-- Second quarter 2026 reported diluted EPS of $0.62 and adjusted diluted
EPS (non-GAAP)1 of $0.72, as compared to reported and adjusted diluted
EPS in the second quarter of 2025 of $0.71 and $0.75, respectively
-- Year-to-date 2026 reported diluted EPS of $1.12 and adjusted diluted EPS
(non-GAAP)1 of $1.23, as compared to reported and adjusted diluted EPS in
the same period of 2025 of $1.20 and $1.25, respectively
-- Reiterate all aspects of financial guidance, including 2026 standalone
adjusted diluted EPS guidance of $3.08-$3.181 (excluding the impacts of
the pending Quadvest acquisition and the financing thereof)
-- $206.9 million2 invested in infrastructure during the first half of 2026
-- Key milestones reached in Quadvest approval process; anticipate closing
end of third/early fourth quarter of 2026; active Quadvest connections up
10%, or 5,400, in 2026 while connections under contract and pending
development has grown 14%, or nearly 12,000 connections
-- Declared $0.44 cash dividend per share of common stock
SAN JOSE, Calif., July 27, 2026 (GLOBE NEWSWIRE) -- H2O America $(HTO)$ today reported financial results for the second quarter of 2026.
"Our strong second quarter results have our company in an excellent position midway through 2026 to deliver on our full year guidance and we remain committed to our longer-term financial targets," said chair and chief executive officer, Andrew F. Walters. "During the second quarter, our teams made substantial progress towards obtaining Texas regulatory approval for the regulated portion of the Quadvest acquisition. In addition, a great deal of thought and effort went into the general rate cases that we filed in Connecticut and Maine seeking the recovery of more than $180 million of combined investments that are not yet recognized in rates. The regulatory and operational focus of our team is unwavering as we execute on our growth strategy while providing our customers and the communities that we are honored to serve with the high quality service they deserve. The hard work and shared passion that my fellow partners here at H2O America exhibit each and every day make it all possible and I could not be more proud."
Second Quarter 2026 Operating Results
Net income prepared in accordance with GAAP for the second quarter ended June 30, 2026 was $26.6 million, an 8% increase compared to $24.7 million in the same quarter last year. GAAP diluted EPS for the quarter of $0.62 decreased versus $0.71 in the prior year quarter.
Adjusting for costs associated with merger, acquisition and integration activities and non-utility real estate transactions, H2O America's adjusted net income (non-GAAP)(1) in the second quarter of 2026 was $30.7 million, an increase of 17% compared to $26.2 million in the prior year quarter. Adjusted diluted EPS (non-GAAP) for the quarter of $0.72 slightly decreased versus $0.75 in the prior year quarter.
For both GAAP and adjusted results, while our underlying net income grew during the 2026 period, this was more than offset by the higher share count as a result of leveraging our at-the-market (ATM) program throughout 2025 and our common stock issuance in early March of 2026. A full reconciliation of GAAP net income to adjusted net income for the quarter ended June 30, 2026 is included in the tables at the end of this news release.
Operating revenue for the second quarter was $210.5 million, compared to $198.3 million for the same quarter last year, a 6% increase. The increase was driven primarily by rate increases of $14.5 million across all of our states but primarily in California and Connecticut. This was partially offset by a decrease of $1.7 million due to regulatory mechanism adjustments.
Operating expenses for the second quarter were $167.7 million, up 9% compared to $154.4 million for the same quarter last year. This change in operating expenses primarily reflects:
-- An increase in water production expenses of $4.6 million compared to the
same quarter last year primarily attributable to increases in average per
unit costs for purchased water and groundwater extraction, partially
offset by lower usage.
-- An increase in depreciation and amortization expense of $3.4 million
associated with utility plant additions placed in service compared to the
same quarter last year.
-- An increase in all other operating expenses of $5.3 million compared to
the same quarter last year primarily attributable to a net increase in
general and administrative expenses driven by increased merger and
acquisition costs, increased outsourced services costs, increased
employee-related costs and increased maintenance agreement costs.
The effective consolidated income tax rates for the second quarter of 2026 and 2025 were approximately 13% and 16%, respectively. The lower effective tax rate for the second quarter of 2026 was primarily due to higher flow through tax benefits.
Year-to-Date Operating Results
Net income prepared in accordance with GAAP for the six months ended June 30, 2026 was $45.6 million, an 11% increase compared to $41.2 million in the same period of 2025. GAAP diluted EPS for the six months of $1.12 decreased versus $1.20 in the same period last year.
H2O America's adjusted net income (non-GAAP) for the six months ended June 30, 2026 was $50.1 million, an increase of 17% compared to $42.9 million in the same period last year. Adjusted diluted EPS (non-GAAP) for the first six months of 2026 of $1.23 slightly decreased versus $1.25 in the same period last year.
For both GAAP and adjusted results, while our underlying net income grew during the 2026 period, this was more than offset by the higher share count as a result of leveraging our ATM program throughout 2025 and our common stock issuance in early March of 2026. A full reconciliation of GAAP net income to adjusted net income for the six months ended June 30, 2026 is included in the tables at the end of this news release.
Operating revenue for the first six months of 2026 was $393.8 million compared to $365.9 million for the same period last year, an 8% increase. The increase was driven primarily by rate increases of $26.4 million, primarily in California, Connecticut, and Texas, as well as higher customer usage of $2.0 million. This was partially offset by a decrease of $1.6 million due to regulatory mechanism adjustments.
Operating expenses for the first six months of 2026 were $313.6 million, up 10% compared to $286.1 million for the same period last year. This change in operating expenses primarily reflects:
-- An increase in water production expenses of $12.1 million compared to the
same period last year primarily attributable to increases in average per
unit costs for purchased water and groundwater extraction, increases in
water production balancing and memorandum accounts, primarily relating to
the Full Cost Balancing Account ("FCBA"), and higher customer usage,
partially offset by decreases in costs as a result of increased
availability of surface water.
-- An increase in depreciation and amortization expense of $7.4 million
associated with utility plant additions placed in service compared to the
same period last year.
-- An increase in all other operating expenses of $8.0 million compared to
the same period last year primarily attributable to a net increase in
general and administrative expenses driven by higher merger and
acquisition costs, outsourced services, insurance, and maintenance
agreement costs.
The effective consolidated income tax rates for the first six months of 2026 and 2025 were approximately 14% and 16%, respectively. The lower effective tax rate for the six months of 2026 was primarily due to higher flow through tax benefits.
Capital Expenditures
Through June 30, 2026, H2O America has invested $206.9 million(2) in infrastructure. We continue to plan to invest $483 million(2) in capital for the full year 2026 (excluding the impact of Quadvest) and a total of $2.7 billion(2) over the 2026-30 period (including the impacts of Quadvest and Cibolo Valley) to build and maintain our water and wastewater operations, subject to regulatory approvals and availability of funding.
Quadvest Acquisition Update
Texas Water Company (TWC) and Texas Water Operation Services continue to progress through the regulatory process for their previously announced $540 million acquisition of Quadvest.
On July 9, 2026, the Public Utility Commission of Texas (PUCT) Staff recommended that the proposed transaction should be allowed to proceed without a public hearing as part of the pending Sale-Transfer-Merger $(STM)$ application docket. The Quadvest STM procedural schedule outlines August 26, 2026 as the 120-day statutory deadline for the PUCT to approve the sale or require a hearing. Based on the aforementioned milestones, we anticipate closing the transaction around the end of the third quarter or early fourth quarter of 2026.
The STM application requests approval of TWC's acquisition of the Quadvest, L.P. assets and certification of the value of the ratemaking rate base, as determined in accordance with Texas' fair market value (FMV) statute, at TWC's $483.6 million purchase price.
(MORE TO FOLLOW) Dow Jones Newswires
July 27, 2026 16:15 ET
Comments