SJW (US:SJW)2024-02-22 22:35Financial Data and Key Metrics - Revenue for 2023 was $670.4 million, an 8% increase from $620.7 million in 2022 [13] - Net income for 2023 was $85 million, a 15% increase from $73.8 million in 2022 [13] - Diluted EPS for 2023 was $2.68, a 10% increase from $2.43 in 2022, driven partly by a $0.14 increase due to the partial release of income tax reserves [13] - Q4 2023 revenue was $171.3 million, compared to $171.4 million in Q4 2022, with net income of $18.9 million or $0.59 per diluted share, down from $33.5 million or $1.09 per diluted share in Q4 2022 [29] Business Line Data and Key Metrics - Texas Water achieved 12% customer growth year-over-year, serving over 28,000 water connections and 950 wastewater connections [9] - Advanced Metering Infrastructure (AMI) project in California is expected to cost approximately $100 million, with $29 million budgeted for 2024 [21] - The company invested $272 million in capital improvements in 2023, exceeding the planned expenditures by $17 million [4] Market Data and Key Metrics - Reduced water usage in Maine due to wet weather and lower industrial usage, and in Texas due to drought conditions and water restrictions [12] - Texas Water serves three of the five fastest-growing counties in the US, with a 47% increase in potential new connections to 22,000 units [67] - The company is targeting voluntary water use reductions in Texas due to ongoing drought conditions, with most service areas classified as Stage 2 or Stage 3 drought [69] Company Strategy and Industry Competition - The company plans to invest $1.6 billion over five years, including $230 million for PFAS remediation [48] - Strategic investments include advanced leak detection, solar generation, battery energy storage systems, and fleet electrification to reduce operating expenses [10] - The company is focused on regulatory outcomes, such as the general rate case in California, Connecticut, and the system improvement charge in Texas [27] Management Commentary on Operating Environment and Future Outlook - Management highlighted constructive regulatory outcomes, including the cost of capital decision and the reimplementation of the Water Conservation Memorandum Account in California [3] - The company expects 2024 diluted EPS guidance of $2.68 to $2.78, consistent with a long-term growth rate of 5% to 7% [70] - Management remains optimistic about Texas Water's growth prospects, driven by organic growth and strategic acquisitions [47] Other Important Information - The company has a gender-balanced board and spent $63 million (21% of addressable spend) with diverse suppliers in 2023 [76] - The company received an A rating from MSCI for ESG efforts and was recognized in the Newsweek Excellence 1000 Index for 2024 [57] - The company is participating in a class action lawsuit against 3M and DuPont to recover costs related to PFAS remediation [97] Q&A Session Summary Question: Connecticut Regulatory Environment and Aquarian Water - Management declined to comment specifically on Aquarian Water but expressed optimism about the regulatory process in Connecticut [60][62] - The company is focused on disciplined growth and evaluating opportunities that create shareholder value [81][82] Question: Pending Rate Case in Connecticut - Management expressed confidence in the team's transparency and collaboration with regulators, expecting a fair outcome [83][84] - The decision on the general rate case is expected by the end of June 2024, with a potential revenue increase effective July 1, 2024 [40] Question: PFAS Remediation and Public Awareness - Management emphasized the importance of EPA's proposed regulatory standards for PFAS and the company's commitment to resolving the issue [95][113] - The company is participating in a class action lawsuit to recover costs, which will benefit customers by mitigating rate impacts [97] Question: Capital Expenditures and Reinvestment in 2024 - Management highlighted that approximately 65% of the $332 million 2024 capital budget will be recovered through pre-approved projects and infrastructure recovery mechanisms [72] - Reinvestment in 2024 includes strategic projects aimed at reducing future costs and improving operational efficiency [87]