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SJW (SJW) - 2023 Q4 - Earnings Call Transcript
SJWSJW (SJW)2024-02-22 22:35
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Financial Data and Key Metrics - Revenue for 2023 was 670.4million,an8670.4 million, an 8% increase from 620.7 million in 2022 [13] - Net income for 2023 was 85million,a1585 million, a 15% increase from 73.8 million in 2022 [13] - Diluted EPS for 2023 was 2.68,a102.68, a 10% increase from 2.43 in 2022, driven partly by a 0.14increaseduetothepartialreleaseofincometaxreserves[13]−Q42023revenuewas0.14 increase due to the partial release of income tax reserves [13] - Q4 2023 revenue was 171.3 million, compared to 171.4millioninQ42022,withnetincomeof171.4 million in Q4 2022, with net income of 18.9 million or 0.59perdilutedshare,downfrom0.59 per diluted share, down from 33.5 million or 1.09perdilutedshareinQ42022[29]BusinessLineDataandKeyMetrics−TexasWaterachieved121.09 per diluted share in Q4 2022 [29] Business Line Data and Key Metrics - Texas Water achieved 12% customer growth year-over-year, serving over 28,000 water connections and 950 wastewater connections [9] - Advanced Metering Infrastructure (AMI) project in California is expected to cost approximately 100 million, with 29millionbudgetedfor2024[21]−Thecompanyinvested29 million budgeted for 2024 [21] - The company invested 272 million in capital improvements in 2023, exceeding the planned expenditures by 17million[4]MarketDataandKeyMetrics−ReducedwaterusageinMaineduetowetweatherandlowerindustrialusage,andinTexasduetodroughtconditionsandwaterrestrictions[12]−TexasWaterservesthreeofthefivefastest−growingcountiesintheUS,witha4717 million [4] Market Data and Key Metrics - Reduced water usage in Maine due to wet weather and lower industrial usage, and in Texas due to drought conditions and water restrictions [12] - Texas Water serves three of the five fastest-growing counties in the US, with a 47% increase in potential new connections to 22,000 units [67] - The company is targeting voluntary water use reductions in Texas due to ongoing drought conditions, with most service areas classified as Stage 2 or Stage 3 drought [69] Company Strategy and Industry Competition - The company plans to invest 1.6 billion over five years, including 230millionforPFASremediation[48]−Strategicinvestmentsincludeadvancedleakdetection,solargeneration,batteryenergystoragesystems,andfleetelectrificationtoreduceoperatingexpenses[10]−Thecompanyisfocusedonregulatoryoutcomes,suchasthegeneralratecaseinCalifornia,Connecticut,andthesystemimprovementchargeinTexas[27]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementhighlightedconstructiveregulatoryoutcomes,includingthecostofcapitaldecisionandthereimplementationoftheWaterConservationMemorandumAccountinCalifornia[3]−Thecompanyexpects2024dilutedEPSguidanceof230 million for PFAS remediation [48] - Strategic investments include advanced leak detection, solar generation, battery energy storage systems, and fleet electrification to reduce operating expenses [10] - The company is focused on regulatory outcomes, such as the general rate case in California, Connecticut, and the system improvement charge in Texas [27] Management Commentary on Operating Environment and Future Outlook - Management highlighted constructive regulatory outcomes, including the cost of capital decision and the reimplementation of the Water Conservation Memorandum Account in California [3] - The company expects 2024 diluted EPS guidance of 2.68 to 2.78,consistentwithalong−termgrowthrateof52.78, consistent with a long-term growth rate of 5% to 7% [70] - Management remains optimistic about Texas Water's growth prospects, driven by organic growth and strategic acquisitions [47] Other Important Information - The company has a gender-balanced board and spent 63 million (21% of addressable spend) with diverse suppliers in 2023 [76] - The company received an A rating from MSCI for ESG efforts and was recognized in the Newsweek Excellence 1000 Index for 2024 [57] - The company is participating in a class action lawsuit against 3M and DuPont to recover costs related to PFAS remediation [97] Q&A Session Summary Question: Connecticut Regulatory Environment and Aquarian Water - Management declined to comment specifically on Aquarian Water but expressed optimism about the regulatory process in Connecticut [60][62] - The company is focused on disciplined growth and evaluating opportunities that create shareholder value [81][82] Question: Pending Rate Case in Connecticut - Management expressed confidence in the team's transparency and collaboration with regulators, expecting a fair outcome [83][84] - The decision on the general rate case is expected by the end of June 2024, with a potential revenue increase effective July 1, 2024 [40] Question: PFAS Remediation and Public Awareness - Management emphasized the importance of EPA's proposed regulatory standards for PFAS and the company's commitment to resolving the issue [95][113] - The company is participating in a class action lawsuit to recover costs, which will benefit customers by mitigating rate impacts [97] Question: Capital Expenditures and Reinvestment in 2024 - Management highlighted that approximately 65% of the $332 million 2024 capital budget will be recovered through pre-approved projects and infrastructure recovery mechanisms [72] - Reinvestment in 2024 includes strategic projects aimed at reducing future costs and improving operational efficiency [87]