Thank you for standing by. At this time, I would like to welcome everyone to the Atmos Energy Corporation Fiscal 2024 Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Dan Meziere, Vice President of Investor Relations and Treasurer. Dan, please go ahead.

Thank you, Greg. Good morning, everyone, and thank you for joining our fiscal 2024 second 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 30 and more fully described in our SEC filings. With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin?

Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal '24 net income of $743 million or $4.93 per diluted share. And we updated our fiscal '24 earnings per share guidance to a range of $6.70 to $6.80. This performance continues to reflect the commitment, dedication, focus and effort of all 5,000 Atmos Energy employees to successfully modernize our natural gas distribution, transmission and storage systems, while safely providing reliable natural gas service to 3.4 million customers and 1,400 communities across our 8 states. For the quarter, we continue to experience robust customer growth, driven by continuing favorable employment trends in Texas, along with a strong new housing market in the North Texas area. For the 12 months ended March 31, 2024, we added over 56,000 new customers, with more than 43,000 of those new customers located in Texas. New home starts in North Texas were up 44.7% during the first calendar quarter of '24 compared to the first quarter of 2023. As a result, the annual new home start rate is now at the highest pace since mid-2022. The Texas Workforce Commission reported in April that the seasonally adjusted number of employees reached a new record high at over 14.1 million. Texas again added jobs at a faster rate than the nation over the last 12 months, ending March, adding nearly 271,000 jobs, representing a 2% annual growth rate. Industrial demand for natural gas in our service territories also remained strong. During the second quarter, we added 11 new industrial customers, with an anticipated annual load of approximately 1 Bcf once they are fully operational. Fiscal year-to-date, we've added 22 new industrial customers, with an anticipated annual load of approximately 4 Bcf once they are fully operational. On a volumetric…

Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the first 6 months of the fiscal year was $4.93, which represents a 12% increase over the $4.40 per share reported in the prior year period. Operating income increased to $950 million or 28% for the first 6 months of the fiscal year. I'll highlight a few key drivers for our financial performance. Rate increases in both of our operating segments totaled $192 million. Residential commercial customer growth in our Distribution segment, combined with higher industrial load, increased operating income by an [ additional ] $12 million. Revenues in our Pipeline & Storage segment increased $8 million period-over-period, due to wider spreads between the Waha header on the western end of APT system and delivery points in the eastern and southern ends of its system. Consolidated O&M expense decreased $13 million, primarily driven by the onetime bad debt adjustment we recorded in Mississippi in the first quarter. Excluding this impact, O&M was essentially flat period-over-period. Finally, operating income was favorably impacted by approximately $15 million from the legislative change in Texas to reduce property tax expenses that we discussed last quarter. This amount approximates $0.07. From a regulatory perspective, fiscal year-to-date, we have implemented approximately $170 million in annualized regulatory outcomes, and we currently have over $350 million in progress. Of this amount, we anticipate implementing $170 million to $180 million in fiscal '24, with the remainder in the first quarter of fiscal '25. Our balance sheet and financial position remains strong. Our equity capitalization as of March 31 was 61%, and we did not have any short-term net outstanding. During the second quarter, we expanded our available liquidity through the renewal of our four credit facilities. We now have…

[Operator Instructions] Our first question comes from the line of Richard Sunderland with JPMorgan.

Can you hear me?

Sure can.

Great. Thanks for all the clarifications around guidance and the changes there. I do just want to circle back to that and particularly the language around the roll forward of the growth rate at year-end, ex those nonrecurring items. Just for the sake of clarity, could you quantify again what those items are? And so just to be clear, those two items would then be removed from your year-end results for the purposes of calculating the growth rate on a [ 4 basis ], am I summarizing that correctly?

You are. So just to kind of reemphasize. On the Texas property tax adjustment, we're anticipating that impact to be $0.10 to $0.11. Additionally, the Mississippi bad debt adjustment was about $0.07. So when we initiate our fiscal '25 guidance, wherever we land on a GAAP basis, we'll back off the $0.10 to $0.11 and the $0.07, and that will be the rebased or adjusted earnings per share from which we will launch our fiscal '25 guidance. And as I mentioned, we're anticipating 6% to 8% growth off of that adjusted amount.

Okay. Got it. Very helpful there. And then just to parse the '24 guidance changes a little more finely. If I'm recalling correctly from last quarter, you had said Mississippi was in the prior range and then Texas property tax, there had been a little uncertainty about whether it was all incremental or not, and now we're obviously getting that update today. So is the balance of the change relative to the $0.10 to $0.11 on the Texas side? Is it the customer growth and consumption in APT spreads that you referenced in the script? Or are there any other key things we should think about in terms of trends into '25 that you're kind of illuminating today?

Okay. So lots to unpack there. So I think, again, on the $0.10 to $0.11 on the Texas property tax, that was really related to -- we're receiving the final valuations in our property tax valuations here in this quarter. And our team is working through what those final valuations will be for taxation purposes. So that's why there's a range there. On the Mississippi bad debt expense which we articulated last quarter, that was a onetime event, as a result of a regulatory change and how we recover those costs. And so again, that will -- going forward, that impact will no longer be reflected in our in our P&L, that the catch-up, if you will, related to primarily prior year periods because the adjustment dated back from April 2022, all the way through the end of calendar '23. So we had effectively recognized bad debt expense in the past that we were then allowed to reallocate back to our over under our GCA recovery balances on the balance sheet. So that was the reason for the pickups, and that's why it's a onetime event. And going forward, in terms of trends, we will update our fiscal '25 guidance here in the fall, and we'll see what happens. The summer was spread with customer growth, mortgage interest rates, and all that will be fully reflected in our '25 guidance, which we will launch later this fiscal year -- or later this calendar year.

And our next question comes from the line of Christopher Jeffrey with Mizuho.

Maybe picking up on one of the other guidance item that was updated in the CapEx guidance went up about [ $20 million ]. And apologies if you talked about it in the call already, but any kind of color there as to what kind of the spread between distribution or pipeline or anything else...

Yes, it's a little hard to understand your question there, but I think [indiscernible], you're asking about the spreads on the pipeline. Obviously, at different times throughout the year, there will be maintenance on various other takeaway capacity. That's what we've seen over the last few weeks to months and anticipate several other pipelines to have additional maintenance, which is driving some negative spreads coming out of Waha, I believe, this morning. Today's cash [ prices ] were negative $2.30. Couple of pipelines have again announced further maintenance into this month, maybe into the following month as well, which will continue to show those wider spreads for the next few week period. And Chris mentioned those in his remarks as well. So we expect it to clear up later toward the summer period.

One of my questions was about spreads on the pipeline. So maybe to clarify my last question, the CapEx guide for '24 increased from the last update. I was just hoping further color on what's driving the increase in which businesses?

Yes, as we normally do. What drives our CapEx is our safety and reliability investment. And again, Chris mentioned in his remarks that we had identified several projects before heading into the heating season that we would like to complete for reliability measures that are out there. And our team continues to evaluate safety projects that are out there or pipe programs across our various jurisdictions. We'll further identify those as we head toward our update near the October-November time frame on 2025.

[Operator Instructions] And it looks like there are no further questions. So at this point, I will turn the call back over to Dan Meziere for closing remarks. Dan?

We appreciate your interest in Atmos Energy, and thank you again for joining us this morning. The recording of this call is available for replay on our website through June 30. Have a great day.

Thanks, Dan. And again, ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.