California Water Service Group ((CWT)) has held its Q1 earnings call. Read on for the main highlights of the call.
California Water Service Group’s recent earnings call revealed a mixed sentiment, with strong non-GAAP performance overshadowed by challenges in GAAP metrics and regulatory negotiations. The company showcased significant revenue and net income growth, alongside major capital investments and favorable regulatory outcomes. However, the inability to settle the California General Rate Case and a decline in GAAP-based revenue and net income compared to the previous year tempered the positive news.
Strong First Quarter Performance
California Water Service Group reported an unexpectedly robust first quarter, traditionally a challenging period. The company saw a 13% increase in operating revenue over non-GAAP 2024 figures, reaching $180.5 million. Net income and diluted earnings per share surged by 225% and 214%, respectively, compared to Q1 2024 non-GAAP results.
Significant Capital Investments
The company maintained its record pace of capital investments, totaling $110.1 million for the quarter. This commitment underscores California Water Service Group’s focus on infrastructure and long-term growth.
Regulatory Progress and Rate Increases
Favorable regulatory decisions were a highlight, with a $27.2 million revenue requirement increase in California and a $1.1 million increase in Hawaii. The Palos Verdes project received approval for $14.2 million in incremental capital costs and a temporary surcharge for $3.8 million in carrying costs.
Dividend Increase
The Board of Directors approved the 321st consecutive quarterly dividend, increasing the annual dividend by 10.7% to $1.24 per share, reflecting the company’s commitment to returning value to shareholders.
Healthy Water Supply Outlook
California reported a 99% normal snowpack, with major reservoirs above historical averages, suggesting no significant water supply issues are anticipated in the summer months.
Revenue and Net Income Comparison to Prior Year
On a GAAP basis, the company faced a decline, with operating revenue at $204 million compared to $270.7 million in Q1 2024. Net income attributed to the group was $13.3 million, down from $69.9 million in the previous year.
Challenges in Reaching Settlement in California GRC
The company faced difficulties in reaching a global settlement with the California Public Advocates regarding the 2021 General Rate Case, highlighting ongoing challenges in regulatory negotiations.
Forward-Looking Guidance
Looking ahead, California Water Service Group expects a compounded annual rate base growth of approximately 11.7%, contingent on the outcome of their 2024 general rate case in California. The company also maintained a strong liquidity profile with $44.5 million in unrestricted cash and $315 million available on credit lines. The board declared a quarterly dividend of $0.30 per share, marking the 321st consecutive quarterly dividend.
In conclusion, California Water Service Group’s earnings call painted a picture of strong non-GAAP performance and strategic investments, tempered by challenges in GAAP metrics and regulatory negotiations. The company’s commitment to growth and shareholder value remains evident, despite the hurdles it faces in the regulatory landscape.