Companhia de Saneamento Básico do Estado de São Paulo - SABESP Q4 FY2025 earnings call

Investment Execution

• Fourth quarter CAPEX was 4.8 billion reais, total 2025 CAPEX 15.2 billion reais, 120% increase year over year.
• Translated into outcomes: 1.8 million people gained access to potable water, 2.1 million to sewage collection, 3.8 million to sewage treatment.

People and Culture

• Embedded Sabespi culture principles, expanded internships, launched trainee program, completed organizational optimization cycle.
• Expanded long-term incentive plan to 52 leadership and key employees.

Regulatory Front

• 74% of injunctions related to large client discounts rolled in Sabespi's favor.
• Launched integrated community engagement plan.

Operational Efficiency

• Renewed metering infrastructure, installed 1.5 million new meters in 2025, expect 9 million more by 2029.
• Completed first full zero-based budgeting cycle.

Service Quality

• Net Promoter Score reached 47, up 2 points year over year.
• WhatsApp service had 2.6 million conversations in February, reduced average service time by 21%, satisfaction rating 4.4.
• Quality indicators strong: distributed water quality 98.8%, treatment plant quality 99.9%, wastewater regulatory compliance 96.2%.

Water Resilience

• Increased system transfer capacity by 14.2 cubic meter per second from 2015-2025.
• Projects scheduled 2026-2030 to add 12.8 cubic meters per second, supported by 5.9 billion reais in investments.

Acquisition

• Acquired MI's voting and non-voting controlling shares in January 2026, acquired additional stake from Oceana Fund, SubSB now holds ~98% of MI's common shares, tender offer for remaining voting shares expected in April. MI has potential to increase reservoir capacity in metropolitan system by up to 52% in the long term.

Water production in the quarter totaled 789 million cubic meters. Water connections reached approximately 9.5 million, increasing 0.4% year over year, while sewage connections grew 0.8%, reaching 8.3 million. Adjusted net revenue for the quarter was 5.7 billion, growing 2.1% year over year. Adjusted EBITDA totaled 3.4 billion, up 13% year over year with margins at 60%. Adjusted net income was stable at around 1.9 billion. Cash flow from operations reached $3 billion, up 24%, with cash conversion at 83%. For the full year 2025, adjusted net revenue was 22.2 billion, up 2.2%. Adjusted EBITDA was 13.2 billion, up 17% with margins at 60%. Adjusted net income was 6.3 billion, up 22%. Cash flow from operations was 8.1 billion. Adjusted figures exclude certain non-recurring items. Revenue growth drivers included pricing, volume growth, and mix. EBITDA drivers included G&A improvements, energy efficiency, headcount optimization, and lower materials consumption, partially offset by higher services expenses. CapEx in 2025 was 15.2 billion, with 4.8 billion in the fourth quarter. Universal access targets were advanced, with 84% of water targets, 74% of sewage collection, and 70% of sewage treatment achieved as of February 2026. 32 major projects were delivered in 2025 with over 827 kilometers of new infrastructure. 38 additional projects are scheduled for 2026. Gross debt was 40 billion with net debt at 28 billion at the end of 2025. Net debt to adjusted EBITDA was approximately 2.2 times. ROIC was 11% and ROE was 17%.

CapEx Guidance

• CapEx plan updated for inflation and brought forward some projects from future cycles, mainly in water safety and metering upgrades.

Universalization Guidance

• As of February 2026, 84% of water targets, 74% of sewage collection, and 70% of sewage treatment for 2026 achieved.

Investment Guidance

• 38 additional projects scheduled for 2026, including key initiatives under Integrative program, water safety projects, and infrastructure expansion.

Tariff and Discount Guidance

• Continued reduction of discounts granted to larger customers, with most contracts revised, still some injunctions being fought to zero the gap.

Regulatory Risks

• Uncertainties regarding the outcome of injunctions related to large client discounts.
• Changes in regulatory requirements and their impact on the company's operations and investments.

Market Risks

• Fluctuations in market regulatory and economic conditions which may affect the company's performance.

Execution Risks

• Delays or issues in the execution of investment projects, which could impact universalization targets and financial performance.

Q: Bruno Amorim with Goldman Sachs asked about the potential upside to the 70 billion Total CapEx number, types of investments, and if 4Q CapEx was a one-off.

A: The 70 billion number is affected by inflation and advancing some future investments like water safety, metering upgrades. 4Q CapEx was a sign of acceleration, and they'll try to maintain or accelerate pace if feasible.

Q: Francisco Navarrete with Bradesco BBI asked about 4Q payroll line and strategic CapEx deployment.

A: Personnel expenses reflect full year revisions and centralization of operations. For strategic CapEx, inorganic opportunities are considered, with focus on large deals. For COPASA, regulatory framework and bidding process are key pillars, and they're pursuing smaller tuck-in opportunities in Sao Paulo and approach drainage as mid to long-term.

Q: Ricardo Bello with Safra asked about reduction of discounts to larger customers and water security project progress.

A: About 450 million reais of discounts removed in 2025, with some injunctions still being fought. For water safety, spent 700 million in 2025, expect 1.5 - 2 billion in 2026, with total pipeline close to 8 billion.