SJW (SJW) 7 Aug 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the SJW Group's Second Quarter 2020 Financial Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jim Lynch, Chief Financial Officer. Thank you. Please go ahead.

operator. you, Thank second SJW the financial conference results Welcome quarter for Group. call to XXXX be Eric I the today presenting will with and Executive Board, Thornburg, Chief Officer. President of Chairman

accompanying website at would follow like For www.sjwgroup.com. are those our along, who slides on available our to remarks

presentation current in developments by to may on trends, performance believes begin this as company contain as forward-looking the other by the of circumstances. These conditions are under Many presentation, based forward-looking cause and historical you implied and appropriate today's posted results assumptions differ the materials company we would statements. like the materially statements. related Before well company's and expected remind actual could factors its from experience, on estimates future factors those made to light I are that and our the website or that expressed statements

that and be XX-Q obtained X-K SJW All presentation, duty For you our and the update of actual results the press XX-K, most filed factors of to this in cause statements statements release our to a Commission, recent today, forward-looking some on we of made or the from are financial forms as website. such Group which may disclaims and statements. copies and Exchange of with could any results to revise description be refer different to Securities

the presentation. end You will the at opportunity of questions an have ask to

As recorded XX, XXXX. webcast a archive October reminder, until webcast available will this is being be the an of

now turn Eric. over website corporate press the I at will access to the can You call our release and the website.

has Group. CEO spread for President and Eric to COVID-XX. and my more protecting you, has serve the been of further as critical safe such SJW Welcome, as is something clean, it's you basic than and water joining I us. of am hand preventing drinking and The delivering Thornburg Thank Jim. everyone, in honor Chairman, public of importance reliable and health when become now washing a evident never activity thank

our my Connecticut this our outages preparing to wide with was towns, especially spread week, service our customers, a well throughout I effective tropical England operations, service water capital New uninterrupted pandemic. investment planning to the our customers and advent. hit This teams our all continue is As remains testament which we who across remarks during highly of strategy provide storm our dedicated to served Isaias. the power Despite and was

support of also the Authority Utilities for Health commissioners their essential thank to prioritize facilities leadership power to restoration Public of Public Connecticut and Regulatory Connecticut the and the the assistance Department We of event. during our

clean, employees our for the we and What nonessential has XXX plus nationwide all the tapwater. mission-critical replacement that the to In paused construction work. pandemic. field customers temporarily the reading, early we That There risks changed is the how and fieldwork assess with is is are delivering meter no days we not associated service of do changed to privileged of operations. other pandemic, because Our communities serve. safe, to

our our and the the office through least protect of deliver The to our COVID-XX spread so could we life-sustaining further third on continue simple, on to at protect to mission that anticipate was so protect service, service Our of majority continue public from employees that people, we delivering could customers they continue quarter. mission. the remotely critical health vast this to our work water mission company and our deliver public continue of

effectively health agencies. of state precautions operations follow continue as were to the internal remotely. while of guidance tremendous to way launched and and public new incredibly teams. and returned unique and proud Extra and initiative review teams employees and leadership Our on of we this a during challenges safety communities. use efficiently work work to appropriate ways an them was task each We've after critical The those as environmental to of team health and our pandemic finding build We've people seen federal field to conducted implemented the effectively ideas serving forward. our the safety they innovation PPE we thorough by our and work safely and is will officials and our move the responded customers and we capture and processes

Cut when spearheaded California. the from sign wanted the to home to of Clara get work to Commute on an people because enabled example, As program, Santa office of pledge launched by out us our we our in the has successful which COVID-XX County

protection our COVID-XX employees and with greater the been of pledge goal the days month conducted or can during the benefits. of There've out pandemic. work of working normal for work about surprising health delivery we've whose be to also office operations shoulder given including work-life course online five a to subsidiaries a remotely, This our opportunity week For benefits brings California of of enhanced and common virtually the XX% employees, when our purpose SJW protecting public has for to work continued resume. our several environment. and for some an service shoulder targeted exceptional a Group its customers employees balance

second the across and resource forced first and for organization. complement each a work share to our allow We've organization. of will Regulators satisfaction sharing, us customer shown operations. and our all a Texas, related satisfaction combined nationwide have of for strength of our record communities that lost teams skills accelerated customer survey other on in seize across further bond quarter, where each four benefit will the total enhance states integration that and or respective each of and states in all launched have at Our knowledge we team web impact the provide now has has pandemic. and built our operations operate benchmark successes This expenses revenues due a serve we Connecticut track proceedings our our measurable It California, the adopted customers, seen platform that to also and teamwork, of initiated our and no the a mechanisms and Maine COVID-XX highlighted and into that consideration allow future. to the our us other Through date. to revenue opportunity, future the new to in

account Our to collections and that we're closely while slowing, continue compensation federal now unemployment be this has monitoring pandemic expired. strong the benefit

costs. some savings On expense side, as as we're such of the incremental of seeing areas travel areas

attention We for of also local and the pandemic remain our industry the our and results to with regulatory tracking in relief. operating closely industry associations, working on focused to impacts raise advocate further and peers national

larger some are a have the states part added that the now combined and organization, operating help of mitigate diversity economic from we of benefit to risks. of four we comes in weather, As regulatory

service, this on core and teamwork. been response respect, will will values by integrity, be that well exemplify guided people, It trust, served throughout event we transparency Our public and move health Protect approach and we as our this has continue fundamental to has principle. rely protect compassion, our forward. and us

other QX XXXX. As such call $X.XX regulatory Jim we to to Jim's remarks, will matters. reaffirm address now review in our I will after earlier who over guidance results and business I'll and Jim. financial our of per the turn $X.XX share

Eric. you, Thank

our usage area results of California the by increases full in operating of surface anchor the winter. and each operations Service rate divisions. service decrease of the offset Connecticut were increases water water this reflect with increasing quarter authorized supplies conditions weather past availability combined partially our CTWS Water in second a These Our customer quarterly and to in dry Northern

earnings. call, noted earnings to evenly finance quarter the future debt year. quarterly transaction we first pattern and our During the the on being throughout that will the is of the shares that impact Recall interest change of transaction new our CTWS recorded issued

hand a water earnings is typical seasonal On CTWS other follow the that utilities. pattern for

pattern lead While this we prior in have merger. to will quarterly of anticipate the changes compared experienced will earnings it annual what on our we no future results, to CTWS to mismatch the impact

second of of diluted $X.XX per the compares due usage, which per income contributed by $X.XX quarter usage. on share share share. million of $X.XX a in XXXX $XX.X decrease quarter results $X.XX quarter revenue surface and per new increase million. $X.XX $X.XX share of earnings $X.XX second increased reflects rate of These $XX.X $XXX.X This customer for expense per contributed share; which the contributed production was increases, million per the reported million which of XXXX. or California with million share partially $XXX production of long-term offset a per Second per CTWS, quarter was for the water revenue per and cost per were higher to increased share. Net $X.XX share diluted over quarter interest second debt for share, increases Diluted or $XX.X

rate $X.XX the on of in CPUC recurred we the Commission equity California the Utilities half to of or merger credit per CTWS first our proceeds this XXXX per XXXX Public per settlement billings XXXX, of the None paid related offering, share first and interest half December of in from of addition, earned of expenses share. $X.XX XXXX. incurred customer $X.XX with invested In our share

comparative which in customer balance we by million our $XX.X million, revenue increase our primarily California decrease $X.X for partially increase to million The contributed million accounts. rate due in analysis Turning the $XX.X and with in memorandum was quarter, generated usage, merger million contributed increased $X.X CTWS, which the increases. to in cumulative revenue was $X.X offset net

The offset increases million $X.X in for water in increased that the million usage. of second of million million Water related did recovery of supply the in expenses water surface compared California Northern $X.X to partially to in to second purchase production accounts. These issued the memorandum to cost customer XXXX of the CTWS sales, in $X.X XXXX. XXXX. $X.X the addition credits balance customer $X.X due In were higher not California supplement million additional quarter of second we decrease million quarter low-volume and by necessary recur quarter included increase $XX.X

availability first additional $X.X XXXX. XXXX, primarily shortfall quarters taxes. operating rainfall experienced non-income million higher of $X.X we Other surface higher Absent depreciation new cost expense this anticipate increases stated increased call, in lowest greater per Northern our As XXXX during property general approximately primarily million two quarter approximately earnings first in the of billion than XXXX result $X.X gallons. watershed we were $X.X billion of the and is be California million inclusion supplement million, and anticipated water in X.X surface from activities. quarter, These and to lower expenses to second-quarter rainfall, the a the in Through Incremental production second planned. expenses water of our the administrative million second we of total due will other watershed. on since gallons $XX.X CTWS'

the for $X.X Effective decrease XX% merger-related decrease The experienced second the was primarily rate second million tax for of a we XXXX. in quarter certain to compared tax CTWS rate addition, XX% of impact was the expenses. In effective tax income due quarter deductions. to flow-through

share, months $XXX months $XX.X diluted the period share, noted million of due Net or the same was prior to increase to $X.XX in first the XX% period. was share was XXXX diluted six year $XX.X or the year million Higher diluted to same per factors or earnings were quarter. contributed decrease surface over Turning on usage the contributed income a merger-related million revenue in first of compared six many share, by costs $X.XX $X.XX for share. change share per The last XXXX, water $X.XX per year. share. per California during for share California $X.XX higher increases the contributed for same per the in customer of to due of results increases Texas long-term expenses partially per share, per $X.XX in contributed production usage $X.XX share, of an These and $X.XX per per expense per and savings Texas offset CTWS of and customer and rate new debt California production $X.XX interest increased

of XXXX transaction. invested we in income finance our share offering. on at addition, per the XXXX of the end from equity proceeds In December interest CTWS were earned XXXX used These proceeds partially $X.XX to

XXXX. similar was in no such, interest earned As income

and customer million, $XX.X million $XX.X These half customer first merger CTWS, $XX.X to water increases. which in increase expenses cost XXXX. XXXX, California XXXX property and expenses administrative in expense, due in increases non the increases increased primarily by Other the other contributed memorandum The million California in decrease were of million in depreciation the in usage. were from surface due million in increased cumulative usage offset Water in $X.X primarily of in partially a $X.X million of accounts. rate higher expenses, $XX.X year-to-date in a to million revenue and was and expenses in inclusion primarily first to $XX.X activities. Northern $XX.X $X.X general first with million the million in and $X.X CTWS recovery was decrease increased Our CTWS primarily increase half income $XX.X $XX.X balance higher These million due production increase million operating higher half million of the taxes. result

$X.X CTWS the decrease we million merger transaction. related in experienced a addition, In to expenses

half million XXXX, on In income and senior equity $X.X October company's interest First and $XXX the the expense offering. first other XXXX income of expense Group's XXXX half in million income included million $X.X SJW XXXX. on other interest of included of notes issued expense earned of the proceeds new

As income noted XXXX. similar no was above, in earned

million. of first second million of program, our we XXXX $XX.X added quarter year funded to plan for half company $XX.X the funded to expenditure capital company total in Turning in bringing the the utility additions

plan add XXXX. are on to track to $XXX million We utility in approximately

Our I unbilled the same $XX.X the million authorized memorandum COVID-XX million A approximately million of payment offset the previously non-cash balancing adjusted -- the million receivables. payment The million half quarter of net credit pandemic. due available net of the million due increase increase At and the of during $XX.X slower by rate cash a Cupertino to in Service operating was for over activities. decreases collections in Concession operations income amounts for XXXX collection $X.X back from XXXX. our and in These City months of bank invoiced short-term were we average and tax in that, million primarily over $XX.X items of Eric. from end of the Agreement our to flows and XXXX, $XX.X income decrease collection had in stop upfront financing on partially The of of with higher customers will million X%. the period during With million an $X.X approximately borrowing $XXX.X connection six credit in the lines accrued. decrease utility first revenue was turn balances $X.X and on decreased additions to XXXX advances of the accounts line plant a and of first and call $X

Thank you, Jim.

systems the the resulting reliable a nation, continues provide to clearly are strategy service Group there safe on affecting our pandemic investing from and water communities While return are SJW challenges high-quality to investments. that and to core water on growth fair across execute of earning businesses those in customers and

continue programs and the capital earnings and water to systems. Our base rate be resilient company's ensuring

in has While there was a and well temporary pause on some capital work in projects our resumed underway operations, four states. work all are

that California, County order not Specifically general San shelter achieving water's place well in capital rate were three-year schedule towards the In Saco million treatment any Maine, replace the negative which facility impact will of work actually authorized and of in treatment in do the river. current we is $XXX Jose We Santa the in fits $XX floodplain and fully in more water to we capital CAPUC new anticipate and underway was before on our expect program million investment issued Clara old ahead continue case. to level. current approved years XXX facility, work than River deliver the is the

held In last fact, groundbreaking on can Maine week, just water's you virtual a which Facebook view page. we

our operation filed Maine authority the case of The We $XXX,XXX additional out a phase years a Company received to our cost. general the our March rule increase the for are without The Maine's called carrying Village constructive revenue XX Public Connecticut, In September request over two to Water Skowhegan in Commission. commission's pandemic but was with divisions regulatory allowed of the Maine we rate filing the of pre-COVID-XX demonstrating in for and was rate requested. base. decision last our continues tripling nearly utility XX authorizing Year-to-date in during XXXX. scheduled filings, to costs than also Connecticut duplicate filings merge separate for acquisition a Heritage company on connections and $XXX,XXX company-funded before decision Utilities water other both since relationship in customer completed over be public recover eliminating expenditures expect the having with more wastewater for growth result customer million division Four end Water SJWTX's state, the Company. the associated in extensions, audits to for delay, single months. SJWTX, final Avon will filed to we've the with growth other grow of nearing efficiency reflecting completed number capital regulatory be by expenses, in companies. for developer-funded and X% of record its are water new three XX,XXX accepted a which companies and increase into $XX Texas and in million water $X the rate XXXX continues in associated will processing, and The and utility payroll company. to in the impress a connections our utility

Turning owing to meet have customer and current water pandemic. demand. In we are to residential among the customers adequate business customers supply, usage subsidiaries lower our from usage general, all our higher of seeing our supplies to

cost in We some demands are seeing operating across increases states. four meet all the to increased

our versus sales we actual lower sales groundwater meet California. our our water, wholesalers are of Importantly, through continue be authorized own nicely to demand supplies. in Despite surface imported able tracking to and availability the

anticipate the reduced water our Jim our integration $X.XX combination any to Group shareholders. costs expect and environment deliver not XXXX positive and all benefits our in due earnings area for On of and note, availability. XXXX supply on SJW employees, our service the plans the the to transformative in to to customers, As continue operating QX. surface execute share per higher also lowered supply communities, our impact currently California of our subsidiaries do as reduction XXXX we guidance water a further we mentioned, a accordingly beyond result,

for XXXX leverage benefits customers invest and team of merger as unpredictable safety at to of challenges, work challenges. Despite has combined people, communities. the our hard stakeholders in in company. to to and management with drive health year unprecedented to internal continues the Our be and our this forward an the and subsidiaries our all been systems a continue we integration

Our team line those our their to of passion the this We at deliver globe have customers service. and company, our employees for life-sustaining deliver clearly and industry the honor work across serve within on their front demonstrated water service. essential to

well-known warm board group board, leadership XXXX Valley and newest welcome are shares accomplishments work His on for with a affection same is our the and we been Carl serve. Lastly, a of that, extend operator all for since the to and to CEO has long turn the Guardino, in the questions. Valley. list. Carl I'd Silicon And of too transformational I'd like to to the to behalf like back the live, call communities deep and Silicon where Carl leader member,

And question with Richard of first the your JPMorgan. line from comes Sunderland

I think or a integration changed the Starting impact COVID-XX a you with and were maybe year made opportunities little Can ago? an where reference more some from impact how a bit accelerated that to the CTWS process have they of there. out speak to you

months since the schedule. close ahead our aspect of nine and really integration been It's of I as the would emphasize cultural

the on, really to and a what's the cultural most we've the driven forward that think success of to alignment that's this side work together across I had the organization. this super just I critical that would integration cultural combination the integration agree is as and cause think common such combination fact the long-term of

of and mitigating would company the cyber integration, a synergies it be of and IT treatment without the travel areas other variety our expect. you challenging and but In many to including chemicals whatnot, structural water delivering public more cost ability costs the are across dreams and can't increases and we and terms

right we're track like feel front. we that really on So on

I was last in believe month. And your California then GRC due filing

Jim year. the supply think finalized that and this there one is So that just are of proceeding our on we he add, wanted an would next I'll filing issues if check to is address to water anything, can and of the rate in cost is results impacting Sure Richard great I of January looking what to is that due XXXX quarter major in upcoming the alluded to requests until as kind -- the XXXX make and in next thing you be case process. actually see, not initial potentially comment XX, March Richard, particularly have rate you so capital general filing our application case has yet that is on well. then final our

put So the water really your on the issue don't an too on approach yet, cost concern of great whole did There's that much a I matter think can that towards aspect discussion decision enjoy. a proposed balancing resolution on and comment also obviously the we supply currently a of have but in our surprise you finger I to don't our mix. a on and included industry's another out that the surprise WRAM

we're our So providing that our upcoming active and to own it FPD, we're some in approach think color commentary watching decision in we will case.

So next I'll just quarter to I on stay provide ask can we color. that tuned and suspect some you more

Your next Fargo. Wells Reeder from of with the question line Jonathan comes

of COVID offsetting them and that right? that covered $X.XX singled tracking you book just accounts you those out, officially until memo actually but those can't the it get So you're Is revenues. the are expenses

the we this at recording at in and should and a trackers we recording an an authorization them our have capture point and utilities, cost discussion opportunity Yeah that recovery those we this Jonathan. tracking Commission not so right of to Jim. later expenses the indication point, in have the any to those It's at but with That's are we've point be three gotten gotten expenses. least in associated have that of at a operating we fourth time,

know in docket didn't stuff it QX updates the anticipated that? position there, like AMI where the request California? were interveners a Any we I in on deployment decision think was but

that very it's for and was do, XXXX a in state preceding, call technology around quarter are that continuing proceeding in something time and exceptional to a business and of think in engaging We're and fact-based on with this we please and that sensed Jim if and some you was with we very our We fourth corner but think better I start we dialogue this type have was the well. much received really really went it. interest there's the feel pleased and there much, results. turned expect clear and we budgets water I'll it work to case. hoping We're add, would Jonathan

So it, feeling miss a optimistic go ways looking about Jim, I towards to quarter. still in we're but pretty to going and the anything? fourth decision be did

No I Eric. think that's right

you to ongoing addition do with the advocate been conversations we have have California those In in what constructed. discussed regarding the and program

So some settlement or in for lead passed the terms of there has those or conversations, of is prospect settlement? of settlement that to that potentially the kind option a a were ever

there OPA least Jonathan, opportunity W-rates at deftly groups. PUC remains are the still staff is there of of course including involved other for of the that there settlement and be and parties and local would adequacy -- with

So very here. business very not, step out laid that if importance remain we we open the further a and think of to can strong do as case done settlement we've and this be

remain this time So optimistic again will we that be different.

then in think about kind what's plan been plan midyear. And around case that filed or of Has Connecticut there? was base the the updated rate I

Sure.

be quarter Jonathan. that color will the third further We in on providing

Connecticut. getting forward would and anticipate to We probably not XX to filing we're accomplished. have that next filed a We looking in X yet in the months

a had on out we past know you As of this year. July there X that expired stay

in course is but our next program good providing of and make right timing and a sure just capital file states So a we're that we'll from could update want this to be quarter. we an the in point is we forward, the in position

about ongoing then be there? back disputes recent I And to bills reports thoughts customers abnormally had in going issues on know receiving years? might you’ve recently, bouncing California, some high any and

talk can well. we meter that reading. put and was Jonathan, pause definitely a because as on Basically of what over I about there it pandemic the Jim turn to Sure. occurred

bills of was bills the of for could methodology the were couple as a the as meters know, be use we until out you wet year. probably to we estimating months same basis our sure for so period cool ago safe So and and a employees estimated a XXXX there would is reading year kind that

we've up hard customers here just our So catch or and issues. have will service customer meter actually up there's sure reps not to absolutely our be usage a catching were help to been that are really so it actually any been we're a I or catching actual payment and up like pandemic getting clear errors no manage has it's and now that that that confident activities. exercising the really working out It's occurred. shortly. just and readings, terminations team work billing very agreements and of the it's willing our collection byproduct and we're that we and of with customers fairly think and We enter resolved We're

really is Yeah Eric cap that think I well.

flowed through accounts not stuff that guess I that bad hasn’t Yes maybe the some put Okay. like might receivable we're do yet pressure additional on you're tracking and stuff that to like but. the debt really expense that that

I'll and can start you additional some all information maybe Eric So on on it. follow-up play

in case the pandemic Connecticut, quarterly. we So meters the we on was and estimate a in read every month California once a meter built or we Jonathan, reads actually basis during as two the

our late stay-at-home And the in on states. follow-on pandemic people's across through different different impacts of increased cycles took reading economy so orders of pay our and were to the the just the the the various so that starting really our starting and and see matriculate and effect pandemic we March meter to view as in folks it's also kind states operate to hold that and with usage impact the across issued we're on in the ability

bad been significant trend higher towards kind a lead to activity any debt. if see little of going early to that to So there's too are

past to program insurance on level the bills. XX well their facilitate or We unemployment are seeing essential may and order what an keeping additional increase if federal so as re-up at eye either days to activities in the we're the to that steps as pay on an due Eric not as taking our folks call in they mentioned be

to arrangements think pleased been flow We the but we've collections the comments XX what has months most us, I've and out on call some supplement two work out was would week in a payment their are agreements I by to honored our workshop and of surprised collection very really seen payment to I've flow last and very thing by customers Jim's great. our anybody Customers other cash activity in said, part been terms just but arrange pleasantly has is and longest for our was so collections. challenge, of as the this activity very we reported personally very, been very, The invite I been have good. months, we've with expense and --

appreciate you and congrats I a additional taking the time. clean on this quarter and color questions Great. the

Thanks Jonathan.

[Operator time. no questions pass are this instructions] there the call And back I'll Eric. at to further

our Thank for XXX serving communities our call and everyone customers, a our SJW express and thanks and dividend The today. SJW XX safe Group and to company and you participation to of Group. I that and spanning consecutive your Thank is of want consecutive of in during your health and profound shareholders the a this our you, employees again to increasing challenge remain my we very you just dividend sincere that the and with quarter by years XX much. this XXX-year hope record stockholders marks XXXX have operator gratitude year track company families great payment the

for you your today's concludes participation. This conference. Thank

disconnect. now may You