CALIFORNIA WATER SERVICE GROUP Q1 FY2025 earnings call

• Strong first quarter performance despite the typical challenging first quarter in the third year of the California general rate case.
• Update on the 2024 general rate case in California remains on track; settlement discussions ongoing with identification of non-contested areas for evidentiary hearings.
• Favorable regulatory decisions: approval of Palos Verdes project incremental costs, drought-related cost recovery in California, and settlement in the Ka’anapali general rate case in Hawaii.
• Positive water supply in the West with strong snow pack in California (99% of normal in April), major reservoirs above historical averages.
• Continued investment in water infrastructure: capital investments totaled $110.1 million in Q1 2025, consistent with Q1 2024.
• Board of Directors approved a $0.30 per share dividend, the 321st consecutive quarterly dividend.
• Growth strategy includes greenfield development in Texas and evaluating domestic M&A opportunities, with focus on rate base growth.
• Preparation for fire season with wildfire hardening projects underway.

On a GAAP basis, operating revenue for the first quarter of 2025 was $204 million compared to $270.7 million in the first quarter of 2024. Net income attributed to the group was $13.3 million or $0.22 per diluted share compared to $69.9 million or $1.21 per diluted share in Q1 of 2024. When adjusting for the Q1 2024 interim rate relief, first quarter revenue increased 13% over non-GAAP 2024 revenue of $180.5 million. First quarter net income and diluted earnings per share increased 225% and 214%, respectively, over Q1 2024 non-GAAP income of $4 million, $4.1 million, and non-GAAP earnings per share of $0.07.

• California 2021 general rate case continues on schedule, with efforts to move into evidentiary hearing phase in May.
• Anticipate rate base growth of approximately 11.7% compounded annual rate base growth if approved.
• Focus on tight management of controllable expenses, staying on budget with capital plans, and maintaining customer service and water quality goals.
• Expect annual capital expenditures to increase over the next 5 years due to water infrastructure replacement and maintenance needs.

• Market volatility, inflation, and potential tariff effects on construction projects.
• Regulatory lag in the third year of the rate case cycle.
• Uncertainties in financial markets affecting future financings.
• Continued drought in West Maui requiring conservation efforts.

Q: Angie Storozynski asked about key points of contention in the California GRC.

A: Martin Kropelnicki stated they didn't reach a global settlement but are identifying non-contested areas for submission to the judge in the prehearing conference, with all parties indicating a desire to keep the rate case on schedule.

Q: Davis Sunderland inquired about comparison of 2021 vs 2025 rate case.

A: Martin Kropelnicki noted positive comments from regulators (Commissioner Bakers wanting rate case done on time), advocates indicating desire to get rate case on time, and a focused judge driving the process, unlike the 2021 rate case with significant delays and COVID-related issues.

Q: Jonathan Reeder asked about drivers of Q1 results.

A: Martin Kropelnicki and James Lynch cited good budget management by operating teams, water mix aligning closely to actual in the rate case, and step increases from the $27 million in rate adjustments starting to impact tariffs.

Q: Jonathan Reeder asked about renewing the ATM program.

A: Martin Kropelnicki stated they are in the process of renewing it, intending to do so in early spring, with ongoing review of the size and features of the ATM program.