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Global Water Resources, Inc. (GWRS)·Q4 2024 Earnings Summary

Executive Summary

  • Regulated revenue grew despite macro cost pressure; full-year 2024 regulated revenue rose 4.9% to $52.7M, while total revenue was flat at $52.7M given the non-recurrence of $2.8M ICFA revenue recognized in 2023 .
  • Q4 2024 implied revenue was $13.25M and net income $0.44M (derived from FY less nine months), with adjusted EBITDA of $6.26M; FY adjusted EBITDA increased 5.2% year over year, reflecting core utility growth and rate implementation in Saguaro .
  • Multiple regulatory catalysts: Farmers unanimous settlement ($1.1M revenue increase phasing 2025–2026), and Santa Cruz/Palo Verde rate case filing ($6.5M proposed revenue increase phasing 2026–2027); management also proposed a CSA formula rate mechanism to reduce regulatory lag .
  • Strategic expansion: ACC approved Tucson acquisition (adds ~2,000+ connections) and P&G special industrial contract signed; sustained organic growth in service connections (+4.4% YoY to 64,520) underpins long-term thesis .
  • Dividend increased to $0.30396 per share annualized in November 2024; near-term stock catalysts include rate case milestones, CSA adoption prospects, and acquisition closings .

What Went Well and What Went Wrong

What Went Well

  • Regulated revenue increased 4.9% YoY to $52.7M; adjusted EBITDA rose 5.2% to $26.7M, evidencing underlying utility performance and growth .
  • Organic growth strengthened: active service connections +4.4% YoY to 64,520; water consumption +3.3% to 4.16B gallons; capex investment of $32.3M supports reliability and future demand .
  • Regulatory momentum: ACC approved Tucson acquisition; Farmers settlement filed ($1.1M annual revenue increase); Santa Cruz/Palo Verde rate case filed ($6.5M proposed increase); management introduced CSA formula rate proposal to reduce regulatory lag. “Under the proposal, [we] would…update our income statement…and balance sheet…put that through the formula…updating rates annually” .

What Went Wrong

  • Net income declined 27.5% YoY to $5.8M ($0.24/share) due to the non-recurrence of $2.8M ICFA revenue recognized in 2023; other expense also ticked higher on interest expense and asset disposal losses .
  • Operating expenses increased 6.3% YoY (O&M +8.3%, D&A +11.2%), driven by wage/medical costs, purchased power, IT services, and higher depreciable assets; margin compression was evident in Q4 .
  • ACC-approved bill credit for Palo Verde reduces revenue by ~$0.57M annually until next rate case resolution (mitigating prior premature revenue collection), adding near-term topline pressure .

Financial Results

Quarterly Performance (Q2 → Q3 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$13.510 $14.321 $13.251 (FY $52.692 − 9M $39.441)
Net Income ($USD Millions)$1.730 $2.925 $0.443 (FY $5.789 − 9M $5.346)
Operating Income ($USD Millions)$2.797 $3.984 $1.316 (FY $9.364 − 9M $8.048)
EBITDA ($USD Millions)$6.565 $8.183 $5.783 (FY $25.734 − 9M $19.951)
Adjusted EBITDA ($USD Millions)$6.793 $8.199 $6.257 (FY $26.653 − 9M $20.396)
Diluted EPS ($)$0.07 $0.12 N/A (not disclosed separately; FY $0.24)
Net Income Margin %12.8% (NI/Rev) 20.4% (NI/Rev) 3.3% (NI/Rev)
EBITDA Margin %48.6% (EBITDA/Rev) 57.2% (EBITDA/Rev) 43.7% (EBITDA/Rev)

Notes: Q4 figures derived from full-year minus nine-month reported amounts (citations provided). EPS not disclosed for Q4 specifically.

Segment Breakdown (FY 2024)

SegmentFY 2023FY 2024YoY Change ($)YoY Change (%)
Water Service Revenue ($USD Millions)$24.860 $26.064 $1.204 4.8%
Wastewater & Recycled Water Revenue ($USD Millions)$25.382 $26.628 $1.246 4.9%
Total Regulated Revenue ($USD Millions)$50.242 $52.692 $2.450 4.9%
Unregulated Revenue ($USD Millions)$2.786 $0.000 ($2.786) (100.0%)
Total Revenue ($USD Millions)$53.028 $52.692 ($0.336) (0.6%)

KPIs

KPIQ2 2024Q3 2024FY/Q4 2024
Active Service Connections (period-end)63,256 63,889 64,520
Water Consumption (Billion Gallons)1.11 1.34 4.16 (FY)
Capex Invested ($USD Millions)$6.4 $7.0 $32.3 (FY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend (annualized)Effective Nov 2024$0.30096$0.30396Raised
Saguaro District RatesPhased Jul 2024–Jan 2025N/A~+$0.4M annual, phased over five periodsImplemented
Farmers Rate CasePhased 2025–2026N/A~+$1.1M annual (50% May 2025; 25% Nov 2025; 25% May 2026)Settlement filed
Santa Cruz & Palo Verde Rate CasePhased 2026–2027N/A~+$6.5M proposed annual (May 2026, Jan 2027 phases)Filed
Palo Verde Bill Credit (premature revenue)Effective Aug 1, 2024N/A~($0.57M) annual reduction until next rate caseImplemented
Tucson AcquisitionH1 2025 closing expectedN/A~+2,200 connectionsACC approved; pending close

No formal revenue/EPS/margin guidance ranges were provided for FY 2025; management emphasized rate case outcomes, CSA proposal, and connection growth drivers .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Regulatory Rate Cases & LagSaguaro settlement approved; Farmers filed; Santa Cruz/Palo Verde test year underway Santa Cruz/Palo Verde rate case filed (~$6.5M); Farmers unanimous settlement; CSA formula rates proposed to annualize updates Accelerating regulatory momentum
Housing Permits & Organic GrowthPhoenix permits +43% 1H; Maricopa +43% 1H; organic connections +4.9% Phoenix +20.3% FY; Maricopa +11.5% FY; active connections +4.4% Improving/stable growth
Industrial Projects (TSMC, P&G)TSMC/Intel expansions; Inland Port opportunity; P&G land acquisition P&G special industrial contract signed; awaiting notice to proceed; TSMC cumulative $168B noted Building pipeline; medium-term
Cost Inflation & OpExO&M/G&A/D&A rising; bill credit to address premature revenue FY Opex +6.3%; interest expense up; asset disposals; net income down YoY Persistent pressure; rate relief pending
Tucson AcquisitionACC process/approval anticipated ACC unanimously approved; closing targeted H1 2025 Near-term expansion
Buckeye Growth PremiumsYTD premiums rising; +$0.6M YoY increase 9M FY higher income associated with Buckeye premiums (+$0.5M) Supportive tailwind

Management Commentary

  • “We now have over $7.5 million in rate increases proposed and under consideration at the ACC…you can see how Global Water is going to be able to grow considerably in the years to come.” — Ron Fleming, CEO .
  • “Adjusted EBITDA was $26.7 million in 2024…up 5.2% year over year…Regulated revenue…was up $2.5 million or 4.9% compared to 2023.” — Michael Liebman, CFO .
  • “The application requests an overall rate base…~$165 million…equity component ~55% and ROE of 10.2%…includes…cost of service adjustment (CSA)…to change rates annually…reduce regulatory lag.” — Chris Krygier, COO .
  • “We anticipate completing our…plan to acquire seven water systems from the City of Tucson…expand our service area…by approximately 2,200…connections.” — Ron Fleming, CEO .
  • “We invested $32.3 million into infrastructure improvements…we had 0 significant compliance events…nearly 8 years without a significant compliance event.” — Ron Fleming, CEO .

Q&A Highlights

  • CSA formula rates: Management explained annual updates to income statement and balance sheet through a formula with expedited review, proposing a five-year program between general rate cases to reduce regulatory lag .
  • Industrial contract execution: P&G’s notice-to-proceed would start detailed design and permitting; typical 2–3-year timeline before construction and revenue commencement .
  • Buckeye premiums: CFO quantified strong growth—about $920K in Q3 vs $730K prior year; YTD ~$2.2M vs $1.6M—supporting other income .

Estimates Context

  • Wall Street consensus EPS and revenue estimates for Q4 2024 via S&P Global were unavailable at the time of analysis; as a result, we cannot formally assess beat/miss versus Street for the quarter [GetEstimates error].

Where estimates are needed for future comparison, we recommend refreshing S&P Global consensus prior to investment decisions.

Key Takeaways for Investors

  • Core utility growth intact: regulated revenue and adjusted EBITDA expanded despite the non-recurrence of ICFA revenue; organic connections and consumption trends remain favorable .
  • Near-term revenue headwinds: Palo Verde bill credit (~$0.57M annual reduction) and higher Opex/D&A compress quarterly margins until rate relief phases in .
  • Regulatory catalysts: Farmers settlement ($1.1M), Santa Cruz/Palo Verde filing ($6.5M proposed), and CSA proposal could materially improve rate recovery and reduce lag from 2026 onward; watch sufficiency/recommendation timelines and potential settlements .
  • Expansion optionality: ACC-approved Tucson acquisition adds ~2,200 connections; industrial projects (P&G contract) augment medium-term upside; monitor closing and industrial NTPs .
  • Capital deployment: $32.3M FY capex and rising rate base (~$165M requested) support long-term ROI under improved regulatory mechanisms; dividend increased to $0.30396 annualized enhances return profile .
  • Trading implications: Near-term prints may reflect margin pressure and muted GAAP NI; stock likely more sensitive to regulatory outcomes (CSA adoption, rate case milestones) and acquisition closings than quarterly GAAP EPS, given the utility model and nonrecurring ICFA dynamics .

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