California Water Service Group Q2 FY2025 earnings call

• Strong Q2 performance with non-GAAP EPS up 15% year-over-year, driven by tariff rate changes and increased customer usage but offset by regulatory account decreases and other factors.
• Capital spending up ~7% quarter-over-quarter; capital investments for the quarter were $119.4 million and year-to-date $229.5 million, a 14.2% increase quarter-over-quarter and 7% year-to-date compared to 2024.
• California rate case on track; settlement discussions took place, hearings were held, and opening briefs were filed with reply briefs, with a final motion hearing on August 5.
• PFAS update: EPA extended compliance deadline for PFOA and PFAS treatments to 2031, but the company remains committed to its $226 million investment plan; received $10.6 million in net proceeds from a PFAS settlement with 3M in May 2025.
• Business development: Agreement with DMB Development for a wastewater treatment facility in San Bernardino County; Texas utility subsidiary growing with increasing customer connections and a rate case settlement awaiting commission approval.
• Sustainability report highlights: Published 2024 report focusing on protecting the planet, serving customers, engaging workforce, and governing with integrity; goals to reduce greenhouse gas emissions, 100% water quality compliance, and philanthropic efforts.

In Q2 2025, revenue increased $20.7 million or 8.5% to $265 million compared to Q2 2024's $244.3 million. Net income for the quarter was $42.2 million or $0.71 per diluted share, compared to $40.6 million or $0.70 per diluted share in Q2 2024. Year-to-date revenue in 2025 was $468.9 million, up 9.7% when adjusting for 2024 interim rate relief. Net income attributed to the group was $55.5 million or $0.93 per diluted share year-to-date, compared to $110.5 million or $1.90 per diluted share in the prior year.

• Rate case is on schedule with the assigned commissioner aiming for a timely decision; optimistic about the rate case proceeding as planned.
• PFAS projects remain on track with some timing adjustments but overall still moving forward with the original investment plan.
• Capital investments to continue with anticipation of receiving approved rate base plans; dividend of $0.30 per share approved, with a 5-year 7.7% compound annual growth rate.
• Focus on executing prudently and efficiently, with attention to the third year of the rate case and ongoing regulatory proceedings in multiple states.

• Regulatory uncertainties related to the California General Rate Case and other rate proceedings in various states.
• PFAS compliance challenges with evolving EPA guidelines and potential shifts in state regulations.
• Legislative changes, such as the impact of a water decoupling bill in California and potential opposition or hurdles in its passage.

Q: Regarding the California GRC, is it still expected to be decided by year-end and what to monitor in August to October?

A: The assigned commissioner aims for a timely decision, with the final motion hearing on August 5 and the judge to draft the proposed decision thereafter; the commissioner is focused on keeping it on schedule.

Q: Comments on PFAS pushout and impact on M&A?

A: The company is still moving forward with PFAS projects, with some timing adjustments for well replacements; M&A initiatives are independent of PFAS timelines with a strong balance sheet.

Q: CapEx shifts and Silverwood spend?

A: CapEx shifts are due to timing of PFAS well replacements and memo account treatment; Silverwood spend is incremental, with Board approval for expenditures over the next 2 years.

Q: Water decoupling bill in California?

A: Senate Bill 473 would require full decoupling for water utilities, passed Senate 37-0, moved through assembly, awaiting appropriations committee; opposition cites $1 million commission cost increase but the company supports it for long-term customer affordability and climate change management.

Q: PFAS settlements coverage?

A: Best estimate is $40 million to $60 million of the $226 million PFAS investment can be covered by settlements, with more to come by end of 2025 as settlements and applications are worked through.