Global Water Resources outlines growth foundation with Tucson acquisition and 3.8% service connection increase

Earnings Call Insights: Global Water Resources, Inc. (GWRS) Q2 2025

MANAGEMENT VIEW

* Chairman, CEO & President Ron L. Fleming began by highlighting the closure of the Tucson acquisition, which included 7 public water systems, approximately 2,200 connections, and about $7.7 million in rate base at a 1.05x multiple. Fleming stated this is "immediately accretive from a share price perspective considering our peer groups trade by our estimates between 1.5 to 2x rate base."
* Fleming emphasized the recent signing of Arizona's Ag-to-Urban water legislation, which he believes "will result in many benefits that will be applicable for Global Water in our service areas, improving aquifer sustainability while creating a new groundwater supply to support additional growth."
* He pointed to the full funding approval for the Highway 347 expansion, estimating construction to begin in fiscal year 2026, which is expected to further support population and economic growth in the City of Maricopa.
* Fleming reported total active service connections increased 3.8% to 65,639 as of June 30, 2025, and that year-to-date, $35.4 million has been invested into infrastructure improvements.
* CFO Michael J. Liebman reported, "Total revenue for the second quarter of 2025 was $14.2 million, which was up $0.7 million or 5.4% compared to Q2 2024... Operating expenses for Q2 2025 were $11.6 million compared to $10.7 million in Q2 2024."
* COO Christopher D. Krygier noted, regarding the Tucson acquisition, "We are now focused on the full integration activities. ... The close proximity allows for greater economies of scale that we believe will eventually create more efficient operations and lower costs for customers over time." Krygier also highlighted the adoption of a new rate structure with 5% increases effective July 2025 and July 2026.

OUTLOOK

* Fleming referenced the ongoing capital investment and rate case strategies, stating, "We have an additional $6.5 million in annual rate increase proposed and under consideration at the ACC."
* Krygier confirmed, "We continue processing the rate case for our Global Water Santa Cruz and Global Water Palo Verde utilities. We are still in the discovery stage... The next milestone date is staff and the consumer advocate filing their recommendations on October 1, 2025. After that, we hope to enter into settlement negotiations and reach a fair conclusion to the case."
* Management signaled expectations of continued growth supported by recent legislative and infrastructure developments, and the full integration of the Tucson systems.

FINANCIAL RESULTS

* Total revenue was $14.2 million for Q2 2025, up $0.7 million or 5.4% year over year, with the increase attributed to service connection growth, higher consumption, and rates.
* Operating expenses rose to $11.6 million from $10.7 million, driven by higher depreciation and amortization, increased personnel costs related to the Tucson acquisition, and additional service provider expenses.
* Other expense for Q2 2025 was $0.4 million, slightly lower than $0.5 million in Q2 2024.
* Net income was $1.6 million or $0.06 per diluted share, compared to $1.7 million or $0.07 per diluted share in Q2 2024.
* Adjusted EBITDA was $6.9 million compared to $6.8 million in Q2 2024, a 2.1% increase.

Q&A

* NOT_APPLICABLE: The transcript does not include any analyst questions or management responses during the Q&A segment.

SENTIMENT ANALYSIS

* No analyst questions were present in the call, so their sentiment cannot be determined.
* Management maintained a confident and constructive tone, emphasizing strong operational execution, significant progress on strategic initiatives, and expectations for continued growth. Fleming remarked, "Customer growth, revenue growth, rate base growth and earnings growth have all been exceptionally strong, and we expect that to continue."
* Compared to the previous quarter, management's tone remains upbeat and focused on long-term value creation, with an added emphasis on the positive impact of the Tucson acquisition and legislative changes.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw the completion and integration of the Tucson acquisition, whereas the previous quarter was anticipating its closure.
* Service connection growth moderated to 3.8% (Q2) from 4.3% (Q1), with annualized growth slightly lower at 3.5%, compared to 4% in Q1.
* Year-to-date capital investments increased to $35.4 million from $15.2 million reported in Q1.
* Management continues to highlight macroeconomic headwinds impacting permits and earnings, but remains optimistic about organic and inorganic growth drivers.
* Strategic focus has shifted from awaiting regulatory approvals and deal closures in Q1 to integration and execution in Q2, with continuing emphasis on regulatory activity and rate case progression.

RISKS AND CONCERNS

* Fleming noted a slowdown in building permits in core markets, with Phoenix MSA permits down 14% and City of Maricopa permits down 24% versus the same period in the prior year, attributing this to "uncertainty around tariffs and other macroeconomic drivers, most notably the stubborn interest rates."
* Management acknowledged the impact of inflation and cost increases on earnings growth, emphasizing the need for new rates to offset these pressures.
* Risks associated with integrating acquisitions and realizing synergies were noted, with Krygier detailing the focus on efficient integration and future rate consolidation.

FINAL TAKEAWAY

Management underscored a foundation for sustainable above-average growth, driven by successful acquisitions, regulatory progress, and capital investment, while acknowledging near-term headwinds from macroeconomic factors and cost pressures. The company’s leadership remains confident in continued revenue, rate base, and earnings growth supported by legislative changes, population trends, and infrastructure development plans, positioning Global Water Resources favorably for future shareholder value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/gwrs/earnings/transcripts]

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* Global Water Resources, Inc. (GWRS) Q2 2025 Earnings Conference Call Transcript [https://seekingalpha.com/article/4813795-global-water-resources-inc-gwrs-q2-2025-earnings-conference-call-transcript]
* Global Water Resources: A Growth Company Disguised As A Utility [https://seekingalpha.com/article/4802407-global-water-resources-a-growth-company-disguised-as-a-utility]
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