RGC Resources, Inc. Reports Second Quarter Earnings

Rhea-AI Summary

RGC Resources (NASDAQ: RGCO) reported strong Q2 FY2025 financial results, with consolidated earnings of $7.68 million ($0.74 per share), up from $6.44 million ($0.63 per share) in Q2 FY2024. The improved performance was driven by a 12% increase in utility margin due to higher base rates effective July 1, 2024, and increased volumes from cooler winter weather. For the first six months of FY2025, net income reached $12.95 million ($1.26 per share), representing a 12.9% increase from the previous year.

The company's earnings from its MVP pipeline investment decreased to $801,175 in Q2 FY2025 from $1.23 million in Q2 FY2024. The State Corporation Commission recently made permanent the negotiated rates from the company's 2024 rate case filing.

Positive

• Net income increased 19.1% YoY to $7.68 million in Q2 FY2025
• Utility margin grew 12% due to higher base rates and increased volumes
• State Corporation Commission approved permanent rates from 2024 rate case
• Strong industrial customer utilization contributed to margin growth

Negative

• MVP pipeline investment earnings decreased 34.8% YoY to $801,175 in Q2
• Higher interest expense impacted overall earnings
• Current liabilities increased significantly to $45.49M from $21.70M YoY

Insights

Financial Analyst

RGC Resources shows strong Q2 performance with 17.5% EPS growth despite expected MVP investment earnings decline following pipeline operational transition.

RGC Resources' second quarter results reveal substantial financial strength with net income of $7,676,208 ($0.74 per share), marking a 17.5% increase from $6,443,390 ($0.63 per share) in Q2 2024. This impressive growth stems primarily from a 12% increase in utility margin (defined as utility revenues less cost of gas).

Revenue climbed to $36,462,097, up 11.6% year-over-year, while operating income surged 20.5% to $10,399,942. The six-month performance shows similar momentum with net income reaching $12,945,897 ($1.26 per share), representing a 12.9% increase from the comparable period.

The balance sheet reveals a notable capital structure shift – current liabilities increased to $45,489,019 from $21,702,382 year-over-year, while long-term debt decreased to $115,226,622 from $135,916,887. Despite this liability restructuring, stockholders' equity strengthened to $117,833,223, up 6.6% from the previous year.

The company's investment in the Mountain Valley Pipeline (MVP) contributed $801,175 to quarterly earnings, down from $1,229,384 in Q2 2024. This expected decline results from the pipeline's transition from construction (when the company recorded Allowance for Funds Used During Construction) to operational status. The 3.75% dividend increase to $0.2075 per share signals management's confidence in sustainable cash flow.

Utilities Industry Specialist

Strong utility margins, favorable regulatory approval, and successful MVP pipeline transition position RGC for continued stable growth.

RGC Resources has demonstrated the resilience of its regulated utility business model with quarterly performance significantly exceeding industry norms. The 12% utility margin improvement highlights two critical success factors: effective regulatory strategy and favorable operating conditions.

The State Corporation Commission's final order issued in early April that permanently approved the negotiated rates from the company's 2024 rate case represents a major regulatory win. This development provides crucial revenue certainty that utility investors highly value. The new rates that took effect July 2024 are now fully secured, establishing a solid foundation for predictable future performance.

Weather conditions played significantly in RGC's favor, with the release specifically noting "a colder January" boosting consumption. Additionally, the company benefited from demand diversification through "a large industrial customer who continued strong utilization compared to the same period a year ago." This commercial/industrial demand provides valuable balance to weather-dependent residential consumption.

The Mountain Valley Pipeline's transition from construction to operation marks a significant milestone. While this transition reduced earnings contribution compared to when AFUDC was recorded during construction ($801,175 versus $1,229,384), operational pipelines typically generate more predictable revenue streams. This transition from development risk to operational stability represents RGC's strategic investment coming to fruition.

For a regulated utility, RGC's growth metrics – 17.5% quarterly EPS growth and 12.9% six-month earnings improvement – substantially outpace typical utility sector growth rates that generally range in mid-single digits.

ROANOKE, Va., May 06, 2025 (GLOBE NEWSWIRE) -- RGC Resources, Inc. (Nasdaq: RGCO) announced consolidated Company earnings of $7,676,208, or $0.74 per share, for the second quarter ended March 31, 2025, compared to $6,443,390, or $0.63 per share, for the second quarter ended March 31, 2024. The primary drivers of the increased earnings were higher base rates that went into effect July 1, 2024 and increased volumes, offset by lower earnings from unconsolidated affiliate and higher interest expense.

Cooler winter weather and higher base rates drove higher margins and earnings. CEO Paul Nester stated, “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. The Company’s earnings from its investment in the MVP, with the pipeline in operation, were $801,175 in the second quarter ended March 31, 2025, down from $1,229,384 in the second quarter ended March 31, 2024. The larger 2024 amount corresponded to the Company’s share of Allowance for Funds Used During Construction (AFUDC) during the construction phase.”

Through the first six months of fiscal 2025, the Company’s net income of $12,945,897, or $1.26 per share, was up 12.9% from $11,463,382, or $1.14 per share, with similar reasons as the quarter – higher utility margin offset by lower earnings from the Company’s investment in MVP and higher interest expense. In early April, the State Corporation Commission issued a final order and made permanent the negotiated rates from the Company’s 2024 rate case filing.

RGC Resources, Inc. provides energy and related products and services to customers in Virginia through its operating subsidiaries Roanoke Gas Company and RGC Midstream, LLC.

Utility margin is a non-GAAP measure defined as utility revenues less cost of gas. Management considers this non-GAAP measure to provide useful information to both management and investors for purpose of such comparability and in evaluating operating performance, but it should be considered in addition to results prepared in accordance with GAAP and should not be considered a substitute for, or superior to, GAAP results.

The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from any expectations expressed in the Company’s forward-looking statements, regarding inflation, interest rates, customer growth, infrastructure investment and margins. These risks and uncertainties include gas prices and supply, domestic and geopolitical considerations, along with risks included under Item 1-A in the Company’s fiscal 2024 Form 10-K. Forward-looking statements reflect the Company’s current expectations only as of the date they are made. The Company assumes no duty to update these statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations.

Past performance is not necessarily a predictor of future results.

Summary financial statements for the second quarter and fiscal year to date are as follows:

RGC Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
		Three Months Ended								Six Months Ended
		March 31,								March 31,
			2025				2024				2025				2024
Operating revenues		$	36,462,097			$	32,659,376			$	63,751,583			$	57,078,728
Operating expenses			26,062,155				24,029,667				46,023,620				41,796,982
Operating income			10,399,942				8,629,709				17,727,963				15,281,746
Equity in earnings of unconsolidated affiliate			801,175				1,229,384				1,655,388				2,697,219
Other income, net			463,633				89,487				936,969				210,273
Interest expense			1,630,275				1,566,613				3,410,205				3,202,886
Income before income taxes			10,034,475				8,381,967				16,910,115				14,986,352
Income tax expense			2,358,267				1,938,577				3,964,218				3,522,970
Net income		$	7,676,208			$	6,443,390			$	12,945,897			$	11,463,382
Net earnings per share of common stock:
Basic		$	0.74			$	0.63			$	1.26			$	1.14
Diluted		$	0.74			$	0.63			$	1.26			$	1.13
Cash dividends per common share		$	0.2075			$	0.2000			$	0.4150			$	0.4000
Weighted average number of common shares outstanding:
Basic			10,304,222				10,170,595				10,281,725				10,099,533
Diluted			10,308,368				10,174,006				10,285,939				10,102,284
Condensed Consolidated Balance Sheets
(Unaudited)
						March 31,
Assets							2025				2024
Current assets						$	25,777,943			$	28,525,645
Utility property, net							267,560,507				254,140,117
Other non-current assets							33,082,837				30,693,768
Total Assets						$	326,421,287			$	313,359,530
Liabilities and Stockholders' Equity
Current liabilities						$	45,489,019			$	21,702,382
Long-term debt, net							115,226,622				135,916,887
Deferred credits and other non-current liabilities							47,872,423				45,196,399
Total Liabilities							208,588,064				202,815,668
Stockholders' Equity							117,833,223				110,543,862
Total Liabilities and Stockholders' Equity						$	326,421,287			$	313,359,530

Contact:	Timothy J. Mulvaney
	Vice President, Treasurer and CFO
Telephone:	(540) 777-3997

FAQ

What was RGC Resources (RGCO) earnings per share for Q2 2025?

RGC Resources reported earnings of $0.74 per share for Q2 2025, up from $0.63 per share in Q2 2024.

How much did RGCO's utility margin increase in Q2 2025?

RGC Resources' utility margin increased by 12% in Q2 2025, driven by higher base rates and increased volumes due to cooler winter weather.

What was the impact of MVP pipeline investment on RGCO's Q2 2025 earnings?

RGCO's earnings from MVP pipeline investment decreased to $801,175 in Q2 2025 from $1,229,384 in Q2 2024, due to the transition from construction phase to operation.

What is RGCO's dividend payment for Q2 2025?

RGC Resources declared a quarterly dividend of $0.2075 per share, up from $0.2000 in the same quarter last year.

How did RGC Resources perform in the first half of fiscal 2025?

In the first six months of fiscal 2025, RGCO's net income increased 12.9% to $12.95 million ($1.26 per share) from $11.46 million ($1.14 per share) in the previous year.