Name: RGC RESOURCES INC Q2 2025 Earnings Call
Start: 2025-05-08T13:01:00.000Z

Executive Summary

Q2 2025 delivered a clean beat: diluted EPS $0.74 vs consensus $0.68* and operating revenues $36.46M vs consensus $34.00M*, driven by 12% utility margin growth on colder weather and strong industrial usage .
Year-over-year, EPS rose 17% and revenues 11.6%; quarter-over-quarter, EPS improved from $0.51 and revenues from $27.29M, reflecting rate increases effective July 1, 2024 and higher volumes .
Guidance raised: FY2025 EPS range to $1.22–$1.27 (from $1.18–$1.25) amid strong first-half results; management still expects a small Q4 net loss due to seasonality .
Strategic and regulatory catalysts: SCC finalized negotiated rates in April; ongoing dialogue to refinance $26.6M current midstream debt by year-end; MVP operating provides regional energy capacity and economic development tailwinds .

What Went Well and What Went Wrong

Utility margin up 12% on colder January and strong industrial customer utilization; “We had a strong second quarter as utility margin increased 12%...” — CEO Paul Nester .
Delivered volumes: total volumes +20% YoY; residential and commercial up on +21% heating degree days YoY for the quarter .
Regulatory stability: SCC issued final order making permanent negotiated rates from 2024 rate case; revenue increase based on 9.9% ROE and ~59% equity ratio .

Lower MVP equity earnings: $0.80M vs $1.23M YoY as AFUDC rolled off after construction phase completion .
Interest expense elevated: $1.63M vs $1.57M YoY; variable-rate midstream debt remains exposed to rate path until refinancing .
Weather-related project delays: winter slowed Franklin County expansion and shifted some MVP growth capex out of FY2025 .

Metric	Q2 2024	Q1 2025	Q2 2025
Operating Revenues ($USD)	$32.66M	$27.29M	$36.46M
Operating Income ($USD)	$8.63M	$7.33M	$10.40M
Net Income ($USD)	$6.44M	$5.27M	$7.68M
Diluted EPS ($USD)	$0.63	$0.51	$0.74

Margins	Q2 2024	Q1 2025	Q2 2025
Operating Income Margin (%)	26.4% (8.63/32.66)	26.9% (7.33/27.29)	28.5% (10.40/36.46)

P&L Components	Q2 2024	Q1 2025	Q2 2025
Equity in Earnings of Unconsolidated Affiliate ($USD)	$1.23M	$0.85M	$0.80M
Other Income, Net ($USD)	$0.09M	$0.47M	$0.46M
Interest Expense ($USD)	$1.57M	$1.78M	$1.63M

Values retrieved from S&P Global.*

Metric	Period	Previous Guidance	Current Guidance	Change
EPS (Diluted)	FY2025	$1.18–$1.25	$1.22–$1.27	Raised
Net Income Seasonality	Q4 2025	Not explicitly guided	Small net loss expected	New detail
Capex	FY2025	~$21.6M	~$21.8M	Slightly raised/shifted mix
Dividend	Quarterly	$0.2075 declared Mar 28	$0.2075 declared Apr 29	Maintained
Rates (SCC final order)	Effective April 2025	Pending final approval	Final order issued; negotiated rates permanent	Finalized

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
Interest Rates & Debt	Elevated interest expense; floating-rate exposure; potential Fed cuts; refinance planning for fiscal ‘26 tranches	Visibility on $26.6M current midstream debt; intent to refinance by 12/31/2025; consensus expects some rate cuts benefiting variable midstream debt	Incrementally constructive; execution focus
MVP Contribution	FY2024 strength from AFUDC; first cash distribution ~$800k in Oct; ongoing cash flow expectations	MVP earnings $0.80M in Q2; lower vs AFUDC prior year; comparable earnings expected in Q4 as shipper agreements active	Normalizing post-AFUDC
Volumes & Weather	Q4 weather headwinds; Q1 strong volumes +16% and HDDs +10%	Q2 volumes +20% YoY; HDDs +21% YoY; robust residential/commercial demand	Positive
Regulatory & Rates	Settlement pending; 9.9% ROE; 59% equity capital structure; rider approvals	SCC final order issued; negotiated rates permanent; rider updates planned in Q3	De-risked
Capex & Expansion	FY2025 capex plan $21.6M; Franklin County expansion initiated; MVP interconnects	FY2025 capex $21.8M; winter delays push some MVP growth spend out; continued system investments	Stable with timing shifts
Regional Economic Dev.	Growth in medical complex; new services and neighborhoods; Franklin County opportunity	Expansions at Novonesis/Munters; healthcare investments $400M+ facility, $100M cancer center; data center interest given MVP capacity	Strengthening backdrop

“We had a strong second quarter as utility margin increased 12%, enhanced by a colder January and by a large industrial customer who continued strong utilization compared to the same period a year ago.” — CEO Paul Nester .
“We have ended the second quarter with a very strong balance sheet… renewed Roanoke Gas' line of credit for 2 years and raised the maximum availability to $30 million at the end of March.” — CFO Tim Mulvaney .
“With the really strong second quarter… we've raised our 2025 earnings per share guidance to $1.22 on the lower end and to $1.27 on the higher end… we do expect a small net loss in the fourth quarter.” — CEO Paul Nester .
“In 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.” — Company release .

Interest expense trajectory: variable midstream debt should benefit modestly if Fed cuts materialize; Roanoke Gas debt largely fixed; refinance options under evaluation; target to complete by 12/31/2025 .
Southgate AFUDC: Accounting method for Southgate (cost method) precludes recognition similar to MVP; no meaningful AFUDC to expect .
Rate case refunds and WNA: Customer refunds in Q3 expected to be small and “totally offset” by WNA charges in May and June .
Tone: Confident, focused on operational reliability, prudent expense control, and regional growth opportunities; acknowledges macro tariff/interest-rate uncertainty .

Q2 2025 beat: EPS $0.74 vs $0.68* and revenues $36.46M vs $34.00M*; coverage limited (# of estimates: 1 for both) .
Guidance raised to $1.22–$1.27 suggests consensus may need upward revisions for FY2025, particularly if residential/commercial volumes and industrial usage persist .

Values retrieved from S&P Global.*

Seasonal strength plus rate increases delivered a clear Q2 beat; operating income margin expanded to ~28.5%, signaling healthy core utility economics .
Equity earnings from MVP are transitioning to normal run-rate post-AFUDC; expect steadier contribution rather than prior-year elevated AFUDC-driven results .
Regulatory overhang resolved: SCC final order locks in negotiated rates and supports ROE 9.9%/~59% equity capital structure, de-risking FY2025 cash flows .
Debt/refinancing watch: $26.6M current midstream debt targeted for refinance by year-end; any favorable rate moves are upside to interest expense and equity cash flows .
Capex and market development: slight capex uplift to $21.8M with timing shifts; MVP capacity catalyzes regional opportunities (healthcare, data center, industrial) that can sustain customer and volume growth .
Dividend continuity: quarterly dividend maintained at $0.2075; payout aligned with raised EPS guide, supportive for income-oriented holders .
Near-term setup: Q3 includes small refunds offset by WNA; expect typical seasonal moderation into Q4 (management guides to small net loss), but FY EPS range raised on strong first half execution .