Essential Utilities, Inc.

Our regulated water and gas business is capital intensive and requires a significant level of capital spending. The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows and external debt and equity financing. The Company’s condensed consolidated balance sheet historically has had a negative working capital position whereby our current liabilities routinely exceed our current assets. Management believes that internally generated funds along with existing credit facilities, and the proceeds from the issuance of commercial paper notes, long-term debt and equity will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements for at least the next twelve months.

Net cash flows from operating activities were $265,405 for the first three months of 2026, compared to $299,517 for the first three months of 2025. Operating cash flow decreased by $34,112 during the three months ended March 31, 2026 compared to the same period in the prior year primarily due to the timing of vendor payments and an increase in operations and maintenance expense.

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.

Net cash inflows from financing activities increased by $43,213 primarily due to lower debt repayments during the first three months of 2026 compared to the same period in 2025.

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.

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.

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.

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.

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.

Credit Risk

The Company and its subsidiaries’ access to capital markets and costs of financing are influenced by its credit ratings. Below summarizes the Company and its subsidiaries’ issuer and security credit ratings as of March 31, 2026:

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.