Q4 2021 SJW Group Earnings Call
Good day, and thank you for standing by and welcome to S. J W. Group Q4, 2021 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
To ask a question. During this session you will need to press star one on your telephone. Please be advised that this call is being recorded if you require any further assistance. Please press star zero.
I'd now like to hand, the conference over to your host today.
Jim Lynch, Chief Accounting Officer, please begin.
Thank you operator, welcome to the 2021 fourth quarter and annual financial results Conference call for SJW Group I will be presenting today with Eric Thornburg Chairman of the Board, President and Chief Executive Officer, and Andrew Walters, Chief Financial Officer, and Treasurer for those who would like to follow along.
Slides accompanying our remarks are available on our website at www Dot SJW group Dot 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.
These statements are based on estimates and assumptions made by the company in light of its experience historical trends current conditions and expected future developments 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 SJW group disclaims any duty to update or revise such statements.
You will have the opportunity to ask questions at the end of the presentation.
As a reminder, this webcast is being recorded and an archive of the webcast will be available until April 25 2022.
You can access the press release and the website at our corporate website.
I will now turn the call over to Eric Thornburg Eric.
Welcome everyone and thank you for joining us Eric Thornburg and it is my honor.
Honored to serve as chair President and CEO of SJW group.
It's my pleasure to be joined on this call by Jim Lynch, Chief Accounting Officer, and Andrew Walters Chief Financial Officer.
I am pleased to report that 2021 was a strong year for Australia will be a group or <unk>.
Talented and passionate employees and leaders rose to the challenges and positions us well for 2022 and coming years.
We were solid in the key areas of our long term growth strategy.
Delivering a reliable supply of high quality water and world class service to customers investing in drinking water and wastewater systems to serve customers and communities and seeking a return of and on that investment.
Focusing on drinking water and wastewater.
<unk> to acquire water and wastewater utilities, maintaining constructive relationships with our stakeholders.
Adding shareholder value through prudent growth.
In 2021, we delivered earnings of $2 <unk> per share.
More than $230 million and our <unk>.
Water and wastewater systems successfully processed our general rate case in Connecticut.
<unk> approval for a step one of a multiyear rate plan for the new water treatment facility in Maine.
And grew our customer base, and our Texas operation by 20% through acquisitions and organic growth.
In January of 2022, we reached a constructive settlement agreement with the public advocates office and our California General rate case.
Our success has its roots in our culture of teamwork and service.
<unk> excellence in environmental social and governance strategies.
Our teams collaborate across our national footprint.
What about serving customers efficiently and sustainably.
We view all aspects of our operations planning and construction and ESG lens.
In 2021, we had an emphasis on supporting the drive of our people, who understand our social and environmental responsibilities.
Want to be a positive force for good in the communities, where we live work and serve.
We intend to emphasize even more in 2022.
Our accomplishments have been recognized with client status by ISS ESG.
Among our U S water utility peers.
Kw group is tied for the lead in overall social score from ISS.
For a second and the overall environmental score.
The company has the best overall governance score possible.
SJW group's 2021, corporate sustainability report, which is now available on our website.
Demonstrates how ESG is reflected throughout our organization.
Our diversity equity and inclusion efforts are a good example.
Hey, Debbie group signed onto the CEO action for diversity and inclusion.
By signing on to this commitment SJW group has pledged to take action to cultivate a workplace where diverse perspectives and experiences are welcomed and respected and employees feel encouraged to discuss diversity and inclusion.
We embrace each person's unique background rates of personality.
So that they will bring their true selves to our teams.
We have a commitment to supplier diversity.
Our efforts in California were recognized by the public Utilities Commission and U S. Veterans magazine honored SJW is one of the nation's top supplier diversity programs in 2020.
California is the model.
Brands have been implemented and supplier diversity goals established for our operations in other states.
SJW group also adopted a vendor code of conduct.
Why is our values across the supply chain.
Likewise, we've been committed to being responsible stewards of the environment by sustainably managing and protecting water resources, which is critical to maintaining adequate supplies of high quality water.
We know that focusing on water resources is no longer enough.
That is why we've committed to reducing greenhouse gas emissions, 50% by 2030, when compared with the 2019 baseline.
Science based targets that aligns with the Paris agreement to limit the warming of the planet.
It's the right thing to do and we will report on our progress.
We're seeing extreme weather across our operations a year ago, our Texas operation experienced ice and prolonged temperatures below freezing.
Causing widespread power and water outages.
In Connecticut. This summer, we saw tropical storms and record rainfall.
In California, we experienced extreme dry conditions into last fall and the early part of 2022.
<unk> patient in California.
Solved between above average and below average.
We plan to issue 2022 guidance. After the rainy season has concluded on our first quarter financial results call.
So it wasn't a precipitation in late 2021 to bring our month of Union drinking water treatment facility back online in mid December 2021.
We are hopeful that California's reservoirs continue to replenish through the rainy season.
Our customers are still under the mandatory conservation order that requires a 15% reduction in water usage compared with 2019.
We will continue to promote water conservation aggressively in our California operations as long as necessary.
Conservation Memorandum and water conservation expense memorandum accounts had been established that allow for the potential future recovery of the revenue and expense impacts of such water use reductions.
We offer an actively promote financial assistance programs to customers in need.
Our utilities work with customers experiencing onetime or ongoing financial hardships through bill forgiveness.
Flexible payment arrangements and in California, Connecticut water rate assistance program that provides a 15% reduction in water bills for income eligible customers.
That'd be group is also committed to ensuring that our customers are aware of state and federal assistance programs such as the federally funded low income household water assistance program.
In California, we applied for firms on behalf of our customers in need and received the check for almost $10 million from the California water and wastewater Arrearage payment program.
Will provide immediate relief for customers who have been in arrears.
We believe the customer assistance programs and innovative ratemaking are at the core of water equity.
Artificially keeping rates low by deferring investment and shortsighted.
And it's unsustainable and does not really serve customers, who all of these are quality water and service for the long term.
Our subsidiaries will continue to make investments in infrastructure. So the customers at all income levels, we will have access to the high quality and reliable water services.
Through prudent planning and ratemaking, such as the low income rates.
Cost and rate impacts of these investments will be incurred gradually so it could be managed more easily by the utility and customers.
Building and retaining our workforce water professionals is also critical.
We invest in the training and development of our people. So they can have rewarding careers in SJW group until <unk>.
They are the foundation of our success is built on.
Tried to provide a safe and productive work environment.
Port the training and development of our teams and measure employee satisfaction and engagement they are independent surveys.
Earlier this month, Connecticut water was recognized as a top workplace in the United States I wanted to just 1100 companies across the country to achieve that distinction.
I'll now turn the call over to Jim who will review our financial results and after Jim's remarks, we will address regulatory and other business matters Jim.
Thank you Eric our 2021 operating results benefited from authorized rate increases in each of our four operating utilities. These increases were offset by a decrease in customer usage, most notably in our California utility as a result of the drought emergency declarations by the state Governor and valley water are local.
Wholesale water agency as well as a decrease in the availability of surface water supplies in our California surface area and.
In addition, we experienced higher general and administrative expenses due primarily to rate case activity in three of our four water utilities and increases in other operating cost.
Also in the fourth quarter of 2021, we benefited from property sales in California and recorded a long lived asset impairment in Texas that together provided a net benefit to our reported results.
Diversification, coupled with our strong local operations and supported by our National framework enable us to provide high quality water and reliable water service to our customers and communities protect our employees and deliver solid results for our shareholders.
Fourth quarter revenue was $139 7 million a $4 million increase over reported fourth quarter 2020 revenue.
Net income for the quarter was $18 million or <unk> 60 per diluted share.
This compares with net income of $13 $3 million or <unk> 46 per diluted share for the fourth quarter of 2020.
Diluted earnings per share for the quarter was primarily driven by cumulative rate increases of 34 per share decrease production costs due to lower customer usage of <unk> 30 per share the sale of non utility property of 29 per share and recognition of the impact of our California water conservation memorandum.
Account or <unk> of <unk> 12 per share.
These increases were offset by a decrease in customer usage of <unk> 40 per share an increase in per unit production cost of <unk> 20 per share.
And the impairment of long lived assets of <unk> <unk> per share.
In addition in the fourth quarter of 2020, we recorded a tax benefit of <unk> 14 per share related to flow through items and the impact of such items on lower fourth quarter pre tax earnings.
No similar rate impact occurred in 2021 due to higher fourth quarter pre tax income.
Turning to our comparative analysis for the quarter to $4 million increase in revenue was primarily due to $10 million in cumulative rate increases and $3 $4 million in the recognition of balancing and memorandum accounts in California, which includes $3 $2 million attributable to <unk>.
These increases were partially offset by a $10 $5 million decrease in customer usage.
The cumulative rate increases include the impact of final decisions on our general rate case, and reconsideration proceeding in Connecticut, which we received at the end of July and November of 2021, respectively.
While these decisions occurred later in the year than we anticipated when coupled with R. W.
With the filing that was approved by PURA in December of 2021, our Connecticut utility will benefit from an increase in our annual revenue requirement by approximately $9 9 million beginning January of 2022.
Water production expense decreased one $8 million compared to the fourth quarter of 2020.
The decrease included $7 $8 million due to lower customer usage, partially offset by $5 $3 million and higher average per unit water production costs.
Other operating expenses decreased $1 $5 million during the quarter, primarily due to a gain on the sale of non utility property of $7 $5 million, partially offset by increased general and administrative expenses of $1 $6 million and the recognition of an impairment of long lived asset of <unk>.
$2 $2 million.
The increase in general and administrative expenses was primarily due to the cost of rate case proceedings in three of our four operating utilities as well as higher compensation consulting and insurance costs.
The effective income tax rate for the fourth quarter was 15% compared to negative 7% for the fourth quarter of 2020.
The higher effective tax rate in 2021 was primarily due to the impact of flow through items on the change in profit before income taxes as compared to 2020.
On November 17th 2021, SJW group entered into an equity distribution agreement whereby the company may offer the sale of shares of its common stock from time to time in at the market offerings.
SJW group's sold and issued approximately 355000 shares of common stock with a weighted average price of $70 40 per share and received approximately $24 million in net proceeds under the agreement in 2021.
Proceeds from the sale of the shares were used to finance the acquisitions of Kendall West and band era East water utilities in Texas, which closed on December 17th 2021.
On December one 2021, San Jose Water company issued $50 million and its series Oh Senior notes. The notes are unsecured accrue interest at 3% and mature 30 years from the issue date.
In addition on December one, Connecticut water company issued $50 million of its series 2021 be senior notes. These notes are also unsecured accrue interest at 310% and mature 30 years from the issue date.
Turning to our annual results 2021 revenue was $573 7 million, a $9 $2 million increase over the prior year.
Net income in 2021 was $65 million or $2 <unk> per diluted share compared to $61 5 million or $2 14 per diluted share in 2020.
The change in diluted earnings per share for the year was due to many of the same factors noted for the quarter.
Cumulative rate increases contributed <unk> 86 per share.
<unk> production cost due to lower customer usage added 51 per share and the sale of non utility property contributed <unk> 28 per share.
In addition, various regulatory mechanisms in balancing and memorandum accounts added 21 per share and the recognition of the California WCS contributed <unk> 12 per share.
These increases were offset by a decrease in customer usage of <unk> 93 per share a production cost price increase of 44 per share and.
And an increase in administrative and general expenses of 25 per share.
In addition, depreciation expense increased 20 per share.
California surface water production resulted in a decrease of <unk> 15 per share and a long lived asset impairment in Texas decreased earnings by <unk> <unk> per share.
The 2021 increase in revenue was primarily due to $25 $2 million in cumulative rate increases $2 $5 million in the net recognition of certain regulatory mechanisms in Connecticut, and Maine, and $3 9 million in the recognition of balancing and memorandum accounts in California, including $3.
$2 million attributable to the WCS, MA and $2 9 million in revenue from new customers.
These increases were partially offset by $24 $7 million and decreased customer usage.
Water production expenses increased $3 3 million in 2021 the.
The increase was primarily due to $11 million $11 6 million in higher average per unit water production costs.
$3 $9 million due to a decrease in surface water supply production and a $1 $3 million increase in California cost recovery balancing and memorandum accounts. These.
These increases were partially offset by $13 $5 million in lower customer water usage.
Other operating expenses.
Increased $12 4 million in 2021, primarily due to $7 $6 million and higher general and administrative expenses $5 1 million and increased depreciation and amortization amortization expenses and $3 9 million in higher maintenance cost as.
As noted earlier in the fourth quarter of 2021, we recognized an impairment on our long lived asset of $2 2 million and a gain on the sale of non utility property of $7 5 million.
The change in other income and expense for the year was primarily the result of the $3 million GWA holdback amount, which I discussed during our second quarter earnings call.
Turning to our capital expenditure program, we added approximately $64 $1 million in company funded utility plant in the fourth quarter of 2021, bringing total company funded additions to $233 $9 million for the year.
Our 2021 cash flow from operations increased approximately $26 million over the same period in 2020.
The increase was primarily due.
Two an increase in collections of previously billed and accrued receivables of $13 million an increase in general working capital and net income adjusted for noncash items of $6 $6 8 million and $5 $2 million decrease in the payment of amounts previously invoiced and accrued due to lower fourth quarter activity.
<unk>.
In addition in 2020, we made a $5 million upfront service payment related to our concession agreement amendment that did not recur in 2021.
These increases were partially offset by an increase in accrued water production costs of $4 million.
At the end of 2021, we had $197 million available on our bank lines of credit for short term financing of utility plant additions and operating activities.
Average borrowing rate on our 2021 line of credit advances was approximately $1 three 2%.
With that I will stop and turn the call back over to Eric.
Thank you Jim.
Hey, Debbie group continues to deliver on our core growth strategy of investing in high quality water systems to provide high quality water and reliable service to customers and communities and earn a fair return on those investments in.
In 2022, SJW group's subsidiaries plan to invest $223 million in infrastructure improvements to serve our customers in California, Connecticut, Maine, and Texas more than one 3 billion and infrastructure investments as planned across the organization over the next five years.
<unk>.
Connecticut, Water's 2021, DRC concluded in the fourth quarter, and San Jose water and the California Public advocates office have reached a settlement agreement that was filed with the California Public Utilities Commission last month.
And Walter will discuss the results of the Connecticut case, the highlights of the settlement agreement in California and rate cases in Maine, and our Texas growth story and provide an update on our California water supply Andrew.
Thank you Eric.
Our board has authorized a $223 million capital spending plan for 2022.
Nearly half of it is allocated to pipeline replacement projects.
The plan includes budgeted investments up.
$115 1 million in California.
61 4 million in Connecticut.
$21 8 million in Maine, and $24 5 million in Texas.
The wicker and whisk infrastructure recovery mechanisms in Connecticut, Maine, respectively, and California's forward looking capital spending authorization as well as the growth in customers in Texas minimize regulatory lag on these infrastructure investments.
San Jose water company's 2021, <unk> application for new rates in 2022 through 2024 is pending before the CPUC.
The application seeks an increase of nearly $88 million in the revenue requirement over the three year period.
Authorization of a $435 million capital budget over the three years.
And recovery of $18 5 million from balancing and memorandum accounts.
SJW SEC filed for interim rates to be effective on January one 2022.
The settlement recognizes the need for continued investments in the water system to deliver high quality and reliable service for customers and community served.
Additionally, and further aligns authorized and capital authorized and actual consumption, particularly for business customers addresses our water supply mix challenge and provides greater revenue recovery.
And the fixed charge.
A final decision is anticipated in the second quarter of 2022.
The 2022 through 2020 for cost of capital proceeding for all class a utilities is pending before the CPUC.
The application requests an increase in revenue to support our return on equity of 10, 3%.
An adjustment on the proposed capital structure of 50, 455% equity and 45, 45% debt.
Partially offset by a decrease in the cost of debt to five 4%.
A decision is expected in the third quarter of 2022.
San Jose Water's advanced metering infrastructure application is pending before the CPUC.
An all party settlement agreement with submitted to the CPUC for adoption that would authorized infrastructure investment of $100 million over four years.
Outside of the capital budget requested and the Trc too.
Deployment of Ami.
A final decision is anticipated in the second quarter of 2022.
In Connecticut, the Connecticut public utility regulatory three issued a final decision in November of Connecticut water company's request for reconsideration.
Which was the last outstanding piece of the company's 2021 Trc.
The final decision allows TWC to increase annual revenues by an additional $2 1 million above the $5 2 million originally authorized in July 28, 2021, Giardi C decision.
For a total of $7 3 million authorized through the Trc.
PURA also authorized a worker up to four 4% effective on January one 2022.
The increase was for more than 2020.
More than $22 million and completed with our projects many of which were not considered by PURA and the <unk> because of the deadline and the <unk> proceeding.
Our pro forma capital additions the new <unk> is expected to generate $2 6 million in additional revenue.
Between July 2021, and January 22, the authorized revenue for CWC increased to $9 9 million through the Trc request for reconsideration and the wake of filings.
Maine water companies previously received approval from the Maine Public Utilities Commission for an innovative REIT smoothing mechanism that provides a more gradual ramp to new rates driven by the $60 million project to replace a 138 year old treatment plant in the <unk> Division.
Supplemental rate application for $6 $9 million is pending with the PUC, which would be the second step in a multiyear rate plan for the project.
And WC has entered settlement discussions with the office of public advocates.
This application and a decision is expected in the second quarter of 2022.
A third step filing associated with the new treatment facility is expected the second half of 2022 following the completion of our new soco referred drinking water treatment facility.
Main water received and PUC approval for a 3% increase and with effective January one 2020 to $41 9 million dollar infrastructure project in the <unk> Division.
The company also expects that by March one 2022, it will have filed rate case applications and four of its divisions as required as a condition of settlement agreements for the 2019 tax cuts and jobs Act order.
We continued to see a pipeline of growth opportunities at SJW Tx <unk>.
Texas water and wastewater utility.
In the fourth quarter SJW, TX closed on the acquisition of Kendall less than bendery east water and wastewater utilities.
The company also closed on the acquisition of Texas country water in January of 2022.
Combined these completed acquisitions added nearly 800 service connections and expanded SJW tx's surface area.
Overall, the company serves more than 24000 surface connections between Austin, and San Antonio and three of the five fastest growing counties in the United States, which include Kemal Hayes and Kendall counties.
<unk> has more than tripled its customer base over the past 15 years, providing service to about 70000 people today.
With a diverse portfolio of water supplies, a growing wastewater business and continued additions to the customer base through organic growth and acquisitions, we remain optimistic about the prospects for SJW, TX and its increased contributions to consolidated earnings.
Surface water supply in California improved in the fourth quarter.
As shown on the chart, we have experienced a significant increase in levels at our <unk> reservoir in the Santa Cruz Mountains due to higher than average rainfall in October and December .
Which allowed San Jose water to put <unk> in a water treatment plant back online in mid December as Eric mentioned earlier.
The current level at <unk> will support approximately one three to one 4 billion gallons and production during the balance of 2022.
For production year to date water produced from San Jose Water company surface water supplies was approximately 350 million gallons, which was generally from runoff until recently supplemented by releases from hausmann.
While there has not been significant rainfall since December the traditional rainy season continues through the end of March which could positively impact the runoff and storage in 2022.
With that I will turn the call back over to Eric.
Thank you Andrew.
The prudent management of our business and financial resources continues to be fundamental growth and our ability to return capital to shareholders.
Demonstrating the company's strong commitment to our shareholders in January of 2022, the board authorized a five 9% increase in SJW group's 2022 dividend to $1 44 per share as compared with the total dividends paid in 2021.
We're proud to have continuously paid a dividend for over 78 years.
We have increased the annual dividend in each of the last 54 years delivering value to our shareholders.
We would like to extend a warm welcome to the California Public Utilities Commission, President Alice Bushing rentals, and Commissioner John Reynolds and to express our appreciation to outgoing Commissioner Martha Guzman of service and President Mary Bell batches for their service.
We look forward to working with the new commissioners and their staff to address the water related issues facing California's regulated water utilities.
And lastly, I'm pleased to welcome Becky <unk> Klein with yesterday that'd be group Board of directors. She has an impressive background in service and extensive experience with water and utilities that he is the principle of an energy and water consulting company in Austin and past chair of the public Utilities Commission.
In Texas.
I'd like to turn the call back to the operator for questions.
And thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key please standby will compile the Q&A roster and our first question comes from Angie <unk> from Seaport.
Your line is now open.
Thank you.
Okay. So I wanted to just clarify one thing I heard Andrew about.
Water production volumes the $1 3 billion gallons you mentioned is it inclusive of the 350 million year to date.
You mentioned around 350.
Its exclusive so it does not include that $3 50 is produced in that.
One three to one four is based off the storage that you see in the chart that we presented.
Okay, that's great and then.
So.
We're waiting for the guidance issued on the <unk>.
On the first quarter earnings call.
Hopefully by then we will have.
Commissions decision on your settlement that we wont have any visibility into the.
The cost of capital proceeding I guess unless it settled by then so could you give us a sense.
Given what we've heard from the consumer advocate on that cost of capital side, how that could.
Well basically translate into your future earnings power and any potential sensitivity associated with changes in the cost of capital.
Yeah, Angie thanks for thanks for joining us today, we appreciate your questions.
I really don't have too much to add here I don't want to speculate necessarily on the outcome, but if you do look at our proposal.
<unk> approved as filed.
It does result in a very modest $1 50 per month.
Customer inquiries and so that reflects our sharing the reduction in debt expenses.
So we've created through our innovative financing and and yet still achieving a higher authorized return on equity.
We're just going to have to play it out and.
We continue to put forth the best evidence that we have available to us.
Andrew again would you have anything to add to that.
No Eric that sums it up perfectly.
Yes.
That's right. Yes go ahead go ahead Angie no. Please please go ahead.
No no no.
Everything that Eric said is that that.
That is our approach.
We have gotten testimony from Interveners now so so the process is moving forward.
But we still got a ways to go.
Okay, and then moving back to the DRC.
Again, it doesn't seem like you would be issuing guidance before the settlement.
Proved but given.
Current expectations for a lot of production volumes.
Would you be rusty in dose.
Stated.
<unk> <unk>.
<unk> includes.
Thanks.
Thanks, Andrew.
Looking at the settlement agreement itself. It reduces the amount of company produced surface water from 265 billion gallons down to one eight so thats.
That's a real win for customers and for the company if that is approved it certainly is.
Reassuring to us.
Right now looking at.
Surface water picture for 2022, we're going to be right in that right in that general vicinity as well. So I'm really pleased for that because that I think helps as well get the settlement ultimately approved by the commission. So so we should be.
It should be in a pretty good place.
Even though we won't necessarily know if the commission has approved the settlement agreement.
We're hopeful that they will in particular given.
With strong approach taken.
We worked with the public advocate I think it's a very compelling settlement for for customers and for the company. So I think it's all good.
Okay and lastly.
Just looking at your core earnings excluding those that one off transactions that happened last year can you give us a sense what percentage of those ongoing earnings came from Texas.
Hi, Christy.
Jim.
Earnings from Texas Jonathan.
I believe I'd have to get back to you on that Andrew I don't have it broken down by subsidiary at this moment. So why don't I circle back with you I know that they.
Typically are right around 10%, but.
But I would like to confirm that before before.
Lock and load on it.
Awesome. Thank you.
Andrew.
Thank you.
And if you have a question that is star one again, if you have a question star one and our next question comes from Jonathan Reeder from Wells Fargo. Your line is now open.
Hey, good morning team.
So.
Friendly.
Couple of my questions the only one that I.
Have remaining the cost of capital.
When do you think a final decision.
Would be realistic if it is fully litigated.
Just given.
The track record in California.
This backlog and everything like that.
Yes, Jonathan Fair question.
We continue to be hopeful that we'll get something by the third quarter, but we will have to have to watch that we don't control it but we will manage with it. So the best we can best we can tell.
Okay great.
In the months ahead as you've got some very important proceedings coming to ahead. So looking forward some good outcomes.
Yes, I appreciate the comment there Jonathan.
Look back over the last.
Last year we.
We worked through very successfully navigating the majority of our regulatory calendar. So with the settlement agreement in place for optimistic for the <unk> outcome in California then.
The Maine rate case, looking looking good and so just to get through this cost of capital proceeding and will be on our way. So I appreciate your questions.
Thank you.
And our next question comes from Richard Sunderland from J P. Morgan. Your line is now open.
Hi, good morning, Thanks for taking my questions today, just thinking about the <unk> water backdrop in California relative to the overall water challenges in the state could you frame a little bit of the progress made with the rainfall last quarter and just how to think about.
<unk>.
The water the state's water situation.
The next year or so.
Well I'll go ahead and start on that and I'll see if my colleagues have anything to add that I missed.
Well I'll tell you what.
December was really an extraordinary month rainfall for us.
You can see on the chart that Andrew shared.
How that just took off in December and that was set up by a very favorable October we were able to get some ground saturation.
Watershed up in the mountains, so that when we had the significant precipitation levels in December .
We didn't have any what was going to recharging. The groundwater. If you will just ran off and we were able to capture that in the reservoir. So and yet is just as strong as December was.
January was the opposite it was the I believe the all time record.
Essentially zero precipitation in San Jose.
The month of January so are our joy was a little bit.
Reduced because we thought while we're really on a roll here.
When you look around the state the major reservoirs around the state.
Definitely received some significant increases in their overall supply.
Snowpack.
Also quite significant.
But as we move into February and March here, you know normally we would expect to see even more precipitation. So so what right now I would say.
Thank goodness for December .
Certainly.
Some of the.
The anxiety, we're all feeling around overall water supply and.
But we're still meeting a significant amount of precipitation that put this thing to an end.
On a statewide basis. So so we're not out of the woods by any means but we certainly got a reprieve for 2022.
Andrew or Jim anything to add.
Yes, I would.
Just as it is.
If you take a look at the California.
Data Exchange center under the Department of water resources. It gives you a good overview of where the reservoirs are and they are still below the historic average for this date and <unk>.
Almost all cases, so as Eric highlighted we still got some room to go in.
And the overall state picture, but certainly relieved where our local picture goes and Thats. The key about the weather patterns and specifically our own water is it's very much a microclimate.
I don't have anything else I.
I don't have anything else to add to that.
Great Great December it's been pretty dry since then we were well above average at that point.
In the reservoirs, we're lining up quite well at that point.
And then we've kind of worked too.
The lower average numbers for this time of year. So looking forward to some continued rain potentially a miracle March who knows but we're sitting pretty well.
With regards to our own.
Our resources as we as we move through the year.
Understood. Thanks for the color and that's all I had thanks.
Thanks, Richard Thank you.
And we have a follow up question from Jonathan Reeder.
From Wells Fargo. Your line is open.
Just figured I'd ask anything additional kind of percolating on the M&A front.
Should we be expecting any future deals to be concentrated in Texas.
Or are there some other states either existing or new that.
That we should be looking at.
Yes, thanks for the follow up Andrew you want to address that.
Sure. We continue to remain focused on Texas, where we have seen.
Good transaction activity with our two most recently announced transactions as it relates to future activity.
Main open on finding.
Good acquisition targets, Texas will remain an area that will feature heavily in that but as we also look beyond Texas.
As those opportunities.
Come about we will evaluate those and I think the key that we always do as we focus on those <unk>.
Acquisitions, which will.
Be accretive to our shareholders.
<unk> improved the diversification for our company and benefit our customers. So those are the things we will continue to evaluate and obviously, we can't comment on things that were specifically working on right now but.
We will remain focused on the areas we have.
Great I appreciate you taking the follow up.
Of course, thank you Jonathan and thank you Adam.
Showing no further questions I would now like to turn the call back over to Eric for Lindbergh, Chief Executive Officer for closing remarks.
Thank you on behalf of the executive leadership team. The SJW group. Thank you for your interest and your support of our company built on our growth strategy of Capex investment and acquisitions in our core commitment to ESG. The SJW group and its 154 year track record make for a compelling investment and growth store.
Thank you very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
Great. Thanks, Dean will then.
Yes.
Yes.
Sure.
Yes.
Okay.
Okay.
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