California Water Service Group Q3 FY2025 earnings call

• 2024 General Rate Case: Administrative law judge may need additional time but commissioner stresses timely decisions, and authorization for Tier 1 advice letter and memo account if delay occurs. - Infrastructure Investment: Invested $135 million in Q3, up 14.8% Y/Y, and $364.7 million YTD, up 9.8% Y/Y. - Financing: Refinanced $370 million in long-term notes and bonds, oversubscribed, strengthening balance sheet. - Texas Expansion: Waiting for commission approval on General Rate Case settlement, received $24 million net PFAS settlement proceeds YTD, total $35 million. - Regulatory Progress: Made steady advancement in multiple regulatory proceedings. - Dividend: Board declared $0.30 per share dividend, 323rd consecutive quarterly dividend, 2025 dividend increase 10.71%. - BVRT: Added 1,100 new connections YTD, with 15,500 committed customers, in a rapidly growing region. - PFAS: EPA reaffirmed max contaminant level, compliance deadline extended, managing PFOA and PFAS programs, estimated $217 million PFAS investment needed, received $35 million net settlement proceeds YTD. - Other States: Hawaii Water's 5 Waikoloa systems got $4.7 million revenue increase; Washington Water filed rate case seeking $4.9 million revenue increase; Texas BVRT utility rate case settlement pending.

In Q3 2025, revenue increased $11.6 million or 3.9% to $311.2 million compared to Q3 2024's $299.6 million. Net income for the quarter was $61.2 million or $1.03 per diluted share, consistent with prior year. Year-to-date 2025 operating revenue was $780.2 million, a decrease of $34.4 million or 4.2% compared to the first 9 months of 2024. However, removing the 2023 interim rate relief from 2024 results, 2025 year-to-date revenue increased $53.1 million or 7.3%. Net income attributable to group was $116.7 million or $1.96 per diluted share, a $54.4 million or 31.8% decrease compared to the same period in 2024, but removing the interim rate relief, it increased $9.8 million or 9.9% over non-GAAP 2024 year-to-date net income.

• Look ahead to 2025: Priorities include maintaining operational excellence, executing capital programs responsibly, achieving timely outcomes in rate cases, and delivering value for customers and stockholders. - 2026 will be the 100th year of operations, will stay focused on existing business plan.

• Rate case delay risk: Administrative law judge may need additional time, though commissioner stresses timely decisions. - Economic and interest rate risks: Impact on cost of capital and financial planning. - PFAS compliance risks: Uncertainty in compliance deadlines, costs, and regulatory changes.

Q: Agnieszka Storozynski asked about rate base growth projections, specifically the impact of settlements and how it compares to projections in Slide 10.

A: James Lynch said they haven't overstated, they are building in anticipation of achieving most of what they asked for in the rate case. Marty Kropelnicki mentioned typically around 10% compound annual growth rate on capital spending year-over-year, and Greg Milleman explained that the listing of undisputed items was just parties' positions for the judge's review. Martin Kropelnicki added that in the last 3 rate cases, they've been north of 80% of their ask.

Q: Davis Sunderland asked about how the merger of American and Essential changes their growth thinking and about the impact of higher-for-longer rate environment on planning.

A: Marty Kropelnicki said their primary growth engine is reinvestment in existing infrastructure, BVRT is a strong growth area, and they are opportunistic on M&A. Regarding the rate environment, James Lynch said they refinanced short-term debt into long-term debt with favorable rates, positioning them well, and Marty Kropelnicki mentioned the cost of capital adjustment mechanism in California and the focus on earning regulatory rate of return.