Earnings call transcript: NorthWestern Corporation Q3 2025 earnings beat boosts stock

NorthWestern Corporation reported its Q3 2025 earnings, surpassing analysts’ expectations with a non-GAAP EPS of $0.79, compared to the forecast of $0.7458. Revenue also exceeded projections, reaching $387 million against an expected $376.04 million. The company’s stock rose by 0.25% in aftermarket trading, closing at $59.83, reflecting positive investor sentiment following the earnings announcement.

Key Takeaways

• NorthWestern Corporation’s Q3 earnings and revenue both exceeded forecasts.
• Stock price increased slightly in aftermarket trading.
• The company is focusing on expanding its data center market presence.
• A proposed merger with Black Hills Corporation is underway.
• The company aims for an 8-11% total shareholder return.

Company Performance

NorthWestern Corporation demonstrated strong financial performance in Q3 2025, with earnings surpassing expectations. The company’s strategic initiatives in expanding its energy generation capacity and data center operations are positioning it well within the industry. Additionally, the proposed merger with Black Hills Corporation could further enhance its competitive edge.

Financial Highlights

• Revenue: $387 million, up from the forecast of $376.04 million.
• Non-GAAP EPS: $0.79, exceeding the forecast of $0.7458.
• Year-to-date GAAP EPS: $2.22.
• Year-to-date Adjusted EPS: $2.41.

Earnings vs. Forecast

NorthWestern’s Q3 2025 EPS of $0.79 represented a 5.93% surprise over the forecasted $0.7458. Revenue also saw a positive surprise of 2.91%, indicating robust operational performance. This marks a continuation of the company’s trend of exceeding market expectations.

Market Reaction

Following the earnings release, NorthWestern’s stock experienced a modest increase of 0.25% in aftermarket trading, closing at $59.83. This price movement positions the stock closer to its 52-week high of $62.43, reflecting investor confidence in the company’s future prospects.

Outlook & Guidance

NorthWestern has provided a 2025 earnings guidance range of $3.53 to $3.65 per share. The company is also preparing for a Montana rate review outcome in Q4 2025 and expects to provide a 2026 outlook in February. The merger with Black Hills Corporation is anticipated to close in the second half of 2026.

Executive Commentary

CEO Brian Bird highlighted the company’s early planning stages for new projects, stating, "We are really in early planning stages, things are really getting going here." CFO Crystal Lail added, "We’ve been extremely busy," emphasizing the company’s active engagement in strategic initiatives.

Risks and Challenges

• Regulatory changes could impact future rate reviews.
• Integration challenges from the proposed merger with Black Hills Corporation.
• Fluctuating energy demand could affect future revenue streams.
• Potential delays in project approvals or implementations.

Q&A

During the earnings call, analysts inquired about the progression of data center requests and the resource adequacy project submission. The management provided clarity on these initiatives, underscoring their importance to NorthWestern’s strategic growth plans.

Full transcript - NorthWestern Corp (NWE) Q3 2025:

Conference Operator: Thank you for standing by. Welcome to the NorthWestern Energy Group third quarter 2025 financial results webinar. 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 would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. I would now like to turn the conference over to Travis Meyer, Director of Corporate Development and Investor Relations. You may begin.

Travis Meyer, Director of Corporate Development and Investor Relations, NorthWestern Energy Group: Thank you, Priscilla. Good afternoon, and thank you again for joining NorthWestern Energy Group’s financial results webcast for the quarter ended September 30, 2025. Joining us on the call today are Brian Bird, President and Chief Executive Officer, and Crystal Lail, Chief Financial Officer. They’ll walk you through our financial results and provide an overall update on the progress this quarter. NorthWestern’s results have been released, and our release is available on our website at northwesternenergy.com. We also released our 10Q pre-market this morning. Please note that that’s the company’s press release. This presentation, comments by presenters, and responses to your questions may contain forward-looking statements. As such, I’ll direct you to the disclosures contained within our SEC filings and safe harbor provisions included on the second slide of this presentation. Also note that this presentation includes non-GAAP financial measures and information regarding the pending merger transaction.

Please see the non-GAAP disclosures, definitions, reconciliation, and merger-related disclosures included in the appendix of the presentation. The webcast is being recorded. The archived replay will be available today shortly after the event and remain active for one year. Please visit the financial results section of our website to access the replay. With those formalities behind us, I’ll hand the presentation over to Brian Bird for his opening remarks.

Brian Bird, President and Chief Executive Officer, NorthWestern Energy Group: Thank you, Travis. On our recent highlights, we reported GAAP diluted EPS of $0.62 per share, non-GAAP diluted EPS of $0.79 per share for the quarter. We are affirming our 2025 earnings guidance range of $3.53 to $3.65. During the quarter, we integrated our Energy West acquisition of the natural gas assets. We’ve also integrated the customers and employees, and we’ve really tucked that business in seamlessly. Very, very excited about that opportunity. I’ll tell you what, something even a bit more excited about is the announcement of our agreement with Black Hills Corporation for an all-stock merger of equals. Even though we did that announcement in mid-August, we have already filed our joint applications for the transaction approval with the regulatory commissions in Montana, Nebraska, and South Dakota.

In addition, during the quarter, we filed a tariff waiver request with the Montana Public Service Commission for recovery of our operating costs associated with the Avista Colstrip interest. Recently, we submitted a 131-megawatt natural gas generation project in the Southwest Power Pool Expedited Resource Adequacy Study. That project, if we move forward, will be approximately a $300 million project, which is currently not included in our five-year CapEx plan. Lastly, a dividend declared during the quarter of $0.66 per share, payable December 31, 2025, to shareholders of record of December 15, 2025. Moving forward to the NorthWestern value proposition with a dividend yield between 4% to 5%. Add that to a base capital plan providing a 4% to 6% EPS growth gives us a total return of 8% to 11% total return.

If you think about that CapEx plan, the vast majority of that is in a T&D investment throughout our total system on both the gas and electric side of our business, obviously necessary to serve our customers. If you consider the incremental opportunities we have, certainly with data centers and large load customers, FERC regional transmission, and any incremental generating capacity, some of which I just spoke to, you could see the dividend yield plus that greater than 6% EPS growth, giving a total return even greater than 11%. With that, I’m going to turn it over to Crystal to talk about the third quarter financial review.

Crystal Lail, Chief Financial Officer, NorthWestern Energy Group: Thank you, Brian, and good afternoon, everyone. We are coming to you from beautiful Butte, America today, following a board meeting here. Based off those highlights, it feels like we might have had a little bit of a busy quarter. I will cover and update you on our third quarter results and outlook for closing out the year, and then turn it back to Brian for some really exciting strategic updates and where we’re at otherwise with the business. We are pleased to deliver a solid quarter in line with our expectations here for the third quarter of 2025 and are on track to deliver on our earnings guidance and financial targets for the year. For the quarter, earnings were $0.62 on a GAAP basis compared to $0.76 in the prior period. On an adjusted basis, we delivered $0.79 as compared with $0.65.

In the upcoming slides, I’ll dig in a bit on the detail of those drivers, but I would note and highlight what you just caught, which is comparability year over year. There are a couple of items I would just highlight that are impacting that. That includes the merger-related costs that are included in third quarter of 2025, and also remind you that in the third quarter of 2024, we had a tax benefit. Moving to slide nine from a year-to-date perspective, that leaves us at $2.22 from a GAAP basis compared to $2.34 last year. Again, on an adjusted basis, that’s $2.41 in 2025 year-to-date compared to $2.27 in 2024. Slide 10 shows you the third quarter drivers of EPS compared to that same period in 2024.

I would note that despite mild weather, margin improvement drove $0.52, which was offset in some regards by our operating costs, including those $0.12 of merger-related costs I referred to, higher depreciation and interest, and inclusion again in the prior year of an $0.11 tax benefit. Moving to slide 11. For further detail on margin, I highlighted that that was $0.52 of improvement. Of that $0.52, rate drove $0.35 of margin improvement. As a reminder, we worked really hard on that regulatory execution to be able to recover our costs and close that gap on earning returns. That $0.35 is certainly key to that, and we are currently awaiting our outcome in our Montana rate review, and I’ll address that a little bit later. Also, customer usage provided $0.08 of improvement, and electric and gas transmission and transportation provided another $0.05.

These were offset by a couple of things we had highlighted previously of trends for 2025, and that includes the market sales impact in our PCAM, and that is a detriment during the quarter, as well as the effects of Montana property tax legislation that are also a detriment to us in the quarter, reducing some of that favorability in the margin line. Moving to slide 12, I’ll discuss again those adjusted items to hopefully make the quarter make a bit more sense for third quarter 2025 versus third quarter of 2024. Again, mild weather in this third quarter impacted us by about $0.05, and that’s compared to, again, an add-back of $0.05, an add-back of $0.01 in the third quarter of 2024. Also, in 2025, we’ve incurred $0.12 of merger-related costs.

As I mentioned earlier, the 2024 results included an $0.11 tax benefit related to prior year gas repairs once that final guidance came out. All of that gets us to, if you look at the adjusted columns, $0.79 of earnings in the third quarter of 2025 compared with $0.65 in 2024. Moving to slide 13, you’ve heard our commitment to credit quality and maintaining that. We’ve largely executed on our financing plans, and those remain unchanged as we continue to focus on making sure we’re keeping that FFO to debt number where it needs to be and expect to see a bit of improvement even on that as we close out the year for 2025. Moving to slide 14.

Our financial performance year-to-date reinforces our confidence in delivering on the financial commitments that we’ve made, and we expect a final outcome in our Montana rate review, as I alluded to earlier, during the fourth quarter. As such, we continue to maintain a wider range of $0.15 as we look to close out 2025. We also expect to provide our 2026 outlook during our year-end call in February, so you can all look forward to that. Moving to slide 16. You’ll see that our capital investment slide and forecast here remains unchanged from what you’ve seen from us before. Brian mentioned the opportunities, and we talked many times about what might be incremental to our current plan, but the opportunity for incremental generation investment in South Dakota under the SEP Expedited Resource Adequacy Study, that is not reflected in these amounts.

As I just alluded to with our 2026 earnings outlook, we expect to roll forward and update our capital plan also on the Q4 call in February. With that, I will turn it back to Brian.

Brian Bird, President and Chief Executive Officer, NorthWestern Energy Group: Thanks, Crystal. On 18, we talked about our merger with Black Hills update. August 18th seems like a long time ago, but it was about two months ago. In that short period of time, we with our Black Hills friends have worked collectively to make three filings with each of the three states that we needed to make filings in. We filed with the Montana Public Service Commission, the North Dakota Public Service Commission, and the South Dakota PUC. Those filings were made, and we continue to work on other filings necessary for the transaction. We continue to work on the S4 and joint proxy statement, expect to release that in Q1 of 2026. In terms of shareholder meetings, sometime in Q2 or Q3, our respective companies would hold shareholder meetings on a vote on the transaction. We are developing transition integration implementation plans.

What I’d say there is we collectively are talking to independent integration consultants, hope to make a decision relatively soon there. We are really in early planning stages, things are really getting going here, I’d argue, in the December, January timetable as we continue planning moving forward. Lastly, receiving approvals and closing the merger, I’d like to think that can happen sometime in the second half of 2026. Moving on to the next page regarding large load customers off to the right, I think all of you are well aware of the three LOIs that we currently have with SABY, Atlas, and Quantica. I’ll mention the development agreement with SABY here shortly. On the left-hand side of the page, just a quick focus on Montana and South Dakota.

We do anticipate making a filing with the Montana Public Service Commission to propose a large load tariff in the fourth quarter of 2025, and we’d like to do that in conjunction with an ESA with SABY. Going in arm in arm, making sure that we’re protecting customers in essence, but also providing what we need to move forward with data centers in the state. In South Dakota, there continues to be significant indications of interest. Any new large load customers require incremental capacity, and in South Dakota, PUC already has an established process for large load customers. The other thing I’d just say in South Dakota, we and certainly other utilities of the state have seen good progress in between legislative sessions on a sales tax exemption bill. I just saw a draft of one here shortly not too long ago, and I’m excited about that opportunity.

Hopefully we can deal with that issue in the next legislative session so we can have a better means to attract data centers in the state of South Dakota. I think really good progress in both states. Regarding that process on slide 20, we continue to lay out for you kind of left to right the process. We have seen good progress here. From a data center request, we’ve moved three of those parties into a high-level assessment. As a matter of fact, of the LOIs, what we’ve done here recently, of our three LOI parties, we’ve entered into a development agreement. What’s that? We notice we show those kind of hand in hand here, maybe. An incremental step of the LOI portion, if you will.

The development agreement is primarily to make sure that we have a commitment, in essence, to fund the studies, and we’ve received development deposits along the way to fund those studies necessary, impact studies, facility studies. That’s an important step we anticipate. The other two LOIs, we could see development agreements with those other two LOIs before the end of the year as well, all with the hopes of getting to energy service agreements as quickly as we can. Moving forward. Colstrip transaction overview. I’m just in the far right. I think I need to provide a bit of a history lesson for folks. Back in January 2023, we acquired the Avista piece, and you may recall that our IRP talked about the necessity of incremental 200-plus megawatts of capacity.

That Avista portion provided resource adequacy for us in Montana, and it also brought our ownership interests in the Colstrip generating facility from 15% to 30%. Unfortunately, 30% interest wasn’t going to be high enough, if you will, to protect ourselves from other owners of the plant. For various reasons, their states didn’t necessarily want them to own coal-fired generation, and thus there could have been an incentive for them to actually close down the Colstrip generating facility. For us to protect our existing interest, 222 megawatts and the Avista interest in Colstrip, in July of 2024, we acquired Puget’s 370 megawatts. What that did is it allowed us to move from a 30% ownership to 55% ownership, providing us a clear advantage to provide the direction for where Colstrip’s going to go on a going forward basis and protecting ourselves and our customers from a capacity standpoint.

We’re excited that. January 1, 2026 is not too far away. I think we’ll sleep better knowing we have those resources to serve our customers on the coldest days of the year. Those combined interests, of course, will deliver substantial benefits to our existing customers, communities, and investors, but also support now the integration of some large load customers. Primarily, that would be the Quantica issue. Two things we did to protect ourselves. Starting on 1/1/26 as quickly as we can here. For the Avista portion, we filed a temporary PCAM tariff waiver request with the Montana Public Service Commission. We did that in August. That would provide a near-term cost recovery mechanism that is expected to largely offset the $18 million of incremental annual operating costs resulting from the transfer. Decision is expected on that the first quarter of 2026.

I think it’s clear you understand with a historic test year in Montana, if we’d not have done this, we would be at risk of not recovering our operating costs of that unit, if you will, those incremental 222 megawatts until our next rate review. This is a prudent means to try to make sure we protect our financial integrity, and hopefully, we’ll see a good outcome from the Montana Commission. I think they will respect the concept of we are buying incremental capacity to serve our customers at a zero upfront cost. All we’re asking here is to get recovery of our operating costs and to a point where offsetting, if you will, sales from that unit to offset those, at least to have those sales cover our operating costs before we actually move into the 90/10 sharing mechanism.

I think it’s a very reasonable ask, and hopefully, the Montana Public Service Commission will see that as well and hopefully see it as quickly as we get into 2026. On the Puget piece, we anticipate signing a contract in Q4 2025 to sell electricity through late 2027. The revenue from that contract is expected to largely offset the $30 million of incremental operating costs from that transfer. We’ve already filed with FERC for cost-based rates in October 2025 for that portion and expect approval during the fourth quarter of 2025. I want to spend a little bit more time on Puget. I think the question could be asked.

Why FERC regulated and not Montana Public Service Commission regulated for that 370 megawatts, the Puget portion? We’ve received comments through the Montana Public Service Commission that it provides uncertainty around how we will or can serve large load customers in Montana. Clearly, the 370 megawatts were not identified in our IRP as needed for resource adequacy on 1/1/2026. That’s reason enough to move things from a FERC regulated to a FERC regulated perspective. I think the other question you might have is, why would you plan to enter into a PPA with another party for the full 370 megawatt output of the Puget portion? First and foremost, that really avoids any affiliate issues that we’d have with our regulated business.

Secondly, having a FERC regulated, fully contracted output with an investment-grade counterparty not only reduces market risk, but it allows us to largely offset our operating costs at the facility. Lastly, the term of that agreement would be through Q3 2027 in order to have 370 megawatts available for large load customers in Q4 2027. Ideally, this 370 megawatts, we will ultimately like to move that into our Montana Public Service Commission regulated business sometime in 2027 or beyond. We certainly need to persuade the Montana Public Service Commission that is in the best interest of not only all of the customers in Montana, but make sure also for their existing customers in Montana. With that, I’ll conclude just by saying I want to thank all of your interest. As Crystal Lail pointed out here earlier, we’ve been extremely busy.

I just want to point out I’m pretty proud of this company for our ability to not only handle our day-to-day jobs, to not only run this business, but work with our friends at Black Hills Corporation to, we think, put together a company that’ll be better together, certainly much larger, much more financially strong, have the scale, if you will, to better serve not only our shareholders, but equally importantly, our customers and our employees as well. With that, admire to handle Q&A.

Crystal Lail, Chief Financial Officer, NorthWestern Energy Group: Thank you, Brian. That was a good update. Perlo will open the lines for Q&A.

Conference Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press the star one on your telephone keypad, raise your hand, and join the queue. If you would like to withdraw your question, simply press the star one again. If you are called upon to ask a question and are listening via loudspeaker in your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Aidan Charles Kelly with JP Morgan. Please go ahead.

Aidan Charles Kelly, Analyst, JP Morgan: Aidan, can you hear us?

Hey, there you go.

Hey, can you hear me?

Yeah.

Yeah. Just want to hone in on the data center front first. Looks like there was some activity in the request in high-level assessment stages. Could you just clarify if this was a simple pull forward of some of the request stage into the high-level assessment, and then maybe one just got added to the request stage?

On top of that, what sort of timeline you might be able to kind of convert the high-level assessments into incremental LOIs?

They’re great questions. I think the data center request, the queue count there went up one. More importantly, net, net, we’ve increased the queue count in the high-level assessment by three. I can’t give you a specific time. One thing I’ve learned through this process, it takes two to tango, in essence, when things move to that next level. I do think there are at least one of those that could show up in that box here relatively soon, that LOI box, if you will, or directly to a development agreement.

That’s helpful to know. Maybe just pivoting to South Dakota, also curious on timeline there for getting approval of the gas plan, and then ultimately, how should we think about that kind of flowing into CapEx and the rate base?

Crystal Lail, Chief Financial Officer, NorthWestern Energy Group: I’ll take that one. I think both MISO and Southwest Power Pool put out this summer an expedited resource adequacy study window. We submitted, based off that study, a facility that would get us to resource adequate and meet the requirements by 2030. We’ve received initial feedback from Southwest Power Pool that what we’ve submitted meets their initial requirements, and we expect to hear on the transmission piece in early 2026. As such, we will wait to put it into our capital plan until we roll forward that refresh here in probably the fourth quarter call in the February timeframe.

Good color to hear. Appreciate it. I’ll leave it there. Thanks.

Thank you.

Conference Operator: If you would like to ask a question, please press star one on your telephone keypad. I’m showing no further questions at this time. I would like to turn it back to Brian Bird for closing remarks.

Aidan Charles Kelly, Analyst, JP Morgan: Thank you so much. Again, I want to reiterate the tremendous support we’ve had, certainly since the announcement, and I think the feedback we’ve received, and I know that our friends at Black Hills have received tremendous support for the merger. I will just tell you that we both collectively seem to be working really well together to make things happen here and continue to move this process along. We both endeavor and understand the importance of this merger and will work really, really hard to make sure it happens. Like I said, hopefully, as soon as the second half of 2026. With that, I want to again thank you for your participation today.

Conference Operator: Thank you. This concludes today’s conference call. Thank you all for joining. You may now disconnect.

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