MSEXP · Middlesex Water Company PFD 7%

Middlesex Water Company delivered a solid first quarter, marked by double-digit growth in operating and net income. This performance was largely driven by the implementation of new base rate increases, which provided a significant boost to revenues. Specifically, Middlesex’s approved base rate increase became effective February 23, 2026, complementing Tidewater's base rate increase from July 3, 2025. These regulatory wins underscore the company's ability to secure timely rate relief, a critical factor in maintaining financial health amidst the capital-intensive nature of the water utility industry.

The company’s ability to increase operating income and net income is based significantly on four factors: weather, adequate and timely rate relief, effective cost management, and customer growth. During the quarter, the combination of these elements proved favorable. Operating income reached $13.1M, up from $11.6M in the prior year period, translating to an operating margin of 26.9%. Net income followed suit, rising to $10.6M from $9.5M, while diluted EPS increased to $0.57 from $0.53. The growth in the Tidewater system, driven by franchise area expansion, contributed to the positive momentum, highlighting the effectiveness of organic residential customer growth strategies.

However, a notable divergence appeared in cash flows. Net cash provided by operating activities decreased to $11.7M from $13.8M in the prior year. Management attributed this decline primarily to the timing of higher vendor payments, which offset the positive impact of the new base rates. This working capital dynamic highlights the importance of liquidity management in the utility sector, where cash flows can be influenced by the timing of operational expenditures. Management noted that cash flows from operations are largely based on weather, adequate and timely rate increases, effective cost management, and customer growth.