- Revenue: $176.2 million, a 12% increase over $156.9 million in Q2 2023.
- Net Income: $20.7 million, a 13% increase over $18.3 million in Q2 2023.
- Diluted Earnings Per Share: $0.64 compared to $0.58 in Q2 2023.
- Adjusted Net Income: $21.3 million.
- Adjusted Diluted Earnings Per Share: $0.66.
- Year-to-Date Revenue: $325.6 million, an 11% increase over $294.2 million in the same period of 2023.
- Year-to-Date Net Income: $32.4 million, a 9% increase.
- Year-to-Date Diluted Earnings Per Share: $1 compared to $0.95 in 2023.
- Year-to-Date Adjusted Net Income: $33 million.
- Year-to-Date Non-GAAP Diluted Earnings Per Share: $1.2 compared to $0.92, an 11% increase over 2023.
- Water Production Expense: Increased 14% compared to Q2 2023.
- Total Other Operating Expenses: Increased 2% year over year.
- Capital Expenditure Plan: $332 million for 2024, with $158 million invested in water and wastewater utility infrastructure.
- Line of Credit: $217 million drawn on a $350 million bank line of credit, with $133 million available.
- Average Borrowing Rate: 6.53% for the quarter, compared to 5.96% in the same period of 2023.
- Effective Consolidated Income Tax Rate: 15% for Q2 2024, compared to negative 9% in Q2 2023.
- Guidance for 2024: $2.66 to $2.76 per diluted share and $2.68 to $2.70 per diluted share on a non-GAAP basis.
- Equity Issuance: $55 million to $65 million, excluding acquisition growth.
- Five-Year Capital Investment Outlook: $1.6 billion, including approximately $230 million in investments in PFAS remediation.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SJW Group (SJW, Financial) reported a 12% increase in revenue for Q2 2024, reaching $176.2 million, driven by rate increases and customer growth.
- Net income for the quarter was $20.7 million, a 13% increase over the same period in 2023.
- The company invested $158 million in water and wastewater utility infrastructure, representing 48% of its 2024 capital expenditure plan.
- SJW Group (SJW) secured additional financial assistance funds in California and expanded eligibility for its water rate assistance program in Connecticut.
- The company delivered earnings per diluted share of $0.64 and adjusted non-GAAP earnings per diluted share of $0.66 in Q2 2024.
Negative Points
- Higher water production expenses offset some of the revenue gains, with a 14% increase in water production costs compared to 2023.
- The Connecticut rate case did not meet all expectations, resulting in $3.9 million in unrecovered expenses.
- The Texas service area is experiencing severe to extreme drought, which may impact water usage and revenue.
- Total other operating expenses increased by 2% year-over-year, driven by higher depreciation and administrative costs.
- The company faces significant challenges ahead, including PFAS remediation, new lead and copper standards, and the replacement of aging infrastructure.
Q & A Highlights
Q: Can you quantify the risk of the Texas drought to 2024 guidance and year-to-date impacts?
A: It's challenging to quantify the exact impact until we see where usage settles. The base case scenario has accounted for some drought effects, but if it worsens, we may need to revisit our guidance. (Andrew Walters, CFO & Interim Principal Accounting Officer)
Q: How does the Connecticut rate case order compare to long-term planning assumptions in the 5%-7% EPS growth rate?
A: The Connecticut order is not additive to our growth rates but is within the expected range of outcomes. While it might be dilutive, other parts of the business are compensating for it. (Andrew Walters, CFO & Interim Principal Accounting Officer)
Q: Does the Connecticut rate case outcome impact interest in acquiring Aquarion?
A: The regulatory climate is a key factor, but the recent regulatory decisions are encouraging. We remain optimistic and will continue to build trust with regulators. (Eric Thornburg, Chairman of the Board, President, & CEO)
Q: Do you expect the Connecticut rate case cycle to condense going forward?
A: We will monitor recovery and make decisions accordingly. We aim to avoid crowding rate cases from different states and will pay attention to timing for the next rate case. (Andrew Walters, CFO & Interim Principal Accounting Officer)
Q: How confident are you in getting a decision on the California rate case by year-end?
A: We are highly confident due to the all-party settlement and the minor remaining policy issues. We expect new rates to be introduced on January 1, 2025. (Eric Thornburg, Chairman of the Board, President, & CEO)
Q: What are your thoughts on the California Supreme Court's ruling on decoupling?
A: The ruling is a positive development, but the Public Advocates Office opposes decoupling. We will watch our peers and consider reintroducing decoupling in our next rate cycle. (Eric Thornburg, Chairman of the Board, President, & CEO)
Q: How are you managing rising electricity prices and their impact on water utilities?
A: In California, we have a balancing account to pass through costs. We are also investing in solar to fix electricity costs and reduce customer expenses. In other states, we contract power in advance to manage costs. (Andrew Walters, CFO & Interim Principal Accounting Officer)
Q: What are the benefits of the Advanced Metering Infrastructure (AMI) project?
A: The AMI project will automate meter reading, provide customers with usage portals, and alert them to leaks. It will also reduce truck runs and manual interventions, enhancing efficiency and customer service. (Eric Thornburg, Chairman of the Board, President, & CEO)
Q: How are you addressing the 3.9 million in unrecovered expenses in Connecticut?
A: We are looking at ways to reduce costs, such as audit expenses, and will continue to work with regulators to communicate the necessity of these expenses. (Andrew Walters, CFO & Interim Principal Accounting Officer)
Q: What are the performance metrics for management in Connecticut?
A: The metrics focus on customer affordability and operational efficiency. We are confident in meeting these metrics to improve utility performance and customer service. (Andrew Walters, CFO & Interim Principal Accounting Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
