American States Water Company

Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call discussing the company's third quarter 2025 results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through November 13th 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 listen-only mode. Should you need assistance, please signal 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 then one on your telephone keypad. To withdraw your question, please press star then 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, unknown 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 except as required by law, the company does not undertake any obligation to publicly update or revise any forward-looking statements. 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 but 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 will turn the call over to Bob Sprouse, President and Chief Executive Officer of American States Water Company. Please proceed.

Thank you, Bailey. Welcome, everyone, and thank you for joining us today. I'll begin with brief highlights to our quarter. Eva will 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. And police report that recorded earnings per share for the third quarter were 11 cents per share higher compared to the third quarter last year, an increase of 11.6%. Favorable variance is attributable to the receipt of final decisions from the California Public Utilities Commission, or CPUC, in January 2025, for our regulated water and electric utilities general rate cases, which authorized new water rates for 2025 to 2027, and authorized new electric rates for 2023 to 2026, and higher earnings for our contracted services business, American States Utility Services, or ASUS, of $0.08 per share due mostly to increases in construction activities during the quarter. For the year to date, September 30th, earnings were $2.63 per share, 21 cents per share higher than last year, or 8.7%. We continue to invest in our water and electric utility systems for the long-term benefit of our customers. Our regulated utilities are on pace to invest a combined $180 to $210 million in infrastructure investments this year. In addition, our water utility recently received CPUC approval to provide water services at another new planned community that will be built out over time, with the first development expected to serve up to 3,800 customer connections during the next five years. And over the longer term, 20 plus years, allows for the construction of 17,500 total dwelling units at full build-up. ASUS continues to enter into U.S. government awarded contract modifications for new construction projects and was awarded $28.7 million in new capital upgrade construction projects during the nine months ended September 30th of this year. These newly awarded projects are expected to be completed through 2028. I'd also like to mention that we are pleased to be recognized on Time's America's Best Midsize Companies 2025 list. and are one of only two investor-owned water utilities on the list. Companies are ranked by revenue growth, employee satisfaction, and sustainability transparency. In addition, American States Water Company is the only water utility included in Barron's 100 most sustainable companies for 2025. Companies were scored across 230 environmental, social and governance performance indicators from workplace diversity to greenhouse gas emissions. We believe these recognitions reflect our strategic growth plans, commitment to our workforce, and focus on our initiatives and disclosures in the sustainability areas, and these will remain priorities for the company. With that, I will turn the call over to Eva to discuss earnings and liquidity.

Let me start with our third quarter results. Recorded consolidated earnings were $1.06 per share for the quarter as compared to $0.95 per share for the third quarter of 2024. For our water utility, Golden State Water, reported earnings were $0.86 per share as compared to $0.84 per share last year. The $0.02 per share increase in 2025 was largely due to new 2025 water rates as a result of receiving a final decision in Golden State water scandal rate case proceedings. Higher gain generated on investment held to fund a retirement plan and lower interest expense, partially offset by higher operating expenses and a higher effective income tax rate. Lastly, there was a decrease in earnings of two cents per share due to the dilutive effect from the issuance of equity under AWR's ad market offering program. Our electric segment earnings were $0.04 per share for the quarter as compared to $0.02 per share for the same quarter last year, a $0.02 per share increase, primarily due to receiving the final CPUC decision on the electric generate case, with the new 2025 electric rates as compared to 2022 rates used to record revenues during the third quarter of last year. Earnings from ASUS were 19 cents per share for the quarter compared to 11 cents per share for the same quarter last year. That is an increase of 8 cents per share, which Bob will discuss further later. Lastly, losses from our parent company were $0.03 per share for the quarter when compared to losses of $0.02 per share for the same quarter last year due largely to an increase in interest expense resulting from higher borrowing levels from AWR's credit facility. Consolidated revenue for the third quarter increased by $21 million when compared to the same quarter of 2024. Revenues for the water segment increased by $8.3 million, largely as a result of receiving the final decision in Golden State Water's general rate case with new rates effective January 1, 2025. Revenues for electric segment increased by $4.3 million, mainly due to new 2025 electric rates as compared to 2022 rates, used to record revenue during the same quarter of 2024. Revenues from SUS increased $8.4 million, primarily due to higher construction activity during the quarter due to timing. Turning to slide 9, supply costs increased by $4 million, mostly due to higher overall per unit purchase wallet costs. included in customer rates in 2025, looking at total operating expenses other than supply costs. Consolidated expenses increased by $10.3 million compared to 2024. This increase includes the impact of the electric generator decision issued in January, which authorized the higher operating expenses primarily for vegetation management and other wildfire mitigation efforts. These costs were previously excluded from customer rates and are not expensed, were not expensed in the third quarter of last year, but they were being tracked in memorandum accounts. They are now included in adopted electric revenue. In addition, the increase was due to higher-end U.S. construction expenses and higher overall operating expenses. These higher expenses were partially offset by lower interest expense, net of interest income, primarily due to decreases in interest rates and overall borrowing levels, partially offset by reduced interest income from a decrease in regulatory asset balances. Lastly, there was an increase in other income net of other expense due largely to higher gains generated on investments held to fund a retirement plan during the quarter as compared to the same period in 2024 due to financial market conditions. Slide 10 shows the EPS bridge comparing reported EPS for the third quarter of 2095 against the same period for 2024. Moving on to slide 11, consolidated earnings for the nine months end of September were $2.63 per share compared to $2.42 per share for the same period in 2024, an increase of 21 cents per share. The increase is largely generated from higher earnings at our regulated utilities. Turning to liquidity on slide 12, net cash provided by operating activities was $202 million for the year today, September, compared to $134.2 million for the same period the last year, with an increase largely related to the implementation of new rates and unregulated utility funds approved to generate case proceedings, as well as various approved surcharges or additional base rates from advice letter filing. In addition, the increase also resulted from differences in timing of income tax payments, billing and cash receipts for construction work, administrative basis at AFUS, and the timing of expender payments. For investing activities, our regulated utility invested $151.8 million on company-funded capital projects in the first nine months of this year, and we project to be on target to reach $180 to $210 million for this year. For financing activities, American State Water, under its Ag Market Offering Program, raised proceeds of $40.2 million during the nine months ended September 30th, net of issuing costs and legal costs, leaving a remaining balance of $68 million available for issuance under the program. In July, Standard & Poor's global ratings affirmed a credit rating of A-stable for American States water and an A-plus stable rating for Golden State water. 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.