Global Water Resources, Inc. (GWRS) has just dropped its 2024 annual report, and it’s a mixed bag of results that could significantly shape the water management sector. The company saw a 4.9% increase in regulated revenue, hitting $52.7 million, driven by organic growth in service connections and increased water consumption. However, total revenue dipped slightly by 0.6% to $52.7 million, largely due to the absence of $2.8 million in unregulated revenue from infrastructure coordination and financing agreements (ICFAs) that didn’t recur in 2024. Net income took a notable hit, decreasing by 27.5% to $5.8 million, or $0.24 per share, primarily due to the lack of ICFA revenue. Despite this, adjusted net income and adjusted EBITDA showed positive growth, increasing by 2.0% and 5.2% respectively.
The operational highlights paint a picture of steady growth. Active service connections climbed by 4.4% to 64,520, and water consumption rose by 3.3% to 4.16 billion gallons. The company invested a substantial $32.3 million in infrastructure projects, underscoring its commitment to supporting existing utilities and accommodating growth. The appointment of Robert J. Kuta as EVP of engineering and environmental resources signals a strategic move to enhance water and wastewater services and prepare for regional expansion.
The company’s proactive approach to rate adjustments and acquisitions is evident in its recent filings and settlements. The unanimous settlement agreement with Farmers Water Company, Inc. (GW-Farmers), if approved, would provide $1.1 million in additional annual revenue. Additionally, the filing of a general rate case application for Global Water – Santa Cruz Water Company, Inc. and Global Water – Palo Verde Utilities Company, Inc. seeks a net increase of $6.5 million in annual revenues. These moves could set a precedent for other utilities grappling with infrastructure investment and rate adjustments.
The acquisition of seven isolated public water systems from the City of Tucson, pending customary closing conditions, highlights Global Water Resources’ aggressive expansion strategy. This acquisition, expected to be completed in the first half of 2025, would expand the company’s service area in Pima County by approximately 2,200 water service connections. This expansion could spur similar consolidation efforts in other regions, potentially reshaping the competitive landscape of the water management sector.
The company’s focus on organic growth and strategic rate adjustments is evident in its plans for 2025. With single-family housing permits in the Phoenix metropolitan area projected to increase by approximately 6.8%, Global Water Resources is well-positioned to capitalize on this growth. The company’s commitment to providing exceptional water service while expanding and consolidating utilities could drive long-term shareholder value and set new standards for the industry.
The sector should brace for increased consolidation and regionalization efforts as other players may follow suit. The focus on infrastructure investment and proactive environmental stewardship could become the new norm, driving innovation and efficiency in water management. The appointment of industry veterans like Robert J. Kuta could signal a trend towards strategic hiring in the sector, with companies seeking experienced leaders to navigate complex regulatory environments and drive growth. The sector should anticipate a wave of rate case filings and settlements as utilities seek to secure additional revenue for infrastructure investments. This could lead to a more dynamic and competitive market, with companies vying to provide the best services and rates to their customers. The sector should also prepare for increased scrutiny and regulation as utilities seek to balance growth with environmental sustainability and community needs.
