WTRG 10-K & 10-Q changes, risk factors and insider trading

expected timing and likelihood of completion of our proposed Merger with American Water;

our ability to operate our business successfully while closing of the Merger is pending, including operating within the restrictions imposed on our business by the Merger Agreement and retaining key business partners and management personnel;

our ability to control operating expenses, achieve operating efficiencies, support programs that promote affordability of our services, and manage the expansion of our business;

Risks Related to the Proposed Merger

The market price of shares of our common stock or American Water Common Stock will fluctuate and the Exchange Ratio will not be adjusted to reflect such fluctuations, and as a result, the Merger Consideration at the date of the closing of the Merger may vary significantly from the date the Merger Agreement was executed.

Upon completion of the Merger, each outstanding share of our common stock will be converted into the right to receive 0.305 shares of American Water Common Stock. The number of shares of American Water Common Stock to be issued pursuant to the Merger Agreement for each share of our common stock will not change to reflect changes in the market price of American Water Common Stock or Essential’s Common Stock. The market price of our common stock and American Water Common Stock at the time of completion of the Merger may vary significantly from the price on the date the Merger Agreement was executed and February 10, 2026, the date of the special shareholder meetings. Because we may not complete the Merger until a significant period of time has passed after these dates, the market value of American Water Common Stock issued in connection with the Merger and our common stock surrendered in connection with the Merger may be higher or lower than the values of those shares on earlier dates. Stock price changes may result from market assessment of the likelihood that the Merger will be completed, changes in our or American Water’s business, operations, or prospects prior to or following the Merger, litigation or regulatory considerations, reactions from the financial markets or analysts, general business, market, industry, or economic conditions and other factors both within and beyond our and American Water’s control, including the risks, uncertainties and other factors described in this Risk Factors section of our Annual Report on Form 10-K, and in our other SEC filings, and those described in American Water’s SEC filings. Neither we nor American Water may terminate the Merger Agreement solely because of changes in the market price of either company’s common stock.

The Merger is subject to various remaining closing conditions, including the receipt of consents and approvals from various governmental and regulatory entities and third parties, and a failure to obtain all such remaining consents or approvals or to satisfy such other closing conditions could prevent or delay the completion of the Merger or impose conditions that could have a material adverse effect on us or the combined company.

We anticipate that, subject to the receipt of all required regulatory and other consents and approvals and the satisfaction or waiver of all other closing conditions, the Merger will be completed in the first quarter of 2027. Among other closing conditions that remain, completion of the Merger is conditioned upon the receipt of such required consents, orders, and approvals from various governmental and regulatory entities and other third parties, including public utility commissions in certain states in which either or both companies operate, including without limitation the Pennsylvania Public Utility Commission. The Merger is also subject to review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the expiration or earlier termination of the waiting period (and any extension of the waiting period) applicable to the Merger is a condition to closing the Merger.

We and American Water cannot provide any assurance that all of the remaining required consents, orders, and approvals will be obtained or that these consents, orders, or approvals will not be conditioned on terms, conditions, or restrictions that would be detrimental to the combined company after the completion of the Merger, including requiring one or both companies to dispose of certain assets. The Merger Agreement allows, subject to certain conditions, limitations, and exclusions, each party to terminate the Merger Agreement (and generally without the payment of a termination fee to the non-terminating party) if the final terms of any of the required regulatory consents, orders or approvals would result in or require an undertaking of efforts or the taking of action that would reasonably be expected to have, individually or in the aggregate, a “Burdensome Effect” (as defined in the Merger Agreement). Any substantial delay in obtaining satisfactory consents, orders, or approvals, or the imposition of any requirements, terms, or conditions in connection with a party’s obtaining such consents, orders, or approvals, could be on terms that we or American Water do not believe to be reasonable or could cause a material reduction in the expected benefits of the Merger and/or an impairment or deterioration in our or American Water’s relationships with their respective applicable public utility commissions. If any such delays or conditions are significant enough, one or both parties may decide to abandon the Merger and terminate the Merger Agreement, subject to its terms. If the Merger is not completed, our ongoing businesses may be adversely affected, including, as follows:

•having to pay certain significant costs relating to the Merger without receiving the benefits of the Merger, including, in certain circumstances, a payment by us to American Water of a termination fee of $370 million;

•diversion of management’s attention from day-to-day operations;

•not pursuing other strategic transactions that we may have otherwise considered had we not entered into the Merger Agreement with American Water;

•we will have been subject to certain restrictions on the conduct of our ongoing businesses, which may prevent us from making certain acquisitions or dispositions or pursuing certain business opportunities while the Merger is pending; and

•the price of our common stock may decline to reflect assumptions by the market as to whether the Merger will be completed.

The Merger may cause suppliers, strategic partners, certain customers, or others to delay or defer decisions regarding our business, and may adversely affect our ability to effectively manage our business.

The Merger will happen only if the remaining stated conditions are satisfied, including the receipt of regulatory approvals, among other conditions. Many of the remaining conditions are outside the parties’ control, and both parties also have certain rights to terminate the Merger Agreement. Accordingly, there may be uncertainty regarding the completion of the Merger. This uncertainty, or any disagreement with the decision to enter into the Merger Agreement, may cause our suppliers, vendors, strategic partners, certain customers, or others that deal with us to delay or defer entering into contracts or make other decisions concerning us, or to seek to change or cancel existing business relationships. Any delay or deferral of those decisions or changes in existing agreements or relationships could have a material adverse effect on us and our financial condition and results of operations.

The Merger Agreement contains provisions that limit our and American Water’s ability to pursue certain alternatives to the Merger, which could discourage a potential acquirer of either American Water or us from making an alternative transaction proposal and, in certain circumstances, could require us or American Water to pay to the other party a significant termination fee.

Under the Merger Agreement, we and American Water are each restricted, subject to limited exceptions, from entering into certain alternative transactions in lieu of the Merger. In general, unless and until the Merger Agreement is terminated, we and American Water are restricted from, among other things, soliciting, initiating, knowingly encouraging, or knowingly facilitating the making of a proposal that is or would reasonably be expected to lead to a competing acquisition proposal from any person. Each of our and American Water’s board of directors is limited in its ability to change its recommendation with respect to the Merger and related proposals. We and/or American Water may terminate the Merger Agreement and enter into an agreement with respect to a superior proposal only if specified conditions have been satisfied, including compliance with the non-solicitation provisions of the Merger Agreement. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of us or American Water from considering or proposing such an acquisition, even if such third party were prepared to pay consideration with a higher per share cash or market value than the consideration proposed to be received or realized in the Merger, or the competing transaction might result in a potential acquirer proposing to pay a lower price than it would otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances. Under the Merger Agreement, in the event the Merger Agreement is terminated to accept a superior proposal, or under certain other circumstances, American Water would be required to pay a termination fee of $835 million to us in the case of a termination of the Merger Agreement by it, and we would be required to pay a termination fee of $370 million to American Water in the case of a termination of the Merger Agreement by us.

We may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Securities class action lawsuits, lawsuits seeking to enjoin the Merger, and derivative lawsuits are often brought against companies that have entered into a merger agreement. Even if these lawsuits are without merit, defending against these claims can result in substantial costs to the parties to the merger agreement and divert management time and resources. Additionally, if any such litigation occurs, and if a plaintiff is successful in obtaining an injunction prohibiting the completion of the Merger, that injunction may delay or prevent the Merger from being completed.

If completed, the Merger may not achieve its anticipated results, and American Water may not be able to integrate our operations and/or operate the combined company in the manner expected.

We and American Water entered into the Merger Agreement with the expectation that the Merger will result in various benefits, including, among other things, increased efficiencies of scale and size, increased geographic diversity, greater long-term growth opportunities for employees of the combined company, and other operating efficiencies. Achieving the anticipated benefits of the Merger is subject to a number of uncertainties, including whether our and American Water’s businesses can be integrated in an efficient, effective, and timely manner.

American Water could have difficulty integrating our assets, personnel, and operations with its own. We anticipate that the integration of the two companies may ultimately be complex, and expect that significant time and resources will be devoted to this integration process. Risks and uncertainties that could impact the integration and combined company negatively include:

•unforeseen or significant difficulties in integrating the two companies and their assets, operations, cultures, and employees;

•the potential disruption of the ongoing businesses and distraction of our and American Water’s management;

•changes in our or American Water’s business focus and/or management;

•risks related to American Water owning, operating, maintaining, and successfully managing our natural gas distribution business, including any increased risks and liabilities associated with the operation of that business;

•difficulties in establishing and/or maintaining uniform standards, systems, controls, procedures, and policies, including accounting and financial reporting, across both of the integrated companies, or merging or linking disparate ones;

•the potential impairment of relationships with employees and partners as a result of any integration of new management personnel;

•the potential inability to manage an increased number of locations and employees; and

•the effect of any government regulations which relate to our business, including with respect to jurisdictions in which American Water’s regulated businesses currently do not operate.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems, or inconsistencies in standards, controls, procedures, practices, policies, and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the Merger as and when expected. The combined company may have difficulty addressing possible differences in corporate cultures and management philosophies, and the various management and corporate governance constructs provided for in the Merger Agreement to govern the combined company, including with respect to the board of directors of the combined company, may not operate successfully as intended or desired. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and otherwise adversely affect the combined company’s future business, financial condition, operating results, and prospects.

The companies may incur substantial and/or unexpected transaction fees and Merger-related costs in connection with the Merger.

We and American Water expect to incur substantial non-recurring expenses associated with completing the Merger, as well as expenses related to combining the operations of the two companies. The combined company may incur additional unanticipated costs in the integration of the companies’ businesses. Although we expect that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset some or all of the incremental transaction and Merger-related costs over time, the combined company may not achieve this net benefit in the near term, or at all.

The shares of American Water Common Stock to be received by our shareholders upon completion of the Merger will have different rights from shares of our common stock.

Upon completion of the Merger, Essential’s shareholders will no longer be shareholders of Essential but will instead become shareholders of American Water, and their rights as American Water shareholders will be governed by the terms of the American Water certificate of incorporation and bylaws. The terms of the American Water certificate of incorporation and bylaws are in some respects materially different than the terms of the Essential articles of incorporation and bylaws, which currently govern the rights of Essential shareholders. Additionally, American Water is a Delaware corporation governed by the Delaware General Corporation Law, and Essential is a Pennsylvania corporation governed by the Pennsylvania Business Corporation Law, the Pennsylvania Entity Transactions Law, and other applicable parts of the Pennsylvania Associations Code, and these state statutes provide for different rights in certain circumstances.

Current shareholders of each company will have reduced ownership and voting interests in their respective companies after the Merger.

Our and American Water’s shareholders currently have the right to vote for their respective directors and on other matters affecting their company. If the Merger occurs, each shareholder of Essential who receives shares of American Water Common Stock will become a shareholder of American Water with a percentage ownership of the combined company that will be smaller than the shareholder’s percentage ownership of Essential. Correspondingly, upon the completion of the Merger, each holder of American Water Common Stock will remain a shareholder of American Water but with a percentage ownership of the combined company that will be smaller than the shareholder’s percentage of ownership immediately prior to the Merger. As a result of these reduced ownership percentages, our former shareholders will have less voting power in the combined company than they now have with respect to Essential, and American Water’s shareholders will have less voting power in the combined company than they now have with respect to American Water.

If the Merger does not qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code of 1986 (the “Code”), the U.S. holders of Essential Common Stock may be required to pay additional U.S. federal income taxes.

American Water and Essential intend for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. Nevertheless, it is not a condition to American Water’s obligation or Essential’s obligation to complete the transactions that the Merger qualify as a “reorganization.”

American Water and Essential have not sought and will not seek any ruling from the IRS regarding any matters relating to the Merger and the other transactions contemplated by the Merger Agreement, and, as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions herein. If the IRS or a court determines that the Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, a U.S. holder of Essential’s Common Stock generally would recognize taxable gain or loss upon the exchange of Essential’s Common Stock for American Water Common Stock pursuant to the Merger.

U.S. holders of Essential’s Common Stock should consult their tax advisors as to the U.S. federal income tax consequences of the Merger, including the income tax consequences arising from such U.S. holders’ particular circumstances, and as to any estate, gift, state, local, or non-U.S. tax consequences arising out of the Merger.

The Merger may not be accretive to the combined company’s earnings and may adversely affect the combined company’s earnings per share, which may negatively affect the market price of the combined company’s common stock.

American Water and Essential currently anticipate that the Merger will be accretive to the combined company’s earnings per share in 2028, the first full year following the completion of the Merger. This expectation is based on preliminary estimates that are subject to change. The combined company could also encounter additional transaction and integration-related costs, may fail to realize all of the benefits anticipated in the Merger, or be subject to other factors that affect American Water’s and Essential’s preliminary estimates. Any of these factors could cause a decrease in the combined company’s earnings per share or decrease or delay the expected accretive effect of the Merger and contribute to a decrease in the market price of the combined company’s common stock.

Uncertainties associated with the Merger may cause a loss of management personnel and other key employees, and American Water and Essential may have difficulty attracting and motivating management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

American Water and Essential are dependent on the experience and industry knowledge of their respective management personnel and other key employees to execute their business plans. The combined company’s success after the completion of the Merger will depend in part upon the ability of American Water and Essential to attract, motivate, and retain key management personnel and other key employees. Prior to completion of the Merger, current and prospective employees of American Water and Essential may experience uncertainty about their roles within the combined company following the completion of the Merger, which may have an adverse effect on the ability of each of American Water and Essential to attract, motivate, or retain management personnel and other key employees. In addition, no assurance can be given that the combined company will be able to attract, motivate, or retain management personnel and other key employees of American Water and Essential to the same extent that American Water and Essential have previously been able to attract or retain their own employees.

The future results and market value of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the Merger or the combined company fails to successfully execute its business strategy and objectives.

Following the completion of the Merger, the size of the combined company’s business will be significantly larger than the current size of either American Water’s or Essential’s respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement operational, managerial, financial, and strategic initiatives that address not only the integration of two independent standalone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity.

In addition, the success of the Merger will depend, in part, on the ability of each of American Water and Essential to successfully execute its business strategy. If the combined company is not able to achieve its business strategy on a timely basis, or otherwise fails to perform in accordance with the expectations of the parties, the anticipated benefits of the Merger may not be realized fully or at all, and the Merger may materially adversely affect the results of operations, financial condition, and prospects of the combined company, and, consequently, the market value of the combined company’s common stock.

The Merger will combine companies that are affected by developments in the water and wastewater utility industries and, additionally, with respect to Essential, the natural gas industry, including changes in regulation. Any failure to adapt to changing regulatory environments after the Merger could adversely affect the stability of the combined company’s earnings.

Because American Water, Essential, and their respective subsidiaries are significantly regulated in the United States, the two companies have been and will continue to be affected by legislative, political, and regulatory developments. After the Merger, the combined company and/or its subsidiaries will be subject to extensive regulation in the states in which the combined company will operate. The costs and burdens associated with complying with these regulations may have an adverse effect on the combined company. Moreover, potential legislative, political, or regulatory changes, or other similar changes, may create greater risks to the stability of the combined company’s revenue, income, and earnings generally.

Execution of Agreement and Plan of Merger with American Water

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 of validly issued, fully paid and nonassessable shares of 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.

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 remaining 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.

The Merger Agreement provides that American Water will retain its current name, maintain its headquarters and principal corporate office in Camden, New Jersey, and maintain substantial operations in Pennsylvania.

Macroeconomic Factors

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.

Convertible Note Purchase Agreement

On August 27, 2025, the Company, through its wholly owned subsidiary, Aqua Infrastructure, entered into a convertible promissory note purchase agreement with IEP Hummingbird Energy LLC (“IEP”) whereby the Company agreed to purchase convertible notes (“Convertible Note Investment”) in the aggregate principal amount of $26,000 through January 2026. IEP, a subsidiary of International Electric Power III, LLC, shall use the proceeds for the development of a gas-fired plant to power a data center being developed Greene County, PA (the “Project”). The Convertible Note Investment bears zero interest, includes a fixed $16,500 loan fee concurrently payable to the Company at maturity with the principal amount of the notes on September 30, 2026, and contains conversion rights into equity at any time on or after maturity or upon certain triggering events, such as a project financial closing or equity financing, as defined in the agreement. The agreement also grants the Company the right of first refusal to certain water and gas business opportunities and additional equity kickers upon the occurrence of a financing event or change of control. As of December 31, 2025, the fair value of the Convertible Note receivable amounts to $25,125.

Due to a change in Project scope to focus on grid provided power, on January 20, 2026, the Company received $20,000, representing the reimbursement of the deposit paid to the gas turbine manufacturer. The Company continues to be an investor in the Project via its remaining convertible notes holdings and continues to have a right of first refusal to certain water and gas business opportunities. The Company’s involvement in this Project underscores its commitment to innovation, sustainability, and regional economic development. As of December 31, 2025, $20,000 of the Convertible Note Investment is presented within Prepayments and other current assets, and the remaining $5,125 is classified as a long-term asset in the accompanying consolidated balance sheets.

Multi-District Litigation Class Action Settlement

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. One such suit to which the Company is a party is a multi-district litigation (the “MDL”) lawsuit which commenced on December 7, 2018, in the United States District Court for the District of South Carolina. Several defendants in such lawsuit have agreed to settle. During the second half of 2025, the Company received a portion of the settlement payments from 3M and DuPont totaling $46,166, net of legal fees and administrative costs. The Company recorded $84 as a credit to claims expense and $9,739 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 that were allocated to the Company’s other water and wastewater subsidiaries totaling $36,343 were recorded within Deferred Credits and Other Non-current liabilities in the accompanying consolidated balance sheets, 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 over the next ten years.

Captive Insurance Subsidiary

The Company expects insurance and claims expenses to continue to be volatile over the long term. In order to mitigate a portion of increased insurance costs, on October 1, 2025, the Company established a wholly-owned captive insurance company, Utility Insurance LLC, incorporated in the State of Utah, whose principal activity at this time is to provide insurance and reinsurance coverage for a portion of the Company’s general liability, property, workers compensation, auto liability, cyber, and management liability risks.

** Consists of 2 locally negotiated rate filings

an increase in customer assistance surcharges of $17,457 in our Regulated Natural Gas segment, which generally has offsetting amounts in revenues; refer to customer assistance surcharge discussion below for further information;

an increase in production costs for water and wastewater operations of $8,489, primarily due to higher power, chemicals, and purchased water costs;

additional operating costs of a higher customer base associated with acquired and pending acquisitions of water and wastewater utility systems of $1,734; and an increase in bad debt expense of $361, which is net of a favorable regulatory asset adjustment of $5,889 in our Regulated Water segment in the first quarter of 2025; offset by an increase in capitalization in our Regulated Natural Gas segment of $9,812 in the current period as compared to the prior period due to higher capital spend and increasing pool of eligible capitalizable costs;

a decrease in insurance expense of $8,392 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; and a decrease in materials and supplies of $1,377.

Taxes other than income taxes decreased by $1,862 or 2.0% in 2025 as compared to 2024 largely due to a favorable adjustment on sales and use tax accruals of our Regulated Natural Gas segment as a result of the closure of a sales and use tax audit during the second quarter of 2025.

Provision for income tax - Our effective income tax rate was an expense of 0.6% in 2025, compared to a benefit of 3.8% in 2024. The increase in the income tax expense in 2025 is attributed to 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, offset in part by 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.

an increase in management fees of $5,504;

an increase in outside services of $5,180; and

During the six months ended June 30, 2026, we implemented, or received approval to implement, base rate increases that result in a $37,613 increase in annual revenues, as summarized below:

*Base rate case – step 1 increase for Year 1

**Operating divisions

On June 12, 2026, the Company’s regulated water and wastewater subsidiary in Indiana filed an application with the Indiana Utility Regulatory Commission designed to increase rates by $4,813 in the first year of new rates being implemented, then by an additional $1,960 and $308 in the second and third years, respectively.

On May 26, 2026, Aqua Illinois filed an application with the Illinois Commerce Commission designed to increase water and wastewater rates by $26,501 annually.

Net cash flows used in investing activities increased by $33,135, primarily due to the Company’s continued investment in replacing aging infrastructure, contaminant mitigation and emissions reductions, among others.

On June 16, 2026, the Company entered into an amendment to its $1,000,000 unsecured long-term revolving credit facility. The amendment extended the maturity date of the facility by another year, to December 2028, and removed the second sustainability performance target applicable to interest rates and commitment fees.

On May 1, 2026, Aqua Pennsylvania and Peoples Natural Gas Companies amended their respective $100,000 and $300,000 revolving credit agreements, extending the maturity date by another 364-day period. The funds borrowed under these revolving credit agreements are classified as loans payable and are used to provide working capital.

Consolidated financial and operational highlights for the periods ended June 30, 2026 and 2025 are presented below.

pre-merger expenses of $1,191;

additional operating costs associated with pending and newly acquired water and wastewater utility systems of $814; offset by a decrease in insurance expense of $4,926, primarily due to an insurance recovery of $6,750 in the second quarter to 2026 for costs associated with remediating an advisory for some of our Illinois water utility customers;

Taxes other than income taxes increased by $3,581 or 17.2% primarily due to the $2,709 favorable sales and use tax accrual adjustment recognized in the second quarter of 2025 upon the closure of certain tax audits in our Regulated Natural Gas segment, which did not recur in the current period.

Other, net was an expense of $1,295 and $391 for the three months ended June 30, 2026 and 2025, respectively. The increase was primarily due to higher unrealized losses on securities held in connection with the non-qualified pension plan, partially offset by a higher non-service cost net periodic benefit credit resulting from increased amortization of actuarial gains in our other postretirement benefit plan.

Six months ended June 30, 2026 compared with six months ended June 30, 2025

Consolidated operating revenues increased by $94,080 or 7.2% as compared to the same period in 2025. Revenues from our Regulated Water and Regulated Natural Gas segments increased by $47,389 and $50,573, respectively, while our Other segment decreased by $3,882. A detailed discussion of the factors contributing to the changes in segment revenue is included below under the section, Segment Results of Operations.

Consolidated operations and maintenance expense increased by $43,096 or 15.1%, primarily due to:

pre-merger expenses of $17,521, consisting of financial advisor fees, legal expenses, communications and other professional fees, during the first half of 2026;

an increase in employee-related costs of $10,183, primarily resulting from annual merit increases, higher incentive bonuses, higher medical claims, and increase in overtime pay due to higher weather-related main break activity during the first half of 2026;

an increase in bad debt expense of $4,980 in our Regulated Water segment, of which $5,889 relates to a favorable regulatory asset adjustment in the first quarter of 2025;

an increase in production costs for water and wastewater operations of $4,122;

an increase in contractor services of $2,698 in our Regulated Water segment, primarily due to higher main break activity, frozen service lines, and snow removal costs during the first half of 2026;

additional operating costs associated with pending and newly acquired water and wastewater utility systems of $1,544;

an increase in insurance expense of $1,417, which is net of insurance recoveries of $5,602 in the first quarter of 2025 and $6,750 in the second quarter of 2026 of costs associated with remediating an advisory for some of our Illinois water utility customers; offset by a decrease in bad debt of expense of $4,453 in our Regulated Natural Gas segment; and a decrease in customer assistance surcharge costs of $2,431 in our Regulated Natural Gas segment, which generally has an offsetting amount in revenues.

Purchased gas increased by $43,440 or 18.0%. 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 $64,313, offset by lower gas usage of $20,873 resulting from a slight shift in customer usage pattern during the first six months of 2026.

Depreciation and amortization expense increased by $21,125 or 10.4% principally due to continued capital expenditures to expand and improve our utility facilities and our acquisitions of new water and wastewater utility systems.

Taxes other than income taxes increased by $6,682 or 15.3% primarily due to a prior year sales and use tax accrual benefit in our Regulated Natural segment, increase in our Illinois subsidiary’s invested capital tax expense, and an increase in payroll taxes as a result of higher employee compensation expense.

Interest expense, net of interest income, increased by $12,953 or 8.0%. Interest expense, net of interest income, increased by $6,260 in our Regulated Water segment and by $3,850 in our Regulated Natural Gas segment. Interest expense, net of interest income, in Other relates to our corporate operations, and this increased by $2,843 primarily due to the additional senior note borrowing in 2026.

Other, net was an expense of $1,220 and $98 for the six months ended June 30, 2026 and 2025, respectively. The increase was primarily due to higher unrealized losses on securities held in connection with the non-qualified pension plan, partially offset by a higher non-service cost net periodic benefit credit resulting from increased amortization of actuarial gains in our other postretirement benefit plan.

Our effective income tax rate was an expense of 2.9% in the first half of 2026, compared to a benefit of 4.3% in the first half 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.