SJW (US:SJW)2020-05-06 16:04Financial Data and Key Metrics Changes - First quarter revenue was $115.8 million, a 49% increase over the first quarter of 2019 [25] - Net income for the quarter was $2.4 million, or $0.08 per diluted share, compared to $5.9 million, or $0.21 diluted earnings per share for the first quarter of 2019 [25] - The change in diluted earnings per share was primarily due to increased customer usage, CTWS results, rate increases, and savings in merger-related costs, offset by interest expense and decreased surface water production [26] Business Line Data and Key Metrics Changes - The revenue increase was attributed to $27.4 million from the CTWS merger, $6 million from higher customer usage, and $3.5 million from cumulative rate increases [27] - Total water production costs increased by 26% compared to the first quarter of 2019, primarily due to new CTWS expenses and decreased lower-cost surface water production [28] Market Data and Key Metrics Changes - California demand was reported to be ahead of last year and the 5-year average, with a 13% increase in system delivery through April [22][59] - The company anticipates significant increases in operating costs due to reliance on purchased water, with every billion gallons costing an additional $4.2 million compared to using its own supply [21][30] Company Strategy and Development Direction - The company continues to execute its core growth strategy of investing in high-quality water systems and ensuring resilient water systems [36] - Capital programs are expected to add rate base and support future earnings, with a focus on completing $320 million in investments authorized in the current general rate case by the end of 2020 [37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the COVID-19 pandemic but noted that there had not yet been a material financial impact through Q1 [18] - The company is closely monitoring revenue impacts and adjusting operations to mitigate them, with a focus on maintaining public health responsibilities [41][44] Other Important Information - The company has a decoupling mechanism in Connecticut that provides downside protection in the event of a decline in demand [61] - The company has continuously paid dividends for over 76 years and increased annual dividends for the last 53 years [23] Q&A Session Summary Question: Can you explain the CMA memo account and its impact on P&L? - The CMA memo account tracks COVID-19 related costs and quantifiable revenue impacts, which will be submitted for review to regulatory authorities in the future [52] Question: What is the process for recovering higher purchased water costs? - The company is evaluating the possibility of applying for a water supply cost balancing account in the next general rate filing [55] Question: What are the demand trends in your jurisdictions? - Demand in California is currently about 13% ahead of the 5-year average, with no revenue impact seen in Q1 [59] Question: Is the guidance adjustment solely due to purchased water expenses? - Yes, the guidance adjustment is completely driven by the need to purchase additional water due to lower surface water availability [64] Question: Will the CapEx budget be affected by the pause in activity? - The company expects to meet its $320 million CapEx budget for California, with any delays shifting into future years rather than reducing the total amount [68]