Otter Tail (OTTR) - 2025 Q2 - Quarterly Results

Executive Summary This section provides an overview of the company's Q2 2025 financial performance, key highlights, and dividend declaration CEO's Overview President and CEO Chuck MacFarlane expressed satisfaction with Q2 2025 financial results, highlighting team commitment amidst dynamic market conditions and segment-specific achievements - The Electric segment successfully restored power after severe weather, secured approval for two solar development projects (345 MW), and filed for a $5.7 million electric rate increase in South Dakota[3][4] - The Manufacturing segment continues to navigate soft end market demand, but its new BTD Georgia facility is ramping up to full production[5] - The Plastics segment's results outpaced expectations due to strong product demand and higher sales volumes, despite receding PVC pipe sales prices[6] - The company increased its 2025 diluted earnings per share guidance for the Plastics segment, leading to an increase in consolidated guidance[6] Key Financial Highlights The corporation reported diluted earnings per share of $1.85 for Q2 2025 and increased its 2025 EPS guidance midpoint to $6.26, with a trailing twelve months' return on equity of 17% Key Financial Highlights | Metric | Value | | :--------------------------------- | :------ | | Diluted Earnings Per Share (Q2 2025) | $1.85 | | 2025 EPS Guidance Midpoint Increase | $0.38 | | New 2025 EPS Guidance Midpoint | $6.26 | | Return on Equity (Trailing 12 Months) | 17% | Quarterly Dividend The Board of Directors declared a quarterly common stock dividend of $0.525 per share, payable on September 10, 2025, to shareholders of record on August 15, 2025 Quarterly Dividend | Metric | Value | | :----------------- | :------ | | Dividend Per Share | $0.525 | | Payable Date | Sep 10, 2025 | | Record Date | Aug 15, 2025 | Financial Performance Overview This section details the corporation's cash flows, liquidity position, and capital allocation for the period Cash Flows and Liquidity Consolidated cash provided by operating activities decreased for the six months ended June 30, 2025, primarily due to timing differences and decreased earnings, while liquidity remained strong Cash Flow Summary (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Cash Provided by Operating Activities | $159.4 | $223.5 | $(64.1) | | Capital Expenditures | $124.2 | N/A | N/A | | Long-Term Debt Issued | $100.0 | N/A | N/A | | Net Repayments of Short-Term Borrowings | $69.6 | N/A | N/A | | Dividend Payments | $44.0 | N/A | N/A | - Total available liquidity as of June 30, 2025, was $688.2 million, comprising $170.0 million from Otter Tail Corporation credit facilities, $211.0 million from Otter Tail Power credit facilities, and $307.2 million in cash and cash equivalents[12] Segment Performance Analysis This section analyzes the financial performance of the Electric, Manufacturing, Plastics, and Corporate segments for the quarter Electric Segment The Electric segment reported increased operating revenues and net income for Q2 2025, driven by higher fuel recovery and rider revenues, and favorable weather conditions Electric Segment Performance (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | % Change | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :--------- | | Operating Revenues | $128.731 | $112.828 | $15.903 | 14.1% | | Net Income | $19.195 | $18.485 | $0.710 | 3.8% | | Retail MWh Sales | 1,337,696 | 1,315,504 | 22,192 | 1.7% | - Operating revenues increased primarily due to higher fuel recovery and rider revenues, and favorable weather conditions compared to the prior year[15] - Net income growth was partially offset by increased operating and maintenance expenses, depreciation, and interest[16] Manufacturing Segment The Manufacturing segment experienced a decline in both operating revenues and net income in Q2 2025, mainly attributed to decreased sales volumes and lower steel costs Manufacturing Segment Performance (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | % Change | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :--------- | | Operating Revenues | $78.726 | $96.684 | $(17.958) | (18.6)% | | Net Income | $3.481 | $6.835 | $(3.354) | (49.1)% | - Operating revenues decreased due to a 9% decrease in sales volumes across various end markets (agriculture, RVs, lawn and garden, construction) and a 7% decrease in steel costs passed through to customers[17] - Net income declined primarily due to lower sales volumes and the absence of enhanced profit margins seen in Q2 2024 from steel cost fluctuations and selling lower-cost inventory[18] Plastics Segment The Plastics segment saw a decrease in operating revenues and net income in Q2 2025, primarily due to a significant drop in sales prices, partially offset by increased sales volumes and lower PVC resin costs Plastics Segment Performance (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | % Change | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :--------- | | Operating Revenues | $125.586 | $132.824 | $(7.238) | (5.4)% | | Net Income | $53.104 | $60.612 | $(7.508) | (12.4)% | - Operating revenues decreased primarily due to a 15% decrease in sales prices, partially offset by an 11% increase in sales volumes driven by strong distributor and end-market demand and increased production capacity[19] - Net income decreased due to lower sales prices, but benefited from increased sales volumes and a 15% decrease in PVC resin costs[20] Corporate Segment The Corporate segment reported an increase in net income for Q2 2025, primarily due to higher market-based gains on corporate-owned life insurance policy investments Corporate Segment Performance (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | % Change | | :--------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :--------- | | Net Income | $1.948 | $1.063 | $0.885 | 83.3% | - The increase in net income was primarily driven by increased market-based gains on corporate-owned life insurance policy investments[21] 2025 Outlook and Guidance Otter Tail Corporation increased its 2025 diluted earnings per share guidance to a range of $6.06 to $6.46, primarily due to better-than-expected Plastics segment results and revised pricing expectations 2025 Diluted EPS Guidance Update | Metric | Previous Guidance (Feb 17, 2025) | Updated Guidance (Aug 4, 2025) | | :-------------------------------- | :------------------------------- | :----------------------------- | | Low EPS | $5.68 | $6.06 | | High EPS | $6.08 | $6.46 | | Midpoint Increase | N/A | $0.38 | 2025 EPS Guidance by Segment (August 4, 2025) | Segment | 2024 Actual EPS | 2025 EPS Guidance (Low) | 2025 EPS Guidance (High) | | :------------ | :-------------- | :---------------------- | :----------------------- | | Electric | $2.16 | $2.29 | $2.35 | | Manufacturing | $0.33 | $0.21 | $0.27 | | Plastics | $4.77 | $3.64 | $3.88 | | Corporate | $(0.09) | $(0.08) | $(0.04) | | Total | $7.17 | $6.06 | $6.46 | | Return on Equity | 19.3% | 14.5% | 15.3% | - The increase in Plastics segment earnings guidance is based on better-than-expected Q2 2025 financial results, anticipated lower material costs (PVC resin), and revised expectations for PVC pipe pricing for the second half of the year[23][26] - The anticipated 2025 earnings mix is approximately 37% from the Electric segment and 63% from the Manufacturing and Plastics segments, deviating from the long-term expected mix of 65% Electric / 35% Non-Electric due to elevated Plastics segment earnings[22] Additional Information This section provides details on the upcoming conference call, forward-looking statements, company overview, and contact information Conference Call and Webcast Otter Tail Corporation will host a live webcast on Tuesday, August 5, 2025, at 10:00 a.m. CT to discuss its financial and operating performance - A live webcast will be held on August 5, 2025, at 10:00 a.m. CT to discuss financial and operating performance, with the presentation available on www.ottertail.com/presentations[24](index=24&type=chunk) Forward-Looking Statements The press release contains forward-looking statements, identified by specific terminology, which are subject to known and unknown risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are identified by words such as "anticipate," "believe," "expect," "plan," "projected," and similar expressions, and are subject to safe harbor provisions of the Private Securities Litigation Reform Act of 1995[25][27] - Known and unknown risks and uncertainties, including energy market risks, raw material availability and pricing, inflationary pressures, changing macroeconomic conditions, and regulatory impacts, may cause actual results to differ materially from forecasted assumptions[27] About the Corporation Otter Tail Corporation is a diversified company with interests in an electric utility and manufacturing businesses, listed on the Nasdaq Global Select Market under the symbol OTTR - Otter Tail Corporation is a diversified company with an electric utility and manufacturing businesses, trading on Nasdaq (OTTR) and a member of the S&P SmallCap 600 Index[28] Investor and Media Contacts Contact information for investor relations and corporate communications is provided for inquiries - Investor inquiries can be directed to Beth Eiken, Manager of Investor Relations, at (701) 451-3571[29] - Media inquiries can be directed to Stephanie Hoff, Director of Corporate Communications, at (218) 739-8535[29] Consolidated Financial Statements This section presents the unaudited consolidated statements of income, balance sheet, cash flows, and segment results Consolidated Statements of Income The unaudited Consolidated Statements of Income present the company's revenues, expenses, and net income for the three and six months ended June 30, 2025, and 2024 Consolidated Statements of Income (Unaudited) | (in millions USD, except per-share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenues | $333.043 | $342.336 | $670.396 | $689.404 | | Operating Income | $97.458 | $110.911 | $181.457 | $205.886 | | Net Income | $77.728 | $86.995 | $145.827 | $161.333 | | Diluted Earnings Per Share | $1.85 | $2.07 | $3.46 | $3.84 | Consolidated Balance Sheet The unaudited Consolidated Balance Sheet provides a snapshot of the company's assets, liabilities, and shareholders' equity as of June 30, 2025, compared to December 31, 2024 Consolidated Balance Sheet (Unaudited) | (in billions USD) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Total Assets | $3.765 | $3.652 | | Total Current Liabilities | $0.203 | $0.310 | | Total Liabilities and Shareholders' Equity | $3.765 | $3.652 | Consolidated Statements of Cash Flows The unaudited Consolidated Statements of Cash Flows detail the cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Consolidated Statements of Cash Flows (Unaudited) | (in millions USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $159.379 | $223.461 | | Net Cash Used in Investing Activities | $(127.026) | $(228.065) | | Net Cash (Used in) Provided by Financing Activities | $(19.763) | $4.903 | | Net Change in Cash and Cash Equivalents | $12.590 | $0.299 | | Cash and Cash Equivalents at End of Period | $307.241 | $230.672 | Segment Results The unaudited Segment Results provide a breakdown of operating revenues, operating income, and net income for the Electric, Manufacturing, Plastics, and Corporate segments for the three and six months ended June 30, 2025, and 2024 Segment Results (Unaudited) - Three Months Ended June 30 (Millions USD) | Segment | 2025 Operating Revenues | 2024 Operating Revenues | 2025 Operating Income | 2024 Operating Income | 2025 Net Income | 2024 Net Income | | :------------ | :---------------------- | :---------------------- | :-------------------- | :-------------------- | :-------------- | :-------------- | | Electric | $128.731 | $112.828 | $23.633 | $22.597 | $19.195 | $18.485 | | Manufacturing | $78.726 | $96.684 | $5.065 | $9.600 | $3.481 | $6.835 | | Plastics | $125.586 | $132.824 | $72.034 | $82.089 | $53.104 | $60.612 | | Corporate | N/A | N/A | $(3.274) | $(3.375) | $1.948 | $1.063 | | Total | $333.043 | $342.336 | $97.458 | $110.911 | $77.728 | $86.995 | Segment Results (Unaudited) - Six Months Ended June 30 (Millions USD) | Segment | 2025 Operating Revenues | 2024 Operating Revenues | 2025 Operating Income | 2024 Operating Income | 2025 Net Income | 2024 Net Income | | :------------ | :---------------------- | :---------------------- | :-------------------- | :-------------------- | :-------------- | :-------------- | | Electric | $278.451 | $254.317 | $52.676 | $51.639 | $43.903 | $40.956 | | Manufacturing | $160.412 | $196.065 | $7.492 | $17.014 | $5.013 | $12.096 | | Plastics | $231.533 | $239.022 | $130.909 | $145.392 | $96.543 | $107.350 | | Corporate | N/A | N/A | $(9.620) | $(8.159) | $0.368 | $0.931 | | Total | $670.396 | $689.404 | $181.457 | $205.886 | $145.827 | $161.333 |