Company Overview - SJW (HTO) is headquartered in San Jose and operates in the Utilities sector, specifically in water supply [3] - The stock has experienced a price change of 5.55% since the beginning of the year [3] Dividend Information - SJW is currently paying a dividend of $0.42 per share, resulting in a dividend yield of 3.23%, which is higher than the Utility - Water Supply industry's yield of 2.47% and the S&P 500's yield of 1.53% [3] - The annualized dividend of $1.68 has increased by 5% from the previous year, with an average annual increase of 5.70% over the last five years [4] - The current payout ratio for SJW is 55%, indicating that it pays out 55% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for SJW's earnings in 2025 is $2.97 per share, reflecting a year-over-year earnings growth rate of 0.68% [5] Investment Appeal - SJW is considered an attractive dividend play and a compelling investment opportunity, currently holding a Zacks Rank of 2 (Buy) [7]

Core Viewpoint - SJW Group has rebranded itself as H2O America, reflecting its evolution into a national platform while maintaining a commitment to local communities [1][3][4] Company Overview - H2O America is a national investor-owned network of local water and wastewater utilities, emphasizing the delivery of clean, high-quality water [8][10] - The company serves over 1.6 million people through its regional utilities, including Connecticut Water, Maine Water, San Jose Water, and Texas Water [10] Rebranding Details - The new name and logo symbolize the company's mission to protect water as a precious resource, with "H2O" representing water's essential role and "America" indicating national reach [2][4][5] - The new Nasdaq ticker symbol is HTO, effective immediately, replacing the former symbol SJW [1][7] Leadership Insights - Eric W. Thornburg, the current CEO, highlighted the company's commitment to delivering high-quality water and exceptional service while creating long-term value for investors [3] - Andrew F. Walters, the CFO, will succeed Thornburg as CEO on July 1, 2025, emphasizing the importance of trust in providing drinking water [3] Future Direction - The rebranding is not just a name change but a reflection of the company's unified platform and commitment to local service [6] - H2O America plans to celebrate its new identity by ringing the Nasdaq Closing Bell on May 14, 2025 [7] Community Engagement - The company invests in critical infrastructure to strengthen water supply and remains actively engaged in local communities [9]

Group 1 - Friedrich Global Research focuses on identifying high-quality companies for stock investment, emphasizing free cash flow, efficient capital allocation, and superior management performance [1] - The founder of Bern Factor LLC has extensive experience in investment analysis, with a background in both quantitative and qualitative analysis, as well as technical analysis [2] - The founder's diverse career experience spans multiple sectors, providing a broad perspective on macroeconomics and detailed operational insights [2] Group 2 - The analyst has disclosed no current stock positions in the mentioned companies but may consider initiating a short position in SJW within the next 72 hours [3] - The analysis presented is based on objective observations from research, without any intention to provide specific investment advice [4] - Seeking Alpha emphasizes that past performance does not guarantee future results and that opinions expressed may not reflect the views of the platform as a whole [5]

First Quarter 2025 Financial Results Presentation On Today's Call Andrew Walters 2 2 Forward-Looking Statements Safe Harbor This presentation contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and ass ...

Financial Data and Key Metrics Changes - In Q1 2025, the company reported GAAP diluted EPS of $0.49 and adjusted diluted EPS of $0.50, reflecting a nearly 41% increase in net income compared to Q1 2024 [10][14] - Revenue for Q1 2025 was $167.6 million, a 12% increase from $149.4 million in Q1 2024, primarily due to rate increases in California and Connecticut [15][16] - GAAP net income was $16.6 million, a 41% increase year-over-year, while adjusted net income was $16.7 million, a 43% increase [15][16] Business Line Data and Key Metrics Changes - The company invested $70.8 million in water and wastewater utility infrastructure across four states in Q1 2025, on track to meet its 2025 capital plan [9][12] - The completion of successful general rate cases in California and Connecticut has reduced regulatory risk, with these states generating 90% of the company's water utility services net income in 2024 [11] Market Data and Key Metrics Changes - The new rates for San Jose Water effective January 1, 2025, support $450 million in capital expenditures over three years, with a total revenue increase of 9.4% [22] - In Connecticut, a $1.6 million revenue increase was authorized effective April 1, 2025, with a cumulative surcharge now at 4.9% [24][25] Company Strategy and Development Direction - The company is focused on a long-term growth strategy that includes a robust $2 billion capital plan and opportunistic acquisitions that benefit customers [12][60] - The company aims to maintain affordability while investing in infrastructure and enhancing operational efficiencies through technology advancements [31][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance for 2025, expecting to meet guidance of adjusted diluted EPS between $2.9 and $3 [14][45] - The leadership transition is progressing smoothly, with a focus on maintaining a strong culture of safety and service [35][68] Other Important Information - The company raised its credit outlook to stable, indicating a commitment to maintaining a strong credit rating [13] - The company is exploring a Water Quality and Treatment Adjustment mechanism to improve regulatory recovery processes [48][51] Q&A Session Summary Question: Can you frame where you're trending relative to guidance for the year? - Management indicated they are trending right on plan for the year and expect to meet the guidance of $2.9 to $3 [42][45] Question: What is the potential impact of the WQTA mechanism? - The WQTA is expected to streamline recovery for environmental improvements, enhancing regulatory capabilities for timely recovery [50][52] Question: Are there specific states in mind for potential acquisitions? - Management highlighted Texas as a prime area for continued acquisition activity, with additional opportunities in California, Connecticut, and Maine [58][60]

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from predictions, with quarterly results not necessarily indicative of full-year performance due to seasonality and other factors - The company identifies several factors that could cause actual results to differ from forward-looking statements, including:[10](index=10&type=chunk)[12](index=12&type=chunk) - Governmental policies and regulations (e.g., rates, PFAS) - Changes in water demand, weather conditions, and climate change impacts - Unexpected costs, contamination of water supplies, and catastrophic events - General economic conditions and the ability to obtain financing on favorable terms [PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2025 reveal significant increases in net income, operating revenue, total assets, and stockholders' equity, alongside a decrease in operating cash flow and a rise in cash from financing activities [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For the three months ended March 31, 2025, SJW Group reported operating revenue of $167.6 million and net income of $16.6 million, representing a 12.2% increase in revenue and a 41.5% increase in net income compared to the same period in 2024, with diluted earnings per share rising to $0.49 Q1 2025 vs. Q1 2024 Performance (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Operating Revenue** | $167,599 | $149,382 | +12.2% | | **Operating Income** | $35,896 | $27,913 | +28.6% | | **Net Income** | $16,551 | $11,699 | +41.5% | | **Diluted EPS** | $0.49 | $0.36 | +36.1% | | **Dividends per share** | $0.42 | $0.40 | +5.0% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to $4.73 billion from $4.66 billion at year-end 2024, primarily due to growth in net utility plant, while total stockholders' equity rose to $1.40 billion Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $4,728,810 | $4,658,309 | | Net Utility Plant | $3,548,249 | $3,488,611 | | Total Current Assets | $197,272 | $190,714 | | **Total Liabilities** | $3,331,473 | $3,291,335 | | Long-Term Debt | $1,691,475 | $1,706,904 | | **Total Stockholders' Equity** | $1,397,337 | $1,366,974 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash provided by operating activities decreased to $43.2 million, net cash used in investing activities increased to $84.8 million, and net cash provided by financing activities significantly rose to $54.2 million Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $43,181 | $51,216 | | **Net cash used in investing activities** | ($84,759) | ($74,273) | | **Net cash provided by financing activities** | $54,160 | $17,876 | | **Net change in cash and cash equivalents** | $12,582 | ($5,181) | | **Cash and cash equivalents, end of period** | $23,696 | $4,542 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's structure, revenue components, regulatory mechanisms, capitalization activities, and segment reporting, highlighting the seasonal nature of water revenue, the use of balancing accounts, and the ongoing 'at-the-market' equity issuance program - The company's primary business is conducted through its wholly owned subsidiaries: San Jose Water Company (SJWC), Connecticut Water Service (CTWS), and SJWTX, Inc. (The Texas Water Company)[29](index=29&type=chunk) - During Q1 2025, the company issued **495,900** shares of common stock under its 'at-the-market' equity distribution agreement, receiving **$26.5 million** in net proceeds[50](index=50&type=chunk) - The company is involved in litigation, including a class action lawsuit against its subsidiary CWC regarding water contaminants and as a plaintiff in a multi-district litigation against PFAS manufacturers, from which it is entitled to a portion of approved settlements[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) Segment Net Income (in thousands) | Segment | Q1 2025 Net Income | Q1 2024 Net Income | | :--- | :--- | :--- | | Water Utility Services | $18,953 | $14,781 | | Other Services | $310 | $1,334 | | Unallocated Corporate | ($2,712) | ($4,416) | | **Consolidated** | **$16,551** | **$11,699** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 41% increase in Q1 2025 net income primarily to rate increases, with operating revenue growing 12% to $167.6 million and operating expenses rising 8% to $131.7 million, while detailing capital expenditure plans of $451 million for 2025 and $1.9 billion over five years [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Consolidated net income for Q1 2025 increased by $4.9 million (41%) year-over-year to $16.6 million, driven by an $18.2 million (12%) increase in operating revenue, while operating expenses rose by $10.2 million (8%) due to higher water production costs Change in Operating Revenue (Q1 2025 vs. Q1 2024, in thousands) | Factor | Increase/(Decrease) | | :--- | :--- | | Rate increases (All other) | $11,892 | | Rate increases (Pass-through water costs) | $5,325 | | Service and other revenue | $1,992 | | Consumption changes | $1,035 | | Other Services | ($2,024) | | **Total Change** | **$18,217** | Change in Operating Expense (Q1 2025 vs. Q1 2024, in thousands) | Factor | Increase/(Decrease) | | :--- | :--- | | Water production expenses | $7,173 | | Administrative and general | $1,972 | | Maintenance | $812 | | Depreciation and amortization | ($88) | | **Total Change** | **$10,234** | - The increase in water production expenses was primarily due to higher average per-unit costs for purchased water and groundwater extraction, a decrease in available surface water, and higher production volume[100](index=100&type=chunk) [Regulation and Rates](index=24&type=section&id=Regulation%20and%20Rates) The company actively manages rate cases across its jurisdictions, implementing a 3.91% rate increase in California, receiving WICA and WRA approvals in Connecticut, awaiting SIC approval in Texas, and having rate adjustment applications pending in Maine - **California:** The CPUC approved a final decision for SJWC allowing for rate increases of **3.91%** in 2025, **2.55%** in 2026, and **2.98%** in 2027[105](index=105&type=chunk)[107](index=107&type=chunk) - **Connecticut:** CWC's Water Infrastructure Conservation Adjustment (WICA) was increased, bringing the cumulative surcharge to **4.90%**[108](index=108&type=chunk)[109](index=109&type=chunk) - **Texas:** TWC expects to receive final approval in Q2 2025 for its amended System Improvement Charge (SIC) to increase annual water revenue by **$3.9 million** and sewer revenue by **$195,000**[111](index=111&type=chunk) - **Maine:** MWC has an application pending to increase annual revenues by **$1.1 million (15.9%)** in its Camden Rockland division, with a decision expected in Q2 2025[112](index=112&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Cash flow from operations decreased to $43.2 million in Q1 2025, while the company plans capital expenditures of approximately $451 million in 2025 and $1.9 billion over the next five years, funded by operations, debt, and equity financing, with $197.4 million available under credit lines - Budgeted utility capital expenditures for 2025 are approximately **$451 million**[119](index=119&type=chunk)[120](index=120&type=chunk) - As of March 31, 2025, the company had **$152.6 million** in outstanding borrowings under its credit lines, with **$197.4 million** of unused capacity[125](index=125&type=chunk) - On March 17, 2025, Standard & Poor's revised the outlook for SJW Group, CTWS, and CWC from negative to **stable**[130](index=130&type=chunk) S&P Credit Ratings | Entity | Rating | Outlook | | :--- | :--- | :--- | | SJW Group | A- | Stable | | SJWC | A | Stable | | CTWS | A- | Stable | | CWC | A- | Stable | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) SJW Group is exposed to market risks primarily from changes in interest rates affecting variable-rate debt and future issuances, as well as fluctuations in pension plan asset values, and does not use derivative financial instruments - The company's primary market risks include changes in interest rates, pension plan asset values, and equity prices[132](index=132&type=chunk) - SJW Group has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk[133](index=133&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during Q1 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures are functioning effectively to provide reasonable assurance that required information is recorded, processed, and reported in a timely manner[134](index=134&type=chunk) - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, the company's internal controls[135](index=135&type=chunk) [PART II: OTHER INFORMATION](index=26&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, including a class action lawsuit against its subsidiary CWC regarding water contaminants and as a plaintiff in multi-district litigation against PFAS manufacturers, from which it is entitled to a portion of approved settlements - CWC, a subsidiary, is a defendant in a putative class action lawsuit in Connecticut alleging water provided contained contaminants[138](index=138&type=chunk) - SJWC and CWC are plaintiffs in a multi-district litigation (MDL) against PFAS manufacturers to recover costs for addressing contamination, and SJW Group is entitled to a portion of approved settlements[139](index=139&type=chunk)[140](index=140&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[141](index=141&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) On April 25, 2025, the Board of Directors declared a regular quarterly dividend of $0.42 per share of common stock, payable on June 2, 2025, to stockholders of record on May 12, 2025 - A quarterly dividend of **$0.42** per share was declared on April 25, 2025[145](index=145&type=chunk) - The dividend is payable on June 2, 2025, to stockholders of record as of May 12, 2025[145](index=145&type=chunk)

SJW (SJW) came out with quarterly earnings of $0.50 per share, beating the Zacks Consensus Estimate of $0.35 per share. This compares to earnings of $0.36 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 42.86%. A quarter ago, it was expected that this parent of San Jose Water Co. Would post earnings of $0.55 per share when it actually produced earnings of $0.74, delivering a surprise of 34.55%.Over the last four quarters, the ...

Financial Performance - Net income for Q1 2025 was $16.6 million, a 41% increase from $11.7 million in Q1 2024, with diluted EPS rising to $0.49, a 36% increase year-over-year [3]. - Adjusted net income for Q1 2025 was $16.7 million, a 43% increase compared to the prior year, with adjusted diluted EPS at $0.50, a 39% increase [3]. - Net income for Q1 2025 reached $16,551,000, up 41.5% from $11,699,000 in Q1 2024 [31]. - Diluted earnings per share increased to $0.49 in Q1 2025, compared to $0.36 in Q1 2024, reflecting a growth of 36.1% [31]. Revenue and Operating Performance - Operating revenue for Q1 2025 reached $167.6 million, up 12% from $149.4 million in the same quarter last year, driven by rate increases of $17.2 million and higher customer usage of $1.0 million [5]. - Operating revenue for Q1 2025 was $167,599,000, an increase of 12.2% compared to $149,382,000 in Q1 2024 [31]. - Operating expenses for Q1 2025 were $131.7 million, an 8% increase from $121.5 million in Q1 2024, primarily due to higher water production and administrative costs [5]. - Total operating expenses rose to $131,703,000 in Q1 2025, a 8.5% increase from $121,469,000 in Q1 2024 [31]. Capital Expenditures and Investments - Capital expenditures in Q1 2025 totaled $78.2 million, representing approximately 17% of the planned $473 million for the full year [6]. - Connecticut Water received a $1.6 million revenue increase effective April 1, 2025, for infrastructure investment projects [12]. - Maine Water anticipates a decision on a GRC application requesting a 15.9% increase in annual revenues, expected in Q2 2025 [14]. Dividends and Shareholder Returns - The company declared a quarterly cash dividend of $0.42 per share, with an expected annualized dividend of $1.68 per share for 2025, compared to $1.60 per share in 2024 [19]. Guidance and Future Projections - The company affirms 2025 adjusted diluted EPS guidance of $2.90 to $3.00, with long-term growth projected at 5% to 7% through 2029 [18]. Balance Sheet and Cash Flow - Cash and cash equivalents increased to $23,696,000 as of March 31, 2025, up from $11,114,000 at December 31, 2024 [34]. - Total assets as of March 31, 2025, were $4,728,810,000, an increase from $4,658,309,000 at December 31, 2024 [36]. - Stockholders' equity rose to $1,397,337,000 as of March 31, 2025, compared to $1,366,974,000 at December 31, 2024 [36]. - The current portion of long-term debt increased to $18,665,000 as of March 31, 2025, from $3,648,000 at December 31, 2024 [36]. Mergers and Acquisitions - The company incurred $254,000 in expenses related to merger and acquisition activities during Q1 2025 [39].

Core Insights - SJW Group reported strong financial results for Q1 2025, highlighting the effectiveness of its business strategy and local water operations [2][3][5] Financial Performance - Net income for Q1 2025 was $16.6 million, a 41% increase from $11.7 million in Q1 2024 [3] - Diluted EPS rose to $0.49, a 36% increase compared to $0.36 in the prior year [3][8] - Adjusted net income (non-GAAP) was $16.7 million, up 43% from the previous year, with adjusted diluted EPS at $0.50, a 39% increase [3][4] Revenue and Expenses - Operating revenue for Q1 2025 was $167.6 million, a 12% increase from $149.4 million in Q1 2024, driven by rate increases and higher customer usage [5] - Operating expenses increased by 8% to $131.7 million, primarily due to higher water production expenses and administrative costs [5][9] Capital Expenditures - The company invested $78.2 million in infrastructure during Q1 2025, representing approximately 17% of the planned $473 million capital expenditures for the year [6][8] Rate Activity and Regulatory Updates - New rates for San Jose Water took effect on January 1, 2025, resulting in an authorized revenue increase of $53.1 million over three years [10] - The Connecticut Public Utilities Regulatory Authority approved a $1.6 million revenue increase for Connecticut Water effective April 1, 2025 [14] Dividend Declaration - SJW Group declared a quarterly cash dividend of $0.42 per share, payable on June 2, 2025, with an expected annualized dividend of $1.68 per share for 2025 [23][24] Guidance - The company affirmed its 2025 adjusted diluted EPS guidance of $2.90 to $3.00, anticipating growth in the top half of the range through 2029 [21]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for SJW despite higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - SJW is expected to report quarterly earnings of $0.35 per share, reflecting a year-over-year decrease of 2.8%, while revenues are projected to be $155.37 million, an increase of 4% from the previous year [3]. - The consensus EPS estimate has been revised down by 2.68% over the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP reading indicates a likely earnings beat, particularly when combined with a strong Zacks Rank [8][10]. - For SJW, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +7.14% and a Zacks Rank of 2, suggesting a high probability of beating the consensus EPS estimate [11]. Historical Performance - SJW has a history of exceeding consensus EPS estimates, having beaten expectations in three out of the last four quarters, including a notable surprise of +34.55% in the last reported quarter [12][13]. Conclusion - SJW is positioned as a compelling candidate for an earnings beat, but investors should consider additional factors beyond earnings results when making investment decisions [14][16].