Group 1: Essential Utilities - Essential Utilities has a dividend yield of 3.50% and an annual dividend of $1.37, with a dividend increase track record of 32 years and a payout ratio of 58.80% [3][5] - The company reported a 35% year-over-year increase in GAAP EPS, driven by its gas and water businesses and operational efficiency, particularly in Texas [4] - Essential Utilities announced a 5.25% increase in its dividend, continuing its tradition of over three decades of dividend increases, indicating strong earnings growth potential [5] Group 2: Globe Life - Globe Life has a dividend yield of 0.77% and an annual dividend of $1.08, with a dividend increase track record of 20 years and a low payout ratio of 8.63% [7][10] - The company reported a net operating income of $271 million for the latest quarter, marking a 10% year-over-year improvement, and raised its full-year earnings guidance [8] - Globe Life has engaged in significant share buybacks, spending approximately $226 million in the second quarter and planning up to $650 million in repurchases through 2025 [9] Group 3: NetEase - NetEase has a dividend yield of 1.66% and an annual dividend of $2.27, with a payout ratio of 30.72% [11] - Despite facing potential downside of -9.5%, most analysts still view NetEase shares as a Buy, highlighting its successful games segment driven by popular titles [12]

Core Viewpoint - Essential Utilities (WTRG) is positioned as a strong investment option in the utility sector due to its growth opportunities from acquired assets, organic growth initiatives, and capital expenditures [1] Growth Projections & Surprise History - The Zacks Consensus Estimate for 2025 earnings per share (EPS) has increased by 0.5% to $2.11 over the past 30 days [2] - The Zacks Consensus Estimate for 2025 sales is projected at $2.35 billion, reflecting a year-over-year increase of 12.7% [2] - The long-term earnings growth rate for Essential Utilities is estimated at 5.18% over the next three to five years [2] - The company has achieved a trailing four-quarter average earnings surprise of 17.5% [2][8] Debt Position - Essential Utilities has a total debt to capital ratio of 53.63%, which is better than the sector average of 59.89% [3] - The time-to-interest earned ratio was 2.9 at the end of Q2 2025, indicating the company's capability to meet future interest obligations [3] Return on Equity - The current return on equity (ROE) for Essential Utilities is 10.1%, surpassing the sector average of 9.78%, demonstrating effective utilization of funds [4] Dividend History - Essential Utilities has a strong dividend history, having paid dividends for 80 years and increased them 35 times in the past 34 years [5] - The current quarterly dividend is 34.26 cents per share, leading to an annualized dividend of $1.37 and a dividend yield of 3.5%, which is significantly higher than the Zacks S&P 500 composite average of 1.16% [5] Customer Base Expansion - The company has been actively expanding its utility operations through municipal asset acquisitions, adding over 135,000 customers since 2015 [6] - Pending acquisitions are expected to add more than 200,000 customers, which will enhance demand and positively impact revenue [6] Share Price Performance - In the past month, WTRG's stock has returned 3.2%, outperforming the industry's growth of 2.2% [9]

Group 1 - The article discusses the trade-offs between concentration and scale in the water utility sector, specifically comparing Artesian Resources (ARTNA) and Essential Utilities (WTRG) [1] - Artesian Resources is characterized as a leaner, water pure-play company, while Essential Utilities has a broader operational scale [1] Group 2 - Joseph Jones, a professor with over fifteen years of market study experience, focuses on portfolio construction from a dividend growth investor's perspective [1]

Company Overview - Essential Utilities (WTRG) is headquartered in Bryn Mawr and has experienced a price change of 7.57% this year [3] - The company currently pays a dividend of $0.33 per share, resulting in a dividend yield of 3.51%, which is higher than the Utility - Water Supply industry's yield of 2.56% and the S&P 500's yield of 1.48% [3] Dividend Performance - The current annualized dividend of Essential Utilities is $1.37, reflecting an 8.3% increase from the previous year [4] - Over the past 5 years, the company has increased its dividend 5 times, achieving an average annual increase of 6.53% [4] - The current payout ratio is 56%, indicating that the company paid out 56% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - The Zacks Consensus Estimate for earnings in 2025 is $2.11 per share, which represents a year-over-year earnings growth rate of 7.11% [5] - Future dividend growth will depend on earnings growth and the payout ratio [4] Investment Appeal - Essential Utilities is considered an attractive dividend play and a compelling investment opportunity, holding a Zacks Rank of 2 (Buy) [6] - The company is positioned well for income investors, especially in comparison to high-growth firms that typically do not offer dividends [6]

Group 1 - The Dividend Champions list is a monthly compilation of companies that have consistently increased their annual dividend payouts, but the data can quickly become outdated due to its monthly publication frequency [1] - Justin Law is a contributor to The Dividend Kings, a group of analysts focused on teaching individuals how to invest wisely in dividend stocks [1] - The Dividend Kings curates the Dividend Champions list, highlighting companies with a history of increasing dividends [1] Group 2 - Justin Law holds a Ph.D. in Chemistry from Rice University and has earned the CFA Institute Investment Foundations certificate, applying his expertise to deep value and dividend-paying stocks [2]

Part I – Financial Information [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the reporting periods [Condensed Consolidated Balance Sheets (unaudited) – June 30, 2025 and December 31, 2024](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)%20%E2%80%93%20June%2030%2C%202025%20and%20December%2031%2C%202024) Key Balance Sheet Metrics | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $18,554,285 | $18,026,554 | +$527,731 | | Net Property, Plant and Equipment | $13,579,450 | $13,143,476 | +$435,974 | | Total Stockholders' Equity | $6,720,202 | $6,198,809 | +$521,393 | | Long-term Debt (net) | $7,622,994 | $7,368,381 | +$254,613 | | Total Liabilities and Equity | $18,554,285 | $18,026,554 | +$527,731 | [Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) – Three Months Ended June 30, 2025 and 2024](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(unaudited)%20%E2%80%93%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Q2 2025 vs Q2 2024 Performance | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $514,907 | $434,406 | +$80,501 | +18.5% | | Operating Expenses | $329,636 | $289,119 | +$40,517 | +14.0% | | Operating Income | $185,271 | $145,287 | +$39,984 | +27.5% | | Net Income | $107,827 | $75,385 | +$32,442 | +43.0% | | Basic EPS | $0.38 | $0.28 | +$0.10 | +35.7% | [Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) – Six Months Ended June 30, 2025 and 2024](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(unaudited)%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) H1 2025 vs H1 2024 Performance | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $1,298,533 | $1,046,475 | +$252,058 | +24.1% | | Operating Expenses | $774,357 | $670,522 | +$103,835 | +15.5% | | Operating Income | $524,176 | $375,953 | +$148,223 | +39.4% | | Net Income | $391,616 | $341,157 | +$50,459 | +14.8% | | Basic EPS | $1.41 | $1.25 | +$0.16 | +12.8% | [Condensed Consolidated Statements of Capitalization (unaudited) - June 30, 2025 and December 31, 2024](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Capitalization%20(unaudited)%20-%20June%2030%2C%202025%20and%20December%2031%2C%202024) Capitalization Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $6,720,202 | $6,198,809 | +$521,393 | | Total Long-term Debt | $7,801,933 | $7,559,096 | +$242,837 | | Total Capitalization | $14,343,196 | $13,567,190 | +$776,006 | [Condensed Consolidated Statements of Equity (unaudited) – Three and Six Months Ended June 30, 2025](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20(unaudited)%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025) H1 2025 Equity Roll-Forward | Metric | Balance at Dec 31, 2024 (in thousands) | Net Income (6 months) (in thousands) | Issuance of Common Stock (6 months) (in thousands) | Dividends Declared (6 months) (in thousands) | Balance at Jun 30, 2025 (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $6,198,809 | $391,616 | $208,576 (ATM) + $7,569 (DRP) | $(180,713) | $6,720,202 | [Condensed Consolidated Statements of Equity (unaudited) – Three and Six Months Ended June 30, 2024](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20(unaudited)%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024) H1 2024 Equity Roll-Forward | Metric | Balance at Dec 31, 2023 (in thousands) | Net Income (6 months) (in thousands) | Issuance of Common Stock (6 months) (in thousands) | Dividends Declared (6 months) (in thousands) | Balance at Jun 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $5,896,183 | $341,157 | $7,672 (DRP) + $423 (options) | $(167,930) | $6,163,234 | [Condensed Consolidated Statements of Cash Flow (unaudited) – Six Months Ended June 30, 2025 and 2024](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flow%20(unaudited)%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) H1 2025 vs H1 2024 Cash Flow | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $571,834 | $426,426 | +$145,408 | | Net Cash Used in Investing Activities | $(632,829) | $(382,111) | $(250,718) | | Net Cash from (Used in) Financing Activities | $76,910 | $(30,108) | +$107,018 | | Net Change in Cash and Cash Equivalents | $15,915 | $14,207 | +$1,708 | | Cash and Cash Equivalents at End of Period | $25,071 | $18,819 | +$6,252 | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) - Interim financial statements are prepared under **GAAP** for interim reporting and SEC rules, and should be read in conjunction with the 2024 Annual Report on Form 10-K[22](index=22&type=chunk) - Future events and macroeconomic conditions may cause actual results to differ materially from current estimates[23](index=23&type=chunk) - No changes to significant accounting policies previously identified in the 2024 Annual Report on Form 10-K[24](index=24&type=chunk) [Note 2 – Revenue Recognition](index=12&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) Revenue by Source (3 Months Ended June 30, 2025) | Revenue Source (3 Months Ended June 30, 2025) | Amount (in thousands) | | :--- | :--- | | Water Revenues | $273,636 | | Wastewater Revenues | $55,962 | | Natural Gas Revenues | $177,321 | | Other Revenues | $7,988 | | **Consolidated Total** | **$514,907** | Revenue by Source (6 Months Ended June 30, 2025) | Revenue Source (6 Months Ended June 30, 2025) | Amount (in thousands) | | :--- | :--- | | Water Revenues | $520,558 | | Wastewater Revenues | $106,997 | | Natural Gas Revenues | $648,118 | | Other Revenues | $22,860 | | **Consolidated Total** | **$1,298,533** | [Note 3 – Water and Wastewater Utility Acquisitions](index=12&type=section&id=Note%203%20%E2%80%93%20Water%20and%20Wastewater%20Utility%20Acquisitions) - Completed acquisitions in 2025 include Beaver Falls, PA wastewater system (**$37.75M**, 3,200 customers), Midvale, OH water system (**$2.95M**, 1,000 customers), and Greenville, PA wastewater assets (**$18M**, 2,300 customers)[26](index=26&type=chunk)[27](index=27&type=chunk) - Pending acquisitions include Integra Water Texas, LLC's wastewater system (**$4.4M**, 1,100 customers), private water/wastewater assets in Harris County, TX (**$1.125M**, 400 customers), and Greenville Municipal Water Authority's water system (**$18M**, 3,000 customers)[31](index=31&type=chunk)[32](index=32&type=chunk) - The acquisition of DELCORA's wastewater system (**$276.5M**, 198,000 retail customers) is subject to regulatory approval and ongoing litigation[36](index=36&type=chunk) - The East Whiteland Wastewater Assets acquisition (**$54.374M**) is currently awaiting a decision from the Pennsylvania Supreme Court after a lower court reversed the PUC approval[34](index=34&type=chunk)[35](index=35&type=chunk) [Note 4 – Dispositions](index=14&type=section&id=Note%204%20%E2%80%93%20Dispositions) - Sale of interest in three non-utility local microgrid and distributed energy projects completed in January 2024 for **$165 million**[37](index=37&type=chunk) - Recognized a gain of **$91.236 million** from the disposition, included in other expense (income) during the first quarter of 2024[37](index=37&type=chunk) [Note 5 – Goodwill](index=14&type=section&id=Note%205%20%E2%80%93%20Goodwill) Goodwill by Segment | Segment | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Regulated Water | $58,425 | $58,421 | $(4) | | Natural Gas | $2,277,447 | $2,277,447 | $0 | | Other | $4,841 | $4,841 | $0 | | **Consolidated Total** | **$2,340,713** | **$2,340,709** | **$(4)** | - A mechanism in the Regulated Water segment allows reclassification of goodwill to utility plant acquisition adjustment, recoverable through customer rates upon achieving specific objectives[38](index=38&type=chunk) [Note 6 – Capitalization](index=15&type=section&id=Note%206%20%E2%80%93%20Capitalization) - Established a new At-the-Market (ATM) equity sales program on August 13, 2024, allowing issuance of common stock up to **$1 billion**[39](index=39&type=chunk) ATM Program Activity | ATM Program Activity | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :--- | :--- | :--- | | Shares Issued | 3,664,762 | 5,291,771 | | Net Proceeds (approx.) | $145,500 | $208,600 | | Equity Available (as of June 30, 2025) | N/A | $753,000 | - Established a **$1 billion** commercial paper program on March 19, 2025, for short-term unsecured notes, backed by the revolving credit facility[40](index=40&type=chunk) - As of June 30, 2025, outstanding commercial paper borrowings were **$566.543 million** with a weighted average interest rate of **4.69%** and a 13-day remaining term[41](index=41&type=chunk) - Aqua Pennsylvania issued **$100 million** in first mortgage bonds in May 2025 to repay existing debt and for general corporate purposes[43](index=43&type=chunk) - The company was in compliance with all debt covenants as of June 30, 2025[44](index=44&type=chunk) [Note 7 – Financial Instruments](index=16&type=section&id=Note%207%20%E2%80%93%20Financial%20Instruments) - Fair value of loans payable, cash and cash equivalents, and deferred compensation assets approximate their carrying values, determined using **Level 1 methods**[46](index=46&type=chunk) Long-term Debt Fair Value | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Long-term Debt (Carrying Amount) | $7,801,933 | $7,559,096 | | Long-term Debt (Estimated Fair Value) | $6,802,766 | $6,431,777 | - Fair value of long-term debt is determined by discounting future cash flows using current market interest rates for similar instruments (**Level 2 methods**)[48](index=48&type=chunk) [Note 8 – Net Income per Common Share](index=17&type=section&id=Note%208%20%E2%80%93%20Net%20Income%20per%20Common%20Share) Earnings Per Share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.38 | $0.28 | $1.41 | $1.25 | | Diluted EPS | $0.38 | $0.28 | $1.41 | $1.25 | | Basic Shares Outstanding (thousands) | 280,275 | 273,567 | 277,748 | 273,472 | | Diluted Shares Outstanding (thousands) | 280,725 | 273,953 | 278,335 | 273,869 | - Employee stock options that were anti-dilutive and thus excluded from diluted EPS calculation were **441 thousand** for both three and six months ended June 30, 2025; and **265 thousand** for the same periods in 2024[49](index=49&type=chunk) [Note 9 – Stock-based Compensation](index=18&type=section&id=Note%209%20%E2%80%93%20Stock-based%20Compensation) - **694,331 shares** were available for issuance under the Amended and Restated Equity Compensation Plan as of June 30, 2025[50](index=50&type=chunk) - Performance Share Units (PSUs) for 2025 grants are based on **TSR (40%)**, three-year average **ROE (30%)**, and consolidated **O&M expense target (30%)**[52](index=52&type=chunk) Stock-based Compensation Expense | Stock-based Compensation Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | PSUs (O&M expense) | $1,831 | $1,082 | $3,247 | $1,188 | | RSUs (O&M expense) | $1,621 | $724 | $2,528 | $1,570 | | Stock Options (O&M expense) | $840 | $71 | $1,109 | $202 | | Restricted Stock (O&M expense) | $12 | $12 | $24 | $24 | | Stock Awards (O&M expense) | $0 | $840 | $0 | $840 | [Note 10 – Pension Plans and Other Postretirement Benefits](index=21&type=section&id=Note%2010%20%E2%80%93%20Pension%20Plans%20and%20Other%20Postretirement%20Benefits) Pension Benefits Net Periodic Benefit Cost | Pension Benefits Net Periodic Benefit Cost (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Service cost | $304 | $357 | $608 | $714 | | Interest cost | $3,991 | $3,908 | $7,982 | $7,816 | | Expected return on plan assets | $(4,266) | $(4,696) | $(8,532) | $(9,392) | | Amortization of prior service cost | $78 | $81 | $156 | $162 | | Amortization of actuarial loss | $833 | $751 | $1,666 | $1,502 | | **Net periodic benefit cost** | **$940** | **$401** | **$1,880** | **$802** | Other Postretirement Benefits Net Periodic Benefit Cost | Other Postretirement Benefits Net Periodic Benefit Cost (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Service cost | $372 | $363 | $744 | $726 | | Interest cost | $1,132 | $1,112 | $2,264 | $2,224 | | Expected return on plan assets | $(1,071) | $(1,105) | $(2,142) | $(2,210) | | Amortization of actuarial gain | $(401) | $(267) | $(802) | $(534) | | **Net periodic benefit cost** | **$32** | **$103** | **$64** | **$206** | - The company intends to make cash contributions of **$3.945 million** to its Pension Plan later in 2025, with no contributions made in the first half of the year[59](index=59&type=chunk) [Note 11 – Rate Activity](index=22&type=section&id=Note%2011%20%E2%80%93%20Rate%20Activity) - Kentucky natural gas subsidiary received approval for a **$7.7 million (11.2%)** annual revenue increase, effective July 1, 2025[60](index=60&type=chunk) - Aqua Pennsylvania received PAPUC approval for a **$73 million** base rate increase, effective February 22, 2025, with an aggregate annual increase of **$110.94 million** including DSIC reset[61](index=61&type=chunk) - Ohio water and North Carolina water/wastewater divisions implemented approved base rate increases totaling **$5.82 million** annually in H1 2025[62](index=62&type=chunk) - Peoples Natural Gas received PAPUC approval for a **$93 million (11.1%)** annual revenue increase, effective September 27, 2024, with an aggregate annual increase of approximately **$111 million** including DSIC reset and other adjustments[65](index=65&type=chunk) - Pending base rate cases include Aqua Virginia (**$7.927M** annually), Aqua Ohio (**$14.653M** annually), Aqua Texas (**$29.149M** annually), and Aqua North Carolina (**$32.847M** in year 1, with further increases in years 2 and 3)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 12 – Taxes Other than Income Taxes](index=24&type=section&id=Note%2012%20%E2%80%93%20Taxes%20Other%20than%20Income%20Taxes) Taxes Other than Income Taxes by Type | Tax Type (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Property | $9,085 | $8,535 | $18,156 | $17,411 | | Gross receipts, excise and franchise | $4,600 | $4,297 | $7,486 | $8,600 | | Payroll | $5,405 | $5,009 | $12,366 | $12,520 | | Regulatory assessments | $2,017 | $1,925 | $4,052 | $3,825 | | Pumping fees | $1,964 | $1,882 | $3,304 | $3,377 | | Other | $(2,199) | $585 | $(1,613) | $1,524 | | **Total** | **$20,872** | **$22,233** | **$43,751** | **$47,257** | - Decrease in taxes other than income taxes for Q2 2025 largely due to a favorable adjustment on sales and use tax accruals in the Regulated Natural Gas segment[127](index=127&type=chunk) - Decrease for H1 2025 largely due to a decrease in Illinois subsidiary's invested capital tax and lower sales and use tax and property taxes in the Regulated Natural Gas segment[135](index=135&type=chunk) [Note 13 – Segment Information](index=24&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) - The company has two reportable segments: **Regulated Water** (eight operating segments aggregated by state) and **Regulated Natural Gas** (one operating segment)[72](index=72&type=chunk)[73](index=73&type=chunk) - The "Other" category includes non-regulated natural gas operations, Aqua Resources, and unallocated corporate costs (general & administrative, interest expense)[74](index=74&type=chunk) Segment Revenues (3 Months Ended June 30, 2025) | Segment Revenues (3 Months Ended June 30, 2025) | Amount (in thousands) | | :--- | :--- | | Regulated Water | $332,282 | | Regulated Natural Gas | $177,321 | | Other and Elims | $5,304 | | **Consolidated Total** | **$514,907** | Segment Revenues (6 Months Ended June 30, 2025) | Segment Revenues (6 Months Ended June 30, 2025) | Amount (in thousands) | | :--- | :--- | | Regulated Water | $633,130 | | Regulated Natural Gas | $648,118 | | Other and Elims | $17,285 | | **Consolidated Total** | **$1,298,533** | [Note 14 – Commitments and Contingencies](index=27&type=section&id=Note%2014%20%E2%80%93%20Commitments%20and%20Contingencies) - Accrued **$22.63 million** for loss contingencies as of June 30, 2025, with **$769 thousand** estimated as probable of insurance recovery[80](index=80&type=chunk) - A class action lawsuit in Illinois related to a "do not consume" advisory was dismissed by a state court in December 2024, but plaintiffs have appealed; the company received **$5.602 million** in related insurance proceeds in February 2025[81](index=81&type=chunk) - The company is a party to multi-district litigation (MDL) against PFAS manufacturers; received an initial **$7.125 million** settlement share from 3M in July 2025[83](index=83&type=chunk) - Management believes the final resolution of these matters is **not expected to have a material adverse effect** on the company's financial position, results of operations, or cash flows[81](index=81&type=chunk)[84](index=84&type=chunk) [Note 15 – Income Taxes](index=28&type=section&id=Note%2015%20%E2%80%93%20Income%20Taxes) Effective Tax Rate | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Effective Tax Rate | 4.1% (expense) | 2.4% (expense) | -4.3% (benefit) | -2.6% (benefit) | - Q2 2025 increase in income tax expense attributed to increased earnings and decreased state tax benefit/amortization of tax repairs surcredit in Regulated Natural Gas segment[86](index=86&type=chunk) - H1 2025 increase in income tax benefit primarily due to the release of **$22.575 million** income tax reserve regulatory liability in the Regulated Water segment[86](index=86&type=chunk) - Statutory Federal tax rate is **21.0%**; State corporate net income tax rates range from **2.25% to 9.50%**[88](index=88&type=chunk) - The recently enacted H.R.1 – One Big Beautiful Bill Act (OBBBA) is **not anticipated to have a significant impact** on consolidated financial statements[90](index=90&type=chunk) [Note 16 – Recent Accounting Pronouncements and Disclosure Rules](index=29&type=section&id=Note%2016%20%E2%80%93%20Recent%20Accounting%20Pronouncements%20and%20Disclosure%20Rules) - Evaluating ASU 2024-03, "Expense Disaggregation Disclosures," effective for annual periods beginning after December 15, 2026[91](index=91&type=chunk) - Plans to adopt ASU 2023-09, "Improvements to Income Tax Disclosures," in its 2025 annual report, not expecting a significant impact[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, liquidity, capital resources, and results of operations for the reporting periods [Forward-looking Statements](index=30&type=section&id=Forward-looking%20Statements) - Forward-looking statements address expected timing of acquisitions, impact of legal proceedings, effects of accounting pronouncements, and management's plans[95](index=95&type=chunk) - Statements are subject to risks and uncertainties including regulation, abnormal weather, geopolitical forces, inflation, cyber-attacks, and changes in capital requirements[95](index=95&type=chunk) - The company undertakes no obligation to update or revise forward-looking statements[95](index=95&type=chunk) [General Information](index=30&type=section&id=General%20Information) - Essential Utilities, Inc provides regulated water, wastewater, or natural gas services to an estimated **5.5 million people** in nine states[96](index=96&type=chunk) - Operates under **Aqua** (water/wastewater) and **Peoples** (natural gas) brands[96](index=96&type=chunk) - Focuses on acquiring businesses in the U.S regulated sector, particularly water and wastewater utilities, and opportunistically pursuing supplementary market-based activities[96](index=96&type=chunk)[97](index=97&type=chunk) - Completed the sale of three non-utility local microgrid and distributed energy projects in January 2024 for **$165 million**, recognizing a **$91.236 million gain**, to focus on core business and finance capital expenditures and acquisitions[98](index=98&type=chunk) [Recent Developments](index=31&type=section&id=Recent%20Developments) [Macroeconomic Factors](index=31&type=section&id=Macroeconomic%20Factors) - Business is subject to macroeconomic conditions, including inflation and interest rate volatility[100](index=100&type=chunk) - Evaluating impacts from government fiscal policies, tariffs, and potential changes to environmental regulations[100](index=100&type=chunk) - Timely and adequate rate relief is crucial for continued profitability and fair shareholder returns, with ongoing efforts to enhance regulatory practices for efficient cost recovery[100](index=100&type=chunk) [Regulatory Developments](index=31&type=section&id=Regulatory%20Developments) 2025 Base Rate Case Authorizations | State | Segment | Effective Date | Annualized Revenue Increase (in thousands) | | :--- | :--- | :--- | :--- | | Kentucky | Natural Gas | 7/1/2025 | $7,700 | | Pennsylvania | Water | 2/22/2025 | $58,400 | | Pennsylvania | Wastewater | 2/22/2025 | $14,600 | | North Carolina | Water | 1/1/2025 | $2,820 | | North Carolina | Wastewater | 1/1/2025 | $1,310 | | Ohio | Water | 1/1/2025 | $1,690 | | **Total Base Rate Case Authorizations in 2025** | | | **$86,520** | - Pending rate applications include Aqua Virginia (**$7.927M** annually), Aqua Ohio (**$14.653M** annually), Aqua Texas (**$29.149M** annually), and Aqua North Carolina (**$29.857M** in year 1, with further increases in years 2 and 3)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) [Growth Through Acquisitions and Capital Investment](index=32&type=section&id=Growth%20Through%20Acquisitions%20and%20Capital%20Investment) - Completed acquisitions in January and April 2025, adding approximately **3,300 customers** in Greenville, PA (wastewater) and **1,000 customers** in Midvale, OH (water); Acquired Beaver Falls, PA wastewater system in July 2025, serving **3,200 customers**[106](index=106&type=chunk) - Five signed purchase agreements for additional water and wastewater systems, totaling approximately **$338 million** in purchase price and serving **210,000 equivalent retail customers**, including DELCORA (**$276.5M**, 198,000 customers)[106](index=106&type=chunk) - Invested **$612.629 million** in capital expenditures during the first half of 2025 for infrastructure improvements[107](index=107&type=chunk) - Plans to invest approximately **$7.8 billion** from 2025 through 2029 to improve water and natural gas systems and enhance customer service[107](index=107&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - Net cash flows from operating activities increased by **$145.408 million** to **$571.834 million** for the first half of 2025, driven by increased operating income and higher gas volumes due to colder weather[109](index=109&type=chunk) - In H1 2025, incurred **$612.629 million** in capital expenditures, obtained **$876.525 million** from borrowings, made **$1.29 billion** in revolving credit facility repayments, obtained **$567.4 million** net proceeds from commercial paper, and **$208.576 million** from ATM common stock sales[110](index=110&type=chunk)[21](index=21&type=chunk) - As of June 30, 2025, the **$1 billion** unsecured revolving credit facility had **$420.033 million** available, and short-term lines of credit of **$400 million** had **$381.960 million** available[117](index=117&type=chunk) - Credit ratings remain at investment grade (**S&P: A-**, **Moody's: Baa2**), though S&P lowered its rating in March 2024 and Moody's changed its outlook to negative in October 2024, citing financial measures and capital spending[118](index=118&type=chunk) - Management continues to enhance regulatory practices to address regulatory lag and recover capital project and operating costs efficiently[119](index=119&type=chunk) [Results of Operations (Consolidated)](index=35&type=section&id=Results%20of%20Operations%20(Consolidated)) [Three months ended June 30, 2025 compared with three months ended June 30, 2024](index=35&type=section&id=Three%20months%20ended%20June%2030%2C%202025%20compared%20with%20three%20months%20ended%20June%2030%2C%202024) Q2 2025 vs Q2 2024 Consolidated Performance | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $514,907 | $434,406 | +$80,501 | +18.5% | | Operations and Maintenance Expense | $148,510 | $142,512 | +$5,998 | +4.2% | | Purchased Gas | $56,735 | $33,728 | +$23,007 | +68.2% | | Depreciation and Amortization | $99,542 | $89,578 | +$9,964 | +11.1% | | Taxes Other than Income Taxes | $20,872 | $22,233 | $(1,361) | -6.1% | | Interest Expense, Net | $79,809 | $73,045 | +$6,764 | +9.3% | | Net Income | $107,827 | $75,385 | +$32,442 | +43.0% | - Operating revenues increased across Regulated Water (**+$29.803M**), Regulated Natural Gas (**+$49.133M**), and Other (**+$1.565M**) segments[122](index=122&type=chunk) - Operations and maintenance expense increased primarily due to higher employee-related costs (**+$6.129M**), bad debt expense (**+$2.175M**), and purchased gas (**+$23.007M**)[123](index=123&type=chunk)[125](index=125&type=chunk)[131](index=131&type=chunk) - Depreciation and amortization increased due to capital expenditures, acquisitions, and new depreciation rates[126](index=126&type=chunk) - Taxes other than income taxes decreased due to a favorable adjustment on sales and use tax accruals in the Regulated Natural Gas segment[127](index=127&type=chunk) - Effective income tax rate was an expense of **4.1%** in Q2 2025, up from **2.4%** in Q2 2024, due to increased earnings and decreased state tax benefit/amortization in the Regulated Natural Gas segment[130](index=130&type=chunk) [Six months ended June 30, 2025 compared with six months ended June 30, 2024](index=37&type=section&id=Six%20months%20ended%20June%2030%2C%202025%20compared%20with%20six%20months%20ended%20June%2030%2C%202024) H1 2025 vs H1 2024 Consolidated Performance | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $1,298,533 | $1,046,475 | +$252,058 | +24.1% | | Operations and Maintenance Expense | $286,334 | $279,412 | +$6,922 | +2.5% | | Purchased Gas | $241,376 | $163,403 | +$77,973 | +47.7% | | Depreciation and Amortization | $196,306 | $178,294 | +$18,012 | +10.1% | | Taxes Other than Income Taxes | $43,751 | $47,257 | $(3,506) | -7.4% | | Interest Expense, Net | $161,874 | $146,318 | +$15,556 | +10.6% | | Gain on Sale of Other Assets | $493 | $91,828 | $(91,335) | -99.5% | | Net Income | $391,616 | $341,157 | +$50,459 | +14.8% | - Operating revenues increased across Regulated Water (**+$50.758M**), Regulated Natural Gas (**+$195.599M**), and Other (**+$5.701M**) segments[132](index=132&type=chunk) - Operations and maintenance expense increased due to higher employee-related costs (**+$11.012M**), customer assistance surcharge costs (**+$9.250M**), and production costs (**+$3.060M**), partially offset by an insurance recovery (**+$5.602M**) and decreased bad debt expense (**+$5.223M**)[133](index=133&type=chunk)[135](index=135&type=chunk) - Purchased gas increased due to higher average cost of gas (**+$45.879M**) and higher gas usage (**+$32.480M**) from colder weather[133](index=133&type=chunk) - Taxes other than income taxes decreased due to lower Illinois invested capital tax and reduced sales/use and property taxes in Regulated Natural Gas[135](index=135&type=chunk) - Gain on sale of other assets significantly decreased due to the Q1 2024 sale of non-utility microgrid projects (**$91.236M gain**)[138](index=138&type=chunk) - Effective income tax rate was a benefit of **4.3%** in H1 2025, up from **2.6%** in H1 2024, primarily due to the release of **$22.575 million** income tax reserve regulatory liability in the Regulated Water segment[139](index=139&type=chunk) [Segment Results of Operations](index=38&type=section&id=Segment%20Results%20of%20Operations) [Regulated Water Segment](index=38&type=section&id=Regulated%20Water%20Segment) - The Regulated Water segment consists of eight operating segments organized by state, aggregated into one reportable segment due to similar economic characteristics and services[140](index=140&type=chunk)[72](index=72&type=chunk) Regulated Water Segment Performance | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $332,282 | $302,479 | $633,130 | $582,372 | | Operations and Maintenance Expense | $100,149 | $95,575 | $189,567 | $186,258 | | Segment Net Income | $100,480 | $87,679 | $208,402 | $151,583 | [Three months ended June 30, 2025 compared with three months ended June 30, 2024](index=39&type=section&id=Three%20months%20ended%20June%2030%2C%202025%20compared%20with%20three%20months%20ended%20June%2030%2C%202024) - Revenues increased by **$29.803 million (9.9%)** due to water/wastewater rate increases (**+$30.573M**) and customer base growth (**+$2.056M**), offset by decreased volume consumption (**$-2.637M**)[142](index=142&type=chunk)[144](index=144&type=chunk) - Operations and maintenance expense increased by **$4.574 million (4.8%)** due to employee-related costs (**+$1.561M**), bad debt expense (**+$344K**), and production costs (**+$376K**)[142](index=142&type=chunk)[144](index=144&type=chunk) - Depreciation and amortization increased by **$7.106 million (12.3%)** due to capital investment, new depreciation rates, and acquisitions[142](index=142&type=chunk) - Interest expense, net, increased by **$2.582 million (7.5%)** due to higher push-down debt and operating company debt issuances[143](index=143&type=chunk) [Six months ended June 30, 2025 compared with six months ended June 30, 2024](index=40&type=section&id=Six%20months%20ended%20June%2030%2C%202025%20compared%20with%20six%20months%20ended%20June%2030%2C%202024) - Revenues increased by **$50.758 million (8.7%)** due to water/wastewater rate increases (**+$52.909M**) and customer base growth (**+$3.554M**), offset by decreased volume consumption (**$-5.631M**)[147](index=147&type=chunk)[150](index=150&type=chunk) - Operations and maintenance expense increased by **$3.309 million (1.8%)** due to employee-related costs (**+$2.448M**), production costs (**+$3.060M**), and management fees (**+$1.810M**), offset by a decrease in bad debt expense (**$-6.022M**) from a favorable regulatory asset adjustment[147](index=147&type=chunk)[150](index=150&type=chunk) - Depreciation and amortization increased by **$10.541 million (9.2%)** due to capital investment, depreciation rate changes, and acquisitions[147](index=147&type=chunk) - Effective income tax rate decreased to an expense of **6.0%** from **18.9%** due to the release of **$22.575 million** income tax reserve regulatory liability[149](index=149&type=chunk) [Regulated Natural Gas Segment](index=41&type=section&id=Regulated%20Natural%20Gas%20Segment) - Natural gas sales are seasonal, with higher demand in colder months; a weather normalization adjustment (WNA) mechanism minimizes weather effects on revenues for residential and small/medium commercial customers[151](index=151&type=chunk) Regulated Natural Gas Segment Performance | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $177,321 | $128,188 | $648,118 | $452,519 | | Operations and Maintenance Expense | $49,786 | $49,709 | $105,461 | $95,626 | | Purchased Gas | $53,532 | $32,680 | $230,491 | $158,222 | | Segment Net Income (Loss) | $17,516 | $(1,717) | $207,021 | $208,223 | [Three months ended June 30, 2025 compared with three months ended June 30, 2024](index=41&type=section&id=Three%20months%20ended%20June%2030%2C%202025%20compared%20with%20three%20months%20ended%20June%2030%2C%202024) - Operating revenues increased by **$49.133 million (38.3%)** due to higher purchased gas costs (**+$20.852M**), higher rates/surcharges (**+$12.885M**), increased volumes from colder weather (**+$5.179M**), and a weather normalization adjustment (**+$4.551M**)[153](index=153&type=chunk)[158](index=158&type=chunk) - Purchased gas increased by **$20.852 million (63.8%)** due to higher average cost (**+$18.988M**) and higher gas usage (**+$1.864M**) from colder weather (**514 HDDs** in Q2 2025 vs **336 HDDs** in Q2 2024)[154](index=154&type=chunk) - Taxes other than income taxes decreased by **$2.612 million (51.2%)** due to a favorable adjustment on sales and use tax accruals[155](index=155&type=chunk) - Interest expense, net, increased by **$4.964 million (23.8%)** due to higher push-down debt borrowings for capital projects[156](index=156&type=chunk) [Six months ended June 30, 2025 compared with six months ended June 30, 2024](index=43&type=section&id=Six%20months%20ended%20June%2030%2C%202025%20compared%20with%20six%20months%20ended%20June%2030%2C%202024) - Operating revenues increased by **$195.599 million (43.2%)** due to higher purchased gas costs (**+$72.269M**), higher rates/surcharges (**+$60.034M**), increased volumes from colder weather (**+$34.700M**), and a weather normalization adjustment (**+$2.562M**)[159](index=159&type=chunk)[161](index=161&type=chunk) - Purchased gas increased by **$72.269 million (45.7%)** due to higher average cost (**+$45.856M**) and higher gas usage (**+$26.799M**) from colder weather (**3,244 HDDs** in H1 2025 vs **2,616 HDDs** in H1 2024)[160](index=160&type=chunk) - Operations and maintenance expense increased by **$9.835 million (10.3%)** due to customer assistance surcharge costs (**+$9.250M**), labor/employee benefits (**+$4.503M**), and legal expenses (**+$2.163M**), offset by decreased materials/supplies (**$-1.561M**)[159](index=159&type=chunk)[161](index=161&type=chunk) - Taxes other than income taxes decreased by **$4.078 million (33.1%)** due to a favorable adjustment on sales and use tax accruals[161](index=161&type=chunk) - Gain on sale of assets was **$0** in H1 2025, compared to **$91.581 million** in H1 2024, due to the prior year's sale of non-utility microgrid projects[163](index=163&type=chunk) [Impact of Recent Accounting Pronouncements](index=44&type=section&id=Impact%20of%20Recent%20Accounting%20Pronouncements) - Refer to Note 16 for details on recent accounting pronouncements[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from changes in interest rates and equity prices, with further details in its 2024 Annual Report - The company is subject to market risks from changes in interest rates and equity prices[167](index=167&type=chunk) - Additional information on market risks can be found in Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2024[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed **effective** as of June 30, 2025[167](index=167&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2025[168](index=168&type=chunk) Part II – Other Information [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Details on legal proceedings are referenced in Note 14 of the condensed consolidated financial statements - Refer to Note 14 of the condensed consolidated financial statements for a discussion of legal proceedings[168](index=168&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Applicable risks are detailed in the "Risk Factors" section of the company's 2024 Annual Report on Form 10-K - Review risks disclosed in "Part 1, Item 1A – Risk Factors" of the Annual Report on Form 10-K for the year ended December 31, 2024[169](index=169&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) This section details executive leadership changes and confirms no new security trading plans were adopted by insiders - Robert A. Rubin retired as Senior Vice President, Chief Accounting Officer on **July 31, 2025**[170](index=170&type=chunk) - Bradley J. Palmer was promoted to Vice President, Chief Accounting Officer upon Mr. Rubin's retirement[170](index=170&type=chunk) - No security trading plans by directors or executive officers were adopted, modified, or terminated during the quarter ended June 30, 2025[173](index=173&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including credit agreements, certifications, and XBRL documents - Exhibits include Second Amended and Restated Revolving Credit Agreement (Aqua Pennsylvania), Amended and Restated Credit Agreement (PNG Companies, LLC), Bond Purchase Agreement (Aqua Pennsylvania), CEO/CFO Certifications, and Inline XBRL documents[174](index=174&type=chunk) Signatures [Signatures](index=47&type=section&id=Signatures) The report was duly executed on August 4, 2025, by the company's CEO and CFO - Report executed on **August 4, 2025**, by Christopher H. Franklin (Chairman, President and CEO) and Daniel J. Schuller (EVP and CFO)[177](index=177&type=chunk)

Core Insights - Essential Utilities reported strong second quarter 2025 results, with earnings per share (GAAP) at $0.38, exceeding the analyst estimate of $0.30, and revenue at $514.9 million, surpassing the forecast of $469.75 million, indicating robust business performance and strategic execution [1][2] Financial Performance - EPS (GAAP) increased by 35.7% year-over-year from $0.28 in Q2 2024 to $0.38 in Q2 2025 [2] - Revenue (GAAP) rose by 18.5% year-over-year from $434.4 million in Q2 2024 to $514.9 million in Q2 2025 [2] - Operating income reached $185.3 million, a 27.5% increase from $145.3 million in Q2 2024 [2] - Net income grew by 43.0% year-over-year, from $75.4 million in Q2 2024 to $107.8 million in Q2 2025 [2] Business Overview - Essential Utilities operates in regulated water, wastewater, and natural gas services across several states, including Pennsylvania, Ohio, North Carolina, and New Jersey, serving millions of customers [3] - The company focuses on two main segments: Regulated Water and Regulated Natural Gas [3] Strategic Initiatives - The company secured $92.6 million in new base water segment rate awards and $8.2 million in natural gas rate approvals as of July 31, 2025, with additional pending rate cases potentially adding $96.5 million in annual revenue [5] - Infrastructure investment is a priority, with $613 million invested in the first half of 2025 and a target of $1.4 to $1.5 billion for the full year [6] - The company plans to invest $7.8 billion from 2025 to 2029, focusing on aging infrastructure and compliance with new EPA regulations on PFAS [6] Acquisition Strategy - In July 2025, the company acquired the Beaver Falls wastewater system for $37.75 million, expanding its customer base [7] - Year-to-date acquisitions serve approximately 10,300 customers for a total purchase price of $58 million, with a pipeline representing about 400,000 potential new customers [7] Segment Performance - Regulated Water segment revenue grew by 9.9%, while the Regulated Natural Gas segment saw a 38.3% increase in revenue, driven by higher rates and surcharges [8] - Overall operating income rose by 27.5% and net income increased by 43.0% year-over-year, supported by rate increases across both segments [8] Future Outlook - Management raised its 2025 EPS guidance, now expecting it to exceed the previous range of $2.07 to $2.11, with a long-term goal of 5 to 7% compound annual EPS growth through 2027 [9] - The capital plan remains unchanged, with continued growth expected in water and gas rate bases at approximately 6% and 11% compound annual rates, respectively [9]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.38, a 35% increase compared to the same quarter last year [6] - Revenues increased by 18.5% year-over-year, rising from $434.4 million to $514.9 million [26] - Net income for the gas business was $17.5 million for the quarter [7] - The company expects GAAP earnings per share to exceed the guidance range of $2.07 to $2.11 for the year [7] Business Line Data and Key Metrics Changes - The gas business showed strong performance with significant revenue growth attributed to favorable rate case outcomes and increased gas volume [26] - The water business is expected to see annual rate base growth of 6% through 2029, not including acquisitions [18] - O&M expenses increased by 4.2% year-over-year, driven by higher employee-related costs and bad debt expenses [29] Market Data and Key Metrics Changes - The company is experiencing a wet summer, which has decreased water consumption in several states [28] - The Texas market has seen a 16% population increase and a corresponding 30% GDP growth, contributing to the company's growth in that region [23] Company Strategy and Development Direction - The company is reaffirming its capital investment plans with a target of approximately $1.4 billion in infrastructure investment for 2025 [7] - The focus remains on growing the water and wastewater business through acquisitions, with recent purchases totaling approximately $58 million for systems serving about 10,300 customers [34] - The company aims to maintain a strong balance sheet and improve cash flow while delivering consistent dividend growth [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong growth potential in both water and gas platforms [36] - The company is committed to addressing PFAS issues and sees regulatory changes as potential growth opportunities [22][76] - Management noted that the engagement with regulatory bodies has been positive, indicating a constructive relationship moving forward [55] Other Important Information - The Board of Directors approved a 5.25% increase in the dividend, continuing a 30-year tradition of dividend growth [12] - The company has been recognized for its community engagement efforts, being named one of Greater Philadelphia's most community-minded businesses [14] Q&A Session Summary Question: Insights on quarterly earnings guidance - Management indicated that GAAP earnings are expected to exceed the guidance range due to strong revenue in gas and favorable tax items [41][44] Question: Cash flow trends and PFAS settlements - The company expects to receive approximately $45 million in PFAS proceeds this year, with $7.1 million already received [49] Question: Regulatory environment in Pennsylvania - Management noted a positive engagement with the new consumer advocate and expressed hope for constructive relationships with all advocates [55][56] Question: Fair market value in acquisitions - Management stated they might consider paying above the reasonable review ratio if significant rate base growth is anticipated [59] Question: Tax rate modeling - Management suggested a low single-digit benefit for 2025 and a low single-digit expense for 2026, indicating a crossover in tax impacts [62]

Financial Data and Key Metrics Changes - The company reported GAAP earnings per share of $0.38, a 35% increase compared to the same quarter last year [4] - Net income for the gas business was $17,500,000, contributing to strong overall performance [5] - Revenues increased by 18.5% year-over-year, rising from $434,400,000 to $514,900,000 [24][25] - Earnings per share increased by 35.7% year-over-year, driven by favorable rate case outcomes and increased gas volume [24] Business Line Data and Key Metrics Changes - The water business is expected to see annual rate base growth of 6% through 2029, not including acquisitions [15] - The gas business experienced strong revenue growth due to higher gas usage and favorable rate outcomes [24] - The water business contributed $2,100,000 to revenue growth, although lower water volumes offset some gains [25] Market Data and Key Metrics Changes - The company serves over a million customers with a rate base exceeding $7,000,000,000 across eight states [15] - In Texas, the company has grown by nearly 25,000 connections over the last ten years, with another 90,000 under contract or negotiation [21] Company Strategy and Development Direction - The company is reaffirming its capital investment plans with a target of approximately $1,400,000,000 in infrastructure investment for 2025 [5] - The focus remains on growing the water and wastewater business through acquisitions, with recent purchases totaling approximately $58,000,000 [32] - The company aims to maintain a strong balance sheet and deliver consistent dividend growth while keeping the payout ratio between 60-65% [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth opportunities, particularly in Pennsylvania due to low energy costs attracting hyperscalers [7][70] - The company is committed to addressing PFAS regulations and sees potential for acquisition growth as municipalities begin to comply with new standards [20][74] - Management expects GAAP earnings per share to exceed the guidance range of $2.07 to $2.11, driven by strong performance and non-recurring benefits [5][46] Other Important Information - The Board of Directors approved a 5.25% increase in the dividend, continuing a 30-year tradition of dividend growth [10] - The company has been recognized for its community engagement efforts, being named one of Greater Philadelphia's most community-minded businesses [12] Q&A Session Summary Question: Clarification on quarterly earnings guidance - Management confirmed that GAAP earnings are expected to be above the guidance range due to strong revenue and some positive tax items [41][46] Question: Trends in cash flow and PFAS settlements - Management indicated a target for funds from operations (FFO) to be above 12% and expects to receive approximately $45,000,000 in PFAS proceeds this year [48][49] Question: Insights on Pennsylvania's regulatory environment - Management noted a positive engagement with the new consumer advocate and expressed hope for constructive relationships with all advocates [54][55] Question: Fair market value and acquisition strategy - Management stated they might consider paying above the reasonable review ratio if significant rate base growth is anticipated [58] Question: Tax rate modeling for future years - Management advised to expect a low single-digit benefit for 2025 and a low single-digit expense for 2026 [61]

NYSE LISTED WTRG Second Quarter 2025 August 1st, 2025 February 2024 Brian Dingerdissen Vice President Treasury, FP&A and Investor Relations 2 Forward Looking Statement This presentation contains in addition to historical information, forward looking statements based on assumptions made by management regarding future circumstances over which the company may have little or no control, that involve risks, uncertainties and other factors that may cause actual results to be materially different from any future r ...