RGC Resources, Inc. Stock

Good morning, and thank you for joining us as we discuss RGC Resources' 2026 third quarter results. I'm Kelsie Davenport, Director of Finance of RGC Resources, Inc. I am joined this morning by Paul Nester, President and CEO of RGC Resources; and Tommy Oliver, Senior Vice President of Regulatory and External Affairs. Tim is under the weather this morning and is unfortunately unable to be with us.

Before we get started, let's review a few administrative items. [Operator Instructions] The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. [Operator Instructions]

Turning to Slide 1. This presentation contains forecasts and projections. Slide 1 has information about risks and uncertainties, including forward-looking statements that should be understood in the context of our public filings.

Slide 2 contains our agenda. We will discuss our operational and financial highlights for the third quarter and first 9 months of our fiscal 2026 year. We will then review the outlook for the remainder of 2026, with time allotted for questions at the end. I will now turn the presentation over to Tommy.

Well, thank you, Kelsie, and good morning, everybody. Turning now to operations on slide 3. Main extensions and renewal activity has continued on a steady pace through fiscal 2026. We installed 3.5 miles of new main through the first 3, I'm sorry, through the first 9 months of the current fiscal year, a little shy of our installation in the same period of fiscal 2025. In addition, we connected 464 new services in 2026, down from the previous same period last year. We do have a healthy backlog of main extensions, which speaks well of our continued residential development across the region.

As shown on the right side of the slide, we renewed 2.7 miles of main and 322 services during the first 9 months of the 2026 fiscal year. While winter weather dampened the main mile renewal, renewed compared to the same period last year, the service renewals increased 40%.

Let's transition over to slide 4. Slide 4 shows our delivered gas volumes for the quarter. Weather patterns during the third quarter resulted in some counterintuitive results, especially in May. The quarter was slightly colder than the same period a year ago, as shown on the slide, but those days occurred unevenly and, as a result, did not generate the typical gas usage you would expect from cooler weather. It did, however, resulted in a credit to customers under the weather normalization adjustment.

Overall for the quarter, residential and commercial usage was flat. Industrial usage was up more than 25%, mostly attributable to our largest industrial customer. As a reminder, under our tiered rate structure in that customer class, those incremental dekatherms are delivered at our lowest margin.

Transition over to slide 5, delivered gas volumes do not tell our exact same story for fiscal 2026 year-to-date. Residential and commercial volumes were down despite heating degree days increasing by 3%. Many of those heating degree days were generated around the Winter Storm Fern event, with other portions of the year warmer than the equivalent period a year ago.

Volumes were up 1%, with the residential and commercial declines offset by industrial increases, again led by that same industrial customer just mentioned. Included within these numbers is the absence this quarter of a longtime top 10 customer who ceased operations in March. We discussed that situation more fully on the previous earnings call.

Slide 6 shows CapEx for the first 9 months of fiscal 2026 compared to 2025. Overall investment was $16.1 million in the current year, up approximately 2% over the same period a year ago. As customary, we picked up the pace of capital spending in quarter 3 and made up most of the deficits that arose from weather delays in the prior quarter. We will discuss plans for the full year later in the presentation.

I'm going to now turn the presentation back over to Kelsie to review our financial results for the quarter. Kelsie?

Thank you, Tommy. Slide 7 shows both our third quarter and 9-month year-to-date financial results for fiscal 2026. Third quarter results were nominally ahead of the same period a year earlier. Net income was approximately $550,000, or $0.05 per diluted share, driven primarily by higher margins. The interim rates that went into effect January 1, along with the new state revenues, drove the margin increase despite the loss of the large industrial customer we've noted in previous calls and the weather Tommy just discussed.

Operating expenses, as shown on the slide, are lower due to gas costs. However, non-gas operating and maintenance expenses are higher to fiscal 2025 third quarter, primarily due to inflationary pressures on personnel costs, professional services, and IT support.

The year-to-date results are also shown on slide 7. Net income was $14.2 million in the first 9 months of fiscal 2026, or $1.37 per diluted share, compared to $1.31 per diluted share in the first 9 months of fiscal 2025, a 4.6% increase. The effect of the non-gas base rate increase was noticeable in the second quarter, largely driving our year-to-date results as the additional revenues affected the volumetric component.

Thus, a larger portion of the increase was recognized during the winter heating season due to the higher energy demands. Accordingly, when delivered volumes are lower in the second half of the fiscal year, margin and net income are also lower. The items that have led to increased expenses in the quarter are also driving higher expenses in the year-to-date results.

Moving to slide 8, our balance sheet remains strong. During the quarter, we refinanced a $15 million note that matures later this month and carries a 2% interest rate. It is classified as long-term debt at June 30. This forward starting note and its attendant interest rate swap is fixed for a 3-year term at 5.2%.

I did want to add a few comments on the Mountain Valley Pipeline investment. The MVP mainline has been in service for just over 2 years now and is operating safely and reliably as expected. Our share of the joint venture earnings is comparable this year to a year ago, and we continue to receive excess cash distributions on a quarterly basis.

To enhance future cash flow from MVP, there are 2 projects underway, Southgate and Boost. Southgate will move gas from the end of the mainline into North Carolina, and Boost will enable a 30% increase in the amount of gas that can be transported through the mainline. Southgate is in the construction phase and progressing as expected. Boost is actively working on its permits and has placed orders for equipment. We have invested just over $1 million in the fiscal year for these projects, with the funding coming from lines of credit that we established in September of last year. We are pleased with the progress and prospects of both projects.

I will now pass the presentation to RGC's CEO, Paul Nester. Paul?

Thank you, Kelsie, and good morning. Thank you for joining us for the third quarter earnings call. We're on Slide 9. We have a few items to discuss as we are close to wrapping up fiscal 2026.

We're going to start on Slide 10 with an update on our LNG facility. If you were with us last quarter, and if you've read our 10-Q, we've disclosed that we did have some structural damage in the fiscal second quarter at the LNG facility. Our teams are still there working to assess that damage and to keep that facility safe. They're doing a great job. I'd like to thank them for all their fantastic work over the last 6 months.

We continue to be in touch with the State Corporation Commission on that matter as well as our insurance carrier. Certainly, when we have more information to disclose, we'll do that appropriately. We, as you can see on the slide, have been aggressively working to replace the peak shaving supply that our LNG facility provided. You may recall that facility was used by the company on the coldest winter days to supplement our interstate pipeline volume. Without the facility being available, you can see we've added gas through one of our primary interstate pipelines, the Columbia Pipeline, or referred to as TCO. We're excited about that and grateful for that.

We're going to talk about a capital project that's now underway, that's going to bring more Mountain Valley gas further into the Roanoke Gas distribution system. That project's begun as well, and we're in the process of procuring truck LNG. That's something we've done in the past, particularly before Mountain Valley was completed.

Moving on to slide 11, we've kept the capital forecast for 2026 about the same as what we showed you last quarter at $22 million. We have changed some of the buckets, if you will, of that spending. We have pulled forward again this Mountain Valley-Lafayette main extension into this year. That project was in our 5-year capital forecast, so it was something that the company fully intended to do, but we've now pulled that forward a little bit into 2026. When we start showing you our 2027 capital forecast, it's going to be a larger component of that.

I would now like to ask Tommy to address the recent rate case results and some other regulatory happenings. Tommy?

Yes, thank you, Paul. We're on Slide 12 now. As we discussed in our most recent earnings call, Roanoke Gas filed an expedited rate case on December 2 of last year seeking approximately $4.3 million in incremental annual revenues based on our currently authorized return on equity of 9.9% and a 59% equity ratio. Rates became effective January 1, 2026, subject to refund.

Happy to report that we reached a settlement with the SCC staff on July 1, 2026, that resolved all issues in the case. We did participate in the scheduled hearing on July 15, 2026. The stipulated incremental revenue agreed to in the settlement was $3.85 million, and we began charging those lower rates that resulted from the settlement beginning August 1. We are pleased to have reached agreement and believe this was a reasonable outcome.

As of June 30, we have $275,000 accrued for refunds to customers related to the rates charged beginning January 1, 2026. The ongoing cost associated with the LNG facility event was not addressed in this case, however. We continue to update the staff and work with them through the process. And we have established a regulatory asset, and we expect recovery in some future proceedings.

Yes, thank you, Tommy. It's a great result, and I just want to thank Tommy and his team and the rest of the RGC team on that. That truly is a company-wide effort. It reflects the investment in the system to continue making it safe or keeping it safe and reliable, I should say.

And a lot of support across the company goes into the ratemaking. And we're really pleased with this result. I think it's fair and appropriate at this point in time. We're of course always mindful, right, Tommy, of the impact on the customer and what it means to customer bills.

Absolutely, yes. Thank you.

All right, before we open the line for questions, let's look at our 2026 forecast. We've narrowed the range from what we presented last quarter. A lot of that is the result of some of that unusual weather pattern and natural gas delivery that was associated with that in that May timeframe. So we're now showing the lower end of the range at $1.29 and the higher end at $1.32.

Similar to 2025, we are projecting a small loss in the fiscal, the typical fourth quarter. Kelsie and Tommy both talked about that. The nature of the volumetric rates certainly lends itself to higher margins in the first and second quarters, less so in the third and fourth quarters.

A lot of discussion on interest rates and inflationary pressure, certainly in the last few weeks. I think most folks now believe we may have a rate increase at some point a little bit later this year. If you go back to last year at this time, there were projections of 3 to 4 rate decreases. Obviously, that's just not possible with the importance of inflationary pressure.

Kelsie talked about the note that we refinanced. That was really a great effort by the team here, and I appreciate our bank partners that worked with us on that. Tommy talked about the housing starts and the residential development. The Roanoke Valley economy continues to be, I would say, net positive. We talked about our large industrial customer that unfortunately ceased operations back in March, but otherwise, I think it's still very positive.

The Google Data Center is moving forward. There continues to be investment in the medical complex here, notably the Taubman Cancer Center. Just the construction on that is phenomenal, and a few other developments around that, so we're excited about that. There was a large foreign direct investment announced in the region, end of the third quarter. That company is going to spend about $85 million and add almost 500 jobs. We're really excited about that as well.

So again, as always, we just want to thank our customers, first and foremost. Without them, we would not be here. And I'd also like to again thank our employees. We've had another quarter of working very safely, and I'm proud of their efforts in that regard.

So with that, we'd like to open the line for questions.

[Operator Instructions]

Good morning, everyone.

Oh, my. Good morning. So nice to have you with us.

Looking across your slide here on the LNG update. So, I was wondering if you could give us a little more color as to maybe what the problem really, what the problem is and maybe potential solution for it. I mean, is this a situation where the tank's got to come out and be replaced or is it something else?

Yes, happy to answer that question, [ Mike ]. In February, around the Winter Storm Fern event where we had really extraordinarily cold weather for an extended period of time, and of course, that cold weather enveloped most of the country, as you know. We did have some what's known as icing around the ground of the tank, and that caused the tank to just move a little bit, if you will, and cause some structural damage to the tank. Maybe one term to think of is metal fatigue, if you will.

Now, we did not have any leaking or any unsafe condition as a result of that, thankfully, and we're again very grateful for that. The tank was constructed and put in operation in 1972, so it's 54 years old. While it's approximately a 90 to 95-year asset, if you will, it's halfway through that and again had a little metal and structural compromise. So we're working through the engineers that we've retained who are tank specialists to help us ascertain what our options are, Mike, for the tank.

Are we able to make repairs in some of those spots where there was some metal stress? Or we are evaluating, for example, possibly newer, more modern tank holding apparatus. As a reminder, our tank is approximately a 200,000-gallon, which also equates to approximately 220,000-dekatherm tank. I would say has been well-sized, if not maybe a little larger than what we've needed in the Roanoke Gas system, which again is a great thing. It's been just wonderful for resilience and reliability over many, many years.

So we're still evaluating what the future looks like, what our future options are for storage. For sure, we want on-system storage to help with peak shaving. We're fortunate now to have the third pipeline, Mountain Valley. And you may remember over many years ago, we always talked about if something were to happen to one component of our supply, having that additional supply source available would make the difference, and that's truly the case today.

So you think you'll have, obviously not for this winter season, but the next winter season? If it's taken care of?

That's the plan right now. We're working to having that peak shaving capability via on-system storage for the 2027-2028 winter season. Correct. That's our goal right now.

Any other questions? [Operator Instructions] We'll wait just one more moment to see if there are any further questions.

Okay. Hearing none, this concludes the third quarter earnings call. Again, we just want to thank each and every one of you for taking time to be with us, and we very much look forward to you listening. Look forward to being with you in December when we share the full year 2026 results. As Kelsie and Tommy reported, we're off to just a good first 9 months and look forward to completing the fiscal year. Wishing everyone a safe and happy weekend.

Thank you.

Good morning, and thank you for joining us as we discuss RGC Resources' 2026 Second Quarter Results. I'm Kelsie Davenport, Director of Finance of RGC Resources, Inc., and I'm joined this morning by Paul Nester, President and CEO of RGC Resources; Tim Mulvaney, our VP, Treasurer and Chief Financial Officer; and Tommy Oliver, Senior Vice President of Regulatory and External Affairs.

I'll review a few administrative items. [Operator Instructions] The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. At the conclusion of the presentation and our remarks, we will take questions.

Turning to Slide 1. This presentation contains forecasts and projections. Slide 1 has information about risks and uncertainties, including forward-looking statements that should be understood in the context of our public filings.

Slide 2 contains our agenda. We will discuss operational and financial highlights for the second quarter and first 6 months of our 2026 fiscal year. We will then review our outlook for the rest of the 2026 fiscal year with time allotted for questions at the end.

I will now turn the presentation over to Tommy.

Well, thank you, Kelsie, and good morning, everyone.

Turning now to operations on Slide 3. Main extensions and renewal activity for the first half of fiscal 2026 were steady. We installed 2.7 main miles, a similar total to the main miles installed in the first half of fiscal 2025. In addition, we connected 340 new services in 2026, which was close to the 359 connections from 2025, evidence that residential development continued across the region in the first half of the fiscal year. As shown on the right side of the slide, we renewed 1.5 miles of main and 196 services during the first half of the 2026 fiscal year. While the main miles renewed were down in part due to weather compared to the same period last year, the service renewals increased by almost 25%.

Let's move to Slide 4, where we show our delivered gas volumes for the quarter. Despite an extreme cold spell in late January and early February, the quarter as a whole was warmer compared to the same quarter in the fiscal 2025 year. Total volumes were down 5% compared to the second quarter of 2025. Residential and commercial volumes were both down approximately 5% and heating degree day -- were heating degree days were down 2% compared to the quarter 2 of fiscal 2025.

Let's move to Slide 5. The story of delivered gas volumes was a little different in the first 6 months of the fiscal 2026, despite the larger number of heating degree days. Total volumes were down 3% compared to the first half of fiscal 2025 with the decline in industrial usage primarily attributable to one customer being the main reason. Unlike the quarter, heating degree days for the 6 months increased 3% as the first 6 months of the fiscal year were colder than the prior year.

Let's move to Slide 6, where we'll talk about CapEx. CapEx for the first half of fiscal 2026 compared to 2025. Total spending was $9.8 million in the current year, down approximately 8% over the same period a year ago. Winter weather related to Winter Storm Fern in late January and early February affected our spending. We picked back up in March and we'll discuss plans for the remainder of the year later in the presentation.

I'm going to now turn it over to our CFO, Tim Mulvaney, to review our financial results for the quarter. Tim?

Thank you, Tommy.

Moving to Slide 7. This shows both our second quarter and first half results for fiscal '26. We had a robust quarter with increased Roanoke gas margins due to the rates that went into effect January 1, combined with higher earnings from our unconsolidated affiliate, MVP, and lower interest expense to overcome higher expenses related to investment in our gas system and inflationary pressures, which remain higher than the Fed's 2% target.

Net income of $8.7 million or $0.84 per diluted share compared to net income in the same quarter a year ago of $7.4 million or $0.74 per diluted share, a 14% increase. The year-to-date results are also shown on Slide 8. The strong Q2 results drove the 6-month performance as well as the first quarter did not have the benefit of the January rates. Net income was $13.6 million in the first half of 2026 or $1.31 per diluted share compared to $1.26 per diluted share in the first half of fiscal 2025, a 5.3% increase.

A reminder about the seasonality of our industry. With recent ratemaking activity, much of our revenue is generated through volumetric factors. And accordingly, our performance in the back half of the year when volumes are lower inevitably results in fewer revenues and profits. Paul will discuss our outlook for the remainder of 2026 in a few moments.

Moving forward to Slide 8. Our balance sheet remains strong. We do have a $15 million note at Roanoke Gas that matures in August that is included in our current maturities of long-term debt. We are deep in conversations with our lenders to refinance this note. We have long known that we would be unable to replicate the 2% rate that we have enjoyed. The discussions with lenders have been positive and should allow us to refinance this note at a rate consistent with our plans. We will have more to share on this in the near term.

I will now pass the presentation to Paul Nester, our CEO. Paul?

Good morning, and thank you, Tim.

We have a few topics that we would like to discuss concerning the second half of 2026. These are listed on Slide 9. Before we get into the details of those, I do want to again thank our customers and employees for an outstanding winter performance. We discussed this a little bit on the first quarter call when we were just coming out of Winter Storm Fern, but our system just performed admirably during that period. Our employees performed admirably and safely and also the customers. So again, we had an outstanding winter heating season. And again, just are appreciative of our employees and customers. We're here to serve our customers.

We did have a couple of challenges that arose in the second quarter. One of our top 5 customers by volume, a long-time manufacturer in the Roanoke Valley, in fact, over 60 years, idled their operations in March. And we really have great care and concern for the employees at that operation who lost their jobs in that process. Many of them had been there many, many years. And as Tim said, it's a headwind really into the second half of 2026. Again, they were a large gas customer. Tommy will talk about the ratemaking impacts of that event in just a few moments.

Another challenge was described in our 10-Q, which we filed yesterday afternoon. We had some damage at our LNG peak shaving facility in the middle of the quarter. We have hired tank experts and other experts to help us assess the cause and nature of this damage and to potentially design some solutions to remediate it. The outcome of that is that we do not expect to have use of our LNG peak shaving facility in the coming winter season. We have begun intense and thorough planning for that event and to provide service without the facility.

As we disclosed in the 10-Q, right now, we're unable to estimate the costs associated with this event, and we're unable to estimate the investment required to possibly repair or if needed, replace the tank. Tommy will also incorporate the ratemaking impacts of that into his comments. We will, of course, continue to update you in future communications and/or SEC filings as more facts about this become known.

But I am going to turn it over to Tommy to give us an update on our pending rate case. Tommy?

Yes. Thank you, Paul, and we're moving to Slide 10 now. As we discussed in our most recent earnings call, Roanoke Gas filed an expedited rate case on December 2, seeking approximately $4.3 million in incremental annual revenues based on our current authorized return on equity of 9.9%. The interim rate became effective January 1, 2026, subject to refund. The SEC staff is in the process of their audit and is scheduled to file testimony in June. The hearing is scheduled for July 15, 2026, and we expect final resolution from the commission by calendar year-end.

For 4 months beginning in January, we were offsetting the new rates through credits on bills to return the tax credits to customers that were resolved with the IRS late in fiscal 2025 had been included with our regulatory liabilities on the balance sheet. We concluded these refunds in April.

And as Paul mentioned just a few minutes ago, we had a large customer cease operations in the second quarter. We informed the SEC staff of this closure, and we are optimistic that the SEC staff will incorporate the expected decline in usage over the coming year into their recommended revenue requirement when they file testimony in June. Regarding the damage that occurred to our LNG facility, we have alerted staff of this situation and have held discussions with staff regarding the establishment of a regulatory asset for these costs.

So Paul, I'm going to turn it over to you.

Thank you, Tommy.

I continue to be pleased with the work of Tommy and his team and really our whole company and our relationships with the State Corporation Commission, not only in the ratemaking side, but also in the safety aspect. So thank you for all that good work there.

We're on Slide 11. Our capital spending forecast remains at $22 million for the fiscal year. We have rebalanced the mix of spending just slightly from what we presented at the end of the first quarter. And again, as more facts become known about our LNG facility, we will continue to be flexible to reposition certain investments as needed or even add to this capital -- potentially add to this capital spending plan.

On Slide 12, with the strong second quarter that Tim reviewed, we've both narrowed and raised our 2026 earnings per share range. On the lower end, we're at $1.31. And on the higher end, we've moved it up to $1.37. I think Tim's reminder about the seasonality is important. Obviously, the third and fourth quarters will not look like the first and second quarters from an earnings standpoint.

We continue to see the same macroeconomic concerns that we've really been talking about now for several quarters. Our practical inflation remains above the 2% level that the Fed targets. We are constantly throughout the organization looking for ways to be more efficient and to save and manage expense.

Interest rates, Tim talked about the refinancing of that note. Certainly, the global situation has caused the interest rate market to be volatile within a range, but still volatile. And we're working with our debt partners almost on a daily basis to optimize that refinancing. But the local economy, and we've said this as well for several years now, continues to be steady. The Google data center is moving forward. There's been a few other positive announcements recently across the Roanoke Valley.

Our teams continue just to work every day with economic development, contractors and other folks that are facilitating this growth, and we do everything we can to support that.

With that, we would love to entertain any questions that you may have. [Operator Instructions] We'll wait just a few more moments in case anyone has a question. [Operator Instructions] Okay. Well, hearing no questions from the audience, this does conclude our prepared remarks.

Our team will be at the AGA Financial Forum in about 10 days, and we hope to have the opportunity there to greet and visit with many of our investors and financing partners there. But certainly, we wish the rest of you to have a safe and pleasant summer, and we look forward to speaking with you again in August to review our 2026 third quarter results. Thank you.

Good morning, and thank you for joining us as we discuss RGC Resources' 2026 First Quarter Results. I am Kelsie Davenport, Director of Finance for RGC Resources, Inc. I am joined this morning by Paul Nester, President and CEO of RGC Resources; Tim Mulvaney, our VP, Treasurer and Chief Financial Officer; and Tommy Oliver, our Senior Vice President of Regulatory and External Affairs. Let's review a few administrative items. [Operator Instructions] The link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. At the conclusion of the presentation and our remarks, we will take questions.

Turning to Slide 1. This presentation contains forecasts, projections and comments about earnings, capital spending and gas prices. Slide 1 has information about risks and uncertainty, including forward-looking statements that should be understood in the context of our public filings. Slide 2 contains our agenda. We will discuss our operational and financial highlights for the first quarter of our 2026 fiscal year. We will then review our outlook for the rest of the 2026 fiscal year, including an eventful January with time allotted for questions at the end.

I will now turn the presentation over to Paul. Paul?

Thank you, Kelsie and good morning. We are on Slide 3. Main extensions and renewal activity in the first quarter of fiscal 2026 was steady. We installed 0.6 new main miles in the first quarter and connected 196 new services, which is almost exactly the same as last year with 197 new services in the first quarter of 2025. Just a comment there, the main miles are down a little bit. Last year, we had 1.1 new main miles. Some of that's dependent on weather. We've actually got an outstanding backlog of new main to install approximately 13,000 feet or 2.5 miles. In addition, we renewed through our SAVE program 117 services in the first quarter of this year, which is an increase of 80% over last year. Together, this investment demonstrates our continued commitment to enhance safety and reliability for our customers as we've been doing for many, many years now.

Slide 4 shows our delivered gas volumes for the quarter. Total volumes were flat compared to Q1 last year. One large industrial customer decreased their natural gas usage from their record levels of a year ago. However, residential usage was up 8% and other commercial volumes increased primarily due to the 11% increase in heating degree days compared to quarter 1 last year. Slide 5 shows capital expenditures for the first quarter of fiscal 2026 and those are compared to the prior year. Total spending of $5.6 million was flat to the same period of last year. Weather was mixed in the quarter this year. We did have some snow and wet weather in early December, which hampered us a little bit.

I will now turn the presentation over to our Chief Financial Officer, Tim Mulvaney, to review the financial results for the quarter. Tim?

Thank you, Paul. Moving to Slide 6. We had a steady quarter with Roanoke gas margins up nominally and lower interest expense as the Fed lowered interest rates. This was more than fully offset by higher costs for personnel, IT, property taxes and depreciation. Net income of $4.8 million or $0.47 per share compared to a net income in the same quarter a year ago of $5.3 million or $0.51 per share. We filed an expedited rate case in December with interim rates that began on January 1. Tommy will discuss the rate case in greater detail in just a minute.

The MVP pipeline continues to perform well, and our year-over-year financial results from our investment were as expected and in a similar magnitude to a year ago. Our balance sheet remains strong. One item to bring to your attention is that $15 million note, which matures in August for Roanoke Gas is now in current liabilities. We fully expect to refinance this note in the coming months and have begun preliminary conversations with our financial institution.

I will pass the presentation back to Paul and Tommy to address some of the developments in late January's cold stamp across the eastern half of the United States as well as our expectations for 2026, including the rate case, capital and earnings per share. We will then take your questions. Paul?

Yes. Thank you, Tim. We are on Slide 7. 2026 -- calendar 2026 has started with a number of really interesting developments. There's a lot of activity in both the international, national and even our local landscapes and economies. We'll get to the weather in just a moment. But here in Virginia, we have a new governor and legislature that has been seeded and they are in session presently. And there's been a lot of activity there, a lot of new legislation, a lot of discussion about this term of affordability and even data centers. As most of you know, Virginia is considered the data center capital of the world. Fortunately, most of this new legislation is not focused on limiting or stymieing natural gas usage or development. We are happy about that. And we are not only monitoring all this legislative activity, but we're actively engaged with our senators and delegates on any pertinent legislation.

The local economy does continue to be solid or even good, but there was a press release recently of a top 5 industrial customer, a very large manufacturer who's been prominent in the Roanoke Valley for almost 60 years. They recently announced an operations change that will likely lead to plant closure later in calendar 2026. We have discussed or started discussions with the commission staff to address this in our pending rate case. As Tim said, Tommy will review the rate case momentarily. We're actually on Slide 9 now. My apologies. I think I said Slide 7 earlier.

We're on Slide 9. And the recent winter weather that Tim mentioned has a name. The National Weather Service has attached Fern to this incredible cold snap that we've had just a little statistic here, beginning January 24 through yesterday, February 9, here in Roanoke, by heating degree day statistic, we have been 53% colder than normal, really quite incredible. We've had 680 heating degree days versus a normal 445. I'm just very pleased to say up to this point, our distribution system has performed flawlessly. The interstate pipelines that serve us have performed without issue. I think one of the great stories to come out of Fern will be what natural gas has meant not only here to us in Roanoke, but in our state, but around the country, particularly in the PJM RTO, natural gas was providing on any given day, approximately 45% to 50% of the fuel for electricity generation during this period.

Again, I think we'll hear more about that in the days and weeks ahead. We did not lose any customers. We're happy about that, proud of that. And we're especially proud about how our folks work safely through treacherous icy conditions. In fact, we've had ice on the ground continually since January 24 and that we haven't had a slip or fall or a car accident is something I'm especially pleased with. Our LNG plant was, in fact, necessary again this winter, providing needed peaking supply on some of the coldest days, providing Fern was, at least in my tenure, an unprecedented spike in natural gas prices at the various pricing points, particularly the pricing points that form our supply. We've attached a chart here on Slide 10 showing you the Henry Hub price. And no, the computer didn't go crazy draw on that chart.

As you can see there on January 22, 23, 24, prices, in fact, multiplied by a factor of approximately 10, really remarkable. And as you know and especially if you've read our Qs and Ks, natural gas costs are passed through to customers dollar for dollar. There's no profit or loss there. So we have a pretty, we believe, estimated to be $8 million to $10 million under collection on gas costs just related to Winter Storm Fern. We'll work with the commission to try to build those into rates in a reasonable way and hopefully collect those over the next 12 to 18 months.

With that, I'd like to ask Tommy to provide an update on the rate case filing. Tommy?

Well, thank you, Paul, and good morning, everybody. We're on Slide 11 now. As we discussed in our last earnings call, Roanoke Gas filed an expedited rate case on December 2, seeking approximately $4.3 million in incremental annual revenue and that's based on our currently authorized ROE of 9.9%. The interim rates were effective January 1, 2026, and those are subject to refund once the commission fully adjudicates the case. We expect that to occur by the conclusion of this calendar year. And as we also mentioned back in December offsetting the new rates, we began making credits to customer bills over the next 4 months, January through April to return to customers tax credits that we resolved with the IRS late in fiscal 2025 and are now included with our regulatory liabilities on the balance sheet.

Paul, I'm going to turn it back over to you now.

Thank you, Tommy, and I appreciate all the great work Tommy and his team are doing on the rate case filing. We are now on Slide 12 and sharing with you our capital forecast for this fiscal year. We're still at $22 million, which was the same as we forecasted in December on the year-end call. Just to note, though, obviously, this winter weather is going to hamper the second quarter. It's going to be weaker. We essentially lost 2 weeks of construction, again, due to all that snow and ice that is still on the ground. It's approximately 17% of the working days in the quarter. We'll see how that -- when the weather breaks in the spring and summer, how much of that we can make up. But it is possible. 2 weeks is a lot to make up across all the crews but we're watching and monitoring that.

Moving to Slide 13. Our earnings per share forecast is also the same as we shared with you in December, the range of $1.27 to $1.35. Certainly, the rate case that Tommy mentioned is a large factor in that. Some of the economic and political and inflation and interest rate variables that we're all experiencing also play a part in that. There's going to be some interest expense with that under collection that we just talked about that's going to work against us. I'd like to conclude my remarks just one more time by thanking all of our employees, each and every single one of them for everything they've really done all winter, but especially here in Winter Storm Fern to serve our customers and not have an outage and to be safe. And we really are excited. Again, once the weather breaks, again, we've got a lot of main miles stacked up, new main miles stacked up to get into the ground and add customers. We're excited about the overall growth and health of our region.

And we also, of course, want to thank you for your continued interest and support in RGC Resources. That does conclude our prepared remarks. [Operator Instructions] We'll wait just a few more seconds in case someone wants to ask a question. Okay. Well, thank you again for taking your time to participate in our first quarter call. And we certainly look forward to being back together with you in May to discuss the second quarter results. We hope everyone has a safe end of the week. Thank you.

Good morning, and thank you for joining us as we discuss RGC Resources' 2025 Fourth Quarter and Year-end Results. I am Tommy Oliver, Senior VP, Regulatory and External Affairs for RGC Resources, Inc. I'm joined this morning by Paul Nester, President and CEO of RGC Resources; and Tim Mulvaney, our VP, Treasurer and Chief Financial Officer. But before we get started, I want to review a few administrative items. One, we have muted all lines and asked that all participants remain muted. Two, the link to today's presentation is available on the Investor and Financial Information page of our website at www.rgcresources.com. And lastly, at the conclusion of the presentation and our remarks, we will take questions.

So let's turn to Slide 1. This presentation contains estimates and projections. Slide 1 has information about risks and uncertainties, including forward-looking statements that should be understood in the context of our public filings. Slide 2 contains our agenda. We will discuss our operational and financial highlights for the fourth quarter and our 2025 fiscal year. We will then provide an outlook for the 2026 fiscal year with time allotted for questions at the end. So let's get started on Slide 3. We had a very strong year for main extensions. In addition, renewal activity was steady during the fiscal 2025 year. Residential growth in the Roanoke Valley has not abated. We installed nearly 5 main miles, which is 50% higher than the total main miles installed in fiscal 2024. We also connected more than 700 new services.

This compares to customer additions in fiscal 2024 of approximately 630 and fiscal year 2023 adds of approximately 550. Those that dive into our year-over-year customer count will notice that our average customer count increases slower than the actual ads cited above. This is due to the nature of our business. We routinely have customers that use natural gas exclusively to heat their homes, disconnect their service or will not pay their bills and will be disconnected through the collections process once spring weather arrives. This past spring, we had over 1,500 customers disconnect, many of which are now returning to the system with the onset of cold weather. In fact, we have reconnected over 500 customers since October. By the end of the second quarter, we expect our customer count to be approximately 65,000 customers.

Focusing on the right side of the slide, our system safety and reliability is always a high priority. Through our SAVE program, we renewed 4.2 miles of main and nearly 350 services during the fiscal 2025 period. Transitioning to Slide 4. We delivered record volumes of gas in fiscal 2025. However, I will come back to that in a moment as Slide 4 shows delivered gas volumes for the quarter. Total volumes increased 8% compared to the fourth quarter of 2024. One industrial customer with fuel switching capability continued their higher natural gas consumption this year as we have discussed in previous quarters. Residential and commercial volumes were slightly up when compared to the same quarter in the prior year.

Slide 5. The combination of that same industrial customer, along with a few other customers, combined with colder weather, also as discussed on previous calls, enabled us to achieve a new gas delivery record with heating degree days up 18%, total volumes moved up 14% compared to last year. This record level of gas delivery outstripped our prior annual record throughput set in 2021. Slide 6 shows full year CapEx. Total spending was $20.7 million in the current year, down 6% compared to the 2024 fiscal year. However, recall that in 2024, we spent approximately $3.2 million to complete the MVP interconnections, which enables us to grow our system in Franklin County.

We did not have that kind of onetime expenditure in fiscal 2025, but continue to invest in extending and renewing our system as noted above. We will provide our outlook for CapEx as we discuss fiscal 2026 later in this presentation. I will now turn the presentation over to our CFO, Tim Mulvaney, to review our financial results and to comment on the consummation of the financing that we told you about at the end of quarter 3. Tim?

Thank you, Tommy. Turning to Slide 7 now. We experienced a slight loss in the current quarter. The fourth quarter is traditionally seasonally weaker for us, and we had higher expenses than the same period a year earlier as inflation, while lower, is still present. This resulted in a net loss of $204,000 or $0.02 per share compared to net income in the same quarter a year ago of $141,000 or $0.01 per share. We will touch on our plans to deal with higher expenses in the outlook section. One item present in both periods were gains of approximately $0.06 per share each year related to donations from the local housing authority as we converted master meter arrangements into system assets to improve reliability and safety for customers.

This will not recur in 2026. Year-to-date results are also shown on Slide 7. Our performance for the year was outstanding. Net income for fiscal 2025 was $13.3 million or $1.29 per share, an increase of 15% from fiscal 2024's $11.8 million or $1.16 per share. The strong increase reflected the record levels of gas deliveries that Tommy discussed and was aided by higher operating margins, partially offset by inflationary cost increases and lower equity earnings from the company's investment in the Mountain Valley Pipeline. MVP's equity earnings for the first 3 quarters of fiscal 2024 contained significant amounts of AFUDC.

Moving to Slide 8. We ended the year with a strong balance sheet. During the fourth quarter, we refinanced the debt that supports our investment in MVP for the long term. We have disclosed the details in our investor communications in September and in Note 7 of our Form 10-K that was filed yesterday. All of these documents can be found on our website. So I will not repeat all the details here. We were pleased to extend the maturity of all the debt supporting our MVP investment to 2032 with reasonable amortization. During the intervening years, we expect cash flows will be enhanced by the Southgate and Boost projects at MVP, and we have addressed our share of funding these projects as well. With these projects generating cash flow, our investment will be more valuable. Now let me turn the presentation over to Paul Nester, our President and CEO, to take us through our 2026 outlook. Paul?

Thank you, Tim, and good morning to everyone. And I would like to take a moment before we dive into the outlook, just to issue our thanks to our customers and our employees for a fantastic fiscal 2025, as Tim and Tommy have just reviewed and certainly to all of our employees for their everyday dedication to serving the customer and doing that safely and reliably. It's translated in these incredible, what are really record earnings and earnings per share results. So thank you. As you can see on Slide 9, we have a short agenda here for the 2026 outlook, and let's move on to Slide 10. We continue to have momentum with new housing here in the greater Roanoke Valley. Tommy mentioned our customer additions over the last 3 years. If you average those out, it's over 660 customers per year, which is just almost exactly 1% customer growth.

And if you look back over the history of the company for really the last 20 years, we've been in that upper 1%, lower 1% range, and that continues to be steady. We're very optimistic about 2026 in that regard. We continue to have expansion in our health care and medical sector and complex here in the Roanoke Valley. It's really one of the shining stars, both scientifically and economically, but we are seeing more real estate there, more footprint, which is hopefully going to result or translate into additional natural gas usage. Tim mentioned MVP in the Southgate and Boost projects. We are thrilled to continue as a partner in those, and we're very optimistic about the success of those projects and what it will mean to this region.

As you can see on the slide, we have the Google logo there, and we've talked about Google in the past and the announcement that was made in our fiscal third quarter about their location in the Roanoke Valley. That's progressing on schedule. Again, I think there'll be more to come about that in our fiscal 2026. We're still working on Franklin County. As Tommy mentioned, and some of new Business Park, they're working very closely with the county to hopefully spur some economic development in the park. And we're also still working on expanding gas service in other parts of the county. We recently had some discussion with our westernmost territory, Montgomery County, which you may recall is actually where most of the MVP in this region is located and in fact, where the Boost project will do some construction hopefully in the near future about some expansion opportunities there. Moving on to Slide 11. I'd like to hand it back over to Tommy so he can give us a few more details on the recently filed rate case. Tommy?

Yes. Thank you, Paul. As Paul noted, we filed an expedited rate case on December 2, in which we're seeking an approximate $4.3 million increase in annual revenues, and that's based on our currently authorized ROE of 9.9%. Based on the timing of the notice and filings, we believe these new rates will become effective January 1, 2026. Those are subject to refund once the commission fully adjudicates the case. We expect that process to take about 12 to 18 months. Offsetting that increase, we recently reached agreement with regards to certain tax credits and expect to begin returning these credits to customers over the next 12 months and are included with our regulatory liabilities on our balance sheet. So I will turn it back over to Paul.

Yes. Thank you, Tommy. It's no small feat to actually get this case filed right on the heels of the prior case being resolved. And Tim and Kelsie and their teams have done a very nice job on this tax credit initiative, which is, we believe, greatly going to help and benefit our customers. So we're pleased to be able to incorporate that with the rate application. Moving on to Slide 12, this slide looks yearly similar year after year. But again, that's part of the predictability of our customer growth and our SAVE program, our ability to invest $20 million, $21 million, $22 million, $23 million a year now is, in fact, proven.

And again, for 2026, we're showing a capital budget of $22 million, led by the continued renewal of the [pre-73-adalate] plastic and a couple of other items through our SAVE program. Again, we have reasonable customer growth expectations and a normal amount of system enhancement. One thing I'd like to add back to the 2 slides ago about the expansion opportunities and growth opportunities. As those arise, we have the ability to either add capital or shift capital. Again, that's something we've historically done and I think done quite nimbly. And again, we're prepared to do that again in 2026. And in fact, like to do that as growth opportunities present themselves.

Let's take a minute and just talk about some of these drivers for 2026, but it does require us to go back and look at 2025 a little bit. Tim and Tommy have already talked about those first 2 bullets, the housing authority transfers. And just as a recap, those were projects with our local housing authority that started 4 years ago, where we converted 5 complexes with modern pipe, modern meters, modern equipment. And our company now owns and operates those facilities. And we're just excited about that because of the safety and reliability that those projects have provided. And we'll see on the next earnings per share slide, and Tim talked about it, there was an income statement impact to those projects that since we have completed the projects, again, will not recur.

And obviously, that creates a little bit of a hole for 2026 when you compare the year-over-year earnings. The other item there, again, thanks to our customers, and as Tommy highlighted, the record gas deliveries last year were just that. And we saw that in a couple of areas, not just the large fuel switching customer, but also in some of our largest firm commercial customers. We just thought it prudent to not plan for those kinds of record volumes again this year. They could happen. We hope they're happening. We'll do everything in our power to help make them happen. But from an expense management standpoint, we thought it more prudent to lower the top line as a planning tool for 2026. Tommy just talked about the new rate case. That's obviously very important to how 2026 turns out. The Save rider continues to provide helpful revenue and in fact, does cover some of the depreciation and property tax growth that, again, we experienced very predictably related to our capital spending.

And finally, there in 2026, it was just announced a few days ago, our Board did authorize a larger increase this year than last year, $0.04 per share on an annualized basis, almost 5% to $0.87 per share, again, a result of the strong earnings in 2025 and what we think is going to be a solid 2026. On Slide 14, you'll see our earnings per share guidance for 2026 and the range. Again, we think there are some headwinds, Tim, and Tommy talked about inflationary pressures. Those are still very real. Obviously, the rate making will hopefully offset some of that. So we do have a little bit of a wider range than normal here. But based on some of the uncertainty in 2026, again, with volume, deliveries, weather and the rate making, we feel like the range is appropriate.

You can see also the slide does highlight the impact of those housing authority projects in 2024 and 2025. I would like to add, we're already 2 months into fiscal 2026, and it is a more challenging year already than 2025, again, for the items we've talked about there. But we're doing our best again to work through that and manage through that. We finally have had some cold weather set into the Roanoke region here in the last 1.5 weeks, and it looks like we're going to have another 1.5 weeks of cold weather. That should be helpful. But again, I'd like to take one more opportunity to thank our customers and especially our employees for working safely. Safety is our #1 priority, working diligently to serve the customer. We're excited about economic development in the region. We continue to participate in a meaningful way on that. And with that, I think we'll conclude our prepared remarks and open the line for questions.

I'd like to go back to your comments here on weather. I take it, it's tracking favorably versus last year.

Yes. We started off -- we had some strange weather patterns in October and November, part of the challenge there. October had a lot of heating degree days, but we really didn't see the volume because of the dispersion of those heating degree days. So October was off from October of last year. November, we're still, of course, closing the books for November. We'll know a little more in a few days. But November turned very warm and then it turned very cold around Thanksgiving, the last few days of the month, and that cold air mass is hung in here.

In fact, we're calling for winter mix and snow to [indiscernible] here in Roanoke. So if you look at the Henry Hub future prices and the NYMEX future prices of natural gas, it feels like nationally, there's going to be more cold weather this year. I think yesterday, it closed at $5, approximately a dekatherm on the current month. And that's a high number. As you know, Mike, we haven't seen that number in quite some time. We did not see it last year, as I recall, certainly not this early in the year.

And then [MVP], they've got a lot of projects going. Any capital requirements from you in 2026?

Yes, I may hand that one over to Tim.

Sure, Mike. We have -- as part of the refinancing that we did, we set up 2 facilities to fund the investment in Boost and in Southgate. So we expect that, that will come straight through what we borrow. It includes over the course of the next several years, our investment in those projects will probably total $4 million to $5 million with maybe the first $1 million to $1.5 million this year.

Okay. And then I guess my question, Paul, you kind of sidestepped it a little bit on the data centers. Just wondering if there's been anything you can share there as to what it's looking like.

Yes. Happy to maybe give a little context from the state lens, and then we can zero into the region here. There's been a lot of announcement in the last 3 to 6 months across the state of Virginia, a fair amount of it, in fact, in the Richmond and Fredericksburg areas. Google announced back in August, approximately $9 billion of investment for 3 data centers sort of south and just to the southwest of Richmond. It was a very large announcement about 1.5 weeks ago with the governor in Caroline County, which is just north of Richmond sort of between Richmond and Fredericksburg. So the state through, I would say, the Governor's office and our Virginia Economic Development Partnership continues to be active in this area.

If you drill that back to Southwest Virginia, there continues to be interest and discussion among prospects, Mike. And I think that's a common answer around the country. As a matter of fact, that's not per se special to us. Certainly, the Google announcement in late May of them acquiring property, and that's really all they publicly announced. But that's certainly, I think, sort of lifted this region a little bit higher in the windshield, if you will, of some of the folks that do this kind of development. Obviously, if Google is willing to consider making an investment here and in fact, buying property to do so, it's noticeable.

So what we're hearing, Mike, is I think there'll be more precise announcement around Google's intentions in the region in 2026. I don't know that there's been a per se date or time frame for that to happen, but that's what we're hearing.

Well, thank you so much for joining us, Mike. Always good to have you.

Do we have any other questions? It doesn't seem like there are any further questions at this time. So this will conclude our fourth quarter and fiscal 2025 earnings call. On behalf of all of us here at RGC Resources, we appreciate you taking time to join us this morning. We wish you and your families a Merry Christmas and a safe and prosperous 2026, and we look forward to speaking with you in February to review 2026 first quarter results. Thank you.