SJW (SJW) - 2023 Q4 - Annual Results

SJW Group 2023 Financial Results 2023 Operating Results SJW Group reported strong 2023 financial results, with net income increasing 15% to $85.0 million and diluted EPS reaching $2.68, primarily driven by rate increases and a lower effective tax rate, alongside 8% operating revenue growth to $670.4 million Full Year 2023 vs 2022 Financial Highlights | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Operating Revenue | $670.4 million | $620.7 million | +8% | | Net Income | $85.0 million | $73.8 million | +15% | | Diluted EPS | $2.68 | $2.43 | +10.3% | - The increase in net income was primarily driven by rate filings in California and Maine, a $0.14 per share positive impact from the partial release of an uncertain tax position reserve, and lower maintenance costs[3] - Revenue growth of $49.1 million was mainly from rate filings ($46.6 million) and customer growth ($3.8 million), partially offset by a $6.6 million decrease from lower customer usage due to weather conditions[4] - Operating expenses increased by $31.2 million, largely due to a $23.4 million rise in water production expenses from higher purchased water costs[4][6] Fourth Quarter 2023 Operating Results SJW Group's Q4 2023 net income decreased 43% to $18.9 million, or $0.59 per diluted share, primarily due to a tough year-over-year comparison from a retroactive revenue increase in Q4 2022, while operating expenses rose 11% Q4 2023 vs Q4 2022 Financial Highlights | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Operating Revenue | $171.3 million | $171.4 million | ~0% | | Net Income | $18.9 million | $33.5 million | -43% | | Diluted EPS | $0.59 | $1.09 | -46% | - The year-over-year comparison is distorted because Q4 2022 results included a retroactive revenue increase of approximately $20.7 million for all of 2022, following a delayed general rate case (GRC) decision[8][11] - Q4 operating expenses rose by 11% to $134.8 million, mainly due to an $11.6 million increase in water production expenses from higher groundwater extraction charges[12][13] - The California Public Utilities Commission (CPUC) reinstated the Water Conservation Memorandum Account (WCMA) and Water Conservation Expense Memorandum Account (WCEMA), providing revenue protection mechanisms retroactive to April 20, 2023[9] Capital Expenditures SJW Group invested $272 million in infrastructure in 2023, exceeding guidance, and plans over $1.6 billion in capital expenditures over the next five years, including approximately $230 million for PFAS treatment pending approvals - Invested $272 million in infrastructure in 2023, exceeding the guidance of $255 million[13] - Plans to invest over $1.6 billion in capital over the next 5 years[14] - The 5-year plan includes approximately $230 million to install treatment for PFAS, subject to regulatory approvals[14] Rate Activity and Regulatory Updates SJW Group actively pursued regulatory rate adjustments across California, Connecticut, Maine, and Texas, securing new rates and filing for future increases while expanding its customer base in Texas - California: New rates effective Jan 1, 2024, include a WCCM-adjusted ROE of 10.01%. A new GRC application for 2025-2027 requests an 11.1% revenue increase in 2025[16][17] - Connecticut: Filed a GRC application for a $21.4 million (18.1%) increase in authorized revenues, with a decision expected around July 1, 2024[18] - Maine: Received approval for a $2.6 million (17.6%) annual revenue increase, effective January 1, 2024, to cover costs for the Saco River Drinking Water Resource Center[19] - Texas: Grew customer base by 12% in 2023 through organic growth and acquisitions. An application for a system improvement charge (SIC) is pending, which is projected to increase annualized water revenue by $1.6 million[2][21] 2024 Guidance and Corporate Outlook SJW Group projects 2024 diluted EPS between $2.68 and $2.78, plans $332 million in infrastructure investments, and reiterates a long-term diluted EPS growth target of 5% to 7% from a 2022 base 2024 Full-Year Guidance | Metric | 2024 Guidance | | :--- | :--- | | Net Income per Diluted Share | $2.68 to $2.78 | | Regulated Infrastructure Investments | ~$332 million | - Reiterated long-term diluted EPS growth target of 5% to 7%, using 2022's diluted EPS of $2.43 as the anchor[23] - The company highlighted that 2023 results were positively impacted by a $0.14 per diluted share adjustment to income tax reserves, which should be considered when comparing to 2024 guidance[23] Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements show full-year operating revenue increasing to $670.4 million and net income to $85.0 million, with total assets growing to $4.35 billion and stockholders' equity to $1.23 billion Condensed Consolidated Income Statement (Full Year) | (in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Operating Revenue | $670,363 | $620,698 | | Operating Income | $149,435 | $130,978 | | Net Income | $84,987 | $73,828 | | Diluted EPS | $2.68 | $2.43 | Condensed Consolidated Balance Sheet Highlights | (in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Net Utility Plant | $3,170,654 | $2,630,317 | | Total Assets | $4,345,067 | $3,755,056 | | Long-Term Debt | $1,526,699 | $1,491,965 | | Total Stockholders' Equity | $1,233,397 | $1,110,868 |