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 fourth quarter and full year 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 February 26th 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 a touch-tone phone. 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, performances 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. Securities made on this conference call speak only as of the date of this call and expect 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, 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 go ahead, sir.

Thank you, Chloe. Welcome, everyone, and thank you for joining us today. I'll begin with a discussion of the year. Eva will then discuss some financial details for both the fourth quarter and the year. And then I'll wrap it up with updates on regulatory activity, ASUS, and dividends. And then we'll take your questions. 2025 was a very productive and positive year for the company. January, the company's water utility, Golden State Water Company, received the final decision from the California Public Utilities Commission or CPUC on its general rate case, setting rates for 2025 through 2027. Our electric subsidiary also received its final decision in January of 2025 for new rates covering the period 2023 through 2026. Both decisions represent constructive regulatory outcomes and position us to continue investing in our utility infrastructure for safe and reliable services for generations to come. In addition, our contracted services business, American States Utility Services, or ASUS, contributed a significant increase in earnings for the year. As a result, I'm pleased to announce we delivered strong financial results for 2025 with reported earnings that were 20 cents per share higher compared to 2024 or 33 cents per share higher as adjusted. Included in the company's reported earnings in 2024 was a tax benefit of 13 cents per share for Golden State Water following the final decision in its general rate case. Excluding this item, adjusted earnings for 2024 were $3.04 per share as compared to $3.37 per share for 2025. In 2025, we invested $210.9 million in infrastructure at our regulated utilities reflecting our continued strong ability to execute our capital plan. In addition, we continue to seek opportunities to expand our regulated water operations. During the year, Golden State Water completed a transaction with a developer to own and operate the water and wastewater systems assets, serving a new plan community to be built out over time which is expected to have approximately 1,300 customer connections, generating two revenue streams for delivering water and wastewater services to this community for many years to come. In addition, during the fourth quarter, we 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 long term, 20 plus years, allows for the construction of 17,500 total dwelling units at full build-out. Also, Golden State Water has signed an agreement with the City of Norwalk in Los Angeles County to acquire its water system assets serving about 900 residential customers. In January, 2026, Golden State Water filed an application with the CPUC to expand its existing region two rate making area and include the $5.25 million purchase price in rate base. ASUS continues to enter into US government awarded contract modifications for new construction projects and was awarded $29.4 million in new capital upgrade construction projects during 2025. These newly awarded projects are expected to be completed through 2028. In 2025, we increased our quarterly cash dividend by 8.3%. This is our 71st consecutive year of annual dividend increases. And we remain proud of our dividend history and continued growth. With that, I'll turn the call over to Eva to discuss earnings and liquidity.

Thank you, Bob. Hello, everyone. Let me start with our first quarter results. Adjusted earnings for AWR consolidated increased 18 cents per share over the prior year. when excluding the impact of a one-time tax benefit recorded in the fourth quarter of 2024, resulting from the WALU general rate case decision, and the retroactive rates related to 2023 and the first nine months of 2024, recorded in the fourth quarter of 2024, as a result of receiving the final CPUC decision on the electric general rate case. Reported consolidated earnings were $0.74 per share as compared to $0.75 per share for the fourth quarter of 2024 or $0.56 per share as adjusted for that quarter. For our water utility, Golden State Water, reported earnings were $0.50 per share for the quarter as compared to $0.52 per share in 2024. or $0.39 per share as adjusted. Included in 2024 reported earning was the previously mentioned $0.13 per share tax benefit recorded in the fourth quarter as a result of the final CPUC decision on the Water GRC. Excluding this item, the $0.11 per share increase as adjusted was largely due to new water rates for 2025 Higher gains generated on investment held to fund a retirement plan, lower interest expense, and a lower effective income tax rate from changes in certain flows through income tax items, partially offset by higher operating expenses. Lastly, there was a decrease in earnings of $0.01 per share due to the dilutive effects from shares issuance under the parent companies at the market offering program. Our electric segment reported earnings were $0.11 per share for the quarter, as compared to $0.13 per share for 2024, a $0.02 per share decrease, or a $0.04 per share increase, as suggested. As previous noted, included in 2024 reported electric earnings is the impact of retroactive rates related to the full year of 2023 and the first nine months of 2024 of $0.06 per share recorded in the fourth quarter of 2024 as a result of receiving the final CPUC decision on the electric GRC. Excluding this item, the $0.04 per share increase is primarily related to 30-year rate increases partially offset by higher overall operating and interest expenses. Earnings from ASUS were 16 cents per share for the quarter compared to 11 cents per share for the same quarter last year, an increase of 5 cents per share. Bob will discuss the details later in the call. Lastly, losses from our parent company were 3 cents per share for the quarter as compared to losses of two cents per share for the same quarter in 2024, largely due to an increase in interest expense resulting from higher borrowing levels from AWR's credit facility, partially offset by lower average interest rates. Consolidated revenue for the quarter increased by $21.2 million when compared to 2024. Revenues for the water segments increased $17.4 million, largely due to new 2025 water rates. Revenue for the electric segment decreased by $5.7 million. Included in the revenues for the quarter of 2024 were $9.2 million of retroactive rates as a result of receiving the final decision as mentioned earlier. Excluding this item, the increase in revenues was partially due to third-year rate increases. Revenue from SUS increased at $9.5 million, primarily due to higher construction activities during the quarter due to timing. Turning to slide 10, supply costs increased by $10.7 million mostly due to higher overall per unit purchase water costs included in customer rates in 2025. Looking at total operating expenses other than supply costs, consolidated expenses increased by $4.2 million compared to 2024. This increase is partially offset by the impact of the electric general rate case decision, which authorized higher operating expenses for vegetation management and other wildfire mitigation efforts that were retroactive to January 1, 2023 and recorded in the fourth quarter of 2024. These costs were previously excluded from customer rates and not expensed prior to receiving the approved general rate case decision, as they were being tracked in memorandum accounts. They are now included in adopted electric revenues. In addition, the increase was due to higher ASUS construction expenses and higher overall operating expenses. There was also an increase in interest expense net of interest income, primarily due to reduced interest income from a decrease in regulatory asset balances partially offset by lower interest expense. Lastly, there was an increase in other income, net of other expense, due largely to higher gain generated on investment held to fund a return plan during the quarter as compared to the same period in 2024 due to financial market conditions. Slide 11 shows the ETS bridge. comparing reported ETS for the fourth quarter of 2025 with the same period in 2024. This slide reflects our full year earnings per share by segment as reported and adjusted. Consolidated earnings for the full year of 2025 as reported were $3.37 per share as compared to $3.17 per share for 2024. Included in the result in 2024 was 13 cents per share related to the impact of a one-time tax benefit recorded in 2024 related to our water segment. Excluding this item from 2024's earnings, reported earnings for 2025 were $3.37 per share as compared to adjusted earnings of $3.04 per share for 2024. That is an increase of 33 cents per share, or 10.9%. The increase is largely generated from higher earnings at our regulated utilities, due mostly to implementation of new rates, and higher earnings at ASUS from increased management fee revenue, higher construction activities, and lower interest expenses. Turning to liquidity, net cash provided by operating activity was $229.7 million for 2025 as compared to $198.7 million for 2024, with increase largely related to the implementation of new rates at our regulated utilities from approved general rate cases. as well as various approved surcharges for additional base rates from advised ladder fighting. In addition, the increase also resulted from settlement proceeds received related to PFAS contamination litigation as plaintiffs in class action lawsuits, billing and cash receipts for construction work at military bases at ASUS, and the timing of vendor payments. For investing activities, our regulated utility invested $210.9 million on company-funded capital projects in 2025, and we project company-funded capital expenditures to reach $185 to $225 million this year. For financing activities, American States Water, under its at-the-market offering program, raised proceeds of $67 million during the year net of issuing costs and legal fees, leaving a remaining balance of $40.7 million available for issuing under the program. We do not expect to continue the ATM program once the remaining balance has been fully utilized. With that, I'll turn the call back to Bob.