AWR - Earnings call transcript Q2 2021 | American States Water Company

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call discussing the company’s Second Quarter 2021 Results. The call is being recorded.

If you would like to listen to the replay of this call, it will begin this afternoon at 5:00 p.m. Eastern Time and run through Tuesday, August 10, 2021 on the company’s website, www.aswater.com. company website. referring the available are that the on slides will to be also The Please that limited Instructions] that [Operator note today’s and being call also recorded will be to hour. today’s X event is from Chief Officer of and Finance today Sprowls, Vice Financial Chief Tang, Executive American is and Company Presenting Bob Water Officer. President and Senior Eva President States

Securities the risks As Form the Securities Litigation with of by statements intended forward-looking Commission. call may a be established XXXX. of reminder, Exchange certain Act in XX-K file the and liability qualify Reform matters most Safe for Please discussed the description and from during Form on recent Private and this conference a our Harbor to XX-Q review uncertainties company’s

discussion prepared or constitute are measures measures In but in addition, our from rules. of accordance States financial the under in this certain not SEC consolidated in presented financial accounting GAAP. non-GAAP principles with These that conference not prepared generally GAAP accepted are in financial measures statements and United financial a that non-GAAP call are derived accordance include with are information, will

call of details, to and the please refer conference At Sprowls, release. time, Bob would American Officer States more like Water turn Chief the press Executive I President to For this to over Company.

Bob Sprowls

Welcome, will wrap I’ll on and then the Eva then dividends, will quarter, with questions. for Jamie. take joining some with on comments details, filings, your us up everyone and regulatory you you, and thank and some begin then Thank brief today. we I ASUS some will it financial updates discuss

adjusted After investments the per retirement to share we $X.XX quarter, fund one periods, an by gains earnings basis. achieved on of second held per For both versus plans, increased on year. $X.XX last from earnings X.X% excluding share of company’s the consolidated

growth last contributed earnings quarter share strong achieved on basis. per a have over an year second XX.X% we year-to-date, to XXXX where earnings adjusted The

marking week, dividend of calendar increase our a year in announced last we the dividend X% addition, increases. XXth In quarterly consecutive

we While X execute wastewater we our California in unwavering strategies, the keeping CPUC, make business million continue to decisions while to over Commission, and or services all commitment safety. water, reliability and systems, people key await investment on timely to high-quality some our from our and electric Public Utilities provide

allow replace Our to capital upgrade come. that for investments to our infrastructure, can us customers’ critical meet so and generations we needs

focus results, excellent well-being, strong customer and our While including ESG remain we to governance sound and environmental and and employee conservation, remains financial strong a inclusion maintaining committed service safety practices. stewardship, on infrastructure, initiatives, diversity

to the the review over turn continue which ESG We now our our our financial the shareholders. ultimately, will for the results on focus will benefit serve, I quarter. customers, to Eva employees, call commitments, suppliers our communities our we and to

Eva Tang

you, Hello, Thank everyone. Bob.

on financial Slide second results start me with our Let quarter X.

adjustments. share $X.XX presents Excluding respectively, earned per share the XXXX on and last gains second XXXX of share second per slide adjusted This earnings and before adjusted for per compared increased year. reported by $X.XX from quarter of to X.X% our as or results $X.XX the investments quarter earnings

rate for higher Our by increased interest were water on earnings per share. water generated per $X.XX by Utilities depreciation tax offset partially investments due $X.XX Public the expense. share in to earnings items. per share in new lower at expense due permanent and increases certain gross California by in segment Commission water quarters, These tax Adjusting the and the rates segment’s authorized and to $X.XX earnings flow-through a treatment both to compared from margin effective increase income a costs, were as incurred gains water

approved construction margins compared quarter to quarter share incurred due were gross CPUC. $X.XX period higher rates resulting share to an in Earnings share the decreased in per segment’s services our segment to as per $X.XX due per certain as increase contracted electric XXXX same costs electric from the Our $X.XX for for on by from the for higher earnings the projects.

usage activities in $X.X an the Our increased successful by to resolution CPUC-approved fees XXXX the of and due for same million full due management in $X.X revenue period increases increased to to Contracted consolidated earnings of million economic was largely the rate increases passing second construction electric quarter to The for due $X.X third increase XXXX million due increases XXXX. tax. revenue a as services and in Water revenues increase increases compared as to quarter XXXX. for year revenues increased step of result in to the as various largely prices. compared in

Slide of adopted $X.X XX, segments the supply for increase Any and period same supply were an the costs changes to our for million water the supply electric in quarter, costs water electric year. million to as Turning the balance both are last income. and tracking compared from $XX costs

consolidated on second interest share earnings expense, shows fully second X of plans the year’s Slide this by the year-to-date increase as second same with part XXXX, When reflects the plan quarter was last comparing EPS. in segment as June increased to investments retirement other the in in compared for earnings due $X.X in held expenses increased months gain and to $X year on bridge XX, by Looking increase were fund $X.XX to XXXX a XX to million adjusted million higher our resulted period as a second last increase XXXX. EPS the the for share This quarter from held at of slide borrowings year-to-date interest the for services XX.X% the retirement costs per ended quarter. due other lower reported an contracted removed as as at costs, discussed. gains supply from diluted This our activity. increased previously $X.XX XXXX. segment resulting is from in $X.XX and compared construction quarter to income net in per earnings. expenses investments to compared to overall operating during construction total resulting year, This generated primarily than expense of Interest

XX-Q. press For refer and details, release more please to Form yesterday’s

result legislation months first improvement was net compared by of due provided nonresidential related a conditions XXXX, was in not economic differences receivable payroll in this XXXX $XX.X but an for $XX.X offset customers of pandemic. operating part accounts of months because by to This to which as was and COVID-XX activities to to X first cash relief partially X cash of liquidity, from effect quarter XXXX the year. the largely of in the improved compared decrease as income to This to payments, due tax Turning for the XXXX. were XXXX million timing as second in of during million deferred

We least invested estimated full regulated company-funded expenditures the utility American Water years million year X businesses. be first for not to additional the Bob. call next Our $XX I’ll at the we to the time, company-funded $XXX fund issue during expect capital to this to its current projects back to our States in equity million $XXX do At X capital With XXXX million. months. that, turn

Bob Sprowls

reduce you, majority Governor costs our activity. to drought. the and provide an XXXX. within and an regarding Thank The future with compared ratemaking its all proclaimed voluntary considered the has areas on state to with California customers in water of drought-related State for CPUC Golden by California to voluntary updates water XX the increased water establish the conservation implement The intends has of and XX meet the the to on of incremental of memorandum California asking as drought in conservation account signed communication on a Water order has to state investor-owned usage request to of efforts extreme be will is CPUC executive to recovery. goal. its authority called Currently, recent has utilities and regulatory to now to for all counties California Eva. all the I this measures emergency conservation filed XX% In voluntarily Californians conservation implement track response, need for

an current year and implementing our the before cycle, the meet in X-year increases the rate segment must test Regarding it has earnings cycle. second rate third step water

in capital tightly reported, have consistent projects previously the achieved we by authorized amount and As CPUC. we the spending capital invested have with our

$XX.X expected gross gross in compared an water rate result, margin increases adopted additional the in a for the to water as As adopted are XXXX XXXX. million margin to generate

fourth Regarding equity of which and scheduled A our X, in on XX% May year of equity XX% return which XX.X% of with this of this structure capital of was on a of final proceeding, base filed quarter is our January capital and rate X.XX%. requested an date cost decision the currently of is effective for XXXX. a structure, year, debt, originally a we capital return adopted

the will a general during prior State $XXX.X water the As calls, case projects be budgets completed. those new we Water capital through general of of rates X-year projects Golden all for rate general XXXX another the filed application XXXX. capital in our Among requested things, other filed its XXXX. case revenue rate July water discussed years Water regions letters in approximately million State are when million office for for determine cycle through to rate $XX.X and advice recovery for This Golden

XXXX that assigned We Cost case Account, mechanism case rate has known until covering or revenue the the through use Modified to Water the law can administrative next rate MCBA this RAM that Golden Balancing XXXX. are water the years to and clarified application continue also the judge as pleased adjustment our general State

to part water app second the pursuant phase the service which, decision the things, on XX on pandemic, this Valley of Golden non-payment other extended until until affordability of service moratorium guidance suspended On will occurs low orders. for issued of water among XXXX, September As actual the CPUC the CPUC utility disconnections disconnections the year. terms X, Service, the year, July response rulemaking, existing approximately COVID-XX State non-payment Bear disconnections June Water moratorium CPUC year, until incur first. to CPUC to income the a for X. XX of electric Electric this and final to of issued of issued is a the due final On electric Under non-payment not extend payment plans, whichever XX decision December disconnections this CPUC service or on adopted further the February

Turning this base weighted for the in the rate average growth XXXX rate slide any amounts Golden recovery water The XXXX annual growth for a XXXX. rate advice of $XXX.X attention million XXXX rate authorized XXXX, not our by Slide projects. through X.X%. to CPUC million in compound include letter grown to presents do XX, has Water’s base base as from for rate The in State $XXX.X

on largely last certain on incurred Let’s due XXXX the on to $X.XX quarter earnings same to as projects. decreased the ASUS second compared to move Slide to share by costs year, during construction contribution $X.XX per ASUS’ quarter higher XX. of

as an overall XX, per year-to-date in and share largely the $X.XX to XXXX. for increase material overall contribute was contribution Thus our timing than as the work XXXX, of compared impact well projection first decrease when year in construction X the operations. construction had $X.XX a to activity per reaffirm to is increase as earnings due revenue activity For differences a The June and XXXX. was due has $X.XX We to months pandemic ASUS’ share fee performed for ASUS will not higher expenses. far, COVID-XX last management in of year-to-date that operating ASUS’ on the

at improvement We bases contract modifications wastewater continue work serve. we potential work infrastructure and for military for the U.S. with capital water of closely relating government the to upgrade to the

ASUS awarded equitable margin. for completion modifications over release bases addition, and U.S. requests to is additional adjustments, new years. price revenues the with for transfers and economic of dollar government The next for expected additional several adjustment, bidding for In contract provide filings projects asset

currently the actively bases privatization. of We stages are process of various proposal considering a in at involved number

good annual growth are its dividend to with of last positioned our to to increase bases, managing U.S. annual share. contracts. and in strong believe have We to these like attention compete we as in week quarterly we water $X.XX Board relationship achieved comparable share the from This over approved a and systems to well and years. new on Directors dividend for the rate as continue the expertise per dividends. company I the wastewater the would a government of $X.XX X turn the history to in by military X% per dividend is increasing a increase last compound X% well

over to more than to over interest operator for compound year questions. the Our X% an annual calendar like Currently, addition date is to and payment XX-year I’d call a of XXXX, in of history States policy unbroken of we will now in for remarks our annual to our long dividend Water, back history prepared conclude thanking increases. dividend rate to the dividend your the consistent American by and long-term. growth turn you provide

Operator

Angie And with comes [Operator your today ahead question Please Seaport. go from first question. our Storozynski from Instructions]

Angie Storozynski

you. Thank

feedback capital to talk future are to Waters had wanted filing? you a able or I you’ve So there learned to and about chance if of your might the cost be if received filing you any And lessons any filing? Cal takeaways GRC to GRC review apply to that

Bob Sprowls

Okay.

couple Angie, there. So a Yes. questions of

this proceeding So not much the on cost point. is at of going capital

We this haven’t point. had a pre-hearing at conference

we’re to it waiting get actually so for started. And

not So to update with to of not Yes. proceeding. much much you the there to cost on regard capital

very their we So see bit we Waters to find have be interesting. filing that interested appears very how the are through process. in flattened California and and tiers a It they goes through with commission, going it the will that the we filing,

do And sophisticated are we this having out plays to but XXXX. company, they filing because – expect in we how to well. make similar watching of or be them think June XXXX I will sorry, – – We’re a of be July and will we a

Angie Storozynski

think, separately then of last mentioned activity. some that Maybe because was additional this then earnings some in you’re this projects But were, But discussions continue guidance scope COVID And mean, ASUS, I COVID happen you for the there later but level I year’s there last we to hoping year. impacted were or of so or that thought engaged pursued some date. flattish year. Okay. be I delayed not you I within I would earnings were were at in would either versus thought to heavily by of the on my that the work. year stated be catch-up a that appreciate largely be going misunderstanding, it about that they and that

So this and off first government the for projects does segment? trajectory that on some is sign flattish need new that, mean to the earnings that would largely without basically

Bob Sprowls

Yes.

that our what on bit done of the the revenue bases. So new was capital for part is a was slowed of XXXX. And stream being that’s work part in

to new aren’t although that in haven’t of substantial increase XXXX. that, in last completely we that year capital there missed upgrade terms point, awards, of a out the on a of the seeing out come would the is this point that than gee, this We at this bit better year suggest in awards this work some we

didn’t only not the of So work, new we’re going get XXXX some awarded. capital get upgrade to the but XXXX that

XX, hopeful We’re the up and couple the fiscal government’s fiscal some will year on the sometimes we projects pick September still ends last in of of months year.

But were things would just to level back COVID. it’s will see. somewhat, say they that not quite prior we’re year We we the to were – are better last to have although than I not

Angie Storozynski

Great. Thank you.

Bob Sprowls

you, Thank Angie.

Operator

with comes next from Please Jonathan Reeder Wells question. your [Operator question from ahead go Instructions] Fargo. Our

Jonathan Reeder

in whether And or is full Wanted a to GRC, of how looking? items? for the and quickly GRC. the pending Eva. would Bob part of that’s reaching characterize final settlement, the decision prospects on the Hey, ask on How your you timing just

Bob Sprowls

how question, the October late case and judge not since that exactly the allowed late you why done September, address that. doing? which he on sure general rate advocates, us hearings with working has time been But public settlement to May. we in what July has Sure, the I’d June, that work did have be on moved happy more a is are from to and Jonathan. to early So

we it’s some settlement to else sure So I tell unclear we have process. good progress, really whether not get settlement. are but other in than we’re settlement. what I’m going going one, I’m much point we’ve you can a real although a this to at engaged hard the can very to we’re not get made working if sure

Eva Tang

a of as because will ALJs by to be year deferred hearings ruling end [indiscernible] timeframe. decision CPUC the final Jonathan, a may not the result And here, able in October be issue the it of

X, be XXXX, probably beyond decision will so effective And final we year. issued. January But was out to rate retroactive push have when is the this

Jonathan Reeder

right. Yes. Right,

based comments, are Bob, your the like mean, I being it I on discussion as mean, productive. So they sounds

that’s I mean settlement you Is at cover kind least at at a of say? kind in some that full expectation but a this times, streamline minimum at you asset would of get the I least to know partial maybe least whether reached you’ve settlement of the is. what kind challenging, to a So hearing past at of point,

Bob Sprowls

Yes. Perhaps, then to And of the I’d two last years had just had full fully litigated a prior ago, case filed. we that, go the that back we settlement to cases capital we budget. GRC. the X

a a Yes, possible apart just distance of get quite kind guess. a it’s get of So issues I settlement, those the ends spectrum, not those settlement to sort are hearings. end we evidentiary to full we’re that take of and on if focus able the that partial would were could

Jonathan Reeder

Alright. some inflationary more for accurate? potentially on into good even headwinds going. you? capital certainly. $X.XX sounded achieved shift during are with by If mouth, Is pressures of remarks, there Certainly, the projects of on that luck in on on and your it. putting the I’m Got I that, luck the you that segment expect in construction your compressing Well, similar it maybe on typical like good the quickly were and but QX. cost margins prepared could Do ASUS, based finally to ‘XX, just the impacted ‘XX rest persist gets

Bob Sprowls

see higher the will Yes. think in I expenses mean very that a construction bit we little pervasive don’t forward, we perhaps going it we quarters. of future did will have but be

Jonathan Reeder

Okay.

of stuff in mean XXX% are that when guess, manageable regard. instruction more is suppliers, stuff like much have relationships things, pressures kind I that. on, I So The for or based that undertaking contracts, you’re like lumber we see up with those you

Bob Sprowls

did needle Jonathan. around going a that’s quarter, not in the move it into accurate, about second but and the it our QX. we little I we’re We our it. We’ve got say don’t – bit Yes, did wringing hands arms would QX

Jonathan Reeder

Great. taking me. Appreciate my all question today. That’s perfect. Thanks for for Alright, that’s it.

Bob Sprowls

Yes. Thanks, Jonathan.

Operator

time, And over ladies at back showing to gentlemen, any I’m floor for closing Mr. no remarks. to this additional the I’d and turn like questions, Sprowls

Bob Sprowls

to Jamie. you. look their just And just know, you for wrap again I Thank Yes. thanking letting want quarter. with today everyone to participation forward today. we you up by next again speaking

thank So you.

Operator

conclude attending, lines. gentlemen, thank do you that your today’s does conference for and now call. Ladies you may We disconnect

American States Water (AWR) 3 Aug 212021 Q2 Earnings call transcript