H2O America Common Stock 2026 Q3 Earnings Call

Thank you. Welcome to the third quarter of 2026 financial results conference call for H2O America. My name is Jonathan Reeder, and I am the Senior Director of Treasury and Investor Relations for H2O America. Presenting today will be Andrew Walters, Chair of the Board and Chief Executive Officer, Ann Kelly, Chief Financial Officer and Treasurer, and Bruce Hauk, President and Chief Operating Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at h2o-america.com. Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that could cause actual results to be different from statements in this presentation, we refer you to financial results press release and to our most recent Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today, and H2O America disclaims any duty to update or revise such statements. You will have an opportunity to ask questions at the end of the presentation. This webcast is being recorded, and an archive of the webcast will be available until January 26, 2027. You can access the press release and the webcast at H2O America's website.

In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share that have not been calculated in accordance with generally accepted accounting principles in the United States or GAAP. These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation. I will now turn the call over to Andrew.

Welcome, everyone, and thank you for joining us today. We are pleased to provide you with an update on our third quarter 2026 results, as well as the exciting progress our team has made with regards to executing our long-term value creation strategy. During the third quarter, we earned $0.99 per share on a GAAP diluted basis and $1.04 per share on an adjusted diluted basis. This brings our year-to-date 2026 earnings per share to $2.13 on a GAAP diluted basis and $2.30 per share on an adjusted diluted basis. Our third quarter and year-to-date results are consistent with our internal expectations in support of both our 2026 guidance as well as our long-term financial growth targets.

Anne will discuss we are narrowing our standalone 2026 adjusted diluted EPS guidance to $3.10-$3.16 per share, which preserves the prior $3.13 per share midpoint. We remain confident in our ability to deliver on our 2026-2035 year plan, as well as our long-term EPS CAGR target of 6%-8%. Before I ask Ann to discuss our financial results in more detail, for those people on this call that do not yet know, I am very excited to announce that we closed on the purchase of Houston, Texas-based Quadvest at the beginning of this month.

This is a significant milestone in our strategy to build a stronger utility portfolio, and I want to express my sincere thanks to all of my internal partners across H2O America that have helped us get to this point. It is a tremendous accomplishment, but we all know our work is far from complete as we continue to integrate Quadvest and bring to bear the numerous benefits of this transformative acquisition, including delivering on the anticipated accretion beginning in 2028. I also want to take a minute to thank all of the hardworking Quadvest team members for their support in bringing our two companies together and welcome them to H2O America team. Quadvest brings an experienced team dedicated to providing dependable service to their customers, a strong development pipeline, and longstanding community relationships to our Texas Water Company subsidiary.

I truly look forward to the great things that I know we will achieve together. One final point on Quadvest, Bruce will elaborate on this later in the call, is that realized customer growth remains robust with active connections up 14% in 2026, and we have a good line of sight on above-average growth continuing in the years ahead. In addition to Quadvest, I am pleased to report we have been advancing the ball in our pending Connecticut and Maine general rate cases. In order to continue making the much needed water infrastructure investments across our national footprint of systems necessary to provide high quality, reliable service to our customers, we have to constructively engage our key local stakeholders in a consensus-building process as we pursue the timely rate recognition of those investments, while being mindful of affordability.

Our regulatory folks have been working tirelessly to keep both rate cases progressing according to their procedural schedules, and we anticipate constructive outcomes as a result of these efforts. In addition, our teams in California and Texas are placing a great deal of thought into preparing their own general rate case filings, which will be made in the months ahead. Bruce will provide additional updates on each of our states in a few minutes, but now I will turn the call over to Ann to provide details on our third quarter 2026 financial results and key elements of our five-year financial plan.

Ann? Thanks, Andrew. Yesterday, after the markets closed, we released our third quarter and year-to-date 2026 operating results.

As Andrew mentioned, we reported third quarter 2026 diluted EPS of $0.99 and year-to-date diluted EPS of $2.13 per share. On an adjusted basis for the third quarter of 2026, we earned adjusted diluted EPS of $1.04, which compares to $1.27 during the third quarter of 2025. On a year-to-date basis, our 2026 adjusted diluted EPS was $2.30 compared to $2.53 during the same period of 2025. These results were consistent with our internal expectations and supportive of the standalone 2026 adjusted diluted EPS guidance of $3.08-$3.18 that we established back in February.

While our adjusted net income is 8% higher through September 30, 2026, compared to the same period in 2025, this was more than offset by the higher share count as weighted average diluted shares outstanding were roughly 20% higher in the 2026 period as a result of leveraging our ATM program throughout 2025 and our equity issuance in March of this year. The year-to-date impact of opportunistically raising the equity in early March, partially offset by the reduction in interest expense and interest income generated from the funds, reduced our EPS by a net $0.17.

For those of you keeping track on our progress against our standalone 2026 adjusted diluted EPS guidance, adding that $0.17 to the aforementioned $2.30 of adjusted diluted EPS puts us at $2.47 of standalone adjusted diluted EPS through the first nine months of the year. This is slightly behind the $2.53 during the same period last year, due primarily to higher depreciation and operating expenses not currently reflected in our rates, as well as the prior year's equity issuances. Based on these results, and with only one quarter left in the year, we are trimming $0.02 off the high end and low end of our standalone range.

Our narrowed standalone 2026 adjusted diluted EPS guidance range of $3.10-$3.16 preserves the $3.13 midpoint. Further, in an effort to be as transparent as possible and level-set everyone's expectations now that the Quadvest acquisition is closed, we are providing a 2026 adjusted diluted EPS guidance range that includes the impacts of our Texas acquisitions and the financings thereof throughout the entire year. That range is $2.91-$2.97. At the midpoint, this equates to roughly 6% dilution from the midpoint of our 2026 standalone guidance. This is less than our previously communicated 10%-20% range of expectation, which is primarily due to the timing of the Quadvest closing on October 1, as opposed to our initially assumed mid-2026 date.