H2O AMERICA (HTO)

CIK: 0000766829. SIC: 4941 Water Supply. Latest 10-K as of: 2026-02-26.

SIC breadcrumb: Transportation, Communications, Electric, Gas, And Sanitary Services > Electric, Gas, And Sanitary Services > SIC 4941 Water Supply

SEC company page: https://www.sec.gov/edgar/browse/?CIK=766829. Latest filing source: 0001628280-26-012438.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-26. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000766829.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-29. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000766829.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-028427.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-04-29. Report date: 2026-03-31.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollar amounts in thousands, except per share amounts and where otherwise noted)

The information in this Item 2 should be read in conjunction with the financial information and the notes thereto included in Item 1 of this Form 10-Q and the condensed consolidated financial statements and notes thereto and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in H2O America’s Annual Report on Form 10-K for the year ended December 31, 2025.

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of H2O America and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about H2O America and its subsidiaries and the industries in which H2O America and its subsidiaries operate and the beliefs and assumptions of the management of H2O America. Actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. For more information about such forward-looking statements, including some of the factors that may affect our actual results, please see our disclosures under “Forward-Looking Statements,” and elsewhere in this Form 10-Q, including Part II, Item 1A under “Risk Factors” as well as the disclosures under Part I, Item 1A in H2O America’s Annual Report on Form 10-K for the year ended December 31, 2025 under “Risk Factors.”

General:

In May 2025, the Company changed the corporate name from SJW Group to H2O America. H2O America is a holding company whose primary business involves ownership of public utilities that provide water and wastewater services, including the production, purchase, storage, purification, distribution, wholesale and retail sale of water. The water utility business of H2O America is conducted through the following wholly owned subsidiaries: San Jose Water Company (“SJWC”), The Connecticut Water Company (“CWC”), The Maine Water Company (“MWC”), and SJWTX, Inc. doing business as The Texas Water Company (“TWC”). These subsidiaries provide water service to approximately 409,000 water and wastewater service connections and serve a combined population of over 1.6 million people in California, Connecticut, Maine and Texas. Water utility services provided by these businesses are subject to regulation by the applicable state public utility commissions. These subsidiaries also engage in non-tariffed operations that are not subject to public utility commission regulation, including contract water and sewer operations, maintenance agreements, and antenna site leases.

Together, SJWC, excluding the City of Cupertino (“Cupertino”) service concession arrangement operations, CWC, MWC and TWC are referred to as “Water Utility Services,” which is our single reportable segment.

Other business activities that are not separately reportable segments are SJWC’s Cupertino service concession arrangement operations, Texas Water Operation Services, LLC (“TWOS”), Texas Water Resources, LLC (“TWR”), New England Water Utility Services, Inc. (“NEWUS”), H2O America Land Company and Chester Realty, Inc. and are collectively referred to as “Other Services.”

Business Strategy for Water Utility Services:

H2O America focuses its business initiatives in three strategic areas:

(1)Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers;

(2)Regional non-tariffed water utility-related services provided in accordance with the guidelines established by applicable state public utility commissions; and

(3)Out-of-region water and utility-related services.

As part of our pursuit of the above three strategic areas, we consider from time to time opportunities to acquire businesses and assets. However, we cannot be certain we will be successful in identifying and consummating any strategic business combinations or acquisitions relating to such opportunities. In addition, the execution of our business strategy will expose us to different risks than those associated with the current utility operations. We expect to incur costs in connection with the execution of this strategy and any integration of an acquired business could involve significant costs, the assumption of certain known and unknown liabilities related to the acquired assets, the diversion of management’s time and resources, the potential for a negative impact on our financial position and operating results, entering markets in which we have no or limited direct prior experience, and the potential loss of key employees of any acquired company. Any strategic combination or acquisition we decide to undertake may also impact our ability to finance our business, affect our compliance with regulatory requirements, and impose additional burdens on our operations. Any businesses we acquire may not achieve sales, customer growth, and projected profitability that would justify the investment. Any difficulties we encounter in the integration process, including the

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integration of controls necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins, and adversely affect our internal controls. H2O America cannot be certain that any transaction will be successful or that it will not materially harm operating results or our financial condition.

As previously disclosed, H2O America, through its indirect subsidiary, TWC, is set to acquire regulated systems owned by Quadvest L.P. for $483.6 million, and TWOS will acquire systems owned by Quadvest Wholesale LLC for $56.4 million. Please see Note 10 “Acquisitions” for further discussion. On the completion of this acquisition, Quadvest will bring operational scale, a strong development pipeline, and increased exposure to one of America’s fastest growing regions, Houston, TX. Quadvest brings a strong legacy of local relationships and reliable service. It has been providing water and sewer service in Southeast Texas for nearly 50 years through its operating entities.

Critical Accounting Estimates:

The discussion and analysis of our financial condition and results of operations is based on the accounting estimates used and disclosed in our 2025 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of our Annual Report on Form 10-K for the year ended December 31, 2025, that was filed with the Securities and Exchange Commission on February 26, 2026.

Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. Our significant accounting policies are described in the notes to the 2025 consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no changes to critical accounting estimates or significant accounting policies during the three months ended March 31, 2026.

New Accounting Pronouncements:

See Note 1 “General” for a discussion of new accounting pronouncements.

Results of Operations:

Water sales are seasonal in nature and are influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased precipitation curtail water usage and sales.

Overview

H2O America’s financial results and highlights for the three months ended March 31, 2026 and 2025 include:

Three months ended March 31,

Increase/

(decrease)

%  Change

2026

2025

(In thousands, except per share data)

Operating Revenue

$

183,293 

167,599 

15,694 

9 

%

Operating Expenses

145,867 

131,703 

14,164 

11 

%

Net Income

19,013 

16,551 

2,462 

15 

%

Earnings Per Share - Basic

$

0.50 

0.49 

0.01 

2 

%

Earnings Per Share - Diluted

$

0.49 

0.49 

— 

— 

%

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Operating Revenue

H2O America has a single reportable segment, referred to as “Water Utility Services.” All other business activities not separately reportable are included in “Other Services.” Operating revenue for the Water Utility Services reportable segment and Other Services was as follows:

Operating Revenue by Segment

Three months ended March 31,

2026

2025

(In thousands)

Water Utility Services

$

179,389 

165,156 

Other Services

3,904 

2,443 

Total operating revenue

$

183,293 

167,599 

The change in consolidated operating revenue was due to the following factors:

Increase/(decrease)

Three months ended

March 31,

2026 vs. 2025

(In thousands)

Water Utility Services:

Consumption changes

$

2,003 

1 

%

Increase in customers

321 

— 

%

Rate increases for:

Pass-through water costs1

4,005 

2 

%

All other increases2

7,839 

5 

%

Regulatory mechanisms3

427 

— 

%

Service and other revenue

— 

— 

%

Other Services

1,099 

1 

%

Total change in operating revenue

$

15,694 

9 

%

____________________

(1)    Consists of rate increases specifically associated with changes in the water supply costs that are passed through to customers.

(2)    Primarily associated with general rate cases and related annual escalation adjustments, infrastructure surcharges, and cost of capital adjustments.

(3)    Excludes portion attributable to rate increases, which are shown in the rate increase lines above.

Operating Expense

Operating expense is summarized below:

Operating Expense by Segment

Three months ended March 31,

2026

2025

(In thousands)

Water Utility Services

$

141,516 

128,980 

Other Services

2,785 

2,006 

Unallocated Corporate

1,566 

717 

$

145,867 

131,703 

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The change in consolidated operating expense was due to the following factors:

Increase/(decrease)

Three months ended

March 31,

2026 vs. 2025

(In thousands)

Water production expenses:

Change in surface water use

$

(2,731)

(2)

%

Change in usage

2,949 

2 

%

Change in new customers

71 

— 

%

Purchased water and groundwater extraction charge, energy price change and other production expenses, net

3,687 

3 

%

Balancing and memorandum account cost recovery

3,481 

3 

%

Total water production expenses

7,457 

6 

%

Administrative and general

2,047 

2 

%

Maintenance

877 

1 

%

Property taxes and other non-income taxes

(241)

— 

%

Depreciation and amortization

4,024 

3 

%

Total change in operating expense

$

14,164 

11 

%

Sources of Water Supply

California Water Supply

SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Valley Water under the terms of a master contract with Valley Water expiring in 2051. During normal rainfall years, purchased water provides approximately 40% to 50% of SJWC’s annual production. An additional 40% to 50% of its water supply is pumped from the underground basin which is subject to a groundwater extraction charge paid to Valley Water. Surface supply, which during a normal rainfall year satisfies about 6% to 8% of SJWC’s annual water supply needs, provides approximately 1% of its water supply in a dry year and approximately 14% in a wet year. In dry years, the decrease in availability of water from surface run-off and diversion and the corresponding increase in purc

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-26. Report date: 2025-12-31.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollar amounts in thousands, except where otherwise noted)

The following discussion and analysis of our financial condition and results of operations should be read together with “Forward-Looking Statements,” Part 1, Item 1 “Business,” Part I, Item 1A “Risk Factors,” and our consolidated financial statements and notes included under Item 8 of this Annual Report on Form 10-K. The following sections include a discussion of results for the year ended December 31, 2025 compared to the year ended December 31, 2024. Unless otherwise provided herein, the comparative results for the year ended December 31, 2024 with for the year ended December 31, 2023 may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Business Strategy

H2O America focuses its business initiatives in three strategic areas:

(1)Investing in regional regulated water utility operations to support the health, safety and quality of life of our customers;

(2)Regional non-tariffed water utility related services provided in accordance with the guidelines established by the applicable state public utility commissions; and

(3)Out-of-region water and utility related services.

Regional Regulated Activities

H2O America’s regulated utility operation is conducted through SJWC, CWC, TWC and MWC. H2O America plans and applies a diligent and disciplined approach to maintaining and improving its water system infrastructures and also seeks to acquire regulated water systems adjacent to or near its existing service territory. CWC and TWC also provide regulated wastewater services.

The United States water utility industry is largely fragmented and is dominated by municipal-owned water systems. The water industry is regulated, and provides a life-sustaining product. This makes water utilities subject to lower business cycle risks than non-tariffed industries.

Regional Non-tariffed Activities

Non-tariffed services provided by H2O America’s subsidiaries include water system operations, maintenance agreements, antenna site leases under agreements with municipalities and other utilities, wholesale water service to adjacent utilities, wastewater services, and Linebacker®, an optional service line protection program covering a limited amount of the cost of repairs for leaking or broken water and wastewater service lines and in-home plumbing to eligible residential customers in Connecticut and water service lines to eligible residential customers in Maine.

H2O America also seeks appropriate non-tariffed business opportunities that complement its existing operations or that allow it to extend its core competencies beyond existing operations. H2O America seeks opportunities to fully utilize its capabilities and existing capacity by providing services to other regional water systems, which also will benefit its existing regional customers.

Out-of-Region Opportunities

H2O America also from time to time pursues opportunities to participate in out-of-region water and utility related services, particularly regulated water and wastewater businesses. H2O America evaluates out-of-region and out-of-state opportunities that meet H2O America’s risk and return profile.

The factors H2O America considers in evaluating such opportunities include:

•Potential profitability;

•Regulatory environment;

•Additional growth opportunities within the region;

•Water supply, water quality and environmental issues;

•Capital requirements;

•General economic conditions; and

•Synergy potential.

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As part of our pursuit of the above three strategic areas, we consider from time-to-time opportunities to acquire businesses and assets. The proposed transactions with Quadvest are an example of this strategy.

Quadvest acquisition

As previously disclosed, H2O America, through its indirect subsidiary, TWC, is set to acquire regulated systems owned by Quadvest, L.P. for $483,600, and TWOS will acquire systems owned by Quadvest Wholesale LLC for $56,400. Please see Note 14 “Acquisitions” for further discussion. On the completion of this acquisition, we expect Quadvest will bring operational scale, a strong development pipeline, and increased exposure to one of America’s fastest growing regions, Houston, TX. Quadvest brings a strong legacy of local relationships and reliable service. It has been providing water and sewer service in Southeast Texas for nearly 50 years through its operating entities.

On July 9, 2025, TWC filed a request with the PUCT to use FMV to support its acquisition of Quadvest, L.P. On August 7, 2025, the PUCT appointed three appraisers to determine the FMV. In December 2025 TWC, received the appraised FMV from the three PUCT appointed appraisers for the assets of Quadvest L.P. In accordance with Texas’ FMV statute, the purchase price of $483,600 will serve as the ratemaking rate base. TWC filed its STM application with the PUCT in January 2026.

Reportable Segment

Water Utility Services is our single reportable segment. Other business activities that are not separately reportable segments are SJWC’s City of Cupertino service concession arrangement operations, H2O America Land Company and Chester Realty, Inc, contract water and sewer operations and other water-related services provided by NEWUS and are collectively referred to as “Other Services.”

Critical Accounting Estimates

H2O America has identified accounting estimates delineated below as estimates critical to its business operations and the understanding of the results of operations. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period. H2O America bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. For a detailed discussion on the application of these and other accounting policies, see Note 2 of “Notes to Consolidated Financial Statements.” H2O America’s critical accounting estimates are as follows:

Recognition of Regulatory Assets and Liabilities

GAAP for water utilities include the recognition of regulatory assets and liabilities as permitted by ASC Topic 980. In accordance with ASC Topic 980, Water Utility Services, to the extent applicable, records regulatory assets for incurred costs that are deemed probable of recovery from customers. Also, Water Utility Services recognizes regulatory liabilities for amounts expected to be refunded to customers in the ratemaking process and for amounts collected in advance of the related expenditures. Regulatory assets or liabilities are also recognized for special revenue programs such as WCMA and WRA in accordance with guidance on alternative revenue programs under ASC Topic 980, including the requirement that such revenues will be collected within 24 months of the year-end in which the revenue is recorded. A reserve is recorded for amounts H2O America estimates will not be collected within the 24-month period. This reserve is based on an estimate of actual usage over the recovery period. The WCMA allows SJWC to track revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reduction. SJWC records the lost revenue captured in the WCMA balancing accounts, including amounts related to a 20-basis point reduction in the authorized return on equity per the terms of the WCMA. Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA. WRA, a decoupling mechanism authorized by PURA for CWC, mitigates risks associated with changes in demand. The WRA is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows the company to implement a surcharge or sur-credit as necessary to recover or refund the revenues approved in the general rate case. The WRA allows the company to defer, as a regulatory asset or liability, the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings. Application of ASC Topic 980, including determining whether recovery is probable, requires significant judgement by management and includes assessing evidence that may exist prior to regulatory authorization, including regulatory rules and decisions, historical ratemaking practices, and other facts and circumstances that would indicate the recovery or refund is probable. The regulatory assets and liabilities recorded by Water Utility Services primarily relate to asset removal costs, the recognition of deferred income taxes for ratemaking versus tax accounting purposes, balancing and memorandum accounts, pensions and other postretirement benefits, and employee benefit costs. The disallowance of any asset in future ratemaking, including regulatory assets, would require Water Utility Services to immediately recognize the impact of the costs for financial reporting purposes. There were no material disallowances recognized during the years ended December 31, 2025, 2024 and 2023.

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Recognition of Balancing and Memorandum Accounts

Balancing and memorandum accounts are primarily utilized by our California operations. The purpose of a balancing account is to track the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. Pursuant to Section 792.5 of the California Public Utilities Code, a balancing account must be maintained for expense items for which revenue offsets have been authorized. Balancing and memorandum accounts are recognized by SJWC when it is probable that future recovery of previously incurred costs or future refunds that are to be credited to customers will occur through the ratemaking process.

Balancing accounts are currently being maintained for the following items in California: purchased water, purchased power, groundwater extraction charges, pensions, group health insurance, and general rate case and cost of capital true-ups. The amount in the water production balancing accounts varies with the seasonality of the water utility business such that, during the summer months when the demand for water is at its peak, the account tends to reflect an under-collection, while during the winter months when demand for water is relatively lower, the account tends to reflect an over-collection. The pension and group health insurance balancing accounts are intended to capture the difference between actual expense and the amount approved in rates by the CPUC. The general rate case true-up accounts are a result of revenue shortfalls authorized for collection or refund by the CPUC due to delayed rate case and cost of capital decisions. The MWRAM tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate would have been in effect.

SJWC also maintains memorandum accounts to track impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC.

In assessing the probability criteria for balancing and memorandum accounts between general rate cases, SJWC considers evidence that may exist prior to CPUC authorization that would satisfy ASC Topic 980 subtopic 340-25 recognition criteria. Such evidence may include regulatory rules and decisions, past practices, and other facts and circumstances that would indicate that recovery or refund is probable. When such evidence provides sufficient support, the balances are recorded in H2O America’s financial statements.

It is typical for the CPUC to incorporate any over-collected and/or under-collected balances in balancing or memorandum accounts into customer rates at the time rate decisions are made as part of SJWC’s general rate case proceedings by assessing temporary surcredits and/or surcharges. In the case where SJWC’s balancing or memorandum-type accounts that have been authorized by the CPUC reach certain thresholds or have termination dates, SJWC can request the CPUC to recognize the amounts in customer rates prior to the next regular general rate case proceeding by filing an advice letter.

Goodwill

Goodwill represents the excess of the purchase price paid over the estimated fair value of the assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized but is tested for impairment annually on October 1st or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. H2O America first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test. In assessing the qualitative factors, H2O America considers the impact of these key factors: change in industry and competitive environment, financial performance, macroeconomic conditions, and other relevant Company-specific events. If H2O America determines that as a result of the qualitative assessment it is more likely than not ( 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed. H2O America performed an impairment analysis as of October 1, 2025. The qualitative assessment found no indicators of impairment and therefore H2O America did not perform the quantitative impairment test. No impairments occurred during the years ended December 31, 2025, 2024 or 2023.

Factors Affecting Our Results of Operations

H2O America’s financial condition and results of operations are influenced by a variety of factors including the following:

•Economic utility regulation;

•Infrastructure investment;

•Compliance with environmental, health and safety standards;

•Production expenses;

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•Customer growth;

•Water usage per customer;

•Weather conditions, seasonality and sources of water supply; and

•Merger and acquisition activities, if any.

Economic Utility Regulation

Water Utility Services is generally subject to economic regulation by the Regulators overseeing public utilities. Regulatory policies vary from state to state and may change over time. In addition, there may be regulatory lag between the time a capital investment is made, a consumption decrease occurs, or an operating expense increases and when those items are adjusted in utility rates.

SJWC employs a forward-looking test year and has been authorized to use several mechanisms to mitigate risks faced due to regulatory lag and new and changing legislation, policies and regulation. These include memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC. Rate recovery for the balances in these memorandum accounts is generally allowed in a subsequent general rate case. SJWC also maintains balancing accounts to track changes in purchased water, purchased power, groundwater extraction charges, pension costs, and group health insurance expenses for later rate recovery. Regulatory risk in California is mitigated by use of a forward-looking test year which allows the return on and return of utility plant on a forecasted basis as it is placed in service, and in some cases interim rate relief is allowed in the event of regulatory lag. The CPUC permits its regulated utilities to acquire other utilities if the proposed sale and asset purchase transaction is determined to be in the public interest. Under Public Utilities Code § 2720, the purchase price, subject to a reasonable test involving appraisals from the acquirer as well as the Public Advocates Office, represents the Fair Market Value. Upon CPUC approval, acquiring utilities can include the Fair Market Value in rate base.

Pursuant to Connecticut regulations, CWC employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Connecticut. Additionally, to mitigate regulatory lag for pipeline replacement and conservation related projects, the Connecticut State Legislature has approved WICA that allows for a surcharge to be added to customer bills semi-annually for certain eligible pre-approved projects. The intended purpose of WICA is to enable the acceleration of the rate of replacement and/or rehabilitation of existing water system infrastructure to mitigate the effect of decay of aging water systems and promote conservation measures. In order to incentivize water utilities to conserve water, the Connecticut State Legislature created WRA in Connecticut in 2013. With the passage, CWC is no longer incentivized to sell more water and can encourage conservation of precious resources, removing financial disincentives to pursue water conservation.

Pursuant to Texas regulation, TWC employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Texas, provided it has been more than 12 months since TWC’s most recent application to change rates was filed. Additionally, to mitigate regulatory lag for capital improvements, Texas implemented its first SIC in 2021. The SIC allows TWC to earn a return on some of its capital improvements made after 2020 through a monthly surcharge to its customers. An application for a SIC or SIC amendment may be filed once per year, and the initial approval of a SIC triggers a requirement to file a general rate case within four years of the date of approval. The PUCT permits the acquisition of utilities using FMV. This process brings in three appraisers to determine the market value of a system. The average of the three appraisals is then compared to the purchase price for the acquisition to determine the value of utility plant included in rate base. In addition, after recent legislation the PUCT adopted rules to allow a water utility to request to apply its current approved rates to the customers of newly acquired systems, which encourages consolidation and minimizes rate case expenses. During 2025, the Texas legislature passed House Bill 2712 which took effect on September 1, 2025 and allows water utilities to use future test year information for ratemaking purposes beginning with applications filed on or after September 1, 2026. The legislation was enacted to enable water utilities to seek rate recovery based on projected costs, encourage timely replacement of infrastructure and improve regulatory alignment with capital planning. Upon implementation of the law, water utilities will be able to utilize the future test year, historical test year or a combination of both when filing a general rate case.

Pursuant to Maine regulations, MWC employs a historical test year. To address regulatory risk due to regulatory lag and changing legislation policies and regulations, rate cases may be filed as necessary in Maine. Additionally, to mitigate regulatory lag for all infrastructure replacements (except meters), the Maine State Legislature has approved of WISC that allows for a surcharge to be added to customer bills semi-annually for certain pre-approved projects.

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Infrastructure Investment

The water utility business is capital-intensive. In 2025 and 2024, company-funded capital improvements were $489,607 and $353,029, respectively, for additions to, or replacements of, property, plant and equipment for our Water Utility Services. We plan to spend approximately $458,000 in 2026 which excludes amounts related to the Company’s previously announced acquisition of Quadvest L.P and $2,568,000 over the next five years for capital improvements inclusive of amounts related to the acquisition. In addition to these capital expenditures, Water Utility Services expects to incur approximately $100,000 over the next five years, including $25,000 in 2026, in capitalizable costs associated with cloud-based computing arrangements. H2O America funds these expenditures through a variety of sources, including earnings received from operations, debt and equity financing, and other borrowings. H2O America relies upon lines of credit to fund capital expenditures in the short term and has historically issued long-term debt to refinance our short-term debt. While our ability to obtain financing will continue to be a key risk, we believe that based on our successful 2025 activities, we will have access to the external funding sources necessary to implement our ongoing capital investment programs in the future. See discussion below under “Liquidity and Capital Resources” for additional information on capital expenditures.

Compliance with Environmental, Health and Safety Standards

Water Utility Services’ operations are subject to water quality and pollution control regulations issued by the EPA and environmental laws and regulations administered by the respective states and local regulatory agencies. Under the federal SDWA, Water Utility Services is subject to regulation by the EPA of the quality of water it sells and treatment techniques it uses to make the water potable. The EPA promulgates nationally applicable standards, including maximum contaminant levels for drinking water. Water Utility Services has implemented monitoring activities and installed specific water treatment improvements enabling it to comply with existing maximum contaminant levels and plan for compliance with future drinking water regulations. However, the EPA and the respective state agencies have continuing authority to issue additional regulations under the SDWA. Water Utility Services incur substantial costs associated with compliance with environmental, health and safety and water quality regulation to which our water services are subject.

In April 2024, the EPA issued new national primary drinking water regulations for six PFAS substances. The regulations impose maximum contaminant levels and monitoring requirements for the nation’s water system for six PFAS chemicals under the SDWA. The final regulation requires water systems to comply with PFAS monitoring and reporting requirements by 2027, and to comply with the maximum contaminant levels by 2029. H2O America estimates capital expenditures of approximately $400,000 for PFAS treatment based on finalized maximum contaminant levels. See discussion below under “Liquidity and Capital Resources” for additional information on capital expenditures.

Environmental, health and safety, and water quality regulations are complex and change frequently, and the overall trend has been that they have become more stringent over time. It is possible that new or more stringent environmental standards and water quality regulations could be imposed that will increase Water Utility Services’ water quality compliance costs, hamper Water Utility Services’ available water supplies, and increase future capital expenditures. Future drinking water regulations may require increased monitoring, additional treatment of underground water supplies, fluoridation of all supplies, more stringent performance standards for treatment plants and procedures to further reduce levels of disinfection by-products. In the past, Water Utility Services have generally been able to recover expenses associated with compliance related to environmental, health and safety standards, but future recoveries could be affected by regulatory lag and the corresponding uncertainties surrounding rate recovery.

Production Expenses

Water Utility Services’ operations require significant production inputs which result in substantial production expenses. These expenses include power, which is used to operate pumps and other equipment, purchased water and groundwater extraction charges. For 2025, production expenses accounted for 50% of our total operating expenses. Price increases associated with these production inputs would adversely impact our results of operations until rate relief is granted. However, for SJWC, the FCBA mitigates the cost of the water supply from changes and variations in quantities from each of these sources which affect the overall mix of the water supply.

Customer Growth

Customer growth in Water Utility Services is driven by: (i) organic population growth within our authorized service areas and (ii) the addition of new customers to our regulated customer base by acquiring regulated water systems adjacent to or near our existing service territories. We did not have any cash outflows for business acquisitions in 2025 or 2024. During the third quarter of 2025 we announced our anticipated acquisitions of Quadvest L.P and South Central Water Company both of which are expected to close in the second half of 2026. During 2023, we had cash outflows of $7,537, for business acquisitions which we believe will allow H2O America to expand our regulated customer base. Before entering new regulated markets, we

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evaluate the regulatory environment to ensure that we will have the opportunity to achieve an appropriate rate of return on our investment while maintaining our high standards for quality, reliability and compliance with environmental, health and safety, and water quality standards.

Water Usage Per Customer

Fluctuations in customer demand for water could be due to seasonality, restrictions of use, weather or lifestyle choices, all of which could affect our results of operations.

The following is the change in combined residential and business customer usage in 2025 compared to 2024:

Change in customer usage

2025 vs. 2024

SJWC

(4.6)

%

CWC

2.7 

%

TWC

(3.1)

%

MWC

2.5 

%

For the year ended December 31, 2025, SJWC’s residential usage was lower by 14.6% and business usage was higher by 2.5%, respectively, than the amount authorized in our 2022-2024 general rate case. SJWC’s service area is currently under a voluntary 15% reduction of water consumption from its water wholesaler. To address the difference between conservation usage and authorized usage in the rate case, the CPUC has approved the activation of the WCMA. The WCMA is a temporary revenue protection mechanism, due to the voluntary 15% water reduction request, which tracks the divergence between authorized versus actual consumption in a balancing account for future recovery.

With the availability of the WCMA in California and the WRA in Connecticut, which allows for recovery of authorized revenues, decreases in consumption year to year do not present the same financial risk as in our other water utility services utilities.

Weather Conditions, Seasonality and Sources of Water Supply

Our ability to meet the existing and future water demands of our customers depends on an adequate supply of water. Drought, governmental restrictions, overuse of sources of water, the protection of threatened species or habitats or other factors may limit the availability of ground and surface water. Also, customer usage of water is affected by weather conditions, in particular during the warmer months. Our water systems experience higher demand in the summer due to the warmer temperatures and increased usage by customers for outside irrigation of lawns and landscaping. In periods of drought, if customers are encouraged or required to conserve water due to a shortage of supply or restriction of use, revenue tends to be lower. Water use restrictions may be imposed at a regional or state level and may affect our service areas regardless of our readiness to meet unrestricted customer demands. Similarly, in unusually wet periods, water supply tends to be higher and customer demand tends to be lower, again resulting in lower revenues.

SJWC believes that its various sources of water supply, which consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and purchased imported water, will be sufficient to meet customer demand for 2026. In addition, SJWC actively works with Valley Water to address California’s long-term water supply challenges by continuing to educate customers on responsible water use practices and to conduct long-range water supply planning. CWC and MWC believe that they will be able to meet customer demand for 2026 with their existing water supply which consists of groundwater from wells, surface water in reservoirs and purchased water treated by neighboring water utilities. TWC expects to meet customer demand for 2026 with TWC’s water supply which consists of groundwater from wells, surface water and purchased treated and raw water from the GBRA.

Results of Operations

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater and lower in the winter months when cooler temperatures and increased rainfall curtail water usage and sales.

See Item 1, “Business” and Item 1A, “Risk Factors” for a discussion of H2O America’s general business, regulatory activities, and information about water supply.

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Overview

H2O America’s consolidated net income for the year ended December 31, 2025 was $102,578, compared to $93,967 for the same period in 2024. This represents an increase of $8,611 or 9%, from 2024. The increase in net income was primarily driven by higher revenue associated with rate increases in California and Connecticut partially offset by higher administrative and general expenses, higher water production expenses, lower customer usage, and higher depreciation and amortization expense primarily related to new utility plant additions.

Operating Revenue

2025

2024

2023

Water Utility Services

$

787,099 

732,580 

652,045 

Other Services

13,491 

15,859 

18,318 

Total operating revenue

$

800,590 

748,439 

670,363 

The change in consolidated operating revenue was due to the following factors:

2025 vs. 2024

Increase/(decrease)

2024 vs. 2023

Increase/(decrease)

Water Utility Services:

Consumption changes

$

(7,220)

(1)

%

$

14,861 

2 

%

Increase in customers

1,452 

— 

%

2,532 

— 

%

Rate increases for:

— 

%

Pass-through water costs1

23,281 

3 

%

26,057 

4 

%

All other increases2

44,134 

6 

%

36,076 

5 

%

Regulatory mechanisms3

(7,987)

(1)

%

(6,633)

(1)

%

Service and other revenue

859 

— 

%

7,642 

2 

%

Other Services

(2,368)

— 

%

(2,459)

— 

%

Total change in operating revenue

$

52,151 

7 

%

$

78,076 

12 

%

____________________

(1)    Consists of rate increases specifically associated with changes in the water supply costs that are passed through to customers.

(2)    Primarily associated with general rate cases and related annual escalation adjustments, infrastructure surcharges, and cost of capital adjustments.

(3)    Excludes portion attributable to rate increases, which are shown in the rate increase lines above.

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2025 vs. 2024

The revenue increase consists of $54,519 for Water Utility Services which is primarily due to a $44,134 increase in authorized rates in California, Connecticut and Texas, an increase in rates of $23,281 attributable to water supply costs that are passed through to customers, an increase of $1,452 from new customers, and increases in services and other revenue of $859, partially offset by decreases of $7,987 in other regulatory mechanisms, and a decrease of $7,220 due to lower usage.

The revenue decrease of $2,368 from Other Services is primarily attributable to lower real estate activity.

2024 vs. 2023

The revenue increase consists of $80,535 for Water Utility Services which is primarily due to an increase in authorized rates in California and Connecticut, which resulted in an additional $36,076 in revenue, an increase in rates of $26,057 attributable to water supply costs that are passed through to customers, an increase of $14,861 due to higher usage, an increase of $2,532 from new customers, and increases in services and other revenue of $7,642, partially offset by decreases of $6,633 in other regulatory mechanisms.

The revenue decrease of $2,459 from Other Services is primarily attributable to lower real estate activity.

Water Utility Services’ Operating Revenue and Customer Counts

The following tables present operating revenues and the number of customers by customer group of Water Utility Services:

Operating Revenue by Customer Group

2025

2024

2023

Residential and business

$

676,065 

625,080 

557,659 

Industrial

5,869 

5,099 

4,693 

Public authorities

28,527 

27,446 

23,755 

Others

59,197 

55,494 

54,166 

Balancing and memorandum accounts and other regulatory mechanisms

9,141 

11,819 

11,772 

Service and other revenue

8,300 

7,642 

— 

$

787,099 

732,580 

652,045 

Number of Customers

2025

2024

2023

Residential and business

386,035 

384,619 

383,126 

Industrial

604 

592 

591 

Public authorities

2,345 

2,370 

2,387 

Others

11,144 

11,060 

10,983 

400,128 

398,641 

397,087 

Operating Expense

Operating expense is summarized below:

2025

2024

2023

Water Utility Services

$

607,056 

560,364 

506,923 

Other Services

9,946 

10,513 

10,408 

Unallocated Corporate

6,061 

7,059 

3,597 

$

623,063 

577,936 

520,928 

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The change in consolidated operating expenses was due to the following factors:

2025 vs. 2024

Increase/(decrease)

2024 vs. 2023

Increase/(decrease)

Water production expenses:

Change in surface water use

$

6,852 

1 

%

$

5,181 

1 

%

Change in usage

(3,336)

(1)

%

10,254 

2 

%

Change in new customers

429 

— 

%

(156)

— 

%

Purchased water and groundwater extraction charge, energy price change and other production expenses, net

24,064 

4 

%

25,035 

5 

%

Balancing and memorandum account cost recovery

(8,870)

(2)

%

(4,492)

(1)

%

Total water production expenses

19,139 

2 

%

35,822 

7 

%

Administrative and general

20,168 

3 

%

7,174 

2 

%

Maintenance

1,594 

— 

%

5,572 

1 

%

Property taxes and other non-income taxes

1,758 

1 

%

1,453 

— 

%

Depreciation and amortization

2,468 

1 

%

6,987 

1 

%

$

45,127 

7 

%

$

57,008 

11 

%

The following table presents the sources of water supply:

Source of Water Supply

2025

2024

(billion gallons)

Purchased water

17.0

17.8

Groundwater

20.5

18.6

Surface water

10.9

11.8

Reclaimed water

0.8

0.8

49.2

49.0

Average water production expense per billion gallons

$6.247 million

$5.956 million

The percentages of water supply by source excluding reclaimed water by state is presented below:

Purchased Water

Groundwater

Surface Water

2025

2024

2025

2024

2025

2024

California

46 

%

48 

%

45 

%

41 

%

7 

%

9 

%

Connecticut

9 

%

6 

%

41 

%

39 

%

50 

%

55 

%

Maine

2 

%

2 

%

7 

%

6 

%

91 

%

91 

%

Texas

12 

%

13 

%

36 

%

37 

%

52 

%

50 

%

Water production in 2025 increased by 0.2 billion gallons from 2024. The changes are primarily attributable to increase in consumption by customers in Connecticut partially offset by decrease in consumption by customers in California.

The contract water rates for SJWC are determined by Valley Water. These rates are adjusted periodically and coincide with Valley Water’s fiscal year, which ends on June 30. The contract water rate for Valley Water’s fiscal years 2026, 2025 and 2024 was $7.872 million, $7.194 million, and $6.411 million per billion gallons, respectively. The contractual cost of the groundwater extraction charge for water pumped from the ground basin was $7.519 million, $6.840 million, and $6.058 million per billion gallons for Valley Water’s fiscal years 2025, 2024 and 2023, respectively.

CWC has an agreement with RWA to purchase water from RWA. The agreement was signed in April 2006 and became effective upon the receipt of all regulatory approvals in 2008 and will remain in effect for a minimum of 50 years upon becoming effective. In addition, CWC is able, but under no obligation, to purchase up to one million gallons of water per day at the then-current wholesale rates per the agreement, $3.1 million per billion gallons as of December 31, 2025. CWC has an agreement with MDC to purchase water from MDC to serve the Unionville system. The agreement became effective on

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October 6, 2000 and has a term of 50 years beginning May 19, 2003, the date the water supply facilities related to the agreement were placed in service. CWC has agreed to purchase 0.28 billion gallons of water annually from MDC at the published retail rate, $3.91 per hundred cubic feet as of December 31, 2025.

MWC had an agreement with the Kennebec Water District for potable water service. The agreement had previously been in place for 20 years prior to being renewed on November 7, 2020. The renewal contained an initial term of five years and the ability to renew for up to 20 years at Kennebec Water District’s option. In November 2025, the agreement was terminated and MWC transitioned from the previously negotiated rate to a standard tariff rate. MWC guarantees a minimum consumption of 0.05 billion gallons of water annually. Through November 2025, water sales to MWC were billed at a wholesale discount of $0.20 per hundred cubic feet of water below Kennebec Water District's tariffed rates. The current tariff rate was $1.51 per hundred cubic feet as of December 31, 2025.

The various components of operating expenses are discussed below.

Water production expenses

Water production expenses increased $19,139 in 2025 primarily related to increased water pass-through costs including purchased water, groundwater extraction charges and decreased availability of surface water, partially offset by decreased balancing and memorandum account cost recovery and lower customer usage.

SJWC was notified by Valley Water that the unit prices of purchased water and the groundwater extraction charge were increased by 9% and 10%, respectively, effective July 1, 2025. Effective July 1, 2024, Valley Water increased the unit price of purchased water by approximately 12% and the groundwater extraction charge by approximately 13% for SJWC.

Administrative and General Expense

Administrative and general expense increased $20,168 in 2025, or 3% of total operating expenses from 2024, The increase was primarily attributable to funds received from the California Extended Water and Wastewater Arrearage Payment Program in the prior year, higher employee expenses, insurance and consulting work.

Maintenance Expense

Maintenance expenses increased $1,594 in 2025, primarily due to higher contracted work.

Property Taxes and Other Non-income Taxes

Property taxes and other non-income taxes increased $1,758 in 2025. The increase was primarily the result of an increase in property taxes due to utility plant additions and higher payroll taxes due to increases in wages and headcount.

Depreciation and Amortization

Depreciation and amortization expense increased $2,468 in 2025. The increase was primarily due to new utility plant additions.

Other Income and Expense

The change in other (expense) income in 2025 compared to 2024 was primarily due to higher income from the equity portion of the Allowance for Funds Used During Construction (“AFUDC”), and an increase in pension non-service credit, partially offset by an increase in interest expense related to higher debt balances partially offset by lower interest rates. AFUDC income increased due to higher construction work in progress balances from ongoing capital projects, resulting in greater capitalization of financing costs.

H2O America’s consolidated weighted-average cost of long-term debt, including the amortization of debt issuance costs, was 4.38% and 4.12% for the years ended December 31, 2025 and 2024. Cost of borrowing on the lines of credit averaged 5.34% and 6.44% for the years ended December 31, 2025 and 2024, respectively.

Provision for Income Taxes

Income tax expense for 2025 was $12,355, compared to $8,970 in 2024. The effective consolidated income tax rate was 11% for 2025 and 9% for 2024. The increase in the effective income tax rate was primarily due to a lower uncertain tax position reserve release and lower reversals of excess deferred income taxes, and the cumulative catch-up adjustment relating to the accounting method change filed in 2024 that resulted in reduced income tax expense for 2024, partially offset by higher flow through tax benefits.

Please refer to Note 7, “Income Taxes,” of Notes to Consolidated Financial Statements for a reconciliation of income tax computed at the federal statutory rate to actual income tax expense.

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On July 4, 2025, Public Law No. 119-21, referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law. The OBBBA contains several changes to corporate taxation including the extension of key provisions of the 2017 Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions effective in 2025 and others phased in through tax year 2027. The legislation may be subject to further clarification and the issuance of interpretive guidance. The Company evaluated the impact of the OBBBA tax legislation for the year ended December 31, 2025, and the impact was not material to the provision for income taxes and deferred tax balances.

Other Comprehensive Income

The change in other comprehensive income in 2025 compared to 2024 was primarily due to the change in the benefit obligation for CWC’s supplemental executive retirement plan primarily as a result of changes in the discount rate.

Non-GAAP Financial Measures

H2O America's net income and diluted EPS are prepared in accordance with GAAP. Adjusted net income and Adjusted diluted EPS are non-GAAP financial measures representing GAAP earnings adjusted to exclude the effects of non-utility real estate transactions and costs associated with mergers and acquisition activities, if any. These non-GAAP financial measures are provided as additional information for investors to evaluate the performance of H2O America's business activities excluding these items. Management also believes these non-GAAP financial measures help investors and analysts better understand our actual results compared to our guidance on a non-GAAP basis. H2O America uses adjusted net income and/or adjusted diluted EPS as the primary performance measurements when communicating with analysts and investors regarding our outlook and results. Adjusted net income and Adjusted diluted EPS are also used internally to measure performance. However, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, even when the same or similarly titled terms are used to identify such measures, limiting their usefulness for comparative purposes. Further, these non-GAAP financial measures should be considered as a supplement to the financial information prepared on a GAAP basis rather than an alternative to the respective GAAP financial measures.

The following tables reconcile Net Income, and EPS, all as defined under GAAP, to our non-GAAP financial measures of Adjusted Net Income and Adjusted EPS for the years ended December 31, 2025, 2024 and 2023:

Year ended December 31,

2025

2024

2023

Reported GAAP Net Income

$

102,578 

93,967 

84,987 

Adjustments:

(Gain)/loss on sale of real estate investments1

(273)

572 

(1,473)

Expense for merger and acquisition activities2

3,464 

3,393 

— 

Tax effect of above adjustments3

(882)

(1,148)

412 

Adjusted Net Income (non-GAAP)

$

104,887 

96,784 

83,926 

Reported GAAP Diluted Earnings Per Share

$

2.92 

2.87 

2.68 

Adjustments:

(Gain)/loss on sale of real estate investments, net of tax

(0.01)

0.01 

(0.03)

Expense for merger and acquisition activities, net of tax

0.08 

0.07 

— 

Adjusted Diluted Earnings Per Share (non-GAAP)

$

2.99 

2.95 

2.65 

1 Included in the "Other, net" line on the consolidated statements of comprehensive income.

2 Included in the "Administrative and general" line on the consolidated statements of income.

3 The tax effect on all adjustments is calculated at the applicable statutory rate.

Liquidity and Capital Resources

Water Utility Services’ business derives the majority of its revenue directly from residential and business customers. Management asserts that the collection rate for its accounts receivables has improved as the ability to use service disconnections have returned to normal. On December 28, 2023, SJWC submitted the application through the State of California Water and Wastewater Arrearages Payment Program to relieve outstanding payment delinquencies for customer accounts greater than 60-

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days past due as of December 31, 2022. We received $9,130 in the second quarter of 2024 under the State of California Water and Wastewater Arrearages Payment Program.

Funds collected from Water Utility Services’ customers are used to pay for water production expenses, in addition to costs associated with general operations. Funds were also generated from borrowings. In 2025, H2O America and its subsidiaries obtained $185,167 in funds from new long-term debt and $122,808 in funds from equity issuances. From these amounts, H2O America funded its 2025 capital expenditure programs, refinanced certain short and long-term borrowings, and funded working capital. See Note 4 and Note 6 of “Notes to Consolidated Financial Statements” for discussion on the equity and debt financing activities of H2O America. In addition, H2O America paid cash dividends of $58,645 during the year ended December 31, 2025.

In 2025, the common dividends declared and paid on H2O America’s common stock represented 57% of net income. Dividends have been paid on H2O America’s and its predecessor’s common stock for 329 consecutive quarters and the annual dividend amount has increased in each of the last 58 years. While historically H2O America has generally paid dividends equal to approximately 50% to 60% of its net income, H2O America cannot guarantee that this trend will continue in the future.

The following table provides a summary of our operating, investing and financing cash flows for the years ended December 31, 2025, 2024 and 2023:

2025

2024

2023

Net cash provided by (used in):

Operating activities

$

244,803 

195,526 

190,831 

Investing activities

(520,101)

(340,095)

(322,272)

Financing activities

284,870 

145,960 

128,820 

Net increase (decrease) in cash and cash equivalents

9,572 

1,391 

(2,621)

Cash and cash equivalents—beginning of the year

11,114 

9,723 

12,344 

Cash and cash equivalents—end of the year

$

20,686 

11,114 

9,723 

Cash Flow from Operations

In 2025, H2O America generated cash flow from operations of $244,803 compared to $195,526 during 2024. Cash flow from operations are primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, share-based compensation, allowance for equity funds used during construction, gains on the sale of assets, and other changes in working capital items.

In 2025, the increase in cash flows from operations was primarily attributable to higher net income, changes in working capital balances, changes in regulatory assets and liabilities, proceeds from the PFAS litigation settlement, and the absence of the prior year’s up-front service concession fee payments related to Cupertino.

Cash Flow from Investing Activities

Net cash used in investing activities for the year ended December 31, 2025, was $520,101 compared to $340,095 in 2024. This increase of $180,006 is primarily a result of (1) an increase in company-funded capital expenditures of $136,578, primarily driven by $73,766 of expenditures at TWC and $62,738 at SJWC, (2) proceeds from the sale of real estate investments decreased by $37,771 driven primarily by the prior‑year sale of H2O America Land Company’s Tennessee real estate assets. and (3) an increase for developer-funded capital expenditures of $5,967.

Cash Flow from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2025, was $284,870 compared to $145,960 in 2024. This increase of $138,910 is primarily a result of (1) decrease in long-term debt repayments of $45,114, (2) an increase in net proceeds from common stock equity offerings of $37,800, (3) an increase in cash receipts of advances and contributions in aid of construction of $26,832, (4) an increase in net borrowings on the lines of credit of $20,969, and (5) an increase in proceeds from PFAS litigation settlement $16,949, partially offset by (6) an increase in payments of dividends of $6,513.

H2O America’s cash management policy includes the issuance of long-term debt to pay down borrowings on our lines of credit. As such, during years when long-term borrowings are high, borrowings on our line of credit tend to be low and when long-term borrowings are low, borrowings on our line of credit tend to be high.

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H2O America and its subsidiaries have unsecured bank lines of credit totaling $370,000 as of December 31, 2025. Drawdowns on our lines of credit are restricted by our funded debt not exceeding a percentage of total capitalization as defined in our debt covenants. H2O America expects to periodically draw down on its lines of credit as dictated by our funding needs and subsequently repay such borrowings with cash from operations and issuance of long-term debt or equity. See also “Sources of Capital” below.

Budgeted Capital Expenditures

Water Utility Services has budgeted 2026 capital expenditures of approximately $458,000, excluding capital expenditures financed by customer contributions and advances. Additionally, the 2026 budgeted capital expenditures exclude amounts pertaining to the Company’s previously announced acquisition of Quadvest, L.P. The table below illustrates the Company’s 2026 budgeted capital expenditures:

Budgeted Capital

Expenditures

2026

SJWC

$

212,000 

CWC

106,000 

TWC

118,000 

MWC

22,000 

Total capital expenditures

$

458,000 

The 2026 capital expenditures budget is concentrated on distribution system investments. Water Utility Services’ capital expenditures are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations. Over the next five years, Water Utility Services expects to incur approximately $2,568,000 in capital expenditures, which includes replacement of pipes and mains, maintaining water systems, and installing approximately $400,000 in PFAS treatment. A significant portion of this amount is subject to future respective state regulatory utility commissions’ approval. Capital expenditures have the effect of increasing utility plant rate base on which Water Utility Services earns a return. Water Utility Services’ actual capital expenditures may vary from projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies and general economic conditions. Total additions to utility plant normally exceed company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

The Water Utility Services’ distribution systems were constructed during the period from the early 1900’s through today. Expenditure levels for renewal and modernization will occur as the components reach the end of their useful lives. In most cases, replacement cost will significantly exceed the original installation cost of the retired assets due to increases in the costs of goods and services and increased regulation.

In addition to these capital expenditures, Water Utility Services expects to incur approximately $100,000 over the next five years, including $25,000 in 2026, in capitalizable costs associated with cloud-based computing arrangements.

Sources of Capital

H2O America’s ability to finance future construction programs, execute on acquisitions and sustain dividend payments depends on its ability to maintain or increase internally generated funds and attract external financing. The level of future earnings and the related cash flow from operations is dependent, in large part, upon the timing and outcome of regulatory proceedings. H2O America’s regulated operations’ financing activity is designed to achieve capital structures consistent with regulatory guidelines

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in the locations where the companies operate. See current authorized capital structures in Item 1, “Business” under “Regulation and Rates.”

Short-term Financing Arrangements

H2O America and its subsidiaries have unsecured line of credit agreements where borrowings are used to refinance existing debt, for working capital, and for general corporate purposes. A summary of the line of credit agreements as of December 31, 2025 and 2024 are as follows:

2025

2024

Maturity Date

Line Limit

Amounts Outstanding

Unused Portion

Amounts Outstanding

Syndicated credit agreement:

September 12, 2030

H2O America

$

50,000 

11,000 

39,000 

3,000 

SJWC

165,000 

45,000 

120,000 

44,000 

CTWS

— 

— 

— 

30,000 

CWC

80,000 

13,000 

67,000 

— 

MWC

25,000 

— 

25,000 

— 

SJWTX

30,000 

16,000 

14,000 

— 

Total syndicated credit agreement

350,000 

85,000 

265,000 

77,000 

SJWC credit agreement

June 11, 2026

10,000 

— 

10,000 

— 

CTWS credit agreement

August 2, 2028

10,000 

1,834 

8,166 

2,124 

CTWS credit agreement (1)

May 15, 2025

— 

— 

— 

40,000 

$

370,000 

86,834 

283,166 

119,124 

(1) On July 11, 2025, CTWS repaid the outstanding balance under this credit agreement and concurrently terminated this credit agreement.

Total outstanding borrowings under the unsecured lines of credit as of December 31, 2025 and 2024 were $86,834 and $119,124, respectively. The weighted-average interest rate on short-term borrowings outstanding at December 31, 2025, was 4.75% compared to 6.08% at December 31, 2024. Cost of borrowing on the lines of credit averaged 5.34% and 6.44% for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the unused portion of the lines of credit available for future borrowings was $283,166.

All of H2O America’s and subsidiaries’ lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes. All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of December 31, 2025, H2O America and its subsidiaries were in compliance with all covenants on their lines of credit.

For additional information on H2O America’s lines of credit, see Note 5 of “Notes to Consolidated Financial Statements.”

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Long-term Financing Arrangements

H2O America’s and its subsidiaries’ long-term debt activities are for purposes of refinancing short-term borrowings, funding capital expenditures and working capital, and repayments of maturing long-term debt. The following table summarizes the long-term debt issuances and repayments for the year ended December 31, 2025:

Issuance (Repayment)

Activity Date

Maturity Date

SJWC:

Senior note, Series R, 5.83%

$

55,000 

November 2025

November 2055

CTWS:

Bank term loan, 4.09%

(1,493)

2025

December 2027

Bank term loan, 4.15%

(663)

2025

August 2037

CWC:

Senior note, Series 2025, 6.08%

60,000 

October 2025

November 2055

State revolving fund loan, 2.00%

(23)

2025

July 2044

MWC:

State revolving fund loans, various series, 0.00%-2.58%

3,485 

2025

2026-2054

Bank term loan, 6.70%

25,000 

July 2025

July 2055

TWC:

Bank term loan, 6.68%

40,000 

September 2025

September 2055

$

181,306 

MWC finances a portion of its capital improvement program through loans under state revolving fund programs, including the Safe Drinking Water Revolving Fund (“SDWSRF”). In 2024, MWC obtained MPUC approval to issue two First Mortgage Bonds through the Maine Municipal Bond Bank. The Series X Bond totaled $3,330, inclusive of $598 of principal forgiveness, resulting in a net loan of $2,732; the issuance was approved on August 22, 2024 and completed on October 1, 2024. The Series Y Bond totaled $3,596, inclusive of $1,258 of principal forgiveness, resulting in a net loan of $2,337; the issuance was approved on August 22, 2024 and completed on November 1, 2024. Each bond constitutes an unsecured obligation of MWC, with the Series X Bond maturing on April 1, 2044 and the Series Y Bond maturing on April 1, 2054, and each bears a fixed interest rate of 1%. Interest is payable semi-annually in arrears on April 1 and October 1, commencing April 1, 2025.

On December 6, 2024, TWC issued a promissory note to a national cooperative bank under an existing master loan agreement for a principal amount of $20,000 at a fixed interest rate of 6.47%. The note is an unsecured obligation of TWC due on November 20, 2054. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year. In January 2025, TWC amended the existing master loan agreement to modify one of the financial covenants. All of the other terms and conditions remain the same.

On May 23, 2025, MWC submitted an application with MPUC seeking approval to issue unsecured notes in an amount up to $25,000. The MPUC granted approval on June 17, 2025. On July 10, 2025, MWC issued a promissory note to a national cooperative bank under an existing master loan agreement for a principal amount of $25,000 at a fixed interest rate of 6.70%. The note is an unsecured obligation of MWC due on July 20, 2055. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.

On September 18, 2025, TWC issued a promissory note to a national cooperative bank under an existing master loan agreement for a principal amount of $40,000 at a fixed interest rate of 6.68%. This note is an unsecured obligation of TWC due on September 1, 2055. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year.

On October 28, 2025, CWC entered into a note purchase agreement with certain institutional investors, pursuant to which the company agreed to sell an aggregate principal amount of $60,000 of its 6.08% Senior Notes, Series 2025 (“Series 2025 Notes”). The Series 2025 Notes are unsecured obligations of CWC and are due on November 1, 2055. Interest is payable semi-annually in arrears on May 1st and November 1st of each year, commencing May 1, 2026.

On November 12, 2025, SJWC entered into a note purchase agreement with certain institutional investors, pursuant to which the company sold an aggregate principal amount of $55,000 of its 5.83% Senior Notes, Series R (“Series R Notes”). The Series R Notes are unsecured obligations of SJWC and are due on November 1, 2055. Interest is payable semi-annually in arrears on May 1st and November 1st of each year, commencing May 1, 2026.

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The debt and credit agreements of H2O America and its subsidiaries contain various financial and other covenants. Non-compliance with these covenants could result in accelerated due dates and termination of the agreements. In addition, the credit agreements contain customary representations and warranties and are subject to customary events of default, which may result in the outstanding debt becoming immediately due and payable. As of December 31, 2025, H2O America and its subsidiaries were in compliance with all covenants related to its long-term debt agreements.

For additional information, see Note 6 of “Notes to Consolidated Financial Statements.”

Equity Financing Arrangements

On October 29, 2024, H2O America entered into an equity distribution agreement (the “New Equity Distribution Agreement”) with BofA Securities, Inc., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, pursuant to which the company may offer and sell shares of its common stock, $0.001 par value per share, from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $200,000. Since the inception of the New Equity Distribution Agreement, H2O America has issued and sold 2,763,359 shares of common stock at a weighted average price of $52.39 for a total net proceeds of $142,975 and has $55,239 of aggregate gross sales price of shares remaining to issue under the New Equity Distribution Agreement as of December 31, 2025.

For the year ended December 31, 2025, H2O America issued and sold a total of 2,387,846 shares of common stock with a weighted average price of $51.90 per share and received $122,806 in net proceeds under the New Equity Distribution Agreement.

Credit Rating

The condition of the capital and credit markets or the strength of financial institutions could impact H2O America’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income. In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase H2O America’s cost of capital. While our ability to obtain financing will continue to be a risk, we believe that based on our 2025 and 2024 activities, we will have access to the external funding sources necessary to implement our ongoing capital investment programs in the future. On July 15, 2025, Standard & Poor’s Ratings Services revised the outlook for H2O America, CTWS and CWC from stable to negative following the announcement of the Quadvest acquisition.

The following table are the current Standard & Poor’s Rating Service assigned company ratings:

Entity

Rating

Outlook

H2O America

A-

Negative

SJWC

A

Stable

CTWS

A-

Negative

CWC

A-

Negative

Off-Balance Sheet Arrangement/Contractual Obligations

H2O America has no significant contractual obligations not fully recorded on its Consolidated Balance Sheet or not fully disclosed in the Notes to Consolidated Financial Statements.

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H2O America’s contractual obligations and commitments as of December 31, 2025 are as follows:

Total

Contractual Obligations Due in

Less than

1 Year

1-3

Years

3-5

Years

After

5 Years

Senior notes, Water Utility Services

$

905,000 

15,000 

15,000 

— 

875,000 

Bank term loans, Water Utility Services

286,295 

5,000 

17,020 

— 

264,275 

Advances for construction, SJWC (1)

58,487 

2,569 

5,150 

5,141 

45,627 

California Pollution Control Financing Authority Revenue Bond, SJWC

70,000 

— 

— 

— 

70,000 

Connecticut Innovations Revenue Bonds, CWC

22,050 

— 

9,550 

12,500 

— 

State revolving fund loans, CWC

308 

16 

33 

33 

226 

State revolving fund loans, MWC

16,336 

1,249 

2,788 

2,052 

10,247 

Senior notes, H2O America

560,000 

— 

— 

360,000 

200,000 

Bank term loans, CTWS

12,212 

2,248 

1,872 

1,601 

6,491 

Seller financing debt, TWC (2)

29,000 

437 

1,642 

2,639 

24,282 

Total contractual cash obligation

1,959,688 

26,519 

53,055 

383,966 

1,496,148 

Total interest on contractual obligations

$

1,469,279 

80,009 

157,834 

142,735 

1,088,701 

___________________________________

(1)     As of December 31, 2025, advances for construction were $201,413 of which $108,311 was related to non-refundable advances for construction and $34,615 was related to advances which are refundable based on service connections made.

(2)    The timing of payments on the seller financing shown in the table above reflects management’s current estimate. The actual timing of payments will be based upon the actual quantities of groundwater produced from the acquired wells.

With regard to uncertain tax positions, no such amounts are reflected in the table above since we are unable to predict the timing of tax settlements as tax audits can involve complex issues and the resolution of those issues may span multiple years, particularly if subject to negotiation or litigation. For further discussion on uncertain tax positions, please see Note 7 of “Notes to Consolidated Financial Statements.”

Water Supply Agreements

SJWC purchases water from Valley Water under terms of a master contract expiring in 2051. Delivery schedules for purchased water are based on a contract year beginning July 1, and are negotiated every three years under terms of the master contract with Valley Water. For the years ended December 31, 2025, 2024 and 2023, SJWC purchased from Valley Water 15.9 billion gallons ($120,322), 17.0 billion gallons ($117,698) and 18.3 billion gallons ($111,173), respectively, of contract water. On June 3, 2025, Valley Water Board of Directors approved treated water deliveries reflecting the contractual delivery schedule reduced by 23% through June 30, 2026. Based on current prices and estimated deliveries, SJWC is committed to purchase from Valley Water a minimum of 90% of the reduced delivery schedule, or 18.9 billion gallons ($148,795) of water at the current contract water rate of $7.87 million per billion gallons in the year ending December 31, 2026. Additionally, SJWC purchases non-contract water from Valley Water on an “as needed” basis if the water supply is available. The contract water rates for SJWC are determined by Valley Water. These rates are adjusted periodically and coincide with Valley Water’s fiscal year, which ends on June 30. The contract water rate for Valley Water’s fiscal years 2026, 2025 and 2024 was $7.872 million, $7.194 million, and $6.411 million per billion gallons, respectively. The contractual cost of the groundwater extraction charge for water pumped from the ground basin was $7.519 million, $6.840 million, and $6.058 million per billion gallons for Valley Water’s fiscal years 2025, 2024 and 2023, respectively.

SJWC also pumps water from the local groundwater basin. There are no delivery schedules or contractual obligations associated with the purchase of groundwater. Valley Water determines the groundwater extraction charge and it is applied on a per unit basis. In addition to the Valley Water groundwater extraction charge, SJWC also incurs power costs to pump the groundwater from the basin.

CWC has an agreement with RWA to purchase water. The agreement was signed in April 2006 and became effective upon the receipt of all regulatory approvals in 2008 and will remain in effect for a minimum of 50 years upon becoming effective. CWC has the option, but is under no obligation, to purchase up to one million gallons of water per day at the then current wholesale rates per the agreement ($3.3 million per billion gallons as of December 31, 2025). CWC has an agreement with the MDC to purchase water from MDC to serve the Unionville system. The agreement became effective on October 6, 2000 and has a term of 50 years beginning May 19, 2003, the date the water supply facilities related to the agreement were placed in service. CWC has agreed to purchase 0.28 billion gallons of water annually from MDC. The rate charged by the MDC at December 31, 2025 were $3.91 per hundred cubic feet.

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MWC had an agreement with the Kennebec Water District for potable water service. The agreement has been in place for 20 years and was extended on November 7, 2020 for a new term of up to 20 years. In November 2025, the agreement was terminated and MWC transitioned from the previously negotiated rate to a standard tariff rate. MWC guarantees a minimum consumption of 50 million gallons of water annually. Water sales to MWC are billed at a wholesale discount of $0.20 per hundred cubic feet of water below Kennebec Water District's tariffed rates. The current tariff rate was $1.51 per hundred cubic feet as of December 31, 2025.

TWC has long-term contracts with the GBRA. The agreements expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide TWC with 7,602 acre-feet per year of water supply from Canyon Lake. The water rate may be adjusted by GBRA at any time, provided GBRA gives TWC a 60-day written notice on the proposed adjustment. TWC also has treated water supply agreements with the LCRA and WTCPUA expiring in 2059 and 2046, respectively, for 350 acre-feet of water per each agreement per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies.

Employee Benefit Arrangements

SJWC and CTWS sponsor noncontributory defined benefit pension plans and provide health care and life insurance benefits for retired employees. In 2025, SJWC and CTWS contributed $5,675 and $7 to the pension plans and other postretirement benefit plans, respectively. In 2026, SJWC and CTWS expect to make required and discretionary cash contributions of up to $7,682 to the pension plans and other postretirement benefit plans. The amount of required contributions for years thereafter is not actuarially determinable.

SJWC’s other benefit obligations include employees’ postretirement benefits, an Executive Supplemental Retirement Plan, Cash Balance Executive Supplemental Retirement Plan, Special Deferral Election Plan and Deferral Election Program for non-employee directors. Under these benefit plans, SJWC is committed to pay approximately $2,299 annually to former officers and directors. Future payments may fluctuate depending on the life span of the retirees and as current officers and executives retire.

CWC’s other benefit obligations include employees’ postretirement benefits, supplemental executive retirement agreements and deferred compensation agreements and plan. Future payments may fluctuate depending on the contribution rates of employees into the deferred compensation plan and the life span of the retirees and as current officers and executives retire. Under these benefit plans, CWC is committed to pay approximately $1,382, annually to former officers and directors.

Recently Adopted Accounting Pronouncements and New Accounting Pronouncements

See Note 2 of “Notes to Consolidated Financial Statements” for a discussion of recently adopted accounting pronouncements and new accounting pronouncements issued and pending adoption.