American States Water Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter EPS rose 25.3% year over year to $1.09, supported by new regulated-utility rates, 4% higher water consumption, a favorable water-supply mix, and increased ASUS construction activity.
  • Positive Sentiment: The board approved an 8.2% dividend increase to an annualized $2.182 per share, extending the company’s dividend-growth streak to 72 consecutive years.
  • Positive Sentiment: American States Water expects regulated-utility infrastructure investment of approximately $185 million to $220 million in 2026, while Golden State Water’s rate base has grown at an 11.3% compound annual rate since 2021.
  • Positive Sentiment: ASUS earnings increased to $0.16 per share from $0.13, and management reaffirmed its full-year contribution outlook of $0.63 to $0.67 per share.
  • Negative Sentiment: Management cautioned that second-quarter benefits from higher consumption and reduced reliance on purchased water may not persist; consumption, weather, groundwater conditions, and supply mix changes could create future earnings volatility.
AI Generated. May Contain Errors.
Earnings Conference Call
American States Water Q2 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's second quarter 2026 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 August 13th on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Operator

Forward-looking statements are not guarantees or assurances of any outcomes, financial results, levels of activity, performance or achievements, and listeners are cautioned not to place undue reliance upon them. Forward-looking statements are subject to estimates and assumptions and known and unknown risks, uncertainties, and other factors. Listeners should review the description of the company's risks and uncertainties that could affect the forward-looking statements in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. Statements made on this conference call speak only as of the date of this call, and except as required by law, the company does not undertake any obligation to publicly update or revise any forward-looking statement. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles in the United States and constitute non-GAAP financial measures.

Operator

These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

Thank you, Bailey. Welcome everyone, and thank you for joining us today. I'll begin with a discussion of the quarter. Eva will discuss some financial details, and then I'll wrap it up with updates on regulatory activity, ASUS, and dividends, and then we will take your questions. We are pleased to report an excellent quarter with financial results that reflected strong execution across our business. Company's performance highlights our effective management and the constructive regulatory framework in which the same quarter in 2025, an increase of $0.22 or 25.3%. All three of our operating business segments performed well and reported year-over-year increases resulting from new customer rates implemented in 2026 at our regulated utilities to cover our infrastructure investments and an increase in construction activities at our contracted services segment.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

In particular, the earnings growth was largely driven by the water segment's strong second quarter performance that was led by new customer rate increases effective January 1st, 2026. A 4% increase in water consumption and a lower reliance on purchased water further supported the quarter's solid performance compared to the same quarter in 2025. However, it is uncertain whether these favorable conditions experienced in the second quarter will continue through the remainder of 2026 or if their positive earnings impact will reverse, as we will discuss later. I'm also pleased to report that last week our board approved a significant dividend increase of 8.2%, resulting in an annualized dividend rate of $2.182 per share. This reflects our board's confidence in the company's ability to achieve long-term sustainable earnings growth.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

We believe a growing dividend allows the company to attract capital for investments in its infrastructure that enables us to provide safe and reliable services to our customers and return value to our shareholders. American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 72 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. In July, Golden State Water Company and the Public Advocates Office at the California Public Utilities Commission, or Cal Advocates, filed a joint settlement to approve the acquisition of an existing water system that serves almost 900 customer connections located in the city of Norwalk in Los Angeles County.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

Our regulated utilities are on pace to invest $185 million-$220 million in infrastructure investments this year as we continue to invest in our water, wastewater, and electric utility systems for the long-term benefit of our customers. We filed a new electric general rate case in January for customer rates covering 2027 through 2030, and a new water general rate case in July, covering rates for 2028 through 2030. We successfully completed our at-the-market equity offering program in June, reaching the maximum aggregate offering capacity of $200 million in gross proceeds raised since the program was first established in February 2024. We have no plans to issue additional equity through at least the end of 2029 to support our current operations. We were once again recognized on TIME's list of Best Companies in 2026 and were one of only two investor-owned water utilities on the list.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

This recognition reflects the company's disciplined execution of its strategic growth plans, strong financial performance, commitment to our workforce, and robust environmental, social responsibility, and governance practices. With that, I will turn the call over to Eva to discuss earnings and liquidity.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

Thank you, Bob, and hello, everyone. Let me start on slide seven. As Bob mentioned, we delivered excellent financial results this quarter. Our consolidated earnings were $1.09 per share, compared to $0.87 per share for the second quarter of 2025. Our water utility, Golden State Water, reported earnings of $0.91 per share, compared to $0.73 per share for the second quarter of last year. The $0.18 per share increase was largely due to new water rates for 2026, including additional revenues associated with approved advice letter capital projects in late 2025 and higher gains generated on investments for a retirement plan, partially offset by an increase in water supply costs, interest expense net of interest income, and the effective income tax rate.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

Lastly, there was a decrease in earnings of $0.02 per share due to the dilutive effect from the share issuances under the parent company's at-the-market offering program. Our electric segments report earnings were $0.04 per share for the quarter as compared to $0.03 per share for the same quarter last year. The $0.01 per share increase is primarily related to rate increases, partially offset by higher overall operating and interest expenses. Earnings from ASUS were $0.16 per share for the quarter, compared to $0.13 per share for the same quarter last year. An increase of $0.03 per share, largely due to higher construction activities, an increase in management fee revenues from the resolution of various economic price adjustments, and lower interest expenses, partially offset by an increase in operating expenses.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

This slide shows that consolidated revenue for the second quarter increased by $18.2 million compared to the same quarter of 2025. Revenues increased by $11.4 million in the water segment and $700,000 in the electric segment, driven largely by the new 2026 rates and additional revenues generated from advice letter projects approved in 2025. Revenues from ASUS increased to $6.2 million, primarily due to higher construction activities and management fee revenues. Turning to slide nine. Looking at supply costs first.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

The increase in supply costs primarily related to our water segment due to an overall increase in per-unit water supply costs covered in rates and an increase in the production of water, resulting from higher customer consumption, partially offset by the favorable impact of an after-water supply source mix that included less purchased water during the quarter compared to the same period last year due to wells being brought back online in certain customer service areas. The remaining consolidated operating expenses increased by $4.6 million compared to 2025, largely due to higher ASUS construction expenses from an increase in construction activity and an overall increase in operating expenses.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

Interest expense, net of interest income, also increased, largely from capitalization of debt costs related to certain advice letter projects approved by the CPUC in the latest Water GRC effective January 1, 2025, which was recorded in 2025, with no similar items this year, and reduced interest income from a decrease in regulatory asset balances for both regulated utilities. Lastly, other income increased during the quarter due to higher gains generated from investment to fund a retirement plan. Slide 10 shows the EPS bridge comparing reported EPS for the second quarter of 2026 against last year's second quarter. Consolidated earnings for the 6 months ended June 2026 were $1.86 per share, compared to $1.57 per share for the same period in 2025, an increase of $0.29 per share. As Bob mentioned, all three of our operating business unit segments performed very well and reported year-over-year increases.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

Turning to liquidity on this slide. Net cash provided by operating activities was $116.6 million for year-to-date 2026 as compared to $109.6 million for the same period last year. The increase is largely related to new rates implemented at our regulated utilities, as well as various approved surcharges and additional revenues from approved advice letter projects. In addition, the increase also results from PFAS litigation proceeds received during the year. For investing activities, our regulated utility invested $91.7 million on company-funded capital projects during the first half of the year, and we expect company-funded capital expenditures to total between $185 million-$200 million for the full year 2026. For financing activities, American States Water, under its at-market offering program, raised proceeds of $39.9 million during the first half of the year, net of issuance costs and legal costs.

Eva Tang
Eva Tang
SVP of Finance and CFO at American States Water Company

As Bob mentioned earlier, we have completed the equity offering program and do not expect to issue additional equities through at least the end of 2029. Last month, Standard & Poor's affirmed the company's strong credit ratings of A for American States Water with a stable outlook and A+ for Golden State Water, also with a stable outlook. These are some of the highest credit ratings in the U.S. investor-owned water utility industry. With that, I'll turn the call back over to Bob.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

Thank you, Eva. Turning now to updates on the regulatory front, starting with the latest water general rate case application that set new rates for the years 2025 through 2027. In December, Golden State Water received approval from the CPUC to implement its full second year and other rate increases, which were effective January 1st of this year. This approval results in higher adopted operating revenues, less water supply costs for the full year 2026 of $32 million compared to adopted operating revenues, less water supply cost for 2025. Included in the 2026 increase is nearly $11 million related to advice letter capital projects. The advice letter projects were added to the adopted rate base for inclusion in the revenue requirement effective January 1st, 2026. In comparison, the net change in adopted operating revenues, less water supply costs in 2025 over 2024 adopted levels was $23 million.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

As a reminder, due to the CPUC's required use of a modified revenue decoupling mechanism and an incremental water supply cost balancing account effective January 1st, 2025, Golden State Water's earnings face future volatility from consumption fluctuations and water supply mix changes. As I mentioned earlier, Golden State Water's second quarter earnings benefited from higher customer consumption of 4% and a favorable water supply source mix that included less purchased water than in the same period of 2025. This improvement in the supply mix was due in part to certain wells that had been temporarily offline during the first quarter, returning to service in the second quarter. It remains uncertain whether these favorable conditions in the second quarter will continue through the remainder of 2026 or if their positive earnings impact will reverse. Customer consumption can fluctuate due to factors like climate change, conservation efforts, and weather conditions.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

For example, El Niño or La Niña weather events could significantly affect precipitation levels and outdoor water use. Additionally, water supply mix changes can occur due to unforeseen groundwater quality issues and changes in the operating conditions of groundwater basins and associated pumping facilities. Any of these factors could have a direct impact on Golden State Water's future net earnings. Next, we review pending and future regulatory proceedings at the water segment. On July 1st, Golden State Water filed a general rate case application for all of its water regions and the general office. This general rate case will determine new water rates for the years 2028 through 2030. Golden State Water requested capital budgets of approximately $1 billion for the three-year rate cycle, and among other things, requested to reinstate the regulatory mechanisms for full revenue decoupling and a full supply cost balancing account for water supply.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

The decision in this rate case is scheduled for the fourth quarter of 2027. As mentioned on prior earnings calls, the CPUC approved a request by Golden State Water and three other large investor-owned California water utilities to defer the cost of capital application by another year. CPUC's approval postponed the filing date of the application by one year until May 1st, 2027, with a corresponding effective date of January 1st, 2028. The CPUC also approved the joint parties' request to leave the current water cost of capital mechanism in place through the one-year deferral period. Golden State Water's current authorized rate of return on rate base is 7.93% based on its weighted average cost of capital, which includes a return on equity of 10.06% and a capital structure with 57% equity and 43% debt, which will continue in effect through December 31st, 2027.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

As I previously highlighted, on July 13th, Golden State Water and Cal Advocates filed a joint motion seeking approval of the settlement agreement to acquire a water system in Norwalk, California. If the settlement agreement is approved by the CPUC, the system will be incorporated into one of Golden State Water's existing rate-making areas and will result in an increase to water revenues. A proposed decision is expected in the fourth quarter of this year. Turning our attention to slide 15, we present the growth in Golden State Water's adopted average water rate base from 2021 through 2026, which increased from $980.4 million in 2021 to $1,673.2 million in 2026. That represents a compound annual growth rate of 11.3% over the five-year period. Golden State Water anticipates a robust and sustained growth in its rate base over the next few years.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

The annual increase in rate base reflects, among other factors, the net effect of capital investments less depreciation. The higher increase in 2026 as compared to the increases in the prior years, represents the effects of the advice letter projects completed prior to 2026 that were included in rate base effective January 1st, 2026. Please see the first footnote at the bottom of the slide. The affordability of our customer bills is always something that our company takes very seriously. We remain focused on balancing the need for continued investment in system reliability and resiliency with the impact on customer bills. CPUC evaluates affordability using metrics such as the affordability ratio, which measures essential utility bills relative to household income, particularly for low-income customers. The majority of our water service areas perform well under the CPUC's affordability metrics.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

For a very few smaller service areas where affordability challenges exist, we are either implementing or have proposed measures to address those concerns. Our electric customer bills and affordability metrics remain within a manageable range. Turning our attention to Bear Valley Electric, which continues to be a strong contributor to the company's results. The current general rate case set rates for 2023 through 2026. In January, Bear Valley Electric implemented new rates for 2026, which is the last year of its four-year rate cycle. There were also additional increases in revenues in 2025 and 2026 associated with $27.9 million of capital projects, including AFUDC, approved for recovery through advice letters that were completed and placed in service. In January of this year, Bear Valley Electric filed a general rate case application that will determine new electric rates for the years 2027 through 2030.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

Among other things, Bear Valley Electric requested capital budgets of approximately $133 million for the four-year rate cycle and another approximately $17 million, plus AFUDC, for capital projects to be filed for revenue recovery through advice letters when the projects are completed. A return on equity of 11.30%, an embedded cost of debt of 5.92%, capital structure of 60% equity and 40% debt, and a return on rate base of 9.15%. Let's continue to ASUS, which contributed earnings of $0.16 per share for the quarter, which was $0.03 per share higher than last year. This was a result of an increase in construction activities, higher management fee revenues resulting from the resolution of various economic price adjustments, and lower interest expense from lower borrowing levels and lower average interest rates, partially offset by higher overall operating expenses.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

ASUS is projected to contribute $0.63-$0.67 per share this year. We remain confident that we can effectively compete for new military base contract awards in the future based on our expertise and strong reputation with the military. I would like to turn our attention to dividends, which I touched on earlier. Last week, we announced an 8.2% increase in the third quarter dividend. This increase is consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term. Our strong dividend history is something that the company is proud of and is a continued asset to our shareholders.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

This strong track record has allowed us to achieve an 8.4% compound annual growth rate in our quarterly dividend rate to shareholders over the last five years since the third quarter of 2021. The company is on pace to achieve a 10-year compound annual growth rate of 8.7% in its calendar year dividend payments through 2026. I'd like to conclude our prepared remarks by thanking you for your interest in American States Water and will now turn the call over to the operator for questions.

Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. At this time, there are no questions. I would like to turn the conference back over to Bob Sprowls for closing remarks.

Bob Sprowls
Bob Sprowls
President and CEO at American States Water Company

Thank you, Bailey. I just want to pass on my thanks to all of you for your participation today, and we look forward to speaking with you next quarter.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Executives
    • Bob Sprowls
      Bob Sprowls
      President and CEO
    • Eva Tang
      Eva Tang
      SVP of Finance and CFO
Powered by Quartr