Good morning, and welcome to American Water's First Quarter 2022 Earnings Conference Call. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the company's Investor Relations website. The audio webcast archive will be available for one year on American's Investor Relations website. I'd now like to introduce your host for today's call, Mr. Aaron Musgrave, Senior Director of Investor Relations. Mr. Musgrave, you may now begin.

Thank you, Nick. Good morning everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. Let me first go over some safe harbor language. Today, we will be making forward-looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based on our current expectations, estimates and assumptions. However, since these statements deal with future event, they are subject to numerous known and unknown risk, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risk, uncertainties and factors as well as the more detailed analysis of our financials and other important information is provided in the earnings release and on our March 31, 2022 Form 10-Q, each filed yesterday with the SEC. All statements during this presentation related to earnings and earnings per share refer to diluted earnings and earnings per share. Susan Hardwick, our President and CEO and CFO will discuss first quarter financial results 2022 earnings and long-term guidance and our commitment to ESG principles. Cheryl Norton, our Executive Vice President and COO, will then review our regulated growth strategy, including capital investments and regulatory proceedings in the first quarter. Susan will then comment on some exciting news we shared yesterday regarding our executive management team, before closing by answering your questions. With that, I'll turn the call over to American Water President CEO and CFO, Susan Hardwick.

Thanks Aaron, and good morning, everyone. As Aaron said, I'll comment further in just a few minutes about recent announced additions to our executive team. But I want to start by saying what a privilege it has been to serve as the company's CFO these past three years. But I also must say I'm thrilled that this will be my last call as the CFO. Let's turn to slide five and six and I'll start by covering our first quarter financial results and then share some business highlights to start the year. In the first quarter of 2022, earnings were $0.87 per share, compared to $0.73 per share in the same period of 2021. Results for the regulated business drove all of the increase of $0.14 per share while market based business and other results were essentially flat as compared to the same period in 2021. Regulator results for the quarter reflect revenue increases from several general rate proceedings completed in 2021 and early 2022, as well as from infrastructure mechanism filings. These higher revenues were partially offset by higher depreciation and increased production costs due to some inflationary pressures on chemicals and energy prices. Market based businesses and other results were similar in the first quarter of 2022 and 2021, with a loss of $2 million, or $0.01 per share in both of those periods. But in those results, the $0.07 per share of earnings from HOS in 2021, was mostly offset in 2022 by the interest income and earnings from the revenue sharing agreements in place as a result of the sale of HOS late last year. While we're currently reflecting the interest income and revenue share contributions in other, they really do represent results driven by the regulated business. And will even more so once the proceeds…

Thanks, Susan, and good morning everyone. Turning to slide 11, our regulated business leaders and their teams did a great job in the first quarter executing on our increased capital plan. It took a significant effort to safely and efficiently deliver the dozens of projects that improved our systems and drove capital investment higher by nearly $100 million in the quarter compared to the same period last year. This result keeps us on pace to hit our goal of approximately $2 billion of regulated capital investment spending in 2022. Turning to slide 12, shown here is our summary of rate case filings and legislative updates. On the legislative front, there are three pieces of legislation that have passed so far this year, two in Indiana and one in Virginia. The Virginia Bill is an important confirmation of the use of standalone state specific capital structure in ratemaking proceedings for investor owned utilities. The two Indiana bills provide constructive outcomes around recovery of property taxes, as well as promoting sound, safety and asset management practices by all utilities in the state. We believe our legislative efforts benefit our customers and give communities more options as they seek solutions to water and wastewater challenges. And you can find in the appendix to today's presentation, a summary of some of our key legislative outcomes in the states we serve. You can also see on slide 12 as Susan previously indicated, this is a very busy year for general rate cases. We filed two cases already in 2022 in New Jersey and Illinois. These two filings were driven by recovery of the extensive capital investments we've made since the last cases in those states, totaling more than $2 billion combined. In New Jersey, this includes a filter rehabilitation project to improve water quality at…

Thanks Cheryl. Turning to our final slide, slide 16. And before we begin Q&A, I want to comment further on our announcement of the hiring of a CFO. As I'm sure you saw yesterday, we announced that John Griffith will be joining American Water as our Executive Vice President and Chief Financial Officer effective May 16. John comes to us from Bank of America and brings more than 25 years of industry knowledge and financial and transactional expertise. I personally know John and his capabilities, he is very talented and will bring the right skills at the right time to help American Water continue its journey of strategic execution, and delivery of superior results. As John joins us, our senior executive team is now fully in place. If you recall, Jim Gallegos, our Executive Vice President and General Counsel joined us on April 1 of this year, Jim brings nearly 20 years of regulated general counsel expertise and is already integrating nicely into the organization. We are thrilled to have both John and Jim on board now. As I've said before, I'm confident in the plan that we have in place to grow this business. And I'm confident we have the right teams in place throughout our states at the basis we serve, and here in our corporate office to achieve our goals in 2022 and beyond. And with that, I'll turn it back over to our operator to begin Q&A and we'll be happy to take your questions.

First question comes from Rebecca Yuan, Goldman Sachs.

Hi, thanks. Good morning. So first question, are there any changes to your equity issuance plans, both in terms of the $1.1 billion magnitude and timing in the middle of the five year range?

Good morning. No, no expected changes to that plan.

Okay, great. And then my second question, given the current inflationary environment, are Munis more willing to sell their utilities? Are you seeing any of that or potential opportunities to accelerate some tuck-ins?

Well, we certainly think that is going to contribute to issues that municipals will face. We haven't seen any specific opportunities pop-up because of that. But we do know that those are factors that will weigh heavily on some of these communities and their analysis and assessment of their opportunity to sell to American Water. And Cheryl, anything to add from your perspective on that.

No, not really, Susan. As you said, we haven't seen anybody specifically come forward related to that. But we do know those pressures are very real and we're able to manage them because of our size and scope where a lot of the Municipals are going to struggle with that.

The next question comes from Ryan Greenwald of Bank of America.

Hey, good morning, everyone. Congratulations on new hiring. So appreciate the color around the O&M timing. Can you guys just talk a bit more about how the quarter shook out relative your expectations? Any other particular considerations that are making you guy’s kind of hold guidance in place after what appears to be a pretty strong quarter to start the year here?

Well, Ryan, I think relative to expectations this quarter was right on target. As we said, in the call, we did have a couple of timing items, not terribly material. But really what drove the quarter was revenue associated with all the regulatory proceedings that we've been in the process of executing. And if you recall, the largest piece of that is the Pennsylvania rate increase that was effective January 28 of 2021. So this year, of course, reflects a full quarters worth of revenues associated with that increase. And obviously, that was a big driver year-over-year for the quarter. So again, the quarter for us was a very good one, but it reflected full execution on our plan, and really met our expectations. And as we said, our expectations for the year remain the same. We're very confident about our ability to deliver on the plan we have laid out for ‘22.

Excellent. And then can you guy just provide an update on Chester from your vantage point where things are in the process, timeline resolution, overall conviction levels to close the transaction?

Yes, not a whole lot to add. Not much new from our side on that. But I'll let Cheryl make a couple comments there.

Yes, so obviously, kind of held up in the courts, if you will. I think we're, I don't anticipate seeing anything probably it's possible this year, but it's going to be months out for sure.

Our next question comes from Shar Pourreza of Guggenheim.

Hey, guys, it's actually a Chen for Shar. Good morning. So I guess just wanted to build off the prior question. It looks like the customer connections for the year is a little ahead of target. Just more broadly, are you seeing increasing competition for some of these muni acquisitions?

I'd say generally, yes. In certain of our jurisdictions, we have seen certainly more competition here in the northeast, we continue to believe that we are the preferred provider and should be, we have the scale and the scope necessary to address many of the issues that these municipals face. And we have the expertise that we've demonstrated in a number of transactions throughout our service territory that really proves that, in fact, we are the best provider in all of these situations. So certainly more competition. But we remain very confident in our ability to deliver the needed services for some of these communities that need help.

Excellent. And like it's just building on the prior one as well, just on the supply chain side, as we think about O&M for the rest of the year. Anything that you've seen in the first quarter that gives you caution one way or the other or anything that we should think about as we look at the rest of year?

Yes, it's a good question. Obviously, there's still lots of impacts being felt throughout the economy. And we certainly are not immune to that. Although, I would say we're in a better position than most just given our size and scale and our ability to sort of mass purchase products that we need. There are some supply chain bottlenecks, I'd say around certain items that we use, but we've actually seen a bit of an improvement in the supply. And some of those critical items, we've seen price increases, but we've actually seen the rate of those increases start to slow down a bit, which is a positive sign. And again, just given our size and scale, we've certainly been able to manage through that so far. And we'll continue to focus on all things we can do to help mitigate those impacts and ultimately, the impacts to customers.

Excellent, thanks. So I'll just echo Ryan and say congrats on the new hires.

Next question will be from Gregg Orrill of UBS.

Yes, thank you. I was wondering if you could put into context, sort of the backlog of rate cases that you have right now relative to your sort of 7% to 9% earnings growth target, is it-- when you think about Pennsylvania and California, and what's already outstanding, do you think that could take you above trend? Or is that kind of what we're expecting? Or is there even sort of momentum that's continuing to build there?

Yes, it's a good question. I would just tell you that our current regulatory schedule, or activity is really according to our plan. We have signaled, I think for some time that you can expect us to be in the regulatory arena regularly. And certainly on our larger stage, every two to three years, we would expect to be in for general rate increases every two to three years. And I think that's reflective, also of just the level of capital spending. As you know, we have increased our spend trajectory in this last plan update we did in November. So that just again, underscores our approach to regulatory recovery, and the cycle on which we will execute that. I think it's also important to note that we have very effective mechanisms in many of our jurisdictions. And I think we're somewhere in the 65% range or so of our spend gets recovered through those mechanisms, which certainly helps on the regulatory lag side, from an earnings perspective, and helps the customer I think, sort of better plan for rate increases coming their way. So we take advantage of all those things and use those as effectively as we can to execute on the strategy. Now, long answer to your question. Short answer is, it is according to the plan, and we've continued to execute according to that plan.

It concludes the question-and-answer session, and also concludes the conference. Thank you for attending today's presentation. You may now disconnect.