Exelon (EXC) 2025 — Grade F: DSO Jumped 11 Days, $50.1B Debt, 2.4x Interest Coverage

Grade: F — Major Red Flags

Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles

Data: SEC EDGAR 10-K (Filed 2026-02-12) + Yahoo Finance

Auditor: PricewaterhouseCoopers LLP — Clean opinion (1 critical audit matter: regulatory asset/liability accounting)

One-line verdict: Exelon is the purest regulated utility play in the NASDAQ 100 — six utilities, zero merchant generation (post-Constellation spinoff), 100% regulated revenue. Revenue grew 5.3% to $24.3B, net income rose 12.5% to $2.8B, and EPS increased from $2.45 to $2.73. The F grade comes from the same structural utility features as AEP: negative FCF for 3+ years, $50.1B debt against $626M cash, and CapEx-driven negative post-acquisition FCF. But Exelon adds a genuine accounting anomaly: receivables outpacing revenue for two consecutive years with DSO jumping from 39 to 50 days over three years. PwC flagged $10.6B in regulatory assets and $12.1B in regulatory liabilities as a critical audit matter. The regulatory accounting complexity is substantial — but the underlying business is stable and growing.

Post-Spinoff: Pure Regulated, Steady Growth

In February 2022, Exelon spun off its competitive generation and energy marketing business into Constellation Energy (CEG). What remained is a pure-play regulated utility holding company operating six electric and gas distribution utilities serving approximately 10 million customers across five states and the District of Columbia.

From the 10-K: "Exelon is a utility services holding company engaged in the energy transmission and distribution businesses through its six reportable segments: ComEd, PECO, BGE, Pepco, DPL, and ACE."

Net Income by Subsidiary (from 10-K)

Every subsidiary grew net income. PECO was the standout (+48%) driven by a Pennsylvania rate case. Corporate overhead increased $145M, partially offsetting subsidiary growth.

Revenue and Income (from 10-K)

Revenue from alternative revenue programs swung from +$696M in FY2023 to -$746M in FY2025 — a $1.4B swing. From the 10-K, this reflects regulatory decoupling mechanisms: "Operating revenues are not intended to be impacted by changes in the number of customers as a result of revenue decoupling mechanisms."

ROE of 9.6% is within the typical range for regulated utilities (9-11% allowed ROE). The improving trend reflects rate case outcomes.

ComEd Operating Detail (from 10-K)

ComEd, the largest subsidiary, provides a window into the regulated utility revenue mechanics:

From the 10-K: "Electric distribution revenue increased during the year ended December 31, 2025, compared to the same period in 2024, primarily due to higher fully recoverable costs, higher rate base, and higher return on regulatory assets."

For ComEd, operating income grew from $1,589M to $1,806M (+$217M), driven by $297M in distribution rate increases. But "regulatory required programs" decreased by $1,234M — reflecting the pass-through nature of many utility revenue items.

Rate Case Activity (from 10-K)

Exelon disclosed significant completed rate case proceedings in 2025:

Regulators typically approve less than requested — ComEd received $1,045M of $1,487M requested (70%). This regulatory lag is an ongoing risk.

Cash Flow: The Regulated Utility Structural Issue

CFFO/NI consistently above 2.0 — profits are backed by cash. The gap is D&A: $3.6B in FY2025 vs $3.5B in FY2024. But CapEx of ~$8.5B far exceeds CFFO, producing persistent negative FCF funded by long-term debt issuance.

2025 Debt Issuance (from 10-K)

Exelon issued $4.8B+ in new long-term debt in 2025 alone. The weighted average coupon is approximately 5.3% — significantly higher than the company's historical cost of debt. Each new issuance at higher rates compresses net income going forward.

Equity Issuance (from 10-K)

From the 10-K: "During 2025, Exelon issued approximately 16 million shares of Common Stock at a net weighted-average price of $43.24 per share. The net proceeds from the 2025 issuances were $691 million." This equity dilution (1.6% of shares outstanding) is part of the standard utility funding model but reduces EPS growth.

The 18-Point Screening

Revenue Quality

A2: This is a genuine anomaly for a regulated utility. DSO has increased from 39 days (FY2023) to 44 days (FY2024) to 50 days (FY2025) — a material deterioration in collection speed. Possible explanations: (1) higher rates increasing customer bills beyond affordability, leading to slower payment, (2) regulatory decoupling mechanisms creating timing differences between recognized revenue and billing, or (3) seasonal billing cycle effects from extreme weather. This deserves investigation because regulated utilities with captive customer bases should have stable or declining DSO.

Expense Quality

B2: CapEx growing 4x faster than revenue. For a regulated utility in investment mode, this is expected — Exelon is investing in grid modernization, advanced metering infrastructure, and distribution upgrades. The key question is whether regulators will approve cost recovery through future rate cases.

Cash Flow Quality

C2 and C4 are structural for utilities — identical to AEP. Exelon funds the gap through revolving credit facilities: "$4 billion in aggregate total commitments of which $3.3 billion was available to support additional commercial paper as of December 31, 2025."

Balance Sheet

D2: Debt/EBITDA of 5.5x and interest coverage of 2.4x — slightly worse than AEP's 2.7x coverage. Interest expense of $2.1B against operating income of $5.1B is manageable but leaves limited cushion. The interest coverage trend is concerning: $1.7B in FY2023 grew to $2.1B in FY2025 (+24%).

Acquisition & Manipulation

PwC Critical Audit Matter: Regulatory Accounting

PwC identified one critical audit matter: accounting for the effects of rate regulation.

From PwC's report: "As of December 31, 2025, there were $10.57 billion of regulatory assets and $12.14 billion of regulatory liabilities." PwC cited "the high degree of audit effort to assess the impact of regulation on accounting for regulatory assets and liabilities and to evaluate the complex audit evidence related to whether the regulatory assets and liabilities will be recovered and settled."

This is the central accounting judgment for regulated utilities: management must assess whether costs deferred as regulatory assets are probable of recovery in future rates. If a regulator denies recovery, the asset is written off against earnings. The $10.6B in regulatory assets represents deferred costs that management has determined are recoverable — a judgment that depends on future regulatory outcomes.

Key Risks from Item 1A

1. Cybersecurity and physical security. From the 10-K: "Risks from cybersecurity and physical threats to energy infrastructures and personnel are increasing. Threat actors, including sophisticated nation-state actors and criminal groups, exploit potential vulnerabilities in the electric and natural gas utility industry." The 10-K specifically warns: "the rapid evolution and increased adoption of artificial intelligence technologies may intensify the Registrants' cybersecurity risks."

2. Regulatory disallowance risk. Rate cases routinely receive less than requested — ComEd received $1,045M of $1,487M requested, PECO received $354M of $464M. If future rate cases are decided unfavorably, regulatory assets may require write-downs.

3. Environmental remediation. From the 10-K, Exelon's subsidiaries face ongoing environmental remediation obligations under CERCLA and state laws. These costs are generally recoverable through rates but create uncertainty.

4. Rising interest expense compressing earnings. Interest expense grew from $1.7B to $2.1B (+24%) over two years. With $50.1B in debt and new issuances at 5-6% coupons, the interest burden will continue rising as lower-coupon legacy debt matures and is refinanced.

Altman Z-Score and F-Score

The Z-Score of 0.82 is structural — identical pattern to AEP. The F-Score of 0.50 with 0.18% fraud probability confirms no manipulation signal.

Summary

Grade: F — mostly structural, with one genuine anomaly.

Like AEP, most of Exelon's red flags are structural features of the regulated utility model: persistent negative FCF, minimal cash vs massive debt, and CapEx-funded-by-borrowing. The F-Score fraud probability of 0.18% confirms no manipulation.

The genuine anomaly is the AR vs revenue trend (A2). DSO has jumped from 39 to 50 days over three years, with receivables outpacing revenue growth for two consecutive years. For a regulated utility with captive customers, this is unusual and warrants investigation — it could signal customer payment stress from higher rates, or it could be a timing effect from regulatory decoupling mechanisms.

Exelon's earnings are real and growing: revenue up 5.3%, net income up 12.5%, every subsidiary profitable, and CFFO/NI of 2.26. But the capital intensity is relentless — $4.8B+ in new debt issuance in 2025 alone, at coupons averaging 5.3%, will progressively compress margins. The $10.6B in regulatory assets and $12.1B in regulatory liabilities represent enormous accounting judgments that depend entirely on future regulatory outcomes.

**Disclaimer**: This report is based on Exelon's FY2025 10-K (SEC EDGAR, filed 2026-02-12) and public financial data. This is NOT investment advice.

Data: SEC EDGAR 10-K (Filed 2026-02-12) + Yahoo Finance

Auditor: PricewaterhouseCoopers LLP (Unqualified opinion, 1 critical audit matter)