Financial Performance (Q1 2023) - Revenue increased by 10% from $124.3 million in 1Q 2022 to $137.3 million in 1Q 2023[9] - Net income saw a significant increase of 209%, rising from $3.7 million in 1Q 2022 to $11.5 million in 1Q 2023[9] - Diluted EPS increased by 208%, from $0.12 in 1Q 2022 to $0.37 in 1Q 2023[9] Capital Expenditure and Investment - Capital expenditures totaled $52.4 million in 1Q 2023, representing 21% of the $255 million budgeted for the year[13] - The company has $278 million available on bank lines of credit, with $72 million currently drawn[36] - Planned equity issuance of $40 million - $50 million in 2023, excluding acquisition growth, with $42 million already issued in 1Q[45] Regulatory Updates and Rate Cases - General Rate Cases (GRCs) approved in four divisions in Maine, resulting in a $692,000 increase in annualized revenue[60] - Connecticut Water WICA saw a 3.1% increase, resulting in a $3.3 million increase in annualized revenue[58] - Awaiting Cost of Capital decision from the California Public Utilities Commission (CPUC), with a proposed revenue increase reflecting a 10.3% return on equity and a 5.48% cost of debt[37] Future Outlook and Guidance - EPS growth guidance is anchored off of 2022 diluted EPS of $2.43[46] - Long-term growth rate is projected to be between 5% and 7%[66] - Initial CapEx estimate for PFAS treatment is $170 million to $190 million[68]

Financial Performance - SJW Group's consolidated financial statements reflect a capital structure of approximately 47% debt and 53% equity in California and Connecticut, with authorized returns on equity of 8.90% and 9.00% respectively[17]. - SJWC received a revenue requirement increase of $25.1 million or 6.03% effective January 1, 2022, with additional increases of $13.0 million or 2.94% in 2023 and $16.1 million or 3.56% in 2024 approved[26]. - SJWC's consolidated net income for 2022 was $73,828, an increase of $13,350 or 22% compared to 2021[210]. - Operating revenue for Water Utility Services in 2022 was $615,093, up from $568,307 in 2021, reflecting an 8% increase[212]. - Rate increases contributed $38,706 (7%) to operating revenue growth from 2021 to 2022[212]. Revenue Adjustments and Charges - Connecticut Water's WICA surcharge was approved at 2.44%, expected to generate approximately $2.6 million in additional revenue starting January 1, 2022[33]. - SJWTX's System Improvement Charge (SIC) is projected to increase water revenue by $1.6 million and sewer revenue by $29,000 within one year of approval from the PUCT[39]. - SJWC filed for a cost of capital adjustment seeking a revenue increase of $6.4 million or 1.61% in 2022, with a proposed return on equity of 10.30%[23]. - Connecticut Water's 2021 Water Revenue Adjustment (WRA) imposed a 2.85% surcharge on customer bills to collect the 2021 revenue shortfall[34]. - The Water Conservation Memorandum Account added $798 to revenue in 2022, reflecting regulatory mechanisms in place[212]. Water Supply and Operations - SJWC serves approximately 232,000 connections, providing water to about one million people over 139 square miles in California[44]. - CTWS provides water service to approximately 141,000 connections, serving around 459,000 people across 81 municipalities[44]. - SJWTX serves approximately 26,000 connections, providing water to about 77,000 people in a service area of over 268 square miles in Texas[44]. - SJWC's water supply consists of 40% to 50% purchased water, with groundwater and surface water making up the remainder[50]. - Connecticut Water's supply is approximately 80% from surface water and 20% from wells, with agreements expiring in 2058 and 2053[55]. - Maine Water's supply is approximately 90% from surface water and 10% from wells, with a supply agreement expiring in 2040[58]. Employee and Workforce Management - SJW Group had 757 full-time employees as of December 31, 2022, with 362 from SJWC, 230 from Connecticut Water, 87 from SJWTX, and 78 from Maine Water[78]. - A tentative three-year bargaining agreement was proposed for union workers at SJWC, including a 6% wage increase in 2023, 3.5% in 2024, and 5.5% in 2025[79]. - The workforce demographics as of 2022 showed 29% female and 71% male employees, with 20% identifying as Hispanic or Latino[85]. - SJW Group's compensation and benefits programs are designed to attract and retain talent, including fair wages benchmarked to local markets and comprehensive health benefits[87]. - Employee engagement and satisfaction are prioritized, with semi-annual surveys and regular meetings to foster a supportive work environment[83]. Regulatory and Compliance Issues - The company has a focus on regulatory compliance, with operating revenue primarily generated from water sales at rates authorized by various regulatory bodies[93]. - SJW Group's financial health is contingent on the accuracy of estimates and forecasts used in rate approval applications, with potential revenue shortfalls if authorized rates are too low[94]. - Changes in regulatory policies could adversely affect SJW Group's operating results and financial condition, highlighting the importance of regulatory stability[95][96]. - The company is required to comply with stringent water quality regulations, and failure to do so could result in significant costs and operational challenges[117]. - SJW Group's operations are subject to environmental, health, and safety regulations, incurring substantial compliance costs[200]. Environmental and Operational Risks - New environmental regulations could increase operating costs and capital expenditures for SJW Group, impacting overall business operations[102][103]. - The company faces litigation risks related to water quality and contamination, which could incur significant legal costs and affect its reputation[100][101]. - Water Utility Services has activated a Water Shortage Contingency Plan to achieve a 15% conservation target due to a drought emergency declared in July 2021[112]. - Seasonal fluctuations in water demand can significantly impact operating results, with lower revenues expected during drought conditions[111]. - The implementation of mandatory conservation measures may lead to reduced water usage and adversely affect revenue[114]. Capital Expenditures and Investments - SJW Group plans to spend approximately $255,053 in 2023 and $1,353,390 over five years for capital improvements[198]. - Company-funded capital improvements were $218,784 in 2022 and $233,933 in 2021 for additions to or replacements of property, plant, and equipment[198]. - The water utility business is capital-intensive, and SJW Group may not have sufficient cash flow or capital resources to fund necessary capital expenditures, which could impact growth and earnings[131]. - SJW Group seeks to acquire regulated water systems adjacent to or near its existing service territory to enhance its regional regulated activities[176]. - The company evaluates out-of-region opportunities that meet its risk and return profile, focusing on regulated water and wastewater businesses[179]. Corporate Governance and Strategy - SJW Group's executive team includes Eric W. Thornburg as President and CEO, Andrew F. Walters as CFO, and Bruce A. Hauk as COO, with extensive experience in the water utility sector[88][89]. - The company’s charter documents and Delaware law may hinder favorable takeovers and reduce stockholder rights, complicating corporate governance[142]. - SJW Group's dividend policy is subject to board discretion and may be limited by legal and contractual requirements, affecting the ability to pay dividends to stockholders[141]. - The company has committed to "ring-fencing" measures to enhance CTWS's separateness, which may limit SJW Group's ability to influence CTWS's management and policies[137]. - The business strategy includes acquiring water systems and expanding non-tariffed services, exposing the company to new risks that could adversely affect financial performance[139].

Financial Data and Key Metrics Changes - In Q4 2022, the company reported revenue of $171.4 million and net income of $33.5 million, with diluted EPS of $1.09, reflecting a 23% increase in revenue and an 86% increase in net income compared to Q4 2021 [21] - For the full year 2022, revenue was $620.7 million, net income was $73.8 million, and diluted EPS was $2.43, representing an 8% increase in revenue and a 22% increase in net income compared to 2021 [22] - The diluted EPS for 2022 increased by 20% year-over-year, primarily driven by revenue increases and better matching of production costs [23] Business Line Data and Key Metrics Changes - The company realized $25.1 million in revenue from the CPUC approved settlement agreement for the 2021 GRC, along with $18.2 million from the recovery of memorandum and balancing accounts [5] - Customer growth contributed $5.1 million in revenue across utilities, while lower customer usage resulted in a decrease of $14.3 million [25] Market Data and Key Metrics Changes - The company continues to operate under a mandatory call for water conservation, which required a 15% reduction in water consumption compared to 2019, resulting in an 11% decrease for residential customers and approximately 6% for business customers in 2022 [26] Company Strategy and Development Direction - The company is targeting a long-term EPS growth rate of 5% to 7%, anchored off the 2022 diluted EPS of $2.43 [2] - A $255 million capital expenditure budget for 2023 is planned, with a total investment of $1.4 billion through 2027, focusing on infrastructure improvements [55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the cost of capital proceeding and its potential positive outcome [1] - Inflation has significantly impacted interest costs, labor costs, and chemical expenses, with expectations for continued increases in 2023 [34][35] Other Important Information - The company has strong ESG ratings and has secured nearly $10 million in financial assistance for customers in arrears [11] - The average borrowing rate for the line of credit advances during 2022 was approximately 3.41%, compared to 1.32% in 2021 [30] Q&A Session Summary Question: Impact of true-up in cost of debt on 2022 EPS - Management confirmed that the 2022 EPS included a negative impact associated with the true-up in the cost of debt from the pending cost of capital proceeding [83] Question: Earnings contributions from Texas acquisitions - Management indicated that earnings contributions from the Texas investment were already seen in 2022, and despite a slowdown in the housing market, growth is still expected [87] Question: Non-linear growth rate due to Connecticut rate cases - Management acknowledged that the growth rate is non-linear, primarily due to the timing of rate cases in Connecticut and Maine, which affects earnings in intervening years [89]

Investor Presentation December 2022 SJW Group Leadership Team Experienced, Record of Execution, Regional Focus and Dedication Leveraged expertise across the multistate platform with a commitment to local communities Eric W. Thornburg Chairman, President and Chief Executive Officer 40 years of water utility experience Andrew Walters Chief Financial Officer and Treasurer 20 years of utility experience Andy Gere President and Chief Operating Officer of San Jose Water 26 years of water utility experience Mauree ...

SJW Group (NYSE:SJW) Q3 2022 Results Conference Call October 28, 2022 1:00 PM ET Company Participants Eric Thornburg - Chairman, President & CEO Andrew Walters - CFO & Treasurer John Tang - Vice President of Regulatory Affairs & Government Relations Conference Call Participants Richard Sunderland - JPMorgan Angie Storozynski - Seaport Research Jonathan Reeder - Wells Fargo Operator Good day, and thank you for standing by. Welcome to the SJW Group Third Quarter 2022 Earnings Conference Call. At this time, al ...

Investor Presentation September 2022 SJW Group Leadership Team Experienced, Record of Execution, Regional Focus and Dedication Leveraged expertise across the multistate platform with a commitment to local communities Eric W. Thornburg Chairman, President and Chief Executive Officer 40 years of water utility experience Jim Lynch Chief Accounting Officer 17 years of water utility experience Andrew Walters Chief Financial Officer and Treasurer 20 years of utility experience Andy Gere President and Chief Operat ...

[FORWARD-LOOKING STATEMENTS](index=2&type=section&id=FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements subject to significant risks and uncertainties - This report contains forward-looking statements that are subject to various risks, uncertainties, and assumptions, meaning actual results may differ materially from current expectations[7](index=7&type=chunk)[8](index=8&type=chunk) - Key risk factors include governmental policies and regulations, changes in water demand, the impact of the COVID-19 pandemic, climate change, and general economic conditions[8](index=8&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2022 [Condensed Consolidated Statements of Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Three Months Ended September 30, 2022 vs. 2021 (in thousands, except per share data) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $175,981 | $166,923 | $9,058 | 5.43% | | Total operating expense | $138,379 | $133,149 | $5,230 | 3.93% | | Operating income | $37,602 | $33,774 | $3,828 | 11.33% | | Income before income taxes | $25,257 | $21,817 | $3,440 | 15.77% | | Provision for income taxes | $223 | $2,749 | $(2,526) | -91.89% | | NET INCOME | $25,034 | $19,068 | $5,966 | 31.29% | | Comprehensive income | $24,861 | $19,056 | $5,805 | 30.46% | | Basic EPS | $0.83 | $0.64 | $0.19 | 29.69% | | Diluted EPS | $0.82 | $0.64 | $0.18 | 28.13% | | Dividends per share | $0.36 | $0.34 | $0.02 | 5.88% | Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Nine Months Ended September 30, 2022 vs. 2021 (in thousands, except per share data) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $449,324 | $433,949 | $15,375 | 3.54% | | Total operating expense | $368,731 | $354,457 | $14,274 | 4.03% | | Operating income | $80,593 | $79,492 | $1,101 | 1.39% | | Income before income taxes | $43,987 | $47,618 | $(3,631) | -7.62% | | Provision for income taxes | $3,658 | $5,159 | $(1,501) | -29.10% | | NET INCOME | $40,329 | $42,459 | $(2,130) | -5.02% | | Comprehensive income | $39,727 | $42,592 | $(2,865) | -6.73% | | Basic EPS | $1.33 | $1.44 | $(0.11) | -7.64% | | Diluted EPS | $1.33 | $1.43 | $(0.10) | -6.99% | | Dividends per share | $1.08 | $1.02 | $0.06 | 5.88% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Unaudited) - As of September 30, 2022 vs. December 31, 2021 (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **ASSETS** | | | | | | Total Utility plant (net) | $2,592,881 | $2,497,499 | $95,382 | 3.82% | | Real estate investments and nonutility properties (net) | $41,157 | $41,681 | $(524) | -1.26% | | Total Current Assets | $157,900 | $134,085 | $23,815 | 17.76% | | Total Other Assets | $812,766 | $819,130 | $(6,364) | -0.78% | | **TOTAL ASSETS** | **$3,604,704** | **$3,492,395** | **$112,309** | **3.22%** | | **LIABILITIES & EQUITY** | | | | | | Total Stockholders' Equity | $1,049,347 | $1,034,519 | $14,828 | 1.43% | | Long-term debt, less current portion | $1,453,748 | $1,492,935 | $(39,187) | -2.62% | | Total Current Liabilities | $318,710 | $203,271 | $115,439 | 56.89% | | Deferred income taxes | $208,130 | $200,451 | $7,679 | 3.83% | | Advances for construction | $140,842 | $130,693 | $10,149 | 7.77% | | Contributions in aid of construction | $319,866 | $316,479 | $3,387 | 1.07% | | Postretirement benefit plans | $89,610 | $89,998 | $(388) | -0.43% | | Other noncurrent liabilities | $24,451 | $24,049 | $402 | 1.67% | | **TOTAL CAPITALIZATION AND LIABILITIES** | **$3,604,704** | **$3,492,395** | **$112,309** | **3.22%** | [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 (Unaudited) - Nine Months Ended September 30, 2022 (in thousands) | Metric | Dec 31, 2021 Balance | Net Income | Stock-based Compensation | Dividends Paid | Other Changes | Sep 30, 2022 Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $30 | $0 | $0 | $0 | $0 | $30 | | Additional Paid-in Capital | $606,392 | $0 | $3,991 | $0 | $3,843 | $614,226 | | Retained Earnings | $428,260 | $40,329 | $(66) | $(32,667) | $0 | $435,856 | | Accumulated Other Comprehensive Income | $(163) | $0 | $0 | $0 | $(602) | $(765) | | **Total Stockholders' Equity** | **$1,034,519** | **$40,329** | **$3,925** | **$(32,667)** | **$3,241** | **$1,049,347** | Changes in Stockholders' Equity (Unaudited) - Nine Months Ended September 30, 2021 (in thousands) | Metric | Dec 31, 2020 Balance | Net Income | Stock-based Compensation | Dividends Paid | Other Changes | Sep 30, 2021 Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $29 | $0 | $0 | $0 | $1 | $30 | | Additional Paid-in Capital | $510,158 | $0 | $3,141 | $0 | $67,902 | $581,201 | | Retained Earnings | $408,037 | $42,459 | $(89) | $(29,996) | $0 | $420,411 | | Accumulated Other Comprehensive Income | $(1,064) | $0 | $0 | $0 | $133 | $(931) | | **Total Stockholders' Equity** | **$917,160** | **$42,459** | **$3,052** | **$(29,996)** | **$68,036** | **$1,000,711** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 2022 vs. 2021 (in thousands) | Activity | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $129,349 | $100,255 | $29,094 | | Net cash used in investing activities | $(181,453) | $(182,899) | $1,446 | | Net cash provided by financing activities | $53,175 | $89,596 | $(36,421) | | Net change in cash, cash equivalents and restricted cash | $1,071 | $6,952 | $(5,881) | | Cash and cash equivalents, end of period | $13,190 | $14,019 | $(829) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. General](index=14&type=section&id=Note%201.%20General) - SJW Group is a holding company with five wholly-owned subsidiaries: San Jose Water Company (SJWC), SJWNE LLC, SJWTX, Inc, SJW Land Company, and SJWTX Holdings, Inc[33](index=33&type=chunk) - Water sales are seasonal, with higher revenue in warm, dry summer months, meaning interim results are not indicative of full-year performance[34](index=34&type=chunk)[96](index=96&type=chunk) Revenue Streams (in thousands) | Revenue Stream | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue from contracts with customers | $169,972 | $163,103 | $440,406 | $422,545 | | Alternative revenue programs, net | $3,172 | $2,216 | $(1,737) | $4,984 | | Other balancing and memorandum accounts, net | $1,857 | $639 | $6,719 | $3,637 | | Other regulatory mechanisms, net | $(494) | $(438) | $(260) | $(1,284) | | Rental income | $1,474 | $1,403 | $4,196 | $4,067 | | **Total Revenue** | **$175,981** | **$166,923** | **$449,324** | **$433,949** | - A pre-tax gain of **$5.4 million** from the sale of a nonutility property was recognized on February 15, 2022[37](index=37&type=chunk) - The fair value of long-term debt was approximately **$1.25 billion** as of September 30, 2022, compared to a book value of **$1.46 billion**[40](index=40&type=chunk) [Note 2. Regulatory Matters](index=16&type=section&id=Note%202.%20Regulatory%20Matters) Regulatory Assets, Net (in thousands) | Regulatory Asset | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Income tax temporary differences, net | $33,811 | $22,420 | | Postretirement pensions and other postretirement benefits | $64,934 | $62,197 | | Business combinations debt premium, net | $18,031 | $19,937 | | Balancing and memorandum accounts, net | $22,583 | $38,334 | | Water Rate Adjustment | $(2,800) | $2,588 | | Other, net | $10,124 | $9,145 | | **Total regulatory assets, net** | **$146,683** | **$154,621** | | Less: current regulatory assets, net | $738 | $2,629 | | **Total regulatory assets, net, less current portion** | **$145,945** | **$151,992** | - SJWC uses balancing and memorandum accounts to track expense and revenue variances and impacts from catastrophic events[45](index=45&type=chunk) - On October 11, 2022, the CPUC approved a recovery of **$18.2 million** in balancing and memorandum accounts from customers[45](index=45&type=chunk) [Note 3. Capitalization](index=18&type=section&id=Note%203.%20Capitalization) - For the nine months ended September 30, 2022, SJW Group issued 47,608 shares of common stock, generating approximately **$3.1 million** in net proceeds[49](index=49&type=chunk) - Since November 17, 2021, SJW Group has issued 402,723 shares, receiving **$27.4 million** in net proceeds, with **$71.8 million** remaining available for issuance[49](index=49&type=chunk) - In March 2021, SJW Group completed a public offering of 1,184,500 shares, generating approximately **$66.8 million** in net proceeds[50](index=50&type=chunk) [Note 4. Bank Borrowings and Long-Term Liabilities](index=18&type=section&id=Note%204.%20Bank%20Borrowings%20and%20Long-Term%20Liabilities) - On August 2, 2022, SJW Group entered into a new **$300 million** syndicated line of credit agreement maturing August 2, 2027[52](index=52&type=chunk)[146](index=146&type=chunk) - The new credit agreement replaces previous agreements and reduced CTWS's revolving credit facility from **$75 million** to **$10 million**[56](index=56&type=chunk)[150](index=150&type=chunk) - Maine Water entered into a credit agreement on April 6, 2022, for **$15 million** at a fixed interest rate of **4.54%**, due May 31, 2042[57](index=57&type=chunk)[154](index=154&type=chunk) - Connecticut Water sold **$25 million** of **4.71%** Senior Notes, Series 2022, due 2052[58](index=58&type=chunk)[155](index=155&type=chunk) - SJWC will sell **$70 million** of **4.85%** Senior Notes, Series P, due February 1, 2053[59](index=59&type=chunk)[156](index=156&type=chunk) [Note 5. Income Taxes](index=19&type=section&id=Note%205.%20Income%20Taxes) Income Tax Expense and Effective Rates (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense | $223 | $2,749 | $3,658 | $5,159 | | Effective consolidated income tax rate | 1% | 13% | 8% | 11% | - The lower effective tax rate for 2022 was primarily due to a tax accounting method change at CTWS regarding non-network asset repairs deduction[60](index=60&type=chunk)[117](index=117&type=chunk) - SJW Group does not expect the Inflation Reduction Act of 2022 to materially impact its year-end tax rate[62](index=62&type=chunk)[118](index=118&type=chunk) [Note 6. Commitments and Contingencies](index=20&type=section&id=Note%206.%20Commitments%20and%20Contingencies) - No pending legal proceedings are expected to have a material effect on the company's business, financial position, or cash flows[63](index=63&type=chunk)[166](index=166&type=chunk) [Note 7. Benefit Plans](index=20&type=section&id=Note%207.%20Benefit%20Plans) - SJW Group maintains noncontributory defined benefit pension plans and provides health care and life insurance benefits for retired employees[64](index=64&type=chunk)[65](index=65&type=chunk) Net Periodic Benefit Costs (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Service cost | $2,652 | $2,711 | $7,956 | $8,134 | | Interest cost | $2,860 | $2,556 | $8,581 | $7,666 | | Expected return on assets | $(5,044) | $(4,748) | $(15,132) | $(14,242) | | Unrecognized actuarial loss | $1,182 | $1,788 | $3,546 | $5,362 | | Amortization of prior service cost | $4 | $12 | $12 | $37 | | **Total** | **$1,654** | **$2,319** | **$4,963** | **$6,957** | - SJW Group expects to make cash contributions of up to **$7.8 million** to pension plans and other postretirement benefits in 2022[66](index=66&type=chunk) [Note 8. Equity Plans](index=20&type=section&id=Note%208.%20Equity%20Plans) - As of September 30, 2022, **179,848 shares** are issuable upon vesting of restricted stock units, and **612,738 shares** are available for future awards[67](index=67&type=chunk) Compensation Costs Charged to Income (in thousands) | Award Type | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | ESPP | $184 | $176 | $369 | $357 | | Restricted stock and deferred restricted stock | $1,214 | $954 | $3,622 | $2,844 | | **Total compensation costs charged to income** | **$1,398** | **$1,130** | **$3,991** | **$3,201** | - Total unrecognized compensation costs related to restricted stock plans amounted to **$5.7 million** as of September 30, 2022[71](index=71&type=chunk) [Note 9. Segment and Non-Tariffed Business Reporting](index=21&type=section&id=Note%209.%20Segment%20and%20Non-Tariffed%20Business%20Reporting) - SJW Group operates in two reportable segments: Water Utility Services and Real Estate Services[73](index=73&type=chunk) Operating Revenue by Segment (in thousands) - Three Months Ended September 30, 2022 vs. 2021 | Segment | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $171,044 | $162,352 | $8,692 | 5.35% | | Water Utility Services (Non-tariffed) | $3,463 | $3,168 | $295 | 9.31% | | Real Estate Services (Non-tariffed) | $1,474 | $1,403 | $71 | 5.06% | | All Other (Non-tariffed) | $0 | $0 | $0 | 0.00% | | **Total SJW Group** | **$175,981** | **$166,923** | **$9,058** | **5.43%** | Operating Income (Loss) by Segment (in thousands) - Three Months Ended September 30, 2022 vs. 2021 | Segment | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $36,305 | $32,437 | $3,868 | 11.93% | | Water Utility Services (Non-tariffed) | $1,371 | $1,012 | $359 | 35.47% | | Real Estate Services (Non-tariffed) | $499 | $447 | $52 | 11.63% | | All Other (Non-tariffed) | $(573) | $(122) | $(451) | 369.67% | | **Total SJW Group** | **$37,602** | **$33,774** | **$3,828** | **11.33%** | Total Assets by Segment (in thousands) - As of September 30, 2022 vs. September 30, 2021 | Segment | Sep 30, 2022 | Sep 30, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $3,498,396 | $3,352,976 | $145,420 | 4.34% | | Water Utility Services (Non-tariffed) | $5,302 | $7,141 | $(1,839) | -25.75% | | Real Estate Services (Non-tariffed) | $43,017 | $44,629 | $(1,612) | -3.61% | | All Other (Non-tariffed) | $57,989 | $64,995 | $(7,006) | -10.78% | | **Total SJW Group** | **$3,604,704** | **$3,469,741** | **$134,963** | **3.89%** | [Note 10. Subsequent Event](index=23&type=section&id=Note%2010.%20Subsequent%20Event) - On October 6, 2022, the CPUC approved SJWC's General Rate Case, authorizing a revenue increase of **$25.1 million (6.03%)** in 2022[79](index=79&type=chunk) - The 2022 GRC also approved recovery of **$18.2 million** from balancing and memorandum accounts and a **$350 million** capital budget[79](index=79&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes financial condition and operational results for the period ended September 30, 2022 [General Business Overview](index=24&type=section&id=General%20Business%20Overview) - SJW Group is a holding company with five wholly-owned subsidiaries operating in California, Connecticut, Maine, and Texas[82](index=82&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) - SJWC provides water service to approximately **232,000 connections** in the San Jose metropolitan area[83](index=83&type=chunk) - CTWS subsidiaries provide water service to approximately **141,000 connections** in Connecticut and Maine[86](index=86&type=chunk) - SJW Land Company and Chester Realty, Inc manage undeveloped land and commercial buildings[90](index=90&type=chunk)[92](index=92&type=chunk) - The business strategy focuses on regional regulated water utility operations and potential acquisitions[91](index=91&type=chunk)[93](index=93&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) [Overview](index=26&type=section&id=Overview) Consolidated Net Income (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $25,034 | $19,068 | $5,966 | 31.29% | | Nine months ended Sep 30 | $40,329 | $42,459 | $(2,130) | -5.02% | - The three-month net income increase includes a one-time impact of **$355 thousand** related to settlement expenses[97](index=97&type=chunk) - The nine-month net income decrease is influenced by a **$5.1 million** gain on a property sale, offset by **$2.2 million** in depreciation and other expenses[97](index=97&type=chunk) [Operating Revenue](index=26&type=section&id=Operating%20Revenue) Consolidated Operating Revenue (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $175,981 | $166,923 | $9,058 | 5.43% | | Nine months ended Sep 30 | $449,324 | $433,949 | $15,375 | 3.54% | Factors Affecting Operating Revenue Change (in thousands) | Factor | 3 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | 9 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | | :--- | :--- | :--- | | Consumption changes (including unbilled utility revenue) | $(4,256) | $(9,085) | | Increase in customers | $842 | $3,723 | | Rate increases | $9,485 | $22,172 | | Texas winter storm customer credits | $838 | $838 | | Balancing and memorandum accounts (MWRAM) | $1,019 | $2,047 | | Balancing and memorandum accounts (WCMA) | $3,868 | $2,768 | | Other regulatory mechanisms | $(2,967) | $(8,466) | | Real Estate Services | $71 | $128 | | **Total Increase/(decrease)** | **$9,058** | **$15,375** | [Operating Expense](index=27&type=section&id=Operating%20Expense) Consolidated Operating Expense (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $138,379 | $133,149 | $5,230 | 3.93% | | Nine months ended Sep 30 | $368,731 | $354,457 | $14,274 | 4.03% | Factors Affecting Operating Expense Change (in thousands) | Factor | 3 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | 9 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | | :--- | :--- | :--- | | Total water production expenses | $1,499 | $2,926 | | Administrative and general | $756 | $4,387 | | Balance and memorandum account cost recovery | $440 | $2,055 | | Maintenance | $696 | $1,430 | | Property taxes and other non-income taxes | $229 | $1,453 | | Depreciation and amortization | $1,692 | $7,555 | | Gain on sale of nonutility properties | $(82) | $(5,532) | | **Total Increase/(decrease)** | **$5,230** | **$14,274** | [Sources of Water Supply](index=27&type=section&id=Sources%20of%20Water%20Supply) - SJWC's water supply consists of imported water, groundwater, surface water, and reclaimed water[100](index=100&type=chunk) - California is experiencing a severe drought, with Valley Water's reservoirs at approximately **17% of total capacity** as of October 1, 2022[101](index=101&type=chunk) - A water shortage emergency led SJWC to activate Stage 3 of its Water Shortage Contingency Plan, imposing restrictions on outdoor water usage[103](index=103&type=chunk) Change in Sources of Water Supply (in million gallons) - Water Utility Services (Three Months Ended Sep 30) | Source | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Purchased water | 7,098 | 5,703 | 1,395 | 24.46% | | Groundwater | 4,870 | 6,283 | (1,413) | -22.49% | | Surface water | 2,866 | 3,113 | (247) | -7.93% | | Reclaimed water | 322 | 341 | (19) | -5.57% | | **Total** | **15,156** | **15,440** | **(284)** | **-1.84%** | Change in Sources of Water Supply (in million gallons) - Water Utility Services (Nine Months Ended Sep 30) | Source | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Purchased water | 16,136 | 15,601 | 535 | 3.43% | | Groundwater | 13,790 | 16,850 | (3,060) | -18.16% | | Surface water | 8,153 | 6,947 | 1,206 | 17.36% | | Reclaimed water | 694 | 669 | 25 | 3.74% | | **Total** | **38,773** | **40,067** | **(1,294)** | **-3.23%** | [Water Production Expenses](index=28&type=section&id=Water%20Production%20Expenses) - Water production expenses increased due to higher average per unit costs for purchased water, groundwater extraction, and energy charges[110](index=110&type=chunk)[111](index=111&type=chunk) - Effective July 1, 2022, Valley Water increased the unit price of purchased water by **~14%** and the groundwater extraction charge by **~15%**[111](index=111&type=chunk) [Other Operating Expenses](index=29&type=section&id=Other%20Operating%20Expenses) - Other operating expenses increased by **$3.7 million** for the three months ended September 30, 2022, driven by higher depreciation, administrative, and maintenance costs[112](index=112&type=chunk) - For the nine months ended September 30, 2022, these expenses increased by **$11.3 million**, primarily due to higher depreciation and administrative costs[113](index=113&type=chunk) [Other (Expense) Income](index=29&type=section&id=Other%20(Expense)%20Income) - For the three months ended September 30, 2022, other expense was impacted by increased interest on lines of credit[114](index=114&type=chunk) - For the nine months ended September 30, 2022, the change was mainly due to a **$3.0 million** pre-tax gain from a prior year sale[115](index=115&type=chunk) [Provision for Income Taxes](index=29&type=section&id=Provision%20for%20Income%20Taxes) Income Tax Expense (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $223 | $2,749 | $(2,526) | -91.89% | | Nine months ended Sep 30 | $3,658 | $5,159 | $(1,501) | -29.10% | - The decrease in income tax expense was primarily due to discrete tax items and a tax accounting method change at CTWS[116](index=116&type=chunk)[117](index=117&type=chunk) - The Inflation Reduction Act of 2022 is not expected to materially impact the company's year-end tax rate[118](index=118&type=chunk) [Regulation and Rates](index=29&type=section&id=Regulation%20and%20Rates) [California Regulatory Affairs](index=29&type=section&id=California%20Regulatory%20Affairs) - The CPUC approved SJWC's 2022 GRC settlement, authorizing revenue increases of **$25.1 million (6.03%)** in 2022, **$13.0 million (2.94%)** in 2023, and **$16.1 million (3.56%)** in 2024[121](index=121&type=chunk)[79](index=79&type=chunk) - The 2022 GRC also approved a **$350 million** capital budget and recovery of **$18.2 million** from balancing and memorandum accounts[121](index=121&type=chunk)[79](index=79&type=chunk) - SJWC filed advice letters to recover **$18.2 million** and refund **$19.9 million**, resulting in a net refund of **$1.7 million** to customers[125](index=125&type=chunk)[126](index=126&type=chunk) - SJWC filed to implement new water rates effective November 1, 2022, in accordance with the 2022 GRC Decision[127](index=127&type=chunk) [Connecticut Regulatory Affairs](index=30&type=section&id=Connecticut%20Regulatory%20Affairs) - PURA approved a WICA surcharge of **2.44%** for Connecticut Water customers, effective January 1, 2022, expected to generate **$2.6 million** in revenue[128](index=128&type=chunk) - The cumulative WICA charge reached **3.26%** as of July 1, 2022, after further project approvals[128](index=128&type=chunk)[130](index=130&type=chunk) - A **2.85%** surcharge was imposed on customer bills, effective April 1, 2022, to collect the 2021 revenue shortfall[129](index=129&type=chunk) - PURA approved Connecticut Water's application to issue **$25 million** in unsecured notes at **4.71%** interest[131](index=131&type=chunk) [Texas Regulatory Affairs](index=30&type=section&id=Texas%20Regulatory%20Affairs) - The PUCT increased CLWSC's Water Pass Through Charge usage rate from **$0.70 to $0.90** per thousand gallons for its Canyon Lake system[133](index=133&type=chunk) - For the Kendall West system, CLWSC's WPC increased from **$2.39 to $2.56** per thousand gallons, effective October 1, 2022[134](index=134&type=chunk) [Maine Regulatory Affairs](index=31&type=section&id=Maine%20Regulatory%20Affairs) - A rate increase of **$6.3 million (72.5%)** for the Biddeford Saco division went into effect on July 1, 2022[135](index=135&type=chunk) - Maine Water filed for general rate increases in four divisions totaling **$532 thousand** in new revenue[136](index=136&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) [Cash Flow from Operating Activities](index=31&type=section&id=Cash%20Flow%20from%20Operating%20Activities) Net Cash Provided by Operating Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $129,349 | $100,255 | $29,094 | 29.02% | - The increase in operating cash flow was driven by changes in regulatory assets and general working capital[137](index=137&type=chunk) - SJWC received **$9.8 million** through a state arrearages payment program to relieve customer payment delinquencies[138](index=138&type=chunk) [Cash Flow from Investing Activities](index=31&type=section&id=Cash%20Flow%20from%20Investing%20Activities) Net Cash Used in Investing Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $(181,453) | $(182,899) | $1,446 | -0.79% | - Cash used in investing activities included **$160.5 million** for company-funded capital expenditures[139](index=139&type=chunk) - Water Utility Services' budgeted capital expenditures for 2022 are approximately **$223 million**, with **72%** invested as of September 30, 2022[140](index=140&type=chunk) - Over the next five years, Water Utility Services expects to incur approximately **$1.3 billion** in capital expenditures[141](index=141&type=chunk)[143](index=143&type=chunk) [Cash Flow from Financing Activities](index=32&type=section&id=Cash%20Flow%20from%20Financing%20Activities) Net Cash Provided by Financing Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $53,175 | $89,596 | $(36,421) | -40.65% | - The decrease in net cash from financing was due to lower proceeds from long-term debt and equity offerings, partially offset by increased borrowings on lines of credit[144](index=144&type=chunk) [Sources of Capital](index=32&type=section&id=Sources%20of%20Capital) - Future financing depends on internally generated funds and the ability to attract external financing, with earnings dependent on regulatory proceedings[145](index=145&type=chunk) Line of Credit Agreements as of September 30, 2022 (in thousands) | Borrower | Maturity Date | Line Limit | Outstanding | Unused Portion | | :--- | :--- | :--- | :--- | :--- | | SJW Group (Syndicated) | Aug 2, 2027 | $50,000 | $0 | $50,000 | | SJWC (Syndicated) | Aug 2, 2027 | $140,000 | $95,000 | $45,000 | | CTWS (Syndicated) | Aug 2, 2027 | $90,000 | $56,000 | $34,000 | | SJWTX, Inc (Syndicated) | Aug 2, 2027 | $20,000 | $1,500 | $18,500 | | CTWS (Citizens Bank) | Dec 14, 2023 | $10,000 | $6,670 | $3,330 | | CTWS (Citizens Bank) | May 15, 2025 | $40,000 | $40,000 | $0 | | **Total** | | **$350,000** | **$199,170** | **$150,830** | - The average cost of borrowing on lines of credit increased to **2.79%** for the nine months ended September 30, 2022, from **1.34%** in 2021[151](index=151&type=chunk) - The company was in compliance with all debt covenants as of September 30, 2022[152](index=152&type=chunk)[157](index=157&type=chunk) - Under an equity distribution agreement, **$71.8 million** remains available to issue into shares[159](index=159&type=chunk) - The current Standard & Poor's rating for SJW Group is **A- with a stable outlook**[160](index=160&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=34&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from interest rate changes and pension plan asset values - Market risks include changes in interest rates, pension plan asset values, and equity prices[161](index=161&type=chunk) - Pension costs are affected by discount rates, mortality rates, and investment returns on plan assets[161](index=161&type=chunk) - SJW Group has no derivative financial instruments or significant off-balance sheet risks[162](index=162&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of September 30, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[163](index=163&type=chunk) - No material changes in internal control over financial reporting occurred during the third fiscal quarter of 2022[164](index=164&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=35&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) No pending legal proceedings are expected to have a material impact on the company's financial position - No pending legal proceedings are expected to materially affect SJW Group's business, financial position, results of operations, or cash flows[166](index=166&type=chunk) [ITEM 1A. RISK FACTORS](index=35&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to risk factors disclosed in the company's Form 10-K and other public filings - No material changes from risk factors previously disclosed in SJW Group's Form 10-K for the year ended December 31, 2021[167](index=167&type=chunk) [ITEM 5. OTHER INFORMATION](index=35&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company declared a regular quarterly dividend of $0.36 per share - A regular quarterly dividend of **$0.36 per share** was declared on October 26, 2022, payable December 1, 2022[168](index=168&type=chunk) - SJW Group posts operating and financial performance information on its websites[169](index=169&type=chunk) [ITEM 6. EXHIBITS](index=36&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including agreements and certifications - Exhibits include the Credit Agreement dated August 2, 2022, amendments to employment agreements, and certifications from the CEO and CFO[171](index=171&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) The report was formally signed by the Chief Financial Officer and Treasurer on October 28, 2022 - The report was signed by Andrew F Walters, Chief Financial Officer and Treasurer, on October 28, 2022[176](index=176&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) SJW Group reported decreased net income for Q2 and H1 2022, with growth in utility plant assets and increased operating cash flow Condensed Consolidated Statements of Comprehensive Income | Metric | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $149,041 | $152,241 | $273,343 | $267,026 | | **Operating Income** | $26,402 | $32,639 | $42,991 | $45,718 | | **Net Income** | $11,558 | $20,775 | $15,295 | $23,391 | | **Diluted EPS** | $0.38 | $0.69 | $0.50 | $0.79 | | **Dividends Per Share** | $0.36 | $0.34 | $0.72 | $0.68 | Condensed Consolidated Balance Sheets | Balance Sheet Item | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | $3,541,047 | $3,492,395 | | Net Utility Plant | $2,553,781 | $2,497,499 | | Cash and Cash Equivalents | $12,049 | $10,908 | | Goodwill | $640,311 | $640,471 | | **Total Liabilities & Capitalization** | $3,541,047 | $3,492,395 | | Total Stockholders' Equity | $1,029,845 | $1,034,519 | | Long-Term Debt, less current portion | $1,455,709 | $1,492,935 | | Line of Credit | $141,336 | $62,996 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $83,598 | $67,096 | | **Net Cash Used in Investing Activities** | ($117,131) | ($107,005) | | **Net Cash Provided by Financing Activities** | $34,065 | $58,741 | | **Net Change in Cash** | $532 | $18,832 | Notes to Financial Statements - Revenue from contracts with customers for the six months ended June 30, 2022, was **$270.4 million**, up from **$259.4 million** in the prior-year period[34](index=34&type=chunk) - Total net regulatory assets decreased to **$142.2 million** as of June 30, 2022, from **$154.6 million** at year-end 2021, primarily due to changes in balancing and memorandum accounts[43](index=43&type=chunk) - The company's Water Utility Services segment generated operating revenue of **$147.7 million** in Q2 2022, while the Real Estate Services segment generated **$1.4 million**[66](index=66&type=chunk) - Subsequent to the quarter end, on July 14, 2022, subsidiary SJWC entered into a note purchase agreement to sell **$70 million** of its 4.85% Senior Notes, Series P, due 2053[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes a **35%** decrease in year-to-date net income to specific factors, while revenue increased **2%** and operating expenses rose **4%**, with solid liquidity supporting future capital expenditures Results of Operations - Consolidated net income for the six months ended June 30, 2022, was **$15.3 million**, a decrease of **$8.1 million (35%)** from the same period in 2021, including a **$4.45 million** gain on a nonutility property sale, offset by **$1.96 million** in depreciation and **$1.71 million** in settlement expenses[88](index=88&type=chunk) | Revenue Change Drivers (Six Months 2022 vs 2021) | Amount Change (in thousands) | % Change | | :--- | :--- | :--- | | Consumption Changes | $(4,829) | (2)% | | Increase in Customers | $2,881 | 1% | | Rate Increases | $12,687 | 5% | | Other Regulatory Mechanisms | $(5,498) | (2)% | | **Total Change** | **$6,317** | **2%** | - Operating expenses for the first six months of 2022 increased by **$9.0 million (4%)** compared to 2021, driven by a **$5.9 million** increase in depreciation and amortization and a **$3.6 million** increase in administrative and general expenses, partially offset by a **$5.45 million** gain on the sale of nonutility properties[90](index=90&type=chunk)[103](index=103&type=chunk) Sources of Water Supply - California is experiencing a severe drought, with Santa Clara Valley Water District's reservoirs at **22%** of total capacity as of July 1, 2022, leading SJWC to activate its Water Shortage Contingency Plan for a mandatory **15%** reduction in water consumption[92](index=92&type=chunk)[94](index=94&type=chunk)[151](index=151&type=chunk) | Water Source | Six Months Ended June 30, 2022 (in million gallons) | Six Months Ended June 30, 2021 (in million gallons) | % Change | | :--- | :--- | :--- | :--- | | Purchased water | 9,038 | 9,257 | (2.4)% | | Groundwater | 8,920 | 10,567 | (15.6)% | | Surface water | 5,287 | 4,475 | 18.1% | | **Total** | **23,617** | **24,627** | **(4.1)%** | Regulation and Rates - **California:** SJWC's General Rate Case settlement agreement, if approved, provides for a revenue increase of **$54.1 million** over three years, starting with a **$25.1 million** increase in 2022, with a final decision expected in Q4 2022 and rates retroactive to January 1, 2022[107](index=107&type=chunk)[108](index=108&type=chunk) - **Connecticut:** Effective April 1, 2022, a **2.85%** surcharge was imposed on customer bills to collect a 2021 revenue shortfall under the Water Rate Adjustment (WRA) mechanism[114](index=114&type=chunk) - **Maine:** A rate increase of **$6.3 million (72.5%)** for the Biddeford Saco division went into effect on July 1, 2022, related to the new Saco River Drinking Water Resource Center[119](index=119&type=chunk) Liquidity and Capital Resources - Cash flow from operations increased to **$83.6 million** for the first six months of 2022, up from **$67.1 million** in the prior year period, primarily due to changes in regulatory assets[122](index=122&type=chunk) - The company plans approximately **$1.3 billion** in capital expenditures over the next five years to upgrade and maintain its water systems, with the 2022 budget at approximately **$223 million**, of which **$101.6 million (46%)** was invested as of June 30, 2022[125](index=125&type=chunk)[126](index=126&type=chunk) - As of June 30, 2022, the company had **$141.3 million** outstanding on its lines of credit, with **$118.7 million** of unused capacity available for short-term financing needs[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks primarily from changes in interest rates, which affect its variable-rate debt, and fluctuations in pension plan asset values - SJW Group's primary market risks include changes in interest rates on variable-rate debt and the impact of investment returns, discount rates, and mortality rates on its pension plans[141](index=141&type=chunk) [Item 4. Controls and Procedures](index=32&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 June 30, 2022, with no material changes to internal control over financial reporting during the second quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the company's disclosure controls and procedures are effective[143](index=143&type=chunk)[144](index=144&type=chunk) - There were no changes in internal control over financial reporting during the second quarter of 2022 that materially affected, or are reasonably likely to materially affect, internal controls[145](index=145&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reports that it is subject to ordinary routine litigation incidental to its business but has no pending legal proceedings expected to have a material effect on its financial condition or results of operations - SJW Group is not a party to any pending legal proceedings that are expected to have a material effect on its business, financial position, results of operations, or cash flows[148](index=148&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=ITEM%201A.%20Risk%20Factors) The company highlights key risks including severe drought impacts, ongoing COVID-19 pandemic effects, and rising inflation, which could adversely affect revenues and increase costs - The severe drought in California has led to mandatory **15%** water conservation measures, which are expected to result in lower water usage and may adversely affect operating results, with lost revenues tracked in a memorandum account for potential future recovery, though not guaranteed[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - The COVID-19 pandemic continues to pose risks, including potential utility termination moratoriums, supply chain disruptions, and labor issues, with some related costs expected to be recovered through rate-making, but regulatory approval is not certain[158](index=158&type=chunk)[160](index=160&type=chunk)[163](index=163&type=chunk) - Rising inflation presents a risk by increasing the company's overall cost structure, including interest rates, capital costs, and labor, and the company may not be able to secure rate increases sufficient to cover these higher costs in a timely manner[165](index=165&type=chunk) [Item 5. Other Information](index=37&type=section&id=ITEM%205.%20OTHER%20INFORMATION) On July 27, 2022, the Board of Directors declared a regular quarterly dividend of **$0.36** per share of common stock, payable on September 1, 2022, to stockholders of record as of August 8, 2022 - The Board of Directors declared a quarterly dividend of **$0.36** per share on July 27, 2022[166](index=166&type=chunk)

SJW Group (NYSE:SJW) Q2 2022 Earnings Conference Call July 28, 2022 10:00 AM ET Company Participants James Lynch - Chief Accounting Officer Eric Thornburg - Chairman, President & CEO Andrew Walters - CFO & Treasurer Conference Call Participants Richard Sunderland - JPMorgan Angie Storozynski - Seaport Research Operator Thank you for standing by, and welcome to the SJW Group Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' present ...

JPM Energy, Power & Renewables Conference June 23, 2022 Forward-Looking Statements 2 Safe Harbor This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Some of these forward-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "projects," "strategy," or "anticipates," or the negative of th ...