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    WTRG
    Earnings call· Dec 2025(FY25)

    Essential Utilities FY25 earnings call WTRG

    Feb 26, 2026 Source

    Executive summary

    Essential Utilities FY25 — Strong Earnings Outperformance and Merger Progress

    Essential Utilities reported strong FY25 results, with GAAP EPS of $2.20 exceeding guidance, driven by regulatory recoveries and gas volumes, despite some weather impacts. Shareholder approval for the American Water merger was secured with overwhelming support, and regulatory filings are progressing, with an expected Q1 2027 close. Management reaffirmed its 5% to 7% multi-year EPS growth target through 2027, emphasizing continued capital investment and dividend growth.

    Highlights

    5

    • Delivered 2025 GAAP EPS of $2.20, exceeding guidance range of $2.07 to $2.11.

    • Increased quarterly dividend by 5.25% in July, marking 35 increases in 34 years and 80 consecutive years of payments.

    • Invested a record $1.4 billion in regulated infrastructure in 2025.

    • Completed 3 municipal acquisitions in 2025, adding over 12,700 new customers.

    • Achieved nearly 95% shareholder approval for the American Water merger in record speed.

    Concerns

    3

    • Lower water volumes due to wetter weather led to an $8.6 million offset to revenue growth.

    • Merger-related expenses partially offset non-recurring benefits in 2025 earnings.

    • DELCORA transaction remains stalled by a stay from a Federal bankruptcy court judge related to the city of Chester's bankruptcy.

    Guidance & targets

    4
    CategoryTargetConfidence
    American Water Merger Close
    Q1 2027
    high materiality
    High
    Multi-year EPS Growth Rate
    5% to 7% CAGR
    high materiality
    High
    Payout Ratio
    60% to 65%
    medium materiality
    High
    Regulated Infrastructure Investments
    $1.7 billion
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Water and Wastewater
    The water and wastewater business contributed the majority of the incremental annualized revenue from regulatory recoveries in 2025.
    Incremental Annualized Revenue from Regulatory Recoveries: $92.6 million
    		————
    Gas
    The gas business also contributed to incremental annualized revenue from regulatory recoveries in 2025.
    Incremental Annualized Revenue from Regulatory Recoveries: $8.9 million
    		————

    Operational metrics

    28
    Total Revenue Increase
    $388.5 millionup 18.6% YoY
    FY25

    Total revenue increased from approximately $2.1 billion a year ago to nearly $2.5 billion this year.

    Revenue Increase from Regulatory Recoveries
    $177.6 million
    FY25

    Portion of total revenue increase attributed to regulatory recoveries.

    Revenue Increase from Purchased Gas
    $126.8 millionYoY
    FY25

    Increase due to both higher gas commodity prices and higher gas usage.

    Revenue Increase from Gas Volumes
    $57.2 million
    FY25

    Contribution from air gas volumes.

    Revenue Increase from Customer Growth
    $5.6 million
    FY25

    Contribution to revenue increase from customer growth.

    Revenue Offset from Lower Water Volumes
    $8.6 million
    FY25

    Offset to revenue growth primarily due to wetter weather.

    O&M Expense Increase
    $52.3 millionup 8.9% YoY
    FY25

    Total increase in O&M expenses year-over-year.

    O&M Increase from Employee-Related Costs
    $26.9 million
    FY25

    Main driver of O&M expense increase.

    O&M Increase from Gas Business Universal Services Rider
    $17.5 million
    FY25

    Increase in O&M with an offset in revenues.

    O&M Increase from Water Production Costs
    $8.5 million
    FY25

    Contributing increases in power, purchased water, and chemicals.

    O&M Increase from Newly Acquired Systems
    $1.7 million
    FY25

    Operating expenses related to newly acquired water and wastewater systems.

    EPS Impact from Regulatory Recoveries
    $0.46
    FY25

    Positive impact on EPS from regulatory recoveries.

    EPS Impact from Higher Gas Volumes
    $0.15
    FY25

    Positive impact on EPS from higher gas volumes.

    EPS Impact from Water Growth
    $0.01
    FY25

    Positive impact on EPS from water growth.

    EPS Impact from Lower Water Volume
    $0.02
    FY25

    Negative impact on EPS from lower water volume.

    EPS Impact from Higher Expenses
    $0.09
    FY25

    Negative impact on EPS from higher expenses.

    EPS Impact from Other Items
    $0.48
    FY25

    Offsetting impact from various other items.

    Annualized Revenue from Regulatory Recoveries
    $101.5 million
    FY25

    Total incremental annualized revenue from regulatory recoveries completed in 2025.

    Annualized Revenue from Regulatory Recoveries
    $12.4 million
    YTD 2026

    Incremental annualized revenue from regulatory recoveries completed thus far in 2026 across water, wastewater, and natural gas businesses.

    Requested Annualized Revenue Increase
    $101.9 million
    Ongoing

    Total requested annualized revenue increase filed for regulatory recoveries in the Water and Wastewater segment.

    New Customers from Acquisitions
    12,700
    FY25

    Number of new customers added through three municipal acquisitions in 2025.

    PFAS Advanced Treatment Systems Deployed
    50+
    FY25

    Number of advanced treatment systems deployed as part of the PFAS capital plan.

    Intelis Meter Installations
    100,000
    FY25

    Milestone reached in Intelis meter installations for the natural gas segment.

    Miles of Main Replaced or Retired
    400+
    FY25

    Total miles of main replaced or retired across both water and natural gas businesses.

    Shareholder Vote for American Water Merger
    95%
    Q4 FY25

    Percentage of shares voted in favor of the merger with American Water.

    State Regulatory Filings for American Water Merger
    7
    FY25

    Number of state regulatory filings completed by year-end 2025 for the merger.

    Consecutive Years of Dividend Increases
    35
    As of July 2025

    Number of consecutive years the company has increased its dividend.

    Consecutive Years of Paying Dividends
    80
    As of July 2025

    Number of consecutive years the company has paid dividends.

    Industry KPIs

    4
    MetricValueDetails
    Ffo to debtabove 12%%
    Adjusted operating EPS$2.20USD/share
    Dividend per share growth5.25%%
    CAPEX multi year capital investment plan$450 millionUSD

    Deals & partnerships

    5
    American WaterCombination to create a premier multistate utility

    Shareholder approval secured with nearly 95% of shares voted in favor. Seven state regulatory filings completed by year-end 2025.

    Multiple municipal entitiesAcquisition of water and wastewater systemsapproximately $58 million

    Three municipal acquisitions completed in 2025, showcasing diversity of growth strategy.

    Multiple municipal entitiesAcquisition of water and wastewater systems

    Three signed purchase agreements for systems in Pennsylvania and Texas, expected to close in the first half of 2026.

    Greenville Municipal Water AuthorityAcquisition of water assets

    Aqua Pennsylvania's acquisition of assets approved by the Pennsylvania Public Utility Commission without modification.

    DELCORAAcquisition of water and wastewater systems

    Transaction stalled by a stay put in place by a Federal bankruptcy court judge related to the bankruptcy of the city of Chester. Optimism for movement following Supreme Court ruling on Chester Water Authority.

    Capital programs

    3
    Regulated Infrastructure Investmentcompleted$1.4 billion
    Period spend: $1.4 billion
    Spent to date: $1.4 billion
    Start: FY25

    Benefit: Improved reliability and resiliency

    Record investment in regulated infrastructure for 2025.

    PFAS Capital Planunderway$450 million

    Benefit: Over 50 advanced treatment systems deployed

    Multi-year plan to ensure finished water meets federal maximum contaminant levels for PFAS chemicals.

    Regulated Infrastructure Investmentplanned$1.7 billion
    Period spend: $1.7 billion
    Start: FY26

    Benefit: Improved reliability and resiliency

    Expected regulated infrastructure investments for 2026.

    Risks & headwinds

    4
    Lower water volumes due to weatherFY25

    $8.6 million revenue offset

    Merger-related expensesFY25

    Partially offset non-recurring benefits in 2025 EPS

    DELCORA transaction stalled by legal proceedingsOngoing

    Transaction stalled

    Mitigation: Monitoring receiver's next move, ready to participate in overall solution for City of Chester's bankruptcy.

    Customer affordability concernsOngoing

    Impact on customer bills

    Mitigation: Balancing responsible investments in infrastructure with managing operating costs to support affordability.

    What to watch next

    5

    DELCORA transaction status

    Next quarter
    CurrentStalled by bankruptcy court stay
    TargetMovement on PUC proceeding or negotiation on reversionary assets

    Why it matters

    Resolution of this long-standing acquisition would contribute to customer growth and strategic expansion.

    Hopefully💬, we'll see💬 some movement on DELCORA now that the Supreme Court has ruled, we remain optimistic about the consolidation of Water and Wastewater systems in the United States and look forward to leveraging the combined resources of Essential and American Water to accelerate our business development work.

    Q&A highlights

    5

    Analyst asked for the specific non-GAAP 2025 EPS figure after adjustments, noting the company stated it would be above guidance.

    Management stated they did not specifically quantify the non-GAAP 2025 EPS but confirmed that even after excluding all one-time items (both positive and negative), the financial performance would still have exceeded the guidance range, as projected.

    “No, we didn't specifically, we just gave you kind of the nonrecurring items there, both sort of positive items and then we noted the transaction costs as well. So if you go to that exercise, you can find all those numbers in the Qs and then in the 10-K that will be released later today, you'll see that we still sit favorable to our guidance range really as we projected throughout the course of the year.”

    asked by Paul Zimbardo · answered by Daniel Schuller

    2 min read6 chapters

    Detailed Narrative

    01

    American Water Merger Progress

    Shareholder approval for the American Water merger was secured with nearly 95% of shares voted in favor, described as a record speed for similar transactions. The company completed 7 state regulatory filings by year-end 2025 and anticipates closing the transaction in Q1 2027. Management expressed confidence in constructive regulatory relationships built over the years to facilitate a positive outcome.

    02

    Financial Outperformance and Outlook

    Essential Utilities delivered 2025 GAAP EPS of $2.20, surpassing its guidance range of $2.07 to $2.11. This outperformance was driven by regulatory recoveries and higher gas volumes, with non-recurring📎 benefits partially offset by merger-related expenses. The company reaffirmed its long-term goal of 5% to 7% EPS growth (CAGR) for the 2024 through 2027 period, using the 2024 non-GAAP EPS of $1.97 as the baseline.

    03

    Capital Investment and Customer Growth

    The company invested a record $1.4 billion in regulated infrastructure in 2025, enhancing reliability and resiliency for communities. This investment contributes to rate base growth and supports service quality. Additionally, three municipal acquisitions were completed in 2025, adding over 12,700 new water and wastewater customers, with three more signed purchase agreements expected to close in the first half of 2026.

    04

    Operational Excellence and Sustainability Initiatives

    Operational achievements in 2025 included the deployment of over 50 advanced PFAS treatment systems across Pennsylvania and North Carolina, demonstrating industry leadership in addressing water quality. The natural gas segment installed its 100,000th Intelis meter, and across both segments, over 400 miles of main were replaced or retired. The company was recognized for sustainability for the fifth consecutive year by Newsweek and for climate leadership by USA TODAY.

    05

    Regulatory Activity and Rate Cases

    In 2025, Essential completed regulatory recoveries totaling $101.5 million in incremental annualized revenue, with $92.6 million from water and wastewater and $8.9 million from gas. For 2026, $12.4 million in recoveries have been completed thus far, and the Water and Wastewater segment has filed for an additional $101.9 million in requested annualized revenue increases. Management aims to minimize regulatory lag while considering customer affordability.

    06

    Chester Water Authority and DELCORA Transaction

    The Pennsylvania Supreme Court ruled that the Chester Water Authority is self-owned, impacting the city of Chester's bankruptcy exit strategy by removing a potential asset for sale. This ruling may unblock the DELCORA transaction, which remains stalled by a federal bankruptcy court stay. Essential Utilities expressed readiness to participate in a solution that assists the city of Chester and ensures affordable, quality water for customers.

    AI-generated summary of the company’s earnings call. Not investment advice.