The York Water Company (YORW): BCG Matrix [11-2024 Updated]

The York Water Company (YORW) stands at a pivotal juncture in 2024, showcasing a diverse portfolio that reflects its strategic positioning in the utility sector. Utilizing the Boston Consulting Group Matrix, we can categorize YORW's business segments into Stars, Cash Cows, Dogs, and Question Marks. Each category reveals critical insights into the company's performance and future potential, from its impressive revenue growth and customer expansion to challenges in specific service areas. Dive deeper to explore how these classifications shape YORW's operational landscape and investment outlook.

Background of The York Water Company (YORW)

The York Water Company, founded in 1816, is the oldest continuously operating utility in the United States. The company primarily engages in the business of impounding, purifying, and distributing drinking water. It operates within its franchised water and wastewater territory, which covers portions of 57 municipalities across four counties in south-central Pennsylvania. As of September 30, 2024, the company serves approximately 72,583 water customers and 6,585 wastewater customers.

The company's water supply is sourced mainly from the South Branch and East Branch of the Codorus Creek, which collectively provide an average daily flow of about 73 million gallons. The company has two main reservoirs, Lake Williams and Lake Redman, with a combined capacity of roughly 2.5 billion gallons of water. In addition, York Water Company supplements its supply through a 15-mile pipeline from the Susquehanna River, which adds another 12 million gallons of untreated water per day.

As of September 30, 2024, the company's average daily availability was reported at 41.1 million gallons, with average daily consumption around 22.4 million gallons. The York Water Company operates under the regulation of the Pennsylvania Public Utility Commission (PPUC), which oversees aspects such as billing, payment procedures, and rate setting.

Financially, the York Water Company has experienced fluctuations in revenue and net income. For the third quarter of 2024, the company reported operating revenues of $19.7 million, an increase of 5.1% compared to the same period in 2023. However, net income for the same quarter was $5.86 million, reflecting a decrease of 22.5% from the prior year, primarily due to higher operating expenses and increased income taxes.

The company's business model is somewhat insulated from large capital requirements and is not heavily reliant on a few key customers. Revenue growth is largely contingent on timely rate increases approved by the PPUC and an expanding customer base. Additionally, the York Water Company has been actively pursuing acquisition opportunities to expand its footprint and enhance its service offerings.

The York Water Company (YORW) - BCG Matrix: Stars

Consistent Revenue Growth

Operating revenue for The York Water Company increased from $52.9 million in 2023 to $56.1 million in 2024, representing an increase of 6.0%.

Strong Customer Base Expansion

The company added approximately 1,062 water customers in 2024, increasing the average number of water customers served from 71,521 in 2023 to 72,583 in 2024.

Additionally, the average number of wastewater customers served rose by 567 customers, from 6,018 in 2023 to 6,585 in 2024.

Successful Implementation of the Distribution System Improvement Charge (DSIC)

The implementation of the Distribution System Improvement Charge (DSIC) contributed an additional $131,000 in revenue for the third quarter of 2024.

Positive Regulatory Environment

The regulatory framework supported timely rate increases from the Pennsylvania Public Utility Commission (PPUC), which allowed the company to maintain and enhance its revenue stream.

The York Water Company (YORW) - BCG Matrix: Cash Cows

Established market presence in water and wastewater utility services across 57 municipalities.

The York Water Company operates in a mature market, providing essential water and wastewater services to a significant customer base. As of 2024, the company serves approximately 72,583 water customers and 6,585 wastewater customers, reflecting its established presence across 57 municipalities.

Stable earnings with net income of $15.2 million for the nine months ended September 30, 2024.

For the nine months ended September 30, 2024, The York Water Company reported a net income of $15.2 million, a decrease from $17.7 million in the same period of 2023. This reflects the company's ability to maintain stable earnings despite fluctuations in operational expenses and market conditions.

High percentage of common stockholders’ equity at 53.2%, indicating financial stability.

The company holds a common stockholders’ equity of approximately $228.7 million as of September 30, 2024. This constitutes about 53.2% of its total capitalization, indicating a strong financial position and stability in its capital structure.

Strong credit rating of A- from Standard & Poor’s, facilitating access to debt financing.

The York Water Company has been assigned a credit rating of A- by Standard & Poor’s as of August 6, 2024. This rating enhances the company’s ability to secure favorable terms for debt financing, which is crucial for funding capital projects and maintaining operational efficiency.

The York Water Company (YORW) - BCG Matrix: Dogs

Decrease in Net Income

The net income for The York Water Company decreased from $7.6 million in Q3 2023 to $5.9 million in Q3 2024, representing a decline of 22.5%. This decline was attributed to higher operating expenses and increased taxes.

Slow Growth in Service Areas

Growth in certain service areas has been limited, with the average number of water customers served increasing by only 1,062 customers, from 71,521 in 2023 to 72,583 in 2024. Similarly, the average number of wastewater customers rose by 567 customers, from 6,018 to 6,585.

Vulnerability to Weather Conditions

The company's revenue is particularly vulnerable to weather conditions, especially during summer months when water consumption typically increases. Prolonged dry spells can lead to drought restrictions, which negatively impact revenues. This seasonality in demand has resulted in fluctuations in revenue.

The York Water Company (YORW) - BCG Matrix: Question Marks

Recent acquisitions of small water systems with minimal impact on overall revenue, indicating potential for growth but uncertain returns.

The York Water Company has made several acquisitions in 2024 that have added a limited number of customers and have minimal impact on overall revenue. For instance:

• On February 21, 2024, the Company acquired the water assets of Longstown Mobile Estates, adding approximately 90 water customers for a total cost of approximately $8, resulting in a negative acquisition adjustment of $2.
• On September 26, 2024, it acquired the water assets of Houston Run Community Water System, adding around 15 customers at a cost of approximately $212.

These acquisitions are considered immaterial to the Company's financial results but reflect a strategy to expand its customer base in a growing market.

Dependence on regulatory approval for rate increases, which can limit revenue growth.

The Company is heavily reliant on regulatory approvals for rate increases. As of October 1, 2024, the Company’s tariff included a Distribution System Improvement Charge (DSIC) on revenues of 1.14%. However, the Company does not expect to file for a rate increase in 2024, which may restrict revenue growth potential in the short term.

Emerging competition in utility services that may challenge market share.

The York Water Company faces increasing competition in the utility services sector. This competition could affect its ability to maintain or grow market share, especially as new entrants may offer competitive pricing or innovative solutions that attract customers away from established providers.

Ongoing need for capital investments to maintain and expand infrastructure, posing risks to cash flow management.

The Company has significant capital expenditure requirements to maintain and expand its infrastructure. In the nine months ended September 30, 2024, York Water invested $32,993 in various construction projects. These expenditures include:

• Armoring and replacing the spillway of the Lake Williams dam.
• Wastewater treatment plant construction.
• Various replacements and improvements to infrastructure.

For the remainder of 2024, anticipated construction expenditures are approximately $9,700, which will be funded primarily through internally generated funds and customer contributions. This ongoing capital requirement poses risks to cash flow management, particularly if revenue growth does not keep pace with these investments.

In summary, The York Water Company's position within the BCG Matrix highlights its strengths and challenges as of 2024. With Stars driving revenue growth and customer expansion, the company benefits from a solid foundation of Cash Cows that ensure financial stability. However, it faces hurdles in the Dogs category, where declining net income and slow growth pose risks, while Question Marks indicate areas for potential growth, albeit with uncertain returns. Moving forward, strategic focus on infrastructure investment and regulatory navigation will be crucial for optimizing its market position.

Updated on 16 Nov 2024

Resources:

1. The York Water Company (YORW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The York Water Company (YORW)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View The York Water Company (YORW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.