MDU Resources (MDU) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Second Quarter 2025 Overview MDU Resources' net income and diluted EPS significantly declined in Q2 2025 due to weather, operational cost challenges, and the Everus spinoff, yet the company maintained pipeline business growth and regulatory progress supporting its pure-play regulated energy delivery value proposition Consolidated Financial Results for Q2 2025 (YoY) | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------------------- | :------ | :------ | :----- | | Net Income | $13.7M | $60.4M | -77.3% | | Diluted EPS | $0.07 | $0.30 | -76.7% | | Income from Continuing Operations | $14.1M | $20.2M | -30.2% | | Diluted EPS from Continuing Operations | $0.07 | $0.10 | -30.0% | Consolidated Financial Results for Six Months Ended June 30 (YoY) | Metric | Six Months 2025 | Six Months 2024 | Change | | :--------------------------------- | :------ | :------ | :----- | | Net Income | $95.7M | $161.3M | -40.7% | | Diluted EPS | $0.47 | $0.79 | -40.5% | | Income from Continuing Operations | $96.6M | $95.0M | +1.7% | | Diluted EPS from Continuing Operations | $0.47 | $0.47 | 0.0% | - On October 31, 2024, MDU Resources successfully completed the spinoff of Everus, which became an independent public company. Prior period results have been restated to reflect this spinoff, with Everus' historical operating results and related costs reported as discontinued operations[3] - Second quarter results were challenged by weather conditions and increased operations and maintenance expenses[3] Full-Year 2025 Guidance Update The company narrowed its full-year 2025 EPS guidance to $0.88-$0.95 based on mid-year performance and weather impacts, while maintaining its long-term EPS growth rate guidance of 6%-8% 2025 Earnings Per Share Guidance | Metric | Updated Guidance | | :---------- | :--------- | | Diluted EPS | $0.88 - $0.95 | - Long-term EPS guidance remains unchanged, projecting a growth rate of 6%-8%[4] - Guidance is based on assumptions including normal weather, economic, and operating conditions; continued utility customer growth of 1%-2% annually; no equity issuances in 2025; and successful execution of approved capital investments and rate recovery plans[11] Segment Performance Analysis Electric Utility Segment The Electric Utility Segment's Q2 2025 net income decreased by 32.9% to $10.4 million, primarily due to increased O&M expenses, partially offset by South Dakota rate adjustments and data center-driven commercial retail sales growth Financial Performance The segment's Q2 2025 net income was $10.4 million, down from $15.5 million in 2024, with operating revenues slightly decreasing by 1.1% to $98.1 million and total operating expenses increasing by 7.8% to $86.9 million, driven by a 29.4% rise in O&M costs Electric Utility Segment Net Income | Period | 2025 | 2024 | Change | | :----- | :----- | :----- | :------- | | Q2 | $10.4M | $15.5M | (32.9)% | | Six Months | $25.4M | $33.4M | (24.0)% | Key Financial Metrics (Q2 2025 YoY Change) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :------- | | Operating Revenues | $98.1M | $99.2M | (1.1)% | | Operations and Maintenance | $29.9M | $23.1M | 29.4% | | Operating Income | $11.2M | $18.6M | (39.8)% | - Key drivers for the net income decrease include a $1.9 million (after-tax) increase in payroll-related costs, a $1.6 million (after-tax) increase in contract services costs related to the Coyote Station planned outage, and a $1.4 million (after-tax) increase in software expenses[24] - Partially offsetting the decrease were rate adjustments in South Dakota and increased commercial retail sales volumes, primarily driven by data center demand near Ellendale, North Dakota[24] Regulatory and Operational Updates The segment saw a 12.0% retail sales volume growth, driven by data center demand and sustained customer growth, with regulatory activities including a North Dakota filing for 49% ownership of the Badger Wind Project, a Wyoming general rate case seeking a $7.5 million annual increase, and a planned Montana electric general rate case later this year - Retail sales volumes increased by 12.0%, primarily driven by data center demand[7] - Combined target growth rate for electric utility and natural gas distribution customer base is 1.4% (YoY)[4] - North Dakota: Filed for pre-approval and a Certificate of Public Convenience and Necessity for a 49% ownership interest in the Badger Wind Project, with a hearing scheduled for September 9, 2025 - Wyoming: Filed a general rate case requesting an annual increase of $7.5 million, expected to be effective May 1, 2026 - Montana: Plans to file an electric general rate case later this year Natural Gas Distribution Segment The Natural Gas Distribution Segment reported a seasonal loss of $7.4 million in Q2 2025, up from a $5.0 million loss in 2024, mainly due to increased O&M expenses and lower sales volumes from warmer weather, partially offset by rate adjustments in Washington and Montana and increased transportation revenues Financial Performance The segment's Q2 2025 net loss increased to $7.4 million from $5.0 million in 2024, with operating revenues growing 2.7% to $206.9 million, but total operating expenses rising 4.7% to $209.8 million, including a 10.0% increase in O&M costs Natural Gas Distribution Segment Net Income (Loss) | Period | 2025 | 2024 | Change | | :----- | :----- | :----- | :------- | | Q2 | $(7.4)M | $(5.0)M | 48.0% | | Six Months | $37.3M | $35.0M | 6.6% | Key Financial Metrics (Q2 2025 YoY Change) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :------- | | Operating Revenues | $206.9M | $201.5M | 2.7% | | Operations and Maintenance | $60.5M | $55.0M | 10.0% | | Operating Income (Loss) | $(2.9)M | $1.2M | (341.7)% | - Key drivers for the increased seasonal loss include a $2.1 million (after-tax) increase in payroll-related costs, a $0.9 million (after-tax) increase in software expenses, and lower sales volumes due to warmer weather, particularly in Idaho[6][27] - Partially offsetting the loss were increased retail sales revenues from rate adjustments in Washington and Montana, and growth in transportation revenues[6][27] Regulatory and Operational Updates The segment experienced decreased sales volumes due to warmer temperatures, yet natural gas retail customer count grew 1.5% YoY, with regulatory updates including a general rate case filing in Idaho and a settlement agreement in Montana - Sales volumes decreased due to warmer temperatures[8] - Natural gas retail customer count increased by 1.5% YoY[8] - Rate adjustments in Washington and Montana partially offset the seasonal loss[8] - Idaho: Filed a general rate case requesting an annual increase of $26.5 million, with a requested effective date of January 1, 2026 - Montana: Filed a settlement agreement for an annual increase of $7.3 million, pending approval by the Montana Public Service Commission; interim rates became effective February 1, 2025 - Washington: Filed a rate revision on April 30, 2025, related to projects not yet in service, resulting in a $3.7 million revenue reduction effective June 1, 2025 - Wyoming: Reached a settlement agreement for an annual increase of $2.1 million, pending formal approval Pipeline Segment The Pipeline Segment's Q2 2025 net income decreased by 11.0% to $15.4 million, primarily due to increased O&M expenses, the absence of 2024 customer settlements, and higher depreciation, partially offset by increased transportation revenues from growth projects and strong demand for short-term capacity Financial Performance The segment's Q2 2025 net income was $15.4 million, down from $17.3 million in 2024, with operating revenues increasing 6.4% to $56.3 million, but total operating expenses rising 14.5% to $33.9 million, including a 16.1% increase in O&M costs Pipeline Segment Net Income | Period | 2025 | 2024 | Change | | :----- | :----- | :----- | :------- | | Q2 | $15.4M | $17.3M | (11.0)% | | Six Months | $32.6M | $32.3M | 0.9% | Key Financial Metrics (Q2 2025 YoY Change) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :------- | | Operating Revenues | $56.3M | $52.9M | 6.4% | | Operations and Maintenance | $22.4M | $19.3M | 16.1% | | Operating Income | $22.4M | $23.3M | (3.9)% | - Key drivers for the earnings decrease include a $0.653 million (after-tax) increase in payroll-related costs, the absence of a $1.5 million (after-tax) customer settlement in Q2 2024, and increased depreciation expenses and property tax accruals in certain jurisdictions due to growth projects placed in service[10][28] - Partially offsetting the decrease were increased transportation revenues from growth projects, including the Wahpeton expansion, and strong customer demand for short-term natural gas transportation contracts[10][28] Strategic Project Updates The Pipeline Segment is advancing several strategic projects, including the Minot expansion (commenced May 2025, expected in-service Q4), Bakken East (negotiations ongoing), and Baker storage and transportation expansion (evaluating smaller-scale project based on open season feedback) - Minot Expansion Project: Construction began in May 2025, adding approximately 7 million cubic feet per day of natural gas transportation capacity, with an expected in-service date in Q4 this year[11] - Bakken East Project: The company is negotiating with relevant parties for a proposed approximately 350-mile pipeline, focusing on project timing and volumes to determine feasibility, and actively engaging with landowners for environmental and civil surveys[11] - Baker Storage and Transportation Expansion Project: The binding open season for this proposed project concluded in May 2025, with the company reviewing results and evaluating a smaller project to align with customer interest based on initial feedback[11] - The company continues to advance other growth projects in various stages of development[11] Other Segment (Impact of Everus Spinoff) The 'Other' segment reported a net loss of $4.7 million in Q2 2025, a significant decline from $32.6 million net income in Q2 2024, primarily due to the absence of discontinued operations income (Everus spinoff) and income tax adjustments, partially offset by lower O&M expenses from reclassified corporate overhead Other Segment Net Income (Loss) | Period | 2025 | 2024 | Change | | :----- | :----- | :----- | :------- | | Q2 | $(4.7)M | $32.6M | (114.4)% | | Six Months | $0.4M | $60.6M | (99.3)% | - The primary reasons for the earnings decrease are the absence of discontinued operations income in 2025 and income tax adjustments related to the company's annual estimated tax rate[31] - Partially offsetting the decrease were lower operations and maintenance expenses, primarily because corporate overhead allocated to Everus in 2024 was not included in the 'Other' segment in 2025[31] - The 'Other' segment also includes insurance activities from the company's captive insurance company, along with general and administrative expenses and interest expense previously allocated to the exploration and production and refining businesses that did not meet discontinued operations criteria[32] Consolidated Financial Statements Consolidated Statements of Income In Q2 2025, MDU Resources' consolidated operating revenues slightly increased to $351.2 million from $344.5 million in Q2 2024, but net income significantly decreased to $13.7 million from $60.4 million, primarily due to the absence of discontinued operations income after the Everus spinoff, with income from continuing operations also declining Consolidated Statements of Income (Q2 2025 YoY) | Metric | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Operating Revenues | $351.2M | $344.5M | | Total Operating Expenses | $320.8M | $305.0M | | Operating Income | $30.4M | $39.5M | | Income from Continuing Operations | $14.1M | $20.2M | | Discontinued Operations (after-tax) | $(0.4)M | $40.2M | | Net Income | $13.7M | $60.4M | | Diluted EPS | $0.07 | $0.30 | - Operating revenues increased by $6.7 million, while operations and maintenance expenses increased by $12.8 million. Net income decreased by $46.7 million, primarily due to the impact of discontinued operations[18] Selected Cash Flows Information For the six months ended June 30, 2025, net cash provided by operating activities increased to $334.9 million from $301.6 million in 2024, while net cash used in investing activities decreased and net cash used in financing activities significantly increased Selected Cash Flows (Six Months Ended June 30) | Metric | Six Months 2025 | Six Months 2024 | | :-------------------------------------- | :------ | :------ | | Net Cash Provided by Operating Activities | $334.9M | $301.6M | | Net Cash Used in Investing Activities | $(174.4)M | $(236.0)M | | Net Cash Used in Financing Activities | $(168.6)M | $(48.2)M | | (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(8.1)M | $17.4M | | Cash, Cash Equivalents, and Restricted Cash - End of Period | $58.8M | $94.4M | Capital Expenditures MDU Resources projects total capital expenditures of $539 million for 2025, with a five-year total from 2025-2029 estimated at $3.067 billion, primarily allocated to the Natural Gas Distribution and Electric segments Capital Expenditure Forecast (2025-2029) | Business Line | 2025 Estimate | 2026 Estimate | 2027 Estimate | 2025-2029 Total Estimate | | :-------------------- | :------------- | :------------- | :------------- | :------------------------ | | Electric | $157M | $494M | $205M | $1,181M | | Natural Gas Distribution | $312M | $258M | $293M | $1,412M | | Pipeline | $70M | $59M | $95M | $474M | | Total Capital Expenditures | $539M | $811M | $593M | $3,067M | - The capital plan is subject to ongoing company review and modification, with actual expenditures potentially differing from estimates due to changes in load growth, regulatory decisions, and other factors[21] Other Financial Data As of June 30, 2025, MDU Resources reported a book value per share of common stock of $13.37, total assets of $6.946 billion, total equity of $2.732 billion, total debt of $2.182 billion, and capitalization ratios of 55.6% equity and 44.4% debt Key Financial Metrics (As of June 30, 2025) | Metric | Amount | | :-------------------------- | :------- | | Book Value Per Share of Common Stock | $13.37 | | Market Price Per Share of Common Stock | $16.67 | | Total Assets | $6,946M | | Total Equity | $2,732M | | Total Debt | $2,182M | Capitalization Ratios | Component | Ratio | | :---------- | :---- | | Total Equity | 55.6% | | Total Debt | 44.4% | Additional Information Conference Call Details MDU Resources management will host a webcast today at 2 p.m. ET to discuss second-quarter results, accessible via the company's investor relations website - The webcast can be found on www.mdu.com under the 'Investors' tab, then 'Events & Presentations,' by clicking on 'Second Quarter 2025 Earnings Conference Call.' A replay will be available at the same location following the webcast[12] About MDU Resources Group, Inc. MDU Resources Group Inc., an S&P SmallCap 600 member, provides safe, reliable, affordable, and environmentally sound electric utility and natural gas distribution services to over 1.2 million customers across the Pacific Northwest and Midwest, operating a natural gas pipeline network and storage system exceeding 3,800 miles - The company provides electric utility and natural gas distribution services and operates a natural gas pipeline network[13] - Serving over 1.2 million customers, the company operates a natural gas pipeline network and storage system exceeding 3,800 miles[13] - The company is committed to delivering safe, reliable, affordable, and environmentally sound energy services[13] Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements based on underlying assumptions, subject to unforeseen risks and uncertainties beyond the company's control, and readers are cautioned not to place undue reliance on these statements, with no obligation for the company to update them - Forward-looking statements include those regarding growth estimates, financial guidance, strategies, and other future activities, identified by words such as 'anticipates,' 'estimates,' 'expects,' 'intends,' 'plans,' and 'projects'[15] - These statements are based on the company's expectations and judgments and are subject to risks and uncertainties detailed in the company's filings with the U.S. Securities and Exchange Commission, such as its annual report on Form 10-K[16] - Except as required by applicable law, the company undertakes no obligation to update forward-looking statements due to new information, future events, or otherwise[16]