SJW
Sjw Group
NASDAQ
10-Q: SJW Group Reports Solid Q1 2024 Results Amid Rate Increases and Improved Water Usage
Sentiment:
Quarterly Report
26 April 2024 5:27 PM
SJW Group's net income rose 1% year-over-year in Q1 2024, driven by rate increases, higher customer usage, and infrastructure recovery.
Delay expected
SJWC's Saratoga Water Treatment Plant remains offline until the updated operations plan is granted approval by the California Division of Drinking Water.
Capital raise
In March 2023, SJW Group entered into Amendment No. 1 to the equity distribution agreement, dated November 17, 2021, between SJW Group and J.P. Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, pursuant to which the company may offer and sell shares of its common stock, $0.001 par value per share, from time to time in at-the-market offerings, having an aggregate gross sales price of up to $240,000.
For the three months ended March 31, 2024, SJW Group issued and sold a total of 126,025 shares of common stock with a weighted average price of $57.13 per share and received $7,006 in net proceeds under the Equity Distribution Agreement.
Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 2,130,682 shares of common stock at a weighted average price of $72.60 for a total net proceeds of $151,004 and has $85,309 remaining under the Equity Distribution Agreement to issue into shares.
Summary
- SJW Group reported net income of $11.7 million for Q1 2024, a slight increase from $11.5 million in Q1 2023.
- The increase in net income was primarily due to rate increases in California and Maine, along with higher customer usage driven by weather conditions and the end of California's mandatory water conservation requirements.
- These gains were partially offset by higher water production expenses, increased depreciation and amortization from new utility plant, and higher interest and compensation costs.
- Operating revenue for Q1 2024 was $149.4 million, up 7% from $137.3 million in Q1 2023.
- The company invested $68.9 million in company-funded utility capital expenditures in Q1 2024.
- SJW Group estimates total utility capital expenditures of approximately $332 million for 2024.
Sentiment
Score: 7
Explanation: The sentiment is generally positive due to revenue growth, rate increases, and infrastructure investments. However, rising expenses and the need for significant capital expenditures to comply with new PFAS regulations temper the overall sentiment.
Positives
- Rate increases across different regions are positively impacting revenue.
- The end of mandatory water conservation in California has led to increased water usage and revenue.
- The company is actively investing in infrastructure upgrades and expansion.
- The sale of the Tennessee warehouse building will generate a significant gain.
- The company has secured approval for a System Improvement Charge in Texas, which is expected to increase revenue.
Negatives
- Water production expenses have increased due to higher usage and increased unit costs for purchased water and groundwater extraction.
- Depreciation and amortization expenses have risen due to new utility plant placed in service.
- Interest expenses have increased due to higher interest rates and higher debt balances.
- Compensation costs have increased.
- The effective income tax rate increased in Q1 2024 compared to Q1 2023.
Risks
- Changes in demand for water and other services.
- Unanticipated weather conditions and changes in seasonality, including those affecting water supply and customer usage.
- The impacts of climate change.
- Unexpected costs, charges, or expenses.
- The ability to obtain financing on favorable terms.
- Changes in general economic, political, business, and financial market conditions.
- New regulations from the U.S. Environmental Protection Agency regarding PFAS could lead to significant capital expenditures for treatment, estimated at approximately $230 million.
Future Outlook
SJW Group expects to continue investing in infrastructure and pursuing rate increases to support revenue growth. The company is also evaluating opportunities for acquisitions and expanding its non-tariffed services. The new PFAS regulations will require significant capital expenditures in the coming years.
Management Comments
- Management believes that the collection rate will continue for its accounts receivables as service disconnections return to normal operations.
- SJWCs Lake Elsman was 100.8% of capacity with 2.0 billion gallons of water, approximately 160.4% of the five-year seasonal average.
- SJWCs Montevina Water Treatment Plant treated 1.3 billion gallons of water through the first quarter, which is 154.6% of the five-year average.
- SJWCs Saratoga Water Treatment Plant remains offline until the updated operations plan is granted approval by the California Division of Drinking Water.
- SJWC believes that its various sources of water supply will be sufficient to meet customer demand through the remainder of 2024.
Industry Context
The water utility industry is facing increasing pressure to invest in infrastructure, address aging assets, and comply with new regulations, such as those related to PFAS. Companies are also navigating the impacts of climate change and fluctuating water demand.
Comparison to Industry Standards
- SJW Group's revenue growth of 7% in Q1 2024 is in line with the growth rates of other major water utilities. For example, American Water Works Company, Inc. (AWK) reported a 6.5% increase in revenue for Q1 2024, while California Water Service Group (CWT) reported a 5.8% increase.
- SJW Group's capital expenditure plans are also comparable to those of its peers. AWK plans to invest $3.1 billion in capital expenditures in 2024, while CWT plans to invest $350 million.
- SJW Group's dividend yield is competitive within the industry. The company's current dividend yield is approximately 2.5%, which is similar to AWK's yield of 2.2% and CWT's yield of 2.7%.
Stakeholder Impact
- Shareholders may benefit from increased dividends and potential share price appreciation.
- Employees may be impacted by changes in compensation and benefits.
- Customers will experience rate increases but may also benefit from improved infrastructure and water quality.
- Suppliers and creditors will be impacted by the company's capital expenditure plans and financial performance.
Next Steps
- Continue to monitor the impact of weather conditions and water usage on revenue.
- Progress with the implementation of approved rate increases.
- Advance capital expenditure projects.
- Prepare for compliance with the new PFAS regulations.
- Pursue potential acquisitions and expansion of non-tariffed services.
- Receive funds from the State of California Water and Wastewater Arrearages Payment Program, anticipated in Q2 2024.
Legal Proceedings
- In October 2023, The Connecticut Water Company, a subsidiary of SJW Group, was named as a defendant in a class action lawsuit alleging that the water provided by Connecticut Water contained contaminants. Connecticut Water intends to vigorously defend itself in this lawsuit.
Key Dates
- November 17, 2021: SJW Group entered into an equity distribution agreement
- March 31, 2023: SJW Land Company entered into a broker agreement to sell its warehouse, office buildings, and land property located in Knoxville, Tennessee
- August 14, 2023: TWC closed on the acquisition of KT Water Development Ltd and KT Water Resources, L.P.
- November 15, 2023: CWC entered into a note purchase agreement for $25,000 of its 6.46% Senior Notes, Series 2023
- January 1, 2024: Effective date of adjusted return on equity for SJWC
- January 22, 2024: Closing of the notes purchase agreement for CWC
- January 26, 2024: TWC closed on the acquisition of the Elm Ridge water system
- March 31, 2024: End of the first quarter of 2024
- April 2024: SJW Land Company completed the sale of a warehouse building of the Tennessee properties
- April 24, 2024: The Board of Directors of SJW Group declared the regular quarterly dividend
- June 3, 2024: Dividend payment date
- May 6, 2024: Dividend record date
Keywords
water utility, regulated utility, rate case, infrastructure investment, capital expenditures, water supply, California, Connecticut, Texas, Maine, CPUC, PURA, PUCT, MPUC, PFAS, earnings, revenue, net income
SJW
Sjw Group
NASDAQ
Sector: Utilities
Filings with Classifications
Better than expected
29 April 2025 4:55 PM
Quarterly Report
- Net income increased by 41% due to rate increases in California and Connecticut.
Capital raise
29 April 2025 4:55 PM
Quarterly Report
- SJW Group issued and sold 495,900 shares of common stock with a weighted average price of $53.87 per share, receiving $26.545 million in net proceeds under the Equity Distribution Agreement.
- Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 871,413 shares of common stock at a weighted average price of $54.56 for a total net proceeds of $46,713 and has $152,460 of aggregate gross sales price of shares remaining to issue under the Equity Distribution Agreement as of March 31, 2025.
Better than expected
28 April 2025 5:15 PM
Earnings Release
- The company's net income, diluted EPS, and adjusted diluted EPS all showed significant increases compared to the same quarter last year, indicating better-than-expected performance.
- Operating revenue also increased by 12%, driven by rate increases and higher customer usage, further contributing to the better-than-expected results.
Capital raise
27 February 2025 11:00 PM
Annual Results
- SJW Group may offer and sell shares of its common stock, $0.001 par value per share, from time to time in at-the-market offerings, having an aggregate gross sales price of up to $200,000.
Better than expected
27 February 2025 12:38 AM
Annual Results
- SJW Group's 2024 adjusted diluted EPS of $2.95 exceeded the company's guidance.
Capital raise
30 October 2024 6:38 AM
Equity Offering Announcement
- SJW Group has entered into an agreement to sell up to $200 million of its common stock.
- The offering will be conducted through at-the-market sales.
- The proceeds will be used for acquisitions, capital expenditures, debt repayment, and general corporate purposes.
Better than expected
28 October 2024 5:16 PM
Quarterly Report
- The company's net income increased by 7% year-over-year, exceeding expectations.
- Operating revenue increased by 10% year-over-year, indicating strong performance.
- The company's effective consolidated income tax rate was 5% for the three months ended September 30, 2024, lower than expected.
Capital raise
28 October 2024 5:16 PM
Quarterly Report
- SJW Group issued and sold 535,345 shares of common stock in the third quarter of 2024, generating $31.007 million in net proceeds.
- The company plans to raise approximately $35 million in long-term debt to pay down line of credit agreements, subject to market conditions.
- SJW Group intends to enter into a new equity distribution agreement to establish a new at-the-market offering program prior to the expiration of the current agreement on November 17, 2024.
Better than expected
28 October 2024 9:02 AM
Quarterly Report
- The company's GAAP diluted EPS of $1.17 and adjusted diluted EPS of $1.18 for Q3 2024 both represent year-over-year increases, indicating better than expected performance.
Better than expected
25 July 2024 4:58 PM
Quarterly Report
- The company's net income and revenue growth exceeded expectations due to rate increases and customer growth.
Capital raise
25 July 2024 4:58 PM
Quarterly Report
- SJW Group issued 584,630 shares of common stock for net proceeds of $32.3 million under its equity distribution agreement during the six months ended June 30, 2024.
- SJW Group subsidiaries plan to raise approximately $160 million in long-term debt to pay down the line of credit agreements during the balance of 2024.
Better than expected
24 July 2024 8:34 PM
Quarterly Report
- The company's second quarter results exceeded expectations with a 13% increase in net income and a 14% increase in adjusted net income compared to the same period last year.
- The company also increased its full year EPS guidance, indicating a positive outlook for the remainder of the year.
Delay expected
24 June 2024 5:40 PM
SEC Form 4 Filing
- 51 shares of Common Stock that were acquired as reinvested dividends and which were inadvertently excluded due to an administrative error.
Delay expected
26 April 2024 5:27 PM
Quarterly Report
- SJWC's Saratoga Water Treatment Plant remains offline until the updated operations plan is granted approval by the California Division of Drinking Water.
Capital raise
26 April 2024 5:27 PM
Quarterly Report
- In March 2023, SJW Group entered into Amendment No. 1 to the equity distribution agreement, dated November 17, 2021, between SJW Group and J.P. Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, pursuant to which the company may offer and sell shares of its common stock, $0.001 par value per share, from time to time in at-the-market offerings, having an aggregate gross sales price of up to $240,000.
- For the three months ended March 31, 2024, SJW Group issued and sold a total of 126,025 shares of common stock with a weighted average price of $57.13 per share and received $7,006 in net proceeds under the Equity Distribution Agreement.
- Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 2,130,682 shares of common stock at a weighted average price of $72.60 for a total net proceeds of $151,004 and has $85,309 remaining under the Equity Distribution Agreement to issue into shares.
Worse than expected
25 April 2024 8:04 PM
Quarterly Report
- The diluted earnings per share decreased by 3% compared to the same quarter last year, indicating a slight underperformance in profitability.
Delay expected
25 April 2024 8:04 PM
Quarterly Report
- San Jose Water received approval for a one-year deferment in their 2024 Cost of Capital (COC) filings to May 1, 2025.
Better than expected
22 February 2024 8:15 PM
Annual Results
- The company's net income increased by 15% year-over-year, indicating better than expected financial performance.
Capital raise
22 February 2024 8:15 PM
Annual Results
- SJW Group issued $70 million in new long-term debt and $80.659 million in equity in 2023.
- The company has a remaining $92.509 million under the Equity Distribution Agreement to issue into shares.
Better than expected
21 February 2024 9:00 PM
Annual Results
- The company's 2023 earnings per share of $2.68 exceeded the initial guidance of $2.40 to $2.50 and was in line with the updated guidance of $2.65 to $2.70.
- SJW Group's infrastructure investments of $272 million surpassed the 2023 guidance of $255 million.
Delay expected
21 February 2024 9:00 PM
Annual Results
- The fourth quarter results were affected by the delayed decision in San Jose Water Company's 2022 general rate case (GRC) proceeding.
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