American States Water Company

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the American States Water Company conference call discussing the company's first quarter 2025 results. The call is being recorded. If you would like to listen to the replay of the call, it will begin this afternoon at 5 p.m. Eastern time and run through May 15th on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. This call will be limited to an hour. Presenting today from American States Water Company are Bob Sprouse, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees or assurances of any outcomes, financial results, levels of activity, performance or achievements, and listeners are cautioned not to place undue reliance upon them. Forward-looking statements are subject to estimates and assumptions and known and unknown risks, uncertainties, and other factors. Listeners should review the description of the company's risks and uncertainties that could affect the forward-looking statements in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. Statements made on this conference call speak only as of the date of this call and accept as required by law. The company does not undertake any obligation to publicly update or revise any forward-looking statement. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information and are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I would like to turn the floor over to Bob Sprouse, President and Chief Executive Officer of the American States Water Company.

Thank you, Jamie. Welcome everyone and thank you for joining us today. I'll begin with a brief discussion on the quarter. Eva will then discuss some financial details and then I'll wrap it up with updates on regulatory activity, ASUS, dividends, and then we'll take your questions. We started 2025 with strong financial results. Consolidated earnings per share for the first quarter were eight cents higher compared to the same quarter in 2024. Favorable variance is attributable to the receipt of final decisions from the California Public Utilities Commission, or CPUC, in the water and electric general rate cases, which authorized new water rates for 2025 to 2027 and authorized new electric rates for 2023 to 2026. These favorable variances were partially offset by higher operating expenses, a $0.05 per share unfavorable variance from losses incurred on our investments to fund one of the company's retirement plans, and the dilutive effects from the issuance of equity under American States waters at the market offering program, which decreased consolidated earnings by $0.02 per share. Our regulated utilities are on pace to invest a combined $170 to $210 million in infrastructure investments this year. With that, I will turn the call over to Eva to discuss earnings and liquidity.

Thank you, Bob. Hello, everyone. Let me start with our first quarter results. Recorded consolidated earnings were $0.70 per share for the quarter. as compared to $0.62 per share for the first quarter of last year. For our water utility, Golden State Water reported earning more $0.52 per share compared to $0.48 per share last year. The $0.04 per share increase in 2025 was largely due to the new 2025 water rates as a result of receiving a final decision in connection with Golden State Water's general rate case proceedings. partially offset by higher operating expenses and losses generated on investments held to fund a retirement plan as compared to gains during the same period in 2024 due to financial market conditions. Lastly, there was a decrease in earnings of $0.02 per share due to the dilutive effect from issuance of equity on the AWR's ad market offering program. Our electric segment earnings were $0.07 per share for the quarter as compared to $0.05 per share for the same quarter in 2024, a $0.02 per share increase, primarily due to receiving the final CPUC decisions on the electric generate case with the new 2025 electric rate as compared to 2022 rates used to record revenues during the first quarter of 2024. Earnings from ASUS were $0.13 per share for the quarter, which was consistent with the same period in 2024, which Bob will discuss further. Lastly, losses from our parent company were $0.02 per share for the quarter when compared to losses of $0.03 the same quarter in 2024 due largely to a decrease in interest expense resulting from lower average interest rate. and lower borrowing levels at AWR's credit facility. Consolidated revenues for the first quarter increased by $12.7 million when compared to the first quarter last year. Revenues for the water segment increased by $11.7 million, largely due to new 2025 water rates as a result of receiving a final decision. in Golden State Water's general rate case proceeding. Effective January 1, 2025, Golden State Water transitioned from a full revenue decoupling mechanism to a modified rate adjustment mechanism known as the Monterey Style Water Revenue Adjustment Mechanism, or the MGRAM. Field water consumption for the first quarter of 2025 approximated consumption levels adopted in the new 2025 rate. And therefore, Golden State Water's transition to the NBRAM did not have a mature impact to revenues recorded during the first quarter. Revenue for the electric segment increased by $2.89 million, mainly due to New 2025 electric rates as compared to 2022 rates used to record revenues during the first quarter of last year. Revenues from ASUS decreased $1.8 million primarily due to lower construction activities during the quarter as they were negatively impacted by unfavorable weather conditions, which were less impactful during Q1 in 2024. Turning to slide nine. Supply costs increased by $4.3 million, mostly due to an increase in customer water usage and higher overall per unit water supply costs. Also effective this year, Golden State Water transitioned from a full supply cost balancing account to an incremental cost balancing account for supply costs. As a result, Golden State Water's earnings are now subject to favorable and unfavorable changes in the water supply source mix as compared to adopted supply source mix reflected in the revenue requirements. During the first quarter, our pumped water sources, which cost less than purchased water, were capable of meeting a greater portion of customer demand. However, the favorable supply cost experience from the favorable supply mix during the first may or may not continue during the remainder of the 2025 year. Looking at total operating expenses other than supply costs, consolidated expenses increased by $2 million compared to 2024. This increase includes the impact of the electric generator decision issued in January, which authorized recovery of higher operating expenses primarily for vegetation management and other wildfire mitigation efforts. These costs were previously excluded from customer rates and not expensed in the first quarter of last year, as they were being tracked in memorandum accounts. They are now included in adopted electric revenue. In addition, the increase was due to higher overall operating expenses partially offset by lower-end U.S. construction expenses. Lastly, there was an overall decrease in other expense, net of other income of $2.5 million due largely to losses generated on investment held to fund a retirement plan during the quarter as compared to gains on investments during the same quarter in 2024 due to financial market conditions. This slide shows ETS bridge comparing reported ETS for the first quarter of this year against the same period for 2024. Turning to liquidity, net cash provided by operating activity was $45.1 million for the quarter as compared to $45.8 million for the same quarter last year. with the change primarily due to timing of working capital items and the change in built water consumption. With the CPUC approved the decision received for both regulated utilities in January, we have implemented new water and electric rates during the quarter. In addition, both of our utilities have either filed or received approval of various advice based on previously approved regulatory mechanisms to implement surcharges or additional base rates. For investing activities, our regulated utility invested $45.5 million on company-funded capital projects in the first quarter, and we will be on target to reach $170 to $210 million for 2025. In terms of financing activities, American States Water, under its ad market offering program, raised proceeds of $25.8 million during the first quarter, net of issuing costs and legal costs. In February, our electric segment completed an issuing of $50 million in unsecured private placement notes that matured in 2030. In addition, earlier this week, American State Water and Golden State Water executed amendments to their credit agreement to extend the credit facility term from June 2028 to June 2029. As part of this amendment, American State Water also extended its credit facility borrowing capacity from $165 million to $195 million. American State Water currently maintains a credit rating of A-stable with Standard & Poor's global ratings for S&P, while Golden State Water maintains an A-plus stable rating with S&P and an A-2 stable rating with Moody's Investors Service. These are some of the highest credit ratings in the U.S. investor-owned water utility industry. With that, I'll turn the call back to Bob.