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CALIFORNIA WATER SERVICE GROUP (CWT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue grew 3.6% YoY to $222.2M, but EPS fell to $0.33 from $0.52 as prior-year non-recurring WRAM/tax items did not repeat; rate increases (+$24.2M) and MWRAM (+$5.5M) were partly offset by lower unbilled revenue (-$8.1M) and the absence of $19.4M of deferred WRAM recognized in Q4’23 .
  • Full-year revenue reached a record $1.037B and EPS $3.25, aided by adoption of the delayed 2021 CA GRC (retroactive 2023 interim relief recorded in 2024) and increased consumption; capex hit a record $471M .
  • Regulatory positioning strengthened: CPUC extended Cal Water’s authorized 10.27% ROE and capital structure through 12/31/26 and reauthorized the WCCM; 2024 CA GRC proceeding is on schedule (Scoping Memo issued, public hearings completed, CalPA report received) .
  • Balance sheet/liquidity solid with $50.1M unrestricted cash, $395M available credit, A+/stable S&P rating, and AA- for Cal Water FMBs; company opportunistically raised $86.5M via ATM in 2024 and issued $125M 5.22% FMBs (10/22/24) .
  • Catalysts: timely 2024 CA GRC decision (rate resets effective 1/1/26), evolving view on decoupling/LUWEP in CA rate design, PFAS capex/deferral and potential recoveries, and dividend increase to $1.20 plus a $0.04 special for 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Rate relief and mechanisms supported results: Q4 revenue +$7.7M YoY to $222.2M, driven by rate increases (+$24.2M) and MWRAM (+$5.5M) .
    • Record investment and growing rate base: 2024 capex $471M (+23% YoY) and 2024 rate base “almost $2.4B,” underpinning mid-teens capex trajectory and ~11.7% rate base CAGR if GRC approved as requested .
    • Regulatory momentum and cost of capital visibility: CPUC extended 10.27% ROE through 2026 and reauthorized WCCM; 2024 GRC progressing on schedule (Scoping Memo, public participation hearings, CalPA report) .
    • Quote: “What a difference a year makes… we end the year in excellent financial position… record… revenue, capital investment… rate base growth and dividend growth” – CEO .

  • What Went Wrong

    • EPS declined YoY on lapping one-time items: Q4 diluted EPS fell to $0.33 from $0.52 as $19.4M of deferred WRAM recognized in Q4’23 and a larger TCJA tax benefit did not recur; lower unbilled revenue (-$8.1M) on wetter/cooler December also weighed .
    • Cost pressures and higher interest: Q4 operating expenses +$10.6M YoY (water production +$3.4M), and net interest expense +$2.6M YoY to $14.9M on higher borrowings .
    • Margin compression QoQ/YoY: EBIT margin stepped down to ~14.5% in Q4 (from ~22.3% in Q3 and ~16.4% in Q4’23), reflecting seasonality, weather/unbilled revenue, and non-recurrence of 2023 deferrals (computed from cited financials) .

Financial Results

Income Statement Summary and Margins

MetricQ4 2023Q2 2024Q3 2024Q4 2024Q4 2024 Consensus
Operating Revenue ($MM)$214.5 $244.3 $299.6 $222.2 N/A (SPGI access limit)
Net Operating Income (EBIT) ($MM)$35.2 $48.2 $66.7 $32.2 N/A
Net Interest Expense ($MM)$12.3 $14.0 $13.6 $14.9 N/A
Net Income Attributable ($MM)$30.1 $40.6 $60.7 $19.7 N/A
Diluted EPS ($)$0.52 $0.70 $1.03 $0.33 N/A
EBIT Margin % (calc)~16.4% (35.2/214.5) ~19.7% (48.2/244.3) ~22.3% (66.7/299.6) ~14.5% (32.2/222.2) N/A
Net Income Margin % (calc)~14.0% (30.1/214.5) ~16.6% (40.6/244.3) ~20.2% (60.7/299.6) ~8.9% (19.7/222.2) N/A

Note: Q4 2024 YoY revenue +3.6% per company slides .

Drivers and Costs – Q4 2024 vs Q4 2023

ItemQ4 YoY Impact ($MM)Detail/Reason
Rate increases+$24.2Authorized rate changes
MWRAM revenue+$5.5Lower higher-tier sales increased mechanism revenue
Unbilled revenue-$8.1Lower December usage (cooler, wetter)
2023 WRAM deferrals (non-recurring)-$19.4Deferred WRAM recognized in Q4’23 did not recur
Water production costs+$3.4Higher wholesale rates and consumption
Income tax benefit-$10.1Lower benefit due to TCJA timing
Net interest expense+$2.6Higher borrowings, partly offset by lower rates

Selected Operating Lines (for KPIs/Context)

Metric ($MM)Q4 2023Q2 2024Q3 2024Q4 2024
Water Production Costs$70.3 $77.6 $95.1 $73.7
Non-regulated Revenue$4.9 $5.5 $4.1 $5.9

Balance Sheet/Liquidity and Rate Base

  • Cash and equivalents at 12/31/24: $50.1M; restricted cash $45.6M; available credit $395M; credit facilities $600M expandable to $800M (maturity Mar 2028); S&P Global A+/stable; Cal Water FMBs AA- .
  • 12/31/24 condensed balance sheet totals: Total assets $5,180.3M; Total equity $1,638.3M; Long-term debt (net) $1,104.6M; Short-term borrowings $205.0M .
  • 2024 regulated rate base “almost $2.4B” (+9.1% YoY); targeted ~11.7% CAGR through 2027 if 2024 CA GRC approved as requested (excludes ~$226M PFAS) .

Guidance Changes

MetricPeriodPreviousCurrentChange
Authorized ROE (CA)Through 202510.27%10.27% maintained through 12/31/26; CPUC reauthorized WCCM Maintained/extended
Capital Structure (CA)Through 202653.4% equity / 46.6% debtSame through 12/31/26 Maintained
WCCM timingNext calc / effectiveN/AMeasured 9/30/25; effective 1/1/26 if triggered Schedule set
2024 CA GRC proposed revenue increases2026–2028N/A+$140.6M (17.1%) 2026; +$74.2M (7.7%) 2027; +$83.6M (8.1%) 2028 New proposal
Dividend2025$1.12 (2024)$1.20 annual (+$0.08) plus $0.04 special Raised + special

Note: Company did not issue explicit 2025 financial guidance (revenue/EPS/margins); regulatory cadence and dividend policy were updated .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 / Q3 2024)Current Period (Q4 2024)Trend
2024 CA GRC & rate design (LUWEP/decoupling concept)Filed 7/8/24; proposed LUWEP to decouple revenue for low-use/low-income; 18‑month process Scoping Memo (Nov); public participation hearings completed; CalPA report received; rebuttal underway; optimistic on timely decision Progressing on schedule
Authorized ROE/Cost of capital10.27% set for 2025; WCCM did not trigger for 2025 CPUC postponed next filing to 5/1/26; 10.27% ROE, 53.4/46.6 structure maintained through 2026; WCCM reauthorized Extended visibility
Capex/Rate base growthCapex $214M 1H24; targeting ~$385M in 2024; PFAS ~$226M excluded from plan Record 2024 capex $471M; 2024 rate base ~2.4B; ~11.7% CAGR to 2027 if GRC approved; PFAS capex still excluded Upward execution
PFAS compliance/cost recoveryProceeding with compliance; pursuing 3M/DuPont recoveries PFAS capex excluded from GRC due to timing/estimate uncertainty; memo account treatment in CA Program forming; outside base plan
Liquidity/Capital structure (ATM, debt)ATM raised ~$86.5M YTD; $125M 5.22% FMB issued 10/22/24 Maintain opportunistic ATM; group over-equitized vs CA authorization—plan to trend toward alignment; $395M available credit Balanced funding
Texas growth platformGreenfield wastewater builds; growth engine [—]>4,200 customers (+39% YoY in 2024); ~16k committed connections in escrow; water entry tied to GBRA pipeline ~2026 Expanding
Emergency preparedness / WildfireEOC drills; awards for response Continued drills; ~$1M contributions over 5 years; SoCal fires did not impact systems Ongoing focus

Management Commentary

  • “We end the year in excellent financial position, setting… highs… including revenue, capital investment… rate base growth and dividend growth… positioned… for continued success in 2025 and beyond.” – CEO .
  • “Our overall rate base grew to almost $2.4 billion… If approved… compounded annual rate base growth of around 11.7% (ex‑PFAS).” – CFO .
  • “CPUC… postponed our cost of capital filing… effectively maintaining… 10.27% return on equity [through 2026]… WCCM… potentially adjusts the rate of return when the Moody’s utility bond index fluctuates…” – CEO .
  • “Texas… fastest-growing area… another 1,200 customers… total… >4,200… ~16,000 connections in escrow… anticipate [water] when the [GBRA] pipeline is completed… into 2026.” – CEO .
  • Dividend policy: “Annual dividend increase of $0.08… plus a special one-time $0.04… bringing the annual dividend to $1.24… meant to reward our shareholders as we dealt with the delayed 2021 general rate case…” – CEO .

Q&A Highlights

  • GRC settlement prospects: Management is “optimistic” about settlement on various items, bolstered by a risk-based capital program; settlement discussions scheduled for April with hearings in May .
  • Equity needs/ATM: 2024 ATM ~$86.5M; future issuance will be opportunistic to maintain group capital structure closer to operating utility authorizations; group currently over-equitized but intends to align efficiently .
  • Texas expansion: Plan to enter water service in South Austin as GBRA pipeline completes (expected 2026); strong wastewater growth continues (customers >4,200; ~16k committed) .
  • PFAS program: Excluded from current GRC given timing/estimate uncertainty; CA memo account treatment expected; corporate program to meet/exceed standards; focus states CA/WA/NM .
  • EPS retroactive benefit: CFO affirmed ~$1.10 EPS contribution from 2021 GRC-related retroactive items in 2024, higher than the $1.00 previously discussed; analysts should adjust 2024 EPS accordingly .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS/revenue was not retrievable due to an S&P Global daily access limit during this session; as such, we cannot provide a definitive “vs. estimates” comparison for Q4 2024 based on SPGI data. No explicit company guidance was provided for 2025 revenue/EPS/margins, so Street models will focus on the 2026 rate reset (if 2024 GRC is timely) and preserved 10.27% ROE through 2026 .
  • Modeling implications:
    • Preserve CA ROE at 10.27% and capital structure through 2026, with potential WCCM update effective 1/1/26 if triggered .
    • Reflect 2026–2028 proposed revenue step-ups from the CA GRC (pending outcome) .
    • Exclude PFAS capex from base capex/rate base until projects/deferrals are better defined (memo account in CA) .

Key Takeaways for Investors

  • Q4 print: modest revenue growth but EPS down on tough compares and weather-driven unbilled; underlying rate relief and mechanisms remain supportive .
  • Multi-year visibility: 10.27% ROE and CA capital structure locked through 2026, de-risking the cost of capital backdrop ahead of the 2024 CA GRC decision .
  • Capex/Rate base engine: record $471M 2024 capex and ~2.4B rate base underpin mid‑to‑high single-digit to low‑double-digit rate base CAGR trajectory if GRC is approved as filed (ex‑PFAS) .
  • Regulatory milestones near-term: April settlement talks/May hearings for the 2024 CA GRC; investors should watch for decoupling/LUWEP outcomes and total revenue levels for 2026–2028 .
  • PFAS is incremental: program scale/timing remain outside the GRC with memo treatment in CA; potential recoveries from responsible parties could offset spend .
  • Funding flexibility: A+/stable rating, $395M available credit, opportunistic ATM and recent $125M 5.22% FMBs support the capex plan while management targets capital structure alignment .
  • Income profile: 2025 dividend raised to $1.20 with a $0.04 special, signaling confidence and normalization post-2021 GRC delay .

Appendices

Additional Q4 2024 and Full-Year 2024 Highlights (from Press Release/8‑K)

  • FY 2024 revenue $1.037B vs $794.6M in 2023; EPS $3.25 vs $0.91, aided by cumulative 2021 CA GRC impacts (+$123.9M revenue) and higher rates/consumption (+$122.1M) .
  • Liquidity/authorization: CPUC approved issuance of up to $1.3B in new debt/equity; Cal Water issued $125M 5.22% FMBs (10/22/24) .
  • Dividend actions: 320th consecutive quarterly dividend; 2025 dividend increase and special declared 1/29/25 .