California Water Service Group — Third Quarter 2026 Earnings Summary

Financial Performance

• Q3 2026 net income was $65.4 million ($1.05 diluted EPS), compared to $61.2 million ($1.03 diluted EPS) in Q3 2025.
• Q3 2026 revenue increased 6.7% to $332.2 million from $311.2 million in Q3 2025, driven by $22.1 million from rate changes/new customers and $3.9 million from DREMA, partially offset by a $4.4 million decline in customer usage.
• Q3 2026 operating expenses rose 3.7% to $249.5 million from $240.6 million in Q3 2025, with increases in other operations expenses ($4.1 million) and income tax expense ($7.1 million).
• Net other income decreased $6.0 million in Q3 2026 due to a $3.9 million reduction in non-qualified benefit plan investment gains and $1.4 million in business acquisition expenses.
• YTD 2026 net income was $125.9 million ($2.07 diluted EPS), a 7.9% increase from $116.7 million ($1.96 diluted EPS) in YTD 2025.
• YTD 2026 revenue increased 9.6% to $855.3 million from $780.2 million in YTD 2025, driven by $51.9 million from rate changes/new customers, $15.7 million from the 2024 California GRC Interim Rates Memorandum Account, and $9.9 million from WRAM deferred revenue recognition.
• YTD 2026 operating expenses increased 7.6% to $683.6 million from $635.4 million in YTD 2025, primarily due to $14.1 million higher water production costs and $19.9 million higher other operations expenses.
• YTD 2026 net other income decreased $9.5 million due to a $4.7 million decrease in net periodic benefit credit, $4.1 million increase in acquisition expenses, and $3.0 million reduction in investment gains.
• As of September 30, 2026, cash and cash equivalents totaled $45.1 million, with restricted cash of $45.8 million.
• Long-term debt, net, was $1,472.0 million as of September 30, 2026, compared to $1,472.0 million as of December 31, 2025.
• Short-term borrowings increased to $175.0 million as of September 30, 2026, from $130.0 million as of December 31, 2025.

Guidance and Future Outlook

• The Company expects to close the Nevada and Oregon acquisitions in the fourth quarter of 2026.
• The Company anticipates financing ongoing initiatives into the first half of 2027, including the acquisition of Nevada and Oregon systems, using existing long-term debt agreements and equity forward arrangements.
• The Company expects to issue $125.0 million in unsecured Notes and $150.0 million in secured Bonds on or before December 31, 2026.
• The Company projects an annual dividend of $1.34 per common share for 2026, an 8.1% increase over 2025.

Business Segments and Product Lines

• Washington Water Service received WUTC approval for a General Rate Case adding $4.1 million to annual revenues, effective October 1, 2026.
• Hawaii Water received HPUC approval for rate increases in the Kapalua systems adding $1.94 million to annual revenues, effective October 21, 2026.
• The Company invested $148.3 million in water system infrastructure during Q3 2026.
• Group capital investments for the nine months ended September 30, 2026, were $424.8 million, up 16.5% from $364.7 million in the prior year period.
• Cal Water invested $23 million YTD in PFAS treatment projects, with 18 plants under construction, and expects to invest $228.0 million company-wide in PFAS treatment and well replacement projects.
• The Company recovered $59.4 million in net proceeds from PFAS manufacturers to date.
• The Company sold 1.0 million shares via its at-the-market equity program in Q3 2026, raising $49.8 million, and entered forward sales agreements for an additional 1.6 million shares.

Market and Competitive Landscape

• The Company serves over 2.2 million people across California, Hawaii, New Mexico, Washington, and Texas.
• Cal Water's 2025 median water bills were 0.88% of median household income, well within the EPA's 2% affordability guideline.
• The Company was named one of America's Greatest Workplaces, America's Greatest Companies, and World's Greenest Companies by Newsweek.
• The Company received approval from the Public Utilities Commission of Nevada and the Oregon Public Utilities Commission for the acquisition of Nexus Water Group's systems.

Risks and Challenges

• Forward-looking statements highlight risks including regulatory commission actions on rate relief, opposition to rate increases, and the ability to recover costs.
• Risks include changes in water quality standards (e.g., PFAS regulations), environmental compliance requirements, and legal challenges to regulations.
• Operational risks include impacts from weather, climate change, natural disasters (wildfires, landslides), public safety power shutoffs, and water supply availability.
• Financial risks include inflationary pressures, interest rate environment changes, credit rating restrictions, and the ability to complete acquisitions and integrate systems.
• Cybersecurity and IT system security risks, as well as labor relations matters, are identified as potential challenges.

Management Commentary and Tone

• Chairman and CEO Martin A. Kropelnicki stated that solid financial performance reflects the successful execution of the business strategy, focusing on sustainability, affordable rates, and a strong balance sheet.
• Management emphasized a "laser focus" on executing strategy and putting customers first, including preparing for emergencies like extreme weather and wildfires.
• The Company highlighted its centennial celebration, scholarship awards, and a new firefighter grant program as part of its community impact efforts.

Other Key Points

• The Board declared the 327th consecutive quarterly dividend of $0.335 per common share.
• The Company announced its 59th consecutive annual dividend increase, expected to yield $1.34 per share for 2026.
• Cal Water partnered with Selma Unified School District and Self-Help Enterprises to connect Indianola Elementary School to its water system, serving 400 students and faculty.
• The Company has $200.0 million of additional short-term borrowing capacity at the Group level and $225.0 million at the Cal Water level.
• The most recent Cost of Capital decision for Cal Water establishes a 10.27% authorized return on equity and a debt/equity structure of 46.6%/53.4%, effective through December 2027.
• The Company is preparing for forecasted El Niño conditions and wildfires through emergency preparedness training, equipment positioning, and vegetation maintenance.