H2O America — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported diluted EPS for Q3 2026 was $0.99, a decrease from $1.27 in Q3 2025; adjusted diluted EPS (non-GAAP) was $1.04, down from $1.27.
• Year-to-date 2026 reported diluted EPS was $2.13, compared to $2.48 in the same period of 2025; adjusted diluted EPS (non-GAAP) was $2.30, down from $2.53.
• Q3 2026 net income was $43.0 million, a 5% decrease from $45.1 million in Q3 2025; adjusted net income was $45.2 million, a 1% decrease from $45.5 million.
• Year-to-date 2026 net income was $88.6 million, a 3% increase from $86.4 million in 2025; adjusted net income was $95.3 million, an 8% increase from $88.4 million.
• Q3 2026 operating revenue was $250.2 million, a 4% increase from $240.6 million in Q3 2025.
• Year-to-date 2026 operating revenue was $644.0 million, a 6% increase from $606.4 million in 2025.
• Q3 2026 operating expenses were $189.7 million, an 8% increase from $175.9 million in Q3 2025.
• Year-to-date 2026 operating expenses were $503.3 million, a 9% increase from $462.0 million in 2025.
• Q3 2026 effective consolidated income tax rate was 11%, compared to 11% in Q3 2025.
• Year-to-date 2026 effective consolidated income tax rate was 12%, compared to 14% in 2025.
• Diluted shares outstanding increased to 43,478,365 in Q3 2026 from 35,643,826 in Q3 2025, and to 41,644,367 year-to-date from 34,797,374.
• Cash and cash equivalents were $572.957 million as of September 30, 2026, compared to $20.686 million as of December 31, 2025.
• Long-term debt (less current portion) was $1,881.4 million as of September 30, 2026, compared to $1,866.8 million as of December 31, 2025.
• Total stockholders' equity was $2,201.2 million as of September 30, 2026, compared to $1,540.8 million as of December 31, 2025.

Guidance and Future Outlook:

• Narrowed 2026 standalone adjusted diluted EPS guidance to $3.10-$3.16 (midpoint $3.13), excluding impacts of Quadvest and pending Cibolo Valley acquisitions.
• Initiated 2026 adjusted diluted EPS guidance including Quadvest and Cibolo Valley impacts at $2.91-$2.97.
• Affirmed long-term adjusted diluted EPS CAGR target of 6-8%, anchored off 2025 adjusted diluted EPS of $2.99.
• Expects to deliver non-linear adjusted diluted EPS CAGR at or above the top end of the 6-8% range over the 2026-30 period.
• Plans to invest a total of $2.7 billion over the 2026-30 period, including impacts of Quadvest and Cibolo Valley.
• Adjusted full year 2026 company-funded capital investment plan to approximately $465 million from $483 million.
• Anticipates filing a consolidated Texas general rate case during the first half of 2027 to reflect ratemaking rate bases of acquired assets.

Business Segments and Product Lines:

• Quadvest acquisition closed on October 1, 2026, with total cash consideration of $542.7 million.
• Quadvest active connections grew 14% (7,700 connections) in 2026, reaching 62,200 total active connections as of September 30, 2026.
• Quadvest connections under contract and pending development grew 13% (11,300 connections) in 2026, exceeding 98,000 as of September 30, 2026.
• Expectation that Texas will grow from 8% of the consolidated customer base at year-end 2025 to 26% by 2029.
• Pending Cibolo Valley wastewater treatment plant and collection systems acquisition (serving 1,500+ connections) expected to close November 2, 2026.
• Revenue drivers in Q3 2026 included rate increases ($16.2 million) and customer growth ($1.1 million year-to-date).
• Revenue offsets included lower customer consumption ($4.1 million in Q3, $2.0 million year-to-date) and regulatory mechanism adjustments ($2.6 million in Q3, $4.3 million year-to-date).
• Operating expense increases in Q3 2026 included water production ($5.0 million), depreciation/amortization ($3.7 million), M&A costs ($3.1 million), and other expenses ($2.0 million).

Market and Competitive Landscape:

• H2O America serves over 1.7 million people across California, Connecticut, Maine, and Texas.
• San Jose Water Company filed for cost recovery of a $176 million PFAS compliance program with the CPUC.
• Connecticut Water Company filed a general rate case requesting $28.8 million in annual revenue increases for $145 million of infrastructure investments.
• Maine Water Company filed its first consolidated general rate case requesting $9.5 million in annual revenue increases for $36 million of infrastructure investments.
• Texas Public Utility Commission approved the Quadvest acquisition and the Cibolo Valley wastewater acquisition.
• Texas system improvement charge order resulted in a $0.2 million annual revenue decrease, compared to the $5.1 million increase previously sought.

Risks and Challenges:

• Risks include potential failure of the Cibolo Valley transaction to close on schedule or at all.
• Challenges involve successfully integrating Quadvest and Cibolo Valley operations and realizing projected financial benefits.
• Regulatory risks include actions concerning rates, authorized return on equity, capital expenditures, and PFAS decisions.
• Risks related to water demand changes, unanticipated weather conditions, and climate change impacts.
• Risks include water supply contamination, infrastructure failure, work stoppages, and catastrophic events.
• Financing risks include ability to obtain favorable terms affected by credit ratings, interest rates, and market conditions.

Management Commentary and Tone:

• Chair and CEO Andrew F. Walters stated the company is positioned to deliver on full-year 2026 guidance and remains committed to long-term financial targets.
• Management highlighted the Quadvest close as a significant milestone for building a diversified utility portfolio and enhancing Texas operations.
• Walters expressed pride in progress on rate cases in Connecticut and Maine regarding $180 million of unrecovered investments and preparations for California's 2028-30 GRC filing.
• Management emphasized the plan to invest over $750 million through 2030 across the combined Texas Water Company enterprise.

Other Key Points:

• Board declared a quarterly cash dividend of $0.44 per share, payable December 1, 2026, to shareholders of record November 9, 2026.
• The 2026 annualized dividend is expected to be $1.76 per share, up from $1.68 in 2025.
• H2O America has paid dividends for over 80 consecutive years, with annual increases for 58 years.
• $325.1 million of total company-funded infrastructure investments were made in 2026 through the third quarter.
• The company leveraged its at-the-market (ATM) program throughout 2025 and issued common stock in early March 2026, contributing to a higher share count.
• M&A and integration costs increased by $3.1 million in Q3 2026 and $7.1 million year-to-date.
• Water production expenses increased due to higher per-unit costs for purchased water and groundwater extraction.