10-QPeriod: Q3 FY2023

American Water Works Company, Inc. Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 1, 2023For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported solid financial results for the third quarter and the first nine months of 2023, demonstrating continued growth and operational strength. Diluted Earnings Per Share (EPS) saw an increase to $1.66 for the third quarter and $4.03 for the nine-month period, up from $1.63 and $3.70 respectively in the prior year. This growth was primarily driven by rate increases implemented across its regulated businesses, reflecting successful recovery of significant capital investments in infrastructure and acquisitions. The company continues to execute its growth strategy, emphasizing substantial capital investment in its infrastructure and pursuing regulated acquisitions. For the first nine months of 2023, AWK invested $1.8 billion in its regulated businesses, with plans to invest approximately $2.9 billion in 2023. The company also successfully completed a significant common stock offering in March 2023, raising approximately $1.688 billion, which was used to repay short-term debt and for general corporate purposes, strengthening its financial position. Despite inflationary pressures and higher production costs, AWK has largely mitigated these impacts through rate adjustments and operational efficiencies.

Financial Highlights

47 data points
Beta

Revenue

$1.17B

Net Income

$323.00M

27.6% Net Margin

EPS (Diluted)

$1.66

Total Assets

$29.82B

Cash & Equivalents

$628.00M

Free Cash Flow

$7.00M

Financial Statements
Beta
Revenue$1.17B
Operating Expenses$689.00M
Operating Income$478.00M
Net Income$323.00M
EPS (Basic)$1.66
EPS (Diluted)$1.66
Shares Outstanding (Basic)195.00M
Shares Outstanding (Diluted)195.00M

Key Highlights

  • 1Diluted EPS increased to $1.66 for Q3 2023 and $4.03 for the nine months ended September 30, 2023, up from $1.63 and $3.70 in the prior year, respectively.
  • 2Operating revenues for the nine months ended September 30, 2023, increased by $341 million to $3.202 billion, driven by authorized rate increases and acquisitions.
  • 3Capital expenditures for the nine months ended September 30, 2023, totaled $1.779 billion, primarily focused on infrastructure improvements and replacements in regulated businesses.
  • 4The company completed a public offering of common stock in March 2023, raising approximately $1.688 billion in net proceeds.
  • 5Significant rate case activity resulted in $273 million in annualized incremental revenues effective in 2023 across various states, aimed at recovering capital investments.
  • 6AWK continues to pursue strategic acquisitions, with 14 closed acquisitions adding approximately 7,900 customers in the first nine months of 2023, and 32 pending acquisitions expected to add approximately 88,100 customers.
  • 7The company estimates potential capital expenditures of approximately $1 billion over three to five years to comply with proposed EPA regulations for PFAS in drinking water.

Frequently Asked Questions

American Water Works Company, Inc. (AWK) reported an increase in diluted EPS for both the third quarter and the first nine months of 2023. The primary drivers for this growth are authorized rate increases in its regulated businesses, which allow the company to recover capital investments in infrastructure and acquisitions. The company's ongoing capital investment program and strategic acquisitions are expected to continue supporting earnings growth.

AWK is experiencing inflationary impacts from increased production costs, including chemicals, fuel, and power, as well as higher pension costs. However, the company has largely offset these pressures through rate increases secured in recent rate cases. Approximately 75% of the estimated impact of these increased costs were reflected in higher revenues in 2023 due to recently completed rate cases.

The company plans to invest approximately $2.9 billion in 2023, primarily in its regulated businesses, focusing on infrastructure improvements and replacements, and regulated acquisitions. For the first nine months of 2023, $1.8 billion has been invested. AWK has a strong liquidity position, with $3.303 billion in total available liquidity as of September 30, 2023, bolstered by a $2.75 billion revolving credit facility and the proceeds from a recent equity offering. The company expects to fund future capital investments through a combination of debt, equity, and operating cash flows.

The EPA has proposed new regulations for PFAS in drinking water, and AWK estimates potential capital expenditures of approximately $1 billion over three to five years for additional treatment facilities to comply. The company also estimates annual operating expenses of approximately $50 million for testing and treatment. These are preliminary estimates, and the actual costs will depend on the final rule and system-specific engineering analyses. AWK is also advocating for policies that hold polluters accountable.