Regency Centers Corporation (REG) Earnings

Management highlights

### Regulatory Update - Received a final decision for the 2024 California General Rate Case (GRC) in late April 2026, approximately 90-100 days delayed but made retroactive to January 1, 2026, with all retroactive amounts recognized via the IRMA balancing account in Q2. New rates went live for customer billings July 1, 2026. - The approved California GRC includes $1.45 billion in pre-approved capital and $229 million in approved advice letter projects, totaling ~$1.7 billion for the 2024-2027 period. It maintains existing balancing accounts for pension, healthcare, conservation expenses, and incremental water production costs, and adds a new sales adjustment mechanism to smooth revenue forecast deviations and a new wildfire insurance liability assurance balancing account. - Reached a full all-party settlement for the Washington water general rate case, with a requested $4.29 million rate increase settled at $4.12 million and a requested 10.2% ROE settled at 10.18%. The settlement is awaiting commission approval, expected in Q3 2026, with new rates effective in Q3. ### Capital and Liquidity - The 10-year compound annual growth rate (CAGR) for growth capital is ~11%, holding slightly above the internal 10% target, driven in part by PFAS treatment investment. Total 2026 capital budget includes a net $155 million for PFAS, offset by approximately $60 million in expected recoveries from polluters and grant funding. Legal teams continue to secure additional recoveries to offset customer costs. - Rate base is growing at a ~12% CAGR, with management projecting total rate base will reach approximately $3.5 billion by the end of 2026 if capital deployment stays on schedule. - As of June 30, 2026, the company held $43.4 million in unrestricted cash, $45.7 million in restricted cash (earmarked for a Texas pipeline project), and had $395 million available under its bank lines of credit. The company raised $88 million via its at-the-market (ATM) stock program in Q2, and maintains A+ stable credit ratings from S&P Global for both the group and California Water Service. - Declared the 326th consecutive quarterly dividend of 33.5 cents per share, representing ~7.6% 5-year CAGR for dividend growth. ### Strategic Initiatives - Integration planning for the acquisition of Nexus assets in Oregon and Washington is progressing well, with all regulatory applications filed. Management targets closing the transaction before the end of 2026. The acquisition will expand the company's footprint into Oregon and Nevada. - The change-of-control application to acquire full ownership of the BVRT joint venture has been deemed complete and is awaiting commission approval. In the South Austin BVRT market, the company connected 200 new wastewater system connections in Q2. - The company is celebrating its 100th anniversary of operations, with ongoing regional events, high customer engagement with the dedicated anniversary website, and several recent awards including the Alliance for Water Efficiency Award, USA Today Top Workplace, and recognition as one of the world's most impactful companies by Time for sustainability work. The company will ring the NYSE bell on November 30 to mark the anniversary. - Two new executive officers were appointed effective July 1, 2026: Greg Szymanski as Vice President of Rates (replacing the retired Greg Millman), and Tammy Johnson as Vice President of California Operations, a new role created to support company growth. - ESG and Sustainability Published updated water quality and sustainability reports during the quarter, and received multiple industry awards for sustainability and operational performance.

Guidance

- Management maintains the target of ~10% annual growth in capital investment and rate base, with current growth holding slightly above this target due to PFAS investment. - The company projects total rate base will reach $3.5 billion by the end of 2028, assuming on-schedule capital deployment. - Management maintains its target to close the Nexus acquisition before the end of 2026. - Washington rate case approval is expected in Q3 2026, with new revenue recognition starting in the same quarter. No changes to long-term operational or financial guidance were announced in the call.

Segment performance

The company does not break out separate product segment financials in this call. Aggregate consolidated results for Q2 2026: Net income was $56.5 million ($0.93 per diluted share), compared to $42.2 million ($0.71 per diluted share) in Q2 2025. Q2 2026 revenue was $308.6 million, up from $265 million in Q2 2025. Year-to-date (H1 2026) net income was $60.5 million ($1.01 per diluted share), compared to $55.5 million ($0.93 per diluted share) in H1 2025. Year-to-date revenue was $523.2 million, up from $468.9 million in H1 2025. Key positive earnings drivers in Q2 2026 were: $15.3 million in IRMA revenue from the retroactive California general rate case (including $9.2 million for Q1 2026), $15 million from rate changes and regulatory mechanism updates, and $9.3 million from recognition of remaining deferred RAM revenue. Partially offsetting these were: $6.3 million higher per-unit water supply costs, $7.9 million in costs related to deferred RAM revenue, and $7 million higher income taxes. Q2 2026 capital expenditure was $147 million, up 23% year-over-year from $119.4 million in Q2 2025. Total H1 2026 capital expenditure was a record $276 million.

Risks & headwinds

- Higher interest rates driven by persistent inflation, deficit-financed government spending, and geopolitical conflict (Middle East tensions) could increase the company's cost of capital. - Growing public and regulatory pushback on utility rate increases driven by affordability concerns, particularly following sharp increases in electric rates across the U.S. and California, could create headwinds for future rate case approvals. - Persistently higher inflation and elevated water production costs could pressure margins if not fully recovered through regulatory mechanisms. - Regulatory approval timelines for acquisitions and rate changes can be unpredictable, particularly in Oregon which does not have a statutory approval timeline for merger reviews.

Analyst Q&A

• Q: Analyst Davis Sunderland asks how affordability concerns and rate increase pushback across the U.S. have changed California Water Service's strategy, and if the company is facing affordability issues in its service territory. /

  A: Management states affordability has always been a core priority. All of the company's districts are below the 2% of household income affordability threshold set by the EPA, and all passed California's mandatory affordability test for the 2024 GRC, with targeted assistance programs used for the one small district that initially did not meet the test. The company proactively engages with customers and runs third-party focus groups ahead of rate cases to address affordability concerns. Management notes that affordability pressure in the U.S. is driven primarily by large electric rate increases, not water rates, and the company has not faced major intervenor pushback or regulatory pushback on its recent rate cases. The company will continue balancing needed infrastructure investment with affordability as it has done over its 20-year history of 10% capital growth. (347 characters)

• Q: Sunderland asks what impact a sustained higher interest rate environment would have on the company's M&A activity, liquidity, and overall business. /

  A: Management notes that the macro environment is uncertain, with short-term rates potentially ticking up before trending down in 2027 if geopolitical conflicts resolve. Critically, California has a cost of capital adjustment mechanism that triggers an ROE adjustment if the Moody's AA utility bond index moves more than 50 basis points up or down, which protects shareholders from rapid rate increases. All capital program costs, including debt costs, are pass-throughs in regulatory rate proceedings, and the upcoming 2028 GRC will update the average cost of debt to current market rates. For M&A, internal capital replacement is the company's primary growth engine, so there is no pressure to pursue overpriced acquisitions; the company will remain opportunistic and only pursue deals with fair valuations. (478 characters)

• Q: Sunderland asks for clarification on the increase in other operating expenses paired with a decrease in depreciation, amortization, and DNA, asking if this is related to IRMA. /

  A: CFO James Lynch clarifies the step up in other operating expenses is tied to the recognition of deferred RAM revenue. GAAP accounting requires gross presentation of the $9.3 million in deferred revenue and the associated $7.9 million in related costs, rather than netting the two amounts. The net impact to income from recognizing all deferred RAM revenue is only ~$1.2 million to $1.3 million. (221 characters)