Essential Utilities Reports Financial Results for Q2 2021
Essential Utilities reported second-quarter results for 2021, showcasing a net income of $80.9 million, an 8.4% increase from $74.6 million in Q2 2020. Earnings per share rose to $0.32 from $0.29. Revenue increased by 3.3% to $397.0 million driven by higher rates and volumes. The regulated water segment generated $248.2 million, up 6.0%, while the natural gas segment dipped to $141.6 million, a 3.6% decline due to warm weather impacts. The company reaffirmed its full-year earnings guidance of $1.64 to $1.69 per share.
- Net income increased by 8.4% to $80.9 million.
- Earnings per share rose from $0.29 to $0.32.
- Revenue for Q2 2021 was $397.0 million, a 3.3% increase.
- Regulated water segment revenue grew 6.0% to $248.2 million.
- Reaffirmed 2021 earnings guidance of $1.64 to $1.69 per share.
- Regulated natural gas segment revenue decreased by 3.6% to $141.6 million.
- Operations and maintenance expenses for the natural gas segment rose to $52.3 million, a 2.9% increase.
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
Operating Results
Essential reported net income of
Essential’s revenues for the quarter were
Essential’s regulated water segment reported revenues for the quarter of
Essential’s regulated natural gas segment reported revenues for the quarter of
As of June 30, 2021, Essential reported year-to-date net income of
For the first six months of 2021, the company reported revenues of
Dividend
On July 2, 2021, Essential’s board of directors declared a quarterly cash dividend of
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
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
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
Capital expenditures
Essential invested approximately
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
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 t o$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
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 |
|||
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FAQ
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