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Ladies and gentlemen, thank you for standing by, and welcome to the Atmos Energy Corporation Fiscal 2023 Second Quarter Earnings Conference Call. I would now like to turn the call over to Dan Meziere Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Mandy. Good morning, everyone, and thank you for joining our fiscal 2023 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 32 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 you joining us today and your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal 2023 net income of $630 million or $4.40 per diluted share. As you will hear from Chris, results were in line with our expectations and positions us for another successful fiscal year. This performance continues to reflect the commitment, dedication, focus and effort of all 4,800 Atmos Energy employees to successfully modernize our natural gas distribution, transmission and storage systems while safely providing reliable natural gas service to our 3.4 million customers and 1,400 communities across our 8 states. We also narrowed our fiscal 2023 earnings per share guidance to a range of $6 to $6.10. We continue to experience strong customer growth, driven by robust employment trends in Texas. For the 12 months ended March 31, we added 65,000 new customers across the company with nearly 49,000 of those new customers located in Texas. And according to the Texas Workforce Commission, the state continued its streak of record employment in March, adding 664,000 jobs since January of 2022 to reach a series high civilian labor force of 14.9 million people. Industrial demand for natural gas in our service territory also remained strong. During the second quarter, we added 18 new industrial customers with an anticipated annual load of approximately 6 Bcf once they are fully operational. Fiscal year-to-date we've added 30 new industrial customers with an anticipated annual load of approximately 15 Bcf once they are fully operational. On a volumetric basis, that 15 Bcf of anticipated industrial load is equal to adding approximately 275,000 residential customers. To support that growth that I just summarized, we continue to enhance the safety, reliability, versatility and supply diversification of our system. For example, in our Atmos Pipeline Texas division, our team completed the injection of working gas into Bethel cavern 1B, our third salt-dome cavern. This third cavern provides additional support to APT's operations and the local distribution companies behind APT system as well as adds over 6 Bcf of new working gas capacity. Work continues on Phase 3 of our Line S-2 project, which will replace 67 miles of 14-inch pipeline with 36-inch pipeline. And as a reminder, this project brings supply from the Haynesville and Cotton Valley shale plays to the east side of the growing Metroplex. The final phase of this project is anticipated to be in service late 2024. Later this calendar year, we expect to complete the remaining 5 miles of the 22-mile project that will install a 36-inch pipeline connecting to the southern end of APT system with a 42-inch Permian highway line that runs from Waha to Katy. This new line will support the forecasted growth and increased supply diversity to the north of Austin in both Williamson and Travis Counties in Texas. Atmos Energy's comprehensive environmental strategy is focused on reducing our Scope 1, 2 and 3 emissions and environmental impact from our operations in the following 5 key focus areas: operations, fleet, facilities, gas supply and customers. In the area of operations through our system modernization efforts, we are on track to place 800 to 1,000 miles of pipe this fiscal year and between 20,000 and 30,000 steel service lines. And in the gas supply area during the first 6 months of fiscal 2023, we added another RNG facility that will transport renewable natural gas across our system. We now have 7 flowing RNG facilities directly connected to our system. Additionally, we've executed interconnect agreements with 3 additional RNG projects expected to begin flowing in calendar year 2023. Once these projects are fully operational, we anticipate to have 8 to 9 Bcf of RNG flowing across our system annually. Finally, we are evaluating nearly 30 additional opportunities to connect RNG facilities to our system. As I mentioned on previous calls, we are partnering with Habitat for Humanity in each of our 8 states to build

Thank you, Kevin, and thank you to everyone who joined us this morning. As previously mentioned, net income for the first 6 months of the fiscal year was $630 million or $4.40 per diluted share. Year-to-date consolidated operating income increased $744 million or 13%. I'll touch on a few of the highlights of our year-to-date performance. Fiscal '22 and '23 regulatory outcomes increased operating income by $152 million. Additionally, residential growth and rising industrial load in our distribution segment increased operating income by an additional $12 million. And we saw a $7 million increase in APT's through-system business. Most of this increase occurred during our first fiscal quarter when spreads widened while some of the key takeaway pipelines in the Permian undergoing maintenance. Consolidated O&M expense increased $57 million. Distribution O&M increased $43 million, driven largely by supporting our growing service territory in Texas, where we experienced a 10% increase in the number of line locates. They're also seeing higher labor costs for these third-party services. Additionally, service orders system-wide have increased 11%, largely driven by customer growth, increased service requests driven by higher natural gas prices and increased collection activities. As a result, our internal labor costs have risen to fulfill these orders. Finally, we experienced higher levels of bad debt expense due to higher customer bills. Most of this increase was recognized during our second fiscal quarter. The remaining $14 million increase is recognized in our Pipeline and Storage segment, driven by the timing of in-line inspection work compared to the prior year period and increased employee costs. Slides 5 and 6 summarize the key performance drivers for each of our operating segments for the quarter and year-to-date periods. Consolidated capital spending increased 19% or $225 million to $1.4 billion with 86% dedicated to improving the safety and reliability of our system. This increase primarily reflects higher spending at APT, the projects that Kevin discussed just a few minutes ago. We continue to execute our annual regulatory filing strategy. To date, we have implemented $116 million in annualized regulatory outcomes and we have about $298 million annualized outcomes in progress. We anticipate implementing about half of this amount during the second half of our fiscal year. Slides 20 through 31 summarize these outcomes and Slide 17 outlines our planned filings for the remainder of the fiscal year. Our financial position continues to remain strong. In early March, we executed a $2 billion term loan to help repay our maturing $2.2 billion in senior notes. Later that month, the Texas Public Financing Authority completed its state-wide securitization program, and we used the proceeds from that program to pay off the term loan. We no longer have meaningful exposure to floating rate interest debt. We finished our second fiscal quarter with an equity capitalization of 60.9% and approximately $3.3 billion of liquidity. Included in this amount is $673 million in net proceeds available under existing foreign sale agreements that will fully satisfy our anticipated fiscal '23 equity needs and a significant portion of our anticipated fiscal '24 needs. The strength of our financial profile was recognized by Moody's in March when they reaffirm the credit ratings and outlook. We continue to look for opportunities to mitigate interest rate risk associated with our anticipated long-term debt financing needs beyond fiscal '23. In march and April of this year, we executed $250 million in starting interest rate swaps. We have now have $1.6 billion of swaps to effectively hedge portions of the treasury component of our total cost of financing at rates ranging from 1.76% to 2.38%. With this activity, a substantial portion of our anticipated fiscal '24 long-term debt needs have now been hedged. Finally, in Kansas, we are still on track to complete our gas cost securitization this fiscal year. Additional details for our financing activities and our financial profile be found on Slides 9 through 11. Our fiscal year-to-date performance gives us confidence to narrow our fiscal '23 earnings per share guidance from $5.90 to $6.10 to the new guidance range of $6 to $6.10. We expect the contribution to fiscal '23 earnings to be somewhat ratable by quarter in the back half of the fiscal year. A few additional thoughts about our updated guidance. The winter heating season is over and approximately 70% of our distribution segment revenue has been recognized. Going into the fiscal year with elevated commodity costs, we anticipate lower customer consumption primarily due to conservation. However, the consumption we saw during the winter heating season exceeded our expectations. Additionally, the most significant regulatory filings impacting fiscal '23 has been or will soon be completed giving us a better line of sight into the regulatory outcomes for the fiscal year. Regarding O&M, much of this increase was anticipated as we originally guided to an approximate 5.5% increase over fiscal '22 levels. However, as I mentioned a few months ago, we are experiencing higher-than-planned spending to support our growing serous territories, particularly in Texas. This is was what we did during the panic, we are working to offset some of these increases. Assuming we achieve the midpoint of our updated guidance, we anticipate O&M for the remaining 6 months of the fiscal year to be in line with our level of spending in the back half of fiscal '22. Finally, our expected cost of financing is now pretty clear. Securitization Texas has been resolved and our expected long-term debt financing for the fiscal year is now complete. Further, we're anticipating higher-than-planned AEDC partly due to the timing of product closings within the fiscal year and remaining FY '23 equity needs have been fully priced. Details surrounding our fiscal '23 guidance can be found on Slides 13 and 14. Thank you for your time this morning, and we'll now open up the call for questions.

Our first question comes from the line of Julian Dumoulin-Smith from Bank of America.

Look, nicely done, guys. I wanted to maybe kick things off quickly. Texas legislature looking at potentially using some of their surplus here potentially look at paying down some of the securitization here. Can you comment on that a little bit here? What are your expectations? Any nuances there? And then ultimately, I would presume that this would effectively never hit customer bills, but I just want to understand sort of the timing and mechanics as to how it's been collected, how it looks like for you guys specifically?

Yes. From a technical basis, Julien, that is correct. We continue to follow that as well as other legislation across our entire system. So not going to try and predict or comment too much further on it than that at this point. If there are any questions or anything that comes up from the committees or those that are sponsoring that, obviously, we're standing by and prepared to answer that for them. But on a system-wide basis, on a legislative perspective, things have kind of been on a consistent theme, if you will, this year, that being damage prevention across all of our jurisdictions has been enhanced as well as some of our jurisdictions looking at energy efficiency programs at the state level as well. So we're very pleased with that. And additionally, I don't know if you've seen out there, but a couple more states have come on to approve all fuels or customer choice legislation, which provides about 24 states, I think, now across the country that has done that as well as, I think, 3 states right now have approved legislation for freedom to cook in their particular jurisdiction. So that's a quick recap across our territory on legislative action.

Actually since you bring it up, maybe I'd love to get your perspective on this. Colorado has had some discussions of late across both the PC and then also, in particular, the legislative side on I suppose, gas bills broadly. Any perspectives therein on where this could go? I mean, it seems a little bit -- it lacks specificity, shall we say.

Well, no crystal ball here, Julien. I can tell you that for sure. But with that committee, with ongoing committees there in any legislature when we're asked, we'll certainly participate. We'll provide testimony, we'll provide feedback for our expert opinion. We're going to continue to watch that stay close to it, but also work with the PUC. If they come up with any questions, comments or open any dockets, we're certainly available to provide our feedback as well as our gas supply team that does a tremendous job each year in and out to make sure we get access to reliable supply for our customers.

Right. And just going back quickly, a little nuance. You alluded to it in your remarks. On O&M, I mean, seemingly holding the line fairly well here despite a consistently inflationary environment. Can you comment a little bit about what you're seeing out there? I mean, obviously, some of your peers had less success in managing their costs here. Can you comment a little bit about the clarity that you have and the line of sight here and just perhaps what that implies going forward as well?

Sure, Julien. This is Chris. Working back closely with our operations team, just kind of looking really line by line opportunities where we could potentially defer items that are not compliance-related or safety related or with the system at risk. Similar to what we did there in the pandemic. A few levers there that we might be able to pull. Additionally, a lot just depends on timing of when contracts are executed in terms of locking in costs for a 12- to 18-month period, what we got in contracts kind of at the early part of our fiscal year. So at that point, we had locked in some contracts. We have a better line of sight, at least in terms of labor costs with respect to some of these third-party services which leads the variable -- just the number of locates, for example, that we might have to manage. And we did some sensitivity work around that. So those are just a couple of examples of how we're trying to look forward, manage your O&M within what we're capable of doing, while it can certainly providing a safe able service on the system.

Yes. And I'll just close that, Julien. As Chris has said before and I've said before on these calls, we're not a just-in-time company when it comes to integrity work, O&M work, those safety-related items on our system. We like to stay well in advance of that, and that does provide some additional flexibility for us when we need it, certainly can speed things up or move things from one period to another. So that's an additional lever we have.

[Operator Instructions] I would now like to turn the call over to Dan Meziere for closing remarks.

We appreciate your interest in Atmos Energy, and thank you for joining us. A recording of this call is available for replay on our website through June 30, 2023. Have a good day.