Customer Base and Revenue - Essential Utilities serves approximately 5.5 million people across multiple states, with Aqua Pennsylvania accounting for about 55% of operating revenues in 2024[14]. - The company reported consolidated operating revenues of $2,086,113,000 for the year ended December 31, 2024, with the Regulated Water segment contributing 58.6% and the Regulated Natural Gas segment contributing 40.4%[17]. - In 2024, residential water customers represented approximately 67% of total water and wastewater revenues, while residential gas customers accounted for 24.2% of natural gas revenues[19]. - The utility customer growth rate was 0.6% in 2024, with an increase of 11,845 customers, primarily due to acquisitions and organic growth[23]. - The company completed the sale of its regulated natural gas utility assets in West Virginia for approximately $39,965,000, representing about 2% of its regulated natural gas customers[16]. Investments and Capital Expenditures - Essential Utilities plans to invest approximately $7.8 billion from 2025 through 2029 to improve water and natural gas systems and meet compliance requirements[29]. - The company estimates capital expenditures of approximately $104 million, representing less than 3% of expected total water and wastewater capital expenditures over the next five years (2025-2029) to address environmental compliance issues[69]. - The company anticipates an investment of at least $450 million in capital expenditures to install additional treatment facilities to comply with the final National Primary Drinking Water Regulation (NPDWR) by 2029[72]. - The company has approximately $39 million budgeted for capital improvements related to dam safety between 2025 and 2029[78]. - The company has budgeted for ongoing infrastructure improvements to comply with environmental regulations, including those related to PFAS and lead pipe replacements[69][81]. Environmental and Regulatory Compliance - The company is committed to integrating environmental, health, and safety requirements into all operational activities, adhering to applicable regulatory standards[67]. - The company is actively involved in legal actions against PFAS manufacturers to ensure accountability for contamination of public water supply systems[75]. - The company is subject to stringent regulations under the Safe Drinking Water Act and the Clean Water Act, ensuring compliance with national quality standards for drinking water and wastewater discharges[68]. - The fair market value legislation in Pennsylvania encourages consolidation in the water and wastewater industry, providing municipalities with options for exiting the business[53]. - The company has a program to evaluate changes in water sources to prevent lead leaching, focusing on identifying and removing lead service lines[170]. Operational Efficiency and Challenges - The company aims to pursue acquisitions of government-owned and regulated water and wastewater systems to expand its customer base and service areas[24]. - The company completed 12 acquisitions of water or wastewater utilities or similar assets over the three-year period ending December 31, 2024[28]. - The integration of acquisitions is complex and may require significant management resources, potentially affecting operational efficiency[189]. - The company faces risks related to capital expenditures, which may be limited if sufficient capital cannot be obtained, potentially affecting earnings growth and compliance with regulations[178]. - The company relies on third-party suppliers for essential goods and services, and disruptions could harm operations and financial results[147]. Financial Performance and Risks - The company's aggregate long-term and short-term debt balance was $7,745,638,000 as of December 31, 2024[176]. - The company faces risks from general economic downturns, which may lead to declines in asset market values and increased cash contributions to pension plans[113]. - Inflation and higher interest rates have negatively impacted the company's financial condition, with operating and capital costs rising significantly[114]. - Regulatory lag in rate adjustments may prevent the company from recovering increased costs due to inflation, affecting profitability[115]. - The company may experience a reduction in discretionary water and natural gas usage by residential customers, particularly during peak seasons[116]. Sustainability and Emissions - In 2024, the company achieved a 25% reduction in Scope 1 and 2 greenhouse gas emissions from its 2019 baseline, with a target of 60% reduction by 2035[90]. - The company replaced 268 miles of gas pipeline in 2024 and over 930 miles since 2021, contributing to its emissions reduction efforts[90]. - The company began procuring nearly 100% renewable electricity for its water and wastewater operations in 2022, enhancing its sustainability efforts[90]. - The company has established a significant board-level oversight for climate-change matters, with quarterly discussions among senior leaders[91]. - The company is subject to risks related to climate change, which could lead to increased operational costs and affect financial performance[161]. Cybersecurity and Operational Risks - Cybersecurity threats pose risks to the company's information technology systems, which are essential for operations and customer service[125]. - The company has implemented a cybersecurity controls framework to mitigate risks, but vulnerabilities remain[128]. - The company maintains a cross-functional committee led by the Chief Information Officer to oversee cybersecurity risks and strategies[194]. - The company’s cybersecurity program is aligned with the NIST Cybersecurity Framework, incorporating best practices to protect against unauthorized access[191]. - The company may face challenges in maintaining adequate insurance coverage for potential cybersecurity incidents and other operational risks[127]. Shareholder Returns and Dividends - The company has paid dividends consecutively for 80 years, highlighting its commitment to shareholder returns[177]. - The company’s net property, plant, and equipment totaled $13,143,476,000 as of December 31, 2024, with Pennsylvania accounting for 70.8% of this total[198]. - In 2024, dividends paid represented 58.2% of net income[203]. - The company has paid dividends consecutively for 80 years, with a 6.0% increase in the quarterly dividend authorized on July 31, 2024, raising the annualized dividend rate to $1.302 per share[203].

Financial Data and Key Metrics Changes - For the year 2024, the company reported GAAP earnings per share (EPS) of $2.17, an increase from $1.86 in 2023, which includes a gain on sale from Pittsburgh Energy projects [12][39] - Non-GAAP earnings per share for 2024 were approximately $1.97, aligning with the guidance range of $1.96 to $2.00 [12][49] - Operating revenues increased due to rate increases and surcharges, with a total increase of nearly $83 million, primarily from water and gas [41][37] Business Line Data and Key Metrics Changes - The water segment saw an increase in revenue of approximately $51 million, while the gas segment contributed about $32 million to the revenue increase [41] - Operating expenses grew by only 2% year-over-year, reflecting the company's focus on operational efficiency [13][44] - The company completed its capital plan of $1.3 billion, which included significant investments in water quality and gas safety [13][20] Market Data and Key Metrics Changes - The company experienced a decline in natural gas commodity prices year-over-year, positively impacting customer bills [38] - Weather normalization mechanisms were implemented to alleviate revenue volatility due to extreme weather conditions [38][18] - The company reported that it was the strongest performing water stock in 2024, although it expressed disappointment in its overall valuation [27][28] Company Strategy and Development Direction - The company plans to invest nearly $7.8 billion in capital over the next five years, focusing on infrastructure improvements and operational excellence [25][61] - A key theme for 2025 is the adoption of lean practices to enhance operational efficiency [29] - The company is exploring opportunities related to data centers, which could provide growth in its natural gas service territory [32][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the regulatory environment in Pennsylvania, highlighting successful rate cases and a constructive regulatory reputation [16][19] - The company anticipates continued growth in its water customer base at an average annual rate of 2% to 3% due to consolidation opportunities [64] - Management noted that the volatility of earnings associated with unusual weather should be dramatically reduced due to the weather normalization mechanism [60] Other Important Information - The company has a strong pipeline of acquisition opportunities, with six signed asset purchase agreements adding over 210,000 customer equivalents [57][58] - The company is actively engaged in PFAS mitigation efforts, with a capital spend of approximately $450 million planned over four years [20][102] - The company plans to raise approximately $315 million in equity through its multiyear ATM program to support growth initiatives [65] Q&A Session Summary Question: Update on M&A activity and Delcora acquisition - Management indicated that the Delcora acquisition is not expected to close this year and has been taken out of the five-year plan, but they remain committed to it [71][72] Question: Consumer advocate situation in Pennsylvania - Management noted that the acting consumer advocate has similar powers to a confirmed advocate, and they are closely monitoring the timeline for a permanent nomination [80][82] Question: PFAS investment strategy and potential earnings - Management confirmed that the $450 million PFAS investment is expected to be net of proceeds from lawsuits and grants, and they are optimistic about the potential for earnings from their patent-pending technology [102][111] Question: Data center opportunities - Management discussed the potential for various types of deals with data centers, including on-site generation and infrastructure projects that could enhance rate base [90][121]

NYSE LISTED WTRG Full Year 2024 Earnings Call February 27th, 2025 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 results expressed or implied by such forward-looking statements. These fact ...

Core Insights - Essential Utilities Inc. (WTRG) reported fourth-quarter 2024 operating earnings per share (EPS) of 67 cents, exceeding the Zacks Consensus Estimate of 66 cents by 1.5% and showing a 34% increase from the previous year's EPS of 50 cents [1][2] Financial Performance - Total operating revenues reached $604 million, surpassing the Zacks Consensus Estimate of $534 million by 13.2%, with a year-over-year increase of 2.6% [3] - Operating income was $226.6 million, reflecting a 30.3% year-over-year growth, while operating and maintenance expenses rose by 4.2% to $163.5 million [4] - Interest expenses increased by 8.8% to $79.3 million compared to $72.9 million in the prior-year quarter [4] Strategic Initiatives - The company has expanded its operations through strategic acquisitions, adding nearly 129,000 wastewater customers since 2015, and signed seven purchase agreements to acquire additional wastewater systems, expected to add 213,000 retail customers [5] - In 2024, the regulated water segment received rate awards to increase annual revenues by $53.9 million across several states, while the regulated natural gas segment received rate awards to boost revenues by $93.9 million in Kentucky and Pennsylvania [6] Financial Position - As of December 31, 2024, current assets were $485.9 million, down from $492 million a year earlier, and long-term debt increased to $7.36 billion from $6.82 billion [7] - The company invested $1.3 billion in 2024 to enhance its regulated water and natural gas infrastructure [7] Future Outlook - Essential Utilities reaffirmed its 2025 EPS guidance of $2.05-$2.11, with the Zacks Consensus Estimate for EPS at $2.13, indicating potential growth [8] - The company plans to invest $1.4-$1.5 billion in infrastructure in 2025 and a total of $7.88 billion from 2025 to 2029 to improve water and natural gas systems [9]

Financial Performance - Essential Utilities reported a 17% increase in earnings per share to $2.17 for the full year 2024, compared to $1.86 in 2023[1] - The company achieved revenues of $2,086.1 million for 2024, a 1.6% increase from $2,053.8 million in 2023[3] - Operating revenues for Q4 2024 reached $604,383 thousand, a 26% increase from $479,419 thousand in Q4 2023[32] - Net income for Q4 2024 was $184,755 thousand, up 36% from $135,448 thousand in Q4 2023[32] - Basic and diluted net income per common share for Q4 2024 was $0.67, compared to $0.50 in Q4 2023, representing a 34% increase[32] - The company reported an adjusted income of $540,898 thousand for the year ended December 31, 2024[40] Revenue Segments - The regulated water segment generated revenues of $1,221.9 million, reflecting a 5.9% increase compared to $1,153.3 million in 2023[5] - The regulated natural gas segment reported revenues of $843.0 million, down from $863.8 million in 2023, primarily due to lower purchased gas costs[6] Investments and Infrastructure - Essential invested approximately $1.3 billion in infrastructure improvements in 2024, including mitigation of PFAS contamination at 13 sites[15] - The company expects to invest $1.4 to $1.5 billion in infrastructure in 2025 and approximately $7.8 billion from 2025 to 2029[16] - The company has signed purchase agreements for additional water and wastewater systems expected to serve over 210,000 equivalent customers, totaling over $344.0 million[19] Growth Projections - Essential's multi-year earnings guidance indicates a compounded annual growth rate of 5-7% in earnings per share through 2027[3] - The average annual long-term growth rate for the water utility customer base is projected to be between 2-3% for acquisitions and organic growth[32] Equity and Debt - Total equity increased to $6,198,809 thousand in 2024 from $5,896,183 thousand in 2023, reflecting a growth of approximately 5%[42] - Long-term debt, net of debt issuance costs, rose to $7,368,381 thousand in 2024 from $6,826,085 thousand in 2023[42] - The company plans to raise approximately $315 million in equity through the At-The-Market equity program in 2025[32] Environmental Goals - The company aims to reduce Scope 1 and 2 greenhouse gas emissions by 60% by 2035 from its 2019 baseline[22] - The company aims to reduce Scope 1 and Scope 2 greenhouse gas emissions by 60% by 2035 from the 2019 baseline[32] Other Notable Events - The company experienced a gain of $91,236 thousand from the sale of non-utility local microgrid and distributed energy projects in Q1 2024[37] - Essential's board declared a quarterly cash dividend of $0.3255 per share, payable on June 2, 2025[9]

Core Insights - Essential Utilities (WTRG) reported quarterly earnings of $0.67 per share, exceeding the Zacks Consensus Estimate of $0.66 per share, and up from $0.50 per share a year ago, representing an earnings surprise of 1.52% [1] - The company posted revenues of $604.38 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 13.19%, compared to $479.42 million in the same quarter last year [2] - Essential Utilities shares have increased approximately 4.7% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.80 on revenues of $699.82 million, and for the current fiscal year, it is $2.13 on revenues of $2.26 billion [7] - The estimate revisions trend for Essential Utilities is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Utility - Water Supply industry is currently in the top 32% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8] - Another company in the same industry, Global Water Resources, Inc. (GWRS), is expected to report quarterly earnings of $0.06 per share, reflecting a year-over-year decline of 14.3% [9]

Core Viewpoint - Essential Utilities (WTRG) has experienced significant selling pressure, resulting in an 8.7% decline over the past four weeks, but analysts anticipate better earnings than previously expected, indicating potential for recovery [1]. Group 1: Stock Performance and Technical Indicators - WTRG is currently in oversold territory with a Relative Strength Index (RSI) reading of 20.88, suggesting that the heavy selling may be exhausting itself, which could lead to a price rebound [5]. - The RSI is a momentum oscillator that helps identify whether a stock is oversold, typically when the reading falls below 30 [2][3]. Group 2: Earnings Estimates and Analyst Sentiment - Over the last 30 days, the consensus EPS estimate for WTRG has increased by 0.2%, indicating a positive trend in earnings estimate revisions, which often correlates with price appreciation [6]. - WTRG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a turnaround [7].

Core Insights - The article discusses Essential Utilities, Inc. (NYSE: WTRG) and its recent quarterly results, emphasizing progress on regulatory approvals in Pennsylvania and ongoing investments in infrastructure improvements in both water and natural gas segments [1] Regulatory Approvals - Essential Utilities has made significant progress in obtaining key regulatory approvals in Pennsylvania, which is crucial for its operational expansion and compliance [1] Infrastructure Investments - The company continues to sustain its investment in infrastructure improvements across its water and natural gas segments, indicating a commitment to enhancing service quality and operational efficiency [1]

Company Overview - The Company serves approximately 5.5 million people across nine states under the Aqua and Peoples brands[112]. Financial Performance - Consolidated operating revenues increased by $24,000 or 5.8% for the three months ended September 30, 2024, compared to the same period in 2023[132]. - Net income for the three months ended September 30, 2024, was $69,402, a decrease from $80,076 in the same period of 2023[132]. - Consolidated operating revenues decreased by $92,675 or 5.9% for the nine months ended September 30, 2024, compared to the same period in 2023[139]. - For the first nine months of 2024, revenues increased by $45,287 or 5.2%, mainly due to higher water and wastewater rates and a larger customer base[157]. Cash Flow and Debt - In the first nine months of 2024, cash flow from operations was $622,510, a decrease from $804,569 in the same period of 2023[122]. - The Company issued $1,394,411 in long-term debt during the first nine months of 2024 to finance capital expenditures and repay existing indebtedness[123]. - As of September 30, 2024, the Company had $8,436 in cash and cash equivalents, an increase from $4,612 at December 31, 2023[127]. - As of September 30, 2024, the company had $824,226 available for borrowing from its $1,000,000 unsecured revolving credit facility[128]. Capital Expenditures - Capital expenditures for the first nine months of 2024 totaled $932,498, primarily for improvements to water, wastewater, and natural gas infrastructure[123]. - The Company estimates a capital expenditure of at least $450,000 to comply with new EPA water quality standards by 2029[115]. - Approximately 6% of the Company's regulated water service systems contain lead or galvanized service lines requiring replacement, with a budget of $210,000 for this over the next five years[117]. Asset Sales and Gains - The Company sold its regulated natural gas utility assets in West Virginia for a final purchase price of $41,178, representing about 2% of its regulated natural gas customers[113]. - The Company recognized a gain of $91,236 from the sale of three non-utility local microgrid and distributed energy projects, completed in January 2024[113]. - Gain on sale of assets was $92,067 for the nine months ended September 30, 2024, compared to $184 in the same period of 2023[145]. - Gain on sale of assets was $91,581 for the nine months ended September 30, 2024, compared to $0 for the same period in 2023[179]. Expenses - Operations and maintenance expense decreased by $2,650 or 1.8% for the three months ended September 30, 2024, primarily due to the sale of regulated natural gas utility assets[133]. - Purchased gas increased by $2,505 or 15.1% for the three months ended September 30, 2024, due to higher average gas costs and usage[134]. - Operations and maintenance expense increased by $7,903 or 2.9% in the first nine months of 2024, primarily due to increased production costs and employee-related costs[158]. - Operations and maintenance expense decreased by $3,642 or 2.5% due to the sale of regulated natural gas utility assets and non-utility projects[175]. - Employee-related costs increased by $3,777, materials and supplies by $2,121, and customer assistance surcharge costs by $692[175]. Depreciation and Amortization - Depreciation and amortization expense increased by $6,566 or 7.6% due to continued capital expenditures and acquisitions[135]. - Depreciation and amortization increased by $3,182 or 5.8% in Q3 2024, attributed to ongoing capital investments and acquisitions of new utility systems[153]. - Depreciation and amortization for the first nine months of 2024 increased by $11,303 or 7.0%, driven by capital investments and acquisitions[159]. - Depreciation and amortization increased by $5,904 or 6.3% due to continued capital investment in pipe replacement[178]. Interest Expense - Interest expense, net of interest income, increased by $7,804 or 11.5% for the three months ended September 30, 2024[136]. - Interest expense, net of interest income, rose by $4,227 or 13.7% in Q3 2024 due to higher debt borrowings for the Regulated Water segment[153]. - Interest expense, net of interest income, increased by $13,231 or 14.5% in the first nine months of 2024, primarily due to higher debt borrowings[160]. Tax Rate - The effective income tax rate for the Regulated Water segment was 14.7% in Q3 2024, up from 13.9% in Q3 2023, reflecting changes in jurisdictional earnings mix[155]. - The effective income tax rate for the first nine months of 2024 was 17.1%, compared to 14.6% in the same period of 2023, due to changes in jurisdictional earnings mix and tax deductions[162]. - The effective income tax rate was a benefit of 27.9% in the first nine months of 2024, down from a benefit of 137.3% in the same period in 2023[180]. Management and Governance - The Chief Accounting Officer announced retirement effective August 2025, with a successor already appointed[186]. - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2024[183]. Other - AFUDC increased by $1,489 due to the increase in the average balance of utility plant construction work in progress[178]. - The company recognized a decrease in legal expenses of $2,735 and bad debt expense of $1,207[175].

Financial Data and Key Metrics Changes - The company reported earnings per share (EPS) of $0.25 for Q3 2024, a decrease from $0.30 in Q3 2023, primarily due to one-time tax benefits in the previous year [23][29] - Revenues for Q3 2024 were $435.3 million, an increase of approximately 6% compared to $411.3 million in Q3 2023, driven by rate increases, surcharges, and customer growth [21][22] - Operations and maintenance (O&M) expenses decreased compared to Q3 2023, mainly due to reduced bad debt expenses and divestitures [22][26] Business Line Data and Key Metrics Changes - The regulated water segment saw revenues increase by nearly 8% in Q3 2024 compared to the same period in 2023, attributed to higher water volume due to warm and dry weather [25] - The natural gas segment experienced a minor revenue decline due to lower gas sales from warmer-than-normal weather [21][24] Market Data and Key Metrics Changes - The Pennsylvania Public Utility Commission (PUC) approved a rate case for Peoples Natural Gas, resulting in an annualized revenue increase of $93 million [9][31] - A settlement agreement for Aqua Pennsylvania is expected to yield an annualized revenue increase of $73 million, pending approval [11][35] Company Strategy and Development Direction - The company reinstated its multiyear EPS guidance at a growth rate of 5% to 7% through 2027, excluding any contributions from the DELCORA transaction [7][43] - Plans to invest approximately $7.8 billion in infrastructure improvements through 2029, focusing on water, wastewater, and natural gas systems [13][44] - The company aims to maintain affordable rates for customers while achieving growth through acquisitions and organic customer growth [47][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving EPS growth despite challenges such as elevated inflation and higher interest rates [16] - The company is optimistic about future growth opportunities, particularly in Texas and North Carolina, where significant population growth is expected [42][47] Other Important Information - The company is actively pursuing acquisitions, with signed agreements projected to add over 213,000 customers across three states [38] - Regulatory activities include pending rate cases and infrastructure surcharges in multiple states, with a total revenue request of $149.2 million [36] Q&A Session Summary Question: Equity financing expectations and timing - Management clarified that they plan to raise approximately $350 million in equity between 2024 and 2025, with flexibility in timing based on market conditions [51][52] Question: Clarification on EPS growth starting point - The starting point for the 5% to 7% EPS growth CAGR is expected to be close to the 2024 guidance midpoint, which is still being finalized [64] Question: PFAS-related costs and recovery mechanisms - Management indicated that they expect to recover PFAS-related costs through various regulatory mechanisms, including deferred accounting treatment [80][81] Question: Timeline for the Peoples Gas appeal - The appeal process is expected to take about a year, with management confident in the strength of the PUC's decision [82][85] Question: Water rate increase implementation - The $73 million water and wastewater base rate increase from the settlement will be implemented all at once in February 2025 [87]