SJW Group Announces Second Quarter 2024 Financial Results
-
Delivers
$0.64 $0.06 $0.66 $0.08 -
Invests
$158 million 48% of 2024 capital budget -
Agreement in principle reached on
California general rate case (GRC) -
Updates 2024 GAAP guidance to
$2.66 $2.76 $2.68 $2.78 -
Declares
$0.40
"We are pleased with our financial results for the quarter, which demonstrate the benefits of our national platform combined with the strength of our local water utility operations," stated SJW Group Chair, CEO, and President, Eric W. Thornburg. "We continued to deliver on our growth strategy by investing in our water supply and infrastructure across our footprint, as well as reaching an all-party settlement agreement in principle on almost all issues in our
Second Quarter Operating Results
Net income prepared in accordance with
Adjusted net income is a non-GAAP measure representing GAAP net income excluding special items. The difference between 2024 GAAP net income and adjusted net income for the quarter was due to a loss on the sale of real estate of
Operating revenue for the second quarter was
Operating expenses for the quarter ended June 30, 2024 were
-
An increase in water production expenses of
$8.6 million -
An increase in depreciation and amortization of
$2.2 million -
An increase in maintenance costs of
$1.6 million Connecticut general rate case and increased security costs; offset by, -
A decrease in administrative and general expenses of
$3.1 million
The effective consolidated income tax rates for the second quarter of 2024 and 2023 were approximately
Year-to-Date Operating Results
Net income prepared in accordance with
Operating revenue year-to-date was
Operating expenses for the first six months of 2024 were
-
An increase in water production expenses of
$13.4 million -
An increase in depreciation and amortization of
$4.3 million -
An increase of maintenance costs of
$2.2 million -
A decrease in administrative and general expenses of
$1.6 million
The effective consolidated income tax rates for the first half of 2024 and 2023 were approximately
Capital Expenditures
Through the second quarter of 2024, SJW Group invested
San Jose Water has begun installation on a
Rate Activity and Regulatory Updates
On June 14, 2024, San Jose Water notified the CPUC that it had reached an all-party settlement agreement in principle with the Public Advocates Office and Water Rate Advocates for Transparency, Equity and Sustainability (WRATES) on all but two policy issues in its 2025 through 2027 GRC application. The formal settlement motion and agreement will be submitted by August 19, 2024. Briefs on the two policy issues, which are expected to be fully litigated, will also be submitted by August 19.
The company's GRC application filed with the CPUC in January 2024 proposed an increase over current authorized revenues of approximately
- Treating PFAS in drinking water;
- Reducing greenhouse gas emissions through solar generation, energy storage systems, continued electrification of our vehicle fleet, and expansion of our advanced leak detection program; and
- Advancing the CPUC’s Environmental and Social Justice Action Plan by improving access to high-quality water service, climate resiliency, and economic and workforce development.
A decision on the GRC and/or the settlement agreement is expected by the CPUC in fourth quarter of 2024 and new rates are anticipated to be effective on January 1, 2025.
On June 12, 2024, the CPUC approved advice letter 609, which increased the authorized revenue requirement by
On June 21, 2024, the CPUC approved advice letter 610/610A, which requested a
On June 28, 2024, the Connecticut Public Utilities Regulatory Authority (PURA) issued a final decision on Connecticut Water's GRC that was filed on October 3, 2023. PURA's decision provided for:
-
An increase in the annual revenue requirement of
$6.5 million 5.5% ; -
An opportunity to earn additional revenue of
$1.1 million -
A return on equity of
9.3% , which is up from9.0% in the last GRC; -
A capital structure of
53% equity and47% debt, which is similar to the last GRC; and - Approval of the company's proposal to expand the existing customer financial assistance program.
As part of the GRC process, the Water Infrastructure and Conservation Adjustment (WICA) infrastructure recovery charge was reset to zero and the prior WICA of
Connecticut Water had requested a
On June 24, 2024, Maine Water filed for increases in the Water Infrastructure Charge in both the
Force for Good
In May 2024, San Jose Water secured
In June 2024, PURA approved Connecticut Water's request to expand income-eligibility for the Water Rate Assistance Program (WRAP), a first of its kind program in the state that offers water bill discounts for income-eligible customers. The expansion allows Connecticut Water to serve more customers and provide greater discounts to eligible WRAP customers.
2024 Guidance
The following table includes a reconciliation of the company's 2024 diluted EPS guidance (GAAP) to adjusted diluted EPS guidance (non-GAAP):
|
2024 Earnings Guidance |
||||||
Estimated Diluted EPS Guidance on a GAAP Basis |
$ |
2.66 |
|
to |
|
2.76 |
|
Adjustments: |
|
|
|
|
|
||
Loss on sale of real estate investments, net of tax |
|
0.02 |
|
|
|
0.02 |
|
Adjusted EPS Guidance (non-GAAP) |
$ |
2.68 |
|
to |
|
2.78 |
|
In addition, we reiterate our non-linear long-term diluted EPS growth of
Our guidance is subject to risks and uncertainties, including, without limitation, those factors outlined in the “Forward Looking Statements” of this release and the “Risk Factors” section of the company’s annual and quarterly reports filed with the Securities and Exchange Commission.
Dividend
On July 24, 2024, the directors of SJW Group declared a quarterly cash dividend on common stock of
Financial Results Call Information
Eric W. Thornburg, president, chief executive officer, and board chair, and Andrew F. Walters, chief financial officer, treasurer, and interim principal accounting officer, will review results for the second quarter of 2024 in a live webcast presentation at 11 a.m. Pacific Daylight Time, or 2 p.m. Eastern Daylight Time, on Thursday, July 25, 2024.
Interested parties may access the webcast and related presentation materials at the website www.sjwgroup.com. An archive of the webcast will be available until October 21, 2024.
Non-GAAP Financial Measures
SJW Group's net income and diluted EPS are prepared in accordance with GAAP and represent the earnings as reported to the Securities and Exchange Commission. Adjusted net income and Adjusted diluted EPS are non-GAAP measures representing GAAP earnings adjusted to exclude the effects of real estate transactions and costs associated with mergers and acquisition activities, if any, which management believes are not representative of our core business activities. These non-GAAP financial measures are provided as additional information for investors to evaluate the performance of SJW Group's ongoing business activities. SJW Group uses adjusted net income and/or adjusted diluted EPS as the primary performance measurements when communicating with analysts and investors regarding our outlook and results. Adjusted net income and Adjusted diluted EPS are also used internally to measure performance. However, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes. Further, these non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.
About SJW Group
SJW Group is among the largest investor-owned pure-play water and wastewater utilities in
Forward-Looking Statements
This release 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,” “estimates,” “anticipates,” “intends,” “seeks,” “plans,” “projects,” “may,” “should,” “will,” or the negative of those words or other comparable terminology. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict.
These forward-looking statements involve a number of risks, uncertainties and assumptions including, but not limited to, the following factors: (1) the effect of water, utility, environmental and other governmental policies and regulations, including regulatory actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures, PFAS and other decisions; (2) changes in demand for water and other services; (3) unanticipated weather conditions and changes in seasonality including those affecting water supply and customer usage; (4) the effect of the impact of climate change; (5) unexpected costs, charges or expenses; (6) our ability to successfully evaluate investments in new business and growth initiatives; (7) contamination of our water supplies and damage or failure of our water equipment and infrastructure; (8) the risk of work stoppages, strikes and other labor-related actions; (9) catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemic, or similar occurrences; (10) changes in general economic, political, business and financial market conditions; (11) the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness, and general market and economic conditions; and (12) legislative, and general market and economic developments. The risks, uncertainties and other factors may cause the actual results, performance or achievements of SJW Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Results for a quarter are not indicative of results for a full year due to seasonality and other factors. Other factors that may cause actual results, performance or achievements to materially differ are described in SJW Group’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC. Forward-looking statements are not guarantees of performance, and speak only as of the date made. SJW Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
SJW Group |
||||||||||||||
Condensed Consolidated Statements of Comprehensive Income |
||||||||||||||
(Unaudited) |
||||||||||||||
(in thousands, except share and per share data) |
||||||||||||||
|
|
|
||||||||||||
|
Three months ended June 30, |
|
Six months ended June 30, |
|||||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||||
Operating revenue |
$ |
176,174 |
|
|
156,886 |
|
|
$ |
325,556 |
|
|
294,182 |
|
|
Operating expense: |
|
|
|
|
|
|
|
|||||||
Production Expenses: |
|
|
|
|
|
|
|
|||||||
Purchased water |
|
38,129 |
|
|
32,592 |
|
|
|
64,321 |
|
|
55,010 |
|
|
Power |
|
2,737 |
|
|
2,379 |
|
|
|
5,164 |
|
|
4,578 |
|
|
Groundwater extraction charges |
|
17,552 |
|
|
14,994 |
|
|
|
29,678 |
|
|
25,353 |
|
|
Other production expenses |
|
12,052 |
|
|
11,921 |
|
|
|
23,101 |
|
|
23,964 |
|
|
Total production expenses |
|
70,470 |
|
|
61,886 |
|
|
|
122,264 |
|
|
108,905 |
|
|
Administrative and general |
|
20,468 |
|
|
23,527 |
|
|
|
46,256 |
|
|
47,871 |
|
|
Maintenance |
|
7,881 |
|
|
6,298 |
|
|
|
14,568 |
|
|
12,356 |
|
|
Property taxes and other non-income taxes |
|
8,419 |
|
|
7,896 |
|
|
|
17,249 |
|
|
16,297 |
|
|
Depreciation and amortization |
|
28,366 |
|
|
26,121 |
|
|
|
56,736 |
|
|
52,417 |
|
|
Total operating expense |
|
135,604 |
|
|
125,728 |
|
|
|
257,073 |
|
|
237,846 |
|
|
Operating income |
|
40,570 |
|
|
31,158 |
|
|
|
68,483 |
|
|
56,336 |
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|||||||
Interest on long-term debt and other interest expense |
|
(18,294 |
) |
|
(16,397 |
) |
|
|
(35,878 |
) |
|
(32,169 |
) |
|
Pension non-service credit (cost) |
|
939 |
|
|
(102 |
) |
|
|
1,889 |
|
|
(166 |
) |
|
Other, net |
|
1,205 |
|
|
2,115 |
|
|
|
3,856 |
|
|
5,381 |
|
|
Income before income taxes |
|
24,420 |
|
|
16,774 |
|
|
|
38,350 |
|
|
29,382 |
|
|
Provision for income taxes |
|
3,724 |
|
|
(1,512 |
) |
|
|
5,955 |
|
|
(434 |
) |
|
Net income |
|
20,696 |
|
|
18,286 |
|
|
|
32,395 |
|
|
29,816 |
|
|
Other comprehensive income (loss), net |
|
— |
|
|
9 |
|
|
|
(442 |
) |
|
102 |
|
|
Comprehensive income |
$ |
20,696 |
|
|
18,295 |
|
|
$ |
31,953 |
|
|
29,918 |
|
|
|
|
|
|
|
|
|
|
|||||||
Earnings per share |
|
|
|
|
|
|
|
|||||||
Basic |
$ |
0.64 |
|
|
0.58 |
|
|
$ |
1.00 |
|
|
0.96 |
|
|
Diluted |
$ |
0.64 |
|
|
0.58 |
|
|
$ |
1.00 |
|
|
0.95 |
|
|
Dividends per share |
$ |
0.40 |
|
|
0.38 |
|
|
$ |
0.80 |
|
|
0.76 |
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|||||||
Basic |
|
32,397,501 |
|
|
31,499,068 |
|
|
|
32,237,115 |
|
|
31,219,324 |
|
|
Diluted |
|
32,460,894 |
|
|
31,594,494 |
|
|
|
32,302,741 |
|
|
31,319,248 |
|
|
SJW Group |
|||||
Condensed Consolidated Balance Sheets |
|||||
(Unaudited) |
|||||
(in thousands, except share and per share data) |
|||||
|
June 30,
|
|
December 31,
|
||
Assets |
|
|
|
||
Utility plant: |
|
|
|
||
Land |
$ |
41,415 |
|
41,415 |
|
Depreciable plant and equipment |
|
4,077,009 |
|
3,967,911 |
|
Construction work in progress |
|
159,084 |
|
106,980 |
|
Intangible assets |
|
35,986 |
|
35,946 |
|
Total utility plant |
|
4,313,494 |
|
4,152,252 |
|
Less accumulated depreciation and amortization |
|
1,030,065 |
|
981,598 |
|
Net utility plant |
|
3,283,429 |
|
3,170,654 |
|
|
|
|
|
||
Nonutility properties and real estate investments |
|
13,376 |
|
13,350 |
|
Less accumulated depreciation and amortization |
|
96 |
|
194 |
|
Net nonutility properties and real estate investments |
|
13,280 |
|
13,156 |
|
|
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
|
22,804 |
|
9,723 |
|
Accounts receivable: |
|
|
|
||
Customers, net of allowances for uncollectible accounts of |
|
70,238 |
|
67,870 |
|
Income tax |
|
— |
|
5,187 |
|
Other |
|
5,584 |
|
3,684 |
|
Accrued unbilled utility revenue |
|
57,822 |
|
49,543 |
|
Assets held for sale |
|
— |
|
40,850 |
|
Prepaid expenses |
|
9,856 |
|
11,110 |
|
Current regulatory assets |
|
1,057 |
|
4,276 |
|
Other current assets |
|
5,818 |
|
6,146 |
|
Total current assets |
|
173,179 |
|
198,389 |
|
Other assets: |
|
|
|
||
Regulatory assets, less current portion |
|
238,963 |
|
235,910 |
|
Investments |
|
17,368 |
|
16,411 |
|
Postretirement benefit plans |
|
36,816 |
|
33,794 |
|
Other intangible asset |
|
28,386 |
|
28,386 |
|
Goodwill |
|
640,311 |
|
640,311 |
|
Other |
|
7,695 |
|
8,056 |
|
Total other assets |
|
969,539 |
|
962,868 |
|
Total assets |
$ |
4,439,427 |
|
4,345,067 |
|
SJW Group |
|||||
Condensed Consolidated Balance Sheets |
|||||
(Unaudited) |
|||||
(in thousands, except share and per share data) |
|||||
|
June 30,
|
|
December 31,
|
||
Capitalization and liabilities |
|
|
|
||
Capitalization: |
|
|
|
||
Stockholders’ equity: |
|
|
|
||
Common stock, |
$ |
33 |
|
32 |
|
Additional paid-in capital |
|
771,189 |
|
736,191 |
|
Retained earnings |
|
502,037 |
|
495,383 |
|
Accumulated other comprehensive income |
|
1,349 |
|
1,791 |
|
Total stockholders’ equity |
|
1,274,608 |
|
1,233,397 |
|
Long-term debt, less current portion |
|
1,549,587 |
|
1,526,699 |
|
Total capitalization |
|
2,824,195 |
|
2,760,096 |
|
|
|
|
|
||
Current liabilities: |
|
|
|
||
Lines of credit |
|
217,495 |
|
171,500 |
|
Current portion of long-term debt |
|
9,023 |
|
48,975 |
|
Accrued groundwater extraction charges, purchased water and power |
|
32,581 |
|
24,479 |
|
Accounts payable |
|
37,932 |
|
46,121 |
|
Accrued interest |
|
15,582 |
|
15,816 |
|
Accrued payroll |
|
10,683 |
|
12,229 |
|
Income tax payable |
|
2,059 |
|
— |
|
Current regulatory liabilities |
|
1,930 |
|
3,059 |
|
Other current liabilities |
|
22,848 |
|
20,795 |
|
Total current liabilities |
|
350,133 |
|
342,974 |
|
|
|
|
|
||
Deferred income taxes |
|
240,903 |
|
238,528 |
|
Advances for construction |
|
144,087 |
|
146,582 |
|
Contributions in aid of construction |
|
333,611 |
|
326,451 |
|
Postretirement benefit plans |
|
47,516 |
|
46,836 |
|
Regulatory liabilities, less current portion |
|
475,293 |
|
461,108 |
|
Other noncurrent liabilities |
|
23,689 |
|
22,492 |
|
Commitments and contingencies |
|
|
|
||
Total capitalization and liabilities |
$ |
4,439,427 |
|
4,345,067 |
|
SJW Group |
|||||||
Reconciliation of Non-GAAP Financial Measures |
|||||||
(Unaudited) |
|||||||
(in thousands, except per share data) |
|||||||
|
2024 Earnings Guidance |
||||||
Estimated Diluted EPS Guidance on a GAAP Basis |
$ |
2.66 |
|
to |
|
2.76 |
|
Adjustments: |
|
|
|
|
|
||
Loss on sale of real estate investments, net of tax |
|
0.02 |
|
|
|
0.02 |
|
Adjusted EPS Guidance (non-GAAP) |
$ |
2.68 |
|
to |
|
2.78 |
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|||||
Reported GAAP Net Income |
$ |
20,696 |
|
|
18,286 |
|
32,395 |
|
|
29,816 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|||||
Loss (gain) on sale of real estate investments1 |
|
909 |
|
|
— |
|
909 |
|
|
(1,473 |
) |
|
Tax effect of above adjustment2 |
|
(291 |
) |
|
— |
|
(291 |
) |
|
412 |
|
|
Adjusted Net Income (non-GAAP) |
$ |
21,314 |
|
|
18,286 |
|
33,013 |
|
|
28,755 |
|
|
|
|
|
|
|
|
|
|
|||||
Reported GAAP Diluted Earnings Per Share |
$ |
0.64 |
|
|
0.58 |
|
1.00 |
|
|
0.95 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|||||
Loss (gain) on sale of real estate investments, net of tax |
|
0.02 |
|
|
— |
|
0.02 |
|
|
(0.03 |
) |
|
Adjusted Diluted Earnings Per Share (non-GAAP) |
$ |
0.66 |
|
|
0.58 |
|
1.02 |
|
|
0.92 |
|
|
1 |
Included in the "Other, net" line on the condensed consolidated statements of comprehensive income. |
|
2 |
The tax effect on all adjustments is calculated at the applicable statutory rate. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240724496356/en/
Andrew F. Walters
Chief Financial Officer, Treasurer and Interim Principal Accounting Officer
408.279.7818
Andrew.Walters@sjwater.com
Daniel J. Meaney, APR
Director of Investor Relations
860.664.6016
Daniel.Meaney@ctwater.com
Source: SJW Group
