Earnings call transcript: Algonquin Power & Utilities Q2 2025 sees steady EPS, revenue

Algonquin Power & Utilities Corp. reported its second-quarter 2025 earnings, meeting both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.04, aligning with analysts’ expectations, and reported revenue of $535.59 million, slightly above the forecast of $535.58 million. Despite the earnings alignment, Algonquin’s stock experienced a 2.11% decline in pre-market trading, closing at $5.92, although it showed a modest increase of 1.35% in pre-market activity at $6.00.

Key Takeaways

• Algonquin met EPS and revenue forecasts for Q2 2025.
• Stock price declined by 2.11% in pre-market trading but showed a slight recovery.
• Financial performance impacted by decreased wind production and higher tax rates.
• No new product innovations announced, focus remains on utility regulation.
• Executives highlighted ongoing cost reduction and economic development partnerships.

Company Performance

Algonquin Power & Utilities Corp. reported a decline in its adjusted net earnings from continuing operations, which fell to $36.2 million from $41.5 million in the same quarter last year. This decline was attributed to several factors, including the normalization of weather conditions, a higher effective income tax rate, and decreased wind production. The company is continuing its strategic shift towards becoming a premium pure-play regulated utility, emphasizing its operational and regulatory capabilities.

Financial Highlights

• Revenue: $535.59 million, slightly above the forecast and nearly flat compared to the forecast.
• Earnings per share: $0.04, meeting expectations but down from $0.06 in Q2 2024.
• Adjusted net earnings: $36.2 million, down 13% year-over-year.

Earnings vs. Forecast

Algonquin’s Q2 2025 earnings report showed no surprises, with both EPS and revenue meeting analysts’ forecasts. The EPS of $0.04 was in line with predictions, while revenue slightly exceeded expectations by $10,000. This performance reflects a steady, albeit unspectacular, quarter for the company.

Market Reaction

Following the earnings report, Algonquin’s stock fell by 2.11%, closing at $5.92. However, in pre-market trading, the stock showed a slight recovery, increasing by 1.35% to $6.00. The stock remains within its 52-week range, with a high of $6.24 and a low of $4.19, indicating investor caution despite the earnings alignment.

Outlook & Guidance

Looking ahead, Algonquin maintains its three-year financial outlook, emphasizing improvements in earned return on equity (ROE) and operating expenses as a percentage of revenues. The company expects to maintain its BBB investment grade credit rating and does not anticipate any common equity financings through 2027. Future earnings per share are projected to be $0.31 for FY 2025 and $0.36 for FY 2026. InvestingPro data shows impressive momentum with a 36.27% price return over the past six months, while maintaining an Altman Z-Score of 3.46, indicating financial stability. Get access to 6 more exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports.

Executive Commentary

CEO Rod West remarked, "We’re already starting to see the impacts of spending discipline take shape," highlighting the company’s commitment to cost reduction and efficiency. He also emphasized the importance of utilities in economic development, saying, "Anywhere there’s economic development, there’s usually a healthy utility helping to serve the communities."

Risks and Challenges

• Weather normalization: Could continue to impact energy production and revenue.
• Regulatory changes: May affect rate adjustments and profitability.
• Economic conditions: Could influence customer demand and investment plans.
• Competition: Growing competitive pressures in the utility sector.
• Tax rates: Higher effective tax rates could further impact net earnings.

Q&A

During the earnings call, analysts inquired about potential portfolio updates and cost reduction efforts. Executives discussed ongoing economic development partnerships and emphasized that there are no immediate plans for hydro asset monetization. They also mentioned continuing proceedings with Empire Electric, with potential settlement discussions on the horizon.

Full transcript - Algonquin Power & Utilities Corp (AQN) Q2 2025:

Conference Operator: Hello, and welcome to the Alden Quinn Power and Utilities Corp. Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, will 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 VP of Investor Relations, Alden Quinn Power and Utilities Corp.: Thank you, operator, and good morning, everyone. Thank you for joining us for our second quarter twenty twenty five earnings conference call. Joining me on the call today will be Rod West, Chief Executive Officer and Sarah McDonald, Chief Transformation Officer. To accompany today’s earnings call, we have a supplemental webcast presentation available on our website, algonquinpower.com. Our financial statements and management discussion and analysis are also available on the website as well as on SEDAR plus 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 and A filed on SEDAR plus EDGAR and available on our website for additional important information on these items.

On the call this morning, Rod will provide a review of the key highlights and operational updates for the quarter, and I will follow with the details of our financial results. We’ll then open the lines for questions. We ask that you kindly restrict your questions to two, then re queue if you have any additional questions to allow others the opportunity to participate. And with that, I’ll turn things over to Rod.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Thanks, Brian, and good morning, everyone. Thank you for joining us on the call this morning. At first glance, the past quarter may appear relatively quiet in terms of outward facing updates, but rest assured, the calm belies a great deal of focused activity behind the scenes. Our team has been hard at work laying critical groundwork, refining internal systems, and making strategic progress that sets the stage for what’s to come. We’re already starting to see the impacts of spending discipline take shape, and while other efforts may not be immediately visible, there are essential investments in achieving our goals related to an improved customer experience and continued growth, resilience and innovation, all on our path to becoming a premium pure play regulated utility.

I remain motivated and excited for the opportunities ahead. And now some highlights from the quarter. Firstly, our Q2 financial results were solid and put us on track to meet our financial outlook for 2025. More from Brian on the financials shortly. Second, our regulatory schedule is proceeding as expected, with notable rate case filings made during the quarter at Arizona Litchfield Park Water, New England Natural Gas, and a total combined rate adjustment request of $73,600,000 Next, we continue to strengthen our executive management team with the appointments of Noel Black as Chief Regulatory and External Affairs Officer and Amy Walt as our Chief Customer Officer.

These strategic additions fortify our bench strength as a leadership team and underscore the company’s commitment to operational excellence and stakeholder engagement and ultimately advance Algonquin’s pure play utility objectives. And lastly, on June 3, the company announced its three year financial outlook and back to basics customer centric plan, which is focused on improving customer outcomes, driving operational efficiencies, and achieving constructive regulatory outcomes. In addition to announcing our estimated adjusted net EPS outlook for 2025 through 2027, we provided projections reflecting expected improvements to our earned ROE and operating expenses as a percent of revenues, anticipated organic capital investment deployment, continued maintenance of our BBB investment grade credit rating, and our expectation that no common equity financings will be needed through 2027, all in the context of increasing value for our four key stakeholder groups. Turning now to some updates on the operational front, starting with regulatory updates that occurred during the period. The Arizona Corporation Commission approved a settlement agreement resulting in a $4,200,000 revenue adjustment at the company’s four water and wastewater facilities in Arizona, with approved rates taking effect July 1.

A settlement agreement is awaiting approval with the New Hampshire Public Utilities Commission, supporting continuation of rates approved back in October 2023 at our Energy North Gas utility. The hearing was held on July 31, and we are awaiting a commission order. And some final comments before I turn things over to Brian. As a utility provider, we recognize that reliable infrastructure and energy services are the foundation of sustainable economic development. Our commitment goes beyond delivering services.

We’re proud to be an active partner in initiatives that drive growth, attract investment, and support the long term vitality of the communities we serve. As a company still in transition, we continue to refocus our efforts on investing in our local communities. We desire to be a key partner in enabling growth and becoming a catalyst for economic development in the 13 states we serve. As part of our long term strategy, we’re actively developing targeted investment plans aimed at driving economic progress across our service areas. I’ll now turn things back to Brian to review the financial highlights from the quarter.

Brian Chin, Interim Chief Financial Officer and VP of Investor Relations, Alden Quinn Power and Utilities Corp.: Brian? Thanks, Rod. As stated earlier, it was an encouraging quarter for our key financial metrics, and we remain on track to meet our 2025 financial outlook. Second quarter adjusted net earnings from continuing operations were $36,200,000 down approximately 13% from $41,500,000 in 2024. Net earnings from the Regulated Services Group were essentially flat year over year as growth from the implementation of approved rates and reduced interest expense related to deleveraging were slightly more than offset by the following factors.

First, we saw a normalization of weather this quarter compared to slight weather favorability in the prior period, the lack of a favorable one time revenue make whole adjustment at our Bermuda Electric Utility in the 2024, and a higher effective income tax rate and lower HLBV income due to decreased wind production. The 5,800,000 increase in net earnings for the Hydro Group was primarily due to the finalization of a one time tax recovery we discussed in Q1. Our expectations of an effective tax rate in the low to mid 20% range for the year has not changed. And on the corporate side, our adjusted net earnings decreased by $10,200,000 primarily related to the removal of Atlantica dividends. Moving to our EPS walk.

Q2 adjusted net earnings per share were $04 which is down from last year’s Q2 twenty twenty four adjusted net earnings per share of $06 including onetime nonrecurring items, but otherwise was operationally flat. Positive drivers for the quarter included $02 related to the implementation of approved rates and $02 of deleveraging on interest expense. These were more than offset by the elimination of Atlantica dividends of $03 share dilution of a negative $00 related to the mandatory conversion of our equity units, of which this is the last quarter of year over year dilution a negative zero zero from the combined effects of higher depreciation taxes and lower HLBV income and a slight return to normal weather from the prior year whose effects also rounded to a negative penny. Overall, results for the quarter were relatively quiet, as we said before, with much work continuing behind the scenes. And now back to Rod for closing remarks.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Thanks, Brian. We look forward to providing updates on our portfolio strategy closer to the end of the year. We also plan to attend the EEI Financial Conference in November and hope to meet with many of you then. In closing, I want to thank you for your continued support and interest. And as we look ahead, we remain confident in our ability to navigate the challenges, invest wisely in our infrastructure for the benefit of our stakeholders, and continue driving sustainable value and growth.

We appreciate your time today and are looking forward to taking your questions. Back to you, operator.

Conference Operator: Thank you. Our first question comes from the line of Richard Sunderland with JPMorgan. Your line is open.

Richard Sunderland, Analyst, JPMorgan: Hi, good morning. Thank you for the time today.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Morning.

Richard Sunderland, Analyst, JPMorgan: Rod, are you still anticipating some type of portfolio update this year? I’m curious if you have any sense on timing there and what you’re evaluating across the business in advance of that.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Yeah, what we said, and I think I just alluded to it, we’ll give a strategy update on the portfolio on the back end of the year. We haven’t made a formal announcement, although I did declare that we plan to attend the EEI financial conference in early November. But we’ve not made any formal pronouncements as of yet.

Richard Sunderland, Analyst, JPMorgan: Okay, got it. Thanks for making that clear. And then the investment plans for economic progress makes sense what you were outlining there. But I’m just curious if you can provide a little more detail on what you are thinking about as, I guess, a target for those investments and how you could be a partner with your territories.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Well, we won’t get ahead of either our regulators or any prospects,

Richard Sunderland, Analyst, JPMorgan: but we are

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: signaling, particularly with our states, that we understand our role as a utility in being a catalyst for economic development. It’s my experience in my prior associations, as well as my specific intentions with Algonquin Liberty, that we will be an active participant in our states. Anywhere there’s economic development, there’s usually a healthy utility helping to serve the communities that are in its service territory. And my objective is making it clear, only to our states, but also to our employees and prospects for growth that we expect to be catalysts at the table. So it’s the beginning of, as you might imagine, several conversations that are in various stages of maturity.

Richard Sunderland, Analyst, JPMorgan: Thank you. I’ll leave it there.

Conference Operator: Our next question comes from the line of Nelson Ng with RBC Capital Markets. Your line is open.

Nelson Ng, Analyst, RBC Capital Markets: Great. Thanks and good morning everyone. Quick question for Brian. You mentioned that you’ve finalized some of the tax items for the hydro business. So and you recognize some onetime benefits in Q1 and Q2.

Should we expect to see any tax recoveries in Q3?

Brian Chin, Interim Chief Financial Officer and VP of Investor Relations, Alden Quinn Power and Utilities Corp.: No. The majority of the tax adjustments related to hydro were taken in Q1. As you know, there was a follow on true up in Q2 and that’s really it. We’re not expecting any further updates on that.

Nelson Ng, Analyst, RBC Capital Markets: Okay, great. Thanks. And my next question, like, obviously you have a lot of ongoing rate cases to run through. You hired Noel and Amy recently. There’s a lot of heavy lifting involved.

Should we expect any additional hires in near term? Do you have the right team in place right now?

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: That will be a conversation that I would simply make announcements when I do, no different than with Noel and Amy. I won’t signal that I’m planning to do X, Y, or Z with a specific role. Just know that we’re constantly asking the question, do we have the right skills in the right places for our objectives? And that’ll be my MO on a go forward basis. I won’t anticipate it.

I’m simply letting everyone know that we’re constantly asking that question. That’s what I view as my job, to make sure I got the right people in the right place to achieve our objective.

Nelson Ng, Analyst, RBC Capital Markets: Great. Thanks, Rod. I’ll get back in the queue.

Conference Operator: Next question comes from the line of Robert Hope with Scotiabank. Your line is open.

Jessica Hoyle, Analyst, Scotiabank: Good morning, everyone. This is Jessica Hoyle on for Robert Hope. Thanks so much for taking my questions. So just to start, can you talk a little bit more about the progress on the plans to rein in costs and increase efficiencies in utility platform?

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: I think the point we’re making was that the efforts are underway. We’re in the early innings, but we’re not ascribing any specific outcome on our efficiency work. We’re simply declaring that cost discipline is the way in which we plan to work. And our financial outlooks that we provided on June 3 reflect our point of view around how we think about our cost posture as an enterprise. It certainly plays itself out differently in each one of the jurisdictions, but we expect and aim to be a lean company coming to our stakeholders, having done the hard work of lowering our cost curve to create room to make more productive capital investments on behalf of our customers to have minimal impact on the build as we can reasonably expect.

So we’re in the early innings. We’re really excited about the progress we’ve made, but we have high ambitions and a long way to go.

Jessica Hoyle, Analyst, Scotiabank: Got it. Thanks. And then secondly, we’ve seen some hydro transactions in the market. Is there any update on the process to potentially monetize these assets?

Brian Chin, Interim Chief Financial Officer and VP of Investor Relations, Alden Quinn Power and Utilities Corp.: No updates at this time, Jessica. We remain in the same posture as we articulated at the three year outlook and on the Q1 call.

Conference Operator: Thank you. Our next question comes from the line of Mark Jarvi with CIBC. Your line is open.

Ali, Analyst, CIBC: Hi, guys. It’s actually Ali on for Mark Jarvi. Just a couple of questions. The first, piggybacking off of a prior question on cost reductions. Just wondering where you might be focused now.

Is it really more on the opco level or would it be on the holdco level? And wondering also how you think we might be able to gauge the progress over the year on those cost reductions efforts?

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Yeah. You won’t see us providing updates on the cost out program. You’ll see us producing on a quarter by quarter basis the outcomes at the jurisdictions. And by outcomes, I mean our rate case settlements, but more importantly, our overall production as a firm. And I think the signals that we’ve been given to marketplace around O and M as a percentage of revenues, our best and right now only public pronouncement to give you a sense of what we’re seeking to accomplish from an enterprise perspective.

Because it’s not just an operating company conversation or holdco or corporate center conversation. It’s an enterprise effort to lower our overall cost profile for the benefit of our stakeholders. And so we’ll be deliberate about how we talk about it publicly, but but it’s it’s an an enterprise enterprise effort. Effort.

Ali, Analyst, CIBC: Excellent. Okay, that’s helpful. And second question on the Empire Electric proceedings. Do you believe that the stakeholders might be willing to engage in a negotiated settlement? And if yes, any potential timelines for settlement discussions or resolution?

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Well, the short answer is always. And the timeline is a function of the procedural schedule. And we have some of the early postures from staff and OPC. And we’ll have our rebuttals, I think, in the coming weeks. And around that November time frame, after the initial posture from the state’s stakeholders and our rebuttal to it, I think that’s usually when the process of negotiations officially begin.

But from our vantage point and our stakeholder engagement objectives, we’re in a constant state of negotiations with the various stakeholders to that outcome. So I won’t give you a timeline, but again, I don’t ever want to get ahead of the ultimate decision makers there, but that process is well underway.

Ali, Analyst, CIBC: That’s great. Thank you. And that’s it for me.

Conference Operator: There are no further questions at this time. I will turn the call to Mr. Rod West.

Rod West, Chief Executive Officer, Alden Quinn Power and Utilities Corp.: Well, if there are no further questions, thank you for your interest. And this concludes our quarter call.

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

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