SJW Group - 10-Q quarterly report FY2026 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________

FORM 10-Q

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

For the quarterly period ended June 30, 2026

☐ 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

H2O AMERICA

(Exact name of registrant as specified in its charter)

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)

(408) 279-7800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

HTO

Nasdaq Global Select Market

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 July 24, 2026, there were 41,856,804 shares of the registrant’s Common Stock outstanding.

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TABLE OF CONTENTS

		Page
Forward-Looking Statements		3
PART I	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three Months and Six Months Ended June 30 , 2026 and 2025	4
	Condensed Consolidated Balance Sheets (unaudited) as of June 30 , 2026 and December 31, 2025	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three Months and Six Months Ended June 30 , 2026 and 2025	7
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30 , 2026 and 2025	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II	OTHER INFORMATION	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

Table of Contents

FORWARD-LOOKING STATEMENTS

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 risks associated with the proposed transactions with Quadvest, L.P., a Texas limited partnership and Quadvest Wholesale, LLC, a Texas limited liability company (together, “Quadvest”), including the risk of the proposed transactions not closing on the anticipated timeline, or at all, the ability to obtain required regulatory approvals, and the ability to successfully integrate Quadvest’s operations and realize the projected financial and other benefits of the proposed transactions;

•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 polyfluoroalkyl 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.

These risks, uncertainties and other factors may cause the actual results, performance or achievements of H2O America 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.

Table of Contents

PART I. FINANCIAL INFORMATION

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,
	2026		2025	2026		2025
Operating revenue	$	210,474	198,255	$	393,767	365,854
Operating expense:
Production expenses:
Purchased water	39,648		37,421	66,593		63,374
Power	3,851		3,851	8,123		7,334
Groundwater extraction charges	28,619		26,354	51,828		44,645
Other production expenses	13,363		13,243	25,361		24,483
Total production expenses	85,481		80,869	151,905		139,836
Administrative and general	33,626		28,795	63,433		56,555
Maintenance	7,455		7,470	15,831		14,969
Property taxes and other non-income taxes	9,024		8,506	17,978		17,701
Depreciation and amortization	32,134		28,750	64,440		57,032

Total operating expense	167,720		154,390	313,587		286,093
Operating income	42,754		43,865	80,180		79,761
Other (expense) income:
Interest on long-term debt and other interest expense	(17,952)		(18,122)	(36,790)		(36,394)
Pension non-service credit	1,992		1,620	3,931		3,223

Other, net	3,773		1,982	5,652		2,777
Income before income taxes	30,567		29,345	52,973		49,367
Provision for income taxes	3,978		4,670	7,371		8,141
Net income	26,589		24,675	45,602		41,226

Comprehensive income	$	26,589	24,675	$	45,602	41,226

Earnings per share
—Basic	$	0.64	0.71	$	1.14	1.20
—Diluted	$	0.62	0.71	$	1.12	1.20
Dividends per share	$	0.44	0.42	$	0.88	0.84
Weighted average shares outstanding
—Basic	41,851,524		34,777,152	39,900,622		34,280,727
—Diluted	42,865,195		34,860,349	40,897,868		34,367,212

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H2O America and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	June 30, 2026		December 31, 2025
Assets
Utility plant:
Land	$	44,498	44,600
Depreciable plant and equipment	4,864,038		4,688,644
Construction work in progress	307,922		269,272
Intangible assets	51,683		51,683
Total utility plant	5,268,141		5,054,199
Less: accumulated depreciation and amortization	1,164,540		1,120,232
Net utility plant	4,103,601		3,933,967

Nonutility properties	2,166		1,683
Less: accumulated depreciation and amortization	105		103
Net nonutility properties	2,061		1,580

Current assets:
Cash and cash equivalents	104,102		20,686

Accounts receivable:
Customers, net of allowances for credit losses of $760 and $722 on June 30, 2026 and December 31, 2025, respectively	71,016		62,471
Income tax	—		2,720
Other	11,846		7,710
Accrued unbilled revenue	70,619		68,971

Prepaid expenses	11,644		11,634
Current portion of regulatory assets	19,610		8,315
Other current assets	7,566		8,086
Total current assets	296,403		190,593
Other assets:
Regulatory assets, less current portion	243,938		246,547
Investments	20,646		19,711
Postretirement benefit plans	84,018		80,967

Goodwill	640,311		640,311
Other	46,286		35,890
Total other assets	1,035,199		1,023,426
Total assets	$	5,437,264	5,149,566

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H2O America and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	June 30, 2026		December 31, 2025
Capitalization and liabilities
Capitalization:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; 41,852,853 issued and outstanding shares on June 30, 2026 and 36,118,242 on December 31, 2025	$	42	36
Additional paid-in capital	1,250,053		958,188
Retained earnings	592,340		581,080
Accumulated other comprehensive income	1,467		1,467
Total stockholders’ equity	1,843,902		1,540,771
Long-term debt, less current portion	1,881,479		1,866,819
Total capitalization	3,725,381		3,407,590

Current liabilities:
Lines of credit	1,364		86,834
Current portion of long-term debt	8,648		23,504
Accrued groundwater extraction charges, purchased water and power	40,207		29,321
Accounts payable	70,444		75,427
Accrued interest	19,061		18,241
Accrued payroll	12,267		19,109

Current portion of regulatory liabilities	1		—
Other current liabilities	25,852		20,942
Total current liabilities	177,844		273,378

Deferred income taxes	317,902		307,893
Advances for construction	206,844		201,413
Contributions in aid of construction	353,869		342,697
Postretirement benefit plans	46,918		45,878
Regulatory liabilities, less current portion	578,408		546,797
Other noncurrent liabilities	30,098		23,920
Commitments and contingencies (Note 6)
Total capitalization and liabilities	$	5,437,264	5,149,566

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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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, 2025	36,118,242	$	36	958,188	581,080	1,467	1,540,771
Net income	—	—		—	19,013	—	19,013

Stock-based compensation	—	—		1,212	(10)	—	1,202
Issuance of restricted and deferred stock units	37,809	—		(616)	—	—	(616)
Employee stock purchase plan	23,112	—		1,023	—	—	1,023
Common stock issuance, net of costs	5,660,377	6		288,595	—	—	288,601
Dividends paid ($0.44 per share)	—	—		—	(15,912)	—	(15,912)
Balances, March 31, 2026	41,839,540	$	42	1,248,402	584,171	1,467	1,834,082
Net income	—	—		—	26,589	—	26,589

Stock-based compensation	—	—		1,715	(9)	—	1,706
Issuance of restricted and deferred stock units	13,313	—		(62)		—	(62)

Common stock issuance, net of costs	—	—		(2)		—	(2)
Dividends paid ($0.44 per share)	—	—		—	(18,411)	—	(18,411)
Balances, June 30, 2026	41,852,853	$	42	1,250,053	592,340	1,467	1,843,902


	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

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H2O America and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Six months ended June 30,
	2026		2025
Operating activities:
Net income	$	45,602	41,226
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,360		59,606
Deferred income taxes	8,818		8,642
Stock-based compensation	2,927		2,674
Allowance for equity funds used during construction	(3,471)		(823)



Accounts receivable and accrued unbilled utility revenue	(12,604)		(15,275)
Accounts payable and other current liabilities	(13,905)		(9,400)
Accrued groundwater extraction charges, purchased water and power	10,885		13,192
Tax receivable and payable, and other accrued taxes	(2,030)		118
Postretirement benefits	(3,587)		(1,420)
Regulatory assets and liabilities excluding cost of removal, income tax temporary differences and postretirement benefits	4,737		4,931
Other noncurrent assets and noncurrent liabilities	6,721		—
Proceeds from litigation settlement, net	3,570		—
Other changes, net	(10,578)		546
Net cash provided by operating activities	104,445		104,017
Investing activities:
Additions to utility plant:
Company-funded	(194,286)		(204,440)
Contributions in aid of construction	(20,158)		(11,963)

Cost to retire utility plant, net of salvage	(1,760)		(1,471)



Net cash used in investing activities	(216,204)		(217,874)
Financing activities:
Borrowings from lines of credit	66,923		114,959
Repayments of lines of credit	(152,393)		(73,243)
Long-term borrowings	16,938		—
Repayments of long-term borrowings	(16,823)		(1,738)
Issuance of common stock, net of issuance costs	288,599		83,713

Dividends paid	(34,323)		(28,746)
Proceeds from litigation settlement, net	7,328		—
Receipts of advances and contributions in aid of construction	20,420		30,293
Refunds of advances for construction	(1,773)		(2,760)
Other changes, net	279		114
Net cash provided by financing activities	195,175		122,592
Net change in cash and cash equivalents	83,416		8,735
Cash and cash equivalents, beginning of period	20,686		11,114


Cash and cash equivalents, end of period	$	104,102	19,849
Cash paid (refunded) during the period for:
Interest	35,780		40,867
Interest, net of amounts capitalized	31,575		37,895
Income taxes	165		(2,370)

Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant	59,597		36,941
Utility property installed by developers	1,174		1,459

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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 2025 Annual Report on Form 10-K, filed with the SEC on February 26, 2026, should be read in conjunction with the accompanying unaudited condensed consolidated financial statements.

H2O America is a holding company that conducts its business through the following wholly owned subsidiaries: San Jose Water Company (“SJWC”), H2O America TX Holdings, Inc., H2O America Land Company, H2O America NE LLC, and National Water Utility Service, LLC (“NWU”). H2O America TX 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”). H2O America NE 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. NWU is the contracting entity for shared services among the H2O America affiliates formed in October 2024. H2O America Risk Solutions, Inc. (“Risk Solutions”), is a captive insurance entity and wholly owned subsidiary of H2O America Inc., established in 2025 to manage certain insurance specific risks of the Company in addition to its use of traditional insurance products provided by its current insurance carriers. H2O America, through its subsidiaries, primarily provides water utility and other related services in California, Connecticut, Maine and Texas. H2O America has business in property management and real estate investment activity conducted by H2O America Land Company and Chester Realty, Inc.

TWC also holds a 25% equity interest in Acequia Water Supply Corporation (“Acequia”). Acequia has been determined to be a variable interest entity within the scope of Accounting Standards Codification (“ASC”) Topic 810—“Consolidation” with TWC as the primary beneficiary. As a result, Acequia has been consolidated with TWC.

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,
	2026		2025	2026		2025
	(In thousands)
Revenue from contracts with customers	$	207,919	197,777	$	387,241	362,640
Alternative revenue programs, net	999		1,759	1,261		2,351
Other balancing and memorandum accounts and regulatory mechanisms, net	775		(2,288)	3,651		(988)
Rental income	781		1,007	1,614		1,851
	$	210,474	198,255	$	393,767	365,854

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

Nonutility Properties

The major components of nonutility properties are as follows as of:


	June 30, 2026		December 31, 2025
	(In thousands)
Land	$	1,394	914

Buildings and improvements	772		769

Subtotal	2,166		1,683
Less: accumulated depreciation and amortization	105		103
Total	$	2,061	1,580

Fair Value Measurement

The following instruments are not measured at fair value on H2O America’s condensed consolidated balance sheets as of June 30, 2026, 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, 2026 approximates their carrying value as reported on the condensed consolidated balance sheets. There have been no changes in valuation techniques during the three and six months ended June 30, 2026. 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 $1,716.5 million and $1,716.6 million as of June 30, 2026 and December 31, 2025, 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, 2026 and December 31, 2025, $1,698.4 million and $1,715.6 million, respectively, would be categorized as Level 2 in the fair value hierarchy and $18.1 million and $1.0 million, 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 $2.7 million and $2.8 million as of June 30, 2026 and December 31, 2025, 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 the treasury stock method which comprises 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 the equity forward purchase agreements granted to investors in the equity offering discussed further in Note 3 “Capitalization” to these condensed consolidated financial statements. For the three months ended June 30, 2026 and 2025, 1,886 and 8,900 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively. For the six months ended June 30, 2026 and 2025, 2,848 and 23,346 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

New Accounting Standards

The recently issued accounting standards that have not yet been adopted by the company as of June 30, 2026 are as follows:

Standard

Description

Date of Adoption

Application

Effect on the Condensed Consolidated Financial Statements

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.

The standard is expected to only result in updates to disclosure and is not expected to have a material impact on the Company’s financial position and results of operations.

ASU 2025-06 “Intangibles-Goodwill and Other-Internal-Use Software (subtopic 350-40)”

The ASU updates the accounting for internal-use software by removing project stage references and introduces a new capitalization threshold based on management authorization and project completion probability. The guidance requires evaluation of significant development uncertainty, including novel functionality and unresolved performance requirements. ASU 2025-06 clarifies that capitalized internal-use software costs are subject to the property, plant and equipment disclosure requirements under ASC 360-10.

The ASU is effective for H2O America for its annual financial statements for the year ending December 31, 2028 and for interim reporting periods for the year ending December 31, 2028.

Prospective, with retrospective application also permitted.

H2O America is currently evaluating the impact of ASU 2025-06 on its financial statements and will adopt ASU 2025-06 in fiscal year ended December 31, 2028.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

Standard

Description

Date of Adoption

Application

Effect on the Condensed Consolidated Financial Statements

ASU 2025-10 “Government Grants (Topic 832)”

The ASU establishes accounting for government grants received by business entities and includes guidance for (1) a grant related to an asset and (2) a grant related to income. The ASU requires that a government grant should not be recognized until it is probable that a business entity will comply with the conditions attached to the grant and the grant will be received. Additionally, the ASU requires that a grant related to an asset be recognized on the balance sheet as the business entity incurs the related costs for which the grant is intended to compensate either as deferred income or an adjustment to the cost basis of the related asset. A grant related to income or a grant recognized as deferred income should be recognized in earnings on a systematic and rational basis over the periods in which the related costs are incurred that the grant is intended to compensate.

The ASU is effective for H2O America for annual reporting periods beginning after December 15, 2028 and interim reporting periods within those annual reporting periods. Early adoption is permitted.

Retrospective adoption with modified prospective and modified retrospective application also permitted.

H2O America is currently evaluating the impact of ASU 2025-10 on its financial statements and will adopt ASU 2025-10 in fiscal year ended December 31, 2029.

ASU 2025-11 “Interim Reporting (Topic 270)”

The ASU provides clarity about the current requirements, rather than an evaluation of whether to expand or reduce interim disclosure requirements. The ASU includes a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The intent of the disclosure principle, which is modeled after a previous SEC disclosure requirement, is to help entities determine whether disclosures not specified in Topic 270 should be provided in interim reporting periods.

The ASU is effective for H2O America for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

Prospective, with retrospective application also permitted.

H2O America is currently evaluating the disclosure impact of ASU 2025-11; however, the standard is not expected to impact the consolidated financial position, results of operations or cash flows.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

Note 2.Regulatory Matters

Regulatory assets and liabilities are comprised of the following as of:


	June 30, 2026		December 31, 2025
	(In thousands)
Regulatory assets:
Income tax temporary differences (a) (r)	$	211,958	204,384
Monterey Water Revenue Adjustment Mechanism (“M-WRAM”) (b)	14,017		8,553
Business combinations debt premium (c) (r)	8,501		9,772
Employee benefit costs (d) (r)	6,127		5,823
Catastrophic event memorandum accounts (“CEMA”) (e)	—		127
Revenue adjustment mechanisms (f) (r)	6,826		7,931
Customer Assistance Program (“CAP”) balancing account (g)	4,410		3,696

Water supply costs (h)	—		847
Ground Water Regulation Legal Expenses memorandum account (“GWRLEMA”) (i)	225		—
Other (j)	11,484		13,729
Total regulatory assets	263,548		254,862
Less: current portion of regulatory assets (k)	19,610		8,315
Total regulatory assets, less current portion	$	243,938	246,547
Regulatory liabilities:
Cost of removal (l)	410,935		394,391
Future income tax benefits due to customers (m)	81,480		82,285
Unrecognized pensions and other postretirement benefits (n)	31,420		32,996
Per- and Polyfluoroalkyl substances (“PFAS”) legal settlement proceeds (o)	36,112		24,682
Employee benefit costs (d)	11,335		8,771
Water supply costs (h)	3,615		—
Revenue adjustment mechanisms (f)	1,067		—
Other (p)	2,445		3,672
Total regulatory liabilities	578,409		546,797
Less: current portion of regulatory liabilities (q)	1		—
Total regulatory liabilities, less current portion	$	578,408	546,797

___________________________________

(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)M-WRAM 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)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. The balances primarily relate to expenses associated with SJWC’s response to COVID-19, including bad debt.

(f)Primarily relates to Water Rate Adjustment mechanism (“WRA”). WRA and Water Conservation Memorandum Account (“WCMA”) are described in the following section.

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

(h)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.

(i)Represents legal and related expenses associated with litigation and consensus-building activities related to SJWC’s water rights. The GWRLEMA was re-established in November 2025 to track these costs.

(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, rate case expenses and acquisition costs.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

(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 WRA, deferred well redevelopment, carbon filters 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.

(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)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.

(o)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. The Water Contamination Litigation Memorandum Account (“WCLMA”) has been established to track net proceeds and costs resulting from water contamination litigation related to SJWC.

(p)Primarily relates to MWC’s accrued tank painting costs.

(q)Primarily relates to the current portion of WRA.

(r)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.

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 M-WRAM 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.

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 $200.0 million. For the three and six months ended June 30, 2026, H2O America did not issue or sell any shares of its common stock under the Equity Distribution Agreement and, accordingly, received no net proceeds therefrom. For the three and six months ended June 30, 2025, the Company issued and sold 1,087,593 and 1,583,493 shares of its common stock, respectively, with a weighted average price of $52.82 and $53.15 per share respectively, and received $57.2 million and $83.7 million in net proceeds, respectively, under the Equity Distribution Agreement. Since the inception of the Equity Distribution Agreement, H2O America has issued and sold 2,763,359 shares of common stock at a weighted average price of $52.39 for total net proceeds of $143.0 million, and has $55.2 million of aggregate gross sales price of shares remaining to issue under the Equity Distribution Agreement as of June 30, 2026.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

purchase price of $51.28 per share, subject to adjustment based on the overnight bank funding rate and expected dividend amounts due upon settlement through maturity in March 2028. The forward purchase agreements can be settled or net settled for delivery of physical shares or settled for cash at the option of H2O America. In addition, the underwriters in the Offering, through the exercise of a 30-day overallotment option, purchased an additional 1,722,723 shares of common stock at a price of $51.28 per share. Total net proceeds to H2O America for the common stock offering were $290.2 million after deducting the underwriting discounts and before estimated offering expenses payable by H2O America of $1.6 million, which are recognized as a reduction of additional paid-in capital. The forward purchase agreements are indexed to H2O America’s common stock and qualify for equity classification. Accordingly, they are not remeasured for changes in the fair value of the Company’s common stock, and no related gains or losses are recognized in earnings.

No forward purchase agreements issued under the Offering were settled during the three and six months ended June 30, 2026.

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, lines of credit, and other obligations.

Lines of Credit

The weighted average interest rate on short-term borrowings outstanding at June 30, 2026 was 4.71%, compared to 4.75% at December 31, 2025.

As of June 30, 2026, the borrowing capacity of the lines of credit was $367.7 million, which excludes a $0.9 million standby letter of credit issued on behalf of H2O America Risk Solutions and guaranteed by H2O America under the Syndicated Credit Agreement.

Long-Term Debt

On November 12, 2025, SJWC entered into a Note Purchase Agreement with certain institutional investors. Under the agreement, SJWC issued an aggregate principal amount of $70.0 million of senior notes in two series consisting of $55.0 million of 5.83% Senior Notes, Series R ("Series R Notes"), and $15.0 million of 5.91% Senior Notes, Series S ("Series S Notes"). The issuance of the Series S Notes was subject to approval by the CPUC which closed on May 14, 2026. The Series S Notes are unsecured obligations of SJWC and are due on November 1, 2055. Interest is payable semi-annually in arrears on May 1st and November 1st of each year, commencing November 1, 2026.

The balance of long-term debt outstanding, net of unamortized debt issuance costs and debt premium and discount, as of June 30, 2026 and December 31, 2025 was $1,881.5 million and $1,866.8 million, respectively. The current portion of long-term debt as of June 30, 2026 and December 31, 2025 was $8.6 million and $23.5 million, respectively.

The debt and credit agreements of H2O America and its subsidiaries contain various financial and other covenants. Non-compliance with these covenants could result in accelerated due dates and termination of the agreements. In addition, the debt and credit agreements contain customary representations and warranties and are subject to customary events of default, which may result in outstanding debt becoming immediately due and payable. As of June 30, 2026, H2O America and its subsidiaries were in compliance with all covenants related to its debt and credit agreements.

Note 5.Income Taxes

Income tax expense was $4.0 million and $4.7 million for the three months ended June 30, 2026 and 2025, respectively. Income tax expense was $7.4 million and $8.1 million for the six months ended June 30, 2026 and 2025, respectively. The effective consolidated income tax rates were 13% and 16% for the three months ended June 30, 2026 and 2025, respectively, and 14% and 16% for the six months ended June 30, 2026 and 2025, respectively. The lower effective tax rate for the three and six months ended June 30, 2026 was primarily due to higher flow through tax benefits.

H2O America had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of $4.3 million and $4.1 million as of June 30, 2026 and December 31, 2025, respectively.

On July 4, 2025, Public Law No. 119-21, referred to as the One Big Beautiful Bill Act (“OBBBA”), was signed into law. The OBBBA contains several changes to corporate taxation including the extension of key provisions of the 2017 Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions which were effective in 2025 and others are phased in

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

through tax year 2027. The legislation may be subject to further clarification and the issuance of interpretive guidance. The impact of the tax legislation was not material to the provision for income taxes and deferred tax balances for the three and six months ended June 30, 2026.

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 is vigorously defending itself in this lawsuit.

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 a 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.

For the three and six months ended June 30, 2026, the Company received $11.0 million from legal settlements with Tyco Fire Products LP, BASF Corporation, and 3M Company related to PFAS contamination, allocated as follows: SJWC received $7.4 million; CWC received $3.5 million; and MWC received $0.1 million, which includes $0.1 million payable to contract operators. For the three and six months ended June 30, 2025, the Company received $6.4 million in cash proceeds from a legal settlement with 3M Company related to PFAS contamination. These proceeds were allocated as follows: SJWC received $4.4 million; CWC received $1.9 million; and MWC received $0.1 million, which includes $0.1 million payable to contract operators. As of June 30, 2026, the Company has received aggregate cash proceeds of $36.1 million from MDL court approved settlements. The proceeds have been allocated as follows: SJWC received $24.4 million; CWC received $11.1 million; and MWC received $0.6 million, which includes $0.4 million payable to contract operators. The proceeds are compensatory in nature and are intended to compensate the Company for costs incurred, or to be 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 in the subsequent seven years, pursuant to the terms of the settlement agreement. The total estimated proceeds to be received during this period are approximately $5.7 million.

H2O 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.

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 3.0% 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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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 are as follows:


	Pension Benefits			Other Benefits
	Three months ended June 30,
	2026		2025	2026		2025
	(In thousands)
Service cost	$	1,722	1,644	$	147	156
Interest cost	3,944		3,901	320		337
Expected return on assets	(5,244)		(4,944)	(293)		(295)
Amortization of actuarial gain	(353)		(458)	(220)		(214)
Amortization of prior service cost	29		4	—		—
Total	$	98	147	$	(46)	(16)


	Pension Benefits			Other Benefits
	Six months ended June 30,
	2026		2025	2026		2025
	(In thousands)
Service cost	$	3,428	3,287	$	290	312
Interest cost	7,842		7,801	630		674
Expected return on assets	(10,535)		(9,887)	(575)		(590)
Amortization of actuarial gain	(766)		(915)	(477)		(428)
Amortization of prior service cost	58		7	—		—
Total	$	27	293	$	(132)	(32)

In 2026, H2O America expects to make required and discretionary cash contributions of up to $5.8 million to the pension plans and other postretirement benefits. For the three and six months ended June 30, 2026, H2O America has made $1.4 million and $3.3 million of contributions to such plans.

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. In addition, shares are issued to employees under H2O America’s Employee Stock Purchase Plan (“ESPP”).

As of June 30, 2026, 292,308 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 998,880 shares are available for award issuances under the long-term incentive plans.

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

A summary of compensation costs charged to income, by award type, and proceeds from the ESPP, are presented below:


	Three months ended June 30,			Six months ended June 30,
	2026		2025	2026		2025
Compensation costs charged to income:
ESPP	$	95	100	$	180	189
Restricted stock and deferred restricted stock	1,620		1,364	2,747		2,485
Total compensation costs charged to income	$	1,715	1,464	$	2,927	2,674
ESPP proceeds	$	—	—	$	1,023	1,116

Restricted Stock and Deferred Restricted Stock

For the three months ended June 30, 2026, H2O America granted 19,879 restricted stock awards with a weighted average grant date fair value per unit of $54.26, which consisted of 18,753 three-year service-based restricted stock awards and 1,126 target units of three-year performance-based restricted stock awards. For the six months ended June 30, 2026, H2O America granted 133,211 restricted stock awards with a weighted average grant date fair value per unit of $49.37, which consisted of 61,903 three-year service-based restricted stock awards and 71,308 target units of three-year performance-based restricted stock awards. 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 the three months ended June 30, 2025, H2O America granted 19,909 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 1,562 target units of performance-based and market-based restricted stock awards with a weighted average grant date fair value per unit of $53.19. For the six months ended June 30, 2025, H2O America granted 66,314 one-year and three-year service-based restricted stock awards with a weighted average grant date fair value per unit of $45.49 and 58,208 target units of performance-based and market-based restricted stock awards with a weighted average grant date fair value per unit of $51.91. 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 and 0% to 200% of the target number for market-based restricted stock awards.

As of June 30, 2026, the total number of outstanding restricted stock awards and deferred restricted stock awards was 313,106 and the total number of shares vested but not issued was 6,588. As of June 30, 2026, unrecognized compensation costs related to restricted and deferred restricted stock plans was $10.5 million. This cost is expected to be recognized over a weighted average period of 1.98 years.

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 H2O America 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 makers (“CODM”) include the Chief Executive Officer and Chair of the Board; the Chief Financial Officer and Treasurer; the President and Chief Operating Officer; and the Vice President and General Counsel. However, ultimate decision-making authority rests with the 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 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.

Previously, H2O America presented a separate reportable segment for Real Estate Services and also presented a disaggregation of regulated and non-tariffed activities within the Water Utility Services reportable segment. Under the current presentation, the activities of Water Utility Services previously presented as “non-tariffed” are generally presented as “Other Services” along with the real estate activity. Certain allocated assets, such as goodwill, revenue and expenses have been included in the

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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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.


	For the three months ended June 30, 2026
	Reportable Segment
	Water Utility Services		Other Services (1)	Unallocated Corporate (2)	Consolidated
	(In thousands)
Operating revenue	$	206,715	3,759	—	210,474

Less:
Production expenses	83,981		1,500	—	85,481
Administrative and general	27,396		201	6,029	33,626
Maintenance	6,740		715	—	7,455
Property taxes and other non-income taxes	9,055		35	(66)	9,024
Depreciation and amortization	31,872		30	232	32,134
Interest on long-term debt and other interest expense	13,496		69	4,387	17,952

Provision (benefit) for income taxes	5,971		370	(2,363)	3,978
Other (3)	(4,457)		(58)	(1,250)	(5,765)
Net income (loss)	$	32,661	897	(6,969)	26,589

Capital expenditures	$	121,936	—	—	121,936


	For the three months ended June 30, 2025
	Reportable Segment
	Water Utility Services		Other Services (1)	Unallocated Corporate (2)	Consolidated
	(In thousands)
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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026


	For the six months ended June 30, 2026
	Reportable Segment
	Water Utility Services		Other Services (1)	Unallocated Corporate (2)	Consolidated
	(In thousands)
Operating revenue	$	386,104	7,663	—	393,767

Less:
Production expenses	149,407		2,498	—	151,905
Administrative and general	55,657		418	7,358	63,433
Maintenance	13,619		2,212	—	15,831
Property taxes and other non-income taxes	17,961		78	(61)	17,978
Depreciation and amortization	63,916		60	464	64,440
Interest on long-term debt and other interest expense	27,997		69	8,724	36,790

Provision (benefit) for income taxes	11,871		731	(5,231)	7,371
Other (3)	(8,022)		(151)	(1,410)	(9,583)
Net income (loss)	$	53,698	1,748	(9,844)	45,602

Capital expenditures	$	214,444	0	0	214,444


	For the six months ended June 30, 2025
	Reportable Segment
	Water Utility Services		Other Services (1)	Unallocated Corporate (2)	Consolidated
	(In thousands)
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

______________________________

(1) The “Other Services” category includes the accounts of H2O America Land Company, Chester Realty, 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, H2O America NE LLC, H2O America TX 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).

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

H2O America’s assets for the Water Utility Services reportable segment and all other are as follows as of:


	June 30, 2026		December 31, 2025
	(In thousands)
Water Utility Services (reportable segment)	$	5,270,343	5,054,235
Other Services	22,953		26,707
Unallocated Corporate	143,968		68,624
Total assets	$	5,437,264	5,149,566

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H2O AMERICA AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

Note 10.Acquisitions

Quadvest 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. (“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 L.P. related to the operation of Quadvest L.P.’s water and sewer utility business at a purchase price consisting of a base amount of $483.6 million, 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 subsidiaries, TWOS and TWC (together with the Company and TWOS, the “Purchasers”), entered into another asset purchase agreement (the “Wholesale Business APA”), with Quadvest Retail and its affiliate, Quadvest Wholesale, LLC (“Quadvest Wholesale”), 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 Quadvest Wholesale’s wholesale water and sewer business at a purchase price consisting of a base amount of $56.4 million, with certain adjustments based on capital expenditures (the “Wholesale Business Transaction”). 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.

On July 9, 2025, TWC filed a request with the Public Utility Commission of Texas (the “PUCT”) to use Fair Market Value (“FMV”) to support its acquisition of Quadvest Retail. On August 7, 2025, the PUCT appointed three appraisers to determine the FMV. In December 2025, TWC received the appraised FMV from the PUCT-appointed appraisers for the assets of Quadvest Retail. In accordance with Texas’ FMV statute, the purchase price of $483.6 million will serve as the ratemaking rate base. On January 22, 2026, TWC filed its Sale, Transfer, Merger (“STM”) application with the PUCT. This application was deemed administratively complete on April 14, 2026. Notice to affected parties and customers was found sufficient on May 21, 2026. On July 9, 2026, PUCT Staff recommended that the transaction should be allowed to proceed.

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

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

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

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

General:

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

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

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

Business Strategy for Water Utility Services:

H2O America focuses its business initiatives in three strategic areas:

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

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

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

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

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operating margins, and adversely affect our internal controls. H2O America cannot be certain that any transaction will be successful or that it will not materially harm operating results or our financial condition.

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

Critical Accounting Estimates:

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

Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. Our significant accounting policies are described in the notes to the 2025 consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no changes to critical accounting estimates or significant accounting policies during the three and six months ended June 30, 2026.

New Accounting Pronouncements:

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

Results of Operations:

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

Overview

H2O America’s financial results and highlights include:


	Three months ended June 30,			Increase/ (decrease)	% Change		Six months ended June 30,			Increase/ (decrease)	% Change
	2026		2025				2026		2025
	(In thousands, except per share data)
Operating Revenue	$	210,474	198,255	12,219	6	%	$	393,767	365,854	27,913	8	%
Operating Expenses	167,720		154,390	13,330	9	%	313,587		286,093	27,494	10	%
Net Income	26,589		24,675	1,914	8	%	45,602		41,226	4,376	11	%
Earnings Per Share - Basic	$	0.64	0.71	(0.07)	(10)	%	$	1.14	1.20	(0.06)	(5)	%
Earnings Per Share - Diluted	$	0.62	0.71	(0.09)	(13)	%	$	1.12	1.20	(0.08)	(7)	%

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Operating Revenue

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


	Operating Revenue by Segment
	Three months ended June 30,			Six months ended June 30,
	2026		2025	2026		2025
	(In thousands)
Water Utility Services	$	206,715	194,674	$	386,104	359,830
Other Services	3,759		3,581	7,663		6,024
Total operating revenue	$	210,474	198,255	$	393,767	365,854

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


	Increase/(decrease)
	Three months ended June 30, 2026 vs. 2025				Six months ended June 30, 2026 vs. 2025
	(In thousands)
Water Utility Services:
Consumption changes	$	180	—	%	$	2,044	1	%
Increase in customers	363		—	%	686		—	%
Rate increases for:
Pass-through water costs1	5,770		3	%	9,970		3	%
All other increases2	8,697		4	%	16,437		4	%
Regulatory mechanisms3	(1,711)		—	%	(1,627)		—	%
Service and other revenue	(1,258)		(1)	%	(1,236)		—	%
Other Services	178		—	%	1,639		—	%
Total change in operating revenue	$	12,219	6	%	$	27,913	8	%

____________________

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

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

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

Operating Expense

Operating expense is summarized below:


	Operating Expense by Segment
	Three months ended June 30,			Six months ended June 30,
	2026		2025	2026		2025
	(In thousands)
Water Utility Services	$	159,044	148,027	$	300,560	277,007
Other Services	2,481		2,565	5,266		4,571
Unallocated Corporate	6,195		3,798	7,761		4,515
	$	167,720	154,390	$	313,587	286,093

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


	Increase/(decrease)
	Three months ended June 30, 2026 vs. 2025				Six months ended June 30, 2026 vs. 2025
	(In thousands)
Water production expenses:
Change in surface water use	$	340	—	%	$	(2,391)	(1)	%
Change in consumption	(805)		—	%	2,288		1	%
Change in new customers	5		—	%	76		—	%
Purchased water and groundwater extraction charge, energy price change and other production expenses, net	4,784		3	%	8,326		3	%
Balancing and memorandum account cost recovery	288		—	%	3,770		2	%
Total water production expenses	4,612		3	%	12,069		5	%
Administrative and general	4,831		3	%	6,878		2	%
Maintenance	(15)		—	%	862		—	%
Property taxes and other non-income taxes	518		—	%	277		—	%
Depreciation and amortization	3,384		3	%	7,408		3	%
Total change in operating expense	$	13,330	9	%	$	27,494	10	%

Sources of Water Supply

The Company’s water supply for its regulated utilities is diversified across groundwater, surface water, and purchased sources, with the mix of and reliance on such sources varying by region. Operations in California and Texas face greater hydrologic variability and drought-related pressures, partially mitigated by long-term contracts, conservation measures, and regulatory cost recovery mechanisms, while operations in Connecticut and Maine maintain more stable supply conditions with fewer near-term constraints. Across all regions, the Company relies on long-term agreements with regional authorities and continues to invest in infrastructure and supply reliability initiatives. Overall, management expects existing supplies to be adequate to meet anticipated customer demand throughout 2026, although cost and availability remain sensitive to weather patterns and regional conditions.


	Three months ended June 30,		Increase/ (decrease)	% of Total Change		Six months ended June 30,		Increase/ (decrease)	% of Total Change
	2026	2025				2026	2025
	(billion gallons)
Purchased water	4.6	4.7	(0.1)	(1)	%	7.2	7.5	(0.3)	(1)	%
Groundwater	5.5	5.2	0.3	2	%	10.2	9.4	0.8	4	%
Surface water	2.9	2.8	0.1	1	%	5.9	5.4	0.5	2	%
Reclaimed water	0.3	0.3	—	—	%	0.3	0.3	—	—	%
	13.3	13.0	0.3	2	%	23.6	22.6	1.0	5	%

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

Water Production Expenses

The increase in water production expenses of $4.6 million for the three months ended June 30, 2026, compared to the same period in 2025, was primarily attributable to increases in average per unit costs for purchased water and groundwater extraction, partially offset by lower usage.

The increase in water production expenses of $12.1 million for the six months ended June 30, 2026, compared to the same period in 2025, was primarily attributable to increases in average per unit costs for purchased water and groundwater extraction, increases in water production balancing and memorandum accounts, primarily relating to the FCBA, and higher customer usage, partially offset by decreases in costs as a result of increased availability of surface water.

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Depreciation and Amortization

Depreciation and amortization expenses increased $3.4 million for the three months ended June 30, 2026 compared to the same period in 2025. The increase is associated with utility plant additions placed in service compared to the same period last year.

Depreciation and amortization expenses increased $7.4 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase is associated with utility plant additions placed in service compared to the same period last year.

Other Operating Expenses

Operating expenses, excluding water production expenses, increased $5.3 million for the three months ended June 30, 2026, compared to the same period in 2025. The increase was primarily attributable to a net increase in general and administrative expenses driven by increased merger and acquisition costs, increased outsourced services costs, increased employee-related costs and increased maintenance agreement costs.

Operating expenses, excluding water production expenses, increased $8.0 million for the six months ended June 30, 2026, compared to the same period in 2025. The increase was primarily attributable to a net increase in general and administrative expenses driven by higher merger and acquisition costs, outsourced services, insurance, and maintenance agreement costs.

Other (Expense) Income

For the three months ended June 30, 2026, compared to the same period in 2025, the change in other (expense) income of $2.3 million was primarily due to an increase in investment income from higher investment balances, an increase in pension non-service credits, and higher income from the equity portion of the Allowance for Funds Used During Construction (AFUDC).

For the six months ended June 30, 2026, compared to the same period in 2025, the change in other (expense) income of $3.2 million was primarily due to higher income from the equity portion of the AFUDC, an increase in pension non-service credits, and an increase in investment income from higher investment balances.

Non-GAAP Financial Measures

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

The following tables reconcile Net Income and EPS, each as defined under GAAP, to our non-GAAP financial measures of Adjusted Net Income and Adjusted EPS for the three and six months ended June 30, 2026, compared to the same period in 2025:

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	Three months ended June 30,			Six months ended June 30,
	2026		2025	2026		2025
	(In thousands)
Reported GAAP Net Income:	$	26,589	24,675	$	45,602	41,226
Adjustments:
(Gain) loss on sale of real estate investments1	—		—	(172)
Expense for merger, acquisition and integration related activities1	5,681		2,093	6,411		2,347
Tax effect of above adjustments2	(1,591)		(586)	(1,747)		(657)
Adjusted Net Income (non-GAAP)	30,679		26,182	50,094		42,916

Reported GAAP Diluted Earnings Per Share	$	0.62	0.71	$	1.12	1.20
Adjustments:
(Gain) loss on sale of real estate investments, net of tax	—		—	—		—
Expense for merger, acquisition and integration related activities, net of tax	0.10		0.04	0.11		0.05
Adjusted Diluted Earnings Per Share (non-GAAP)	$	0.72	0.75	$	1.23	1.25

1 Included in the "Administrative and general" and “Other, net” lines on the consolidated statements of comprehensive income.

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

Regulation and Rates

Almost all of the operating revenue of H2O America results from the sale of water at rates authorized by the subsidiaries’ respective state utilities commissions. The state utilities commissions set rates that are intended to provide revenue sufficient to recover operating expenses and the opportunity to achieve a specified return on common equity. The timing of rate decisions could have an impact on the results of operations.

Please also see Note 2 “Regulatory Matters”.

The following table describes current rate related activities as applicable for Water Utility Services:

Company

Jurisdiction

Regulatory Mechanism / Filing

Revenue Impact

Approval / Decision Date

Rates Effective

Approved Regulatory Proceedings

SJWC

California

Advice Letter No. 613 – Revenue Requirement and Balancing and Memorandum account Recovery

$21.3 million increase; $15.8 million recovery

Approved December 2024 (D.24-12-077)

January 1, 2025

SJWC

California

Advice Letter No. 616 – Purchased Water / Groundwater Offset

$22.5 million increase

Approved May 2025

July 1, 2025

SJWC

California

Advice Letter No. 617 – Advanced Metering Infrastructure (“AMI”) Project Recovery

$6.8 million increase

Approved May 2025

July 1, 2025

SJWC

California

Advice Letter No. 618 – Water Contamination Litigation Memorandum Account (“WCLMA”)

No immediate revenue impact

Approved July 2025

June 24, 2025

SJWC

California

Advice Letter No. 620 – Ground Water Regulation Legal Expenses Memorandum Account (“GWRLEMA”)

No immediate revenue impact

Approved October 2025

November 14, 2025

SJWC

California

Advice Letter No. 621A – Revenue Requirement Increase

$17.2 million increase

Approved December 2025

January 1, 2026

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SJWC

California

Cost of Capital (“COC”) Filing Deferment

No change expected

Approved November 2025

The timing for the next COC filing will be May 1, 2027, approximately effective January 1, 2028

SJWC

California

Advice Letter No. 627A – Monterey Water Revenue Adjustment Mechanism (“M-WRAM”)

$13.3 million surcharge

Approved June 2026

July 1, 2026

SJWC

California

Advice Letter No. 628A – Purchased Water / Groundwater Offset

$22.8 million increase

Approved June 2026

July 1, 2026

SJWC

California

Advice Letter No. 629A –
AMI Project Recovery

$8.38 million increase; $52.9 million rate base increase

Approved June 2026

July 1, 2026

CWC

Connecticut

2024 Water Infrastructure Conservation Adjustment (“WICA”) Reconciliation and Increase

$1.6 million surcharge, $6.0 million annual collection

Approved March 2025

April 1, 2025

CWC

Connecticut

2024 Water Rate Adjustment mechanism (“WRA”)

$4.6 million surcharge

Approved March 2025

April 1, 2025

CWC

Connecticut

2025 WICA Increase

$3.1 million surcharge, $9.1 million annual collection

Approved July 2025

October 1, 2025

CWC

Connecticut

Water Quality and Treatment Adjustment (“WQTA”)

$0.6 million surcharge

Approved March 2026

April 1, 2026

CWC

Connecticut

2025 WRA

$7.2 million surcharge

Approved March 2026

April 1, 2026

CWC

Connecticut

2025 WICA Reconciliation and Increase

Increase of $2.7 million surcharge and reconciliation surcharge of $0.3 million. $12.1 million annual collection

Approved March 2026

April 1, 2026

MWC

Maine

Camden Rockland General Rate Case

$0.9 million increase

Approved June 2025

July 1, 2025

MWC

Maine

Water Infrastructure Surcharge (“WISC”) for Oakland and Biddeford Saco divisions

$0.5 million surcharge

Approved June 2025

July 1, 2025

MWC

Maine

Request to establish a unified tariff across its ten separate rate divisions.

No revenue impact

Approved January 2026

February 1, 2026

MWC

Maine

WISC

$0.9 million surcharge

Approved May 2026

May 1, 2026

TWC

Texas

Amended System Improvement Charge (“SIC”)

Increase of $3.9 million for water and $0.2 million for sewer

Approved May 2025

May 15, 2025

Pending Regulatory Proceedings

SJWC

California

Cost of Recovery of Per- and Polyfluoroalkyl Substances (“PFAS”) Compliance Program

No immediate revenue impact

Filed April 10, 2026

Expected Q4 2027

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CWC

Connecticut

General Rate Case

$28.8 million increase

Filed May 11, 2026

Expected February 2027

MWC

Maine

General Rate Case

$9.5 million increase

Filed April 13, 2026

Expected Q2 2027

TWC

Texas

Second SIC Amendment

Increase of $4.7 million for water and $0.3 million for sewer

Filed October 6, 2025

Expected second half of 2026

In addition to filings included in the above table, TWC is required to file a general rate case on or before March 21, 2028.

Liquidity:

Water Utility Services’ business derives the majority of its revenue directly from residential and business customers. Management asserts that the collection rate for its accounts receivables has improved as the ability to use service disconnections has returned to normal.

Funds collected from Water Utility Services’ customers are used to pay for water production expenses, in addition to costs associated with general operations. Funds were also generated from borrowings.

In the six months ended June 30, 2026, H2O America and its subsidiaries received $290.2 million in proceeds from an underwritten offer of common stock. From these amounts, H2O America expects to fund its acquisition of Quadvest L.P. and Quadvest Wholesale LLC and capital expenditures. See Note 3 “Capitalization” and Note 4 "Lines of Credit and Long-term Liabilities” for discussion on the equity and debt financing activities of H2O America. In addition, H2O America paid cash dividends on its common stock of $34.3 million during the six months ended June 30, 2026.

In 2025, the dividends declared and paid on H2O America’s common stock represented approximately 57% of net income. Dividends have been paid on H2O America’s and its predecessor’s common stock for 330 consecutive quarters and the annual dividend amount has increased in each of the last 58 years. While historically H2O America has generally paid dividends equal to approximately 50% to 60% of its net income, H2O America cannot guarantee that this trend will continue in the future.

The following table provides a summary of our operating, investing and financing cash flows for the six months ended June 30, 2026 and 2025.


	Six months ended June 30,			Increase/ (decrease)
	2026		2025
	(In thousands)
Net cash provided by (used in):
Operating activities	$	104,445	104,017	428
Investing activities	(216,204)		(217,874)	1,670
Financing activities	195,175		122,592	72,583
Net increase (decrease) in cash and cash equivalents	83,416		8,735	74,681
Cash and cash equivalents - beginning of the period	20,686		11,114
Cash and cash equivalents - end of the period	$	104,102	19,849

Cash Flow from Operating Activities

In the six months ended June 30, 2026, H2O America generated cash flow from operations of $104.4 million compared to $104.0 million during six months ended June 30, 2025. Cash flow from operations are primarily generated by net income from revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, share-based compensation, allowance for equity funds used during construction, gains on the sale of assets, and other changes in working capital items.

In the six months ended June 30, 2026, the increase in cash flows from operations was primarily attributable to higher net income, changes in working capital balances, and changes in regulatory assets and liabilities.

Cash Flow from Investing Activities

Cash flows from investing activities consist of cash payments and cash receipts for capital expenditures and investments. Net cash used in investing activities for the six months ended June 30, 2026, decreased by $1.7 million from the same period in the

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prior year related to lower company-funded utility capital expenditures of $10.2 million partially offset by increased developer-funded capital expenditures of $8.2 million.

Cash Flow from Financing Activities

Cash flows from financing activities consist of cash payments to and cash receipts from creditors, investors, and developers. Net cash provided by financing activities for the six months ended June 30, 2026 increased by $72.6 million from the same period in the prior year, primarily as a result of (1) an increase in net proceeds from common stock equity offerings of $204.9 million, (2) an increase in proceeds of $16.9 million from the issuance of long-term debt, (3) proceeds from PFAS litigation settlement of $7.3 million, offset by (4) an increase in net repayments on the lines of credit of $127.2 million, (5) an increase in net repayments on long-term borrowings of $15.1 million, (6) a decrease in cash receipts of advances and contributions in aid of construction of $9.9 million and (7) an increase in payments of dividends of $5.6 million.

Budgeted Capital Expenditures

Water Utility Services’ estimated utility capital expenditures for 2026, exclusive of capital expenditures financed by customer contributions and advances, are anticipated to be approximately $458.0 million. The budgeted capital expenditures exclude capitalizable costs of $25.0 million forecasted in 2026 that are associated with cloud-based computing arrangements. As of June 30, 2026, $194.3 million, or approximately 42%, of the $458.0 million has been invested.

Water Utility Services’ capital expenditures are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations. Over the next five years, Water Utility Services expects to incur approximately $2,568.0 million in capital expenditures, which includes replacement of pipes and mains, maintaining water systems, and installing approximately $400.0 million in PFAS treatment facilities. A significant portion of this amount is subject to future respective state regulatory utility commissions’ approval. Capital expenditures have the effect of increasing utility plant rate base on which Water Utility Services earns a return. Water Utility Services’ actual capital expenditures may vary from their projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies, and general economic conditions. Total additions to utility plant normally exceed company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

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

In addition to these capital expenditures, Water Utility Services expects to incur approximately $100.0 million over the next five years, including $25.0 million in 2026, in capitalizable costs associated with cloud-based computing arrangements. For the six months ended June 30, 2026, Water Utility Services incurred $12.6 million in cloud-based computing expenses.

Sources of Capital:

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

Short-term Financing Agreements

H2O America and its subsidiaries have unsecured line of credit agreements where borrowings are used to refinance existing debt, for working capital, and for general corporate purposes.

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A summary of the line of credit agreements as of June 30, 2026 are as follows:


	Maturity Date	Line Limit		Amounts Outstanding	Unused Portion
		(In thousands)
Syndicated credit agreement:	September 12, 2030
H2O America		$	50,000	—	50,000
SJWC		165,000		—	165,000

CWC		80,000		—	80,000
MWC		25,000		—	25,000
SJWTX		30,000		—	30,000
Total syndicated credit agreement		350,000		—	350,000
SJWC credit agreement	June 11, 2027	10,000		—	10,000
CTWS credit agreement	August 2, 2028	10,000		1,364	8,636
		$	370,000	1,364	368,636

On June 11, 2026, SJWC extended the termination date of its uncommitted loan facility under the SJWC Credit Agreement from June 11, 2026 to June 11, 2027.

Total outstanding borrowings under the unsecured lines of credit as of June 30, 2026 were $1.4 million. For the six months ended June 30, 2026, the cost of borrowing on the lines of credit averaged 4.61% compared to 5.45% in the same period in 2025. As of June 30, 2026, the borrowing capacity of the lines of credit was $367.7 million, which excludes a $0.9 million standby letter of credit issued on behalf of H2O America Risk Solutions and guaranteed by H2O America under the Syndicated Credit Agreement.

All of H2O America’s and subsidiaries’ lines of credit contain customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, acquisitions and investments, restricted payments, asset sales, and fundamental changes. All of the lines of credit also include certain customary financial covenants such as a funded debt to capitalization ratio and a minimum interest coverage ratio. As of June 30, 2026, H2O America and its subsidiaries were in compliance with all covenants on their lines of credit.

Long-term Financing Agreements

On November 12, 2025, SJWC entered into a Note Purchase Agreement with certain institutional investors. Under the agreement, SJWC issued an aggregate principal amount of $70.0 million of senior notes in two series consisting of $55.0 million of 5.83% of Senior Notes, Series R ("Series R Notes"), and $15.0 million of 5.91% Senior Notes, Series S ("Series S Notes"). The issuance of the Series S Notes was subject to approval by the CPUC which closed on May 14, 2026. The Series S Notes are unsecured obligations of SJWC and are due on November 1, 2055. Interest is payable semi-annually in arrears on May 1st and November 1st of each year, commencing November 1, 2026.

The balance of long-term debt outstanding, net of unamortized debt issuance costs and debt premium and discount, as of June 30, 2026 was $1,881.5 million. The current portion of long-term debt as of June 30, 2026 was $8.6 million.

The debt and credit agreements of H2O America and its subsidiaries contain various financial and other covenants. Non-compliance with these covenants could result in accelerated due dates and termination of the agreements. In addition, the debit and credit agreements contain customary representations and warranties and are subject to customary events of default, which may result in outstanding debt becoming immediately due and payable. As of June 30, 2026, H2O America and its subsidiaries were in compliance with all covenants related to their debt and credit agreements.

Equity Financing Arrangements

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at a weighted average price of $52.39 for total net proceeds of $143.0 million, and has $55.2 million of aggregate gross sales price of shares remaining to issue under the Equity Distribution Agreement as of June 30, 2026.

In March 2026, H2O America issued 3,937,654 shares of common stock in an underwritten offering pursuant to an Underwriting Agreement with J.P. Morgan Securities LLC and Wells Fargo Securities LLC, as representatives of several underwriters named in the Underwriting Agreement (the “Offering”). In connection with the Offering, H2O America entered into two-year forward purchase agreements (“FPA”) to issue 7,547,170 shares of common stock with an initial forward purchase price of $51.28 per share, subject to adjustment based on the overnight bank funding rate and expected dividend amounts due upon settlement through maturity in March 2028. The FPA can be settled or net settled for delivery of physical shares or settled for cash at the option of H2O America. In addition, the underwriters in the Offering, through the exercise of a 30-day overallotment option, purchased an additional 1,722,723 shares of common stock at a price of $51.28 per share. Total net proceeds to H2O America for the common stock offering were $290.2 million after deducting the underwriting discounts and before estimated offering expenses payable by H2O America of $1.6 million, which are recognized as a reduction of additional paid-in capital.

No forward purchase agreements issued under the Offering were settled during the three and six months ended June 30, 2026.

Credit Rating

The condition of the capital and credit markets or the strength of financial institutions could impact H2O America’s ability to draw on its lines of credit, issue long-term debt, sell its equity or earn interest income. In addition, government policies, the state of the credit markets and other factors could result in increased interest rates, which would increase H2O America’s cost of capital. While our ability to obtain financing will continue to be a risk, we believe that based on our 2026 and 2025 activities we will continue to have access to the external funding sources necessary to implement our ongoing capital investment programs in the future. On July 15, 2025, Standard & Poor’s Ratings Services revised the outlook for H2O America, CTWS and CWC from stable to negative following the announcement of the Quadvest acquisition.

The following table presents the current Standard & Poor’s Ratings Services assigned company ratings:

Entity

Rating

Outlook

H2O America

A-

Negative

SJWC

Stable

CTWS

A-

Negative

CWC

A-

Negative

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

H2O America is subject to market risks in the normal course of business, including changes in interest rates, pension plan asset values, and equity prices. The exposure to changes in interest rates can result from the issuance of debt and short-term funds obtained through the Company’s variable rate lines of credit. H2O America’s subsidiaries sponsor noncontributory pension and other post-retirement plans for its employees. Pension and other post-retirement costs and the funded status of the plans may be affected by a number of factors including the discount rate, mortality rates of plan participants, investment returns on plan assets, and pension reform legislation.

H2O America has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk.

ITEM 4.CONTROLS AND PROCEDURES

H2O America’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of H2O America’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that H2O America’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by H2O America in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. H2O America believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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There has been no change in internal control over financial reporting during the second fiscal quarter of 2026 that has materially affected, or is reasonably likely to materially affect, the internal controls over financial reporting of H2O America.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

H2O America and its subsidiaries are subject to ordinary routine litigation incidental to its business.

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 an 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.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in H2O America’s Annual report on Form 10-K for the year ended December 31, 2025 and our other public filings, which could materially affect our business, financial condition or future results. There have been no material changes from risk factors previously disclosed in “Risk Factors” in H2O America’s Annual report on Form 10-K for the year ended December 31, 2025.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5.OTHER INFORMATION

Quarterly Dividend

On July 27, 2026, the Board of Directors of H2O America declared the regular quarterly dividend of $0.44 per share of common stock. The dividend will be paid on September 1, 2026, to stockholders of record as of the close of business on August 10, 2026.

Insider Trading Arrangements

In the quarter ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K.

Information Web Sites

H2O America posts information about the operating and financial performance of H2O America and its subsidiaries on its web sites at www.h2o-america.com, www.sjwater.com, www.ctwater.com, www.txwaterco.com, and www.mainewater.com from time to time. The information on our web sites is not a part of and should not be considered incorporated by reference into this Form 10-Q.

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ITEM 6.EXHIBITS


Exhibit Number						Description

10.1						Amended and Restated Director Compensation and Expense Reimbursement Policies . (1)

10.2						Third Amended and Restated Formulaic Equity Award Program for Non-Employee Board Members. (1)

31.1						Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Executive Officer. (1)

31.2						Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial Officer and Treasurer. (1)

32.1						Certification Pursuant to 18 U.S.C. Section 1350 by Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

32.2						Certification Pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer and Treasurer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

101.INS						XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document

(1)Filed currently herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

H2O AMERICA

Date:

July 28, 2026

By:

/s/ ANN P. KELLY

Ann P. Kelly

Chief Financial Officer and Treasurer

(Principal financial officer)

SJW Group - 10-Q quarterly report FY2026 Q2

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