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of companies that have consistently increased their annual dividend payouts, but the data can quickly become outdated due to its monthly publication frequency [1] - Justin Law is a contributor to The Dividend Kings, a group of analysts focused on teaching individuals how to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]

Financial Performance - Q2 2025 EPS was $0.38, with 2025 EPS guidance set at $2.07 - $2.11[9] - Operating revenues for Q2 2025 increased by 18.5% to $514.9 million, compared to $434.4 million in Q2 2024[41] - Net income for Q2 2025 increased by 43.0% to $107.8 million, compared to $75.4 million in Q2 2024[41] - YTD 2025 operating revenues increased by 24.1% to $1,298.5 million, compared to $1,046.5 million in YTD 2024[75] - YTD 2025 net income increased by 14.8% to $391.6 million, compared to $341.2 million in YTD 2024[75] Investments and Growth - Infrastructure investments for 2025 are projected to be $1.4 billion - $1.5 billion[9] - The company anticipates approximately $7.8 billion in infrastructure investments from 2025-2029[20] - The company targets a rate base CAGR of approximately 6% through 2029 for Aqua[23] - The company targets a rate base CAGR of approximately 11% through 2029 for Peoples[65] Regulatory and Acquisitions - Completed regulatory recoveries in 2025 are expected to increase annualized revenue by $92.6 million for the water segment and $8.2 million for the gas segment[53] - Pending regulatory recoveries are expected to increase annualized revenue by $96.6 million for the water segment[53] - Over 135,000 water and wastewater customers and approximately $550 million in rate base have been acquired through M&A since 2015[60]

[Q2 2025 Earnings Release](index=1&type=section&id=Essential%20Utilities%20Reports%20Strong%20Second%20Quarter%202025%20Results) Essential Utilities delivered strong Q2 and H1 2025 results, driven by financial growth, strategic investments, and a positive future outlook [Financial Performance](index=1&type=section&id=Operating%20Results) Essential Utilities achieved significant financial growth in Q2 and H1 2025, driven by increased net income and revenue from rate adjustments | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $107.8 million | $75.4 million | +43.0% | | Diluted EPS | $0.38 | $0.28 | +35.7% | | Revenues | $514.9 million | $434.4 million | +18.5% | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $391.6 million | $341.2 million | +14.8% | | Diluted EPS | $1.41 | $1.25 | +12.8% | | Revenues | $1,298.5 million | $1,046.5 million | +24.1% | - Primary drivers for the quarterly earnings increase were rate hikes in both business segments, which were partially offset by higher depreciation, interest, and operations and maintenance expenses[5](index=5&type=chunk)[6](index=6&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) Both regulated water and natural gas segments reported robust Q2 2025 revenue growth, primarily due to new rates and higher purchased gas costs | Regulated Water Segment | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $332.3 million | $302.5 million | +9.9% | | O&M Expenses | $100.1 million | $95.6 million | +4.7% | | Regulated Natural Gas Segment | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $177.3 million | $128.2 million | +38.3% | | O&M Expenses | $49.8 million | - | Relatively flat | [Shareholder Returns & Financing](index=2&type=section&id=Shareholder%20Returns%20%26%20Financing) The company increased its quarterly dividend by 5.25% and maintains a stable financial position with available credit lines - The board of directors declared a **5.25% increase** in the quarterly cash dividend to **$0.3426 per share**[11](index=11&type=chunk) - This marks the **35th dividend increase** in the last **34 years** and continues an **80-year streak** of consecutive quarterly cash dividends[11](index=11&type=chunk) - As of June 30, 2025, the company's weighted average cost of fixed-rate long-term debt was **4.03%**, with **$802 million** available on its credit lines[12](index=12&type=chunk) [Operational Highlights & Strategy](index=2&type=section&id=Operational%20Highlights%20%26%20Strategy) Essential Utilities advanced its strategy through substantial infrastructure investments, strategic acquisitions, and successful rate adjustments - Invested **$613 million** in the first half of 2025 and is on track to invest over **$1.4 billion** for the full year[7](index=7&type=chunk)[14](index=14&type=chunk) - Long-term capital plan includes investing approximately **$7.8 billion** from 2025 through 2029 to improve water and gas systems, address PFAS, and reduce methane emissions[14](index=14&type=chunk) - Closed the acquisition of the City of Beaver Falls wastewater system for **$37.75 million**, serving approximately **7,000 customers** and equivalent dwelling units (EDUs)[17](index=17&type=chunk) - The company has four signed purchase agreements pending for additional systems, expected to serve over **200,000 customers**, and is actively pursuing a pipeline representing approximately **400,000 total customers**[18](index=18&type=chunk)[19](index=19&type=chunk) - As of July 31, 2025, the company received rate awards and surcharges totaling **$100.8 million** (**$92.6 million** for water, **$8.2 million** for gas) and has pending cases for an additional **$96.5 million** in annual revenue[13](index=13&type=chunk) [Future Outlook & Guidance](index=3&type=section&id=Multi-Year%20Financial%20and%20Growth%20Guidance) The company updated its 2025 EPS guidance upward and reaffirmed long-term growth targets, including significant rate base CAGR and emission reduction goals - For 2025, the company expects to achieve GAAP earnings per share above the guidance range of **$2.07-$2.11** due to non-recurring benefits[7](index=7&type=chunk)[20](index=20&type=chunk) | Long-Term Guidance (through 2029 unless noted) | Target | | :--- | :--- | | EPS CAGR (through 2027) | 5% to 7% | | 2025 Regulated Infrastructure Investments | $1.4 to $1.5 billion | | Total Regulated Infrastructure Investments | ~$7.8 billion | | Regulated Water Segment Rate Base CAGR | ~6% | | Regulated Natural Gas Segment Rate Base CAGR | ~11% | | Combined Regulated Utility Rate Base CAGR | >8% | - Reaffirms commitment to reduce Scope 1 and 2 greenhouse gas emissions by **60% by 2035** from a 2019 baseline[21](index=21&type=chunk)[25](index=25&type=chunk) - Guidance assumptions exclude the potential DELCORA acquisition and assume the company will continue to issue equity to support capital plans[22](index=22&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) Unaudited financial statements detail Q2 2025 operating results and the company's financial position, showing growth in income and assets | Selected Operating Data (Q2 Ended June 30, in thousands, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Operating revenues | $514,907 | $434,406 | | Net income | $107,827 | $75,385 | | Diluted net income per common share | $0.38 | $0.28 | | Condensed Balance Sheet Data (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Net property, plant and equipment | $13,579,450 | $13,143,476 | | Total Assets | $18,554,285 | $18,026,554 | | Long-term debt (net) | $7,622,994 | $7,368,381 | | Total equity | $6,720,202 | $6,198,809 |

Core Insights - Essential Utilities Inc. (WTRG) reported second-quarter 2025 operating earnings per share (EPS) of 38 cents, exceeding the Zacks Consensus Estimate of 29 cents by 31% and reflecting a year-over-year increase of 35.7% [1][7] - Total operating revenues reached $515 million, surpassing the Zacks Consensus Estimate of $473 million by 8.8% and showing an 18.7% increase year over year, driven by higher rates and purchased gas costs [2][7] Revenue Breakdown - The regulated water segment generated revenues of $332.3 million, a 9.9% increase from $302.5 million in the second quarter of 2024, primarily due to higher water and wastewater rates [3] - The regulated natural gas segment reported revenues of $177.3 million, a significant 38.3% increase from $128.2 million in the same quarter last year, driven by higher purchased gas costs and increased rates and surcharges [4] Expense and Investment Highlights - Operation and maintenance expenses were $148.5 million, up 4.2% from $142.5 million in the prior year [5] - Operating income totaled $185.3 million, reflecting a 27.5% year-over-year increase [5] - The company invested $613 million in the first half of 2025 to upgrade its regulated water and natural gas infrastructure [5] Strategic Acquisitions and Future Guidance - Essential Utilities acquired systems serving nearly 10,300 customers for approximately $58 million in 2025, with new water and gas rate approvals expected to increase annual revenues by $92.6 million and $8.2 million, respectively [6] - The company reaffirmed its 2025 EPS guidance in the range of $2.07-$2.11, with a long-term annual earnings growth forecast of 5% to 7% through 2027 [9] - Planned investments for infrastructure in 2025 are projected to be between $1.4 billion and $1.5 billion, with a total of $7.8 billion planned from 2025 to 2029 [10]

Over the last four quarters, the company has surpassed consensus EPS estimates four times. Essential Utilities, which belongs to the Zacks Utility - Water Supply industry, posted revenues of $514.91 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 8.76%. This compares to year-ago revenues of $434.41 million. The company has topped consensus revenue estimates four times over the last four quarters. Essential Utilities (WTRG) came out with quarterly earnings of $0.38 per sha ...