Southwest Gas Holdings - Earnings Call - Q2 2021

Transcript

Operator (participant)

Good afternoon, ladies and gentlemen, and welcome to Southwest Gas Holdings' 2021 Q2 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should need any assistance during the conference, please press star zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Mr. Ken Kenny, Vice President of Finance and Treasury.

Ken Kenny (VP of Finance and Treasury)

Thank you, Crystal, and thank you, everyone, for joining us, and welcome to Southwest Gas Holdings' 2021 Q2 Earnings Conference Call. As Crystal stated, my name is Ken Kenny, and I am the Vice President of Finance and Treasury. Our conference call is being broadcast live over the internet. For those of you who would like to access the webcast, please visit our website at www.swgasholdings.com and click on the conference call link. We have slides on the internet, which can be accessed to accompany our discussion.

Today, we have Mr. John P. Hester, President and Chief Executive Officer; Mr. Gregory J. Peterson, Senior Vice President, Chief Financial Officer; Mr. Justin L. Brown, Senior Vice President, General Counsel, Southwest Gas Corporation, and other members of senior management to provide a brief overview of the company's operation and earnings ended June 30, 2021, and an affirmation of our earnings per share guidance for 2021. Also, the company will address certain factors that may impact this coming year's earnings.

Further, our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based on management's assumptions, which may or may not come true, and you should refer to the language on slide three in the press release and also our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement.

With that said, I would like to turn the time over to John Hester. John?

John Hester (President and CEO)

Thanks, Ken. Turning to slide four, we detail some of our 2021 highlights. From the holding company perspective, we realized earnings per share of $0.43. We're excited that year-to-date financial results are on track with our full-year expectations for both business segments, and as a result, we are reaffirming our previously announced 2021 earnings per share guidance range of $4 to $4.20. For our regulated utility operations, growth continues to be strong as we added 37,000 customers over the past year and realized a $21 million increase in operating margin in the Q2. We also filed applications with the Arizona Corporation Commission to recover $74 million in costs related to our Customer-Owned Yard Line and Vintage Steel Pipe replacement programs, and we're very happy to have successfully implemented a new state-of-the-art customer information system that will serve our utility customers well for years to come.

At our unregulated Centuri Infrastructure Services business, we saw Q2 revenues increase by $34 million, or 7%, realized 12-month record revenues of $2 billion, and have announced an exciting planned acquisition of Riggs Distler & Company for $855 million that will facilitate further growth at Centuri while expanding its geographic footprint and service offerings. Moving to slide five, we provide an outline for today's call. Greg Peterson will provide an overview of our financial results for the period ended June 30, as well as recap on our planned acquisition of Riggs Distler. Justin Brown will provide an update on our regulatory activities, and I will finish with an update on customer growth, liquidity and capital expenditures, rate base and dividend growth, our sustainability initiatives, and our expectations for the balance of this year. With that, I'll now turn the call over to Greg.

Gregory J. Peterson (SVP and CFO)

Thanks, John. Let's start with a summary of total company operating results on slide six. For the Q2 of 2021, consolidated net income was $25.1 million, or $0.43 per share, compared to $38 million, or $0.68 per share for the Q2 of 2020. I should note that consolidated results for the prior year quarter were aided by a $12 million, or $0.22 per share increase in the cash surrender values of company-owned life insurance, or COLI policies, compared to $3.1 million, or $0.05 per share in COLI increases during this year's Q2. For the 12 months ended June 30, 2021, net income was $264 million, or $4.60 per diluted share, compared to net income in the prior year period of $208 million, or $3.76 per diluted share.

The COLI influence during the current 12-month period was $18.5 million, or $0.32 a share, while in the prior year period it was $2.9 million, or $0.05 per share. Let's look at some of the details by segment, starting with the quarterly comparison of Natural Gas Operations on slide seven. Net income for the Natural Gas Operations segment decreased $500,000 between quarters. As I previously mentioned, COLI returns in the prior year quarter were $12 million versus $3.1 million in the Q2 of this year. This non-operating impact is included in the $9 million reduction shown for other income in the waterfall chart. Absent this item, utility income would have increased over $8 million between quarters.

The $21.3 million overall margin increase includes $15 million in rate relief from Arizona, Nevada, and California due to completed rate cases during the past 12 months. New customers associated with 37,000 first-time meter sets provided over $2 million of incremental margin. The remaining margin increase includes recoveries of regulatory assets and the reestablishment of late fees that had been suspended due to COVID-19. The $8.4 million increase in depreciation, amortization, and general taxes includes $4.4 million from depreciation driven by a $549 million, or 7% growth in average gas plant and service as we continue to expand and reinforce our distribution system. The remaining general tax increase of $4 million is due to the resetting of the Arizona Property Tax tracker. Next, let's go to slide eight and discuss Centuri's quarterly results.

Centuri, our Utility Infrastructure Services segment, had an increase in revenues of $33.8 million, or 7%, between the Q2 of 2021 and 2020. This was primarily due to incremental work under gas infrastructure contracts. This increase was net of reduced revenues totaling $27 million from two significant customers due to timing and mix of project under each customer's multi-year capital spending programs. Electric infrastructure services revenues were up $2.4 million despite a $4 million reduction in emergency restoration storm support services. Infrastructure expenses increased $48.4 million between quarters primarily due to cost to complete gas infrastructure work. Changes in the mix of work between quarters led to comparative cost increases that outpaced revenue increases.

In the Q2 of 2021, storm restoration work was lower, and the mix of gas infrastructure work included more service line replacement work compared to the higher level of more profitable main replacement work completed in 2020. The operating efficiencies, equipment utilization, and absorption of fixed costs experienced in the prior year quarter were temporarily replaced by somewhat lower reduced efficiencies, lower equipment utilization, and under-absorption of fixed costs, including demobilization in the current quarter. Reductions in COVID-related Canadian wage and rent subsidies and incremental costs associated with our pending acquisition of Riggs Distler & Company also increased expense between quarters. Moving to slide nine, we see the relative contributions by our two business segments during the 12 months ended June 30, 2021. As shown, Natural Gas Operations provided nearly three-fourths of our consolidated net income, while Centuri's Utility Infrastructure Services group provided a little more than one-fourth.

Upon consummation of the Riggs Distler acquisition, the Centuri earnings contribution is expected to move from the upper 20% range to the low- to mid-30% range by 2022. Slide 10 depicts the component changes of the Natural Gas Operations' $41.7 million increase in income between 12-month periods. The $54 million, or 5%, improvement in operating margin includes $39 million in combined rate relief in Arizona, Nevada, and California, as well as $14 million from continued customer growth. Operations and maintenance, or O&M, expenses were relatively flat between periods as management cost curbing initiatives and decreases in travel and in-person training costs were offset by incremental expenditures for pipeline damage prevention programs and higher service-related pension costs.

The $26.2 million, or 9% increase in depreciation, amortization, and general taxes reflects the impact of a $604 million, or 8% increase in average gas plant and service, as well as six months of higher property taxes under the Arizona tracking mechanism. The $16.2 million increase in other income primarily relates to changes in COLI cash surrender values and net death benefits between periods. The current period reflects an $18.5 million increase, while the prior year period included $2.9 million of COLI income. The major components of the 12-month changes in our Utility Infrastructure Services segment are reflected on slide 11. This slide shows the components of the $15.5 million increase in Centuri net income between 12-month periods. Revenues increased $200 million, or 11%, primarily due to incremental electric infrastructure revenues of $134 million.

Included in the electric infrastructure revenues was $86.5 million in the current period from emergency restoration services provided by Linetec, as compared to $13.6 million in the prior 12-month period. Revenues also grew with existing gas infrastructure customers under master service and bid agreements. Infrastructure expenses were $174 million higher than the prior year period, including $87 million in incremental electric infrastructure costs and a similar incremental amount for the completion of additional gas infrastructure work. Gains on sale of equipment, which are reflected as an offset to infrastructure expenses, were $5.6 million in the current period and $4.9 million in the prior year period. Depreciation and amortization increased $6.1 million, primarily due to $4.3 million of incremental amounts associated with electric infrastructure operations. For the 12 months ended 30 June 2021, Centuri operations contributed $73.1 million in net income toward our consolidated results.

Turning to slide 12, we can see a $23 million, or 12% increase in earnings before interest, taxes, depreciation, and amortization, or EBITDA, between the 12-month periods. Slide 62 in the appendix provides a reconciliation of GAAP-based revenues to EBITDA. Also in the appendix, slides 52 and 53, are Centuri operating results formatted to show gross profit and a separate depiction of general and administrative expenses. The next three slides provide an overview, strategic rationale, and a transaction update regarding Centuri's pending acquisition of Riggs Distler & Company. An overview of the transaction is shown on slide 13. On June 29, we announced an agreement to acquire Riggs Distler for $855 million and implied estimated EBITDA for 2022, multiple of 8.4x. We expect it to be accretive to earnings in the first full year of operations.

We have a fully committed financing package led by Wells Fargo that will utilize a $1.145 billion Term Loan B to fund the purchase price, financing, fees, and working capital amounts, as well as refinancing existing Centuri US debt. We will also establish a new $400 million secured revolving credit facility. As a reminder, this transaction will not require any SWX equity or debt issuance, and Centuri will continue to provide ongoing cash dividends to the parents. Slide 14 depicts six major strategic rationale points for the acquisition. Let me touch on a few. For the past couple of years, we have been communicating with the investment and analyst communities our desire to expand Centuri's union electric platform. Riggs does that. SWX remains focused on having operations that derive revenue primarily from regulated utility cost of service customers. Riggs does that.

Growth is a driving force of what we do at both segments of our overall business. We provide safe and reliable service to all of our customers and continue to seek to expand our respective customer bases and provide additional service to our existing customers. Riggs does that. Slide 15 provides some of the major steps necessary to complete the acquisition. As shown, the HSR requisite waiting period expired earlier this week, completing one of the steps. We continue to conduct appropriate basic integration planning with management members at Riggs Distler. Riggs is a 100-plus-year-old company that has a skilled employee base and a seasoned management team that we want to retain and who we believe are excited to become a part of the Centuri team. We are working on necessary management agreements to ensure continued operational and financial success.

As I mentioned earlier, we are finalizing the specific financing terms for this acquisition. As announced earlier today by Wells Fargo, updated marketing materials will be provided to potential interested Term Loan B debt investors on Monday. These marketing materials will also be posted on the SWX website. We have also received assigned debt ratings from both Moody's, Ba2, and S&P BB- on the Term Loan B debt to be issued. We will continue to update the investor and analyst community on our progress in this transaction. Consistent with our messaging when we announced the definitive agreement to acquire Riggs Distler & Company, we will provide updated earnings guidance once we have completed the acquisition, which we currently expect to be near the end of August. With that, I'll now turn the call over to Justin Brown for an update on regulatory items.

Justin Brown (SVP and General Counsel)

Thanks, Greg. As shown on slide 16, the final decision on our California general rate case settlement was approved earlier this year, and it authorized a revenue increase of approximately $6.5 million, including an ROE of 10% relative to an equity ratio of 52%. Other key components include continuation of our annual attrition filings of 2.75%, as well as approval of two different capital tracking programs. First, our proposed Risk-Informed Decision-Making programs, which will allow us to invest up to $119 million over the next five years. Second, we agreed to remove a large replacement project in North Lake Tahoe from our base rate request and move it to a surcharge. This amount will now be recovered annually through a surcharge as segments of the project are completed.

Turning to slide 17, while it seems like yesterday that we received approval to adjust revenues by nearly $37 million in Arizona and $23 million in Nevada, we are well underway in getting prepared to make our next round of rate case filings in both states. We currently expect to file a rate case in Nevada by the end of this month, and we're targeting a filing in Arizona before the end of the year. Moving to slide 18, during the quarter, we filed our application with the ACC requesting to implement a surcharge to recover the unrecovered revenues from the COYL and VSP programs.

In total, the applications request recovery of approximately $74 million and are comprised of $14 million related to the COYL program, which is proposed to be recovered over one year, and $60 million related to the VSP program, which is proposed to be recovered over a three-year time period. We're hopeful to receive a decision before the end of the year on both applications. Turning to slide 19, our operations team continues to make progress in line with our expectations on phase two of our most recently approved $62 million expansion project in Spring Creek, Nevada, while we continue to work on hooking up customers in the first phase, where we saw 100% of the eligible customers request gas service.

Turning to slide 20, we are awaiting final approval of our proposed acquisition of the gas assets of Graham County Utilities, a member-owned cooperative located in the southeast portion of Arizona. The acquisition contemplates a $3.5 million transaction comprised of an approximate rate base of $2.5 million and an addition of 5,200 customers to the Southwest Gas family. We remain hopeful that we will receive approval of the acquisition before the year end. Lastly, moving to slide 21, in an ongoing effort to support customer and other stakeholder interests in pursuing greenhouse gas emissions reductions, we recently filed an application with the Public Utilities Commission of Nevada proposing a voluntary carbon offset program for our Nevada sales customers. This program will provide customers the opportunity to purchase carbon offsets to reduce their respective combustion-related greenhouse gas emissions.

The application also includes a proposal to establish a regulatory asset to track program-related costs and revenues. The company anticipates a decision in January of 2022. With that, I'll turn it back to John.

John Hester (President and CEO)

Thanks, Justin. Turning to slide 22, as I mentioned at the outset of the call, customer growth continues to be robust throughout our service territory as our local economies recover to pre-pandemic levels and people and businesses continue to find the desert Southwest a desirable location in which to live and conduct commerce. On slide 23, we provide detail on our geographically diversified and growing customer base. Our regulated utility services are overseen by three different state regulatory commissions, each of which has authorized decoupled rate designs to dampen cost recovery volatility for both our customers and the company.

Turning to slide 24, we provide some local color on the thriving Arizona economy, which continues to experience strong growth in jobs and new housing starts. Moving to slide 25, we provide some detail on the significant economic rebound being experienced in our Nevada service territory, which is also seeing strong growth in jobs and housing starts. On slide 26, as Justin Brown mentioned earlier in the call, legislatively supported service territory expansions in Nevada are an important part of our regulated operations growth, where we are dedicating $100 million to bring safe, reliable, and affordable natural gas service to new customers in both southern and northern Nevada. Turning to slide 27, we provide detail on our company's strong liquidity position, which includes a $400 million revolving credit facility, a $250 million term loan, and a $50 million commercial paper program.

As of the end of June, we had $246 million of combined availability of borrowing capacity and cash. Moving to slide 28, we detail our capital expenditure program that supports the great opportunities we have to reinvest in our growing utility operations. We anticipate continuing to reinvest approximately $700 million per year to serve new customers and replace older vintage pipe to ensure we operate the safest and most reliable natural gas distribution system possible for our 2 million customers. We expect that approximately 50% of our capital expenditures will be sourced from internal cash flows, with the balance coming through a combination of new debt and equity issuances. Turning to slide 29, we provide detail on the sources and uses of funds for the three-year period ended December 2023. We will require $2.4 billion to support our robust capital expenditure program and shareholder dividends.

As mentioned on the prior slide, these uses will be funded from a combination of cash flow from operations and new debt and equity issuances. On slide 30, we provide some historical perspective on our utility operations investments, as well as illustrate our prospective plan to invest approximately $700 million per year for 2021 through 2023. On slide 31, we illustrate how our continued capital reinvestment in our growing utility operations translates into growing rate base. We expect rate base to grow from approximately $4.5 billion at the end of last year to $6.5 billion by the end of 2025, representing a 7.5% compounded annual growth rate over the five-year period. Moving to slide 32, we show the significant growth our dividend has experienced over the past five years.

Earlier this year, our board of directors authorized an increase in our annual dividend to its current level of $2.38 per share. Turning to slide 33, we underscore our commitment to helping our community partners achieve environmental goals with balanced energy solutions. On slide 34, we detail the service offerings we continue to expand upon to help achieve carbon reduction goals, energy efficiency, compressed natural gas for vehicles, renewable natural gas, hydrogen, and the operation of a modernized distribution system that minimizes leaks. Moving to slide 35, we show some of the renewable gas projects we have underway. Partnering with wastewater treatment plants, fleet operators, and dairy farms, we're helping deploy innovative new technologies to achieve aggressive environmental goals. Turning to slide 36, we're also very excited about the future of hydrogen.

We're partnering with Arizona State University to pilot a hydrogen blending program in Tempe, as well as the University of Nevada, Las Vegas, for a hydrogen program at our Southern Nevada operations center. We're also working to establish hydrogen standards to help ensure successful deployment of hydrogen blending throughout our distribution network. On slide 37, we reference our latest sustainability report, which provides further detail on our many sustainability initiatives, including our adoption of the SASB disclosure framework. Our complete sustainability report can be accessed at the web address footnoted on this slide. Moving to slide 38, we summarize the disciplined focus of our utility and infrastructure services businesses.

At Southwest Gas, we expect continued strong capital reinvestment and rate base growth, robust customer growth, attention to cost controls and affordability for customers, innovative solutions to achieve carbon reduction goals, constructive regulatory results, continued growth in earnings and dividends, and a focus on a sustainable energy future. At Centuri, we will continue pursuing exciting new gas and electric infrastructure opportunities, focus on operations excellence, manage our costs, cross-sell our growing service offerings to our combination utility customers, increase our profitability and dividend growth, focus on a sustainable future, and continue to provide a cash source for Southwest Gas. On slide 39, we reaffirm our previously issued earnings guidance for 2021. We anticipate earnings to range between $4 and $4.20, excluding impacts from our announced acquisition of Riggs Distler & Company, which is expected to close in the Q3.

On slide 40, we provide detail on the assumptions underpinning our reaffirmed 2021 earnings guidance. At our regulated utility operations, operating margin is expected to increase by 6 to 8%. Operating income should increase by 3 to 5%. Pension costs should be flat. COLI returns are estimated at $3 to 5 million. As I indicated earlier, capital expenditures for the year should total $700 million. Meanwhile, at our infrastructure services business, revenues are expected to grow by 1 to 4% over record 2020 levels. Operating income is expected to be 5.3 to 5.8% of revenues. Interest expense is estimated at $7 to 8 million. Net income expectations are net of non-controlling interest. Recall that Canadian exchange rates can influence results due to our Canadian operations. Finally, on slide 41, we detail our longer-term expectations.

At the holding company, we anticipate $600 to $800 million of equity issuances over the three-year period ended 2023 and a dividend payout ratio of 55% to 65%. Our Natural Gas Operations should experience $3.5 billion of capital investment for the five-year period ended 2025, with rate base growing 7.5% annually over the same period. Our infrastructure services business expects annual revenue growth of 5% to 8% over the three-year period ended 2023. Operating income should approximate 5.25% to 6.25% of revenues over the period ended 2023. EBITDA is expected to be 10% to 11% of revenues over the three years ended 2023. With that, I will now return the call to Ken.

Ken Kenny (VP of Finance and Treasury)

Thanks, John. That concludes our prepared presentation.

For those who have accessed our slides, we have also provided an appendix with slides that include other pertinent information about Southwest Gas Holdings and its two business segments. These slides can be reviewed at your convenience. Our operator, Crystal, will now explain the process for asking questions.

Operator (participant)

Ladies and gentlemen, if you have a question at this time, please press star, then the number one on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Richard Sunderland with J.P. Morgan.

Richard Sunderland (Equity Research Analyst)

Hi. Thanks for the time today. Maybe starting with the RDC acquisition, just curious if there are other milestones to watch along the path towards closing the deal. Just to be clear, do you expect to update guidance alongside deal close or at the earnings, the next earnings after close?

Gregory J. Peterson (SVP and CFO)

Yeah, Richard, this is Greg. I think the slide that I talked to a little bit really shows the items that are open for us. Everything's progressing as we had planned in the Riggs Distler acquisition. We're just working on the details of the financing now. As I mentioned earlier, we expect that to be done by the end of the month. That's kind of our expected close date for the transaction. I don't really see any items that will get in our way of that successful close. As it relates to guidance, we want to keep everybody informed. We are very well aware of that.

When we announced this deal at the end of June, there were some questions about what we thought things like depreciation or amortization of intangibles would be. I indicated that we would wait until the transaction closed. Once that closes, give us a few weeks or whatever. I think we will find a way to get some additional information out to the investment community. We do not intend to wait until November to do that.

Richard Sunderland (Equity Research Analyst)

Understood. That is very helpful. Maybe switching gears to the COYL and VSP proceeding. Curious if you have any line of sight towards year-end without a procedural schedule this year, or maybe just your overall confidence in the pace of that process, especially given the multi-year recovery you are asking for alongside an upcoming rate case filing.

Justin Brown (SVP and General Counsel)

Yeah, Richard, it is Justin. Prior to making the filing, since we've made the filing and we continue to do so, we've been in constant communication with the utility staff, working with them, providing them information, answering data requests. I think it's just based on that exchange is where we feel like parties are all working to try to get something done before the end of the year.

Richard Sunderland (Equity Research Analyst)

Got it. That's helpful context. Thank you for the time today.

Justin Brown (SVP and General Counsel)

Thank you.

Operator (participant)

Our next question comes from the line of Chris Ellinghaus with Siebert Williams Shank.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Hey, guys. How are you?

John Hester (President and CEO)

Hey, Chris. Good.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Can you give us a little bit more color in terms of the Centuri description for the quarter? You talk about a couple of large customers with some changes in their sort of revenue mix for you. Can you give us a little more color about that?

Gregory J. Peterson (SVP and CFO)

Sure, Chris. This is Greg. As has been our historical practice, we try not to call out specific customers by name. These were a couple of our kind of bigger top 10 customers that just had really a change in the timing and the type of work that they had. We thought it was important enough to let everybody know because it did have an impact on the cost relative to revenue changes between quarters. Overall, these customers will be our customers for a long time. They have been customers of ours for a long time. We just thought it was important, given the anomaly between revenues and expense for the quarter, to just call it out. Nothing of major import, just a relatively brief timing issue.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Okay. The acquisition costs for Riggs Distler, should we expect a similar kind of level for the Q3 on close? There's some closing sort of true-up costs there that might even make that bigger in the Q3.

Gregory J. Peterson (SVP and CFO)

Yeah, Chris, this is Greg again. Certainly, the closer we get and the more of the finalization of all the diligence and clearly a lot of legal fees, the number will go up in Q3 as we close this. There will, of course, then be some of the actual deal costs that will come through. Yes, we expect that number to ramp up in Q3. I don't have a number for you, but we do expect it to be higher than the approximate, say, 600,000 to 800,000 that we incurred in Q2.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Okay. John, sort of about you're seeing even some acceleration in customer growth. Are you seeing that momentum carry forward? Is there anything specific where that's coming from, or is that really just housing starts?

John Hester (President and CEO)

Chris, I think it's definitely something that we see continuing. The housing market out here is very strong. As you know, Chris, the economies are very strong. We've got a number of large industrial projects in Arizona. The resort corridor is doing well. They've been having a number of events, actually on simultaneous days, at Allegiant Stadium, T-Mobile, and the Park Theater. I think the housing market is quite strong, but the overall level of commerce is quite strong as well. It's a multifaceted growth.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Okay. Justin, you were talking about your filings. I'm sure you've been watching the APS rate case proceeding. Does the outcome for APS give you any concern for, A, what the mood of the commission is, or, B, how long you think rate cases might take for you?

Justin Brown (SVP and General Counsel)

Hey, Chris. It's something historically we always monitor the different proceedings, but I think each of the proceedings kind of stand on their own merits as well to a certain degree. Obviously, they have a root. It's not a final commission decision. We'll continue to watch and monitor that and learn from anything that we can pick up from it. At the same time, I think as we've talked before about our own proceedings and our own outcomes, I think to a certain level, each of the utilities kind of stand on their own and on their own merits and their applications and filings and how their proceedings go.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Okay. Can you also talk about with the surge in COVID, has Vegas seen a little bit of a turndown in visitors in recent weeks?

John Hester (President and CEO)

Yeah, Chris, we really have not. As you suggest in Las Vegas, we've seen the positivity rate go up. It's higher than what the CDC likes to see. I can tell you just this past Sunday, I was watching on TV the Gold Cup of the US against Mexico, and they had over 60,000 people in Allegiant Stadium. The Las Vegas visitation continues to be very strong. They have reimplemented their mask policy for indoors. That said, I can tell you when I watched that soccer game at Allegiant Stadium, it didn't seem like there was a high level of compliance with that policy. People still seem to be very interested in coming here. We have the advantage of competitive airfares, but also with the Southern California market, you can just jump in your car and drive here.

No, I haven't seen any indication that the higher rates of COVID have resulted in any anecdotal downturn in the Las Vegas economy.

Chris Ellinghaus (Managing Director and Senior Equity Analyst)

Okay. Great. I appreciate the details, guys. Have a great weekend.

John Hester (President and CEO)

Thank you. You too.

Justin Brown (SVP and General Counsel)

Thanks.

Operator (participant)

I am showing no further questions at this time. I would now like to turn the conference back to Ken Kenny.

Ken Kenny (VP of Finance and Treasury)

Thank you, Crystal. And thank you all for your time today. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Holdings.

Operator (participant)

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.