Global Water(GWRS) - 2025 Q2 - Quarterly Report

Report Information Global Water Resources, Inc is classified as a non-accelerated filer and a smaller reporting company - Global Water Resources, Inc is a non-accelerated filer and a smaller reporting company[4] Key Metrics | Metric | Value | | :--- | :--- | | Common shares outstanding as of August 12, 2025 | 27,473,277 shares | | Common stock par value | $0.01 per share | PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements, reflecting growth in total assets and equity alongside a year-over-year decrease in net income Condensed Consolidated Balance Sheets (unaudited) The balance sheet shows an increase in total assets, primarily driven by growth in net utility plant, and a significant rise in shareholders' equity Financial Position Summary | Metric (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Net utility plant | 401,749 | 359,379 | | Cash and cash equivalents | 10,220 | 9,047 | | Total assets | 449,382 | 405,137 | | Capitalization and Liabilities | | | | 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 (unaudited) The operations statement reveals a year-over-year revenue increase, but higher operating expenses led to a slight decline in net income Operating Performance Summary | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | 14,241 | 13,510 | 26,698 | 25,120 | | Operating income | 2,620 | 2,797 | 3,875 | 4,064 | | Net income | 1,612 | 1,730 | 2,203 | 2,421 | | Basic earnings per share | 0.06 | 0.07 | 0.08 | 0.10 | | Diluted earnings per share | 0.06 | 0.07 | 0.08 | 0.10 | | Dividends per share | 0.08 | 0.08 | 0.15 | 0.15 | Condensed Consolidated Statements of Shareholders' Equity (unaudited) Shareholders' equity increased significantly due to the issuance of common stock, which raised substantial net proceeds - Total shareholders' equity was $76,740 thousand as of June 30, 2025, a significant increase from $47,604 thousand on December 31, 2024, primarily due to the issuance of 3,220,000 common shares for net proceeds of $30,783 thousand[18] Shareholders' Equity Summary | Metric (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common shares outstanding | 27,830,545 | 24,570,994 | | Common stock | 273 | 240 | | Additional paid-in capital | 76,469 | 47,366 | | Retained earnings | — | — | | Total shareholders' equity | 76,740 | 47,604 | Condensed Consolidated Statements of Cash Flows (unaudited) Cash flow from operations decreased, while cash used in investing activities increased significantly, offset by strong cash generation from financing activities Cash Flow Summary | Cash Flow Activity (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 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 at end of period | 12,376 | 19,696 | Notes to the Condensed Consolidated Financial Statements These notes provide detailed explanations of accounting policies, recent acquisitions, regulatory matters, and other key financial components 1. Description of Business, Basis of Presentation, Significant Accounting Policies, and Recent Accounting Pronouncements This note outlines the basis for the financial statements and discusses the potential impact of new accounting standards on future disclosures - The company is evaluating the impact of ASU 2023-09 (Income Tax Disclosure Improvements) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures for Comprehensive Income) on its financial statement disclosures[25][26] 2. Acquisitions This note details the company's recent acquisition of seven water systems in Tucson to expand its service area and customer base in Pima County - On July 8, 2025, the company's subsidiary GW-Ocotillo acquired seven water systems from Tucson Water for approximately $8.2 million in cash, serving about 2,200 water connections with a current rate base of approximately $7.7 million[27] 3. Regulatory Matters This note details recent decisions and activities by the Arizona Corporation Commission (ACC) that affect the company's revenue requirements and rate structures - GW-Santa Cruz and GW-Palo Verde filed rate case applications on March 5, 2025, with hearings expected to begin in the fourth quarter of 2025[28] - The ACC approved the GW-Farmers rate case on April 29, 2025, with a $1.1 million annual revenue increase, a 9.6% return on equity, and rates effective in three phases starting May 1, 2025[29] - The ACC approved the rate case for GW-Saguaro and six other utilities on June 20, 2024, resulting in a collective annual revenue increase of approximately $351 thousand, effective in five phases starting July 1, 2024[30] 4. Revenue Recognition This note provides a breakdown of revenue by source and customer class, along with policies for contract balances and credit loss allowances Revenue by Source | Revenue Source (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 7,368 | 6,668 | 13,348 | 11,894 | | Total wastewater and recycled water service revenue | 6,873 | 6,842 | 13,350 | 13,226 | | Total regulated revenue | 14,241 | 13,510 | 26,698 | 25,120 | Contract Balances | Contract Balance (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable, net | 3,830 | 3,233 | | Deferred revenue - ICFA | 22,449 | 21,517 | Allowance for Credit Losses | Credit Loss Allowance (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning balance | (163) | (122) | | Credit loss expense | (59) | (103) | | Write-offs | 56 | 90 | | Recoveries | (4) | (28) | | Ending balance | (170) | (163) | 5. Earnings Per Share This note provides the calculation for basic and diluted earnings per share, including the impact of dilutive securities - For the three and six months ended June 30, 2025, approximately 130,000 share-based awards were excluded from the diluted EPS calculation because their effect was anti-dilutive[38] Weighted-Average Shares Outstanding | Metric (in thousands of shares) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted-average common shares | 27,463 | 24,199 | 25,925 | 24,188 | | Effect of dilutive securities | 42 | 110 | 62 | 118 | | Diluted weighted-average common shares | 27,505 | 24,309 | 25,987 | 24,306 | 6. Utility Plant This note details the composition of the company's utility plant assets and provides information on depreciation expenses - Depreciation expense for the three and six months ended June 30, 2025, was $3.2 million and $6.4 million, respectively, an increase from the prior year periods[39] Utility Plant Composition | Utility Plant (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Transmission and distribution plant | 342,068 | 321,075 | | Equipment | 75,931 | 67,917 | | Office buildings and other structures | 68,858 | 67,313 | | Construction in progress | 73,095 | 54,388 | | Land | 2,315 | 2,300 | | Total utility plant | 562,267 | 512,993 | 7. Taxes, prepaid expenses and other current assets This note provides a detailed breakdown of taxes, prepaid expenses, and other current assets as of the reporting date Current Assets Breakdown | Current Assets (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ICFA receivable | 2,191 | 1,871 | | Prepaid expenses | 697 | 648 | | Buckeye growth premium receivable | 615 | 738 | | Prepaid insurance | 303 | 533 | | Income taxes receivable | 149 | 149 | | Other current assets | 14 | 141 | | Total taxes, prepaid expenses and other current assets | 3,969 | 4,080 | 8. Goodwill This note explains the changes in goodwill during the reporting period, primarily related to a reclassification to regulatory assets for a rate case - In March 2025, the company reclassified approximately $3.0 million of goodwill to regulatory assets to establish an acquisition premium related to the GW-Farmers rate case[42] Goodwill Reconciliation | Goodwill Movement (in thousands of USD) | Amount | | :--- | :--- | | Balance at December 31, 2024 | 9,486 | | Reclassification to regulatory assets | (2,959) | | Other adjustments | (245) | | Balance at June 30, 2025 | 6,282 | 9. Equity This note discloses the details of the company's public offering of common stock completed in March 2025 - On March 27, 2025, the company completed a public offering of 3,220,000 shares of common stock at $10.00 per share, raising gross proceeds of approximately $32.2 million and net proceeds of approximately $30.8 million[43] - Certain existing shareholders, including directors and their affiliates, purchased 1,439,200 shares of common stock[43] 10. Debt This note details the company's debt arrangements, including updates on its WIFA loan and revolving credit facility - The final disbursement of the WIFA loan was received in May 2025, with an outstanding balance of $1.6 million as of June 30, 2025[44] - The company's revolving credit facility with Northern Trust was amended on April 14, 2025, extending the maturity date to May 18, 2027, and increasing the maximum borrowing amount from $15 million to $20 million[45] - As of June 30, 2025, and December 31, 2024, the company had no outstanding borrowings under the revolving credit facility[45] 11. Accrued Expenses and Other Current Liabilities This note presents a detailed breakdown of accrued expenses and other current liabilities as of the reporting date Current Liabilities Breakdown | Current Liabilities (in thousands of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued project liabilities | 4,536 | 5,858 | | Other taxes | 1,550 | 1,648 | | AIAC refund, current portion | 1,431 | 1,431 | | Interest | 1,186 | 1,180 | | Accrued payroll | 1,036 | 991 | | Dividends payable | 695 | 614 | | Customer advances | 545 | 556 | | Accrued franchise fees | 350 | 353 | | Other accrued liabilities | 1,190 | 1,170 | | Total accrued expenses and other current liabilities | 12,519 | 13,801 | 12. Fair Value This note provides information on financial assets and liabilities measured at fair value and explains the valuation methods used - The estimated fair value of the contingent consideration (growth premium) related to the GW-Farmers acquisition was $1.2 million, and for the GW-Saguaro utilities was $0.7 million, remaining unchanged as of June 30, 2025, and December 31, 2024[48][49] Fair Value Measurements | Fair Value Measurement (in thousands of USD) | Total at June 30, 2025 | Total at December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | HUF funds - restricted cash | 507 | 870 | | Certificates of deposit - restricted | 1,649 | 1,239 | | Liabilities | | | | Contingent consideration | 1,923 | 1,942 | Fair Value of Long-Term Debt | Long-Term Debt (in thousands of USD) | Carrying Value at June 30, 2025 | Fair Value at June 30, 2025 | Carrying Value at Dec 31, 2024 | Fair Value at Dec 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Long-term debt | 116,803 | 115,145 | 118,518 | 118,702 | 13. Income Taxes This note provides the company's effective tax rate for the reporting periods and explains the primary reasons for rate changes - The increase in the effective tax rate for the second quarter of 2025 was primarily due to differences between book and taxable compensation expense related to share-based compensation[53] - The increase in the effective tax rate for the first half of 2025 was mainly due to a reduction in deferred tax assets in the prior year period[53] - The company is evaluating the impact of the "One Big Beautiful Bill Act" but does not expect a material impact on its results of operations, cash flows, or financial condition[54] Effective Tax Rate | Effective Tax Rate | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Effective tax rate | 27.7% | 25.7% | 26.6% | 24.9% | 14. Share-based Compensation This note details the share-based compensation expenses for employees and non-employees during the reporting periods Share-based Compensation Expense | Share-based Compensation (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total employee share-based compensation | 192 | 268 | 369 | 551 | | Total non-employee share-based compensation | (2) | 53 | (5) | 44 | | Total share-based compensation | 190 | 321 | 364 | 595 | 15. Transactions With Related Parties This note discloses transactions between the company and its related parties, including an employee medical benefits plan and stock purchases - The company provides medical benefits to employees through a plan sponsored by an affiliate of a significant shareholder and director, with medical claims paid totaling $0.5 million and $1.0 million for the three and six months ended June 30, 2025, respectively[56] - Certain directors and their affiliates purchased a total of 1,439,200 common shares in the March 2025 public offering[57] 16. Commitments and Contingencies This note details the company's commitments and contingencies, including growth premiums, ICFA repayment obligations, and asset retirement obligations - As of June 30, 2025, the estimated fair value of the growth premium liability related to the Farmers Water Co acquisition was $1.2 million[58] - The carrying value of the growth premium liability within the GW-Saguaro utility service area was $0.7 million[59] - The company has an obligation to repay ICFA advances related to the CP Water utility through future ICFA fee reductions, with a liability of $0.9 million[60] - As of June 30, 2025, the estimated liability for asset retirement obligations was $1.0 million, an increase from $0.7 million at December 31, 2024[61] - Management is not aware of any legal proceedings that would have a material effect on the company's financial condition, results of operations, or cash flows[62] 17. Business Segment Information This note states that the company operates as a single segment and provides a reconciliation of non-GAAP measures used by management - The company operates as a single operating and reportable segment, providing regulated water, wastewater, and recycled water services primarily within one geographic region in Arizona[63] Reconciliation of Non-GAAP Measures | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | 1,612 | 1,730 | 2,203 | 2,421 | | EBITDA | 6,826 | 6,565 | 12,307 | 11,768 | | Adjusted EBITDA | 6,935 | 6,793 | 12,577 | 12,197 | 18. Other, Net This note presents the components of "Other, Net" for the reporting periods, primarily consisting of the Buckeye growth premium and AFUDC-Equity Components of Other, Net | Other, Net (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Buckeye growth premium | 615 | 480 | 1,233 | 1,257 | | AFUDC-Equity | 277 | 237 | 556 | 444 | | Other | (3) | 55 | (2) | 73 | | Total Other, Net | 889 | 772 | 1,787 | 1,774 | 19. Supplemental Cash Flow Information This note provides supplemental cash flow data, including cash paid for interest and income taxes, and non-cash activities Supplemental Cash Flow Data | Supplemental Cash Flow Info (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash paid for interest (net of capitalized amounts) | 2,839 | 2,290 | | Cash paid for income taxes | 1,027 | — | | Operating cash flows used for operating leases | 192 | 153 | | Capital expenditures (accrued in accounts payable and accrued liabilities) | 5,067 | 710 | | Utility plant constructed and contributed by developers | 15,424 | 2,645 | | Increase in asset retirement obligations | 278 | — | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, covering business outlook, key performance factors, and a comparative analysis of liquidity and capital resources Overview The company is a water resource management firm that owns and operates 39 utility systems in Arizona using a "Total Water Management" approach - GWRI is a water resource management company that owns, operates, and manages 39 water, wastewater, and recycled water utility systems in the Phoenix and Tucson metropolitan areas of Arizona[71] - The company employs a "Total Water Management" approach to reduce reliance on scarce water resources and ensure sustainability through recycled water reuse and regional planning[71][76] Business Outlook The company continues to experience organic growth and is optimistic about long-term prospects despite a recent downturn in housing permit forecasts - As of June 30, 2025, the company's active connections grew by 3.8% year-over-year, demonstrating organic growth[72] - The Phoenix metropolitan area's population is projected to reach 5.8 million by 2030 and 6.5 million by 2040[72] Phoenix Metro Housing Permit Forecast | Phoenix Metro Area Housing Permit Forecast | 2025 | 2026 | | :--- | :--- | :--- | | Single-family permits | 24,010 | 24,090 | | Multi-family permits | 10,559 | 10,728 | Housing Equivalent Permits (Y-o-Y Change) | Housing Equivalent Permits (Y-o-Y Change) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | City of Maricopa single-family permits | 177 | 233 | (24)% | 365 | 558 | (35)% | | Phoenix Metro single-family permits | 5,929 | 6,898 | (14)% | 12,337 | 14,433 | (15)% | | City of Maricopa multi-family equivalent permits | 86 | 776 | (89)% | 290 | 1,176 | (75)% | Factors Affecting our Results of Operations This section discusses various factors influencing the company's performance, including growth, acquisitions, regulation, investment, costs, weather, and water supply Population and Community Growth Population and community growth in the Phoenix metropolitan area directly drive revenue and variable expense growth through an increase in active service connections - As of June 30, 2025, active service connections increased by 2,383, or 3.8%, to 65,639, primarily due to organic growth in the service area[80] - Approximately 89.8% of active service connections are served by the GW-Santa Cruz and GW-Palo Verde utilities[80] Recent Acquisition Activity The company recently acquired seven water systems in Tucson to expand its customer base and improve operational efficiency through integration and upgrades - On July 8, 2025, the company completed the acquisition of seven water systems from Tucson Water, serving approximately 2,200 water connections and expected to generate about $1.5 million in annual revenue[84] - This acquisition brings the company's total customer count in Pima County to approximately 7,200, and the company plans to upgrade these systems by installing AMI smart water meters[84] Economic and Environmental Utility Regulation The company is extensively regulated by the ACC and must comply with environmental rules, which may increase costs but are typically recoverable through rates - The ACC sets "just and reasonable" rates by evaluating the "used and useful" nature of utility plant and the "prudence" of costs using a historical test year[85] - Revenue for the company's water utilities consists of a fixed fee and a consumption-based volumetric fee, while wastewater services are based on a fixed fee[86] - The EPA has finalized Maximum Contaminant Levels (MCLs) for six PFAS, and the company expects compliance to increase capital expenditures and operating costs[89] - The company has completed its service line inventory, found no lead pipes, and does not expect the new Lead and Copper Rule to materially impact its results of operations[93] Infrastructure Investment Infrastructure investment is a key driver of earnings growth by expanding the "used and useful" rate base, which is supported by a capital improvement plan - Capital expenditures are a component of the rate base, and the company recovers a return on equity and debt service costs on these investments through rates[94] - As of December 31, 2024, the company's estimated rate base was $212.5 million, an 82% increase since 2019[96] Production and Treatment Costs Significant production costs are incurred for water and wastewater services, and while generally recoverable, regulatory lag can impact profits during periods of cost increases - The company's most significant costs include labor, water and wastewater treatment chemicals, and electricity for operating pumps and other equipment[97] - Regulatory lag can lead to decreased profit margins and earnings when production costs or other operating expenses increase significantly[97] Weather and Seasonality Customer water consumption is influenced by weather, with higher demand in summer, and the company's geographic concentration makes it sensitive to extreme weather patterns - Customer water usage is affected by weather conditions, with higher demand in the summer due to increased temperatures and outdoor uses like irrigation[99] - The geographic concentration of the company's service areas makes its operations more sensitive to extreme weather patterns[100] - The second and third quarters are typically the highest revenue periods for water and wastewater services[100] Access to and Quality of Water Supply The company relies on groundwater and recycled water, faces water resource constraints in parts of Pima County, and expects a new "farm-to-city" program to support sustainability - The company primarily relies on groundwater and recycled water supplies to meet future demand in its service areas[101] - Water resource constraints exist in areas near the City of Maricopa in Pima County, which could affect developers' ability to obtain final plat approval[101] - Arizona's "farm-to-city" program (Senate Bill 1611), signed in June 2025, allows agricultural water rights to be converted for new development, which is expected to promote water sustainability and regional growth[102] Rate Regulation Updates The ACC has approved a "formula rate plan" policy to allow for more predictable rate adjustments, and the company has filed a new rate case seeking a significant revenue increase - In December 2024, the ACC approved a "Formula Rate Policy Statement" allowing utilities to adjust rates annually based on a pre-approved formula to reduce "regulatory lag"[103] - On March 5, 2025, GW-Santa Cruz and GW-Palo Verde filed a rate case requesting a net annual revenue increase of approximately $6.5 million, to be implemented in two phases starting May 2026[105] - The company has proposed adopting a formula rate in the future for smaller, more gradual annual updates to costs and investments[105] Recent Rate Case History | Company | Approved ROE | Approved Incremental Annual Revenue (in millions of USD) | Application Date | ACC Decision No | Rate Effective Date | | :--- | :--- | :--- | :--- | :--- | :--- | | GW-Santa Cruz | 9.20% | 1.2 | July 22, 2020 | 78644 | July 1, 2022 | | GW-Palo Verde | 9.20% | 0.7 | July 22, 2020 | 78644 | July 1, 2022 | | GW-Farmers | 9.60% | 1.1 | June 27, 2024 | 80695 | May 1, 2025 | Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024 Total revenue grew 5.4% to $14.2 million, but an 8.5% increase in operating expenses led to a 6.3% decline in operating income and a 6.8% drop in net income - Revenue growth was primarily driven by organic growth in active water and wastewater connections, increased water and recycled water consumption, and rate increases for GW-Saguaro and GW-Farmers[111] - The increase in operations and maintenance personnel costs was mainly due to higher salaries and medical costs from filling vacant positions[113] - The increase in depreciation and amortization was primarily attributable to an increase in depreciable fixed assets and additional amortization from a new office lease[115] Q2 Operating Results Summary | Metric (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 14,241 | 13,510 | 731 | 5.4% | | Operating expenses | 11,621 | 10,713 | (908) | (8.5)% | | Operating income | 2,620 | 2,797 | (177) | (6.3)% | | Net income | 1,612 | 1,730 | (118) | (6.8)% | | Basic earnings per share | 0.06 | 0.07 | (0.01) | (14.3)% | Q2 Revenue Breakdown | Revenue Detail (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 7,368 | 6,668 | 700 | 10.5% | | Total wastewater and recycled water service revenue | 6,873 | 6,842 | 31 | 0.5% | | Active water connections | 36,382 | 35,128 | 1,254 | 3.6% | | Active wastewater connections | 29,257 | 28,128 | 1,129 | 4.0% | | Water consumption (million gallons) | 1,201 | 1,110 | 91 | 8.2% | | Recycled water consumption (million gallons) | 289 | 232 | 57 | 24.5% | Q2 Operating Expense Breakdown | Operating Expense Detail (in thousands of USD) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operations and maintenance personnel costs | 1,356 | 1,184 | (172) | (14.5)% | | Utilities, chemicals, and repairs | 1,183 | 1,084 | (99) | (9.1)% | | Depreciation and amortization | 3,317 | 2,996 | (321) | (10.7)% | | Total operations and maintenance expenses | 3,917 | 3,485 | (432) | (12.4)% | | Total general and administrative expenses | 4,387 | 4,232 | (155) | (3.7)% | | Total operating expenses | 11,621 | 10,713 | (908) | (8.5)% | Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024 Total revenue grew 6.3% to $26.7 million, but an 8.4% increase in operating expenses led to a 4.7% decline in operating income and a 9.0% drop in net income - Revenue growth was primarily driven by organic growth in active water and wastewater connections, increased water and recycled water consumption, and rate increases for GW-Saguaro and GW-Farmers[119] - The increase in utilities, chemicals, and repairs expense was mainly due to higher electricity purchases ($0.2 million) and increased chemical costs ($0.1 million) to support higher consumption and equipment operation[122] - The increase in depreciation and amortization was primarily attributable to a 6.7% increase in depreciable fixed assets and additional amortization from a new office lease[125] H1 Operating Results Summary | Metric (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 26,698 | 25,120 | 1,578 | 6.3% | | Operating expenses | 22,823 | 21,056 | (1,767) | (8.4)% | | Operating income | 3,875 | 4,064 | (189) | (4.7)% | | Net income | 2,203 | 2,421 | (218) | (9.0)% | | Basic earnings per share | 0.08 | 0.10 | (0.02) | (20.0)% | H1 Revenue Breakdown | Revenue Detail (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total water service revenue | 13,348 | 11,894 | 1,454 | 12.2% | | Total wastewater and recycled water service revenue | 13,350 | 13,226 | 124 | 0.9% | | Active water connections | 36,382 | 35,128 | 1,254 | 3.6% | | Active wastewater connections | 29,257 | 28,128 | 1,129 | 4.0% | | Water consumption (million gallons) | 2,037 | 1,783 | 254 | 14.2% | | Recycled water consumption (million gallons) | 399 | 301 | 98 | 32.5% | H1 Operating Expense Breakdown | Operating Expense Detail (in thousands of USD) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Operations and maintenance personnel costs | 2,696 | 2,477 | (219) | (8.8)% | | Utilities, chemicals, and repairs | 2,215 | 1,875 | (340) | (18.1)% | | Depreciation and amortization | 6,645 | 5,930 | (715) | (12.1)% | | Total operations and maintenance expenses | 7,604 | 6,769 | (835) | (12.3)% | | Total general and administrative expenses | 8,574 | 8,357 | (217) | (2.6)% | | Total operating expenses | 22,823 | 21,056 | (1,767) | (8.4)% | Liquidity and Capital Resources The company funds its operations through cash flow, debt, equity, and grants, and believes its current resources are sufficient for future needs - The company's primary capital sources are internal operating cash flow, debt and equity financing, and government grants[128] - On March 27, 2025, the company raised approximately $30.8 million in net proceeds from a public offering of common stock[130] - WIFA awarded a $1.6 million grant to the GW-Farmers utility for smart water meter replacement[131] - The revolving credit facility was increased to $20 million with its maturity extended to May 18, 2027, and had no outstanding balance as of June 30, 2025[133] - The company expects its existing cash and $20 million revolving credit facility to be sufficient to meet its operational and capital needs for the next 12 months and beyond, while remaining in compliance with debt covenants[137] - The company maintains a monthly dividend program, currently set at $0.02533 per share (annualized at $0.30396)[138] - For the six months ended June 30, 2025, net cash provided by operating activities was $8.8 million, net cash used in investing activities was $35.4 million, and net cash provided by financing activities was $27.8 million[140][141][144] - As of June 30, 2025, the company was in compliance with the financial debt covenants under its senior secured notes and Northern Trust loan agreement[146] ITEM 3. Qualitative and Quantitative Disclosures About Market Risk This section states that disclosures about market risk are not applicable - This section is not applicable[149] ITEM 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, and no material changes were made to internal controls - As of June 30, 2025, the company's disclosure controls and procedures were determined to be effective[149] - There were no material changes to the company's internal controls during the fiscal quarter ended June 30, 2025[150] PART II. OTHER INFORMATION ITEM 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material impact - The company is not involved in any legal proceedings expected to have a material impact on it[151] ITEM 1A. Risk Factors This section updates risk factors, highlighting regulatory dependence for expansion and water resource limitations in Pima County - The company's expansion into new service areas and existing water/wastewater services depend on regulatory approvals, and failure to obtain them would adversely affect future growth[152] - Water resource limitations near the City of Maricopa in Pima County could affect developers' ability to obtain final plat approval, thereby limiting future growth[153] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discloses that no unregistered equity securities were sold and details stock repurchases to cover employee tax obligations - There were no sales of unregistered securities during the three months ended June 30, 2025[155] - The shares purchased represent shares withheld from employees or board members to satisfy tax obligations related to the vesting of restricted stock awards[158] Share Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1, 2025 to May 31, 2025 | 11,347 | $10.41 | ITEM 3. Defaults Upon Senior Securities This section states that no defaults upon senior securities occurred during the reporting period - There were no defaults upon senior securities[159] ITEM 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable - Mine safety disclosures are not applicable[160] ITEM 5. Other Information This section discloses that no Rule 10b5-1 trading plans were adopted or terminated by directors or officers during the period - During the three months ended June 30, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement[161] ITEM 6. Exhibits This section lists the exhibits filed with the report, including corporate charters, loan agreement amendments, and XBRL files - Exhibits include the company's Articles of Incorporation, Amended Bylaws, the Sixth Modification Agreement with Northern Trust Company, and XBRL-related files[162] Signatures The report was duly signed on behalf of the company by its Chief Financial Officer - The report was signed on August 13, 2025, by Michael J. Liebman, Chief Financial Officer and Corporate Secretary, on behalf of Global Water Resources, Inc[167]