Spire Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 20, 2024

Key Takeaways

  • Neutral Sentiment: Spire announced a CFO transition as Steve Rasche will retire next spring, succeeded by Adam Woodard, aiming for a seamless leadership change.
  • Negative Sentiment: Spire reported fiscal 2024 adjusted earnings of $4.13 per share, up $0.08 year-over-year, but Q4 results missed expectations due to weak gas marketing fundamentals and higher corporate expenses.
  • Positive Sentiment: The Board approved a 4% increase in the common dividend to $3.14 per share, marking the 22nd consecutive annual raise.
  • Positive Sentiment: Capital investments totaled $861 million in FY24 and a robust 10-year plan of $7.4 billion, with 98% focused on gas utilities to drive 7–8% rate base growth.
  • Positive Sentiment: Fiscal 2025 adjusted EPS guidance of $4.40–4.60 per share was launched and the company reaffirmed its long-term 5–7% EPS growth target.
AI Generated. May Contain Errors.
Earnings Conference Call
Spire Q4 2024
00:00 / 00:00

There are 10 speakers on the call.

Operator

Good morning, everyone, and welcome to the Spire Inc. Q4 Fiscal Year 20 24 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please Also note, today's event is being recorded.

Operator

At this time, I'd like to turn the floor over to Megan McPhail, Managing Director, Investor Relations. Please go ahead.

Speaker 1

Good morning, and welcome to Spire's fiscal 2024 4th quarter earnings call. We issued an earnings news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There is a slide presentation that accompanies our webcast, and you may download it from either the webcast site or from our website under Investors and then Events and Presentations. Before we begin, let me cover our Safe Harbor statement and use of non GAAP earnings measures. Today's call, including responses to questions, may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Although our forward looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing non GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. I would like to note going forward, the non GAAP measures we previously referred to as net economic earnings and net economic earnings per share will be referred to as adjusted earnings and adjusted earnings per share.

Speaker 2

On the

Speaker 1

call today is Steve Lindsey, President and CEO and Steve Rasche, Executive Vice President and CFO. Also in the room today is Scott Doyle, Executive Vice President and COO and Adam Worter, Vice President and Treasurer. With that, I will turn the call over to Steve Lindsey. Steve?

Speaker 3

Thanks, Megan, and good morning, everyone. Thank you for joining us for an update on Spire's fiscal 2024 year end results, outlook and other developments across our businesses. Before I begin, I want to take this opportunity to acknowledge and thank our Chief Financial Officer, Steve Rasche. After 15 years of service, Steve will step down from his role as CFO on January 1 and will continue to serve as Senior Advisor until his retirement this spring. Steve has been instrumental to Spire's success over the years and he leaves behind a tremendous legacy.

Speaker 3

His dedication and leadership have driven transformation across the organization and scale the company you see today. I know I speak on behalf of all of our coworkers when I extend my gratitude and say congratulations. And Steve, we wish you nothing but the best. I'm pleased to say that Adam Woodard, our current Vice President, Treasurer and CFO of Gas Utilities will succeed Steve as the new CFO. Many of you know that Steve and Adam have worked closely over the last several years ensuring a seamless transition.

Speaker 3

Adam has a deep understanding of the company, industry and financial markets and has played a key role in developing our strategy since joining Aspire in 2018. We are confident in Adam's ability to lead us in his new role. Turning now to Slide 4, where I'll walk through 3 key categories financial and operational performance, regulatory and outlook. This morning, we reported fiscal 2024 adjusted earnings of $4.13 per share, an increase of $0.08 per share compared to a year ago. This improvement reflects higher earnings at the Gas Utility and Midstream segments, partially offset by lower earnings in our Gas Marketing segment.

Speaker 3

Our results for the Q4 were below expectations as a result of headwinds created by natural gas market fundamentals and higher expenses at corporate. We begin 2025, I can assure you we are striving to deliver consistent financial results in the future. Steve will provide a deeper dive into our results and outlook in a moment. Recognizing confidence in our long term growth plan, the Board of Directors recently approved an increase to our common dividend of 4%, bringing the annualized rate to $3.14 per share. This is our 22nd consecutive year of dividend increases, which we have continuously paid since 1946.

Speaker 3

The vital part of this confidence is our ability to execute successfully on our capital expenditure plan. This past year, we invested $861,000,000 across the gas utilities and gas related businesses to further enhance safety and reliability for our customers. From a regulatory perspective, we are engaged with key stakeholders to strengthen recovery mechanisms in our jurisdictions. Our goal is to achieve more consistent and constructive regulatory outcomes, leading to a more sustainable financial performance. One last key message pertains to our financial outlook.

Speaker 3

Today, we rolled out our 10 year capital expenditure plan forward to 2,034 and it increased to $7,400,000,000 We also reaffirmed our long term EPS growth target of 5% to 7% and launched fiscal 2025 earnings guidance of $4.40 to 4.6 $0 per share. Looking ahead, we have visibility into improving our earned returns in Missouri during FY 'twenty six, which we anticipate will help us achieve our targeted growth frames. We remain focused on delivering this driven our strategy to grow our businesses, invest in infrastructure and drive continuous improvement to deliver value. Turning to Slide 5 for an update on our capital investment plan. Long term driver of our earnings growth remains investment focused on modernizing infrastructure at our gas utilities.

Speaker 3

During fiscal 2024, our capital investment totaled $861,000,000 with over 80% invested in the gas utilities segment. $295,000,000 was spent to upgrade infrastructure, an additional $111,000,000 was spent connecting new homes and businesses. We also accelerated our deployment of advanced meters to residential customers, investing $184,000,000 in FY 'twenty four. During the year, we installed 350,000 advanced meters, bringing the total number of customers benefiting from this technology to over 850,000. The investment in our midstream segment over the year totaled $170,000,000 largely for the storage expansion and we remain on track for the additional withdrawal capacity to come online next month.

Speaker 3

In fiscal year 2025, we plan to invest $790,000,000 representing an incremental $100,000,000 of spend to gas utilities compared to our prior forecast. This capital plan is once again focused on reliability, new service connections and completion of Spire Missouri's advanced meter installations. Lastly, our robust 10 year CapEx plan is now $7,400,000,000 with approximately 98% at the gas utilities, driving 7% to 8% rate base growth at our largest utility, Spire Missouri. Turning to slide 6 for an update on our gas utilities. Throughout the year, our employees continue to deliver for our customers providing them energy safely and reliable with a focus on excellent service and affordability.

Speaker 3

Investments made during the year are driving benefits for customers, shareholders and the communities that we serve. On our call in July, we discussed with you the launch of a customer affordability initiative to lower our overall cost structure and improve operational efficiency across the organization. We're realizing benefits of this initiative and continue to expect to see cost savings and improved efficiencies to support our growth expectations. During fiscal year 2024, our Gas Utilities segment benefited from lower run rate O and M expenses that were 3% better compared to the prior year and we expect FY 'twenty five run rate O and M at the utilities to be flat compared to FY 'twenty four as we continue to benefit from our cost management initiatives. However, we will continue to maintain our focus on the safety and reliability of our natural gas system.

Speaker 3

For example, our average leak response time in 2024 was nearly 4 minutes or 13% faster than it was in 2021. On the regulatory front, constructive mechanisms across our jurisdictions are essential to ensure that we receive timely recovery of our costs associated with delivering natural gas safely and reliably. To that end, we expect to file a rate case in Missouri by the end of the month to recover costs incurred for investment in infrastructure and technology upgrades to better serve our customers. Our top priorities in the case remain updating our cost of service, rate base and rate of return. We're looking at options to improve recovery of volumetric revenue, including the impacts of both weather and conservation.

Speaker 3

We anticipate that the request paired with last week's approval to lower our purchase gas adjustment resulted in overall build decrease for the average residential customer. We look forward to working with key stakeholders throughout the process. I'm pleased to say that the Missouri Public Service Commission recently approved $16,700,000 annual increase for our infrastructure rider or ISRS, which allows us to recover revenues for certain eligible projects in between rate cases. The increase was effective earlier this month and brings our revenues reflected in this rider to an annualized rate of $53,600,000 Further, in Missouri this week, we filed our 1st integrated resource plan or IRP with the commission. The IRP provides a blueprint for how Spire Missouri's energy will support our customers and communities in the state over the next 20 years, with the primary goal being to ensure our customers' energy needs are met.

Speaker 3

Moving now to regulatory update for our Alabama operations. As a reminder, our rates in the state are updated annually and are set using a forecasted budget. We are currently in the RSE rate saving process and are working closely with the Public Service Commission staff to update rates. To sum up, we are well positioned for success as we execute on our robust capital investment plan to support the growth and performance of our utilities and our gas related businesses. We believe in the ability of our experienced management team and employees to successfully lead us into the future.

Speaker 2

I will now hand

Speaker 3

the call over to Steve to provide a financial update.

Speaker 4

Thanks, Steve, and good morning, everyone. Let's review our fiscal year 'twenty four results and our guidance for 2025 and beyond. For the year ended September 30, 2024, we reported adjusted earnings of nearly $247,000,000 8% ahead of last year. On a per share basis, our earnings of $4.13 were $0.08 higher than last year. These results include our 4th quarter loss of just under $28,000,000 or $0.54 per share, reflecting the seasonality of our businesses.

Speaker 4

Those adjusted earnings were $10,000,000 or $0.24 better than last year, but fell below our expectations coming into the quarter due to weak market conditions impacting our marketing segment, combined with slightly higher holding company interest expense. Now I'll focus my remaining remarks today on the full fiscal year. Looking at our business segments, our Gas Utilities earned $221,000,000 up 10 percent or $20,000,000 from last year as new customer rates in both Missouri and Alabama were offset by partial weather mitigation in Missouri and higher interest expense. Midstream delivered earnings of $34,000,000 up $19,000,000 as we are seeing pull through from our Salt Plains and MoGas acquisitions as well as earnings associated with our storage expansion. Gas marketing earned $23,000,000 as strong market conditions last winter were offset by lower basis volatility over the last 6 months.

Speaker 4

As a reminder, marketing delivered solid results this year and was slightly above our initial expectations, but these results were well below last year due to the significantly favorable market conditions in fiscal year 'twenty three that did not recur this year. And finally, other corporate costs were $30,000,000 a nearly $4,000,000 or 11% improvement over last year, reflecting the benefit of an interest rate hedge and lower corporate costs offset in part by Holdco interest expense. For your reference, a detailed variance analysis of our fiscal year and Q4 results is included in the appendix to this presentation. Turning to our outlook. As Steve mentioned earlier, we are reaffirming our long term adjusted earnings per share growth target of 5% to 7%, retaining the midpoint of our original fiscal year 'twenty four guidance range of $4.35 per share as a base.

Speaker 4

This growth is driven by 1st, 7% to 8% rate base growth and continued timely recovery via the ISFRIS mechanism in Missouri, coupled with a reasonable outcome in the soon to be filed rate case with new rates targeted to be effective in fiscal year 2026. 2nd, equity growth in the Southeast coupled with annual RC resets. And finally, continued focus on cost efficiency. We are launching our fiscal year 'twenty five adjusted earnings range at between $4.40 $4.60 per share. At the midpoint, this is a 9% growth from our actual results in 'twenty four, but falls a bit short of our growth target range at the midpoint as we work through the Missouri rate case.

Speaker 4

With a reasonable outcome and expected improvements in our earned ROE, we anticipate moving fully back into the target range for fiscal year 2020 6 and beyond. Turning to our business unit guidance, we anticipate our Gassy Tollies will earn between $238,000,000 $258,000,000 next year, reflecting the combined benefits of incremental Missouri IFRS revenues and the return of normal weather, new rates in Alabama and Gulf under the RC mechanism and no increase in run rate O and M cost. As Steve noted earlier, our fiscal year 'twenty four operations and maintenance expenses excluding bad debts were 3% below last year and our goal in fiscal year 'twenty five is to lock in those savings and offset the impacts of other inflationary increases in wages, insurance, 3rd party costs among others with our cost efficiency initiatives. We also expect net interest expense to be lower. Turning to gas marketing, we anticipate adjusted earnings of $21,000,000 to $25,000,000 reflecting an increase from our initial 24 expectations due to organic growth.

Speaker 4

Midstream adjusted earnings are targeted between $40,000,000 $46,000,000 reflecting the growth in both storage and pipelines. In the storage business, we expect to see full year benefit of the storage contracts we commenced in fiscal year 2024 combined with bringing the rest of the Spire Storage West capacity online in fiscal year 2025. These benefits will be offset in part by higher operating costs, interest expense and depreciation. On the pipeline side, we will see the full year benefit from the MoGas acquisition. We anticipate the resulting midstream business mix to be roughly 55 percent storage and 45% pipelines in fiscal year 2025.

Speaker 4

Corporate and other, principally interest cost, is anticipated to be in the range of negative $30,000,000 to $36,000,000 down from last year's run rate of roughly $36,000,000 after adjusting for the interest rate hedge benefit that is not expected to recur in fiscal year 2025. We've also updated our 3 year financing plan as outlined on Slide 10. After a very busy fiscal year 2024, our equity needs going forward dropped to a much lower level that we'll manage with our ATM program. I would note that at ninethirty, we had $75,000,000 of forward equity sales that will settle in fiscal year 2025. And turning to our long term debt needs, our 3 year financing plan assumes refinancing of maturities and incremental debt of roughly $600,000,000 to fund our capital plan.

Speaker 4

Our debt maturity table is included in the appendix. And finally, no change to our credit metric or payout targets. In summary, we have a solid plan heading into fiscal year 2025 and we'll remain focused on delivering against those goals. And Steve, I appreciate your kind words on my retirement next spring. My decision was actually pretty easy knowing that I am handing off to Adam and a strong and focused buyer leadership team.

Speaker 4

It's funny. I can assure you that I finally say goodbye to 6 a. M. Flights and the 30 plus years of preparing for investor meetings with the acknowledgment that I always walk away from those meetings smarter due to your questions and suggestions. What I will truly miss are the great friends across our industry and here at Spire.

Speaker 4

I look forward to seeing you all over the next few months as we roll into fiscal year 2025 and rest assured as shareholder, I will be tracking Spire's progress and success going forward. With that, let me turn it back over to you, Steve.

Speaker 3

Thanks, Steve. I'd like to finish with our priorities for the coming year on Slide 11 as we are laser focused to achieve our targets for fiscal year 2025 and beyond. Our priorities for this year are aligned in building a more resilient, efficient and sustainable company that delivers value for our customers and shareholders. 1st and foremost, we are committed to delivering natural gas safely and reliable. During the year, we expect to deploy 7 $90,000,000 of capital primarily at the gas utilities.

Speaker 3

And we are engaged with key stakeholders to achieve constructive regulatory outcomes for customers and shareholders, while strengthening regulatory recovery mechanisms. And lastly, we're focused on delivering our fiscal year 2025 EPS guidance range and maintaining the strength of our balance sheet. We look forward to updating you on our progress throughout the year. Thank you for joining us today, and we will now take your questions.

Operator

Ladies and gentlemen, at this time, we'll begin the question and answer session. And first in line, we have Richard Sunderland from JPMorgan. Please go ahead with your question.

Speaker 5

Hey, good morning and thank you for the time today.

Speaker 4

Hey, Rich. Good morning, Rich.

Speaker 5

And I guess before my questions, Steve and Adam, congratulations to both of you on the announcements and Steve, best of luck in retirement year.

Speaker 2

Thanks, Brian.

Speaker 5

Let's see. 1st and foremost, the 2025 segment drivers, I'm hoping you can parse those in some finer detail, particularly midstream, where it looks like you're expecting to exceed the year over year growth previously indicated there, and I guess marketing as well. So for both of those, is this really the baseline going forward? And I guess that baseline is just ratcheted up a little bit versus what you've guided to previously? Any details there would be helpful.

Speaker 4

Yes, Rich, great question and thanks again. Marketing is consistent with how we've handled previous years. We go back to the organic growth strategy for the marketing business that Pat, John, Brad and the team drive. And we'll hopefully be positioned to take advantage of market opportunities, but that's why we anchored back to the original guidance for last year, which we were actually able to beat in 24. So that's kind of the normal organic step that we would expect in every business because we expect every business to grow.

Speaker 4

Midstream, yes, I think you're correct. We gave some directional guidance 6 months ago when we were still in the process of landing the final timing of the Spire Storage West expansion and also just now starting to see the benefits of the contracts, many of which started upon April 1 this year. And I think we have better clarity now into how that business is growing into the investment returns that we've talked about with you and the rest of the investors previously. So I think the expectation is that we're getting close to where that run rate would be for that business. Clearly, we're going to work through the rest of the expansion, the Spire Storage West and some of that capacity were coming online in December of this year and then contracts generally renew in the industry overall, as you know, on 4.1.

Speaker 4

So we'll continue to manage that going forward. But you're right, it's a pretty good step up from where we originally guided, but a lot of that is due to us getting a better fix and clarity in the business mix. And we also just to help out, did clarify where we see the business mix for 2025 that to help you as you're doing your modeling.

Speaker 5

Great. Got it. That was helpful. And then picking up the other side of that piece with the utilities, I realize the Missouri rate case filing is not out there yet coming shortly. But you had some commentary around how the rate case gets you back into the range for 2026 against that 5% to 7% growth.

Speaker 5

Could you just be clear on some of that commentary from the rate case? It sounded like you were saying reasonable outcome returns you to 5% to 7%. Is it was it just the outcome gets you there or you need an uplift in the authorized ROE as well? Just want to make sure I understand the drivers there.

Speaker 6

No, it's really we're looking for a straightforward recovery, cost of service recovery. We're behind there. And as we've talked about before, we do we are under earning in Missouri. So just bringing that back up closer to authorized, we feel very, 1, encouraged by our dialogue with stakeholders coming into the case, but also confident in our filing of the case we can reach a reasonable outcome for Spire and Spire Missouri. But that we're not expecting anything we're not we're just counting on rate of return or returning capital return and cost of service return to get us into that range.

Speaker 5

Okay, understood. And then just one final one for me. I know there's been a tension on some of the weather impacts in recent years. It looks like in Slide 9, you're saying a return to normal weather for 2025. So just want to confirm, 1, 2025, the outlook assumes normal weather across the utilities?

Speaker 5

And 2, just curious how weather has been trending to date since the start of your fiscal year?

Speaker 6

Yes. So, yes, that is the assumption is normalized weather. We have and a functioning weather normalization mechanism, we do that is something that we've, as Steve mentioned in his remarks, it is something that we're focused on in the filing to fine tune that mechanism for more straightforward recovery. But we are assuming normalized weather. So far this year, it did the fall has started on a warmer than normal basis.

Speaker 6

No comment on the mechanism how the mechanism has worked thus far. Okay, great. Well, thank you

Speaker 5

for the time there and congrats again to everyone. Thank you.

Speaker 2

Thanks, Rich.

Operator

Our next question comes from Julien Dumoulin Smith from Jefferies. Please go ahead with your question.

Speaker 2

Hey, guys. It's James Ward on for Julian. Just wanted to join in. Hi, James. Hey, how are you?

Speaker 2

Good. Just wanted to join in first on wishing you all the besties in retirement and your future endeavors and also to say congratulations, Adam, on your new role. Well deserved and look forward to continuing to work with you here.

Speaker 6

Great. Appreciate it.

Speaker 2

So on the debt front, the weather mechanism question was asked there earlier and then some of the segment elements we were interested in as well. So appreciate the color there. As we look at refinancings, given the recent cuts at the Fed and assumptions heading into 2025 now that we've got an election outcome, understanding limitations on potential impacts there as well in terms of leadership. What are you guys assuming in terms of interest rates in your guidance relative to 2024 levels or I guess I should say relative to current levels both next year and then beyond?

Speaker 6

Yes, sure. Jameson, the high level. Yes. No, absolutely. And Jameson, this is Adam.

Speaker 6

On the short term side, obviously, you observed, we all observed the Fed has started to cut. That is something that we didn't assume would happen on the short term side. We would expect in our plans to see 2 to 3 more cuts before the end of next year. But your guess is as good as mine as far as when those occur and I think there's been some uncertainty around that, but I think a couple more cuts would be expected. On the long term side, we don't have a lot to do in the next 12 months, but we are pretty comfortable with the current level of longer term rates that we're seeing

Speaker 2

right now. Terrific. That's extremely helpful. And any additional color just in terms of obviously, you mentioned the incremental $600,000,000 you've got refinancings. Just any color around FFO to debt?

Speaker 2

You obviously have a lot of cushion relative to like S and P's threshold and so on. That would be our final question there.

Speaker 6

No, absolutely. Great question. We do continue to see progress there. I think really getting fully up in that target in a sustainable way. We're above that target with Moody's now, but on a sustainable basis, I think we'll see we'll certainly see that coming out of the rate case.

Speaker 2

Yes. Okay. That's what we're looking at with the projections. It seems like you're going to have a lot of cushion. Okay.

Speaker 2

Thank you so much, guys. Really appreciate it. And congrats then to everyone. Thank you.

Operator

And our next question comes from Christopher Jeffrey from Mizuho Securities. Please go ahead with your question.

Speaker 7

Hi, everyone. Thanks for taking my question and congrats to Adam and Steve. Maybe just touching on the outlook for the legislative session upcoming in Missouri. There seem to be a few utility focused bills that could have some impacts for Spire. Just kind of can you speak about those more broadly and whether those would impact the timing of your rate case filing or any of the asks therein?

Speaker 8

Yes. Hey, Christopher, this is Scott Doyle. I'll answer your last question first. It won't impact the timing or kind of how we proceed with the rate case. What we do are working through this legislative session is clarifying future test year availability for gas utilities.

Speaker 6

As you may

Speaker 8

recall, legislation made its way through in the last session earlier this year. And so we look to work on the progress that was made in that legislation and advance that topic as we move through this legislative session.

Speaker 7

Okay, great. Thanks. And then maybe just looking at the updated CapEx guide, just kind of curious, it seems like we're kind of putting in more CapEx for 2024 and 2025, just how you're looking about maybe the run rate for 2016 beyond and kind of the drivers on those decisions?

Speaker 6

Yes. Chris, it's Adam. A lot of that is driven obviously by a lot of our CapEx is driven by Missouri. And I think we have talked before about there in particular, maybe a little bit out of run rate. We're looking and focused on getting our meter replacements done in the near term.

Speaker 6

So that has moved up kind of that CapEx growth in Missouri. And specifically, we see that getting done in 2025 and getting back into kind of a more normalized 7% to 8% rate base growth, but probably a little bit higher than that over the last 18 months or so, just getting the meters done. You don't want to spread that out too far out into

Speaker 3

out over time. And Chris, this is Steve. The last thing I would say is as we're winding down the deployment of capital into the storage expansion, I think we talked earlier about roughly 98% is dedicated to the utilities for the next 10 years. And really it goes well beyond that. We're giving you a 10 year outlook right now, but we've got a long line of sight from a capital deployment perspective and we have good regulatory mechanisms in Missouri as well as in Alabama, which is pretty much real time rate making.

Speaker 3

So we feel very good about our capital plan in the facilities.

Speaker 7

Great. Super helpful. Thanks Steve and Adam.

Speaker 6

Thanks, Chris.

Operator

Our next question comes from Bill Apicelli from UBS. Please go ahead with your question.

Speaker 9

Hi, good morning. Congrats to Steve and Adam, echo everyone else's sentiments there. Just wanted to dig into the I guess the Q4 results a bit. You guys had guided down full year earnings last quarter and then you came in a little bit light of the lowered expectations for the full year. So I guess what happened there?

Speaker 9

Was it the gas marketing? Was that you had modified that outlook to $27,000,000 to $31,000,000 for the full year and you came in that $23,000,000 So was that would fell short of expectations in Q4 or can you share a little more color on that please?

Speaker 4

Yes, Bill and thanks for your well wishes. This is Steve. You are spot on. If you think about the businesses, the two areas in Q4 that surprised us on the negative side were primarily marketing, and it was really reflective of the market. We have seen and I mentioned in the prepared remarks and Adam even alluded to it as we get through October that the market has been kind of meh, to use a more current term, the low commodity prices, low basis differential, it doesn't give us a lot of opportunity to create value and that surprised us on the negative side.

Speaker 4

And if we step back, if you think about marketing overall, they achieved their goal for the year, actually overachieved our expectations for the year that we started the year with. We just had some assumption of more normalized rate of demand coming into the Q4 and it didn't materialize. So, we're still very pleased with where we ended up, but it clearly surprised us on the downside and we own that one. The other segment was probably a couple of $1,000,000 higher in terms of interest costs than we had expected. And I think we've got our arms around the interest expense going forward, but that also surprised us a little bit.

Speaker 4

And surprisingly, the other 2, the big business segments, the majority of our business actually performed very well this quarter. And I think that sets us up well as we think about 25% going forward.

Speaker 3

Hey, Bill, this is Steve. I'll follow-up on Steve's comments. You got to go back to the root word in marketing is market. And there's opportunity there some years and sometimes there might not be as much. But over the last 5 years, they've done an unbelievable job of creating results that have allowed us to invest in our utilities and not have to go to the market for equity.

Speaker 3

So I think we think about this in the long term. And so some years and some quarters, you might have some ups and downs. But if you think about the way we're structured from a utility perspective, from a midstream perspective, and that's a combination of storage and pipelines and marketing, I think we're very comfortable with the business mix that we have.

Speaker 9

Okay, great. And then just a follow-up question on the O and M. I think in prior conversations, there was some expectation of cost savings that were going to show up in Q3 and Q4. But I guess you did actually achieve better overall O and M profile in 'twenty four and now you're saying run rate O and M in line with 24 for 'twenty five. So is there more sort of cost savings opportunity or maybe just sort of address the cadence of the cost reductions and how they've showed up relative to your expectations?

Speaker 8

Yes. Hey, Bill, this is Scott. Yes, just real quick on O and M and I'll give maybe some color on kind of what's driving it and hand it back off to Adam on the guide as well. But that savings, the initial savings and even some of the longer term savings are coming from kind of a mix of labor reductions in our corporate support functions as well as our utility leadership structure. And then even within that, we're optimizing both our internal and external labor strategy across our full operations, whether you're talking about our construction and service activities and delivering our service or even in our call centers, how we optimize our labor strategy there as well.

Speaker 8

And then we're beginning to see some of the efficiency gains associated with technology spend that we've made here recently in the form of the meters that we're deploying as we're getting that system fully deployed and fully active. As Adam mentioned earlier, we'll have that system fully deployed in the St. Louis market area mid next year. And so we have opportunities coming in front of us associated with that deployment. And Adam, you may just want to comment on the guide.

Speaker 6

Yes. Bill, on the guide, it's we're very pleased to be able to guide flat O and M at the utility. Clearly, we have made some progress last year that's extending into this year. But given the headwinds that we're all seeing from a cost perspective, it's something that we feel very good about. And we typically have over time have managed below inflation, but this is kind of an extra step below that.

Speaker 9

All right, great. Thank you all very much.

Speaker 2

Thanks, Bill. Thanks, Bill.

Operator

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the floor back over to Megan McPhail for any closing remarks.

Speaker 1

Thank you all for joining the call this morning. We look forward to speaking with many of you later today and in the coming weeks. Have a great day.

Operator

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining.

Powered by Quartr