Northwest Natural pany(NWN) - 2025 Q2 - Quarterly Results

NW Natural Holdings Reports Second Quarter 2025 Results Financial Highlights (Q2 and YTD Consolidated) The company reported a narrowed net loss and positive adjusted net income for Q2 2025, with significant year-to-date growth driven by all business segments | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Loss | $(2.5) million | $(2.8) million | Increase $0.3 million | | Net Loss Per Share | $(0.06) | $(0.07) | Increase $0.01 | | Adjusted Net Income | $0.3 million | $(2.8) million | Increase $3.1 million | | Adjusted Net Income Per Share | $0.01 | $(0.07) | Increase $0.08 | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $85.4 million | $61.0 million | Increase $24.4 million | | Net Income Per Share | $2.11 | $1.60 | Increase $0.51 | | Adjusted Net Income | $92.1 million | $61.0 million | Increase $31.1 million | | Adjusted Net Income Per Share | $2.28 | $1.60 | Increase $0.68 | - Net income growth was primarily driven by new rates for the Oregon gas utility, contributions from SiEnergy, new rates and acquisitions for the NWN water utility, and earnings from NWN Renewables, partially offset by higher operating, depreciation, and interest expenses[1] Key Events and Business Developments The company achieved key milestones in Q2 2025, including a rate case settlement in Oregon, the acquisition of Pines Holdings, and significant customer connection growth - Reached a multi-party settlement in the Oregon gas utility rate case, expected to generate $21.3 million in annual revenue growth[3] - Acquired Hughes Gas Resources, Inc (renamed Pines Holdings) for $60.8 million, expanding SiEnergy's regulated gas utility operations in Texas with approximately 7,000 connections and a backlog of over 12,000 contracted customers[3][6] - Added over 92,000 gas and water utility connections in the last 12 months ending June 30, 2025, representing a consolidated growth rate of 10.6%, primarily driven by the SiEnergy and Pines acquisitions[3] - Achieved strong organic customer growth of 1.9% (annualized) on a consolidated basis in the first half of 2025[3] Oregon General Rate Case Settlements - NW Natural filed an annual revenue requirement increase request of $59.4 million on December 30, 2024, which included approximately $10 million for a depreciation study increase[2] - On June 23, 2025, NW Natural reached a settlement with other parties, agreeing to a revenue requirement increase of $21.3 million (or 2.5%), including $4.8 million for the depreciation study increase[3] | Metric | Details | | :--- | :--- | | Capital Structure | 50% common equity, 50% long-term debt | | Return on Equity (ROE) | 9.5% | | Overall Cost of Capital | 7.12% | | Projected Rate Base | Approx $2.2 billion (an increase of $144 million from the last rate case) | - New rates are expected to take effect on October 31, 2025, subject to OPUC review and approval, and completion of identified capital projects[5] Pines Holdings Acquisition - SiEnergy acquired Pines Holdings in June 2025 for $60.8 million, which serves approximately 7,000 connections across 12 communities northeast of Houston[6] - Pines Holdings is projected to have a rate base of approximately $47 million by the end of 2025 and has a backlog of over 12,000 contracted customers, further expanding SiEnergy's regulated gas utility operations in Texas[6] 2025 Guidance and Long-Term Targets NW Natural Holdings updated its 2025 GAAP EPS guidance, reaffirmed its adjusted EPS guidance and long-term EPS growth target, and announced its capital expenditure forecast for 2025 | Metric | 2025 Guidance | | :--- | :--- | | GAAP EPS | $2.60 to $2.80 | | Adjusted EPS | $2.75 to $2.95 | - The adjusted EPS guidance excludes $8.6 million in pre-tax transaction and business development costs (approximately $6.3 million after-tax or $0.15 per share) related to the SiEnergy and Pines acquisitions[7] - Reaffirmed long-term EPS growth target of 4% to 6% (compounded annually from a 2025 adjusted EPS baseline)[3][7] - Capital expenditures for 2025 are projected to be between $450 million and $500 million, expected to be financed through internal generation or long-term debt or equity financing[7] Dividend Declared The NW Natural Holdings Board of Directors declared a quarterly dividend, maintaining the company's ongoing shareholder returns | Metric | Amount | | :--- | :--- | | Quarterly Dividend | $0.49 per share | | Annualized Dividend Rate | $1.96 per share | | Payment Date | August 15, 2025 | | Record Date | July 31, 2025 | Detailed Segment Results Second Quarter Results by Segment In Q2 2025, NW Natural Holdings' consolidated net loss narrowed year-over-year, with adjusted net income turning positive, driven by significant net income growth in both the NWN Gas and NWN Water utility segments and new contributions from the SiEnergy Gas Utility acquisition | Segment | Q2 2025 Net Income ($ thousands) | Q2 2024 Net Income ($ thousands) | Change ($ thousands) | | :--- | :--- | :--- | :--- | | NWN Gas Utility | $1,529 | $(2,987) | $4,516 | | SiEnergy Gas Utility | $1,014 | — | $1,014 | | NWN Water Utility | $2,833 | $1,071 | $1,762 | | Other | $(7,876) | $(871) | $(7,005) | | Consolidated | $(2,500) | $(2,787) | $287 | | Adjusted Consolidated | $315 | $(2,787) | $3,102 | | Segment | Q2 2025 EPS | Q2 2024 EPS | Change | | :--- | :--- | :--- | :--- | | NWN Gas Utility | $0.04 | $(0.08) | $0.12 | | SiEnergy Gas Utility | $0.03 | — | $0.03 | | NWN Water Utility | $0.07 | $0.03 | $0.04 | | Other | $(0.20) | $(0.02) | $(0.18) | | Consolidated | $(0.06) | $(0.07) | $0.01 | | Adjusted Consolidated | $0.01 | $(0.07) | $0.08 | Year-to-Date Results by Segment For the first half of 2025, NW Natural Holdings achieved substantial growth in both consolidated net income and adjusted net income, with positive contributions from all major business segments including NWN Gas, SiEnergy Gas, and NWN Water | Segment | H1 2025 Net Income ($ thousands) | H1 2024 Net Income ($ thousands) | Change ($ thousands) | | :--- | :--- | :--- | :--- | | NWN Gas Utility | $88,695 | $62,728 | $25,967 | | SiEnergy Gas Utility | $6,519 | — | $6,519 | | NWN Water Utility | $4,521 | $325 | $4,196 | | Other | $(14,319) | $(2,017) | $(12,302) | | Consolidated | $85,416 | $61,036 | $24,380 | | Adjusted Consolidated | $92,118 | $61,036 | $31,082 | | Segment | H1 2025 EPS | H1 2024 EPS | Change | | :--- | :--- | :--- | :--- | | NWN Gas Utility | $2.19 | $1.65 | $0.54 | | SiEnergy Gas Utility | $0.16 | — | $0.16 | | NWN Water Utility | $0.11 | $0.01 | $0.10 | | Other | $(0.35) | $(0.06) | $(0.29) | | Consolidated | $2.11 | $1.60 | $0.51 | | Adjusted Consolidated | $2.28 | $1.60 | $0.68 | NWN Gas Utility Performance The NWN Gas Utility segment achieved significant growth in net income and gross margin for both the second quarter and first half of 2025, primarily due to the implementation of new rates in Oregon and continued system investments | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin | $127,222 thousand | $110,309 thousand | Increase $16,913 thousand | | Net Income | $1,529 thousand | $(2,987) thousand | Increase $4,516 thousand | | EPS | $0.04 | $(0.08) | Increase $0.12 | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin | $384,044 thousand | $328,459 thousand | Increase $55,585 thousand | | Net Income | $88,695 thousand | $62,728 thousand | Increase $25,967 thousand | | EPS | $2.19 | $1.65 | Increase $0.54 | - The second-quarter net income increase primarily reflects the implementation of new rates in Oregon, which contributed to a $16.9 million increase in gross margin[13] - The first-half net income growth was mainly driven by new rates in Oregon, resulting in a $55.6 million increase in gross margin[14] SiEnergy Gas Utility Performance The SiEnergy Gas Utility segment contributed net income and gross margin for the first time in the second quarter and first half of 2025 following its acquisition, with performance meeting management expectations and benefiting from strong customer growth | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin | $8,161 thousand | — | $8,161 thousand | | Net Income | $1,014 thousand | — | $1,014 thousand | | EPS | $0.03 | — | $0.03 | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Margin | $21,745 thousand | — | $21,745 thousand | | Net Income | $6,519 thousand | — | $6,519 thousand | | EPS | $0.16 | — | $0.16 | - SiEnergy was acquired on January 7, 2025, and Pines on June 2, 2025; since their acquisitions, these entities contributed $1.0 million in net income ($0.03 per share) in the second quarter and $6.5 million in net income ($0.16 per share) in the first half[16] - Gross margin performance was in line with management expectations, reflecting strong customer growth in both the second quarter and first half[16] NWN Water Utility Performance The NWN Water Utility segment delivered strong net income growth in the second quarter and first half of 2025, driven by the implementation of new rates in Arizona and contributions from the acquisition of Infrastructure Capital Holdings/Puttman (ICH) water utilities | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Operating Income | $4,296 thousand | $1,798 thousand | Increase $2,498 thousand | | Net Income | $2,833 thousand | $1,071 thousand | Increase $1,762 thousand | | EPS | $0.07 | $0.03 | Increase $0.04 | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Operating Income | $7,339 thousand | $2,252 thousand | Increase $5,087 thousand | | Net Income | $4,521 thousand | $325 thousand | Increase $4,196 thousand | | EPS | $0.11 | $0.01 | Increase $0.10 | - The second-quarter net income increase of $1.8 million primarily reflects a $4.8 million increase in operating income, driven by new rates for the largest utility in Arizona and incremental revenues from the ICH water utilities acquired in September 2024[20] - The first-half net income increase of $4.2 million was mainly due to an $8.0 million increase in operating income, driven by new rates for Arizona utilities and incremental revenues from the ICH water utility acquisition[21] Other Business Activities Performance The "Other" business segment reported increased net loss and adjusted net loss for both the second quarter and first half of 2025, primarily due to a significant rise in interest expense related to incremental financing activities in December 2024 and March 2025 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Loss | $(7,876) thousand | $(871) thousand | Increase $(7,005) thousand | | Adjusted Net Loss | $(5,061) thousand | $(871) thousand | Increase $(4,190) thousand | | Loss Per Share | $(0.20) | $(0.02) | Increase $(0.18) | | Adjusted Loss Per Share | $(0.13) | $(0.02) | Increase $(0.11) | | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Loss | $(14,319) thousand | $(2,017) thousand | Increase $(12,302) thousand | | Adjusted Net Loss | $(7,617) thousand | $(2,017) thousand | Increase $(5,600) thousand | | Loss Per Share | $(0.35) | $(0.06) | Increase $(0.29) | | Adjusted Loss Per Share | $(0.18) | $(0.06) | Increase $(0.12) | - The second-quarter adjusted net loss increased by $4.2 million, primarily due to a $9.1 million increase in interest expense from the issuance of subordinated notes in March 2025[24] - The first-half adjusted net loss increased by $5.6 million, mainly related to higher interest expense from incremental financing at NW Natural Holdings in December 2024 and March 2025[25] Company Overview and Investor Information About NW Natural Holdings NW Natural Holdings is a utility holding company with over 166 years of history, headquartered in Portland, Oregon, providing essential energy, water, and wastewater services to over one million customers across seven states through its subsidiaries, with a commitment to safety, environmental stewardship, and community service - The company owns Northwest Natural Gas Company (NW Natural), SiEnergy Operating (SiEnergy Gas Utility), NW Natural Water Company (NWN Water Utility), NW Natural Renewables Holdings (NWN Renewables), and other businesses[29] - Serves over one million customers across seven states with natural gas, water, and wastewater services through its subsidiaries[30] - Recognized by Ethisphere® as one of the World's Most Ethical Companies® for four consecutive years and consistently leads the industry in J.D. Power & Associates customer satisfaction surveys[30] - NWN Gas Utility serves approximately 2 million people in Oregon and Southwest Washington with about 807,000 meters and 21.6 Bcf of underground gas storage capacity[31] - SiEnergy Gas Utility is one of the fastest-growing natural gas distribution utilities in the U.S, serving over 83,000 meters in the Houston, Dallas, and Austin metropolitan areas[32] - NWN Water Utility provides water and wastewater services to approximately 195,000 people in the Pacific Northwest, Texas, Arizona, and California, with about 78,600 meters[33] Conference Call and Webcast Details NW Natural Holdings will host a conference call and webcast to discuss its second-quarter 2025 financial and operating results, with replay information available | Event | Details | | :--- | :--- | | Date and Time | Tuesday, August 5, 2025, at 8 a.m. PT (11 a.m. ET) | | U.S. Phone Number | 1-833-470-1428 | | International Phone Number | 1-404-975-4839 | | Passcode | 546522 | | Webcast | ir.nwnaturalholdings.com | | Replay Phone (U.S.) | 1-866-813-9403 | | Replay Phone (International) | 1-929-458-6194 | | Replay Access Code | 198960 | Financial Statements Consolidated Income Statement and Financial Highlights This section provides the unaudited consolidated statements of income and financial highlights for NW Natural Holdings, covering key financial data such as operating revenues, expenses, net income, and earnings per share for the second quarter and first half of 2025 and 2024 | Metric ($ thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $236,194 | $211,714 | $730,478 | $645,184 | | Total Operating Expenses | $208,983 | $196,008 | $548,913 | $519,651 | | Operating Income | $27,211 | $15,706 | $181,565 | $125,533 | | Net Income (Loss) | $(2,500) | $(2,787) | $85,416 | $61,036 | | Diluted EPS | $(0.06) | $(0.07) | $2.11 | $1.60 | | Dividends Declared Per Share | $0.4900 | $0.4875 | $0.9800 | $0.9750 | | Capital Structure (at period end) | 2025 | 2024 | | :--- | :--- | :--- | | Common Equity | 38.0 % | 44.8 % | | Long-Term Debt | 54.2 % | 52.5 % | | Short-Term Debt | 7.8 % | 2.7 % | | Total | 100.0 % | 100.0 % | | Operating Statistics (meters at period end) | H1 2025 | H1 2024 | | :--- | :--- | :--- | | NWN Gas Utility | 807,243 | 801,943 | | SiEnergy Gas Utility | 83,278 | — | | NWN Water Utility | 78,635 | 74,337 | | Total Meters | 969,156 | 876,280 | Consolidated Balance Sheets This section presents the unaudited consolidated balance sheets of NW Natural Holdings, detailing the assets, liabilities, and equity as of June 30, 2025, and June 30, 2024, reflecting changes in the company's financial position | Metric ($ thousands) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | $466,116 | $423,120 | | Net Property, Plant and Equipment | $4,146,423 | $3,530,445 | | Goodwill | $370,889 | $163,166 | | Total Non-Current Assets | $5,320,447 | $4,399,246 | | Total Assets | $5,786,563 | $4,822,366 | | Liabilities and Equity | | | | Total Current Liabilities | $683,867 | $435,540 | | Long-Term Debt | $2,086,650 | $1,574,751 | | Total Deferred Credits and Other Non-Current Liabilities | $1,556,808 | $1,465,359 | | Total Equity | $1,459,238 | $1,346,716 | | Total Liabilities and Equity | $5,786,563 | $4,822,366 | - As of June 30, 2025, total assets increased by approximately $964 million compared to the same period in 2024, primarily driven by increases in net property, plant, and equipment and goodwill - Both current liabilities and long-term debt saw significant increases, reflecting the company's financing needs for operational and investment activities Consolidated Statements of Cash Flows This section provides the unaudited consolidated statements of cash flows for NW Natural Holdings, detailing cash flows from operating, investing, and financing activities for the first half of 2025 and 2024, reflecting the sources and uses of the company's cash | Metric ($ thousands) | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $281,770 | $246,076 | | Cash Used in Investing Activities | $(555,887) | $(200,441) | | Cash Provided by (Used in) Financing Activities | $332,799 | $(14,220) | | Increase in Cash, Cash Equivalents, and Restricted Cash | $58,682 | $31,415 | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $106,664 | $81,039 | - In the first half of 2025, cash outflow from investing activities increased significantly, primarily due to capital expenditures and acquisition activities (net $331,329 thousand) - Financing activities shifted from a cash use in H1 2024 to a cash source in H1 2025, mainly driven by the issuance of long-term debt ($375,000 thousand) Non-GAAP Measures and Forward-Looking Statements Non-GAAP Financial Measures This section defines and explains the non-GAAP financial measures used by NW Natural Holdings, such as "Adjusted Net Income" and "Adjusted EPS," emphasizing their use in evaluating the company's overall performance by excluding certain charges and expenses that may not be indicative of core business operations - Management uses non-GAAP financial measures such as "Adjusted Net Income," "Adjusted EPS," "Adjusted Segment Net Loss," "Segment EPS," and "Adjusted Segment EPS" to evaluate the company's overall performance[40] - These non-GAAP measures provide meaningful supplemental information by excluding transaction and business development costs, which primarily include professional fees related to business combinations and development activities[40] - Non-GAAP financial measures should not be considered a substitute for or superior to GAAP measures and may be calculated differently by other companies, limiting their comparative use[41] 2025 Guidance Reconciliation to GAAP This section provides a reconciliation of NW Natural Holdings' 2025 GAAP EPS guidance to its adjusted EPS guidance, clarifying the adjustments and their impact on earnings per share | Metric | 2025 | | :--- | :--- | | GAAP EPS Guidance | $2.60 to $2.80 | | Transaction and Business Development Costs | $0.15 | | Adjusted EPS Guidance | $2.75 to $2.95 | - Transaction and business development costs (including impacts from SiEnergy and Pines) are estimated at $6.3 million after-tax for 2025, or $0.15 per share, assuming 41.1 million average diluted shares and a 26.5% income tax rate[47] Q2 and YTD 2025 Reconciliation to GAAP This section provides a detailed reconciliation of GAAP net income (loss) to adjusted net income (loss) for NW Natural Holdings' consolidated and "Other" segments for the second quarter and first half of 2025, specifying transaction and business development costs and their income tax effects | Metric ($ thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Consolidated | | | | GAAP Net Income (Loss) | $(2,500) | $(2,787) | | Transaction and Business Development Costs | $3,831 | — | | Income Tax Effect | $(1,016) | — | | Adjusted Net Income (Loss) | $315 | $(2,787) | | Other | | | | GAAP Net Income (Loss) | $(7,876) | $(871) | | Transaction and Business Development Costs | $3,831 | — | | Income Tax Effect | $(1,016) | — | | Adjusted Net Income (Loss) | $(5,061) | $(871) | | Metric ($ thousands) | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Consolidated | | | | GAAP Net Income | $85,416 | $61,036 | | Transaction and Business Development Costs | $9,118 | — | | Income Tax Effect | $(2,416) | — | | Adjusted Net Income | $92,118 | $61,036 | | Other | | | | GAAP Net Income (Loss) | $(14,319) | $(2,017) | | Transaction and Business Development Costs | $9,118 | — | | Income Tax Effect | $(2,416) | — | | Adjusted Net Income (Loss) | $(7,617) | $(2,017) | - SiEnergy transaction costs were recognized in Q1 2025, while business development costs and Pines transaction costs were recognized in Q2 2025; the tax effect of adjustments is calculated at a combined federal and statutory tax rate of 26.5%[48] Forward-Looking Statements This section contains forward-looking statements about future events and financial performance, emphasizing that these statements are based on current expectations and assumptions and are subject to inherent uncertainties, risks, and changes in circumstances that could cause actual results to differ materially from expectations; the company undertakes no obligation to publicly update any forward-looking statement, except as required by law - Forward-looking statements involve plans, objectives, assumptions, estimates, expectations, forecasts, outlook, timing, goals, strategies, commitments, future events, financial condition, financial performance, investments, and valuations for future periods[37] - These statements are based on current expectations and assumptions about the business, economy, geopolitical factors, and other future conditions but are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict[38] - Actual results may differ materially from those projected in forward-looking statements, and investors should use caution when relying on them[38] - The company undertakes no obligation to publicly update any forward-looking statement, except as required by law[39]