0001628280-26-012444
SEC filingCalifornia Water Service Group reported FY 2025 operating revenue of $1.00 billion, a decrease of $36.7 million (3.5%) from FY 2024. Net income attributable to the company was $128.2 million, a significant decrease of $62.6 million (32.8%) from the prior year. Earnings per diluted share were $2.15, down $1.10 (33.8%) from $3.25 in FY 2024. The decline in net income was primarily driven by a decrease in operating revenue and an increase in total operating expenses of $18.0 million, partially offset by a decrease in income tax expense of $24.7 million. The company generated $302.6 million in net cash from operating activities and ended the year with total assets of $5.67 billion. A key forward-looking event is the pending acquisition of Nexus Water Group's Nevada and Oregon systems for approximately $218.0 million, expected to close by the end of 2026.
California Water Service Group's FY 2025 financial performance showed a decline compared to the prior year. Operating revenue decreased by $36.7 million (3.5%) to $1.00 billion, primarily due to a $12.7 million decrease in customer usage and the absence of $88.6 million in IRMA revenue recorded in 2024 related to the 2021 CA GRC, partially offset by $69.6 million in rate increases. Net income attributable to the company was $128.2 million, down $62.6 million (32.8%) from FY 2024. Earnings per diluted share decreased to $2.15 from $3.25. Total operating expenses increased by $18.0 million to $829.8 million, driven by higher water production costs ($11.5M increase), administrative and general expenses ($2.1M), other operations expenses ($11.6M), depreciation and amortization ($12.5M), and property taxes ($3.7M), partially offset by a $24.7 million decrease in income tax expense.
The company operates primarily in California, which accounted for 91.2% of total consolidated operating revenue in 2025. Other geographic segments contributed smaller portions: Hawaii Water (4.6%), Washington Water (2.6%), New Mexico Water (0.8%), and Texas Water (0.8%). Revenue from contracts with customers was $963.7 million, with residential customers representing the largest portion at $567.3 million (58.9% of contract revenue). Business customers contributed $192.7 million (20.0%), multiple residential $84.0 million (8.7%), industrial $31.0 million (3.2%), and public authorities $54.7 million (5.7%). Regulatory balancing account revenue contributed $36.4 million. The revenue decline was primarily attributed to lower customer usage and the timing of regulatory revenue recognition.
Operating margin was 17.0% in FY 2025, down from 21.7% in FY 2024. Water production costs, comprising purchased water, purchased power, and pump taxes, represented 38.8% of total operating costs, up from 38.3% in 2024. Purchased water expenses increased by $11.7 million (4.9%) to $252.9 million, primarily due to a 6.9% blended purchased water wholesaler rate increase. Administrative and general expenses increased by $2.1 million (1.5%) to $141.6 million, driven by higher employee-related costs and legal fees. Other operations expenses increased by $11.6 million (9.8%) to $130.1 million, with notable increases in bad debt expense ($2.5M), labor expense ($2.8M), and software expenses ($1.8M).
The company generated $302.6 million in net cash from operating activities in FY 2025. Investing activities used $520.1 million, primarily for $517.0 million in utility plant expenditures. Financing activities provided $219.3 million, including net short-term borrowing activities and $368.2 million in long-term debt issuance. Free cash flow (operating cash flow minus utility plant expenditures) was negative $217.5 million. The balance sheet shows total assets of $5.67 billion, with net utility plant of $4.58 billion. Total equity was $1.69 billion, and long-term debt, net was $1.47 billion. The company ended the year with $51.8 million in cash and cash equivalents and $45.6 million in restricted cash.
The company has entered into an agreement to purchase Nexus Water Group's Nevada and Oregon water and wastewater systems for approximately $218.0 million, subject to regulatory approvals and expected to close by the end of 2026. The systems serve approximately 36,000 equivalent residential connections with a combined rate base of approximately $109.0 million. Texas Water also entered into an agreement to purchase the remaining membership interests of BVRT for $45.0 million, subject to regulatory approval. The company faces regulatory risks related to rate case decisions, particularly the pending 2024 CA GRC. Environmental compliance costs, particularly for PFAS regulations requiring an estimated $269.1 million capital investment, represent significant future expenditures. The company expects to offset some PFAS costs with settlement proceeds, having received $40.9 million in FY 2025.