Global Water Resources, Inc. (NASDAQ:GWRS) is a water resource management company that owns, operates, and manages 32 water, wastewater, and recycled water systems in strategically located communities, primarily in metropolitan Phoenix and Tucson, Arizona. The company's innovative "Total Water Management" approach aims to reduce demand on scarce non-renewable water sources and costly renewable water supplies, ensuring sustainability and benefiting communities both environmentally and economically.

Financials

In the fiscal year 2023, Global Water Resources reported annual revenue of $53,028,000, a 6.9% increase from the prior year. The company's net income for the year reached $7,982,000, while its annual operating cash flow stood at $25,393,000 and free cash flow at $3,081,000. These strong financial results demonstrate the company's ability to execute its growth strategy and deliver value to its shareholders.

During the first quarter of 2024, Global Water Resources continued to build on its momentum, reporting total revenue of $11,610,000, a decrease of 11.6% compared to the same period in 2023. This decline was primarily attributable to the recognition of $2,268,000 in unregulated revenue related to infrastructure coordination and financing agreements (ICFA) in the first quarter of 2023, which did not recur in the current period. However, the company's regulated revenue, which excludes ICFA revenue, increased by $750,000 or 6.9% year-over-year, driven by organic connection growth of 4.4% and increased water consumption.

Operating expenses for the first quarter of 2024 were $10,343,000, an increase of 10.6% compared to the same period in 2023. This increase was primarily due to higher depreciation and amortization expenses, personnel costs, and other operating expenses related to the company's ongoing infrastructure investments and growth initiatives.

Net income for the first quarter of 2024 was $691,000, or $0.03 per diluted share, compared to $2,466,000, or $0.10 per diluted share, in the first quarter of 2023. The decrease in net income was largely attributable to the absence of the ICFA revenue recognized in the prior-year period, as well as the increase in operating expenses.

Business Overview

Despite the quarterly fluctuations, Global Water Resources remains well-positioned for long-term growth. The company's service areas in the metropolitan Phoenix and Tucson regions continue to experience robust population and economic growth, driven by factors such as affordable housing, favorable weather, and a diverse employment base. According to the latest U.S. Census estimates, the Phoenix metropolitan statistical area (MSA) is the 10th largest in the U.S., with an estimated population of 5.1 million as of 2023, representing a 4.6% increase over the 2020 Census.

To capitalize on this growth, Global Water Resources has been actively investing in its infrastructure and expanding its service footprint. In the first quarter of 2024, the company invested $5.8 million in capital expenditures to improve its existing utilities and support the deployment of its Total Water Management model. Additionally, the company announced the acquisition of seven public water systems from the City of Tucson, which will add approximately 2,200 active service connections to its customer base.

Regulatory Strategy

The company's regulatory strategy also remains a key focus. In the first quarter of 2024, Global Water Resources continued to make progress on its rate case filings with the Arizona Corporation Commission (ACC). The company's Saguaro District rate case is nearing completion, with a recommended opinion and order expected to be heard by the ACC in the coming months. Additionally, the company is preparing to file rate cases for its Farmers Water and Global Water-Santa Cruz and Global Water-Palo Verde utilities in 2024 and 2025, respectively.

Liquidity

Global Water Resources' financial position remains strong, with a healthy balance sheet and ample liquidity to support its growth initiatives. As of March 31, 2024, the company had $22,872,000 in cash, cash equivalents, and restricted cash, and $124,859,000 in total debt. The company's current ratio stood at 1.83, indicating a solid ability to meet its short-term obligations.

Outlook

Looking ahead, Global Water Resources remains optimistic about its future prospects. The company's management team has provided guidance for continued organic growth, driven by the robust housing and economic development trends in its service areas. Additionally, the company's strategic acquisitions and regulatory initiatives are expected to contribute to its long-term success.

Conclusion

Overall, Global Water Resources is well-positioned to capitalize on the significant growth opportunities in the Arizona Sun Corridor. The company's innovative approach to water resource management, combined with its strong financial performance and strategic initiatives, make it an attractive investment opportunity for investors seeking exposure to the water utility sector.