California Water Service Group Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved sharply: Net income rose to $56.5 million, or $0.93 per diluted share, from $42 million a year earlier, while revenue increased to $308.6 million. Results benefited from $15.3 million in retroactive IRMA revenue, California rate changes and deferred WRAM revenue.
• Infrastructure and PFAS investment accelerated: Capital expenditures reached a record $276 million in the first half of 2026, including $147 million in the second quarter. The company expects approximately $155 million in net PFAS treatment spending for the full year and projects its rate base could reach $3.5 billion by 2028.
• Regulatory and acquisition activity remains active: California Water Service reached a Washington rate-case settlement, continued pursuing the Nexus acquisition in Oregon and Washington, and is awaiting decisions on Texas regulatory matters. Management aims to close the acquisitions before year-end while maintaining strong liquidity and an A+ stable credit rating.

California Water Service Group NYSE: CWT reported higher second-quarter earnings as the company recognized revenue tied to its California general rate case, continued a record pace of infrastructure investment and advanced regulatory and acquisition initiatives.

Net income for the second quarter of 2026 was $56.5 million, or $0.93 per diluted share, compared with $42 million, or $0.71 per diluted share, in the prior-year period. Quarterly revenue rose to $308.6 million from $265 million a year earlier.

For the first six months of 2026, net income totaled $60.5 million, or $1.01 per diluted share, compared with $55.5 million, or $0.93 per diluted share, in the first half of 2025. Year-to-date revenue increased to $523.2 million from $468.9 million.

Rate-case revenue supported quarterly results

Senior Vice President and CFO James Lynch said second-quarter results reflected the California Public Utilities Commission’s decision in the company’s 2024 California general rate case, including retroactive application to Jan. 1 through the company’s IRMA balancing account.

The company recorded $15.3 million of IRMA revenue associated with the delayed rate case, including approximately $9.2 million related to the first quarter. Lynch said rate changes and regulatory mechanisms added $15 million, while recognition of remaining deferred Water Revenue Adjustment Mechanism, or WRAM, revenue added $9.3 million.

Those benefits were partly offset by $6.3 million in higher per-unit water supply costs, $7.9 million in costs associated with deferred WRAM revenue and $7 million in higher income taxes. On a per-share basis, customer rate changes, IRMA revenue and deferred WRAM revenue contributed $0.20, $0.15 and $0.11, respectively, during the quarter, Lynch said.

CEO Marty Kropelnicki said the California rate case was approximately 90 to 100 days delayed but allows the company to be made whole retroactively to the beginning of the year. Billing under the approved rates began July 1.

Capital investment and PFAS spending accelerate

California Water Service invested $147 million in capital expenditures during the second quarter, up 23% from $119.4 million a year earlier. Capital investment reached a record $276 million during the first half of 2026, according to Kropelnicki.

The company’s growth capital compound annual growth rate over 10 years is about 11%, while its rate base is growing at a nearly 12% compound annual rate, he said. The company expects to have approximately $3.5 billion in rate base by the end of 2028, assuming planned investment is completed on schedule.

Its 2026 capital plans include an estimated net $155 million for PFAS treatment programs. Kropelnicki said the net figure accounts for roughly $60 million in expected recoveries from polluters, with further legal recoveries and grant funding potentially affecting the program’s costs. The company had spent about $30 million on PFAS efforts year to date.

The California rate-case decision included approximately $1.45 billion in pre-approved capital investment for the 2024 through 2027 period, plus about $229 million of advice-letter projects.

• The California decision retained the company’s Monterey-style WRAM and several balancing accounts, including mechanisms for pensions, health care, conservation expenses and incremental water-production costs.
• The settlement also authorized a sales adjustment mechanism that can modify the following year’s sales forecast when actual sales differ from forecasts by a specified percentage.
• The company also received authorization for an insurance balancing account in California.

Washington settlement and acquisition planning

During the quarter, the company reached an all-party settlement in its Washington water general rate case. The settlement calls for a $4.12 million increase and a 10.18% return on equity, compared with the company’s original request of $4.29 million and a 10.2% return on equity.

The Washington commission had not yet approved the settlement as of the call, but Kropelnicki said the company expects a decision during the third quarter and expects to begin recognizing associated revenue then.

The company also continued work on its acquisition of Nexus assets in Oregon and Washington. Change-in-control applications have been filed, and integration planning is progressing, management said. The company expects Nevada’s decision may arrive first because that state has a statutory merger-review timeline. Management said its goal is to close the acquisition before year-end.

In Texas, the company is awaiting commission action on its application to become sole owner of the BVRT joint venture and on a consolidated rate case settlement. The company added 200 new wastewater connections during the quarter in the South Austin market.

Liquidity, financing and dividend

As of June 30, California Water Service had $43.4 million in unrestricted cash, $45.7 million in restricted cash and about $395 million available under bank credit lines. Its credit facilities total $600 million and can be expanded to $800 million, with maturities extending to March 2028.

The company raised $88 million through its at-the-market equity program during the second quarter. Lynch said additional financing in the second half would primarily support the remainder of the 2026 capital program and the closing of the Nevada and Oregon acquisitions, as well as efforts to reduce California line-of-credit borrowings.

Both the parent company and Cal Water maintain an A+ stable credit rating from S&P Global, Lynch said. The board also declared its 326th consecutive quarterly dividend of $0.335 per share.

Management said affordability remains a focus, with Kropelnicki stating that the company’s water bills are below the U.S. Environmental Protection Agency’s 2% household-budget affordability benchmark in all districts. He said the company has not encountered major affordability issues in its current California or Washington rate proceedings.

About California Water Service Group (NYSE:CWT)

California Water Service Group NYSE: CWT is a publicly traded holding company that provides regulated water utility services through its subsidiaries. The company delivers safe, reliable drinking water and wastewater management to residential, commercial, industrial and municipal customers across California, Hawaii and New Mexico. Its principal operating units include California Water Service, New Mexico Water Service and Hawaii Water Service, each responsible for end‐to‐end water supply operations—from source development and treatment to distribution and customer service.

Founded in 1926 as the California Water Service Company, the group has grown to become one of the largest investor‐owned water utilities in the United States by customer count.

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