Unitil Q1 2025 Earnings Report

Unitil EPS Results

• Actual EPS: $1.74
• Consensus EPS: $1.78
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: N/A

Unitil Revenue Results

• Actual Revenue: $207.00 million
• Expected Revenue: $193.03 million
• Beat/Miss: Beat by +$13.97 million
• YoY Revenue Growth: N/A

Unitil Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 2:00PM ET

Unitil (NYSE:UTL), a public utility holding company, engages in the distribution of electricity and natural gas. It operates through two segments, Utility Electric Operations, Utility Gas Operations. The company distributes electricity in the southeastern seacoast and state capital regions of New Hampshire, and the greater Fitchburg area of north central Massachusetts; and distributes natural gas in southeastern New Hampshire and portions of southern and central Maine, including the city of Portland and the Lewiston-Auburn area, as well as electricity and natural gas in the greater Fitchburg area of north central Massachusetts. It also operates 86 miles of interstate underground natural gas transmission pipeline that provides interstate natural gas pipeline access and transportation services primarily in Maine and New Hampshire. In addition, the company provides real estate management services. It serves approximately 108,100 electric customers and 87,500 natural gas customers. Unitil Corporation was incorporated in 1984 and is headquartered in Hampton, New Hampshire.

Unitil Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, Unitil reported adjusted net income of $28.4 million and adjusted EPS of $1.74, up $0.05 from the same period last year.
• Unitil completed the Bangor Natural Gas acquisition and announced deals to acquire Maine Natural Gas plus three water utilities, adding roughly 38,000 customers and expanding its regulated operations.
• The company reaffirmed its long-term guidance, expecting 5–7% annual earnings growth (toward the upper end) and approximately 10% rate base growth through 2029 driven by these acquisitions.
• Unitil filed a New Hampshire electric rate case seeking an $18.5 million revenue increase with a proposed 10.5% ROE and temporary rates effective July 1, 2025.
• Management highlighted a strong balance sheet and investment-grade credit metrics, noting that debt-funded acquisitions would remain well above downgrade thresholds.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the First Quarter twenty twenty five Unitil Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Golding, Vice President of Finance and Regulatory. Please go ahead.

[Christopher Goulding, Vice President of Finance and Regulatory at Unitil]

Good afternoon, and thank you for joining us to discuss Unitil Corporation's first quarter twenty twenty five financial results. Speaking on the call today will be Tom Meissner, Chairman and Chief Executive Officer and Dan Herstack, Senior Vice President, Chief Financial Officer and Treasurer. Also with us today are Bob Havert, President and Chief Administrative Officer and Todd Diggins, Chief Accounting Officer and Controller. We will discuss financial and other information on this call. As we mentioned in the press release announcing today's call, we have posted information, including a presentation, to the Investors section of our website at unitil.com.

[Christopher Goulding, Vice President of Finance and Regulatory at Unitil]

We will refer to that information during this call. Moving to Slide two. The comments made today about future operating results or events are forward looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements inherently involve risks and uncertainties that can cause actual results to differ materially from those predicted. Statements made on this call should be considered together with cautionary statements and other information contained in our most recent annual report on Form 10 ks and other documents we have filed with or furnished to the Securities and Exchange Commission.

[Christopher Goulding, Vice President of Finance and Regulatory at Unitil]

Forward looking statements speak only as of today, and we assume no obligation to update them. This presentation contains non GAAP financial measures. The accompanying supplemental information more fully describes these non GAAP financial measures and includes a reconciliation to the nearest GAAP financial measures. The company believes these non GAAP financial measures are useful in evaluating its performance. With that, I will now turn the call over to the Chairman and CEO, Tom Eisner.

[Tom Meissner, Chairman, President & CEO at Unitil]

Thank you, Chris, and good afternoon, everyone. Thanks for joining us today. I'm going to begin on Slide three, where today we announced adjusted net income, excluding acquisition related costs, of $28,400,000 and adjusted earnings per share of $1.74 for the first quarter of twenty twenty five. This is an increase of $1,200,000 or $05 per share compared to the first quarter of twenty twenty four. This is an exciting time for our company as we recently completed the acquisition of Bangor Natural Gas and recently announced agreements to acquire Maine Natural Gas as well as three water utilities, Aquarian Water of Massachusetts, Aquarian Water of New Hampshire, and Abenaki Water of New Hampshire.

[Tom Meissner, Chairman, President & CEO at Unitil]

These acquisitions provide a great opportunity to expand our regulated operations in states where we currently operate and support our long term rate base and earnings growth. We're very excited by these opportunities and believe our focus on delivering high quality, affordable service will benefit the customers and the community served. I'll provide additional information about these acquisitions shortly. Lastly, I'm pleased to announce that we are reaffirming our long term guidance for earnings growth, dividend growth and rate base growth. In addition, over the next five years, we expect the recently announced acquisitions to support earnings growth toward the upper end of the 5% to 7% range.

[Tom Meissner, Chairman, President & CEO at Unitil]

Moving now to Slide four. I'd like to start by saying that both Bangor Natural Gas and Maine Natural Gas are a perfect complement to our existing operations in Maine. We closed Bangor Natural Gas on January 31 and announced Maine Natural Gas on April 1. We're purchasing both companies at attractive multiples and view the additions as a cost effective way to expand our service areas. We will be adding about 15,000 customers in some of the most attractive areas of the state where there is strong customer growth of 4% to 5%.

[Tom Meissner, Chairman, President & CEO at Unitil]

The distribution systems are relatively new and the proximity to our existing operations provide opportunities for operational synergies. Future growth prospects are strong, and we believe the low penetration of natural gas in the state will drive continued conversions in the years ahead. Notably, Maine has the highest reliance on oil of any state in the nation, and converting to natural gas offers an alternative that is both cleaner and more affordable. In the coming years, we anticipate updating distribution rates to better reflect the current cost of service, after which we expect these acquisitions to be accretive to our long term outlook. Turning now to Slide five.

[Tom Meissner, Chairman, President & CEO at Unitil]

Yesterday, we executed a purchase agreement to acquire three Massachusetts and New Hampshire subsidiaries of the Aquarian Water Company for $100,000,000 including the assumption of approximately $30,000,000 of debt and subject to customary closing adjustments. The Aquarian Water Company is a water supply and wastewater treatment company formed in 1857 that operates five subsidiaries throughout the New Hampshire, Massachusetts, and Connecticut areas. The agreement will be structured as a back to back transaction with the Aquarian Water Authority, a newly created quasi public political division of the state of Connecticut that is purchasing the Aquarian Water Company from Eversource and will subsequently sell the New Hampshire, Massachusetts subsidiaries to Unitil. In conjunction with the purchase agreement, we have negotiated an operating agreement with the Aquarian Water Authority to provide centralized services for initial term of five years. The transaction is subject to regulatory approvals in Connecticut, Massachusetts, New Hampshire, and Maine, and is expected to close in late twenty twenty five.

[Tom Meissner, Chairman, President & CEO at Unitil]

Turning to slide six, I'd like to provide a brief overview of the rationale behind the Aquarion transaction, which ultimately boils down to the criteria we look for in an acquisition: high quality assets, proximity to our existing operations, expected long term earnings accretion, future growth opportunities, and a constructive regulatory environment. Aquarion matches all those criteria and provides an attractive first entry into water distribution. Water utilities provide a critical resource, have favorable ESG characteristics and highly predictable returns. Massachusetts and New Hampshire are regulatory jurisdictions that we know well and where we enjoy strong relationships. There is also precedent for accelerated cost recovery in both jurisdictions, and we will look to continue those rate structures.

[Tom Meissner, Chairman, President & CEO at Unitil]

The transaction includes $78,000,000 of rate base as of 12/31/2024, adds 23,000 customers and provides opportunities for further consolidation of municipal water systems in The States where we currently operate. Most community water systems are municipally owned and have become increasingly capital intensive due to aging infrastructure in new water quality standards. Our strong reputation, operational capabilities, and financial strength put us in a strong position to capitalize on future opportunities. We look forward to providing additional details about this transaction on future calls. Turning now to slide seven.

[Tom Meissner, Chairman, President & CEO at Unitil]

As I mentioned earlier, we expect rate base growth to accelerate to about 10% annually through 2029 due to these acquisitions. We also expect the acquisitions to support earnings growth near the top end of our guidance range over the next five years. Collectively, the acquisitions will be earnings neutral in the short run, but are expected to become earnings accretive over the long run. Turning to Slide eight, our balance sheet strength remains a top priority, and we believe it greatly enhances our ability to effectively finance the company's core operations as well as acquisitions. The flexibility provided by our strong credit metrics and our ability to generate low risk cash flows is significant.

[Tom Meissner, Chairman, President & CEO at Unitil]

We have ample liquidity through our revolver and the S and P rating agency recently noted that even if both Bangor Natural Gas and Maine Natural Gas are funded entirely with debt, the company's credit metrics are still above the downgrade thresholds and well within the investment grade rating category. We will continue to effectively manage risk and expect our FFO to debt and other credit metrics to remain above our peers and above our downgrade thresholds. With that, I'll now pass it over to Dan, who will provide greater detail on our first quarter financial results.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Thank you, Tom. Good afternoon, everyone. I'll begin on Slide nine. As Tom mentioned, we announced first quarter adjusted net income of $28,400,000 and adjusted earnings per share of $1.74 representing an increase of $1,200,000 or $05 per share compared to the same period in the prior year. Our first quarter twenty twenty five results were consistent with the quarterly earnings distribution chart provided during our previous earnings call in February.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Moving to Slide 10, I will discuss our electric adjusted gross margin. For the three months ended 03/31/2025, electric adjusted gross margin was $27,500,000 an increase of $400,000 or 1.5% compared to the same period in 2024. The increase in electric adjusted gross margin reflects higher distribution rates and customer growth. The company added approximately nine seventy electric customers compared to the first quarter of twenty twenty four. And as noted during prior calls, electric distribution revenues are substantially decoupled, which eliminates the dependency of distribution revenue on the volume of electricity sales.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Turning to Slide 11, I will discuss our gas adjusted gross margin. For the three months ended 03/31/2025, gas adjusted gross margin was $70,900,000 an increase of $9,900,000 or approximately 16.2% compared to the same period in 2024. The increase in gas adjusted gross margin reflects higher distribution rates and customer growth as well as a return to normal winter weather in 2025. The company added approximately 9,230 new gas customers compared to the same period in 2024, including 8,730 customers from the Banger acquisition, which closed at the January. Approximately 55% of the company's gas customers are under decoupled rates and we estimate the decoupling supported gas margin by approximately $02 per share in the first quarter.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Looking at existing operations, excluding the Bangor acquisition, gas adjusted gross margin was $68,000,000 an increase of $7,000,000 or 10.2% compared to the first quarter of twenty twenty four. Moving to Slide 12, we provide an earnings bridge comparing twenty twenty five first quarter results to the same period in 2024. As I just discussed, adjusted gross margin for the first quarter increased by $10,300,000 primarily driven by higher distribution rates, customer growth and colder winter weather. Operation and maintenance expenses increased $4,400,000 reflecting higher utility operating costs, higher labor costs and higher professional fees. This increase includes $700,000 related to Bangor Natural Gas operating expenses and $1,200,000 of transaction costs, which are excluded from adjusted net income.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

In addition, certain transmission expenses were higher in 2025 based on approved formula rates in our Fitchburg service area. Depreciation and amortization expense increased by $3,700,000 reflecting higher depreciation rates from the most recent Fitchburg gas rate case, higher levels of utility plant service higher amortization of storm costs and other deferred costs. Taxes other than income taxes increased by $200,000 primarily due to amounts related to Bangor natural gas. Interest expense increased $1,800,000 primarily reflecting higher levels of long term debt and higher interest expense on regulatory liabilities, partially offset by lower interest expense on short term borrowings. Other expense decreased by $200,000 reflecting lower retirement benefit costs.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Lastly, income taxes increased $100,000 reflecting higher pretax earnings in 2025. Turning to Slide 13, we recently filed a distribution rate case with the New Hampshire Public Utilities Commission for Unitil Energy Systems, our New Hampshire electric utility, which includes a proposed revenue requirement increase of $18,500,000 This rate case includes pro form a rate base of $289,000,000 as of 12/31/2024, an equity layer of 52.67 percent and a return on equity of 10.5%. We are requesting a temporary rate increase of $7,800,000 subject to commission approval and expect the approved temporary rate increase will take effect on 07/01/2025. Permanent rates are expected to take effect 05/01/2026 and will be subject to recoupment or refund based on the final order. In New Hampshire, permanent rate case awards are reconciled back to the effective date of the temporary rate award.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

Similar to previous New Hampshire rate cases, we have proposed a multi year rate plan to provide for timely cost recovery of 2025 and 2026 capital investments. These investments support the advanced energy grid, as well as the continued safety and reliability of our system. We look forward to working with all stakeholders throughout this proceeding and we'll provide additional information on future earnings calls. Moving to Slide 14, as noted during our previous earnings call, our current five year capital budget now totals approximately $1,000,000,000 and is 46% higher than the prior five years. This capital budget represents our investment plan for existing operations and does not incorporate investment growth from our acquisitions.

[Daniel Hurstak, Senior VP, CFO & Treasurer at Unitil]

We expect the acquisition of Bangor Natural Gas and the recently announced transactions involving Maine Natural Gas and the acquiring companies will result in total capital spending above this plan over the next five years. Turning to Slide 15, we are reaffirming our 2025 earnings guidance, which we expect to be in the range of $3.01 to $3.17 per share. Given our expectations that the Maine Natural Gas and Aquarium Companies transactions will close in late twenty twenty five, we do not expect those transactions will have a significant effect on our 2025 results. I will now turn the call back over to Tom.

[Tom Meissner, Chairman, President & CEO at Unitil]

Thanks, Dan. Ending now on Slide 16. We had a strong and busy start to the year, and we are very pleased with our operating and financial performance. Our core businesses are performing well, and we are actively carrying out our strategic initiatives and pursuing growth opportunities. The company is heading in a great direction, and we strongly believe we are in a better position than ever before to provide long term sustainable value.

[Tom Meissner, Chairman, President & CEO at Unitil]

With that, I'll pass the call back to Chris.

[Christopher Goulding, Vice President of Finance and Regulatory at Unitil]

Thanks, Tom. That wraps up

[Christopher Goulding, Vice President of Finance and Regulatory at Unitil]

the prepared material for this call. Thank you for attending. I will now turn the call over to the operator who will coordinate questions.

Participants

Executives

• Christopher Goulding, Vice President of Finance and Regulatory
• Tom Meissner, Chairman, President & CEO
• Daniel Hurstak, Senior VP, CFO & Treasurer