California Water Service Group

Thank you for standing by, and welcome to the California Water Service Group fourth quarter and year-end 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Dave Healy, Vice President, Controller. Please go ahead, sir.

Thank you, Jonathan. Welcome, everyone, to the 2021 Year End and Fourth Quarter Earnings Results Call for California Water Service Group. With me today is Martin Kropelnicki, our President and CEO, Thomas Nagel, our Vice President, Chief Financial Officer, and Paul Townsley, our Vice President of Business Development. Replay dial-in information for this call can be found in our year-end earnings release, which was issued earlier today. The replay will be available until April 27, 2022. As a reminder, before we begin, the company has a slide deck to accompany the earnings call. The slide deck was furnished with an 8K this morning and is also available at the company's website at www.calwatergroup.com. Before looking at this quarter's results and year-end results, we'd like to take a few moments to cover forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company's current expectations. Because of this, the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company's disclosures on risk and uncertainties found in our Form 10-K, Form 10-Q press releases, and other reports filed from time to time with the Securities and Exchange Commissions. I'm going to pass it over to Tom to begin.

Thanks Dave and good morning everyone. Happy to be with you to talk about Cal Water, California Water Service Group's results and expectations going forward for 2022. I'm going to start on slide five of the slide deck and run through the financial results for the full year and then we'll pass it around as the slides go by. I want to spend a little bit more time on this first slide than I normally do because there's a couple of new things in here just to identify for the group. First, our operating revenue was down slightly for the year, and yet the net income attributable to the company was up $4.3 million. That's certainly good news and we're proud of that result. One thing that you might take from that, you might scratch your head a little bit. The reason for the lower revenue and higher net income is that through the California regulatory process, we are returning to customers excess deferred income taxes. And that shows in the customer rates and therefore the revenue, but also in lower income tax expense. So you'll notice if you look into the financials attached to the press release, or into the 10K that we have lower income tax for the year. The other thing that you'll notice here is I mentioned net income attributable to CWT. That is because we exclude the impact of the minority interest in our BVRT entity that we co-own in Texas. And so you'll see if you read the 10-K, a lot of disclosure and description around that. But this is the net income attributable to CWT, and you'll continue to see that language both in the press release and in our SEC filings on a go-forward basis. On an earnings per share basis, we were down very slightly for the year from $1.97 to $1.96. And again, the reason for the divergence between the net income being up, the earnings per share being down, is that we did issue 3.3 million new shares here in 2021 as part of our ATM program. We'll talk a little bit more about that later on in the slide deck. Our financial results for the fourth quarter, which is on slide six, We did see a decline in net income and earnings here for the fourth quarter. This is primarily due to the impact of reduced unbilled revenue. We talked about this both in the second quarter and on the third quarter calls where the company had experienced a much higher than normal unbilled revenue accrual in the second and third quarter, and that's come back down to normal. for the end of the year, and so that is really impacting what you see for the fourth quarter results. So that's the primary driver. We can get into that with the bar charts in a few slides.