Earnings Call Transcript - AWK Q1 FY2026

Operator

Good morning and welcome to American Water's first quarter 2026 earnings conference call. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the company's Investor Relations website. The audio webcast archive will be available for one year on American Water's Investor Relations website. I would now like to introduce your host for today's call, Aaron Musgrave. He's Vice President of Investor Relations. Mr. Musgrave, you may begin.

Aaron Musgrave, Head of Investor Relations

Good morning, everyone, and thank you for joining us for today's call. At the end of our prepared remarks, we will open the call for your questions. Let me first go over some safe harbor language. Today, we'll be making forward-looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based on our current expectations, estimates, and assumptions. However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties, and factors, as well as a more detailed analysis of our financials and other important information is provided in the first quarter earnings release and Form 10Q, each filed yesterday with the SEC. This call will include a discussion of non-GAAP financial information. A reconciliation of our historical adjusted earnings per share to GAAP earnings per share and other disclosures related to our non-GAAP financial information can be found in the appendix of the slides for this call. And finally, all statements during this presentation related to earnings and earnings per share refer to diluted adjusted earnings and earnings per share. With that, I'll turn the call over to American Waters President and CEO, John Griffith. Thanks, Aaron, and good morning, everyone.

John Griffith, CEO

As we announced yesterday, we started 2026 with financial results that were right on track to achieve our full-year earnings guidance, which we are pleased to affirm again this quarter, along with our long-term targets. Adjusted earnings were $1.01 per share for the quarter and reflect a successful execution of our plan so far in 2026. We expect to again deliver 8% EPS growth in 2026 while continuing to provide high-quality, affordable service to our customers. We are well on our way to executing on our regulatory and capital plans for 2026 with rate cases completed in two states and investments in infrastructure progressing well. Our teams have also continued to advocate for our customers in various facets to start the year. For example, we've now secured approximately $185 million of net payments from PFAS manufacturers that will be passed on to customers or offset the cost of PFAS remediation. And, in two more states, we've helped advance legislation in 2026 that should set the foundation for expanded, limited-income customer bill assistance. These efforts align squarely with our mission to provide safe, clean, reliable, and affordable service to our customers. In sum, for slide five, I am confident we'll successfully execute on our plans for 2026 and beyond. Moving on to slide six, as we announced yesterday, our Board of Directors approved an increase in the company's quarterly cash dividend of 8.2% to 89.5 cents per share. We have grown our dividend consistently over the last decade, significantly outpacing virtually all of our utility peers. Looking ahead, we continue to expect to grow our dividend at 7% to 9% per year in line with our compelling 7% to 9% EPS growth target. Our board and management team highly value our dividend and its contribution to our compelling total shareholder return for investors. In closing on slide seven, I'm pleased to share that we've achieved another milestone on the path to closing our proposed merger with essential utilities. You may recall, as a part of the update I provided in February, we filed all of the required state regulatory approvals prior to the end of 2025. Last week, we received our first state approval for the merger in Kentucky. We expect to receive the next decision in Virginia in June. In other states, including in Pennsylvania and New Jersey, the cases are proceeding as planned with procedural schedules expected to continue through the summer and early fall. Also, late this summer, we plan to file the Hart-Scott-Rodino notification application related to the proposed essential utilities merger. Finally, we continue to expect the merger to close by the end of the first quarter, 2027. With that, I'll hand it over to David to cover our financial and regulatory update in further detail. Thanks, John, and good morning, everyone.

Aaron Musgrave, Head of Investor Relations

Starting on slide nine, I'll provide some further insights into our financial results for the quarter. Consolidated.