• Q4 2024 Operating Revenue: $222.2 million, a 3.6% increase from $214.5 million in Q4 2023.
• Q4 2024 Net Income: $19.7 million or $0.33 per diluted share, compared to $30.1 million or $0.52 per diluted share in Q4 2023.
• Full Year 2024 Operating Revenue: Slightly more than $1 billion, compared to $794.6 million in 2023.
• Full Year 2024 Net Income: $190.8 million or $3.25 per diluted share, a 267.6% increase from $51.9 million or $0.91 per diluted share in 2023.
• 2024 Capital Investments: $471 million, a 23% increase over 2023.
• Rate Base Growth: Grew to almost $2.4 billion, a 9.1% increase over 2023.
• Dividend Increase for 2025: Annual dividend increased to $1.24 per share, up from $1.12 per share, representing a 10.71% increase.
• Liquidity as of December 31, 2024: $50.1 million in unrestricted cash, $45.6 million in restricted cash, and $395 million in available credit.
• Texas Customer Growth: Connected 1,200 new customers in 2024, totaling over 4,200, a 39% increase year-over-year.

• Warning! GuruFocus has detected 7 Warning Signs with CWT.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• California Water Service Group (NYSE:CWT) achieved record financial results in 2024, with significant increases in revenue, capital investment, rate base growth, and dividend growth.
• The company benefited from new rates and rate structures authorized in the 2021 California General Rate Case, contributing to strong financial performance.
• CWT made substantial capital investments totaling $471 million in 2024, a 23% increase over 2023, enhancing infrastructure and service reliability.
• The company's regulated rate base grew by 9.1% to almost $2.4 billion, with expectations of continued growth through planned capital investments.
• CWT maintained a strong balance sheet with significant liquidity, including $50.1 million in unrestricted cash and $395 million in available credit, supporting future capital plans.

Negative Points

• Net income for Q4 2024 decreased to $19.7 million from $30.1 million in Q4 2023, partly due to non-recurring benefits from the previous year.
• Operating expenses increased by $10.6 million in Q4 2024 compared to the same period in 2023, driven by higher water production costs and depreciation.
• The company faced challenges with delayed rate cases, which impacted financial results and created lumpiness in earnings.
• Lower water usage due to cooler, wetter weather in December 2024 partially offset revenue gains from new rates.
• The company anticipates regulatory challenges and negotiations in upcoming rate cases, which could impact future financial performance.

Q & A Highlights

Q: What are your thoughts on the public advocates' position in the 2026 to 2028 General Rate Case (GRC) and the potential for reaching a settlement, particularly on key items like CapEx and expenses? A: Greg Milleman, Vice President - Rates and Regulatory Affairs, noted that while there is traditionally a significant margin between positions, recent activities with other water companies suggest opportunities for settlement. The company is working on its rebuttal to strengthen its negotiation position. Marty Kropelnicki, Chairman, President & CEO, added that the company's risk-based approach to capital programs, focusing on infrastructure improvement and climate change adaptation, supports their case in negotiations.

Q: Is the roughly $85 million of equity issued in 2024 under the ATM a good annual run rate to assume in the years ahead? A: James Lynch, CFO, explained that the current ATM expires in April, and they are assessing future needs to support capital investments. The goal is to raise equity only as necessary to maintain a consistent capital structure. The amount will be opportunistic, based on capital needs and market conditions.

Q: Do you have aspirations or near-term plans to move into the water business in Texas? A: Marty Kropelnicki confirmed plans to enter the water business in the South Austin market, partnering with the Guadalupe Basin River Authority to extend a water pipeline. The project is expected to be completed by 2026, allowing the company to expand beyond its current wastewater operations in the area.

Q: How are you thinking about acquisitions in 2025 and the business development pipeline more broadly? A: Marty Kropelnicki emphasized the company's focus on executing its infrastructure improvement plans, which are driving significant rate base growth. While strategic M&A opportunities will be considered, the primary growth engine remains internal investments. The company will be strategic in its focus, prioritizing opportunities that offer regulatory and customer value.

Q: Why are PFOA and PFAS not included in the CapEx plans, and how should we think about the cadence of spending on these upgrades? A: Marty Kropelnicki explained that PFOA and PFAS standards are new, requiring extensive testing and assessment of water sources. Due to uncertainty in timing and capital costs, these are treated separately with memo account treatment in California. The company is working to refine estimates and plans to manage this as a corporate program to meet new water quality standards.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.