Q1 2026 H2O America Earnings Call

April 29, 2026

Operator: Good day, and thank you for standing by. Welcome to the H2O America 2026 Q1 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Jonathan Reeder. Please go ahead.

Speaker #1: Good day, and thank you for standing by. Welcome to the H2O America 2026 Q1 financial results conference call. At this time, all participants are in a listen-only mode.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Operator: You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Jonathan Reeder. Please go ahead.

Speaker #1: I would now like to hand the conference over to your first speaker, Jonathan Reader. Please go ahead.

Speaker #2: Thank you, Siobhan. Welcome to the first quarter of 2026 financial results conference call for H2O America. My name is Jonathan Reader, and I am the senior director of treasury and investor relations for H2O America.

Jonathan Reeder: Thank you, Siobhan. Welcome to the Q1 2026 financial results conference call for H2O America. My name is Jonathan Reeder, and I am the Senior Director of Treasury and Investor Relations for H2O America. Presenting today will be 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.

Speaker #2: Presenting today will be 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.

Speaker #2: For those who would like to follow along, slides accompanying our remarks are available on our website at h2oamerica.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.

Jonathan Reeder: 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.

Speaker #2: 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.

Speaker #2: 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 Exchange Commission, copies of which may be obtained on our website.

Jonathan Reeder: 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 29 July 2026. You can access the press release and the webcast at H2O America's website.

Jonathan Reeder: 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.

Speaker #2: All forward-looking statements are made as of today in 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.

Speaker #2: This webcast is being recorded, and an archive of the webcast will be available until July 29th, 2026. You can access the press release and the webcast at h2oamerica's website.

Jonathan Reeder: This webcast is being recorded, and an archive of the webcast will be available until 29 July 2026. You can access the press release and the webcast at H2O America's website. In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share, have not been calculated in accordance with Generally Accepted Accounting Principles in the United States or GAAP.

Speaker #2: In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share, but not been calculated in accordance with generally accepted accounting principles in the United States for GAAP.

Jonathan Reeder: In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share, 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.

Speaker #2: These non-GAAP financial measures should be considered as supplement to the financial information prepared on a GAAP basis rather than as an alternative with respect to GAAP financial measures.

Jonathan Reeder: 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.

Speaker #2: 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.

Speaker #2: I will now turn the call over to Andrew.

Speaker #3: 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 49 cents per share on a GAAP diluted basis.

Andrew F. Walters: Welcome, everyone, and thank you for joining us today. We are pleased to provide you with an update on our strong Q1 2026 results, during which we earned $0.49 per share on a GAAP diluted basis and $0.50 per share on adjusted diluted basis. Our Q1 2026 results were consistent with our internal expectations in support of our standalone 2026 EPS guidance of $3.08 per share to $3.18. 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.

Andrew Walters: Welcome, everyone, and thank you for joining us today. We are pleased to provide you with an update on our strong Q1 2026 results, during which we earned $0.49 per share on a GAAP diluted basis and $0.50 per share on adjusted diluted basis. Our Q1 2026 results were consistent with our internal expectations in support of our standalone 2026 EPS guidance of $3.08 per share to $3.18. 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.

Speaker #3: In 50 cents per share on adjusted diluted basis. Our first quarter 2026 results were consistent with our internal expectations and support of our standalone 2026 EPS guidance.

Speaker #3: Of $3.08 per share to $3.18. 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.

Speaker #3: Following our year-end 2025 update and taking advantage of what we viewed as a receptive equity market, we decided to take the Quadbest 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 to $125 million of equity needed for our 2026 standalone capital budget.

Andrew F. Walters: 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 to 125 million of equity needed for our 2026 standalone 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 upside the issuance to $700 million, including the greenshoe. The upsizing also served to address our forecasted equity needs through 2027.

Andrew Walters: 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 to 125 million of equity needed for our 2026 standalone 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.

Speaker #3: Our equity offering received an overwhelmingly positive response from investors. As it was more than five times oversubscribed and priced at a Type 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 green sheet.

Andrew Walters: Due to the overwhelming demand and our desire to accommodate some very high quality, long-term oriented investors into our shareholder base, we upside 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.

Speaker #3: 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.

Andrew F. Walters: 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 at the end of February, including our increased long-term EPS CAGR target of 16%. 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.

Speaker #3: At the same time, we recognize that our work is far from complete. We remain steadfast in our commitment to deliver on the 2026–2030 plan that we rolled out at the end of February, including our increased long-term EPS CAGR target of 16%.

Andrew Walters: 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 at the end of February, including our increased long-term EPS CAGR target of 16%.

Speaker #3: 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.

Andrew Walters: 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.

Speaker #3: 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.

Andrew F. Walters: 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, recoveries in Connecticut, Maine, Texas, as well as making a PFOS remediation project recovery filing in Connecticut as well as California. In addition, a great deal of thought and effort has gone into preparing our general rate case filings in Connecticut and Maine. Of course, there was a 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.

Andrew Walters: 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, recoveries in Connecticut, Maine, Texas, as well as making a PFOS remediation project recovery filing in Connecticut as well as California. In addition, a great deal of thought and effort has gone into preparing our general rate case filings in Connecticut and Maine.

Speaker #3: This includes leveraging infrastructure investment mechanisms, recoveries in Connecticut, Maine, Texas, as well as making a PFOS remediation project recovery filing in Connecticut, as well as California.

Speaker #3: 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 a filing of the Quadbest 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.

Andrew Walters: Of course, there was a 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 Quadvest transaction as well as some of our key regulatory developments later in the call. Now I will turn it over to Ann to provide details on our Q1 2026 results and the key elements of our financial plan. Ann.

Speaker #3: Bruce will provide more detailed updates on Quadbest transaction as well as some of our key regulatory findings 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.

Andrew F. Walters: Bruce will provide more detailed updates on Quadvest transaction as well as some of our key regulatory developments later in the call. Now I will turn it over to Ann to provide details on our Q1 2026 results and the key elements of our financial plan. Ann.

Speaker #3: Ann, thank you, Andrew. Yesterday, after the market closed, we released our first quarter 2026 operating results. As Andrew mentioned, we were pleased to report first quarter 2026 diluted EPS of 49 cents, and adjusted diluted EPS of 50 cents.

Ann Kelly: Thank you, Andrew. Yesterday, after the market closed, we released our Q1 2026 operating results. As Andrew mentioned, we were pleased to report Q1 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 Q1 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'd like to briefly discuss all the key drivers resulting in the comparable year-over-year earnings per share.

Speaker #3: 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 first quarter of 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.

Ann Kelly: 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 Q1 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'd like to briefly discuss all the key drivers resulting in the comparable year-over-year earnings per share. We realized $0.41 per share increase due to higher revenue.

Speaker #3: Moving to slide eight, I'd like to briefly discuss all the key drivers resulting in the comparable year-over-year earnings per share. We realized 41 cents per share increase due to higher revenues.

Ann Kelly: We realized $0.41 per share increase due to higher revenue. Roughly half of this, 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 revenue 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 balancing and memorandum accounts primarily related to the full cost balancing account in California, and $0.08 from higher customer usage.

Speaker #3: Roughly half of this, or 20 cents, was driven by rate relief received from general rate cases and infrastructure surcharges primarily in California, Connecticut, and Texas.

Ann Kelly: Roughly half of this, 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 revenue 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.

Speaker #3: There was also 11 cents of higher revenues for pass-through water supply costs that are offset in our water production expenses and do not impact our net income.

Speaker #3: In addition, higher usage, larger due to a hot, dry March across our California service territory added 5 cents. The revenue increase was partially offset by higher water production expenses of 20 cents.

Ann Kelly: 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 balancing and memorandum accounts primarily related to the full cost balancing account in California, and $0.08 from higher customer usage.

Speaker #3: Attributable to 10 cents of higher water supply costs due to increases in average per unit cost for purchased water and groundwater extraction, 9 cents from increases in water production balancing and memorandum accounts primarily related to the full cost balancing account in California, and 8 cents from higher customer usage.

Speaker #3: These increases are partially offset by 7 cent decrease in water production expense as a result of the increased availability of surface water. In addition, other operating expenses increased 18 cents.

Ann Kelly: These increases are partially offset by $0.07 decrease in water production expense as a result of 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 plants 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 of 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 in Q1 2026 was approximately 15% versus 17% in Q1 2025. The lower effective tax rate was primarily due to higher flow-through tax benefits.

Speaker #3: The biggest item here was an 11-cent increase in depreciation and amortization for new utility plant placed in service as well as an increase in maintenance, employee-related costs, and a higher non-labor administrative and general expenses.

Speaker #3: The remaining drivers relate to 7 cents of dilution, which I alluded to earlier from the higher share count, partially offset by 4 cents of net other benefits.

Speaker #3: As for taxes during the quarter, our effective income tax in Q1 2026 was approximately 15% versus 17% in Q1 2025. The lower effective tax rate was primarily due to higher flow-through tax benefits.

Ann Kelly: As for taxes during the quarter, our effective income tax in Q1 2026 was approximately 15% versus 17% in Q1 2025. The lower effective tax rate was primarily due to higher flow-through tax benefits. Shifting from the Q1 results to our full year 2026 and beyond expectations, the figures on the next few slides should look familiar as 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 Q1 of 2026, we invested $85 million into infrastructure improvements.

Speaker #3: Shifting from the first quarter results to our full year 2026 and beyond expectations, the figures on the next few slides should look familiar as we are reiterating all aspects of the guidance that we rolled out near the end of February with our year-end 2025 update.

Ann Kelly: Shifting from the Q1 results to our full year 2026 and beyond expectations, the figures on the next few slides should look familiar as 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 Q1 of 2026, we invested $85 million into infrastructure improvements. This represents 18% of our full year 2026 CapEx budget of $483 million, which does not include the impacts of 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.

Speaker #3: 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 Quadbest.

Ann Kelly: This represents 18% of our full year 2026 CapEx budget of $483 million, which does not include the impacts of 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.

Speaker #3: 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.

Speaker #3: 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.

Ann Kelly: Importantly, roughly 80% of the $2.7 billion capital plan qualifies for timely regulatory recovery, either through California's three or forward-looking 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 necessarily what was or will be recognized and 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.

Speaker #3: Importantly, roughly 80% of the $2.7 billion capital plan qualifies for timely regulatory recovery either through California's three-year forward-looking general rate case framework or through various infrastructure recovery mechanisms in Connecticut, Maine, and Texas.

Speaker #3: Our five-year capital investment plan, combined with our pending acquisition of Quadbest, is expected to translate into a 13% rate-based CAGR off our year-end 2025 estimated rate base of 2.8 billion.

Speaker #3: As a reminder, these amounts represent our estimated rate base at year-end and not necessarily what was or will be recognized in rates by our state regulators in those particular years.

Ann Kelly: As a reminder, these amounts represent our estimated rate base at year-end and not necessarily what was or will be recognized and 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 have provided on our year-end update.

Speaker #3: We are laser-focused on not only delivering the rate-based 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.

Ann Kelly: The details on slide 10 are consistent with what we have provided on our year-end update. I won't go through them all, but wanted to reiterate our expectation to deliver a nonlinear EPS CAGR over the 2026 to 2030 period at or above the top edge 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, 1, the line of sight that we have on our 5-year capital expenditure plan. 2, the anticipated accretion from pending Quadvest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that we plan to follow and file in early 2027 go into effect.

Speaker #3: The details on slide 10 are consistent with what we have provided on our year-end update. I won't go through them all, but wanted to reiterate our expectations to deliver a non-linear EPS CAGR over the 2026 to 2030 period at or above the top edge of our 6 to 8 percent long-term organic EPS growth rate target using our 2025 adjusted EPS of $2.99 as a base year.

Ann Kelly: I won't go through them all, but wanted to reiterate our expectation to deliver a nonlinear EPS CAGR over the 2026 to 2030 period at or above the top edge of our 6% to 8% long-term organic EPS growth rate target using our 2025 adjusted EPS of $2.99 as a base year.

Ann Kelly: The ability to deliver growth at or above our 6% to 8% long-term sustainable rate is enabled by, 1, the line of sight that we have on our 5-year capital expenditure plan. 2, the anticipated accretion from pending Quadvest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that we plan to follow and file in early 2027 go into effect. Three, our expectation to continue to work constructively with key stakeholders in each of our states to achieve fair and timely revenue regulatory outcomes.

Speaker #3: The ability to deliver growth at or above our 6 to 8 percent 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 pending Quadbest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that we plan to follow in 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 revenue regulatory outcomes.

Ann Kelly: Three, our expectation to continue to work constructively with key stakeholders in each of our states to achieve fair and timely revenue regulatory outcomes. We remain excited about our 5-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 to not only 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 ATM program, through at least year-end 2027 as we have the ability to draw down on the $400 million board agreement component of the March issuance over this period to fund our capital needs.

Speaker #3: 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 to not only fund our pending Texas acquisitions but also our 2026 and 2027 base capital expenditures.

Ann Kelly: We remain excited about our 5-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 to not only 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 ATM program, through at least year-end 2027 as we have the ability to draw down on the $400 million board agreement component of the March issuance over this period to fund our capital needs.

Speaker #3: We expect to stay out of the equity markets, including issuances through our ATM program, through at least year-end 2027 as we have the ability to draw down on the $400 million board agreement component of the March issuance over this period to fund our capital needs.

Speaker #3: And we still expect to raise $100 to $200 million of debt across the parent and Texas operating company levels to fund the Quadbest transaction.

Ann Kelly: We still expect to raise $100 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 upside equity issuance. Our liquidity is strong to fund our daily operations. While we work towards closing Quadvest later this year, we utilize 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.

Speaker #3: Although we have more flexibility now regarding the timing given the upside equity issuance, our liquidity is strong to fund our daily operations. While we work towards closing Quadbest later this year, we utilize the cash received from the equity issuance to pay down our bank lines and credit, meaning the full $370 million is available, and we have invested the remainder of the proceeds into cash equivalents.

Speaker #3: In addition, our A-minus 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 debt ratio to be in the 11 to 12 percent range through 2027, which is above S&P's 11% downgrade threshold.

Ann Kelly: 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 pay down of our 2029 holdco maturity. With that, I will turn the call over to Bruce to provide some regulatory updates, including on our pending acquisition of Quadvest.

Speaker #3: In 2028, we expect the ratio to be above 12%, and we will continue to deliver throughout the rest of the plan through increased cash flows and the anticipated paydown of our 2029 hold co-maturity.

Ann Kelly: 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 pay down of our 2029 holdco maturity. With that, I will turn the call over to Bruce to provide some regulatory updates, including on our pending acquisition of Quadvest.

Speaker #3: And with that, I will turn the call over to Bruce to provide some regulatory updates, including on our pending acquisition of Quadbest.

Speaker #2: 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 of 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.

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-based 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.

Speaker #2: The estimated capital cost for the Ion Exchange project is $176 million. If approved, SJWC would adjust rates via annual rate-based 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.

Bruce Hauk: 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 1 April 2026. Also on 1 April, we implemented our 2025 water revenue adjustment mechanism surcharge to reconcile revenues as authorized in CWC's most recent rate case.

Speaker #2: 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 April 1st, 2026.

Bruce Hauk: 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 1 April 2026. Also on 1 April, 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 13 March to file a GRC application within the next 60 days.

Speaker #2: Also, on April 1st, we implemented our 2025 Water Revenue Adjustment Mechanism (WARA) 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 WARA surcharge provides recovery of certain amounts of compensation expenses.

Bruce Hauk: 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 13 March to file a GRC application within the next 60 days.

Speaker #2: And then, as most of you are aware, CWC filed a letter of intent on March 13th to file a GRC application within the next 60 days.

Speaker #2: 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, for new rates to become effective early 2027.

Bruce Hauk: 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 for new rates to become effective early 2027 as CWC seeks recovery for the approximately $129 million of infrastructure investments made between its last rate case and the end of 2026, as that investment is not reflected in current rates. Moving on to May on slide 14, after getting approval of the stipulation and the rate unification proceeding in January, NWC filed its first consolidated WISC application in late February, requesting a $0.9 million increase.

Speaker #2: As CWC seeks recovery for the approximately $129 million of infrastructure investments made between its last rate case and the end of 2026, as that investment is not reflected in current rates.

Speaker #2: Moving on to May on slide 14, after getting approval of the stipulation and the rate unification proceeding in January, MWC filed its first consolidated WISC application in late February requesting a 0.9 million increase.

Speaker #2: And then earlier this month, MWC filed its first consolidated GRC filing requesting a 9.5 million increase in annual revenues to recover the approximately $36 million of infrastructure investments that have been or are expected to be made in the state by the end of 2026 and are not currently in rates.

Bruce Hauk: Earlier this month, MWC filed its first consolidated GRC filing, requesting a $9.5 million increase in annual revenues to recover the approximately $26 million of infrastructure investments that have been or are expected to be made in the state by the end of 2026 and are not currently in rates. We expect the new rates to go into effect by Q2 2027. Lastly, I'd like to shift to Texas regulatory activity. We continue to work through the $5.1 million SIC mechanism application we filed in October and expect a decision from the PUCT in H2 2026. We also continue to move the ball forward through the PUCT's approval process for the two pending acquisitions.

Speaker #2: We expect the new rates to go into effect by the second quarter of 2027. Lastly, I'd like to shift to Texas regulatory activity. We continue to work through the $5.1 million SIC mechanism application we filed in October, and expect a decision from the PUCT in the second half of 2026.

Speaker #2: We also continue to move the ball forward through the PUCT's approval process for the two pending acquisitions. In fact, I'm pleased to report that just last week, we filed the sales, transfer, and 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 the fourth quarter of 2026.

Bruce Hauk: We also continue to move the ball forward through the PUCT's approval process for the two pending acquisitions. In fact, I'm 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 Q4 2026.

Bruce Hauk: In fact, I'm 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 Q4 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 6,000 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. Beginning in 2024, the magnitude of needed infrastructure investments to improve water supply and reliability at our Texas utility increased considerably.

Speaker #2: And then, in early 2027, after the close of the Quadbest and Cibolo Valley acquisitions, as well as the completion of our significant investments to bring an additional $6,000 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.

Bruce Hauk: 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 6,000 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. Beginning in 2024, the magnitude of needed infrastructure investments to improve water supply and reliability at our Texas utility increased considerably.

Speaker #2: So that these and other additions to Texas Water's rate base can be recognized in rates. Beginning in 2024, the magnitude of needed infrastructure investments to improve water supply and reliability at our Texas utility increased considerably.

Speaker #2: Over the 24 through 26 period, we expect to have invested more than $300 million into the infrastructure and thus filing a GRC to get those investments recognized in rates is critical.

Bruce Hauk: Over the 2024 through 2026 period, we expect to have invested more than $300 million into the infrastructure, and thus filing a GRC to get those investments recognized in rates is critical. Now before I move to an update on Quadvest, I did want to point out that despite us making all of these significant and much-needed CapEx 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 reported 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.

Speaker #2: Now, before I move to an update on Quadbest, 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.

Speaker #2: This is well below the EPA's recent study that reported water and wastewater bills are affordable if, when combined, they are less than $4.5% of median household income.

Bruce Hauk: This is well below the EPA's recent study that reported 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.

Speaker #2: 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.

Bruce Hauk: 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 rate making 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 are filed with the commission, the PUCT's 120-day approval process will commence.

Speaker #2: Now for an update on Quadbest. The STM application for the regulated portion of the Quadbest transaction was filed in January, and earlier this month it was deemed administratively complete.

Bruce Hauk: 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 rate making rate base as determined in accordance with the Texas Fair Market Value Statute at TWC's $483.6 million purchase price.

Speaker #2: As outlined on slide 15, the STM application requests approval of TWC's acquisition of the Quadbest LP assets and certification of the value of the rate-making rate base, as determined in accordance with the Texas Fair Market Value Statute, at TWC's $483.6 million purchase price.

Speaker #2: 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.

Bruce Hauk: TWC is in the process of issuing the required public notices, and once proof of those notices are filed with the commission, the PUCT's 120-day approval process will commence. That said, the 120-day timeframe may be extended if staff or the Office of Public Utility Counsel requests a hearing and/or timeline extension. As such, we are updating our expected closing of the Quadvest acquisition from mid 2026 to something during the H2 of 2026.

Speaker #2: That said, the 120-day timeframe may be extended if staff for the Office of Public Utility Council request a hearing and/or timeline extension. As such, we are updating our expected closing of the Quadbest acquisition from mid-2026 to simply during the second half of 2026.

Bruce Hauk: That said, the 120-day timeframe may be extended if staff or the Office of Public Utility Counsel requests a hearing and/or timeline extension. As such, we are updating our expected closing of the Quadvest acquisition from mid 2026 to something during the H2 of 2026. Meanwhile, we continue to see robust connection growth in the Houston-based Quadvest water and wastewater system, which now has more than 57,200 active connections as of 31 March 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.

Speaker #2: Meanwhile, we continue to see robust connection growth in the Houston-based Quadbest water and wastewater system, which now has more than 57,200 active connections as of March 31, 2026.

Bruce Hauk: Meanwhile, we continue to see robust connection growth in the Houston-based Quadvest water and wastewater system, which now has more than 57,200 active connections as of 31 March 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.

Speaker #2: This represents an impressive 5% increase in the first three months of 2026 after the active connection count increased 16% during 2025. And as Quadbest undercontract and pending development pipeline converts into active connections, the pool of future connections continues to be replenished, extending the longevity of the growth profile.

Speaker #2: Specifically, during the first quarter of 2026, despite Quadbest converting 2,800 connections from the pipeline to active, the pipeline was increased by 5,000 connections. Of course, future connection growth will vary based on the number of conditions, so this is no guarantee of future of the future pace of growth.

Bruce Hauk: Specifically, during Q1 2026, despite Quadvest converting 2,800 connections from the pipeline to active, the pipeline was increased by 5,000 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's 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.

Speaker #2: However, these results are in line with our range of expectations, and we believe solid growth will continue with a greater Houston area which is the second fastest growing metropolitan area in the United States.

Speaker #2: The addition of Quadbest's 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.

Bruce Hauk: The addition of Quadvest's 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.

Speaker #2: Between Quadbest 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.

Bruce Hauk: That concludes my regulatory updates, and I will now turn the call back over to Andrew.

Speaker #1: Thank you, Bruce. Before opening the call up to Q&A, I wanted to welcome Commissioner Patrick Rhodes, who Governor Abbott appointed a few weeks ago to fill the remaining vacancy on the Public Utility Commission of Texas.

Andrew F. Walters: Thank you, Bruce. Before opening the call up to Q&A, I wanted to welcome Commissioner Patrick Rhode, who 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, 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 of ours. 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.

Andrew Walters: Thank you, Bruce. Before opening the call up to Q&A, I wanted to welcome Commissioner Patrick Rhode, who 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, investors alike, especially as the recent uptick in energy prices due to the conflict in the Middle East has caused inflationary expectations to rise.

Speaker #1: 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.

Speaker #1: 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.

Andrew Walters: Affordability is, and frankly, always has been a top priority of ours. 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 H2O 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.

Speaker #1: Affordability is, and frankly, always has been a top priority of ours. 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.

Speaker #1: As Bruce mentioned, as of year-end 2025, the average H2O bills were less than 1% of median household income across all four of our states.

Andrew F. Walters: As Bruce mentioned, as of year-end 2025, average H2O 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. In addition, and 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.

Speaker #1: 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.

Andrew Walters: 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. In addition, and 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.

Speaker #1: In addition, our and 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.

Speaker #1: Anytime we can swap operating expenses for capital deployment, we will look to do it as a win-win for customers and the company. So in closing, I believe our company is off to a good start operationally and financially.

Andrew F. Walters: In closing, I believe our company is off to a good start operationally and financially. We have a busy regulatory agenda ahead of us, but I believe our team is up to the challenge and our company is poised to deliver great things in 2026 and beyond. Our dedicated team remains focused on driving shareholder and customer value through disciplined infrastructure investment and executing on our financial goals, advancing the transformational Quadvest acquisition as well as Cibolo Valley, and deepening our strong partnerships with local stakeholders and our unrelenting pursuit of operational excellence in identifying creative and sustainable solutions to serve generations to come while maintaining a focus on affordability. With that, I will turn the call back over to the operator for questions.

Andrew Walters: In closing, I believe our company is off to a good start operationally and financially. We have a busy regulatory agenda ahead of us, but I believe our team is up to the challenge and our company is poised to deliver great things in 2026 and beyond.

Speaker #1: We have a busy regulatory agenda ahead of us, but I believe our team is up to the challenge and our company is poised to deliver great things in 2026 and beyond.

Speaker #1: Our dedicated team remains focused on driving shareholder and customer value through disciplined infrastructure investment and executing on our financial goals. Advancing the transformational Quadbest acquisition as well as Cibolo Valley, deepening our strong partnerships with local stakeholders, and our unrelenting pursuit of operational excellence in identifying, creative, and sustainable solutions to serve generations to come while maintaining a focus on affordability.

Andrew Walters: Our dedicated team remains focused on driving shareholder and customer value through disciplined infrastructure investment and executing on our financial goals, advancing the transformational Quadvest acquisition as well as Cibolo Valley, and deepening our strong partnerships with local stakeholders and our unrelenting pursuit of operational excellence in identifying creative and sustainable solutions to serve generations to come while maintaining a focus on affordability. With that, I will turn the call back over to the operator for questions.

Speaker #1: With that, I will turn the call back over to the operator for questions.

Speaker #2: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press the star 11 on your telephone and wait for your name and company name to be announced.

Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press the star one one on your telephone and wait for your name and company name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alex Kania of BTIG. Your line is now open.

Speaker #2: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes in the line of Alex Kania, of BTIG.

Speaker #2: Your line is now open.

Alex Kania: Good morning. Thanks for taking my question. I kind of had just two questions. The first one was, just as you think about the, you know, the regulatory, the upcoming rate case process, I guess, for, I'd say for Quadvest, you know, next year. I know obviously it's early, but just from a high level, how would you know, obviously this rate case is gonna be important, but how would you just think about, maybe some of the affordability statistics that you provided for your other jurisdictions, and maybe how they may end up looking, you know, relative to what you might expect from Quadvest, you know, kind of on a run rate basis?

Speaker #3: Good morning. Thanks for taking my question. I kind of had just two questions. The first one was just, as you think about the regulatory the upcoming rate case process, I guess, I'd say for Quadbest, next year, would you and I know, obviously, it's early, but just from a high level, how would you obviously, this rate case is going to be important, but how would you just think about maybe some of the affordability statistics that you provided for your other jurisdictions and maybe how they may end up looking relative to what you might expect from Quadbest kind of on a run-rate basis?

Alex Kania: I know obviously it's early, but just from a high level, how would you know, obviously this rate case is gonna be important, but how would you just think about, maybe some of the affordability statistics that you provided for your other jurisdictions, and maybe how they may end up looking, you know, relative to what you might expect from Quadvest, you know, kind of on a run rate basis?

Speaker #1: Sure. I'll ask Bruce if he can take that question. And thank you very much, Alex. And good morning. Yeah, thank you, Alex, for the question.

Andrew F. Walters: Sure. I'll ask Bruce Hauk if he would take that question. Thank you very much, Alex Kania, and good morning.

Andrew Walters: Sure. I'll ask Bruce Hauk if he would take that question. Thank you very much, Alex Kania, and good morning.

Bruce Hauk: Yeah. Thank you, Alex Kania, for the question. As it relates to Quadvest rates, we've not disclosed the potential impact on rates, but we have disclosed that it would be significant. With that in mind, there's been, you know, a lot of investment that needs to be made for liability in the system, as you heard in my prepared remarks, and also the FMV transaction itself. With that being said, you know, we're in the process of being engaged with all the stakeholders, customers, and also the regulatory commission as well. We have to be creative and thoughtful in our preparations in preparing for that. That will most likely be most public, if you will, sometime in 2027 when we file.

Speaker #1: As it relates to Quadbest rates, we've not exposed the potential impact on rates, but we have disclosed that it would be significant. With that in mind, there's been a lot of investment that needed to be made for liability in the system, as you heard in my prepared remarks, and also the FMV transaction itself.

Speaker #1: With that being said, we are in the process of being engaged with all the stakeholders, customers, and also the regulatory commission as well. And we have to be creative and thoughtful in our preparations and preparing for that.

Bruce Hauk: We have to be creative and thoughtful in our preparations in preparing for that. That will most likely be most public, if you will, sometime in 2027 when we file. With that being said, 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 as well, but also being mindful of how to most appropriately bring those investments to light and to rates and how we can do that in conjunction and partnership with the Commission.

Speaker #1: And that will most likely be most public, if you will, sometime in 2027 when we file. But with that being said, as Andrew mentioned in his comments, we are very focused on affordability.

Bruce Hauk: With that being said, 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 as well, but also being mindful of how to most appropriately bring those investments to light and to rates and how we can do that in conjunction and partnership with the Commission.

Speaker #1: And our rate design will take that into consideration. And we are going to be proposing a low-income tariff to address affordability issues in Texas as well.

Speaker #1: But also, being mindful of how to most appropriately bring those investments to light and to rates and how we can do that in conjunction and partnership with the commission.

Speaker #3: Great. That's helpful. And then maybe a question for Ann, just as you talked about the balance sheet and the fact that it might be in that 11 to 12 percent range for the next couple of years.

Alex Kania: Great. That's helpful. Then maybe a question for Ann, just as you talked about the balance sheet and the fact that you might be in that 11% to 12% range for the next couple of years, given that cushion from the equity offering. Just thinking about the thoughts and around the comments on the desire to continue to deleverage. Is there a kind of a target that we should be thinking of over the very long term from an FFO to debt? And maybe just the thinking behind wanting to be pretty sizably above maybe whatever downgrade threshold might be for your A rating. Thanks.

Speaker #3: Given that cushion from the equity offering, just thinking about the thoughts around the comments on just the desire to continue to deleverage, is there kind of a target that we should be thinking of over the very long term from an FFO to debt?

Speaker #3: And maybe just the thinking behind wanting to be pretty sizably above maybe whatever a downgrade threshold downgrade threshold might be for your rate rating.

Speaker #3: Thanks.

Speaker #4: Yeah, thanks, Alex. Yeah, so as we mentioned, we do plan to delever over the five-year plan, with a target being to get into the A flat rating, which is comparable to our competitors.

Ann Kelly: Thanks, Alex Kania. 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 we have, I think it's a 15% FFO to debt upgrade threshold. We would need to be north of that. We expect to be there by the end of the five-year term. Going to the A flat credit rating gives us flexibility. We said overall that we're very committed to our A category rating, currently at the A minus.

Speaker #4: Right now, we have a I think it's a 15% FFO to debt upgrade threshold, so we would need to be north of that. We expect to be there by the end of the five-year interview.

Speaker #4: And going to the A flat credit rating gives us flexibility. So we've said overall that we're very committed to our A category ratings currently at the A minus.

Ann Kelly: Going to the A flat credit rating gives us flexibility. We said overall that we're very committed to our A category rating, currently at the A minus. Building back up to an A flat gives us flexibility if we were to pursue an acquisition or any other transactions in the future, to be able to do so while still maintaining the A category rating.

Speaker #4: But building back up to an A flat gives us flexibility if we were to pursue an acquisition or any other transactions in the future to be able to do so while still maintaining the A category rating.

Ann Kelly: Building back up to an A flat gives us flexibility if we were to pursue an acquisition or any other transactions in the future, to be able to do so while still maintaining the A category rating.

Speaker #3: Great. Thanks so much.

Alex Kania: Great. Thanks so much.

Speaker #1: Thank you, Alex.

Andrew F. Walters: Thank you, Alex.

Andrew Walters: Thank you, Alex.

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

Speaker #2: Thank you. And our next question comes from the line of Davis Sunderland of Baird. Your line is now open.

Davis Sunderland: Hey, good morning, guys.

Speaker #5: Hey, good morning, guys. Andrew, Bruce, thank you so much. Yeah, excited to be joining you guys as analyst community. And thank you for taking our questions.

Andrew F. Walters: Morning, Davis.

Andrew Walters: Morning, Davis.

Davis Sunderland: Andrew, Bruce, thank you so much. Yeah, excited to be joining you guys at the analyst community, and thank you for taking our questions. Maybe two from me, just starting first on Quadvest. Wondering maybe Andrew or Bruce, if you guys could talk just a bit about the final steps needed to close this, any risks you guys see to the timeline, and then whether or not any small deviations, thinking months difference here, would pose any risk to your guys' timing for potentially filing the Texas rate case application next year.

Speaker #5: Maybe two from me, just starting first on Quadbest. I'm wondering maybe, Andrew or Bruce, if you guys could talk just a bit about the final steps needed to close this, any risks you guys see to the timeline, and then whether or not any small deviations thinking months difference here would pose any risk to your guys' timing for potentially filing the Texas rate case application next year.

Speaker #1: Yeah, I'll have Bruce take that question, but thank you, Davis. Yeah, thank you, Davis, for the question. And we're super excited about the major hurdle that we most recently covered, which was being deemed administratively sufficient.

Andrew F. Walters: Yeah. I'll have Bruce take that question, but thank you, Davis.

Andrew Walters: Yeah. I'll have Bruce take that question, but thank you, Davis.

Bruce Hauk: Yeah. Thank you, Davis, for the question. You know, we're super excited about the major hurdle that we most recently covered, which was being deemed administratively sufficient. That specific step allows us to engage in the notice to customers of the acquisition and kicks off a process that allows us to actually get the 120-day procedural schedule set by the commission. With that being said, if you think back when we actually announced this acquisition, filed notice for the FMV, and then proceeded with filing over 7,000 pages of the STM filing, the sales trade for merger process, to only have had a 60-day examination of that process to get deemed administratively sufficient, that's significant in terms of an achievement.

Speaker #1: That specific step allows us to engage in the notice to customers of the acquisition and kicks off a process that allows us to actually get the $120-day procedural schedule set by the commission.

Speaker #1: So with that being said, if you think back when we actually announced this acquisition, filed notice for the FMV, and then proceeded with filing over 7,000 pages of the STM filing, the sales transfer merger process, to only have had a 60-day examination of that process to get deemed administratively sufficient, that's significant in terms of an achievement.

Bruce Hauk: With that being said, if you think back when we actually announced this acquisition, filed notice for the FMV, and then proceeded with filing over 7,000 pages of the STM filing, the sales trade for merger process, to only have had a 60-day examination of that process to get deemed administratively sufficient, that's significant in terms of an achievement. With that being said, you know, as things proceed, that puts us from where we said in my prepared remarks from a mid-2026 close to a, you know, sometime in the latter half of 2026.

Speaker #1: With that being said, as things proceed, that puts us from where we said in my prepared marks—from a mid-2026 close to sometime in the latter half of 2026.

Bruce Hauk: With that being said, you know, as things proceed, that puts us from where we said in my prepared remarks from a mid-2026 close to a, you know, sometime in the latter half of 2026. All commissions across this country are inundated with a lot of dockets. You know, Texas is no exception with the amount of investment and growth that's taking place in Texas. We have to work with the commission in partnership to proceed and prosecute the STM. So far, you know, we're on track, like I mentioned, for that late 2026, barring no significant exceptions in terms of delays with things that may come up in the due diligence process.

Speaker #1: That being said, all commissions across this country are inundated with a lot of dockets, Texas is no exception with the amount of investment and growth that's taking place in Texas.

Bruce Hauk: All commissions across this country are inundated with a lot of dockets. You know, Texas is no exception with the amount of investment and growth that's taking place in Texas. We have to work with the commission in partnership to proceed and prosecute the STM. So far, you know, we're on track, like I mentioned, for that late 2026, barring no significant exceptions in terms of delays with things that may come up in the due diligence process.

Speaker #1: So we have to work with the commission in partnership to proceed and prosecute the STM. And so far, we're on track, like I mentioned, for that late 2026, barring no significant exceptions in terms of delays with things that may come up in the due diligence process.

Speaker #1: But so far, so good. And we are planning to close as I mentioned at the latter part of 2026, barring no unforeseen things that may come up by intervening parties or just basically with the commission staff being unable to get to things as timely as we would like.

Bruce Hauk: So far so good, and we are planning to close, as I mentioned, at the latter part of 2026, barring no unforeseen things that may come up by intervening parties or just basically with the, you know, with the commission staff being unable to get to things as timely as, you know, we would like, based on their docket and all the actual cases that they're reviewing. We're very happy with the process thus far and the total engagement by the commission and the staff. We are happy with, I mentioned, you know, crossing that hurdle at this point.

Speaker #1: Based on their docket, and all the actual cases that they're reviewing. But we're very happy with the process thus far. And the total engagement by the commission and the staff.

Speaker #1: So we are happy with, I mentioned, crossing that hurdle at this point. Yeah. I think it's an important point, Davis, too, is just to kind of highlight that anybody gets that amount of volume of documents to go through, they're not going to kind of scrimp on their review process.

Andrew F. Walters: Yeah. I think that it's an important point, Davis, too. It's just to kind of highlight that if anybody gets that amount of volume of documents to go through, they're not going to kind of scrimp on their review process. It just means they have to work very hard in order to get through it. You know, at least from our standpoint, we have nothing but gratitude for the hard work that the staff is putting into this.

Andrew Walters: Yeah. I think that it's an important point, Davis, too. It's just to kind of highlight that if anybody gets that amount of volume of documents to go through, they're not going to kind of scrimp on their review process. It just means they have to work very hard in order to get through it. You know, at least from our standpoint, we have nothing but gratitude for the hard work that the staff is putting into this.

Speaker #1: It just means they have to work very hard in order to get through it. And at least from our standpoint, we have nothing but gratitude for the hard work that the staff is putting into this.

Speaker #3: That is super helpful, and thank you both for all the detail. Maybe just one other, if I could sneak it in. I know this is a bit of a moving target, if you will, to an extent, but the EPA has been talking a bit more about regulating microplastics and other potentially harmful substances in drinking water, and I think in fairness, it took maybe two and a half years to officially move forward on PFAS.

Davis Sunderland: That is super helpful. Thank you both for all the detail. Maybe just one other, if I could sneak it in. I know this is a bit of a moving target, if you will, to an extent. The EPA has been talking a bit more about regulating microplastics and other potentially harmful substances in drinking water. I think in fairness, it took maybe 2.5 years to officially move forward on PFAS, so it is still early on. I guess my question is, have you guys thought about whether or not treating for PFAS would also cover treating some of these other potentially harmful substances, or is this maybe a tailwind to increase capital deployments longer term, or just how to think of this in context of your guys' planned capital deployments? Thank you very much.

Speaker #3: So it's still early on. But I guess my question is, have you guys thought about whether or not treating for PFAS would also cover treating some of these other potentially harmful substances or is this maybe a tailwind to increased capital deployments, longer term, or just how to think of this in context of your guys' planned capital deployments?

Davis Sunderland: I guess my question is, have you guys thought about whether or not treating for PFAS would also cover treating some of these other potentially harmful substances, or is this maybe a tailwind to increase capital deployments longer term, or just how to think of this in context of your guys' planned capital deployments? Thank you very much.

Speaker #3: And thank you very much.

Bruce Hauk: Thank you, Davis, for that question. Super engaged in the process with the EPA, working with the ruling process. Just to kind of level set, you know, the six constituents that are actually PFAS regulated with MCLs and what have you, we're very much on track to make the improvements that are needed in Connecticut and California to achieve, you know, that compliance and, you know, things are on track there. This new list of compounds that were part of that process that you just described, you know, just like you had mentioned, the rulemaking process is lengthy and long, and the due process is pretty extensive.

Speaker #1: Thank you, Davis, for that question and super engaged in the process with the EPA. the process and just to kind of level set the six constituents that are actually PFAS regulated with MCLs and what have you.

Speaker #1: We're very much on track to make the improvements that are needed in Connecticut and California. To achieve that compliance and things are on track there.

Speaker #1: This new list of compounds that were part of that process that you just described just like you had mentioned, the rulemaking process is lengthy and long and the due process is pretty extensive.

Bruce Hauk: This new list of compounds that were part of that process that you just described, you know, just like you had mentioned, the rulemaking process is lengthy and long, and the due process is pretty extensive. The partnership that we have with The Water Research Foundation, also our other partners with EPA and other organizations, NAWC, allows us to be a significant and meaningful part of that process and a voice. To your point of does ion exchange or GAC or any of these treatment processes that we use to mitigate PFAS, are there ancillary benefits? Absolutely.

Speaker #1: But the partnership that we have with the Water Research Foundation, also our other partners with EPA and other organizations in AWC, allows us to be a significant and meaningful part of that process and a voice.

Bruce Hauk: The partnership that we have with The Water Research Foundation, also our other partners with EPA and other organizations, NAWC, allows us to be a significant and meaningful part of that process and a voice. To your point of does ion exchange or GAC or any of these treatment processes that we use to mitigate PFAS, are there ancillary benefits? Absolutely. One of the things on microplastics I'm super proud of is our director of water quality based out of our San Jose Water operation is actually doing a pilot through The Water Research Foundation and actually using our Montevina plant to do a pilot on microplastics to inform the science behind what can be done to eliminate, treat, remediate microplastics.

Speaker #1: To your point, do ion exchange, GAC, or any of these treatment processes that we use to mitigate PFAS have ancillary benefits?

Speaker #1: Absolutely. One of the things on microplastics I'm super proud of is our director of water quality based out of our San Jose water operation is actually doing a pilot through the Water Research Foundation and actually using our Monavena plant to do a pilot on microplastics to inform the science behind what can be done to eliminate, treat, remediate microplastics.

Bruce Hauk: One of the things on microplastics I'm super proud of is our director of water quality based out of our San Jose Water operation is actually doing a pilot through The Water Research Foundation and actually using our Montevina plant to do a pilot on microplastics to inform the science behind what can be done to eliminate, treat, remediate microplastics. We're very much in on the research and participating in the process that will help our company as well as others, as we work through the process and the rulemaking. Super excited about that.

Speaker #1: So we're very much in on the research and participating in the process that will help our company as well as others as we work through the process and the rulemaking.

Bruce Hauk: We're very much in on the research and participating in the process that will help our company as well as others, as we work through the process and the rulemaking. Super excited about that.

Speaker #1: So super excited about that.

Speaker #2: Yeah, I think it's good that Bruce highlights that because I think, as we look at the team that is supporting all of us, we get the honor of telling the story.

Andrew F. Walters: Yeah. I think it's, you know, it's good that Bruce Hauk highlights that because I think as we look at the team that is supporting all of us, when we get the honor of telling the story, the work that actually gets done on the field, is nothing short of amazing for what those folks do every day. Suzanne DeLorenzo, who Bruce Hauk just talked about, is one of those amazing partners that is continuing to drive progress in our company and actually put us at the forefront of things that impact the entire industry, not just us.

Andrew Walters: Yeah. I think it's, you know, it's good that Bruce Hauk highlights that because I think as we look at the team that is supporting all of us, when we get the honor of telling the story, the work that actually gets done on the field, is nothing short of amazing for what those folks do every day. Suzanne DeLorenzo, who Bruce Hauk just talked about, is one of those amazing partners that is continuing to drive progress in our company and actually put us at the forefront of things that impact the entire industry, not just us.

Speaker #2: The work that actually gets done on the field is nothing short of amazing for what those folks do every day. And Suzanne De Lorenzo, who Bruce just talked about, is one of those amazing partners that is continuing to drive progress in our company and actually put us at the forefront of things that impact the entire industry, not just us.

Speaker #3: Super helpful. Thanks for the time, guys. I'll pass it on.

Davis Sunderland: Super helpful. Thanks for the time, guys. I'll pass it on.

Speaker #1: Thank you.

Andrew F. Walters: Take care.

Andrew Walters: Take care.

Speaker #4: Thank you. As a reminder, to ask a question, please press star 11 on your telephone. I'm showing no further questions at this time. I would now like to turn it back over to Andrew Walters for any closing remarks.

Operator: Thank you. As a reminder, to ask a question, please press star one one 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.

Speaker #1: Thank you. 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.

Andrew F. Walters: Thank you. 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's precious. At the same time, we continue executing our growth strategy and delivering our shareholder value, including our unwavering commitment to the dividend, which we paid for more than 80 consecutive years and increased it in each of the past 58. Our success is built on a culture of service and partnership. We value our customers, communities, the environment, and capital partners. I couldn't be prouder of our team whose dedication makes it all possible. I'm always available for follow-up along with my partners, Ann and Bruce. We appreciate your interest in H2O America.

Andrew Walters: Thank you. 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's precious. At the same time, we continue executing our growth strategy and delivering our shareholder value, including our unwavering commitment to the dividend, which we paid for more than 80 consecutive years and increased it in each of the past 58.

Speaker #1: Together, we protect what's precious. At the same time, we continue executing our growth strategy and delivering our shareholder value, including our unwavering commitment to the dividend, which we have paid for more than 80 consecutive years and increased in each of the past 58.

Speaker #1: Our success is built on a culture of service and partnership. We value our customers, communities, the environment, and capital partners. And I couldn't be prouder of our team whose dedication makes it all possible.

Andrew Walters: Our success is built on a culture of service and partnership. We value our customers, communities, the environment, and capital partners. I couldn't be prouder of our team whose dedication makes it all possible. I'm always available for follow-up along with my partners, Ann and Bruce. We appreciate your interest in H2O America.

Speaker #1: I'm always available for follow-up along with my partners Ann and Bruce. We appreciate your interest in H2O America.

Operator: Welcome to the H2O America 2026 Q1 Financial Results Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Jonathan Reeder. Please go ahead.

Speaker #4: disconnect. Good day, and thank you for standing by. Welcome to the H2O America 2026 Q1 financial results conference call. At this time, all participants are in a listen-only mode.

Speaker #4: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone.

Speaker #4: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #4: I would now like to hand the conference over to your first speaker, Jonathan Reader. Please go ahead.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: This webcast is being recorded, and an archive of the webcast will be available until July 29th, 2026. You can access the press release and the webcast at h2oamerica's website.

Speaker #2: In addition, some of the information discussed today includes the non-GAAP financial measures of adjusted net income and adjusted diluted earnings per share, not been calculated in accordance with generally accepted accounting principles in the United States, or GAAP.

Jonathan Reeder: In addition, some of the information discussed today includes the 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: I will now turn the call over to Andrew.

Speaker #3: 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.

Andrew F. Walters: Welcome, everyone, and thank you for joining us today. We are pleased to provide you with an update on our strong Q1 2026 results, during which we've earned $0.49 per share on a GAAP diluted basis and $0.50 per share on adjusted diluted basis. Our Q1 2026 results were consistent with our internal expectations and supportive of our standalone 2026 EPS guidance of $3.08 per share to $3.18. 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.

Speaker #3: In 50 cents per share on 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 per share to $3.18.

Speaker #3: 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.

Andrew F. Walters: 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 to 125 million of equity needed for our 2026 standalone capital budget. Our equity offering received an overwhelmingly positive response from investors as it was more than 5 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 upside the issuance to $700 million, including the greenshoe. The upsizing also served to address our forecasted equity needs through 2027.

Speaker #3: Our equity offering received an overwhelmingly positive response from investors. As it was more than five times oversubscribed and priced at a type 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 green sheet.

Speaker #3: 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 at the end of February, including our increased long-term EPS CADR target of 68%.

Speaker #3: This includes leveraging infrastructure investment mechanisms, recoveries in Connecticut, Maine, and Texas, as well as making a PFOS remediation project recovery filing in Connecticut and California.

Speaker #3: 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 a filing of the Quadbest 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.

Speaker #3: Bruce will provide more detailed updates on the Quadbest transaction, as well as some of our key regulatory bonuses, 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.

Speaker #3: Ann, thank you, Andrew. Yesterday, after the market closed, we released our first-quarter 2026 operating results. As Andrew mentioned, we were pleased to report first-quarter 2026 diluted EPS of 49 cents and adjusted diluted EPS of 50 cents.

Speaker #3: The results were consistent with our internal expectations in support 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 first quarter of 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.

Speaker #3: Moving to slide eight, I'd like to briefly discuss all the key drivers resulting in the comparable year-over-year earnings per share. We realized a $0.41 per share increase due to higher revenues. Roughly half of this, or $0.20, was driven by rate relief received from general rate cases and infrastructure surcharges, primarily in California, Connecticut, and Texas.

Ann Kelly: We realized $0.41 per share increase due to higher revenue. Roughly half of this, or $0.20, was driven by rate relief received from general rate cases and infrastructure surcharges, primarily in California, Connecticut, and Texas. In addition, there was $0.11 of higher revenue for pass-through water supply costs that are offset in our water production expenses and do not impact our net income. 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 balancing and memorandum accounts primarily related to the full cost balancing account in California, and $0.08 from higher customer usage.

Speaker #3: There was also 11 cents of higher revenues for pass-through water supply costs that are offset in our water production expenses and do not impact our net income.

Speaker #3: In addition, higher usage, largely due to a hot, dry March across our California service territory, added 5 cents. The revenue increase was partially offset by higher water production expenses of 20 cents.

Speaker #3: Attributable to 10 cents of higher water supply costs due to increases in average per-unit costs for purchased water and groundwater extraction, 9 cents from increases in water production balancing and memorandum accounts primarily related to the full cost balancing account in California, and 8 cents from higher customer usage.

Speaker #3: These increases are partially offset by 7 cents decrease in water production expense as a result of increased availability of surface water. In addition, other operating expenses increased 18 cents.

Ann Kelly: These increases are partially offset by $0.07 decrease in water production expense as a result of 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 plants 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 of 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 in Q1 2026 was approximately 15% versus 17% in Q1 of 2025. The lower effective tax rate was primarily due to higher flow-through tax benefits.

Speaker #3: The biggest item here was an 11-cent 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.

Speaker #3: The remaining drivers relate to 7 cents of dilution, which I alluded to earlier from the higher share count, partially offset by 4 cents of net other benefits.

Speaker #3: As for taxes during the quarter, our effective income tax in Q1 2026 was approximately 15% versus 17% in Q1 of 2025. The lower effective tax rate was primarily due to higher flow-through tax benefits.

Speaker #3: Shifting from the first-quarter results to our full-year 2026 and beyond expectations, the figures on the next few slides should look familiar as we are reiterating all aspects of the guidance that we rolled out near the end of February with our year-end 2025 update.

Ann Kelly: Shifting from the Q1 results to our full year 2026 and beyond expectations, the figures on the next few slides should look familiar as 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 Q1 of 2026, we invested $85 million into infrastructure improvements. This represents 18% of our full year 2026 CapEx budget of $483 million, which does not include the impacts of 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.

Speaker #3: 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 Quadbest.

Speaker #3: 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.

Speaker #3: 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.

Ann Kelly: Importantly, roughly 80% of the $2.7 billion capital plan qualifies for timely regulatory recovery, either through California's 3 or 4-year forward-looking general rate case framework or through various infrastructure recovery mechanisms in Connecticut, Maine, and Texas. Our 5-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 necessarily what was or will be recognized and 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.

Speaker #3: Our five-year capital investment plan, combined with our pending acquisition of Quadbest, is expected to translate into a 13% rate-based CAGR of our year-end 2025 estimated rate base of $2.8 billion.

Speaker #3: As a reminder, these amounts represent our estimated rate base at year-end, and not necessarily what was or will be recognized in rates by our state regulators in those particular years.

Speaker #3: The details on slide 10 are consistent with what we have provided on our year-end update. I won't go through them all, but wanted to reiterate our expectations to deliver a nonlinear EPS CAGR over the 2026 to 2030 period at or above the top end of our 6 to 8 percent long-term or organic EPS growth rate target.

Ann Kelly: The details on slide 10 are consistent with what we have provided on our year-end update. I won't go through them all, but wanted to reiterate our expectations to deliver a nonlinear EPS CAGR over the 2026 to 2030 period at or above the top edge 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, 1, the line of sight that we have on our 5-year capital expenditure plan. 2, the anticipated accretion from pending Quadvest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that was planned to follow and file in early 2027 go into effect.

Speaker #3: Using our 2025 adjusted EPS of $2.99 as a base year. The ability to deliver growth at or above our 6 to 8 percent 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 pending Quadbest acquisition beginning in 2028 once the new rates from the consolidated Texas general rate case that we plan to follow in 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 revenue regulatory outcomes.

Ann Kelly: Three, our expectation to continue to work constructively with key stakeholders in each of our states to achieve fair and timely revenue 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 F. Walters discussed, we executed on the equity need, needed to not only fund our pending Texas acquisitions, but also our 2026 and 2027 base CapEx. We expect to stay out of the equity markets, including issuances through our ATM program, through at least year-end 2027 as we have the ability to draw down on the $400 million board agreement component of the March issuance over this period to fund our capital needs.

Ann Kelly: We still expect to raise $100 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 upsize 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. Our A-minus 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.

Speaker #3: And we still expect to raise $100 to $200 million of debt across the parent and Texas operating company levels to fund the Quadbest transaction.

Speaker #3: Although we have more flexibility now regarding the timing given the upside equity issuance. Our liquidity is strong to fund our daily operations. While we work towards closing Quadbest later this year, we utilize 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 equivalent.

Speaker #3: And with that, I will turn the call over to Bruce to provide some regulatory updates including on our pending acquisition of Quadbest.

Speaker #2: Also, on April 1, we implemented our 2025 Water Revenue Adjustment Mechanism (WARA) 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 WARA surcharge provides recovery of certain amounts of compensation expenses.

Speaker #2: And then, as most of you are aware, CWC filed a letter of intent on March 13th to file a GRC application within the next 60 days.

Bruce Hauk: The actual rate case will be filed in the weeks ahead. Per the letter, CWC plans to request an approximately $26 million increase in annual revenues for new rates to become effective early 2027. As CWC seeks recovery for the approximately $129 million of infrastructure investments made between its last rate case and the end of 2026, as that investment is not reflected in current rates. Moving on to May on Slide 14, after getting approval of the stipulation and the rate unification proceeding in January, MWC filed its first consolidated WISC application in late February, requesting a $0.9 million increase.

Speaker #2: 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, for new rates to become effective early 2027.

Speaker #2: In an earlier this month, MWC filed its first consolidated GRC filing requesting a $9.5 million increase in annual revenues to recover the approximately $36 million of infrastructure investments that have been or are expected to be made in the state by the end of 2026 and are not currently in rates.

Speaker #2: We also continue to move the ball forward through the PUCT's approval process for the two pending acquisitions. In fact, I'm pleased to report that just last week we filed the sales, transfer, and 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 the fourth quarter of 2026.

Bruce Hauk: In fact, I'm 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 Q4 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 6,000 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. Beginning in 2024, the magnitude of needed infrastructure investments to improve water supply and reliability at our Texas utility increased considerably.

Speaker #2: And then, in early 2027, after the close of the Quadbest and Cibolo Valley acquisitions, as well as the completion of our significant investments to bring an additional 6,000 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.

Bruce Hauk: Over the 2024 through 2026 period, we expect to have invested more than $300 million into the infrastructure and thus filing a GRC to get those investments recognized in rates is critical. Before I move to an update on Quadvest, 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 reported 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.

Speaker #2: This is well below the EPA's recent study that reported water and wastewater bills are affordable if, when combined, they are less than 4.5% of median household income.

Bruce Hauk: We believe this is a reasonable guideline depicting affordability and provides bill headroom for the recovery of our planned infrastructure investments going forward. For an update on Quadvest. The STM application for the regulated portion of the Quadvest transaction was filed in January. 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. Once proof of those notices are filed with the commission, the PUCT's 120-day approval process will commence.

Speaker #2: Now, for an update on Quadbest. The STM application for the regulated portion of the Quadbest transaction was filed in January, and earlier this month it was deemed administratively complete.

Speaker #2: As outlined on slide 15, the STM application requests approval of TWC's acquisition of the Quadbest LP assets and certification of the value of the rate-making rate base.

Speaker #2: 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.

Bruce Hauk: That said, the 120-day time frame may be extended if staff or the Office of Public Utility Counsel requests a hearing and/or timeline extension. As such, we are updating our expected closing of the Quadvest acquisition from mid-2026 to sometime during H2 2026. Meanwhile, we continue to see robust connection growth in the Houston-based Quadvest water and wastewater system, which now has more than 57,200 active connections as of 31 March 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.

Speaker #2: That said, the $120-day timeframe may be extended if staff for the Office of Public Utility Council request a hearing and/or timeline extension. As such, we are updating our expected closing of the Quadbest acquisition from mid-2026 to simply during the second half of 2026.

Speaker #2: Extending the longevity of the growth profile. Specifically, during the first quarter of 2026, despite Quadbest converting 2,800 connections from the pipeline to active, the pipeline was increased by 5,000 connections.

Bruce Hauk: Specifically, during Q1 2026, despite Quadvest converting 2,800 connections from the pipeline to active, the pipeline was increased by 5,000 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's 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.

Speaker #2: Of course, future connection growth will vary based on the number of conditions, so this is no guarantee of future of the future pace of growth.

Speaker #2: 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.

Speaker #2: The addition of Quadbest's 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.

Bruce Hauk: That concludes my regulatory update. I will now turn the call back over to Andrew.

Andrew F. Walters: Thank you, Bruce. Before opening the call up to Q&A, I wanted to welcome Commissioner Patrick Rhode, who 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, 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 of ours, 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.

Speaker #1: 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.

Speaker #1: 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.

Andrew F. Walters: As Bruce mentioned, as of year-end 2025, average H2O 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. In addition, and 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.

Speaker #1: As Bruce mentioned, as of year-end 2025, the average H2O bills were less than 1% of median household income across all four of our states.

Speaker #1: 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.

Andrew F. Walters: In closing, I believe our company is off to a good start operationally and financially. We have a busy regulatory agenda ahead of us, but I believe our team is up to the challenge and our company is poised to deliver great things in 2026 and beyond. Our dedicated team remains focused on driving shareholder and customer value through disciplined infrastructure investment and executing on our financial goals, advancing the transformational Quadvest acquisition as well as Cibolo Valley, deepening our strong partnerships with local stakeholders, and our unrelenting pursuit of operational excellence in identifying creative and sustainable solutions to serve generations to come while maintaining a focus on affordability. With that, I will turn the call back over to the operator for questions.

Speaker #1: We have a busy regulatory agenda ahead of us, but I believe our team is up to the challenge, and our company is poised to deliver great things in 2026 and beyond.

Speaker #1: 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, you will need to press the star one one on your telephone and wait for your name and company name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alex Kania of BTIG. Your line is now open.

Speaker #2: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes in the line of Alex Kania, of BTIG.

Speaker #2: Your line is now open.

Alex Kania: Good morning. Thanks for taking my question. I kind of had just two questions. The first one was, just as you think about the, you know, the upcoming rate case process, I guess, for, I'd say for Quadvest, you know, next year. I know obviously it's early, but just from a high level, how would you know, obviously, this rate case is gonna be important, but how would you just think about maybe some of the affordability statistics that you provided for your other jurisdictions, and maybe how they may end up looking, you know, relative to what you might expect from Quadvest, you know, kind of on a run rate basis?

Speaker #3: Good morning. Thanks for taking my question. I kind of had just two questions. The first one was just, as you think about the regulatory, the upcoming rate case process, I guess, for—I'd say, for Quadbest—you know, next year, would you, and I know obviously it's early, but just from a high level, how would you—you know, obviously, this rate case is going to be important, but how would you just think about maybe some of the affordability statistics that you provided for your other jurisdictions, and maybe how they may end up looking relative to what you might expect from Quadbest kind of on a run-rate basis?

Andrew F. Walters: Sure. I'll ask Bruce to take that question. Thank you very much, Alex, and good morning.

Speaker #1: Sure. I'll ask Bruce if he can take that question. And thank you very much, Alex. And good morning. Yeah, thank you, Alex, for the question.

Bruce Hauk: Yeah. Thank you, Alex Kania, for the question. As it relates to Quadvest rates, we've not disclosed the potential impact on rates, but we have disclosed that it would be significant. With that in mind, there's been, you know, 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. With that being said, you know, we are in the process of being engaged with all the stakeholders, customers, and also the regulatory commission as well. We have to be creative and thoughtful in our preparations in preparing for that. That will most likely be most public, if you will, sometime in 2027 when we file.

Speaker #1: And also the FMV transaction itself. With that being said, we are in the process of being engaged with all the stakeholders, customers, and also the regulatory commission as well.

Speaker #1: And we have to be creative and thoughtful in our preparations and preparing for that. And that will most likely be most public, if you will, sometime in 2027 when we file.

Bruce Hauk: With that being said, as Andrew mentioned in his comments, we are very focused on affordability, and our rate design will take that into consideration, and we are going to be proposing a low-income tariff to address affordability's issues in Texas as well, but also being mindful of how to most appropriately bring those investments to light and to rates, and how we can do that in conjunction and partnership with the commission.

Speaker #1: But with that being said, as Andrew mentioned in his comments, we are very focused on affordability. And our rate design will take that into consideration.

Speaker #1: And we are going to be proposing a low-income tariff to address affordability issues in Texas as well. But also being mindful of how to most appropriately bring those investments to light and to rates and how we can do that in conjunction and partnership with the commission.

Alex Kania: Great. That's helpful. Then maybe a question for Ann, just as you talked about the balance sheet and the fact that you might be in that 11% to 12% range for the next couple of years, given that cushion from the equity offering. Just thinking about the thoughts and around the comments on the desire to continue to deleverage. Is there a kind of a target that we should be thinking of over the very long term, from an FFO to debt and maybe just the thinking behind wanting to be pretty sizably above maybe whatever a downgrade threshold might be for your A rating?

Speaker #3: Great, that's helpful. And then maybe a question for Ann—just as you talked about the balance sheet and the fact that it might be in that 11% to 12% range for the next couple of years, given that cushion from the equity offering.

Speaker #3: Just thinking about the thoughts around the comments on just the desire to continue to deleverage, is there kind of a target that we should be thinking of over the very long term from an FFO to debt?

Speaker #3: And maybe just the thinking behind wanting to be pretty sizably above maybe whatever a downgrade threshold downgrade threshold might be for your rate rating.

Alex Kania: Thanks.

Speaker #3: Thanks.

Ann Kelly: Thanks, Alex. As we mentioned, we do plan to delever over the 5-year plan with the target being to get into the, you know, the A flat rating, which is, it's comparable to our competitors.

Speaker #4: Yeah, thanks, Alex. Yeah, so as we mentioned, we do plan to delever over the five-year plan, with a target being to get into the A flat rating, which is comparable to our competitors.

Alex Kania: Mm-hmm.

Ann Kelly: You know, right now we have, I think it's a 15% FFO to debt upgrade threshold, so we would need to be north of that. We expect to be there by the end of the five-year term deal. Going to the A flat credit rating gives us flexibility. We said overall that we're very committed to our A category rating, currently at the A minus. Building back up to an A flat gives us flexibility if we were to pursue an acquisition or any other transactions in the future, to be able to do so while still maintaining the A category rating.

Speaker #4: Right now, we have—I think it's a 15% FFO-to-debt upgrade threshold, so we would need to be north of that. We expect to be there by the end of the five-year interview.

Speaker #4: And going to the A flat credit rating gives us flexibility. So we said overall that we're very committed to our A category rating, currently at the A minus.

Alex Kania: Great. Thanks so much.

Speaker #3: Great. Thanks so much.

Andrew F. Walters: Thank you, Alex.

Speaker #1: Thank you, Alex.

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

Speaker #2: Thank you. And our next question comes from Davis Sunderland of Baird. Your line is now open.

Davis Sunderland: Hey, good morning, guys.

Andrew F. Walters: Morning, Davis.

Andrew F. Walters: Andrew, Bruce, thank you so much. Yeah, excited to be joining you guys' analyst community, and thank you for taking our questions. Maybe two from me, just starting first on Quadvest. Wondering maybe Andrew or Bruce, if you guys could talk just a bit about the final steps needed to close this, any risks you guys see to the timeline, and then whether or not any small deviations, thinking months difference here, would pose any risk to your guys' timing for potentially filing the Texas rate case application next year.

Speaker #5: Hey, good morning, guys. Andrew, Bruce, and thank you so much. Yeah, excited to be joining you guys as analyst community. And thank you for taking our questions.

Speaker #5: Maybe two from me. Just starting first on Quadbest—wondering, maybe, Andrew or Bruce, if you guys could talk just a bit about the final steps needed to close this, any risks you guys see to the timeline, and then whether or not any small deviations—thinking months’ difference here—would pose any risk to your guys' timing for potentially filing the Texas rate case application next year.

Andrew F. Walters: Yeah. I'll have Bruce Hauk take that question, but thank you, Davis Sunderland. Yeah. Thank you, Davis Sunderland, for the question. You know, we're super excited about the major hurdle that we most recently covered, which was being deemed administratively sufficient. That specific step allows us to engage in the notice to customers of the acquisition and kicks off a process that allows us to actually get the 120-day procedural schedule set by the commission. With that being said, if you think back when we actually announced this acquisition, filed notice for the FMV, and then proceeded with filing over 7,000 pages of the STM filing, the sales transfer merger process, to only have had a 60-day examination of that process to get deemed administratively sufficient, that's significant in terms of an achievement.

Speaker #1: So with that being said, if you think back to when we actually announced this acquisition, filed notice for the FMV, and then proceeded with filing over 7,000 pages of the STM filings—the sales transfer merger process—to only have had a 60-day examination of that process to get deemed administratively sufficient, that's significant in terms of an achievement.

Bruce Hauk: With that being said, you know, as things proceed, that puts us from where we said in my prepared remarks from a mid-2026 close to a, you know, sometime in the latter half of 2026. That being said, all commissions across this country are inundated with a lot of dockets. You know, Texas is no exception with the amount of investment and growth that's taking place in Texas. We have to work with the commission in partnership to proceed and prosecute the STM. So far, you know, we're on track, like I mentioned, for that late 2026, barring no significant exceptions in terms of delays with things that may come up in the due diligence process.

Speaker #1: With that being said, as things proceed, that puts us from where we said in my prepared marks from a mid-2026 close to a sometime in the latter half of 2026.

Speaker #1: That being said, all commissions across this country are inundated with a lot of dockets. Texas is no exception, with the amount of investment and growth that's taking place in Texas.

Speaker #1: So we have to work with the Commission in partnership to proceed and prosecute the STM. And so far, we're on track, like I mentioned, for that late 2026—barring no significant exceptions in terms of delays with things that may come up in the due diligence process.

Bruce Hauk: So far so good, we are planning to close, as I mentioned, at the latter part of 2026, barring no unforeseen things that may come up by intervening parties or just basically with the, you know, the commission staff being unable to get to things as timely as, you know, we would like, based on their docket, and all the actual cases that they're reviewing. We're very happy with the process thus far and the total engagement by the commission and the staff. We are happy with, I mentioned, you know, crossing that hurdle at this point. Yeah. I think that it's an important point, Davis, too, is just to kind of highlight that if anybody gets that amount of volume of documents to go through, they're not going to kind of scrimp on their review process.

Speaker #1: Based on their docket, and all the actual cases that they're reviewing, we're very happy with the process thus far, and the total engagement by the commission and the staff.

Speaker #1: So we are happy with, I mentioned, crossing that hurdle at this point. Yeah, I think it's an important point, Davis, too, is just to kind of highlight that anybody gets that amount of volume of documents to go through, they're not going to kind of scrimp on their review process.

Andrew F. Walters: It just means they have to work very hard in order to get through it. You know, at least from our standpoint, we have nothing but gratitude for the hard work that the staff is putting into this.

Davis Sunderland: That is super helpful, and thank you both for all the detail. Maybe just one other, if I could sneak it in. I know this is a bit of a moving target, if you will, to an extent, but the EPA has been talking a bit more about regulating microplastics and other potentially harmful substances in drinking water. I think in fairness, it took maybe two and a half years to officially move forward on PFAS, so that it's still early on. I guess my question is, have you guys thought about whether or not treating for PFAS would also cover treating some of these other potentially harmful substances, or is this maybe a tailwind to increase capital deployments longer term, or just how to think of this in context of your guys' planned capital deployments? Thank you very much.

Speaker #3: That is super helpful. And thank you both for all the detail. Maybe just one other, if I could sneak it in. I know this is a bit of a moving target, if you will, to an extent, but the EPA has been talking a bit more about regulating microplastics and other potentially harmful substances in drinking water.

Speaker #3: And I think, in fairness, it took maybe two and a half years to officially move forward on PFAS, so it's still early on. But I guess my question is: Have you guys thought about whether or not treating for PFAS would also cover treating some of these other potentially harmful substances, or is this maybe a tailwind to increased capital deployments longer term, or just—how should we think of this in the context of your planned capital deployments?

Speaker #3: And thank you very much.

Bruce Hauk: Thank you, Davis, for that question and super engaged in the process with the EPA, working with the rulemaking process. Just to kinda level set, you know, the six constituents that are actually PFAS regulated with MCLs and what have you, we're very much on track to make the improvements that are needed in Connecticut and California to achieve, you know, that compliance and, you know, things are on track there. This new list of compounds that were part of that process that you just described, you know, just like you had mentioned, the rulemaking process is lengthy and long, and the due process is pretty extensive.

Speaker #1: Thank you, Davis, for that question and super engaged in the process with the EPA. Working with the process and just to kind of level set the six constituents that are actually PFAS regulated with MCLs and what have you.

Speaker #1: We're very much on track to make the improvements that are needed in Connecticut and California to achieve that compliance and things are on track there.

Speaker #1: This new list of compounds that were part of that process that you just described just like you had mentioned, the rulemaking process is lengthy and long, and the due process is pretty extensive.

Bruce Hauk: The partnership that we have with The Water Research Foundation, also our other partners with EPA and other organizations, NAWC, allows us to be a significant and meaningful part of that process and a voice. To your point of does ion exchange or GAC or any of these treatment processes that we use to mitigate PFAS, are there ancillary benefits? Absolutely. One of the things on microplastics I'm super proud of is our director of water quality based out of our San Jose Water is actually doing a pilot through The Water Research Foundation and actually using our Montevina plant to do a pilot on microplastics to inform the science behind what can be done to eliminate, treat, and remediate microplastics.

Speaker #1: But the partnership that we have with the Water Research Foundation, also our other partners with EPA and other organizations, NAWC, allows us to be a significant and meaningful part of that process and a voice.

Speaker #1: To your point of, does iron exchange or GAC or any of these treatment processes that we use to mitigate PFAS, are there ancillary benefits?

Speaker #1: So we're very much in on the research and participating in the process that will help our company as well as others as we work through the process and the rulemaking.

Speaker #1: So super excited about that.

Andrew F. Walters: Yeah. I think it's, you know, it's good that Bruce highlights that because I think as we look at the team that is supporting all of us, when we get the honor of telling the story, the work that actually gets done on the field, is nothing short of amazing for what those folks do every day. Suzanne DeLorenzo, who Bruce just talked about, is one of those amazing partners that is continuing to drive progress in our company and actually put us at the forefront of things that impact the entire industry, not just us.

Speaker #2: Yeah, I think it's it's good that Bruce highlights that because I think as we look at the team that is supporting all of us.

Speaker #2: So we get the honor of telling the story, the work that actually gets done on the field is nothing short of amazing for what those folks do every day.

Speaker #2: And Suzanne De Lorenzo, who Bruce just talked about, is one of those amazing partners that is continuing to drive progress in our company and actually put us at the forefront of things that impact the entire industry, not just us.

Davis Sunderland: Super helpful. Thanks for the time, guys. I will pass it on.

Speaker #3: Super helpful. Thanks for the time, guys. I'll pass it on.

Andrew F. Walters: Thank you.

Speaker #1: Thank you.

Andrew F. Walters: Thank you. 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's precious. At the same time, we continue executing our growth strategy and delivering our shareholder value, including our unwavering commitment to the dividend, which we paid for more than 80 consecutive years and increased it in each of the past 58. Our success is built on a culture of service and partnership. We value our customers, communities, the environment, and capital partners, and I couldn't be prouder of our team, whose dedication makes it all possible. I'm always available for follow-up, along with my partners, Ann and Bruce. We appreciate your interest in H2O America.

Speaker #1: Thank you. Thank you again for joining us. 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.

Speaker #1: Together, we protect what's 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 80 consecutive years and increased in each of the past 58.

Speaker #1: I'm 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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