10-QPeriod: Q1 FY2023

ATMOS ENERGY CORP Quarterly Report for Q1 Ended Dec 31, 2022

Filed February 7, 2023For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported strong financial results for the three months ended December 31, 2022, with net income increasing by 9% to $271.9 million, or $1.91 per diluted share, compared to $249.2 million, or $1.86 per diluted share, in the prior year period. This growth was driven by positive rate outcomes from investments in safety and reliability, and significant capital expenditure focused on infrastructure modernization. The company successfully raised approximately $1.0 billion in long-term debt and equity financing during the quarter, bolstering its liquidity and maintaining a healthy equity capitalization ratio of 52.9%. Looking ahead, Atmos Energy has a robust capital expenditure program, with over 85% dedicated to improving the safety and reliability of its distribution and transportation systems, often under regulatory mechanisms designed to reduce recovery lag. The company's forward-looking strategy, coupled with proactive regulatory engagement and a strong balance sheet, positions it to continue delivering shareholder value, evidenced by an 8.8% increase in the quarterly dividend for fiscal year 2023.

Financial Highlights

44 data points
Beta

Revenue

$1.48B

50.3% Gross Margin

Net Income

$271.86M

18.3% Net Margin

EPS (Diluted)

$1.91

Total Assets

$23.37B

Cash & Equivalents

$171.60M

Free Cash Flow

$188.90M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$738.25M
Gross Profit$745.76M
Operating Income$321.19M
Interest Expense$36.76M
Net Income$271.86M
EPS (Basic)$1.92
EPS (Diluted)$1.91
Shares Outstanding (Basic)141.82M
Shares Outstanding (Diluted)141.94M

Key Highlights

  • 1Net income rose 9% year-over-year to $271.9 million for the quarter, driven by rate increases and infrastructure investments.
  • 2Diluted earnings per share increased to $1.91 from $1.86 in the prior year period.
  • 3Capital expenditures totaled $795.7 million, with over 85% focused on safety and reliability improvements.
  • 4The company successfully raised approximately $1.0 billion in long-term debt and equity financing during the quarter.
  • 5Equity capitalization stood at a healthy 52.9% as of December 31, 2022.
  • 6The quarterly dividend was increased by 8.8% for fiscal year 2023.
  • 7The company maintains strong liquidity, with approximately $3.4 billion in total liquidity as of December 31, 2022.

Frequently Asked Questions

The increase in net income was primarily driven by positive rate outcomes from investments in safety and reliability initiatives, which resulted in a $111.8 million increase in annual operating income through implemented regulatory actions. Higher customer growth and increased industrial load also contributed, partially offset by increased depreciation and operation & maintenance expenses.

Atmos Energy is funding its capital expenditures through a combination of internally generated cash flows and external financing. During the quarter, they raised approximately $1.0 billion in long-term debt and equity. The company also maintains significant liquidity, including cash and cash equivalents, funds available through equity forward sales agreements, and substantial undrawn capacity under its credit facilities.

Atmos Energy is heavily investing in modernizing its natural gas distribution and transmission systems, with over 85% of capital expenditures focused on safety and reliability. The company actively pursues regulatory mechanisms, such as formula rate mechanisms and infrastructure programs, that aim to reduce regulatory lag and allow for timely recovery of these investments, with many new investments recoverable within six months or less.

The company is focused on maintaining an equity-to-total-capitalization ratio between 50% and 60%. As of December 31, 2022, their equity capitalization was 52.9%. They utilize short-term debt for cost-effective financing until it can be replaced with a balanced mix of long-term debt and equity. The company also has a strong credit rating and access to significant revolving credit facilities.