California Water Service(US:CWT)2025-10-30 20:08Financial Performance - Net income attributable to California Water Service Group for Q3 2025 was $61.2 million, a slight increase from $60.7 million in Q3 2024, with earnings per diluted share remaining at $1.03[107]. - For the nine months ended September 30, 2025, net income decreased to $116.7 million from $171.1 million in the same period of 2024, reflecting a $54.4 million decline primarily due to a $34.4 million decrease in operating revenue[108]. - Operating revenue for Q3 2025 increased by $11.6 million, or 3.9%, to $311.2 million compared to $299.6 million in Q3 2024[110]. - For the nine months ended September 30, 2025, operating revenue decreased by $34.4 million, or 4.2%, to $780.2 million compared to $814.6 million in the same period of 2024[110]. - Total operating expenses for Q3 2025 increased by $7.8 million, or 3.4%, to $240.6 million, driven by higher water production costs and depreciation[111]. - For the nine months ended September 30, 2025, total operating expenses rose by $13.6 million, or 2.2%, to $635.4 million, primarily due to increases in water production costs and other operational expenses[112]. - The net change in operating revenue for Q3 2025 was influenced by rate increases of $12.7 million, partially offset by a decrease in customer usage of $8.1 million[113]. Water Production and Costs - Water production sources for Q3 2025 included 52% from well production, 44% from purchased water, and 4% from surface water, compared to 50%, 46%, and 4% respectively in Q3 2024[114]. - Water production costs increased by $7.6 million, or 8.0%, for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to an increase in wholesale rates[115]. - For the nine months ended September 30, 2025, water production costs rose by $14.3 million, or 6.0%, compared to the same period in 2024, driven by higher wholesale rates and increased customer usage[115]. - Other operations expenses increased by $7.8 million for the nine months ended September 30, 2025, mainly due to a $2.9 million rise in bad debt expense and a $2.2 million increase in labor expense[116]. - Depreciation and amortization expense rose by $3.1 million and $9.2 million for the three and nine months ended September 30, 2025, respectively, due to utility plant placed in service in 2024[117]. Regulatory and Compliance - The company anticipates regulatory challenges and uncertainties regarding rate increases and compliance with new environmental standards, which may impact future financial performance[102]. - The effective tax rate for the company is expected to remain stable, with no material impact from recent legislative changes on income tax expense for Q3 2025[106]. - The Water Board adopted a maximum contaminant level (MCL) of 10 parts per billion for Chromium-6 in drinking water, with compliance required within two to four years[177]. - Management believes that supplies will meet current water quality standards using available treatment processes or by installing the best available technologies[173]. - The company is well positioned to comply with new urban water use regulations established by California's Assembly Bill 1668 and Senate Bill 606[175]. Future Investments and Projections - Cal Water proposed to invest over $1.6 billion in infrastructure improvements from 2025 to 2027, with approximately $1.3 billion allocated for new capital investments[124]. - Cal Water expects to increase total revenue by $140.6 million, or 17.1%, in 2026, with additional increases of $74.2 million, or 7.7%, in 2027, and $83.6 million, or 8.1%, in 2028[125]. - In September 2025, Cal Water submitted an advice letter to recover $18.7 million related to MWRAM undercollection through surcharges implemented on October 1, 2025[134]. - Cal Water filed an application for $125.0 million in PFAS treatment costs in 2026 and 2027, with associated annual revenue increases of $6.7 million and $9.0 million for 2027 and 2028, respectively[136]. - The company implemented new rates on January 1, 2025, resulting in an annual gross revenue increase of $27.2 million from escalation rate increases for 18 regulated districts[129]. Cash Flow and Financing - Cash flow from operations for the nine months ended September 30, 2025, was $254.7 million, an increase of 14.0% compared to $222.8 million in the same period of 2024[147]. - Utility capital expenditures for the nine months ended September 30, 2025, totaled $364.7 million, with an estimated range of $450.0 million to $550.0 million for the full year 2025[150][168]. - Net cash provided by financing activities for the nine months ended September 30, 2025, was $139.1 million, compared to $132.3 million for the same period in 2024[151]. - The company paid dividends of $56.0 million during the nine months ended September 30, 2025, up from $48.8 million in the same period of 2024[151]. - The company borrowed $420.0 million on unsecured revolving credit facilities during the nine months ended September 30, 2025, compared to $370.0 million in 2024[152]. Asset and Shareholder Information - Book value per common share increased to $28.54 as of September 30, 2025, compared to $27.49 at December 31, 2024[167]. - The net income for the nine months ended September 30, 2025, was $118.1 million, compared to $193.5 million for the full year 2024[162]. - As of September 30, 2025, total assets were $5.01 billion, an increase from $4.71 billion as of December 31, 2024[163]. - The company plans to use proceeds from the issuance of $70.0 million and $100.0 million in senior unsecured notes to refinance existing indebtedness and for general corporate purposes[158]. - The company expects to maintain a long-term dividend payout ratio goal of 60% of net income[164]. Water Supply and Extraction - Average annual groundwater extraction from adjudicated groundwater basins is approximately 7.8 billion gallons, representing 14.9% of the total average annual water supply pumped from wells for 2023 to 2024[172]. - Average annual groundwater extraction from managed groundwater basins is approximately 29.6 billion gallons, accounting for 56.4% of the total average annual water supply pumped from wells for 2023 to 2024[172]. - Well pump taxes for the nine months ended September 30, 2025, were $17.8 million, compared to $15.7 million for the same period in 2024[172]. - Statewide reservoir storage as of September 30, 2025, was 109% of the historical average over the last 50 years[173]. - Estimated capital investment required to comply with the PFAS regulation is approximately $226.0 million[176]. Contractual Obligations - There have been no material changes in contractual obligations outside the normal course of business during the nine months ended September 30, 2025[178].