SWX

Southwest Gas Holdings, Inc. - Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026, for Southwest Gas Holdings, Inc. (Holdings) and its wholly-owned subsidiary, Southwest Gas Corporation (Southwest Gas). Following the deconsolidation of its Utility Infrastructure Services segment (Centuri) in August 2025, the Company now operates solely as a regulated natural gas distributor serving approximately 2.3 million customers in Arizona, Nevada, and California. The report is filed on a combined basis, with separate financial statements provided for both entities.

Key Financial Metrics

Operating Margin (Non-GAAP): $477.0 million for Q1 2026, compared to $461.8 million in Q1 2025.

Material Changes vs. Prior Period

• Revenue Decline: Operating revenues decreased by $161.3 million (21.6%) primarily due to a significant reduction in the net cost of gas sold ($176.4 million decrease), which is passed through to customers without markup. Lower gas procurement costs reduced the revenue base.
• Profitability Increase: Net income attributable to Holdings increased by $24.5 million (21.5%). This was driven by a $15.1 million increase in operating margin, offset by higher depreciation ($5.9 million) and income tax expenses ($6.4 million).
• Discontinued Operations: Q1 2025 included a $25.1 million loss from discontinued operations (Centuri). Q1 2026 reflects no such loss, as Centuri was deconsolidated in August 2025.
• Cash Flow Volatility: Operating cash flow decreased by $129.1 million. This was largely due to the transition from a period of over-collection of gas costs to a period requiring refunds to customers, resulting in a $112.9 million reduction in cash flow from continuing operations.

Guidance, Outlook, and Risks

• Regulatory Proceedings:
  • Arizona: Filed a general rate case seeking ~$101.0 million in annual revenue increases, with rates expected effective April 2027. Proposed a formula-based Annual Rate Adjustment Mechanism (RAM).
  • Nevada: Filed a general rate case seeking ~$71.3 million in annual revenue increases, with rates expected effective October 2026.
  • California: A partial settlement was reached for a $39.5 million revenue increase; final decision expected in Q2 2026.
• Great Basin Expansion: The 2028 expansion project remains a key growth driver. An open season in April 2026 was significantly oversubscribed with 2.5 billion cubic feet per day of interest. Estimated capital investment is ~$1.7 billion.
• Dividend: The Board increased the quarterly dividend to $0.645 per share (a 4% increase), effective June 2026.
• Internal Controls: A material weakness in internal control over financial reporting related to state tax apportionment rates continues to exist for Holdings. Remediation is ongoing, including expanded review controls. Southwest Gas Corporation's controls were deemed effective.
• Liquidity: The Company maintains ~$1.2 billion in available liquidity. A $248.1 million over-collection of gas costs (PGA liability) will require cash refunds to customers in future periods.

Investor Verification Checklist

• PGA Refund Impact: Verify the timing and cash flow impact of the $248.1 million over-collection refund to customers.
• Rate Case Outcomes: Monitor the final decisions on the Arizona and Nevada general rate cases filed in early 2026, as they are critical for future margin growth.
• Internal Control Remediation: Track the progress of the remediation plan for the material weakness in tax accounting controls at the Holdings level.
• Great Basin Financing: Confirm the approval of the $1.7 billion financing authority for the Great Basin expansion project.
• Capital Expenditure Pace: Assess the sustainability of the increased capital expenditure run rate ($208.7 million in Q1) against projected operating cash flows.