Unitil's Q3 2025 Call: Contradictions Emerge on Rate Base, M&A, CapEx, and Dividend Strategy

Date of Call: None provided

Financials Results

• EPS: Adjusted EPS: $0.03 for Q3 2025, up $0.01 YOY; adjusted EPS for first 9 months 2025: $2.03, up $0.03 YOY
• Gross Margin: Electric adjusted gross margin (9 months): $86.4M, up $4.7M or 5.8% YOY; Gas adjusted gross margin (9 months): $134.7M, up $19.1M or ~16.5% YOY (excluding Bangor: $127.3M, up $11.7M or 10.1% YOY)

Guidance:

• Reaffirming 2025 adjusted earnings guidance of $3.01 to $3.17 per share (midpoint $3.09).
• Expect acquisitions to accelerate rate base ~10% annually through 2029 and support long-term earnings growth in the upper half of the 5%–7% target range.
• Permanent rates for NH rate case expected Q2 next year; plan to file distribution rate cases for Bangor (early 2027) and Maine Natural Gas (mid-2027).
• 5-year capital plan now ~$1.1B (19% above prior plan).

Business Commentary:

• Earnings Growth and Acquisitions:
• Unitil Corporation reported adjusted net income of $0.4 million and adjusted earnings per share of $0.03 for Q3 2025, up $0.01 per share compared to Q3 2024.

• The growth was driven by successful acquisitions, including Bangor Natural Gas and Maine Natural Gas, which contributed to a strong balance sheet and improved credit metrics.

• Gas Customer Growth and Revenue Increase:

• The company added approximately 9,400 new gas customers compared to the same period in 2024, including approximately 8,800 customers from Bangor Natural Gas acquisition.

• This led to an increase in gas adjusted gross margin by $19.1 million (16.5%) for the 9 months ended September 30, 2025, due to customer growth and colder winter weather.

• Capital Expenditures and Rate Base Growth:

• Unitil's capital spending for the year is consistent with expectations, contributing to a $1.4 billion total rate base forecast for 2025.

• The increase reflects additional rate base from acquisitions and projects expected to be placed in service by the end of the year.

• Sustainability Initiatives and Emissions Reduction:

• Unitil remains on track to reduce company-wide direct greenhouse gas emissions by 50% by 2030 and achieve net-zero emissions by 2050.
• The company has implemented operational initiatives, such as leveraging fleet data to improve efficiency and reduce emissions, contributing to its sustainability goals.

Sentiment Analysis:

Overall Tone: Positive

• Management reaffirmed guidance, reported successful integration of Bangor Natural Gas and closing of Maine Natural Gas, completed a $72M equity offering to strengthen the balance sheet, and stated acquisitions will be earnings accretive once new distribution rates take effect.

Q&A:

• Question from Matvey Tayts (Freedom Broker): Comparing Slide 19 ($1.152M rate base) and Slide 5 ($1.4M forecast) — is the difference due to M&A consolidation? Also, why did rate base change only ~$1M despite ~$33M CapEx (net of depreciation)?
  Response: Difference is due to additional rate base from the three acquired companies (Maine Natural Gas, Bangor Natural Gas, Aquarion); the CapEx vs rate base gap is timing—projects sit in construction work in progress until closed/placed into service, so rate base increases when assets are placed in service.

Contradiction Point 1

Rate Base and M&A Impact

It involves the effect of mergers and acquisitions on the rate base, which directly impacts the financial structure and regulatory compliance of the company.

Is the difference between the $1.2 million rate base on Slide 19 and the $1.4 million on Slide 5 due to additional rate base from acquired companies? - Matvey Tayts(Freedom Broker)

20251105-2025 Q3: The difference between the $1.2 million rate base on Slide 19 and the $1.4 million on Slide 5 reflects the additional rate base for the acquired companies, Maine Natural Gas, Bangor Natural Gas, and Aquarion, which are set to be consolidated. - Daniel Hurstak(CFO)

Does the $1.4 million rate base include the additional base rate for all three acquisitions or only those completed by year-end 2025? - Matvey Tayts(Freedom Broker)

2025Q3: The $1.4 million rate base includes the additional base rate for all 3 acquisitions: Maine Natural Gas, Bangor Natural Gas, and Aquarion. - Daniel Hurstak(CFO)

Contradiction Point 2

Capital Expenditures and Rate Base Increase

It involves the relationship between capital expenditures and rate base increases, which affects the company's financial planning and investment strategies.

Why the discrepancy between CapEx and rate base increase? - Matvey Tayts(Freedom Broker)

20251105-2025 Q3: The discrepancy between CapEx and rate base increase is due to the timing of capital projects' completion and related capital expenditures. - Daniel Hurstak(CFO)

The rate base increase is $1 million, but capital expenditures net of depreciation were $33 million. Is this due to regulatory revisions? - Matvey Tayts(Freedom Broker)

2025Q3: The difference in capital expenditures versus rate base increase is due to when capital projects are completed and placed into service versus when initial capital expenditures are made or funded. - Daniel Hurstak(CFO)

Contradiction Point 3

Dividend Approach and EPS Impact

It involves the company's approach to dividends and how negative EPS results in a specific quarter may affect this approach, which could impact shareholder expectations and financial planning.

Will the expected negative EPS in Q3 impact your dividend approach for the quarter, and how will you address this potential negative result in Q3 2025? - Matvey Tayts (Freedom Broker)

20251105-2025 Q3: No, the earnings for the full year are in line with where we thought they would be. The slight change in the quarterly distribution for the second half of the year will not have an effect on the company's approach to 2025 dividends. - Daniel J. Hurstak(CFO)

Will Q3's slight negative EPS impact affect your Q3 dividend approach, and how will you address the potential negative result in Q3 2025? - Matvey Tayts (Freedom Broker)

2025Q2: No, the earnings for the full year are in line with where we thought they would be. The slight change in the quarterly distribution for the second half of the year will not have an effect on the company's approach to 2025 dividends. - Daniel J. Hurstak(CFO)

Contradiction Point 4

Rate Base Acquisition and CapEx Discrepancy

It involves the explanation of rate base increase and the relationship between capital expenditures (CapEx) and rate base increase, which could affect financial reporting and capital budgeting.

Does the rate base increase from $1.2 million to $1.4 million between Slide 19 and Slide 5 reflect the additional rate base from acquired companies? Why does the CapEx not align with the rate base increase? - Matvey Tayts (Freedom Broker)

20251105-2025 Q3: The difference between the rate bases reflects the additional rate base for the acquired companies, including Maine Natural Gas, Bangor Natural Gas, and Aquarion. The discrepancy between CapEx and rate base increase is due to the timing of capital projects' completion and related capital expenditures. - Daniel Hurstak(CFO)

Why the discrepancy between the rate base increase and capital expenses? - Matvey Tayts (Freedom Broker)

2025Q2: The reconciliation, then, is that we have the rate base increase, and we have expenses that were capitalized, that will be included as part of the rate base request. - Daniel Hurstak(CFO)