H2O America Q2 2025 slides: 13% revenue growth, Texas expansion strategy

H2O America (NASDAQ:HTO), formerly SJW (NYSE:SJW) Corporation, reported strong second-quarter 2025 results with significant revenue growth and strategic expansion plans, according to the company’s earnings presentation released on July 29, 2025. The water utility reaffirmed its full-year guidance while highlighting its transformative acquisition in Texas.

Quarterly Performance Highlights

H2O America reported second-quarter diluted earnings per share of $0.71 on a GAAP basis and $0.75 on an adjusted (non-GAAP) basis, representing a 14% increase from the $0.66 adjusted EPS in Q2 2024. Year-to-date, the company has achieved $1.20 GAAP EPS and $1.25 adjusted EPS.

The company reaffirmed its 2025 adjusted EPS guidance range of $2.90 to $3.00 and expects its growth rate through 2029 to be in the top half of its previously guided 5% to 7% range, based on 2022 diluted EPS of $2.43.

As shown in the following financial highlights slide:

Revenue increased by 13% to $198.3 million in Q2 2025 compared to $176.2 million in Q2 2024. This growth was primarily driven by rate increases ($10.9 million), pass-through water cost rate increases ($6.7 million), and higher usage ($4.9 million), as illustrated in the revenue breakdown:

Financial Analysis

While revenue showed strong growth, operating expenses also increased significantly. Water production expenses rose 15% from Q2 2024, reaching $80.9 million compared to $70.5 million in the prior year. This increase was primarily driven by $8.0 million in higher water supply costs and $2.7 million from increased production volume.

The following chart details the water production expense changes:

Other operating expenses increased by 13% to $73.5 million, up from $65.1 million in Q2 2024. The main contributors to this increase were higher customer credit loss ($4.6 million) and increased administrative and general costs ($3.7 million).

The company’s adjusted EPS bridge shows how various factors affected earnings performance year-over-year:

On the financing front, H2O America raised approximately $84 million in gross equity proceeds year-to-date to fund growth and capital investment, with a target equity issuance of $120 to $140 million for the full year. The company has $360 million in bank lines of credit available, with $161 million drawn and $199 million remaining available. The average borrowing rate on credit advances improved to 5.45%, down from 6.53% in 2024.

Strategic Initiatives

The most significant strategic development highlighted in the presentation is H2O America’s agreement to acquire Quadvest in Houston, which would make its combined Texas Water operations the second-largest investor-owned water utility in Texas. The acquisition is expected to be accretive in 2028 and meaningfully accretive to the company’s long-term growth rate.

This transformative acquisition will significantly shift the company’s customer base distribution, with Texas growing from 7% of customers today to 26% by 2029, as shown in the following slide:

Quadvest brings operational scale, a strong development pipeline, and increased exposure to one of America’s fastest-growing regions. The company has shown impressive connection growth, with potential for over 140,000 connections:

Regulatory Progress

H2O America reported significant regulatory progress across its national footprint:

• San Jose Water received a $6.8 million revenue increase effective July 1, 2025, for a $44 million investment in Advanced Metering Infrastructure (AMI).
• Maine Water secured an $865,000 revenue increase in the Camden Rockland division and a $547,000 increase in Water Infrastructure Charges for other divisions.
• Texas Water obtained a $4.1 million revenue increase through the System Improvement Charge, effective May 15, 2025.
• Connecticut Water received a $1.6 million revenue increase through the Water Infrastructure and Conservation Adjustment, effective April 1, 2025.

The company also highlighted legislative milestones, including Connecticut’s new Water Quality and Treatment Adjustment infrastructure recovery mechanism, Texas laws to minimize regulatory lag, and Maine legislation authorizing water utilities to offer affordability programs.

Forward-Looking Statements

H2O America’s capital plan is a key driver of its projected earnings growth. The company invested $207 million in water and wastewater utility infrastructure during Q2 and plans substantial capital expenditures through 2029:

Regarding the Quadvest acquisition, the company has notified the Public Utility Commission of Texas of its intention to use Fair Market Value. The closing is expected in mid-2026, with a combined general rate case planned for early 2027 and new rates anticipated in early 2028.

The company is also addressing PFAS (per- and polyfluoroalkyl substances) in drinking water, with a $300 million capital expenditure estimate for treatment. H2O America received $6.4 million in legal settlement proceeds from PFAS manufacturers in Q2 2025.

As H2O America continues its strategic expansion and infrastructure investment, the company appears well-positioned to deliver on its long-term growth targets while addressing water quality challenges and leveraging regulatory mechanisms for timely cost recovery.

Full presentation:

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