Earns $0.32 earnings per share; reaffirms
annual earnings guidance
Publishes 2020 ESG report
Essential Utilities Inc. (NYSE: WTRG) (“Essential”), today
reported results for the second quarter ended June 30, 2021.
“We delivered strong earnings in the first half of the year
while continuing to provide essential services across our 10-state
footprint,” said Essential Chairman and Chief Executive Officer
Christopher Franklin. “We remain focused on our mission as we
continue to make significant investments in infrastructure and
remain confident in our ability to reaffirm our 2021 earnings
guidance range of $1.64 to $1.69 per share.”
Operating Results
Essential reported net income of $80.9 million for the second
quarter 2021, an 8.4% increase compared to $74.6 million reported
for the same quarter 2020. Earnings per share were $0.32 for the
quarter compared to $0.29 per share for the second quarter 2020.
Rates and surcharges and increased volume in the regulated water
segment were the primary drivers of the increase in earnings.
Essential’s revenues for the quarter were $397.0 million, an
increase of 3.3% compared to $384.5 million in the second quarter
of 2020. Rates and surcharges, increased volume and growth from the
regulated water segment, and higher purchased gas prices were the
largest contributors to the increase in revenues for the quarter.
Operations and maintenance expenses decreased slightly to $127.5
million for the second quarter of 2021 compared to $128.6 million
in the second quarter of 2020.
Essential’s regulated water segment reported revenues for the
quarter of $248.2 million, an increase of 6.0% compared to $234.1
million in the second quarter of 2020. Rates and surcharges,
customer growth, and increased volume were the largest contributors
to the increase in revenues for the period. Operations and
maintenance expenses for Essential’s regulated water segment
increased 1.5% to $77.8 million for the second quarter of 2021
compared to $76.6 million.
Essential’s regulated natural gas segment reported revenues for
the quarter of $141.6 million, a decrease of 3.6% compared to
$146.9 million in the second quarter of 2020. Lower gas volume was
the largest driver in the decrease, resulting from warmer weather
in the early part of the second quarter of 2021 as compared to the
same period of 2020. Operations and maintenance for the same period
for Essential’s regulated natural gas segment increased to $52.3,
or 2.9% from $50.9 million in the second quarter of 2020. Purchased
gas costs were $39.8 million for the quarter as compared to $41.6
million for the same quarter in 2020. The second quarter of 2021
represents the first quarter of comparable results for the
regulated natural gas segment since closing on the Peoples
transaction on March 16, 2020.
As of June 30, 2021, Essential reported year-to-date net income
of $264.6 million or $1.04 per share (GAAP) compared to $126.4
million or $0.50 per share (GAAP) reported through the same period
of 2020. Year-over-year comparisons were impacted by the Peoples
transaction, which closed on March 16, 2020. Results for the first
half of 2021 include the full six months of operating results of
Peoples, which comprises the company’s regulated natural gas
segment. For the first half of 2020, adjusted income and adjusted
income per share (both non-GAAP financial measures) excluded
Peoples-related transaction expenses and included a normalized pro
forma adjustment for the Peoples operating results for the period
Jan. 1, 2020 to March 15, 2020 to provide the basis for a 2020
full-year run rate of operating results. Adjusting for those items,
Essential’s adjusted income in the first six months of 2020 was
$228.3 million (non-GAAP), or $0.90 per share (non-GAAP). When
compared to the adjusted income in the first six months of 2020,
earnings in the first half of 2021 increased 15.9%. Please refer to
the reconciliation of GAAP to non-GAAP financial measures later in
this press release for additional information on Essential’s use of
non-GAAP financial measures as a supplement to its GAAP
results.
For the first six months of 2021, the company reported revenues
of $980.6 million, an increase of 53.2% compared to $640.1 million
in the first half of 2020. Operations and maintenance expenses for
the first half of 2021 were $252.6 million compared to $235.2
million in 2020.
Dividend
On July 2, 2021, Essential’s board of directors declared a
quarterly cash dividend of $0.2682 per share of common stock. This
increase represents a 7% increase to the quarterly dividend rate
and is the company’s 31st increase in the last 30 years. This
dividend will be payable on Sept. 1, 2021 to shareholders of record
on Aug. 13, 2021. Essential has paid a consecutive quarterly cash
dividend for 76 years.
Environmental, Social and Governance
Essential is publishing its 2020 Environmental, Social and
Governance (ESG) report on Aug. 5, 2021. The updated report fully
incorporates the natural gas segment and is aligned with a number
of leading reporting frameworks and principles, including those set
by the Sustainability Accounting Standards Board (SASB), the Task
Force on Climate-related Financial Disclosures (TCFD), the CDP
climate change survey (CDP), and the United Nations Sustainable
Development Goals (UN SDGs).
“We are proud to be able to share our ESG efforts, progress and
commitments with our customers, shareholders, employees and the
communities we serve. We believe this to be among the most
comprehensive and accessible ESG reporting in the utility industry.
The strength of our company is not only measured by our financial
performance, but also by our commitment to environmental
stewardship, sustainable business practices, employee safety,
diversity and inclusion, customer experience and community
engagement,” Franklin added. “These principles are ingrained in our
135-year-old company, and they drive our decision-making when it
comes to our growth and our future.”
Essential’s ESG report is published as an interactive microsite
at ESG.Essential.co.
Financing
In August 2020, Essential announced an offering of 6.7 million
shares of common stock via a forward equity sale agreement. The
company expects to fully settle the transaction on or before Aug.
10, 2021. Assuming full physical settlement at the forward equity
agreement price, the company would receive approximately $300
million in proceeds, which is net of expenses for interest and
dividends during the term of the agreement. The proceeds are
expected to be used to fund general corporate purposes, including
water and wastewater acquisitions in the company’s pipeline.
Water utility acquisition growth
Essential’s continued acquisition growth allows the company to
provide safe and reliable water and wastewater service to an even
larger customer base. On Aug. 2, 2021, Essential Utilities closed
its first fair market value acquisition transaction in Texas. The
Commons Water Supply, Inc. water treatment and distribution system
in Huffman, Texas serves approximately 1,000 customer
connections.
The company currently has seven signed purchase agreements for
additional water and wastewater systems that are expected to serve
approximately 233,000 equivalent retail customers or equivalent
dwelling units and add approximately $458.5 million in rate base in
two of our existing states. This includes the recently signed
agreement to acquire the water system from the Borough of
Shenandoah for $12 million, which serves approximately 3,000
customers in Pennsylvania. Also included is the company’s agreement
to acquire the Delaware County Regional Water Quality Control
Authority (DELCORA) for $276.5 million. DELCORA, a Pennsylvania
sewer authority, serves approximately 198,000 equivalent dwelling
units in the Philadelphia suburbs.
The pipeline of potential water and wastewater municipal
acquisitions the company is actively pursuing represents
approximately 390,000 total customers or equivalent dwelling units.
On average, the company remains on track to annually increase
customers between 2 and 3% through acquisitions and organic
customer growth.
Capital expenditures
Essential invested approximately $404.6 million in the first
half of the year to improve its regulated water and natural gas
infrastructure systems and to enhance its customer service across
its operations. The company remains on track to invest
approximately $1 billion in 2021 to replace and expand its water
and wastewater utility infrastructure and to replace and upgrade
its natural gas utility infrastructure, leading to significant
reductions in methane emissions that occur in aged gas pipes. In
total, infrastructure investments of approximately $3 billion are
expected through 2023 to improve water and natural gas systems and
better serve our customers through improved information technology.
The capital investments made to rehabilitate and expand the
infrastructure of the communities Essential serves are critical to
its mission of safely and reliably delivering Earth’s most
essential resources. The company’s plan to accelerate the
replacement of aged gas pipe at Peoples continues, thereby enabling
significant reduction in methane emissions.
Rate activity
To date in 2021, the company’s regulated water segment received
rate awards or infrastructure surcharges in New Jersey, North
Carolina, Ohio, Pennsylvania, Illinois, Indiana, and Virginia of
$16.7 million. The company currently has a rate proceeding pending
in Ohio for its regulated water segment, which would add an
estimated $8.7 million in incremental revenue. Additionally, the
company’s regulated natural gas segment has received rate awards or
infrastructure surcharges in Pennsylvania and Kentucky totaling an
estimated increase to annualized revenues of $1.3 million. The
company currently has a rate proceeding pending in Kentucky for its
regulated natural gas segment, which would add an estimated $9.1
million in incremental revenue.
Reaffirms 2021 Essential Guidance
Essential continues to monitor the effects of the COVID-19
pandemic on its customers, employees and the business and will
update guidance impacts from the pandemic in the future if needed.
The following is the company’s 2021 full-year guidance:
- Net income per diluted common share of $1.64 to $1.69
- Earnings per share growth CAGR of 5 to 7% for 2020 through
2023
- Regulated water segment infrastructure investments of
approximately $550 million in 2021
- Regulated natural gas segment infrastructure investments of
approximately $450 million in 2021
- Infrastructure investments of approximately $3 billion through
2023 to rehabilitate and strengthen water, wastewater and natural
gas systems
- Regulated water segment rate base compound annual growth rate
of 6 to 7% through 2023
- Regulated natural gas segment rate base compound annual growth
rate of 8 to 10% through 2023
- Average annual regulated water segment customer (or equivalent
dwelling units) growth of between 2 and 3% from acquisitions and
organic customer growth
- Gas customer count stable for 2021
- Reduction of Scope 1 and Scope 2 greenhouse gas emissions by
60% by 2035
- Multiyear plan to increase diverse supplier spend to 15%
- Multiyear plan to achieve 17% employees of color
Essential Utilities does not guarantee future results of any
kind. Guidance is subject to risks and uncertainties, including,
without limitation, those factors outlined in the “Forward Looking
Statements” of this release and the “Risk Factors” section of the
company’s annual and quarterly reports filed with the Securities
and Exchange Commission.
Earnings Call Information
Date: Aug. 5, 2021 Time: 11 a.m. EDT (please dial in by 10:45
a.m.) Webcast and slide presentation link:
https://www.essential.co/events-and-presentations/events-calendar
Replay Dial-in #: 888.203.1112 (U.S.) & +1 719.457.0820
(International) Confirmation code: 6175168
The company’s conference call with financial analysts will take
place Thursday, Aug. 5, 2021 at 11 a.m. Eastern Daylight Time. The
call and presentation will be webcast live so that interested
parties may listen over the internet by logging on to Essential.co
and following the link for Investors. The conference call will be
archived in the Investor Relations section of the company’s website
for 90 days following the call. Additionally, the call will be
recorded and made available for replay at 2 p.m. on Aug. 5, 2021
for 10 business days following the call. To access the audio replay
in the U.S., dial 888-203-1112 (pass code 6175168). International
callers can dial +1 719-457-0820 (pass code 6175168).
About Essential
Essential is one of the largest publicly traded water,
wastewater and natural gas providers in the U.S., serving
approximately 5 million people across 10 states under the Aqua and
Peoples brands. Essential is committed to excellence in proactive
infrastructure investment, regulatory expertise, operational
efficiency and environmental stewardship. The company recognizes
the importance water and natural gas play in everyday life and is
proud to deliver safe, reliable services that contribute to the
quality of life in the communities it serves. For more information,
visit http://www.essential.co.
Forward-looking statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, among others: the guidance range of net income per
diluted common share for the fiscal year ending in 2021; the 3-year
earnings growth from 2021 to 2023; the projected total regulated
water segment customer growth for 2021; the anticipated amount of
capital investment in 2021; the anticipated amount of capital
investment from 2021 through 2023; the reduction of Scope 1 and
Scope 2 greenhouse gas emissions by 60% by 2035; the company’s
ability to increase diverse supplier spend to 15%; the company’s
ability to achieve 17% employees of color; the company’s
anticipated rate base growth from 2021 through 2023; the expected
settlement of the forward equity sale; and, the company’s ability
to accelerate the replacement of aged gas pipes. There are
important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking
statements including: disruptions in the global economy; financial
and workforce impacts from the COVID-19 pandemic; potential
disruptions in the supply chain for raw and finished materials; the
continuation of the company's growth-through-acquisition program;
general economic business conditions; housing and customer growth
trends; unfavorable weather conditions; the success of certain
cost-containment initiatives; changes in regulations or regulatory
treatment; the company’s ability to successfully close municipally
owned systems presently under agreement; and other factors
discussed in our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q, which are filed with the Securities and
Exchange Commission. For more information regarding risks and
uncertainties associated with Essential's business, please refer to
Essential's annual, quarterly and other SEC filings. Essential is
not under any obligation - and expressly disclaims any such
obligation - to update or alter its forward-looking statements
whether as a result of new information, future events or
otherwise.
WTRGF
Essential Utilities, Inc. and Subsidiaries Selected
Operating Data (In thousands, except per share amounts) (Unaudited)
Quarter Ended
Six Months Ended
June
30,
June
30,
2021
2020
2021
2020
Operating revenues
$
397,032
$
384,468
$
980,597
$
640,053
Operations and maintenance expense
$
127,515
$
128,604
$
252,590
$
235,241
Net income
$
80,914
$
74,629
$
264,603
$
126,410
Basic net income per common
share
$
0.32
$
0.29
$
1.04
$
0.52
Diluted net income per common share
$
0.32
$
0.29
$
1.04
$
0.50
Basic average common shares
outstanding
254,769
254,167
254,667
245,144
Diluted average common shares outstanding
255,441
254,434
255,268
254,452
Essential Utilities, Inc. and Subsidiaries
Consolidated Statement of Operations (In thousands, except per
share amounts) (Unaudited)
Quarter Ended Six Months Ended
June 30, June
30,
2021
2020
2021
2020
Operating revenues
$
397,032
$
384,468
$
980,597
$
640,053
Cost & expenses:
Operations and maintenance
127,515
128,604
252,590
235,241
Purchased gas
44,897
43,420
177,050
56,190
Depreciation
72,764
67,925
144,401
113,491
Amortization
1,408
1,967
2,715
2,646
Taxes other than income taxes
21,120
19,433
42,161
35,869
Total
267,704
261,349
618,917
443,437
Operating income
129,328
123,119
361,680
196,616
Other expense (income):
Interest expense
52,036
51,666
102,805
86,788
Interest income
(338
)
(196
)
(725
)
(5,231
)
Allowance for funds used during construction
(4,906
)
(2,230
)
(7,840
)
(5,178
)
Gain on sale of other assets
(223
)
(20
)
(303
)
(125
)
Equity earnings in joint venture
-
(470
)
-
(343
)
Other
(1,941
)
(722
)
(5,412
)
957
Income before income taxes
84,700
75,091
273,155
119,748
Provision for income taxes (benefit)
3,786
462
8,552
(6,662
)
Net income
$
80,914
$
74,629
$
264,603
$
126,410
Net income per common share:
Basic
$
0.32
$
0.29
$
1.04
$
0.52
Diluted
$
0.32
$
0.29
$
1.04
$
0.50
Average common shares
outstanding: Basic
254,769
254,167
254,667
245,144
Diluted
255,441
254,434
255,268
254,452
Essential Utilities, Inc. and Subsidiaries Reconciliation of
GAAP to Non-GAAP Financial Measures (In thousands, except per share
amounts) (Unaudited)
The Company is providing disclosure of the reconciliation of the
non-GAAP financial measures to the most comparable GAAP financial
measures. The Company believes that the non-GAAP financial measures
"adjusted income" and "adjusted income per common share" provide
investors the ability to measure the Company’s financial operating
performance by adjustment, which is more indicative of the
Company’s ongoing performance and is more comparable to measures
reported by other companies. The Company further believes that the
presentation of these non-GAAP financial measures is useful to
investors as a more meaningful way to compare the Company’s
operating performance against its historical financial results.
This reconciliation includes a presentation of the non-GAAP
financial measures “adjusted income” and “adjusted income per
common share” and have been adjusted for the following items:
(1) Transaction-related expenses for the
Company's Peoples acquisition that closed on March 16, 2020, which
consists of costs recorded as operations and maintenance expenses
for the three months ended March 31, 2020 of $25,397, primarily representing
expenses associated with investment banking fees, obtaining
regulatory approvals, legal expenses, and integration planning;
(2) In order to illustrate the full-year 2020
effects of the Peoples acquisition as if this transaction closed on
January 1, 2020, this adjustment includes both the estimated impact
of Peoples Gas pre-tax operating results for the period in 2020
prior to closing from January 1, 2020 to March 15, 2020, as well as
the additional net interest expense expected to have been incurred
for partially funding the estimated purchase price of Peoples;
and
(3) The income tax impact of the non-GAAP
adjustments described above.
These financial measures are measures of the Company’s operating
performance that do not comply with U.S. generally accepted
accounting principles (GAAP), and are thus considered to be
“non-GAAP financial measures” under applicable Securities and
Exchange Commission regulations. These non-GAAP financial measures
are derived from our consolidated financial information, if
available, and is provided to supplement the Company's GAAP
measures, and should not be considered as a substitute for measures
of financial performance prepared in accordance with GAAP.
The following reconciles our GAAP results to the non-GAAP
information we disclose:
Quarter Ended Six Months Ended
June 30, June
30,
2021
2020
2021
2020
Net income (GAAP financial
measure)
$
80,914
$
74,629
$
264,603
$
126,410
Adjustments: (1) Transaction-related
expenses for the Peoples transaction closed March 16, 2020
-
-
-
25,573
(2) Adjustments to provide full-year 2020 run rate of Peoples
operating results, including additional
net interest expense
-
-
-
108,132
(3) Income tax effect of non-GAAP adjustments
-
-
-
(31,803
)
Adjusted income (Non-GAAP financial measure)
$
80,914
$
74,629
$
264,603
$
228,312
Net income per common share
(GAAP financial measure): Basic
$
0.32
$
0.29
$
1.04
$
0.52
Diluted
$
0.32
$
0.29
$
1.04
$
0.50
Adjusted income per common share
(Non-GAAP financial measure): Basic
$
0.32
$
0.29
$
1.04
$
0.93
Diluted
$
0.32
$
0.29
$
1.04
$
0.90
Average common shares
outstanding: Basic
254,769
254,167
254,667
245,144
Diluted
255,441
254,434
255,268
254,452
Essential Utilities, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In thousands of dollars) (Unaudited)
June 30, December 31,
2021
2020
Net property, plant and equipment
$
9,707,363
$
9,512,877
Current assets
304,732
380,220
Regulatory assets and other assets
3,921,897
3,812,180
$
13,933,992
$
13,705,277
Total equity
$
4,836,815
$
4,683,877
Long-term debt, excluding current portion, net of debt issuance
costs
5,648,232
5,507,744
Current portion of long-term debt and loans payable
151,509
162,551
Other current liabilities
317,646
441,322
Deferred credits and other liabilities
2,979,790
2,909,783
$
13,933,992
$
13,705,277
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210804006096/en/
Brian Dingerdissen Essential Utilities Inc. Investor Relations
O: 610.645.1191 BJDingerdissen@Essential.co Erin O’Donnell
Communications and Marketing 412.208.6614 Media@essential.co
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