Financial Analysis

Commitments and Contingencies Commitments The Company has long-term commitments to purchase water from water wholesalers. The Company also has operating and finance leases for water systems, offices, land easements, licenses, equipment, and other facilities. These commitments and leases are described in the Companys Annual Report on Form 10-K for the year ended December 31, 2025. Water Supply Contracts On August 16, 2022, BVRT, a majority owned subsidiary of Texas Water, entered into a long-term water supply agreement with the Guadalupe Blanco River Authority (GBRA) through its wholly owned subsidiary, Camino Real Utility (Camino Real). The Company has provided a limited guarantee to GBRA for the agreed upon obligations. GBRA is a water conservation and reclamation district established by the Texas Legislature that oversees water resources for 10 counties. Under the terms of the agreement with GBRA, Camino Real is contracted to receive up to 2,419 acre-feet of potable water annually. The GBRA agreement involves four off-takers, including Camino Real, and GBRA plans to extend a potable water pipeline from the City of Lockhart to the City of Mustang Ridge and surrounding areas. Camino Real is contracted to be the utility service provider in this area of the Austin metropolitan region and to provide potable water, recycled water, and wastewater services to portions of the City of Mustang Ridge and surrounding areas. In 2022, Camino Real committed $21.5 million for its share of t …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Short-term and Long-term Borrowings On March 31, 2023, the Company and Cal Water entered into syndicated credit agreements, which provide for unsecured revolving credit facilities of up to an initial aggregate amount of $600.0 million for a term of five years. The Company and subsidiaries that it designates may borrow up to $200.0 million under the Companys revolving credit facility (the Company facility). Cal Water may borrow up to $400.0 million under its revolving credit facility (the Cal Water facility). Additionally, the credit facilities may be increased by up to an incremental $50.0 million under the Company facility and $150.0 million under the Cal Water facility, subject in each case to certain conditions. At the Companys or Cal Waters option, as applicable, borrowings under the Company and Cal Water facilities, as applicable, will bear interest annually at a rate equal to (i) the base rate, plus an applicable margin of 0.00% to 0.25%, depending on the Company and its subsidiaries consolidated total capitalization ratio, or (ii) Term SOFR, plus an applicable margin of 0.80% to 1.25%, depending on the Company and its subsidiaries consolidated total capitalization ratio. The Company and Cal Water facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, the Company and Cal …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table disaggregates the Companys operating revenue by source for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue from contracts with customers $ 278,035 $ 256,216 $ 475,369 $ 438,917 Regulatory balancing account revenue 30,561 8,738 47,800 30,010 Total operating revenue $ 308,596 $ 264,954 $ 523,169 $ 468,927 In the following table, revenue from contracts with customers is disaggregated by class of customers for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Residential $ 153,374 $ 141,929 $ 262,265 $ 247,362 Business 51,747 48,094 93,667 88,642 Multiple residential 22,554 20,723 43,154 39,926 Industrial 6,489 6,529 12,440 12,934 Public authorities 15,229 13,011 24,658 22,256 Other (a) 28,642 25,930 39,185 27,797 Total revenue from contracts with customers $ 278,035 $ 256,216 $ 475,369 $ 438,917 (a) Other includes changes to accrued and unbilled revenue. The following table disaggregates the Companys non-regulated revenue by source for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Contract operating and maintenance revenue $ 3,458 $ 3,239 $ 6,843 $ 6,506 Other non-regulated revenue 2,179 1,091 3,429 2,339 Non-regulated revenue from contracts with customers 5,637 4,330 10,272 8,845 Lease revenue 604 581 1,190 1,14 …

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Stock-Based Compensation The Companys 2024 Equity Incentive Plan (2024 Equity Plan) was adopted by the Board of Directors and approved by stockholders on May 29, 2024. The Company reserved 1,600,000 shares of common stock for awards the Company is authorized to issue pursuant to the 2024 Equity Plan. In addition, the Board of Directors reauthorized 158,950 shares for issuance under its legacy equity incentive plan. In March of 2026, the Company granted RSAs to Officers and members of the Board of Directors (Directors). The RSAs are valued based on the fair market value of the Companys common stock at the date of grant. The 2026 RSAs granted to Officers vest over 36 months with the first 12 months cliff vesting and the remaining RSAs vesting quarterly thereafter. RSAs granted to the Directors in 2026 vest at the end of 12 months. The 2026 RSAs are recognized as expense evenly over 36 months for the shares granted to Officers and 12 months for the shares granted to the Directors. As of June 30, 2026, there was approximately $3.7 million of total unrecognized compensation cost related to RSAs. The cost is expected to be recognized over a weighted average period of 1.7 years. A summary of the status of the outstanding RSAs as of June 30, 2026 is presented below: Number of RSA Shares Weighted-Average Grant-Date Fair Value RSAs at January 1, 2026 76,294 $ 47.34 Granted 62,875 46.95 Vested (48,169) 47.28 RSAs at June 30, 2026 91,000 $ 47.10 In March of 2026, the Company granted both …

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Fair Value of Financial Assets and Liabilities The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Level 2 Inputs to the valuation methodology include: Quoted market prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; and Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Specific valuation methods include the following: Cash, accounts receivable, short-term borrowings, and accounts payable carrying amounts approximated the fair value because of the short-term maturi …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

Income Taxes The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items. The provision for income taxes is shown in the table below: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Income tax expense $ 13,872 $ 6,915 $ 13,946 $ 7,950 Income tax expense on other income and expenses 1,716 1,752 3,107 3,455 Total income tax expense $ 15,588 $ 8,667 $ 17,053 $ 11,405 Total income tax expense increased $6.9 million and $5.6 million for the three and six months ended June 30, 2026 as compared to the same period in 2025. The increase in total income tax expense for the three months ended June 30, 2026 is primarily due to an increase in the effective tax rate (see below) and an increase in pre-tax operating income, which resulted from the 2024 CA GRC decision in the second quarter of 2026. The Companys effective tax rate was 22.0% and 17.1% before discrete items as of June 30, 2026 and June 30, 2025, respectively. The increase in the effective tax rate was primarily due to the decrease in Tax Cuts and Jobs Act (TCJA) refunds of excess deferred federal income taxes. On June 27, 2024, California Senate Bill 167 (SB 167) was enacted into law. SB 167 provides for a three-year suspension of net operating losses under the California Corporation tax. Among other things, this new law temporarily disallows the use of …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Recently Adopted Accounting Pronouncements In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-06, Targeted Improvements to the Accounting for Internal-Use Software , which removes all references to prescriptive and sequential software development stages. The ASU requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable that the project will be completed and the software will be used for its intended purpose. ASU 2025-06 is effective for the Companys annual periods beginning January 1, 2028. Early adoption is permitted and the guidance can be applied on a prospective basis, a modified basis for in-process projects, or on a retrospective basis. The Company early adopted ASU 2025-06 prospectively beginning January 1, 2026. The adoption of this guidance did not have a material impact on the Companys unaudited condensed consolidated interim financial statements or disclosures. New Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , which requires disaggregation of certain Consolidated Statement of Operations expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for the Companys annual periods beginning January 1, 2027, with early adoption permitted. The guidance is applied prospe …

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Pension Plan and Other Postretirement Benefits The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all of its employees. The Company makes annual contributions to fund amounts accrued for the qualified pension plan. The Company also maintains an unfunded, non-qualified SERP. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate. The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents (other postretirement benefit plans). Participants are required to pay a premium, which offsets a portion of the cost. Cash contributions made by the Company to the pension plans were $1.7 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively. No cash contributions were made by the Company to the other postretirement benefit plans for the six months ended June 30, 2026 and 2025. The Company estimates in 2026 that the annual contribution to the pension plans will be $2.7 million and no annual contribution will be made to the other postretirement plans. The following tables list components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under pension plan includes the qualified pension plan and the non-qualified SERP. The data listed under other benefits is for all other postretirement benefit plans. Pension Plan Other Benefits Three Months Ended June 30, 2026 20 …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Segment Information The Company principally provides water and wastewater services in California, Washington, New Mexico, Hawaii, and Texas. The Companys operating segments were aggregated into one reportable segment as the operating segments provide similar services and operate in similar regulatory environments. The Company defines its segments on the basis of the way in which internally reported financial information is regularly reviewed by the chief operating decision maker (CODM) to analyze financial performance, make decisions, and allocate resources. The Companys CODM is the Chairman, President and Chief Executive Officer. The CODM assesses performance of the segment and decides how to allocate resources on a consolidated basis based on consolidated net income. The CODM uses consolidated net income to evaluate income generated from the segment in making operating, capital, and business decisions. The CODM is regularly provided with only the consolidated operating expenses at the same level of detail as noted on the face of the unaudited Condensed Consolidated Statements of Operations. Total assets are also provided as noted on the face of the unaudited Condensed Consolidated Balance Sheets. …

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Summary of Significant Accounting Policies Operating Revenue The following table disaggregates the Companys operating revenue by source for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue from contracts with customers $ 278,035 $ 256,216 $ 475,369 $ 438,917 Regulatory balancing account revenue 30,561 8,738 47,800 30,010 Total operating revenue $ 308,596 $ 264,954 $ 523,169 $ 468,927 Revenue from contracts with customers The Company principally generates operating revenue from contracts with customers by providing regulated water and wastewater services at tariffed rates authorized by the Commissions in the states in which it operates, and non-regulated water and wastewater services at rates authorized by contracts with government agencies and other third parties. Revenue from contracts with customers reflects amounts billed for the volume of consumption at authorized per unit rates, for service charges, and for other authorized charges. The Company satisfies its performance obligation to provide water and wastewater services over time as services are rendered. The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has a right to invoice for the volume of consumption, for the service charge, and for other authorized charges. The measurement of sales to customers is gene …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Equity On May 14, 2025, the Company entered into an equity distribution agreement to sell shares of its common stock having an aggregate gross sales price of up to $350.0 million (2025 Equity Agreement) from time to time, depending on market conditions, through an at-the-market equity program over the succeeding three years. Pursuant to the terms of the 2025 Equity Agreement, the Company may enter into forward sale agreements with forward counterparties. The Company intends to use the net proceeds from equity sales, after deducting commissions and offering expenses, for general corporate purposes, which may include working capital, construction and acquisition expenditures, investments and repurchases, and redemptions of securities. During the three months ended June 30, 2026, the Company sold 1,972,357 shares of common stock through its at-the-market equity program and raised proceeds of $88.0 million, net of $0.9 million in commissions paid. During the six months ended June 30, 2026, the Company sold 2,106,557 shares of common stock through its at-the-market equity program and raised proceeds of $94.1 million, net of $1.0 million in commissions paid. As of June 30, 2026, approximately $253.4 million remains available for sale under the at-the-market equity program. During the three and six months ended June 30, 2025, the Company did not utilize the at-the-market equity program. The Companys changes in total equity for the three and six months ended June 30, 2026 and 2025 we …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing