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NN

Northwest Natural Holding Co (NWN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean beat: adjusted EPS $2.28 vs. $1.69 YoY and GAAP EPS $2.18, with revenue $494.3M; both EPS and revenue exceeded Wall Street consensus (EPS $2.01, revenue $465.0M). Management reaffirmed adjusted FY25 EPS guidance and updated GAAP EPS guidance slightly lower to reflect acquisition-related costs . Consensus figures marked with * (Values retrieved from S&P Global).
  • Strategic momentum: closed SiEnergy in January; signed an agreement to acquire Hughes Gas Resources for $60M with ~6,900 customers and ~353 miles of pipeline; transaction expected to close in Q2 2025 and be accretive in its first full year .
  • Oregon rate case benefits flowed through: Gas Utility margin up $38.7M primarily from the rate case; consolidated net income up $24.1M YoY despite higher depreciation and interest expense; water segment improved on Arizona rate actions and the Puttman acquisition .
  • Guidance intact and balanced: FY25 adjusted EPS $2.75–$2.95 reaffirmed; GAAP EPS nudged to $2.65–$2.85; CapEx $450–$500M; long-term EPS CAGR target 4–6% maintained, positioning NWN for durable growth .
  • Potential stock reaction catalysts: clear beat vs consensus, constructive rate outcomes, accretive Texas bolt-on acquisition, and continued discipline on financing and dividends ($0.49 per share declared for May 15) .

What Went Well and What Went Wrong

What Went Well

  • Oregon rate case tailwinds: NWN Gas Utility margin +$38.7M and net income +$21.5M YoY, driven primarily by new Oregon rates effective Nov. 1, 2024 .
  • Texas growth on-track: SiEnergy delivered $5.5M net income with strong growth; signed the Hughes acquisition, expected accretive in first full year, expanding Texas footprint and backlog .
  • Water segment turnaround: NWN Water net income +$2.4M YoY on new Arizona rates and contributions from the Puttman/ICH assets .
  • Management quote: “We are off to a good start in 2025... SiEnergy integration has gone well, and they have met their growth targets” – Justin B. Palfreyman, CEO .

What Went Wrong

  • Transaction costs weighed on GAAP: $3.9M after-tax acquisition costs recorded in Q1 (Other segment GAAP net loss widened to $(6.4)M; adjusted loss $(2.6)M) .
  • Higher non-cash and financing drag: depreciation and general taxes +$4.8M; higher pension expense and interest expense at Holding Company increased adjusted Other loss .
  • Capital structure leverage increased: long-term debt rose to $2.19B and equity mix at period-end was 38.7% equity vs. 44.5% prior year, highlighting a more levered balance sheet amid growth investments .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Operating Revenues ($USD)$136.934M $370.876M $494.284M
Net Income ($USD)$(27.167)M $45.002M $87.916M
Diluted EPS (GAAP) ($)$(0.71) $1.12 $2.18

Adjusted EPS

MetricQ3 2024Q4 2024Q1 2025
Adjusted EPS ($)N/A$1.41 $2.28

Actual vs Wall Street Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD)$132.467M*$395.051M*$464.972M*
Revenue Actual ($USD)$136.934M $370.876M $494.284M
Primary EPS Consensus Mean ($)$(0.80)*$1.414*$2.01*
Primary EPS Actual ($)$(0.71) $1.12 $2.18 (GAAP) / $2.28 (Adj.)
  • Q1 2025: Revenue and EPS were significant beats vs consensus; Q4 revenue missed but EPS was in line; Q3 beat on both EPS and revenue. Consensus figures marked with * (Values retrieved from S&P Global).

Margins

MetricQ3 2024Q4 2024Q1 2025
Net Income Margin (%)(Net loss $27.167M / Rev $136.934M) = (19.8%) ($45.002M / $370.876M) = 12.1% ($87.916M / $494.284M) = 17.8%

Segment Breakdown (Q1 2025)

SegmentMargin ($USD)Net Income ($USD)Notes
NWN Gas Utility$256.822M $87.166M Margin +$38.7M YoY; driven by Oregon rate case (+$42.6M) partially offset by lower deferral amortizations (-$5.0M)
SiEnergy Gas Utility$13.584M $5.505M Acquired Jan 7; strong growth and results aligned with expectations
NWN Water UtilityN/A$1.688M Income from operations $3.043M; benefits from Arizona rates and Puttman acquisition
OtherN/A$(6.443)M Adjusted net loss $(2.557)M; acquisition costs and higher Holding Co. interest expense

KPIs

KPIQ1 2025
Meters – NWN Gas Utility807,426
Meters – SiEnergy Gas Utility73,077
Meters – NWN Water Utility78,052
Total Meters End of Period958,555
Connections Added (LTM)~84,000; combined growth rate 9.6%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2025$2.66–$2.86 $2.65–$2.85 Lowered (reflects transaction costs)
Adjusted EPSFY 2025$2.75–$2.95 $2.75–$2.95 Maintained
CapExFY 2025$450–$500M $450–$500M Maintained
Long-term EPS Growth2025–20304–6% CAGR 4–6% CAGR reaffirmed Maintained
Segment EPS contributionFY 2025SiEnergy: ~$0.25–$0.30; Water: ~$0.25–$0.30 Reaffirmed ~$0.25–$0.30 each Maintained
DividendQ2 2025$0.49 declared (Feb cycle) $0.49 (payable May 15, record Apr 30) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Oregon rate caseOrder increased revenue req. $93.3M; ROE 9.4%; rate base +$334M; non-cash disallowance on line extension Benefits evident: Gas margin +$38.7M; net income +$21.5M Positive operational tailwind
Texas growth (SiEnergy, Hughes)SiEnergy closed in Jan; double-digit meter growth expected; regulatory strategy (GRIP) under evaluation SiEnergy $5.5M NI; signed $60M Hughes acquisition; expected accretive; ~6,900 customers Scaling platform, accretive bolt-on
Water segmentRate actions across territories; strong pipeline; Arizona order effective Nov. 1 Net income +$2.4M YoY; EPS contribution guided $0.25–$0.30 Improving earnings trajectory
RNG / RenewablesFacilities online; long-term offtake; not dependent on RIN/LCFS Full quarter of steady cash flows and earnings; operations smooth Stable cash/earnings contribution
Tariffs/supply chainMonitoring; financing/CapEx plans detailed No material FY25 impact expected; filed deferral for gas costs if needed Managed risk; neutral
Regional energy reliabilityEmphasis on gas system’s role; Oregon energy mix and peak reliability Gas system delivers “50% more energy” than any other Oregon utility; grid uses more gas for power than LDCs deliver Reinforced narrative, supportive of rate recovery
Financing & liquidityEquity $65–$75M expected in 2025; junior subordinated notes planned $325M junior subordinated debentures issued in March; >$600M liquidity as of Mar 31 Proactive liability management

Management Commentary

  • Strategic positioning: “We are well-positioned to deliver on our 2025 guidance and focused on creating long-term shareholder value.” – Justin B. Palfreyman, CEO .
  • Earnings drivers: “Adjusted net income of $91.8 million or $2.28 per share... reflected new Oregon rates, contributions from SiEnergy and water, and a full quarter of revenues from Renewables.” – Ray Kaszuba, CFO .
  • Texas expansion: “Hughes... is expected to have approximately $46 million of rate base at the end of 2025... a logical bolt-on... expected to be accretive in 2026.” – Justin B. Palfreyman .
  • Risk management: “We have analyzed and are actively monitoring the new tariff regulations... we do not expect a material effect on 2025 financial results from tariffs.” – Ray Kaszuba .

Q&A Highlights

  • Water outlook: Management reiterated ~$0.25–$0.30 EPS contribution from Water in 2025 and a multi-year 10–15% EPS growth outlook for the segment .
  • Hughes customer mix: Primarily residential and commercial; no transmission business; geographic overlap supports synergies .
  • Guidance cadence and confidence: Reaffirmed consolidated adjusted EPS guidance and highlighted seasonality, with most earnings in Q1 and Q4 heating months .

Estimates Context

  • Q1 2025 beats: Revenue $494.3M vs. $465.0M consensus*; EPS $2.18 (GAAP) / $2.28 (Adjusted) vs. $2.01 consensus* – both significant beats. Prior Q4 showed in-line EPS and a revenue miss; Q3 was a beat on both metrics. Consensus figures marked with * (Values retrieved from S&P Global).
  • Implication: Given stronger-than-expected utility margin from Oregon rates and early SiEnergy contribution, sell-side models likely need upward revisions to FY25 revenue/EPS; management’s maintained adjusted EPS range supports stability in estimates .

Key Takeaways for Investors

  • Constructive regulatory outcomes are translating to tangible margin and EPS gains; Oregon rate case benefits should continue supporting FY25 performance .
  • Texas platform is scaling (SiEnergy + Hughes), adding meter growth, backlog, and accretive earnings—expect incremental EPS from these units, consistent with guidance .
  • Water segment is now an earnings contributor with rate actions in core territories; multi-year growth visibility is improving .
  • Balance sheet/liquidity remain adequate post SiEnergy financing; junior subordinated debentures add flexibility while equity needs are modest ($65–$75M in 2025) .
  • Non-GAAP adjustments are confined and transparent; core operating trajectory is intact despite higher depreciation and interest expense .
  • Near-term trading setup: Q1 beats and accretive acquisition news are positive catalysts; watch follow-on estimate revisions and any updates on Oregon rate case execution and Texas regulatory timing .
  • Medium-term thesis: Durable EPS CAGR 4–6% driven by gas rate base growth, Texas expansion, water rate actions, and renewables cash flows—balanced by funding discipline and regulatory execution .

Values retrieved from S&P Global for consensus estimates and EBITDA.