Global Water(GWRS) - 2018 Q4 - Annual Report

Financial Performance - Total revenues increased from $4.9 million in 2004 to $35.5 million in 2018, representing a growth of approximately 624%[14] - The company operates regulated water, wastewater, and recycled water utilities with 43,687 active service connections, generating approximately 92.9% of total revenues in 2018[34] - The company achieved a compliance rate of 99.9% for state and federal drinking water standards and 99.8% for wastewater requirements in 2018[69] - The company has experienced significant growth, with total revenues increasing from $4.9 million in 2004 to $35.5 million in 2018, representing a growth of approximately 624% over this period[127] - Total service connections rose from 8,113 as of December 31, 2004, to 44,289 as of December 31, 2018, indicating a growth of about 446%[127] Service Area and Customer Base - The company serves over 55,000 people across approximately 21,000 homes within a service area of 352 square miles[14] - Total service connections grew from 8,113 in 2004 to 44,289 in 2018, an increase of about 446%[14] - The company has added 9,920 active service connections in the Maricopa/Casa Grande region from December 2009 to December 2018, indicating continued growth despite national trends[37] - The Santa Cruz utility serves 20,385 active service connections, contributing approximately 42.5% of total revenue in 2018, while the Palo Verde utility serves 20,150 connections, contributing about 52.9%[39] Water Management and Sustainability - The company has reused 7.6 billion gallons of recycled water in the City of Maricopa, significantly reducing the demand for limited groundwater and surface water by over 40%[30] - Approximately 90% of the recycled water is utilized for non-potable irrigation and local farming, promoting sustainable water usage[30] - The company has implemented a Total Water Management model, which maximizes the use of recycled water and promotes sustainable communities, leading to increased housing density in water-scarce areas[35] - The company focuses on increasing the use of recycled water to augment groundwater supplies, although current infrastructure may limit this capability[81][82] Regulatory Environment - The company’s utilities are regulated by the Arizona Corporation Commission, ensuring predictable rate-regulated cash flows[34] - The company operates under extensive regulations, including the Safe Drinking Water Act and Clean Water Act, which govern water quality and environmental compliance[67][75] - The company is subject to regulatory oversight by the Arizona Corporation Commission (ACC), which approves rates and service areas[77] - The company is subject to comprehensive regulation by the Arizona Corporation Commission, which influences its ability to recover costs and set rates[99] Operational Efficiency and Technology - Automated meter reading technology is utilized, with over 99% of meters being read automatically, allowing for better demand modeling and leak identification[32] - The company’s automated billing technologies have minimized human labor and errors, enhancing customer service and operational efficiency[32] - The company utilizes advanced technology for water treatment and customer service, including automated meter reading and geographic information system technologies[63][64] - The company emphasizes automation and resource efficiency to enhance operational performance and reduce costs[66] Growth and Expansion Challenges - The company aims to become one of the largest investor-owned operators of integrated water and wastewater utilities in the arid western U.S.[25] - The company is subject to regulatory approvals for service area expansions, which could limit future growth if not obtained[108] - The company has faced challenges in acquiring necessary approvals and permits when expanding to states outside Arizona, which could impact profitability[109] - The growth of the customer base is heavily reliant on the success of developers in residential and commercial projects within service areas, which have been below historical rates since 2006[167] Financial Risks and Liabilities - The company may incur higher compliance or remediation costs than expected, which could adversely affect its business or results of operations[105] - New or stricter regulatory standards could increase compliance costs, potentially impacting profitability if the company cannot raise rates to offset these costs[103] - The company’s operational costs, including salaries and wages, are subject to market conditions and may rise faster than revenue, potentially affecting financial performance[134] - Total indebtedness as of December 31, 2018, was $115.1 million, which may limit the ability to respond to growth opportunities[158] Market and Competitive Landscape - The company faces competition from municipalities and investor-owned utilities for new service areas and acquisitions, which could adversely affect revenue growth[166] - The company faces no competition within existing service areas due to Arizona law granting exclusive rights, but competes for new service areas and acquisitions against companies like EPCOR Water Arizona Inc. and Arizona Water Company[92] Shareholder and Stock Performance - The concentration of stock ownership among a few individuals (approximately 59%) may limit the influence of other shareholders on corporate matters[177] - The market price of the company's common stock is likely to be volatile, influenced by various external factors including financial performance and market conditions[178] - The company intends to pay a regular monthly dividend of $0.023625 per share, totaling approximately $5.6 million annually[191] - The company's common stock began trading on NASDAQ on April 28, 2016, with no prior public market[204]