RGC Resources, Inc. Reports First Quarter Earnings

Rhea-AI Summary

RGC Resources (RGCO) reported Q1 FY2025 earnings of $5,269,689 ($0.51 per share), up from $5,019,992 ($0.50 per share) in Q1 FY2024. The increase was driven by new base rates effective July 1, 2024, and colder December weather. Operating revenues rose to $27.3M from $24.4M year-over-year.

The company's equity earnings from MVP investment decreased to $854,213 from $1,467,835 in the previous year, as the pipeline transitioned from construction to operation phase. Operating income improved to $7.3M from $6.7M, despite higher interest expenses. The company continued investing in utility infrastructure to enhance system reliability and expand customer reach.

Positive

• Net income increased 5% YoY to $5.27M
• Operating revenues grew 11.8% YoY to $27.3M
• Operating income improved 10.2% to $7.3M
• Quarterly dividend increased to $0.2075 from $0.2000

Negative

• Equity earnings from MVP decreased 41.8% YoY to $854,213
• Interest expense increased 8.8% YoY to $1.78M

Insights

Financial Analyst

RGC Resources' Q1 FY2025 results reveal a complex financial picture with several key dynamics at play. The 5% net income growth to $5.27M demonstrates resilient performance, but the underlying drivers warrant careful analysis.

The transition of MVP from construction to operational phase has significantly impacted equity earnings, dropping from $1.47M to $854K. This 41.8% decrease reflects the shift from AFUDC earnings during construction to actual operational returns. While this decline was expected, it represents a fundamental change in earnings quality - from construction-period accounting benefits to actual operational cash flows.

The company's infrastructure investment strategy continues to expand, with utility property increasing by 6.1% YoY to $265.54M. This growth in rate base, combined with the new rates effective July 2024, positions the company for sustained margin improvements. However, this expansion has led to increased leverage, with long-term debt rising to $111.34M, up 8.7% YoY.

The rising interest expense (8.8% increase to $1.78M) reflects both the expanded debt position and higher rates. With a debt-to-equity ratio of approximately 1:1, the company maintains a balanced capital structure, though interest coverage metrics bear monitoring given the rising cost of debt.

Looking ahead, the strong customer usage patterns, particularly from large transportation customers, combined with the rate base growth, suggest potential for continued margin expansion. However, this must be weighed against the higher financing costs and the stabilization of MVP-related earnings at lower levels.

ROANOKE, Va., Feb. 10, 2025 (GLOBE NEWSWIRE) -- RGC Resources, Inc. (Nasdaq: RGCO) announced consolidated Company earnings of $5,269,689, or $0.51 per share, for the first quarter ended December 31, 2024, compared to $5,019,992, or $0.50 per share, for the fiscal quarter ended December 31, 2023. Higher utility margin reflected the new base rates that went into effect July 1, 2024 and was offset by lower equity earnings from unconsolidated affiliate and higher interest expense.

Roanoke Gas continued investing in utility infrastructure to enhance system reliability and deliver gas to new customers, driving both higher margins and earnings. CEO Paul Nester stated, “Colder weather in December and strong usage by our largest transportation customer also contributed to a higher quarterly performance. The Company’s equity earnings from its investment in the MVP were $854,213 in the first quarter ended December 31, 2024, as the pipeline is in operation, compared to $1,467,835 in the first quarter ended December 31, 2023, which corresponded to the Company’s share of Allowance for Funds Used During Construction (AFUDC) during the construction phase.”

RGC Resources, Inc. provides energy and related products and services to customers in Virginia through its operating subsidiaries Roanoke Gas Company and RGC Midstream, LLC.

Utility margin is a non-GAAP measure defined as utility revenues less cost of gas. Management considers this non-GAAP measure to provide useful information to both management and investors for purpose of such comparability and in evaluating operating performance, but it should be considered in addition to results prepared in accordance with GAAP and should not be considered a substitute for, or superior to, GAAP results.

The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from any expectations expressed in the Company’s forward-looking statements, regarding inflation, customer growth, infrastructure investment and margins. These risks and uncertainties include gas prices and supply, geopolitical considerations, MVP operation, along with risks included under Item 1-A in the Company’s fiscal 2024 Form 10-K. Forward-looking statements reflect the Company’s current expectations only as of the date they are made. The Company assumes no duty to update these statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations.

Past performance is not necessarily a predictor of future results.

Summary financial statements for the first quarter are as follows:

RGC Resources, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited)
	Three Months Ended December 31,
	2024			2023
Operating revenues	$	27,289,486		$	24,419,352
Operating expenses		19,961,465			17,767,315
Operating income		7,328,021			6,652,037
Equity in earnings of unconsolidated affiliate		854,213			1,467,835
Other income, net		473,336			120,786
Interest expense		1,779,930			1,636,273
Income before income taxes		6,875,640			6,604,385
Income tax expense		1,605,951			1,584,393
Net income	$	5,269,689		$	5,019,992
Net earnings per share of common stock:
Basic	$	0.51		$	0.50
Diluted	$	0.51		$	0.50
Cash dividends per common share	$	0.2075		$	0.2000
Weighted average number of common shares outstanding:
Basic		10,259,717			10,029,243
Diluted		10,263,997			10,031,354
Condensed Consolidated Balance Sheets (Unaudited)
	December 31,
Assets	2024			2023
Current assets	$	35,920,737		$	34,769,875
Utility property, net		265,540,721			250,343,833
Other non-current assets		33,711,014			29,589,527
Total Assets	$	335,172,472		$	314,703,235
Liabilities and Stockholders' Equity
Current liabilities	$	64,324,575		$	64,196,722
Long-term debt, net		111,336,132			102,461,196
Deferred credits and other non-current liabilities		47,750,676			44,500,714
Total Liabilities		223,411,383			211,158,632
Stockholders' Equity		111,761,089			103,544,603
Total Liabilities and Stockholders' Equity	$	335,172,472		$	314,703,235

Contact:	Timothy J. Mulvaney
	Vice President, Treasurer and CFO
Telephone:	(540) 777-3997

FAQ

What was RGCO's earnings per share for Q1 2025?

RGCO reported earnings of $0.51 per share for Q1 FY2025, compared to $0.50 per share in Q1 FY2024.

How much did RGCO's operating revenues increase in Q1 2025?

Operating revenues increased to $27,289,486 in Q1 2025 from $24,419,352 in Q1 2024, representing an 11.8% increase.

What caused the decrease in RGCO's MVP equity earnings in Q1 2025?

The decrease in MVP equity earnings from $1,467,835 to $854,213 was due to the transition from construction phase (AFUDC earnings) to operational phase.

What is RGCO's current quarterly dividend payment?

RGCO's quarterly dividend payment is $0.2075 per share, increased from $0.2000 in the previous year.

What factors drove RGCO's Q1 2025 performance?

RGCO's Q1 2025 performance was driven by new base rates effective July 1, 2024, colder December weather, and strong usage by their largest transportation customer.