H2O America (HTO) Q1 2026 Earnings Transcript

DATE

Wednesday, April 29, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chair of the Board and Chief Executive Officer — Andrew Walters
• Chief Financial Officer and Treasurer — Ann Kelly
• President and Chief Operating Officer — Bruce Hauk

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TAKEAWAYS

• GAAP Diluted Earnings Per Share -- $0.49, unchanged from the prior year due to an increased share count offsetting underlying net income growth of approximately 15%.
• Adjusted Diluted Earnings Per Share -- $0.50, with the figure also flat year over year for the same reasons impacting GAAP EPS.
• 2026 EPS Guidance -- Reiterated at $3.08 to $3.18 per share, supported by performance in the quarter.
• Equity Offering -- Completed $700 million in March, upsized from $550 million due to five times oversubscription and pricing at a 2.6% discount, addressing forecasted equity needs through 2027.
• Capital Expenditures -- $85 million invested in the quarter, representing 18% of the planned $483 million 2026 CapEx budget, with seasonal factors cited for the quarterly pace.
• Rate Base Growth Target -- Five-year plan projects a 13% compound annual growth rate from an estimated $2.8 billion rate base at year-end 2025, with 80% of planned $2.7 billion capex eligible for timely regulatory recovery.
• QuadVest Acquisition Progress -- Transaction pending with the STM application deemed administratively complete in April and closing now expected in the latter half of 2026.
• QuadVest Connection Growth -- 57,200 active connections as of March 31, 2026, representing a 5% increase in three months after a 16% increase in 2025.
• Customer Growth Mix Shift -- Management stated Texas customers are expected to expand from 8% to 26% of the consolidated customer base by 2029, driven by QuadVest and Cibolo Valley additions.
• Liquidity and Debt -- $370 million in available credit lines after paydown, proceeds invested in cash equivalents, and expected $100 million to $200 million debt raise for QuadVest funding still planned.
• Credit Metrics -- S&P A- rating affirmed in April; FFO-to-debt ratio expected at 11%-12% through 2027, "above S&P's 11% downgrade threshold," with an aim to be "above 12%" in 2028 and progress toward a 15% upgrade threshold over five years.
• Rate Relief -- Received $0.20 EPS benefit from rate relief in CA, CT, and TX; Connecticut approved $3.3 million combined annual revenue increases under WICA and WQTA effective April 1, 2026.
• Upcoming Rate Cases -- Connecticut GRC to seek a $26 million annual revenue hike for $129 million infrastructure spend; Maine requests $9.5 million annually for $36 million in state improvements, both aiming for new rates by 2027.
• Major Infrastructure Projects -- Williams Station PFAS remediation project in CA filed with an estimated $176 million capital cost, with expected recovery via annual rate base offsets if approved.
• Affordability Metrics -- Average bills were under 1% of median household income in all states at year-end 2025, below EPA's presented 2.25% affordability threshold per service type.

SUMMARY

H2O America (NASDAQ:HTO) delivered in-line quarterly earnings, maintained forward EPS guidance, and executed a $700 million equity raise fully covering capital needs through 2027. The company advanced its national growth plan with regulatory efforts in four states, notable progress toward closing the CubVest acquisition, and ongoing rate case activity supporting future multi-year compounding rate base and customer growth in Texas. Significant regulatory and infrastructure initiatives are underway, including application filings for PFAS remediation and rate relief, while all strategic cash, liquidity, and credit targets were addressed without new risks identified by management.

• The $700 million equity raise resulted in H2O America expecting to avoid further equity market issuance, including via the ATM program, through at least year-end 2027, as the company can utilize a $400 million forward agreement component.
• Management outlined that QuadVest connection growth continues to replenish its pipeline despite accelerated conversion of under-contract units, indicating ongoing expansion in the Houston market.
• The Williams Station remediation proposal in California, if approved, would employ similar regulatory recovery mechanisms as prior AMI investments, supporting capital cost pass-through via annual rate base filings.
• Management asserted that shifting operating spending to capital deployment maintains customer bill neutrality while permitting higher infrastructure investment recovery.
• Ann Kelly stated, "we do plan to delever over the five-year plan, with the target being to get into the A flat rating, which is comparable to our competitors," indicating the credit rating strategy underlying balance sheet management.
• The company reaffirmed that forward earnings growth expectations and rate base CAGR projections do not assume any M&A outside the two pending Texas acquisitions discussed.
• Regulatory filings submitted in Maine and Connecticut leverage surcharges and stipulated mechanisms (e.g. WICA, WQTA, consolidated risk), aiming to recoup major infrastructure outlay not yet reflected in current regulated rates.

INDUSTRY GLOSSARY

• GRC (General Rate Case): A regulatory proceeding in which a utility seeks approval for changes to its service rates based on cost structures, investments, and allowed returns.
• WICA (Water Infrastructure and Conservation Adjustment): A mechanism in Connecticut enabling water utilities to recover approved infrastructure costs between rate cases through annual surcharges.
• WQTA (Water Quality Testing Adjustment): Connecticut-specific mechanism that allows utilities to recoup certain water quality testing expenses outside of general rate case filings.
• PURA: Public Utilities Regulatory Authority, Connecticut’s regulatory body overseeing utilities, including performance-based rate elements.
• PUCT: Public Utility Commission of Texas, the state regulatory body reviewing utility acquisition, rates, and infrastructure recovery.
• STM (Sales Transfer Merger) Application: The formal regulatory filing process for approval of the purchase and merger of utility assets in Texas.
• FFO-to-debt: The ratio of funds from operations to total debt, used by credit rating agencies to assess relative credit strength.
• PFAS (Per- and Polyfluoroalkyl Substances): A group of regulated and emerging chemical contaminants being addressed in water treatment and regulatory filings for additional capital recovery.
• AMI (Advanced Metering Infrastructure): Technology investments that automate reading, collecting, and managing utility meters to improve service and data analytics.
• FMV (Fair Market Value): Regulatory standard for valuing utility assets in acquisitions, influencing rate base decisions for future cost recovery.

Full Conference Call Transcript

Andrew Walters, Chair of the Board and Chief Executive Officer; Ann Kelly, Chief Financial Officer and Treasurer; and Bruce Hauk, President and Chief Operating Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at h2o-america.com. Before we begin today, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, and expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that could cause actual results to be different from statements in this presentation, we refer you to the financial results press release and to our most recent Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today and H2O America disclaims any duty to update or revise such statements. You will have an opportunity to ask questions at the end of the presentation.

This webcast is being recorded, and an archive of the webcast will be available until July 29, 2026. You can access the press release and the webcast at H2O America's website. In addition, some of the information discussed today includes non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share, which have not been calculated in accordance with generally accepted accounting principles in the United States, or GAAP. These non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis, rather than as an alternative with respect to GAAP financial measures.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table in the appendix of our presentation. I will now turn the call over to Andrew.

Andrew Walters: Welcome, everyone, and thank you for joining us today. We are pleased to provide you with an update on our strong first quarter 2026 results, during which we earned $0.49 per share on a GAAP diluted basis and $0.50 per share on an adjusted diluted basis. Our first quarter 2026 results were consistent with our internal expectations in support of our standalone 2026 EPS guidance of $3.08 to $3.18 per share. Before I ask Ann to discuss the quarterly results in more detail, I want to update everyone on the very successful equity raise that we executed in early March.

Following our year-end 2025 update, and taking advantage of what we viewed as a receptive equity market, we decided to take the QuadVest acquisition-related equity risk off the table by coming to the market with a $550 million equity offering to fund not only the transaction, but also the $100 million to $125 million of equity needed for our 2026 San Juan capital budget. Our equity offering received an overwhelmingly positive response from investors, as it was more than five times oversubscribed and priced at a tight 2.6% discount. Due to the overwhelming demand and our desire to accommodate some very high-quality, long-term-oriented investors into our shareholder base, we upsized the issuance to $700 million including the greenshoe.

The upsizing also served to address our forecasted equity needs through 2027. I believe the successful equity offering is a direct reflection of the hard work of all my partners here at H2O America and their dedication to providing our customers with high-quality, reliable service while executing on the financial goals that we have communicated to investors. At the same time, we recognize that our work is far from complete. We remain steadfast in our commitment to deliver on the 2026 to 2030 plan that we rolled out in February, including our increased long-term EPS CAGR target of 6% to 8%.

The core element of the plan is our tried-and-true strategy of growing the business and creating shareholder value by making the much needed water infrastructure investments across the national footprint of our systems, while constructively engaging our key local stakeholders in a consensus-building process to provide timely regulatory recovery while maintaining customer affordability. As a reminder, our plan does not include any M&A opportunities beyond our two pending Texas acquisitions. On the regulatory front, our teams have been busy working to secure the necessary approvals to execute on our long-term plan. This includes leveraging infrastructure investment mechanisms and recoveries in Connecticut, Maine, and Texas, as well as making a PFAS remediation project recovery filing in Connecticut and California.

In addition, a great deal of thought and effort has gone into preparing our general rate case filings in Connecticut and Maine. And of course, there was the filing of the QuadVest LP sales transfer merger application earlier in the year, and our focus continues to be on closing the transformative acquisition later this year and delivering on the anticipated accretion beginning in 2028. Bruce will provide more detailed updates on the QuadVest transaction as well as some of our key regulatory items later in the call. But now I will turn it over to Ann to provide details on our first quarter 2026 results and the key elements of our financial plan.

Ann Kelly: Thank you, Andrew. Yesterday, after the market closed, we released our first quarter 2026 operating results. As Andrew mentioned, we are pleased to report first quarter 2026 diluted EPS of $0.49 and adjusted diluted EPS of $0.50. The results were consistent with our internal expectations and supportive of the financial guidance that we provided on our year-end 2025 update. Although we grew the underlying net income by roughly 15%, both our reported and adjusted diluted earnings per share were unchanged when compared to the 2025 results due to the higher share count as a result of leveraging our ATM program in 2025 and our equity issuance in early March.

Moving to Slide 8, I would like to briefly discuss the key drivers resulting in the comparable year-over-year earnings per share. We realized a $0.41 per share increase due to higher revenue. Roughly half of it, or $0.20, was driven by rate relief received from general rate cases and infrastructure surcharges primarily in California, Connecticut, and Texas. There was also $0.11 of higher revenues for pass-through water supply costs that are offset in our water production expenses and do not impact our net income. In addition, higher usage, largely due to a hot, dry March across our California service territory, added $0.05.

The revenue increase was partially offset by higher water production expenses of $0.20 attributable to $0.10 of higher water supply costs due to increases in average per-unit cost for purchased water and groundwater extraction, $0.09 from increases in water production balances in memorandum accounts primarily related to the full cost balancing account in California, and $0.08 from higher customer usage. These increases were partially offset by a $0.07 decrease in water production expense as a result of the increased availability of surface water. In addition, other operating expenses increased $0.18.

The biggest item here was an $0.11 increase in depreciation and amortization for new utility plant placed in service, as well as an increase in maintenance, employee-related costs, and higher non-labor administrative and general expenses. The remaining drivers relate to $0.07 dilution, which I alluded to earlier, from the higher share count partially offset by $0.04 of net other benefits. As for taxes during the quarter, our effective income tax rate in Q1 2026 was approximately 15% versus 17% in 2025. The lower effective tax rate was primarily due to higher flow-through tax.

Shifting from the first quarter results to our full-year 2026 and beyond expectations, the figures on the next few slides show that we are reiterating all aspects of the guidance that we rolled out near the end of February with our year-end 2025 update. During the first quarter of 2026, we invested $85 million into infrastructure improvement. This represents 18% of our full-year 2026 CapEx budget of $483 million, which does not include the impacts of closing QuadVest. While the 18% might seem low, it reflects the seasonality of our CapEx cycle, particularly during the winter months for our Connecticut and Maine operations.

We are on track to deliver the full-year 2026 CapEx budget, as well as our plan to invest $2.7 billion of capital over the 2026 to 2030 period. Importantly, roughly 80% of the $2.7 billion capital plan qualifies for timely regulatory recovery either through California's three-year forward general rate case framework or through various infrastructure recovery mechanisms in Connecticut, Maine, and Texas. Our five-year capital investment plan, combined with our pending acquisition of QuadVest, is expected to translate into a 13% rate base CAGR off our year-end 2025 estimated rate base of $2.8 billion.

As a reminder, these amounts represent our estimated rate base at year-end and not what was or will be recognized in rates by our state regulators in those particular years. We are laser-focused on not only delivering the rate base growth, but translating it into attractive earnings growth by minimizing regulatory lag and continually seeking ways to operate more efficiently in order to keep rates affordable while providing our customers with best-in-class service. The details on Slide 10 are consistent with what we provided in our year-end update.

I will not go through them all, but I wanted to reiterate our plan to deliver a non-linear EPS CAGR over the 2026 to 2030 period at or above the top end of our 6% to 8% long-term organic EPS growth rate target, using our 2025 adjusted EPS of $2.99 as a base year.

The ability to deliver growth at or above our 6% to 8% long-term sustainable rate is enabled by: one, the line of sight that we have on our five-year capital expenditure plan; two, the anticipated accretion from the pending QuadVest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that we plan to file in early 2027 go into effect; and three, our expectation to continue to work constructively with key stakeholders in each of our states to achieve fair and timely regulatory outcomes. We remain excited about our five-year plan and long-term prospects and believe our team is fully capable of delivering on it.

Turning to financing and credit on Slide 11, as Andrew discussed, we executed on the equity needed not only to fund our pending Texas acquisitions, but also our 2026 and 2027 base capital expenditures. We expect to stay out of the equity markets, including issuances through our program, through at least year-end 2027, as we have the ability to draw down on the $400 million forward agreement component of the March issuance over this period to fund our capital needs. We still expect to raise $100 million to $200 million of debt across the parent and Texas operating company levels to fund the QuadVest transaction, although we have more flexibility now regarding the timing given the upsized equity issuance.

Our liquidity is strong to fund our daily operations. While we work towards closing QuadVest later this year, we utilized the cash received from the equity issuance to pay down our bank lines of credit, meaning the full $370 million is available, and we have invested the remainder of the proceeds into cash equivalents. In addition, our A- credit rating, which S&P affirmed earlier this month, affords us access to the capital needed to fund our longer-term investments. We expect our FFO-to-debt ratio to be in the 11% to 12% range through 2027, which is above S&P's 11% downgrade threshold.

In 2028, we expect the ratio to be above 12%, and we will continue to delever throughout the rest of the plan through increased cash flows and the anticipated paydown of our 2029 HoldCo. With that, I will turn the call over to Bruce to provide some regulatory updates, including on our pending acquisition of QuadVest.

Bruce Hauk: Thank you, Ann. Our regulatory teams have been busy to start the year. While the California team is gearing up for the 2028 to 2030 GRC filing that will be made in January 2027, earlier this month, we filed a request with the CPUC outside of the GRC process for approval and recovery of our planned Williams Station PFAS remediation project. The estimated capital cost of the ion exchange project is $176 million. If approved, SJWC would adjust rates via annual rate base filing offsets. This is similar to the recovery approach we took for our current AMI project that is expected to be completed around the end of this year.

In Connecticut, we filed and received approval to implement annual revenue increases totaling a combined roughly $3.3 million under the WICA and WQTA mechanisms that went into effect on 04/01/2026. Also on April 1, we implemented our 2025 water revenue adjustment mechanism surcharge to reconcile revenues as authorized in CWC's most recent rate case. Notably, as a result of CWC achieving the PURA-prescribed performance metrics in our last GRC, the WRA surcharge provides recovery of certain amounts of compensation expenses. As most of you are aware, CWC filed a letter of intent on March 13 to file a GRC application within the next sixty days.

The actual rate case will be filed in the weeks ahead, but per the letter, CWC plans to request an approximately $26 million increase in annual revenues before new rates become effective early 2027, as CWC seeks recovery of approximately $129 million of infrastructure investments made between its last rate case and 2026, as that investment is not reflected in current rates. Moving on to Maine on Slide 14, after getting approval of the stipulation and the rate unification proceeding in January, MWC filed its first consolidated risk application in late February requesting a $900 thousand increase.

Earlier this month, MWC filed its first consolidated GRC filing requesting a $9.5 million increase in annual revenues to recover approximately $36 million of infrastructure investments that have been or are expected to be made in the state by 2026 and are not currently in rates. We expect the new rates to go into effect by 2027. Lastly, I would like to shift to Texas regulatory activity. We continue to work through the $5.1 million SICK mechanism application we filed in October, with an expected decision from the PUCT in 2026. We also continue to move the ball forward through the PUCT approval process for the two pending acquisitions.

I am pleased to report that just last week, we filed a sales transfer merger, or STM, application for the Cibolo Valley wastewater plant and related collection system, which keeps us on track for an anticipated close of this transaction during 2026. In early 2027, after the close of the QuadVest and Cibolo Valley acquisitions, as well as the completion of our significant investments to bring an additional 6 thousand acre-feet of water annually into our existing system, Texas Water continues to expect to file a combined company general rate case with new rates effective in early 2028, so that these and other additions to Texas Water's rate base can be recognized in rates.

I did want to point out that despite us making all of these significant and much needed capital investments in recent years across our service territories and seeking recognition of these investments from our regulators, our average bills are still below 1% of the median household income in each of our service territories. This is well below the EPA's recent study that reports water and wastewater bills are affordable if, when combined, they are less than 4.5% of median household income. Assuming a 50/50 split between water and wastewater, it would suggest below 2.25% for each is affordable.

We believe this is a reasonable guideline depicting affordability and provides bill headroom for the recovery of our planned infrastructure investments going forward. Now for an update on QuadVest. The STM application for the regulated portion of the QuadVest transaction was filed in January and earlier this month it was deemed administratively complete. As outlined on Slide 15, the STM application requests approval of TWC's acquisition of the QuadVest LP assets and certification of the value of the ratemaking rate base, as determined in accordance with the Texas fair market value statute, at TWC's $483.6 million purchase price.

TWC is in the process of issuing the required public notices and once proof of those notices is filed with the Commission, the PUCT's 120-day approval process will commence. That said, the 120-day time frame may be extended if Staff or the Office of Public Utility Counsel request a hearing and/or timeline extension. As such, we are updating our expected closing of the QuadVest acquisition from mid-2026 to sometime during the latter half of 2026. Meanwhile, we continue to see robust connection growth in the Houston-based QuadVest water and wastewater system, which now has more than 57 thousand 200 active connections as of 03/31/2026.

This represents an impressive 5% increase in the first three months of 2026, after the active connection count increased 16% during 2025. As QuadVest’s under-contract and pending development pipeline converts into active connections, the pool of future connections continues to be replenished, extending the longevity of the growth profile. Specifically, during 2026, despite QuadVest converting 2 thousand 800 connections from the pipeline to active, the pipeline increased by 5 thousand connections. Of course, future connection growth will vary based on a number of conditions, so this is no guarantee of the future pace of growth.

However, these results are in line with our range of expectations, and we believe solid growth will continue in the Greater Houston area, which is the second-fastest growing metropolitan area in the United States. The addition of QuadVest active customers plus the continued conversion of its contracted development backlog is the primary contributor that is expected to drive Texas from 8% of our consolidated customer base today to 26% by 2029. Between QuadVest and Cibolo Valley, we are very excited about our long-term growth potential in Texas. That concludes my regulatory updates, and I will now turn the call back over to Andrew.

Andrew Walters: Thank you, Bruce. Before opening the call up to Q&A, I wanted to welcome Commissioner Patrick Rhode, whom Governor Abbott appointed a few weeks ago to fill the remaining vacancy on the Public Utility Commission of Texas, and take a minute to expand a bit on Bruce's remarks with respect to customer affordability. We know the concern remains top of mind with customers, regulators, and investors alike, especially as the recent uptick in energy prices due to the conflict in the Middle East has caused inflationary expectations to rise.

Affordability is, and frankly always has been, a top priority for us, and we will continue to work constructively with our state regulatory partners as we look to balance affordability with the extensive investment required to replace aging infrastructure and treat emerging contaminants, all while providing safe, high-quality water and reliable service. As Bruce mentioned, as of year-end 2025, average bills were less than 1% of median household income across all four of our states, which is well below the EPA's suggested 2.25% affordability threshold. In addition, we offer affordability tariffs in California, Connecticut, and Maine, with hopes to introduce this benefit to our Texas customer base as part of our future rate proceeding.

As always, we will continue to strive to run the business as efficiently as possible, as we recognize that every dollar of avoided operating expenses enables the recovery of $7 of capital investments with a neutral impact on customer bills. Anytime we can swap operating expenses for capital deployment, we will look to do it, as it is a win-win for customers and the company. With that, I will turn the call back over to the operator for questions.

Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name and company name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Alexis Kania of BTIG. Your line is now open.

Alexis Kania: Good morning. Thanks for taking my question. I had two questions. First, as you think about the upcoming rate case process in Texas for QuadVest next year, I know it is early, but from a high level, how would you think about the affordability statistics you provided for your other jurisdictions and how they may end up looking on a run-rate basis for QuadVest?

Andrew Walters: Sure. I will ask Bruce to take this.

Bruce Hauk: Thank you very much, Alexis, and good morning. As it relates to the QuadVest rates, we have not disclosed the potential impact on rates, but have disclosed that it would be significant. There has been a lot of investment that needs to be made for reliability in the system, as you heard in my prepared remarks, and also the FMV transaction itself. We are engaged with all the stakeholders, customers, and the regulatory commission as well. We have to be creative and thoughtful in our preparations, and that will most likely be public in 2027 when we file. As Andrew mentioned in his comments, we are very focused on affordability, and our rate design will take that into consideration.

We are going to be proposing a low-income tariff to address affordability issues in Texas, while being mindful of how to most appropriately bring those investments into rates and how we can do that in partnership with the commission.

Alexis Kania: Great, that is helpful. And then maybe a question for Ann. As you talked about the balance sheet and the FFO-to-debt being in the 11% to 12% range for the next couple of years, given the cushion from the equity offering, is there a long-term FFO-to-debt target we should think about, and the thinking behind wanting to be sizably above whatever the downgrade threshold might be for your A rating?

Ann Kelly: Thanks, Alexis. As we mentioned, we do plan to delever over the five-year plan, with the target being to get into the A flat rating, which is comparable to our competitors. Right now, S&P’s upgrade threshold is a 15% FFO-to-debt level, so we would need to be north of that. We expect to be there by the end of the five-year period. Moving to an A flat credit rating gives us flexibility.

Overall, we are very committed to our A category rating, currently at A-, but building that up to an A flat gives us flexibility if we were to pursue an acquisition or other transactions in the future, to be able to do so while still maintaining the A category rating.

Andrew Walters: Thank you, Alexis.

Operator: Thank you. Our next question comes from the line of a Baird analyst. Your line is now open.

Analyst: Andrew, Bruce, thank you so much. Excited to be joining your analyst community, and thank you for taking our questions. Two for me. First on QuadVest: could you talk about the final steps needed to close, any risks you see to the timeline, and whether any small deviations—thinking months—would pose any risk to your timing for potentially filing the Texas rate case application next year?

Andrew Walters: I will have Bruce take that question. Thank you.

Bruce Hauk: Thank you for the question. We are super excited about the major hurdle we most recently cleared, which was being deemed administratively sufficient. That step allows us to issue notice to customers of the acquisition and kicks off a process that allows us to set the 120-day procedural schedule with the commission. When we announced this acquisition, we filed notice for the FMV and then proceeded with filing over 7 thousand pages in the STM process, and to have had a roughly 60-day examination to be deemed administratively sufficient is a significant achievement. As things proceed, that moves us from a mid-2026 close to sometime in the latter half of 2026.

All commissions are inundated with dockets—Texas is no exception—so we will work with the commission in partnership to prosecute the STM. We are on track for late 2026, barring significant exceptions in terms of delays that may come up in the process. So far, so good, and we are planning to close in the latter part of 2026, barring unforeseen issues from intervenors or commission staff timing due to their docket load. We are very happy with the process thus far and the engagement by the commission and staff.

Andrew Walters: I think that is an important point to highlight. When anyone receives that volume of documents to review, they are not going to scrimp on their process. It just means they have to work very hard to get through it, and from our standpoint, we have nothing but gratitude for the hard work that the staff is putting into this.

Analyst: That is super helpful, thank you both. One other if I could: the EPA has been talking more about regulating microplastics and other potentially harmful substances in drinking water. It took a couple of years to move forward on PFAS, so it is still early. Have you thought about whether treating for PFAS would also treat some of these other substances, or could this be a tailwind to increased capital deployment longer term? How should we think about this in the context of your planned capital deployments?

Bruce Hauk: Thank you for that question. We are very engaged in the EPA process. To level set, the six constituents that are PFAS-regulated with MCLs—we are on track to make the improvements needed in Connecticut and California to achieve compliance. The new list of compounds is at an early stage, and the rulemaking process is lengthy. Our partnerships with the Water Research Foundation, EPA, and NAWC allow us to be a meaningful part of that process. As to whether ion exchange or GAC used for PFAS mitigation have ancillary benefits: absolutely.

On microplastics, our Director of Water Quality based at our San Jose Water operation is conducting a pilot through the Water Research Foundation at our Montevina plant on microplastics to inform the science behind how to eliminate, treat, and remediate microplastics. We are very much in the research and participating in the process that will help our company and the industry as a whole as we work through rulemaking.

Andrew Walters: It is good that Bruce highlights the team. We get the honor of telling the story, but the work done in the field is nothing short of amazing. Suzanne DeLorenzo, whom Bruce mentioned, is one of those amazing partners driving progress in our company and putting us at the forefront of issues that impact the entire industry, not just us.

Analyst: Super helpful. Thanks for the time. I will pass it on.

Operator: As a reminder, to ask a question, please press star 11 on your telephone. I am showing no further questions at this time. I would now like to turn it back over to Andrew Walters for any closing remarks.

Andrew Walters: Thank you again for joining us today. H2O America proudly leverages our national platform to support our distinct local operations, all united by a shared mission: delivering reliable service and high-quality water to 1.6 million people across four states. Together, we protect what is precious. At the same time, we continue executing our growth strategy and delivering shareholder value, including our unwavering commitment to the dividend, which we have paid for more than eighty consecutive years and increased in each of the past fifty-eight. I am always available for follow-up, along with my partners, Ann and Bruce. We appreciate your interest in H2O America.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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