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.

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,…

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…

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…

[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.