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DATE

Thursday, May 14, 2026 at 1 p.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Ron L. Fleming
  • Chief Financial Officer — Michael J. Liebman
  • Chief Operating Officer — Christopher D. Krygier

TAKEAWAYS

  • Total Revenue -- $13.3 million, up $800 thousand or 6.7% year over year, driven by the Tucson system acquisition, organic connection growth, and higher Farmers utility rates.
  • Active Service Connections -- 68,900 as of March 31, 2026, reflecting 5.7% annual growth; excluding the Tucson systems, organic growth estimated at 1.9%.
  • Operating Expenses -- $12.9 million, increased by $1.7 million or 15.1% year over year, with $900 thousand attributed to higher depreciation, amortization, and accretion from new depreciable assets.
  • Net Loss -- $400 thousand, or $0.01 per diluted share, compared to net income of $600 thousand, or $0.02 per share the prior year.
  • EBITDA -- $5.6 million, consistent with the prior year despite higher operating and financing expenses.
  • Infrastructure Investment -- $6.3 million allocated in 2026 for improvements and upgrades to existing utilities.
  • Rate Case Settlement -- The Santa Cruz settlement contemplates a $2.3 million increase in water revenue with a $400 thousand reduction for Palo Verde wastewater, effective November 1, 2026.
  • Building Permits -- Phoenix MSA permits in Q1 2026 totaled 5,200, down 18.8%; Maricopa permits were 157, down 16.5%, indicating market softness still offset by 2.6% organic connection growth.
  • Other Expense -- $900 thousand, up from $500 thousand year over year, driven by higher interest expense, lower interest income, and reduced income from Buckeye growth premiums.
  • Pending Regulatory Activity -- New rates for Palo Verde wastewater anticipated in 2028, with further rate review filings planned for Farmers, Saguaro, Ocotillo, and Santa Cruz divisions.

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RISKS

  • Ron L. Fleming said, “these investments increased certain operating expenses and most notably, depreciation expense. Such expenses continue to adversely impact net income and earnings per share in 2026.”
  • The company reported a shift from net income to net loss, with Michael J. Liebman citing increased depreciation, medical costs, and higher operational costs due to plant commissioning.
  • Slower new permit activity, with Phoenix and Maricopa down 18.8% and 16.5% respectively, may impede future organic growth if this trend persists.

SUMMARY

Global Water Resources (GWRS +4.50%) reported increased total revenue supported by acquisitions and connection growth, but earnings turned negative due to higher operating and financing costs linked to recent capital investments. The company finalized a rate case settlement for its Santa Cruz and Palo Verde utilities, establishing a clear path to higher revenue for water but a temporary reduction for wastewater. Lower new home permit activity signaled softer regional demand, though organic connection growth remained positive. Near-term focus will center on securing additional rate increases and intensifying capital discipline, with regulatory milestones planned across several divisions.

  • Christopher D. Krygier outlined, “Unanimous settlement contemplates a water revenue of approximately $2.3 million for Santa Cruz, and a wastewater revenue decrease of $400 thousand for Palo Verde.”
  • The effective date for new Santa Cruz and Palo Verde rates is estimated to be November 1, 2026, with further regulatory proceedings beginning in August 2026 and new Palo Verde rates anticipated for 2028.
  • Management stated intentions to slow capital investment pace for the remainder of the year while preparing multiple additional rate case filings.

INDUSTRY GLOSSARY

  • EBITDA: Earnings before interest, taxes, depreciation, and amortization; a non-GAAP measure used to assess operating performance excluding non-cash and financing items.
  • Rate Case: A formal regulatory proceeding in which a utility seeks approval to increase or change rates charged to customers, based on investments and expenses.
  • Accretion Expense: Non-cash accounting expense related to changes in asset retirement obligation liabilities, typically tied to infrastructure upgrades or environmental remediation obligations.

Full Conference Call Transcript

Kyle Upchurch: Thank you, operator. And welcome, everybody. Thank you for joining us on today's call. Yesterday, we issued our 2026 first quarter financial results by press release a copy of which is available on our website at gwresources.com. Speaking today is Ron L. Fleming, President and Chief Executive Officer; Michael J. Liebman, Chief Financial Officer; and Christopher D. Krygier, Chief Operating Officer. Ron will summarize the key operational events of the quarter, Mike will review the financial results for the first quarter, and Christopher will review Arizona Corporation Commission activity. Ron, Michael, and Christopher will be available for questions at the end of the call.

Before we begin, I would like to remind you that certain information presented today may include forward looking statements. Such statements reflect the company's current expectations, estimates, projections, and assumptions regarding future events. These forward looking statements involve a number of assumptions, risks, uncertainties, estimates and other factors that could cause actual results to differ materially from those contained in the forward looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward looking statements, which reflect management's views as of the date hereof and are not guarantees of future performance. For additional information regarding factors that may affect future results, please read the risk factors and MD&A sections of our periodic SEC filings.

Additionally, certain non-GAAP measures may be included within today's call. For a reconciliation of those measures to the comparable GAAP measures, please see the tables included in yesterday's earnings release, which is available on our website. I will now turn the call over to Ron.

Ron L. Fleming: Thank you, Kyle. Good morning, everyone. Thank you for joining us today. First, before jumping to normal operating highlights, I would like to emphasize our focus on earnings growth. While most elements of our business have experienced growth, our goal is to achieve long term earnings growth and we are committed to this objective. Which we believe will allow us to enhance shareholder value. As we reported last quarter, as part of our year end reporting for 2025, we had a near record year for capital investments that were critical to complete. This included the investment necessary to recommission our Southwest plant water reclamation facility. Which was originally constructed 20 years ago and was mothballed during the Great Recession.

Although these investments grow rate base considerably, and thus become drivers of future earnings growth, these investments increased certain operating expenses and most notably, depreciation expense. Such expenses continue to adversely impact net income and earnings per share in 2026. This is an unfortunate yet necessary part of the historical test year environment here in Arizona. As you must make the investments incur the expenses, and then pursue rate recovery. As I have been saying for many quarters now, we need new rates to keep up with all the investment and inflation that we have experienced in our utilities.

To this end, while it represents a diversion from our original rate application, the recently announced rate case settlement provides a clearer path to a notable rate increase for our largest water utility Santa Cruz, later this year For Palo Verde, while delayed, the delay deals with the primary difference of opinion on the timing of rate recovery as it relates to our historical Southwest plant water reclamation facility issue. Thus, the new schedule provides a clearer path to setting appropriate rates for our largest wastewater utility along this new timeline. Together, this will allow us to better realize recovery of inflationary expenses and return on and a return of our plant investments.

Including the Southwest plant resulting in years of meaningful earnings growth ahead. Christopher will discuss the rate case further later on the call, but I will add that we plan to announce additional rate activity for our other utilities in the coming quarters. In the meantime, 2026 is about working hard to control expenses and we have reduced the pace of our capital investments. In the years to come, we believe we can maintain solid revenue and earnings growth as we seek to obtain appropriate rate increases combined with our anticipated strong organic growth. Now I will provide a few operational highlights. Total active service connections increased 5.7% to 68.9 thousand as of 03/31/2026, from the 12 months prior.

In 2026, we achieved an annualized 1.9% total active service connection growth rate excluding the acquisition of the 7 Tucson Water Systems. Specifically, we have invested $6.3 million into infrastructure improvements and existing utilities in 2026 to provide safe and reliable service. Now I want to discuss organic customer growth and what is going on in our core utilities further. The single family dwelling unit market ended 2025 with approximately 21.8 thousand building permits. Issued in the Phoenix Greater Metro Statistical Area. In 2026, this market realized 5.2 thousand building permits. Representing an 18.8% decrease compared to the same period in 2025. Meanwhile, the Maricopa market realized 157 building permits representing a 16.5% decrease from the same period. In 2025.

While new permit activity has slowed in 2026, continued 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. We believe the decline in permits is temporary and we remain well positioned to benefit from the anticipated long term growth of the Phoenix MSA and our specific area drivers including job growth, affordability, improving transportation, including State Route 347 widening, and our large assured water supply. I will now turn the call over to Mike for financial highlights.

Michael J. Liebman: Thanks, Ron. Hello, everyone. Total revenue for 2026 was $13.3 million, which was up $800 thousand or 6.7% compared to Q1 25. The increase in revenue was primarily attributable to the acquisition of 7 Water Systems from the city of Tucson in July 2025, organic connection growth and higher rates in our Farmers utility. Operating expenses for Q1 26 increased approximately $1.7 million or 15.1% to $12.9 million compared to $11.2 million in Q1 25. Notable changes in operating expenses included depreciation, amortization, and accretion expense, increased $900 thousand for Q1.

The increase was substantially attributable to the additional depreciable assets placed in service last year as a result of our 2025 capital improvement plan and the commissioning of related projects. Operating and maintenance costs increased approximately $500 thousand The increase was primarily driven by rising medical expense, higher purchase power associated with newly operational plant, and wastewater disposal expenses related to the start up of 2 new wastewater reclamation facilities. G&A costs increased by approximately $300 thousand primarily driven by rising medical costs. Now to discuss other expense. Other expense for Q1 26 was $900 thousand compared to $500 thousand in Q1 25.

The increase in expense is primarily attributable to higher interest expense, lower interest income, and a decrease in income associated with our Buckeye growth premiums. Net loss for Q1 26 was $400 thousand or $0.01 per diluted share as compared to net income of $600 thousand or $0.02 per diluted share in Q1 25. Lastly, I will discuss EBITDA which adjusts for certain noncash items such as restricted stock expense, EBITDA remained consistent at $5.6 million in 2026 and 2025. This concludes our update on the first quarter 26 financial results. I will now pass the call to Christopher to review our regulatory activity for the quarter.

Christopher D. Krygier: Thank you, Mike, and hello, everyone. As you heard Ron mention earlier, and saw in our 04/29/2026 press release, and 10 Q we reached a settlement in our pending rate reviews. Unanimous settlement contemplates a water revenue of approximately $2.3 million for Santa Cruz, and a wastewater revenue decrease of $400 thousand for Palo Verde. As an extension of the existing temporary bill credit. The estimated effective date of these new rates is November 1, 2026. The settlement allows us to close most of the history related to GW Santa Cruz's Southwest Area water assets and turn our attention to the wastewater assets.

The next steps in the process include filing testimony in support of the settlement by the end of this month with the hearing commencing in August 2026. After that, the administrative law judge writes a recommendation for the commission's consideration. Planning ahead, we will continue our focus on securing appropriate rates for our well investments made. As part of the settlement agreement, we agreed to withdraw the Palo Verde rate review. We anticipate filing a new rate review request for GW Palo Verde's wastewater assets in 2027, with new rates estimated to be implemented in 2028.

This upcoming rate review request is anticipated to include the Southwest Plant Water Reclamation Facility that you heard about earlier, incremental capital investment made since 2025, and reflect operating expenses of a 2026 test year. As Ron mentioned earlier, we are laser focused on recovering in rates the capital investments made across our utilities. We are in the planning stages for multiple rate review filing for our utilities, and expect to provide you updates at our next quarterly update in August 2026. Those updates are expected to include the timing of our next rate review filings for our farmers division, Saguaro division, Ocotillo Division, and Santa Cruz division amongst others. This concludes the update on regulatory activity for the quarter.

I will now pass the call back to Ron.

Ron L. Fleming: Thank you, Christopher. Despite the headwinds, our work continues. What we do and how we do what we do matters to our communities. We truly believe that expanding our total water management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved. That said, I understand that shareholders are a vital stakeholder and our goal is to achieve long term earnings growth which we believe will allow us to enhance shareholder value. This is our focus.

We appreciate your investment in and support of us as we grow Global Water, to continue to address important utility, water resource, and economic development matters along the Arizona Sun Corridor allowing our communities to thrive. So these highlights conclude our prepared remarks. Thank you. We are now available to answer any questions.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press * then 1, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press * then 2. Again, it is * then 1 to ask a question. To assemble our roster, a reminder again, it is * then 1 to ask a question. This concludes our question-and-answer session. I would like to turn the conference back over to Ron L. Fleming for any closing remarks.

Ron L. Fleming: All right. Thank you, operator. We would just again like to thank everyone for participating on the call and your interest in Global Water. Thanks, and we look forward to speaking with you again.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.