Essential Utilities, Inc.

Previous wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things: the expected timing of closing of our acquisitions; the projected impact of various legal proceedings; the projected effects of recent accounting pronouncements; the proposed merger with American Water Works Company, Inc. (“American Water”); prospects, plans, objectives, expectations and beliefs of management, as well as information contained in this report where statements are preceded by, followed by or include the words “believes,” “expects,” “estimates,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “intends,” “will,” “continue,” “in the event” or the negative of such terms or similar expressions. Forward-looking statements are based on a number of assumptions concerning future events, and are subject to a number of risks, uncertainties and other factors, many of which are outside our control, which could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, among others, the effects of regulation, abnormal weather, geopolitical forces, the impact of inflation and supply chain pressures, including those resulting from changes in government fiscal policies and regulations, the imposition of tariffs, the threat of cyber-attacks and data breaches, changes in capital requirements and funding, the success of growth initiatives, including pending acquisitions, changes to the capital markets, impact of public health threats, and our ability to assimilate acquired operations, as well as those risks, uncertainties and other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in such reports. In addition to the foregoing, there are various risks and other uncertainties associated with the Company’s proposed merger with American Water, including a fixed exchange ratio that will not adjust or account for fluctuations in American Water’s or the Company’s stock price; limitations on the parties’ ability to pursue alternatives to the proposed merger; financial impacts of the proposed merger on the Company and the combined company’s earnings, earnings per share, financial condition, results of operations, cash flows and share price, and any related accounting impacts; any impact of the proposed merger on the Company’s ability to declare and pay quarterly dividends on its common stock; the amount and nature of incurred transaction costs associated with the proposed merger; as well as those risks, uncertainties and other factors disc…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things: the expected timing of closing of our acquisitions; the projected impact of various legal proceedings; the projected effects of recent accounting pronouncements; the proposed merger with American Water Works Company, Inc. (“American Water”); prospects, plans, objectives, expectations and beliefs of management, as well as information contained in this report where statements are preceded by, followed by or include the words “believes,” “expects,” “estimates,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “intends,” “will,” “continue,” “in the event” or the negative of such terms or similar expressions. Forward-looking statements are based on a number of assumptions concerning future events, and are subject to a number of risks, uncertainties and other factors, many of which are outside our control, which could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, among others, the effects of regulation, abnormal weather, geopolitical forces, the impact of inflation and supply chain pressures, including those resulting from changes in government fiscal policies and regulations, the imposition of tariffs, the threat of cyber-attacks and data breaches, changes in capital requirements and funding, the success of growth initiatives, including pending acquisitions, changes to the capital markets, our ability to control operating expenses and our ability to assimilate acquired operations, as well as those risks, uncertainties and other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in such reports. In addition to the foregoing, there are various risks and other uncertainties associated with the Company’s proposed merger with American Water, including a fixed exchange ratio that will not adjust or account for fluctuations in American Water’s or the Company’s stock price; limitations on the parties’ ability to pursue alternatives to the proposed merger; an event, change or other circumstance that could give rise to the termination of the merger agreement; a delay in the timing to consummate the proposed merger; each party’s ability to obtain required governmental and regulatory approvals required for the proposed merger (and/or that such approvals may result in the imposition of burdensome or commercially undesirable conditions, including required dispositions, that could adversely affect the combined company or the expected…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

On October 26, 2025, American Water Works Company, Inc. (“American Water”), Alpha Merger Sub, Inc., a direct wholly owned subsidiary of American Water (“Merger Sub”), and the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of American Water. Subject to the terms and conditions of the Merger Agreement, at the time at which the Merger becomes effective (the “Effective Time”), each share of the Company’s common stock, par value $0.50 per share (“Essential Common Stock”), issued and outstanding immediately prior to the Effective Time, other than any shares of Essential Common Stock owned by American Water or Merger Sub or by the Company as treasury stock (in each case, other than restricted shares), will be converted into the right to receive 0.305 shares (the “Exchange Ratio”) of validly issued, fully paid and nonassessable common stock, par value $0.01 per share, of American Water (“American Water Common Stock”) (the aggregate number of such shares of American Water Common Stock to be issued in the Merger, the “Merger Consideration”).

Current wording

On October 26, 2025, American Water Works Company, Inc. (“American Water”), Alpha Merger Sub, Inc., a direct wholly owned subsidiary of American Water (“Merger Sub”), and the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of American Water. Subject to the terms and conditions of the Merger Agreement, at the time at which the Merger becomes effective (the “Effective Time”), each share of the Company’s common stock, par value $0.50 per share (“Essential Common Stock”), issued and outstanding immediately prior to the Effective Time, other than any shares of Essential Common Stock owned by American Water or Merger Sub or by the Company as treasury stock (in each case, other than restricted shares), will be converted into the right to receive 0.305 shares (the “Exchange Ratio”) of validly issued, fully paid and nonassessable common stock, par value $0.01 per share, of American Water (“American Water Common Stock”) (the aggregate number of such shares of American Water Common Stock to be issued in the Merger). On February 10, 2026, at the respective special shareholder meetings of the Company and American Water, each company’s shareholders approved the merger-related proposals, satisfying certain of the conditions to closing.

Previous wording

Company’s shareholders; and receipt of certain governmental approvals, including (a) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and (b) the approval of certain public utility commissions, in each case on such terms and conditions that would not, individually or in the aggregate, result in a “Burdensome Effect” (as defined in the Merger Agreement). There can be no guarantee that all of the closing conditions and approvals will be satisfied, and the failure to complete the proposed merger on a timely basis or at all may adversely affect the Company’s financial condition and results of operations. The Company currently estimates that the closing of the proposed merger will occur by the end of the first quarter of 2027.

Current wording

Consummation of the Merger is subject to certain remaining customary conditions, including the receipt of certain governmental approvals, including (a) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and (b) the approval of certain public utility commissions, in each case on such terms and conditions that would not, individually or in the aggregate, result in a “Burdensome Effect” (as defined in the Merger Agreement). There can be no guarantee that all of the closing conditions and approvals will be satisfied, and the failure to complete the proposed merger on a timely basis or at all may adversely affect the Company’s financial condition and results of operations. The Company currently estimates that the closing of the proposed merger will occur by the end of the first quarter of 2027. During the three months ended March 31, 2026, the Company incurred $16,300 of pre-merger related expenses which is presented within operations and maintenance expense in the condensed consolidated statements of operations and comprehensive income.

Previous wording

Our business is subject to various economic factors that affect our customers and our industry. The recent changes in government fiscal policies and regulations introduced by the new administration have resulted in heightened uncertainty for businesses and consumers, as well as volatility in financial markets. We will continue to evaluate the evolving macroeconomic environment, including those impacts resulting from the recent imposition, or proposed imposition, of tariffs and potential changes to environmental regulations, and to take action to mitigate the impact on our business, consolidated results of operations, and financial condition. Timely and adequate rate relief is important to our continued profitability and in providing a fair return to our shareholders. We continue to pursue enhancements to our regulatory practices to facilitate the efficient recovery of the increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory lag associated with traditional rate making processes.

Current wording

Our business is subject to various economic factors that affect our customers and our industry. We continue to evaluate the evolving macroeconomic environment, including those impacts resulting from potential changes to environmental regulations and geopolitical conflicts, and to take action to mitigate the impact on our business, consolidated results of operations, and financial condition. Timely and adequate rate relief is important to our continued profitability and in providing a fair return to our shareholders. We continue to pursue enhancements to our regulatory practices to facilitate the efficient recovery of the increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory lag associated with traditional rate making processes.

Previous wording

On July 30, 2025, the Company’s regulated water and wastewater operating subsidiary in Virginia, Aqua Virginia, filed an application with the State Corporation Commission designed to increase revenues by $7,927 annually.

Current wording

On January 30, 2026, the Company’s regulated water and wastewater operating subsidiary in New Jersey, Aqua New Jersey, filed an application with the New Jersey Board of Public Utilities designed to increase revenues by $7,886 annually.

Previous wording

On June 20, 2025, the Company’s regulated water and wastewater operating subsidiary in Texas, Aqua Texas, filed an application with the Public Utility Commission of Texas designed to increase rates by $29,149.

Current wording

On June 20, 2025, the Company’s regulated water and wastewater operating subsidiary in Texas, Aqua Texas, filed an application with the Public Utility Commission of Texas designed to increase rates by $29,149. Interim rates were implemented on March 9, 2026, with the difference between interim and final approved rates subject to refund to customers based on an estimate of the final outcome of the order.

Previous wording

On April 30, 2025, the Company’s regulated water and wastewater operating subsidiary in North Carolina, Aqua North Carolina, filed an application with the North Carolina Utilities Commission designed to increase rates by $32,847 in the first year of new rates being implemented, then an additional $5,915 and $6,000 in the second and third years, respectively.

Current wording

On April 30, 2025, the Company’s regulated water and wastewater operating subsidiary in North Carolina, Aqua North Carolina, filed an application with the North Carolina Utilities Commission, which was updated on August 18, 2025. The updated rate case filing requests an increase in rates of $30,154 in the first year of new rates being implemented, then by an additional $6,014 and $6,074 in the second and third years, respectively. Interim rates were implemented on January 1, 2026, based on an estimate of the final outcome of the order, with the difference between interim and final approved rates subject to refund to customers.

Previous wording

In January 2025, the Company acquired Greenville Sanitary Authority’s wastewater utility assets, which serves approximately 2,300 customers in Greenville, Pennsylvania for $18,000. In April 2025, the Company closed on its acquisition of the Village of Midvale’s water system in Ohio, which serves approximately 1,000 customers for $2,950. In July 2025, the Company acquired the wastewater utility system of the City of Beaver Falls, Pennsylvania for $37,750. The system serves approximately 3,200 customers in the City of Beaver Falls and also provides bulk transmission and treatment service for approximately 3,800 equivalent dwelling units in seven nearby municipalities. As of September 30, 2025, the Company had four signed purchase agreements for additional water and wastewater systems that are expected to serve approximately 203,000 equivalent retail customers or equivalent dwelling units and total approximately $300,000 in purchase price in two of our existing states. This includes the Company’s agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,500. DELCORA, a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the Philadelphia suburbs. Refer to Note 3 –Water and Wastewater Acquisitions for further discussion.

Current wording

In March 2026, the Company acquired Greenville Municipal Water Authority’s water utility system in Greenville, Pennsylvania which serves approximately 3,000 customers for $18,000. As of March 31, 2026, the Company had four signed purchase agreements for additional water and wastewater systems that are expected to serve approximately 201,000 equivalent retail customers or equivalent dwelling units and total approximately $286,000 in purchase price in three of our existing states. This includes the Company’s agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA) for $276,500. DELCORA, a Pennsylvania sewer authority, serves approximately 198,000 equivalent dwelling units in the Philadelphia suburbs. Refer to Note 3 – Water and Wastewater Acquisitions for further discussion.

Previous wording

During the nine-month period ended September 30, 2025, we invested $983,089 to improve our regulated water and natural gas infrastructure system and to enhance customer service. From 2025 through 2029, the Company plans to invest approximately $7,800,000 to improve water and natural gas systems and better serve customers through improved information technology. The capital investments made to rehabilitate and expand the infrastructure of the communities the Company serves are critical to its mission of safely and reliably delivering Earth’s most essential resources.

Current wording

During the three-month period ended March 31, 2026, we invested $269,249 to improve our regulated water and natural gas infrastructure system and to enhance customer service. From 2026 through 2030, the Company plans to invest approximately $8,700,000 to improve water and natural gas systems and better serve customers through improved information technology. The capital investments made to rehabilitate and expand the infrastructure of the communities the Company serves are critical to its mission of safely and reliably delivering Earth’s most essential resources.

Previous wording

A number of the Company’s water and wastewater subsidiaries are parties to a multi-district litigation (the “MDL”) lawsuit in the United States District Court for the District of South Carolina against manufacturers of certain per- and polyfluoroalkyl substances or compounds (“PFAS”) for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems. During the third quarter of 2025, the Company received $39,844 representing a portion of its share of the settlement reached with 3M, net of legal fees and settlement costs. The Company recorded $8,776 of the proceeds allocated to its North Carolina and Virginia water and wastewater subsidiaries as a regulatory liability, pursuant to regulatory orders issued by the public utility commissions from such states regarding the treatment of PFAS settlement costs. The remaining proceeds received that were allocated to the Company’s other water and wastewater subsidiaries totaling $31,068 were recorded within Deferred Credits and Other Non-current liabilities in the accompanying condensed consolidated balance sheet, pending recommendation or order from the respective public utility commissions on treatment of the amounts. The Company anticipates receiving additional settlement payments from the MDL lawsuit defendants.

Current wording

A number of the Company’s water and wastewater subsidiaries are parties to a multi-district litigation (the “MDL”) lawsuit in the United States District Court for the District of South Carolina against manufacturers of certain per- and polyfluoroalkyl substances or compounds (“PFAS”) for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems. In 2024, the MDL court granted approval of the DuPont, 3M, Tyco Fire Products LP, and BASF Corp class action settlements. The total amount of recovery by the Company is uncertain. During the three months ended March 31, 2026, the Company received an additional $252 from DuPont. As of March 31, 2026, the Company presented $9,972 of the proceeds allocated to its North Carolina and Virginia water and wastewater subsidiaries as a regulatory liability, pursuant to regulatory orders issued by the public utility commissions from such states regarding the treatment of PFAS settlement costs. The remaining proceeds received that were allocated to the Company’s other water and wastewater subsidiaries totaling $36,446 were recorded within deferred credits and other non-current liabilities in the accompanying condensed consolidated balance sheet, pending recommendation or order from the respective public utility commissions on treatment of the amounts. In April 2026, the Company received a portion of the Tyco settlement, net of legal fees and settlement costs, amounting to $7,260. The Company anticipates receiving additional settlement payments from the MDL lawsuit defendants over the next ten years.

Previous wording

During the first nine months of 2025, we incurred $983,089 of capital expenditures, obtained net proceeds of $152,525 from our commercial paper program (the “CP Program”), issued long-term debt of $1,312,446, and repaid short-term debt and other long-term debt in aggregate of $1,236,664. The capital expenditures were related to new and replacement water, wastewater, and natural gas mains, improvements to treatment plants, tanks, hydrants, and service lines, well and booster improvements, information technology improvements, and other enhancements and improvements. Cash inflows from financing activities were higher during the first nine months of 2025 compared to 2024, primarily due to the issuance of common stock from the Company’s at-the-market equity sales program (“ATM”), partially offset by greater repayments of long-term debt.

Current wording

Net cash flows used in investing activities decreased by $20,419 primarily due to the $20,000 return of a portion of the Company’s convertible note investment in January 2026. During the first three months of 2026, we incurred $269,249 of capital expenditures. The capital expenditures were related to new and replacement water, wastewater, and natural gas mains, improvements to treatment plants, including additional treatment processes to remove PFAS compounds, tanks, hydrants, and service lines, well and booster improvements, information technology improvements, and other enhancements and improvements.

Previous wording

On August 7, 2025, the Company issued $500,000 of senior notes, less expenses of $1,220, due on August 15, 2035 with an interest rate of 5.25%. The Company used the proceeds from the issuance of senior notes to repay a portion of its commercial paper borrowings and for general corporate purposes.

Current wording

On March 9, 2026, the Company issued $500,000 of senior notes, less expenses of $5,140, due on March 15, 2036, with an interest rate of 5.13%. The Company used the proceeds from the issuance of the senior notes to repay a portion of its commercial paper borrowings and for general corporate purposes. In addition to the senior notes issued by the Company, during the three months ended March 31, 2026, the Company’s regulated water subsidiaries obtained in the aggregate $15,187 of low-interest government loans to fund capital projects, with interest rates ranging from 0.46% to 1.743% and maturity dates ranging from 2030 to 2049.

Previous wording

On March 19, 2025, the Company established the CP Program that allows it to issue, through private placement, short-term, unsecured commercial paper notes (the “CP Notes”) in an aggregate principal amount not to exceed $1,000,000. Maturities of CP Notes may vary, but cannot exceed 364 days from the date of issue. Amounts available under the CP Program may be borrowed, repaid, and re-borrowed from time to time. The CP Program is reinforced by the Company’s revolving credit facility, as amounts undrawn under the Company’s revolving credit facility are available to repay the CP Notes. Notes issued under the CP Program rank equally with the Company’s present and future unsecured indebtedness. The Company utilizes the proceeds from the sale of the CP Notes for general corporate purposes, which may include working capital, capital expenditures, water and wastewater utility acquisitions, and repaying outstanding indebtedness, including under the Company’s revolving credit facility or the revolving credit facilities of its subsidiaries. As of September 30, 2025, outstanding borrowings under the Company’s CP Program were $152,982, net of unamortized discount on issuance of $18.

Current wording

On March 19, 2025, the Company established the CP Program that allows it to issue, through private placement, short-term, unsecured commercial paper notes (the “CP Notes”) in an aggregate principal amount not to exceed $1,000,000. Maturities of CP Notes may vary, but cannot exceed 364 days from the date of issue. Amounts available under the CP Program may be borrowed, repaid, and re-borrowed from time to time. The CP Program is reinforced by the Company’s revolving credit facility, as amounts undrawn under the Company’s revolving credit facility are available to repay the CP Notes. Notes issued under the CP Program rank equally with the Company’s present and future unsecured indebtedness. The Company utilizes the proceeds from the sale of the CP Notes for general corporate purposes, which may include working capital, capital expenditures, water and wastewater utility acquisitions, and repaying outstanding indebtedness, including under the Company’s revolving credit facility or the revolving credit facilities of its subsidiaries. As of March 31, 2026, outstanding borrowings under the Company’s CP Program were $314,463, net of unamortized discount on issuance of $537, with a weighted average interest rate of 4.16%and weighted average remaining term of 16 days.

Previous wording

On August 13, 2024, the Company established an ATM, under which we may issueand sell shares of our common stock up to an aggregate offering price of $1,000,000 (“2024 ATM”). During the three months ended September 30, 2025, we issued 2,379,579 shares of common stock for net proceeds of approximately $91,500 under the 2024 ATM. During the nine months ended September 30, 2025, we issued 7,671,350 shares of common stock for net proceeds of approximately $300,100 under the 2024 ATM. As of September 30, 2025, the 2024 ATM had approximately $660,700 of equity available for issuance. The Company used the net proceeds from the sales of shares through the 2024 ATM for working capital, capital expenditures, water and wastewater utility acquisitions, and repaying a portion of outstanding indebtedness.

Current wording

On August 13, 2024, the Company established an ATM, under which we may issueand sell shares of our common stock up to an aggregate offering price of $1,000,000 (“2024 ATM”). During the three months ended March 31, 2026, we issued 44,300 shares of common stock for net proceeds of approximately $1,800 under the 2024 ATM. As of March 31, 2026, the 2024 ATM had approximately $658,900 of equity available for issuance. The Company used the net proceeds from the sales of shares through the 2024 ATM for working capital, capital expenditures, water and wastewater utility acquisitions, and repaying a portion of outstanding indebtedness.

Previous wording

At September 30, 2025, we had $6,397 of cash and cash equivalents compared to $9,156 at December 31, 2024. During the first nine months of 2025, we used the proceeds from long-term debt, the proceeds from the issuance of commercial paper, and the proceeds from issuance of common stock, as well as internally generated funds, for capital expenditures, repayment of existing indebtedness, payment of dividends, and general corporate purposes.

Current wording

At March 31, 2026, we had $75,926 of cash and cash equivalents compared to $34,778 at December 31, 2025. During the first three months of 2026, we used the proceeds from long-term debt, the proceeds from the issuance of commercial paper, and the proceeds from issuance of common stock, as well as internally generated funds, for capital expenditures, repayment of existing indebtedness, payment of dividends, and general corporate purposes.

Previous wording

At September 30, 2025, our $1,000,000 unsecured revolving credit facility, which expires in December 2027, had $834,433 available for borrowing (net of $153,000 of capacity designated for outstanding principal borrowings under our commercial paper program and $12,567 letter of credit usage). Additionally, at September 30, 2025, we had short-term lines of credit of $400,000, primarily used for working capital, of which $303,635 was available for borrowing. Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be.

Current wording

At March 31, 2026, our $1,000,000 unsecured revolving credit facility, which expires in December 2027, had $670,632 available for borrowing (net of $315,000 of capacity designated for outstanding principal borrowings under our commercial paper program and $14,368 letter of credit usage). Additionally, at March 31, 2026, we had short-term lines of credit of $400,000, primarily used for working capital, of which $364,447 was available for borrowing. Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be.

Previous wording

As of September 30, 2025, our credit ratings remained at investment grade levels. During the nine months ended September 30, 2025, S&P Global Ratings (“S&P”) reaffirmed the Company, Aqua Pennsylvania, and Peoples Natural Gas Companies’ A- long-term issuer credit rating with a stable outlook. As can be noted in their report, S&P continues to assess our business risk profile as excellent, considering our low-risk and rate-regulated water and gas distribution operations in credit-supportive regulatory environments, our geographic and regulatory diversity, our large and stable residential and commercial customer base, and our solid and reliable operations. On August 27, 2025, Moody's Investors Service ("Moody's") reaffirmed the Company's senior secured notes and Peoples Natural Gas companies’ senior unsecured notes’ Baa2 credit rating with negative outlook. The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, its ability to fund capital expenditures in a balanced manner using both debt and equity, and its ability to generate cash flow. A material downgrade of our credit rating may result in the imposition of additional financial and/or other covenants, impact the market prices of equity and debt securities, increase our borrowing costs, and adversely affect our liquidity, among other things. Management continues to enhance our regulatory practices to address regulatory lag and recover capital project costs and increases in operating costs efficiently and timely through various rate-making mechanisms.

Current wording

The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, its ability to fund capital expenditures in a balanced manner using both debt and equity, and its ability to generate cash flow. A material downgrade of our credit rating may result in the imposition of additional financial and/or other covenants, impact the market prices of equity and debt securities, increase our borrowing costs, and adversely affect our liquidity, among other things. Management continues to enhance our regulatory practices to address regulatory lag and recover capital project costs and increases in operating costs efficiently and timely through various rate-making mechanisms.

Previous wording

Consolidated operating revenues increased by $41,716 or 9.6% as compared to the same period in 2024. Revenues from our Regulated Water, Regulated Natural Gas, and Other segments increased by $29,578, $11,719, and $419, respectively. A detailed discussion of the factors contributing to the changes in segment revenue is included below under the section, Segment Results of Operations.

Current wording

Consolidated operating revenues increased by $78,133 or 10.0% as compared to the same period in 2025. Revenues from our Regulated Water and Regulated Natural Gas segments increased by $22,127 and $58,615, respectively, while our Other segment decreased by $2,609. A detailed discussion of the factors contributing to the changes in segment revenue is included below under the section, Segment Results of Operations.

Previous wording

an increase in employee-related costs of $18,225, primarily resulting from annual merit increases, increases in overtime pay due to outages from extreme cold weather conditions during the first quarter of 2025, increases in employee medical costs, and higher stock-based compensation expense compared to prior period;

Current wording

an increase in employee-related costs of $4,319, primarily resulting from annual merit increases, higher incentive bonuses, and increase in overtime pay in our Regulated Water Segment due to higher weather-related main break activity during the first quarter of 2026;

Previous wording

a decrease in insurance expense of $3,652, primarily due to an insurance recovery of $5,602 during the first quarter of 2025 for a portion of expenses incurred by the Company associated with remediating an advisory for some of our Illinois water utility customers;

Current wording

an increase in insurance expense of $6,344, of which $5,602 relates to an insurance recovery in the first quarter of 2025 of costs associated with remediating an advisory for some of our Illinois water utility customers;

Previous wording

a decrease in bad debt expense of $1,015, of which $5,889 relates to a favorable regulatory asset adjustment in our Regulated Water segment in the first quarter of 2025;

Current wording

an increase in bad debt expense of $5,450 in our Regulated Water segment, of which $5,889 relates to a favorable regulatory asset adjustment in the first quarter of 2025;

Previous wording

an increase in customer assistance surcharge costs of 9,839 in our Regulated Natural Gas segment, which generally has an offsetting amount in revenues; and

Current wording

a decrease in customer assistance surcharge costs of $903 in our Regulated Natural Gas segment, which generally has an offsetting amount in revenues.

Previous wording

Purchased gas increased by $3,411 or 17.9%. Purchased gas represents the cost of gas sold by the Company, which for the regulated natural gas business has a corresponding offset in revenue. The increase is the result of an increase in the average cost of gas of $4,496 and lower gas usage of $1,085 during the third quarter of 2025.

Current wording

Purchased gas increased by $53,974 or 29.2%. Purchased gas represents the cost of gas sold by the Company, which for the regulated natural gas business has a corresponding offset in revenue. The increase is the result of an increase in the average cost of gas of $67,160 and lower gas usage of $13,186 during the first quarter of 2026.

Previous wording

Depreciation and amortization expense increased by $14,465 or 15.6% principally due to continued capital expenditures to expand and improve our utility facilities, our acquisitions of new water and wastewater utility systems, and the implementation of new depreciation rates.

Current wording

Depreciation and amortization expense increased by $11,352 or 11.4% principally due to continued capital expenditures to expand and improve our utility facilities, our acquisitions of new water and wastewater utility systems, and the implementation of new depreciation rates.

Previous wording

Interest expense, net of interest income, increased by $5,738 or 7.6%. Interest expense, net of interest income, increased by $3,139 in our Regulated Water segment and by $4,076 in our Regulated Natural Gas segment. Interest expense, net of interest income, in Other relates to our corporate operations, and this decreased by $1,477 primarily due to our revolving credit facility borrowings being replaced by commercial paper issuances at a lower interest rate, during the third quarter of 2025.

Current wording

Interest expense, net of interest income, increased by $3,860 or 4.7%. Interest expense, net of interest income, increased by $3,318 in our Regulated Water segment and by $1,605 in our Regulated Natural Gas segment. Interest expense, net of interest income, in Other relates to our corporate operations, and this decreased by $1,063 primarily due to our revolving credit facility borrowings being replaced by commercial paper issuances at a lower interest rate, beginning the second quarter of 2025.

Previous wording

Our effective income tax ratewas a benefit of 2.5% and an expense of 1.7% in the first nine months of 2025 and 2024, respectively. The increase in income tax benefit during the first nine months of 2025 is attributed to the release of $22,575 of income tax reserve regulatory liability in the Regulated Water segment based on the rate order received by Aqua Pennsylvania in February 2025, offset by the decreases in both the state tax benefit and amortization of tax repairs surcredit in the Regulated Natural Gas segment based on a rate order received in September 2024.

Current wording

Our effective income tax rate was an expense of 2.8% in the first quarter of 2026, compared to a benefit of 7.8% in the first quarter of 2025. The increase in the income tax expense is primarily attributed to last year’s release of $22,575 of income tax reserve regulatory liability in the Regulated Water segment based on the rate order received by Aqua Pennsylvania in February 2025 not recurring in the current year.

Previous wording

Revenues from our Regulated Water segment increased by $29,578 or 8.8% for the third quarter of 2025 as compared to the same period in 2024, mainly due to the following:

Current wording

Revenues from our Regulated Water segment increased by $22,127 or 7.4% for the first quarter of 2026 as compared to the same period in 2025, mainly due to the following:

Previous wording

additional water and wastewater revenues of $1,370 associated with a larger customer base due to utility acquisitions and organic growth; and

Current wording

additional water and wastewater revenues of $2,402 associated with a larger customer base due to utility acquisitions and organic growth.

Previous wording

a decrease in bad debt expense of $2,514, of which $5,889 relates to a favorable regulatory asset adjustment during the first quarter of 2025.

Current wording

an increase in bad debt expense of $5,450, of which $5,889 relates to a favorable regulatory asset adjustment in the first quarter of 2025;

Previous wording

Depreciation and amortization increased by $7,318 or 12.6% primarily due to continued capital investment to expand and improve our utility facilities, the implementation of new depreciation rates in connection with recently completed rate cases, and our acquisitions of new utility systems.

Current wording

Depreciation and amortization increased by $9,062 or 14.9% primarily due to continued capital investmentto expand and improve our utility facilities, the implementation of new depreciation rates in connection with recently completed rate cases, and our acquisitions of new utility systems.

Previous wording

Interest expense, net of interest income, increased by $3,139 or 8.9% for the quarter primarily due to higher push down debt borrowings and operating company debt issuances for the Regulated Water segment.

Current wording

Interest expense, net of interest income, increased by $3,318 or 9.1% for the quarter primarily due to higher push down debt borrowings and operating company debt issuances for the Regulated Water segment.

Previous wording

Our effective income tax rate for our Regulated Water Segment was an expense of 9.0% and 17.1% in the first nine months of 2025 and 2024, respectively. The decrease in the effective tax rate is largely attributed to the release of $22,575 of income tax reserve regulatory liability based on the rate order received by Aqua Pennsylvania in February 2025.

Current wording

Our effective income tax rate for our Regulated Water Segment was an expense of 15.3% in the first quarter of 2026, compared to a benefit of 4.4% in the first quarter of 2025. The increase in the effective tax rate is primarily attributed to last year’s release of $22,575 of income tax reserve regulatory liability in the Regulated Water segment based on the rate order received by Aqua Pennsylvania in February 2025 not recurring in the current year.

Previous wording

an increase in purchased gas costs of $2,362; refer to purchased gas costs discussion below for further information;

Current wording

an increase in purchased gas costs of $56,343; refer to purchased gas costs discussion below for further information;

Previous wording

an increase of $5,741 due to higher rates and other surcharges;

Current wording

an increase of $7,531 due to higher rates and other surcharges; offset by

Previous wording

a weather normalization adjustment of $155 in Pennsylvania, which had the effect of increasing revenues for the quarter ended September 30, 2025; offset by

Current wording

an increase in the weather normalization adjustment of $4,410 in Pennsylvania, which had the effect of decreasing revenues for the quarter ended March 31, 2026; and

Previous wording

an increase in customer assistance surcharge of $589, which generally has an offsetting amount in operations and maintenance expense; and

Current wording

a decrease in customer assistance surcharge of $1,041, which generally has an offsetting amount in operations and maintenance expense.

Previous wording

Operations and maintenance expense for the three months ended September 30, 2025 decreased by $1,549 or 3.2% primarily due to the following:

Current wording

Operations and maintenance expense for the three months ended March 31, 2026 increased by $558 or 1.0% primarily due to the following:

Previous wording

an increase in labor and employee benefits of $2,236;

Current wording

an increase in labor and employee benefits of $2,521; offset by

Previous wording

Our Regulated Natural Gas segment is affected by the cost of natural gas, which is passed through to customers using a purchased gas adjustment clause and includes commodity price, transportation and storage costs. These costs are reflected in the condensed consolidated statement of operations and comprehensive income as purchased gas expenses. Fluctuations in the cost of purchased gas impact operating revenues on a dollar-for-dollar basis. Purchased gas increased by $2,362 or 13.4% largely due to an increase in the average cost of gas of $3,989, offset by lower gas usage of $1,627 resulting from a slight shift in customer usage pattern during the third quarter of 2025.

Current wording

Our Regulated Natural Gas segment is affected by the cost of natural gas, which is passed through to customers using a purchased gas adjustment clause and includes commodity price, transportation and storage costs. These costs are reflected in the condensed consolidated statement of operations and comprehensive income as purchased gas expenses. Fluctuations in the cost of purchased gas impact operating revenues on a dollar-for-dollar basis. Purchased gas increased by $56,343 or 31.8% largely due to an increase in the average cost of gas of $63,293, offset by lower gas usage of $6,950 resulting from a slight shift in customer usage pattern during the first quarter of 2026.

Previous wording

Depreciation and amortization increased by $7,093 or 20.7% primarily due to continued capital investment, and the implementation of new depreciation rates following a recently completed rate case.

Current wording

Depreciation and amortization increased by $2,241 or 5.8% primarily due to continued capital investment, and the implementation of new depreciation rates following a recently completed rate case.