Welcome to Chesapeake Utilities Corporation's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Lucia Dempsey, Head of Investor Relations. Lucia De

Thank you, and good morning, everyone. Today's presentation can be accessed on our website under the Investors page and Events and Presentations subsection. After our prepared remarks, we will open up the call for questions. On Slide 2, we show our typical disclaimers, while I remind you that matters discussed on this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The safe harbor for forward-looking statements section of our 2024 annual report on Form 10-K and on our second quarter Form 10-Q provide further information on the factors that could cause such statements to differ from our actual results. Additionally, the company evaluates its performance based on certain non-GAAP measures, including adjusted gross margin, adjusted net income and adjusted earnings per share, and the information today includes the appropriate disclosures in accordance with the SEC's Regulation G. A reconciliation of these non-GAAP measures to the related GAAP measures has been provided in the appendix of this presentation, our earnings release and our second quarter Form 10-Q. Here at Chesapeake Utilities, safety is our first priority. We start all meetings with a safety moment, and we'll do so here with a moment on digging safely as highlighted on Slide 3. Monday, August 11, is National 811 Day when utilities across the nation remind customers to call before they dig to prevent dangerous and costly damage to underground infrastructure, including natural gas pipelines, electric distribution lines and water pipes, among others. Whether installing a small mailbox or excavating a large stump, dial 811 before breaking ground to request local utilities to mark all underground lines, ensuring you can safely dig and complete your project. I'll now introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will provide an update on our key accomplishments and highlights since our last earnings call, our quarterly and year-to-date performance, our full year guidance metrics and our capital growth program. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will summarize our progress on multiple regulatory initiatives, our ongoing business transformation efforts and our stakeholder engagement. And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our financial results, financing updates and investment highlights. With that, it is my pleasure to turn the call over to Jeff.

Thank you, Lucia. Good morning. We appreciate you joining our discussion today. The highlights on Slide 5 demonstrate how we've continued to deliver with purpose over the last few months. Our growth trajectory continues as we've expanded our capital investment program, achieved regulatory success and maintained a strong balance sheet while financing future growth. As shown on Slide 6, we reported adjusted earnings per share of $1.04 for the second quarter of 2025, up 21% from the second quarter of 2024. This marks the fourth consecutive quarterly increase in earnings relative to the prior year period following the Florida City Gas acquisition, driven by continued growth in our service areas, successful integration of FCG and consistent focus on operational excellence. Our second quarter performance, coupled with a strong start to the year, is driving double-digit growth in adjusted gross margin, operating income and adjusted net income for the first half of 2025 relative to the same period last year. These results are in line with our expectations, so we continue to reaffirm our full year 2025 EPS guidance of $6.15 to $6.35 per share, as shown on Slide 7. This range does assume a successful outcome in 2025 on the Florida City Gas depreciation study, which was filed with the Florida Public Service Commission at the start of this year, and Jim will provide an update on this filing later on the call. On the capital investment side, growing demand for natural gas from residential, commercial and industrial customers continues to drive our robust capital program with $213 million already invested in the first 6 months of this year. Given this pace of investment and our expectations for the second half of the year, we are increasing our 2025 full year capital expenditure guidance to $375 million to $425 million, a $50 million increase over our prior range. A significant amount of our total capital spend this year will drive margin growth in 2026 and beyond, supporting our EPS guidance through 2028. I'll now shift to Slide 8 to discuss the increasing demand for natural gas, as we strategically invest in some of the fastest-growing regions of the country. Both of our core service areas generated another quarter of above-average customer growth, leading to year- to-date residential customer growth of 4.2% in Delmarva and 3% in Florida compared with the first half of last year. We're seeing a number of multifamily developments opt to add natural gas instead of the typical all-electric build-outs and a number of business park developers in Delaware are leveraging state funding to install natural gas infrastructure, which attracts additional small business and manufacturing customers. We also continue to expand natural gas service to new developments across Florida. One recent example is Newfield in Palm City, a new farm-to-table community that combines housing, sustainable farming and a vibrant town center, where we're installing natural gas infrastructure to serve homes, schools, businesses and agricultural work. The opportunities we have to serve increasing customer demand and improved system reliability are the basis for our overall growth strategy, which in turn drives sustainable earnings. We remain committed to increasing shareholder value by focusing on the 3 pillars of our growth strategy, as shown on Slide 9, which I'm certain you have memorized by now. In short, we are consistently focused on identifying and prudently deploying capital, proactively managing our regulatory agenda and continually transforming our business operations. We believe that successful execution of these 3 pillars will enable us to maintain top quartile growth and total shareholder return. Slide 10 provides some highlights of our 2025 capital program. We were pleased to bring 6 major capital projects online within the first half of the year, supported in some cases by interim service from our Marlin Virtual Pipeline operations. Boynton Beach came online in the first quarter, and New Smyrna Beach, St. Cloud Expansion Project, and the 3 RNG transportation projects were brought online in the second quarter of this year. Altogether, projects placed in service thus far in the year generated $2.5 million in the second quarter and are expected to generate $9.8 million for full year 2025. All other construction projects remain on track and on budget. We also have a number of incremental investments that are driving the $50 million increase in our full year capital expenditure guidance. We expect to spend approximately $20 million on additional infrastructure replacement and reliability projects through our GUARD and SAFE programs. About half or $10 million of the incremental capital investment for the Worcester Resiliency Upgrade, or WRU, will be spent this year as well as an additional $10 million to meet increased demand for our Marlin Virtual Pipeline services and $10 million as we build out infrastructure to support the rapid growth in our Port St. Lucie, Florida area. We were particularly excited to announce our first data center-related project, Duncan Plains outside of Columbus, Ohio. We've entered into an agreement with American Electric Power to construct and operate an intrastate natural gas pipeline to power our new AEP fuel cell facility that will serve a data center. This $10 million capital project is expected to be online in the first half of 2027. I'll now provide additional details on WRU, our LNG storage facility in Bishopville, Maryland, as shown on Slide 11. Last quarter, we shared that cost increases drove the total capital investment for the project to approximately $100 million and shifted the expected in- service date to the first half of 2026. We subsequently requested updated rates, and at the end of last month, received FERC approval to recover this incremental capital investment, which results in an additional $3.9 million of full year margin contribution upon project completion. In June, we took delivery of the storage tanks and are pleased to report that we now have all 5 tanks safely on site. In July, we formally mobilized our contractor and received an initial notice to proceed from FERC, enabling us to begin site preparation and construction. This project remains the lowest cost project to support affordable energy and protect against weather- related disruptions for growing populations in Southern Delaware and Maryland. We look forward to having the project fully in service in the first half of 2026. As shown in detail on Slide 12, all of our major capital projects are advancing as expected with more than half now in service. We forecast these projects to contribute approximately $23 million of gross margin in 2025 and $45 million in 2026. As summarized on Slide 13, our regulated capital program benefits from multiple sources of investment, not just the new transmission projects, but also infrastructure projects that support reliability and resiliency. Our capital investment under our 4 regulated infrastructure programs are expected to generate gross margin of $27 million in 2025 and approximately $38 million in 2026. Shifting to Slide 14. All of these projects support our 5-year capital investment plan of $1.5 billion to $1.8 billion, of which we've already identified and initiated at least $1.4 billion. Most importantly, approximately 70% of that investment requires no additional regulatory approval or support. Not yet included in this forecast are a number of projects still under exploration and development, several of which are highlighted on Slide 15. We have a number of potential expansion opportunities ahead of us, including serving the space industries in Virginia and Florida, expanding our systems in the southern part of Delmarva and Florida and meeting incremental demand for our Marlin Virtual Pipeline services to transport RNG, CNG and LNG. As we determine the likelihood, size and timing of these potential projects alongside our upcoming strategic planning process, we will evaluate updates to our 5-year capital expenditure guidance. With that, I'll turn to Jim to discuss our regulatory strategy and business transformation initiatives.

Thank you, Jeff, and glad to speak with everyone this morning. I'd like to start with an update on our rate cases, as shown on Slide 16. I'm pleased to report that we've now received final orders on all 3 rate cases that have been active over the last year. The final order for our Maryland rate case was effective in April and approved an annual revenue increase of $3.5 million. In June, we received a final order for our Delaware rate case, approving the previously settled $6.1 million annual revenue increase. And in early July, the Florida PSC issued a final order for our Florida electric rate case, approving the $8.6 million annual revenue increase that was previously settled. Following recovery of interim rates in the second quarter, permanent rates for each of these cases are now in place for the second half of the year. We are grateful for the constructive relationships we've maintained with our regulators across all 3 states that supported us achieving final conclusions for these filings. Slide 17 provides additional detail on our traditional depreciation study filing for Florida City Gas, which included updated asset lives that reduced annualized depreciation expense by approximately $1 million and also included a 2-year amortization of an excess depreciation reserve. Through our normal discovery process, the excess depreciation amount was updated to $22.4 million. In April, the Office of Public Counsel filed a motion for reconsideration and subsequently filed a motion to dismiss the case. The Florida PSC staff is in agreement with the company and has recommended denial of the motion for reconsideration. A commission hearing on both motions is expected in September 2025, and a final order on this filing is still expected in the fourth quarter of this year. We continue to expect to reach a successful outcome on the depreciation study and will provide updates as available. I'll now turn to Slide 18 to provide a few updates on our business transformation efforts that support our long-term growth. We are moving forward on the next steps of our multiyear enterprise resource plan, or ERP, which will build upon our SAP platform that consolidated our utility billing systems, further enabling us to operate as one company, enhance process efficiency and expand reporting and analytics across functions, including finance, procurement, human resources, customer care and field service management. In June, we were excited to welcome Abhi Bhatwadekar to our team as our new Chief Information Officer. Abhi brings a wealth of industry experience and technology expertise, which will be valuable as we strengthen our innovation technology team and better align technology initiatives with our business objectives, strength and growth. And in July, we concluded the transition services agreement with NextEra Energy that had been in place since the Florida City Gas acquisition. This represents one of the last milestones in the FCG integration process as we bring all operations fully under the Chesapeake Utilities management. Slide 19 provides a couple of updates on our engagement with stakeholders. In May, we published our third micro sustainability report, which highlights the ways we have invested in our employee, customer and community relationships throughout 2023 and 2024. These efforts have continued into 2025. Through June, we have contributed over $350,000 in charitable donations and corporate sponsorship for organizations and events across our service areas. In addition, more than 360 employees have volunteered over 1,000 hours throughout the first half of the year, supporting many organizations and causes near and dear to their hearts. We were also honored to be named Best in the U.S. for Corporate Governance by World News Media in July of this year. This is our third year receiving this award. We are grateful for the recognition of our commitment to earning trust, upholding accountability and fostering a values-driven culture, which is central to our mission to deliver energy that makes life better for the people and communities we serve. With that, I will turn the call to Beth for a more detailed discussion of our financial results.

Thanks, Jim, and good morning, everyone. Our financial results for the second quarter of 2025 continue to demonstrate steady growth and advancement toward our 2025 EPS guidance range as shown on Slide 20. Adjusted gross margin was approximately $143 million, up 13% from the second quarter of 2024. Margin growth from investments in transmission and distribution infrastructure, organic growth and regulatory initiatives, coupled with operational efficiencies led to adjusted net income of approximately $24 million, up 26% from the second quarter of 2024. And even with a higher share count than a year ago, we reported double-digit growth in adjusted earnings per share, up $0.18 to $1.04, a 21% increase over the second quarter of 2024. This performance reflects our commitment to executing on our growth strategy as well as our focus on operational excellence, particularly as we achieved this growth without the benefit of $2.3 million of reduced depreciation expense that was recognized under the Florida City Gas RSAM mechanism in the second quarter of last year. I'll now highlight some of the key drivers of our second quarter performance, as shown on the adjusted EPS bridge on Slide 21. Continued demand for natural gas drove $0.18 of incremental EPS, including $0.12 related to transmission capital projects and $0.06 of distribution growth across our service areas. Updated rates from our 3 rate cases contributed an additional $0.13 in adjusted EPS this quarter, and margin from our infrastructure program investments contributed $0.11 per share. Our unregulated businesses generated net incremental margin of $0.08, largely driven by increased Marlin Virtual Pipeline transportation services as well as margin from our Full Circle Dairy RNG production facility. These gains were partially offset by a few factors, including $0.14 per share of increased depreciation and amortization expense, as this quarter had no RSAM related depreciation expense reduction compared with an $0.08 benefit in the second quarter of last year. We also incurred additional operating expenses of $0.09 per share this quarter as higher facilities, operations and maintenance expenses were only partially offset by lower payroll, benefits and employee expenses. Lastly, financing activity, including our debt issuance in November 2024, and additional equity issuances in the latter half of 2024 and the first half of 2025, reduced adjusted EPS by $0.08. Shifting to Slide 22. Adjusted gross margin for our Regulated segment was approximately $118 million this quarter, up 14% from the second quarter of last year. As just discussed, this improvement was driven by organic transmission and distribution growth in our natural gas distribution operations and increased rates following the conclusion of our 3 rate cases. Our focus on cost management drove an even larger increase in regulated operating income, up 28% to approximately $52 million in the second quarter of 2025. Our Unregulated Energy segment also demonstrated growth relative to the second quarter of last year, as shown on Slide 23. Adjusted gross margin was up 7% to approximately $25 million in the second quarter of 2025. Our Marlin Gas Services business continues to serve incremental demand for virtual pipeline transportation services, driving $3.5 million of additional gross margin when combined with the incremental contribution from Full Circle Dairy in the second quarter of 2025. This growth was partially offset by a $2.3 million reduction in propane margins, driven by lower consumption and higher commodity costs in this quarter. I'll now move to Slide 24 to review our capital structure and financing activities. I'm excited to report that at the end of the quarter, we reached our equity capitalization target of 50%, as we've issued $66.2 million of equity throughout the first half of this year. With this level of equity, our total book capitalization has exceeded $3 billion for the first time, an important milestone as we continue our transformation to a mid-cap company. We've also made several advances to enhance our overall debt capacity to fund our capital investments. In June, we amended and extended our long-term shelf agreement with MetLife, one of our key debt holders, allowing us to secure up to $200 million of new long-term debt through June 2030. At the end of July, we also took advantage of the favorable rate environment to commit to issue $200 million of new long-term unsecured senior notes in the private placement debt market. $150 million of this new debt was funded on August 1, 2025, with the remaining $50 million being funded in mid-September. We issued the debt at a blended 5.04% coupon, including $60 million of 4.88% 3-year notes, $50 million of 5.02% 5-year notes and $90 million of 5.16% 6-year notes. Subsequent to locking in this financing, we met with Fitch and were subsequently notified that they had rated all of these new notes as an A- credit as we had initially targeted. Lastly, in early August, we also renewed our 364-day revolving credit facility for another year at the same terms and conditions. As you can see, we also continue to maintain strong liquidity and sufficient capacity to support growth with 64% of our revolving credit facility and private placement shelf facilities available at the end of June 2025. With the new long-term debt financings just executed in August and upcoming September, this availability will increase to 92%. Alongside our equity and debt plans, our dividend policy continues to be a key component of our capital allocation strategy as we fund growth capital investment to drive earnings growth and overall shareholder return. As shown on Slide 25, our annualized dividend per share of $2.74 reflects a 7% annual increase from 2024 and supports a long-term dividend CAGR of 9%. We will continue to support long-term dividend growth while reinvesting significant earnings back into the company, enabling our investors to benefit from both long-term top quartile earnings and strong dividend growth. As we have discussed many times, we are committed to our long-term earnings per share growth of 8% through 2028 to drive top quartile shareholder returns as shown on Slide 26. Our second quarter 2025 growth supports our trajectory toward our full year 2025 adjusted EPS guidance of $6.15 to $6.35 per share, inclusive of a successful outcome on the Florida City Gas depreciation study, as Jeff discussed earlier. Before we shift to Q&A, I'd like to remind you of the unique differentiators shown on Slide 27 that enable us to drive shareholder value in 2025 and for years to come. We remain committed to delivering on our promises. We recognize that our consistent track record has driven expectations for continued strong growth, both in terms of performance and valuation. We will continue to execute on our 3 pillars of growth, enabled by continued infrastructure reliability improvements and growing demand for natural gas throughout our service areas and supported by our increased 2025 capital guidance range of $375 million to $425 million. We will maintain our disciplined approach to financing, including ensuring balance sheet strength, upholding investment-grade credit metrics and sustaining our target capital structure, so that we remain well positioned to address market volatility as we fund our growth plan. That disciplined approach resulted in us achieving our target capital structure by the end of June and increasing our debt capacity meaningfully by our recent actions. All of these elements drive our ability to reach new heights, both in 2025 and beyond. We look forward to delivering with purpose and driving long-term value for all stakeholders and appreciate your continued interest, support and investment in our company. With that, we'll take your questions. Operator?

[Operator Instructions] Our first question is coming from Nicholas Campanella with Barclays.

This is Michael Brown for Nicholas Campanello. First question is, was the successful outcome in the FCG depreciation study assumed in the $6.25 midpoint guidance for 2025 when you originally gave it? And what are the levers you have to offset it if you do not achieve a successful outcome?

Michael, this is Beth. And yes, considered within the full guidance range was a successful outcome on the Florida City Gas depreciation study. So what we're trying to -- since there's been a lot of questions, we really tried to hone in, in this call and point out that, that full band reflects a successful outcome on that filing.

Okay. Second question is, how do you plan to fund the additional CapEx for this year?

Sure. Great question. So we talked about quite a few things. Number one, where we sit on a year-to-date basis through at the end of June, we have reached our target capital structure, as we mentioned, at 50%. The long-term debt placements that we've done have opened up capacity on our revolver to the point that our revolver will probably be at the lowest level it's been in many, many years. Our goal is to continue to stay at our target capital structure, but the timing and construction of some of those projects that are longer term may result in us better aligning some of the equity with the in-service dates, but you're not going to see us vary significantly from our target capital structure, maybe a little bit like I mentioned, for those longer-term projects. So we'll continue to pursue a capital structure that is around 50% plus equity to total capitalization. It may be slightly less than that at times because of bigger projects. And we have availability now with the revolver to have significant capacity. And again, we've accessed the long-term debt markets and expect to as we continue to move forward. So no different plan. Just certainly, we'll execute it in line with the timing of some of our projects from an equity perspective.

My last question. When do you anticipate like a full refresh of your key guidance next year?

We have our guidance, as you know, Michael, out through 2028. And so we're still second year into that. As always, we have an update on our strategic plan. I think likely, you'll see us continue to evaluate and come out with our new capital guidance for 2026 in February of next year. I think as we continue to execute on our strategic plan, we will look at the appropriateness of that range and decide whether a refresh is needed in any part or an extension at some potential time. But right now, we're really only into year 2, and that's kind of typically how we've approached it. If you look back in the past, we get a couple of years well into our guidance range before we provide a refresh.

And we'll go next to Michael Gaugler with Janney Montgomery Scott.

We've noticed a couple of gas companies in our coverage universe with Pennsylvania operations indicating this quarter, they're under NDAs for new projects for hyperscalers in the state. I know your exposure in Pennsylvania is limited. But with Eastern Shore and the Ohio assets, wondering if you're in discussions with anyone.

Well, Michael, I mean, as you know, I mean, Chesapeake, and I'll certainly turn it to Jeff for any additional commentary, but as you know, we're constantly -- our business development group is looking at projects across our different service territories. And at the point that any type of project like that might be finalized with us having executed an agreement, we would certainly disclose it. We're continuing -- you saw us actually introduce this new project in Ohio because that contract had been executed. So again, we are always looking at things, but we don't have anything at this point that we could disclose around any other particular projects. Jeff, I don't know if there's anything else you might want to add.

No, I think that is exactly right. I mean we see the same things that you're seeing in Pennsylvania and certainly in other places. And we have a continued interest in those sorts of opportunities, much as we announced the pipeline to the fuel cell that AEP is developing for a data center in Ohio. So those things continue to be intriguing, and we continue to pursue them.

Appreciate the color. And then just one other question. The recent PJM power auction, certainly interesting. I'm wondering if you're seeing greater incoming calls for natural gas service, given what looks like going to be higher electric prices for the next few years, probably out through 2031.

I don't know that we have any direct relationship there that we're discerning in the market, although you can, as you just did, presume that people are thinking about options and one of the options clearly is direct natural gas service. And so we are certainly talking to a number of larger commercial and industrial customers across our service territory outside of PJM, frankly, into Florida as well that are looking for increasing their natural gas capabilities. And so we continue to find that. Again, an opportunity for us to grow the business, and we're seeing those things pop up all over the place.

And we'll go next to Paul Fremont with Ladenburg.

My question has to do with, I guess, the schedule in the depreciation case. My understanding is, and I think it's next week that staff is supposed to come out with or file a third-party consultant report in the cases. Is that correct? And I guess, do you have any expectations with respect to what they are going to file?

So I would just say -- go ahead. I was just actually going to ask Jim. Jim, would you like to take this?

Yes. Thank you, Beth. Paul, as you probably know, the staff has been supportive of our approach here and in fact, has opposed an OPC motion to dismiss the proceeding. So we're expecting staff to make a recommendation in September and base that on their review of our filing, and we're confident that the filing will be received and be successful.

Great. And so what is it that -- is there anything on the schedule for them to do next week?

No, not the commission, Paul.

It appears we have no further questions at this time. I will now turn the program back over to Jeff Householder for any additional or closing remarks.

Thank you for joining us today. As always, we appreciate the continued interest in the company, and we look forward to updating you again next quarter. Goodbye.

Thank you. This concludes Chesapeake Utilities Corporation's Second Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.