Global Water(GWRS) - 2025 Q2 - Quarterly Results

Executive Summary Global Water Resources reported 5.4% revenue growth to $14.2 million in Q2 2025, with net income at $1.6 million, alongside operational expansion, strategic investments, and regulatory successes Q2 2025 Financial Highlights Global Water Resources reported a 5.4% increase in total revenue to $14.2 million for Q2 2025, driven by organic connection growth, increased consumption, and higher rates, though net income decreased to $1.6 million ($0.06 per share) due to increased depreciation expense, while Adjusted EBITDA saw a modest increase of 2.1% to $6.9 million Q2 2025 Financial Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :------------------- | :------------------ | :------------------ | :--------- | | Total Revenue | $14.2 | $13.5 | 5.4% | | Net Income | $1.6 | $1.7 | -5.9% | | EPS | $0.06 | $0.07 | -14.3% | | Adjusted EBITDA | $6.9 | $6.8 | 2.1% | - The decline in net income was primarily due to increased depreciation expense resulting from the company's capital improvement plan[5] Q2 2025 Operational Highlights The company experienced significant operational growth in Q2 2025, with active service connections increasing by 3.8% and water consumption rising by 8.2%, alongside substantial investments in infrastructure projects to support existing utilities and future growth Q2 2025 Operational Metrics | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--------------------------- | :----------- | :----------- | :--------- | | Total Active Service Connections | 65,639 | 63,256 | 3.8% | | Water Consumption | 1.2 billion gallons | 1.1 billion gallons | 8.2% | - Invested $20.2 million in infrastructure projects to support existing utilities and continued growth[5] Other Key Highlights Global Water Resources extended its revolving credit facility to May 2027 and increased its borrowing capacity to $20 million, declared monthly cash dividends of $0.02533 per share, secured key regulatory approvals for GW-Farmers expected to generate an additional $1.1 million in annual revenue, and completed a significant acquisition of seven water systems from Tucson Water projected to add $1.5 million in annual revenue - Extended maturity date of revolving credit facility to May 18, 2027, and increased principal amount available for borrowing from $15 million to $20 million[5] - Declared three monthly cash dividends of $0.02533 per common share, totaling $0.30396 per common share on an annualized basis[5] - The Arizona Corporation Commission (ACC) issued Decision No. 80695 for GW-Farmers, with new rates expected to generate approximately $1.1 million in increased annual revenue, phased in starting May 1, 2025[5] - Completed the acquisition of seven water systems from Tucson Water in July, valued at approximately $7.7 million, expected to generate approximately $1.5 million in annual revenue[5] - The City of Maricopa was estimated by the U.S. Census Bureau to be the 6th fastest growing large city in the country, with a 7.4% population increase in 2024[5] Management Commentary & Strategic Outlook Management attributes Q2 growth to organic connections and rate cases, details strategic initiatives and regulatory progress, and underscores Arizona's robust economic outlook as a key growth driver Q2 Performance Drivers Global Water Resources' Q2 top-line growth was primarily fueled by organic connection growth, increased water consumption, and a successful rate case strategy, including the approval of the GW-Farmers general rate case - Top-line growth in Q2 was primarily driven by organic connection growth, increased consumption, and successful rate case strategy[6] - Received approval for the GW-Farmers general rate case, with 50% of the approved rate increase effective May 1, 2025, supporting improvements for customers and the Sahuarita community[6] Strategic Initiatives & Regulatory Updates The company anticipates significant regional growth catalysts, including the Arizona Department of Transportation's plan for State Route 347 improvements and the new 'ag-to-urban' bill (Senate Bill 1611), which is expected to support water management and development, while the general rate case for GW-Santa Cruz and GW-Palo Verde is progressing, aiming for approximately $6.5 million in additional net annual revenue to maintain high-quality services - Arizona Department of Transportation's inclusion of State Route 347 improvements in its $11.6 billion five-year plan is seen as a major milestone and catalyst for sustainable growth, potentially driving increased demand for water services[7] - Arizona's Senate Bill 1611, the new 'ag-to-urban' bill, effective September 26, 2025, is expected to support water management, economic development, and housing accessibility, with up to 384,000 acres eligible for conversion[8] - The general rate case for GW-Santa Cruz and GW-Palo Verde is proceeding, with testimony and a hearing expected in Q4 2025, seeking approximately $6.5 million in additional net annual revenue[9] - The company expects appropriate rates to capture 2025 capital investments upon the anticipated completion of the Pinal County utilities' rate case around mid-2026[10] Arizona Growth & Economic Outlook Arizona's robust economic outlook, characterized by strong job growth and unprecedented investment commitments from major industry leaders, is expected to drive organic connection growth for Global Water Resources, particularly in the Metro Phoenix area - Arizona's strong economic outlook, with employment expected to rise by 478,000 jobs through 2032 (1.4% annual growth), is anticipated to support organic connection growth[11] - The state received $50 billion in investment commitments last year, including TSMC's $165 billion planned investment in Metro Phoenix and Apple's multi-billion dollar plans, significantly reshaping the region[11] Financial Performance Analysis This section details a 5.4% revenue increase to $14.2 million, an 8.5% rise in operating expenses, and a 6.8% decrease in net income to $1.6 million, while Adjusted EBITDA grew by 2.1% Revenue Analysis Total regulated revenue increased by 5.4% to $14.2 million in Q2 2025, primarily driven by organic growth in active water and wastewater connections, increased consumption, and higher rates from recent general rate cases for GW-Saguaro and GW-Farmers Three Months Ended June 30, Revenue (in thousands) | Service Type | 2025 | 2024 | Change ($) | Change (%) | | :----------------------------- | :------ | :------ | :--------- | :--------- | | Water service | $7,368 | $6,668 | $700 | 10.5% | | Wastewater and recycled water service | $6,873 | $6,842 | $31 | 0.5% | | Total regulated revenue | $14,241 | $13,510 | $731 | 5.4% | | Total revenue | $14,241 | $13,510 | $731 | 5.4% | - Revenue increase was primarily attributable to organic growth in active water and wastewater connections, increased water and recycled water consumption, and higher rates for GW-Saguaro (effective July 2024 and January 2025) and GW-Farmers (effective May 1, 2025)[12][13] Operating Expenses Analysis Total operating expenses increased by 8.5% to $11.6 million in Q2 2025, mainly due to higher personnel costs, increased IT service provider contracts, one-time wastewater disposal costs, and higher depreciation and amortization Three Months Ended June 30, Operating Expenses (in thousands) | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :------------------------------- | :------ | :------ | :--------- | :--------- | | Personnel costs - operations and maintenance | $1,356 | $1,184 | ($172) | (14.5)% | | Utilities, chemicals and repairs | $1,183 | $1,084 | ($99) | (9.1)% | | Other operations and maintenance expenses | $1,378 | $1,217 | ($161) | (13.2)% | | Total operations and maintenance expense | $3,917 | $3,485 | ($432) | (12.4)% | | Personnel costs - general and administrative | $2,236 | $2,185 | ($51) | (2.3)% | | Professional fees | $441 | $482 | $41 | 8.5% | | Other general and administrative expenses | $1,710 | $1,565 | ($145) | (9.3)% | | Total general and administrative expense | $4,387 | $4,232 | ($155) | (3.7)% | | Depreciation and amortization | $3,317 | $2,996 | ($321) | (10.7)% | | Total operating expenses | $11,621 | $10,713 | ($908) | (8.5)% | Operations and Maintenance Higher operations and maintenance costs were primarily due to increased salaries and wages from filling vacant positions, higher medical costs, additional IT service provider contracts, and one-time wastewater disposal costs - Higher personnel costs were attributable to increased salaries and wages from filling vacant positions and increased medical costs[15] - Other operations and maintenance expenses increased due to additional contracts with IT service providers and one-time wastewater disposal costs[15] General and Administrative The increase in general and administrative expenses was mainly driven by higher costs associated with various service providers - Increase in other general and administrative expenses was primarily due to higher costs associated with various service providers[16] Depreciation and Amortization Depreciation and amortization expenses rose due to an increase in depreciable fixed assets and additional amortization from a new office lease in Pima County - Increase in depreciation and amortization was substantially attributable to an increase in depreciable fixed assets and additional amortization from a new office lease in Pima County in December 2024[17] Other Income (Expense) Other expense decreased to $0.4 million in Q2 2025 from $0.5 million in the prior year, primarily due to higher income from Buckeye growth premiums resulting from an increase in new meter connections - Other expense decreased by $0.1 million, primarily due to higher income associated with Buckeye growth premiums from increased new meter connections[18] Net Income & Adjusted EBITDA Net income for Q2 2025 decreased by 6.8% to $1.6 million, or $0.06 per share, compared to $1.7 million, or $0.07 per share, in Q2 2024, while Adjusted EBITDA, however, increased by 2.1% to $6.9 million Q2 2025 Net Income and Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------- | :------ | :------ | :--------- | :--------- | | Net Income | $1,612 | $1,730 | ($118) | -6.8% | | EPS | $0.06 | $0.07 | ($0.01) | -14.3% | | Adjusted EBITDA | $6,935 | $6,793 | $142 | 2.1% | Business Operations & Strategy The company's strategy focuses on increasing service connections, improving efficiencies, and securing rate increases, supported by a consistent dividend policy and favorable regional growth trends Dividend Policy Global Water Resources recently declared a monthly cash dividend of $0.02533 per common share, which translates to an annualized dividend of $0.30396 per share - Declared a monthly cash dividend of $0.02533 per common share, payable on August 29, 2025, to holders of record on August 15, 2025, equivalent to $0.30396 per share on an annualized basis[21] Business Strategy The company's near-term growth strategy focuses on increasing service connections, improving operating efficiencies, and securing utility rate increases, while long-term, Global Water plans to continue aggregating water and wastewater utilities through strategic acquisitions and consolidation to realize benefits of regionalization and environmental stewardship - Near-term growth strategy involves increasing service connections, improving operating efficiencies, and increasing utility rates as approved by the ACC[22] - Plans to continue aggregating water and wastewater utilities through strategic acquisitions and entity consolidation to achieve benefits of consolidation, regionalization, and environmental stewardship[22] Connection Rates & Growth Trends Active service connections increased by 3.8% year-over-year, primarily driven by organic growth in the company's service areas, supported by the Phoenix metropolitan area's significant population increase and lower housing costs in areas like the City of Maricopa, despite a recent decrease in housing permits Active Service Connections | Date | Active Service Connections | | :----------- | :------------------------- | | June 30, 2025 | 65,639 | | June 30, 2024 | 63,256 | | Change | +2,383 (3.8%) | - The Phoenix MSA is the 10th largest MSA in the U.S. with an estimated population of 5.2 million in 2024, a 7.0% increase since 2020, and is projected to reach 5.8 million by 2030 and 6.5 million by 2040[24] - Organic growth is heavily influenced by the nearly 30% lower median home sales price in the City of Maricopa compared to the City of Phoenix as of June 2025[25] - Despite a decrease in single-family and multi-family permits in H1 2025 due to macroeconomic challenges, management believes the company is well-positioned for long-term growth in the Phoenix MSA due to available lots and existing infrastructure[26] Company Information & Financial Statements This section provides an overview of Global Water Resources' operations and Total Water Management approach, defines non-GAAP measures, includes cautionary notes on forward-looking statements, and presents condensed consolidated financial statements About Global Water Resources Global Water Resources is a leading water resource management company operating 39 systems providing water, wastewater, and recycled water services primarily in growth corridors around metropolitan Phoenix and Tucson, recognized for its Total Water Management (TWM) approach which integrates the entire water cycle to maximize beneficial use of recycled water and promote conservation - Global Water Resources owns and operates 39 systems providing water, wastewater, and recycled water service, primarily in growth corridors around metropolitan Phoenix and Tucson[29] - The company implements Total Water Management (TWM), an integrated approach to managing the entire water cycle, maximizing recycled water use, and enabling smart water management programs for conservation[30] - Received national recognition as a 'Utility of the Future Today' for superior water reuse practices and Cityworks' Excellence in Departmental Practice Award for public asset management[31] Use of Non-GAAP Measures This section defines non-GAAP financial measures such as EBITDA, Adjusted EBITDA, and Adjusted Net Income, which management uses as supplemental indicators of operating performance and overall corporate performance, while cautioning investors that these should not replace GAAP measures - EBITDA is defined as net income before interest, income taxes, depreciation, and amortization[33] - Adjusted EBITDA excludes gains/losses related to nonrecurring events, restricted stock expense, and disposal of assets[33] - Adjusted Net Income reflects net income excluding amortization related to ICFA intangible assets and their tax effect[33] - Management believes these non-GAAP measures provide useful supplemental information for investors but should not be construed as alternatives to GAAP measures[34] Cautionary Note Regarding Forward-Looking Statements This section provides a standard disclaimer regarding forward-looking statements, highlighting that they involve assumptions, risks, and uncertainties that could cause actual results to differ materially from expectations, and investors are cautioned not to place undue reliance on these statements, which are subject to various political, economic, business, market, and regulatory factors - Forward-looking statements reflect the company's expectations regarding future events and involve assumptions, risks, uncertainties, and other factors that could cause actual results to differ materially[35] - These statements are based on current beliefs and are subject to political, economic, business, market, regulatory, and other factors, as detailed in SEC filings[35] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets The balance sheet shows an increase in total assets to $449.4 million as of June 30, 2025, from $405.1 million at December 31, 2024, primarily driven by an increase in net utility plant, with total shareholders' equity also increasing significantly to $76.7 million Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Net utility plant | $401,749 | $359,379 | | Total Assets | $449,382 | $405,137 | | Total shareholders' equity | $76,740 | $47,604 | | Long-term debt, net | $116,803 | $118,518 | | Total Capitalization | $193,543 | $166,122 | | Total current liabilities | $20,006 | $22,258 | | Total other liabilities | $235,833 | $216,757 | | Total Capitalization and Liabilities | $449,382 | $405,137 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, total revenue increased to $14.2 million, while operating income slightly decreased to $2.6 million, with net income at $1.6 million, resulting in basic and diluted EPS of $0.06 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | | Total revenue | $14,241 | $13,510 | | Total operating expenses | $11,621 | $10,713 | | Operating Income | $2,620 | $2,797 | | Income Before Income Taxes | $2,229 | $2,328 | | Net Income | $1,612 | $1,730 | | Basic earnings per common share | $0.06 | $0.07 | | Diluted earnings per common share | $0.06 | $0.07 | | Dividends declared per common share | $0.08 | $0.08 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $8.8 million, a decrease from $13.6 million in the prior year, while net cash used in investing activities significantly increased to $35.4 million due to higher capital expenditures, and net cash provided by financing activities was $27.8 million, largely due to the issuance of common stock Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $8,827 | $13,571 | | Net cash used in investing activities | ($35,395) | ($12,211) | | Net cash provided by financing activities | $27,788 | $13,573 | | Increase in cash, cash equivalents, and restricted cash | $1,220 | $14,933 | | Cash, cash equivalents, and restricted cash — End of period | $12,376 | $19,696 | Reconciliation of Non-GAAP Measures The reconciliation shows that Adjusted EBITDA increased to $6.9 million in Q2 2025 from $6.8 million in Q2 2024, and Adjusted Net Income remained consistent with Net Income in Q2 2025, as there were no ICFA intangible amortization expenses or related tax effects Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Net Income | $1,612 | $1,730 | | Income tax expense | $617 | $598 | | Interest income | ($216) | ($266) | | Interest expense | $1,496 | $1,507 | | Depreciation and amortization | $3,317 | $2,996 | | EBITDA | $6,826 | $6,565 | | EBITDA adjustments | $109 | $228 | | Adjusted EBITDA | $6,935 | $6,793 | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Net Income | $1,612 | $1,730 | | ICFA intangible amortization expense | — | $81 | | Income tax effect of items above | — | ($20) | | Adjusted Net Income | $1,612 | $1,791 | Conference Call & Contact Information Global Water Resources will host a conference call on August 14, 2025, to discuss its Q2 2025 results, with details provided for dial-in and webcast access, and contact information for the company's CFO and Investor Relations is also included - Conference call to discuss Q2 2025 results scheduled for Thursday, August 14, 2025, at 1:00 p.m. Eastern time[27] - Dial-in numbers: Toll-free 1-833-816-1435, International 1-412-317-0527, Conference ID: 10201420, Webcast available via **www.gwresources.com**[27](index=27&type=chunk) - Company Contact: Michael J. Liebman, CFO and SVP, Tel (480) 999-5104, Investor Relations: Ron Both or Grant Stude, Encore Investor Relations, Tel (949) 432-7450[36]