Welcome to Chesapeake Utilities Corporation's Fourth Quarter and Full Year 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 the call up 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 2025 annual report on Form 10-K provides 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 presented 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 2025 annual report on Form 10-K. 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 Women's Heart Health as highlighted on Slide 3. As February is American Heart Month, it's a good time to take care of ourselves and our loved ones by making small changes that can have a big impact on our heart health. Cardiovascular disease is the #1 killer for women in particular. So it's important to understand the unique risk factors women face across various stages of life, including pregnancy and menopause. We are proud to be a long-standing supporter of the American Heart Association, which has in-depth resources for managing heart health risks and implementing changes that support long-term cardiovascular health. It's now my pleasure to introduce our presenters today. Jeff Householder, Chair of the Board, President and Chief Executive Officer, will summarize the highlights and accomplishments of 2025 and introduce our theme for 2026. Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer, will provide updates on our regulatory strategy, business transformation efforts and stakeholder engagement. And Beth Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary, will discuss our full year financial results, financing updates and investment highlights. I'll now turn the call over to Jeff.

Thank you, Lucia. Good morning. It's great to speak with you today. As shown on Slide 5, 2025 was a year of outstanding performance and growth. I'm proud of everything our team has done in the last year to deliver with purpose. We have once again reached significant new heights across our entire enterprise. 2025 was our 19th consecutive year of earnings growth. We generated adjusted earnings of $6.01 per share, reflecting industry-leading growth of 12% relative to full year 2024. Above-average residential growth of 3% across our service areas continues to serve as the primary driver for our capital program. We invested $470 million through 2025, a 32% increase over our 2024 capital spend and $20 million above our 2025 guidance range, a record of non-acquisition capital. 2025 was also a record year for incremental adjusted gross margin growth up $71 million. Included in that was transmission project margin of $19 million and incremental infrastructure margin of $14 million. Our proactive regulatory approach also contributed to our full year results with completed rate cases in our Maryland, Delaware and Florida electric jurisdictions, driving an additional $13 million of gross margin in 2025. And lastly, we are pleased to end the year back at our target equity capitalization of 50%, exactly in line with the goal we laid out at the start of 2025 and ahead of the schedule we established at the time of the FCG acquisition. Slide 6 provides additional detail on our record levels of earnings growth. For the fourth quarter and full year 2025, we generated double-digit growth in adjusted gross margin, adjusted net income and adjusted earnings per share. These results demonstrate our commitment to providing high-quality, safe and reliable service for all customers and driving value for all stakeholders. I'll now shift to Slide…

Thank you, Jeff. It is great to be with you all again today. I'll start with Slide 15, which includes updates on our regulatory agenda. As Jeff mentioned at the start of the call, successful rate cases in our Delaware, Maryland and Florida electric jurisdictions drove over $12 million of incremental gross margin in 2025 and are expected to generate over $18 million in 2026, the first full year of revised rates. Our Florida City Gas depreciation study also concluded last week. The Florida Public Service Commission denied our request for a 2-year amortization of the $19 million excess depreciation reserve and adopted its staff recommendation of only $6.8 million of excess depreciation recovered over the life of the assets. This results in annual depreciation savings of approximately $500,000. Given the timing of the order, we opted to not reopen the books for 2025 and instead will apply 2 years' worth of reduced depreciation expense or close to $1 million in 2026. And as you'll recall, achieving our 2025 earnings guidance included appropriate cost recovery and return on equity at FCG, which did not happen. We had hoped to avoid filing a general rate case and utilize depreciation expense savings from the excess reserve to delay a customer rate adjustment for as long as possible. Given the outcome of the depreciation study, however, we immediately submitted notice of intent, indicating our plan to file a general rate case for FCG in mid-April of 2026. This rate request will ensure appropriate cost recovery and an improved allowed ROE. We expect interim rates to be effective by early July 2026 and look forward to FCG returning to its earnings contribution levels in 2027 and beyond. I'd now like to turn to the 2 core elements of our theme for 2026, which Jeff…

Thanks, Jim, and good morning, everyone. Slide 18 shows our record-breaking financial results for full year 2025. We generated approximately $639 million of adjusted gross margin, $141 million of adjusted net income and $6.01 of adjusted earnings per share in 2025, all representing double-digit increases over full year 2024. Adjusted net income was up 16%, which translated into a 12% increase in adjusted EPS after we purposely advanced our equity to total capitalization ratio back to 50% to support our CapEx program at a faster pace than our forecasted financial models post FCG. This reflects Chesapeake's highest level of annual earnings and our 19th year of consecutive earnings growth, as I will discuss in more detail shortly. Our results were driven by consistent growth across our entire business as detailed on Slide 19. For full year 2025, our key margin drivers added $2.41 per share, only partially offset by increased expenses and financing costs of $1.79 per share. Record levels of capital investment drove $0.58 of incremental adjusted EPS from transmission expansion projects and $0.43 from infrastructure projects to improve reliability and resiliency across our regulated businesses. Growth in our service areas and increasing demand for natural gas drove $0.51 of incremental adjusted EPS, including $0.28 of higher customer consumption and $0.23 of distribution system customer growth. Permanent rates from the 3 rate cases we completed in 2025 added $0.39 of adjusted EPS and our unregulated businesses generated $0.29 of net incremental earnings per share, largely driven by substantial growth in our Marlin Virtual Pipeline transportation business and supported by strong performance in our Propane and Aspire Energy operations. As I just mentioned, these positive margin gains were partially offset by a few factors, most notably $0.51 from the absence of the RSAM benefit we recorded in 2024 and we…

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

This is Michael Brown on for Nicholas Campanella. My first question is, you reaffirmed your full year '28 EPS target. Can you walk us through the growth rate for full year '25 through full year '27 to reach a full year '28?

Michael, I'm sorry. This is Beth. Can you restate your question? Would you mind?

You reaffirmed your full year '28 EPS target. Can you walk us through the growth rate from full year '25 through full year '27 to get to full year '28?

We have -- at the present time, as we -- as I talked about on the call, we have reaffirmed our 2028 EPS guidance. And Michael, you may recall this, but I will just remind you, as a company, we've historically provided long-term EPS guidance given some of the capital expenditures that we incur and how the timing of getting some of those capital expenditures underway and completed. And so what we've done is actually put out there our long-term EPS CAGR of 8% and again, reaffirmed our 2028 EPS guidance. Also in conjunction with that, we have put out our annual capital guidance this year and some of the projects that are underway that will hopefully, both with that information and also the information that we include in our major projects table, enable you to provide a forecast as we move through that period to 2028.

We'll take our next question from Chris Ellinghaus with Siebert.

Can you talk about the first quarter thus far? It seems like we've had some pretty cold snaps. And I'm just kind of curious what you're thinking about tailwind from weather in the first quarter.

Sure. Great question. Certainly, weather has been top of mind for us like many across the country with the weather that we've experienced. As you may recall, in our northern service territories on the Maryland side, we have weather normalization, right? So that's going to somewhat stabilize the impact of the weather for our Maryland operations. In Delaware, there will certainly be an impact, and we've begun to quantify the first part of that for January, but the numbers certainly are preliminary, and we're not in a position to really talk about that just yet. Similarly, on the propane side, there will be some benefit that comes from the weather in Florida. You also may recall with cooler -- the colder weather there -- also in weather, we have a greater portion of our bill that is more of a fixed than a variable component. So again, more weather normalized when you get to Florida. So yes, coming out of the gate, there will be some impact in January and as we're seeing into February. What we're also, Chris, being very mindful of is the impact on our customers and wanting to work with them, certainly from a payment standpoint, working with them to hopefully put those that may need it in touch with some of the social service agencies. And then finally, from an operations standpoint, I can't say enough about from our standpoint, how our team operated during this challenging time, how our facilities were maintained, a no disruption of service across our systems. And again, we look forward to providing more information when we jump on our first quarter call.

Okay. I'm not quite sure if you have insights into this, but I'm guessing over your wide-ranging Florida service areas that the temperatures were fairly unusually cool. Is that fair?

In certain parts of our areas in Florida, absolutely. I can tell you, I've just been down in Florida. And when I landed, it wasn't the normal temperatures. I'm traditionally accustomed to. So yes, there would be. But again, with our rate design over the last several years, we have limited that a little bit more than as we've moved over the last couple of years. But certainly, there will be some, and there will also be some, to your point, that may come from certainly the propane side as well down there.

Okay. The growth in the FCG customers for the year, you do have this wide-ranging FCG service area. Does that suggest versus maybe the more Miami proper area that there are some portions of the service area that are growing in the 3% to 4% range?

There are portions of Florida that certainly have higher growth than others. I think it's -- and I would say it's probably closer to the 3-ish-percent in some of those areas. What I would also say, though, is despite what individuals may think about growth, let's say, in more of a metropolitan area like Miami, what you are seeing, we saw this last year on one of the trips down there when we took a ride in the service area and with our team looked at some of what's going on, there is a lot of redevelopment that's going on there. So opportunities to particularly have increased margin that comes from commercial infrastructure that's being constructed when particular buildings are being torn down and multi-unit dwellings are being constructed, again, there may be more opportunities as well. So yes, higher in certain markets, but there are opportunities from a commercial side and a residential side, even in some of those lower growing markets. The other thing, Chris, that I would point out, and I think your point to some degree, I would just highlight, we try to make it very clear in our earnings release. In Florida, in particular, the amount of commercial infrastructure that is supporting the residential growth that is going on down there is pretty phenomenal. It's also happening on the Peninsula, but to a much lesser degree, more driven there by residential. So we're continuing to see the levels of growth that we had thought we would experience over the last several years since Florida City Gas. So that's been exciting that it's been on track.

Chris, I'll just add -- this is Jeff. I'll just add a little detail to that specific to your question. If you look at the city gas service territories, where we're seeing significant residential growth followed by, as Beth indicated, a substantial amount of commercial service growth is in the Port St. Lucie area around Vero Beach and then up in the Brevard County area, especially to the West of the county out in the Viera communities. And so those are significantly higher growth areas than what we're experiencing currently in the Miami portion of that service territory.

That's kind of what I was thinking. Can you talk about the ERP and what you see as the benefits where you might see cost savings or sort of synergistic value creation? Can you quantify any of that?

Sure. I can talk a -- go ahead, Jeff. Go ahead, please.

No, no, go ahead, please.

I was just going to start off, one of the ways that we've been talking about it internally, Chris, and we've been working on establishing some metrics would be as we think about and talk about from time to time, our O&M expenses as a percentage of gross margin. So as this project starts to be underway on the back end, certainly of this project and many other technology improvements that we're making, you'll see us referring to that, in particular, as we talk about that benchmark O&M as a percentage of gross margin. And you may recall, Chris, we've been talking about that pretty much since Jeff became our CEO coming out of the gate and talking about that each year. And if you look at our history, we've been on a declining path as we've continued to grow. So I would say that out of the gate -- Jeff, maybe I'll turn it to you, and you can touch on just some of the things that we're thinking about from the technology standpoint.

Sure. I think this is a drive to accumulate data in a more proactive way that allows us to actually utilize that data and making better decisions about the company. I mean that's fundamentally what this is. To specifically talk about a handful of areas that we believe we'll see efficiencies and ultimately some cost savings. I think there are opportunities on the customer service side, certainly, with respect to electronic billing, moving customers into a portal relationship with the company, reducing the number of calls to our call centers, automatic meter reading. All of those things, I think, are on the horizon for us that will provide significant efficiencies. There are a variety of supply chain issues here that we believe that kind of march down this One Company approach that we've been looking at to standardize things across all of our operating areas over the last few years. We've just sort of scratched the surface, I think, on the way we buy materials and supplies and services in the company. And so I think there are significant opportunities there. A number of field services operations activities, especially in the way we schedule work and control kind of the flow of orders back and forth from a computer system out into the field and back without having to physically touch those. There are a variety of accounting and finance improvements that I think we'll see just how we process accounts payable. I mean and on and on and on. I mean, it's the sort of classic ERP opportunity here. And so, linking that into our recently installed what we call 1CX, the SAP Customer Service Billing and Field Services Management Systems that we have in place across the company now, I think will continue to drive some of the cost savings that Beth was trying to support and to quantify. We haven't gotten to a number. I mean, I walk around with one in my head, but I'm certainly not ready to begin to publicly describe that. But I think it is significant. And I think we will see that we will realize those cost savings, and they will flow through ultimately to keep customers' bills down to allow us to redeploy some of those dollars in support of some of the capital operations that we're pursuing and to make the company more efficient and less costly.

Okay. Maybe one last question for Jim. Jim, how surprised were you by the Florida decision? And was that somewhat of a tacit invitation to file a rate case?

Well, thank you, Chris. I mean that's a very good question. Our purpose all along was to kind of simplify what was the RSAM to a more traditional approach to depreciation. I think in some ways, we got caught up in the continuing tendency of the Supreme Court review and action. And while that was still pending, I think the OPC took a certain stand against what we were trying to do. And then that just fed into taking a lot longer than we or really anyone anticipated to land with a decision. We were -- our approach was to avoid as long as possible a general rate increase filing. But with this decision now, we made the decision to go forward, and that's what we're doing. So I guess we were surprised in some way that a relatively simple straightforward application of traditional approaches got caught up in this vortex for the past year. But we're accepting it, and we're moving on, and we'll be filing here very shortly.

So there seem to be some sympathy at the Supreme Court when they did the oral argument. What happens from now if some constructive order comes out of the Supreme Court?

Well, I think ultimately, that's helpful for us. It really will address an issue that we're no longer going to deal with, and that is the validity of the RSAM. But I think in supporting that approach, I think it helps all of us in Florida that are filing rate cases. Did I lose you, Chris?

We'll take our next question from Mike Brown with Barclays.

Are you planning on giving guidance this year for full year '26?

We -- again, what we are doing is basically reaffirming our 2028 guidance at this time. We don't -- historically, other than the year post Florida City Gas, we gave guidance on an annual basis in 2024 coming out of the acquisition because we knew that year with the transaction just occurring at the end of the year, we knew we could be accretive, but it was much less than what our historical run rate had been. So we provided annual guidance. But we have a long term -- our long-term track record going back to 2018 when we initiated guidance is we follow a long-term view of the CAGR that we can achieve over a period of time. And so the short answer after I gave you the long-winded answer, Mike, is that we will not be, at this time, giving annual guidance for 2026.

Can you provide an update on the Florida pipeline project that starts in the Indiantown gas hub and kind of where that stands at this point and when it will make it into the plan?

So we are -- Jeff, do you want to start this one off?

No. No, no. Go, Beth. Go sorry.

No. I'm going to defer to you, Jeff, and let you kick this one off.

Okay. All right. Fairly simple explanation. We are continuing the engineering design on that project and are working through -- in fact, I'm looking across the hall at the group of engineering folks that are working on that project as we speak. I think we're in pretty good shape to get an engineering design cost estimate here over the next 30 to 60 days on at least the first significant segments of that to get down toward our distribution system in Miami. I believe that we will be on time with our estimated project start date, which I will probably hold back a little bit on describing when that is, but certainly sometime this year. It looks like we will be able to find the pipe and get the right of ways that we need to identify completed. So I'm pretty comfortable that we're on the right track with that project at this point.

We'll take our next question from Paul Fremont with Ladenburg.

And hopefully, you have less snow down there than we have up here, Beth. I guess, for my first question, I'd like to maybe draw your attention to Page 43 PDF of your 10-K. I think you're basically saying that the adjusted gross margin from Full Circle Dairy and Noble was $10.9 million in 2025, and you're projecting '26 to be $28.5 million and '27 to be $29.7 million, I guess. Can you walk us through the delta between '25 and '26?

So Paul, the line that you're looking at is actually a compilation of Marlin, Full Circle Dairy and our Noble RNG project that is in Ohio. It is not just Full Circle Dairy. And so some of the growth -- a big part of the growth that year-over-year, we've been experiencing, particularly if you look in the major project table, is actually coming more from Marlin because as you can imagine, with the facilities being in place for both Full Circle Dairy and our Ohio operations, there's not a steady -- they've both been in operation now for a year. And so the opportunities for Full Circle Dairy for us, and certainly, we're going to have a follow-up with you and our other analysts would be around the production tax credit side. I know you've been talking to me about that. I think we've talked previously on the phone before around the investment tax credit that, that's really something for us that gets amortized over the life of the project. It is not a won and done. So the big part of the growth that you're seeing in any margin there is really going to be related to what Marlin is doing and less about those 2 facilities that are operating as planned.

And if I look at that uplift, I mean, wouldn't that essentially offset the absence of RSAM for 2026, based on the?

Well, that would be great. Well, that would be great if we stopped there at the margin line. But as you know, there's operating expenses that are associated with that growth. And so with Marlin and it continuing to serve increasing amounts of -- an increasing projects, there's certainly costs associated with the labor side and other incremental expenses that are variable. And so you can't just unfortunately look at that line. I like to look at that line too, but then I have to remind myself that there's variable costs. So a significant chunk of that would be offset in payroll-related costs. If we have to buy additional equipment to support that demand that's associated with depreciation and certainly property taxes associated with that, that all gets factored into it. So we can certainly walk through some of that as we get together, but that would need to be factored into your calculations.

And then can you just quantify specifically the amount of PTC benefit that you're expecting to book in '26?

We have some preliminary estimates on that. We are continuing to refine those, and I would certainly love for us to set up some time and walk through that. We're not quite there. We're still noodling with that a little bit, but we can certainly walk through where we are in our assumptions behind that.

Great. And then can you also maybe -- I guess this would be more, Jim. Can you walk us through what -- how interim rates are set in Florida and what we should expect in terms of when interim rates come into play in July?

Do you want me to start that, Jim? Or do you -- Jeff? I don't know, Jim, do you?

Well, I can take a pass at that. Yes, Jim is having some trouble.

Yes, please go ahead. Yes.

Okay. The interim rate filing in Florida typically comes about 60 days after the actual filing date. So we're looking for those, as you well know, sometime in probably July, early-July. The traditional methodology for determining interim rates is to look at kind of existing rate base, could be some adjustments in there, look at the bottom end of the ROE range and to do a relatively straightforward calculation of any deficiency that exists there and to apply it to calculating the interim rates. So we're assuming that we would see interim rates in effect for the last half of this year or until certainly the permanent rates actually go into effect. And so we'll see what the timing looks like on that. I don't think at this point, we're quite ready to describe what we believe that interim rate calculation will result in. There are some things that we are and will, I'm sure, debate with the Public Service Commission as we file for interim rate. One of those, as you may recall, is that the current return on equity for City Gas is about 100 basis points lower than what we would traditionally see at other gas utilities in Florida. That was set because of the RSAM. And so the rate-making deal that was established by NextEra before we acquired the company reduced ROEs from the more traditional levels down about 100 basis points. And so we'll argue that, that's no longer applicable. And there are a couple of other things that will roll around in there. What I will tell you, though, Paul, is that you were -- I think the path you were down a second ago is one that I continue to go down between the weather impacts between the other associated opportunities that we have within the company and the interim rates, I believe that we will not see significant impacts resulting from missing out on the depreciation study result that we had anticipated for this year. And in fact, as you may know, what would be traditionally done by the Florida Public Service Commission is if that depreciation study result had occurred the way we filed it in '26, that would have been a reduction most likely to the interim rates. And so I think there is a -- it's disappointing that we didn't get that depreciation result. But in the great scheme of things, I think we'll be able to overcome that with the several things that are going right for us this year.

Great. And then last question for me. It looks as if there are 3 sort of additional RNG projects that maybe came online in '25. Are those -- can you describe -- are those dairy or otherwise in terms of their nature?

Those are basically -- go ahead, Beth. Sorry.

No, go ahead, Jeff.

Those are essentially RNG transport projects from landfills.

That's just the pipeline.

Yes, that's the pipeline or the Marlin service that begins before the pipeline shows up. And so that's what you're seeing there. We don't have the production facility investment.

We'll take our next question from Alex Kania with BTIG.

Just thoughts on just the overall customer growth. I mean, again, just Delmarva continues to be really strong. I'm just kind of wondering if you see that as kind of sustainable or kind of any reason why that number can't continue in the near future?

Sure. So being based here on the Delmarva Peninsula, I can tell you in talking with our team, we continue to actually see strong growth in Delaware. It is not slowing down. In fact, you've heard -- in fact, Alex, on a couple of calls ago, Jeff actually, we talked about a small town by the name of Ellendale, which for someone who's from Delaware. Again, it would not have been an area that I would have thought would be close to the resort areas, but it's about a half hour to 45 minutes in. That is one of the new areas that we have begun to provide natural gas distribution service to, and it continues. There is a lot of planned also infrastructure growth, particularly in the Southern County of Delaware that is being anticipated given it's a growing population. There's a lot of retirement activity that's happening in terms of new developments. So the infrastructure that's coming along like medical facilities, other types of things to support that growth are also continuing to stay at pretty high levels. So we continue to be excited. And what I would add to that, which is, again, even more exciting when you layer this on top, right, is as that growth continues, it also supports the need for additional pipeline capacity to bring more gas into the southern part of the Delmarva Peninsula. And so we've got projects. Jeff just talked about it -- the newest one today. I think you're going to see, Alex, continued upstream pipeline demands that necessitate increased expansion there. So all continues. Nothing has changed from -- in terms of our view at this time.

Great. And then just maybe a follow-up on your comments a little bit earlier just on a little opportunity on the financing of the FCG acquisition debt. Could you just talk a little bit about kind of what that opportunity might be in terms of kind of a help on interest expense and if you see some additional ongoing opportunities down that path in the next couple of years?

Absolutely. Great question, an area that I absolutely love. So you're spot on this morning. Yes, I mean, when we did the Florida City Gas financing, we unfortunately had to place debt that had a sixth handle to it -- a 6-plus handle to it. And so we have steady retirements that are going to happen over the next several years. So there's going to be a robust refinancing plan that has to take place. You're going to see us, Alex, take a similar approach to what we did last year, which means we'll be looking at blending a portfolio of different tenors to accomplish a rate that's much more in line with what we would be expecting and based upon our history in terms of our long-term debt portfolio. So I don't think it's unreasonable to think that the opportunity exists for us to shave anywhere from 50 bps to 100 bps off of the coupon rate as long as things stay where they are. And so that's what you should expect to see from us this year.

And that does conclude the Q&A portion of today's call. I would now like to hand it back to Jeff Householder for any closing remarks.

Thank you, and thank all of you for joining us this morning. We'll continue to provide significant information on our capital deployment, our project status and our margin production throughout the year. We look forward to continuing our long track record of strong growth and top quartile financial success. And we look forward to seeing many of you at the AGA Financial Forum out in Scottsdale here in the next couple of months. So thanks again. We'll talk to you soon. Goodbye.

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