SJW Group Announces Second Quarter 2024 Financial Results
-
Delivers
$0.64 of GAAP diluted earnings per share (EPS), a year-over-year increase of$0.06 ; adjusted diluted EPS (non-GAAP) of$0.66 , a year-over-year increase of$0.08 -
Invests
$158 million in infrastructure during the first half of 2024, or approximately 48% of 2024 capital budget -
Agreement in principle reached on
California general rate case (GRC) -
Updates 2024 GAAP guidance to
$2.66 to$2.76 diluted EPS. Reaffirms 2024 guidance range of$2.68 to$2.78 for adjusted diluted EPS (non-GAAP) -
Declares
$0.40 cash dividend per share of common stock
"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,
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
-
An increase in water production expenses of
$8.6 million compared to the same quarter last year; -
An increase in depreciation and amortization of
$2.2 million primarily due to utility plant additions; and -
An increase in maintenance costs of
$1.6 million primarily due to adjustments to certain regulatory assets as a result of the final decision in theConnecticut general rate case and increased security costs; offset by, -
A decrease in administrative and general expenses of
$3.1 million primarily due to decreases in the allowance for uncollectible customer accounts and higher allocations to construction activities, partially offset by inflationary increases.
The effective consolidated income tax rates for the second quarter of 2024 and 2023 were approximately 15% and (9)%, respectively. The higher effective tax rate in the 2024 period was primarily due to the partial release of an uncertain tax position reserve in the second quarter of 2023.
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 compared to the same period last year; -
An increase in depreciation and amortization of
$4.3 million primarily due to utility plant additions; and -
An increase of maintenance costs of
$2.2 million primarily due to adjustments to certain regulatory assets as a result of the final decision in the Connecticut GRC and increased security costs; offset by, -
A decrease in administrative and general expenses of
$1.6 million primarily due to decreases in the allowance for uncollectible customer accounts and higher allocations to construction activities, partially offset by inflationary increases.
The effective consolidated income tax rates for the first half of 2024 and 2023 were approximately 16% and (1)%, respectively. The higher effective tax rate in the 2024 period was primarily due to the partial release of an uncertain tax position reserve in the second quarter of 2023.
Capital Expenditures
Through the second quarter of 2024,
Rate Activity and Regulatory Updates
On
The company's GRC application filed with the CPUC in
- 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
On
On
On
-
An increase in the annual revenue requirement of
$6.5 million , or 5.5%; -
An opportunity to earn additional revenue of
$1.1 million for meeting certain performance metrics; - A return on equity of 9.3%, which is up from 9.0% in the last GRC;
- A capital structure of 53% equity and 47% 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 7.41% was rolled into base rates.
Connecticut Water had requested a
On
Force for Good
In
In
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 5% to 7%, anchored off 2022's diluted EPS 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
Dividend
On
Financial Results Call Information
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
Non-GAAP Financial Measures
About
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
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
|
||||||||||||||
Condensed Consolidated Statements of Comprehensive Income |
||||||||||||||
(Unaudited) |
||||||||||||||
(in thousands, except share and per share data) |
||||||||||||||
|
|
|
||||||||||||
|
Three months ended |
|
Six months ended |
|||||||||||
|
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 |
|
|
|||||
Condensed Consolidated Balance Sheets |
|||||
(Unaudited) |
|||||
(in thousands, except share and per share data) |
|||||
|
|
|
|
||
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 |
|
|
|
640,311 |
|
640,311 |
|
Other |
|
7,695 |
|
8,056 |
|
Total other assets |
|
969,539 |
|
962,868 |
|
Total assets |
$ |
4,439,427 |
|
4,345,067 |
|
|||||
Condensed Consolidated Balance Sheets |
|||||
(Unaudited) |
|||||
(in thousands, except share and per share data) |
|||||
|
|
|
|
||
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 |
|
|||||||
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 |
|
Six months ended |
|||||||||
|
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/
Chief Financial Officer, Treasurer and Interim Principal Accounting Officer
408.279.7818
Andrew.Walters@sjwater.com
Director of Investor Relations
860.664.6016
Daniel.Meaney@ctwater.com
Source: