Q2 2025 RGC Resources Inc Earnings Call
Press Pound Pound 1, or Hash Hash 1 to speak.
Speaker Change: Good morning, and thank you for joining us as we discuss RGC Resources 2025 second-quarter
Speaker Change: I am Tommy Oliver, Senior Vice President, Regulatory and External Affairs for RGC Resources Inc. I am joined this morning by Paul Nester, our President and CEO and Tim Mulvaney, our VP, Dressure and Chief Financial Officer.
Speaker Change: Before we get started, I want to review a few administrative items. First, we have needed all lines and asked that all participants remain needed.
Speaker Change: Second, the link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com.
Speaker Change: And lastly, at the conclusion of the presentation and our remarks, we will take questions.
Speaker Change: Let's move to slide one. This presentation contains forecasts and projections. Slide one has information about risks and uncertainties, including court looking statements that should be understood in the context of our public violence.
Speaker Change: For Slide 2, contains our agenda. We will discuss our operational and financial highlights for the second quarter of our 2025 fiscal year. We will then review our outlook for the rest of the 2025 fiscal year with time allotted for questions at the end. [inaudible]
Speaker Change: Turning now to operations on slide three. Main extensions and renewal activity for the first half of fiscal 2025 were strong. We installed 2.7 main miles, which is higher than the total main miles installed in the full 2024 fiscal year. [inaudible]
Speaker Change: We also connected 359 new services in the first six months of the fiscal year as residential development in the region was robust. In addition, we renewed 1.9 miles of Maine and the 159 services during the first half of the 2025 fiscal year.
Speaker Change: While this is down from a year ago, it demonstrates our continued investment in our systems to enhance safety and reliability for our customers.
Slide 4 shows are delivered gas volumes for the core.
Speaker Change: Total volumes were up 20% compared to the second quarter of 2024 as one industrial customer, but the ability to fuel Swiss continue the higher consumption of the natural gas in the current year.
Speaker Change: Residential and commercial volumes rubbed as well through the 21% increase in heating degree days compared to a quarter-two of the fiscal 2024.
Thank you.
Speaker Change: The story of delivered gas volumes was much the same in the first six months of fiscal 2025. Total volumes dropped strongly at 18% compared to the first half of fiscal 2024 due to the same customer.
Speaker Change: That increase was enhanced by residential and commercial volumes with the heating degree days increased sitting at 16% so far this year.
Slide 6
or give you a little regulatory update.
We're in good place after a busy regulatory year.
Speaker Change: An early April , the State Corporation Commission entered its final order in our 2024 rate case, confirming the rates that we have been billing customers since November .
Speaker Change: As a reminder, in this case, we've produced an annual increase in revenue of more than $4 million based on a 9.9% ROE and a 59% equity rate.
Michael Gaugler, Paul Nester, Timothy Mulvaney, Paul Nester, Timothy Mulvaney,
Speaker Change: We will be filing normal rider updates for SAVE and R&G in the third quarter.
Speaker Change: Slide 7 shows our capital expenditures for the first half of fiscal 2025 compared to 2024. Total spending was 10.7 million in the current year down approximately 5% over the same period of year
Speaker Change: Winner Weather early in the quarter affected our spending and has also contributed to a slower than hoped expansion of Franklin County.
Speaker Change: I will now turn the presentation over to our CFO , Tim Mulvaney, to review our financial results for the quarter. Tim?
Thank you, Tommy.
Speaker Change: Moving on to slide 8, we had an outstanding quarter with increased grown-up gas margins due to the rates that went into effect this past July , overcoming lower earnings from our unconsolidated affiliate.
and higher interest expense.
Speaker Change: Net income of $7.7 million or $0.74 per share compared to net income in the same quarter a year ago of $6.4 million or $0.63 per share, a 17% increase.
Thank you.
The year-to-date results are also shown on slide 8.
Speaker Change: The themes for the first half of the year are very similar to the quarter. Our hyaluronic gas margins made up for lower MVP earnings and higher interest expense.
Speaker Change: net income of $12.9 million in the first half of fiscal 25 or $1.26 per share compared to $1.14 per share in the first half of fiscal 24 at 11% increase.
Speaker Change: As a reminder, for the back half of the year, the rates that were finalized went into effect July 1st of 2024, so there will be no corresponding list in the gas margins in the fourth quarter of this year.
Speaker Change: At the same time, the MVP pipeline went into service in June of 2024, and the Shipper Agreements became active on July 1st of 2024.
Speaker Change: As a result, our share of MVP earnings should be comparable in the fourth quarter of this coming gear.
Speaker Change: I'm transitioning now to slide nine. I'd like to make one final comment.
Speaker Change: We have ended the second quarter with a very strong balance sheet.
As we noted in the form, 10Q [inaudible]
Speaker Change: We renewed run-up gases, line of credit for two years and raised the maximum availability to 30 million at the end of March. We do have 26.6 million of midstream debt that is classified as current. This debt supports our investment in MVP.
Speaker Change: MVP made the transition from construction to operation. This is the first of our debt maturity since that has occurred.
Speaker Change: We are considering long-term options that may include additional debt amortization.
Speaker Change: The conversations with our bankers have been positive and productive and we fully expect to refinance this prior to its maturity on December 31st in 2025. We will have more to share on this topic in the future.
Speaker Change: I will now pass the presentation over to our CEO Paul Nester, Paul.
Paul Nester: Thank you, Tim, and good morning everyone. Thank you for taking some time today to join us on our our call
Speaker Change: As you can tell from Tommy's and Tim's comment, we just had an outstanding start to physical 2020
25, and I'd like to make a very no worthy
Speaker Change: mentioned about our customers and our employees. Our customers, Tommy Halle, with the volumes just had an outstanding first six months across all.
Sectors, Residential Commercial and Industrial
Speaker Change: And then I would like to also highlight our employees. Their focus on safety and ensuring our system performance has been exemplary. We did not have a single outage or system disruption this winter. That's something we're very proud of.
Speaker Change: I would also like to highlight that the interstate pipeline is feeding our system also performed magnificently so just incredible reliability through what was a sustained colder weather period in fact I would also like to highlight that the interstate pipeline is feeding our system
Speaker Change: The coldest weather we've seen in this region in a decade.
We're on slide 10.
Speaker Change: I'm going to take a few minutes and talk about some of the things happening in our area related to economic development and growth opportunities for our company.
Speaker Change: We've all been watching and experiencing to some degree the tear for holocaust and the related uncertainty that has occurred thus far in 2025. We do feel that these macro factors have undoubtedly affected.
Business Activity.
Speaker Change: In fact, some of our largest customers are economic, sensitive, which is normal for a utility of course. We have large customers in the building materials sector and in fact the large fuel customer of the time he described is in that sector auto parts and food production.
Again, through March 31st, their volumes have been...
It's fantastic, really, really strong.
Alvo's
Speaker Change: Look, as we go through the remainder of our physical year and the remainder of calendar 2025 certainly is a question. One of the things we've been comparing that to is maybe the 2020 COVID year, the physical year. We had great concerns coming out of the March 2020 government shutdown.
Speaker Change: And as it turned out for our company in particular, where we had the the winter season volumes in the books, so to speak.
Speaker Change: That physical year turned out to be still pretty solid. This may be the same, so if we have some economic uncertainty
Speaker Change: Again, related to those macroeconomic factors in the back half of the year, it's certainly helpful that we're through.
The winter heating season.
Let's move to slide 11.
Speaker Change: and talk about economic development. And we want to focus on some of the regional economic trends that we've seen here recently. And we call some of these winds, particularly the logos that you see on the slide there. These are all recent announcements.
Speaker Change: Um, primarily of expansions in the case of mevinesis, monthers, and integer. Um, and those are companies doing great things with great operations here in the Runaq Valley, who again are expanding their business. So a little bit of a counter to that national macro economic.
Speaker Change: Meredith, I think those three in particular highlight the cooperation between our state, economic development office, our regional, economic development partners, our local government partners, and even the governor's office. I didn't want to highlight the tiny cargo
Speaker Change: It's no fun intended. It is a smaller economic development opportunity at this point.
Speaker Change: But it's noteworthy because it's a spin-out from the Freyland Biomedical Research Institute and it's utilizing some incredible, incredible medical technology that has really an opportunity to revolutionize
Speaker Change: Medicine and Pharmacy, and we're just so happy to have it here in the Renault Valley. It's exciting and more to come there.
Speaker Change: There are some other economic development opportunities that are in various stages of progress. Some of these will represent potentially more direct opportunities for running a gas and natural gas usage.
Speaker Change: but we're happy about all those opportunities because they really do contribute to the vibrancy of this region. We hope to be able to share some news and success from those in the third or fourth quarters.
Speaker Change: In terms of broader trends, as it seemingly is in the press almost on a daily basis now, conversations related to data centers.
Speaker Change: Our view is that this region's access to energy, data lines, and water make it attractive to those who would like to locate a data center.
Potentially Located Data Center.
Speaker Change: Competition for those locations and that infrastructure is fierce, as you probably know, but within VP operational, there's a tremendous amount of energy we've been talking about this frankly for years, even before MVP was completed, up to 2 billion deck of thorns daily.
Speaker Change: That simple fact continues to generate a lot of conversation and interest from a variety of industries and we're actively participating in those conversations.
Speaker Change: Finally, and this is also so important to this region's economy. We continue to enhance the run of the area through its three major hospital systems, continues to enhance its ability to serve the wider region's healthcare needs.
Speaker Change: Our local hospital system downtown will be bringing on a $400 million plus expansion very very soon in fact in just a few days or in the next few weeks.
Speaker Change: and that same system broke ground on a much needed new state of the art cancer center just a few days ago that's going to be approximately a hundred million dollar investment as well. It's very exciting.
Speaker Change: Our other healthcare providers and businesses, again, are locating and expanding their presence in the region as well.
Speaker Change: And our view again on this is that these customers of the Renault gas company benefit from the reliability and economics of natural gas.
for that.
Speaker Change: and again our distribution system just continues to to be there to meet the needs of this growing customer base. Moving to slide 12.
Speaker Change: and looking at our four-year capital spending projection of $21.8 million that's up slightly from what we shared with you last quarter.
Speaker Change: We have reallocated the mix a little bit from what we presented last quarter. Again, totally you're spending is Just up a little bit the mountain valley. We're going to see you in the next video.
Speaker Change: Growth Category is a little delayed mostly because of the winter weather and the focus on
our company and our efforts to make sure we delivered.
Speaker Change: gas every customer every day during the winter and a little bit of timing down in the Franklin County area there but we're still still have the same expectations if you will long term to some of that money's moving out of this physical year.
Speaker Change: Moving to slide 13 with the really strong second quarter that Tommy and Tim highlighted. We've raised our 20, 25 share guidance to $1.22 on the lower end and to $1.27 on the higher end.
Speaker Change: We do expect a small net loss in the fourth quarter as more of our revenues and earnings are tied to the wetest sensitive volumes of the first and second.
Hoarders
Speaker Change: I want to thank our employees for just an outstanding job of working safely and diligently across the sustained cold weather this winter. We're really encouraged by the recent economic development success.
Speaker Change: and the potential for more success in the coming days this year in this run of region.
and we continue again just to be engaged with you.
Speaker Change: and focus to participate in that growth to the benefit of our shareholders.
Speaker Change: So again, thank you, the shareholder for your continued interest and support in RGC Resources
Speaker Change: So that concludes our prepared remarks. If you have any questions, please dial pound pound one to unmute your line pound pound one to unmute your line.
Good morning, everyone.
Mike, good morning. How are you today?
Doing well yourself, sir?
We're doing just fine. Thank you.
Speaker Change: I've got a couple of questions for you this morning. I thought we'd start on interest expense. I saw that dropped quarter of a quarter and Tim mentions, you know, you're gonna be doing some refinancing this here.
some wondering now with
Speaker Change: Where rates are today, MVP operational, should we expect interest expense to continue to decline quarter-over-quarter, or is there something in there that may be I'm not
You know, I missed him.
Speaker Change: I would love to know what interest expense was going to be for certain. And in particular, what was going to happen with interest rights. If you think back to the beginning of the year,
Speaker Change: The general consensus was the Fed was going to drop interest rates four to six times.
Speaker Change: It will not move either way, but the debt that supports midstream is subject to variable and so in the short term I expect will will benefit a little bit the longer term and the refinance you know it really depends on how does the economy.
Speaker Change: At and so I I don't really have a good prognostication there.
Speaker Change: A second question Southeak.
Speaker Change: Well, we see any a F U D C for that next year, that's meaningful yeah, I can start with that in Tim can chime in like so where were a smaller by percentage owner in South gate.
Speaker Change: And think back in 2018, it's been quite some time, we actually have the the cost method of accounting in that investment there and that cost method precludes us from from recognizing any a F UDC related to.
Speaker Change: Two southgate.
Speaker Change: Okay.
Speaker Change:
Speaker Change: [noise] customer refunds in three Q associated with the rate case, well those basically be offset by the W. N. A adjustment like they will be totally offset by it given the length of time effect.
Speaker Change: Also starting in May and that'll be billed ever two months WNA may and June.
Speaker Change: Got it alright, gentlemen, that's really all I had congrats on the quarter I I think we all kind of expected that though.
Speaker Change: Well. Thank you appreciate that Mike Yeah, we're the cooler weather again, it's it's a very real force in our business and it. It obviously is demonstrating itself there in the year to day results and the quarter and year today results.
Speaker Change: Alright look forward to seeing you all at a G. A yes sir.
Speaker Change: [noise] anyone else have a question pound pound one to Unmutual line.
Speaker Change: Any other questions at this time, we'll hang on for just a few more seconds on that.
Speaker Change: Okay, well, if there's no more questions. This does conclude the second quarter earnings call. Thank you for joining us and we certainly look forward to seeing some of you as Mike mentioned at the a G. A financial forum here in just a couple of weeks.
Speaker Change: And for everyone else, we look forward to speaking with you in August as we'll review our 2025 third quarter results. Thank you.