California Water Service Group (CWT) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw significant financial improvement, with net income rising to $40.6M ($0.70/share) from $9.6M ($0.17/share) in Q2 2023, driven by new rates, regulatory decisions, and the 2021 GRC approval.

• Six-month net income reached $110.5M ($1.90/share) versus a net loss of $12.7M last year, reflecting cumulative GRC adjustments and strong operating revenue growth.

• Major capital investments continued, with $214.4M invested in H1 2024 (56% of the $385M annual target), focusing on infrastructure, PFAS remediation, and emergency response.

• ESG initiatives advanced, including updated GHG reduction targets, a new ESG report, and the highest ISS ESG score among North American investor-owned water utilities.

• Regulatory and legal wins included a favorable California Supreme Court decision preserving decoupling and due process in rate-making.

Financial highlights

• Q2 2024 operating revenue rose 25.9% to $244.3M; net income was $40.6M; diluted EPS was $0.70, up from $0.17 in Q2 2023.

• Year-to-date 2024 revenue increased 58.4% to $515M; net income was $110.5M ($1.90/share) compared to a net loss of $12.7M in 2023.

• Q2 2024 operating expenses were $196.1M, up from $178.1M in Q2 2023, mainly due to higher water production and income tax expenses.

• $64M of 2023 income was recorded in 2024 due to retroactive rate relief; $18.7M of this related to Q2 2023.

• Cumulative GRC adjustments and deferred WRAM revenue recognition contributed to strong results.

Outlook and guidance

• 2024 GRC filing requests revenue increases of 17.1% for 2026, 7.7% for 2027, and 8.1% for 2028, with $1.6B in capital investments planned for 2025–2027, excluding $226M in PFAS projects.

• Planned 2024 capital investments are $385M, with 56% completed by June 30, 2024.

• Regulated rate base is estimated to exceed $3.3B by 2027, subject to regulatory approval.

• Usage is tracking about 2% ahead of last year, with year-to-date usage at approximately 96% of rate case assumptions.

• Management expects to fund future utility plant needs through a balanced approach of long-term debt and equity.