H2O AMERICA 10-Q

ITEM 1. FINANCIAL STATEMENTS H2O America and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (in thousands, except share and per share data) Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Operating revenue $ 198,255 176,174 $ 365,854 325,556 Operating expense: Production Expenses: Purchased water 37,421 38,129 63,374 64,321 Power 3,851 2,737 7,334 5,164 Groundwater extraction charges 26,354 17,552 44,645 29,678 Other production expenses 13,243 12,052 24,483 23,101 Total production expenses 80,869 70,470 139,836 122,264 Administrative and general 28,795 20,468 56,555 46,256 Maintenance 7,470 7,881 14,969 14,568 Property taxes and other non-income taxes 8,506 8,419 17,701 17,249 Depreciation and amortization 28,750 28,366 57,032 56,736 Total operating expense 154,390 135,604 286,093 257,073 Operating income 43,865 40,570 79,761 68,483 Other (expense) income: Interest on long-term debt and other interest expense ( 18,122 ) ( 18,294 ) ( 36,394 ) ( 35,878 ) Pension non-service credit 1,620 939 3,223 1,889 Other, net 1,982 1,205 2,777 3,856 Income before income taxes 29,345 24,420 49,367 38,350 Provision for income taxes 4,670 3,724 8,141 5,955 Net income 24,675 20,696 41,226 32,395 Other comprehensive loss, net — — — ( 442 ) Comprehensive income $ 24,675 20,696 $ 41,226 31,953 Earnings per share —Basic $ 0.71 0.64 $ 1.20 1.00 —Diluted $ 0.71 0.64 $ 1.20 1.00 Dividends per share $ 0.42 0.40 $ 0.84 0.80 Weighted average shares outstanding —Basic 34,777,152 32,397,501 34,280,727 32,237,115 —Diluted 34,860,349 32,460,894 34,367,212 32,302,741 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 4 Table of Contents H2O America and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) June 30, 2025 December 31, 2024 Assets Utility plant: Land $ 44,681 44,657 Depreciable plant and equipment 4,395,856 4,249,314 Construction work in progress 241,793 179,486 Intangible assets 51,604 51,604 Total utility plant 4,733,934 4,525,061 Less: accumulated depreciation and amortization 1,079,538 1,036,450 Net utility plant 3,654,396 3,488,611 Nonutility properties 1,314 1,314 Less: accumulated depreciation 99 98 Net nonutility properties 1,215 1,216 Current assets: Cash and cash equivalents 19,849 11,114 Accounts receivable: Customers, net of allowances for credit losses of $ 994 and $ 1,172 on June 30, 2025 and December 31, 2024, respectively 76,758 68,679 Income tax — 5,953 Other 7,666 7,059 Accrued unbilled revenue 67,960 60,847 Prepaid expenses 8,427 10,297 Current regulatory assets 12,626 18,172 Other current assets 7,164 8,593 Total current assets 200,450 190,714 Other assets: Regulatory assets, less current portion 232,650 224,055 Investments 18,878 18,087 Postretirement benefit plans 68,682 66,422 Goodwill 640,311 640,311 Other 30,344 28,893 Total other assets 990,865 977,768 Total assets $ 4,846,926 4,658,309 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 5 Table of Contents H2O America and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) June 30, 2025 December 31, 2024 Capitalization and liabilities Capitalization: Stockholders’ equity: Common stock, $ 0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 35,287,080 on June 30, 2025 and 33,629,169 on December 31, 2024 $ 35 34 Additional paid-in capital 914,330 827,796 Retained earnings 549,646 537,184 Accumulated other comprehensive income 1,960 1,960 Total stockholders’ equity 1,465,971 1,366,974 Long-term debt, less current portion 1,692,212 1,706,904 Total capitalization 3,158,183 3,073,878 Current liabilities: Lines of credit 160,840 119,124 Current portion of long-term debt 18,923 3,648 Accrued groundwater extraction charges, purchased water and power 38,310 25,118 Accounts payable 48,231 56,256 Accrued interest 16,126 17,476 Accrued payroll 11,579 15,193 Current regulatory liabilities 2 1,122 Other current liabilities 20,223 23,236 Total current liabilities 314,234 261,173 Deferred income taxes 286,031 276,043 Advances for construction 172,612 155,397 Contributions in aid of construction 339,949 340,738 Postretirement benefit plans 44,033 45,063 Regulatory liabilities, less current portion 508,980 483,719 Other noncurrent liabilities 22,904 22,298 Commitments and contingencies Total capitalization and liabilities $ 4,846,926 4,658,309 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 6 Table of Contents H2O America and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except share and per share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Number of Shares Amount Balances, December 31, 2024 33,629,169 $ 34 827,796 537,184 1,960 1,366,974 Net income — — — 16,551 — 16,551 Stock-based compensation — — 1,210 ( 9 ) — 1,201 Issuance of restricted and deferred stock units 31,587 — ( 908 ) — — ( 908 ) Employee stock purchase plan 26,129 — 1,116 — — 1,116 Common stock issuance, net of costs 495,900 — 26,545 — — 26,545 Dividends paid ($ 0.42 per share) — — — ( 14,142 ) — ( 14,142 ) Balances, March 31, 2025 34,182,785 $ 34 855,759 539,584 1,960 1,397,337 Net income — — — 24,675 — 24,675 Stock-based compensation — — 1,464 ( 9 ) — 1,455 Issuance of restricted and deferred stock units 16,702 — ( 61 ) — — ( 61 ) Common stock issuance, net of costs 1,087,593 1 57,168 — — 57,169 Dividends paid ($ 0.42 per share) — — — ( 14,604 ) — ( 14,604 ) Balances, June 30, 2025 35,287,080 $ 35 914,330 549,646 1,960 1,465,971 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 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 7 Table of Contents H2O America and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Six months ended June 30, 2025 2024 Operating activities: Net income $ 41,226 32,395 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 59,606 57,847 Deferred income taxes 8,642 1,278 Stock-based compensation 2,674 2,813 Allowance for equity funds used during construction ( 823 ) ( 1,145 ) Changes in operating assets and liabilities: Accounts receivable and accrued unbilled utility revenue ( 15,275 ) ( 9,746 ) Accounts payable and other current liabilities ( 9,400 ) ( 1,952 ) Accrued groundwater extraction charges, purchased water and power 13,192 8,102 Tax receivable and payable, and other accrued taxes 118 3,617 Postretirement benefits ( 1,420 ) ( 1,080 ) Regulatory assets and liabilities excluding cost of removal, income tax temporary differences and postretirement benefits 4,931 8,621 Other changes, net 546 ( 218 ) Net cash provided by operating activities 104,017 100,532 Investing activities: Additions to utility plant: Company-funded ( 204,440 ) ( 158,368 ) Contributions in aid of construction ( 11,963 ) ( 11,779 ) Cost to retire utility plant, net of salvage ( 1,471 ) ( 1,434 ) Proceeds from sale of real estate investments — 40,628 Other changes, net — ( 29 ) Net cash used in investing activities ( 217,874 ) ( 130,982 ) Financing activities: Borrowings from lines of credit 114,959 151,668 Repayments of lines of credit ( 73,243 ) ( 106,556 ) Long-term borrowings — 25,000 Repayments of long-term borrowings ( 1,738 ) ( 41,488 ) Issuance of common stock, net of issuance costs 83,713 32,302 Dividends paid ( 28,746 ) ( 25,724 ) Receipts of advances and contributions in aid of construction 30,293 10,054 Refunds of advances for construction ( 2,760 ) ( 1,341 ) Other changes, net 114 ( 384 ) Net cash provided by financing activities 122,592 43,531 Net change in cash and cash equivalents 8,735 13,081 Cash and cash equivalents, beginning of period 11,114 9,723 Cash and cash equivalents, end of period $ 19,849 22,804 Cash paid (refunded) during the period for: Interest $ 40,867 38,100 Interest, net of amounts capitalized $ 37,895 36,509 Income taxes $ ( 2,370 ) 702 Supplemental disclosure of non-cash activities: Accrued payables for additions to utility plant $ 36,941 29,125 Utility property installed by developers $ 1,459 748 Proceeds receivable from sale of real estate investments $ — 2,801 Accrued selling expenses on sale of real estate investments $ — 2,386 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 8 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) 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 (“SEC”). The Notes to Consolidated Financial Statements in H2O America’s 2024 Annual Report on Form 10-K, filed with the SEC on February 28, 2025, should be read in conjunction with the accompanying unaudited condensed consolidated financial statements. In May 2025, the Company changed the corporate name from SJW Group to H2O America and the trading symbol from SJW to HTO on the Nasdaq Global Select Market. H2O America is a holding company that conducts its business through the following wholly owned subsidiaries: San Jose Water Company (“SJWC”), SJWTX Holdings, Inc., SJW Land Company, SJWNE LLC, and National Water Utility Service, LLC (“NWU”). 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. Revenue 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. H2O America’s revenue components are as follows: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Revenue from contracts with customers $ 197,777 173,106 $ 362,640 323,114 Alternative revenue programs, net 1,759 1,314 2,351 ( 523 ) Other balancing and memorandum accounts and regulatory mechanisms, net ( 2,288 ) 977 ( 988 ) 413 Rental income 1,007 777 1,851 2,552 $ 198,255 176,174 $ 365,854 325,556 Nonutility Properties The major components of nonutility properties as of June 30, 2025 and December 31, 2024, are as follows: June 30, 2025 December 31, 2024 Land $ 915 915 Buildings and improvements 399 399 Subtotal 1,314 1,314 Less: accumulated depreciation 99 98 Total $ 1,215 1,216 Fair Value Measurement The following instruments are not measured at fair value on H2O America’s condensed consolidated balance sheets as of June 30, 2025, 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 June 30, 2025 approximates their carrying value as reported on the 9 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) condensed consolidated balance sheets. There have been no changes in valuation techniques during the three and six months ended June 30, 2025. 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 H2O America’s long-term debt was $ 1,513,238 and $ 1,490,024 as of June 30, 2025 and December 31, 2024, 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 June 30, 2025 and December 31, 2024, $ 1,496,137 and $ 1,473,393 , respectively, would be categorized as Level 2 in the fair value hierarchy and $ 17,101 and $ 16,631 , 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 $ 2,567 and $ 2,812 as of June 30, 2025 and December 31, 2024, respectively, and are categorized as Level 1 in the fair value hierarchy. Earnings per Share 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 H2O America’s long-term incentive plans and shares potentially issuable under H2O America’s employee stock purchase plan. For the three months ended June 30, 2025 and 2024, 8,900 and 6,567 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively. For the six months ended June 30, 2025 and 2024, 23,346 and 9,394 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively. 10 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) New Accounting Standards The recently issued accounting standards that have not yet been adopted by the company as of June 30, 2025 are as follows: Standard Description Date of Adoption Application Effect on the Condensed Consolidated Financial Statements Accounting Standards Update (“ASU”) 2023-09 “Improvements to Income Tax Disclosures” The ASU amends certain income tax disclosure requirements, including adding requirements to present the reconciliation of income tax expense computed at the statutory rate to actual income tax expense using both percentages and amounts and providing a disaggregation of income taxes paid. Further, certain disclosures are eliminated, including the current requirement to disclose information on changes in unrecognized tax benefits in the next 12 months. H2O America will adopt the ASU beginning with its annual financial statements for the year ending December 31, 2025. Prospective, with retrospective application also permitted. H2O America is currently evaluating the requirements of ASU 2023-09. ASU 2024-03 “Disaggregation of Income Statement Expenses” The ASU requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses. The ASU requires disclosure of purchases of inventory, employee compensation, depreciation, and intangible asset amortization in interim and annual reporting periods. Further, other amounts already required to be disclosed in accordance with current U.S. GAAP would be included in the same disclosure as the other disaggregation requirements. Additionally, the ASU requires qualitative descriptions of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively as well as disclosure of selling expenses in annual periods and an entity’s definition of selling expenses. The ASU is effective for H2O America for its annual financial statements for the year ending December 31, 2027 and for interim reporting periods for the year ending December 31, 2028. Early adoption is permitted. Prospective, with retrospective application also permitted. H2O America is currently evaluating the requirements of ASU 2024-03. 11 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) Note 2. Regulatory Matters Regulatory assets and liabilities are comprised of the following as of June 30, 2025 and December 31, 2024: June 30, 2025 December 31, 2024 Regulatory assets: Income tax temporary differences (a) (p) $ 185,239 180,103 Monterey Water Revenue Adjustment Mechanism (“MWRAM”) (b) 14,753 9,985 Business combinations debt premium (c) (p) 11,043 12,313 Employee benefit costs (d) (p) 6,144 6,370 Revenue adjustment mechanisms (e) (p) 5,780 5,024 Customer Assistance Program (“CAP”) balancing account (f) 4,686 6,599 Unrecognized pensions and other postretirement benefits (g) (p) 1,506 3,177 2022 general rate case interim memorandum account (h) 1,106 3,392 Other (j) 15,019 15,264 Total regulatory assets 245,276 242,227 Less: current regulatory assets (k) 12,626 18,172 Total regulatory assets, less current portion $ 232,650 224,055 Regulatory liabilities: Cost of removal (l) 379,624 364,398 Future income tax benefits due to customers (m) 83,326 84,128 Unrecognized pensions and other postretirement benefits (g) 27,696 27,872 PFAS legal settlement proceeds (q) 6,352 — Employee benefit costs (d) 4,933 1,137 Water supply costs (i) 4,405 3,386 Revenue adjustment mechanisms (e) 2 1,122 Other (n) 2,644 2,798 Total regulatory liabilities 508,982 484,841 Less: current regulatory liabilities (o) 2 1,122 Total regulatory liabilities, less current portion $ 508,980 483,719 ___________________________________ (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 5 to 100 years. (b) MWRAM is described in the following section. (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, and group health insurance. (e) Primarily relates to Water Rate Adjustment mechanism (“WRA”). WRA and Water Conservation Memorandum Account (“WCMA”) are described in the following section. (f) Represents costs associated with SJWC’s CAP. (g) 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. (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 (“FCBA”), 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) Primarily relates to SJWC’s balancing and memorandum account surcharge in accordance with Decision No. 24-12-077 and the current portion of CWC’s deferred well redevelopment and rate case costs. (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. 12 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) (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) Other includes accrued tank painting costs and other regulatory mechanisms. (o) Primarily relates to the current portion of WRA. (p) Generally, not earning a return either by interest on the regulatory asset or as a component of rate base at the allowed rate of return. (q) Primarily relates to legal settlements received by SJWC and CWC from ongoing PFAS water contamination litigation against manufacturers which will be used to offset future costs incurred, recorded as Contributions in Aid of Construction (“CIAC”), or returned to customers through future rates. Water Contamination Litigation Memorandum Account (“WCLMA”) has been established to track net proceeds and costs resulting from water contamination litigation related to SJWC. 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 FCBA 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 WCLMA allows SJWC to track net proceeds and costs resulting from water contamination litigation. 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, including amounts related to a 20 -basis point reduction in the authorized return on equity per the terms of the WCMA. Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA. 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. On December 19, 2024, the CPUC issued General Rate Case Decision No. 24-12-077, which approved a recovery of $ 15,792 in balancing and memorandum accounts from customers through a 12-month surcharge effective January 1, 2025. 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. Note 3. Capitalization In October 2024, H2O America entered into an equity distribution agreement (the, “Equity Distribution Agreement”) with BofA Securities, Inc., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, pursuant to which the company may offer and sell shares of its common stock, $ 0.001 par value per share, from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $ 200,000 . The Equity Distribution Agreement replaced the previous agreement that ended in 2024. For the three and six months ended June 30, 2025, H2O America issued and sold a total of 1,087,593 and 1,583,493 shares of common stock, respectively, with a weighted average price of $ 52.82 and $ 53.15 per share respectively, and received $ 57,168 and $ 83,713 in net proceeds, respectively, under the Equity Distribution Agreement. Since the inception of the Equity Distribution Agreement, H2O America has issued and sold 1,959,006 shares of common stock at a weighted average price of $ 53.59 for a total net proceeds of $ 103,882 and has $ 95,017 of aggregate gross sales price of shares remaining to issue under the Equity Distribution Agreement as of June 30, 2025. 13 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) Note 4. Lines of Credit and Long-Term Liabilities H2O America’s contractual obligations and commitments include senior notes, bank term loans, revenue bonds, state revolving fund loans and other obligations. Lines of Credit The weighted average interest rate on short-term borrowings outstanding at June 30, 2025, was 5.43 %, compared to 6.08 % at December 31, 2024. As of June 30, 2025, the unused portion of the lines of credit was $ 199,160 . On April 15, 2025, CTWS extended the maturity date on its $ 40,000 credit agreement from May 15, 2025 to August 13, 2025. SJWC has entered into a $ 10,000 credit agreement with JPMorgan Chase Bank, N.A., dated June 11, 2025. The credit agreement has a maturity date of June 11, 2026. This line of credit was unused at June 30, 2025. Note 5. Income Taxes Income tax expense was $ 4,670 and $ 3,724 for the three months ended June 30, 2025 and 2024, respectively. Income tax expense was $ 8,141 and $ 5,955 for the six months ended June 30, 2025 and 2024, respectively. The effective consolidated income tax rates were 16 % and 15 % for the three months ended June 30, 2025 and 2024, respectively, and 16 % for the six months ended for both June 30, 2025 and 2024, respectively. H2O America had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of $ 3,896 and $ 3,707 as of June 30, 2025 and December 31, 2024, respectively. H2O America 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 H2O America and its subsidiaries are subject to ordinary routine litigation incidental to its business. In October 2023, CWC, a subsidiary of H2O America, was named as a defendant in a putative class action lawsuit alleging that the water provided by CWC contained contaminants. The case is currently pending in the State of Connecticut Superior Court. CWC intends to vigorously defend itself in this lawsuit. H2O America is unable to provide a reasonable estimate of loss, if any, at this time. SJWC and CWC are plaintiffs in a lawsuit against manufacturers of certain PFAS compounds for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS compounds in public water supply systems owned and operated by these utility subsidiaries and throughout their respective service areas. The lawsuit is part of Multi-District Litigation (“MDL”) that commenced on December 7, 2018, in the United States District Court for the District of South Carolina. MWC has submitted timely claims as a settlement class member. On February 8, 2024, the MDL court approved settlements involving defendants The Chemours Company, Corteva, Inc., and DuPont de Nemours, Inc. to resolve claims brought in the MDL against them by public water systems, including SJWC and CWC. On March 29, 2024, the MDL court approved a similar settlement involving defendant 3M Company. On November 22, 2024, the MDL court approved settlements involving defendants Tyco Fire Products LP and BASF Corporation. H2O America is entitled to a portion of the settlements and is monitoring and evaluating the ongoing litigation and settlement activity with the PFAS manufacturers for potential impacts to the various claims that these utility subsidiaries have asserted. During the quarter ended June 30, 2025, the Company received $ 6,443 in cash proceeds from a legal settlement with 3M related to PFAS contamination. These proceeds were allocated as follows: SJWC received $ 4,420 ; CWC received $ 1,906 ; and MWC received $ 117 , which includes $ 91 payable to contract operators. The proceeds are compensatory in nature and are intended to reimburse the Company for costs incurred to address the presence of PFAS compounds in public water supply systems or to be refunded to customers through rate reductions, and have been recorded as a regulatory liability subject to regulatory approval. H2O America is entitled to receive additional cash proceeds from 3M Company during the remainder of 2025 and the subsequent nine years , pursuant to the terms of the settlement agreement. In addition, the Company is party to pending settlements with DuPont de Nemours, Inc., Tyco Fire Products LP, and BASF Corporation. Proceeds from these settlements are also expected to be received in 2025 and will be accounted for in a manner consistent with the 3M Company settlement. H2O 14 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) America is monitoring and evaluating the ongoing litigation and settlement activity with the PFAS manufacturers for potential impacts to the various claims that these utility subsidiaries have asserted. However, the amount of these additional proceeds is not estimable as of the date of this filing. Note 7. Benefit Plans H2O America 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. H2O America 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. H2O America 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 six months ended June 30, 2025 and 2024 are as follows: Pension Benefits Other Benefits Three months ended June 30, 2025 2024 2025 2024 Service cost $ 1,644 1,666 $ 156 166 Interest cost 3,901 3,613 337 295 Expected return on assets ( 4,944 ) ( 4,463 ) ( 295 ) ( 267 ) Amortization of actuarial (gain) loss ( 458 ) ( 18 ) ( 214 ) ( 161 ) Amortization of prior service cost 4 4 — — Total $ 147 802 $ ( 16 ) 33 Pension Benefits Other Benefits Six months ended June 30, 2025 2024 2025 2024 Service cost $ 3,287 3,331 $ 312 332 Interest cost 7,801 7,226 674 591 Expected return on assets ( 9,887 ) ( 8,926 ) ( 590 ) ( 534 ) Amortization of actuarial (gain) loss ( 915 ) ( 35 ) ( 428 ) ( 322 ) Amortization of prior service cost 7 7 — — Total $ 293 1,603 $ ( 32 ) 67 In 2025, H2O America expects to make required and discretionary cash contributions of up to $ 6,113 to the pension plans and other postretirement benefits. For the three and six months ended June 30, 2025, H2O America has made $ 628 and $ 2,105 , respectively, contributions to such plans. 15 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) Note 8. Equity Plans H2O America’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 H2O America. H2O America 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 H2O America’s employee stock purchase plan (“ESPP”). As of June 30, 2025, 230,275 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 913,976 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 six months ended June 30, 2025 and 2024: Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Compensation costs charged to income: ESPP $ 100 — $ 189 195 Restricted stock and deferred restricted stock 1,364 1,275 2,485 2,618 Total compensation costs charged to income $ 1,464 1,275 $ 2,674 2,813 ESPP proceeds $ — — $ 1,116 1,101 Restricted Stock and Deferred Restricted Stock For the three months ended June 30, 2025 and 2024, H2O America granted 19,909 and 24,692 , respectively, of one year and three-year service-based restricted stock awards with a weighted average grant date fair value per unit of $ 48.57 and $ 50.04 , respectively. For the six months ended June 30, 2025 and 2024, H2O America granted 66,314 and 64,482 , respectively, of one-year and three-year service-based restricted stock awards with a weighted average grant date fair value per unit of $ 45.49 and $ 58.39 , respectively. For the three months ended June 30, 2025 and 2024, H2O America granted 1,562 and 356 target units, respectively, of performance-based and market-based restricted stock awards with a weighted-average grant date fair value per unit of $ 53.19 and $ 52.90 , respectively. For the six months ended June 30, 2025 and 2024, H2O America granted 58,208 and 45,763 target units, respectively, of performance-based and market-based restricted stock awards with a weighted average grant date fair value per unit of $ 51.91 and $ 55.60 , 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 June 30, 2025, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $ 8,405 . This cost is expected to be recognized over a weighted average period of 1.93 years. 16 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) Note 9. Segment Reporting H2O America’s single reportable segment provides water utility and utility-related services to its customers through H2O America’s subsidiaries, SJWC, CWC, TWC, MWC, and Acequia, which are aggregated and referred to as “Water Utility Services.” Water Utility Services’ activities are water utility operations with both regulated and non-tariffed businesses. Other business activities that do not comprise separately reportable segments primarily include SJWC’s City of Cupertino service concession arrangement operations, property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., contract water and sewer operations and other water-related services provided by NEWUS and are referred to as “Other Services.” H2O America’s operating segments have been determined based on information used by the chief operating decision maker. H2O America’s chief operating decision maker (“CODM”) includes the Chairman, President, and Chief Executive Officer; the Chief Financial Officer and Treasurer; the Chief Operating Officer; the Senior Vice President and Chief Administrative Officer; and the Vice President and General Counsel. However, ultimate decision-making authority rests with the Chairman, President, and Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis that is accompanied by certain disaggregated information about operating revenue, expenses, net income, and total assets. The CODM uses the net income to assess the financial performance of the segments and allocate resources (including employees, financial, or capital resources) in the budgeting and forecasting process. Certain allocated assets, such as goodwill, revenue and expenses have been included in the reportable segment amounts. Certain corporate costs and expenses are not allocated to Water Utility Services or Other Services and are shown separately to reconcile to the applicable consolidated amounts. As previously disclosed, H2O America updated its segment presentation in the fourth quarter of 2024. Accordingly, prior period information has been recast to conform with the current period presentation. The following tables set forth information relating to H2O America's reportable segment and other business activities: For the three months ended June 30, 2025 Reportable Segment Water Utility Services Other Services (1) Unallocated Corporate (2) Consolidated Operating revenue $ 194,674 3,581 — 198,255 Less: Production expenses 79,324 1,545 — 80,869 Administrative and general 24,967 252 3,576 28,795 Maintenance 6,745 725 — 7,470 Property taxes and other non-income taxes 8,506 9 ( 9 ) 8,506 Depreciation and amortization 28,485 34 231 28,750 Interest on long-term debt and other interest expense 12,719 — 5,403 18,122 Provision (benefit) for income taxes 6,706 283 ( 2,319 ) 4,670 Other (3) ( 1,748 ) ( 38 ) ( 1,816 ) ( 3,602 ) Net income (loss) $ 28,970 771 ( 5,066 ) 24,675 Capital expenditures $ 132,058 — — 132,058 17 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) For the three months ended June 30, 2024 Reportable Segment Water Utility Services Other Services (1) Unallocated Corporate (2) Consolidated Operating revenue $ 172,046 4,128 — 176,174 Less: Production expenses 69,176 1,293 1 70,470 Administrative and general 19,292 820 356 20,468 Maintenance 7,261 620 — 7,881 Property taxes and other non-income taxes 8,463 20 ( 64 ) 8,419 Depreciation and amortization 28,057 86 223 28,366 Interest on long-term debt and other interest expense 12,037 224 6,033 18,294 Provision (benefit) for income taxes 5,325 233 ( 1,834 ) 3,724 Other (3) ( 1,570 ) 583 ( 1,157 ) ( 2,144 ) Net income (loss) $ 24,005 249 ( 3,558 ) 20,696 Capital expenditures $ 96,636 — — 96,636 For the six months ended June 30, 2025 Reportable Segment Water Utility Services Other Services (1) Unallocated Corporate (2) Consolidated Operating revenue $ 359,830 6,024 — 365,854 Less: Production expenses 137,309 2,527 — 139,836 Administrative and general 51,718 812 4,025 56,555 Maintenance 13,748 1,221 — 14,969 Property taxes and other non-income taxes 17,715 ( 50 ) 36 17,701 Depreciation and amortization 56,517 61 454 57,032 Interest on long-term debt and other interest expense 25,758 — 10,636 36,394 Provision (benefit) for income taxes 12,012 509 ( 4,380 ) 8,141 Other (3) ( 2,870 ) ( 137 ) ( 2,993 ) ( 6,000 ) Net income (loss) $ 47,923 1,081 ( 7,778 ) 41,226 Capital expenditures $ 216,403 — — 216,403 18 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) For the six months ended June 30, 2024 Reportable Segment Water Utility Services Other Services (1) Unallocated Corporate (2) Consolidated Operating revenue $ 316,961 8,595 — 325,556 Less: Production expenses 120,213 2,051 — 122,264 Administrative and general 43,142 1,630 1,484 46,256 Maintenance 13,504 1,064 — 14,568 Property taxes and other non-income taxes 17,053 258 ( 62 ) 17,249 Depreciation and amortization 56,118 172 446 56,736 Interest on long-term debt and other interest expense 23,579 445 11,854 35,878 Provision (benefit) for income taxes 9,021 817 ( 3,883 ) 5,955 Other (3) ( 4,455 ) 575 ( 1,865 ) ( 5,745 ) Net income (loss) $ 38,786 1,583 ( 7,974 ) 32,395 Capital expenditures $ 170,147 — — 170,147 ___________________________________ (1) The “Other Services” category includes the accounts of SJW Land Co, Chester Reality, Inc., SJWC’s Cupertino service concession arrangement operations, TWOS, TWR, and NEWUS, on a stand-alone basis. (2) The “Unallocated Corporate” category includes the accounts of H2O America, SJWNE LLC, SJWTX Holdings, Inc., CTWS, NWU on a stand-alone basis. (3) Primarily comprised of pension non-service credit (cost) and items of miscellaneous non-operating income (expense). H2O America’s assets for the Water Utility Services reportable segment and all other are as follows as of: June 30, 2025 December 31, 2024 Water Utility Services (reportable segment) $ 4,728,012 4,567,182 Other Services 27,994 25,053 Unallocated Corporate 90,920 66,074 Total assets $ 4,846,926 4,658,309 19 Table of Contents H2O AMERICA AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2025 (in thousands, except share and per share data) Note 10. Subsequent Events H2O America acquisition On July 7, 2025, the Company, through its indirect subsidiary, TWC, entered into an Asset Purchase Agreement (the “Regulated Business APA”), with Quadvest, L.P., a Texas limited partnership, as seller (“Quadvest Retail”) and the Company, as guarantor, pursuant to which, and subject to the terms and conditions set forth therein, Quadvest Retail has agreed to sell, and TWC has agreed to acquire, substantially all of the assets of Quadvest Retail related to the operation of Quadvest Retail’s water and sewer utility business (the “Regulated Business”) at a purchase price consisting of a base amount of $ 483,600 , with certain adjustments based on capital expenditures (the “Regulated Business Transaction”). The Regulated Business Transaction will be subject to the satisfaction of various closing conditions set forth in the Regulated Business APA, including satisfaction of the closing conditions with respect to the Wholesale Business Transaction described below. Concurrently on July 7, 2025, the Company, its indirect subsidiary, Texas Water Operation Services, LLC (“TWOS”) and TWC (together with the Company and TWOS, the “Purchasers”), entered into another Asset Purchase Agreement (the “Wholesale Business APA” and together with the Regulated Business APA, the “Agreements”), with Quadvest Retail and its affiliate, Quadvest Wholesale, LLC, a Texas limited liability company (“Quadvest Wholesale” and together with Quadvest Retail, the “Sellers”), pursuant to which, and subject to the terms and conditions set forth therein, Quadvest Wholesale has agreed to sell, and TWOS has agreed to acquire substantially all of the assets of Quadvest Wholesale related to the operation of the Quadvest Wholesale’s wholesale water and sewer business (the “Wholesale Business” and together with the Regulated Business, the “Businesses”) at a purchase price consisting of a base amount of $ 56,400 , with certain adjustments based on capital expenditures (the “Wholesale Business Transaction”, and together with the Regulated Business Transaction, the “Transactions”). The Wholesale Business Transaction will be subject to the satisfaction of various closing conditions set forth in the Wholesale Business APA, including the simultaneous closing of the Regulated Business Transaction described above. Maine and Connecticut financing agreements On May 23, 2025, MWC submitted an application with MPUC seeking approval to issue unsecured notes in an amount up to $ 25,000 . The MPUC granted approval on June 17, 2025. On July 10, 2025, MWC issued a promissory note to a national cooperative bank under an existing master loan agreement for a principal amount of $ 25,000 at a fixed interest rate of 6.70 %. The note is an unsecured obligation of MWC due on July 20, 2055. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year. On July 11, 2025, CTWS repaid the $ 25,000 outstanding balance on a credit agreement originally due on August 13, 2025. Concurrently, CTWS terminated this credit agreement, which had a credit limit of $ 40,000 , on July 11, 2025. One Big Beautiful Bill Act (“OBBBA”) On July 4, 2025, Public Law No. 119-21, known as the OBBBA was signed into law. The OBBBA contains several tax provisions affecting business taxpayers. The company is evaluating the impact of these provisions on the income tax provision in our consolidated financial statements. Any changes will be recognized in the period of enactment which is the third quarter of 2025. 20 Table of Contents