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    SWX
    Earnings call· Mar 2026(Q1 FY26)

    Southwest Gas Holdings Q1 FY26 earnings call SWX

    May 5, 2026 Source

    Executive summary

    Southwest Gas Holdings Q1 FY26 — Strong Start with Great Basin Expansion Upside

    Southwest Gas Holdings reported a solid Q1 FY26, driven by favorable regulatory outcomes and significantly lower interest expense, leading to the affirmation of its full-year and long-term guidance. The Great Basin expansion project demonstrated substantial demand, indicating potential upside to the company's regulated investment-driven growth strategy. While the California rate case decision was delayed, its full-year financial impact is expected to be mitigated by retroactive recovery.

    Highlights

    5

    • Reported Q1 FY26 earnings per share from continuing operations of $1.91, up from $1.86 in Q1 FY25.

    • Great Basin 2028 expansion project open season was significantly oversubscribed, receiving bids totaling 2.5 Bcf/d for 0.3 Bcf/d of available capacity.

    • Affirmed 2026 adjusted EPS guidance of $4.17 to $4.32 and long-term growth of 12% to 14%.

    • Maintained a strong balance sheet with approximately $3.2 billion of net debt and investment-grade ratings, not anticipating equity issuances in 2026.

    • Filed general rate cases in Arizona requesting a $101 million revenue increase and in Nevada requesting a $71 million revenue increase, both including constructive regulatory mechanisms.

    Concerns

    3

    • The final decision on the California general rate case was delayed, impacting Q1 results, though full-year impact is expected to be offset by retroactive recovery.

    • Experienced a modest slowdown in net customer growth over the past year, particularly in Southern Nevada, which is viewed as localized and timing-related.

    • Operations and maintenance expense increased by $2.1 million or 1.6%, primarily due to higher insurance costs and related claims.

    Guidance & targets

    7
    CategoryTargetConfidence
    Adjusted EPS
    $4.17 to $4.32
    high materiality
    High
    Long-term EPS growth rate
    12% to 14%
    high materiality
    High
    Capital investment
    $1.25 billion
    high materiality
    High
    Capital investment plan
    $6.3 billion
    high materiality
    High
    Rate base CAGR
    9.5% to 11.5%
    high materiality
    High
    California general rate case decision
    Expected during 2026
    high materiality
    Medium
    Nevada general rate case final decision
    October
    medium materiality
    High

    Operational metrics

    9
    Operating margin improvement
    $15.1 millionN/A
    Q1 FY26 vs Q1 FY25

    Driven primarily by rate relief in Arizona and continued customer growth.

    Customer growth contribution to margin
    $3.1 millionN/A
    Q1 FY26 vs Q1 FY25

    Part of the overall operating margin improvement.

    Net customer growth
    1%vs. 1.5% 5-year historical average; vs. 1.4% embedded in long-term plan
    past 12 months

    Reflects strong underlying demand across service territory, with a modest slowdown particularly in Southern Nevada.

    O&M expense increase
    $2.1 million1.6%
    Q1 FY26 vs Q1 FY25

    Driven largely by higher insurance costs and related claims, but remaining below inflation.

    Depreciation and amortization increase
    $5.9 millionN/A
    Q1 FY26 vs Q1 FY25

    Primarily reflecting a 6% increase in gas plant in service.

    Gas plant in service increase
    6%N/A
    Q1 FY26 vs Q1 FY25

    Consistent with disciplined infrastructure investment strategy.

    Other income decline
    $3.6 millionN/A
    Q1 FY26 vs Q1 FY25

    Driven by lower interest income at the utility level associated with reduced cash balances.

    Income taxes increase
    $6.4 millionN/A
    Q1 FY26 vs Q1 FY25

    Due to higher pretax earnings and increased amortization of excess deferred income taxes, and higher nondeductible executive compensation.

    Net debt
    $3.2 billionN/A
    Q1 FY26

    Reflects balance sheet strength and credit profile.

    Industry KPIs

    7
    MetricValueDetails
    Retail sales growth1%%
    Adjusted operating EPS$1.91USD
    Dividend per share growthIncreasedN/A
    Regulatory rate base growth9.5% to 11.5%%
    Equity hybrid financing atm issuanceNo equity issuancesN/A
    Large load data center demand pipeline2.5 Bcf/dBcf/d
    CAPEX multi year capital investment plan$6.3 billionUSD

    Orderbook & backlog

    3
    Great Basin 2028 Expansion Project Bids2.5 Bcf/dQ1 FY26

    N/A

    Bids received for 0.3 Bcf/d available capacity; nearly 8x oversubscribed; demand for service ranging between 2028 and 2035; currently converting interest into binding precedent agreements.

    Great Basin 2028 Expansion Project Design Capacity1 Bcf/dQ1 FY26

    N/A

    Estimated cost of $1.7 billion; includes 0.3 Bcf/d available capacity recently marketed.

    Great Basin 2028 Expansion Project Secured Contracts0.6 Bcf/dQ1 FY26

    N/A

    Remaining under signed and secured contracts after a shipper's withdrawal from the project.

    Capital programs

    2
    5-year Capital Planunderway$6.3 billion
    Period spend: $1.25 billion
    Funding: Operating cash flow, cash from holdings, planned bond issuance
    Start: FY26

    Benefit: Supports 9.5% to 11.5% rate base CAGR through 2030; focused on safety, reliability, and system growth, including Great Basin expansion project.

    Affirmed multi-year capital program, nearly equal to year-end 2025 rate base of $6.7 billion.

    Nevada Triennial Resource Planapproved$225 million

    Benefit: Prudency predeterminations for capital investment.

    Approved by Nevada regulators, reducing regulatory risk for preapproved projects.

    Risks & headwinds

    4
    California general rate case delayQ1 FY26

    Impacted Q1 results

    Mitigation: Approved memorandum account preserves full-year benefit; full retroactive recovery assumed; decision expected during 2026.

    Modest slowdown in net customer growthPast 12 months

    1% net customer growth over past 12 months vs. 1.4% embedded in long-term plan

    Mitigation: Viewed as somewhat localized and timing related, not indicative of a change in long-term demand trends (S&P projects ~5% population growth in AZ/NV 2026-2031).

    Higher operations and maintenance (O&M) expensesQ1 FY26 vs Q1 FY25

    Increased by $2.1 million or 1.6%

    Mitigation: Driven largely by higher insurance costs and related claims, but remaining below inflation and reflecting net reductions in other areas.

    Higher depreciation associated with capital investmentQ1 FY26 vs Q1 FY25

    Increased $5.9 million

    Mitigation: Associated with ongoing capital investment despite not yet having corresponding California rate recovery; guidance assumes full retroactive recovery.

    What to watch in Q2 FY26

    5

    California Rate Case Final Decision

    FY26
    CurrentDelayed, draft decision on settlement (excluding cost of capital) on May 14 agenda
    TargetFinal decision issued

    Why it matters

    The final decision will determine the revenue and margin impact for the California jurisdiction, with full retroactive recovery expected to impact full-year results.

    As we await the final decision on our California general rate case, we remain optimistic about the company's outlook and are affirming our 2026 and long-term guidance ranges. While the pending California decision impacted the first quarter, a CPUC decision is expected sometime this year and is not expected to affect our full year 2026 guidance.

    Q&A highlights

    6

    Can you elaborate on the potential to ramp the Great Basin project beyond 0.6 Bcf/d, the process for converting open season interest, and the impact on margin versus CapEx, especially for the longer-term demand (2030-2035)?

    The oversubscription of the open season reflects significant potential demand. The company will now negotiate binding precedent agreements requiring surety. If contracted demand settles at the current 1 Bcf/d design, existing CapEx and margin guidance holds. If demand materially exceeds 1 Bcf/d, design changes (pipe sizes, compression) would be needed, impacting capital investment and margin. It is too early to quantify, but updates will be provided as commercial milestones are achieved.

    “If ultimately that settled demand comes in at the 1 bcf level, well, then I think the guidance that we've given around margin and CapEx are going to hold. If for some reason, that additional capacity comes in materially more than that, we're going to need to think about our design, think about pipe sizes, think about compressor assumptions that we've made, and that's ultimately going to have an impact on the capital investment and ultimately the margin.”

    asked by Julien Dumoulin-Smith · answered by Justin Brown

    2 min read6 chapters

    Detailed Narrative

    01

    California Regulatory Update

    The final decision on the California general rate case has been delayed, but a memorandum account ensures the full-year benefit to earnings as if new rates were effective January 1. A draft decision approving the proposed settlement, representing approximately $39 million or nearly 90% of the requested revenue increase (excluding cost of capital), is on the CPUC's May 14 agenda. The cost of capital issues, which were the unsettled portion, will be addressed in a separate decision.

    02

    Arizona Regulatory Progress

    Southwest Gas filed a general rate case in Arizona, requesting a $101 million revenue increase. This request is supported by a proposed rate base of approximately $3.9 billion, reflecting $900 million in incremental investments since the last rate case. The filing also included a request for a formula rate mechanism, expected to be implemented approximately 12 months after new rates are effective, designed to mitigate regulatory lag and align rates with service costs.

    03

    Nevada Regulatory Developments

    A general rate case was filed in Nevada, seeking a $71 million revenue increase, anchored by a proposed rate base of approximately $2.4 billion, which includes $600 million of incremental investments. Under the statutory 210-day timeline, intervenor testimony is expected in Q3, with a final decision in October and new rates effective in Q4. Concurrently, the rule-making process for alternative ratemaking under SB 417 is advancing, with potential to enhance regulatory mechanisms and reduce lag.

    04

    Great Basin Expansion Project Momentum

    The 2028 Great Basin expansion project remains on schedule across engineering, regulatory, and commercial milestones. A recent open season for 0.3 Bcf/d of available capacity was significantly oversubscribed, receiving bids totaling 2.5 Bcf/d, nearly eight times the available design capacity. This strong interest included demand for service ranging from 2028 to 2035. The company is now focused on converting this interest into binding precedent agreements.

    05

    Capital Investment and Rate Base Growth

    Southwest Gas plans to invest approximately $1.25 billion in 2026 and $6.3 billion over the next five years, with a focus on safety, reliability, and system growth, including the Great Basin expansion project. This substantial capital program, nearly equal to the year-end 2025 rate base of $6.7 billion, is expected to support a rate base CAGR of 9.5% to 11.5% through 2030, driving consistent earnings growth.

    06

    Financial Strength and Liquidity

    The company ended the quarter with approximately $3.2 billion of net debt and maintains strong investment-grade credit ratings. Following the payoff of all Holdco debt last summer, the company has significant liquidity and does not anticipate needing equity issuances in 2026. Operating cash flow, cash from holdings, and a planned bond issuance are expected to fund the 2026 capital program and a modest bond maturity.

    AI-generated summary of the company’s earnings call. Not investment advice.