[Part I – Financial Information](index=2&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's discussion and analysis of Essential Utilities, Inc. for the interim periods [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited consolidated financial statements, including balance sheets, statements of operations, capitalization, equity, and cash flows, along with detailed notes on accounting policies and financial performance for the specified periods [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets, highlighting key asset, liability, and equity changes between June 30, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (June 30, 2021 vs. December 31, 2020) | Metric (in thousands of dollars) | June 30, 2021 | December 31, 2020 | Change | % Change | | :------------------------------- | :------------ | :---------------- | :----- | :------- | | **Assets** | | | | | | Net property, plant and equipment | 9,707,363 | 9,512,877 | 194,486 | 2.04% | | Total current assets | 304,732 | 380,220 | (75,488) | (19.85%) | | Regulatory assets | 1,400,215 | 1,362,788 | 37,427 | 2.75% | | Goodwill | 2,340,836 | 2,324,547 | 16,289 | 0.70% | | Total assets | 13,933,992 | 13,705,277 | 228,715 | 1.67% | | **Liabilities & Equity** | | | | | | Total stockholders' equity | 4,836,815 | 4,683,877 | 152,938 | 3.26% | | Long-term debt (net) | 5,648,232 | 5,507,744 | 140,488 | 2.55% | | Total current liabilities | 469,155 | 603,873 | (134,718) | (22.31%) | | Total liabilities and equity | 13,933,992 | 13,705,277 | 228,715 | 1.67% | [Consolidated Statements of Operations and Comprehensive Income (Three Months Ended June 30, 2021 and 2020)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Three%20Months%20Ended%20June%2030%2C%202021%20and%202020)) This section details the consolidated statements of operations and comprehensive income for the three months ended June 30, 2021, and 2020, showing revenue, expenses, and net income trends Three Months Ended June 30 (in thousands, except per share amounts) | Metric | 2021 | 2020 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Operating revenues | 397,032 | 384,468 | 12,564 | 3.27% | | Total operating expenses | 267,704 | 261,349 | 6,355 | 2.43% | | Operating income | 129,328 | 123,119 | 6,209 | 5.04% | | Income before income taxes | 84,700 | 75,091 | 9,609 | 12.79% | | Provision for income taxes | 3,786 | 462 | 3,324 | 719.48% | | Net income | 80,914 | 74,629 | 6,285 | 8.42% | | Basic net income per common share | 0.32 | 0.29 | 0.03 | 10.34% | | Diluted net income per common share | 0.32 | 0.29 | 0.03 | 10.34% | [Consolidated Statements of Operations and Comprehensive Income (Six Months Ended June 30, 2021 and 2020)](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Six%20Months%20Ended%20June%2030%2C%202021%20and%202020)) This section presents the consolidated statements of operations and comprehensive income for the six months ended June 30, 2021, and 2020, reflecting significant financial performance changes Six Months Ended June 30 (in thousands, except per share amounts) | Metric | 2021 | 2020 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- |\n| Operating revenues | 980,597 | 640,053 | 340,544 | 53.20% | | Total operating expenses | 618,917 | 443,437 | 175,480 | 39.57% | | Operating income | 361,680 | 196,616 | 165,064 | 83.95% | | Income before income taxes | 273,155 | 119,748 | 153,407 | 128.11% | | Provision for income taxes (benefit) | 8,552 | (6,662) | 15,214 | -228.37% | | Net income | 264,603 | 126,410 | 138,193 | 109.32% | | Basic net income per common share | 1.04 | 0.52 | 0.52 | 100.00% | | Diluted net income per common share | 1.04 | 0.50 | 0.54 | 108.00% | [Consolidated Statements of Capitalization](index=7&type=section&id=Consolidated%20Statements%20of%20Capitalization) This section outlines the consolidated capitalization structure, including stockholders' equity and various debt instruments, as of June 30, 2021, and December 31, 2020 Consolidated Capitalization (in thousands of dollars) | Metric | June 30, 2021 | December 31, 2020 | Change | % Change | | :--------------------------------------- | :------------ | :---------------- | :----- | :------- | | Total stockholders' equity | 4,836,815 | 4,683,877 | 152,938 | 3.26% | | Long-term debt of subsidiaries | 3,097,995 | 3,014,280 | 83,715 | 2.78% | | Notes payable to bank (revolving credit) | 60,000 | 385,000 | (325,000) | (84.42%) | | Unsecured notes payable | 2,066,095 | 1,980,963 | 85,132 | 4.30% | | Total capitalization | 10,485,047 | 10,191,621 | 293,426 | 2.88% | [Consolidated Statements of Equity (Six Months Ended June 30, 2021)](index=8&type=section&id=Consolidated%20Statements%20of%20Equity%20(Six%20Months%20Ended%20June%2030%2C%202021)) This section details the changes in consolidated stockholders' equity for the six months ended June 30, 2021, including net income, dividends, and stock transactions Changes in Stockholders' Equity (Six Months Ended June 30, 2021, in thousands of dollars) | Item | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Total | | :------------------------------------------ | :----------- | :----------------------------- | :---------------- | :------------- | :------ | | Balance at December 31, 2020 | 124,285 | 3,379,057 | 1,261,862 | (81,327) | 4,683,877 | | Net income | - | - | 264,603 | - | 264,603 | | Dividends declared | - | - | (123,104) | - | (123,104) | | Issuance of common stock (DRIP) | 95 | 8,161 | - | - | 8,256 | | Repurchase of stock | - | - | - | (3,279) | (3,279) | | Equity compensation plan | 99 | (99) | - | - | - | | Exercise of stock options | 21 | 1,485 | - | - | 1,506 | | Stock-based compensation | - | 4,947 | (320) | - | 4,627 | | Other | - | (179) | - | 508 | 329 | | Balance at June 30, 2021 | 124,500 | 3,393,372 | 1,403,041 | (84,098) | 4,836,815 | [Consolidated Statements of Equity (Six Months Ended June 30, 2020)](index=9&type=section&id=Consolidated%20Statements%20of%20Equity%20(Six%20Months%20Ended%20June%2030%2C%202020)) This section presents the changes in consolidated stockholders' equity for the six months ended June 30, 2020, reflecting net income, dividends, and significant stock issuances Changes in Stockholders' Equity (Six Months Ended June 30, 2020, in thousands of dollars) | Item | Common Stock | Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Total | | :------------------------------------------ | :----------- | :----------------------------- | :---------------- | :------------- | :------ | | Balance at December 31, 2019 | 111,935 | 2,636,555 | 1,210,072 | (77,702) | 3,880,860 | | Net income | - | - | 126,410 | - | 126,410 | | Dividends declared | - | - | (109,619) | - | (109,619) | | Issuance of common stock (Private Placement) | 11,999 | 718,136 | - | - | 730,135 | | Issuance of common stock (DRIP) | 93 | 7,968 | - | - | 8,061 | | Repurchase of stock | - | - | - | (4,343) | (4,343) | | Equity compensation plan | 114 | (114) | - | - | - | | Exercise of stock options | 30 | 1,037 | - | - | 1,067 | | Stock-based compensation | - | 3,990 | (241) | - | 3,749 | | Other | - | (43) | - | 91 | 48 | | Balance at June 30, 2020 | 124,171 | 3,366,695 | 1,226,622 | (81,954) | 4,635,534 | [Consolidated Statements of Cash Flow](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flow) This section provides the consolidated statements of cash flow for the six months ended June 30, 2021, and 2020, detailing operating, investing, and financing activities Consolidated Statements of Cash Flow (Six Months Ended June 30, in thousands of dollars) | Cash Flow Activity | 2021 | 2020 | Change | % Change | | :----------------------------------- | :----- | :----- | :----- | :------- | | Net cash flows from operating activities | 412,868 | 245,202 | 167,666 | 68.38% | | Net cash flows used in investing activities | (403,781) | (3,759,935) | 3,356,154 | 89.26% | | Net cash flows (used in) from financing activities | (5,510) | 1,653,038 | (1,658,548) | (100.33%) | | Net change in cash and cash equivalents | 3,577 | (1,861,695) | 1,865,272 | 100.19% | | Cash and cash equivalents at end of period | 8,404 | 7,227 | 1,177 | 16.29% | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the consolidated financial statements, covering accounting policies, significant transactions, and financial instrument disclosures [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) The unaudited consolidated financial statements are prepared in accordance with GAAP for interim reporting and SEC rules, and should be read with the 2020 Form 10-K. Management believes all necessary recurring accruals have been made for a fair presentation. The COVID-19 pandemic has not materially impacted estimates, assumptions, or forecasts due to the essential nature of the business, though future effects are uncertain. No changes to significant accounting policies were made since the 2020 Form 10-K - The financial statements are unaudited and prepared for interim reporting, consistent with GAAP and SEC rules[23](index=23&type=chunk) - Management believes all necessary recurring accruals have been made for a fair presentation of financial position, equity changes, results of operations, and cash flow[23](index=23&type=chunk) - The COVID-19 pandemic has not had a material impact on the Company's estimates, assumptions, and forecasts due to the essential nature of its business, but future impacts remain uncertain[25](index=25&type=chunk) [Note 2 – Revenue Recognition](index=12&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) Revenue is disaggregated by major source (water, wastewater, natural gas, other) and customer class (residential, commercial, fire protection, industrial, gas transportation, other water/wastewater). Tariff revenues are recognized over time as services are rendered, with rates approved by state utility commissions. Other utility revenues, including antenna fees and operation/maintenance contracts, are also recognized over time. Alternative revenue programs, such as weather-normalization adjustments for natural gas, are contracts with regulators, not customers, and are outside FASB revenue recognition guidance. Non-regulated natural gas operations and Aqua Resources also contribute to 'Other and Eliminations' revenues Operating Revenues Disaggregated by Source and Customer Class (Three Months Ended June 30, in thousands) | Revenue Source/Class | June 30, 2021 | June 30, 2020 | | :------------------- | :------------ | :------------ | | Water Revenues | 212,183 | 200,863 | | Wastewater Revenues | 32,504 | 30,149 | | Natural Gas Revenues | 142,886 | 146,880 | | Other Revenues | 9,459 | 6,576 | | **Consolidated Total** | **397,032** | **384,468** | Operating Revenues Disaggregated by Source and Customer Class (Six Months Ended June 30, in thousands) | Revenue Source/Class | June 30, 2021 | June 30, 2020 | | :------------------- | :------------ | :------------ | | Water Revenues | 405,114 | 385,643 | | Wastewater Revenues | 64,100 | 58,363 | | Natural Gas Revenues | 486,252 | 184,915 | | Other Revenues | 25,131 | 11,132 | | **Consolidated Total** | **980,597** | **640,053** | - The Company's performance obligation for tariff revenues is to provide potable water, wastewater treatment, or natural gas delivery and sale, satisfied over time as services are rendered[29](index=29&type=chunk) [Note 3 – Acquisitions](index=14&type=section&id=Note%203%20%E2%80%93%20Acquisitions) The Company completed the Peoples Gas Acquisition on March 16, 2020, for **$3.47 billion**, expanding its regulated utility business to include natural gas distribution. The purchase price allocation was finalized in Q1 2021, increasing goodwill by **$16.4 million**. The Company also completed several smaller water and wastewater utility acquisitions in 2020 and 2021 and has multiple pending acquisitions, including a significant DELCORA wastewater system acquisition for **$276.5 million**, which is subject to ongoing litigation and regulatory approval - Peoples Gas Acquisition completed on March 16, 2020, for **$3.47 billion**, expanding into natural gas distribution[35](index=35&type=chunk) Peoples Gas Acquisition Purchase Price Allocation Adjustments (in thousands of dollars) | Item | Previously Recognized as of Acquisition Date (a) | Measurement Period Adjustments | Recognized as of Acquisition Date (as Adjusted) | | :-------------------------------- | :--------------------------------------------- | :----------------------------- | :-------------------------------------------- | | Property, plant and equipment, net | 2,476,551 | - | 2,476,551 | | Current assets | 242,531 | (9,197) | 233,334 | | Regulatory assets | 286,751 | (22,293) | 264,458 | | Goodwill | 2,261,047 | 16,400 | 2,277,447 | | Total assets acquired | 5,341,951 | (15,090) | 5,326,861 | | Total liabilities assumed | 1,876,607 | (15,090) | 1,861,517 | | Net assets acquired | 3,465,344 | - | 3,465,344 | - Pending acquisitions include Shenandoah Borough (**$12.0 million**), Oak Brook (**$12.5 million**), East Whiteland Township and Willistown Township (**$72.4 million**), Village of Bourbonnais (**$32.1 million**), and Lower Makefield Township (**$53.0 million**)[46](index=46&type=chunk) - The DELCORA wastewater system acquisition for **$276.5 million** is pending, subject to regulatory approval and ongoing litigation with Delaware County, with closing expected in 2022[49](index=49&type=chunk) [Note 4 – Goodwill](index=19&type=section&id=Note%204%20%E2%80%93%20Goodwill) Goodwill increased by **$16.4 million** to **$2.34 billion** as of June 30, 2021, primarily due to measurement period adjustments related to the Peoples Gas Acquisition. A reclassification of $111 thousand from goodwill to utility plant acquisition adjustment also occurred, reflecting a mechanism for recovery through customer rates Changes in Goodwill by Business Segment (in thousands of dollars) | Segment | December 31, 2020 | Measurement Period Adjustments | Reclassification | June 30, 2021 | | :---------------- | :---------------- | :----------------------------- | :--------------- | :------------ | | Regulated Water | 58,659 | - | (111) | 58,548 | | Regulated Natural Gas | 2,261,047 | 16,400 | - | 2,277,447 | | Other | 4,841 | - | - | 4,841 | | **Consolidated** | **2,324,547** | **16,400** | **(111)** | **2,340,836** | - Goodwill increased by **$16.4 million** due to measurement period purchase price allocation adjustments from the Peoples Gas Acquisition[50](index=50&type=chunk) [Note 5 – Disposition](index=19&type=section&id=Note%205%20%E2%80%93%20Disposition) In October 2020, the Company sold its 49% investment in a joint venture, Aqua Infrastructure, which operated a private pipeline system for natural gas well drilling operations. A **$3.7 million** charge for the write-down of this investment was recorded in Q3 2020 - The Company sold its **49%** investment in a joint venture (Aqua Infrastructure) in October 2020, which supplied raw water to natural gas well drilling operations[52](index=52&type=chunk) - A charge of **$3.7 million** was recorded in Q3 2020 for the write-down of the investment associated with the sale[52](index=52&type=chunk) [Note 6 – Capitalization](index=20&type=section&id=Note%206%20%E2%80%93%20Capitalization) The Company filed a universal shelf registration in April 2021 for future equity and debt offerings. It has a forward equity sale agreement for **6.7 million shares** of common stock, expected to settle in August 2021, with proceeds for general corporate purposes and acquisitions. A private placement of **21.66 million common shares** was completed in March 2020, generating **$749.9 million**. Tangible equity units issued in April 2019 will automatically settle into common stock by April 2022. New long-term debt was issued in April 2021, including **$100 million** in first mortgage bonds by Aqua Ohio and **$400 million** in unsecured notes by the Company, used to repay existing indebtedness and for general corporate purposes - Filed a universal shelf registration in April 2021 for potential future offerings of common stock, preferred stock, debt securities, and other securities[54](index=54&type=chunk) - Entered into a forward equity sale agreement for **6.7 million shares** of common stock in August 2020, with settlement expected by August 9, 2021, at a forward price of **$44.77 per share** as of June 30, 2021[55](index=55&type=chunk)[56](index=56&type=chunk) - Completed a private placement of **21.66 million common shares** in March 2020, generating gross proceeds of **$749.9 million**[57](index=57&type=chunk) - Issued **$690 million** in tangible equity units in April 2019, which will automatically settle into common stock by April 30, 2022[61](index=61&type=chunk)[62](index=62&type=chunk) - Issued **$100 million** of first mortgage bonds by Aqua Ohio and **$400 million** of long-term debt by the Company in April 2021, used to repay existing debt and for general corporate purposes[64](index=64&type=chunk) [Note 7 – Financial Instruments](index=23&type=section&id=Note%207%20%E2%80%93%20Financial%20Instruments) The Company follows FASB guidance for fair value measurements, categorizing inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs). Loans payable, cash and cash equivalents, and assets underlying deferred compensation/non-qualified pension plans are recorded at carrying value, approximating fair value using Level 1 methods. Long-term debt fair value is determined using Level 2 methods by discounting future cash flows with current market interest rates. Customers' advances for construction fair value cannot be accurately estimated due to variable future payments - Fair value measurements are categorized into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[71](index=71&type=chunk) - Loans payable, cash and cash equivalents, and assets for deferred compensation/non-qualified pension plans approximate fair value using Level 1 methods[70](index=70&type=chunk) Long-term Debt Carrying Amounts and Estimated Fair Values (in thousands of dollars) | Metric | June 30, 2021 | December 31, 2020 | | :---------------- | :------------ | :---------------- | | Carrying amount | 5,769,090 | 5,630,243 | | Estimated fair value | 6,254,857 | 6,366,030 | - The fair value of long-term debt is determined by discounting future cash flows using current market interest rates for similar financial instruments (Level 2 methods)[72](index=72&type=chunk) [Note 8 – Net Income per Common Share](index=25&type=section&id=Note%208%20%E2%80%93%20Net%20Income%20per%20Common%20Share) Basic net income per common share is calculated based on weighted average common shares outstanding and the minimum shares from tangible equity units. Diluted net income per common share includes potentially dilutive securities like the forward equity sale agreement and employee stock-based compensation, calculated using the treasury stock method. All employee stock options were dilutive for the periods presented Average Common Shares Outstanding (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic computation | 254,769 | 254,167 | 254,667 | 245,144 | | Effect of dilutive securities: | | | | | | Forward equity sale agreement | 285 | - | 147 | - | | Issuance of common stock from private placement | - | - | - | 8,926 | | Employee stock-based compensation | 387 | 267 | 454 | 382 | | Diluted computation | 255,441 | 254,434 | 255,268 | 254,452 | - Basic EPS includes the weighted-average impact of **9.09 million shares** from tangible equity units for both periods[76](index=76&type=chunk) - All employee stock options were included in diluted EPS calculations as their exercise cost was less than the average market price[77](index=77&type=chunk) [Note 9 – Stock-based Compensation](index=26&type=section&id=Note%209%20%E2%80%93%20Stock-based%20Compensation) The Company's Amended and Restated Equity Compensation Plan authorizes **6.25 million shares** for various awards, including Performance Share Units (PSUs), Restricted Stock Units (RSUs), Stock Options, Restricted Stock, and Stock Awards. Compensation costs for PSUs, RSUs, and stock options are amortized over their vesting periods, while restricted stock awards are amortized over the restriction period, and stock awards are expensed immediately. Total stock-based compensation within operations and maintenance expenses for the six months ended June 30, 2021, was **$5.05 million** - The Amended and Restated Equity Compensation Plan authorizes **6.25 million shares** for issuance, with **2.13 million shares** available at June 30, 2021[78](index=78&type=chunk) Stock-based Compensation within Operations and Maintenance Expenses (in thousands of dollars) | Award Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Performance Share Units (PSUs) | 1,290 | 966 | 2,931 | 1,447 | | Restricted Stock Units (RSUs) | 761 | 554 | 1,365 | 1,032 | | Stock Options | 90 | 265 | 301 | 766 | | Restricted Stock | 12 | 99 | 106 | 117 | | Stock Awards | 175 | 170 | 350 | 345 | | **Total** | **2,328** | **2,054** | **5,053** | **3,707** | - The Company did not grant stock options or restricted stock for the six months ended June 30, 2021[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 10 – Pension Plans and Other Postretirement Benefits](index=31&type=section&id=Note%2010%20%E2%80%93%20Pension%20Plans%20and%20Other%20Postretirement%20Benefits) The Company maintains qualified and nonqualified pension plans and other postretirement benefit plans, including those assumed from the Peoples Gas Acquisition. Net periodic benefit cost for pension benefits was a credit of **$(1.35) million** for the six months ended June 30, 2021, compared to a cost of **$2.54 million** in 2020, driven by improved investment returns. A plan amendment in Q2 2021, ending benefit accrual for a participant group, resulted in a **$20.73 million** decrease in pension benefit obligation and regulatory assets Net Periodic Benefit Cost (in thousands of dollars) | Benefit Type | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------- | :----------------------------- | :----------------------------- | | Pension Benefits | (1,352) | 2,536 | | Other Postretirement Benefits | 892 | 892 | - A plan amendment effective May 1, 2021, ended benefit accrual for a group of participants, leading to a **$20.73 million** decrease in pension benefit obligation and regulatory assets[91](index=91&type=chunk) - The Company made cash contributions of **$12.66 million** to its Pension Plan during the first six months of 2021 and plans to contribute an additional **$2.11 million** during the remainder of 2021[90](index=90&type=chunk) [Note 11 – Rate Activity](index=32&type=section&id=Note%2011%20%E2%80%93%20Rate%20Activity) During the first six months of 2021, the Company's water and wastewater utilities in New Jersey, Ohio, Virginia, and Indiana received base rate increases totaling **$2.64 million** annually. Its Kentucky gas utility also received a rate increase of **$0.75 million** annually. Additionally, infrastructure rehabilitation surcharges were approved for Pennsylvania and North Carolina water/wastewater divisions, expected to increase annual operating revenues by **$12.89 million** - Water and wastewater utility operating divisions in New Jersey, Ohio, Virginia, and Indiana were granted base rate increases designed to increase total operating revenues by **$2.64 million** annually[92](index=92&type=chunk) - A gas utility operating division in Kentucky was granted a rate increase designed to increase annual revenues by **$0.75 million**[92](index=92&type=chunk) - Infrastructure rehabilitation surcharges were approved for water and wastewater utility operating divisions in Pennsylvania and North Carolina, designed to increase total operating revenues by **$12.89 million** annually[92](index=92&type=chunk) [Note 12 – Taxes Other than Income Taxes](index=33&type=section&id=Note%2012%20%E2%80%93%20Taxes%20Other%20than%20Income%20Taxes) Taxes other than income taxes increased by **$6.29 million (17.5%)** for the six months ended June 30, 2021, compared to the same period in 2020. This increase was primarily driven by higher payroll taxes (**$2.77 million**) and other taxes (**$1.65 million**) associated with acquired operations, particularly the Peoples Gas Acquisition Components of Taxes Other than Income Taxes (in thousands of dollars) | Tax Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Property | 9,570 | 8,275 | 17,284 | 15,308 | | Gross receipts, excise and franchise | 3,949 | 3,579 | 7,633 | 6,701 | | Payroll | 4,718 | 4,693 | 11,474 | 8,973 | | Regulatory assessments | 847 | 698 | 1,685 | 1,398 | | Pumping fees | 1,464 | 1,487 | 2,590 | 2,568 | | Other | 572 | 701 | 1,495 | 921 | | **Total** | **21,120** | **19,433** | **42,161** | **35,869** | [Note 13 – Segment Information](index=33&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) The Company operates with two reportable segments: Regulated Water (eight operating segments aggregated) and Regulated Natural Gas (one operating segment from Peoples Gas Acquisition). An 'Other' category includes non-regulated natural gas operations, Aqua Infrastructure, Aqua Resources, and unallocated corporate costs. The Regulated Natural Gas segment significantly increased operating revenues and income for the six months ended June 30, 2021, due to the full period inclusion of Peoples Gas results - The Company has two reportable segments: Regulated Water (eight aggregated operating segments) and Regulated Natural Gas (one operating segment)[94](index=94&type=chunk) - The 'Other' category includes non-regulated natural gas operations, Aqua Infrastructure, Aqua Resources, and unallocated corporate costs[95](index=95&type=chunk) Segment Operating Results (Six Months Ended June 30, 2021 vs. 2020, in thousands of dollars) | Metric | Regulated Water 2021 | Regulated Water 2020 | Regulated Natural Gas 2021 | Regulated Natural Gas 2020 | Other 2021 | Other 2020 | Consolidated 2021 | Consolidated 2020 | | :-------------------------- | :------------------- | :------------------- | :------------------------- | :------------------------- | :--------- | :--------- | :---------------- | :---------------- | | Operating revenues | 476,530 | 450,283 | 484,677 | 184,915 | 19,390 | 4,855 | 980,597 | 640,053 | | Operating income (loss) | 198,233 | 186,299 | 153,545 | 36,530 | 9,902 | (26,213) | 361,680 | 196,616 | | Net income (loss) | 142,879 | 128,929 | 121,155 | 31,535 | 569 | (34,054) | 264,603 | 126,410 | | Capital expenditures | 247,911 | 217,373 | 156,252 | 75,458 | 394 | 259 | 404,557 | 293,090 | Total Assets by Segment (in thousands of dollars) | Segment | June 30, 2021 | December 31, 2020 | | :---------------- | :------------ | :---------------- | | Regulated water | 8,158,852 | 7,838,034 | | Regulated natural gas | 5,594,238 | 5,303,507 | | Other | 180,902 | 563,736 | | **Consolidated** | **13,933,992** | **13,705,277** | [Note 14 – Commitments and Contingencies](index=36&type=section&id=Note%2014%20%E2%80%93%20Commitments%20and%20Contingencies) The Company has accrued **$17.51 million** for loss contingencies as of June 30, 2021, with an estimated **$3.33 million** probable of recovery through insurance. A class action lawsuit related to a 'do not consume' advisory in Illinois is in discovery, but management does not expect a material adverse effect. Commitments from the Peoples Gas Acquisition include **$120 million** for pipe replacement (recoverable through rates) and **$23.004 million** in one-time customer rate credits, which have been granted - As of June 30, 2021, **$17.51 million** is accrued for loss contingencies, with an estimated **$3.33 million** probable of recovery through insurance[98](index=98&type=chunk) - A class action lawsuit in Illinois related to a 'do not consume' water advisory is ongoing, but management does not expect a material adverse effect on financial position, results of operations, or cash flows[99](index=99&type=chunk)[100](index=100&type=chunk) - Commitments from the Peoples Gas Acquisition include **$120 million** for pipe replacement (recoverable through customer rates) and **$23.004 million** in one-time customer rate credits, which were granted in 2020[102](index=102&type=chunk) [Note 15 – Income Taxes](index=37&type=section&id=Note%2015%20%E2%80%93%20Income%20Taxes) The Company's effective tax rate increased to **4.5%** for Q2 2021 (from **0.6%** in Q2 2020) and to **3.1%** for the six months ended June 30, 2021 (from **-5.6%** in 2020). This increase is attributed to higher income before income taxes and a lower tax deduction for qualifying infrastructure in Q2 2021, and an increased tax benefit from qualifying infrastructure for the six-month period. A settlement approved by the Pennsylvania Public Utility Commission dictates that **$160.655 million** in income tax benefits from a 'catch-up adjustment' for infrastructure investments will be refunded to utility customers over five years, starting August 2021 - Effective tax rate was **4.5%** for Q2 2021 (vs. **0.6%** in Q2 2020) and **3.1%** for the six months ended June 30, 2021 (vs. **-5.6%** in 2020)[104](index=104&type=chunk) - The increase in effective tax rate is due to higher income before income taxes and changes in tax deductions for qualifying infrastructure[104](index=104&type=chunk) - A settlement approved by the Pennsylvania Public Utility Commission will refund **$160.655 million** in income tax benefits from a 'catch-up adjustment' to utility customers over a five-year period, starting August 2021[103](index=103&type=chunk) [Note 16 – Recent Accounting Pronouncements](index=39&type=section&id=Note%2016%20%E2%80%93%20Recent%20Accounting%20Pronouncements) The Company is evaluating new FASB guidance on convertible instruments and contracts in an entity's own equity (effective after December 15, 2021) and reference rate reform (effective upon issuance, applicable through December 31, 2022) to determine their impact. Updated guidance simplifying income tax accounting was adopted on January 1, 2021, with no material impact on consolidated financial statements - Evaluating new FASB guidance on accounting for convertible instruments and contracts in an entity's own equity (effective after December 15, 2021)[108](index=108&type=chunk) - Evaluating new FASB guidance on reference rate reform (effective upon issuance, applicable through December 31, 2022)[109](index=109&type=chunk) - Adopted updated FASB guidance simplifying income tax accounting on January 1, 2021, which did not have a material impact on consolidated financial statements[110](index=110&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including forward-looking statements, a general overview of the business, the impact of the COVID-19 pandemic, and a detailed analysis of financial performance for the three and six months ended June 30, 2021, compared to the prior year. It highlights the Company's growth strategy through acquisitions, particularly the Peoples Gas Acquisition, and discusses key financial metrics and operational drivers across its Regulated Water and Regulated Natural Gas segments [Forward-looking Statements](index=40&type=section&id=Forward-looking%20Statements) This section contains forward-looking statements regarding expected acquisition timings, legal proceedings, accounting pronouncements, and management's plans. These statements are subject to risks and uncertainties, including the COVID-19 pandemic, regulation, and capital markets, and readers are cautioned not to place undue reliance on them. The Company undertakes no obligation to update or revise these statements - The report contains forward-looking statements about acquisitions, legal proceedings, accounting pronouncements, and management's plans[114](index=114&type=chunk) - These statements are subject to risks and uncertainties, including the COVID-19 pandemic, regulation, and capital markets, which could cause actual results to differ materially[114](index=114&type=chunk) - The Company undertakes no obligation to update or revise forward-looking statements[114](index=114&type=chunk) [General Information](index=40&type=section&id=General%20Information) Essential Utilities, Inc. is a holding company providing regulated water, wastewater, and natural gas services to approximately five million people across ten states under the Aqua and Peoples brands. Its growth strategy focuses on acquiring regulated utilities and pursuing opportunistic market-based activities. The Company's most significant recent transaction was the March 2020 acquisition of Peoples, a natural gas distribution utility - Essential Utilities, Inc. provides regulated water, wastewater, and natural gas services to approximately five million people in ten states[116](index=116&type=chunk) - The Company's growth strategy targets acquisitions in the U.S. regulated sector (water, wastewater, natural gas) and opportunistic market-based activities[119](index=119&type=chunk) - The March 16, 2020, acquisition of Peoples, a natural gas distribution utility, marked the Company's entrance into the regulated natural gas business[119](index=119&type=chunk) [COVID-19 Pandemic](index=41&type=section&id=COVID-19%20Pandemic) The Company continues to monitor the COVID-19 pandemic, prioritizing employee safety and operational continuity for its essential services. It has implemented security measures, adjusted purchasing procedures to manage supply chain risks, and is monitoring customer utility billings. While some collection practices were temporarily curtailed by regulators, most states have allowed disconnections to resume. Despite ongoing risks, the Company has not experienced material financial or operational impacts related to COVID-19 as of the report date - The Company provides critical services and prioritizes employee safety, operational continuity, and customer support during the COVID-19 pandemic[122](index=122&type=chunk) - Adjusted purchasing procedures to secure necessary materials and continued its capital investment program without material impact[124](index=124&type=chunk) - As of the report date, the Company has not experienced any material financial or operational impacts related to COVID-19, despite ongoing risks[125](index=125&type=chunk) [Financial Condition](index=42&type=section&id=Financial%20Condition) The Company maintains a negative working capital position but expects adequate liquidity from internally generated funds, existing credit facilities, and proceeds from long-term debt and equity. In the first six months of 2021, it incurred **$404.56 million** in capital expenditures and issued **$760.18 million** in long-term debt. The Peoples Gas Acquisition in March 2020 was financed through various transactions, and related commitments include **$120 million** for pipe replacement and **$23.004 million** in customer rate credits. A **$160.655 million** income tax benefit from a 'catch-up adjustment' will be refunded to customers over five years - Management believes internally generated funds, existing credit facilities, and proceeds from long-term debt and equity will provide sufficient working capital for the next twelve months[127](index=127&type=chunk) - Incurred **$404.56 million** in capital expenditures and issued **$760.18 million** of long-term debt during the first six months of 2021[128](index=128&type=chunk) - The **$1.00 billion** unsecured revolving credit facility had **$916.69 million** available for borrowing at June 30, 2021[137](index=137&type=chunk) - A **$160.655 million** income tax benefit from a 'catch-up adjustment' for infrastructure investments will be refunded to utility customers over a five-year period starting August 2021[133](index=133&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) The Company's results of operations show significant growth, particularly for the six months ended June 30, 2021, driven by the full inclusion of Peoples Gas Acquisition results. Consolidated operating revenues increased by **53.2%** and net income by **109.3%** for the six-month period. The Regulated Water segment also saw revenue growth from rate increases and customer base expansion, while the Regulated Natural Gas segment's performance was heavily influenced by the timing of the Peoples Gas acquisition and weather-related volume changes [Analysis of Second Quarter of 2021 Compared to Second Quarter of 2020](index=44&type=section&id=Analysis%20of%20Second%20Quarter%20of%202021%20Compared%20to%20Second%20Quarter%20of%202020) [Consolidated results (Q2 2021 vs. Q2 2020)](index=44&type=section&id=Consolidated%20results%20(Q2%202021%20vs.%20Q2%202020)) Consolidated operating revenues increased by **$12.56 million (3.3%)** for Q2 2021, leading to an **8.4% rise in net income** despite a higher income tax provision Consolidated Financial Performance (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Operating revenues | 397,032 | 384,468 | 12,564 | 3.27% | | Operating expenses | 267,704 | 261,349 | 6,355 | 2.43% | | Operating income | 129,328 | 123,119 | 6,209 | 5.04% | | Net income | 80,914 | 74,629 | 6,285 | 8.42% | | Effective income tax rate | 4.5% | 0.6% | 3.9% | 650.00% | - Operations and maintenance expenses decreased by **$1.09 million (0.8%)**, primarily due to reduced insurance claims, charitable trust contributions, and COVID-19 related expenses, offset by increased employee-related costs and production costs[141](index=141&type=chunk)[146](index=146&type=chunk) - Allowance for funds used during construction (AFUDC) increased by **$2.68 million (120.0%)** due to an increase in utility plant construction work in progress[145](index=145&type=chunk) [Regulated Water Segment (Q2 2021 vs. Q2 2020)](index=46&type=section&id=Regulated%20Water%20Segment%20(Q2%202021%20vs.%20Q2%202020)) The Regulated Water segment's revenues increased by **$14.09 million (6.0%)** for Q2 2021, driven by rate increases, customer base expansion, and higher volumes - Regulated Water segment revenues increased by **$14.09 million (6.0%)** for Q2 2021[149](index=149&type=chunk) - Revenue growth was primarily due to rate increases (**$7.85 million**), additional customers from acquisitions and organic growth (**$2.66 million**), and increased customer volumes (**$3.00 million**)[151](index=151&type=chunk) - Operations and maintenance expense increased by **$1.16 million (1.5%)**, driven by acquired systems, labor, and production costs, offset by decreased COVID-19 expenses[149](index=149&type=chunk)[151](index=151&type=chunk) [Regulated Natural Gas Segment (Q2 2021 vs. Q2 2020)](index=47&type=section&id=Regulated%20Natural%20Gas%20Segment%20(Q2%202021%20vs.%20Q2%202020)) The Regulated Natural Gas segment's operating revenues decreased by **$5.32 million (3.6%)** for Q2 2021 due to warmer weather and lower purchased gas adjustment revenues, significantly impacting net income Regulated Natural Gas Segment Gross Margin (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Change | % Change | | :-------------------- | :----- | :----- | :----- | :------- | | Operating revenues (GAAP) | 141,562 | 146,880 | (5,318) | (3.62%) | | Purchased gas | 39,788 | 41,593 | (1,805) | (4.34%) | | Gross margin (non-GAAP) | 101,774 | 105,287 | (3,513) | (3.34%) | - Operating revenues decreased by **$5.32 million (3.6%)** due to lower volumes from warmer weather and decreased purchased gas adjustment revenues[157](index=157&type=chunk)[160](index=160&type=chunk) - Net income for the Regulated Natural Gas segment decreased by **$16.09 million (89.4%)** due to factors including increased interest expense[159](index=159&type=chunk) [Analysis of First Six Months of 2021 Compared to First Six Months of 2020](index=48&type=section&id=Analysis%20of%20First%20Six%20Months%20of%202021%20Compared%20to%20First%20Six%20Months%20of%202020) [Consolidated results (Six Months 2021 vs. 2020)](index=48&type=section&id=Consolidated%20results%20(Six%20Months%202021%20vs.%202020)) Consolidated operating revenues increased by **$340.54 million (53.2%)** for the first six months of 2021, with net income surging by **$138.19 million (109.3%)** due to the full period inclusion of Peoples Gas Acquisition results Consolidated Financial Performance (Six Months Ended June 30, in thousands)

Financial Data and Key Metrics Changes - The company reported revenues of $397 million for Q2 2021, an increase of 3.3% year-over-year [17] - Net income grew by 8.4% from $74.6 million to $80.9 million, with GAAP earnings per share increasing from $0.29 to $0.32 [17][21] - Operations and maintenance (O&M) expenses decreased slightly to $127.5 million from $128.6 million in the same quarter last year [17][20] Business Line Data and Key Metrics Changes - The regulated water segment contributed $248.2 million to revenues, while the regulated natural gas segment contributed $141.6 million [17] - Water consumption increased by 4.2% in Q2 2021, with commercial usage rising by 20% as businesses reopened [19] - The regulated natural gas segment experienced a decrease in volume, contributing to a revenue decline of $4.9 million due to warmer weather [18] Market Data and Key Metrics Changes - The company completed rate cases or surcharge filings in multiple states, resulting in total annualized revenue of $16.7 million for the regulated water segment and $1.3 million for the regulated natural gas segment [26][27] - The company anticipates customer growth of 2% to 3% on average for the regulated water segment [34] Company Strategy and Development Direction - The company is focused on a municipal acquisition strategy, with 7 pending acquisitions totaling approximately $458.5 million [10][30] - The company plans to invest nearly $3 billion across its platform by 2023, aiming for rate base growth of 6% to 7% in water and 8% to 10% in gas [34] - The company is committed to ESG initiatives, including a multiyear target for employee diversity and a goal of 60% reduction in greenhouse gas emissions by 2035 [15][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing positive regulatory environment for fair market value transactions, despite some detractors [40] - The company expects to maintain its earnings guidance of $1.64 to $1.69 per share for the full year, despite anticipated expenses in the second half [34][24] - Management noted that the gas business typically does not generate significant revenue in Q3 but expects a rebound in Q4 with the heating season [25] Other Important Information - The company announced a 7% increase in its quarterly dividend, marking 31 years of consecutive increases [10] - The company published its 2020 ESG report, which includes detailed information on its natural gas segment for the first time [12] Q&A Session Summary Question: Impact of fair market value (FMV) on legislation and individual deals - Management believes there will be no rollback on FMV legislation and sees positive momentum as municipalities seek solutions for capital constraints [40][41] Question: Status of water quality accountability legislation in Pennsylvania - Management indicated that the legislation is still moving forward and expects it to progress through the legislature before the year ends [44] Question: Insights on the Texas acquisition process - The Texas deal was described as relatively smooth, taking about a year to complete [46] Question: Update on Pennsylvania commissioner appointments - Management noted a potential 2:1 Republican majority on the commission, which could influence pending applications [50] Question: Stability of gas customer count and weather conditions - Gas customer count is expected to remain stable, with organic growth in certain states, while weather conditions have been generally favorable [60][61] Question: Interaction between ESG profile and local utility commissions - Management acknowledged that ESG elements are increasingly discussed with regulators, particularly regarding greenhouse gas emissions and customer assistance programs [68][70]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 10-Q (Mark One) S QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2021 £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from_______________ to _______________ Commission File Number 1-6659 ESSENTIAL UTILITIES, INC. (Exact name of registrant as specified in its charter ...

| --- | --- | --- | --- | --- | --- | --- | |-------------|---------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | May 6, 2021 | Essential. EARNINGS CALL First Quarter 2021 | | | | | | | | | | | | | | WTRG NYSE LISTED Welcome | --- | --- | --- | --- | --- | |-------|--------------------------------------------------------------------------------------------|-------|-------|----------| | | | | | | | | | | | | | | Brian Dingerdissen Vice President, Chief of Sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File number 1-6659 ESSENTIAL UTILITIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-1702594 (St ...

Part I – Financial Information [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements%3A) Presents unaudited consolidated financial statements, highlighting the impact of the Peoples Gas Acquisition [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $13.4 billion, primarily due to the Peoples Gas Acquisition, raising long-term debt to $5.15 billion Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$13,399,488** | **$9,361,985** | | Net property, plant and equipment | $9,260,460 | $6,345,790 | | Goodwill | $2,333,627 | $63,822 | | Cash and cash equivalents | $8,494 | $1,868,922 | | **Total Liabilities and Equity** | **$13,399,488** | **$9,361,985** | | Long-term debt, net | $5,152,973 | $2,943,327 | | Total stockholders' equity | $4,635,753 | $3,880,860 | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Operating revenues rose significantly due to the Peoples Gas Acquisition, impacting Q3 and nine-month net income trends Q3 Performance (in thousands, except per share) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Operating Revenues | $348,647 | $243,626 | | Operating Income | $105,233 | $106,470 | | Net Income | $55,732 | $88,489 | | Diluted EPS | $0.22 | $0.38 | Nine-Month Performance (in thousands, except per share) | Metric | YTD 2020 | YTD 2019 | | :--- | :--- | :--- | | Operating Revenues | $988,700 | $663,650 | | Operating Income | $301,849 | $254,858 | | Net Income | $182,142 | $160,316 | | Diluted EPS | $0.71 | $0.76 | [Consolidated Statements of Cash Flow](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flow) Net cash from operations increased, while investing activities used $4.02 billion for the Peoples Gas Acquisition Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash from operating activities | $420,655 | $228,029 | | Net cash used in investing activities | ($4,019,645) | ($397,520) | | Net cash from financing activities | $1,738,562 | $2,196,432 | | Net change in cash and cash equivalents | ($1,860,428) | $2,026,941 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes explain financial statements, focusing on the $3.47 billion Peoples Gas Acquisition and its impact - The Peoples Gas Acquisition was completed on **March 16, 2020**, for cash consideration of **$3.47 billion**, expanding the company's business to include natural gas distribution[25](index=25&type=chunk)[41](index=41&type=chunk) - As a result of the acquisition, the company now has two reportable segments: Regulated Water and Regulated Natural Gas[115](index=115&type=chunk) - The acquisition was financed through a series of transactions including common stock offerings, a private placement, tangible equity units, and debt issuances[42](index=42&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, emphasizing the transformative Peoples Gas Acquisition and COVID-19 impact [Financial Condition](index=46&type=section&id=Financial%20Condition) Financial condition altered by $3.47 billion Peoples Gas Acquisition, financed by equity and debt, with $837.6 million credit - Completed the Peoples Gas Acquisition on **March 16, 2020**, for cash consideration of **$3.47 billion**[161](index=161&type=chunk) - In April 2020, issued **$1.1 billion** of long-term debt to repay short-term debt assumed in the acquisition and borrowings under the revolving credit facility[170](index=170&type=chunk) - As of September 30, 2020, the company had **$837.6 million** available for borrowing under its **$1 billion** unsecured revolving credit facility[167](index=167&type=chunk) [Consolidated Results of Operations](index=49&type=section&id=Consolidated%20Results%20of%20Operations) Revenues significantly increased due to the Peoples Gas Acquisition, impacting both Q3 and nine-month results, alongside COVID-19 effects - Q3 2020 revenues increased by **$105.0 million** (**43.1%**), primarily due to **$92.1 million** in natural gas revenues from the Peoples Gas Acquisition[172](index=172&type=chunk) - Q3 2020 operations and maintenance expenses increased by **$54.2 million** (**66.0%**), with **$62.2 million** attributable to the Peoples Gas Acquisition[172](index=172&type=chunk) - Nine-month 2020 revenues increased by **$325.1 million** (**49.0%**), with **$280.3 million** from the Peoples Gas Acquisition[183](index=183&type=chunk) - Nine-month 2020 operations and maintenance expenses increased by **$123.6 million** (**49.9%**), with **$123.7 million** from the Peoples Gas Acquisition[184](index=184&type=chunk) [Results of Operations – Regulated Natural Gas Segment](index=54&type=section&id=Results%20of%20Operations%20%E2%80%93%20Regulated%20Natural%20Gas%20Segment) The new Regulated Natural Gas segment contributed $280.3 million in revenues and $6.1 million in earnings Regulated Natural Gas Segment Performance (in thousands) | Metric | Q3 2020 | Nine Months 2020 | | :--- | :--- | :--- | | Operating revenues (GAAP) | $88,880 | $273,798 | | Purchased gas | $14,841 | $68,807 | | **Gross margin (non-GAAP)** | **$74,039** | **$204,991** | - Since the acquisition date of March 16, 2020, the natural gas operations contributed operating revenues of **$280.3 million** and earnings of **$6.1 million** to consolidated results[202](index=202&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rates and equity prices, potentially impacting pension plan assets - The company is subject to market risks from changes in interest rates and equity prices[206](index=206&type=chunk) - Volatile equity markets due to the COVID-19 pandemic could negatively affect pension and post-retirement plan asset values, potentially increasing future funding requirements[206](index=206&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective, but the Peoples Gas Acquisition caused a material change in internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[207](index=207&type=chunk) - The Peoples Gas Acquisition is considered a material event that has affected internal control over financial reporting, and the integration of its controls is ongoing[208](index=208&type=chunk) Part II – Other Information [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, none expected to materially affect financial position - The company states that there are no pending legal proceedings expected to have a material adverse effect on its financial position, operations, or cash flows[210](index=210&type=chunk) [Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) Key risks include stock price volatility from equity issuances and the natural gas business's sensitivity to weather - The sale or issuance of substantial amounts of common stock, including from stock purchase contracts and forward sale agreements, could adversely affect the market price[212](index=212&type=chunk) - The natural gas business is seasonal and temperature-sensitive, with warmer-than-normal weather potentially harming demand and financial results[213](index=213&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired 44 common shares from employees in Q3 2020 to satisfy tax obligations from stock compensation Issuer Purchases of Equity Securities (Q3 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1-31, 2020 | 11 | $42.86 | | August 1-31, 2020 | 32 | $45.31 | | September 1-30, 2020 | 1 | $45.31 | | **Total** | **44** | **$44.69** | - The shares were acquired from employees to pay withholding taxes upon the vesting of stock-based compensation[216](index=216&type=chunk) [Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including CEO and CFO certifications and Inline XBRL data files - Lists filed exhibits, including CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and Inline XBRL documents[218](index=218&type=chunk)

Financial Data and Key Metrics Changes - The second quarter ended with revenues of $384.5 million, up 75.6% year-over-year, with the Peoples acquisition contributing $149.6 million to this growth [31] - Net income increased by 35.9% year-over-year from $54.9 million to $74.6 million, and GAAP EPS rose 16% to $0.29 [31][20] - Operations and maintenance (O&M) expenses increased to $128.6 million, up 48.8% from $86.4 million last year, primarily due to the addition of Peoples operations [31][37] Business Line Data and Key Metrics Changes - The regulated water segment saw significant revenue growth, with new revenue related to Peoples being the main driver, adding almost $150 million [33] - The regulated natural gas segment also contributed to revenue growth, with $129 million invested in infrastructure [17] - The municipal acquisition strategy remains strong, with signed agreements totaling over $300 million in expected rate base and over 200,000 new customers [21] Market Data and Key Metrics Changes - Residential water usage increased nearly 10%, offsetting declines in commercial and industrial segments due to COVID-19 [34] - The company secured a $500 million term loan as a precautionary liquidity measure during the pandemic, which was repaid in June [36] Company Strategy and Development Direction - The company is focused on a municipal acquisition program as a primary growth engine, with significant opportunities in water and wastewater transactions [50] - The company aims to maintain a balanced rate base mix of approximately 70% water and 30% gas, with a focus on strategic acquisitions [52] - The company is committed to ESG initiatives and has appointed a manager to enhance its ESG program [67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year earnings per share guidance of $1.53 to $1.58, despite ongoing pandemic challenges [69] - The company is closely monitoring COVID-19 impacts on operations, including consumption, billing, and collections [32] - Management emphasized the importance of affordability for customers and the need for a balanced approach to regulatory moratoriums on service disconnections [90][91] Other Important Information - The board approved a 7% dividend increase, marking the 29th consecutive year of dividend increases [23][24] - The company has a robust capital investment plan, anticipating approximately $2.8 billion in investments across the Essential platform through 2022 [70] Q&A Session Summary Question: Can you provide more color around the acquisition platform in Texas? - Management expressed optimism about opportunities in Texas, highlighting the recent fair market value deal and ongoing discussions for additional acquisitions [74][75] Question: Any regulatory update on service disconnection moratoriums in Pennsylvania? - Management noted that the Pennsylvania PUC has provided relief for COVID-related debt expenses and anticipates action on disconnection moratoriums by September [84][85] Question: How is the company managing the balance between operational costs and customer affordability during COVID-19? - Management emphasized a surgical approach to handling collections and providing assistance to customers, while advocating for a balanced regulatory approach [90][91] Question: What factors are enabling the company to outpace the industry in municipal acquisitions? - Management attributed success to a strong reputation in the community, proactive engagement with municipalities, and a focus on providing solutions during financial constraints [93]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 10-Q (Mark One) S QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2020 £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from_______________ to _______________ Table of Contents Commission File Number 1-6659 ESSENTIAL UTILITIES, INC. (Exact name of registrant as specified in its charter) ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON DC 20549 FORM 10-Q (Mark One) S QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2020 £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from_______________ to _______________ Commission File Number 1-6659 ESSENTIAL UTILITIES, INC. (Exact name of registrant as specified in its charter ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 Or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File number 1-6659 ESSENTIAL UTILITIES, INC. (Exact name of registrant as specified in its charter) (State or other jurisdictio ...