Global Water(GWRS) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2025 financials show revenue growth to $12.5 million, a net income decline, and significant asset and equity increases driven by a stock offering Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $443.9 million and shareholders' equity to $77.2 million, driven by utility plant growth, cash, and a stock offering Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Net utility plant | $378,245 | $359,379 | | Cash and cash equivalents | $31,467 | $9,047 | | Total Assets | $443,918 | $405,137 | | Capitalization and Liabilities | | | | Total shareholders' equity | $77,216 | $47,604 | | Long-term debt, net | $118,876 | $118,518 | | Total Capitalization and Liabilities | $443,918 | $405,137 | Condensed Consolidated Statements of Operations Q1 2025 total revenue rose 7.3% to $12.5 million, yet operating income slightly decreased and net income fell to $0.59 million, yielding diluted EPS of $0.02 Q1 2025 vs. Q1 2024 Operating Results (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $12,457 | $11,610 | $847 | 7.3% | | Operating Income | $1,255 | $1,267 | ($12) | (0.9)% | | Net Income | $591 | $691 | ($100) | (14.5)% | | Diluted EPS | $0.02 | $0.03 | | | | Dividends declared per share | $0.08 | $0.08 | | | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity grew from $47.6 million to $77.2 million by March 31, 2025, primarily from a $30.8 million common stock issuance, partially offset by $1.9 million in dividends - The company issued 3,220,000 shares of common stock, resulting in a net increase of $30.8 million to equity in Q1 2025[18] - Dividends of $0.08 per share were declared, totaling approximately $1.9 million for the quarter[18] Condensed Consolidated Statements of Cash Flows Q1 2025 cash flows show $7.5 million from operations, $15.2 million used in investing for capital expenditures, and a strong $29.8 million inflow from financing, primarily a stock issuance Q1 2025 vs. Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,477 | $8,068 | | Net cash used in investing activities | ($15,216) | ($5,765) | | Net cash provided by financing activities | $29,758 | $15,806 | | Increase in cash, cash equivalents, and restricted cash | $22,019 | $18,109 | - The primary source of financing cash flow in Q1 2025 was the $31.0 million net proceeds from the issuance of common stock[20] Notes to the Condensed Consolidated Financial Statements The notes detail key accounting policies and events, including a pending acquisition, regulatory rate case updates, a recent public stock offering, and goodwill reclassification - The company entered an agreement to acquire seven public water systems from the City of Tucson for $8.4 million, adding approximately 2,200 water service connections. The acquisition is expected to close in mid-2025[27] - The ACC approved a $1.1 million annual revenue increase for the GW-Farmers utility, to be phased in starting May 1, 2025. A related $3.0 million acquisition premium was deferred for recovery in a future rate case[28][42] - In March 2025, the company filed a new general rate case for its GW-Santa Cruz and GW-Palo Verde utilities[29] - A public offering of 3,220,000 shares of common stock was completed on March 27, 2025, generating net proceeds of approximately $30.8 million[43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting revenue growth, net income decline due to higher costs, and strategic initiatives like acquisitions, rate cases, and a successful equity raise Overview and Business Outlook The company, a water resource management firm, maintains a positive business outlook in Arizona, driven by strong population and economic growth in the Phoenix MSA - The company's strategy is centered on "Total Water Management," a comprehensive approach involving water reuse, regional planning, and advanced technology[70] - The Phoenix MSA, a key market, is the 10th largest in the U.S. and is expected to see continued population growth, reaching 5.8 million by 2030[71] - Job growth in the Phoenix MSA is forecasted at 2.2% for 2025, outpacing national gains, with major investments from companies like Taiwan Semiconductor and Intel[73][74] Factors Affecting our Results of Operations Company results are influenced by population growth, regulation, infrastructure investment, and costs, with active connections up 4.3% and significant investments in acquisitions and infrastructure - Active service connections increased by 4.3% organically to 65,163 as of March 31, 2025, compared to the prior year[81] - A pending acquisition from the City of Tucson is expected to add approximately 2,200 water service connections[84] - The EPA's new regulations on PFAS will require increased capital expenditures and operating costs, which the company generally expects to recover through rates, subject to regulatory lag[89] - The estimated rate base as of December 31, 2024, was $212.5 million, an 82% increase from the rate base in the 2019 general rate case, reflecting significant infrastructure investment[95] Rate Regulation Updates The company actively manages regulatory filings, with GW-Santa Cruz and GW-Palo Verde filing a rate case for a $6.5 million revenue increase and Formula Rates, following a $1.1 million increase approval for GW-Farmers - On March 5, 2025, the company filed a general rate case for its GW-Santa Cruz and GW-Palo Verde utilities, requesting a $6.5 million net annual revenue increase and proposing the use of Formula Rates[103] Recent Approved Rate Cases (in millions) | Company | Approved Incremental Annual Revenue ($) | ACC Decision | Rates Effective | | :--- | :--- | :--- | :--- | | GW-Saguaro | 0.4 | 79383 | July 01, 2024 | | GW-Farmers | 1.1 | 80695 | May 01, 2025 | Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024 Q1 2025 total revenue increased 7.3% to $12.5 million, driven by connection growth and consumption, but operating expenses rose 8.3% to $11.2 million, leading to a 14.5% net income decrease to $0.6 million Q1 2025 vs. Q1 2024 Financial Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $12,457 | $11,610 | $847 | 7.3% | | Operating expenses | $11,202 | $10,343 | ($859) | (8.3)% | | Operating income | $1,255 | $1,267 | ($12) | (0.9)% | | Net income | $591 | $691 | ($100) | (14.5)% | - Revenue growth was driven by a 4.3% increase in total active connections and a 24.2% increase in water consumption, particularly from irrigation, construction, and commercial customers[110][111] - Operating expenses increased primarily due to a $0.24 million (30.5%) rise in utilities, chemicals, and repairs, and a $0.39 million (13.4%) increase in depreciation and amortization from a larger asset base[112][113][115] Liquidity and Capital Resources The company's liquidity is supported by operations, debt, and equity, with Q1 2025 seeing a $30.8 million stock offering and an increased $20.0 million revolving credit facility, ensuring sufficient capital for future needs - In March 2025, a public offering of common stock generated approximately $30.8 million in net proceeds[120] - The revolving credit facility with Northern Trust was amended in April 2025 to increase the borrowing capacity from $15.0 million to $20.0 million and extend the maturity to May 2027. No amount was outstanding as of March 31, 2025[124] - Cash used in investing activities increased to $15.2 million in Q1 2025 from $5.8 million in Q1 2024, reflecting an increase in capital expenditures[131] - The company was in compliance with all financial debt covenants as of March 31, 2025[136] Item 3. Qualitative and Quantitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - Not applicable[139] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[139] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025[140] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal proceedings that are expected to have a material effect on its financial condition or operations - The company is not currently involved in any legal proceeding expected to have a material effect on the company[141] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the 2024 Form 10-K[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell any unregistered securities during the first quarter of 2025. It did purchase 725 shares of its common stock, which were shares withheld from employees to satisfy tax obligations related to the vesting of restricted stock awards - No unregistered securities were sold during the three months ended March 31, 2025[143] - The company withheld 725 shares from employees at an average price of $11.35 per share to satisfy tax obligations on vested restricted stock awards[146] Item 5. Other Information During the first quarter of 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter[149] Item 6. Exhibits This section lists the exhibits filed with the report, including corporate governance documents, a recent loan modification agreement, CEO/CFO certifications, and XBRL data files - Key exhibits filed include the Sixth Modification Agreement to the Northern Trust loan, CEO and CFO certifications (Rule 13a-14(a) and Section 1350), and Inline XBRL documents[150]