YORK WATER CO Annual Report: A Clear View for Investors

Considering an investment in essential services? Let's explore the latest annual report for YORK WATER CO, a long-standing utility company providing vital water and wastewater services. This summary cuts through the complexity, offering a clear picture of their performance, strategy, and what it means for your investment decisions.

Fiscal Year 2025: Strategic Growth and Solid Performance

The fiscal year ending December 31, 2025, marked a period of strategic expansion and strong financial performance for YORK WATER CO. As a "Smaller reporting company" and "Non-accelerated filer," the company benefits from slightly streamlined reporting requirements compared to larger corporations, yet it demonstrates a clear commitment to transparency through timely and accessible filings.

Business Overview: YORK WATER CO operates as a regulated public utility, primarily providing water collection, purification, and distribution, alongside wastewater collection and treatment. The company serves residential, commercial, and industrial customers across various municipalities within its authorized service territories in Pennsylvania. The Pennsylvania Public Utility Commission (PAPUC) oversees its operations. YORK WATER CO's core business model relies on stable, regulated revenue streams from delivering these essential utility services.

Financial Performance for 2025:

• Revenue Growth: The company reported $65.2 million in total operating revenue, a 7.8% increase from the previous year. Recent acquisitions and initial rate adjustments primarily drove this growth.
• Net Income: Net income rose to $18.5 million, up 9.5% year-over-year, resulting in $1.42 earnings per share (EPS). This reflects effective cost management alongside revenue expansion.
• Operating Cash Flow: Strong operational performance generated $32.1 million in cash flow from operations, providing ample liquidity for capital expenditures and dividend payments.
• Dividends: YORK WATER CO continued its long history of consistent shareholder returns, paying $0.80 per share in dividends for the year, underscoring its stable utility business model.

Management Discussion (MD&A Highlights):

Expanding Our Service Area Through Strategic Acquisitions YORK WATER CO's active acquisition strategy significantly drove growth in 2025, expanding its regulated asset base and customer footprint. These acquisitions are vital for increasing the customer base and achieving economies of scale.

• Throughout 2024: YORK WATER CO successfully integrated several water assets:
  • Longstown Mobile Estates (February 2024, adding ~350 customers)
  • Houston Run Community Water System LLC (September 2024, adding 200 customers)
  • Pine Run Retirement Community (December 2024, adding 150 customers)
  • Brookhaven Mobile Home Park (December 2024, adding 250 customers) The company also expanded its wastewater services by acquiring collection and treatment assets from:
  • MESCO Inc. (January 2024, serving 400 connections)
  • York Haven Sewer Authority (December 2024, serving 600 connections) The total investment for these 2024 acquisitions reached approximately $12 million.
• Looking Ahead to 2026: This growth continues with the announced acquisition of CMV Sewage Co. Inc. on January 28, 2026. This acquisition expects to add another 500 wastewater connections and contribute an estimated $0.5 million in annual revenue.

These acquisitions not only add new customers but also expand the company's regulated asset base, which is fundamental to its long-term revenue stability and growth potential.

Seeking Rate Adjustments for Infrastructure Investment On May 30, 2025, YORK WATER CO filed a request with the Pennsylvania Public Utility Commission (PAPUC) for a rate increase across both its water and wastewater services. The proposed increase averages 14.5% for water services and 18.0% for wastewater services, aiming to generate an additional $8.5 million in annual revenue. This adjustment is essential to cover the rising costs of maintaining and upgrading aging infrastructure, ensuring continued delivery of high-quality, reliable service, and funding future capital projects. The PAPUC expects to issue its decision in early 2026; a favorable outcome would significantly bolster future earnings and investment capacity.

Prudent Financial Management and Debt Strategy To finance its growth initiatives and ongoing capital expenditures, the company issued $50 million in Senior Notes in February 2024, due in 2054. These long-term notes carry a fixed interest rate of 5.85%, providing stable, predictable financing. Additionally, YORK WATER CO uses interest rate swaps, financial agreements that convert variable interest rate obligations into fixed ones. This effectively hedges against potential increases in borrowing costs and stabilizes financial expenses. This proactive approach to debt management helps the company fund its strategic objectives while mitigating interest rate risk.

Financial Health: The company's balance sheet demonstrates solid financial health. Total assets grew to $450 million, driven by strategic investments in infrastructure and acquisitions. The company maintained a healthy debt-to-equity ratio of approximately 1.1x, indicating prudent financial management. Strong operating cash flow of $32.1 million provides ample liquidity to cover operational needs, capital expenditures, and dividend payments. The issuance of long-term Senior Notes and the use of interest rate swaps reflect a strategic approach to managing debt and interest rate exposure, ensuring stable financing for future growth.

Competitive Position: As a regulated public utility, YORK WATER CO operates primarily as a monopoly within its authorized service territories. This grants the company a significant competitive advantage, as it faces no direct competition for water and wastewater services within these areas. Its competitive position largely stems from its ability to secure and expand these regulated territories, efficiently manage its cost structure, and maintain a strong relationship with regulatory bodies. The company's long operating history and established infrastructure also create substantial barriers to entry for potential competitors. While direct competition is limited, the Pennsylvania Public Utility Commission oversees the company's operations, influencing rates, service quality, and expansion opportunities.

Risk Factors: Investors should be aware of several key risks inherent to the utility sector:

• Regulatory Risk: Regulatory decisions significantly influence the company's profitability, particularly regarding rate increases and environmental compliance. Delays or unfavorable rulings from the PAPUC could impact financial performance.
• Operational Risk: Maintaining and upgrading extensive infrastructure, managing water quality, and responding to severe weather events are ongoing challenges that require significant capital and operational expertise.
• Interest Rate Risk: While swaps mitigate some risk, the company's overall debt levels mean that substantial increases in interest rates could still impact financing costs for future borrowings.
• Environmental Regulations: Evolving environmental standards could necessitate costly upgrades to treatment facilities and operational practices.
• Climate Change Risk: Potential impacts from changing weather patterns, including droughts affecting water supply or increased storm intensity damaging infrastructure, could affect operations and capital expenditures.

Future Outlook: YORK WATER CO's strategy focuses on expanding its regulated footprint through targeted acquisitions, investing in critical infrastructure to ensure service reliability, and prudently managing its finances. The outcome of the pending rate case, expected in early 2026, will significantly shape its near-term financial outlook, potentially adding $8.5 million in annual revenue. The announced acquisition of CMV Sewage Co. Inc. in early 2026 is expected to contribute an additional $0.5 million in annual revenue. Continued operational efficiency and strategic capital deployment will drive long-term value for shareholders. The company's consistent dividend history and essential service offering underscore its appeal as a stable, income-generating investment, with a focus on sustainable growth within its regulated utility framework.