SJW (SJW) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, the company reported revenue of $171.4 million and net income of$33.5 million, with diluted EPS of $1.09, reflecting a 23$620.7 million, net income was $73.8 million, and diluted EPS was$2.43, representing an 8% increase in revenue and a 22% increase in net income compared to 2021 [22] - The diluted EPS for 2022 increased by 20% year-over-year, primarily driven by revenue increases and better matching of production costs [23] Business Line Data and Key Metrics Changes - The company realized $25.1 million in revenue from the CPUC approved settlement agreement for the 2021 GRC, along with$18.2 million from the recovery of memorandum and balancing accounts [5] - Customer growth contributed $5.1 million in revenue across utilities, while lower customer usage resulted in a decrease of$14.3 million [25] Market Data and Key Metrics Changes - The company continues to operate under a mandatory call for water conservation, which required a 15% reduction in water consumption compared to 2019, resulting in an 11% decrease for residential customers and approximately 6% for business customers in 2022 [26] Company Strategy and Development Direction - The company is targeting a long-term EPS growth rate of 5% to 7%, anchored off the 2022 diluted EPS of $2.43 [2] - A$255 million capital expenditure budget for 2023 is planned, with a total investment of $1.4 billion through 2027, focusing on infrastructure improvements [55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the cost of capital proceeding and its potential positive outcome [1] - Inflation has significantly impacted interest costs, labor costs, and chemical expenses, with expectations for continued increases in 2023 [34][35] Other Important Information - The company has strong ESG ratings and has secured nearly$10 million in financial assistance for customers in arrears [11] - The average borrowing rate for the line of credit advances during 2022 was approximately 3.41%, compared to 1.32% in 2021 [30] Q&A Session Summary Question: Impact of true-up in cost of debt on 2022 EPS - Management confirmed that the 2022 EPS included a negative impact associated with the true-up in the cost of debt from the pending cost of capital proceeding [83] Question: Earnings contributions from Texas acquisitions - Management indicated that earnings contributions from the Texas investment were already seen in 2022, and despite a slowdown in the housing market, growth is still expected [87] Question: Non-linear growth rate due to Connecticut rate cases - Management acknowledged that the growth rate is non-linear, primarily due to the timing of rate cases in Connecticut and Maine, which affects earnings in intervening years [89]