Yahoo Finance Vistra Corp (VST) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Market Inclusion: Vistra Corp included in S&P 500 as of the first day of the earnings call.
Adjusted EBITDA: $813 million for Q1 2024, a 47% increase from Q1 2023.
Net Leverage: Finished the quarter at approximately 3x, expected to be below 3x by end of 2024.
Share Repurchases: $3.9 billion through May 3, 2024; plan to execute at least $2.25 billion more through 2024 and 2025.
Dividend: Q1 2024 common stock dividend of $0.2175 per share, up 7% from Q2 2023.
Capital Expenditure: Construction begun on solar and energy storage facilities at Baldwin and Calpine sites.
Adjusted Free Cash Flow Before Growth: Guidance for 2024 set at $2.2 billion to $2.7 billion.
Energy Harbor Acquisition: Closed on March 1, with expected adjusted EBITDA contribution exceeding $1.1 billion by 2026.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Vistra Corp (NYSE:VST) reported a significant increase in ongoing operations adjusted EBITDA of $813 million, a 47% increase compared to the first quarter of 2023.
The company successfully integrated Energy Harbor, identifying additional operational synergies and performance improvements expected to exceed $1.1 billion in adjusted EBITDA contribution from 2026.
Vistra Corp (NYSE:VST) continues to execute a robust capital return plan, having returned approximately $4.6 billion to investors, including $3.9 billion in share repurchases.
The company has maintained a strong balance sheet with net leverage finishing the quarter at approximately 3x, and anticipates it will be below 3x by year-end 2024.
Vistra Corp (NYSE:VST) is well-positioned to capitalize on the increasing power demand and has begun construction on solar and energy storage facilities, which are expected to be online by the end of the year.
Negative Points
Despite positive financial performance, the company's ongoing operations adjusted free cash flow before growth for 2024 is below the target range of 55% to 60%, primarily due to timing impacts.
The retail segment reported a negative $28 million in the first quarter, although this was within expected ranges.
There are uncertainties around the implementation of the nuclear production tax credit (PTC), which could impact future financial guidance.
New EPA greenhouse gas rules could make it challenging to economically build baseload combined cycle gas turbine facilities, potentially affecting future operations and growth.
Vistra Corp (NYSE:VST) faces potential challenges in the integration and optimization of the newly acquired Energy Harbor operations, despite current progress.
Q & A Highlights
Q: Jim, not to sound like a broken record here, but obviously, the moves we've seen in sparks, does that change your thoughts around maybe Tradition's stand-alone viability and potentially separating the 2 companies sooner rather than later or kind of vice versa? A: James A. Burke - Vistra Corp. - President, CEO & Director: The sparks have obviously increased. Fixed-price power has also increased. This discussion about the value of tradition, which I think has come into focus a lot in the last 2 months, has been really positive for Vistra overall. As you note, the Vistra Tradition business is a key part of how we integrate our model overall. So we have a very large retail business that we have in Vistra Vision, and a lot of that business is residential. Residential has a level of usage that can vary with weather. And that's something that the asset side in Vistra Tradition supports extremely well.
Q: Jim, just on the market dynamics. I mean, a big investor debate right now over a new entry in ERCOT and whether it will even make a dent in demand through the end of the decade. I guess what's your house view on gas due builds and scarcity at this point? A: James A. Burke - Vistra Corp. - President, CEO & Director: I think the queue of gas is starting to build a little bit. The application process will officially open for the Texas loan program in June. I think it's different than the early 2000s in a couple of ways. Number one, while sparks have improved over the -- even the last 2 months, in ERCOT, we no longer have the severe backwardation that we are accustomed to seeing. So that's a bullish sign. The loan program would be a bullish sign.
Q: Congrats on the solid print. Just maybe can I ask you on the free cash flow conversion? So it looks like the '24 guidance is about 50% of EBITDA and then you gave us the numbers for Vistra Vision and then Tradition. Just how do you see that trending? A: Kristopher E. Moldovan - Vistra Corp. - Executive VP & CFO: As you would expect, we put a lot of emphasis internally on the free cash flow conversion rate. And as Jim said in our prepared remarks, we target 55% to 60%, and we're a little bit lower than that based on 2 timing issues, I would say, this year. One of those is that of the -- on Slide 11, you'll see that Energy Harbor increased $150 million. One of that is -- $100 million of that $150 million is really due to a change in accounting methodology for outage expense recognition. So that's a noncash item that is increasing EBITDA but not turning into cash. So that is hurting free cash flow conversion.
Q: Great update. I was wondering, could you talk (inaudible) I'm curious, which location... A: James A. Burke - Vistra Corp. - President, CEO & Director: David, this is Jim. I think I heard you mention data centers and curious about locations. Was that the question? It broke up a little bit on us, I'm sorry.
Q: Sorry about that. I was wondering the data center opportunity with your nuclear plants, could you give an update as to potential timing, which locations might be more attractive than others? A: James A. Burke - Vistra Corp. - President, CEO & Director: Sure. Yes, thank you, David. I think the conversation certainly has picked up this year. We started our process actually last year looking at our -- at the time, it was a prospective close of Energy Harbor, which, of course, is now in the rearview mirror, which is great. And of course, the Talen AWS deal came out early March. So that was certainly a benchmark and a watershed event for the industry.
Q: So just first maybe starting with your credit metrics and investment-grade aspirations. So just wondering what's the time line when we think you're going to hit -- the low -- I mean, investment-grade metrics? And how you could potentially use like stock-based M&A to actually accelerate this path to investment-grade? A: Kristopher E. Moldovan - Vistra Corp. - Executive VP & CFO: Thanks, Angie. I appreciate that. As you know, we just said today, we're right at 3x. I think there's a -- we're 2 notches away from investment-grade with 2 of the agencies and 1 notch away from the other one. So we have some work to do even to get closer to investment grade. I think we're continuing to look at -- as we look at the outlook, I mean, our leverage metrics go down just with the increase in EBITDA that you're seeing over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
