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TXNM ENERGY INC (TXNM)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 consolidated ongoing EPS rose to $0.50 (vs $0.32 YoY), while GAAP EPS was $0.19 (vs $0.20 YoY); operating income improved to $68.1M on higher transmission margins, TNMP rate relief, and colder weather-driven volumes .
  • Management affirmed ongoing EPS guidance of $2.50–$2.60 for FY 2022 and $2.60–$2.75 for FY 2023; quarterly distribution of earnings was updated to 20%/20%/52%/8% for Q1/Q2/Q3/Q4 (from 16%/21%/51%/12% previously) .
  • Key tailwinds: Western Spirit transmission contract, FERC formula rate recovery, and TNMP TCOS/DCOS riders; headwinds: unfavorable trust investment mark-to-market, higher depreciation and property taxes on new capex .
  • Regulatory catalysts dominate near-term narrative: AVANGRID merger appeal brief filed Apr 7, 2022; TNMP TCOS increase approved Mar 25, 2022; PNM decoupling declaratory order issued Apr 27, 2022 .

What Went Well and What Went Wrong

What Went Well

  • Transmission and rate recovery: “Higher transmission margins due to higher system demand and new customers, including the Western Spirit transmission contract,” and TNMP “TCOS and DCOS increases” supported earnings .
  • Load and weather: Higher retail sales volumes from colder temperatures supported PNM and TNMP performance .
  • Financing: Corporate interest savings from 2021 refinancing reduced losses .

What Went Wrong

  • GAAP headwind: Decrease in GAAP earnings driven by a net increase in unrealized losses on investment securities for decommissioning and reclamation trusts .
  • Cost pressure: Higher depreciation and property tax expense associated with new capital investments at both utilities .
  • Regulatory uncertainty: Decoupling order limited rate adjustment mechanism; merger approval path extended to appeal at the NM Supreme Court, elongating timeline .

Financial Results

Consolidated P&L (Q1 2022 vs Q1 2021)

MetricQ1 2021Q1 2022
Electric Operating Revenues ($USD Millions)$364.7 $444.1
Operating Income ($USD Millions)$43.2 $68.1
GAAP Net Earnings Attributable to PNMR ($USD Millions)$17.6 $16.0
GAAP Diluted EPS ($USD)$0.20 $0.19
Ongoing Net Earnings ($USD Millions)$27.8 $43.3
Ongoing Diluted EPS ($USD)$0.32 $0.50

EPS Trend vs Prior Quarters

MetricQ3 2021Q4 2021Q1 2022
GAAP Diluted EPS ($USD)$1.32 $0.13 $0.19
Ongoing Diluted EPS ($USD)$1.37 $0.21 $0.50

Margins (calculated)

MetricQ1 2021Q1 2022
Operating Margin (%)11.8% (=$43.2M/$364.7M) 15.3% (=$68.1M/$444.1M)

Segment EPS Breakdown

SegmentQ1 2021 GAAP EPSQ1 2022 GAAP EPSQ1 2021 Ongoing EPSQ1 2022 Ongoing EPS
PNM$0.22 $0.05 $0.27 $0.35
TNMP$0.10 $0.18 $0.10 $0.18
Corporate & Other($0.12) ($0.04) ($0.05) ($0.03)
Consolidated$0.20 $0.19 $0.32 $0.50

KPIs and Operating Drivers

KPIQ1 2021Q1 2022Notes
PNM Heating Degree Days1,220 1,278 Net EPS vs normal +$0.02
TNMP Heating Degree Days1,015 1,101 Net EPS vs normal +$0.01
PNM Total Retail Load YoY—+0.5% 2022E +2–3%
TNMP Volumetric Load YoY—+1.2% 2022E +1–2%
TNMP Demand-Based Load YoY—+3.1% 2022E +2.5–3.5%
Total Available Liquidity ($USD Millions)—$715.1 As of 4/21/22
Consolidated Total Debt ($USD Millions)$3,761.6 (12/31/21) $3,885.5 (3/31/22) Includes short-term
Dividends Declared per Common Share$0.3275 $0.3475 Boards’ increase disclosed 2/3/22

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Ongoing EPSFY 2022$2.50–$2.60 $2.50–$2.60 Maintained
Ongoing EPSFY 2023$2.60–$2.75 $2.60–$2.75 Maintained
Quarterly Ongoing EPS Distribution202216%/21%/51%/12% 20%/20%/52%/8% Adjusted
Dividend (quarterly)Q1 2022$0.3275 (Q1’21) $0.3475 (Q1’22) Raised
Segment EPS (PNM)FY 2022Key drivers disclosed (Western Spirit $0.17–$0.18) Drivers reiterated, quarterly mix adjusted Clarified cadence
Segment EPS (TNMP)FY 2022TCOS/DCOS uplift detailed Rate rider implementation updates (TCOS approved 3/25; DCOS filed 4/5) Implementation progress

Earnings Call Themes & Trends

TopicQ3 2021 (Prior-2)Q4 2021 (Prior-1)Q1 2022 (Current)Trend
AVANGRID mergerHearings complete; decision pending Merger appeal initiated; extended to Apr 2023 Brief-in-Chief filed Apr 7; appeal timeline outlined Extended legal path, process-focused
Western Spirit & FERCNew customer adds margin 2022 PNM EPS driver $0.17–$0.18 Higher transmission margins realized Ramping contribution through 2022
TNMP rate recoveryTCOS/DCOS approvals TCOS filing Jan 26 TCOS approved Mar 25; DCOS filed Apr 5 Ongoing rider recovery supports growth
Load/WeatherMilder weather pressured load Milder weather Q4 Colder temps drove higher volumes Weather-normalized outlook, seasonal variance
DecouplingRecommended decision (limit to EE savings) —Declaratory order limiting mechanism issued Apr 27 Regulatory clarity with constraints

Management Commentary

  • “First quarter results reflect a strong start to the year as we execute our business plan to invest in critical infrastructure and deliver clean energy.” — Pat Vincent-Collawn, Chairman, President & CEO .
  • Focus remains on clean energy transition and community priorities while advancing investment plans for safe, reliable, sustainable energy .

Q&A Highlights

  • The Q1 2022 earnings call transcript is available externally; key discussions covered progress on the merger appeal, affirmed guidance distribution, TNMP rider implementations, and PNM transmission margin drivers .
  • Management reiterated confidence in FY 2022–2023 guidance ranges and clarified quarterly earnings cadence (higher Q3 weighting), consistent with updated distribution .
  • Regulatory docket timing and sequencing (decoupling, Four Corners, merger appeal briefs) were highlighted as process drivers for the medium-term outlook .

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q1 2022 were unavailable due to data access limits; as a result, we cannot quantify beats/misses versus consensus for revenue or EPS at this time. Values retrieved from S&P Global were unavailable due to the Daily Request Limit exceeded.
  • Based on internal drivers (transmission margins, TNMP rider recovery, colder weather), the quarter’s ongoing EPS cadence was stronger than typical Q1 distribution in the prior framework, aligning with the updated quarterly mix .

Key Takeaways for Investors

  • Earnings quality: Strong ongoing EPS ($0.50) driven by regulated margin drivers (FERC/TNMP riders) and colder weather; GAAP volatility from trust mark-to-market underscores the relevance of non-GAAP “ongoing” view .
  • Guidance durability: Affirmed FY 2022–2023 ranges and shifted quarterly earnings distribution suggest predictable cadence and a heavier Q3; position around seasonal earnings skew and capital deployment timing .
  • Regulatory support: TNMP TCOS/DCOS execution is on track; Western Spirit is contributing as expected; these are constructive for near-term EPS stability .
  • Cost headwinds: Elevated depreciation and property taxes from new investments persist; incorporate into margin expectations and valuation multiples .
  • Balance sheet: Liquidity ($715M) and investment-grade ratings support capex plan; monitor consolidated debt trajectory (rose to $3.89B by 3/31/22) .
  • Regulatory risk: Merger appeal timeline and decoupling constraints are key narrative drivers; stock likely sensitive to incremental docket developments .
  • Dividend: Quarterly DPS increased to $0.3475; payout policy remains anchored near ~55% of ongoing EPS .

Appendix: Source References

  • Q1 2022 8-K Item 2.02 press release and exhibits: earnings, segment EPS, GAAP vs ongoing reconciliations, consolidated statements .
  • Q4 2021 8-K preliminary results: dividend increase, annual financials, quarterly EPS reconciliations .
  • Q1 2022 earnings presentation: guidance, load/Weather, regulatory agenda, liquidity/debt, driver breakdowns .
  • Q3 2021 earnings presentation: prior-quarter earnings, regulatory milestones, load/Weather .
  • Press distribution copy (PR Newswire) .