SJW Group (NYSE:SJW) Q1 2023 Earnings Call Transcript

SJW Group (NYSE:SJW) Q1 2023 Earnings Call Transcript May 1, 2023

SJW Group beats earnings expectations. Reported EPS is $0.37, expectations were $0.18.

Operator: Good afternoon, and thank you for standing by. Welcome to the SJW Group First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that, today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Walters, Chief Financial Officer and Treasurer. Please go ahead.

Andrew Walters: Thank you, Operator. Welcome to the First Quarter 2023 Financial Results Conference Call for SJW Group. I will be presenting today with Eric Thornburg, Chair of the Board, President and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com. Before we begin today, I would like to remind you that, this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions, expected future results, as well as other factors that the company believes are appropriate under the circumstances.

Many factors could cause the company’s actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that would cause actual results to be different from statements in this presentation, we refer you to the financial results press release and to our most recent Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today and SJW Group disclaims any duty to update or revise such statements. You will have an opportunity to ask questions at the end of the presentation. As a reminder, this webcast is being recorded and an archive of the webcast will be available until July 24, 2023.

You can access the press release and the webcast at our corporate website. I will now turn the call over to Eric Thornburg. Eric?

Eric Thornburg: Welcome, everyone, and thank you for joining us. I’m Eric Thornburg, and it is my honor to serve as Chair, President and CEO of SJW Group. The first quarter of 2023 was successful for our company. We delivered on key elements of our growth strategy and have laid the foundation for a strong year. We invested $52.4 million in water and wastewater utility infrastructure, which constitutes 21% of our $255 million 2023 capital expenditure plan. We work constructively with regulators to secure approval of general rate cases in Maine and an infrastructure surcharge in Connecticut, and we advanced the regulatory approval process for the acquisition of the Texas water utility, KT Water, that was announced earlier this year.

We also delivered earnings per diluted share of $0.37 and made solid progress across our environmental, social and governance goals, as part of executing our strategic plan. Andrew will review our financial results and regulatory updates in our state operations. Andrew?

Andrew Walters: Thank you, Eric. This morning, prior to market opening, we released our first quarter 2023 operating results. It is important to note that the quarter-over-quarter comparisons are affected by the delay in San Jose Water Company’s 2022 to 2024 general rate case proceedings. As you may recall, the settlement agreement between the Public Advocates Office and San Jose Water Company was approved by the California Public Utilities Commission in the fourth quarter of 2022. The authorized revenue increase and the general rate case was recorded in the fourth quarter of 2022, but was retroactive back to January 1st, 2022. The delay in recognizing revenues authorized in the general rate case will affect quarterly comparisons through 2023.

In the first quarter, we reported revenue of $137.3 million and net income of $11.5 million or diluted EPS of $0.37 per share. This compares to 2022 quarterly revenue of $124.3 million, reflecting a 10% increase and net income of $3.7 million, reflecting a 209% increase or diluted EPS of $0.12 per share, reflecting a 208% increase. As you can see, the quarter-over-quarter increase in diluted earnings per share for Q1 2023 was primarily driven by revenue increases of $0.51 per share, which I will break down for you shortly, and one-time true-up of $0.07 that occurred in the first quarter of 2022. Partially offsetting the quarter-over-quarter increase was a $0.19 decrease due to lower water usage and a non-recurring $0.16 gain on the sale of non-utility property in Q1 2022 and increased water supply cost from our water wholesaler, which is a pass-through expense.

As promised, a breakdown of the increase in revenue compared to the first quarter of 2022. The revenue increase was mostly driven by $17.4 million and cumulative rate filings. The total includes California’s first quarter 2023 revenue increase and the 2022 portion of the general rate case that was approved in Q4 2022. The benefit of the five general rate case approvals in Maine that were authorized in Q1 2022 and a water infrastructure conservation adjustment increased in Connecticut that was effective in Q2 2022. The revenue increase was partially offset by a $6.6 million decrease due to lower usage. Drought conditions in California have vastly improved. The drought declaration and mandatory water conservation that were in place in the first quarter of 2023 ended April 11th.

I will provide more detail on that shortly. There was a slight increase in water production expense when compared to the first quarter of 2022. The increase was largely driven by a $6.2 million change in regulatory cost deferrals related to recovery from memorandum and balancing accounts, mostly related to conservation and sources of supply. Water supply costs increased for purchased water, energy, and water production expenses by $6.2 million. Partially offsetting the increase expense was a $7 million decrease in production costs that related to lower customer usage and increase in owned water supply in California that reduced costs from Q1 2022 by $4.6 million. Remember that the increased usage of our own surface water supply benefits, our California customers as a result of the 2022 GRC decision.

The 6% increase in other operating expenses compared to the prior year was driven by a non-recurring sale of non-utility property for $5.5 million in the first quarter of 2022 and $1.1 million in depreciation. The increase was partially offset by a $2.4 million reduction in depreciation and amortization due to the one-time impact in the first quarter of 2022 related to our Cupertino concession assets and a small decrease in maintenance costs. $42 million was replaced by SJW Group in the first quarter of 2023 through our aftermarket program. At the end of the quarter, we had $278 million available and $72 million drawn on our bank lines of credit for short-term financing of utility plant additions and operating activities. The average borrowing rate for our line of credit advances during the first quarter was approximately 5.74%.

The average borrowing rate in the same period 2022 was approximately 1.64%. We, along with our fellow Class A water utilities in California continue to await a decision in the cost of capital proceeding. The CPUC has extended the deadline to make a decision until August 2023. We are hopeful that there will be a final decision at that time. As I mentioned earlier, Drought conditions have improved dramatically in California. The water supply outlook is the best in years owing to a full groundwater basin and record snow pack in the Sierra, Nevada Mountains. Our largest owned water – surface water supply, Lake Elsman was at 101% of its storage capacity on March 31, 2023. Surface water production was 1.5 billion gallons on March 31, and so already exceeded 1.8 billion gallons during April of 2023.

Because of improved drought conditions, our wholesale water supplier, Valley Water ended the mandatory water conservation on April 11, 2023. The call for a 15% voluntary conservation remains in place, and our request to continue tracking revenue losses in the Water Conservation Memorandum Account and the Water Conservation Expense Memorandum Account is pending before the CPUC. In Connecticut, the Connecticut Public Utility Regulatory Authority approved a 3.1% increase in the Water, Infrastructure and Conservation Adjustment, effective April 1, 2023. The increase is expected to deliver $3.3 million in annualized revenues and would bring the cumulative WICA to nearly 6.2%. The cumulative cap is 10% between general rate cases. Connecticut Water is also planning to file a general rate case in the third quarter of 2023.

On March 31, the Maine water filed with the public — sorry, Maine Public Utility Commission, the final step of the three-step general rate case related to the construction and operation of the new Saco River Drinking Water Resource Center that went online in June of 2022. The company is requesting a $2.9 million increase in annualized revenues over two years. The GRC filing reflects the actual operating cost of the new treatment facility and increased financing costs. The decision is expected for the third quarter of 2023. GRCs are also planned in two other divisions later this year. Texas Water filed an application for system improvement charge at the end of 2022. Since our last general rate case in 2014, the company has invested more than $33.6 million in the system improvement charge eligible drinking water and wastewater infrastructure, that is in service and providing benefits to customers.

Our system improvement charge finally request recovery of $14.8 million, an improvement that were made between January 1, 2020 and September 30, 2022. If approved as filed, the surcharge would generate approximately $1.6 million in annualized revenues. A decision from the Public Utility Commission of Texas is expected in the second half of 2023. The filing to expand our service area with the Public Utility Commission of Texas is pending for transfer of more than 500 acres of water service areas and more than 300 acres of wastewater service area from the San Antonio Water System to Texas water. San Antonio has already approved the service area transfer. No customers would be affected. Texas Water currently serves more than 26,000 water connections and 900 wastewater connections in a rapidly growing area between Austin and San Antonio, and it serves three of the five fastest-growing counties in the US according to the census bureau reports.

We are reaffirming our 2023 guidance of $2.40 to $2.50 per diluted share and five year capital investment outlook of $1.4 billion. Factors impacting the 2023 guidance include no significant rate case decisions expected in 2023, continued inflation affecting interest costs, labor costs and other expenses, a conservative cost of capital ruling in California and usage recovery associated with the end of mandatory conservation and temporary decoupling mechanism in California. The company maintains its long-term EPS growth rate target of 5% to 7% anchored off of 2022 diluted EPS of $2.43. Importantly, the year-over-year growth is not expected to be linear, but given the relative contributions of each utility and rate case timing. With that, I will turn the call back over to Eric.

Eric?

Eric Thornburg: Thank you, Andrew. The United States Environmental Protection Agency has proposed standards and regulations for 6 PFAS compounds that are due to be finalized by the end of 2023. SJW Group supports the creation of health-based standards for PFAS. We also have initiated action to hold the manufacturers of PFAS and polluters ultimately responsible for this contaminant. Further, we are also advocating on our own and through national and local industry associations that any available federal and state funding for PFAS treatment be available to all affected water and wastewater utilities. Meanwhile, we have completed voluntary testing for PFAS in the vast majority of our water systems. We are evaluating the capital and operating expenditures necessary for the design, construction and ongoing operations of PFAS treatment.

The initial estimate of CapEx spend for PFAS treatment is approximately $170 million to $190 million, which is based on testing to-date and an assumption that EPA’s regulation is adopted as proposed. We endeavor daily to be stewards of the environment and leaders in sustainability. In 2023, we’ve completed one solar energy project in California with an additional project under construction and three more planned to be under construction by the end of the year. In Connecticut, construction is set to begin on the solar project that will offset 98% of the energy needs of New England headquarters, Southern Region Work Center and two EV charging stations. In Maine, we are waiting on energy infrastructure upgrades to begin a solar project that will offset 100% of the energy needs of our Saco River Drinking Water Resource Center.

We expect that project to be complete in 2024. Our efforts for our community and towards corporate social responsibility have resulted in an improved ESG corporate rating from Institutional Shareholder Services or ISS from a B- to a B rating in the first quarter, which is prime status. Further, our environmental score from ISS increased in the first quarter. Our ISS Environmental, social and governance scores among the highest for U.S.-based water utilities. We will continue to work towards achieving rankings that reflect our long-term commitment to ESG. I’m pleased to share that Tom Hodge is our newly appointed Vice President of Business Development at SJW Group and President of our non-regulated Water Services subsidiary in Texas. Tom has built a strong record of successful acquisitions and business development.

As President of Texas Water, Tom has led the team at quadrupled our service connections in Texas, since 2007, through prudent acquisitions and securing water supply to support organic growth. He’s an accomplished leader who models our values of service, while building relationships, successfully integrating acquisitions and driving results. It is with deep appreciation and respect that SJW Group bids farewell to retired Board member, Walter J. Bishop, after over a decade of dedicated service to the company. Walter has elevated the company’s commitment to sustainable water supplies, environmental stewardship, our growth in Texas, and served as the first Chair of our Sustainability Committee. We thank him for his service, and leadership. I also want to thank our employees for their daily hard work serving customers, communities and each other while being good stewards of the environment.

Every quarter, the progress made by our talented teams across the nation at SJW Group, makes me proud and inspired to see what more we can do to provide value to our investors and local communities, while setting best-in-class standards for reliability and high-quality water. With commitments to investing in infrastructure, engaging in constructive regulatory relationships, and growing our leadership in the communities we serve and within our industry, I have confidence our team will continue to excel and position SJW Group, well for the future. The work we do will continue to embody our core values of integrity, trust, service, compassion, transparency, teamwork, and straight talk and honor our culture which is essential for long-term success.

With that, I will turn the call back over to the operator.

Q&A Session

Operator: The first question comes from Angie Storozynski with Seaport Research. Your line is now open.

Angie Storozynski: Thank you. Okay. So, maybe let’s start with the end of the consolidation mandate. So, you continue to track the sales volume in the memorandum account. Now, if I look at your recent general rate case and your sales projections, assuming that this memorandum account is not approved or extended? Are you still tracking roughly in line with your sales expectations?

Eric Thornburg: All right. So, Angie, it’s a great question. And the answer is we’re about 10% below our authorized numbers for the first quarter. You got to keep in mind that we had a lot of rain during the quarter, which impacts usage all by itself, excluding the impacts from the drought conditions themselves. The way I’m thinking about it is, if we look at last year, last year, we had the drought conditions in place during the full year. Our total revenue impact, net of the ROE offset was $3.6 million. That’s something I look to. So, I would expect the number less than the $3.6 million going into this year. How much less than that really depends on how fast the usage picks up, which is weather-dependent as many other factors as to when people start watering their lawns and washing cars, filling pools and the other things.

We have had some hot weather the previous week where it’s been in the 1980s, this week gets cooler. So, it’s really going to be weather dependent as to how fast it recovers is going to be one of the bigger drivers.

Angie Storozynski: Okay. And how soon are we going to know if the commission signs off on continued on the continuation of this memorandum account?

Eric Thornburg: Yes, I can’t comment at this stage. Like I will let the commission give them the time to get through the process and it shouldn’t theoretically take too long to approve or deny the request related to that, but it just depends on their other workloads.

Angie Storozynski: Okay. I understand. And then moving on to O&M expenses and interest expense. So, how are those tracking versus your prior expectations? The interest expense, I mean, at least the rate looks pretty high. So, I’m just wondering how those track versus prior expectations? And secondly, given that we keep waiting for the cost capital decision, would you be able to update the latest cost of debt to be reflected in that true-up when it happens on the cost of capital side,

Eric Thornburg: Well, the answer is no for the update on the cost of debt. The only time that there’s a cost of debt update as if the cost of capital adjustment mechanism takes place, then there is an update on the equity, and there’s also an update on the debt at that point. But as it relates to the interest cost, it is going up fairly significantly. We’ve done our best to position ourselves for the increases this year. That included the use of more equity at the beginning of the year as opposed to last year we issued at the end of the year. That’s the first aspect. The second is we issued most of our fixed long-term debt mid last year. And so we won’t need to issue debt towards the — until the end of this year. Now that does mean that we have short-term lines of credit that we will be carrying during the year.

You’ll note that — or the balances of those short-term line of credit were at $72 million for end of the first quarter. That is down pretty significantly from the peak of last year, but we had some debt issuances, which we use the line of credit to temporary refinance until we have the long-term pieces of debt come in as well. So those would be the impact. So I think we’re doing our best to offset it, but as I highlighted in our — our guidance for the year, we expected the interest rates to go up. They are higher than what I had initially expected and the rates have continued to go up, but we’ve also fit in mechanisms in place to kind of counterbalance that. And O&M side, well, as we look at the different challenges that we have from usage and interest rates and inflation, we have continued to focus on the operations of our business, and we will continue to do that as the year progresses.

Angie Storozynski: Okay. And just one last one. The Connecticut rate case. Now we have the final decision for Aquarion’s rate case. Yes. It’s special on its own. So I mean, is there a lesson learned from what we saw from the commission in Connecticut? And how are you going to adjust your strategy as you approach the rate case filing in the third quarter?

Andrew Walters: Thank you, Angie. And spot on, it’s quite — it was quite a decision. And as you know, Aquarion has — has appealed the case and we’re going to carefully watch for emerging results from that appeal. But as I look at the recent case we’re Aquarion, of course, the subsidiary of Eversource, I see it both as affirming to our strategy, but also instructive to things that we need to do differently. It’s a firming in that it’s consistent with our announced strategy to file GRCs more regularly and work to reduce the risk of future cases by keeping the issues to a minimum and as discrete as possible. and of course, coming in for smaller amounts. And I think to Aquarion’s credit, they stayed out for quite a long time. But then when you do come in, there’s a whole lot of issues to address and the size of the increase is just — it creates public relations problems, which ultimately put pressure on you politically.

And also, remember that Connecticut is blessed with the water infrastructure conservation adjustment. This data has a very progressive repair tax policy and ram all of which are capital supported policies. On the other side, the case was instructive for us in that it clearly signals that utilities in general, need to do a better job of supporting the justification for capital investments and really going to greater lengths to demonstrate the value of those investments bring to customers and communities. So our team in Connecticut is all over this. We’re reimagining our rate case presentation in order to address those messages. And I’m confident that we’ll be ready when we file. So we’re going to watch the appeal carefully, but we’re doing our best to approach it in a completely different fashion taking heed of the chairs commentary there.

So definitely emerging issues in Connecticut, but I think we’re on top of it.

Angie Storozynski: Okay. Good luck. Thank you. Operator: Please stand by for our next question. Our next question comes from Richard Sunderland with JPMorgan. Your line is now open.

Richard Sunderland: Hi. Good morning, and thank you for the time today.

Eric Thornburg: Hi, Richard, thanks for calling in.

Richard Sunderland: Circling back to the WCMA, could you walk us through some of the more recent history here with voluntary conservation, if I’m recalling correctly, you had a similar request that was denied. But I guess, I’m curious now, if the backdrop stands a little different, given there’s decoupling potentially on the horizon, any thoughts and context there would be helpful.

Andrew Walters: Richard, it’s a great question, and it’s hard to kind of necessarily have all the answers of how they’ll look at this. But the situation is slightly different just in terms of where the drought is, where our agency that provides the water supply has asked us to be in terms of the continued voluntary conservation. They’ve given a specific target. They have continued to limit outdoor watering, and those things do create more of a backdrop that could be supportive of a continued approval of the WCMA. That being said, they did not approve it after the governor pulled off last time. So we’re going to wait till we have a specific guidance from the commission on the WCMA, as to how we track the expenses going forward for 2023.

Eric Thornburg: Richard, this is Eric. The additional comment I would add is that back in 2014, the commission adopted a resolution and authorized water utilities without full revenue decoupling mechanisms to request a memorandum account to track revenue shortfalls associated with reduced sales from the activation of either voluntary or mandatory conservation programs, so we’re kind of hitching our request to that action, but it was some years ago. So we put forth, I think, a compelling argument, but we also understand sort of the prevailing approaches in California have not been supportive of this. So we’re going to work at it, and we’re convinced we have a good – good case to make here, but we’ll see it through and see where we are.

Richard Sunderland: Got it. Very helpful color there. Secondly, for me, just turning to your PFAS update, the $170 million to $190 million CapEx estimate. Is that incremental to the current plan or do you see any potential offsets of moving capital kind of in and out of the current outlook? And then secondly, is there any estimate of how long it would take to deploy those investments?

Eric Thornburg: Thank you, Richard. Yes, this is a fast-moving development, of course. And these investments would be incremental to our $1.4 billion CapEx spend over the next five years. It would be our full effort to not have these investments crowd out other investments within our cases going forward because we believe they’re all necessary but we’ll also continue to evaluate that in light of commission actions and affordability matters. I think we’re in a good case and good position wealth to make that case. But – but we’ll adjust accordingly. And this standard would go into effect and we’d be required to get in line. I think it’s three years hence. So there’s a lot of work to be done in pretty short order. So fortunately, I think we’ve got a lot of advanced work already underway and some experience in this area.

But make no mistake, this is a challenging time frame, but we fully support the regulation and it’s the right thing to do for customers. And again, bear in mind, the reduction here, basically, if you can detect it, you need to remove it. And I think that’s a very powerful step that the EPA is making. So, we support that. We will continue to make our best efforts here to get on track for this as quickly as possible.

Richard Sunderland: Understood. Thank you so much for the time today.

Eric Thornburg: Thank you, Richard. Thanks for calling in.

Operator: Please stand by for our next question. The next question comes from Jonathan Reeder with Wells Fargo. Your line is now open.

Jonathan Reeder: Hey, Eric and Andrew. How are you guys doing today?

Eric Thornburg: Hey Jonathan, thanks for all calling.

Andrew Walters: Good morning. Good afternoon.

Jonathan Reeder: Yes. Thanks for taking my question. I appreciate it. Some have already been answered, but I did kind of want to follow up to Angie’s first one. When exactly did you make that request, I guess, with the CPUC to continue tracking the revenue and expense impact. And then, if you don’t have a decision on the WCMA and the WCEMA before Q2 results, will the default be to assume the mechanism is not in effect for Q2?

Andrew Walters: Excellent questions. So, a couple of things. So first of all, the date of the request was April 20, and it’s Advice Letter 592. If we don’t get approval from the Commission on this, we will not be moving forward with continuing the WCMA until we have explicit approval from them.

Jonathan Reeder: Okay. Good. I appreciate that clarity. And then, another kind of point of clarity about the 2023 equity issuance plans. Are there acquisition growth-related needs in 2023 due to deals that are already announced and like working their way through the regulatory approval process that would bring the total issuance in 2023 above the $40 million to $50 million guidance range, or is that caveat just in there to account for any potential future sizable deals that might come about?

Andrew Walters: No, it’s an excellent question. The answer is for deals that are currently working their way through, that would be incremental to the $40 million to $50 million that we already announced. And I’ll just highlight that every time that we issue equity in today’s environment, it is actually accretive to our shareholders. So the short-term cost of debt relative to the earnings — current earnings impact of equity is biased towards the equity as opposed to short-term line of credit.

Jonathan Reeder: Okay. Makes sense what the rates are. And then last kind of question, I think it’s kind of small overall, but your release discussed a lot of solar projects you’re doing in various states to offset energy consumption. How much like cumulatively are you investing on solar generation, and am I correct in assuming that it’s recoverable in rate base in the respective jurisdictions?

Andrew Walters: Yes. So, it’s an excellent question. The answer is we would apply for recovery in the jurisdictions where it’s open. There are some of these investments are related to our order institute investigation, the OII settlement that we did. So, some of those are shareholder funded investments, but that will impact our greenhouse gas and also impact the cost of the rates for our customers long-term. So it’s an excellent investment for those customers.

Jonathan Reeder: Okay. And the ones on the East Coast, though, are any of those, like I think out there, there might have been the one that was over a megawatt and size. Is that something that you would expect to be recoverable in Maine or…?

Eric Thornburg: Yes. That’s a Maine and Connecticut. Everywhere where we put it in, it’s recoverable other than the OII talked about. And that includes in California, if we do incremental things beyond what we’ve discussed. Those would also expect to be recoverable as part of our rate case.

Jonathan Reeder: Okay. Great. Congrats on a good quarter and good job continuing to improve the disclosures in the presentation materials. I appreciate that.

Eric Thornburg: Thank you, Jonathan. Really appreciate it.

Operator: Please standby for our next question. Our next question comes from Gregg Orrill with UBS. Your line is now open.

Gregg Orrill : Yes. Great. Thank you. Regarding the PFAS expenditures you talked about, do you have a sense yet for how those would break down state-by-state?

Andrew Walters: No. I’ll need to revert to you on that. That’s about half in Connecticut and the other half in California. What we have in Maine and Texas is pretty modest.

Gregg Orrill : Okay. Thanks.

Eric Thornburg: Thank you.

Andrew Walters: Thanks, Gregg.

Operator: Please standby next for our question. Our next question comes from Angie Storozynski with Seaport Research. Your line is now open.

Angie Storozynski : Thank you. I just wanted to follow-up on Connecticut. So I see this performance-based rate making decision that came out of PURA. And I’m just wondering if your upcoming rate case will be already covered by it and how, if at all, that could impact what you’re going to file and the outcome?

Andrew Walters: Yes. Thank you, Angie. I guess primarily in spirits, but not in specifics. We have not seen any discussion around specific performance criteria on the water side. But we recognize demonstrating the value of our investments and the impact it has on our communities. We’re going to need to lead with that as well. So more to come, but we’re watching it very closely. And as you know, there’s also legislation that’s moving in Connecticut. And our team is engaged in that process and really working to make sure that we do our best to inform legislators and mitigate any adverse impacts where we can as it relates to water utilities. Because clearly, the target is, is the energy environment there. But, we’re sort of part and parcel now to do all of that. And we want to make sure our voice is heard in that process.

Angie Storozynski: Okay. And changing topics, so you know, the sales are, could potentially be a drag on your earnings. You have a slightly higher than expected interest expense. You issued equity early, like you said, but that’s actually helped. So what are the other, I mean, and the other thing is, right, that any increase in the allowed ROE which we had hoped for is getting delayed even though there could be actually a catch-up. So, I’m just wondering, what is my main driver here to be at the midpoint of your guidance? Is it some changes in the effective tax rate? Is it some cost cutting? Again, how comfortable are you that you can still hit the midpoint despite some of these headwinds?

Andrew Walters: Angie, it’s an excellent question and you’re recognizing when we gave the guidance kind of the different issues that we’re all facing. I would say, as it stands today, none of the issues are pushing us outside of our guidance range. We are and have some internal levers that we’re exercising in order to make sure that we hit our guidance and we will continue to head down that path. We will keep everybody updated. We still have items out there that need to continue down and meet our expectations, which is the cost of capital and the recovery on usage. We’re not obviously expecting usage to go back to, pre-drought levels instantaneously. So that’s one thing I can highlight. But as it relates to the rest, it just depends on how the announcements come out and if things are different than what we expect and we’ll address it at the time.

Angie Storozynski: Understood. Thank you.

Andrew Walters: You’re welcome. Thank you.

Operator: I show no further questions at this time. I would now like to turn the conference back to Eric Thornburg for closing remarks.

Eric Thornburg: Thank you, operator. It’s a real honor to lead SJW Group, a leading pure-play water utility with a strong platform for growth, an elite dividend track record, and a recognized leader in ESG performance. On behalf of our team across the nation, we thank you for your interest in and support of our company.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.