How does the increase in core income from $28 million to $35 million reconcile with the lower EPS? | HE (Aug 07, 2025) | Candlesense

How does the increase in core income from $28 million to $35 million reconcile with the lower EPS?

Short answer:

The rise in “core” (or “Core 1”) income from $28 million to $35 million does not automatically translate into a higher earnings‑per‑share (EPS) figure because EPS is calculated on a different basis:

Metric 2024 (Q2) 2025 (Q2)
Core 1 income (continuing ops) $28 M $35 M
Core 1 income per share $0.26 $0.20
GAAP net income – (not disclosed in the excerpt) $26 M
GAAP EPS – (not disclosed) $0.15
Diluted shares used for EPS Smaller denominator (fewer shares) Larger denominator (more shares)

The key points that reconcile the higher dollar amount with a lower per‑share number are:

  1. Different denominators (share count)

    Core 1 income per share is calculated using diluted‑share counts that include all potentially dilutive securities (stock options, restricted stock units, convertible debt, etc.). If the number of diluted shares grew from 2024 to 2025, the same (or even a larger) dollar amount of core profit will be spread over more shares, driving the per‑share figure down.

  2. Core 1 income is a **non‑GAAP measure** –

    • It excludes items that are included in the GAAP net‑income figure used for EPS, such as the Maui wildfire‑related expenses and the costs tied to the strategic‑options review for Pacific Current.
    • Because those excluded expenses are sizable, the GAAP net income is lower ($26 M) than the Core 1 income ($35 M).
  3. EPS reflects **all GAAP expenses** –

    • The $0.15 EPS is derived from the $26 M GAAP net income after deducting the wildfire and strategic‑review costs, plus any other ordinary operating expenses, interest, taxes, and preferred‑stock dividends.
    • Therefore, even though Core 1 profit rose, the overall profitability after all expenses fell, resulting in a lower EPS.
  4. Potential one‑time or extraordinary items

    • The wildfire‑related costs and the strategic‑options review expenses are non‑recurring or at least irregular. When they are excluded from Core 1, the metric appears stronger, but the GAAP bottom line (and EPS) must still absorb them.
  5. Share‑based compensation and other dilutive instruments

    • If the company granted more stock options or RSUs during the quarter, the diluted‑share count used for EPS would increase, further diluting the per‑share figure even when total earnings rise.

Step‑by‑step reconciliation

  1. Start with Core 1 income (continuing operations):

    • 2024: $28 M → $0.26 per share (implies ~ 108 M diluted shares).
    • 2025: $35 M → $0.20 per share (implies ~ 175 M diluted shares).
  2. Calculate implied diluted shares:

    [
    \text{Diluted shares}{2024} = \frac{28\text{M}}{0.26} \approx 107.7\text{M}
    ]
    [
    \text{Diluted shares}
    {2025} = \frac{35\text{M}}{0.20} = 175\text{M}
    ]

The number of diluted shares used for the per‑share calculation rose by roughly 62 %.

  1. Add back the excluded expenses to get GAAP net income:

    • GAAP net income (2025) = $26 M (as reported).
    • The difference between Core 1 income ($35 M) and GAAP net income ($26 M) is $9 M, which represents the wildfire‑related costs + strategic‑review expenses + any other GAAP items that were excluded from Core 1.
  2. Derive GAAP EPS:

    [
    \text{EPS}_{2025} = \frac{26\text{M}}{175\text{M}} \approx 0.148 \ (\text{rounded to }0.15)
    ]

This matches the reported $0.15 EPS.

  1. Why the EPS is lower than the prior‑year EPS (if we assume it was higher):
    • Even if the prior‑year GAAP EPS was higher (the news snippet does not give it), the combination of higher diluted shares and additional GAAP expenses in 2025 would drive EPS down despite a higher Core 1 profit.

Take‑away for investors

  • Core 1 income is a useful “operating‑performance” gauge because it strips out large, irregular costs that can obscure the health of the core utility business. The rise from $28 M to $35 M signals that the underlying electricity‑generation and distribution operations are improving.

  • EPS is the bottom‑line metric that matters for GAAP‑based valuation; it includes all costs and is diluted by any share issuances. The $0.15 EPS tells you the net profit available to each diluted share after all fire‑related and strategic‑review expenses.

  • When evaluating performance, look at both numbers together:

    • Core 1 growth → positive sign for ongoing operations.
    • Lower GAAP EPS → cautionary sign that extraordinary expenses are eroding net profitability and/or that share dilution is increasing.
  • Future outlook: If the wildfire‑related expenses are truly one‑off and the strategic‑options review does not generate additional costs, the GAAP net income (and EPS) could bounce back in subsequent quarters, especially if the share count stabilizes.


Bottom line: The $7 million increase in Core 1 income is offset in the EPS calculation by (a) a larger diluted‑share denominator and (b) $9 million of GAAP‑level expenses (wildfire and strategic‑review costs) that are excluded from Core 1. Consequently, the per‑share Core 1 figure falls from $0.26 to $0.20, and the GAAP EPS ends up at $0.15 despite higher core earnings.