American States Water Q1 2025 Earnings Report

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the American States Water Company's conference call discussing the company's first quarter twenty twenty five results. The call is being recorded. If you would like to listen to the replay of the call, it will begin this afternoon at 5PM Eastern Time and run through May 15 on the company's website, www.aswater.com.

The slides that the company will be referring to are also available on the website. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press and then 1.

To withdraw your questions, you may press and 2. This call will be limited to an hour. Presenting today from American States Water Company are Bob Sprowse, president and chief executive officer and Eva Tang, senior vice president of finance and chief financial officer. As a reminder, certain matters discussed during this conference call may be forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements are not guarantees or assurances of any outcomes, financial results, levels of activity, performance, or achievements, and listeners are cautioned not to place undue reliance upon them.

Forward looking statements are subject to estimates and assumptions and known and unknown risks, uncertainties and other factors. Listeners should review the description of the company's risks and uncertainties that could affect the forward looking statements in our most recent Form 10 ks and Form 10 Q on file with the Securities and Exchange Commission. Statements made on this conference call speak only as of the date of this call and except as required by law, the company does not undertake any obligation to publicly update or revise any forward looking statement. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in The United States and constitute non GAAP financial measures under SEC rules. These non GAAP financial measures are derived from consolidated financial information and are not presented in our financial statements that are prepared in accordance with GAAP.

For more details, please refer to the press release. At this time, I would like to turn the floor over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Thank you, Bob, and hello, everyone. Let me start with our first quarter results. Recorded consolidated earnings were $0.70 per share for the quarter as compared to $0.62 per share for the first quarter of last year. For our water utility, Golden State Water reported earning were 52¢ per share compared to 48¢ per share last year. The 4¢ per share increase in 2025 was largely due to the new 2025 water rates as a result of receiving a final decision in connection with Golden State Water's general rate case proceeding, partially offset by higher operating expenses and losses generated on investments held to fund a retirement plan as compared to gains during the same period in 2024 due to financial market conditions.

Lastly, there was a decrease in earnings of $02 per share due to the dilutive effect from the issuance of equity under AWR's at the market offering program. Our electric segment's earnings were $07 per share for the quarter as compared to $05 per share for the same quarter in 2024, a $02 per share increase, primarily due to receiving the final CPUC decisions on the electric general rate case with the new 2025 electric rate as compared to 2022 rates used to record revenues during the first quarter of twenty twenty four. Earnings from ASUS were $0.13 per share for the quarter, which was consistent with the same period in 2024, which Bob will discuss further. Lastly, losses from our parent company were $02 per share for the quarter when compared to losses of $03 the same quarter in 2024, due largely to a decrease in interest expense resulting from lower average interest rate and lower borrowing levels at AWR's credit facility. Consolidated revenues for the first quarter increased by $12,700,000 when compared to the first quarter last year.

Revenues for the water segment increased by $11,700,000 largely due to new 2025 water rates as a result of receiving a final decision in Golden State Water's general rate case proceeding. Effective 01/01/2025, Golden State Water transitioned from a full revenue decoupling mechanism to a modified rate adjustment mechanism known as the Monterey style water revenue adjustment mechanism or the NBRAM. Still water consumption for the first quarter of twenty twenty five approximated consumption levels adopted in the new 2025 rate. And, therefore, Golden State Water's transition to the end brand did not have a material impact to revenues recorded during the first quarter. Revenue for the electric segment increased by $2,800,000 mainly due to new 2025 election rates as compared to 2022 rates used to record revenues during the first quarter of last year.

Revenues from ASUS decreased $1,800,000 primarily due to lower construction activities during the quarter as they were negatively impacted by unfavorable weather conditions, which were less impactful during q one in 2024. Turning to slide nine. Supply costs increased by $4,300,000 mostly due to an increase in customer water usage and higher overall per unit water supply cost. Also effective this year, Golden State Water transitioned from a full cost balance supply cost balancing account to an incremental cost balancing account for supply cost. As a result, Golden State Water's earnings are now subject to favorable and unfavorable changes in the water supply source mix as compared to adopted supply source mix, reflected in the revenue requirement.

During the first quarter, our pumped water sources, which cost less than purchased water, were capable of meeting a greater portion of customer demand. However, this favorable supply cost experience found this, found the favorable supply mix during the first quarter may or may not continue during the remainder of the 2025 year. Looking at total operating expenses other than supply costs, consolidated expenses increased by $2,000,000 compared to 2024. This increase includes the impact of electric generators decision issued in January, which authorized recovery of higher operating expenses primarily for vegetation management and other wildfire mitigation efforts. These costs were previously excluded from customer rates and not expensed in the first quarter of last year, as they were being tracked in memorandum accounts.

They are now included in adopted electric revenue. In addition, the increase was due to higher overall operating expenses, partially offset by lower US construction expenses. Lastly, there was an overall decrease in other expenses other expense, net of other income, of $2,500,000 due largely to losses generated on investment held to fund a retirement plan during the quarter, as compared to gains on investments during the same quarter in 2024 due to financial market conditions. This slide shows EPS bridge comparing reported EPS for the first quarter of this year against the same period for 2024. Turning to liquidity, net cash provided by operating activity was $45,100,000 for the quarter as compared to $45,800,000 for the same quarter last year, with the change primarily due to timing of working capital items and the change in billed water consumption.

With the CPUC approved decision received for both regulated utilities in January, we have implemented new water and electric rates during the quarter. In addition, both of our utilities have either filed or received approval of various advice letters based on previously approved regulatory mechanisms to implement surcharges or additional base rates. For investing activities, our regulated utility invested $45,500,000 on company funded capital projects in the first quarter, and we will be on target to reach $170,000,000 to $210,000,000 for 2025. In terms of financing activities, American States Water, under its at market offering program, raised a proceeds of $25,800,000 during the first quarter, net of issuing costs and legal costs. In February, our electric segment completed an issuance of $50,000,000 in unsecured private placement notes that matured in 02/1930.

In addition, earlier this week, American State Water and Golden State Water executed amendments to their credit agreement to extend the credit facility term from June 2028 to June 2029. As part of this amendment, American States Water also expanded its credit facility borrowing capacity from $165,000,000 to $195,000,000. American States Water currently maintains a credit rating of A stable with Standard and Poor's Global ratings for S and P, while Golden State Water maintains A plus stable ratings with S and P and A2 stable rating with Moody's Investors Service. These are some of the highest credit ratings in The US Investor owned Wall ETV industry. With that, I'll turn the call back to Bob.

Ladies and gentlemen, at this time, we will begin that question and answer session. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. And our first question comes from Jonathan Reeder from Wells Fargo.

Please go ahead with your question.

Yeah. I think in in terms of full year, 60,000,000 probably is our target. But, you know, right now we have some capacity in our credit facility, and so we'll reassess how much we need needed from the market for this year. But over the three year vacate cycle, we plan to do the $200,000,000 We already did, I want to say, 190,000,000, dollars 1 hundred and 70 million, oh, no, dollars 117,000,000 so far. So we still have a total $83,000,000 to $85,000,000 left, Johnson.

So we're playing out for this next two years.

Probably.

Yes. Hello, Jonathan. Hope you're doing well. Yeah, so on the military front, as we've talked in the past, we sort of bifurcate the military program by a branch, and so we've got the Army, the Air Force, and the Navy. Do we see any actual privatizations in 2025?

There are no fifty year privatizations out on the street at this point, so the expectation there is we probably won't see a privatization this year, in fact, an award is what I would say. We do expect the Army to be putting perhaps one or two privatizations up later this year, although things are a little bit in a state of flux there, not from a, Hey, we've heard this or we've heard that, it's just more us trying to read the tea leaves that everyone else is reading. I'm not sure that means we're going to see a slowdown or an increase, but we recognize that we have a new administration in office and it could have an impact on military based privatizations. We're not sure which direction either at this point, but it looks like the Army is sort of completed, they're in the process of completing their assessment. Approximately a year ago, our team was at a presentation where they were talking very favorably about doing, sort of cranking back up the privatization program.

As you may know, the Army had sort of taken a pause since the end of twenty twenty on that program. We think the Air Force is perhaps a little bit behind the Army in reinstituting their program, but the Navy has been, I would say, the most excited about the program, and as you know, they've done a couple of privatizations, one of which is the Patuxent River that we had won. And then we have the JVCC contract, which is a fifteen year contract, and it's possible we'll see something similar to that that could get worked on during 2025, but it's not entirely clear about that. So there's a number of irons in the fire, some nontraditional. Those nontraditional are a little more difficult to bring to closure.

Similar to like JBCC, we had spent quite a bit of time on that, but we're glad to have that contract, and it's sort of a new contracting vehicle that is available to the Department of Defense at this point. We're proud that we know how to make that work, and perhaps that gives us a leg up on the competition, at least on those kinds of privatizations. That was a long winded answer. Happy to expand. Hopefully I answered your question.

I don't expand. Well, must be a rough morning for me.

Yeah, that's kind of where we're at, Jonathan. I mean, as you know, there's uncertainty at the DoD right now, and as there is at a lot of different government agencies, but so far everything's going fine on the basis we have, and we continue to make a lot of sales calls, so that's always important.

Yeah, I think the fifteen year variety is, I think it's just a little easier for the bases to get their arms around. Fifty years is a long time. Obviously, we like the fifty year contracts. Those are very, very well run privatizations by the defense logistics agency energy, very efficient bidding processes. Exchange for services, the one we did at JBCC took a long time, and we kind of invented, us and JBC sort of invented a roadmap for that, and now it's, I guess, another tool in the tool belt for the government that maybe might make it easier for them to sign up to a fifteen year contract than a fifty year contract.

So we'll see if there's those kinds of things out there. We are pursuing at least one of those, and then we're also seeing other, I want to say, nontraditional type privatizations that will take probably several years to run to ground if in fact they come to fruition. So I guess my point is it's not just the fifty year utility privatization template, but we do hope that the Army and the Air Force are back pursuing that.

Yeah, thank you, Jonathan. A little activity on the regulatory front this year so far, so that's nice. Last year was a lot of work and a lot of Well, I mean, think we got two good decisions, and you just gotta work hard on those things and try to get settlements, and we think we got a couple good ones. So thank you for your questions. Okay, well Jamie, if we aren't getting any other questions, we can wrap it up.

Is that okay?