Global Water Resources Inc.
05/13/2026 | Press release | Distributed by Public on 05/13/2026 14:54
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management's discussion and analysis of Global Water Resources, Inc.'s financial condition and results of operations ("MD&A") relate to the three months ended March 31, 2026 and should be read together with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this report.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q are forward-looking in nature and may constitute "forward-looking information" within the meaning of applicable securities laws. Often, but not always, forward-looking statements can be identified by the words "believes", "anticipates", "plans", "expects", "intends", "projects", "estimates", "objective", "goal", "focus", "aim", "should", "could", "may", and similar expressions.
These forward-looking statements include future estimates described in "Business Outlook", "Factors Affecting our Results of Operations", and "Liquidity and Capital Resources". These forward-looking statements include, but are not limited to, statements about our strategies; expectations about future business plans, prospective performance, growth, and opportunities, including the potential for new service connections; future financial performance; regulatory and ACC proceedings, decisions and approvals, such as the outcome, timing and other statements regarding our plans, expectations and estimates relating to our rate cases and other applications with the ACC and other regulatory bodies, including with respect to the Settlement Agreement; our plans relating to future filings of our rate cases and other regulatory applications; acquisition plans and strategies, including our ability to complete additional acquisitions, and our expectations about future benefits of our acquisitions, such as projected revenue from our acquisitions, as well as our plans relating to the integration and upgrade of acquired water systems; statements concerning Arizona's Assured Water Supply "Ag-to-Urban" program and the State Route 347 Improvement Project, including anticipated benefits; population and growth projections; technologies, including expected benefits from implementing such technologies; revenue; metrics; operating expenses; trends relating to our industry, market, population and job growth, and housing permits; the adequacy of our water supply to service our current demand and growth for the foreseeable future; liquidity and capital resources; plans and expectations for capital expenditures; cash flows and uses of cash; dividends; depreciation and amortization; tax payments; our ability to repay indebtedness and invest in initiatives; the anticipated impact and resolutions of legal matters; the anticipated impact of new or proposed laws, including regulatory requirements, tax changes, and judicial decisions; the anticipated impact of accounting changes and other pronouncements; and other statements that are not historical facts.
Forward-looking statements should not be read as a guarantee of future performance or results. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results may vary materially from what is contained in a forward-looking statement. Investors are cautioned not to place undue reliance on forward-looking information. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks related to legal, regulatory, and legislative matters; risks related to our business and operations; risks related to market and financial matters; risks related to technology; and risks related to the ownership of our common stock, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
These and other factors are discussed in the risk factors described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K") and in Part II, Item 1A "Risk Factors" in this report, as updated from time to time in our subsequent filings with the SEC. Any forward-looking statement speaks only as of the date of this report. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Overview
GWRI is a water resource management company that owns, operates, and manages thirty-nine water, wastewater, and recycled water public utility systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona. We seek to deploy an integrated approach, referred to as "Total Water Management." Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically. This approach employs a series of principles and practices that can be tailored to each community:
•Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future;
•Regional planning;
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•Use of advanced technology and data;
•Employing respected subject matter experts and retaining thought leaders;
•Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, municipalities, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and
•Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
Business Outlook
We continue to experience organic growth exhibited through our year-over-year organic increase in active connections (i.e., exclusive of acquisition-related growth) of 2.6% as of March 31, 2026. According to the 2025 U.S. Census estimates, the Phoenix metropolitan statistical area ("MSA") is the 10th largest MSA in the U.S. and had an estimated population of 5.2 million, an increase of 7.9% over the 4.8 million people reported in the 2020 Census. Growth in the Phoenix MSA continues as a result of its excellent weather, large and growing universities, a diverse employment base, and low taxes. The Employment and Population Statistics Department of the State of Arizona predicts that the Phoenix metropolitan area will have a population of 5.8 million people by 2030 and 6.5 million by 2040.
Our organic growth continues to be primarily influenced by the comparatively lower cost of housing in the City of Maricopa relative to other areas within the Phoenix MSA. As of March 2026, the median home sales price in the City of Maricopa was 26% lower than in the City of Phoenix. In addition, preparation work for the construction on the State Route 347 Improvement Project started in April 2026, with construction expected to commence this summer and completion scheduled for 2029. The project represents a transformative investment in regional infrastructure that we believe will enhance safety, improve mobility and support the continued growth of the City of Maricopa and surrounding areas.
We continue to monitor potential effects on our operations due to changes in the macroeconomic environment, such as the impacts of tariffs on our operational costs and construction work in progress, as well as new home construction in our service areas. We continue to expect a positive long-term outlook based on forecasted performance of job and population growth, as well as indicators of stabilizing construction in the single-family housing market in the Phoenix MSA.
The 2026 and 2027 residential permit forecasts, published by Arizona State University - W.P. Carey School of Business Greater Phoenix Blue Chip Real Estate Consensus Panel in January 2026, are presented in the table below:
| 2026 | 2027 | |||||||
| Phoenix MSA Consensus | ||||||||
| Single family permits | 23,671 | 24,353 | ||||||
| Multi-family permits | 9,225 | 8,872 | ||||||
Single family and multi-family housing equivalent permits issued are presented in the table below:
|
Three Months Ended March 31, |
Change | |||||||||||||
| 2026 | 2025 | # | % | |||||||||||
| Single family permits | ||||||||||||||
| City of Maricopa | 157 | 188 | (31) | (16) | % | |||||||||
| Phoenix MSA | 5,204 | 6,408 | (1,204) | (19) | % | |||||||||
| Multi-family housing equivalent permits | ||||||||||||||
| City of Maricopa | 215 | 204 | 11 | 5 | % | |||||||||
While new permit activity has slowed, growth in the Phoenix MSA, particularly in the City of Maricopa, is reflected in the Company's 2.6% year-over-year organic increase in active connections. Management believes, despite fluctuations in permit projections, we remain well-positioned to benefit from the anticipated long-term growth of the Phoenix MSA.
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Factors Affecting our Results of Operations
Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to:
•population and community growth;
•economic and environmental utility regulation;
•the need for infrastructure investment;
•production and treatment costs;
•weather and seasonality; and
•adequate water supply.
We are subject to regulation by the state regulator, the ACC. The U.S. federal and state governments also regulate environmental, health and safety, and water quality matters. We continue to execute on our strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
We continue to monitor the impact of business and macroeconomic conditions, including inflationary pressures, changes in tariff policy and changes resulting from geopolitical conflicts, such as the ongoing military conflict in the Middle East, on our business and operations. While these conditions did not have a material effect on our business operations, results of operations, cash flows and financial position for the three months ended March 31, 2026, we are unable to predict the ultimate extent to which our business operations, results of operations, cash flows, and financial position could be impacted.
Population and Community Growth
Population and community growth in the metropolitan Phoenix area served by our utilities have a direct impact on our earnings. An increase or decrease in our active service connections will affect our revenue and variable expenses in a corresponding manner. As of March 31, 2026, active service connections increased 3,722, or 5.7%, to 68,885 compared to 65,163 active service connections as of March 31, 2025, primarily due to organic growth in our service areas and the acquisition of seven water systems from the City of Tucson in July 2025. Approximately 87.3% of the 68,885 active service connections are serviced by our GW-Santa Cruz and GW-Palo Verde utilities as of March 31, 2026.
The graph below presents the historical change in active connections for our ongoing operations over the past five years.
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Recent Acquisition Activity
Acquisition of Water Systems from City of Tucson
On July 8, 2025, the Company's GW-Ocotillo subsidiary completed the previously announced acquisition of seven water systems from Tucson Water, the City of Tucson's water utility, in an all-cash transaction for an amended purchase price of approximately $8.1 million. The systems served approximately 2,200 water service connections in and around Pima County with a rate base of approximately $7.7 million at the time of acquisition. The Company adopted Tucson Water's rates for the acquired water systems, including a previously approved 5.0% rate increase scheduled for July 2026. Following the acquisition, the total number of Global Water customers in Pima County exceeded 7,200. The Company expects the acquired water systems to generate approximately $1.5 million in revenue annually. The Company will integrate the acquired water systems using the same proven approach to consolidation and effective water management implemented in its other acquisitions in Pima County. The Company plans to update the acquired water systems over time with the installation of upgraded AMI, which will include smart meters that enable wireless usage metering, similar to the technology that Global Water has deployed for approximately 90% of its active customers.
Economic and Environmental Utility Regulation
We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors in the state's utilities. The ACC uses a historical test year to evaluate whether the plant in service is used and useful, to assess whether costs were prudently incurred, and to set "just and reasonable" rates. Rate base is typically the depreciated original cost of the plant in service (net of CIAC and AIAC, which are funds or property provided to a utility under the terms of a main extension agreement, the value of which may be refundable), that has been determined to have been "prudently invested" and "used and useful", although the reconstruction cost of the utility plant may also be considered in determining the rate base. The ACC also decides on an applicable capital structure based on actual or hypothetical analyses. The ACC determines a "rate of return" on that rate base, which includes the approved capital structure and the actual cost of debt and a fair and reasonable cost of equity based on the ACC's judgment. The overall revenue requirement for rate making purposes is established by multiplying the rate of return by the rate base and adding reasonably incurred operating expenses for the test year, depreciation, taxes, and any applicable pro forma adjustments.
To ensure an optimal combination of access to water and water conservation, balanced with a fair rate of return for investors, our water utility operating revenue is based on two components: a fixed fee and a consumption or volumetric fee. For our water utilities, the fixed fee, or "basic service charge," provides access to water for residential usage and has generally been set at a level to produce approximately 50% of total water revenue. The volumetric fee is based on the total volume of water supplied to a given customer after the minimum number of gallons, if any, covered by the basic service charge, multiplied by a price per gallon set by a tariff approved by the ACC. A discount to the volumetric rate applies for customers that use less than an amount specified by the ACC. For all investor-owned water utilities, the ACC has, as a policy matter, required the establishment of inverted tier conservation-oriented rates, meaning that the price of water increases as consumption increases. For wastewater utilities, wastewater collection and treatment can be based on volumetric or fixed fees. Our wastewater service is billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component.
We are required to file rate cases with the ACC to obtain approval for a change in the rates we charge to customers. Rate cases and other rate-related proceedings can take a year or more to complete. As a result, there is frequently a delay, or regulatory lag, between the time of a capital investment or incurrence of an operating expense increase and when those costs are reflected in rates. We generally expect to file for rate increases every three to five years, in line with common industry practice. Refer to "- Rate Regulation Updates" below and Note 3 - "Regulatory Matters" of the Notes to the Condensed Consolidated Financial Statements (unaudited) included in Part I, Item 1 of this report for additional information.
Additionally, our water and wastewater utility operations are subject to extensive regulation by U.S. federal, state, and local regulatory agencies that enforce environmental, health, and safety requirements, which affect all of our regulated subsidiaries. Environmental, health and safety, and water quality regulations are complex, change frequently, and have tended to become more stringent over time. Although it is difficult to project the ultimate costs of complying with pending or future requirements, we do not expect requirements under current regulations to have a material impact on our operations or financial condition, though it is possible new methods of treating drinking water may be required if additional regulations become effective in the future. See "Business-Regulation", included in Part I, Item 1 of the 2025 Form 10-K for additional information.
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Infrastructure Investment
Capital expenditures for infrastructure investment are a component of the rate base on which our regulated utility subsidiaries are allowed to earn a rate of return. Capital expenditures for infrastructure provide a basis for earnings growth by expanding our "used and useful" rate base, which is a component of our permitted return on investment and revenue requirement. We have generally been able to recover a rate of return on these capital expenditures (return on equity and debt), together with debt service and certain operating costs, through the rates we charge.
We have an established capital improvement plan to make targeted capital investments to repair and replace existing infrastructure as needed, address operating redundancy requirements and expand our infrastructure in areas where growth is occurring. Refer to "- Liquidity and Capital Resources" below for additional information.
Production and Treatment Costs
Our water and wastewater service requires significant production resources and therefore results in significant production costs. Although we are permitted to recover these costs through the rates we charge, regulatory lag can decrease our margins and earnings if production costs or other operating expenses increase significantly before we are able to recover them through increased rates. Our most significant costs include labor, chemicals used to treat water and wastewater, and power used to operate pumps and other equipment. Power and chemical costs can be volatile. However, we employ a variety of technologies and methodologies to minimize costs and maximize operational efficiencies.
Weather and Seasonality
Our ability to meet the existing and future water demands of our customers depends on the availability of an adequate supply of water. Drought, overuse of sources of water, the protection of threatened species or habitats, or other factors may limit the availability of ground and surface water.
Also, customer usage of water and recycled water is affected by weather conditions, particularly during the summer. Our water systems generally experience higher demand in the summer months due to the warmer temperatures and increased usage by customers for irrigation and other outdoor uses. However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income. Conversely, when weather conditions are extremely dry, our business may be affected by government-issued drought-related warnings and/or water usage restrictions that would artificially lower customer demand and reduce our operating revenue.
The limited geographic diversity of our service areas makes the results of our operations more sensitive to the effect of extreme weather patterns. The second and third quarters of the year are generally those in which water service revenue and wastewater service revenue are highest. For additional information and risks associated with weather and seasonality, refer to "Risk Factors-Business and Operational Factors-Our utilities business is subject to seasonal fluctuations and other weather-related conditions, such as droughts, which could adversely affect the supply of and demand for our service and our results of operations," and "Risk Factors-Business and Operational Factors-Climate variability may cause increased volatility in weather and may impact water usage and related revenue or require additional expenditures, all of which may not be fully recoverable in rates or otherwise," included in Part I, Item 1A of the 2025 Form 10-K.
Adequate Water Supply
In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources. We currently rely predominantly on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us. In addition, regulatory restrictions on the use of groundwater and the development of groundwater wells, lack of available water rights, drought, overuse of local or regional sources of water, protection of threatened species or habitats, or other factors, including climate change, may limit the availability of ground or surface water. In particular, water resource constraints exist in certain areas within Pinal County near and around the City of Maricopa. We have obtained a DAWS in the Maricopa/Casa Grande region (GW-Santa Cruz) for two distinct service areas for approximately 22,900 acre-feet of water use in total. We have significant unused DAWS capacity in the larger service area in the north, including the incorporated City of Maricopa. In a smaller service area southwest of the City of Maricopa within Pinal County, the DAWS coverage is limited and more constrained by state law and groundwater regulations, which may impact developers' ability to obtain final plat approval if the DAWS is not expanded. While we believe we have sufficient capacity for many years to support connection growth in this area, it is the increase in land entitlement that may exceed the allocation of the smaller service area within the DAWS, which in turn may limit future plat approvals. We are working with our development partners and others to develop long-term solutions for this area. Regardless,
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considering the existing capacity in the DAWS, we believe that we have an adequate supply of water to service our current demand and growth for the foreseeable future in our service areas. For additional information and risks associated with the access to and quality of water supply, see "Risk Factors-Business and Operational Factors-Inadequate water supplies and wastewater capacity could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenue," included in Part I, Item 1A of the 2025 Form 10-K.
Ag-to-Urban
In January 2026, a developer in GW-Santa Cruz's service area filed their initial application with the ADWR under the new Ag-to-Urban program for the conversion of agricultural land to urban development that allows for the creation of Groundwater Savings Credits ("GSCs"). GW-Santa Cruz is in the process of preparing an application to modify its DAWS to incorporate these GSCs, along with additional recycled water, and is planning to file the application with the ADWR in the second quarter of 2026. The Company anticipates a decision on the application will take approximately 12 to 18 months. If the DAWS modification application is approved, the Company believes this will expand GW-Santa Cruz's water resource portfolio and provide increased water resource security in addition to providing water for growth in the utility's service area. There can be no assurance that the ADWR will approve the modification application or on the timing of a decision by the ADWR.
Ocotillo DAWS Application
On March 27, 2026, the Company's GW-Ocotillo utility filed a DAWS application with the ADWR to secure water supplies and provide water resource security in its service area. The Company anticipates a final decision from the ADWR in the fourth quarter of 2027.
Rate Regulation Updates
Santa Cruz/Palo Verde Rate Cases
On March 5, 2025, GW-Santa Cruz and GW-Palo Verde each filed a general rate case application and related schedules with the ACC for, among other things, increased water and wastewater rates, respectively, based on a test year ended December 31, 2024, with updates for post-test year plant. On October 1, 2025, the ACC Utilities Division ("ACC Staff") and RUCO filed their respective initial written testimonies with the ACC in the rate cases, with subsequent rebuttal, surrebuttal and rejoinder testimonies having been filed by the parties.
On April 28, 2026, GW-Santa Cruz, GW-Palo Verde, RUCO, and ACC Staff filed with the ACC a settlement agreement (the "Settlement Agreement") detailing the terms upon which the parties have agreed to bifurcate and settle the rate cases. Pursuant to the Settlement Agreement, the parties have agreed to, among other things:
•an increase in GW-Santa Cruz's annual revenue requirement of approximately $2.3 million with a capital structure of 55% common equity/45% debt and a return on equity of 9.6%;
•a requested effective date of the new rates for GW-Santa Cruz of November 1, 2026; and
•the withdrawal of the GW-Palo Verde rate case, with an agreement that GW-Palo Verde will refile its rate application in 2027 using a 2026 test year without seeking formula rates.
Additionally, in consideration of the Settlement Agreement, GW-Palo Verde has agreed to seek an amendment to Decision No. 79424 (July 18, 2024) issued by the ACC to increase the amount of the temporary bill credit for customers related to the Company's Southwest Plant. The Settlement Agreement provides that the increase to the temporary bill credit will coincide with new rates described above for GW-Santa Cruz going into effect and is expected to reduce revenue by approximately $0.4 million annually. The parties have also agreed that the final resolution relating to this bill credit will be addressed in GW-Palo Verde's 2027 rate case.
The parties expect testimony supporting the settlement to be filed by May 22, 2026, followed by hearings before the ALJ beginning August 3, 2026. The Settlement Agreement remains subject to the approval of the ACC, and there can be no assurance that the ACC will approve the Settlement Agreement in the form filed or otherwise modify provisions contained therein.
See "Risk Factors-Legal, Regulatory, and Legislative Factors-We are subject to the jurisdiction and regulations of the ACC, the primary utility regulator in Arizona, and our financial condition depends upon our ability to recover costs in a timely manner from customers through regulated rates," included in Part I, Item 1A of the 2025 Form 10-K for additional information.
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The following table describes current rate case actions as applicable for each of our regulated utilities (in millions):
| Company | Approved Return on Equity |
Approved Incremental Annual Revenue(1) ($)
|
Filing Date | ACC Decision # | Rates Effective | ||||||||||||
| Approved Rate Cases | |||||||||||||||||
|
GW-Santa Cruz(2)
|
9.20% | 1.2 | July 22, 2020 | 78644 | July 1, 2022 | ||||||||||||
|
GW-Palo Verde(2)
|
9.20% | 0.7 | July 22, 2020 | 78644 | July 1, 2022 | ||||||||||||
|
GW-Belmont(2)
|
9.20% | 0.2 | July 22, 2020 | 78644 | July 1, 2022 | ||||||||||||
|
GW-Turner(2)
|
9.20% | 0.1 | July 22, 2020 | 78644 | July 1, 2022 | ||||||||||||
|
GW-Saguaro(3)
|
9.60% | 0.4 | June 27, 2023 | 79383 | July 1, 2024 | ||||||||||||
|
GW-Farmers(4)
|
9.60% | 1.1 | June 27, 2024 | 80695 | May 1, 2025 | ||||||||||||
| Pending Rate Cases | |||||||||||||||||
|
GW-Santa Cruz(5)
|
In process | In process | March 5, 2025 | In process | In process | ||||||||||||
|
GW-Palo Verde(5)
|
In process | In process | March 5, 2025 | In process | In process | ||||||||||||
(1)Approved incremental annual revenue represents the aggregate annual revenue increase following the final phase-in period. To the extent that the number of active service connections has increased and continues to increase from a rate case's test year levels, the additional revenues may be greater than the amounts set forth above. On the other hand, if active connections decrease or the Company experiences declining usage per customer, the Company may not realize all of the anticipated revenues.
(2)The final phase-in of rates under this rate case was effective January 1, 2024.
(3)The first increase for GW-Saguaro was effective July 1, 2024. The subsequent four increases will be effective on January 1 of each subsequent year. The majority of the revenue increase was phased in on January 1, 2025.
(4)Rates are being phased-in over three periods. 50% of the increase was effective on May 1, 2025, with another 25% effective on November 1, 2025. The final 25% increase was phased in on May 1, 2026.
(5)In March 2025, GW-Santa Cruz and GW-Palo Verde each filed a general rate case application and related schedules with the ACC based on a test year ended December 31, 2024, with updates for post-test year plant. On April 28, 2026, the Settlement Agreement pertaining to the rate cases was filed with the ACC with hearings scheduled to begin in August 2026. Refer to "-Rate Regulation Updates-Santa Cruz/Palo Verde Rate Cases" above for additional information.
Refer to Note 3 - "Regulatory Matters" of the Notes to the Condensed Consolidated Financial Statements (unaudited) included in Part I, Item 1 of this report for additional information.
Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025
The Company is not organized around a specific product or service, geographic region, or regulatory environment. Refer to Note 15 - "Business Segment Information" of the Notes to the Condensed Consolidated Financial Statements (unaudited) included in Part I, Item 1 of this report for additional segment information.
Financial data is summarized in the following tables.
| Three Months Ended | Favorable (Unfavorable) | |||||||||||||
| March 31, | 2026 vs. 2025 | |||||||||||||
| (in thousands, except per share amounts) | 2026 | 2025 | $ | % | ||||||||||
|
Revenue
|
$ | 13,286 | $ | 12,457 | $ | 829 | 6.7 | % | ||||||
| Operating expenses | 12,897 | 11,202 | (1,695) | (15.1) | % | |||||||||
| Operating income | 389 | 1,255 | (866) | (69.0) | % | |||||||||
| Total other expense | (860) | (481) | (379) | (78.8) | % | |||||||||
| Income (loss) before income taxes | (471) | 774 | (1,245) | (160.9) | % | |||||||||
| Income tax benefit (expense) | 105 | (183) | 288 | 157.4 | % | |||||||||
| Net income (loss) | $ | (366) | $ | 591 | $ | (957) | (161.9) | % | ||||||
| Basic earnings (loss) per common share | $ | (0.01) | $ | 0.02 | $ | (0.03) | (150.0) | % | ||||||
| Diluted earnings (loss) per common share | $ | (0.01) | $ | 0.02 | $ | (0.03) | (150.0) | % | ||||||
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Revenue
Operating revenue is substantially derived from regulated water, wastewater, and recycled water service provided to customers based upon tariff rates approved by the ACC. Regulated revenue consists of amounts billed to customers based on approved fixed monthly fees and consumption based fees, as well as unbilled revenue, which is estimated revenue from the last meter reading date to the end of the accounting period utilizing historical customer data recorded.
| Three Months Ended | Favorable (Unfavorable) | |||||||||||||
| March 31, | 2026 vs. 2025 | |||||||||||||
| (in thousands) | 2026 | 2025 | % | |||||||||||
|
Water service
|
||||||||||||||
| Basic charge | $ | 3,890 | $ | 3,508 | $ | 382 | 10.9 | % | ||||||
| Consumption | 2,529 | 2,346 | 183 | 7.8 | % | |||||||||
| Other | 187 | 126 | 61 | 48.3 | % | |||||||||
| Total water service | 6,606 | 5,980 | 626 | 10.5 | % | |||||||||
|
Wastewater and recycled water service
|
||||||||||||||
| Basic | 6,472 | 6,205 | 267 | 4.3 | % | |||||||||
| Consumption | 120 | 193 | (73) | (37.8) | % | |||||||||
| Other | 88 | 79 | 9 | 11.2 | % | |||||||||
| Total wastewater and recycled water service | 6,680 | 6,477 | 203 | 3.1 | % | |||||||||
| Total revenue | $ | 13,286 | $ | 12,457 | $ | 829 | 6.7 | % | ||||||
| Active water connections | 39,007 | 36,130 | 2,877 | 8.0 | % | |||||||||
| Active wastewater connections | 29,878 | 29,033 | 845 | 2.9 | % | |||||||||
| Total active connections | 68,885 | 65,163 | 3,722 | 5.7 | % | |||||||||
| Consumption (in million gallons) | ||||||||||||||
| Water service | 902 | 836 | 66 | 7.9 | % | |||||||||
| Recycled water | 70 | 110 | (40) | (36.0) | % | |||||||||
The increase in revenue for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was primarily attributable to:
•Organic growth in active water and wastewater connections.
•Growth from the acquisition of the seven water systems from the City of Tucson in July 2025.
•Increased water consumption, predominantly driven by growth in active connections and higher usage largely as a result of unseasonably warm and dry weather during the quarter.
•Higher rates for GW-Farmers resulting from the GW-Farmers general rate case, effective May 1, 2025 and November 1, 2025.
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Operating Expenses
| Three Months Ended | Favorable (Unfavorable) | |||||||||||||
| March 31, | 2026 vs. 2025 | |||||||||||||
| (in thousands) | 2026 | 2025 | $ | % | ||||||||||
| Personnel costs - operations and maintenance | $ | 1,483 | $ | 1,340 | $ | (143) | (10.7) | % | ||||||
| Utilities, chemicals and repairs | 1,172 | 1,032 | (140) | (13.6) | % | |||||||||
| Other operations and maintenance expenses | 1,529 | 1,315 | (214) | (16.3) | % | |||||||||
| Total operations and maintenance expense | 4,184 | 3,687 | (497) | (13.5) | % | |||||||||
| Personnel costs - general and administrative | 2,357 | 2,195 | (162) | (7.4) | % | |||||||||
| Professional fees | 389 | 467 | 78 | 16.7 | % | |||||||||
| Other general and administrative expenses | 1,706 | 1,525 | (181) | (11.9) | % | |||||||||
| Total general and administrative expense | 4,452 | 4,187 | (265) | (6.3) | % | |||||||||
| Depreciation, amortization and accretion | 4,261 | 3,328 | (933) | (28.0) | % | |||||||||
| Total operating expenses | $ | 12,897 | $ | 11,202 | $ | (1,695) | (15.1) | % | ||||||
Operations and Maintenance
Operations and maintenance expenses primarily consist of personnel costs, production costs (primarily chemicals and purchased electrical power), maintenance costs, and property tax.
•Higher personnel costs were primarily attributable to rising medical costs.
•Higher utilities, chemicals and repairs were primarily the result of increased purchased power driven by increased water consumption and additional processing equipment in operation as a result of our 2025 capital improvement plan.
•The increase in other operations and maintenance expenses was primarily driven by expenses for wastewater disposal related to the start-up of two new wastewater reclamation facilities.
General and Administrative
General and administrative expenses primarily consist of the day-to-day expenses of office operations, personnel costs, legal and other professional fees, insurance, rent, and regulatory fees.
•Higher personnel costs were primarily attributable to rising medical costs.
•The increase in other general and administrative expenses was primarily attributable to:
◦Increased contract service costs primarily associated with additional licensing fees.
◦Increased rent expense related to the renewal of our corporate office lease in August 2025.
◦Higher general liability insurance costs.
Depreciation, Amortization and Accretion - The increase for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was substantially attributable to a 20.1% increase in depreciable fixed assets as a result of our 2025 capital improvement plan, which resulted in a significant number of assets placed in service in the fourth quarter of 2025. In addition, amortization of intangible assets associated with ICFA payments received increased in the first quarter of 2026.
Total Other Expense -The increase in total other expense for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was substantially attributable to:
•An increase in interest expense of $0.2 million primarily due to a new term loan entered into in December 2025 to support our 2025 capital improvement plan.
•A decrease in interest income of $0.1 million as a result of carrying lower average cash balances.
•A decrease in income associated with Buckeye growth premiums of $0.1 million that resulted from fewer new meter connections in the area. Refer to Note 16 - "Other, Net" of the Notes to the Condensed Consolidated Financial Statements (unaudited) included in Part I, Item 1 of this report for additional information regarding the Buckeye growth premiums.
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Income Tax Benefit (Expense) - The change from income tax expense for the three months ended March 31, 2025 to an income tax benefit for the three months ended March 31, 2026 was primarily driven by the shift from pre-tax income in the prior year period to a pre-tax loss in the current year period.
Liquidity and Capital Resources
The Company's capital resources are primarily provided by internally generated cash flows from operations, debt and equity financing and certain government grants. External debt financing is provided primarily through the issuance of long-term debt or utilization of the Company's $20.0 million Revolver. Additionally, its regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas.
Significant sources of funds from historical financing activity included:
Sales of Equity Securities
The Company has historically completed multiple equity raises through sales of its common stock in both public and private offerings, including the recent transactions below.
On September 30, 2025, the Company entered into a securities purchase agreement for the issuance and sale by the Company of an aggregate of 1,270,572 shares of the Company's common stock at a purchase price of $10.30 per share in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder. The Company received gross proceeds of approximately $13.1 million from the offering. Certain existing shareholders, including certain directors and/or their affiliates, purchased an aggregate of 882,223 shares of common stock in the offering at the purchase price.
On March 27, 2025, the Company completed a public offering of 3,220,000 shares of its common stock at a public offering price of $10.00 per share, which included 420,000 shares issued and sold to the underwriters following the exercise in full of their option to purchase additional shares of common stock. Certain existing shareholders, including certain directors and/or their affiliates, purchased an aggregate of 1,439,200 shares of common stock at the public offering price. The public offering resulted in approximately $32.2 million of gross proceeds or $30.8 million of net proceeds, after deducting underwriting discounts, commissions and offering expenses paid by the Company.
WIFA Grant and Note
On April 30, 2024, the Company's Global Water - Rincon Water Company, Inc. utility (now part of GW-Saguaro) entered into a loan agreement with WIFA for a note with a principal amount of $2.4 million (the "WIFA Note") to improve the utility's infrastructure, including enhancements to the fluoride treatment system and other projects, of which $0.7 million is forgivable. The WIFA Note is due on April 1, 2044 and bears an interest rate of 4.911%. Funding occurs through one or more draw requests submitted by the Company and the subsequent disbursement of principal by WIFA. The Company received the final disbursements in May 2025. As of March 31, 2026, the outstanding balance of the WIFA Note was $1.6 million. In connection with the underlying assets being placed in service, the forgivable portion of the loan was recognized as CIAC in June 2025.
Revolver
The Company maintains a revolving credit facility with Northern Trust pursuant to a loan agreement entered into between the parties (as amended, the "Northern Trust Loan Agreement") that provides for a $20 million maximum borrowing capacity. On April 30, 2026, the Company and Northern Trust entered into a seventh amendment to the Northern Trust Loan Agreement to, among other things, extend the scheduled maturity date from May 18, 2027 to May 18, 2028. Pursuant to the Northern Trust Loan Agreement, the amounts outstanding bear interest, payable monthly, at a rate equal to the SOFR plus 2.10%. Additionally, the Company pays a quarterly facility fee equal to 0.35% of the average daily unused amount of the Revolver. As of March 31, 2026, the Company had $1.0 million of outstanding borrowings under the Revolver.
Senior Secured Notes
On June 24, 2016, the Company issued two series of senior secured notes with a total principal balance of $115.0 million at a blended interest rate of 4.55%. The Series A notes (the "Series A Notes") carry a principal balance of $28.8 million and bear an interest rate of 4.38%, payable semi-annually on June 15 and December 15 of each year, over a twelve-year term, with the principal payment due on June 15, 2028. The Series B notes (the "Series B Notes") carry a principal balance of $69.0 million and bear an interest rate of 4.58%, payable semi-annually on June 15 and December 15 of each year, over a 20-year term, with
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the final principal balance due on June 15, 2036. The Series B Notes were interest only for the first five years, with $1.9 million principal payments paid semi-annually thereafter beginning December 2021.
Additionally, on January 3, 2024, the Company issued $20 million aggregate principal amount of 6.91% Senior Secured Notes due on January 3, 2034 (the "6.91% Notes" and collectively with the Series A Notes and the Series B Notes, the "Senior Secured Notes"). The 6.91% Notes accrue interest at 6.91% per annum from the date of issuance, payable semi-annually on January 3 and July 3 of each year, beginning on July 3, 2024, with a balloon payment due on January 3, 2034.
Term Loan
On December 10, 2025, the Company entered into a credit agreement with, and issued a related promissory note to, CoBank, ACB, a federally-chartered instrumentality of the United States. Under the terms of the credit agreement and promissory note, the Company was provided term loan borrowings with an aggregate principal amount of $15 million (the "Term Loan"). The Term Loan bears interest at a fixed rate of 5.49% per annum, payable semi-annually on June 15 and December 15 of each year, beginning on June 15, 2026, with the principal payment due on December 10, 2035, the scheduled maturity date. As of March 31, 2026, the Term Loan carried a principal balance of $15.0 million.
The Company uses capital resources primarily to:
•fund operating costs;
•fund capital requirements, including construction expenditures;
•make debt and interest payments;
•fund acquisitions; and
•pay dividends.
The Company's utility subsidiaries operate in rate-regulated environments in which the amount of new investment recovery may be limited. Such recovery will take place over an extended period of time because recovery through rate increases is subject to regulatory lag.
On July 8, 2025, the Company completed the previously announced acquisition of seven water systems from Tucson Water, the City of Tucson's water utility, for a purchase price of approximately $8.1 million.
As of March 31, 2026, the Company has no notable near-term cash expenditures, other than for its capital improvement plan, declared dividends and the principal payments for its Series B Notes in the amount of $1.9 million due in both June 2026 and December 2026. While specific facts and circumstances could change, the Company believes that with the cash on hand and the ability to draw on its $20.0 million Revolver, it will be able to generate sufficient cash flows to meet its operating cash flow requirements and capital maintenance needs, whilst remaining in compliance with its financial debt covenants for the next twelve months and beyond. In addition, the Company may choose to raise additional funds from time to time through equity or debt financing arrangements, which may or may not be needed for additional working capital, capital expenditures and/or strategic acquisitions for the next twelve months and beyond. However, there are currently no commitments in place for future financing, and there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. Additional issuances of equity or convertible debt securities will result in dilution to our shareholders.
The Company maintains a monthly dividend program with dividends currently set at $0.02533 per share ($0.30396 per share annually). Although the Company expects that monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of the Company's board of directors and is subject to legal requirements and debt service ratio covenant requirements.
Cash from Operating Activities
Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. The Company's future cash flows from operating activities will be affected by economic utility regulation, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
For the three months ended March 31, 2026, net cash provided by operating activities totaled $4.5 million compared to $7.5 million for the three months ended March 31, 2025. The change in cash from operating activities was primarily driven by the decrease in net income year over year and changes in working capital resulting from lower current liability balances and an
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ICFA related payment received during the three months ended March 31, 2025 that did not recur during the same period in 2026.
Cash from Investing Activities
The net cash used in investing activities totaled $6.3 million for the three months ended March 31, 2026 compared to $15.2 million for the three months ended March 31, 2025. The $8.9 million decrease in cash used in investing activities was the result of a planned decrease in capital expenditures in 2026 compared to 2025 under the Company's capital improvement plan.
The Company continues to invest capital prudently in existing, core service areas where the Company is able to deploy the Total Water Management model as this includes any required maintenance capital expenditures and the construction of new water and wastewater treatment and delivery facilities. The timing and magnitude of projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors. As a result, the Company may adjust capital expenditures to correspond with any substantial changes in demand for new development in its service areas.
Cash from Financing Activities
The net cash used in financing activities totaled $0.2 million for the three months ended March 31, 2026, a $30.0 million decrease, as compared to $29.8 million in cash provided by financing activities for the three months ended March 31, 2025. This decrease was primarily driven by the $31.0 million of aggregate proceeds from the issuances of common stock sold in the Company's public offering, net of issuance costs, during the three months ended March 31, 2025, partially offset by an increase of $0.5 million in net AIAC advances and an increase in net Revolver borrowings of $1.0 million during the three months ended March 31, 2026.
Insurance Coverage
The Company carries various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards. However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. The Company is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on the Company's short-term and long-term financial condition and the results of operations and cash flows.
Debt Covenants
The Company's Senior Secured Notes, Term Loan and Revolver (collectively, the "debt instruments") require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income. The debt instruments also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. Further, the foregoing covenants are subject to various qualifications and limitations as set forth in each of the debt instruments' respective agreements. The debt instruments are subject to certain customary events of default after which they could be declared due and payable if not cured within the grace period or, in certain circumstances, could be declared due and payable immediately. As of March 31, 2026, the Company was in compliance with its financial debt covenants under the debt instruments.
Contractual Obligations and Off-Balance Sheet Arrangements
A summary of contractual obligations is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations" of our 2025 Form 10-K. There have been no material changes in our reported contractual obligations from those disclosed in our 2025 Form 10-K.
As of March 31, 2026, the Company did not have any off-balance sheet arrangements.
Critical Accounting Estimates
A summary of our critical accounting estimates is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" of our 2025 Form 10-K. There were no material changes made as of March 31, 2026.
Global Water Resources Inc. published this content on May 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 13, 2026 at 20:54 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]