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RGC RESOURCES INC (RGCO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered modest profitability with revenue of $17.26M and EPS of $0.05, beating S&P Global consensus ($15.0M rev, $0.02 EPS; 1 estimate) as MVP equity income and lower interest expense offset a seasonal “shoulder” quarter and lower WNA revenue . Consensus figures: Revenue $15.0M*, EPS $0.02* (1 estimate*) — both were beats. Actuals: Revenue $17.26M, EPS $0.05 .
  • Management maintained FY2025 EPS guidance at $1.22–$1.27 and flagged a modest Q4 loss given seasonality and rate case timing; full-year capex outlook ~ $22M .
  • Balance sheet and funding visibility improved: Roanoke Gas’ revolver increased to $30M; Midstream secured a firm commitment to refinance ~$53.6M of debt over seven years at SOFR+1.55% with ~$0.711M quarterly amortization, reducing refinancing risk .
  • Operating drivers: volumes +6% YoY on strong industrial usage; gross utility margin +4% YoY as base-rate uplift and SAVE/RNG riders offset lower WNA and higher pipeline capacity pass-throughs; continued robust customer growth and main extensions .
  • Potential near-term stock catalysts: finalized Midstream refinancing, ongoing quarterly MVP cash distributions (~$2.7M over 9M), and maintained full-year EPS guide; near-term headwind is expected seasonal Q4 loss .

What Went Well and What Went Wrong

  • What Went Well

    • MVP contribution and distributions: Equity in earnings rose to $0.77M in Q3 (vs $0.28M LY), and RGCO received ~$2.7M in cash distributions over the first nine months; management expects similar quarterly distributions going forward .
    • Customer growth and system expansion: “Robust residential growth” with 3.9 new main miles (already 50% above FY2024 total) and 541 new services through 6/30; CEO: “MVP has been a successful and meaningful part of delivering value” .
    • Funding visibility and cost control: Revolver renewed/increased to $30M; firm commitment to refinance Midstream debt to SOFR+1.55% with planned fixed-rate swaps and structured amortization (~$0.711M/quarter) .

  • What Went Wrong

    • WNA and seasonality: WNA revenue declined YoY ($0.493M vs $0.821M) as weather was 22% warmer than normal; management expects a modest Q4 loss due to seasonality and prior rate lift timing .
    • Opex inflation and capacity costs: O&M +9% YoY in Q3 on wage/benefit and contracted services inflation; pipeline capacity charges were materially higher (pass-through), reflecting FERC rate increases and MVP capacity .
    • MVP earnings mix: As AFUDC ended in 2024, MVP in-service earnings are lower than prior AFUDC levels on a YoY basis for YTD; management continues to optimize Midstream costs and cash flows .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Operating Revenues ($)$14,458,202 $27,289,486 $36,462,097 $17,264,615
Operating Income ($)$1,557,593 $7,328,021 $10,399,942 $1,196,560
Net Income ($)$156,692 $5,269,689 $7,676,208 $538,412
Diluted EPS ($)$0.02 $0.51 $0.74 $0.05
Equity in Earnings of Unconsolidated Affiliate ($)$282,604 $854,213 $801,175 $772,082
Cash Dividends per Share ($)$0.2000 $0.2075 $0.2075 $0.2075

Vs Estimates (S&P Global consensus and actuals)

MetricQ3 2025 ConsensusQ3 2025 ActualResult
Revenue ($)$15,000,000*$17,264,615 Beat
Primary EPS ($)$0.02*$0.05 Beat
# of Estimates1 (rev)* / 1 (EPS)*—Thin coverage

Segment breakdown (Q3)

SegmentQ3 2024Q3 2025
Gas Utility Revenues ($)$14,431,379 $17,239,550
Gas Utility Operating Income ($)$1,574,375 $1,219,977
Investment in Affiliates Operating Income (Loss) ($)$(37,692) $(43,691)
Equity in Earnings of Unconsolidated Affiliate ($)$282,604 $772,082

KPIs (Q3)

KPIQ3 2024Q3 2025
Delivered Volumes – Res/Comm (Dth)786,221 735,293
Delivered Volumes – Transp/Interruptible (Dth)996,813 1,146,410
Total Delivered Volumes (Dth)1,783,034 1,881,703
Heating Degree Days167 250
Gross Utility Margin ($)$9,086,695 $9,423,369
WNA Revenue ($)$821,145 $492,840
SAVE Plan Margin Contribution ($)$127,073 $426,551
RNG Revenue ($)$393,921 $479,380

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (Diluted)FY2025$1.22–$1.27 (Q2 level) $1.22–$1.27 Maintained
CapexFY2025“Upper $21M, just shy of $22M” ~ $22M Maintained/slightly refined
RNG Rider Revenue RequirementFY2026 (effective 10/1/2025)N/A$1.66M (pending SCC) New filing
SAVE Rider Revenue RequirementFY2026 (effective 10/1/2025)N/A$2.64M (pending SCC) New filing
Dividend per ShareQuarterly$0.2000 (Q3 FY2024) $0.2075 (Q3 FY2025) Raised YoY

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY2025)Current Period (Q3 FY2025)Trend
MVP economicsQ1: MVP equity income $0.854M; AFUDC ended; Q2: $0.801M vs higher AFUDC LY Equity income $0.772M; ~ $2.7M YTD distributions; refinance to SOFR+1.55% with amortization schedule Stable operational earnings; improved funding visibility
Regulatory outcomesQ2: SCC finalized rate case; base-rate increase effective RNG and SAVE Rider updates filed; decisions expected by Sept 2025 Constructive; riders pending
Customer/volume driversQ1/Q2: colder winter; strong large industrial usage; margin +12% in Q2 Volumes +6% YoY; industrial strength; WNA lower; strong residential growth and main extensions Positive demand mix; weather normalization drag
CapexQ2: elevated capex to support growth/reliability FY2025 capex ~ $22M; Franklin County timing shifting more spend to FY2026 Maintained pace; timing shift
Debt/liquidity—Roanoke Gas revolver to $30M; Midstream refi plan reduces maturity risk Improved
Macro costs/Inflation—O&M inflation persists; pipeline capacity charges higher (pass-through) Persistent pressure
Regional development (Google)—Management highlights late-June Google announcement; potential ancillary opportunities Emerging tailwind

Management Commentary

  • CEO Paul Nester (press release): “MVP has been a successful and meaningful part of delivering value and energy for a full year. Roanoke Gas continues to produce strong financial results resulting from prudent system investment and exemplary operational performance.”
  • CFO Tim Mulvaney: “Higher earnings in the current quarter from our share of MVP's normal operations, along with lower interest expense, overcame lower operating income” .
  • CFO on refinancing: “New note to refinance all [Midstream] debt … seven years at SOFR + 1.55 … swap to fixed … begin amortize … about $711,000 per quarter” .
  • CEO on growth: “We continue to experience robust residential growth … 3.9 new main miles … 541 new services through June 30” .
  • CEO on FY outlook: “We’re still keeping the range of earnings per share in the $1.22 to $1.27 range … anticipate a modest net loss in the fourth quarter” .

Q&A Highlights

  • 2026 capital mix and MVP growth: Management expects MVP-related growth capex to be “significantly higher” in FY2026 as Franklin County expansion shifts from FY2025; SAVE spending steady; potential mix shifts due to crew constraints .
  • Google data center and system expansion: Too early for specifics, but company expects to support regional development opportunities directly or indirectly; housing development is robust, aiding new services and main extensions .
  • Penetration and conversions: Active saturation studies and outreach; elevated PJM electricity prices and VCEA dynamics are driving steady-to-strong fuel-switching conversions to gas along existing mains .

Estimates Context

  • Q3 FY2025 results vs S&P Global consensus: Revenue $17.26M vs $15.0M*, EPS $0.05 vs $0.02* — both beats; coverage thin (1 estimate* for each metric) .
  • Forward snapshot (S&P Global): Next quarter (Q4 FY2025) consensus is EPS -$0.05* and revenue $14.0M* (seasonal loss expected), with 1 estimate* each; actuals later printed revenue $14.32M and EPS -$0.02, consistent with seasonality [GetEstimates].
  • Implication: With limited sell-side coverage, estimate dispersion is low; maintained FY guide suggests only modest model adjustments needed near-term .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality beat on light coverage: Q3 revenue and EPS exceeded S&P Global consensus (1 estimate), aided by MVP equity income and lower interest expense despite lower WNA — a constructive print for a shoulder quarter . Values retrieved from S&P Global.*
  • Guidance intact; seasonality ahead: FY EPS guide $1.22–$1.27 reiterated with an expected modest Q4 loss — reduces downside surprise risk into year-end .
  • De-risked Midstream capital structure: Firm refi at SOFR+1.55% with structured amortization materially reduces 2025–2026 maturity overhang; revolver upsized to $30M strengthens liquidity .
  • MVP cash flows tangible: ~$2.7M of YTD distributions with expectations for similar quarterly payments underpin Midstream servicing and enhance capital allocation flexibility .
  • Demand tailwinds: Strong industrial usage, robust residential growth, and potential regional projects (e.g., Google) support medium-term volume and expansion opportunity; watch Franklin County timing into FY2026 .
  • Cost optics: O&M inflation persists and pipeline capacity charges are elevated but largely pass-through; base-rate uplift, SAVE and RNG riders help protect margin .
  • Trading setup: Near-term, maintained guidance and refi clarity are supportive; seasonal Q4 loss is well telegraphed. Medium-term, MVP visibility plus regional growth and regulated mechanisms argue for steady EPS and dividend sustainability .

S&P Global estimates disclaimer: Values marked with * are retrieved from S&P Global.