000076682912/312024Q3FALSExbrli:sharesiso4217:USDiso4217:USDxbrli:sharessjw:subsidiarysjw:wellxbrli:puresjw:peoplesjw:serviceConnection00007668292024-01-012024-09-3000007668292024-10-2100007668292024-07-012024-09-3000007668292023-07-012023-09-3000007668292023-01-012023-09-3000007668292024-09-3000007668292023-12-310000766829us-gaap:CommonStockMember2023-12-310000766829us-gaap:AdditionalPaidInCapitalMember2023-12-310000766829us-gaap:RetainedEarningsMember2023-12-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000766829us-gaap:RetainedEarningsMember2024-01-012024-03-3100007668292024-01-012024-03-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310000766829us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310000766829us-gaap:CommonStockMember2024-01-012024-03-310000766829us-gaap:CommonStockMember2024-03-310000766829us-gaap:AdditionalPaidInCapitalMember2024-03-310000766829us-gaap:RetainedEarningsMember2024-03-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-3100007668292024-03-310000766829us-gaap:RetainedEarningsMember2024-04-012024-06-3000007668292024-04-012024-06-300000766829us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300000766829us-gaap:CommonStockMember2024-04-012024-06-300000766829us-gaap:CommonStockMember2024-06-300000766829us-gaap:AdditionalPaidInCapitalMember2024-06-300000766829us-gaap:RetainedEarningsMember2024-06-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-3000007668292024-06-300000766829us-gaap:RetainedEarningsMember2024-07-012024-09-300000766829us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300000766829us-gaap:CommonStockMember2024-07-012024-09-300000766829us-gaap:CommonStockMember2024-09-300000766829us-gaap:AdditionalPaidInCapitalMember2024-09-300000766829us-gaap:RetainedEarningsMember2024-09-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300000766829us-gaap:CommonStockMember2022-12-310000766829us-gaap:AdditionalPaidInCapitalMember2022-12-310000766829us-gaap:RetainedEarningsMember2022-12-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100007668292022-12-310000766829us-gaap:RetainedEarningsMember2023-01-012023-03-3100007668292023-01-012023-03-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310000766829us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000766829us-gaap:CommonStockMember2023-01-012023-03-310000766829us-gaap:CommonStockMember2023-03-310000766829us-gaap:AdditionalPaidInCapitalMember2023-03-310000766829us-gaap:RetainedEarningsMember2023-03-310000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100007668292023-03-310000766829us-gaap:RetainedEarningsMember2023-04-012023-06-3000007668292023-04-012023-06-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300000766829us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300000766829us-gaap:CommonStockMember2023-04-012023-06-300000766829us-gaap:CommonStockMember2023-06-300000766829us-gaap:AdditionalPaidInCapitalMember2023-06-300000766829us-gaap:RetainedEarningsMember2023-06-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-3000007668292023-06-300000766829us-gaap:RetainedEarningsMember2023-07-012023-09-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300000766829us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300000766829us-gaap:CommonStockMember2023-07-012023-09-300000766829us-gaap:CommonStockMember2023-09-300000766829us-gaap:AdditionalPaidInCapitalMember2023-09-300000766829us-gaap:RetainedEarningsMember2023-09-300000766829us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-3000007668292023-09-300000766829sjw:WarehouseBuildingMember2024-04-012024-04-300000766829sjw:OfficeBuildingLandAndParkingLotMember2024-06-012024-06-300000766829sjw:TennesseePropertiesMember2023-12-3100007668292023-08-140000766829us-gaap:FairValueInputsLevel2Member2024-09-300000766829us-gaap:FairValueInputsLevel2Member2023-12-310000766829us-gaap:FairValueInputsLevel3Member2024-09-300000766829us-gaap:FairValueInputsLevel3Member2023-12-310000766829us-gaap:FairValueInputsLevel1Memberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2024-09-300000766829us-gaap:FairValueInputsLevel1Memberus-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2023-12-310000766829us-gaap:RestrictedStockUnitsRSUMember2024-07-012024-09-300000766829us-gaap:RestrictedStockUnitsRSUMember2023-07-012023-09-300000766829us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-09-300000766829us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-09-300000766829sjw:RegulatoryAssetImpairmentMember2024-04-012024-06-300000766829us-gaap:GeneralAndAdministrativeExpenseMember2024-04-012024-06-300000766829us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-09-300000766829us-gaap:DeferredIncomeTaxChargesMember2024-09-300000766829us-gaap:DeferredIncomeTaxChargesMember2023-12-310000766829us-gaap:PensionAndOtherPostretirementPlansCostsMember2024-09-300000766829us-gaap:PensionAndOtherPostretirementPlansCostsMember2023-12-310000766829sjw:BusinessCombinationsDebtPremiumMember2024-09-300000766829sjw:BusinessCombinationsDebtPremiumMember2023-12-310000766829sjw:EmployeeBenefitCostsMember2024-09-300000766829sjw:EmployeeBenefitCostsMember2023-12-310000766829sjw:MontereyWaterRevenueAdjustmentMechanismMWRAMMember2024-09-300000766829sjw:MontereyWaterRevenueAdjustmentMechanismMWRAMMember2023-12-310000766829sjw:CustomerAssistanceProgramBalancingAccountMember2024-09-300000766829sjw:CustomerAssistanceProgramBalancingAccountMember2023-12-310000766829sjw:CatastrophicEventMemorandumAccountsCemaMember2024-09-300000766829sjw:CatastrophicEventMemorandumAccountsCemaMember2023-12-310000766829sjw:A2022GeneralRateCaseInterimMemorandumAccountMember2024-09-300000766829sjw:A2022GeneralRateCaseInterimMemorandumAccountMember2023-12-310000766829sjw:RevenueAdjustmentMechanismsMember2024-09-300000766829sjw:RevenueAdjustmentMechanismsMember2023-12-310000766829sjw:WaterSupplyCostsMember2024-09-300000766829sjw:WaterSupplyCostsMember2023-12-310000766829sjw:OtherRegulatoryAssetsMember2024-09-300000766829sjw:OtherRegulatoryAssetsMember2023-12-310000766829sjw:CostOfRemovalMember2024-09-300000766829sjw:CostOfRemovalMember2023-12-310000766829us-gaap:DeferredIncomeTaxChargesMember2024-09-300000766829us-gaap:DeferredIncomeTaxChargesMember2023-12-310000766829sjw:UnrecognizedPensionsAndOtherPostretirementBenefitsMember2024-09-300000766829sjw:UnrecognizedPensionsAndOtherPostretirementBenefitsMember2023-12-310000766829sjw:RevenueAdjustmentMechanismsMember2024-09-300000766829sjw:RevenueAdjustmentMechanismsMember2023-12-310000766829sjw:WaterSupplyCostsMember2024-09-300000766829sjw:WaterSupplyCostsMember2023-12-310000766829sjw:OtherRegulatoryLiabilitiesMember2024-09-300000766829sjw:OtherRegulatoryLiabilitiesMember2023-12-310000766829srt:MinimumMember2024-01-012024-09-300000766829srt:MaximumMember2024-01-012024-09-300000766829sjw:AtTheMarketOfferingMember2021-11-170000766829sjw:AtTheMarketOfferingMember2024-07-012024-09-300000766829sjw:AtTheMarketOfferingMember2024-01-012024-09-300000766829sjw:AtTheMarketOfferingMember2021-11-172024-09-300000766829sjw:AtTheMarketOfferingMember2024-09-300000766829us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2024-09-300000766829sjw:A6.46SeniorNoteSeries2023Membersjw:ConnecticutWaterCompanyMemberus-gaap:SeniorNotesMember2023-11-150000766829sjw:A5.63SeniorNotesSeriesQMembersjw:SanJoseWaterCompanyMemberus-gaap:SeniorNotesMember2024-07-310000766829sjw:A5.78SeniorNotesDue2054Membersjw:ConnecticutWaterCompanyMemberus-gaap:SeniorNotesMember2024-07-3100007668292024-09-012024-09-300000766829srt:ScenarioForecastMember2024-10-012024-12-310000766829sjw:CTWSEmployeesMember2024-01-012024-09-300000766829us-gaap:PensionPlansDefinedBenefitMember2024-07-012024-09-300000766829us-gaap:PensionPlansDefinedBenefitMember2023-07-012023-09-300000766829us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2024-07-012024-09-300000766829us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-07-012023-09-300000766829us-gaap:PensionPlansDefinedBenefitMember2024-01-012024-09-300000766829us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-09-300000766829us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2024-01-012024-09-300000766829us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-01-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersjw:IncentivePlanMember2024-09-300000766829sjw:EmployeeStockPurchasePlanMember2024-07-012024-09-300000766829sjw:EmployeeStockPurchasePlanMember2023-07-012023-09-300000766829sjw:EmployeeStockPurchasePlanMember2024-01-012024-09-300000766829sjw:EmployeeStockPurchasePlanMember2023-01-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMember2024-07-012024-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMember2023-07-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMember2024-01-012024-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMember2023-01-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MinimumMember2023-07-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MaximumMember2023-07-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MinimumMember2024-01-012024-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MinimumMember2023-01-012023-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MaximumMember2024-01-012024-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMembersrt:MaximumMember2023-01-012023-09-300000766829us-gaap:PerformanceSharesMember2024-07-012024-09-300000766829us-gaap:PerformanceSharesMember2023-07-012023-09-300000766829us-gaap:PerformanceSharesMember2024-01-012024-09-300000766829us-gaap:PerformanceSharesMember2023-01-012023-09-300000766829us-gaap:PerformanceSharesMembersrt:MinimumMember2024-01-012024-09-300000766829us-gaap:PerformanceSharesMembersrt:MaximumMember2024-01-012024-09-300000766829sjw:MarketbasedRSUMembersrt:MinimumMember2024-01-012024-09-300000766829sjw:MarketbasedRSUMembersrt:MaximumMember2024-01-012024-09-300000766829sjw:RestrictedStockAndDeferredRestrictedStockMember2024-09-300000766829sjw:EmployeeStockPurchasePlanMember2024-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2024-07-012024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2024-07-012024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2024-07-012024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2024-07-012024-09-300000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2024-07-012024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2024-07-012024-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2023-07-012023-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2023-07-012023-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2023-07-012023-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2023-07-012023-09-300000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2023-07-012023-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2023-07-012023-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2024-01-012024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2024-01-012024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2024-01-012024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2024-01-012024-09-300000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2024-01-012024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2024-01-012024-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2023-01-012023-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2023-01-012023-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2023-01-012023-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2023-01-012023-09-300000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2023-01-012023-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2023-01-012023-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2024-09-300000766829us-gaap:RegulatedOperationMembersjw:ReportableSegmentOneMember2023-12-310000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentOneMember2023-12-310000766829sjw:ReportableSegmentOneMember2024-09-300000766829sjw:ReportableSegmentOneMember2023-12-310000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2024-09-300000766829us-gaap:UnregulatedOperationMembersjw:ReportableSegmentTwoMember2023-12-310000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:AllOtherSegmentsMember2023-12-310000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2024-09-300000766829us-gaap:RegulatedOperationMemberus-gaap:CorporateMember2023-12-310000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2024-09-300000766829us-gaap:UnregulatedOperationMemberus-gaap:CorporateMember2023-12-310000766829sjw:KTWaterDevelopmentLtdMembersjw:TexasWaterMember2023-08-140000766829sjw:SouthernComalCountyTexasMembersjw:KTWaterDevelopmentLtdMembersjw:TexasWaterMember2023-08-140000766829sjw:KTWaterDevelopmentLtdMember2023-08-142023-08-140000766829sjw:KTWaterResourceLPMember2023-08-142023-08-140000766829sjw:KTWaterResourceLPMember2023-08-14

___________________________________________ 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission file number 001-8966

 

Delaware

77-0066628

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

110 West Taylor Street, San Jose, CA

95110

(Address of principal executive offices)

(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

        Large accelerated filer  ☒                Non-accelerated filer  ☐    

        Accelerated filer  ☐                Smaller reporting company  ☐

                                Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No  x

As of October 21, 2024, there were 33,253,536 shares of the registrant’s Common Stock outstanding.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or the negative of those words or other comparable terminology. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.

The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but not limited to, the following factors:

•the effect of water, utility, environmental and other governmental policies and regulations, including regulatory actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures, per- and polyfluroralkyl substances (“PFAS”) and other decisions;

•changes in demand for water and other services;

•unanticipated weather conditions and changes in seasonality including those affecting water supply and customer usage;

•the effect of the impacts of climate change;

•unexpected costs, charges or expenses;

•our ability to successfully evaluate investments in new business and growth initiatives;

•contamination of our water supplies and damage or failure of our water equipment and infrastructure;

•the risk of work stoppages, strikes and other labor-related actions;

•catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemic or other similar occurrences;

•changes in general economic, political, business and financial market conditions;

•the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness and general market and economic conditions; and

•legislative and general market and economic developments.

The risks, uncertainties and other factors may cause the actual results, performance or achievements of SJW Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Results for a quarter are not indicative of results for a full year due to seasonality and other factors. In addition, actual results, performance or achievements are subject to other risks and uncertainties that relate more broadly to our overall business, including those more fully described in our filings with the SEC, including our most recent reports on Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements are not guarantees of future performance, and speak only as of the date made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

 

ITEM 1.FINANCIAL STATEMENTS

 

 

 

			September 30, 2024						December 31, 2023
Capitalization and liabilities
Capitalization:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 33,226,735 on September 30, 2024 and 32,023,004 on December 31, 2023			$	33					32
Additional paid-in capital			804,848						736,191
Retained earnings			527,575						495,383
Accumulated other comprehensive income			1,349						1,791
Total stockholders’ equity			1,333,805						1,233,397
Long-term debt, less current portion			1,673,715						1,526,699
Total capitalization			3,007,520						2,760,096
Current liabilities:
Lines of credit			93,235						171,500
Current portion of long-term debt			8,088						48,975
Accrued groundwater extraction charges, purchased water and power			38,433						24,479
Accounts payable			44,480						46,121
Accrued interest			19,549						15,816
Accrued payroll			12,180						12,229
Current regulatory liabilities			1,770						3,059
Other current liabilities			26,314						20,795
Total current liabilities			244,049						342,974
Deferred income taxes			268,370						238,528
Advances for construction			150,546						146,582
Contributions in aid of construction			336,559						326,451
Postretirement benefit plans			48,158						46,836
Regulatory liabilities, less current portion			473,899						461,108
Other noncurrent liabilities			23,201						22,492
Commitments and contingencies
Total capitalization and liabilities			$	4,552,302					4,345,067

			Common Stock												Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Income												Total Stockholders’ Equity
			Number of Shares						Amount
Balances, December 31, 2023			32,023,004						$	32					736,191						495,383						1,791												1,233,397
Net income			—						—						—						11,699						—												11,699
Unrealized loss on investment, net of tax of $163			—						—						—						—						(442)												(442)
Stock-based compensation			—						—						1,538						(9)						—												1,529
Issuance of restricted and deferred stock units			30,432						—						(1,215)						—						—												(1,215)
Employee stock purchase plan			21,755						—						1,101						—						—												1,101
Common stock issuance, net of costs			126,025						—						7,006						—						—												7,006
Dividends paid ($0.40 per share)			—						—						—						(12,824)						—												(12,824)
Balances, March 31, 2024			32,201,216						32						744,621						494,249						1,349												1,240,251
Net income			—						—						—						20,696						—												20,696
Stock-based compensation			—						—						1,275						(8)																		1,267
Issuance of restricted and deferred stock units			9,083						—						(2)						—						—												(2)
Common stock issuance, net of costs			458,605						1						25,295						—						—												25,296
Dividends paid ($0.40 per share)			—						—						—						(12,900)						—												(12,900)
Balances, June 30, 2024			32,668,904						33						771,189						502,037						1,349												1,274,608
Net income			—						—						—						38,652						—												38,652
Stock-based compensation			—						—						1,566						(8)						—												1,558
Issuance of restricted and deferred stock units			1,388						—						(1)						—						—												(1)
Employee stock purchase plan			21,098						—						1,087						—						—												1,087
Common stock issuance, net of costs			535,345						—						31,007						—						—												31,007
Dividends paid ($0.40 per share)			—						—						—						(13,106)						—												(13,106)
Balances, September 30, 2024			33,226,735						$	33					804,848						527,575						1,349												1,333,805

Note 1.General

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the results for the interim periods.

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission. The Notes to Consolidated Financial Statements in SJW Group’s 2023 Annual Report on Form 10-K should be read in conjunction with the accompanying unaudited condensed consolidated financial statements.

SJW Group is a holding company with five wholly owned subsidiaries: San Jose Water Company (“SJWC”), SJWTX Holdings, Inc., SJW Land Company, SJWNE LLC, and National Water Utility Service, LLC (“National Water Utility”). SJWTX Holdings, Inc., is a holding company for its wholly owned subsidiaries, SJWTX, Inc., doing business as The Texas Water Company (“TWC”), Texas Water Operation Services, LLC, (“TWOS”) and Texas Water Resources, LLC (“TWR”). SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”) whose wholly owned subsidiaries are The Connecticut Water Company (“CWC”), The Maine Water Company (“MWC”), New England Water Utility Services, Inc. (“NEWUS”), and Chester Realty, Inc. National Water Utility is the contracting entity for shared services among the SJW Group affiliates formed in October 2024. SJWC, CWC, TWC, TWOS, TWR, MWC, NEWUS and National Water Utility are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.”

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. 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 resulting in lower sales.

SJW Group’s revenue components are as follows:

The major components of nonutility properties and real estate investments as of September 30, 2024 and December 31, 2023, are as follows: 

In March 2023, SJW Land Company entered into a broker agreement to sell its warehouse, office building, and land property located in Knoxville, Tennessee. The company reclassified the Tennessee properties from held-and-used to held-for-sale at March 31, 2023. The company recorded the Tennessee properties at the lower of their carrying value or estimated fair value less cost to sell, and also stopped recording depreciation on assets held for sale. SJW Group's broker provided the estimated fair value of the Tennessee properties.

In April 2024, SJW Land Company completed the sale of a warehouse building of the Tennessee properties for $27,000. The pre-tax gain on the sale was $6,918. In June 2024, SJW Land Company completed the sale of an office building, land, and parking lot of the Tennessee properties for $17,000. The pre-tax loss on the sale was $7,887. The net pre-tax loss associated with these transactions for the nine months ended September 30, 2024 was $969 and is included in the “Other, net” line on the condensed consolidated statements of comprehensive income. A portion of the proceeds from these sales totaling $2,801 is being held in escrow pending completion of certain post-closing obligations. As a result of these two transactions, the sale of the Tennessee properties is complete and the company does not have any other assets held for sale.

The sale of the Tennessee properties does not represent a strategic shift that has or will have a major effect on SJW Group; therefore, the sale does not qualify for treatment as a discontinued operation.

The Tennessee properties are included in SJW Group’s “Real Estate Services” reportable segment in Note 9, “Segment and Non-Tariffed Business Reporting”. The following represents the major components of the Tennessee properties that were recorded in assets held-for-sale on the condensed consolidated balance sheets as of December 31, 2023:

In August 2023, a non-regulated subsidiary, TWR, acquired eight wells and the associated water rights of KT Water Resources, LLC, as discussed in Note 10, “Acquisitions”. In connection with a transaction in the third quarter of 2024, TWC purchased these assets from TWR for use in utility operations. Accordingly, SJW Group reclassified $28,386 related to indefinite life water rights from other intangible assets to utility plant intangible assets and $11,684 from nonutility property to utility plant.

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of September 30, 2024, but require disclosure of their fair values: cash and cash equivalents, accounts receivable and accounts payable. The estimated fair value of such instruments as of September 30, 2024 approximates their carrying value as reported on the condensed consolidated balance sheets. There have been no changes in valuation techniques during the three and nine months ended September 30, 2024. The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of SJW Group’s long-term debt was $1,534,801 and $1,394,412 as of September 30, 2024 and December 31, 2023, respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company. Of the total fair value of long-term debt at September 30, 2024 and December 31, 2023, $1,518,400 and $1,378,683, respectively, would be categorized as Level 2 in the fair value hierarchy and $16,401 and $15,729, respectively, would be categorized as Level 3 in the fair value hierarchy.

CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust. The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $2,952 and $2,833 as of September 30, 2024 and December 31, 2023, respectively, and are categorized as Level 1 in the fair value hierarchy.

Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s long-term incentive plans, shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under SJW Group’s employee stock purchase plans. For the three months ended September 30, 2024 and 2023, 485 and 1,826 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively. For the nine months ended September 30, 2024 and 2023, 5,289 and 12,524 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

During the second quarter of 2024, SJW Group recorded a reduction to its allowance for credit losses of $7,822, of which $3,960 resulted in a reduction to regulatory assets and $3,862 was recorded through administrative and general expense ($2,782 net of tax or $0.09 per diluted share for the nine months ended September 30, 2024).

The recently issued accounting standards that have not yet been adopted by the company as of September 30, 2024 are as follows:

Note 2.Regulatory Matters

Regulatory assets and liabilities are comprised of the following as of September 30, 2024 and December 31, 2023:

			September 30, 2024						December 31, 2023
Regulatory assets:
Income tax temporary differences (a)			$	173,671					157,669
Unrecognized pensions and other postretirement benefits (b)			24,593						24,593
Business combinations debt premium (c)			12,948						14,855
Employee benefit costs (d)			5,433						9,815
Monterey Water Revenue Adjustment Mechanism (“MWRAM”) (e)			10,327						9,361
Customer Assistance Program (“CAP”) balancing account (f)			6,683						5,457
Catastrophic event memorandum accounts (“CEMA”) (g)			975						4,819
2022 general rate case interim memorandum account (h)			3,354						4,571
Revenue adjustment mechanisms (n)			2,528						—
Water supply costs (i)			—						583
Other (j)			13,478						8,463
Total regulatory assets			253,990						240,186
Less: current regulatory assets (k)			828						4,276
Total regulatory assets, less current portion			$	253,162					235,910
Regulatory liabilities:
Cost of removal (l)			360,176						346,418
Future income tax benefits due to customers (m)			85,966						88,610
Unrecognized pensions and other postretirement benefits (b)			20,515						20,196
Revenue adjustment mechanisms (n)			1,770						5,536
Water supply costs (i)			3,648						—
Other (o)			3,594						3,407
Total regulatory liabilities			475,669						464,167
Less: current regulatory liabilities (p)			1,770						3,059
Total regulatory liabilities, less current portion			$	473,899					461,108

___________________________________

(a)Consists primarily of temporary income tax differences that are flowed through to customers, which will be recovered in future rates as these temporary differences reverse. The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the lives of the plant assets, which are between 4 to 100 years.

(b)Represents actuarial losses and gains and prior service cost that have not yet been recognized as components of net periodic benefit cost for certain pension and other postretirement benefit plans.

(c)Consists of debt fair value adjustments recognized through purchase accounting for the completed merger with CTWS in 2019.

(d)Includes deferrals of pension and other postretirement benefit expense and cost of accrued benefits for vacation.

(e)MWRAM is described in the following section.

(f)Represents costs associated with SJWC’s CAP.

(g)The California Public Utilities Commission (“CPUC”) has authorized water utilities to activate CEMA accounts in order to track savings and costs related to SJWC’s response to catastrophic events, which includes external labor and materials, increases in bad debt from suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage. At December 31, 2023, the balance primarily relates to increased bad debt expenses associated with SJWC’s response to COVID-19.

(h)Represents the difference between revenues collected in interim rates in effect as of January 1, 2022 and revenues that would result from rates authorized in SJWC’s 2022 general rate case retroactive to January 1, 2022.

(i)Reflects primarily SJWC’s Full Cost Balancing Account which tracks differences in actual water supply costs compared to amounts assumed in base rates, including applicable changes and variations in costs and quantities that affect the overall mix of the water supply.

(j)Other includes other balancing and memorandum accounts and regulatory mechanisms, deferred costs for certain information technology activities, asset retirement obligations, tank painting, well reconditioning and rate case expenses.

(k)As of September 30, 2024, primarily relates to the current portion of CWC’s deferred well redevelopment and rate case costs. As of December 31, 2023, primarily relates to the current portion of MWRAM.

(l)Represents amounts collected in rates from customers for estimated costs to retire assets at the end of their expected useful lives before the costs are incurred.

(m)On December 22, 2017 the Tax Cuts and Jobs Act of 2017 (the "Tax Act”) was signed into law. The Tax Act included a reduction in the federal income tax rate from 35% to 21%. The rate reduction was effective on January 1, 2018 and resulted in a regulatory liability for the excess deferred income taxes. The benefit of amortization of excess deferred income taxes flows back to the customers under current normalization rules and agreed upon methods with the commissions.

(n)Consists of Water Rate Adjustment mechanism (“WRA”) and Water Conservation Memorandum Account (“WCMA”),which are described in the following section.

(o)Other includes other balancing and memorandum accounts, other regulatory mechanisms and accrued tank painting costs.

(p)As of September 30, 2024 and December 31, 2023, primarily relates to the current portion of WRA.

SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. SJWC has been authorized for the use of the Full Cost Balancing Account to track water supply costs and energy consumption. The MWRAM balancing account 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. The WCMA allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions, both mandatory and voluntary. SJWC records the lost revenue captured in the WCMA balancing accounts. Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA. All balancing accounts and memorandum accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2% of authorized revenue, whichever occurs first.

CWC has been authorized by the Connecticut Public Utilities Regulatory Authority (“PURA”) to utilize a WRA, a decoupling mechanism, to mitigate risk 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.

As of September 30, 2024 and December 31, 2023, SJW Group’s regulatory assets not earning a return primarily included unrecognized pensions and other postretirement benefits and business combination debt premiums. The total amount of regulatory assets not earning a return at September 30, 2024 and December 31, 2023, either by interest on the regulatory asset or as a component of rate base at the allowed rate of return, was $41,962 and $43,141, respectively.

Note 3.Capitalization

In March 2023, SJW Group entered into Amendment No. 1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between SJW Group and J.P. Morgan Securities LLC, Janney Montgomery Scott 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 $240,000. For the three and nine months ended September 30, 2024, SJW Group issued and sold a total of 535,345 and 1,119,975 shares of common stock, respectively, at a weighted average price of $59.17 and $57.70 per share, respectively, and received $31,007 and $63,309 in net proceeds, respectively, under the Equity Distribution Agreement. Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 3,124,632 shares of common stock at a weighted average price of $67.88 for a total net proceeds of $207,307 and has $27,889 of aggregate gross sales price of shares remaining to issue under the Equity Distribution Agreement as of September 30, 2024.

Note 4.Lines of Credit and Long-Term Liabilities

SJW Group’s contractual obligations and commitments include senior notes, bank term loans, revenue bonds, state revolving fund loans and other obligations.

The weighted average interest rate on short-term borrowings outstanding at September 30, 2024, was 6.61%, compared to 6.48% at December 31, 2023.

As of September 30, 2024, the unused portion of the lines of credit was $256,765.

On November 15, 2023, CWC entered into a note purchase agreement with certain institutional investors, pursuant to which the company sold an aggregate principal amount of $25,000 of its 6.46% Senior Notes, Series 2023 (“Series 2023 Notes”). The Series 2023 Notes are unsecured obligations of CWC and are due on January 1, 2054. Interest is payable semi-annually in arrears on January 15th and July 15th of each year. The closing of the notes purchase agreement occurred in January 2024.

Note 5.Income Taxes

For the three and nine months ended September 30, 2024, income tax expense was $1,928 and $7,883, respectively. Income tax expense for the three and nine months ended September 30, 2023 was $4,561 and $4,127, respectively. The effective consolidated income tax rates were 5% and 11% for the three months ended September 30, 2024 and 2023, respectively, and 10% and 6% for the nine months ended September 30, 2024 and 2023, respectively. The lower effective tax rate for the three months ended September 30, 2024 was primarily due to a tax accounting method change related to the repairs deduction. The higher effective tax rate for the nine months ended September 30, 2024 was primarily due to lower discrete tax benefits in 2024.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $4,920 and $4,511 as of September 30, 2024 and December 31, 2023, respectively. SJW Group currently does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of a lapse of the statute of limitations.

Note 6.Commitments and Contingencies

Note 7.Benefit Plans

SJW Group maintains noncontributory defined benefit pension plans for its eligible employees. SJWC employees hired before March 31, 2008 and CWC and MWC employees hired before January 1, 2009 are entitled to benefits under the pension plans based on the employee’s years of service and compensation.

For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee. Starting in 2023, TWC employees are also eligible to participate under SJWC’s cash balance plan. Certain employees hired before March 1, 2012, and covered by a plan merged into the CWC plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation. CTWS employees hired on or after January 1, 2009, are entitled to an additional 1.5% of eligible compensation to their company sponsored savings plan. SJW Group does not have multi-employer plans.

In addition, senior management hired before March 31, 2008, for SJWC and January 1, 2009 for CWC, are eligible to receive additional retirement benefits under supplemental executive retirement plans and retirement contracts. SJWC’s senior management hired on or after March 31, 2008, are eligible to receive additional retirement benefits under SJWC’s Cash Balance Executive Supplemental Retirement Plan. The supplemental retirement plans and Cash Balance Executive Supplemental Retirement Plan are non-qualified plans in which only senior management and other designated members of management may participate. SJW Group also provides health care and life insurance benefits for retired employees under employer-sponsored postretirement benefits that are not pension plans.

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and nine months ended September 30, 2024 and 2023 are as follows:

For the three and nine months ended September 30, 2024, SJW Group has made $2,258 and $4,516, respectively, of contributions to such plans. SJW Group does not expect to make any additional required and discretionary cash contributions to the pension plans and other postretirement benefit plans for the remainder of 2024.

Note 8.Equity Plans

SJW Group’s long-term incentive plans provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or subsidiary the opportunity to acquire an equity interest in SJW Group. SJW Group also maintains stock plans in connection with its acquisition of CTWS which are no longer granting new stock awards. In addition, shares are issued to employees under SJW Group’s employee stock purchase plan (“ESPP”). As of September 30, 2024, 187,810 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 1,038,040 shares are available for award issuances under the long-term incentive plans.

A summary of compensation costs charged to income, by award type, and proceeds from the ESPP, are presented below for the three and nine months ended September 30, 2024 and 2023:

For the three months ended September 30, 2024, there was no grant activity of service-based restricted stock awards. For the three months ended September 30, 2023, SJW Group granted 968 one-year and three-year service-based restricted stock awards with a weighted average grant date fair value per unit of $63.96. For the nine months ended September 30, 2024 and 2023, SJW Group granted 64,482 and 38,310, respectively, one-year and three-year service-based restricted stock awards with a weighted average grant date fair value per unit of $56.70 and $76.88, respectively.

For the three months ended September 30, 2024 and 2023, there was no grant activity of performance-based or market-based restricted stock awards. For the nine months ended September 30, 2024 and 2023, SJW Group granted 45,763 and 31,345 target units, respectively, of performance-based and market-based restricted stock awards with a weighted average grant date fair value per unit of $55.60 and $80.05, respectively. Based upon actual attainment relative to the target performance metric, the number of shares issuable can range between 0% to 150% of the target number of shares for performance-based restricted stock awards, or between 0% and 200% of the target number of shares for market-based restricted stock awards.

As of September 30, 2024, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $6,739. This cost is expected to be recognized over a weighted average period of 1.77 years.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 31, 2025, for the ESPP is approximately $135. This cost is expected to be recognized during the fourth quarter of 2024.

Note 9.Segment and Non-Tariffed Business Reporting

SJW Group is a holding company with five subsidiaries: (i) SJWC, (ii) SJWTX Holdings, Inc., a holding company for TWC, its consolidated variable interest entity, Acequia Water Supply Corporation, TWOS and TWR, (iii) SJW Land Company, (iv) SJWNE LLC, a holding company for CTWS and its subsidiaries, CWC, MWC, NEWUS and Chester Realty, Inc., and (v) National Water Utility. The first segment provides water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, CWC, TWC, MWC, NEWUS, and National Water Utility together referred to as “Water Utility Services.” Water Utility Services’ activities are water utility operations with both regulated and non-tariffed businesses. The second segment consists of property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff.

The executive staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and total assets, by subsidiary.

The following tables set forth information relating to SJW Group’s reportable segments and distribution of regulated and non-tariffed business activities within the reportable segments. Certain allocated assets, such as goodwill, revenue and expenses have been included in the reportable segment amounts. Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.

____________________

(1)    The “Water Utility Services” category for the three and nine months ended September 30, 2024 and 2023, includes the accounts of SJWC, CWC, TWC, MWC, and NEWUS on a stand-alone basis.

(2)    The “All Other” category for the three and nine months ended September 30, 2024 and 2023, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc. on a stand-alone basis.

SJW Group’s assets by segment are as follows:

Note 10.Acquisitions

In January 2023, TWC reached an agreement to acquire KT Water Development Ltd. (“KT Water Development”) and SJWTX Holdings, Inc. reached an agreement to acquire KT Water Resources, L.P. (“KT Water Resources”). The agreement between SJWTX Holdings, Inc. and KT Water Resources was assigned to TWR prior to closing. KT Water Development was an investor-owned water utility providing water to approximately 1,725 people through over 570 service connections in the Rockwall Ranch subdivision in southern Comal County, Texas. KT Water Resources was a wholesale groundwater resource supplier to KT Water Development formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas. The Public Utility Commission of Texas (“PUCT”) approved the proposed KT Water Development acquisition on July 24, 2023. The acquisition of KT Water Resources did not require PUCT approval. Both transactions closed on August 14, 2023. Further information regarding each of the acquisitions is set forth below.

The purchase price of KT Water Development was $7,338, all of which was cash, and was determined in accordance with a fair market value process defined under the Texas Water Code. The transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805—“Business Combinations.” The transaction consideration was allocated to utility plant.

The final purchase price allocation was completed during the quarter ended March 31, 2024, with no change from the preliminary purchase price allocation. Transaction costs were not material. The results of KT Water Development have been included in SJW Group’s consolidated statements of comprehensive income since the acquisition date and were not material. Pro forma financial information has not been presented because the acquisition was not material to SJW Group’s consolidated financial statements.

The total purchase price of KT Water Resources of $39,891 and consisted of a $24,491 up-front cash payment and an obligation for a post-closing production payment with an acquisition date fair value of $15,400. Considering transaction costs of $170, the total cost of the acquisition was $40,061. The KT Water Resources acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805.

The total cost was allocated as follows based on the fair values of the assets acquired: $28,386 to other intangible asset, $11,684 to nonutility property, and $9 to other current liabilities. The other intangible asset represents indefinite life water rights. The nonutility property consists of wells, land, easements, and construction work in progress.

The post-closing production payment represents an obligation to pay a total amount of $29,000 to the seller over a period up to 29 years. The repayment schedule is based on the quantity of groundwater produced from the acquired wells, subject to certain provisions in the purchase agreement. The fair value of the post-closing payment as of the acquisition date was determined by discounting forecasted repayments based on management’s estimates of future groundwater production. The difference between the fair value of $15,400 and the gross obligation of $29,000 was recorded as a debt discount and is being amortized as interest expense using the effective interest method over the life of the obligation. The post-closing production payment obligation is classified as long-term debt in the condensed consolidated balance sheets.

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

SJW Group 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 SJW Group is conducted through five wholly owned subsidiaries: San Jose Water Company (“SJWC”), Connecticut Water Company (“CWC”), The Maine Water Company (“MWC”), SJWTX, Inc. doing business as Texas Water Company (“TWC”) and National Water Utility Service, LLC (“National Water Utility”). National Water Utility is the contracting entity for shared services among the SJW Group affiliates formed in October 2024. The remaining subsidiaries provide water service to approximately 403,000 connections and wastewater service to approximately 4,000 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. Collectively, these water utility and utility-related services form our “Water Utility Services” segment.

SJW Group’s second segment, “Real Estate Services,” consists of property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., which own undeveloped land and operate commercial buildings in California and Connecticut. In the second quarter of 2024, SJW Land Company completed the sale of its Tennessee properties.

SJW Group 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 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. SJW Group cannot be certain that any transaction will be successful or that it will not materially harm operating results or our financial condition.

Please also see Note 10 of “Notes to Condensed Consolidated Financial Statements” for SJW Group’s recent acquisition activities.

SJW Group’s real estate investment activity is conducted through SJW Land Company and Chester Realty, Inc. SJW Land Company owns undeveloped land in California. At the end of the second quarter of 2024, all of Tennessee properties have been sold. Chester Realty, Inc. owns and operates land and commercial buildings in Connecticut. SJW Land Company and Chester Realty, Inc. manage their acquired income-producing and other properties until such time a determination is made to reinvest proceeds from the sale of such properties.

The discussion and analysis of our financial condition and results of operations is based on the accounting policies used and disclosed in our 2023 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, 2023, that was filed with the Securities and Exchange Commission on February 23, 2024.

Our critical accounting policies 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, 2023. Our significant accounting policies are described in the notes to the 2023 consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023. There have been no changes to our critical or significant accounting policies during the three and nine months ended September 30, 2024.

See Note 1 of “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of new accounting pronouncements.

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. 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.

SJW Group’s consolidated net income for the three months ended September 30, 2024 was $38,652, an increase of $2,430, or approximately 7%, from $36,222 for the same period in 2023. SJW Group’s consolidated net income for the nine months ended September 30, 2024 was $71,047, an increase of $5,009, or approximately 8%, from $66,038 for the same period in 2023. The increase in net income for the three months ended September 30, 2024 was primarily driven by rate increases in California and Connecticut and lower income tax expense attributable to a tax accounting method change. These factors were offset by higher water production expenses and increased other operating expenses as discussed below, lower customer usage in our Texas service areas driven primarily by weather conditions, and decreased real estate revenue due to the Tennessee properties that were sold in the second quarter of 2024. The increase in net income for the nine months ended September 30, 2024 was also primarily driven by rate increases in California and Connecticut, as well as growth in customers, primarily in Texas. These factors were offset by decreased real estate revenue due to the Tennessee properties that were sold in the second quarter of 2024, higher water production expenses, higher interest expense and an increase in other operating expenses as discussed below.

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

____________________

(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.

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

SJWC’s water supply consists of groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from Santa Clara Valley Water District (“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 purchased and pumped water increases production expenses substantially. The opposite is also true where water production expenses decrease in wet years. In both instances, the impacts of surface water, purchased water, groundwater charges and purchased power are tracked in SJWC’s Full Cost Balancing Account authorized by the California Public Utilities Commission (“CPUC”).

For the nine months ended September 30, 2024, water conditions remained positive across the State of California. As a result, the California Department of Water Resources (“DWR”) announced an increase in the State Water Project allocation from 15% to 30% of contract amount during the first quarter of 2024 and the U.S. Bureau of Reclamation announced an increase in the Central Valley Project allocation from 65% to 75% during the same period. The DWR further announced an increase in the State Water Project allocation from 30% to 40% of contract amount during the second quarter of 2024 while the U.S. Bureau of Reclamation’s Central Valley Project allocation remained at 75% during the same period. Water allocations for the State Water Project and the Central Valley Project remained at 40% and 75%, respectively, during the third quarter of 2024. On October 1, 2024, Valley Water’s 10 reservoirs were 27% of capacity, or 71% of restricted capacity, with 14.5 billion gallons of water in storage. Valley Water’s largest reservoir, Anderson, remained drained for a dam seismic retrofit project. Valley Water also reported that the managed groundwater recharge from January to September in the Santa Clara Plain was 122% of the five-year average. The groundwater level in the Santa Clara Plain is approximately three feet lower than September 2023. According to Valley Water, the projected total groundwater storage at the end of 2024 is expected to be in the Normal Stage of the Water Shortage Contingency Plan.

As of September 30, 2024, SJWC’s Lake Elsman was 74.2% of capacity with 1.5 billion gallons of water, approximately 220.3% of the five-year seasonal average. However, the rainfall at SJWC’s Lake Elsman was measured at zero inches for the period from July 1, 2024 through September 30, 2024. SJWC’s Montevina Water Treatment Plant treated 2.7 billion gallons of water for the nine months ended September 30, 2024, which is 131.7% of the five-year average. SJWC’s Saratoga Water Treatment Plant remains offline until the next rain season (November to March). SJWC believes that its various sources of water supply will be sufficient to meet customer demand through the remainder of 2024.

CWC’s water sources vary among the individual systems, but overall, approximately 80% of the total dependable yield comes from surface water supplies and 20% from wells. In addition, CWC has water supply agreements to supplement its water supply with the South Central Connecticut Regional Water Authority and The Metropolitan District that expire in 2058 and 2053, respectively.

TWC’s water supply consists of groundwater from wells and purchased treated and untreated raw water from local water agencies. TWC has long-term agreements with the Guadalupe-Blanco River Authority (“GBRA”), which expire in 2037, 2040, 2044 and 2050. The agreements, which are take-or-pay contracts, provide TWC with an aggregate of approximately 7,650 acre-feet of water per year from Canyon Lake at prices that may be adjusted periodically by GBRA. TWC also has raw water supply agreements with the Lower Colorado River Authority and West Travis Public Utility Agency expiring in 2059 and 2046, respectively, to provide for 350 acre-feet of water per year from Lake Austin and the Colorado River, respectively, at prices that may be adjusted periodically by the agencies. Forty active production wells located in a Comal Trinity Groundwater Conservation District, a regulated portion of the Trinity aquifer, are charged a groundwater pump tax based upon usage.

In August 2023, a non-regulated subsidiary, Texas Water Resources, LLC (“TWR”), acquired eight wells and the associated water rights of KT Water Resources, LLC. In connection with a transaction in the third quarter of 2024, TWC purchased these assets from TWR for use in utility operations. Accordingly, SJW Group reclassified $28,386 related to indefinite life water rights from other intangible assets to utility plant intangible assets and $11,684 from nonutility property to utility plant. These wells have been projected to yield at least 6,000 acre-feet per year or more. Development of the KT Water System continues.

The Texas service area is currently experiencing drought conditions that result in water usage restrictions for customers. These water usage restrictions will likely impact revenue for the remainder of 2024. Significant future capital investment of transmission main and storage facilities in addition to developing additional supply sources is planned for 2025 and beyond.

Water sources at MWC vary among the individual systems, but overall, approximately 90% of the total dependable yield comes from surface water supplies and 10% from wells. MWC has a water supply agreement with the Kennebec Water District expiring in 2040.

The following table presents the change in sources of water supply, in billion gallons, for Water Utility Services:

The changes in the source of supply mix were consistent with the changes in the water production expenses.

SJWC’s unaccounted-for water on a 12-month-to-date basis for September 30, 2024 and 2023 approximated 8.9% and 7.9%, respectively, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through the system, partially offset by SJWC’s main replacements and lost water reduction programs.

Connecticut Water Service, Inc. (“CTWS”)’s unaccounted-for water on a 12-month-to-date basis for September 30, 2024 and 2023 approximated 14.4% and 13.0%, respectively, as a percentage of total production. The unaccounted-for water estimate is based on the results of past experience and the impact of flows through CTWS’s systems, unadjusted for any required system flushing, partially offset by Water Infrastructure Conservation Adjustment and Water Infrastructure Surcharge main replacement programs and lost water reduction initiatives.

The change in water production expenses of $13,064 for the three months ended September 30, 2024, compared to the same period in 2023, was primarily attributable to increases in average per unit costs for purchased water and groundwater extraction, and increases in production volume, offset by decreases resulting from regulatory adjustments through SJWC’s Full Cost Balancing Account.

The change in water production expenses of $26,423 for the nine months ended September 30, 2024, compared to the same period in 2023, was primarily attributable to increases in average per unit costs for purchased water and groundwater extraction, and production volume, offset by decreases resulting from regulatory adjustments.

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. Effective July 1, 2023, Valley Water increased the unit price of purchased water by approximately 14% and the groundwater extraction charge by approximately 15%.

Operating expenses, excluding water production expenses, increased $5,409 for the three months ended September 30, 2024, compared to the same period in 2023. The increase was primarily attributable to increases in expenses related to contracted work for others, increases in general and administrative expenses for contracted work and inflationary increases offset by higher allocations to construction activities, and increases in depreciation and amortization for new utility plant placed in service.

Operating expenses, excluding water production expenses, increased $11,277 for the nine months ended September 30, 2024, compared to the same period in 2023. The increase was primarily attributable to increases in depreciation and amortization for new utility plant placed in service and higher maintenance expenses related to contracted work for others, security expenses, and adjustments to certain regulatory assets as a result of the final decision in the Connecticut general rate case (“GRC”), and a slight increase in administrative and general expenses. The general and administrative expenses change is primarily from inflationary increases offset by decreases in the allowance for credit losses of $6,847 and higher allocations to construction activities. The higher allocations and inflationary increases are expected to impact the remainder of 2024.

For the three months ended September 30, 2024, compared to the same period in 2023, the change in other (expense) income was primarily due to lower income from certain service and other activities and higher interest expense on long-term debt, offset by an increase in return on pension plan assets.

For the nine months ended September 30, 2024, compared to the same period in 2023, the change in other (expense) income was primarily due to an increase in interest expense due to higher average balances and interest rates, decreases in gains from real estate sale transactions of $2,054 and lower income from certain service and other activities, offset by an increase in return on pension plan assets.

For the three and nine months ended September 30, 2024, compared to the same period in 2023, income tax expense decreased $2,633 and increased $3,756, respectively. The decrease in income tax expense for the three months ended September 30, 2024 was primarily due to a tax accounting method change. The increase in income tax expense for the nine months ended September 30, 2024 was primarily due to a higher pre-tax income in 2024.

The effective consolidated income tax rates were 5% and 11% for the three months ended September 30, 2024 and 2023, respectively, and 10% and 6% for the nine months ended September 30, 2024 and 2023, respectively. The lower effective tax rate for the three months ended September 30, 2024 was primarily due to a tax accounting method change related to the repairs deduction. The higher effective tax rate for the nine months ended September 30, 2024 was primarily due to lower discrete tax benefits in 2024.