CHESAPEAKE UTILITIES CORPORATION REPORTS THIRD QUARTER 2024 RESULTS
Net income and earnings per share ("EPS")* were $17.5 million and $0.78, respectively, for the third quarter of 2024, and $81.9 million and $3.66, respectively, for the nine months ended September 30, 2024
Adjusted net income and Adjusted EPS**, which exclude transaction and transition-related expenses attributable to the acquisition and integration of Florida City Gas ("FCG"), were $18.1 million and $0.80, respectively, for the third quarter of 2024 and $84.2 million and $3.76, respectively, for the nine months ended September 30, 2024
Adjusted gross margin** growth of $89.3 million during the first nine months of 2024 driven by contributions from FCG, regulatory initiatives and infrastructure programs, natural gas organic growth, continued pipeline expansion projects, and additional customer consumption
Results continue to track in line with Management's expectations, and the Company continues to affirm 2024 EPS and capital guidance
DOVER, Del., Nov. 7, 2024 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE:CPK) ("Chesapeake Utilities" or the "Company") today announced financial results for the three and nine months ended September 30, 2024.
Net income for the third quarter of 2024 was $17.5 million ($0.78 per share) compared to $9.4 million ($0.53 per share) in the third quarter of 2023. Excluding transaction and transition-related expenses associated with the fourth quarter 2023 acquisition of FCG, adjusted net income was $18.1 million ($0.80 per share) or approximately 16 percent higher per share compared to the prior-year period.
The higher results for the third quarter of 2024 were largely attributable to incremental contributions from FCG, additional margin from regulated infrastructure programs, continued pipeline expansion projects to support distribution growth, growth in the Company's natural gas distribution businesses and increased levels of virtual pipeline services. The financing impacts of the FCG acquisition, including increased interest expense related to debt issued and additional shares outstanding, partially offset the increases.
During the first nine months of 2024, net income was $81.9 million ($3.66 per share) compared to $61.9 million ($3.47 per share) in the prior-year period. Excluding the transaction and transition-related expenses, adjusted net income was $84.2 million ($3.76 per share) compared to $64.8 million ($3.63 per share) for the same period in 2023.
Year-to-date earnings for 2024 were primarily impacted by the factors discussed for the third quarter as well as additional adjusted gross margin from increased customer consumption experienced earlier in the year and contributions from the Company's unregulated businesses.
"Chesapeake Utilities delivered strong financial performance and sustained operational excellence in the third quarter as we continued to execute on the three pillars that drive long-term earnings growth and shareholder value: prudently deploying record levels of capital, proactively advancing our regulatory agenda and continually executing on business transformation," said Jeff Householder, chair, president and CEO. "In the third quarter alone, we invested nearly $100 million in capital expenditures, filed for rate increases in Delaware and in Florida for our electric operations and successfully implemented our new enterprise-wide customer billing system."
"In the third quarter of 2024, adjusted earnings per share was up 16 percent relative to the same period in 2023, attributable to adjusted gross margin growth of close to 30 percent and continued cost management driven by our business transformation efforts and focus on a "one company" approach. Some of the larger margin drivers include the addition of FCG, which we continue to effectively integrate, strong customer growth of approximately 4 percent in both Delmarva and Florida, incremental margin related to transmission expansions and increased virtual pipeline services and depreciation savings related to regulatory initiatives," continued Householder. "I'm proud of our teammates' consistent dedication to prioritizing service and safety to deliver performance in line with our expectations. This commitment enables us to affirm our full-year 2024 adjusted EPS and capital guidance."
Earnings and Capital Investment Guidance
The Company continues to affirm its 2024 EPS guidance of $5.33 to $5.45 in adjusted earnings per share given the incremental margin opportunities present across the Company's businesses, investment opportunities within and surrounding FCG, regulatory initiatives and operating synergies.
The Company also affirms its previously-announced 2024 capital expenditure guidance of $300 million to $360 million, as well as the capital expenditure guidance for the five-year period ended 2028 that will range from $1.5 billion to $1.8 billion. This investment forecast is projected to result in a 2025 EPS guidance range of $6.15 to $6.35, as well as a 2028 EPS guidance range of $7.75 to $8.00. This implies an EPS growth rate of approximately 8 percent from the 2025 EPS guidance range.
*Unless otherwise noted, EPS and Adjusted EPS information are presented on a diluted basis.
Non-GAAP Financial Measures
**This press release including the tables herein, include references to both Generally Accepted Accounting Principles ("GAAP") and non-GAAP financial measures, including Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS. A "non-GAAP financial measure" is generally defined as a numerical measure of a company's historical or future performance that includes or excludes amounts, or that is subject to adjustments, so as to be different from the most directly comparable measure calculated or presented in accordance with GAAP. Our management believes certain non-GAAP financial measures, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period.
The Company calculates Adjusted Gross Margin by deducting the purchased cost of natural gas, propane and electricity and the cost of labor spent on direct revenue-producing activities from operating revenues. The costs included in Adjusted Gross Margin exclude depreciation and amortization and certain costs presented in operations and maintenance expenses in accordance with regulatory requirements. The Company calculates Adjusted Net Income and Adjusted EPS by deducting costs and expenses associated with significant acquisitions that may affect the comparison of period-over-period results. These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures. The Company believes that these non-GAAP measures are useful and meaningful to investors as a basis for making investment decisions, and provide investors with information that demonstrates the profitability achieved by the Company under allowed rates for regulated energy operations and under the Company's competitive pricing structures for unregulated energy operations. The Company's management uses these non-GAAP financial measures in assessing a business unit and Company performance. Other companies may calculate these non-GAAP financial measures in a different manner.
The following tables reconcile Gross Margin, Net Income, and EPS, all as defined under GAAP, to our non-GAAP measures of Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for each of the periods presented.
Adjusted Gross Margin
For the Three Months Ended September 30, 2024
(in thousands)
Regulated Energy
Unregulated Energy
Other andEliminations
Total
Operating Revenues
$ 130,633
$ 35,567
$ (6,062)
$ 160,138
Cost of Sales:
Natural gas, propane and electric costs
(28,366)
(15,868)
6,033
(38,201)
Depreciation & amortization
(12,301)
(4,553)
3
(16,851)
Operations & maintenance expenses (1)
(10,722)
(8,058)
—
(18,780)
Gross Margin (GAAP)
79,244
7,088
(26)
86,306
Operations & maintenance expenses (1)
10,722
8,058
—
18,780
Depreciation & amortization
12,301
4,553
(3)
16,851
Adjusted Gross Margin (Non-GAAP)
$ 102,267
$ 19,699
$ (29)
$ 121,937
For the Three Months Ended September 30, 2023
(in thousands)
RegulatedEnergy
UnregulatedEnergy
Other andEliminations
Total
Operating Revenues
$ 102,411
$ 34,970
$ (5,834)
$ 131,547
Cost of Sales:
Natural gas, propane and electric costs
(26,518)
(16,381)
5,805
(37,094)
Depreciation & amortization
(13,192)
(4,420)
2
(17,610)
Operations & maintenance expenses (1)
(4,819)
(7,532)
(382)
(12,733)
Gross Margin (GAAP)
57,882
6,637
(409)
64,110
Operations & maintenance expenses (1)
4,819
7,532
382
12,733
Depreciation & amortization
13,192
4,420
(2)
17,610
Adjusted Gross Margin (Non-GAAP)
$ 75,893
$ 18,589
$ (29)
$ 94,453
For the Nine Months Ended September 30, 2024
(in thousands)
Regulated Energy
Unregulated Energy
Other and Eliminations
Total
Operating Revenues
$ 429,684
$ 160,089
$ (17,619)
$ 572,154
Cost of Sales:
Natural gas, propane and electric costs
(105,662)
(70,928)
17,532
(159,058)
Depreciation & amortization
(39,495)
(12,257)
8
(51,744)
Operations & maintenance expenses (1)
(35,713)
(24,373)
1
(60,085)
Gross Margin (GAAP)
248,814
52,531
(78)
301,267
Operations & maintenance expenses (1)
35,713
24,373
(1)
60,085
Depreciation & amortization
39,495
12,257
(8)
51,744
Adjusted Gross Margin (Non-GAAP)
$ 324,022
$ 89,161
$ (87)
$ 413,096
For the Nine Months Ended September 30, 2023
(in thousands)
Regulated Energy
UnregulatedEnergy
Other and Eliminations
Total
Operating Revenues
$ 345,822
$ 158,886
$ (19,439)
$ 485,269
Cost of Sales:
Natural gas, propane and electric costs
(105,692)
(75,068)
19,282
(161,478)
Depreciation & amortization
(39,179)
(12,923)
6
(52,096)
Operations & maintenance expenses (1)
(23,346)
(23,528)
(377)
(47,251)
Gross Margin (GAAP)
177,605
47,367
(528)
224,444
Operations & maintenance expenses (1)
23,346
23,528
377
47,251
Depreciation & amortization
39,179
12,923
(6)
52,096
Adjusted Gross Margin (Non-GAAP)
$ 240,130
$ 83,818
$ (157)
$ 323,791
(1) Operations & maintenance expenses within the condensed consolidated statements of income are presented in accordance with regulatory requirements and to provide comparability within the industry. Operations & maintenance expenses which are deemed to be directly attributable to revenue producing activities have been separately presented above in order to calculate Gross Margin as defined under US GAAP.
Adjusted Net Income and Adjusted EPS
Three Months Ended
September 30,
(in thousands, except per share data)
2024
2023
Net Income (GAAP)
$ 17,507
$ 9,407
FCG transaction and transition-related expenses, net (1)
593
2,804
Adjusted Net Income (Non-GAAP)
$ 18,100
$ 12,211
Weighted average common shares outstanding - diluted (2)
22,564
17,858
Earnings Per Share - Diluted (GAAP)
$ 0.78
$ 0.53
FCG transaction and transition-related expenses, net (1)
0.02
0.16
Adjusted Earnings Per Share - Diluted (Non-GAAP)
$ 0.80
$ 0.69
Nine Months Ended
September 30,
(in thousands, except per share data)
2024
2023
Net Income (GAAP)
$ 81,946
$ 61,884
FCG transaction and transition-related expenses, net (1)
2,276
2,898
Adjusted Net Income (Non-GAAP)
$ 84,222
$ 64,782
Weighted average common shares outstanding - diluted (2)
22,402
17,847
Earnings Per Share - Diluted (GAAP)
$ 3.66
$ 3.47
FCG transaction and transition-related expenses, net (1)
0.10
0.16
Adjusted Earnings Per Share - Diluted (Non-GAAP)
$ 3.76
$ 3.63
(1) Transaction and transition-related expenses represent costs incurred attributable to the acquisition and integration of FCG including, but not limited to, transaction costs, transition services, consulting, system integration, rebranding and legal fees.
(2) Weighted average shares for the three and nine months ended September 30, 2024 reflect the impact of 4.4 million common shares issued in November 2023 in connection with the acquisition of FCG.
Operating Results for the Quarters Ended September 30, 2024 and 2023
Consolidated Results
Three Months Ended
September 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 121,937
$ 94,453
$ 27,484
29.1 %
Depreciation, amortization and property taxes
24,998
23,800
1,198
5.0 %
FCG transaction and transition-related expenses
819
3,899
(3,080)
(79.0) %
Other operating expenses
55,202
46,526
8,676
18.6 %
Operating income
$ 40,918
$ 20,228
$ 20,690
102.3 %
Operating income for the third quarter of 2024 was $40.9 million, an increase of $20.7 million compared to the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $17.6 million or 73.0 percent compared to the prior-year period. An increase in adjusted gross margin in the third quarter of 2024 was driven by contributions from the acquisition of FCG, incremental margin from regulated infrastructure programs, continued pipeline expansion projects, increased demand for virtual pipeline services and natural gas organic growth. Higher operating expenses were driven largely by the operating expenses of FCG and increased payroll, benefits and other employee-related expenses compared to the prior-year period. Increases in depreciation, amortization and property taxes attributable to growth projects and FCG were partially offset by a $3.2 million reserve surplus amortization mechanism ("RSAM") adjustment from FCG and lower depreciation from our electric operations and Maryland natural gas division due to revised rates from approved depreciation studies.
Regulated Energy Segment
Three Months Ended
September 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 102,267
$ 75,893
$ 26,374
34.8 %
Depreciation, amortization and property taxes
19,853
18,891
962
5.1 %
FCG transaction and transition-related expenses
819
3,899
(3,080)
(79.0) %
Other operating expenses
37,660
28,191
9,469
33.6 %
Operating income
$ 43,935
$ 24,912
$ 19,023
76.4 %
The key components of the increase in adjusted gross margin** are shown below:
(in thousands)
Contribution from FCG
$ 23,399
Margin from regulated infrastructure programs
1,806
Natural gas transmission service expansions, including interim services
1,548
Natural gas growth including conversions (excluding service expansions)
1,013
Changes in customer consumption
(361)
Other variances
(1,031)
Quarter-over-quarter increase in adjusted gross margin**
$ 26,374
The major components of the increase in other operating expenses are as follows:
(in thousands)
FCG operating expenses
$ 7,476
Payroll, benefits and other employee-related expenses
1,223
Insurance related costs
222
Other variances
548
Quarter-over-quarter increase in other operating expenses
$ 9,469
Unregulated Energy Segment
Three Months EndedSeptember 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 19,699
$ 18,589
$ 1,110
6.0 %
Depreciation, amortization and property taxes
5,144
4,902
242
4.9 %
Other operating expenses
17,616
18,410
(794)
(4.3) %
Operating loss
$ (3,061)
$ (4,723)
$ 1,662
35.2 %
Operating results for the second and third quarters historically have been lower due to reduced customer demand during warmer periods of the year. The impact to operating income may not align with the seasonal variations in adjusted gross margin as many of the operating expenses are recognized ratably over the course of the year.
The major components of the increase in adjusted gross margin** are shown below:
(in thousands)
Propane Operations
Contributions from acquisition
$ 135
CNG/RNG/LNG Transportation and Infrastructure
Increased level of virtual pipeline services
1,098
Other variances
(123)
Quarter-over-quarter increase in adjusted gross margin**
$ 1,110
The major components of the decrease in other operating expenses are as follows:
(in thousands)
Payroll, benefits and other employee-related expenses
$ (515)
Other variances
(279)
Quarter-over-quarter decrease in other operating expenses
$ (794)
Operating Results for the Nine Months Ended September 30, 2024 and 2023
Consolidated Results
Nine Months Ended
September 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 413,096
$ 323,791
$ 89,305
27.6 %
Depreciation, amortization and property taxes
77,811
70,918
6,893
9.7 %
FCG transaction and transition-related expenses
3,114
3,899
(785)
(20.1) %
Other operating expenses
170,878
145,486
25,392
17.5 %
Operating income
$ 161,293
$ 103,488
$ 57,805
55.9 %
Operating income for the first nine months of 2024 was $161.3 million, an increase of $57.8 million compared to the same period in 2023. Excluding transaction and transition-related expenses associated with the acquisition and integration of FCG, operating income increased $57.0 million or 53.1 percent compared to the prior-year period. An increase in adjusted gross margin in the first nine months of 2024 was driven by contributions from the acquisition of FCG, incremental margin from regulatory initiatives, natural gas organic growth and continued pipeline expansion projects, higher customer consumption and increased margins from the Company's unregulated businesses. Higher operating expenses during the current period were driven largely by the operating expenses of FCG and increased insurance costs. These increases were partially offset by lower payroll, benefits and other employee-related expenses compared to the prior-year period. Increases in depreciation, amortization and property taxes attributable to growth projects and FCG were partially offset by an $8.9 million RSAM adjustment from FCG and lower depreciation from our electric operations and Maryland natural gas division due to revised rates from approved depreciation studies.
Regulated Energy Segment
Nine Months Ended
September 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 324,022
$ 240,130
$ 83,892
34.9 %
Depreciation, amortization and property taxes
63,671
56,415
7,256
12.9 %
FCG transaction and transition-related expenses
3,114
3,899
(785)
(20.1) %
Other operating expenses
114,688
87,988
26,700
30.3 %
Operating income
$ 142,549
$ 91,828
$ 50,721
55.2 %
The key components of the increase in adjusted gross margin** are shown below:
(in thousands)
Contribution from FCG
$ 71,725
Margin from regulated infrastructure programs
4,424
Natural gas growth including conversions (excluding service expansions)
4,182
Natural gas transmission service expansions, including interim services
3,702
Rate changes associated with the Florida natural gas base rate proceeding (1)
1,630
Eastern Shore contracted rate adjustments
(238)
Other variances
(1,533)
Period-over-period increase in adjusted gross margin**
$ 83,892
(1) Includes adjusted gross margin contributions from permanent base rates that became effective in March 2023.
The major components of the increase in other operating expenses are as follows:
(in thousands)
FCG operating expenses
$ 25,363
Facilities, maintenance costs and outside services
677
Insurance related costs
651
Other variances
9
Period-over-period increase in other operating expenses
$ 26,700
Unregulated Energy Segment
Nine Months Ended
September 30,
(in thousands)
2024
2023
Change
Percent Change
Adjusted gross margin**
$ 89,161
$ 83,818
$ 5,343
6.4 %
Depreciation, amortization and property taxes
14,142
14,500
(358)
(2.5) %
Other operating expenses
56,413
57,789
(1,376)
(2.4) %
Operating income
$ 18,606
$ 11,529
$ 7,077
61.4 %
The major components of the change in adjusted gross margin** are shown below:
(in thousands)
Propane Operations
Increased propane customer consumption
$ 1,261
Contributions from acquisition
733
Increased propane margins and service fees
521
CNG/RNG/LNG Transportation and Infrastructure
Increased level of virtual pipeline services
1,585
Aspire Energy
Increased margins - rate changes and gathering fees
1,267
Other variances
(24)
Period-over-period increase in adjusted gross margin**
$ 5,343
The major components of the decrease in other operating expenses are as follows:
(in thousands)
Vehicle expenses
$ 575
Insurance related costs
456
Payroll, benefits and other employee-related expenses
(1,598)
Facilities, maintenance costs, and outside services
(631)
Other variances
(178)
Period-over-period decrease in other operating expenses
$ (1,376)
Forward-Looking Statements
Matters included in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company's 2023 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2024 for further information on the risks and uncertainties related to the Company's forward-looking statements.
Conference Call
Chesapeake Utilities (NYSE:CPK) will host a conference call on Friday, November 8, 2024 at 8:30 a.m. Eastern Time to discuss the Company's financial results for the three and nine months ended September 30, 2024. To listen to the Company's conference call via live webcast, please visit the Events & Presentations section of the Investors page on www.chpk.com. For investors and analysts that wish to participate by phone for the question and answer portion of the call, please use the following dial-in information:
Toll-free: 800.245.3074International: 203.518.9765Conference ID: CPKQ324
A replay of the presentation will be made available on the previously noted website following the conclusion of the call.
About Chesapeake Utilities Corporation
Chesapeake Utilities Corporation is a diversified energy delivery company, listed on the New York Stock Exchange. Chesapeake Utilities Corporation offers sustainable energy solutions through its natural gas transmission and distribution, electricity generation and distribution, propane gas distribution, mobile compressed natural gas utility services and solutions, and other businesses.
Please note that Chesapeake Utilities Corporation is not affiliated with Chesapeake Energy, an oil and natural gas exploration company headquartered in Oklahoma City, Oklahoma.
For more information, contact:
Beth W. CooperExecutive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary302.734.6022
Michael D. GaltmanSenior Vice President and Chief Accounting Officer302.217.7036
Lucia M. DempseyHead of Investor Relations347.804.9067
Financial Summary(in thousands, except per-share data)
