Financial Performance - H2O America's consolidated net income for Q3 2025 was $45,132, a 17% increase from $38,652 in Q3 2024[107]. - For the nine months ended September 30, 2025, consolidated net income reached $86,358, up approximately 22% from $71,047 in the same period of 2024[107]. - Total operating revenue for H2O America in Q3 2025 was $240,550, up 7% from $225,063 in Q3 2024; for the nine months, it was $606,404, a 10% increase from $550,619[108][109]. - H2O America generated cash flows from operations of $181,283 for the nine months ended September 30, 2025, an increase of $27,217 from the same period in 2024[151]. Revenue and Expenses - Operating revenue for Water Utility Services in Q3 2025 was $236,222, a 7% increase from $220,938 in Q3 2024; for the nine months, it was $596,052, a 10% increase from $537,899[108][109]. - Operating expenses for Water Utility Services in Q3 2025 were $172,178, a 6.9% increase from $161,929 in Q3 2024; for the nine months, they were $449,185, up 8.9% from $411,959[111]. - Water production expenses increased by $2,614 (1%) in Q3 2025 compared to Q3 2024, and by $20,186 (4%) for the nine months[111]. - The effective consolidated income tax rates were 11% for Q3 2025, compared to 5% for Q3 2024, reflecting a higher pre-tax income in 2025[130]. Capital Expenditures and Investments - Water Utility Services' estimated capital expenditures for 2025 are approximately $473,000, with 74% or $351,069 already invested as of September 30, 2025[155]. - H2O America expects to incur approximately $1,900,000 in capital expenditures over the next five years, including $300,000 for PFAS treatment[156]. - The company is set to acquire regulated systems from Quadvest L.P. for $483,600 and systems from Quadvest Wholesale LLC for $56,400, enhancing operational scale in Houston, TX[102]. Rate Changes and Charges - SJWC filed for a rate increase of $21,318 or 3.91% effective January 1, 2025, as part of its General Rate Case[132]. - CWC's cumulative Water Infrastructure Conservation Adjustment (WICA) surcharge as of April 1, 2025, is 4.90%, collecting $6,000 annually[138]. - TWC's System Improvement Charge (SIC) increased annual water revenue by $3,915 and annual sewer revenue by $195, effective May 15, 2025[145]. - SJWC's groundwater extraction charge increased by 10% effective July 1, 2025, following a previous increase of approximately 13% in 2024[125]. - MWC's approved rate increase of $865 represents a 13.00% rise in annual revenues for the Camden Rockland division, effective July 1, 2025[148]. Water Supply and Production - The company serves approximately 407,000 water and wastewater service connections, serving a combined population of over 1.6 million people[96]. - Water supply conditions in California improved, with the State Water Project allocation increasing from 35% to 50% during 2025[113]. - As of September 30, 2025, SJWC's Lake Elsman was at 73% capacity with 1.5 billion gallons of water, which is approximately 168.1% of the five-year seasonal average[114]. - SJWC's Montevina Water Treatment Plant treated 1.8 billion gallons of water through Q3 2025, representing 103.4% of the five-year average[114]. - The total water supply for SJWC consists of 60% surface water and 40% from wells, with existing agreements to supplement supply until 2058[116]. - TWC expects to meet customer demand for the remainder of 2025 despite ongoing drought conditions, supported by a diversified water supply portfolio[118]. Stock and Debt - H2O America issued and sold 2,076,352 shares of common stock for net proceeds of $108,138 under the Equity Distribution Agreement for the nine months ended September 30, 2025[168]. - The average cost of borrowing on lines of credit decreased to 5.42% for the nine months ended September 30, 2025, compared to 6.53% in the same period in 2024[163]. - MWC issued a promissory note for $25,000 at a fixed interest rate of 6.70%, due on July 20, 2055[166]. - TWC issued a promissory note for $40,000 at a fixed interest rate of 6.68%, due on September 1, 2055[167]. Outlook and Ratings - Standard & Poor's revised the outlook for H2O America from stable to negative following the announcement of the Quadvest acquisition[170].

EXHIBIT 99.1 H2O America Announces Third Quarter 2025 Financial Results SAN JOSE, Calif. — October 27, 2025 — H2O America (NASDAQ: HTO) today reported financial results for the third quarter of 2025. "This quarter's performance reflects our team's continued focus on delivering sustainable growth and long-term value," said chief executive officer, Andrew F. Walters. "We made meaningful progress on our strategic priorities, including advancing the acquisition of Quadvest and reaching an agreement to acquire t ...

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties, and interim results are not indicative of full-year performance - The report contains forward-looking statements subject to risks, uncertainties, and assumptions that are difficult to predict. Results for a quarter are not indicative of full-year results due to seasonality and other factors[9](index=9&type=chunk)[11](index=11&type=chunk) - In May 2025, the Company changed its corporate name from SJW Group to H2O America, and its trading symbol from SJW to HTO on the Nasdaq Global Select Market[12](index=12&type=chunk)[29](index=29&type=chunk) - Key risks include those associated with the proposed acquisition of Quadvest, governmental policies and regulations, changes in water demand, weather conditions, climate change impacts, unexpected costs, and financing terms[13](index=13&type=chunk) [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) This section presents H2O America's unaudited condensed consolidated financial statements, including comprehensive income, balance sheets, equity changes, cash flows, and detailed notes on accounting policies and regulatory matters [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | % Change (YoY) | | :--------------------------------- | :------------------ | :------------------ | :----------- | :------------- | | Operating revenue | $198,255 | $176,174 | $22,081 | 12.53% | | Total operating expense | $154,390 | $135,604 | $18,786 | 13.85% | | Operating income | $43,865 | $40,570 | $3,295 | 8.12% | | Income before income taxes | $29,345 | $24,420 | $4,925 | 20.17% | | Provision for income taxes | $4,670 | $3,724 | $946 | 25.40% | | Net income | $24,675 | $20,696 | $3,979 | 19.22% | | Basic EPS | $0.71 | $0.64 | $0.07 | 10.94% | | Diluted EPS | $0.71 | $0.64 | $0.07 | 10.94% | | Dividends per share | $0.42 | $0.40 | $0.02 | 5.00% | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | % Change (YoY) | | :--------------------------------- | :------------------ | :------------------ | :----------- | :------------- | | Operating revenue | $365,854 | $325,556 | $40,298 | 12.38% | | Total operating expense | $286,093 | $257,073 | $29,020 | 11.30% | | Operating income | $79,761 | $68,483 | $11,278 | 16.47% | | Income before income taxes | $49,367 | $38,350 | $11,017 | 28.73% | | Provision for income taxes | $8,141 | $5,955 | $2,186 | 36.71% | | Net income | $41,226 | $32,395 | $8,831 | 27.26% | | Basic EPS | $1.20 | $1.00 | $0.20 | 20.00% | | Diluted EPS | $1.20 | $1.00 | $0.20 | 20.00% | | Dividends per share | $0.84 | $0.80 | $0.04 | 5.00% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (as of June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------- | :--------------------------- | :----------------------------- | :-------------------- | | **Assets** | | | | | Total utility plant (net) | $3,654,396 | $3,488,611 | $165,785 | | Total current assets | $200,450 | $190,714 | $9,736 | | Total other assets | $990,865 | $977,768 | $13,097 | | **Total assets** | **$4,846,926** | **$4,658,309** | **$188,617** | | **Capitalization and Liabilities** | | | | | Total stockholders' equity | $1,465,971 | $1,366,974 | $98,997 | | Long-term debt, less current portion | $1,692,212 | $1,706,904 | $(14,692) | | Total capitalization | $3,158,183 | $3,073,878 | $84,305 | | Total current liabilities | $314,234 | $261,173 | $53,061 | | Deferred income taxes | $286,031 | $276,043 | $9,988 | | Total capitalization and liabilities | **$4,846,926** | **$4,658,309** | **$188,617** | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric | December 31, 2024 (in thousands) | Net Income (in thousands) | Stock-based Compensation (in thousands) | Common Stock Issuance (net) (in thousands) | Dividends Paid (in thousands) | June 30, 2025 (in thousands) | | :--------------------------------- | :------------------------------- | :------------------------ | :----------------------------------- | :--------------------------------------- | :---------------------------- | :----------------------------- | | Common Stock (shares) | 33,629,169 | — | 48,291 | 1,583,493 | — | 35,287,080 | | Common Stock (amount) | $34 | — | — | $1 | — | $35 | | Additional Paid-in Capital | $827,796 | — | $2,674 | $83,713 | — | $914,330 | | Retained Earnings | $537,184 | $41,226 | $(18) | — | $(28,746) | $549,646 | | Accumulated Other Comprehensive Income | $1,960 | — | — | — | — | $1,960 | | **Total Stockholders' Equity** | **$1,366,974** | **$41,226** | **$2,656** | **$83,714** | **$(28,746)** | **$1,465,971** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :-------------------------- | | Net cash provided by operating activities | $104,017 | $100,532 | $3,485 | | Net cash used in investing activities | $(217,874) | $(130,982) | $(86,892) | | Net cash provided by financing activities | $122,592 | $43,531 | $79,061 | | Net change in cash and cash equivalents | $8,735 | $13,081 | $(4,346) | | Cash and cash equivalents, end of period | $19,849 | $22,804 | $(2,955) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. General](index=11&type=section&id=Note%201.%20General) This note provides general company information, including its recent name change, operational structure, seasonality of water sales, fair value of debt, and new accounting standard evaluations - H2O America changed its corporate name from SJW Group to H2O America and its trading symbol from SJW to HTO in May 2025, operating through wholly-owned subsidiaries including San Jose Water Company (SJWC), SJWTX Holdings, Inc., and SJWNE LLC[29](index=29&type=chunk) - Water sales are seasonal, with higher revenue in warm, dry summer months and lower in winter months, making interim results not indicative of full-year performance[30](index=30&type=chunk)[100](index=100&type=chunk) Revenue Components (Three Months Ended June 30) | Revenue Component | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | | Revenue from contracts with customers | $197,777 | $173,106 | | Alternative revenue programs, net | $1,759 | $1,314 | | Other balancing and memorandum accounts and regulatory mechanisms, net | $(2,288) | $977 | | Rental income | $1,007 | $777 | | **Total Operating Revenue** | **$198,255** | **$176,174** | Revenue Components (Six Months Ended June 30) | Revenue Component | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | | Revenue from contracts with customers | $362,640 | $323,114 | | Alternative revenue programs, net | $2,351 | $(523) | | Other balancing and memorandum accounts and regulatory mechanisms, net | $(988) | $413 | | Rental income | $1,851 | $2,552 | | **Total Operating Revenue** | **$365,854** | **$325,556** | - The fair value of long-term debt was **$1,513,238 thousand** as of June 30, 2025, up from **$1,490,024 thousand** as of December 31, 2024, determined using discounted cash flow analysis[35](index=35&type=chunk) - H2O America is evaluating the requirements of new accounting standards ASU 2023-09 (Improvements to Income Tax Disclosures, effective December 31, 2025) and ASU 2024-03 (Disaggregation of Income Statement Expenses, effective December 31, 2027)[38](index=38&type=chunk) [Note 2. Regulatory Matters](index=14&type=section&id=Note%202.%20Regulatory%20Matters) This note details the company's regulatory assets and liabilities, including balancing accounts, decoupling mechanisms, and the treatment of PFAS legal settlement proceeds Regulatory Assets and Liabilities (as of June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------------- | :--------------------------- | :----------------------------- | | Total regulatory assets | $245,276 | $242,227 | | Less: current regulatory assets | $12,626 | $18,172 | | **Total regulatory assets, less current portion** | **$232,650** | **$224,055** | | Total regulatory liabilities | $508,982 | $484,841 | | Less: current regulatory liabilities | $2 | $1,122 | | **Total regulatory liabilities, less current portion** | **$508,980** | **$483,719** | - SJWC uses balancing accounts (e.g., FCBA, MWRAM, WCMA) to track under-collection or over-collection of expenses and revenues, and memorandum accounts for catastrophic events, water quality, energy efficiency, and water conservation[48](index=48&type=chunk)[49](index=49&type=chunk) - A **$15,792 thousand** recovery from balancing and memorandum accounts was approved by CPUC effective January 1, 2025[49](index=49&type=chunk) - CWC utilizes a Water Rate Adjustment (WRA) mechanism, a decoupling mechanism authorized by PURA, to mitigate demand-related risks and reconcile actual revenues with allowed revenues[50](index=50&type=chunk) - A regulatory liability for excess deferred income taxes resulted from the Tax Cuts and Jobs Act of 2017, with benefits flowing back to customers through amortization[52](index=52&type=chunk) - PFAS legal settlement proceeds received by SJWC and CWC are recorded as a regulatory liability, intended to offset future costs or be returned to customers through future rates, subject to regulatory approval[52](index=52&type=chunk) [Note 3. Capitalization](index=15&type=section&id=Note%203.%20Capitalization) This note outlines H2O America's equity distribution agreement and common stock issuance activities - H2O America has an equity distribution agreement to sell up to **$200,000 thousand** of common stock in 'at-the-market' offerings[51](index=51&type=chunk) - For the six months ended June 30, 2025, the company issued **1,583,493 shares**, receiving **$83,713 thousand** in net proceeds[51](index=51&type=chunk) - As of June 30, 2025, **$95,017 thousand** of aggregate gross sales price of shares remained to be issued[51](index=51&type=chunk) [Note 4. Lines of Credit and Long-Term Liabilities](index=16&type=section&id=Note%204.%20Lines%20of%20Credit%20and%20Long-Term%20Liabilities) This note details the company's short-term borrowings, unused credit lines, and recent credit agreement extensions - The weighted average interest rate on short-term borrowings outstanding at June 30, 2025, was **5.43%**, down from **6.08%** at December 31, 2024[54](index=54&type=chunk) - As of June 30, 2025, the unused portion of lines of credit was **$199,160 thousand**[54](index=54&type=chunk) - CTWS extended its **$40,000 thousand** credit agreement maturity to August 13, 2025, and SJWC entered a new **$10,000 thousand** credit agreement maturing June 11, 2026[54](index=54&type=chunk)[55](index=55&type=chunk) [Note 5. Income Taxes](index=16&type=section&id=Note%205.%20Income%20Taxes) This note presents the company's income tax expense and effective rates, along with unrecognized tax benefits Income Tax Expense and Effective Rates | Period | Income Tax Expense (in thousands) | Effective Consolidated Income Tax Rate | | :--------------------------------- | :-------------------------------- | :------------------------------------- | | Three months ended June 30, 2025 | $4,670 | 16% | | Three months ended June 30, 2024 | $3,724 | 15% | | Six months ended June 30, 2025 | $8,141 | 16% | | Six months ended June 30, 2024 | $5,955 | 16% | - Unrecognized tax benefits (before state tax deductions, excluding interest and penalties) were **$3,896 thousand** as of June 30, 2025, up from **$3,707 thousand** at December 31, 2024[57](index=57&type=chunk) - No significant changes in uncertain tax positions are expected over the next 12 months[57](index=57&type=chunk) [Note 6. Commitments and Contingencies](index=16&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note details the company's involvement in legal proceedings, including a class action lawsuit and multi-district litigation against PFAS manufacturers, and related settlement proceeds - CWC is a defendant in a putative class action lawsuit alleging water contamination, which it intends to vigorously defend[59](index=59&type=chunk)[164](index=164&type=chunk) - SJWC and CWC are plaintiffs in a Multi-District Litigation (MDL) lawsuit against PFAS manufacturers for damages and reimbursement of costs[60](index=60&type=chunk)[165](index=165&type=chunk) - Settlements with Chemours, Corteva, DuPont, 3M, Tyco Fire Products, and BASF have been approved[61](index=61&type=chunk)[166](index=166&type=chunk) - During Q2 2025, the Company received **$6,443 thousand** in cash proceeds from a 3M PFAS legal settlement, allocated to SJWC (**$4,420k**), CWC (**$1,906k**), and MWC (**$117k**)[62](index=62&type=chunk)[167](index=167&type=chunk) - These proceeds are recorded as a regulatory liability, subject to regulatory approval, to offset future costs or be refunded to customers[62](index=62&type=chunk)[167](index=167&type=chunk) - Additional cash proceeds from 3M and other pending settlements (DuPont, Tyco, BASF) are expected in 2025 and subsequent years, but the amount is not estimable as of the filing date[63](index=63&type=chunk)[64](index=64&type=chunk)[168](index=168&type=chunk) [Note 7. Benefit Plans](index=17&type=section&id=Note%207.%20Benefit%20Plans) This note describes H2O America's defined benefit pension plans and postretirement health care benefits, including net periodic benefit costs and expected contributions - H2O America maintains noncontributory defined benefit pension plans and employer-sponsored postretirement health care and life insurance benefits for eligible employees[65](index=65&type=chunk)[66](index=66&type=chunk) Net Periodic Benefit Costs (Three Months Ended June 30) | Component | Pension Benefits 2025 (in thousands) | Pension Benefits 2024 (in thousands) | Other Benefits 2025 (in thousands) | Other Benefits 2024 (in thousands) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Service cost | $1,644 | $1,666 | $156 | $166 | | Interest cost | $3,901 | $3,613 | $337 | $295 | | Expected return on assets | $(4,944) | $(4,463) | $(295) | $(267) | | Amortization of actuarial (gain) loss | $(458) | $(18) | $(214) | $(161) | | Amortization of prior service cost | $4 | $4 | — | — | | **Total** | **$147** | **$802** | **$(16)** | **$33** | Net Periodic Benefit Costs (Six Months Ended June 30) | Component | Pension Benefits 2025 (in thousands) | Pension Benefits 2024 (in thousands) | Other Benefits 2025 (in thousands) | Other Benefits 2024 (in thousands) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Service cost | $3,287 | $3,331 | $312 | $332 | | Interest cost | $7,801 | $7,226 | $674 | $591 | | Expected return on assets | $(9,887) | $(8,926) | $(590) | $(534) | | Amortization of actuarial (gain) loss | $(915) | $(35) | $(428) | $(322) | | Amortization of prior service cost | $7 | $7 | — | — | | **Total** | **$293** | **$1,603** | **$(32)** | **$67** | - H2O America expects to contribute up to **$6,113 thousand** to pension and other postretirement plans in 2025, having already contributed **$2,105 thousand** for the six months ended June 30, 2025[67](index=67&type=chunk) [Note 8. Equity Plans](index=18&type=section&id=Note%208.%20Equity%20Plans) This note details the company's equity plans, including shares issuable upon vesting of restricted stock units and available for future awards, along with related compensation costs - As of June 30, 2025, **230,275 shares** are issuable upon vesting of outstanding restricted stock units, and **913,976 additional shares** are available for award issuances under long-term incentive plans[68](index=68&type=chunk) Compensation Costs Charged to Income (Three and Six Months Ended June 30) | Award Type | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | ESPP | $100 | — | $189 | $195 | | Restricted stock and deferred restricted stock | $1,364 | $1,275 | $2,485 | $2,618 | | **Total compensation costs** | **$1,464** | **$1,275** | **$2,674** | **$2,813** | | ESPP proceeds | — | — | $1,116 | $1,101 | - Total unrecognized compensation costs for restricted and deferred restricted stock plans were **$8,405 thousand** as of June 30, 2025, expected to be recognized over a weighted average period of **1.93 years**[72](index=72&type=chunk) [Note 9. Segment Reporting](index=19&type=section&id=Note%209.%20Segment%20Reporting) This note provides financial information by segment, distinguishing between Water Utility Services and Other Services, including operating revenue, net income, capital expenditures, and assets - H2O America operates a single reportable segment, 'Water Utility Services,' which includes SJWC, CWC, TWC, MWC, and Acequia[74](index=74&type=chunk) - 'Other Services' includes non-utility activities like property management and contract water/sewer operations[74](index=74&type=chunk) Segment Operating Revenue (Three Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $194,674 | $172,046 | | Other Services | $3,581 | $4,128 | | **Consolidated Total** | **$198,255** | **$176,174** | Segment Operating Revenue (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $359,830 | $316,961 | | Other Services | $6,024 | $8,595 | | **Consolidated Total** | **$365,854** | **$325,556** | Segment Net Income (Loss) (Three Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $28,970 | $24,005 | | Other Services | $771 | $249 | | Unallocated Corporate | $(5,066) | $(3,558) | | **Consolidated Net Income** | **$24,675** | **$20,696** | Segment Net Income (Loss) (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $47,923 | $38,786 | | Other Services | $1,081 | $1,583 | | Unallocated Corporate | $(7,778) | $(7,974) | | **Consolidated Net Income** | **$41,226** | **$32,395** | Segment Capital Expenditures (Three and Six Months Ended June 30) | Period | Water Utility Services (in thousands) | Other Services (in thousands) | Unallocated Corporate (in thousands) | Consolidated Total (in thousands) | | :--------------------------------- | :------------------------------------ | :---------------------------- | :----------------------------------- | :-------------------------------- | | Three months ended June 30, 2025 | $132,058 | — | — | $132,058 | | Three months ended June 30, 2024 | $96,636 | — | — | $96,636 | | Six months ended June 30, 2025 | $216,403 | — | — | $216,403 | | Six months ended June 30, 2024 | $170,147 | — | — | $170,147 | Segment Assets (as of June 30, 2025 vs. December 31, 2024) | Segment | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :--------------------------- | :----------------------------- | | Water Utility Services | $4,728,012 | $4,567,182 | | Other Services | $27,994 | $25,053 | | Unallocated Corporate | $90,920 | $66,074 | | **Total assets** | **$4,846,926** | **$4,658,309** | [Note 10. Subsequent Events](index=22&type=section&id=Note%2010.%20Subsequent%20Events) This note describes significant events occurring after the reporting period, including a major acquisition agreement, debt issuance, credit agreement termination, and new legislation - On July 7, 2025, H2O America, through its indirect subsidiary TWC, entered into an Asset Purchase Agreement to acquire Quadvest Retail's water and sewer utility business for a base amount of **$483,600 thousand**[83](index=83&type=chunk)[84](index=84&type=chunk) - Concurrently, TWOS agreed to acquire Quadvest Wholesale's wholesale water and sewer business for a base amount of **$56,400 thousand**[84](index=84&type=chunk) - Both transactions are subject to closing conditions, including regulatory approvals[84](index=84&type=chunk) - On July 10, 2025, MWC issued a **$25,000 thousand** unsecured promissory note at a fixed interest rate of **6.70%**, due July 20, 2055, following MPUC approval[85](index=85&type=chunk) - On July 11, 2025, CTWS repaid and terminated a **$40,000 thousand** credit agreement[86](index=86&type=chunk) - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and the company is evaluating its impact on income tax provisions, with changes to be recognized in Q3 2025[87](index=87&type=chunk)[123](index=123&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on H2O America's financial condition and results of operations, covering business strategy, accounting estimates, operating results, regulatory developments, and liquidity [General](index=23&type=section&id=General) This section provides an overview of H2O America's business as a holding company primarily involved in public utilities providing water and wastewater services through its subsidiaries - H2O America is a holding company primarily involved in public utilities providing water and wastewater services through subsidiaries SJWC, CWC, MWC, and TWC, serving approximately **407,000 connections** and over **1.6 million people** in California, Connecticut, Maine, and Texas[91](index=91&type=chunk) - The 'Water Utility Services' segment includes regulated water utility operations, while 'Other Services' encompasses non-tariffed operations like contract water/sewer services and property management[92](index=92&type=chunk)[93](index=93&type=chunk) [Business Strategy for Water Utility Services](index=23&type=section&id=Business%20Strategy%20for%20Water%20Utility%20Services) This section outlines H2O America's strategic focus on investing in regulated water utility operations, providing related non-tariffed services, and expanding through acquisitions - H2O America's business strategy focuses on three areas: investing in regional regulated water utility operations, providing regional non-tariffed water utility-related services, and offering out-of-region water and utility-related services[94](index=94&type=chunk) - The company is set to acquire Quadvest's regulated systems for **$483,600 thousand** and wholesale systems for **$56,400 thousand**, aiming to expand operational scale and market exposure in Texas[96](index=96&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) This section confirms that there have been no changes to critical accounting estimates or significant accounting policies during the reported periods - There have been no changes to critical accounting estimates or significant accounting policies during the three and six months ended June 30, 2025[98](index=98&type=chunk) [New Accounting Pronouncements](index=24&type=section&id=New%20Accounting%20Pronouncements) This section refers to Note 1 for a discussion of new accounting pronouncements currently being evaluated by the company - Refer to Note 1 for a discussion of new accounting pronouncements, including ASU 2023-09 and ASU 2024-03, which the company is currently evaluating[99](index=99&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) [Overview](index=24&type=section&id=Overview) This overview summarizes the consolidated net income increase for the three and six months ended June 30, 2025, driven by rate increases and partially offset by higher operating expenses - Consolidated net income increased by **$3,979 thousand (19%)** to **$24,675 thousand** for the three months ended June 30, 2025, and by **$8,831 thousand (27%)** to **$41,226 thousand** for the six months ended June 30, 2025[101](index=101&type=chunk) - This increase was primarily due to rate increases in California and Connecticut, partially offset by higher water production and other operating expenses[101](index=101&type=chunk) [Operating Revenue](index=24&type=section&id=Operating%20Revenue) This section details the operating revenue by segment and the factors contributing to changes in consolidated operating revenue for the three and six months ended June 30 Operating Revenue by Segment (Three Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $194,674 | $172,046 | | Other Services | $3,581 | $4,128 | | **Total operating revenue** | **$198,255** | **$176,174** | Operating Revenue by Segment (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $359,830 | $316,961 | | Other Services | $6,024 | $8,595 | | **Total operating revenue** | **$365,854** | **$325,556** | Change in Consolidated Operating Revenue (2025 vs. 2024) | Factor | Three Months Ended June 30 (Increase/(decrease) in thousands) | Six Months Ended June 30 (Increase/(decrease) in thousands) | | :--------------------------------- | :---------------------------------------------------------- | :-------------------------------------------------------- | | Consumption changes | $4,885 | $5,870 | | Increase in customers | $331 | $559 | | Rate increases (pass-through water costs) | $6,675 | $12,000 | | Rate increases (all other) | $10,935 | $22,827 | | Regulatory mechanisms | $(2,255) | $(2,435) | | Service and other revenue | $(546) | $(2,571) | | Other Services | $2,056 | $4,048 | | **Total change in operating revenue** | **$22,081** | **$40,298** | [Operating Expense](index=25&type=section&id=Operating%20Expense) This section presents operating expenses by segment and details the factors contributing to changes in consolidated operating expenses for the three and six months ended June 30 Operating Expense by Segment (Three Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $148,027 | $132,249 | | Other Services | $2,565 | $2,839 | | Unallocated Corporate | $3,798 | $516 | | **Total operating expense** | **$154,390** | **$135,604** | Operating Expense by Segment (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | | :-------------------- | :------------------ | :------------------ | | Water Utility Services | $277,007 | $250,030 | | Other Services | $4,571 | $5,175 | | Unallocated Corporate | $4,515 | $1,868 | | **Total operating expense** | **$286,093** | **$257,073** | Change in Consolidated Operating Expense (2025 vs. 2024) | Factor | Three Months Ended June 30 (Increase/(decrease) in thousands) | Six Months Ended June 30 (Increase/(decrease) in thousands) | | :--------------------------------- | :---------------------------------------------------------- | :-------------------------------------------------------- | | Water production expenses | $10,399 | $17,572 | | Administrative and general | $8,327 | $10,299 | | Maintenance | $(411) | $401 | | Property taxes and other non-income taxes | $87 | $452 | | Depreciation and amortization | $384 | $296 | | **Total change in operating expense** | **$18,786** | **$29,020** | [Sources of Water Supply](index=26&type=section&id=Sources%20of%20Water%20Supply) This section details the various sources of water supply for the company's subsidiaries and changes in supply volumes for the three and six months ended June 30 - SJWC's water supply consists of groundwater (**40-50%**), purchased water (**40-50%**), and surface water (**6-8%** in normal years)[106](index=106&type=chunk) - Purchased water and groundwater extraction charges are tracked in the Full Cost Balancing Account (FCBA) for cost recovery[106](index=106&type=chunk) - California water conditions remained positive in H1 2025, with State Water Project allocation increasing to **50%** and Central Valley Project allocation to **80%**[107](index=107&type=chunk)[108](index=108&type=chunk) - SJWC's Lake Elsman was at **93.5% capacity**, **156.5%** of the five-year seasonal average[108](index=108&type=chunk) - CWC's water supply is approximately **60%** surface water and **40%** wells, supplemented by long-term agreements with regional water authorities[110](index=110&type=chunk) - TWC's supply includes groundwater from wells and purchased treated/untreated raw water from local agencies, with long-term take-or-pay agreements with GBRA[111](index=111&type=chunk) - Despite drought, TWC expects to meet demand in 2025[112](index=112&type=chunk) - MWC's water sources are approximately **90%** surface water and **10%** wells, supplemented by a supply agreement with Kennebec Water District[113](index=113&type=chunk) Change in Sources of Water Supply (Three Months Ended June 30) | Source | 2025 (billion gallons) | 2024 (billion gallons) | Increase/(decrease) (billion gallons) | | :--------------- | :--------------------- | :--------------------- | :------------------------------------ | | Purchased water | 4.7 | 4.4 | 0.3 | | Groundwater | 5.2 | 4.9 | 0.3 | | Surface water | 2.8 | 3.1 | (0.3) | | Reclaimed water | 0.3 | 0.2 | 0.1 | | **Total** | **13.0** | **12.6** | **0.4** | Change in Sources of Water Supply (Six Months Ended June 30) | Source | 2025 (billion gallons) | 2024 (billion gallons) | Increase/(decrease) (billion gallons) | | :--------------- | :--------------------- | :--------------------- | :------------------------------------ | | Purchased water | 7.5 | 6.5 | 1.0 | | Groundwater | 9.4 | 8.8 | 0.6 | | Surface water | 5.4 | 6.1 | (0.7) | | Reclaimed water | 0.3 | 0.2 | 0.1 | | **Total** | **22.6** | **21.6** | **1.0** | [Water Production Expenses](index=27&type=section&id=Water%20Production%20Expenses) This section explains the increase in water production expenses, attributing it to higher per-unit costs, increased production volume, and decreased surface water availability - Water production expenses increased by **$10,399 thousand** (three months) and **$17,572 thousand** (six months) primarily due to higher average per unit costs for purchased water and groundwater extraction, increased production volume, and decreased surface water availability, partially offset by regulatory adjustments[115](index=115&type=chunk)[116](index=116&type=chunk) - Valley Water increased the unit price of purchased water by approximately **12%** and groundwater extraction charge by **13%** for SJWC effective July 1, 2024, with further increases of **9%** and **10%** respectively, effective July 1, 2025[117](index=117&type=chunk) [Other Operating Expenses](index=27&type=section&id=Other%20Operating%20Expenses) This section details the increase in other operating expenses, primarily due to higher administrative and general expenses, including customer credit losses, acquisition costs, and insurance - Operating expenses (excluding water production) increased by **$8,387 thousand** (three months) and **$11,448 thousand** (six months) due to higher administrative and general expenses, including customer credit losses (following prior year's payment program funds), acquisition costs, insurance, and contracted work[118](index=118&type=chunk)[119](index=119&type=chunk) [Other (Expense) Income](index=27&type=section&id=Other%20(Expense)%20Income) This section explains the changes in other (expense) income, primarily driven by increased pension non-service credit, prior year real estate sales, and interest expense - The change in other (expense) income for the three months was mainly due to increased pension non-service credit and a prior year loss on real estate sales[120](index=120&type=chunk) - For the six months, it was due to lower income from other activities and increased interest expense, offset by higher pension non-service credit and prior year real estate sale loss[121](index=121&type=chunk) [Provision for Income Taxes](index=27&type=section&id=Provision%20for%20Income%20Taxes) This section discusses the increase in income tax expense due to higher pre-tax income and the company's evaluation of new tax legislation - Income tax expense increased by **$946 thousand** (three months) and **$2,186 thousand** (six months) primarily due to higher pre-tax income[122](index=122&type=chunk) - Effective consolidated income tax rates were **16%** (2025) vs. **15%** (2024) for three months, and **16%** for both periods for six months[122](index=122&type=chunk) - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, on its income tax provision, with changes to be recognized in Q3 2025[123](index=123&type=chunk) [Regulation and Rates](index=28&type=section&id=Regulation%20and%20Rates) [California Regulatory Affairs](index=28&type=section&id=California%20Regulatory%20Affairs) This section details CPUC approvals for SJWC's General Rate Case, including authorized rate increases, capital budget, and recovery from balancing accounts, along with recent advice letter approvals - CPUC approved SJWC's General Rate Case Decision No. 24-12-077, authorizing rate increases of **$21,318 thousand (3.91%)** in 2025, **$14,432 thousand (2.55%)** in 2026, and **$17,373 thousand (2.98%)** in 2027[125](index=125&type=chunk) - The approval also included a **$450,000 thousand** three-year capital budget and **$15,792 thousand** recovery from balancing/memorandum accounts[125](index=125&type=chunk) - SJWC received approval for Advice Letter No. 613 to implement new water rates and recover balancing/memorandum accounts effective January 1, 2025[127](index=127&type=chunk) - SJWC filed and received approval for Advice Letter No. 616 to increase revenue by **$22,536 thousand (4.00%)** to offset increased purchased water and groundwater extraction charges, effective July 1, 2025[128](index=128&type=chunk) - SJWC filed and received approval for Advice Letter No. 617 to increase revenue by **$6,818 thousand (1.16%)** for Advanced Metering Infrastructure (AMI) plant additions, effective July 1, 2025[129](index=129&type=chunk) - SJWC's Advice Letter No. 618 to establish the Water Contamination Litigation Memorandum Account (WCLMA) was approved in July 2025, effective June 24, 2025[130](index=130&type=chunk) [Connecticut Regulatory Affairs](index=28&type=section&id=Connecticut%20Regulatory%20Affairs) This section outlines PURA approvals for CWC's Water Infrastructure Conservation Adjustment (WICA), Water Rate Adjustment (WRA), Drinking Water State Revolving Fund Loans, and new legislation for emerging contaminants - PURA approved CWC's Water Infrastructure Conservation Adjustment (WICA) increase of **$1,600 thousand** in annualized revenues for **$15,700 thousand** in completed projects, resulting in a cumulative WICA surcharge of **4.90%** effective April 1, 2025[131](index=131&type=chunk) - CWC's 2024 Water Rate Adjustment (WRA) surcharge of **3.62%** was approved by PURA, effective for 12 months beginning April 1, 2025[132](index=132&type=chunk) - PURA approved CWC's request to issue **$19,402 thousand** in Drinking Water State Revolving Fund Loans for three projects, including system interconnection, raw water treatment, and a Lead Service Line Identification Program[133](index=133&type=chunk) - The Connecticut General Assembly approved Public Act No. 25-142, allowing CWC to surcharge customers for investments related to emerging contaminants like PFAS[134](index=134&type=chunk) - CWC submitted its Water Quality and Treatment Adjustment (WQTA) Assessment Report on July 2, 2025[135](index=135&type=chunk) [Texas Regulatory Affairs](index=29&type=section&id=Texas%20Regulatory%20Affairs) This section details PUCT approvals for TWC's System Improvement Charge (SIC) applications, resulting in increased water and sewer rates, and future general rate case requirements - PUCT approved TWC's System Improvement Charge (SIC) application (Docket No. 54430), increasing annual water rates by **$1,574 thousand** and sewer rates by **$28 thousand**[136](index=136&type=chunk) - PUCT also approved TWC's amended SIC application (Docket No. 56974), further increasing annual water revenue by **$3,915 thousand** and sewer revenue by **$195 thousand**, applicable to all customers[137](index=137&type=chunk) - TWC is required to file a general rate case by March 21, 2028, and will continue annual adjustments for Water Pass-through Charges (WPC)[138](index=138&type=chunk) [Maine Regulatory Affairs](index=29&type=section&id=Maine%20Regulatory%20Affairs) This section outlines MPUC approvals for MWC's rate increases, a unified tariff filing, and a Water Infrastructure Surcharge for specific divisions - MPUC approved a settlement stipulation for MWC's Camden Rockland division, authorizing an increase in rates of **$865 thousand (13.00%)** effective July 1, 2025[139](index=139&type=chunk) - MWC filed for a unified tariff across its 10 rate divisions, with a decision expected in Q4 2025[140](index=140&type=chunk) - MPUC approved a Water Infrastructure Surcharge of **3.00% ($547 thousand combined)** for MWC's Oakland and Biddeford Saco divisions, effective July 1, 2025[140](index=140&type=chunk) [Liquidity](index=29&type=section&id=Liquidity) [Cash Flow from Operating Activities](index=29&type=section&id=Cash%20Flow%20from%20Operating%20Activities) This section details the increase in net cash provided by operating activities, driven by higher net income and partially offset by changes in regulatory accounts and working capital - Net cash provided by operating activities increased by **$3,485 thousand** to **$104,017 thousand** for the six months ended June 30, 2025, primarily due to higher net income (adjusted for non-cash items) and increased payments for production costs[141](index=141&type=chunk) - This was partially offset by changes in regulatory assets/liabilities, tax accruals, accounts receivable, and accounts payable[141](index=141&type=chunk) - Water Utility Services' write-offs for credit losses remained below **1%** of total revenue, consistent with the prior year, and management expects collection rates to improve[142](index=142&type=chunk) [Cash Flow from Investing Activities](index=29&type=section&id=Cash%20Flow%20from%20Investing%20Activities) This section explains the increase in net cash used in investing activities, primarily due to higher capital expenditures and decreased proceeds from real estate sales - Net cash used in investing activities increased by **$86,892 thousand** for the six months ended June 30, 2025, primarily due to a **$46,072 thousand** increase in company-funded utility capital expenditures and a **$40,628 thousand** decrease in proceeds from real estate sales (due to the completion of Tennessee property sales in 2024)[143](index=143&type=chunk) [Cash Flow from Financing Activities](index=30&type=section&id=Cash%20Flow%20from%20Financing%20Activities) This section details the increase in net cash provided by financing activities, driven by common stock offerings, lower debt repayments, and increased contributions, partially offset by higher dividends and lower debt proceeds - Net cash provided by financing activities increased by **$79,061 thousand** for the six months ended June 30, 2025, driven by higher net proceeds from common stock offerings (**$51,411k**), lower repayments on long-term debt (**$39,750k**), and increased cash receipts from advances/contributions in aid of construction (**$20,239k**)[144](index=144&type=chunk) - These were partially offset by increased dividend payments (**$3,022k**), decreased net borrowings on lines of credit (**$3,396k**), and lower proceeds from long-term debt issuance (**$25,000k**)[144](index=144&type=chunk) [Budgeted Capital Expenditures](index=30&type=section&id=Budgeted%20Capital%20Expenditures) This section outlines the estimated utility capital expenditures for Water Utility Services for 2025 and the next five years, including significant investments in PFAS treatment and cloud-based computing - Water Utility Services' estimated utility capital expenditures for 2025 are approximately **$451,000 thousand**, with **$204,440 thousand (45%)** invested as of June 30, 2025[145](index=145&type=chunk) - This excludes **$22,000 thousand** in capitalizable cloud-based computing costs[145](index=145&type=chunk) - Over the next five years, Water Utility Services expects to incur approximately **$1,900,000 thousand** in capital expenditures, including **$300,000 thousand** for PFAS treatment, with a significant portion subject to regulatory approval[146](index=146&type=chunk) - An additional **$105,000 thousand** is expected for capitalizable cloud-based computing arrangements over the next five years, including **$22,000 thousand** in 2025[148](index=148&type=chunk) [Sources of Capital](index=30&type=section&id=Sources%20of%20Capital) [Short-term Financing Agreements](index=30&type=section&id=Short-term%20Financing%20Agreements) This section details the company's lines of credit agreements, including maturity dates, limits, outstanding amounts, unused portions, and compliance with covenants Lines of Credit Agreements (as of June 30, 2025) | Agreement | Maturity Date | Line Limit (in thousands) | Outstanding (in thousands) | Unused Portion (in thousands) | | :--------------------------------- | :------------ | :------------------------ | :------------------------- | :---------------------------- | | H2O America Syndicated | August 2, 2029 | $50,000 | — | $50,000 | | SJWC Syndicated | August 2, 2029 | $140,000 | $66,000 | $74,000 | | CTWS Syndicated | August 2, 2029 | $90,000 | $67,000 | $23,000 | | TWC Syndicated | August 2, 2029 | $20,000 | — | $20,000 | | SJWC Credit Agreement | June 11, 2026 | $10,000 | — | $10,000 | | CTWS Credit Agreement | August 2, 2028 | $10,000 | $2,840 | $7,160 | | CTWS Credit Agreement (terminated July 11, 2025) | August 13, 2025 | $40,000 | $25,000 | $15,000 | | **Total** | | **$360,000** | **$160,840** | **$199,160** | - The average cost of borrowing on lines of credit for the six months ended June 30, 2025, was **5.45%**, down from **6.53%** in the same period of 2024[151](index=151&type=chunk) - H2O America and its subsidiaries were in compliance with all financial and other covenants on their lines of credit as of June 30, 2025[152](index=152&type=chunk) [Long-term Financing Agreements](index=31&type=section&id=Long-term%20Financing%20Agreements) This section details MWC's recent promissory note issuance and confirms the company's compliance with long-term debt covenants - MWC issued a **$25,000 thousand** promissory note on July 10, 2025, at a fixed interest rate of **6.70%**, due July 20, 2055, following MPUC approval[154](index=154&type=chunk) - H2O America and its subsidiaries were in compliance with all covenants in their long-term debt agreements as of June 30, 2025[153](index=153&type=chunk) [Equity Financing Arrangements](index=31&type=section&id=Equity%20Financing%20Arrangements) This section outlines H2O America's equity distribution agreement, including shares issued and net proceeds received during the period - Under an equity distribution agreement, H2O America issued **1,583,493 shares** of common stock for **$83,713 thousand** in net proceeds during the six months ended June 30, 2025[155](index=155&type=chunk) - **$95,017 thousand** of aggregate gross sales price remains available under the agreement[155](index=155&type=chunk) [Credit Rating](index=31&type=section&id=Credit%20Rating) This section reports on Standard & Poor's Ratings Services' revised outlook for H2O America and its subsidiaries following the Quadvest acquisition announcement - Standard & Poor's Ratings Services revised the outlook for H2O America, CTWS, and CWC from stable to negative on July 15, 2025, following the announcement of the Quadvest acquisition[156](index=156&type=chunk) Standard & Poor's Ratings Services Assigned Company Ratings (as of July 15, 2025) | Entity | Rating | Outlook | | :----------- | :----- | :------ | | H2O America | A- | Negative | | SJWC | A | Stable | | CTWS | A- | Negative | | CWC | A- | Negative | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) H2O America is exposed to market risks, including changes in interest rates, pension plan asset values, and equity prices, but does not use derivative financial instruments or have significant off-balance sheet risks - Market risks include changes in interest rates (from debt issuance and variable rate lines of credit), pension plan asset values, and equity prices[158](index=158&type=chunk) - Pension and post-retirement costs are affected by discount rates, mortality rates, investment returns, and pension reform legislation[159](index=159&type=chunk) - H2O America has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of H2O America's disclosure controls and procedures as of June 30, 2025, concluding they are effective, with no material changes in internal control over financial reporting - The CEO and CFO concluded that H2O America's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[161](index=161&type=chunk) - No material changes in internal control over financial reporting occurred during the second fiscal quarter of 2025[162](index=162&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) H2O America is involved in routine litigation and specific lawsuits related to water contamination, including a class action against CWC and multi-district litigation against PFAS manufacturers, from which the company has received settlement proceeds and expects more - CWC is a defendant in a putative class action lawsuit alleging water contamination, which it is vigorously defending[164](index=164&type=chunk) - SJWC and CWC are plaintiffs in a Multi-District Litigation (MDL) against PFAS manufacturers[165](index=165&type=chunk) - Settlements with Chemours, Corteva, DuPont, 3M, Tyco Fire Products, and BASF have been approved[166](index=166&type=chunk) - During Q2 2025, the Company received **$6,443 thousand** in cash proceeds from a 3M PFAS legal settlement, recorded as a regulatory liability subject to regulatory approval[167](index=167&type=chunk) - Additional cash proceeds from 3M and other pending settlements (DuPont, Tyco, BASF) are expected in 2025 and subsequent years, but the amount is not estimable[168](index=168&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section highlights specific risk factors related to the proposed acquisition of Quadvest, including regulatory approval challenges, integration difficulties, potential for lower realized value, and the impact of transaction failure on H2O America's business and financial results - The proposed Quadvest acquisition is subject to regulatory approvals (e.g., Hart Scott-Rodino Act, PUCT), which may impose conditions, limitations, or costs, potentially delaying or preventing completion[171](index=171&type=chunk)[172](index=172&type=chunk) - Delays in the PUCT approval process for the Quadvest acquisition could reduce or eliminate anticipated benefits, with the exact timeline unknown[174](index=174&type=chunk)[175](index=175&type=chunk) - Failure to successfully integrate Quadvest's business could negatively impact H2O America's future business and financial results, due to challenges like managing customer relationships, integrating complex systems, and potential unforeseen liabilities[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) - A lower fair market value determination by the PUCT for the Regulated Business could result in H2O America not realizing the full expected value in rates[178](index=178&type=chunk) - Failure to complete the Quadvest transactions could negatively impact stock prices, business operations, and financial results, potentially requiring H2O America to pay a **$21 million** termination fee under certain circumstances[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - Inability to obtain financing for the proposed transactions on favorable terms could adversely affect H2O America's financial condition, results of operations, or cash flows, potentially leading to dilution or restrictive debt covenants[183](index=183&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there were no unregistered sales of equity securities or use of proceeds to report for the period [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities to report for the period [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to H2O America's business operations [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section details the company's recent corporate name change, quarterly dividend declaration, executive officer appointments, and confirms no insider trading arrangements were adopted or terminated during the quarter - On May 5, 2025, SJW Group officially changed its corporate name to H2O America[188](index=188&type=chunk) - On July 25, 2025, the Board declared a regular quarterly dividend of **$0.42 per share** of common stock, payable September 2, 2025, to stockholders of record as of August 11, 2025[189](index=189&type=chunk) - The Board designated Andrew F. Walters (CEO), Ann P. Kelly (CFO & Treasurer), Bruce A. Hauk (President & COO), Kristen A. Johnson (President of Shared Services, SVP & CAO), and Willie Brown (VP & General Counsel) as executive officers, effective July 25, 2025[190](index=190&type=chunk)[193](index=193&type=chunk) - No directors or officers adopted or terminated Rule 10b5-1(c) plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[191](index=191&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, asset purchase agreements, certifications, and XBRL-related documents [Signatures](index=38&type=section&id=Signatures) - The report was signed on behalf of H2O America by Ann P. Kelly, Chief Financial Officer and Treasurer, on July 29, 2025[199](index=199&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) H2O America reported strong Q2 2025 financial results, marked by significant EPS growth, substantial infrastructure investments, and a strategic Texas acquisition [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) H2O America reported strong Q2 2025 financial results, with significant year-over-year increases in both reported and adjusted diluted EPS and substantial infrastructure investments Key Financial Highlights | Metric | Q2 2025 ($) | YoY Change (%) | YTD 2025 ($) | YoY Change (%) | | :-------------------------------- | :------ | :--------- | :------- | :--------- | | Reported Diluted EPS | $0.71 | +11% | $1.20 | +20% | | Adjusted Diluted EPS (non-GAAP) | $0.75 | +14% | $1.25 | +23% | | YTD Infrastructure Investment | | | $207.2M | | | Full-Year CapEx Target | | | $473.0M | | - Declared a quarterly cash dividend of **$0.42 per share** of common stock[4](index=4&type=chunk) - Entered into an agreement to acquire all of Quadvest's assets in the high-growth Houston region, with active connections and connections under contract increasing by **4% (5,400 connections)** between December 31, 2024, and June 30, 2025[4](index=4&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Andrew F. Walters highlighted strong Q2 results driven by local water operations, strategic execution, constructive regulatory outcomes, and significant infrastructure investments, including the Quadvest acquisition - Achieved a constructive outcome in the Camden Rockland general rate case in Maine and received authorization for new affordability programs[3](index=3&type=chunk) - Secured new or enhanced regulatory mechanisms in Connecticut and Texas to reduce lag, and received approval in California to recover investment in advanced metering infrastructure[3](index=3&type=chunk) - Invested **$207.2 million** in water supply and infrastructure across the national footprint, on track for 2025 and five-year capital expenditure goals[3](index=3&type=chunk) - Announced a strategic agreement for the Texas Water subsidiary to acquire Quadvest's assets in the greater Houston area, representing a significant growth opportunity with Quadvest's active connections increasing by **7%** and connections under contract growing by **2%** from December 31, 2024, to June 30, 2025[3](index=3&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) This section details H2O America's second quarter and year-to-date 2025 operating results, highlighting revenue and earnings growth drivers [Second Quarter 2025 Operating Results](index=2&type=section&id=Second%20Quarter%202025%20Operating%20Results) H2O America reported a 19% increase in GAAP net income and an 11% increase in diluted EPS for Q2 2025. Adjusted figures also showed strong growth, with adjusted net income up 23% and adjusted diluted EPS up 14%. Operating revenue increased by 13%, primarily due to rate increases and higher customer usage Q2 2025 Financial Performance (YoY) | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change (%) | | :-------------------------------- | :-------- | :-------- | :--------- | | GAAP Net Income | $24.7 | $20.7 | +19% | | Diluted EPS (GAAP) | $0.71 | $0.64 | +11% | | Adjusted Net Income (non-GAAP) | $26.2 | $21.3 | +23% | | Adjusted Diluted EPS (non-GAAP) | $0.75 | $0.66 | +14% | | Operating Revenue | $198.3 | $176.2 | +13% | | Operating Expenses | $154.4 | $135.6 | +14% | - The increase in operating revenue was driven by **$17.6 million** from rate increases (primarily California and Connecticut) and **$4.9 million** from higher customer usage due to weather conditions[7](index=7&type=chunk) - The difference between GAAP and adjusted net income was primarily due to **$1.5 million** (net of tax) in expenses incurred for merger and acquisition activities[6](index=6&type=chunk) [Year-to-Date Operating Results](index=2&type=section&id=Year-to-Date%20Operating%20Results) For the first six months of 2025, H2O America saw a 27% increase in GAAP net income and a 20% increase in diluted EPS. Adjusted figures also showed robust growth, with adjusted net income up 30% and adjusted diluted EPS up 23%. Operating revenue increased by 12%, primarily from rate increases and higher customer usage, partially offset by regulatory mechanism adjustments. Operating expenses rose by 11% due to increased water production and administrative costs YTD 2025 Financial Performance (YoY) | Metric | YTD 2025 ($M) | YTD 2024 ($M) | Change (%) | | :-------------------------------- | :--------- | :--------- | :--------- | | GAAP Net Income | $41.2 | $32.4 | +27% | | Diluted EPS (GAAP) | $1.20 | $1.00 | +20% | | Adjusted Net Income (non-GAAP) | $42.9 | $33.0 | +30% | | Adjusted Diluted EPS (non-GAAP) | $1.25 | $1.02 | +23% | | Operating Revenue | $365.9 | $325.6 | +12% | | Operating Expenses | $286.1 | $257.1 | +11% | - Year-to-date operating revenue increase was driven by **$34.8 million** from rate increases (primarily California and Connecticut) and **$5.9 million** from higher customer usage, partially offset by a **$2.4 million** decrease from regulatory mechanism adjustments[9](index=9&type=chunk) - Year-to-date operating expenses increased due to: * **$17.5 million** increase in water production expenses, primarily from increased water pass-through costs and higher customer usage * **$10.3 million** increase in administrative and general expenses, mainly from customer credit losses (offsetting prior year collections from California Extended Water and Wastewater Arrearage Payment Program) and increases in acquisition, insurance, and contracted work costs[11](index=11&type=chunk) [Strategic Initiatives & Capital Deployment](index=3&type=section&id=Strategic%20Initiatives%20%26%20Capital%20Deployment) This section outlines H2O America's capital expenditure progress and strategic growth through the significant Quadvest acquisition [Capital Expenditures](index=3&type=section&id=Capital%20Expenditures) H2O America has invested $207.2 million in infrastructure through June 30, 2025, representing approximately 44% of its planned $473 million capital expenditures for the full year, indicating the company is on track to meet its target Capital Expenditures (YTD 2025) | Metric | Amount ($M) | | :-------------------------------- | :------- | | Infrastructure Investment (YTD) | $207.2 | | Planned 2025 Capital Expenditures | $473.0 | | % of Target Achieved | 44% | [Growth through Acquisition (Quadvest)](index=3&type=section&id=Growth%20through%20Acquisition%20(Quadvest)) H2O America, through its Texas Water subsidiary, entered an agreement to acquire Quadvest's assets in the rapidly growing greater Houston area. This acquisition is expected to significantly expand Texas operations, making it the second-largest investor-owned water and wastewater utility in the state, serving seven of the 50 fastest-growing counties in the U.S. The transaction is projected to be accretive in 2028 and meaningfully accretive to long-term growth - Agreement signed on **July 7, 2025**, to acquire Quadvest's water and wastewater utility assets in the greater Houston area[13](index=13&type=chunk) - The acquisition will position Texas operations as the **second-largest investor-owned water and wastewater utility** in the state and serve **seven of the 50 fastest-growing counties** in the U.S[13](index=13&type=chunk) - The transaction is expected to be accretive in **2028** and meaningfully accretive to the long-term growth rate[13](index=13&type=chunk) [Regulatory and Rate Activities](index=3&type=section&id=Regulatory%20and%20Rate%20Activities) This section details H2O America's recent regulatory approvals and rate adjustments across California, Connecticut, Maine, and Texas [California Regulatory Updates](index=3&type=section&id=California%20Regulatory%20Updates) The CPUC approved two advice letters in June 2025, resulting in a total authorized revenue increase of $29.3 million (5.2%) for H2O America's California operations. These increases are to offset higher purchased water charges and to recover investments in the advanced metering infrastructure (AMI) project - CPUC approved Advice Letter 616, increasing authorized revenue by **$22.5 million (4.0%)** effective **July 1, 2025**, to offset increased purchased potable water, groundwater extraction, and recycled water charges[15](index=15&type=chunk) - CPUC approved Advice Letter 617, increasing revenue by **$6.8 million (1.2%)** effective **July 1, 2025**, for San Jose Water's investment in its advanced metering infrastructure (AMI) project[16](index=16&type=chunk) [Connecticut Regulatory Updates](index=3&type=section&id=Connecticut%20Regulatory%20Updates) Connecticut enacted the Water Quality and Treatment Adjustment (WQTA) mechanism, expected to be available in 2026, to recover capital investments for PFAS and other emerging contaminants, with an estimated $190 million for PFAS treatment. Additionally, a $1.6 million revenue increase for infrastructure projects was implemented through the Water Infrastructure and Conservation Adjustment (WICA), bringing the cumulative WICA surcharge to 4.9% - Connecticut Governor Lamont signed the Water Quality and Treatment Adjustment (WQTA) into law on **July 1, 2025**, to recover capital investment for PFAS and other emerging contaminants, with an estimated **$190 million** for PFAS treatment expected to be recovered through this mechanism starting in **2026**[17](index=17&type=chunk) - A **$1.6 million** revenue increase for Connecticut Water's infrastructure investment projects through the Water Infrastructure and Conservation Adjustment (WICA) was implemented on **April 1, 2025**, bringing the cumulative WICA surcharge to **4.9%**[18](index=18&type=chunk) [Maine Regulatory Updates](index=3&type=section&id=Maine%20Regulatory%20Updates) The MPUC issued a final decision in Maine Water's Camden-Rockland general rate case, authorizing an $865,000 revenue increase. Water Infrastructure Charge increases totaling $547,000 (3.0%) were also approved for the Biddeford Saco and Oakland divisions. New legislation allows Maine water utilities to offer affordability programs, with the company working on an affordability tariff - MPUC authorized an **$865,000** revenue increase for Maine Water's Camden-Rockland division in a general rate case decision on **June 27, 2025**[19](index=19&type=chunk) - Approved Water Infrastructure Charge increases totaling **$547,000 (3.0%)** for the Biddeford Saco and Oakland divisions on **June 24, 2025**[19](index=19&type=chunk) - Governor Mills signed legislation allowing Maine water utilities to offer affordability programs, with the company developing an affordability tariff as part of its application to unify ten rate districts[20](index=20&type=chunk) [Texas Regulatory Updates](index=4&type=section&id=Texas%20Regulatory%20Updates) Texas Water filed a Notice of Intent to Determine Fair Market Value (FMV) with the PUCT for the Quadvest transaction, with recovery expected in the next rate case. The PUCT also approved a System Improvement Charge (SIC) for an additional $4.1 million in revenues. New legislation was passed to reduce regulatory lag by allowing future/hybrid test years in rate cases and shortening SIC application processing timelines - Texas Water filed a Notice of Intent to Determine Fair Market Value (FMV) with the PUCT for the Quadvest transaction on **July 9, 2025**, with FMV recovery expected in TWC's next rate case[21](index=21&type=chunk) - PUCT approved Texas Water's request for a System Improvement Charge (SIC) on **May 15, 2025**, authorizing an additional **$4.1 million** in revenues[22](index=22&type=chunk) - Texas State Legislature passed two key pieces of legislation to reduce regulatory lag: authorizing future or hybrid test years in general rate cases and reducing SIC application processing from **120 to 60 days**[23](index=23&type=chunk) [Financial Outlook & Shareholder Returns](index=4&type=section&id=Financial%20Outlook%20%26%20Shareholder%20Returns) This section outlines H2O America's reaffirmed 2025 guidance and long-term EPS growth targets, alongside its consistent dividend declaration [2025 Guidance Reaffirmation](index=4&type=section&id=2025%20Guidance%20Reaffirmation) H2O America reaffirmed its 2025 adjusted diluted EPS guidance of $2.90 to $3.00 and its non-linear long-term diluted EPS growth of 5% to 7% through 2029, anchored off 2022's diluted EPS of $2.43. The company anticipates achieving growth in the top half of the long-term range 2025 and Long-Term Guidance | Metric | Guidance | | :-------------------------------- | :---------------- | | 2025 Adjusted Diluted EPS ($) | $2.90 to $3.00 | | Long-Term Diluted EPS Growth (to 2029) | 5% to 7% (from 2022 base of $2.43) | - Based on current business conditions, the company expects to achieve growth in the **top half of the long-term range**[24](index=24&type=chunk) [Dividend Declaration](index=4&type=section&id=Dividend%20Declaration) H2O America declared a quarterly cash dividend of $0.42 per share, payable on September 2, 2025. The annualized dividend for 2025 is projected to be $1.68 per share, an increase from $1.60 in 2024. The company has a strong history of dividend payments, with increases for 57 consecutive years Dividend Information | Metric | Value ($) | | :-------------------------------- | :------ | | Q3 2025 Quarterly Cash Dividend | $0.42 | | 2025 Annualized Dividend (Expected) | $1.68 | | 2024 Annualized Dividend | $1.60 | - Dividends have been paid for over **80 consecutive years**, with annual increases for **57 consecutive years**[26](index=26&type=chunk) [Corporate Information](index=4&type=section&id=Corporate%20Information) This section provides details on H2O America's financial results call, non-GAAP measures, company overview, forward-looking statements, and contact information [Financial Results Call Information](index=4&type=section&id=Financial%20Results%20Call%20Information) H2O America's CEO, CFO, and President/COO will review Q2 results in a live webcast presentation on Tuesday, July 29, 2025, at 11 a.m. Pacific Daylight Time. The webcast and related materials are accessible via the company's website, with an archive available until October 20, 2025 - Live webcast presentation scheduled for **Tuesday, July 29, 2025, at 11 a.m. PDT (2 p.m. EDT)**[27](index=27&type=chunk) - Webcast and presentation materials available at www.sjwgroup.com, with an archive accessible until **October 20, 2025**[28](index=28&type=chunk) [Non-GAAP Financial Measures Explanation](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) H2O America provides adjusted net income and adjusted diluted EPS as non-GAAP financial measures. These metrics exclude the effects of non-utility real estate transactions and merger/acquisition costs, aiming to offer investors additional insight into core business performance and to align with management's internal performance measurements and guidance communication. These measures are supplementary to GAAP figures - Adjusted net income and adjusted diluted EPS are non-GAAP measures that exclude non-utility real estate transactions and merger/acquisition costs[29](index=29&type=chunk) - These non-GAAP measures are provided to help investors evaluate business performance, understand actual results against guidance, and are used internally for performance measurement[29](index=29&type=chunk) - Non-GAAP measures should be considered supplementary to GAAP financial information, not an alternative[29](index=29&type=chunk) [About H2O America](index=5&type=section&id=About%20H2O%20America) H2O America is a leading investor-owned pure-play water and wastewater utility in the U.S., serving 1.6 million people. Its subsidiaries operate in California, Connecticut, Maine, and Texas, focusing on financial strength, operational expertise, and technological innovation to deliver high-quality service, safeguard the environment, and provide sustainable value to stockholders - H2O America is among the **largest investor-owned pure-play water and wastewater utilities** in the U.S., serving **1.6 million people**[30](index=30&type=chunk) - Operates through subsidiaries: San Jose Water Company (California), The Connecticut Water Company (Connecticut), The Maine Water Company (Maine), and SJWTX, Inc. (dba The Texas Water Company) in Texas[30](index=30&type=chunk) - Focuses on investing in operations, community engagement, and delivering sustainable value to stockholders[30](index=30&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section outlines that the release contains forward-looking statements based on current expectations, estimates, and projections, which are subject to various risks, uncertainties, and assumptions. Actual results may differ materially due to factors such as risks associated with the Quadvest acquisition, governmental policies, demand changes, weather conditions, unexpected costs, and the ability to obtain financing. The company disclaims any obligation to update these statements - Forward-looking statements are subject to risks, uncertainties, and assumptions, and actual results may differ materially[31](index=31&type=chunk) - Key risk factors include those associated with the Quadvest acquisition (closing, regulatory approvals, integration), governmental policies and regulations (rates, capital structures, PFAS), changes in demand, unanticipated weather, unexpected costs, and financing availability[32](index=32&type=chunk) - Results for a quarter are not indicative of full-year results, and the company undertakes no obligation to publicly update or revise forward-looking statements[34](index=34&type=chunk) [Contacts](index=5&type=section&id=Contacts) Contact information for H2O America's Chief Financial Officer and Treasurer, Ann P. Kelly, and Director of Investor Relations, Daniel J. Meaney, is provided for inquiries - Ann P. Kelly, Chief Financial Officer and Treasurer, can be reached at **408.385.4752** or Ann.Kelly@H2O-America.com[35](index=35&type=chunk) - Daniel J. Meaney, Director of Investor Relations, can be reached at **860.664.6016** or Daniel.Meaney@H2O-America.com[35](index=35&type=chunk) [Appendices: Financial Statements](index=7&type=section&id=Appendices%3A%20Financial%20Statements) This section provides unaudited condensed consolidated financial statements, including statements of income, balance sheets, and non-GAAP reconciliations [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the unaudited condensed consolidated statements of income for the three and six months ended June 30, 2025, and 2024, detailing operating revenue, various operating expenses, operating income, other income/expense, income before taxes, provision for income taxes, net income, and earnings per share Condensed Consolidated Statements of Income (Selected Data) | Metric | Three months ended June 30, 2025 ($K) | Three months ended June 30, 2024 ($K) | Six months ended June 30, 2025 ($K) | Six months ended June 30, 2024 ($K) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating revenue | $198,255 | $176,174 | $365,854 | $325,556 | | Total operating expense | $154,390 | $135,604 | $286,093 | $257,073 | | Operating income | $43,865 | $40,570 | $79,761 | $68,483 | | Net income | $24,675 | $20,696 | $41,226 | $32,395 | | Diluted Earnings per share ($) | $0.71 | $0.64 | $1.20 | $1.00 | | Dividends per share ($) | $0.42 | $0.40 | $0.84 | $0.80 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets (utility plant, nonutility properties, current assets, other assets) and capitalization and liabilities (stockholders' equity, long-term debt, current liabilities, deferred income taxes, advances for construction, contributions in aid of construction, postretirement benefit plans, regulatory liabilities, and other noncurrent liabilities) Condensed Consolidated Balance Sheets (Selected Data) | Metric | June 30, 2025 ($K) | December 31, 2024 ($K) | | :-------------------------------- | :-------------- | :---------------- | | **Assets** | | | | Total utility plant | $4,733,934 | $4,525,061 | | Net utility plant | $3,654,396 | $3,488,611 | | Total current assets | $200,450 | $190,714 | | Total assets | $4,846,926 | $4,658,309 | | **Capitalization and Liabilities**| | | | Total stockholders' equity | $1,465,971 | $1,366,974 | | Long-term debt, less current portion | $1,692,212 | $1,706,904 | | Total capitalization | $3,158,183 | $3,073,878 | | Total current liabilities | $314,234 | $261,173 | | Total capitalization and liabilities | $4,846,926 | $4,658,309 | [Reconciliation of Non-GAAP Financial Measures](index=10&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides a reconciliation of GAAP net income and diluted EPS to adjusted net income and adjusted diluted EPS for the three and six months ended June 30, 2025, and 2024. Adjustments primarily include the exclusion of loss on sale of real estate investments and expenses for merger and acquisition activities, net of their tax effects Reconciliation of Non-GAAP Financial Measures | Metric | Three months ended June 30, 2025 ($K) | Three months ended June 30, 2024 ($K) | Six months ended June 30, 2025 ($K) | Six months ended June 30, 2024 ($K) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Reported GAAP Net Income | $24,675 | $20,696 | $41,226 | $32,395 | | Adjustments (net of tax) | $1,507 | $618 | $1,690 | $618 | | Adjusted Net Income (non-GAAP) | $26,182 | $21,314 | $42,916 | $33,013 | | Reported GAAP Diluted EPS ($) | $0.71 | $0.64 | $1.20 | $1.00 | | Adjustments (net of tax) ($) | $0.04 | $0.02 | $0.05 | $0.02 | | Adjusted Diluted EPS (non-GAAP) ($) | $0.75 | $0.66 | $1.25 | $1.02 | - Adjustments for Q2 2025 primarily include **$2.093 million** in merger and acquisition activities expense, with a tax effect of **$(0.586) million**[43](index=43&type=chunk) - Adjustments for YTD 2025 primarily include **$2.347 million** in merger and acquisition activities expense, with a tax effect of **$(0.657) million**[43](index=43&type=chunk)

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]

Financial Performance - Revenue increased by 12% to $167.6 million in 1Q 2025 compared to $149.4 million in 1Q 2024[22] - GAAP Net Income increased by 41% to $16.6 million in 1Q 2025 compared to $11.7 million in 1Q 2024[22] - Adjusted Net Income increased by 43% to $16.7 million in 1Q 2025 compared to $11.7 million in 1Q 2024[22] - Diluted EPS increased by 36% to $0.49 in 1Q 2025 compared to $0.36 in 1Q 2024[22] - Adjusted Diluted EPS increased by 39% to $0.50 in 1Q 2025 compared to $0.36 in 1Q 2024[22] Guidance and Targets - The company affirms its 2025 Adjusted Diluted EPS guidance range of $2.90 to $3.00[19] - The company affirms its growth rate through 2029 in the top half of the guidance range of 5% to 7% based on 2022 EPS of $2.43[19] - The company anticipates a $2 billion 5-year Capital Expenditure (CapEx) plan[15,37] Capital Expenditure and Financing - $78 million was invested in water and wastewater utility infrastructure in 1Q 2025[13] - Approximately $27 million in gross equity proceeds were raised at the market to fund growth and capital investment in 1Q 2025[34] Regulatory Updates - San Jose Water's 2025 to 2027 general rate case was delivered on time, effective January 1[13] - Connecticut Water's Water Infrastructure and Conservation Adjustment (WICA) was approved, resulting in an annualized revenue increase of $1.6 million, a cumulative WICA of 4.9%[13,43]

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)