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Introduction & Market Context
SJW Group (NYSE:SJW) presented its first quarter 2025 financial results on April 29, showcasing significant growth across key metrics as the company continues to execute on its multi-state infrastructure investment strategy. The water utility’s stock responded positively to the earnings announcement, rising 6.3% to close at $56.80, reflecting investor confidence in the company’s performance and outlook.
The company’s presentation highlighted its progress in regulatory approvals, capital investments, and operational efficiencies across its service territories in California, Connecticut, Maine, and Texas. These efforts come amid ongoing challenges including drought conditions in Texas and the need to address PFAS contamination across its systems.
Quarterly Performance Highlights
SJW Group reported substantial year-over-year growth in both revenue and earnings for the first quarter of 2025. Revenue reached $167.6 million, representing a 12% increase from $149.4 million in Q1 2024. Adjusted diluted earnings per share rose to $0.50, a 39% increase from $0.36 in the same period last year.
As shown in the following detailed financial comparison:
The company’s net income also saw remarkable growth, with GAAP net income increasing 41% to $16.6 million and adjusted net income rising 43% to $16.7 million compared to Q1 2024. This performance significantly exceeded analyst expectations, with the $0.50 adjusted EPS beating forecasts by approximately 61%.
Detailed Financial Analysis
The 12% revenue increase was primarily driven by rate increases, which contributed $11.9 million, and pass-through water cost rate increases adding another $5.3 million. Higher usage and customer growth provided modest additional gains of $1.0 million and $0.2 million, respectively.
The following chart breaks down the factors contributing to the revenue increase:
On the expense side, water production costs increased 14% to $59.0 million, driven primarily by higher water supply costs ($5.6 million) and increased production volume ($2.4 million). Other operating expenses rose 4% to $72.7 million, with higher administrative and general costs ($2.0 million) and maintenance costs ($0.8 million) being the main contributors.
The company’s EPS growth can be attributed to several factors, as illustrated in this bridge diagram:
SJW Group raised approximately $27 million in gross equity proceeds in Q1 2025 to fund growth and capital investment. The company maintains $350 million in bank lines of credit, with $153 million drawn, leaving $197 million available. The average borrowing rate on credit advances improved to 5.47% in 2025, down from 6.54% in 2024.
Strategic Initiatives
SJW Group invested $78 million in water and wastewater utility infrastructure during Q1 2025, keeping pace with its full-year capital expenditure plan of $473 million. The company’s five-year capital plan totals $2 billion, reflecting its commitment to infrastructure improvement and expansion.
In California, SJW Group is implementing a $450 million capital expenditure plan over three years (2025-2027) as part of its General Rate Case, which became effective January 1, 2025. Additionally, the company is undertaking a separate $100 million Advanced Metering Infrastructure project, with the bulk of spending planned for 2025 and 2026.
The following slide details the California regulatory updates and investment plans:
In Texas, the company is addressing persistent drought conditions while serving one of the fastest-growing regions in the country. SJW Group expects to bring 6,000 acre-feet of additional water supply online by the end of 2026 and has a System Improvement Charge application pending before regulators.
As shown in this overview of the Texas operations:
The company is also pursuing business modernization initiatives to improve efficiency and operational excellence, which it expects will create financial flexibility to support critical investments while moderating customer bills. These efforts include standardized, enterprise-wide platforms and advanced metering infrastructure to reduce operating costs and generate long-term savings.
Forward-Looking Statements
SJW Group 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 5% to 7% guidance range. The company also provided details on its equity issuance plans and capital expenditure targets.
The following slide summarizes the company’s guidance and long-term targets:
The company is also addressing emerging challenges, including the need to comply with new EPA standards for PFAS in drinking water. SJW Group estimates approximately $300 million in capital expenditures will be required for treatment at the EPA’s finalized maximum contaminant levels.
Looking ahead, SJW Group remains focused on maintaining its "A" category credit rating while executing its ambitious capital plan. The company aims to achieve a funds from operations to debt ratio of 12% by 2028, which would be 100 basis points above the downgrade threshold.
With a 54-year history of consistent dividend payments and 32 consecutive years of dividend increases, SJW Group continues to demonstrate financial stability while investing in infrastructure to meet the growing demands of its service territories.
Full presentation:
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