Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2025 or ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-53713 OTTER TAIL CORPORATION (Exact name of registrant as specified in its charter) Minnesota (State or other jurisdiction of incorporation or org ...

Otter Tail (OTTR) Q1 2025 Earnings Call May 06, 2025 11:00 AM ET Company Participants Tyler Nelson - VP - Finance & TresaurerCharles MacFarlane - President and CEOTodd Wahlund - VP & CFO Conference Call Participants Sophie Karp - Managing Director & Equity Research Analyst Operator Good morning, and welcome to Otter Tail Corporation's First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded. We will hold a question and answer session after the prepared remarks. I will now tu ...

Otter Tail (OTTR) Q1 2025 Earnings Call May 06, 2025 11:00 AM ET Speaker0 Good morning, and welcome to Otter Tail Corporation's First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded. We will hold a question and answer session after the prepared remarks. I will now turn the call over to the company for their opening comments. Speaker1 Good morning, and welcome to our first quarter earnings conference call. My name is Tyler Nelson. I'm Otter Tail Corporation's Vice Presiden ...

Earnings Conference Call Q1 2025 Safe Harbor 1 Strategic diversification for growth over long- term cycles 2 Internally financed investment: Growth without equity needs 3 Long-term EPS growth rate: 6-8% 4 Uninterrupted dividend for 86 years, part of 9-11% TSR target 5 Utility industry leading ROE and TSR track record 6 Targeted earnings mix: 65% Electric / 35% Manufacturing Investment Thesis Founded in 1907 Serve approximately 134,000 customers in MN, ND, SD Diverse end-markets High utilization of asset bas ...

Financial Performance - Otter Tail Corporation reported earnings of $68.1 million, or $1.62 per diluted share, for Q1 2025, aligning with expectations [2]. - The company maintains its 2025 diluted earnings per share guidance range of $5.68 to $6.08, expecting a return on equity between 13.8% and 14.6% [7][25]. - Net Income for Q1 2025 was $68,099,000, down 8.4% compared to $74,338,000 in Q1 2024 [31]. - Basic Earnings Per Share (EPS) decreased to $1.63 in Q1 2025 from $1.78 in Q1 2024, reflecting a decline of 8.4% [31]. - Operating Income for Q1 2025 was $83,999,000, a decrease of 11.5% from $94,975,000 in Q1 2024 [31]. - Total Operating Revenues for Q1 2025 were $337,353,000, a decrease of 2.1% from $347,068,000 in Q1 2024 [31]. Segment Performance - Operating revenues for the Electric segment increased by $8.2 million, or 5.8%, driven by higher fuel recovery revenues and favorable weather conditions [15][17]. - The Manufacturing segment experienced a revenue decline of $17.7 million, or 17.8%, primarily due to a 13% decrease in sales volumes [19]. - The Plastics segment's operating revenues decreased slightly by $0.3 million, or 0.2%, despite a 13% increase in sales volumes [21]. - Total operating revenues for the electric segment reached $149,720 thousand, an increase from $141,488 thousand in the prior year, reflecting a growth of about 5% [34]. - The manufacturing segment reported operating revenues of $81,685 thousand, compared to $99,380 thousand in the previous year, indicating a decrease of approximately 18% [34]. - Net income for the electric segment was $24,708 thousand, up from $22,470 thousand year-over-year, marking an increase of about 10% [34]. Cash Flow and Liquidity - Consolidated cash provided by operating activities was $39.5 million for Q1 2025, down from $71.9 million in Q1 2024 [10]. - For the three months ended March 31, 2025, net cash provided by operating activities was $39,469 thousand, a decrease from $71,913 thousand in the same period of 2024, representing a decline of approximately 45% [33]. - Available liquidity as of March 31, 2025, was $607 million, including cash and credit facilities [12][14]. - Cash and cash equivalents decreased to $284,814,000 from $294,651,000, a decline of about 3.5% [32]. - The cash and cash equivalents at the end of the period were $284,814 thousand, compared to $238,158 thousand at the end of the previous year, representing an increase of approximately 19.6% [33]. - The company experienced a net change in cash and cash equivalents of $(9,837) thousand, contrasting with a positive change of $7,785 thousand in the same period last year [33]. Expenses and Costs - Total Operating Expenses increased slightly to $253,354,000 in Q1 2025 from $252,093,000 in Q1 2024, representing a 0.5% increase [31]. - Electric Production Fuel costs decreased to $14,321,000 in Q1 2025, down 19.5% from $17,694,000 in Q1 2024 [31]. - Electric Purchased Power costs increased significantly to $30,870,000 in Q1 2025, up 37.1% from $22,521,000 in Q1 2024 [31]. - Interest Expense rose to $11,553,000 in Q1 2025, an increase of 17.3% compared to $9,850,000 in Q1 2024 [31]. Assets and Liabilities - Total current assets increased to $651,274,000 from $630,041,000, representing a growth of approximately 3.9% year-over-year [32]. - Total noncurrent assets rose to $3,045,520,000 from $3,022,041,000, reflecting an increase of approximately 0.8% [32]. - Total assets reached $3,696,794,000, up from $3,652,082,000, indicating a growth of about 1.2% [32]. - Current liabilities totaled $248,420,000, compared to $230,990,000, marking an increase of approximately 7.5% [32]. - Short-term debt decreased to $58,853,000 from $69,615,000, a reduction of about 15.5% [32]. - Total noncurrent liabilities and deferred credits amounted to $737,500,073, showing a slight increase from the previous period [32]. - Shareholders' equity increased to $209,370,209 from $194,040,000, representing an increase of approximately 7.9% [32]. - Regulatory assets rose to $11,539,000 from $9,962,000, an increase of about 15.8% [32]. - Goodwill remained stable at $37,572,000 with no change from the previous year [32]. Capital Expenditures - Capital expenditures for Q1 2025 totaled $58.0 million, primarily focused on the Electric segment's projects [11]. - Capital expenditures for the three months ended March 31, 2025, were $58,012 thousand, down from $74,044 thousand in the same period of 2024, a reduction of approximately 22% [33]. Future Outlook - Otter Tail Power expects a compounded annual growth rate in rate base of 9% from 2025 to 2029, aiming for long-term earnings-per-share growth of 6% to 8% [8]. - The company plans to focus on expanding its electric segment and enhancing operational efficiencies to improve future performance [34].

Financial Performance - In 2024, Otter Tail Corporation achieved a net income of $301.7 million, or $7.17 per diluted share, representing a 3% increase from $294.2 million, or $7.00 per diluted share, in 2023[208]. - Net income for 2024 increased to $301,662, up 2.5% from $294,191 in 2023[322]. - Basic earnings per share rose to $7.22 in 2024, compared to $7.06 in 2023, reflecting a 2.3% increase[322]. - Total operating revenues for 2024 were $1,330,548, a decrease of 1.3% from $1,349,166 in 2023[322]. - Operating income for 2024 was $380,250, a slight increase from $377,919 in 2023[322]. - Total shareholders' equity rose to $1,668,499 in 2024, an increase of 15.6% from $1,443,006 in 2023[320]. Segment Performance - The Electric segment reported an 8% earnings growth in 2024, increasing from $84.4 million in 2023 to $91.0 million, driven by higher retail revenue from an interim rate increase in North Dakota[209]. - The Manufacturing segment experienced a 36% decline in earnings, dropping from $21.5 million in 2023 to $13.7 million in 2024, primarily due to lower sales volumes and decreased gross profit margins[210]. - The Plastics segment's earnings grew by 7%, from $187.7 million in 2023 to $200.7 million in 2024, attributed to increased sales volumes despite a decrease in gross profit margins[211]. - Net income for the Electric segment in 2024 was $90,963,000, an increase of 7.3% from $84,424,000 in 2023[389]. - Net income for the Manufacturing segment in 2024 was $13,681,000, a decrease of 36.5% from $21,454,000 in 2023[391]. - Net income for the Plastics segment in 2024 was $200,747,000, an increase of 6.5% from $187,748,000 in 2023[392]. Revenue and Expenses - Operating revenues decreased by $18.6 million in 2024, with the Electric segment's revenues down by 1% and the Manufacturing segment's revenues down by 15%[222]. - Operating expenses decreased by $20.9 million in 2024, mainly due to lower purchased power costs in the Electric segment[223]. - Selling, General, and Administrative Expenses in Corporate increased by $12.4 million, or 102.9%, primarily due to increased insurance expenses[239]. - Total operating revenue for the company in 2024 was $1,330,548,000, a decrease of 8.9% from $1,349,166,000 in 2023[399]. Cash Flow and Liquidity - The company reported a net cash provided by operating activities of $452.7 million for 2024, an increase of $48.2 million compared to $404.5 million in 2023[252]. - Net cash used in investing activities rose to $411.4 million in 2024, up by $122.1 million from $289.3 million in 2023, primarily due to increased capital expenditures[255]. - The total available liquidity as of December 31, 2024, was $606.3 million, compared to $479.8 million as of December 31, 2023[251]. - The company has $311.6 million of available liquidity under credit agreements as of December 31, 2024[250]. Capital Expenditures and Investments - Capital expenditures for the Electric segment in 2024 were $301 million, with anticipated total capital expenditures of $1.426 billion from 2025 to 2029[259]. - Capital expenditures increased to $358,650,000 in 2024, compared to $287,134,000 in 2023, reflecting a 25% rise[325]. - The company made a $50.1 million investment in U.S. treasuries in April 2024, maturing in September 2026[401]. Debt and Interest - Interest expense increased by $4.1 million in 2024 due to the issuance of an additional $120.0 million of long-term debt[224]. - As of December 31, 2024, OTP had $947 million of principal outstanding under long-term debt arrangements[270]. - OTP's interest-bearing debt to total capitalization ratio was 0.47 to 1.00 as of December 31, 2024, with an interest and dividend coverage ratio of 3.34 to 1.00[272]. - The weighted-average interest rate on outstanding borrowings was 5.61% as of December 31, 2024[267]. Regulatory and Taxation - The effective tax rate improved to 17.8% in 2024 from 19.1% in 2023, resulting in a $4.1 million decrease in income tax expense[225]. - OTP requested a net increase in annual revenue of $17.4 million, or 8.4%, in its North Dakota rate case filing[242]. - The NDPSC approved a revenue requirement of $225.6 million, with a net increase of $13.1 million, or 6.18%, based on the settlement agreement[243]. Goodwill and Impairment - The company changed its annual goodwill impairment test date to October 1st in 2024 to better align with year-end financial reporting[289]. - No goodwill impairment was identified in the fourth quarter of 2024, with estimated fair values substantially exceeding carrying values[294]. Other Financial Metrics - Total assets increased to $3,652,082 in 2024, up 12.6% from $3,242,568 in 2023[320]. - Total current liabilities remained stable at $309,790 in 2024, slightly up from $309,757 in 2023[320]. - Long-term debt increased to $943,734 in 2024, up 14.5% from $824,059 in 2023[320]. - Regulatory assets decreased from $16,127 in 2023 to $9,962 in 2024, a decline of 38.5%[320]. - Regulatory liabilities increased from $276,547 in 2023 to $288,928 in 2024, reflecting a growth of 4.9%[320].

Earnings Conference Call Q4 2024 Forward Looking Statement Except for historical information contained here, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "can," "could," "estimate," "expect," "future," "goal," "intend," "likely," "may," "opportunity," "outlook," "plan," "possible," "potential," "predict," "probable," "projected," "should," "target," "will," "would ...

Financial Data and Key Metrics Changes - Otter Tail Corporation achieved record earnings with diluted earnings per share of $7.17 in 2024, up from $7 in 2023, reflecting a year-over-year increase of approximately 2.4% [34] - The company updated its long-term earnings per share growth rate to 6% to 8%, an increase from the previous range of 5% to 7% [9][50] - The return on equity was reported at 19% on an equity layer of 62%, outperforming many utility peers [43] Business Line Data and Key Metrics Changes - The electric segment's earnings grew nearly 8% year-over-year, contributing an increase of $0.15 per share, driven by an interim rate increase and higher rider revenues [37] - The manufacturing segment's earnings decreased by $0.18 per share due to lower sales volumes and higher production costs, with sales volumes down 15% from 2023 [38][39] - The plastics segment generated record earnings per share of $4.77, an increase of $0.30 per share from 2023, primarily due to a 27% increase in sales volumes [40][41] Market Data and Key Metrics Changes - The company noted that nearly all end markets faced challenges in 2024 due to higher dealer and used inventory levels, inflationary pressures, and increased interest rates [24] - The sales prices of PVC pipe declined by 12% in 2024 compared to 2023 levels, impacting the plastics segment's earnings [26] Company Strategy and Development Direction - Otter Tail Corporation updated its five-year capital spending plan to $1.4 billion, a 9% increase over the previous plan, with a projected rate-based compounded annual growth rate of 9% [8][17] - The company plans to invest in solar generation and transmission, with estimated capital investments of $100 million for Solway Solar and $400 million for Abercrombie Solar [14][46] - The company aims to maintain affordable electric rates while executing its capital spending plan, leveraging existing low-cost assets and available tax credits [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the manufacturing segment despite current market challenges, citing reshoring and housing demand as supportive factors [25] - The company anticipates that plastics segment earnings will normalize in 2028, with a long-term earnings mix target of 65% electric and 35% manufacturing [51] Other Important Information - The company announced a 12% increase in its dividend, resulting in an annual indicated dividend of $2.10 per share for 2025 [35] - Total available liquidity as of December 31, 2024, was reported at $606 million, positioning the company well for growth initiatives [42] Q&A Session Summary Question: Did the company secure large load agreements with customers? - Management clarified that there are no signed agreements yet, but term sheets are out for 150 megawatts, with hopes to finalize agreements in the next one to three years [57][58] Question: What are the reasons for the current weakness in manufacturing demand? - Management attributed the weakness to cyclical factors, high dealer inventory levels, and corrections in agriculture, with construction being less affected [62] Question: Is the expansion of BTD Georgia related to specific end markets? - Management indicated that the expansion supports various end markets, with more construction activity noted in that segment [64]

Financial Performance - Otter Tail Corporation achieved record annual diluted earnings per share of $7.17 in 2024, up from $6.88 in 2023[2] - The Electric segment generated net income of $90.96 million, a 7.7% increase from $84.42 million in 2023, despite a 0.7% decrease in operating revenues[11] - The Plastics segment reported record earnings of $201 million, driven by a 27% increase in sales volumes, although sales prices decreased by 12% compared to the previous year[17] - The Manufacturing segment experienced a 14.9% decline in operating revenues to $342.59 million, with net income dropping 36.2% to $13.68 million due to a 15% decrease in sales volumes[15] - Operating revenues for the twelve months ended December 2024 are reported at $1.331 billion, a slight decrease from $1.349 billion in 2023[33] - Net income for the twelve months ended December 2024 is $301.662 million, compared to $294.191 million in 2023, indicating a year-over-year increase[33] - Operating income for the three months ended December 2024 is $66.824 million, down from $70.080 million in the same period of 2023[33] - Total operating revenues for the twelve months ended December 2024 were $1,330,548, a decrease of 1.3% from $1,349,166 in 2023[36] - Net income for the twelve months ended December 2024 was $301,662, an increase of 2.5% compared to $294,191 in 2023[36] Cash Flow and Liquidity - Consolidated cash provided by operating activities reached a record $452.7 million in 2024, up from $404.5 million in 2023[8] - The total available liquidity as of December 31, 2024, was $606.3 million, comprising $311.6 million in credit facilities and $294.7 million in cash[9] - Cash and cash equivalents were reported at $294,651,000 in 2024, up from $230,373,000 in 2023, indicating an increase of about 27.9%[34] - Net cash provided by operating activities for the twelve months ended December 2024 was $452,731, compared to $404,499 in 2023[35] - The company reported a net change in cash and cash equivalents of $64,278 for the twelve months ended December 2024[35] Capital Expenditures and Investments - Capital expenditures for 2024 totaled $358.7 million, primarily focused on the Electric segment, with a revised 5-year capital spending plan of $1.4 billion[8] - Total capital expenditures for 2024 are projected at $359 million, with a five-year total of $1.555 billion from 2025 to 2029[27] - The Electric segment's capital expenditures for 2024 are $301 million, contributing to a total of $1.426 billion over the next five years[27] - The Manufacturing and Plastics segments' capital expenditures are projected at $129 million over the next five years, focusing on equipment upgrades and capacity expansion[27] Assets and Liabilities - Total current assets increased to $630,041,000 in 2024 from $570,170,000 in 2023, representing an increase of approximately 10.5%[34] - Total noncurrent assets rose to $3,022,041,000 in 2024, up from $2,672,398,000 in 2023, indicating a growth of about 13.1%[34] - Total assets reached $3,652,082,000 in 2024, compared to $3,242,568,000 in 2023, marking an increase of approximately 12.6%[34] - Current liabilities totaled $309,790,000 in 2024, a decrease from $309,975,000 in 2023, reflecting a slight reduction[34] - Long-term debt stood at $943,734,000 in 2024, compared to $824,059,000 in 2023, showing an increase of about 14.5%[34] - Shareholders' equity increased to $2,091,402,000 in 2024 from $1,855,553,000 in 2023, representing a growth of approximately 12.7%[34] - Regulatory assets decreased to $9,962,000 in 2024 from $16,127,000 in 2023, a decline of approximately 38.5%[34] - Inventories slightly decreased to $148,885,000 in 2024 from $149,701,000 in 2023, reflecting a minor reduction[34] - Other noncurrent assets increased to $66,416,000 in 2024 from $51,377,000 in 2023, indicating a growth of approximately 29.3%[34] Future Outlook - Otter Tail Corporation updated its long-term earnings per share growth rate target to 6-8%, up from 5-7%[6] - The company anticipates 2025 diluted earnings per share to range between $5.68 and $6.08, reflecting a 7% expected growth in the Electric segment[25] - The Electric segment's return on equity was 19.3% for 2024, with a target of 13.8% to 14.6% for 2025[26] - The Electric segment's average rate base is expected to grow from $1.892 billion in 2024 to $2.909 billion by 2029, reflecting an annual growth rate of 9.0%[27] - The average rate base is anticipated to increase by 12% in 2025 compared to 2024, enhancing returns[28] - A planned maintenance outage at Coyote Station is scheduled for 2025, which may impact operational performance[28] - The company expects continued declines in product sales prices throughout 2025, following a retreat from 2022 highs[28] Segment Performance - Electric segment operating revenues for the three months ended December 2024 were $139,818, up 5.5% from $132,362 in 2023[36] - Manufacturing segment net income for the twelve months ended December 2024 was $13,681, down 36.6% from $21,454 in 2023[36] - Plastics segment operating revenues for the three months ended December 2024 were $96,661, an increase of 8.7% from $89,105 in 2023[36]

Core Viewpoint - Otter Tail (OTTR) has experienced a downtrend with a 5.3% decline over the past four weeks, but it is now in oversold territory, suggesting a potential turnaround due to analysts' positive earnings outlook [1]. Group 1: Technical Indicators - The Relative Strength Index (RSI) for OTTR is currently at 28.29, indicating that the heavy selling pressure may be exhausting, which could lead to a price rebound [5]. - RSI is a momentum oscillator that ranges from 0 to 100, with a reading below 30 typically indicating that a stock is oversold [2]. - Technical analysis suggests that stocks oscillate between overbought and oversold conditions, and the RSI can help identify potential reversal points [3]. Group 2: Earnings Estimates - There has been a strong consensus among sell-side analysts to raise earnings estimates for OTTR, resulting in a 1.7% increase in the consensus EPS estimate over the last 30 days [7]. - An upward trend in earnings estimate revisions is generally associated with price appreciation in the near term [7]. - OTTR holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate trends and EPS surprises, indicating a strong potential for a turnaround [8].