American States Water Company 2026 Q2 Earnings Call

Thank you, Bailey. Welcome everyone, and thank you for joining us today. I'll begin with a discussion of the quarter. Eva will discuss some financial details, and then I'll wrap it up with updates on regulatory activity, ASUS, and dividends, and then we will take your questions. We are pleased to report an excellent quarter with financial results that reflected strong execution across our business. Company's performance highlights our effective management and the constructive regulatory framework in which we operate. Our reported earnings per share for the second quarter was $1.09 compared to $0.87 for the same quarter in 2025, an increase of $0.22 or 25.3%. All three of our operating business segments performed well and reported year-over-year increases resulting from new customer rates implemented in 2026 at our regulated utilities to cover our infrastructure investments and an increase in construction activities at our contracted services segment.

In particular, the earnings growth was largely driven by the water segment's strong second quarter performance that was led by new customer rate increases effective January 1st, 2026. A 4% increase in water consumption and a lower reliance on purchased water further supported the quarter's solid performance compared to the same quarter in 2025. However, it is uncertain whether these favorable conditions experienced in the second quarter will continue through the remainder of 2026 or if their positive earnings impact will reverse, as we will discuss later. I'm also pleased to report that last week our board approved a significant dividend increase of 8.2%, resulting in an annualized dividend rate of $2.182 per share. This reflects our board's confidence in the company's ability to achieve long-term sustainable earnings growth.

We believe a growing dividend allows the company to attract capital for investments in its infrastructure that enables us to provide safe and reliable services to our customers and return value to our shareholders. American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 72 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. In July, Golden State Water Company and the Public Advocates Office at the California Public Utilities Commission, or Cal Advocates, filed a joint settlement to approve the acquisition of an existing water system that serves almost 900 customer connections located in the city of Norwalk in Los Angeles County.

Our regulated utilities are on pace to invest $185 million-$220 million in infrastructure investments this year as we continue to invest in our water, wastewater, and electric utility systems for the long-term benefit of our customers. We filed a new electric general rate case in January for customer rates covering 2027 through 2030, and a new water general rate case in July, covering rates for 2028 through 2030. We successfully completed our at-the-market equity offering program in June, reaching the maximum aggregate offering capacity of $200 million in gross proceeds raised since the program was first established in February 2024. We have no plans to issue additional equity through at least the end of 2029 to support our current operations. We were once again recognized on TIME's list of Best Companies in 2026 and were one of only two investor-owned water utilities on the list.

This recognition reflects the company's disciplined execution of its strategic growth plans, strong financial performance, commitment to our workforce, and robust environmental, social responsibility, and governance practices. With that, I will turn the call over to Eva to discuss earnings and liquidity.

Thank you, Bob, and hello, everyone. Let me start on slide seven. As Bob mentioned, we delivered excellent financial results this quarter. Our consolidated earnings were $1.09 per share, compared to $0.87 per share for the second quarter of 2025. Our water utility, Golden State Water, reported earnings of $0.91 per share, compared to $0.73 per share for the second quarter of last year. The $0.18 per share increase was largely due to new water rates for 2026, including additional revenues associated with approved advice letter capital projects in late 2025 and higher gains generated on investments for a retirement plan, partially offset by an increase in water supply costs, interest expense net of interest income, and the effective income tax rate.

Lastly, there was a decrease in earnings of $0.02 per share due to the dilutive effect from the share insurances under the parent company's at-the-market offering program. Our electric segments report earnings were $0.04 per share for the quarter as compared to $0.03 per share for the same quarter last year. The $0.01 per share increase is primarily related to rate increases, partially offset by higher overall operating and interest expenses. Earnings from ASUS were $0.16 per share for the quarter, compared to $0.13 per share for the same quarter last year. An increase of $0.03 per share, largely due to higher construction activities, an increase in management fee revenues from the resolution of various economic price adjustments, and lower interest expenses, partially offset by an increase in operating expenses.

This slide shows that consolidated revenue for the second quarter increased by $18.2 million compared to the same quarter of 2025. Revenues increased by $11.4 million in the water segment and $700,000 in the electric segment, driven largely by the new 2026 rates and additional revenues generated from advice letter projects approved in 2025. Revenues from ASUS increased to $6.2 million, primarily due to higher construction activities and management fee revenues. Turning to slide nine. Looking at supply costs first.

The increase in supply costs primarily related to our water segment due to an overall increase in per-unit water supply costs covered in rates and an increase in the production of water, resulting from higher customer consumption, partially offset by the favorable impact of an after-water supply source mix that included less purchased water during the quarter compared to the same period last year due to wells being brought back online in certain customer service areas. The remaining consolidated operating expenses increased by $4.6 million compared to 2025, largely due to higher ASUS construction expenses from an increase in construction activity and an overall increase in operating expenses.

Interest expense, net of interest income, also increased, largely from capitalization of debt costs related to certain advice letter projects approved by the CPUC in the latest Water GRC effective January 1, 2025, which was recorded in 2025, with no similar items this year, and reduced interest income from a decrease in regulatory asset balances for both regulated utilities. Lastly, other income increased during the quarter due to higher gains generated from investment to fund a retirement plan. Slide 10 shows the EPS bridge comparing reported EPS for the second quarter of 2026 against last year's second quarter. Consolidated earnings for the 6 months ended June 2026 were $1.86 per share, compared to $1.57 per share for the same period in 2025, an increase of $0.29 per share. As Bob mentioned, all three of our operating business unit segments performed very well and reported year-over-year increases.

Turning to liquidity on this slide. Net cash provided by operating activities was $116.6 million for year-to-date 2026 as compared to $109.6 million for the same period last year. The increase is largely related to new rates implemented at our regulated utilities, as well as various approved surcharges and additional revenues from approved advice letter projects. In addition, the increase also results from PFAS litigation proceeds received during the year. For investing activities, our regulated utility invested $91.7 million on company-funded capital projects during the first half of the year, and we expect company-funded capital expenditures to total between $185 million-$200 million for the full year 2026. For financing activities, American States Water, under its at-market offering program, raised proceeds of $39.9 million during the first half of the year, net of insurance costs and legal costs.