SJW - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the SJW Group third quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this call is being recorded. to conference like to now would turn over the Ms. I Counsel Corporate Group. Secretary Papazian, of and Suzy General SJW

You may begin.

Suzy Papazian

Presenting Thornburg, Thank you, and Financial conference Group. Officer. results quarter Chief XXXX are operator. Welcome James to call the Executive Officer, for Lynch, Board, of the Chairman third and financial today President Eric Chief SJW

For remarks our on www.sjwgroup.com. are would website to along, follow like who available those slides these accompanying at

materials today's presentation, forward-looking this I would on remind our to and that related are statements. based contain begin like presentation on assumptions you merger and in company estimates its company current future the we the as experience, light posted under or as materially statements may cause website our and Before website historical circumstances. statements. by Many of made expected and the factors expressed those conditions differ company's implied performance trends, to are by and believes forward-looking actual could from results appropriate that development the the well other factors These

For presentation, XX-Q a be in recent to XX-K, factors most statements that different to from of results this the cause our actual could refer press release to you Forms the and some and Commission, copies we description or revise at such filed with the are any to update which today disclaims duty Securities and website. and may statements. be of X-K obtained All as of Exchange our made statements forward-looking SJW Group of

the questions of ask You presentation. to at end will the have opportunity the

an available of October until As a webcast recorded webcast the XX, reminder, this be will being archive is XXXX. and

to to website. the turn the I like now our Eric. access on and corporate release press can You the call over will webcast

Eric Thornburg

Chief SJW Chairman, CEO and us. Financial for Executive everyone, Officer joining Group, pleased Palle Lynch, of SJW joined I'm Jensen, you Jose Vice of Eric very President Thornburg, and San Thank I'm be Jim President Water. to you, of by Suzy. Welcome, and Group. thank

Connecticut merger by you Water. on begin updating our me with Let

acquisition investigation They're respond In be the work first scheduled the to that regarding to steps transaction. SJW Commission customers, and is it and Maine November create Group approvals that accretion Connecticut in XXXX of facilitate soon. combination terms instituting Water national Group been track XX, and we Also, to by share. regulatory SJW them weeks, equity anticipate in X, million, hearings in transformative the participated accretive increasing few we’ve agreement concluding taking at The the expected continues be continue to common the Public complete Water shareholders appropriate common a and XXXX, transaction, We has stock-for-stock our a earnings SJW purchase water California on by on leading merger the a of Utilities Group’s order Connecticut the issued complete for for the with in agreement the required to XXXX. shareholders, announced combination, $XXX $X.X Connecticut Connecticut all per SJW enable from the amended to the last to wastewater share meantime, by to the transformative will structured the for agreement Water of to serve. Group all-cash confident billion Both the employees of shares XXXX Water percentage As special value an amended the high-single-digit which quarter will $XX and close. hard we’ve meeting Water August regulators. A help significant of company's strongly an and also has outstanding we’ve Connecticut vote this amended per price Group closing which and to we well of believe to SJW EPS remain been XXXX. necessary board cash Connecticut in to on post-close, communities of our and benefits going transaction utility.

XX on processing XX, Our of schedule XXXX by of allow to for OII CPUC that submitted would indicated respectively. XXXX. and a October the The remains were the reply opening that comments it completion to and the committed the September CPUC end has

to and earning to progress its core investing Water pleased of slide execute towards Connecticut and Group water and provide report to transaction, closing in Turning reliable an strategy the safe five, on I'm a to that on addition in return – infrastructure communities the to to and SJW service necessary that customers of making continues investment. growth

company. track base, our capital capital Our the complete rate in And on investment investments $XXX to our engine are approximately XXXX. in add earnings to program of we to continues million

systems last shareholders. the water XX $X billion our and our for to in approximately customers years, Over we deliver invested have

to Our capital invest prudent water and in our underscores and business superb The our relationships as execution our need our and talented our and systems ability reliable of our to at shareholders. return ability to expertise of business team to in fundamental the service. water well management constructive remain our the resources regulators and our who will partners, to financial infrastructure recognize safe, for our as high-quality SJW investments deliver growth increased with

I'll who With I’ll Jim's other provide After detailed other company. We’re and forward analysis greater proud now QX of of commentary. even of of years, a information to combined that, dividend over XX and each as to value will last annual more additional to looking shareholder review of matters. things continuing on and you of provide remarks, and drive XX our continuous Jim? increase financial results payments a turn than our dividend and the history long-standing Lynch years regulatory with business Jim in the

James Lynch

Eric. Thank you,

was rate quarter the $XXX.X effective of result January for quarter resulted Water Valley additional general Rate general the increase recover increase District, July million, provided $X.X that a $XXX,XXX increase revenue. went the by cost third and as XXXX. revenue increases rate on a of of the increases Santa California application X quarter the to over district. primarily Third effect Clara X XXXX X.X% or in million California water for case into our increases imposed in were rate rate X.X% These a

$X million. our million customers were increase during in Act utility along million. offset to of costs of per and and benefits accounts boards directed balancing commissions in service act Ranch memorandum activities of with account due contributed These Texas, the expenses base unit capital and water both higher by offset that by surface cost The organic million our in new update, revenue million proceeding. increases of water This the to an net of $X.X pass the production million, production diluted an share acquisition or $X.XX power Deer million New purchased on company area. revenue income through derived or $XX.X $X.X quarter was due due third primarily tax of recovery lower per customer tax per regulated accounting Creek Tax net Texas as to the primarily of partially in from with decrease growth $X standard of our increase implementation act, was from standard due to adoption Water quarterly System partially in the Job additional our for customers. a the Net in compares cost $XX.X to was decrease the in a California quarter and This $X.X income memorandum and lower Cuts balancing share. Recall us the in rate diluted quarter financial return $X.XX in the $X.X authorized or XXXX. Texas the California to regulated and cost water an the million and the for for of increase revenue production

increases for operating higher merger income. and to million depreciation. other the increased $X.X XX% compared lower per tax Income expenses million of in primarily XXXX federal $X.XX, share rates, million to addition, primarily the and of customers, and from for related the to $X.XX on increase earnings decrease diluted balancing quarter share pretax the a related of impact depreciation taxes customer In lower by per XX% surface higher $X.XX XXXX. higher share, The $X.XX of were share, and per from $X.XX quarter due per in earnings million rate due share. per to were to and costs $X.XX of to These of a per activity were water. $X.XX third $X.X account $X.XX $XX.X Diluted activity statutory lower increase share offset quarterly transaction CTWS included change of expenses memorandum available in comparative quarter, an $X.X new merger-related

by of California the return our $X.X was million. offset primarily for proceeding. purchases $XX revenue higher decrease water increased results, year-to-date many expenses primarily cost This per partially additional $X.X increases million increased was and million, income in increases a $X.X of contributed due net resulted an million the authorized water million lower third $X.X revenue. new our purchased recovery million revenue and memorandum partially factors $X cost accounts in million the base quarter. year-to-date same Turning an of XXXX. increased by offset our Rate production And and year-to-date of production volume production primarily tax These revenue lower-cost to service costs usage, increase $X.X of in higher area, unit increases on in the Texas capital a million balancing increase in account and surface memorandum in customers, additional million. Year-to-date rate of in net $XX.X a balancing decrease additional in was and power as cost year our $X.X due million, quarter water act, of year-to-date. and increase $XXX usage by The the for of revenue implementation an Customer $XX.X driven customer to lower over to million. by were water

real contributed usage the XXXX. offset increased per The share. share primarily $X.XX our share. account, by These per availability of the $X.XX impact $X.XX California cost due increases per proceeding, of share, water $X.XX, surface to $XX and per contributed million account during memorandum other the $X.XX of period per $X.XX And same lower per addition, were lower to tax to contributed XXXX. Connecticut were Increased lower is customers conservation higher new and and costs capital in $XX.X year-to-date, and in statutory memorandum the a million Rate share. similar share. first contributed occurred balancing the water increases per on which of share of customer gain the million of estate to primarily $X.XX were decrease first compared act. sales contributions sale Year-to-date No due earnings taxes pretax real diluted million other income. operating also Year-to-date included XXXX primarily compared due months Water for depreciation. of pretax primarily tax X.X the nine months income in nine to lower million the $XX.X of rate federal Income increased estate XXXX investments. $X.X expenses merger In a XXXX

In in not incurred water resulted Also, share XXXX in $X.XX per addition, of sale that an the estate higher per and in amortization per merger-related did production costs real cost the in depreciation difference per we of share. share. of on $X.XX of $X.XX of gain and expenses investments increase XXXX share, reoccur $X.XX

back in our added Turning program, utility that, as of call we million other company we of plant year-to-date brings quarter, lines financing quarter future the I third This as bank to for of the end will XXXX. had $XX on capital With turn Eric. in of million. million At well $XX.X short-term over credit company-funded additions stop activities. additions, the to and $XX.X operating the to plant available our funded total utility

Eric Thornburg

Jim. you, Thank

Before reiterate opening and quarter go-forward the to during floor growth our I'd like questions, few to on a developments up third the strategy. touch

fair Jose diligently were has issue our CPUC a with reach expeditiously XXXX, closely remedy some investigate this worked thoroughly Since San We early of first of work notified the continue practice. in potential their to and the we resolution of to matter. review to regarding billing billing Water

that we our While has we Office found our settlement evidence with fact alignment did in by engaged Advisors company the that rate our were investigation Public industry standards. a out proceeding, general ever with of no supported internal the case in billing, learn double

billing to steps Advocates for the including XXXX, the customers addressing inconsistency, Public in general January refund our CPUC's our a that the to within changes service reaching to and matter taken through address as effective case our XXXX well current in Office propose to CPUC's December settlement practice XXXX and the customers period June with proceeding divisions XXXX when for to CPUC as a rate subject period three-year through rate to the revising final CPUC several period within refunds the the extending approval, investigation filing various of inquiries with from billing from they responding order. prorate charges our XXXX, have for We voluntarily occur

to Our with the to committed us customers this as closely matter work needed. important CPUC are continuing we’re and to on

continues parallel Now, application general path, its a on with San the case rate CPUC. to Jose Water pursue

with X% the rates. revenue requirement. authorized or approved CPUC This XXXX San We’re majority A Water letter preceding. XXXX revenues of to decision, the filings recently quarter included with project on issued issues which and retrofit Regulatory Water’s integrates final about Treatment decision Montevina proposed closely is the effective $X.X incorporates effective reviewing this vast XX, an January in November on a anticipated in settlement the rates million in XXXX. the August advice by investments into XXXX the new was increased X, rate Jose approximately identified incorporate filing XXXX change of Plant

look we commitment guidance long-standing and environment the commitment protecting customers, high one preserving and board as Turning growth XXXX announced corporate to to like and environment. leaders Water as service the Deer aspects our a year-to-date within quality focused customers also because good neighboring opportunity high-quality service, reliable delivers but contribution XX%, in safety, and and leadership, further this our to and SJWTX. in being United company's well formed and on adjacent to the program, current mission and and of vibrant Group’s consolidated about and health has area while at social our and water challenges not the Ranch remains and operating it's on with earnings. increase a to responsibility our portfolio utility, impressive do economically water to immediately The stewardship while its environmental of reliable strategy our remains water take fastest service work of cement to highlight high-quality service on wastewater board growth ability our on water July Creek to serving expertise. diverse supplies committee team our water exceptional and organization. is of Texas, safe, water supply status also regions be growth. measured the X, for our everything our growing optimistic live, in strong owing System continue will systems utilities SJW previously core go-forward we growth States. assisting their daily continues with water our through the prospects SJWTX service, organically operations the I'd sustainability display area This Reaffirming Group acquisition organic including is Texas growing the provide of to Customer as of to through of With the SJWTX, deliver our SJW remain growth to to SJW steward track across our and by quality to our an we key Group operates environmental water industry where Inc., safe, XXXX, as acquisitions, has record the we serve. regions. both in two as treatment, the delivery. to only

our deliver to and keenly service. continue We to prudent improvements our on operations the plan, deployment investments on business also of our focused while execute world-class management employees continuous innovative through in financial technology, water in remaining

investments driver big of our well will initiatives but transformative Group. various a combination other so SJW are be growth Connecticut underway with that and Water at success, will the Our significant organic future

any earnings might growth you I'll haul, support. Thank deliver questions to Over be answer have. your confident for happy sustained our you in dividends. the we ability and profitability, remain and long to continued

Operator

Instructions]. Thank [Operator you.

Evercore of question ISI. first Durgesh comes Our from Chopra

now is open. line Your

Durgesh Chopra

Good morning, team.

Eric Thornburg

Good morning.

Durgesh Chopra

questions two me. for So,

the Jim. first you, for quarter The on

slide Just I this but you XX, number. bucket It’s went comprised if other and that rather of? is – on over apologize the sizable already, what a

James Lynch

a discussion on our or is be bucket is this it don't changes se. items other individually detail our I to specific per such talk kind as call expenses per in your give you but And the property themselves include basis. about at of – really like maintenance The and it’s items can the tax share, the a would on more we raise to request. in that that wouldn't that items changes But that could individually $X.XX specific something

Durgesh Chopra

these to Okay, high they that perfect. like Or modeling think these, of just items? about you But when in do level, – going more be are one-time these are sort we’re nature? recurring thinking

James Lynch

Well, it's recurrent in more probably nature.

have there Maintenance, that one principally we manage to that there tax on and property factor changes investment those. time example, so able be we expenses would in. that the CapEx, higher a have be in is For basis, the to go-forward could we more in and to due

there some that. variability So, in could be

Durgesh Chopra

give Beautiful. plan? you then, just of how then, then? the execute Thanks. timing Would And could about us wait the regulatory or quick? the it? Like, a Eric, are real financing look can execute before you you’d plan to approval thinking for recap merger And you the you it that for when of

Eric Thornburg

Yeah. going your leading Thank answer for it's effort on okay, Jim you, the Durgesh, that been I'm team He’s our question. have If question. matter. to

James Lynch

Yeah.

the So, it the a between we’re and now now we’re of Eric And looking and occur as debt right at anticipating and a through when mix mentioned now, equity right transaction. we sometime conservative closes. transaction January the expect to close transaction for financing

So, watching take now between time. and to both opportunistic we’ll then be market, the the and advantage an of full markets debt equity

Durgesh Chopra

Awesome. Thank quarter. you, guys. Great

Eric Thornburg

Thanks.

James Lynch

Thank you.

Operator

Instructions]. [Operator you. Thank

comes from of Michael question Gaugler next Montgomery. Our Janney

open. is line now Your

Michael Gaugler

everyone. morning, Good

Eric Thornburg

Good morning, Michael.

Michael Gaugler

guidance you on if QX. acquisition can any wondering provide Just in costs

James Lynch

costs and capitalized the are so and forward. the anticipate related in, are you and in the net to amortized equity, equity. obviously, going go issuance won't for be going proceeds, through P&L be would and residing And, debt they our to debt know, be those going largely that going costs forward to of The the as Michael, we

would that would the the except the those of biggest one to and extent So, of we cost. the of going company be directly would impact see, debt costs forward those amortization profitability the future neither of

So, transaction. pay it not success We do though, occurs. lot big this contemplated still as right now, us completion. have the At those fees a got costs our to I the yet transaction of transaction of as is that the the behind think relates point, advisors to are forward the to will as some we've moving we

Michael Gaugler

gentlemen. That's you. all Thank Okay. I had,

Eric Thornburg

Michael. Thanks, Okay.

Operator

session. this closing to question-and-answer call And Instructions]. remarks. turn I any Thornburg for Eric back now to conclude our [Operator you. the Thank does like over would

Eric Thornburg

Very good. appreciate you, your call. Thank today's company. participating our and operator. for Thank you, in We everybody, really support in interest

very We’re forward. those and future our as we excited about keeping on forward matters look you to go we updated

and care soon. take we’ll to everybody So, talk you

Operator

ladies program. in conference. today’s you thank gentlemen, and today’s for participating concludes This

You great a may Everyone, have disconnect. all day.

SJW (SJW) 25 Oct 182018 Q3 Earnings call transcript