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CALIFORNIA WATER SERVICE GROUP (CWT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS of $0.22 beat Wall Street consensus of $0.16; revenue of $204.0M missed consensus of $215.4M. The variance is largely due to non-recurring interim rate relief recorded in Q1 2024; on a non-GAAP comparable basis, revenue rose 13% and EPS rose sharply versus Q1 2024 non-GAAP . EPS consensus and revenue consensus values retrieved from S&P Global.*
  • Management highlighted progress on the 2024 California General Rate Case (GRC); although a global settlement wasn’t reached, evidentiary hearings are planned for May with parties aligned on keeping the case on schedule .
  • Regulatory tailwinds in Q1 included $27.2M escalation step increases effective Jan 1, Palos Verdes surcharge approval ($3.8M) and rate base inclusion ($14.2M), and Hawaii Ka’anapali rate approval effective May; dividend continuity (321st consecutive quarterly dividend) supports yield visibility .
  • Liquidity remains strong with $44.5M unrestricted cash, $45.7M restricted cash, and $315M available credit; Q1 CapEx was $110.1M, continuing the infrastructure investment plan and underpinning expected rate base growth trajectory .

What Went Well and What Went Wrong

What Went Well

  • EPS beat vs consensus: $0.22 actual vs $0.16 estimate; management cited rate changes, usage, and approved advice letters (drought and Palos Verdes) adding ~$0.07/share to EPS . EPS consensus values retrieved from S&P Global.*
  • Regulatory progress: 2024 California GRC remains on schedule with hearings in May; parties (commissioner, judge, advocates) emphasize timeliness, improving odds of an on-time outcome vs prior cycle .
  • Capital deployment and dividend continuity: $110.1M CapEx in Q1 2025; 321st consecutive quarterly dividend declared at $0.30 and anticipated 2025 annual dividend of $1.24 (including Jan special $0.04) .

What Went Wrong

  • Revenue miss vs consensus: $204.0M actual vs $215.4M estimate; headwind mainly from non-recurring Q1 2024 interim rate relief (GAAP YoY down $66.7M), though non-GAAP comps show underlying growth . Revenue consensus values retrieved from S&P Global.*
  • Cost pressures and margin: Depreciation and amortization rose to $36.0M due to new assets; water production costs remained elevated at $63.0M; EBIT margin % for Q1 2025 was lower than recent quarters as the rate relief timing normalized* . EBIT margin values retrieved from S&P Global.*
  • Uncertainty on tariffs and financing markets: Management flagged potential tariff impacts on materials and continued volatility in debt/equity markets as watch items, requiring disciplined cost management .

Financial Results

GAAP vs Non-GAAP YoY Comparison (Q1)

MetricQ1 2024 (GAAP)Q1 2024 (Non-GAAP)Q1 2025 (GAAP)
Revenue ($USD Millions)$270.749 $180.483 $203.973
Diluted EPS ($USD)$1.21 $0.07 $0.22
Net Income ($USD Millions)$69.917 $4.104 $13.331

Notes: Q1 2024 GAAP included $90.3M revenue and $65.8M net income from 2023 interim rate relief; non-GAAP adjusts for these effects .

Sequential and Recent Trend

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$299.563 $222.195 $203.973
Diluted EPS ($USD)$1.03 $0.33 $0.22
EBIT Margin %28.94%*14.48%*13.82%*

Values with asterisk retrieved from S&P Global.

Versus Estimates (Q1 2025)

MetricConsensusActualSurprise
Revenue ($USD)$215.436M*$203.973M -$11.463M (-5.3%)*
EPS ($USD)$0.16*$0.22 +$0.06 (+37.5%)*
EPS # of Estimates2*——
Revenue # of Estimates3*——

Values marked * retrieved from S&P Global.

Operating Details and KPIs

KPIQ1 2025
Net Operating Income ($USD Millions)$22.345
Water Production Costs ($USD Millions)$62.991
Depreciation & Amortization ($USD Millions)$35.956
CapEx ($USD Millions)$110.1
Unrestricted Cash ($USD Millions)$44.5
Restricted Cash ($USD Millions)$45.7
Available Credit ($USD Millions)$315.0

Segment breakdown: Not disclosed in Q1 press materials; Company reports consolidated results .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
California Escalation Rate Increases (adopted gross revenue)2025—+$27.2M (18 districts; effective Jan 1, 2025) Raised
Palos Verdes Peninsula Project – Incremental Capital in Rate Base2025—$14.2M added to rate base (base rates effective Feb 1, 2025) Implemented
Palos Verdes Peninsula Project – Surcharge (Carrying Costs)2025—$3.8M surcharge (effective Apr 1, 2025) Implemented
California DRMA Recovery2025—$1.4M recovery via surcharges (effective Apr 1, 2025) Implemented
Hawaii Ka’anapali Rate Case2025Prior revenue requirement $6.4MApproved test year revenue requirement $7.5M; new rates effective May 2025 Raised
Cost of Capital (CA)Through 202610.27% ROE; 53.4%/46.6% equity/debtExtended to Dec 31, 2026; WCCM may adjust ROE Jan 1, 2026 Maintained (extension)
Dividend2025$1.12 annual (2024)$1.24 anticipated annual (incl. $0.04 special); 321st quarterly dividend $0.30 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
2024 California GRC scheduleFiling, scoping, ALJ/Commissioner assigned; IRMA/MWRAM/ICBA approvals Cost of capital extension; CalPA report received; proceeding on time No global settlement; moving to evidentiary hearings in May; parties aligned on timeliness Steady progress; schedule discipline improving
Water supply outlook——CA snowpack ~99% of normal; reservoirs above average; targeted conservation in West Maui Positive supply outlook
Tariffs/macro cost risk—Financing markets volatility noted Tariff uncertainty flagged; disciplined cost control and budget focus; market volatility monitoring Emerging headwind watch
CapEx & rate base growth$332.2M YTD CapEx; infrastructure focus Record $471.0M 2024 CapEx; investment plan continues Q1 2025 CapEx $110.1M; plan supports ~11.7% rate base CAGR if approved Continued execution
DividendsDeclared $0.28 quarterly Declared $0.30 + $0.04 special (Jan 2025) 321st consecutive $0.30 quarterly; anticipated 2025 annual $1.24 Consistent increase
Decoupling/WRAMTransition effects from 2021 GRC mechanisms (MWRAM) Cost of capital/WCCM reauthorized; decoupling approach part of GRC Decoupling and rate design are major litigated GRC issues Ongoing regulatory debate
Surcharges & recoveriesIRMA/MWRAM/ICBA approvals with $94.2M cash recovery over 3 years —DRMA $1.4M and Palos Verdes $3.8M surcharges implemented April Executed recoveries
Hawaii rates——Ka’anapali settlement approved; new rates effective May Positive regulatory update

Management Commentary

  • “We are pleased with our strong start to 2025… we remain focused on achieving a timely and constructive resolution to our 2024 California GRC” — Martin A. Kropelnicki, CEO .
  • CFO on EPS drivers: “Rate changes and increased customer usage… contributed $0.20 per share, and approval of two advice letters… contributed $0.07 per share” .
  • Regulatory tone: “Commissioner… judge and the advocates have all indicated desire to keep the rate case on schedule… I’m a lot more bullish this time” — CEO .
  • Macro vigilance: “Too early to tell [on tariffs]… we remain guardedly optimistic… disciplined budgetary approach… markets whipsawed since April” — CEO/CFO .

Q&A Highlights

  • GRC settlement status and path: No global settlement; company pursuing undisputed items to streamline hearings; major issues (decoupling, rate design, capital plans) likely litigated .
  • Tariff and supply chain impacts: Materials sourced globally; teams managed COVID-era constraints; continued focus on cost discipline amidst uncertainty .
  • Results quality vs internal expectations: Better-than-typical first-quarter performance driven by tighter budgets, improved water mix alignment, and step increases of $27.2M feeding tariffs .
  • ATM program: Intends to renew; timing targeted for spring; sizing under finance committee review .

Estimates Context

  • Q1 2025 EPS beat: $0.22 actual vs $0.16 consensus; positive surprise of $0.06 (+37.5%)* .
  • Q1 2025 revenue miss: $203.973M actual vs $215.436M consensus; negative surprise of -$11.463M (-5.3%)* .
  • Estimate coverage is light (EPS: 2 estimates; Revenue: 3), increasing the potential for post-print revisions as analysts normalize for non-GAAP comparables and regulatory developments.* Values marked * retrieved from S&P Global.

Key Takeaways for Investors

  • Underlying growth is stronger than GAAP YoY suggests due to Q1 2024 interim rate relief; non-GAAP comps show 13% revenue growth and EPS rising to $0.22 .
  • EPS beat vs consensus and clear regulatory milestones (escalation increases, surcharges, Hawaii rates) are near-term support; revenue miss should be contextualized by prior-year non-recurring items .
  • GRC cadence is the main stock narrative: hearings in May and aligned parties on schedule reduce delays risk vs the 2021 cycle; watch decoupling and capital plan outcomes as valuation catalysts .
  • Defensive liquidity and active CapEx ($110.1M) underpin rate base growth; cost of capital extension to 2026 anchors ROE visibility (10.27%) .
  • Macro watch items: potential tariffs, market volatility, and wholesale water rates could pressure costs; management is emphasizing expense discipline .
  • Dividend continuity (321st consecutive quarter; anticipated $1.24 annual in 2025) supports total return and income investor appeal .
  • Trading implications: near term, EPS beat vs revenue miss likely nets out neutral-to-positive if the market focuses on normalized non-GAAP trajectory and GRC schedule adherence; medium term, rate case resolution and rate base growth drive the thesis.