TXNM Earnings Dip Amid Rising Costs, Revenue Growth

TL;DR

**TXNM's revenue growth is being eaten alive by soaring costs and interest, making it a risky bet despite infrastructure investments.**

AI Summary

TXNM Energy, Inc. reported a slight decrease in net earnings attributable to TXNM for the three months ended September 30, 2025, falling to $130.71 million from $131.20 million in the prior year, a 0.37% decline. For the nine months ended September 30, 2025, net earnings attributable to TXNM significantly decreased by 28.81% to $161.21 million from $226.44 million in 2024. Electric operating revenues increased by 13.69% to $647.16 million for the three-month period and by 9.25% to $1.63 billion for the nine-month period. Operating expenses rose substantially, with cost of energy increasing by 40.41% to $195.04 million for the quarter and by 24.87% to $531.85 million for the nine months. Interest charges also saw a notable increase, up 17.58% to $70.15 million for the quarter and 21.54% to $205.71 million for the nine months. Cash flows from operating activities increased to $426.79 million for the nine months ended September 30, 2025, up from $349.52 million in the prior year, a 22.11% improvement. The company also issued $842.89 million in common stock during the nine-month period of 2025, compared to none in 2024.

Why It Matters

This filing reveals a mixed financial picture for TXNM Energy, Inc., with revenue growth offset by rising operating expenses and interest charges. For investors, the significant 28.81% drop in nine-month net earnings attributable to TXNM, despite increased electric operating revenues, signals potential margin pressures and could impact future dividend sustainability, which saw a modest increase to $0.4075 per share. The substantial increase in long-term borrowings by $1.92 billion and common stock issuance of $842.89 million in 2025 indicates a focus on financing growth and capital expenditures, potentially for grid modernization or resource acquisition, which could affect competitive positioning against other utilities like American Electric Power (AEP). Employees and customers might see the impact through continued investment in infrastructure, but also potential rate adjustments to cover rising costs.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant increase in operating expenses, particularly the cost of energy, which rose 24.87% for the nine months ended September 30, 2025, and a 21.54% increase in interest charges over the same period. While electric operating revenues increased by 9.25%, the net earnings attributable to TXNM decreased by 28.81% to $161.21 million, indicating margin compression and potential profitability challenges.

Analyst Insight

Investors should closely monitor TXNM's operating expense management and interest rate exposure, as these factors are significantly eroding net earnings despite revenue growth. Consider the impact of the $1.92 billion increase in long-term borrowings and the $842.89 million common stock issuance on future earnings per share and dividend coverage. Await further details on the 'Merger' with an affiliate of Blackstone Infrastructure Partners L.P. as this could significantly alter the company's financial structure and strategic direction.

Financial Highlights

revenue

$1.63B

operating Margin

21.36%

net Income

$161.21M

eps

$1.63

revenue Growth

+9.25%

Revenue Breakdown

Key Numbers

• $130.71M — Net Earnings Attributable to TXNM (Q3 2025) (Decreased from $131.20M in Q3 2024, a 0.37% decline.)
• $161.21M — Net Earnings Attributable to TXNM (YTD Sep 2025) (Significantly decreased from $226.44M in YTD Sep 2024, a 28.81% decline.)
• $647.16M — Electric Operating Revenues (Q3 2025) (Increased from $569.26M in Q3 2024, a 13.69% increase.)
• $1.63B — Electric Operating Revenues (YTD Sep 2025) (Increased from $1.49B in YTD Sep 2024, a 9.25% increase.)
• $195.04M — Cost of Energy (Q3 2025) (Increased from $138.91M in Q3 2024, a 40.41% increase.)
• $531.85M — Cost of Energy (YTD Sep 2025) (Increased from $425.92M in YTD Sep 2024, a 24.87% increase.)
• $70.15M — Interest Charges (Q3 2025) (Increased from $59.66M in Q3 2024, a 17.58% increase.)
• $205.71M — Interest Charges (YTD Sep 2025) (Increased from $169.25M in YTD Sep 2024, a 21.54% increase.)
• $426.79M — Net Cash Flows from Operating Activities (YTD Sep 2025) (Increased from $349.52M in YTD Sep 2024, a 22.11% increase.)
• $842.89M — Issuance of Common Stock (YTD Sep 2025) (Increased from $0 in YTD Sep 2024, indicating significant equity financing.)

Key Players & Entities

• TXNM Energy, Inc. (company) — Registrant and parent company
• Public Service Company of New Mexico (company) — Subsidiary of TXNM Energy, Inc.
• Texas-New Mexico Power Company (company) — Subsidiary of TXNM Energy, Inc.
• Blackstone Infrastructure Partners L.P. (company) — Affiliate involved in the Merger Agreement
• $130.71 million (dollar_amount) — Net Earnings Attributable to TXNM for Q3 2025
• $161.21 million (dollar_amount) — Net Earnings Attributable to TXNM for nine months ended Sep 30, 2025
• $647.16 million (dollar_amount) — Electric Operating Revenues for Q3 2025
• $1.63 billion (dollar_amount) — Electric Operating Revenues for nine months ended Sep 30, 2025
• $195.04 million (dollar_amount) — Cost of energy for Q3 2025
• $531.85 million (dollar_amount) — Cost of energy for nine months ended Sep 30, 2025

FAQ

Risk Factors

• Regulatory Disallowances [medium — regulatory]: The company experienced regulatory disallowances of $731 thousand in the nine months ended September 30, 2025, compared to $10,601 thousand in the prior year. These disallowances can negatively impact earnings and cash flows.
• Fluctuating Energy Costs [high — market]: Cost of energy increased by 24.87% to $531.85 million for the nine months ended September 30, 2025. Significant increases in energy commodity prices can pressure margins if not fully recoverable through rates.
• Increased Interest Charges [medium — financial]: Interest charges rose by 21.54% to $205.71 million for the nine months ended September 30, 2025. Higher interest expenses increase the cost of capital and reduce net earnings.
• Depreciation and Amortization [medium — operational]: Depreciation and amortization expenses increased by 10.10% to $314.80 million for the nine months ended September 30, 2025. This reflects ongoing investments in infrastructure but also a significant non-cash expense.

Industry Context

The electric utility sector is characterized by significant capital investment in infrastructure and a highly regulated operating environment. Companies like Public Service Co of New Mexico are subject to rate-setting by state commissions, which influences revenue and profitability. Trends include the transition to cleaner energy sources, grid modernization, and managing volatile fuel costs.

Regulatory Implications

Public Service Co of New Mexico operates under strict regulatory oversight, primarily from the New Mexico Public Regulation Commission. Changes in regulatory policy, rate case outcomes, and the treatment of operating expenses (like regulatory disallowances) can materially affect financial performance and the company's ability to earn a fair return on its investments.

What Investors Should Do

1. Monitor rate case outcomes and regulatory decisions.
2. Analyze the impact of rising energy costs on margins.
3. Evaluate the equity issuance strategy.
4. Assess the divergence between net earnings and operating cash flow.

Glossary

Regulatory disallowances

Costs incurred by a utility that are not permitted to be recovered from customers through rates by the regulatory commission. (These directly reduce the company's reported earnings and impact its ability to recover operating expenses.)

Cost of energy

The direct costs associated with purchasing or generating the electricity sold to customers. (A significant operating expense that has seen a substantial increase, impacting profitability.)

Interest Charges

The cost incurred by the company for borrowing money, such as on bonds or loans. (An increase in interest charges indicates higher debt levels or rising interest rates, which reduces net income.)

Net Earnings Attributable to TXNM

The portion of the company's net earnings that belongs to the common shareholders of TXNM Energy, Inc. after accounting for non-controlling interests and preferred dividends. (This is the bottom-line profit available to TXNM's shareholders, which has seen a significant decline year-to-date.)

Net Cash Flows from Operating Activities

The cash generated or used by the company's normal business operations. (An increase here suggests improved operational cash generation, despite lower net earnings.)

Year-Over-Year Comparison

Compared to the prior year, Public Service Co of New Mexico (TXNM) experienced a slight decrease in net earnings attributable to TXNM for Q3 2025, but a significant 28.81% drop year-to-date. Electric operating revenues showed healthy growth, up 13.69% for the quarter and 9.25% year-to-date. However, operating expenses, particularly the cost of energy (up 40.41% quarterly and 24.87% year-to-date), and interest charges (up 17.58% quarterly and 21.54% year-to-date) rose substantially, eroding profitability. Despite lower net earnings, operating cash flows saw a strong 22.11% improvement year-to-date, and the company significantly increased its equity financing through common stock issuance.

Key Financial Figures

• $10 — mber of shares of common stock of TNMP, $10 par value per share, outstanding as of
• $550.0 million — ne 18, 2021 Convertible Notes TXNM's $550.0 million junior subordinated convertible notes i
• $343.2 million — ds On November 15, 2023, ETBC I issued $343.2 million aggregate principal amount of its senio
• $344 million — t includes investments of approximately $344 million for the first six years of a broader 11
• $40.0 million — PNM New Mexico Credit Facility PNM's $40.0 million Unsecured Revolving Credit Facility P
• $200.0 million — it Facility PNM 2024 Term Loan PNM's $200.0 million term loan that matures on November 10,
• $195.0 Million — er 10, 2025 PNM 2025 Term Loan PNM's $195.0 Million Unsecured Term Loan issued on January 2
• $300.0 million — 2025 SUNs PNM April 2025 SUNs PNM's $300.0 million Senior Unsecured Notes issued on April
• $400.0 million — 5 PNM Revolving Credit Facility PNM's $400.0 million Unsecured Revolving Credit Facility P
• $285.0 million — Agreement for the sale of an aggregate $285.0 million of TNMP's 2024 Bonds TNMP February 20
• $140.0 Million — Agreement for the sale of an aggregate $140.0 Million of TNMP February 2025 Bonds TNMP Revo
• $1.0 billion — XNM 2021 Delayed-Draw Term Loan TXNM's $1.0 billion Unsecured Delayed-Draw Term Loan that m
• $500.0 million — 18, 2025 TXNM 2023 Term Loan TXNM's $500.0 million term loan that matures on June 30, 2026

Filing Documents

• pnm-20250930.htm (10-Q) — 4307KB
• txnm9302025ex311.htm (EX-31.1) — 11KB
• txnm9302025ex312.htm (EX-31.2) — 11KB
• txnm9302025ex313.htm (EX-31.3) — 11KB
• txnm9302025ex314.htm (EX-31.4) — 11KB
• txnm9302025ex315.htm (EX-31.5) — 11KB
• txnm9302025ex316.htm (EX-31.6) — 11KB
• txnm9302025ex321.htm (EX-32.1) — 8KB
• txnm9302025ex322.htm (EX-32.2) — 7KB
• txnm9302025ex323.htm (EX-32.3) — 7KB
• 0001108426-25-000109.txt ( ) — 21096KB
• pnm-20250930.xsd (EX-101.SCH) — 150KB
• pnm-20250930_cal.xml (EX-101.CAL) — 130KB
• pnm-20250930_def.xml (EX-101.DEF) — 948KB
• pnm-20250930_lab.xml (EX-101.LAB) — 1297KB
• pnm-20250930_pre.xml (EX-101.PRE) — 1183KB
• pnm-20250930_htm.xml (XML) — 3714KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) TXNM ENERGY , INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 8 Condensed Consolidated Statements of Comprehensive Income 9 Condensed Consolidated Statements of Cash Flows 10 Condensed Consolidated Balance Sheets 12 Condensed Consolidated Statements of Changes in Equity 14 PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 15 Condensed Consolidated Statements of Comprehensive Income 16 Condensed Consolidated Statements of Cash Flows 17 Condensed Consolidated Balance Sheets 19 Condensed Consolidated Statements of Changes in Equity 21 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 22 Condensed Consolidated Statements of Cash Flows 23 Condensed Consolidated Balance Sheets 24 Condensed Consolidated Statements of Changes in Common Stockholder's Equity 26 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 27

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 76

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 110

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 112

OTHER INFORMATION

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 113

RISK FACTORS

ITEM 1A. RISK FACTORS 113

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 115

EXHIBITS

ITEM 6. EXHIBITS 115 SIGNATURE 116 3 Table of Contents GLOSSARY Definitions: 2024 Rate Change PNM's request for a general increase in electric rates filed with the NMPRC on December 5, 2022 using a calendar year 2024 FTY 2025 Rate Request PNM's request for a general increase in electric rates filed with the NMPRC on June 14, 2024 using a FTY beginning July 1, 2025 2028 Resource Application PNM's November 22, 2024 application with the NMPRC for approval of resources to be available for the 2028 summer peak ACE Rule Affordable Clean Energy Rule AEP OnSite Partners AEP OnSite Partners, LLC, a subsidiary of American Electric Power, Inc. until the completion of its sale on September 30, 2024 to Basalt Infrastructure Partners LLC AFUDC Allowance for Funds Used During Construction AOCI Accumulated Other Comprehensive Income APS Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners ARO Asset Retirement Obligation ASU Accounting Standards Update Blackstone Infrastructure Blackstone Infrastructure Partners L.P. Board Board of Directors of TXNM CAA Clean Air Act CAISO California Independent System Operator Carbon Pollution Standards Carbon Pollution Standards established by the EPA on August 3, 2015 CCN Certificate of Convenience and Necessity CCR Coal Combustion Residuals CCS Carbon Capture and Storage/Sequestration CIAC Contributions in Aid of Construction CO 2 Carbon Dioxide CODM Chief Operating Decision Maker Community Solar Act Senate Bill 84 effective June 18, 2021 Convertible Notes TXNM's $550.0 million junior subordinated convertible notes issued on June 10, 2024 and June 21, 2024 DC Circuit United States Court of Appeals for the District of Columbia Circuit DCRF TNMP's applications for a distribution cost recovery factor DOE United States Department of Energy EDAM Extended Day Ahead Market EEI Edison Electric Institute, an association representing all U.S. investor-owned e

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS TXNM ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands, except per share amounts) Electric Operating Revenues $ 647,162 $ 569,256 $ 1,632,374 $ 1,494,235 Operating Expenses: Cost of energy 195,042 138,909 531,846 425,919 Administrative and general 68,445 64,840 205,205 179,848 Energy production costs 21,172 21,259 71,799 68,055 Regulatory disallowances ( 731 ) 6,142 ( 731 ) 10,601 Depreciation and amortization 105,012 97,400 314,798 285,000 Transmission and distribution costs 27,167 23,660 79,133 71,475 Taxes other than income taxes 28,185 25,966 82,864 75,984 Total operating expenses 444,292 378,176 1,284,914 1,116,882 Operating income 202,870 191,080 347,460 377,353 Other Income and Deductions: Interest income 6,496 8,669 14,615 17,719 Gains on investment securities 11,376 13,770 33,691 32,326 Other income 7,688 7,953 18,121 20,552 Other (deductions) ( 3,028 ) ( 1,988 ) ( 11,767 ) ( 20,146 ) Net other income and deductions 22,532 28,404 54,660 50,451 Interest Charges 70,149 59,664 205,713 169,254 Earnings before Income Taxes 155,253 159,820 196,407 258,550 Income Taxes 18,949 23,422 21,293 19,822 Net Earnings 136,304 136,398 175,114 238,728 (Earnings) Attributable to Valencia Non-controlling Interest ( 5,462 ) ( 5,064 ) ( 13,509 ) ( 11,891 ) Preferred Stock Dividend Requirements of Subsidiary ( 132 ) ( 132 ) ( 396 ) ( 396 ) Net Earnings Attributable to TXNM $ 130,710 $ 131,202 $ 161,209 $ 226,441 Net Earnings Attributable to TXNM per Common Share: Basic $ 1.22 $ 1.45 $ 1.63 $ 2.50 Diluted $ 1.22 $ 1.45 $ 1.63 $ 2.50 Dividends Declared per Common Share $ 0.4075 $ 0.3875 $ 1.2225 $ 1.1625 The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements. 8 Table of Contents TXNM ENERGY, INC. AND SUB

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