas represented roughly two-thirds of total capital spend, with increased investment focused on core infrastructure, particularly in safety and reliability as we continue to support system resiliency and customer growth.

For fiscal 2026, we have increased our capital investment expectations to a range of $815 million to $950 million, up from our prior outlook of $775 million to $930 million. This increase is primarily driven by additional investment at the utility, reflecting our focus on safety and reliability initiatives. As clean energy ventures for maintaining our current investment range, reflecting the depth of opportunities in our product pipeline and the flexibility we have in the point capital. Based on products already underway, we remain confident in achieving the lower end of that range. With product optionality that could move us toward the top end, we do not have any change to our estimates for fiscal 2027, and we're reaffirming our five-year topics outlook of $4.8 to $5.2 billion through fiscal 2030.

This level of investment supports our 7 to 9 percent long-term NSEP growth target while remaining consistent with strong credit metrics.

Our capital plan remains highly visible and reignite from a diverse set of investment opportunities across our complementary businesses, rather than being dependent on any single project or outcome. We expect to provide further clarity as we roll our outlook forward in November.

Turn to our balance sheet on slide 13. The cash generation prevalent throughout our businesses is a main source of funding for our capital plan. We expect our adjusted effort to adjust the debt ratio to exceed 20 percent in fiscal 2026, reflecting the stability of our earnings and our discipline approach to capital allocation. From a liquidity standpoint, we have substantial available capacity and maintain a well-lathered debt maturity profile that limits near-term refinancing risk and positions as well across different market environments. Together, these factors reinforce the strength of our financial position and our ability to execute on our long-term plan.

Turning to slide 14, we're tightening our fiscal 2026 NSEP's guidance range to $3.52, to $3.62 per share, reflecting improved performance through the year and raising the midpoint of our range. We tighten our expected segment contribution ranges with relatively minor changes compared to our second quarter conference call. As we look ahead, we expect to revisit our segment next in November as we roll our fiscal 2027 and look forward and normalize expectations consistent with our approach each year.

With that, I'll turn to speed for concluding remarks on slide 15.

Thanks, Roberto. Overall, NJR is executing well and remains on track to achieve our long-term growth objectives. Our outlook remains anchored by our regulated utility with continued capital investment in New Jersey Natural Gas, helping to ensure safe and reliable operations while supporting long-term growth. At the same time, Natural Gas remains one of the lowest cost ways to heat a home, reinforcing its value proposition for customers. Storage and transportation is well positioned supported by near-term earnings visibility and additional upside as expansion and opportunities progress. At Clean Energy Ventures, our portfolio is scaling as expected driven by a secured development pipeline and disciplined capital deployment. This consistent execution reflects the strength and durability of our business model and gives us confidence in the path ahead.

Finally, I want to take a moment to thank our employees across NJR. Over the past year, we've talked a lot about our performance during a demanding winter, speaking to the reliability of our system, and more recently, we're attested again by the extreme heat and severe storms. During these moments, the commitment of our people truly shines, such as our home services employees working through extreme heat to ensure customers remain comfortable and safe.

When we perform through conditions like this, it reflects the strength of our infrastructure and the dedication of our people. And that's something we're incredibly proud of and thankful for.

With that, let's open up the line for questions. We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset closer to your mouth when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. And in addendum, please do not feel the need to limit yourself to one question and one follow up. Ask as many as you'd like.

Hey, Eli, thanks for the question. So, you know, you saw our filing back in June where we combined our Ray case with a number of other filings to really, you know, protect costs for consumers. Obviously, that was done purposely, so we're well aware of the cost issues for consumers. So, you know, moving forward, you know, the process to date, you know, has been, you know, normal. And, you know, you're going to see, you know, as we move through this process, you know, hopefully just the, you know, normal cycle going forward. Just one other note to add to that, you know, natural gas to keep this way, you know, heat your home business. So, we feel like we're in a good position.

And, you know, we look forward to just working through the process.

You know, obviously, you guys are tracking well above, you know, where we would think 27 would be. Can you just remind us how you think about rebasing and obviously, you know, just in the context of what implied 27 numbers would be. And, you know, when you might think about updating that rebasing. Thanks.

Hey, this is Roberto. Thanks for the question. So, we're going to provide our guidance in November for the next year. But as we usually do, we base our guidance on the 7 to 9% from the starting point and that's not changing. If you remember that starting point was $2.73 for 20 to 25. So, from their own, you can draw your friend to 9% and that's the angle of what you should expect.

So, I mean, this hasn't been any different than any other, you know, Ray Case just has a little extra color. You know, this is a normal, you know, kind of plain vanilla Ray Case like we've had before. So, really, you know, no differences. And we've just started the process. So, you know, not a lot of color, but I think if anything, you know, not any differences to point out, you know, at this point.

Yeah, I think that, you know, needs to play out a little bit more. You know, to date, you know, that those executive orders have really been focused on the electric companies. We have not been closely involved in it. But, you know, we're certainly watching it, you know, four opportunities just like you pointed out that if we can make this smoother process, you know, for all, you know, certainly, you know, look to do so. But right now, you know, kind of be an opportunistic with this process at this point.

Do you kind of anticipate the same capital intensity kind of going forward through time and maybe any color on kind of the contracting, contracting the incremental capacity, any kind of pricing data points that you're seeing? I mean, there's certainly strong demand, you know, for the services that, you know, our midstream facilities provide. You know, as far as, you know, moving forward, you know, I'd expect that, you know, expansions, you know, would continue and that capital intensity would continue. So, I think there is, you know, opportunities, you know, we've got the ability to expand, you know, Delta Gateway at compression and do other things. You know, none of these are in our capital plan, you know, currently.

But, you know, we would expect, you know, to continue to invest in those assets because they are very valuable market, you know, services are being sought after. And you can see that reflected, you know, in the re-contracting rates and the increases that we're seeing there.

I mean, you know, when we do, you know, our next year's already in November in our capital plan, you know, we'll be, you'll see that, you know, in the next, and we'll provide for more detail. But I don't really expect it to deviate, you know, for what I've just described.

So, you know, we see opportunity with CEV we've talked about before, you know, the ability to use, you know, our existing interconnect and existing infrastructure, you know, to expand and add to the capacity markets, you know, you know, capacity is, you know, more valuable. That's what we need to add to the grid in order to lower, you know, prices to consumers. So, we're looking at ways to be able to participate in that. And, you know, we've spent for a long time, you know, the cheapest way to basically add new capacity, the market is through your existing infrastructure. And we have, you know, considerable existing infrastructure, you know, not only in New Jersey, but in the Northeast of being able to add to that, you know, should be, you know, the next, you know, best cost to the grid.

So, we're working at ways, we're looking at ways to do that, you know, this CAFEX, you know, really isn't in our plan at this point in time. It's just, you know, new solar build in CEV at this, at this point. So, it would be additive to the plan. And we, you know, come up with a structure and add some more fairness around how we invest capital will share it. But, you know, suffice to say that we're optimistic, you know, about participating in this market at longer term.

Yeah. I mean, yeah, there's interest, right? There's interest in adding capacity in the market. And, you know, the load factor on our interconnects, you know, is not 100%. So, there's room to be able to use existing infrastructure to do so. It's just a matter of coming up with the right structure and then the right investment in the right returns and the right risk profile in order for us to make an investment.

All right. No, I appreciate the call. I guys have a, you know, have a great rest of your day. All right. Thank you.

There are no further questions at this time. I will now turn the call back to Adam prior for closing remarks.

Oh, thanks. And I'd like to thank all of you for joining us. Always. We appreciate your interest and investment in J. R. and have a good rest of your day.

This concludes today's call. Thank you for attending. You may now disconnect.