Earnings call transcript: Algonquin Power & Utilities beats Q3 2025 expectations

Algonquin Power & Utilities Corp. (AQN) reported its third-quarter 2025 earnings, showcasing a robust performance with earnings per share (EPS) exceeding expectations. The company reported an EPS of $0.09, surpassing the forecasted $0.06, marking a 50% surprise. Revenue also slightly beat expectations, reaching $600.8 million compared to the anticipated $595 million. Following the announcement, Algonquin’s stock rose by 8.04% in pre-market trading, reflecting positive investor sentiment.

Key Takeaways

• Algonquin reported a 13% year-over-year increase in EPS.
• Revenue slightly exceeded forecasts, contributing to a positive market reaction.
• Stock surged 8.04% in pre-market trading, indicating strong investor confidence.
• The company maintains its financial outlook for 2025 unchanged.
• New CFO Robert Stefani to join in early 2026.

Company Performance

Algonquin Power & Utilities Corp. demonstrated solid performance in Q3 2025, driven by improvements in operational efficiency and strategic rate adjustments. The company achieved adjusted net earnings of $71.7 million, marking a 10% increase from the same period last year. This growth reflects a strong focus on cost discipline and restructuring efforts, positioning the company well in the regulated utility sector.

Financial Highlights

• Revenue: $600.8 million, slightly above the forecast and showing resilience in market conditions.
• Earnings per share: $0.09, up from $0.08 in the previous year, reflecting a 13% increase.
• Adjusted net earnings: $71.7 million, a 10% year-over-year rise.

Earnings vs. Forecast

Algonquin’s Q3 2025 results exceeded expectations, with EPS at $0.09 compared to the forecasted $0.06, resulting in a 50% surprise. Revenue also surpassed projections, albeit modestly, coming in at $600.8 million against the expected $595 million. This performance highlights the company’s effective cost management and operational improvements.

Market Reaction

Following the earnings announcement, Algonquin’s stock experienced a significant uptick, climbing 8.04% in pre-market trading. The stock’s rise to $5.83 reflects investor optimism, with the price nearing its 52-week high of $6.48. This positive market reaction underscores confidence in the company’s strategic initiatives and financial health.

Outlook & Guidance

Algonquin reiterated its financial outlook for 2025, maintaining stable projections for the year. The company continues to focus on enhancing its transmission capacity and stabilizing its generation portfolio. Additionally, Algonquin is exploring opportunities in data center infrastructure, which could further bolster its growth trajectory.

Executive Commentary

CEO Rod West emphasized the company’s commitment to creating sustainable long-term value for stakeholders. He noted, "Our focus remains on creating sustainable long-term value for our stakeholders." Interim CFO Brian Chin highlighted the ongoing restructuring efforts, stating, "We’re in the early innings of our restructuring efforts."

Risks and Challenges

• Regulatory Approvals: Pending rate case settlements could impact future earnings.
• Market Conditions: Fluctuating energy prices may affect revenue stability.
• Restructuring Risks: Ongoing restructuring efforts may face execution challenges.
• Competition: Increasing competition in the utility sector could pressure margins.
• Economic Factors: Macroeconomic conditions, including interest rates, could influence financial performance.

Q&A

During the earnings call, analysts inquired about potential opportunities in data center infrastructure and strategies for regulatory settlements. Executives addressed cost reduction efforts and highlighted improvements in customer systems, reflecting the company’s proactive approach to operational challenges.

Full transcript - Algonquin Power & Utilities Corp (AQN) Q3 2025:

Conference Call Operator: Hello and welcome to the Algonquin Power & Utilities Corp. Third Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you’d like to ask a question during this time, simply press star one on your telephone keypad. I’ll now turn the conference over to Mr. Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations. Please go ahead.

Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations, Algonquin Power & Utilities Corp.: Thank you, Operator, and good morning, everyone. Thank you for joining us for our third quarter 2025 earnings conference call. Joining me on the call today is Rod West, Chief Executive Officer. To accompany today’s earnings call, we have a supplemental webcast presentation available on our website at algonquinpower.com. Our financial statements and management discussion and analysis are also available on the website as well as on SEDAR+ and EDGAR. We’d like to remind you that our discussion during the call will include certain forward-looking information and non-GAAP measures. Actual results could differ materially from any forecast or projection contained in such forward-looking information. Certain material factors and assumptions were applied in making the forecasts and projections reflected in such forward-looking information. Please note and review the related disclaimers located on slide two of our earnings call presentation at the Investor Relations section of our website at algonquinpower.com.

Please also refer to our most recent MD&A filed on SEDAR+ and EDGAR and available on our website for additional important information on these items. On the call this morning, Rod will touch on our leadership and then provide a review of the key highlights and operational updates for the quarter. He’ll also provide some commentary regarding the company’s portfolio strategy. I will follow with details of our financial results. We will then open the lines for questions. We ask that you kindly restrict your questions to two and then re-queue if you have any additional questions to allow others the opportunity to participate. With that, I’ll turn things over to Rod.

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: Thanks, Brian, and good morning, everyone. Thanks for joining us on the call. Before we move into the quarter results, I’d like to briefly touch on the important leadership update we announced by press release earlier this morning. We’re very pleased that Robert Stefani will be joining Algonquin as Chief Financial Officer effective January 5, 2026. Robert brings to the role an exceptional blend of financial discipline, capital markets expertise, and strategic acumen, having served the last three years as CFO at Southwest Gas Holdings and four years in the same role in treasury of PBF Energy. We’re excited to welcome Rob to the executive leadership team. I expect his capabilities and contribution will help us accelerate our path to becoming a premium pure-play regulated utility. I’d also like to take a moment to thank Brian Chin for stepping into the interim CFO role.

I personally appreciate his partnership and steady hand during my early months as CEO, and we look forward to having Brian continue with us as a key member of the finance and leadership team and to assist in the leadership transition. Onward we go. From a financial and operational standpoint, I’m pleased to report that it was a constructive and solid quarter. Our Q3 financial results were strong, with double-digit year-over-year % increases in adjusted net earnings and adjusted net earnings per share, and our outlooks remain unchanged. On the operational front, we received approval of our Energy North rate case settlement, and our Cal Pico rate case settlement is pending. At Empire Electric, we filed a settlement and recognized from commission feedback that we have more work to do to align on specific metrics and milestones to demonstrate improved and predictable customer service.

Let me state we always appreciate hearing from the commission. We are listening, and we are committed to reciprocating the transparency. We will be working with the parties to consider how to factor the commission’s feedback into our settlement. We have hearings in December on our New England natural gas rate case, and in our Litchfield Park case, intervenor testimony is due on January 2026, with hearings scheduled for March of next year. These two cases represent a combined total rate request of $73.6 million of the $326.4 million in total pending rate requests. A few additional comments while we’re on the topic of our regulatory proceedings. We understand that any adjustments in rates can be challenging for some customers, and affordability is a concern we take very seriously.

Rate requests go through a rigorous regulatory review process designed to support our continued delivery of safe, reliable, and cost-effective utility services for our customers, with rates reflecting the very real cost of modernizing infrastructure, meeting safety and reliability standards, and improving customer experiences and outcomes. These are investments made by the company to create sustainable value for all of our stakeholders. We recognize that while necessary, our investments must be balanced with affordability in mind, which is why we are committed to doing our part to continuously find ways to lower our costs and be more efficient in the way in which we work. Finally, before I turn things over to Brian on the results, a few comments on the company’s portfolio optimization strategy.

When I became CEO in March, I initiated a series of quantitative and qualitative screens of our portfolio, including value accretion, dilution, credit strength, and overall strategic fit. I heard the questions that many of you were asking me in my first days, hours, and weeks in the role. With the benefit of that initial work now behind me, I am confident that our back-to-basics pure-play regulated strategy we laid out in June is fundamentally sound. Continuing our focus on lowering our cost curve, improving operational performance, and stakeholder engagement is our best path to creating sustainable value, reducing risk, and growing our business. That being said, with a stable balance sheet and robust organic growth prospects within our existing portfolio, we are poised to be opportunistic should the situation arise.

Regarding those opportunistic situations, you should first expect that any potential opportunity must be first value-enhancing to our regulated pure-play strategy, whether it is through EPS accretion and/or risk reduction. Secondly, you should expect that we would have and articulate clear lines of sight on transactability. Thirdly, it should not be a surprise to you, given the fact that we are turning this company’s performance around or aim to. It should not unduly distract management’s attention from our central strategy of turning around our financial performance and keeping our promise to you to be steady and predictable. That being said, Brian, I will turn it over to you for the quarter results.

Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations, Algonquin Power & Utilities Corp.: Thank you, Rod. As Rod stated earlier, it was another positive quarter for our key financial metrics, and our 2025 financial outlook remains unchanged. Third quarter adjusted net earnings from continuing operations were $71.7 million, up approximately 10% from $64.9 million in 2024. Net earnings for the regulated services group were up year-over-year, fueled by growth from the implementation of approved rates across several of the company’s gas and water utilities, as well as slightly favorable weather compared to the prior year at the Empire Electric system. Lower operating and interest expenses also contributed positively to the quarter, with gains partially offset by higher income tax expense due to higher earnings before tax. Our expectation of an effective tax rate for the year in the mid to low 20% range has not changed. Net earnings for the Hydro Group were essentially flat for the quarter.

For the corporate group, a decrease of $14.7 million was primarily related to the removal of dividends related to the company’s investment in Atlantica, which was sold in the fourth quarter of 2024, partially offset by lower interest expense of $8.9 million. Moving to our EPS walk, Q3 adjusted net earnings per share were $0.09, up 13% from last year’s Q3 2024 adjusted net earnings per share of $0.08. Positive drivers for the quarter included $0.02 driven by stronger operational performance from approved rate adjustments and favorable weather compared to last year, another penny related to lower operating expenses, and a $0.01 one-time gain from the Energy North depreciation deferral. We were down a penny due to the inclusion of a benefit in third quarter 2024 of a New York water retroactive payment that did not repeat in 2025.

Additionally, we benefited by $0.02 from lower interest expense from deleveraging, which was more than offset by the elimination of Atlantica dividends of $0.03 and finally a negative penny of unfavorable taxes. Now back to Rod for his closing remarks.

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: Thanks, Brian. To close, this was another quarter of quiet but steady, thoughtful execution. As we continue our way forward, our focus remains on creating sustainable long-term value for our stakeholders and continuing to effectively serve our customers and communities. We’re looking forward to seeing many of you at EEI in the coming days. Thanks again for your time and continued support, and we are happy to take your questions. Back to you, Operator.

Conference Call Operator: Thank you. If you’d like to, if you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. We’ll just take a brief moment to compile the Q&A roster. Your first question comes from the line of Baltej Sidhu from National Bank of Canada. Your line is live.

Hey, good morning, and congratulations on the strong quarter. Just looking at the OpEx improvement, could you share any color as to what were the main drivers of this and if it’s sustainable? Looking at the MD&A, you had highlighted favorable timing as a factor.

Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations, Algonquin Power & Utilities Corp.: Yeah, thanks, Baltej. As you know, we have been continuing to work on improving our cost discipline. You’ll notice that we have taken cost-cutting measures as part of our ongoing strategy of improving value to our customers and stakeholders. We do say in the MD&A, and I’m glad you pointed it out, that we do expect a little bit of reversal on OpEx timing to happen in Q4, and that’s part of the reason why our optimistic remains unchanged. In terms of specific drivers, it’s across the board. I wouldn’t point to any one particular thing, Baltej. It’s a myriad of improvements in efficiency and discipline across the board. Do be prepared for a little bit of reversal of that in Q4, but broadly speaking, we’re pleased with the trajectory that we’ve been making.

Great. Thanks. Just another one for me, if you can provide some color on if there’s been any incremental conversations with data center players and/or if you expect any large-sized projects that would or could meaningfully contribute to your system or rate base.

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: Yeah, we would not be talking about any conversations with customers unless they were aligned with us disclosing those conversations. I will say that our focus is on creating the conditions precedent to serving a multitude of customers, especially increasing transmission capacity in Southern Missouri, which we have already disclosed that we intend to do, and certainly looking at stabilizing our generation portfolio in the region as well. That is about all we will say.

Great. Thanks for the color. I’ll leave it there.

Conference Call Operator: Your next question comes from the line of Nelson Ng from RBC Capital Markets. Your line is live.

Great. Thanks. Just a quick follow-up on the operating costs. I think out of the $11 million of cost reductions we saw in Q3, $9 million was due to timing. Brian, should we expect to see the $9 million all get pushed into Q4?

Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations, Algonquin Power & Utilities Corp.: Nelson, I think that the timing aspect for Q4 is going to be an item that does crop up. Is it going to come out exactly at 9? We’ll see what happens as we continue to progress through Q4, but the order of magnitude, I think, is correct.

Okay. Thanks. Also in the quarter, I think restructuring costs were about $9.6 million for the quarter and I think $22 million year-to-date. Can you just talk about when you expect to see restructuring costs gradually roll off?

What I’d say is we’re in the early innings of our restructuring efforts still. Obviously, given the history of the company, we believe we have a lot of opportunities to provide value across our cost curve. Stay tuned for more, but early innings is how we would describe it here.

Okay. So this could be a multi-year process?

Early innings, Nelson, is how I would phrase it.

Great. Okay. Thanks, Brian. I’ll get back to you.

Conference Call Operator: Your next question comes from the line of Rob Hope from Scotiabank. Your line is live.

Morning, everyone. As part of the portfolio optimization review, did you take a look at the domicile of the company just given the fact that the majority is now in the U.S.?

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: No, no question about it. I got those questions, as you know, and you guys were part of the queue from March on about the domicile question. It is an active conversation and consideration as we think about providing sustainable value. The question for us, recognizing that we would need to get the support of our existing shareholder base, is how does that play out? While we have not made any determinations, I owe it to you and to my board to do the due diligence to answer those questions. That work and that analysis is in flight, and that’s all I can say. I do expect that at some point we’ll be in a position to opine as to whether it’s something we pursue or not.

All right. Appreciate that. Maybe just moving over to the regulatory front, are the settlements at the various utilities kind of better or worse than you were expecting in your financial update in June? More broadly, on the next go-around for these regulatory filings, how would you, as the new management team, do things differently?

In our outlooks that we laid out for you in June, we made certain assumptions around the reasonableness of our regulatory outcomes in the litany of rate cases. I will simply say that, as I alluded to in my opening remarks, everything is very much in flight. I will not comment on whether or not where we are in our various settlement postures is above or below expectations, but our expectation around reasonable outcomes remains as reflected in our outlooks. In terms of what we are doing differently and what our existing, and certainly with Rob’s arrival, our future management team would be doing differently, we would be spending more time, as we have sought to accelerate here, engaged with our stakeholders long before we put pen to paper on a regulatory filing.

You have heard me say this before, but it bears repeating, that our objective is that by the time we actually make a filing for any rate adjustment mechanism tweak or legislative change, we have reduced the number of contested issues to as few as humanly possible before we make the filing to give our regulators a lot better air cover in both assessing and deciding on regulatory outcomes. That is just more work beforehand that really efficient and, candidly, premium utilities, that is what they do, and we expect to mirror the attributes of those highly valued pure play utilities.

That’s great. Thank you.

Conference Call Operator: Your next question comes from the line of Mark Jarvi from CIBC Capital Markets. Your line is live.

Yeah. Thanks, everyone. Just on the activities at Empire, you had a non-unanimous settlement. OPC hasn’t signed off yet. Are you in ability to negotiate with them and do a revised sort of more fulsome settlement in parallel to the public hearings that were ongoing?

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: We’re going to always be open to resolving disputes between any and every stakeholder. I’m not singling out OPC as I don’t want to get ahead of any of the processes in Missouri. The short answer is our objective is to get the support of the commission by bringing as many of the stakeholders along in resolving disputes. OPC is an important stakeholder, but it’s the commission at the end of the day who will call balls and strikes, and we’re going to do our best to bring as many folks along as we can.

I’m also curious how you guys think about updating the market in terms of the journey on the cost-cutting and navigating these rate cases. If you had sort of final decisions on Calpico and Empire at some point in earlier 2026 and you’ve seen some progress on the cost reductions, would there be a view to update potentially 2026 and 2027 guidance at some point early in or sort of mid-year 2026?

Yeah, it’s a great question, and I think it also aligns as I look out at the calendar with the arrival of our new CFO in January. I certainly would want, if all things remained equal, not just with the timing of the various rate case developments, I’d want my new CFO to come in and weigh in because he, along with me, would own the path forward. An update, if we thought that there was any need to disclose a material change in our outlooks, I’d give him a little bit of grace in the early part of next year, but our foundation is sound. My short answer is I’d always update if I thought there was material change, but the arrival of the CFO gives us a chance to reflect and have fresh eyes on it as well.

Your assumptions on timing, I think, are pretty sound.

Okay. Makes sense. Just, Brian, I know you mentioned the reversal in Q4 of some operating costs, but just as it stands today now, would you be tracking above the 2025 guidance on EPS?

Brian Chin, Interim Chief Financial Officer and Vice President of Investor Relations, Algonquin Power & Utilities Corp.: No, our guidance is our guidance. So we’re not going to make any comment about how we’re thinking about things relative to that guidance.

All right. Had to try. Okay. Thanks for the time, everyone.

Good attempt.

Conference Call Operator: Your final question comes from the line of John Mould from TD Cowen. Your line?

Hi. Good morning, everybody.

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: Good morning.

Maybe just going back to the portfolio optimization aspect, I’m just wondering if you can elaborate a little bit on the risk reduction commentary. Is that chiefly a comment around utility or state-specific regulatory risk, or are there other aspects of the portfolio optimization process where you see risk reduction opportunities as enhanced potentially?

No, great question. The short answer is all of the above. It’s risk, period. So anything that would reflect a risk to our ability to achieve steady, predictable outcomes for the long term would be a consideration. I don’t mean to point to any specific one, but in the same way that we know doing the math on whether a specific transaction would be EPS accretive, the remainder of the considerations that would drive portfolio assessment, value assessment, would be just how we articulate, identify, and mitigate risk. I appreciate the opportunity to be explicit on that. It’s the generic enterprise risk to value.

Okay. Thanks for that additional detail. Maybe just one more on your customer and billing and data systems. I appreciate the challenges that we’ve talked about on previous calls. I’m pretty backward-looking at this point, but could you just give us a sense of how that system is operating broadly across your utility footprint at this point?

Yeah. Yeah. In the midst of all the noise from the customer disruptions with the billing issues we’ve had, I’m encouraged with the progress that we have made. When we brought Amy Waldon as Chief Customer Officer, it was her experience around SAP deployment and end-to-end customer assistance that gave us confidence that there was a path forward for us to create different outcomes for customers. We’re well on our way to doing that, which is why I was explicit and intentional in recognizing the guidance and feedback we got from Missouri, who themselves want to see better customer outcomes and are really focusing us on the metrics and milestones that, not to be trite, the show-me state wants us to show them how we are improving the customer outcomes, which we know we are, but how do we know that we’re doing it in a way that is sustainable?

I am really encouraged with the progress we’re making internally and the fact that we have an opportunity in Missouri to show how the improvements we made are going to be sustainable. We’re making progress. Got a lot of work to do, but we’re making progress.

Okay. Thanks very much for all that detail. I’ll get back in the queue.

Conference Call Operator: There are no further questions at this time. I’d like to turn the call over to Mr. Rod West. Please go ahead.

Rod West, Chief Executive Officer, Algonquin Power & Utilities Corp.: Everyone, we are days away from EEI, so I thank you for your time and attention to our story, and we look forward to double-clicking face to face. Safe travels to everyone. Have a great weekend.

Conference Call Operator: This concludes today’s conference call. You may disconnect.

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