American Water Works Co. Inc (AWK) — Q4 2021 Earnings Call Transcript

Thanks, Tom. 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 events, they are subject to numerous known and unknown risks, 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 risks, uncertainties and factors as well as a more detailed analysis of our financials and other important information is provided in the earnings release and in our December 31, 2021, Form 10-K, each filed yesterday with the SEC. The reconciliation for the calculation of the O&M efficiency ratio, a non-GAAP financial measure can be found in our earnings release and in the appendix of the accompanying slide deck, which has been posted to the Investor Relations page on our website. All statements during this presentation related to earnings and earnings per share refer to diluted earnings and earnings per share. In addition, for the purposes of the presentation, our long-term EPS CAGR range is anchored off of the normalized 2021 earnings per share results, our last reported actual results. And with that, I'll turn the call over to American Water's President, CEO, and CFO, Susan Hardwick.

Thanks, Aaron, and good morning, everyone. Before we begin, I want to take a moment to express my gratitude for the kind messages sent our way over the past few months wishing Walter a speedy recovery. I also appreciate those who have reached out recently with encouragement for my role as CEO. It is a privilege to serve this great company. As I embark on this journey, I want to assure you that our strategy remains consistent with what we communicated in November last year. Our team is energized and fully engaged in executing our commitment to achieve 7% to 9% long-term earnings growth by investing in our infrastructure, expanding our regulated operations through acquisitions, and supporting our military by enhancing our military services footprint. We are focused on operating in areas where we can create substantial value. Now that we've transitioned to a fully regulated business model, we believe we are well-positioned to generate higher quality earnings. There is no other water and wastewater service provider in the United States that matches our scale and capabilities. For our investors relying on dividends, we are dedicated to increasing our dividend at the higher end of the 7% to 10% range. We recognize that delivering results is the best way to earn your trust. That’s what we achieved in 2021, and we are committed to doing it again. Now, let's move on to our financial results and some operational highlights for 2021. For the year ending December 31, 2021, earnings were $6.95 per share, compared to $3.91 per share from the previous year. The full year and fourth quarter results incorporate a gain of $2.70 per share from the sale of Homeowner Services in December, offset by a $0.19 per share contribution to the American Water Charitable Foundation from the sale proceeds. Before the gain on the HOS sale, full year and fourth quarter results were $4.25 per share and $0.85 per share, respectively, representing an 8.7% growth over 2020 earnings, which aligns with our expectations and showcases our ability to meet annual earnings guidance. Earnings from the regulated business increased by $0.40 per share in 2021, driven by higher revenues from new rates and earnings from acquisitions, although these were slightly tempered by rising wages and other labor-related expenses. Operating and maintenance costs, along with depreciation, also rose to support business growth. Excluding the gain from the sale of HOS, Market-Based business results decreased by $0.10 per share compared to 2020, mainly due to the timing of the HOS sale. Parent company results showed an increase of $0.04 per share in 2021 versus 2020. On the people front, I’m proud that last year marked one of our company’s best years for safety performance, especially amid the ongoing challenges posed by the pandemic. Our resiliency investments in New Jersey, Pennsylvania, and Maryland proved valuable as we effectively managed widespread flooding after Hurricane Ida without compromising our customers' drinking water quality. In terms of capital investments, our regulated business achieved $1.8 billion in infrastructure improvements and upgrades in 2021 to better serve our customers. We are dedicated to keeping customer bills affordable by emphasizing operational and capital efficiencies, securing constructive regulatory outcomes, and leveraging our scale and successful supply chain efforts throughout the pandemic. As discussed last year, our regulated acquisitions play a crucial role in our strategy for customer affordability and growth. While we added approximately 20,000 new customer connections through acquisitions across six states, we recognize these results fell short of our annual targets. Acquisition totals can vary yearly, but we are excited to have agreements in place for about 77,000 customer connections as we start the new year. Cheryl will provide more updates on our acquisitions shortly. Lastly, we are pleased with our successful sales of HOS and our operations in New York and Michigan. As mentioned in November, we will reinvest the proceeds from these divestitures into our regulated business to best serve customers and enhance efficiency, ultimately creating value for all our stakeholders. We believe the combination of EPS growth, dividends, and an ESG premium continues to resonate with investors, solidifying our position as a top performer in the utility sector in terms of total shareholder return. Over the past five years, we have delivered an exceptional total return of 185% to our shareholders, alongside impressive dividend growth. Given our long-term plans and track record of executing strategies effectively, we anticipate continuing to provide a competitive total shareholder return in the years ahead. I want to highlight a few key points regarding our current credit ratings. We believe our investment plan and financing strategies support these ratings. Both S&P and Moody's acknowledged this by reaffirming our ratings following our Investor Day presentation last year. This was partly due to their recognition of our shift to 100% regulated earnings and our commitment to operating in constructive regulatory environments. Our robust financial metrics enhance our business profile, and we take pride in having an A credit rating from S&P, one of only two in the industry. We value our strong credit profile and will continue to maintain it for the benefit of our customers. Importantly, our total debt to total capital ratio was 61% at the end of 2021. After factoring in the initial HOS sale proceeds of $480 million yet to be deployed, this is about 1% improvement compared to 2020, placing us on a solid path toward our goal of around 60% by the end of our five-year plan. As we look forward to 2022, let’s recap our important strategies outlined in November. Our geographic diversity is a major advantage, allowing us to distribute capital investment evenly across our large customer base, which helps maintain affordability. Serving an estimated 14 million people across 24 states, including 17 military installations, illustrates our scale and its benefits. We plan to invest between $13 billion and $14 billion over the next five years and approximately $28 billion to $32 billion over the next decade in our regulated business. These investments will generate significant economic benefits for local and regional communities while enhancing the environmental sustainability of these systems. This reflects how our ESG values are embedded in our everyday operations. We will manage these investments through a disciplined regulatory approach and strategic cost management to support customer affordability. While the increased capital investments may initially involve a ramp-up period, we expect to achieve more consistent and stable earnings in the long term. Now, let's look ahead to our earnings outlook for 2022 compared to 2021. We are affirming our 2022 guidance range of $4.39 to $4.49 per share, as discussed in our earnings release yesterday. It may be useful to highlight some of the year-over-year drivers, as there are several influencing factors. Our regulated earnings growth range for 2022 of $0.24 to $0.30 reflects several significant rate cases we will file this year, as well as pressures from labor and chemical costs that may not be recoverable outside of these rate cases. We find ourselves back in this regulatory cycle we’ve previously discussed. Also, we do not expect to see significant earnings in 2022 from redeploying the proceeds from the HOS sales in New York. Nonetheless, we will gain from the interest income on the HOS note and revenue share agreement this year, helping to offset the loss of earnings from HOS operations. Finally, I want to reiterate our confidence in the long-term financial objectives we set in November, including 7% to 9% EPS growth through 2026 and potentially beyond that. Next, I would like to discuss our ESG efforts. American Water has long been recognized as a leader in ESG, and we take pride in these acknowledgments. I want to emphasize what I believe is an undervalued aspect of our ESG narrative – our long-standing potential for transformational impact in communities across the U.S. Our regulated acquisition growth strategy positions us to drive significant environmental and social change in the communities we currently serve or will serve in the future. This slide illustrates the ESG impact opportunity with acquired systems, but our entire growth triangle includes impactful ESG initiatives in every area. As we continue to highlight our ESG story, you'll notice our new ESG badge in communications both internally and externally. This badge will represent our commitment to integrating ESG principles and values in all our activities, showcasing their relevance according to the topic at hand. Lastly, let me conclude with an example of our ESG impact. This story comes from Indiana American Water, serving over 1 million customers there. As some of you may know, I hail from a small town in Indiana, a short distance from another small town called Sheridan. In recent years, Sheridan faced significant environmental compliance issues with the U.S. EPA regarding its wastewater system. The situation escalated beyond environmental concerns as business development opportunities became limited due to noncompliance. Today, you'll see a number of positive changes we've achieved as we collaborated with the community to address these issues. In the future, when we talk about our pipeline of 1.3 million customer connections, I hope you'll see it as more than just a financial growth opportunity – it represents a lengthy runway for making positive environmental and social impacts. With that, I’ll turn it over to Cheryl for a deeper dive into our operating strategies for 2022.

Thanks, Susan. Before we dive into our growth triangle to review key operational and financial goals this year, let's turn to Slide 16 to cover our foundations for success in 2022. As Susan mentioned earlier, our strengths start with our unwavering commitment to safety, which is a leading indicator of our company's health, but we must get the other fundamentals of a high-performance culture right as well. Striving for operational excellence helps us work smarter, and it enables us to provide safe, clean and affordable water services for our customers. This means we go well beyond minimum requirements in order to be the industry leader in operational and environmental excellence. This can only be achieved over the long run with a commitment to building collaborative high-performing teams. We know that creating an equitable culture where people feel valued, included, and empowered is critical to our ability to serve our customers every day. We share with our employees the ways that they contribute to the success of our company, which inspires them to make a positive difference for our customers and for the communities we serve. The recognition of New Jersey and Illinois American Water for being ranked #1 within the J.D. Power 2021 Water Utility Residential Customer Satisfaction Study is truly a testament to our employees' commitment to delivering exceptional customer service. I'll talk more about growth in a few minutes. But regarding ESG, we believe the spirit of ESG is just an affirmation of the values we've upheld for decades. From environmental leadership and sustainability to employee engagement and equity, to transparency and good governance, these principles are foundational to our corporate strategy. Turning to Slide 17. I want to start by expressing my gratitude to our regulated business leaders and their teams for achieving our goal of $1.9 billion of capital investments in 2021. It's no small feat to safely and efficiently execute the hundreds of projects across our territories each year. This is especially true in years like 2021 when we reallocated capital midyear in response to a business need. We allocated additional capital to infrastructure investments in the second half of 2021 as we witnessed less of a need for capital acquisitions in the first half of the year. As we've discussed many times, the infrastructure needs across the business are significant, and our teams quickly adjusted to utilize the additional available capital. You can continue to expect us to shift capital between these 2 buckets each year to adjust for changing business conditions. Looking ahead to our step-up in regulated infrastructure investments in 2022 of $2 billion from $1.8 billion in 2021, we'll be focusing on a variety of projects across our footprint. As we've told you before, there are very few major projects in terms of dollar magnitude, but rather hundreds of smaller ones. A few projects planned for 2022 that stand out, though, include $8 million for intake pipe work at our Hopewell, Virginia water treatment plant and $13 million for pipeline and treatment improvements at our Hays Mine water treatment plant in Pittsburgh, Pennsylvania. Moving to Slide 18. We want to briefly highlight our continued execution related to growing regulated rate base, which drives our earnings growth. We're also affirming our expectations of 8% to 9% rate base growth over the next decade, which aligns with the $25 billion to $28 billion of investment needs across our systems, plus the rate base we add through acquisitions. Turning to Slide 19. Shown here is our summary of rate case filings. 2022 is a very busy year for general rate cases. We filed 2 cases already in 2022 in New Jersey and Illinois. These filings are driven by recovery of the extensive capital investments we've made since the last cases in those states totaling more than $2 billion combined. We also have 4 active cases from 2021 that we expect to bring to conclusion this year, including West Virginia, where we invested almost $260 million in upgrading our infrastructure since our last case. To show the magnitude of these filings to date, you can see on Slide 20 that we have a total annualized revenue request of $255 million, which includes 2 infrastructure surcharge proceedings. Already in rates is $218 million in annualized new revenues since January of 2021. This includes $135 million from general rate cases and step increases, including the agreed reduction in revenues for excess accumulated deferred income taxes and $83 million from infrastructure surcharges. For the remainder of the year, we expect to file additional general rate cases to roll in infrastructure investment and acquisitions since the last cases. As always, execution on these regulatory priorities is key to our plan for growth in the business because we make prudent investments and have skilled and dedicated employees working on these cases, we're very confident in constructive outcomes as we've demonstrated many times over the years. On to Slide 21, where you can see that our focus on customer affordability continues. Our emphasis on cost and capital efficiencies, coupled with our customer growth efforts, have continued to deliver very affordable bills as a percentage of household income for most of our customers. Our customers' bills are currently on average in the range of $45 to $65 per month. As we grow our footprint, we are continuously looking at ways to improve our operating efficiencies as we work hard to limit bill increases over time. Turning to Slide 22. We continue to work constructively with regulators and legislators in the states where we operate. As you can see on the slide, there were multiple pieces of legislation enacted last year that we believe will benefit our customers and give communities more options as they seek solutions to water and wastewater challenges. Let me highlight just 3. First, in New Jersey, the state's Water Quality Accountability Act was strengthened last year. The enhancements include additional enforcement requirements for reporting data, stronger cybersecurity requirements, and asset management plans and requirements for the sale of systems with prolonged violations. Given the national news on cyber threats to our infrastructure, we saw this legislation as an important step taken by the state of New Jersey. Similar legislation also exists in Indiana and Missouri, and we continue to see other states consider bills that set operational standards for all water utilities. Second, we saw fair market value legislation enacted in more states. This important tool for communities now exists in 12 of the states where we operate. Finally, the bipartisan infrastructure package became law and we are currently working at the state level to identify projects where we can use low-interest financing made available through an increase in state revolving funds. The savings made possible by these state revolving funds are passed directly to our customers, meaning we can invest more with less impact on bills. I also want to note that in addition to our historical customer assistance programs, our states are implementing programs that were funded by the 2021 American Rescue Plan Act. In Pennsylvania alone, we have distributed nearly $750,000 to customers in need in the first 5 weeks of the new program. It's a great program and one that we hope continues. We are already engaging in 22 legislative efforts at both the state and federal level as many sessions are underway. Turning to Slide 23 and the acquisition piece of our growth triangle. I want to start by talking about our sharpened focus on our acquisition strategies. We're very focused on growing in states where we can leverage our competitive advantages. For us, this means a few things. We target acquisitions in the range of 5,000 to 50,000 customers where we have constructive regulatory environments and existing footprint and critical mass. This critical mass is not only helpful to promote customer affordability and cost efficiencies, but as we grow in each state, we will have a greater voice to help solve industry challenges through the legislative and regulatory policies. We also have ample opportunities for wastewater acquisitions where we have an existing water service footprint. Now that we've covered the strategies, let's turn to Slide 24 to look at our 2021 results and our expectations for 2022. While we were pleased to welcome 20,000 new customers across 6 states in 2021, our $135 million of acquisitions was short of our planned target for the year. Some of this was due to COVID as municipalities maintained a cautious approach to evaluating possible solutions for their systems needs in light of potential federal assistance. That said, we are starting this year with about 77,000 customer connections under agreement, which is a very strong number. This includes 74,000 customer connections under agreement as of December 31, of which approximately 45,000 are in York, Pennsylvania, which we expect to close in the second quarter of this year. It also includes 25 more signed agreements from 2021 for acquisitions representing 29,000 customer connections as well as another 3,500 signed in the first 6 weeks of 2022. Of those agreements, Egg Harbor City is the first sale under the New Jersey Water Infrastructure Protection Act and represents about 3,000 customer connections that we expect to close mid to late year. Importantly, we believe other municipalities will benefit from this legislation in the future. You'll see on the slide, we also had bids accepted representing over 11,000 customers in 5 states at the end of 2021. The bids accepted phase is part of the pathway to acquisition, falling between the pipeline of opportunities and the under agreement phase. In total, our goal is $500 million of acquisitions in 2022, including York. We also have multiple unique opportunities with communities that recognize our competitive advantages. We have great teams in place with great solutions to offer many communities. Combined with our infrastructure investments, we're very confident that we can meet our goal of $2.5 billion of regulated investments in 2022. Turning to Slide 25. Our Military Services Group or MSG completes our growth triangle and remains an important part of our business. This regulated-like business focuses on serving military installations across the country through 50-year operating contracts and then optimizing revenues on those installations beyond the base contract. We currently serve 17 installations and are actively bidding on 3 additional projects, including Naval Station Mayport in Florida, which we expect will announce the winning bidder in the summer. The other 2 active bids are expected to be awarded in 2023. Beyond these 3, there could be nearly 70 other opportunities in the years ahead, the majority of which we think we can win based on our successful track record and our growing expertise in the business. I'll now turn it back over to Susan for some closing remarks.

Thanks, Cheryl. Turning to our final slide, Slide 27. And before we begin Q&A, I want to reiterate what I said at the beginning of the call today. I am 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 bases we serve and here in our corporate office to achieve our goals in 2022 and beyond. Our team has consistently delivered on our earnings and dividend growth goals year-over-year. Nothing has changed regarding our team's ability and determination to continue that record of execution. We have, without question, consistently raised the bar in the water and wastewater industry for standards of operating excellence, ESG leadership, and financial performance as evidenced in part by our exceptional 5-year total shareholder return of 185%. That's why we're reaffirming the long-term targets we initiated last November. And with that, I'll turn it back over to our operator to begin Q&A and take any questions you may have for us.

And first of all, I do definitely wish Walter the best of luck and Susan definitely good luck in this new role and I think an important one at that.

Thank you, Insoo. We certainly appreciate that.

First question I think just on the financial side, I just wanted to verify that on your 5-year plan, I think at the Analyst Day, you had talked about, I think, $1.1 billion of equity needs. Just want to confirm that, that is still the right number that we should be thinking of? And if that's the case, and related to that, any thoughts around types of equity issuances, whether it's trade or potential for equity in unit converts?

Yes, Insoo, we didn't specifically mention this in the call today, but you are correct. The $1.1 billion of equity we outlined in November remains our current plan. We are still expecting it around the middle of this five-year period, so you can anticipate it in the '23, '24 timeframe. We are exploring options and believe there are numerous tools available to execute effectively. The $1 billion figure is significant and we could potentially handle that in a single issuance, but we want to carefully consider the timing of the issuance concerning our spending. Therefore, we may stage it over time, still roughly aligning with the middle of the five years. There is no change in the total amount or the timing; we just need to finalize our strategy for the issuance. However, the fundamentals remain the same.

Got it. That makes sense. And then just on the CFO process of finding the permanent CFO, are you looking both internally or is it mostly external? And any type of profile that you're looking for, whether it's someone with the experience in the utilities industry or whatnot, just any thoughts you have there so far?

Yes, it's a good question. We have engaged Korn Ferry to help us with the search. We do expect the search to move very quickly. And this is a highly regulated business, as we've talked about. So certainly, individuals that have utility experience, have been in or around the industry will certainly be high on our list of potential candidates.

Susan, congrats on your appointment, and also my best wishes for Walter.

Thank you. Appreciate it.

Okay. So just one thing I wanted to clarify. I think Aaron touched on this, but just on the 7% to 9% EPS growth rate starting point, did you guys effectively move that from '20 to 2021 now?

It is anchored off of our normalized '21. And our practice here typically has been to anchor it off of the most recent actual results. So as we are affirming guidance here and talking about long-term plans, we are anchoring off of '21.

Okay, excellent. Susan, you mentioned this in your comments, but I understand that the strategy remains unchanged. Is there anything significant that you would approach differently? I know you’ve been deeply involved in the strategy, but I would like to hear your thoughts on this.

No. We think the strategy is quite strong. We obviously made some changes when we came out in November with the plan we laid out in November, and we are absolutely committed to that plan. We think it is the right plan. And as I said at the outset, and I think Cheryl demonstrated in her remarks, we're very confident in our ability to execute on this plan.

Excellent. Okay. And then just one last follow-up, if I may, and I'll jump back in the queue. Any things, how are you feeling about this New Jersey rate case that you just filed anything for investors to watch on? What are the drivers? anything specifically that we should be focused on as this case progresses?

Yes. I'll let Cheryl comment in a second. But certainly, it's a large case for us. We've got a lot of investments since the last case, believe it or not, in that case, I think it was just 2 years ago. So it's a very important case, large jurisdiction for us. We think we can be and have been very effective in the New Jersey jurisdiction. So we would expect sort of typical issues in this case, but we're very optimistic about the case we have filed and our ability to work through it effectively. Cheryl, anything you want to add to that?

No, Susan, I think really, as you said, the main drivers are the amount of capital that we've invested in the system. And it's a pretty standard case for us, strong team filing the case, and I will just go through the process as we have in the past, and it is important for us, but we feel like we've filed a really strong case with great investments.

Susan, congratulations.

Thank you, Angie.

I just wanted to follow up on the equity. So I understand that you have plenty of liquidity right now and that you're trying to match that incremental funding with the spend. But I mean, you could consider an equity forward. There is maybe a way to also monetize some of the smaller, less core assets to avoid the equity. Could you comment on either of those just to get this equity overhang out of the way?

Yes, that's a good question, Angie. I didn't specifically address this in my response to Insoo, but we are considering equity forward as one of our options. We've executed some strategic transactions, such as the exit of HOS in New York and Michigan, which are intended to create equity and generate proceeds for us to invest, thereby reducing the amount of equity we need to raise in the marketplace. These strategies were taken into account in our November plan and are included in the $1.1 billion. We will continue to evaluate whether there are additional opportunities we should pursue. At this juncture, we believe we have the right assets in the appropriate jurisdictions. The plan we outlined supports the equity requirement in the middle of our strategy. As I've mentioned before, while there's anticipation for us to issue and the associated overhang, I want to avoid premature issuance that could lead to dilution unless we have corresponding investments. We have timed this in a way we believe is suitable. We will keep exploring options for the best approach and will communicate any changes to that plan as necessary, but I don't foresee any significant alterations at this time.

Okay. And then secondly, on any sort of inflationary pressures that you are seeing on the regulated side? And then how, if at all, that could actually help you with any municipal M&A because I'm assuming that those municipally-owned systems also face the same pressures and that might exacerbate their need for funding. So if you could comment on these.

Yes, I'll let Cheryl provide insight on the potential effects on municipalities. Generally, regarding inflation, we are actively involved in the regulatory process, allowing us to accurately reflect cost impacts to our business. Naturally, this affects our customers, so we strive to keep those cost impacts to a minimum. We've had significant success in managing supply chain issues this year and will continue to do so to limit cost increases. Therefore, any significant impacts to us or our customers should be minimized. As for whether this situation might encourage municipalities to consider privatization, that's a valid question. We expect some reaction and will have discussions with various municipalities about these additional pressures. However, I haven't observed any significant direct effects or changes in conversations just yet. I’ll ask Cheryl to share her thoughts on this matter.

Yes, Angie, I think it's just one more thing that piles onto those municipal systems that just kind of adds to the load that they're feeling right now. The regulatory environment is absolutely significant for putting pressure on those municipal systems to try to find a better solution than operating their own systems. And I think this inflation piece and also the availability of pipe and chemicals and things like that can absolutely just add more pressure. But Susan is right in that we haven't seen a big push yet as a result directly of that, but anticipated adding to the load.

Okay. And if I may, Susan, I know you mentioned that you're committed to the strategy you announced back in October or November. However, taking a step back and considering the recent decline in valuations of other water utilities, do you believe that there is an opportunity to create value through any larger strategic transactions involving public water utilities?

Well, Angie, that's a difficult question to answer here. I'm just going to say what I said at the outset. We're very confident in this plan. We have a long track record of execution. We have continued to prepare for this plan and prepare for execution against this plan, and that's what we're intending to do. We are always looking and thinking about the strategy and how it evolves. We have plenty of work to do with this plan, and we're going to continue to execute against it.

All my best to Walter here and congratulations, Susan. Appreciate the opportunity to connect. So perhaps to kick off here. Absolutely. I look forward to it. So if I can, I think most of them have been answered. On Chester, just to come back to this conversation, I know that you all have indicated your relative confidence. Where does that stand as far as your involvement in that process and your continued confidence there in?

Yes. It's a great question, Julien. Obviously, lots continuing to go on, on that particular system. And I'm going to ask Cheryl actually to comment on what our current thinking there is, which, by the way, has not changed much. But Cheryl?

Yes, it really hasn't changed, Julien. We believe we bid on the system on the RFP and came in with the highest bid. And it's really up to the receiver to decide what is the best thing for that community. And we believe that the very strong bid puts us in a good spot to be able to close that deal.

Fair enough. Excellent. Susan, if I may, I know the last two questions touched on this, but are there any new strategies you're considering? You mentioned various legislative efforts earlier, but I’m curious if you have any updated thoughts on entering or exiting specific states or geographies as you shape the company moving forward.

Yes, Julien, I wouldn't say it's revised. Our plan has always been to survey the landscape continually. We are satisfied with the states we are currently in, and we have made adjustments to ensure we are in the jurisdictions we find most effective. We believe we are well-placed now. We'll keep evaluating other jurisdictions regarding regulatory and legislative conditions and our ability to make a significant entry. Our criteria remain unchanged; we expect to reach at least 50,000 customers within five years, which is still our benchmark. We are consistently assessing options and reviewing the landscape in states where we don't operate to ensure our current presence is optimal. This is an ongoing process that hasn't altered.