SJW GROUP (SJW)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 EPS of $0.49 (+36% YoY) and adjusted EPS of $0.50 (+39% YoY) on revenue of $167.6M (+12% YoY); operating income rose to $35.9M as new rates in CA and CT and modest usage growth offset higher production costs .
• 2025 guidance affirmed: adjusted EPS $2.90–$3.00 and 5%–7% long-term EPS CAGR through 2029 (management expects top-half of range); 2025 CapEx plan of $473M reiterated; ATM equity issuance plans of $120M–$140M reaffirmed .
• Regulatory momentum remains constructive: CA GRC rates effective Jan 1 (2025 step +$21.3M), CT approvals for WICA (+$1.6M) and WRA (3.62% surcharge); TX SIC decision could come as early as Q2 2025; management also highlighted an S&P credit outlook upgrade to stable .
• Key watch items: water production expense inflation (pass-through mechanisms help), persistent drought in Texas (assumed in plan), and timing of infrastructure riders; management says FY is “on plan” with some front-loaded dynamics (WCMA volatility) .

What Went Well and What Went Wrong

• What Went Well

  • Rate implementation and regulatory wins drove 12% revenue growth; CA and CT rate cases plus CT WICA/WRA approvals supported results .
  • Guidance intact with confident tone: “We are affirming our 2025 guidance… and expect to be in the top half of the range” .
  • Balance sheet and credit: management noted S&P raised SJW’s outlook to stable; average Q1 LOC borrowing rate declined to ~5.47% from 6.54% YoY .
  • Execution on CapEx: $78.2M invested in Q1; on track for $473M 2025 and a $2B five-year plan; AMI project and KT Water build-out progressing .

• What Went Wrong

  • Production costs rose: +$7.2M YoY in Q1, driven by purchased water and groundwater extraction charges; total production expenses +14% .
  • Admin and general expenses increased $2.0M (credit losses, insurance) and maintenance +$0.8M .
  • Texas drought continues to weigh on usage (assumed in plan); management is investing to bring 6,000 AF KT Water supply online by end of 2026 .

Financial Results

Sequential trend (oldest → newest):

Notes: Operating margin calculated from cited revenue and operating income figures in each quarter .

Year-over-year for Q1:

KPIs and cost context:

Drivers and mix (management detail):

• Revenue +$17.2M from rates, +$1.0M from usage; production cost increases largely pass-through; admin/credit losses/insurance added expense .
• CA GRC: 2025 step +$21.3M revenue; service charge now 48%; AMI ($100M) recovered via rate base offsets (file in May for July 2025 effective) .

Non-GAAP adjustment:

• Q1 2025 adjusted EPS adds back ~$0.01 for M&A expense (net of tax) .

Guidance Changes

Context and cadence:

• Management highlighted some front-loaded dynamics in 2025 (WCMA volatility), but reiterated “on plan” to guidance .

Earnings Call Themes & Trends

Management Commentary

• “We are pleased with our financial results for the quarter…secured new rates…implemented WICA and WRA in Connecticut…invested $78.2 million…on track to meet our 2025 and five-year capital expenditure goals” — Eric W. Thornburg .
• “We are affirming our 2025 guidance range of adjusted diluted earnings per share of $2.90 to $3.00… and expect to be in the top half of the range” — Ann Kelly .
• “S&P raised the credit outlook for SJW Group to stable… committed to maintaining our A category credit rating” — Andrew Walters .
• “AMI is a $100 million project… recovered via annual rate base offset filings… anticipate filing in May 2025 for rates effective July 2025” — Bruce Hauk .
• “We’re investing in standardized enterprise-wide platforms… unified customer service system… AMI will reduce operating costs and improve leak detection” — Kristen A. Johnson .

Q&A Highlights

• Trajectory vs guidance: Management said Q1 trends are “right on plan” for $2.90–$3.00; noted some front-loading and WCMA volatility but expect full-year alignment; drought in Texas assumed in plan .
• CT Water Quality & Treatment Adjustment (WQTA): Mechanism akin to WICA focused on environmental treatment capex; would reduce regulatory lag on ~$130M of eligible CT treatment investments; capped at 15%; not expected to affect 2025 earnings .
• M&A appetite: Emphasis on continued tuck-ins, especially in Texas; disciplined approach across core states and opportunistically elsewhere without compromising leverage targets .

Estimates Context

• We attempted to pull S&P Global consensus for Q1 2025 EPS and Revenue, but the S&P Global mapping for SJW was unavailable in our system at the time of retrieval; therefore, a direct actuals vs consensus comparison could not be provided. We will update once mapping is restored [SpgiEstimatesError].
• As a proxy, management affirmed FY guidance and cited results as on plan for the year, with regulatory outcomes and pass-through mechanisms supporting revenue and cost recovery .

Key Takeaways for Investors

• Q1 delivered clean, rate-driven growth with GAAP EPS $0.49 and adjusted EPS $0.50; revenue +12% YoY; operating income +29% YoY — constructive start to a guidance-affirming year .
• Regulatory backdrop remains favorable across CA/CT/ME/TX, undergirding rate base growth and reducing lag (e.g., CT WICA/WRA approvals; CA GRC now in effect; potential TX SIC decision in Q2) .
• CapEx cadence is seasonally light in Q1 but on track for $473M in 2025 and a $2B five-year plan, with AMI, PFAS, and TX resiliency/KT Water as core drivers .
• Cost pressures persist (production costs, insurance/credit losses), but pass-through structures and efficiency initiatives (platform standardization, AMI) mitigate earnings risk .
• Balance sheet flexibility intact: improving borrowing costs vs prior year and S&P outlook upgrade to stable; ATM issuance remains a key funding lever .
• Watch for: CT WQTA enactment (reduces lag on treatment capex), timing of CA AMI rate base offsets (July 2025 target), TX SIC decision, and drought persistence in Texas .
• Without published consensus from S&P Global in our system, trade the narrative: regulatory execution + affirmed guide + infrastructure catalysts vs. drought/production cost headwinds; catalysts skew positive if CT WQTA and TX SIC timelines deliver .

Appendix: Additional Context and Data Sources

• Q1 2025 press release and financials (Form 8-K, Ex. 99.1): revenue, EPS, operating detail, CapEx, regulatory updates, dividend .
• Q1 2025 earnings call transcript: guidance affirmation, state updates, funding/credit/drought commentary, Q&A .
• Prior quarters (trend): Q4 2024 press release and call; Q3 2024 press release — for sequential and policy trajectory .