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What changed in Global Water Resources, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Global Water Resources, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+379 added−449 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-07)

Top changes in Global Water Resources, Inc.'s 2024 10-K

379 paragraphs added · 449 removed · 287 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+28 added−19 removed63 unchanged
Biggest changeA summary description of our utilities at December 31, 2023 is set forth in the following table and described in more detail below: -9- Table of Con tents Utility Date of Acquisition (A) or Formation (F) Service Provided Square Miles of Service Area (1) Active Service Connections Average Monthly Rate Per Service Connection PINAL COUNTY Global Water - Santa Cruz Water Company, Inc. 2004 (A) Water 90 27,766 $ 63 Global Water - Palo Verde Utilities Company, Inc. 2004 (A) Wastewater and Recycled Water 115 27,421 77 MARICOPA COUNTY Global Water - Hassayampa Utilities Company, Inc. 2005 (F) Wastewater and Recycled Water 43 0 0 Global Water - Belmont Water Company, Inc. 2006 (A) Water 111 622 142 Global Water - Turner Ranches Irrigation, Inc. 2018 (A) Water 7 962 82 PIMA COUNTY Global Water - Red Rock Water Company, Inc. 2018 (A) Water 7.0 0 0 Global Water - Francesca Water Company, Inc. 2020 (A) Water 0.4 119 61 Global Water - Mirabell Water Company, Inc. 2020 (A) Water 0.4 61 82 Global Water - Lyn Lee Water Company, Inc. 2020 (A) Water 1 38 44 Global Water - Tortolita Water Company, Inc. 2020 (A) Water 0.1 23 59 Global Water - Las Quintas Serenas Water Company, Inc. 2021 (A) Water 3.0 1,238 51 Global Water - Rincon Water Company, Inc. 2022 (A) Water 9 79 77 Global Water - Farmers Water Company, Inc. 2023 (A) Water 21 3,462 27 Total 408 61,791 (1) Certified areas may overlap in whole or in part for separate utilities.
Biggest changeA summary description of our utilities at December 31, 2024 is set forth in the following table and described in more detail below: Company Date of Acquisition (A) or Formation (F) Service Provided Square Miles of Service Area (1) Active Service Connections Average Monthly Rate Per Service Connection PINAL COUNTY GW-Santa Cruz 2004 (A) Water 91 29,121 $ 62 GW-Palo Verde 2004 (A) Wastewater and Recycled Water 116 28,721 78 MARICOPA COUNTY GW-Hassayampa 2005 (F) Wastewater and Recycled Water 43 — — GW-Belmont 2006 (A) Water 111 622 155 GW-Turner 2018 (A) Water 7 962 84 PIMA COUNTY GW-Saguaro 2021 (A) Water 20 1,571 55 GW-Farmers 2023 (A) Water 21 3,494 29 GW-Ocotillo 2023 (F) Water — — — Total 409 64,491 (1) Certified areas may overlap in whole or in part for separate utilities.
Arizona water and wastewater utilities must also comply with state environmental regulation regarding drinking water and wastewater, including environmental regulations set by Councils of Government (such as the Central Arizona Governments and the Maricopa Association of Governments), the ADEQ, and the ADWR.
Environmental Regulation Arizona water and wastewater utilities must also comply with state environmental regulation regarding drinking water and wastewater, including environmental regulations set by Councils of Government (such as the Central Arizona Governments and the Maricopa Association of Governments), the ADEQ and the ADWR.
We believe competition for new service areas and acquisitions is based on relationships with municipalities and developers, experience in making acquisitions, the ability to finance and obtain regulatory approval, quality and breadth of products and services, the ability to integrate both water and wastewater services, and implement conservation practices throughout the service areas, price, speed, and ease of implementation.
We believe competition for new service areas and acquisitions is based on relationships with municipalities and developers, experience in making acquisitions, the ability to finance and obtain regulatory approval, quality and breadth of products and services, the ability to integrate both water and wastewater service, and implement conservation practices throughout the service areas, price, speed, and ease of implementation.
We also use automated voice, internet billing, payment processing, and customer service applications that contribute to additional reduced headcount and a reduction in associated personnel costs. Decentralized Treatment Facilities We design and build standard, decentralized facilities that are scaled to the service areas they serve in order to achieve optimum efficiency in providing both water and wastewater services.
We also use automated voice, internet billing, payment processing, and customer service applications that contribute to additional reduced headcount and a reduction in associated personnel costs. Decentralized Treatment Facilities We design and build standard, decentralized facilities that are scaled to the service areas they serve in order to achieve optimum efficiency in providing both water and wastewater service.
Although we intend to rely on recycled water to help meet water demands in areas, the infrastructure, permits, and customer base necessary to generate and deliver recycled water are not necessarily in place in most of our service areas. In addition, although recycling can extend a limited supply, it does not actually generate a new supply of water.
Although we intend to rely on recycled water to help meet water demands in some areas, the infrastructure, permits and customer base necessary to generate and deliver recycled water are not necessarily in place in most of our service areas. In addition, although recycling can extend a limited supply, it does not actually generate a new supply of water.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, municipalities, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
The Company has implemented automated meter reading for 99% of its active customers with a substantial proportion of its remaining customers in the process of or being, or planned to be, upgraded with such functionality. Currently, all meters in our Maricopa service areas allow for automated meter infrastructure.
The Company has implemented automated meter infrastructure for 99% of its active customers with a substantial proportion of its remaining customers in the process of being, or planned to be, upgraded with such functionality. Currently, all meters in our Maricopa service areas allow for automated meter infrastructure.
Components of our Total Water Management approach include: • Regional planning to reduce overall design and implementation costs, leveraging the benefits of replicable designs, gaining the benefits of economies of scale, and enhancing the Company’s position as a premier water and wastewater service provider in the region. ◦ For example, the Company has secured four separate area-wide Clean Water Act Section 208 Regional Water Quality Management Plans in its major planning areas, covering more than 500 square miles of land.
Components of our Total Water Management approach include: • Regional planning to reduce overall design and implementation costs, leveraging the benefits of replicable designs, gaining the benefits of economies of scale, and enhancing the Company’s position as a premier water and wastewater service provider in the region. ◦ For example, the Company has secured six separate area-wide Clean Water Act Section 208 Regional Water Quality Management Plans in its major planning areas, covering more than 500 square miles of land.
In combination with automated meter reading, this suite of technology has minimized the use of human labor and reduced the potential for human error for the entire billing and remittance process, while providing better customer service. We believe our Total Water Management-based business model provides us with a significant competitive advantage in high growth, water scarce regions.
In combination with automated meter infrastructure, this suite of technology has minimized the use of human labor and reduced the potential for human error for the entire billing and remittance process, while providing better customer service. We believe our Total Water Management-based business model provides us with a significant competitive advantage in high growth, water scarce regions.
Based on our experience and discussions with developers, we believe developers prefer our approach because it provides a bundled solution to infrastructure provision and improves housing density in areas of scarce water resources. Developers are also focusing on increased consumer and regulatory demands for environmentally friendly or “green” housing alternatives.
Based on our experience and discussions with developers, we believe developers prefer our approach because it provides a bundled solution to infrastructure provision and improves housing density in areas of scarce water resources. Developers are also focusing on increased consumer and regulatory demands for environmentally friendly or "green" housing alternatives.
Throughout the year, and particularly during typically warmer months, demand may vary with temperature, as well as the timing and overall levels of rainfall. In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand for our water may decrease and therefore, adversely affect our revenues.
Throughout the year, and particularly during typically warmer months, demand may vary with temperature, as well as the timing and overall levels of rainfall. In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the customer demand for our water may decrease and therefore, adversely affect our revenue.
The U.S. water industry has traditionally not taken advantage of advances in technology available to enhance revenue, increase operating efficiencies, and decrease operating costs (including labor and energy costs). Areas of opportunity include automated meter reading, systems management, and administrative functions, such as customer billing and remittance systems.
The U.S. water industry has traditionally not taken advantage of advances in technology available to enhance revenue, increase operating efficiencies and decrease operating costs (including labor and energy costs). Areas of opportunity include automated meter infrastructure, systems management, and administrative functions, such as customer billing and remittance systems.
In addition, the Company has won numerous awards for education, outreach, and conservation in the water industry. • Incorporating automated processes, such as supervisory control and data acquisition, automated meter reading, and back-office technologies and “green” billing, which reduce operating costs, improve system availability and reliability, and improve customer satisfaction. ◦ Supervisory Control and Data Acquisition.
In addition, the Company has won numerous awards for education, outreach and conservation in the water industry. • Incorporating automated processes, such as supervisory control and data acquisition, automated meter infrastructure and back-office technologies and “green” billing, which reduce operating costs, improve system availability and reliability, and improve customer satisfaction. ◦ Supervisory Control and Data Acquisition.
We are also subject to various federal, state, and local laws and regulations governing the storage of hazardous materials, the management and disposal of hazardous and solid wastes, discharges to air and water, the cleanup of contaminated sites, dam safety, fire protection services in the areas we serve, and other matters relating to the protection of the environment, health, and safety.
We are also subject to various federal, state and local laws and regulations governing the storage of hazardous materials, the management and disposal of hazardous and solid wastes, discharges to air and water, the cleanup of contaminated sites, dam safety, fire protection service in the areas we serve and other matters relating to the protection of the environment, health and safety.
If we seek to extend our services outside Arizona, we will face competition from other regional or national water utilities for these opportunities. Although we believe we compete effectively in our regulated businesses, our competitors may have more resources and experience than we have and may therefore have a competitive advantage.
If we seek to extend our service outside Arizona, we will face competition from other regional or national water utilities for these opportunities. Although we believe we compete effectively in our regulated businesses, our competitors may have more resources and experience than we have and may therefore have a competitive advantage.
For 2023, we achieved a compliance rate of 99.9% for meeting state and federal drinking water standards and 99.9% for compliance with wastewater requirements, for an overall compliance rating of 99.9%. Compliance with governmental regulations is of utmost importance to us, and considerable time and resources are spent ensuring compliance with all applicable federal, state, and local laws and regulations.
For 2024, we achieved a compliance rate of 99.9% for meeting state and federal drinking water standards and 99.9% for compliance with wastewater requirements, for an overall compliance rating of 99.9%. Compliance with governmental regulations is of utmost importance to us, and considerable time and resources are spent ensuring compliance with all applicable federal, state and local laws and regulations.
The comprehensive technology platform that we use includes automated meter reading technology, which allows us to read water meters remotely rather than physically, improves water resources accounting, allows for identification of high water usage and water theft from disconnected meters.
The comprehensive technology platform that we use includes automated meter infrastructure technology, which allows us to read water meters remotely rather than physically, improves water resources accounting, allows for identification of high water usage and water theft from disconnected meters.
The majority of the approximately 50,000 water utilities are serving a population of 5,000 or less, and 85% of the water utilities serve only 10% of the population. • Large Public Sector Ownership . Municipally-owned utilities provide water and wastewater services for the vast majority of the U.S. population.
The majority of the approximately 50,000 water utilities are serving a population of 5,000 or less, and 85% of the water utilities serve only 10% of the population. • Large Public Sector Ownership . Municipally-owned utilities provide water and wastewater service for the vast majority of the U.S. population.
The ACC also has broad administrative power and authority to set rates and charges, determine service areas and conditions of service, and authorize the issuance of securities as well as authority to establish uniform systems of accounts and approve the terms of contracts with both affiliates and customers.
The ACC has broad administrative power and authority to set rates and charges, determine service areas and conditions of service and authorize the issuance of securities. The ACC also has authority to establish uniform systems of accounts and approve the terms of contracts with both affiliates and customers.
The comprehensive technology platform that we use includes supervisory control and data acquisition (SCADA), automated meter reading (AMR), and geographical information system (GIS) technologies, which we use to map and monitor our physical assets and water resources on an automated, real-time basis with fewer people than the standard water utility model requires.
The comprehensive technology platform that we use includes supervisory control and data acquisition (SCADA), automated meter infrastructure, and geographical information system (GIS) technologies, which we use to map and monitor our physical assets and water resources on an automated, real-time basis with fewer people than the standard water utility model requires.
Most of the Santa Cruz and Palo Verde infrastructure is less than twenty years old. Santa Cruz and Palo Verde provide water, wastewater, and recycled water services, respectively, under an innovative public-private partnership memorandum of understanding with the City of Maricopa in Pinal County for approximately 278 square miles of its planning area.
Most of the GW-Santa Cruz and GW-Palo Verde infrastructure is less than twenty years old. GW-Santa Cruz and GW-Palo Verde provide water, wastewater and recycled water service, respectively, under an innovative public-private partnership memorandum of understanding with the City of Maricopa in Pinal County for approximately 278 square miles of its planning area.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results of Operations—Weather and Seasonality,” included in Part II, Item 7 of this report, for additional information . Human Capital Resources Our employees’ significant contributions through innovation and standardization are essential to our realized and continued success.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results of Operations—Weather and Seasonality,” included in Part II, Item 7 of this report, for additional information . -17- Table of Contents Human Capital Resources Our employees’ significant contributions through innovation and standardization are essential to our realized and continued success.
In order to meet their capital spending challenges and take advantage of technology-related operating efficiencies, many municipalities are examining a combination of outsourcing and partnerships with the private sector or outright privatizations. • Outsourcing involves municipally-owned utilities contracting with private sector service providers to provide services, such as meter reading, billing, maintenance, or asset management services. -6- Table of Con tents • Public-private partnerships among government, operating companies, and private investors include arrangements, such as design, build, and operate contracts; build, own, operate, and transfer contracts; and own, leaseback, and operate contracts. • Privatization involves a transfer of responsibility for, and ownership of, the utility from the municipality to private investors.
In order to meet their capital spending challenges and take advantage of technology-related operating efficiencies, many municipalities are examining a combination of outsourcing and partnerships with the private sector or outright privatizations. • Outsourcing involves municipally-owned utilities contracting with private sector service providers to provide service, such as meter reading, billing, maintenance, or asset management. • Public-private partnerships among government, operating companies, and private investors include arrangements, such as design, build and operate contracts; build, own, operate and transfer contracts; and own, leaseback and operate contracts. • Privatization involves a transfer of responsibility for, and ownership of, the utility from the municipality to private investors.
Since many administrative and support activities can be efficiently centralized to gain economies of scale and sharing of best practices, companies that participate in industry consolidation have the potential to improve operating efficiencies, lower costs, and improve service at the same time. Our Strategy We are a water resource management company that provides water, wastewater, and recycled water utility services.
Since many administrative and support activities can be efficiently centralized to gain economies of scale and sharing of best practices, companies that participate in industry consolidation have the potential to improve operating efficiencies, lower costs, and improve service at the same time. -7- Table of Contents Our Strategy We are a water resource management company that provides water, wastewater, and recycled water utility service.
In addition, investor-owned utilities that achieve larger scales are able to spread overhead expenses over a larger customer base, thereby reducing the costs to serve each customer.
In addition, investor-owned utilities that achieve larger scale are able to spread overhead expenses over a larger customer base, thereby reducing the costs to serve each customer.
In areas of water scarcity, such as the arid western U.S., water recycling represents a relatively simple, inexpensive, and energy-efficient means of augmenting water supply as compared to transporting surface water, groundwater, or desalinated water from other locations.
In areas -6- Table of Contents of water scarcity, such as the arid western U.S., water recycling represents a relatively simple, inexpensive, and energy-efficient means of augmenting water supply as compared to transporting surface water, groundwater, or desalinated water from other locations.
A developer may make an independent showing of an assured water supply resulting in a Certificate of Assured Water Supply (“CAWS”) for a subdivision or may obtain a written commitment for service from a designated water provider, such as a privately owned water company or a municipal water supplier.
A developer may make an independent showing of an assured water supply resulting in a CAWS for a subdivision or may obtain a written commitment for service from a designated water provider, such as a privately owned water company or a municipal water supplier.
Because the Company requires developers -7- Table of Con tents to take back and utilize recycled water within their communities and invest in “purple pipe” recycled water infrastructure during the initial development of subdivisions, the Company is now able to distribute the majority of its recycled water back to the community for beneficial purposes.
Because the Company requires developers to take back and utilize recycled water within their communities and invest in “purple pipe” recycled water infrastructure during the initial development of subdivisions, the Company is now able to distribute the majority of its recycled water back to the community for beneficial purposes.
While we do not make public comments on the details of our -15- Table of Con tents security programs, we have been in contact with federal, state, and local law enforcement agencies to coordinate and improve the security of our water delivery systems and to safeguard our water supply.
While we do not make public comments on the details of our security programs, we have been in contact with federal, state and local law enforcement agencies to coordinate and improve the security of our water delivery systems and to safeguard our water supply.
The Company is the water, wastewater, and recycled water provider for the City of Maricopa, which currently has a population of approximately 74,000. A community of this size produces an approximate annual average of 3.7 million gallons of wastewater per day.
The Company is the water, wastewater, and recycled water provider for the City of Maricopa, which currently has a population of approximately 75,000. A community of this size produces an approximate annual average of 3.9 million gallons of wastewater per day.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
We seek to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
Each memorandum of understanding reflects the Company’s intent to deploy Total Water Management. The Company also has 154 infrastructure coordination and financing agreements with landowners or developer entities that include requirements for usage of recycled water and other attributes that support the Company’s Total Water Management model.
Each memorandum of understanding reflects the Company’s intent to deploy Total Water Management. The Company also has 154 ICFAs with landowners or developer entities that include requirements for usage of recycled water and other attributes that support the Company’s Total Water Management model.
Groundwater is a limited resource in Arizona, and access to new uses of groundwater is closely regulated in the areas served by us.
Groundwater is a limited resource in Arizona, and new uses of groundwater are closely regulated in the areas served by us.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . -18- Table of Con tents
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . Table of Contents
Competition -16- Table of Con tents As an owner and operator of regulated utilities, we do not face competition within our existing service areas because Arizona law provides the holder of a CC&N for water and wastewater service with an exclusive right to provide that service within the certificated area, as against other public service corporations.
Competition As an owner and operator of regulated utilities, we do not face competition within our existing service areas because Arizona law provides the holder of a CC&N for water and wastewater service with an exclusive right to provide that service within the ACC-designated service area, as against other public service corporations.
This represents an increase of nine employees, or 9% from December 31, 2022 due primarily to the hiring of additional employees throughout the organization as the company continues to grow and the acquisition of Farmers in February 2023. Currently, none of our employees participate in collective bargaining agreements, and we consider our employee relations to be good.
This represents an increase of sixteen employees, or 15% from December 31, 2023 due primarily to the hiring of additional employees throughout the organization as the company continues to grow. Currently, none of our employees participate in collective bargaining agreements, and we consider our employee relations to be good.
ITEM 1. BUSINESS Overview GWRI is a water resource management company that owns, operates, and manages twenty-nine water, wastewater, and recycled water systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.
ITEM 1. Business Overview GWRI is a water resource management company that owns, operates, and manages thirty-two water, wastewater, and recycled water public utility systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.
We offer comprehensive compensation and benefits package to attract and retain top talent. In addition to competitive base wages, additional benefits include annual bonus opportunities, employee stock options, Company matched 401(k) plan, healthcare and insurance benefits, flexible spending accounts and paid time off. As of December 31, 2023, we employed 106 full-time individuals and 3 part-time employees.
We offer a comprehensive compensation and benefits package to attract and retain top talent. In addition to competitive base wages, additional benefits include annual bonus opportunities, share-based compensation, Company matched 401(k) plan, healthcare and insurance benefits, flexible spending accounts and paid time off. As of December 31, 2024, we employed 122 full-time individuals and 3 part-time employees.
The utility segment of the U.S. water industry is highly fragmented, with approximately 50,000 water utilities and approximately 16,000 community wastewater utilities, according to the U.S. Environmental Protection Agency (“EPA”) .
The utility segment of the U.S. water industry is highly fragmented, with approximately 50,000 water utilities and approximately 16,000 community wastewater utilities, according to the EPA .
We are also subject to state environmental laws and regulations, such as Arizona’s Aquifer Protection Program and other environmental laws and regulations enforced by the Arizona Department of Environmental Quality (“ADEQ”), and extensive regulation by the ACC, which regulates public utilities.
We are also subject to state environmental laws and regulations, such as Arizona’s Aquifer Protection Permit program and other environmental laws and regulations enforced by the ADEQ, and extensive regulation by the ACC, which regulates public utilities in Arizona.
To date, the Company has reused approximately 11.7 billion gallons of recycled water in the City of Maricopa. • Integrating and standardizing water, wastewater, and recycled water infrastructure delivery systems using a separate distribution system of purple pipes to conserve water resources, reduce energy, treatment, and consumable costs (e.g., chemicals, filter media, other general materials, and supplies), provide operational efficiencies, and align the otherwise disparate objectives of water sales and conservation. ◦ In addition to the previous example, which related to the requirements for recycled water usage, the separate distribution system of purple pipes, and water conservation achievements, the Company believes that its model results in additional benefits from an economic perspective due to lower use of power and consumables.
To date, the Company has reused approximately 12.5 billion gallons of recycled water in the City of Maricopa. • Integrating and standardizing water, wastewater and recycled water infrastructure delivery systems using a separate recycled water distribution system of purple pipe to maximize effective and safe water reuse, conserve water resources, reduce energy, treatment and consumable costs (e.g., chemicals, filter media, other general materials, and supplies), provide operational efficiencies, and align the otherwise disparate objectives of water sales and conservation. ◦ In addition to the previous example, which relates to the increasing adoption and demand for recycled water usage, the separate recycled water distribution system of purple pipe, and the Company’s water conservation achievements, the Company believes that its model results in additional benefits from an -8- Table of Contents economic perspective due to lower use of power and consumables.
The City of Maricopa continues to grow, as demonstrated by our addition of 12,959 active service connections, which represents 6.1% annualized growth from December 2018 to December 2023. Development in the area is still considered to be affordable with the median home value being $341,000 compared to $429,000 in the Phoenix Metro area.
The City of Maricopa continues to grow, as demonstrated by our addition of 13,485 active service connections, which represents 6.1% annualized growth from December 2019 to December 2024. Development in the area is still considered to be affordable, with the median home value being $359,000 compared to $460,000 in the Phoenix Metro area.
In addition to regulation by governmental entities, our operations may also be affected by civic or consumer advocacy groups. These organizations provide a voice for customers at local and national levels to communicate their service priorities and concerns.
In addition to regulation by governmental entities, our operations may also be affected by civic or consumer advocacy groups. These organizations provide a voice for customers at local and national levels to communicate their service priorities and concerns. Although these organizations may lack regulatory or enforcement authority, they may be influential in achieving service quality and rate improvements for customers.
While we are not presently regulated to meet source control requirements, we maintain source control through various Codes of Practice that have been accepted by the ACC as enforceable limits on consumer discharges to sanitary sewer systems.
While we are not presently regulated to meet source control requirements, we maintain source control through various Codes of Practice that have been accepted by the ACC as enforceable limits on consumer discharges to sanitary sewer systems. We believe we maintain the necessary permits and approvals for the discharges from our water and wastewater facilities.
With this data, we can better model demand usage, identify system water loss, identify leaks on the customer side of the meter, monitor for abnormal usage, and present interval, hourly, daily, weekly, or monthly usage back to the customers. -8- Table of Con tents ◦ Back-Office Technologies and Paperless Billing.
Reading meters at this frequency provides many benefits to both the utility and the customer. With this data, we can better model demand usage, identify system water loss, identify leaks on the customer side of the meter, monitor for abnormal usage and present interval, hourly, daily, weekly or monthly usage back to the customers. ◦ Back-Office Technologies and Paperless Billing.
Hassayampa currently has no active service connections; however, its service area lies directly in the expected path of future growth in the far west valley of metropolitan Phoenix, which we believe should provide opportunities for growth once development commences in this area. We acquired Turner in May 2018.
GW-Hassayampa currently has no active service connections; however, its service area lies directly in the expected path of future growth in the far west valley of metropolitan Phoenix, which we believe should provide opportunities for growth once development commences in this area. GW-Belmont served 622 active service connections as of December 31, 2024.
In Arizona, the requirements of the Safe Drinking Water Act are incorporated by reference into the Arizona Administrative Code. In order to remove or inactivate microbial organisms, the EPA has promulgated various rules to improve the disinfection and filtration of drinking water and to reduce consumers’ exposure to disinfectants and by-products of the disinfection process.
In order to remove or inactivate microbial organisms, the EPA has promulgated various rules to improve the disinfection and filtration of drinking water and to reduce consumers’ exposure to disinfectants and by-products of the disinfection process.
Our implementation of the Total Water Management philosophy in Arizona has led to the development of relationships with key regulatory bodies. Our Regulated Utilities We own and operate regulated water, wastewater, and recycled water utilities in communities principally located in metropolitan Phoenix and Tucson. Our utilities are regulated by the ACC , as described further under “—Regulation—Arizona Regulatory Agencies” below.
Our implementation of the Total Water Management philosophy in Arizona has led to the development of beneficial relationships with key regulatory bodies. Our Regulated Utilities We own and operate regulated water, wastewater, and recycled water utilities in communities principally located in metropolitan Phoenix and Tucson.
Palo Verde served 27,421 active service connections as of December 31, 2023 and revenues from Palo Verde represented approximately 47.9% and 51.8% of our total revenue for the years ended December 31, 2023 and 2022, respectively. The Santa Cruz and Palo Verde service areas include approximately 205 square miles, which we believe provide further opportunities for growth.
GW-Palo Verde served 28,721 active service connections as of December 31, 2024 and revenue from GW-Palo Verde represented approximately 50.7% and 47.9% of our total revenue for the years ended December 31, 2024 and 2023, respectively. The GW-Santa Cruz and GW-Palo Verde service areas include approximately 207 square miles, which we believe provide further opportunities for growth.
Serving more than 82,000 people in approximately 32,000 homes within the Company’s 408 square miles of certificated service areas as of December 31, 2023, the Company provides water and wastewater utility services under the regulatory authority of the ACC.
Serving more than 111,000 people in approximately 36,000 homes within the Company’s 409 square miles of ACC-designated service areas as of December 31, 2024, the Company provides water and wastewater utility service under the regulatory authority of the ACC.
Water samples across our water system are analyzed on a regular basis in material compliance with regulatory requirements. Water quality tests are conducted at subcontracted laboratory facilities in addition to providing continuous online instrumentation for monitoring parameters, such as turbidity and disinfectant residuals, and allowing for adjustments to chemical treatment based on changes in incoming water quality.
Water quality tests are conducted at subcontracted laboratory facilities in addition to providing continuous online instrumentation for monitoring parameters, such as turbidity and disinfectant residuals, and allowing for adjustments to chemical treatment based on changes in incoming water quality.
Companies that wish to provide water or wastewater service apply for a CC&N with the ACC, which, if granted, allows them to serve customers within a geographic area specified by a legal description of the property.
The ACC is comprised of five elected members, each serving a four-year term. -13- Table of Contents Companies that wish to provide water or wastewater service apply for a CC&N with the ACC, which, if granted, allows them to serve customers within a geographic area specified by a legal description of the property.
The members established a new entity, GWR Global Water Resources Corp. (“GWRC”), which was incorporated under the Business Corporations Act (British Columbia) on March 23, 2010 to acquire shares of our common stock and to actively participate in our management, business, and operations through its representation on our board of directors and its shared management.
(“GWRC”), which was incorporated under the Business Corporations Act (British Columbia) on March 23, 2010 to acquire shares of GWRI’s common stock and to actively participate in its management, business, and operations through its representation on GWRI’s Board of Directors.
Although it is difficult to project the ultimate costs of complying with the above or other pending or future requirements, we do not expect current requirements under the Safe Drinking Water Act to have a material impact on our operations or financial condition, although it is possible new methods of treating drinking water may be required if additional regulations become effective in the future.
Although it is difficult to project the ultimate costs of complying with the above or other pending or future requirements, we do not expect current requirements under the Safe Drinking Water Act to have a material impact on our operations or financial condition, although it is possible new methods of treating drinking water may be required if additional regulations become effective in the future. -12- Table of Contents National Primary Drinking Water Regulations The NPDWR are legally enforceable primary standards and treatment techniques that apply to public water systems and are designed to limit the levels of contaminants in drinking water.
The Pima County Department of Environmental Quality has delegated authority for overseeing ADEQ requirements in Pima County. The ADWR regulates surface water extraction, groundwater withdrawal, designations and certificates of assured water supply, extinguishment of irrigation grandfathered water rights, groundwater savings facilities, recharge facilities, recharge permits, recovery well permits, storage accounts, and well construction, abandonment, or replacement.
The ADWR regulates surface water extraction, groundwater withdrawal, designations and certificates of assured water supply, extinguishment of irrigation grandfathered water rights, groundwater savings facilities, recharge facilities, recharge permits, recovery well permits, storage accounts and well construction, abandonment or replacement.
For additional information related to the rate case, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Rate Case Activity”, included in Part II, Item 7 of this report and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
For information related to rate cases for our utilities, see “– Regulation” below, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Rate Case Activity”, included in Part II, Item 7 of this report and Note 3 – “Regulatory Matters” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
The activities of these businesses include the building, financing, and operating of water and wastewater utilities, utility repair services, contract operations, laboratory services, manufacturing and distribution of infrastructure and technology components, and other specialized services. -5- Table of Con tents Key Characteristics of the U.S.
The activities of these businesses include the building, financing, and operating of water and wastewater utilities, utility repair, contract operations, laboratory service, manufacturing and distribution of infrastructure and technology components, and other specialized services. Key Characteristics of the U.S. Water Industry The U.S. water industry is characterized by: • Significant Constraints on the Availability of Fresh Water .
The ADEQ regulates water quality and permits water reclamation facilities, discharges of recycled water, re-use of recycled water, and recharge of recycled water. The ADEQ also regulates the clean closure requirements of facilities. The Maricopa County Environmental Services Department has delegated authority for overseeing ADEQ requirements in Maricopa County.
The ADEQ also regulates the clean closure requirements of facilities. The Maricopa County Environmental Services Department has delegated authority for overseeing ADEQ requirements in Maricopa County. The Pima County Department of Environmental Quality has delegated authority for overseeing ADEQ requirements in Pima County.
Communities prefer the approach because it provides a partnering platform which promotes economic development, reduces their traditional dependence on bond financing and ensures long term water sustainability. Our competitive advantage facilitates the execution of our growth strategy. We believe our proven conservation methods lead to successful permitting for more connections in expanded and new service areas.
Communities prefer the approach because it provides a partnering platform which promotes economic development, reduces their traditional dependence on bond financing and ensures long term water sustainability. Our competitive advantage facilitates the execution of our growth strategy.
Outside of Arizona’s Active Management Areas, the “adequate water supply” program requires a determination of whether there is an adequate water supply—similar to an assured water supply—but it does not necessarily foreclose development when the showing cannot be made.
The DAWS covers approximately 5,300 acre-feet of water use, and in 2024, we pumped approximately 977 acre-feet. -15- Table of Contents Outside of Arizona’s Active Management Areas, the “adequate water supply” program requires a determination of whether there is an adequate water supply—similar to an assured water supply—but it does not necessarily foreclose development when the showing cannot be made.
The Maricopa Association of Governments is the designated management authority for Section 208 of the Clean Water Act for Maricopa County and administers the requirements of the Regional Water Quality Management Plans and Amendments at the local level.
The Maricopa Association of Governments is the designated management authority for Section 208 of the Clean Water Act for Maricopa County and administers the requirements of the Regional Water Quality Management Plans and Amendments at the local level. -14- Table of Contents The ADEQ regulates water quality and permits water reclamation facilities, discharges of recycled water, re-use of recycled water and recharge of recycled water.
In February 2023, the Company completed the acquisition of Farmers Water Co., an operator of a water utility with service area in Sahuarita, Arizona and in unincorporated Pima County, Arizona. As of December 31, 2023, Farmers served 3,462 active water connections with approximately 21.0 square miles of service area.
In February 2023, the Company completed the acquisition of Farmers Water Co., an operator of a Pima County water utility with a service area in Sahuarita, Arizona and in unincorporated Pima County, Arizona.
Additionally, the ACC has statutory authority to oversee service quality and consumer complaints, and approve or disapprove expansion of service areas. The ACC is comprised of five elected members, each serving a four year term.
Additionally, the ACC has statutory authority to oversee service quality and consumer complaints and approve or disapprove expansion of service areas.
Investor-owned water and wastewater utilities are generally economically regulated, including rate regulation, by public utility commissions in the states in which they operate. The utility segment is characterized by high barriers to entry, including high capital spending requirements. • General Water Products and Services. This business includes manufacturing, engineering and consulting companies, and numerous other fee-for-service businesses.
The utility segment is characterized by high barriers to entry, including high capital spending requirements. • General Water Products and Service. This business includes manufacturing, engineering and consulting companies, and numerous other fee-for-service businesses.
Approximately 89.3% of the active service connections are customers of the Company’s the Company’s Global Water - Santa Cruz Water Company, Inc. (“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”) utilities, which are located within a single service area. U.S. Water Industry Overview U.S.
Approximately 89.6% of the active service connections are customers of the Company’s GW-Santa Cruz and GW-Palo Verde utilities, which are located within a single service area. U.S. Water Industry Overview U.S. Water Industry Areas of Business The U.S. water industry has two main areas of business: • Utility Service to Customers .
However, we currently rely almost exclusively (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas.
However, we currently rely predominantly on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. Aside from some rights to water through the Central Arizona Project, groundwater (and recycled water derived from groundwater) is the only water supply available to us.
See “Risk Factors—Business and Operational Factors—Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues,” included in Part I, Item 1A of this report, for additional information. -14- Table of Con tents Nearly all of our service areas are located in “Active Management Areas” within which the use of groundwater is regulated by ADWR in order to manage ongoing problems with groundwater overdraft.
See “Risk Factors—Business and Operational Factors— Inadequate water supplies and wastewater capacity could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenue ,” included in Part I, Item 1A of this report, for additional information.
Water Industry In the U.S., the water industry is characterized by: • Significant Constraints on the Availability of Fresh Water . In Arizona, the Arizona Department of Water Resources (“ADWR”) estimates that annual water usage is 7 million acre-feet per year, as of 2017.
In Arizona, the ADWR estimates that annual water usage is 7 million acre-feet per year, as of 2017.
Recycled water can be delivered for all common area irrigation needs, as well as delivered direct to homes where it can be used for outdoor residential irrigation. Our Total Water Management model, an integrated approach to the use of potable and non-potable water to manage the entire water cycle, both conserves water and maximizes its total economic value.
Our Total Water Management model, an integrated approach to the use of potable and non-potable water to manage the entire water cycle, both conserves water and maximizes its total economic value.
For example, our water and wastewater treatment facilities store and use chlorine and other chemicals and generate wastes that require proper handling and disposal under applicable environmental regulations. We could also incur remedial costs in connection with any environmental contamination relating to our operations or facilities, releases or our off-site disposal of wastes.
We could also incur remedial costs in connection with any environmental contamination relating to our operations or facilities, releases or our off-site disposal of wastes.
The service areas include approximately 111 square miles and provides water services to Maricopa County west of the Hassayampa River and to two small subdivisions in northern Scottsdale. Within the Belmont service area, we have entered into agreements with developers to serve approximately 100,000 home sites plus commercial, schools, parks, and industrial developments at full build-out.
Within the GW-Belmont service area, we have entered into agreements with developers of mixed use, master planned communities to serve approximately 100,000 anticipated home sites plus commercial, schools, parks and industrial developments at full build-out. GW-Turner is a non-potable irrigation water utility located in Maricopa County, Arizona, with approximately seven square miles of service area.
Under the latter approach, the water provider must demonstrate satisfaction of assured water supply requirements for the developments within its service areas resulting in a Designation of Assured Water Supply (“DAWS”) for the provider. At present, we have obtained a DAWS in the Maricopa/Casa Grande service territory (Santa Cruz) for approximately 22,900 acre-feet of water use.
Under the latter approach, the water provider must demonstrate satisfaction of assured water supply requirements for the developments within its service areas resulting in a DAWS for the provider.
In addition, capital expenditures and operating costs to comply with environmental mandates traditionally have been recognized by state public utility commissions as appropriate for inclusion in establishing rates, although rate recovery may be delayed by “regulatory lag”, that is, the delay between the utility’s test year and the issuance of a rate order approving new rates.
Capital expenditures and operating costs to comply with environmental mandates traditionally have been recognized by state public utility commissions as appropriate for inclusion in establishing rates.
Safe Drinking Water Act The federal Safe Drinking Water Act and regulations promulgated thereunder establish minimum national quality standards for drinking water. The EPA has issued rules governing the levels of numerous naturally occurring and man-made chemical and microbial contaminants and radionuclides allowable in drinking water and continues to propose new rules.
The EPA has issued rules governing the levels of numerous naturally occurring and man-made chemical and microbial contaminants and radionuclides allowable in drinking water and continues to propose new rules. These rules also prescribe testing requirements for detecting contaminants, the treatment systems that may be used for removing contaminants, and other requirements.
Global Water Management, LLC (“GWM”) was formed as an affiliated company to provide business development, management, construction project management, operations, and administrative services to GWR and all of its regulated subsidiaries. -17- Table of Con tents In early 2010, the members of GWR made the decision to raise money through the capital markets, and GWR and GWM were reorganized to form Global Water Resources, Inc., a Delaware corporation.
Global Water Management, LLC (“GWM”) was formed as an affiliated company to provide business development, management, construction project management, operations, and administrative services to GWR and all of its regulated subsidiaries.
Water quality standards, first introduced with the Clean Water Act in 1972 and the Safe Drinking Water Act in 1974, are becoming increasingly stringent and numerous. For water, the American Water Works Association estimates investment needs for buried drinking water infrastructure will total more than $1 trillion over the next 25 years.
Water quality standards, first introduced with the Clean Water Act in 1972 and the Safe Drinking Water Act in 1974, are becoming increasingly stringent and numerous.
The Belmont development is a mixed use, master planned community. We formed Hassayampa in 2005. Hassayampa is a wastewater utility and has a Certificate of Convenience & Necessity (“CC&N”) for approximately 43 square miles in an area in western Maricopa County known as Tonopah.
GW-Hassayampa is a wastewater utility and has a CC&N for approximately 43 square miles in an area in western Maricopa County known as Tonopah.
However, raising large amounts of funds required for capital investment is often challenging for municipal water utilities, which affects their ability to fund capital spending. Many smaller utilities also do not have the in-house technical and engineering resources to manage significant infrastructure or technology-related investments.
Many smaller utilities also do not have the in-house technical and engineering resources to manage significant infrastructure or technology-related investments.
A key component of our water utility business is the use of recycled water. Recycled water is highly treated and purified wastewater that is distributed through a separate distribution system of purple pipes for a variety of beneficial, non-potable uses.
Recycled water is highly treated and purified wastewater that is distributed through a separate distribution system of purple pipes for a variety of beneficial, non-potable uses. Recycled water can be delivered for all common area irrigation needs, as well as delivered direct to homes where it can be used for outdoor residential irrigation.
We believe we maintain the necessary permits and approvals for the discharges from our water and wastewater facilities. -13- Table of Con tents Arizona Regulatory Agencies The ACC is the regulatory authority in Arizona with jurisdiction over privately-held water and wastewater utilities.
Arizona Regulatory Agencies Rate Regulation The ACC is the regulatory authority in Arizona with jurisdiction over privately-held water and wastewater utilities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs such, we are eligible to take advantage of certain exemptions from various reporting requirements that are otherwise applicable generally to public companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (so long as we also remain a non-accelerated filer); (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (iii) reduced disclosure obligations regarding financial statements. -34- Table of Con tents We may take advantage of the scaled disclosures available to smaller reporting companies for so long as our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.
Biggest changeAs such, we are eligible to take advantage of certain exemptions from various reporting requirements that are otherwise applicable generally to public companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act (so long as we also remain a non-accelerated filer); (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and (iii) reduced disclosure obligations regarding financial statements.
We also plan to construct facilities and obtain the necessary permits to recharge recycled water to stretch and augment our existing and planned future water supplies, but do not yet have this capability in all of our service areas.
We also plan to construct facilities and obtain the necessary permits to recharge recycled water to stretch and augment our existing and planned future water supplies, but we do not yet have this capability in all of our service areas.
Electrical power costs are beyond our control and can increase unpredictably in substantial amounts. Under these circumstances, our cash flows between our general rate case filings and our earnings may be adversely affected until the ACC has authorized a rate increase.
Electrical power costs are beyond our control and can increase unpredictably and in substantial amounts. Under these circumstances, our cash flows between our general rate case filings and our earnings may be adversely affected until the ACC has authorized a rate increase.
Dividend payments are not mandatory or guaranteed; there can be no assurance that we will continue to pay a dividend in the future. Our failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act as a public company could have a material adverse effect on our business and share price.
Dividend payments are not mandatory or guaranteed; there can be no assurance that we will continue to pay a dividend in the future. Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act as a public company could have a material adverse effect on our business and share price.
We may not be able to effectively manage any expansion in one or more of these areas, and our failure to do so could harm our ability to maintain or increase revenues and operating results. The expenses incurred in pursuing growth could increase without a corresponding increase in our revenue base, which could decrease operating results and profit margin.
We may not be able to effectively manage any expansion in one or more of these areas, and our failure to do so could harm our ability to maintain or increase revenue and operating results. The expenses incurred in pursuing growth could increase without a corresponding increase in our revenue base, which could decrease operating results and profit margin.
A CC&N is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same services within the specified area, which we refer to as “service areas.” Moreover, real estate development is a cyclical industry.
A CC&N is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same service within the specified area, which we refer to as “service areas.” Moreover, real estate development is a cyclical industry.
In addition, governments or government agencies that regulate our operations may enact legislation or adopt new requirements that could have an adverse effect on our business, including: • restricting ownership or investment; • providing for the expropriation of our assets by the government through condemnation or similar proceedings; • providing for changes to water and wastewater quality standards; • requiring cancellation or renegotiation of, or unilateral changes to, agreements relating to our provision of water and wastewater services; • changing regulatory or legislative emphasis on water conservation in comparison to other goals and initiatives; • promoting an increase of competition among water companies within our designated service areas; • requiring the provision of water or wastewater services at no charge or at reduced prices; • restricting the ability to terminate services to customers whose accounts are in arrears; • restricting the ability to sell assets or issue securities; • adversely changing tax, legal, or regulatory requirements, including employment, property ownership, or general business regulations; • changing environmental requirements and the imposition of additional requirements and costs on our operations; • changes in the charges applied to raw water abstraction; • changes in rate making policies; or • restrictions relating to water use and supply, including restrictions on use, increased offsetting groundwater replenishment obligations, changes to the character of groundwater rights, and settlement of Native American claims.
In addition, governments or government agencies that regulate our operations may enact legislation or adopt new requirements that could have an adverse effect on our business, including: • restricting ownership or investment; • providing for the expropriation of our assets by the government through condemnation or similar proceedings; • providing for changes to water and wastewater quality standards; • requiring cancellation or renegotiation of, or unilateral changes to, agreements relating to our provision of water and wastewater service; -19- Table of Contents • changing regulatory or legislative emphasis on water conservation in comparison to other goals and initiatives; • promoting an increase of competition among water companies within our designated service areas; • requiring the provision of water or wastewater service at no charge or at reduced prices; • restricting the ability to terminate service to customers whose accounts are in arrears; • restricting the ability to sell assets or issue securities; • adversely changing tax, legal or regulatory requirements, including employment, property ownership or general business regulations; • changing environmental requirements and the imposition of additional requirements and costs on our operations; • changes in the charges applied to raw water abstraction; • changes in rate making policies; or • restrictions relating to water use and supply, including restrictions on use, increased offsetting groundwater replenishment obligations, changes to the character of groundwater rights and settlement of Native American claims.
The market price for our common stock is likely to be volatile, due to many factors, outside our control, including those described elsewhere in this “Risk Factors” section, as well as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our services; • future announcements concerning our business or our competitors’ businesses; • regulatory developments, including those related to the ACC; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by investment analysts or failure to meet their expectations; • the market’s perception towards our reduced disclosure as a result of being a “smaller reporting company” as defined in the Exchange Act; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations, or principles; • changes in senior management or key personnel; -33- Table of Con tents • issuances, exchanges, or sales, or expected issuances, exchanges, or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic, and political conditions in the U.S., and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war (including the ongoing wars between Russia and Ukraine and between Israel and Hamas), other geopolitical uncertainties, public health concerns, and responses to such events.
The market price for our common stock is likely to be volatile, due to many factors, outside our control, including those described elsewhere in this “Risk Factors” section, as well as the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our service; • future announcements concerning our business or our competitors’ businesses; • regulatory developments, including those related to the ACC; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by investment analysts or failure to meet their expectations; -33- Table of Contents • the market’s perception towards our reduced disclosure as a result of being a “smaller reporting company” as defined in the Exchange Act; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the U.S., and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war (including the ongoing wars and conflicts between Russia and Ukraine and between Israel and Hamas), other geopolitical uncertainties, public health concerns and responses to such events.
Increased operating expenses associated with any expansion of our business may negatively impact our income as we, among other things: • seek to acquire new utilities and service areas; • expand geographically in and outside of Arizona; • make significant capital expenditures to support our ability to provide services in our existing service areas; • fund development costs for our system and technology; and • incur increased general and administrative expenses as we grow.
Increased operating expenses associated with any expansion of our business may negatively impact our income as we, among other things: • seek to acquire new utilities and service areas; • expand geographically within and outside of Arizona; • make significant capital expenditures to support our ability to provide service in our existing service areas; • fund development costs for our system and technology; and • incur increased general and administrative expenses as we grow.
Any future interruption to our water supply or restrictions on water usage during drought conditions or other legal limitations on water use could result in decreased customer billing and lower revenues or higher expenses that we would not be able to recoup without prior regulatory approval for a rate increase, which may not be granted.
Any future interruption to our water supply or restrictions on water usage during drought conditions or other legal limitations on water use could result in decreased customer billing and lower revenue or higher expenses that we would not be able to recoup without prior regulatory approval for a rate increase, which may not be granted.
If we are unable to treat or substitute our water supply in a cost-effective manner, our financial condition, results of operations, cash flow, liquidity, and reputation may be adversely affected. We may not be able to recover costs associated with treating contaminated water or developing new sources of supply through the rate setting process or through insurance.
If we are unable to treat or substitute our water supply in a cost-effective manner, our financial condition, results of operations, cash flows, liquidity and reputation may be adversely affected. We may not be able to recover costs associated with treating contaminated water or developing new sources of supply through the rate setting process or through insurance.
If hazardous or toxic substances are discovered at real property or facilities owned or used by us (including a landfill owned by another party that is used by us for disposal of hazardous substances), we could incur significant remediation costs, liability exposure, or litigation expenses that could adversely affect our profitability, results of operations, liquidity, and cash flows.
If previously unknown hazardous or toxic substances are discovered at real property or facilities owned or used by us (including a landfill owned by another party that is used by us for disposal of hazardous substances), we could incur significant remediation costs, liability exposure or litigation expenses that could adversely affect our profitability, results of operations, liquidity and cash flows.
Insufficient availability of water or wastewater treatment capacity could materially and adversely affect our ability to provide for expected customer growth necessary to increase revenues. We continuously look for new sources of water to augment our reserves in our service areas, but have not yet obtained material surface water rights.
Insufficient availability of water or wastewater treatment capacity could materially and adversely affect our ability to provide for expected customer growth necessary to increase revenue. We continuously look for new sources of water to augment our reserves in our service areas, but we have not yet obtained material surface water rights.
In addition, our owned utilities and/or the developments that we serve must demonstrate to the ADWR that there exists a 100-year water supply and obtain either a CAWS, which is a certificate issued by the ADWR evidencing sufficient groundwater, surface water, or effluent of adequate quality will be continuously available to satisfy the water needs of the proposed use for at least one hundred years and which applies to a specific subdivision, or a DAWS, which applies to the utility’s entire service area.
In addition, our owned utilities and/or the developments that we serve must demonstrate to the ADWR that there -21- Table of Contents exists a 100-year water supply and obtain either a CAWS, which is a certificate issued by the ADWR evidencing sufficient groundwater, surface water, or effluent of adequate quality will be continuously available to satisfy the water needs of the proposed use for at least one hundred years and which applies to a specific subdivision, or a DAWS, which applies to the utility’s entire service area.
Although we may not be able to achieve similar growth as we have seen since our formation in 2003, or grow at all, in future periods, we expect to continue to significantly expand our facilities, infrastructure, marketing, testing, management, and administrative operations, as well as our financial and accounting controls.
Although we may not be able to achieve similar growth as we have seen since our formation in 2003, or any growth at all, in future periods, we expect to continue to significantly expand our facilities, infrastructure, marketing, testing, management and administrative operations, as well as our financial and accounting controls.
This expansion has placed, and will continue to place, strain on our management and administrative, operational, technical, and financial infrastructure. If management is unable to manage growth effectively, the quality of our services, our ability to attract and retain key personnel, and our business or prospects could be harmed significantly.
This expansion has placed, and will continue to place, strain on our management and administrative, operational, technical and financial infrastructure. If management is unable to manage growth effectively, the quality of our service, our ability to attract and retain key personnel and our business or prospects could be harmed significantly.
Operating costs, construction costs, and costs of providing services can be volatile and may rise faster than revenue. Our ability to increase rates over time is dependent upon approval of rate increases by the ACC, which may be inclined, for political or other reasons, to limit rate increases.
Operating costs, construction costs and costs of providing service can be volatile and may rise faster than revenue. Our ability to increase rates over time is dependent upon approval of rate increases by the ACC, which may be inclined, for political or other reasons, to limit rate increases.
Our utilities business is subject to seasonal fluctuations and other weather-related conditions, such as droughts, which could adversely affect the supply of and demand for our services and our results of operations. We depend on an adequate water supply to meet the present and future needs of our customers.
Our utilities business is subject to seasonal fluctuations and other weather-related conditions, such as droughts, which could adversely affect the supply of and demand for our service and our results of operations. We depend on an adequate water supply to meet the present and future needs of our customers.
Water and wastewater utilities, including Palo Verde and Santa Cruz, have large customer bases and as a result are exposed to public criticism regarding, among other things, the reliability of their water and wastewater services, the quality of water provided, the timeliness and accuracy of bills that are provided for such services, and the quality of customer service.
Water and wastewater utilities, including GW-Palo Verde and GW-Santa Cruz, have large customer bases and as a result are exposed to public criticism regarding, among other things, the reliability of their water and wastewater service, the quality of water provided, the timeliness and accuracy of bills that are provided for such service and the quality of customer service.
The potential negotiation of future acquisitions and development of new projects could require us to incur significant costs and expose us to significant risks, including: • risks relating to the condition of assets acquired and exposure to residual liabilities of prior businesses; • operating risks, including equipment, technology and supply problems, failure to achieve expected synergies and operating efficiencies, regulatory requirements, and approvals necessary for acquisitions; • risks that potential acquisitions may require the disproportionate attention of our senior management, which could distract them from the management of our existing business; • risks related to our ability to retain experienced personnel of the acquired company; and -26- Table of Con tents • risks that certain acquisitions may require regulatory approvals, which could be refused or delayed and which could result in unforeseen regulatory expenses or unfavorable regulatory conditions.
The potential negotiation of future acquisitions and development of new projects could require us to incur significant costs and expose us to significant risks, including: • risks relating to the condition of assets acquired and exposure to residual liabilities of prior businesses; • operating risks, including equipment, technology and supply problems, failure to achieve expected synergies and operating efficiencies, regulatory requirements and approvals necessary for acquisitions; • risks that potential acquisitions may require the disproportionate attention of our senior management, which could distract them from the management of our existing business; • risks related to our ability to retain experienced personnel of the acquired company; and • risks that certain acquisitions may require regulatory approvals, which could be refused or delayed and which could result in unforeseen regulatory expenses or unfavorable regulatory conditions.
See “—Business and Operational Factors — Pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, could adversely affect our business operations, cash flows, and financial position to an extent that is difficult to predict . ” for additional information.
See “—Business and Operational Factors — Pandemics, epidemics or disease outbreaks, such as the COVID-19 pandemic, could adversely affect our business operations, cash flows and financial position to an extent that is difficult to predict” for additional information.
Municipalities and other governmental subdivisions have historically been involved in the provision of water and wastewater services, and efforts may arise from time to time to convert some or all of our assets to public ownership and operation.
Municipalities and other governmental subdivisions have historically been involved in the provision of water and wastewater service, and efforts may arise from time to time to convert some or all of our assets to public ownership and operation.
See “—Operational Factors—We depend on an adequate supply of electricity and chemicals for the delivery of our water, and an interruption in the supply of these inputs or increases in their prices could adversely affect our results of operations.” Additionally, the second largest component of our operating costs after water production is made up of salaries and wages.
See “—Operational Factors—We depend on an adequate supply of electricity and chemicals for the delivery of our water, and an interruption in the supply of these inputs or increases in their prices could adversely affect our results of operations.” -24- Table of Contents Additionally, the second largest component of our operating costs after water production is made up of salaries and wages.
Regulations relate to, among other things, standards and criteria for drinking water quality and for wastewater discharges, customer service and service delivery standards, waste disposal and raw groundwater abstraction limits, and rates and charges for our regulated services.
Applicable regulations relate to, among other things, standards and criteria for drinking water quality and for wastewater discharges, customer service and service delivery standards, waste disposal and raw groundwater abstraction limits and rates, and charges for our regulated service.
As a result, it is possible that, in the future, we will not be able to obtain sufficient water or water supplies to increase customer growth necessary to increase or even maintain our revenues.
As a result, it is possible that, in the future, we will not be able to obtain sufficient water or water supplies to increase customer growth necessary to increase or even maintain our revenue.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and share price.
The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and cause stockholders to lose -34- Table of Contents confidence in our reported financial information, all of which could materially and adversely affect our business and share price.
Contamination of the water supplied by us may result in disruption in our services, loss of credibility, lower demand for our services, and potential liability that could adversely affect our business and financial condition.
Contamination of the water supplied by us may result in disruption in our service, loss of credibility, lower demand for our service and potential liability that could adversely affect our business and financial condition.
In addition, the costs of responding to and recovering from a cyber incident may not be covered by insurance. We rely on information technology systems to assist with the management of our business and customer relationships. A disruption or interruption of these systems could adversely affect our business and operations.
In addition, the costs of responding to and recovering from a cyber incident may not be covered by insurance. -30- Table of Contents We rely on information technology systems to assist with the management of our business and customer relationships. A disruption or interruption of these systems could adversely affect our business and operations.
Extending/expanding the existing infrastructure to provide service may result in the need to make additional, currently unplanned, capital improvements and there is no guarantee that we may recover our costs timely. As a result, our return on our investment and cash flow stream could be adversely affected.
Extending/expanding the existing infrastructure to provide service may result in the need to make additional, currently unplanned, capital improvements, and there is no guarantee that we may recover our costs timely. As a result, our return on our investment and cash flows could be adversely affected.
Further, our information technology systems are vulnerable to damage or interruption from: • power loss, computer systems failures, and internet, telecommunications, or data network failures; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data, including as a result of or security breaches, cyberattacks, misappropriation, and similar events; • computer viruses; • intentional acts of vandalism and similar events; and -32- Table of Con tents • fires, floods, earthquakes, and other natural disasters.
Further, our information technology systems are vulnerable to damage or interruption from: • power loss, computer systems failures and internet, telecommunications or data network failures; • operator negligence or improper operation by, or supervision of, employees; • physical and electronic loss of customer data, including as a result of or security breaches, cyberattacks, misappropriation and similar events; • computer viruses; • intentional acts of vandalism and similar events; and • fires, floods, earthquakes and other natural disasters.
As discussed above, we currently rely predominantly (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
As discussed above, we currently rely predominantly on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
Other global incidents, such as a pandemic, could have a similar effect of disrupting our business to the extent they reach and impact the service areas in which we operate, the availability of supplies we need, the customers we serve, or the employees who operate our businesses.
Other global incidents, such as a pandemic or other public health crisis, could have a similar effect of disrupting our business to the extent they reach and impact the service areas in which we operate, the availability of supplies we need, the customers we serve, or the employees who operate our businesses.
Risks Related to the Ownership of Our Common Stock The concentration of our stock ownership with our officers, directors, certain stockholders, and their affiliates will limit your ability to influence corporate matters.
Risks Related to the Ownership of Our Common Stock The concentration of our stock ownership with our officers, directors, certain stockholders and their affiliates may limit your ability to influence corporate matters.
Our information technology systems, which includes information technology functions that are outsourced to various third-party service providers and software vendors, are an integral part of our business.
Our information technology systems, which include information technology functions that are outsourced to various third-party service providers and software vendors, are an integral part of our business.
In the event that our water supply is contaminated, we may have to interrupt or stop the use of that water supply until we are able to treat the water or to substitute the supply of water from another water source, including, in some cases, through the purchase of water from a supplier.
In the event that our water supply is contaminated, we may have to -25- Table of Contents interrupt or stop the use of that water supply until we are able to treat the water or to substitute the supply of water from another water source, including, in some cases, through the purchase of water from a supplier.
These impacts may include, among others, disruptions to our operations and business activities, including any closures of offices or facilities, and to those of governmental agencies regulating our business, suppliers, customers, and other business partners; reduce demand for our water and wastewater services from our commercial customers, particularly if businesses are shutdown; greater difficulty in collecting customer receivables; a slowdown or disruption in the supply chain for the supplies used in our operations, including chemicals used to treat water and wastewater, in addition to higher costs; and limitations on employee resources, productivity, and availability, including due to sickness, government restrictions, labor supply shortages, and the desire of employees to avoid contact with large groups of people.
These impacts may include, among others, disruptions to our operations and business activities, including any closures of offices or facilities, and to those of governmental agencies regulating our business, suppliers, customers and other business partners; reduced demand for our water and wastewater service from our commercial customers, particularly if businesses are shut down; greater difficulty in collecting customer receivables; a slowdown or disruption in the supply chain for the supplies used in our operations, including chemicals used to treat water and wastewater, in addition to higher costs; and limitations on employee resources, productivity and availability, including due to sickness, government restrictions, labor supply shortages and the desire of employees to avoid contact with large groups of people.
Our effective income tax rate could be adversely affected by various factors, many of which are outside of our control, including: • changes in tax laws, regulations, and/or interpretations of such tax laws in multiple jurisdictions, including but not limited to U.S. federal and state regulations or interpretations resulting from the 2017 Tax Cuts and Jobs Act (the “TCJA”); • increases in corporate tax rates and the availability of deductions or credits; • tax effects related to purchase accounting for acquisitions; and • resolutions of issues arising from tax examinations and any related interest or penalties.
Our effective income tax rate could be adversely affected by various factors, many of which are outside of our control, including: • changes in tax laws, regulations, and/or interpretations of such tax laws in multiple jurisdictions, including but not limited to U.S. federal and state regulations or interpretations resulting from the TCJA; • increases in corporate tax rates and the availability of deductions or credits; • tax effects related to purchase accounting for acquisitions; and • resolutions of issues arising from tax examinations and any related interest or penalties.
Population growth could also decline under drought conditions as individuals and businesses move out of the area or elect not to relocate there. Lower water use for any reason could lead to lower revenue. Demand for water is seasonal and varies with temperature and rainfall levels.
Population growth could also decline under drought conditions as individuals and businesses move out of the area or elect not to relocate to our service areas. Lower water use for any reason could lead to lower revenue. Demand for water is seasonal and varies with temperature and rainfall levels.
If a developer has an ICFA, and/or once a developer has entered into a service agreement with our utility subsidiary and the property being developed has been included within a service area, we have the obligation to serve under the terms of those -23- Table of Con tents agreements and existing regulations.
If a developer has an ICFA, and/or once a developer has entered into a service agreement with our utility subsidiary and the property being developed has been included within a service area, we have the obligation to serve under the terms of those agreements and existing regulations.
Upgrades and improvements to computer systems and networks, or the implementation of new systems, may require substantial amounts of management’s time and financial resources to complete, and may also result in system or network defects or operational errors due to multiple factors, including employees’ ability to effectively use such new or upgraded system.
Upgrades and improvements to computer systems and networks, or the implementation of new systems, may require substantial amounts of management’s time and financial resources to complete, and may also result in system or network defects or operational errors due to multiple factors, including the inability of employees to effectively use such new or upgraded systems.
New or stricter regulatory standards or other governmental actions could increase our regulatory compliance and operating costs, require us to alter our existing treatment facilities, and/or cause us to build additional facilities, which could cause our profitability to suffer, particularly if we are unable to increase our rates to offset such costs.
Legal, Regulatory, and Legislative Factors New or stricter regulatory standards or other governmental actions could increase our regulatory compliance and operating costs, require us to alter our existing distribution or treatment facilities, and/or cause us to build additional facilities, which could cause our profitability to suffer, particularly if we are unable to increase our rates to offset such costs.
If we are unable to access adequate water supplies, such water shortage could adversely affect our business operations, results of operations, cash flow, and financial position in a variety of other ways, which may include, but are not limited to, the following: • result in water rationing; • adversely affect water supply mix by causing us to rely on more expensive purchased water; • adversely affect operating costs; • increase the risk of contamination to water systems due to the inability to maintain sufficient pressure; • increase capital expenditures for building pipelines to connect to alternative sources of supply, new wells to replace those that are no longer in service or are otherwise inadequate to meet the needs of customers, and reservoirs and other facilities to conserve or reclaim water; and • result in regulatory authorities refusing to approve new service areas if an adequate water supply cannot be demonstrated and restrictions on new customer connections may be imposed in existing service areas if there is not sufficient water.
If we are unable to access adequate water supplies, such water shortage could adversely affect our business operations, results of operations, cash flows and financial position in a variety of other ways, which may include, but are not limited to, the following: • water rationing; • adverse changes to water supply mix, causing us to rely on more expensive purchased water; • increased operating costs; • increased risk of contamination to water systems due to the inability to maintain sufficient pressure; • increased capital expenditures for building pipelines to connect to alternative sources of supply, new wells to replace those that are no longer in service or are otherwise inadequate to meet the needs of customers and reservoirs and other facilities to conserve or reclaim water; and • regulatory authorities refusing to approve new service areas if an adequate water supply cannot be demonstrated and restricting new customer connections in existing service areas if there is not sufficient water.
We have to comply with Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting.
We are required to comply with Section 404(a) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting.
To manage growth effectively, we must: • continue to expand our water management capacity; • retain key management and augment our management team; • continue to enhance our technology, operations, and financial and management systems; • manage multiple relationships with our customers, regulators, suppliers, and other third parties; and • expand, train, and manage our employee base.
To manage growth effectively, we must: • continue to expand our water management capacity; -23- Table of Contents • retain key management and augment our management team; • continue to enhance our technology, operations and financial and management systems; • manage multiple relationships with our customers, regulators, suppliers and other third parties; and • expand, train and manage our employee base.
This is because we must obtain regulatory approval to increase our rates, which can be time-consuming and costly and our requests for increases may not be approved in part or in full. -19- Table of Con tents We are required to test our water quality for certain parameters and potential contaminants on a regular basis.
This is because we must obtain regulatory approval to increase our rates, which can be time-consuming and costly and our requests for increases may not be approved in part or in full. We are required to test our water quality for certain parameters and potential contaminants on a regular basis.
Any defects in our systems or significant reliability, quality, or performance problems with respect to our systems or services could have a number of negative effects on our profitability, results of operations, liquidity, and cash flows, including: -24- Table of Con tents • loss of revenues; • diversion of management and development resources and the attention of engineering personnel; • significant customer relations problems; • increased repair, support, and insurance expenses; • adverse regulatory actions; and • legal actions for damages by our customers, including but not limited to damages based on commercial losses and effects on human health.
Any defects in our systems or significant reliability, quality, or performance problems with respect to our systems or service could have a number of negative effects on our profitability, results of operations, liquidity, and cash flows, including: • loss of revenue; • diversion of management and development resources and the attention of engineering personnel; • significant customer relations problems; • increased repair, support, and insurance expenses; • adverse regulatory actions; and • legal actions for damages by our customers, including but not limited to damages based on commercial losses and effects on human health.
Arizona law provides for the acquisition of public utility property by governmental agencies through their power of eminent domain, also known as condemnation.
Arizona law provides for the acquisition of public utility property by governmental agencies through their power of eminent domain, -20- Table of Contents also known as condemnation.
Our existing indebtedness could affect our business adversely and limit our ability to plan for or respond to growth opportunities, and we may be unable to generate sufficient cash flow to satisfy our liquidity needs. As of December 31, 2023, we had total indebtedness of $108.0 million . In addition, we may incur substantial additional indebtedness in the future.
Our existing indebtedness could affect our business adversely and limit our ability to plan for or respond to growth opportunities, and we may be unable to generate sufficient cash flow to satisfy our liquidity needs. As of December 31, 2024, we had total indebtedness of $122.4 million . In addition, we may incur substantial additional indebtedness in the future.
For example, the growth rate of development, especially residential development, from 2006 through 2019, both nationally and in Arizona had been below historical rates.
For example, the growth rate of development, especially residential development, from 2006 through 2019, both nationally and in Arizona, was below historical rates.
Our directors, executive officers, and stockholders holding more than 5% of our capital stock and their affiliates beneficially own, in the aggregate, approximately 54% of our outstanding common stock, including 45% beneficially owned in the aggregate by our former director, William S. Levine, and current director Jonathan L. Levine.
Our directors, executive officers and stockholders holding more than 5% of our capital stock and their affiliates beneficially own, in the aggregate, approximately 53% of our outstanding common stock, including 42.4% beneficially owned in the aggregate by our former director, William S. Levine, and current director Jonathan L. Levine.
Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the Internal Revenue Service (“IRS”) and other taxing authorities.
Our calculation of the provision for income taxes is subject to our interpretation of applicable tax laws in the jurisdictions in which we file. In addition, our income tax returns are subject to periodic examination by the IRS and other taxing authorities.
A disruption of our information technology systems could significantly limit our ability to manage and operate our business efficiently, which in turn could cause our business to suffer and cause our results of operations to be reduced.
A disruption of our information technology systems could significantly limit our ability to manage and operate our business efficiently, which in turn could cause our business to suffer and negatively impact our results of operations.
Amounts received as CIAC reduce our rate base once expended on utility plants. The developer is not required to pay the bulk of the agreed-upon fees until a development receives platting approval. Accordingly, we cannot always accurately predict or control the timing of the collection of our fees.
Amounts received as CIAC and expended on construction projects reduce our rate base once utility plants are placed in service. The developer is not required to pay the bulk of the agreed-upon fees until a development receives platting approval. Accordingly, we cannot always accurately predict or control the timing of the collection of our fees.
Using a new water source is generally associated with increased costs compared to an existing water source -27- Table of Con tents and, as indicated above, purchasing water is typically more expensive than obtaining the water from other means.
Using a new water source is generally associated with increased costs compared to an existing water source and, as indicated above, purchasing water is typically more expensive than obtaining the water from other means.
The ACC requires us to record a portion of the funds we receive under ICFAs as contributions in aid of construction (“CIAC”), which are funds or property provided to a utility under the terms of a collection main extension agreement and/or service connection tariff, the value of which are not refundable.
The ACC requires us to record a portion of the funds we receive under ICFAs as CIAC, which are funds or property provided to a utility under the terms of a collection main extension agreement and/or service connection tariff, the value of which are not refundable.
In Arizona, water and wastewater utilities are subject to regulation by water, environmental, public utility, and health and safety regulators, and we are required to obtain environmental permits from governmental agencies in order to operate our facilities.
In Arizona, water and wastewater utilities are subject to regulation by water, environmental, public utility and health and safety regulators, and the Company’s utilities are required to obtain environmental permits from governmental agencies in order to operate their facilities.
If a developer encounters difficulties, such as during a real estate market downturn, that result in a complete or partial abandonment of the development or a significant delay in its completion, we will have planned, built, and invested in infrastructure that will not be supported by development and will not generate either payments under the applicable ICFA or cash flows from providing services.
If a developer encounters difficulties, such as experienced during the Great Recession and associated real estate market downturn, that result in a complete or partial abandonment of the development or a significant delay in its completion, such as experienced with the Company’s Southwest Plant, we will have planned, built and invested in infrastructure that will not be supported by development and will not generate either payments under the applicable ICFA or cash flows from providing service.
We currently intend to continue to pay a regular monthly dividend on our common stock of $0.02508 per share ($0.30096 per share annually).
We currently intend to continue to pay a regular monthly dividend on our common stock of $0.02533 per share ($0.30396 per share annually).
The discovery of -28- Table of Con tents previously unknown conditions, or the imposition of cleanup obligations in the future, could result in significant costs, and could adversely affect our financial condition, results of operations, cash flow, and liquidity.
The discovery of previously unknown conditions, or the imposition of cleanup obligations in the future, could result in significant costs, and could adversely affect our financial condition, results of operations, cash flows and liquidity.
Pursuant to this regulatory mandate, the ACC may impose conditions that could discourage, delay, or prevent a transaction involving a change in control of our company.
Pursuant to this regulatory mandate, the ACC may impose conditions that could discourage, delay or prevent a transaction involving a change in control of our company. ITEM 1B. Unresolved Staff Comments None.
Our investment can be considerable, as we phase-in the construction of facilities in accordance with a regional master plan, as opposed to a single development. Developers and builders pay us agreed-upon fees upon the occurrence of specified development events for their development projects.
Prior to 2014, we extended water and wastewater infrastructure financing to developers and builders through ICFA contracts. Our investment can be considerable, as we phase-in the construction of facilities in accordance with a regional master plan, as opposed to a single development. Developers and builders pay us agreed-upon fees upon the occurrence of specified development events for their development projects.
If we are unable to execute our growth strategy effectively, we will need to rely more heavily on regulatory rate increases to increase our revenue. However, there can be no assurance that the regulatory authorities will approve any rate increases. We face competition for new service areas and acquisition targets.
If we are unable to execute our growth strategy effectively, we will need to rely more heavily on regulatory rate increases to increase our revenue. However, there can be no assurance that the regulatory authorities will approve any rate increases.
Our operations of regulated utilities are currently located exclusively in the state of Arizona, and more specifically approximately 85.6% of our active service connections are within a single municipality, which increases the impact of local conditions on our results of operations. -25- Table of Con tents The customers of our regulated utilities are currently located exclusively in the state of Arizona and 85.6% of our active service connections are located in the City of Maricopa, Arizona.
Our operations of regulated utilities are currently located exclusively in the state of Arizona, and more specifically approximately 86.1% of our active service connections are within a single municipality, which increases the impact of local conditions on our results of operations.
There would be many variables and uncertainties associated with any future pandemics, epidemics or disease outbreaks, including, but not limited to, the duration and severity of the outbreak; the extent of travel restrictions, business closures and other measures imposed by governmental authorities; availability of vaccines; and other factors that may be currently unknown or considered immaterial, to fully assess the potential impact on our business operations, cash flows, and financial position. -29- Table of Con tents Doing business in jurisdictions other than Arizona may present unforeseen regulatory, legal, and operational challenges that could impede or delay our operations or adversely affect our profitability.
There would be many variables and uncertainties associated with any future pandemics, epidemics or disease outbreaks, including, but not limited to, the duration and severity of the outbreak; the extent of travel restrictions, business closures and other measures imposed by governmental authorities; availability of vaccines; and other factors that may be currently unknown or considered immaterial, to fully assess the potential impact on our business operations, cash flows and financial position.
In addition, we require regulatory approval from the ACC for some means of raising capital, such as issuance of debt by our regulated utilities, and approval may be denied or delayed.
We may experience difficulty in raising the necessary capital due to volatility in the capital markets or increases in the cost of infrastructure finance. In addition, we require regulatory approval from the ACC for some means of raising capital, such as issuance of debt by our regulated utilities, and approval may be denied or delayed.
Condemnation also results in a loss of revenue from the operations of the affected utility. Changes in, interpretations of, or enforcement trends related to tax rules and regulations may adversely affect our effective income tax rates or operating margins and we may be required to pay additional tax assessments.
Changes in, interpretations of, or enforcement trends related to tax rules and regulations may adversely affect our effective income tax rates or operating margins and we may be required to pay additional tax assessments.
To implement this model, we cultivate relationships with developers, municipalities, and members of the communities we serve and focus on educating them regarding the benefits and safety of recycled water.
Our Total Water Management model emphasizes the maximum use of recycled water for non-potable purposes. To implement this model, we cultivate relationships with developers, municipalities and members of the communities we serve and focus on educating them regarding the benefits and safety of recycled water.
The failure of major pipes and reservoirs may also result in the need to shut down some facilities or parts of our network in order to conduct repairs.
A failure of major pipes or reservoirs could result in injuries and property damage for which we may be liable. The failure of major pipes and reservoirs may also result in the need to shut down some facilities or parts of our network in order to conduct repairs.
During periods of economic distress, there may be an increase in home foreclosures and vacancies. For example, during the economic downturn beginning in 2008, our utilities experienced an increase in the number of vacant homes, reaching a peak of 4,020 vacant connections as of February 28, 2009, approximately 11.9% of our total connections at the time.
For example, during the economic downturn beginning in 2008, our utilities experienced an increase in the number of vacant homes, reaching a peak of 4,020 vacant connections as of February 28, 2009, approximately 11.9% of our total connections at the time. Accordingly, in the event of an economic downturn, we may experience a material reduction in revenue.
Any failures and shutdowns may limit our ability to supply water in sufficient quantities to customers and to meet the water and wastewater delivery requirements prescribed by applicable utility regulators, which would adversely affect our financial condition, results of operations, cash flow, liquidity, and reputation.
Any failures and shutdowns may limit our ability to supply water in sufficient quantities to customers and to meet the water and wastewater delivery requirements prescribed by applicable utility regulators, which would adversely affect our financial condition, results of operations, cash flows, liquidity and reputation. -27- Table of Contents We may have difficulty accomplishing our growth strategy within and outside of our current service areas.
The loss or shutdown over an extended period of operations at any of our treatment facilities or any losses relating to these risks could have a material adverse impact on our profitability, results of operations, liquidity, and cash flows. Service interruptions, including due to any disruption or problem at our facilities could increase our expenses.
The loss or shutdown over an extended period of operations at any of our treatment facilities or any losses relating to these risks could have a material adverse impact on our profitability, results of operations, liquidity and cash flows. We face competition for new service areas and acquisition targets.
In order for our owned utilities to provide water or wastewater service, they must obtain a CC&N for a service area before they can service that area.
The ACC has authority, among other things, to determine service areas for utility providers. In order for our owned utilities to provide water or wastewater service, they must obtain a CC&N for a service area before they can service that area.
If our business does not generate sufficient cash flow from operations or if we are unable to borrow money or otherwise generate funds sufficient to enable us to fund our liquidity needs, we may be unable to plan for or respond to growth opportunities, which could adversely affect our operating results and business prospects. -30- Table of Con tents Our growth depends significantly on increased residential and commercial development in our service areas, and if developers or builders are unable to complete additional residential and commercial projects, our revenue may not increase.
If our business does not generate sufficient cash flow from operations or if we are unable to borrow money or otherwise generate funds sufficient to enable us to fund our liquidity needs, we may be unable to plan for or respond to growth opportunities, which could adversely affect our operating results and business prospects.
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or results of operations in future periods. Legal, Regulatory, and Legislative Factors Proposals to change policy in Arizona made through legislative, regulatory, or ballot initiatives may impact our growth, business plans and financial condition.
Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or results of operations in future periods.
Decisions made by the ACC could have a material adverse impact on our financial condition, results of operations and cash flows. Our water and wastewater systems are subject to condemnation by governmental authorities, which may result in the receipt of less than the fair market value of our assets and a loss of revenue from our operations .
As a result, our return on our investment and cash flow stream could be adversely affected. Our water and wastewater systems are subject to condemnation by governmental authorities, which may result in the receipt of less than the fair market value of our assets, and a loss of revenue from our operations .
In addition, our service areas are susceptible to pandemic outbreaks, terrorist acts, and operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the US where protests and other disturbances may affect our ability to operate. -22- Table of Con tents Inadequate water and wastewater supplies could have a material adverse effect upon our ability to achieve the customer growth necessary to increase our revenues.
In addition, our service areas are susceptible to pandemic outbreaks, terrorist acts and operations may be affected by disruptive political events, both global and domestic, such as civil unrest in countries in which our vendors are located or products are manufactured, and in the U.S. where protests and other disturbances may affect our ability to operate.
Our growth depends significantly on increased residential and commercial development in our service areas, and if developers or builders are unable to complete additional residential and commercial projects, our revenue may decline.
Our growth depends significantly on increased residential and commercial development in our service areas, and if developers or builders are unable to complete additional residential and commercial projects, our revenue may not increase. The growth of our customer base depends almost entirely on the success of developers in developing residential and commercial properties within our CC&N areas.
Failure to obtain required regulatory approvals will adversely affect future growth. In Arizona, the ACC is the regulatory authority that oversees the formation, expansion, and ongoing operations of water and wastewater utilities. The ACC has authority, among other things, to determine service areas for utility providers.
Our ability to expand into new service areas and to expand current water and wastewater service depends on approval from regulatory agencies. Failure to obtain required regulatory approvals will adversely affect future growth. In Arizona, the ACC is the regulatory authority that oversees the formation, expansion and ongoing operations of water and wastewater utilities.
In particular, the ACC is the regulatory authority with jurisdiction over privately-held water and wastewater utilities and our ability to fully recover costs from utility customers in a timely manner.
We are subject to comprehensive regulation by several federal, state and local regulatory agencies that significantly influence our business, liquidity and results of operations. In particular, the ACC is the regulatory authority with jurisdiction over privately-held water and wastewater utilities and our ability to fully recover costs from utility customers in a timely manner.
Our ability to meet the existing and future water demands of our customers depends on an adequate supply of water. In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources.
In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates -22- Table of Contents exceed sustainable levels for certain water resources.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+2 added−13 removed6 unchanged
Biggest changeThe Company is subject to laws and rules issued by multiple government agencies concerning safeguarding and maintaining the confidentiality of our security, customer, and business information. The company employs various aspects of risk assessment regularly, and to the extent possible, continuously.
Biggest changeThe Company is subject to laws and rules issued by multiple government agencies concerning safeguarding and maintaining the confidentiality of its security, customer and business information. The Company employs various aspects of risk assessment regularly, and to -35- Table of Contents the extent possible, continuously.
The Company has engaged independent experts to assess the security environment for potential vulnerabilities or weaknesses and has plans for future engagements periodically to supplement the expertise and processes established within the Company. Thorough updates are provided to the board of directors quarterly by the Vice President, Information Technology (IT) Operations and Security.
The Company has engaged independent experts to assess the security environment for potential vulnerabilities or weaknesses and has plans for future engagements periodically to supplement the expertise and processes established within the Company. Thorough updates are provided to the board of directors quarterly by the Vice President, IT Operations and Security.
Management regularly assesses new and emerging risks by keeping apprised of current events and actual or anticipated threats within the industry and the overall security environment, which is used along with a risk-based approach to plan and implement changes or improvements to the security environment.
Management regularly assesses new and emerging risks by keeping apprised of current events and actual or anticipated threats within the industry and the overall security environment, which are used along with a risk-based approach to plan and implement changes or improvements to the security environment.
Incident management is led by the -36- Table of Con tents Security Incident Response Team, under the primary leadership of the Vice President, IT Operations and Security, in which the process is categorized by the detection, analysis, containment, eradication and recovery phases and is inclusive of post-incident activities.
Incident management is led by the Security Incident Response Team, under the primary leadership of the Vice President, IT Operations and Security, in which the process is categorized by the detection, analysis, containment, eradication and recovery phases and is inclusive of post-incident activities.
Removed
In the regular course of our business, the Company manages a range of sensitive security, customer, and business systems information.
Added
As of the date of this report, we are not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Removed
A security breach of our information systems such as theft or the inappropriate release of certain types of information, including confidential customer, employee, financial or system operating information, could have a material adverse impact on our financial condition, results of operations or cash flows.
Added
For additional information regarding cybersecurity-related risks we face, see “Risk Factors—Technology Factors—Our information technology systems may be vulnerable to unauthorized external or internal threats due to hacking, ransomware, viruses or other cybersecurity breaches,” included in Part I, Item 1A of this report. -36- Table of Contents
Removed
The Company operates in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite implementation of security measures, the technology systems are vulnerable to disability, failures or unauthorized access. Facilities, information technology systems and other infrastructure facilities and systems and physical assets could be targets of such unauthorized access.
Removed
Failures or breaches of our systems could impact the reliability of systems and also subject the Company to financial harm.
Removed
If the technology systems were to fail or be breached and if the Company is unable to recover in a timely way, fulfilling critical business functions and sensitive confidential data could be compromised, which could have a material adverse impact on the Company’s financial condition, results of operations or cash flows.
Removed
The Company has experienced, and expects to continue experiencing, these types of threats and attempted intrusions. The implementation of additional security measures could increase costs and have a material adverse impact on the Company’s financial results.
Removed
Cyber insurance has been obtained to provide coverage for a portion of the losses and damages that may result from a security breach of information technology systems, but such insurance may not cover the total loss or damage caused by a breach.
Removed
In addition, all costs of responding to and recovering from a cyber incident may not be covered by insurance. These types of events could also require significant management attention and resources, and could adversely affect the Company’s reputation with customers and the public.
Removed
As operators of critical infrastructure, the Company may face a heightened risk of cyberattacks from internal or external sources. Unauthorized access to confidential information located or stored on these systems could negatively and materially impact customers, employees, suppliers and other third parties.
Removed
Further, third parties, including vendors, suppliers and contractors, who perform certain services or administer and maintain our sensitive information, could also be targets of cyberattacks and unauthorized access. While the Company has instituted safeguards to protect the information technology systems, those safeguards may not always be effective due to the evolving nature of cyberattacks and cyber vulnerabilities.
Removed
The Company cannot guarantee that such protections will be completely successful in the event of a cyberattack.
Removed
If the information technology systems, or that of third parties on which the Company relies, are affected by a significant cyber breach, this could result in, among other things, a significant disruption to operations; costly investigations and remediation; misappropriation of confidential information of the Company or that of customers, employees, business partners or others; litigation and potential liability; enforcement actions and investigations by regulatory authorities; loss of customers and contracts; harm to reputation; and a loss of management time, attention and resources from regular business operations, any of which could have a negative impact on business, results of operations, and cash flows.
Removed
As previously discussed, the Company is subject to laws and rules issued by multiple government and private agencies concerning safeguarding and maintaining the confidentiality of our security, customer, and business information. The increasing promulgation of rules and standards will increase our compliance costs and our exposure to the potential risk of violations of the standards. Table of Con tents

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES The following table lists the principal properties that we own or lease: Nature of Property Location Operated By Owned or Leased Corporate Offices Phoenix, Arizona Global Water Resources, Inc. Leased Wastewater Utility Plant 2 Wastewater Treatment Plants - Maricopa, Arizona Global Water - Palo Verde Utilities Company, Inc.
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ITEM 2. Properties The following table lists the principal properties that we own or lease as of December 31, 2024. We believe that our existing properties are adequate to meet our current needs.
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Owned Global Water Center - Regional Office Maricopa, Arizona Global Water - Palo Verde Utilities Company, Inc. Owned Wastewater Utility Plant 8 Lift Stations - Maricopa, Arizona Global Water - Palo Verde Utilities Company, Inc. Owned Wastewater Utility Plant Red Rock, Arizona Global Water - Palo Verde Utilities Company, Inc.
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Operated by Nature of Property Type Count County GW-Santa Cruz Water Utility Plant Water Distribution Center 6 Pinal Well Site 17 Pinal Recycled Water Booster Station 1 Pinal GW-Palo Verde Wastewater Utility Plant Lift Station 8 Pinal Wastewater Recycling Facility 3 Pinal Regional Operations Center 1 Pinal GW-Belmont Water Utility Plant Booster Station 1 Maricopa Water Distribution Center 11 Maricopa Well Site 4 Maricopa GW-Saguaro Water Utility Plant Water Distribution Center 3 Pima Well Site 10 Pima Regional Operations Center 1 Pima Water Distribution Main 1 Pima Water Storage 1 Pima GW-Farmers Water Utility Plant Water Distribution Center 3 Pima Well Site 9 Pima Water Storage 2 Pima GW-Turner Water Utility Plant Irrigation System 4 Maricopa Irrigation Well Site 2 Maricopa GWRI Corporate Office Offices 1 Maricopa
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Owned Water Utility Plant 16 Well Sites - Maricopa, Arizona Global Water - Santa Cruz Water Company, Inc. Owned Water Utility Plant 6 Water Distribution Sites - Maricopa, Arizona Global Water - Santa Cruz Water Company, Inc. Owned Water Utility Plant Red Rock, Arizona Global Water - Santa Cruz Water Company, Inc.
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Owned Water Utility Plant 14 sites - Maricopa County, Arizona Global Water - Belmont Water Company, Inc. Owned Irrigation Utility Plant Mesa, Arizona Global Water - Turner Ranches Irrigation, Inc. Owned Water Utility Plant Water Distribution Site - Tucson, Arizona Global Water - Mirabell Water Company, Inc.
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Owned Water Utility Plant Well Site - Tucson, Arizona Global Water - Mirabell Water Company, Inc. Owned Water Utility Plant 2 Water Distribution Sites - Tucson, Arizona Global Water - Francesca Water Company, Inc. Owned Water Utility Plant 2 Well Sites - Tucson, Arizona Global Water - Francesca Water Company, Inc.
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Owned Water Utility Plant Marana, Arizona Global Water - Tortolita Water Company, Inc. Owned Water Utility Plant Marana, Arizona Global Water - Lyn Lee Water Company, Inc. Owned Water Utility Plant Water Distribution Site, Sahuarita, Arizona Global Water - Las Quintas Serenas Water Company, Inc.
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Owned Water Utility Plant 2 Well Sites, Sahuarita, Arizona Global Water - Las Quintas Serenas Water Company, Inc. Owned Water Utility Plant 2 Water Distribution Sites - Vail, Arizona Global Water - Rincon Water Company, Inc. Owned Water Utility Plant 4 Water Distribution Sites - Sahuarita, Arizona Global Water - Farmers Water Company, Inc.
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Owned Water Utility Plant 3 Well Sites - Sahuarita, Arizona Global Water - Farmers Water Company, Inc. Owned Water Utility Plant 3 Water Distribution Sites - Green Valley, Arizona Global Water - Farmers Water Company, Inc.
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Owned Water Utility Plant Well Site - Red Rock, Arizona Global Water - Red Rock Utility Water Company Owned Global Water Center - Regional Office Green Valley, Arizona Global Water - Farmers Water Company, Inc. Leased We believe that our existing properties are adequate to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS In the ordinary course of business, the Company may, from time to time, be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. To our knowledge, the Company is not involved in any legal proceeding which is expected to have a material effect on the Company.
Biggest changeITEM 3. Legal Proceedings In the ordinary course of business, the Company may, from time to time, be subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. To our knowledge, the Company is not involved in any legal proceeding which is expected to have a material effect on the Company. ITEM 4.
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Mine Safety Disclosures Not applicable. -37- Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShareholders As of March 6, 2024, there were approximately 56 shareholders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.
Biggest changeBecause many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record. Dividends We currently intend to continue to pay a regular monthly dividend of $0.02533 per share ($0.30396 per share annually).
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Liquidity and Capital Resources” in Part II, Item 7 of this report for a discussion of provisions of our senior secured notes and our revolving credit facility that limit the payment of dividends.
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Liquidity and Capital Resources” in Part II, Item 7 of this report for a discussion of provisions of our senior secured notes and our Revolver that limit the payment of dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NASDAQ Global Market (“NASDAQ”) under the symbol “GWRS”. Our common stock began trading on the NASDAQ on April 28, 2016.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NASDAQ under the symbol “GWRS” and began trading on April 28, 2016. Shareholders As of March 3, 2025, there were approximately 57 shareholders of record of our common stock.
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2022 201 $ 9.52 — — November 1 to 30, 2022 9,921 $ 11.35 — — December 1 to 31, 2022 — $ — — — Total 10,122 — Unregistered Sales of Equity Securities None.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 to 31, 2024 218 $ 12.89 — — November 1 to 30, 2024 649 $ 12.68 — — December 1 to 31, 2024 — $ — — — Total 867 — Unregistered Sales of Equity Securities None.
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Dividends We currently intend to continue to pay a regular monthly dividend of 0.02508 per share (0.30096 per share annually).
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Table of Con tents Performance Graph The following graph compares the relative performance of our common stock, the S&P 500 Index, and our Peer Group Index. This graph covers the period from December 31, 2018 through December 31, 2023.
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The graph assumes that $100 was invested on December 31, 2018 in the common stock of GWRS, the S&P 500 Index, and our Peer Group Index, and also assumes reinvestment of dividends.
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The stock price performance on the following graph is not necessarily indicative of future stock price performance. * Peer group includes American States Water Company, American Water Works, Aqua America, Inc., Artesian Resources Corp., California Water, SJW Group, Middlesex Water Company, and York Water Co. 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Global Water Resources, Inc. $ 100.00 $ 130.02 $ 142.85 $ 152.53 $ 136.34 $ 119.63 S&P 500 Index $ 100.00 $ 128.88 $ 149.83 $ 180.81 $ 153.16 $ 190.27 Peer Group Index* $ 100.00 $ 132.45 $ 151.09 $ 176.57 $ 190.23 $ 137.35 Issuer Purchases of Equity Securities The following table presents information with respect to purchases of common stock we made during the three months ended December 31, 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of Results of Operations for the Year Ended December 31, 2023 and 2022 The following table summarizes results of operations for the year ended December 31, 2023 and 2022 (in thousands, except for share amounts): For the Year Ended December 31, 2023 2022 Revenues $ 53,028 $ 44,728 Operating expenses 40,742 36,909 Operating income 12,286 7,819 Total other expense (1,432) (1,379) Income before income taxes 10,854 6,440 Income tax expense (2,872) (934) Net income $ 7,982 $ 5,506 Basic earnings per common share $ 0.33 $ 0.24 Diluted earnings per common share $ 0.33 $ 0.24 Revenues – The following table summarizes revenues for the year ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Water services $ 24,860 $ 20,885 Wastewater and recycled water services 25,382 23,843 Unregulated revenues 2,786 — Total revenues $ 53,028 $ 44,728 Total revenues increased $8.3 million, or 18.6%, to $53.0 million for the year ended December 31, 2023 compared to $44.7 million for the year ended December 31, 2022.
Biggest changeFinancial and operational data for the Company years ended December 31, 2024 and 2023 is summarized in the following table (in thousands, except for share amounts): Year Ended Favorable (Unfavorable) December 31, 2024 vs. 2023 2024 2023 $ % Revenue $ 52,692 $ 53,028 $ (336) (0.6) % Operating expenses 43,328 40,742 (2,586) (6.3) % Operating income 9,364 12,286 (2,922) (23.8) % Total other expense (1,502) (1,432) (70) (4.9) % Income before income taxes 7,862 10,854 (2,992) (27.6) % Income tax expense (2,073) (2,872) 799 27.8 % Net income $ 5,789 $ 7,982 $ (2,193) (27.5) % Basic earnings per common share $ 0.24 $ 0.33 $ (0.09) (27.3) % Diluted earnings per common share $ 0.24 $ 0.33 $ (0.09) (27.3) % Revenue – Operating revenue is substantially derived from contracts with customers to provide regulated water, wastewater, and recycled water service based upon tariff rates approved by the ACC.
Additionally, our water and wastewater utility operations are subject to extensive regulation by U.S. federal, state, and local regulatory agencies that enforce environmental, health, and safety requirements, which affect all of our regulated subsidiaries. Environmental, health and safety, and water quality regulations are complex and change frequently, and they have tended to become more stringent over time.
Additionally, our water and wastewater utility operations are subject to extensive regulation by U.S. federal, state, and local regulatory agencies that enforce environmental, health, and safety requirements, which affect all of our regulated subsidiaries. Environmental, health and safety, and water quality regulations are complex, change frequently, and have tended to become more stringent over time.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought and application leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
This approach employs a series of principles and practices that can be tailored to each community: • Reuse of recycled water, either directly or to non-potable uses, through aquifer recharge, or possibly direct potable reuse in the future; • Regional planning; • Use of advanced technology and data; • Employing respected subject matter experts and retaining thought leaders; • Leading outreach and educational initiatives to ensure all stakeholders including customers, development partners, municipalities, regulators, and utility staff are knowledgeable on the principles and practices of the Total Water Management approach; and • Establishing partnerships with communities, developers, and industry stakeholders to gain support of the Total Water Management principles and practices.
Significant inputs used in the fair value calculation are follows: year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.
Significant inputs used in the fair value calculation are as follows: year of the first meter installation, total new accounts per year, years to complete full build out and discount rate.
Private Placement Offering of Common Stock On June 8, 2023, the Company entered into a securities purchase agreement for the issuance and sale by the Company of an aggregate of 230,000 shares of the Company’s common stock at a purchase price of $12.07 per share in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder.
On June 8, 2023, the Company entered into a securities purchase agreement for the issuance and sale by the Company of an aggregate of 230,000 shares of the Company’s common stock at a purchase price of $12.07 per share in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder.
Additionally, an evaluation of the recoverability of deferred tax gains is based on an assessment of the Company’s ability to fully utilize the deferred tax gain before it expires. The Company’s assessment is based upon the ability to acquire qualifying properties.
Additionally, an evaluation of the recoverability of deferred tax gains is based on an assessment of the Company’s ability to fully utilize the deferred tax gain before it expires. The Company’s assessment is based upon its ability to acquire qualifying properties.
Cash from Operating Activities Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. The Company’s future cash flows from operating activities will be affected by economic utility regulation, infrastructure investment, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
Cash from Operating Activities Cash flows provided by operating activities are used for operating needs and to meet capital expenditure requirements. The Company’s future cash flows from operating activities will be affected by economic utility regulation, growth in service connections, customer usage of water, compliance with environmental health and safety standards, production costs, weather, and seasonality.
Substantially all of the Company’s operations are subject to the rate-setting authority of the ACC and are accounted for pursuant to accounting guidance for regulated operations under ASC 980, “Regulated Operations.” As such, the fair value of the acquired assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying values and does not reflect any net valuation adjustments.
Substantially all of the Company’s operations are subject to the rate-setting authority of the ACC and are accounted for pursuant to accounting guidance for regulated operations under ASC 980. As such, the fair value of the acquired assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying values and does not reflect any net valuation adjustments.
Population and Community Growth Population and community growth in the metropolitan Phoenix area served by our utilities have a direct impact on our earnings. An increase or decrease in our active service connections will affect our revenues and variable expenses in a corresponding manner.
Population and Community Growth Population and community growth in the metropolitan Phoenix area served by our utilities have a direct impact on our earnings. An increase or decrease in our active service connections will affect our revenue and variable expenses in a corresponding manner.
Management continually evaluates the anticipated recovery, settlement or refund of regulatory assets, liabilities, and revenues subject to refund and provides for allowances and/or reserves that it believes to be necessary.
Management continually evaluates the anticipated recovery, settlement or refund of regulatory assets, liabilities, and revenue subject to refund and provides for allowances and/or reserves that it believes to be necessary.
The Company continues to execute on the strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
We continue to execute on our strategy to optimize and focus the Company in order to provide greater value to our customers and shareholders by aiming to deliver predictable financial results, making prudent capital investments, and focusing our efforts on earning an appropriate rate of return on our investments.
Although it is difficult to project the ultimate costs of complying with pending or future requirements, we do not expect requirements under current regulations to have a material impact on our operations or financial condition, although it is possible new methods of treating drinking water may be required if additional regulations become effective in the future.
Although it is difficult to project the ultimate costs of complying with pending or future requirements, we do not expect requirements under current regulations to have a material impact on our -41- Table of Contents operations or financial condition, though it is possible new methods of treating drinking water may be required if additional regulations become effective in the future.
Fair values are determined in accordance with ASC 820 “Fair Value Measurement,” which allows for the characteristics of the acquired assets and liabilities to be considered, particularly restrictions on the use of the asset and liabilities.
Fair values are determined in accordance with ASC Topic 820, Fair Value Measurement , which allows for the characteristics of the acquired assets and liabilities to be considered, particularly restrictions on the use of the asset and liabilities.
In the event that management’s assessment as to the probability of the inclusion in the ratemaking process is incorrect, the associated regulatory asset or liability will be adjusted to reflect the change in assessment or the impact of regulatory approval of rates.
In the -49- Table of Contents event that management’s assessment as to the probability of the inclusion in the ratemaking process is incorrect, the associated regulatory asset or liability will be adjusted to reflect the change in assessment or the impact of regulatory approval of rates.
Factors Affecting our Results of Operations Table of Con tents Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to: • population and community growth; • economic and environmental utility regulation; • economic environment; • the need for infrastructure investment; • production and treatment costs; • weather and seasonality; and • access to and quality of water supply.
Factors Affecting our Results of Operations Our financial condition and results of operations are influenced by a variety of industry-wide factors, including but not limited to: • population and community growth; -39- Table of Contents • economic and environmental utility regulation; • the need for infrastructure investment; • production and treatment costs; • weather and seasonality; and • access to and quality of water supply.
For wastewater utilities, wastewater collection, and treatment can be based on volumetric or fixed fees. Our wastewater utility services are billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component.
For wastewater utilities, wastewater collection and treatment can be based on volumetric or fixed fees. Our wastewater service is billed based solely on a fixed fee, determined by the size of the water meter installed. Recycled water is sold on a volumetric basis with no fixed fee component.
Income Taxes -55- Table of Con tents Estimation of income taxes includes an evaluation of the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income.
Income Taxes Estimation of income taxes includes an evaluation of the recoverability of deferred tax assets based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire. The Company’s assessment is based upon existing tax laws and estimates of future taxable income.
Off Balance Sheet Arrangements As of December 31, 2023 and 2022, the Company did not have any off-balance sheet arrangements.
As of December 31, 2024 and 2023, the Company did not have any off-balance sheet arrangements.
Metropolitan Phoenix continues to grow due to its comparatively affordable housing, excellent weather, large and growing universities, a diverse employment base, and low taxes. The Employment and Population Statistics Department of the State of Arizona predicts that the Phoenix metropolitan area will have a population of 5.8 million people by 2030 and 6.5 million by 2040.
Metropolitan Phoenix continues to grow due to its favorable employment opportunities, excellent weather, large and growing universities, a diverse employment base, and low taxes. The Employment and Population Statistics Department of the State of Arizona predicts that the Phoenix metropolitan area will have a population of 5.8 million people by 2030 and 6.5 million by 2040.
Pursuant to the terms of the note purchase agreement, the Company issued the notes on January 3, 2024. Refer to Note 11 - “Debts” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
Pursuant to the terms of the note purchase agreement, the Company issued the notes on January 3, 2024. Refer to Note 10 - “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
The Company seeks to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
We seek to deploy an integrated approach, referred to as “Total Water Management.” Total Water Management is a comprehensive approach to water utility management that reduces demand on scarce non-renewable water sources and costly renewable water supplies, in a manner that ensures sustainability and greatly benefits communities both environmentally and economically.
We have an established capital improvement plan to make targeted capital investments to repair and replace existing infrastructure as needed, address operating redundancy requirements, improve our overall financial performance and expand our infrastructure in areas where growth is occurring. Production and Treatment Costs Our water and wastewater services require significant production resources and therefore result in significant production costs.
We have an established capital improvement plan to make targeted capital investments to repair and replace existing infrastructure as needed, address operating redundancy requirements, improve our overall financial performance and expand our infrastructure in areas where growth is occurring. Production and Treatment Costs Our water and wastewater service requires significant production resources and therefore results in significant production costs.
Acquisitions Acquisitions are accounted for as a business combination under ASC 805, “Business Combinations” and the purchase price is allocated to the acquired utility assets and liabilities based on the acquisition-date fair values.
Acquisitions Acquisitions are accounted for as a business combination under ASC Topic 805, Business Combinations and the purchase price is allocated to the acquired utility assets and liabilities based on the acquisition-date fair values.
Recent Accounting Pronouncements A discussion of recently issued and recently issued but not yet adopted accounting pronouncements is included in Note 1 – “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements - Recent Accounting Pronouncements” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report and is incorporated herein by reference.
Recent Accounting Pronouncements A discussion of recently issued and recently issued but not yet adopted accounting pronouncements is included in Note 1 – “Description of Business, Basis of Presentation, Significant Accounting Policies, and Recent Accounting Pronouncements” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report and is incorporated herein by reference.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management’s discussion and analysis of Global Water Resources, Inc.’s (the “Company”, “GWRI”, “we”, or “us”) financial condition and results of operations (“MD&A”) relate to the year ended December 31, 2023 and should be read together with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis of Global Water Resources, Inc.’s financial condition and results of operations (“MD&A”) relate to the year ended December 31, 2024 and should be read together with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this report.
Rate base is typically the depreciated original cost of the plant in service (net of contributions in aid of construction (“CIAC”) and advances in aid of construction (“AIAC”) which are funds or property provided to a utility under the terms of a main extension agreement, the value of which may be refundable), that has been determined to have been “prudently invested” and “used and useful”, although the reconstruction cost of the utility plant may also be considered in determining the rate base.
Rate base is typically the depreciated original cost of the plant in service (net of CIAC and AIAC, which are funds or property provided to a utility under the terms of a main extension agreement, the value of which may be refundable), that has been determined to have been “prudently invested” and “used and useful”, although the reconstruction cost of the utility plant may also be considered in determining the rate base.
Series A carries a principal balance of $28.8 million and bears an interest rate of 4.38% over a twelve-year term, with the principal payment due on June 15, 2028 (the “Series A Notes”).
Series A Notes carry a principal balance of $28.8 million and bear an interest rate of 4.38% over a twelve-year term, with the principal payment due on June 15, 2028 (the “Series A Notes”).
The Company is subject to economic regulation by the state regulator, the ACC. The U.S. federal and state governments also regulate environmental, health and safety, and water quality matters.
We are subject to economic regulation by the state regulator, the ACC. The U.S. federal and state governments also regulate environmental, health and safety, and water quality matters.
We currently rely predominantly (and are likely to continue to rely) on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to -46- Table of Con tents meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
We currently rely predominantly on the pumping of groundwater and the generation and delivery of recycled water for non-potable uses to meet future demands in our service areas. At present, groundwater (and recycled water derived from groundwater) is the primary water supply available to us.
Refer to Note 11 — “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to Note 10 - “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
Census estimates, the Phoenix metropolitan statistical area (“MSA”) is the 11th largest MSA in the U.S. and had an estimated population of 5.0 million, an increase of 3.5% over the 4.8 million people reported in the 2020 Census.
Census estimates, the Phoenix metropolitan statistical area (“MSA”) is the 10th largest MSA in the U.S. and had an estimated population of 5.1 million, an increase of 4.6% over the 4.8 million people reported in the 2020 Census.
Overview GWRI is a water resource management company that owns, operates, and manages twenty-nine water, wastewater, and recycled water systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.
Overview GWRI is a water resource management company that owns, operates, and manages thirty-two water, wastewater, and recycled water public utility systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.
Although the Company expects that monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of the Company’s board of directors and is subject to legal requirements and debt service ratio covenant requirements (refer to “—Senior Secured Notes” and “—Revolving Credit Line”).
Although the Company expects that monthly dividends will be declared and paid for the foreseeable future, the declaration of any dividends is at the discretion of the Company’s board of directors and is subject to legal requirements and debt service ratio covenant requirements.
However, insurance coverage may not be adequate or available to cover unanticipated losses or claims. The Company is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on the Company’s short-term and long-term financial condition and the results of operations and cash flows.
The Company is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on the Company’s short-term and long-term financial condition and the results of operations and cash flows.
Cash from Investing Activities The net cash used in investing activities totaled approximately $28.6 million for the year ended December 31, 2023 compared to $34.2 million for the year ended December 31, 2022.
Cash from Investing Activities The net cash used in investing activities totaled approximately $32.5 million for the year ended December 31, 2024 compared to $28.6 million for the year ended December 31, 2023.
The Series A Notes and the Series B Notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest, and other non-cash charges net of non-cash income.
Debt Covenants The Company’s Senior Secured Notes and Revolver (collectively, the “debt securities”) require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00. Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income.
While specific facts and circumstances could change, the Company believes that with the cash on hand and the ability to draw on its $15.0 million revolving line of credit, it will be able to generate sufficient cash flows to meet its operating cash flow requirements and capital expenditure plan, as well as remain in compliance with its debt covenants, for the next twelve months and beyond.
While specific facts and circumstances could change, the Company believes that with the cash on hand and the ability to draw on its $15.0 million Revolver, it will be able to generate sufficient cash flows to meet its operating cash flow requirements and capital maintenance needs, whilst remaining in compliance with its debt covenants for the next twelve months and beyond.
For the year ended December 31, 2023, net cash provided by operating activities totaled approximately $25.4 million compared to $23.3 million for the year ended December 31, 2022.
For the year ended December 31, 2024, net cash provided by operating activities totaled $21.8 million compared to $25.4 million for the year ended December 31, 2023.
Refer to Note 13 — “Deferred Compensation Awards” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to Note 18 — “Business Segment Information” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional segment information.
The Company received gross proceeds of approximately $2.8 million from the offering. Farmers Acquisition On February 1, 2023, the Company acquired all of the equity of Farmers, an operator of a water utility with service area in Pima County, Arizona.
Acquisition On February 1, 2023, the Company acquired all of the equity of Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona.
The graph below presents the historical change in active connections for our ongoing operations over the past five years. -43- Table of Con tents -44- Table of Con tents Economic and Environmental Utility Regulation We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors of utilities.
Economic and Environmental Utility Regulation We are subject to extensive regulation of our rates by the ACC, which is charged with establishing rates based on the provision of reliable service at a reasonable cost while also providing an opportunity to earn a fair rate of return on rate base for investors of utilities.
Carey School of Business Greater Phoenix Blue Chip Real Estate Consensus Panel (the “Greater Phoenix Blue Chip Panel”), the single-family housing market experienced a weakness in permits during 2022 and 2023, however, the outlook for single-family housing is improving.
Carey School of Business Greater Phoenix Blue Chip Real Estate Consensus Panel (the “Greater Phoenix Blue Chip Panel”), the single-family housing market in the Phoenix metropolitan area has experienced a weakness in permits since 2021; however, the outlook for single-family housing is improving. The Greater Phoenix Blue Chip Panel anticipates single-family permit increases in 2025.
Refer to “—Rate Case Activity” below and Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to “—Rate Regulation Updates” below and Note 3 – “Regulatory Matters” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
There can be no assurance that the ACC will approve the settlement agreement and the ACC could take other actions as a result of the rate case. Further, it is possible that the ACC may determine to decrease future rates.
Like all of its rate case proceedings, there can be no assurance that the ACC will approve the Company’s requests for Formula Rates (if any) during the proceedings, and the ACC could take other actions as a result of a rate case or Formula Rate proposal. Further, it is possible that the ACC may determine to decrease future rates.
The $5.6 million decrease in cash used in investing activities was primarily driven by a decrease in capital expenditures of $11.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, partially offset by the $6.2 million cash paid for the acquisition of Farmers (net of cash acquired) in 2023.
The $3.9 million increase in cash used in investing activities was primarily driven by an increase in capital expenditures of $10.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, partially offset by the $6.2 million cash paid for the acquisition of GW-Farmers (net of cash acquired) in February 2023.
Despite a general slowdown in housing for the Phoenix metropolitan area primarily due to inflation and increased interest rates, management believes that we are well-positioned to benefit from the growth expected in the Phoenix metropolitan area due to the availability of lots, existing infrastructure in place within our services areas, and increased activity related to multi-family developments.
During 2024, multi-family permits trended upwards. Management believes that we are well-positioned to benefit from the growth expected in the Phoenix metropolitan area due to the availability of lots, existing infrastructure in place within our service areas, and increased activity related to multi-family developments.
Additionally, in the majority of the Phoenix Active Management Area, the Arizona Department of Water Resources (“ADWR”) has paused the issuance of new certificates of assured water supply based on groundwater and paused modifications of any designations of assured water supply for the increase in groundwater.
Additionally, in the majority of the Phoenix Active Management Area, the ADWR has paused the issuance of new certificates of assured water supply based on groundwater and paused modifications of any designations of assured water supply for the increase in groundwater. Approximately 1.76% of the Company’s water connections are located within the Phoenix Active Management Area.
Pursuant to the Northern Trust Loan Agreement, the revolving credit facility is subject to certain customary events of default after which the revolving credit facility could be declared due and payable if not cured within the grace period or, in certain circumstances, could be declared due and payable immediately.
The debt securities are subject to certain customary events of default after which they could be declared due and payable if not cured within the grace period or, in certain circumstances, could be declared due and payable immediately.
For additional information and risks associated with the access to and quality of water supply, see “Risk Factors,” included in Part I, Item 1A of this report.
We believe that we have an adequate supply of water to service our current demand and growth for the foreseeable future in our service areas. For additional information and risks associated with the access to and quality of water supply, see “Risk Factors,” included in Part I, Item 1A of this report.
Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
For additional information on the Company’s acquisition activity, refer to Note 2 – “Acquisitions” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report.
As of December 31, 2023, the Company has no notable near-term cash expenditures, other than the principal payments for its Series B senior secured notes in the amount of $1.9 million due in both June 2024 and December 2024.
As of December 31, 2024, the Company has no notable near-term cash expenditures, other than the anticipated acquisition of seven isolated public water systems from the City of Tucson for a purchase price of $8.4 million and the principal payments for its Series B Notes in the amount of $1.9 million due in both June 2025 and December 2025.
Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
Refer to Note 15 — “Share-based Compensation” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information.
For additional information and risks associated with weather and seasonality, see “Risk Factors,” included in Part I, Item 1A of this report. Access to and Quality of Water Supply In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources.
Access to and Quality of Water Supply In many areas of Arizona (including certain areas that we service), water supplies are limited and, in some cases, current usage rates exceed sustainable levels for certain water resources.
The $2.1 million increase in cash from operating activities was primarily driven by the improvement in net income and increased depreciation expense for the year ended December 31, 2023 compared to the year ended December 31, 2022, as well as an increase in current liabilities for 2023 as compared to the prior year.
The $3.6 million decrease in cash from operating activities was primarily driven by an increase other noncurrent liabilities for year ended December 31, 2024, as well as lower net income in the year ended December 31, 2024 compared to the year ended December 31, 2023.
Corporate Transactions Private Placement Offering of 6.91% Senior Secured Notes On October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $20 million of 6.91% Senior Secured Notes due on January 3, 2034.
Refer to Note 9 - “Equity” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details. -46- Table of Contents Private Placement Offering of 6.91% Senior Secured Notes On October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $20 million of 6.91% Notes due on January 3, 2034.
Additionally, its regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas. The Company uses capital resources primarily to: • fund operating costs; • fund capital requirements, including construction expenditures; • make debt and interest payments; • fund acquisitions; and • pay dividends.
Additionally, its regulated utility subsidiaries receive advances and contributions from customers, home builders, and real estate developers to partially fund construction necessary to extend service to new areas.
The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles of service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County at the time of the acquisition. Refer to Note 15 - “Acquisitions” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles of service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County at the time of the acquisition.
Debt Senior Secured Notes On June 24, 2016, the Company issued two series of senior secured notes with a total principal balance of $115.0 million at a blended interest rate of 4.55%.
Refer to Note 10 - “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details. Senior Secured Notes On June 24, 2016, the Company issued two series of senior secured notes with a total principal balance of $115.0 million at a blended interest rate of 4.55%.
The Company’s utility subsidiaries operate in rate-regulated environments in which the amount of new investment recovery may be limited. Such recovery will take place over an extended period of time because recovery through rate increases is subject to regulatory lag.
Such recovery will take place over an extended period of time because recovery through rate increases is subject to regulatory lag.
These deferred regulatory assets and liabilities are then reflected in the income statement in the period in which the same amounts are reflected in the rates charged for service.
These deferred regulatory assets and liabilities are then reflected in the income statement in the period in which the same amounts are reflected in the rates charged for service. When the Company’s regulated subsidiaries file rate cases, their capital assets, operating costs and other matters are subject to review.
In March 2014, the Company initiated a dividend program to declare and pay a monthly dividend. On November 30, 2024, the Company announced a monthly dividend increase from 0.02483 per share (0.29796 per share annually) to 0.02508 per share (0.30096 per share annually).
On November 27, 2024, the Company announced a monthly dividend increase to $0.02533 per share ($0.30396 per share annually) from $0.02508 per share ($0.30096 per share annually).
However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income. Conversely, when weather conditions are extremely dry, our business may be affected by government-issued drought-related warnings and/or water usage restrictions that would artificially lower customer demand and reduce our operating revenue.
However, summer weather that is cooler or wetter than average generally suppresses customer water demand and can have a downward effect on our operating revenue and operating income.
The projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors.
The projected capital expenditures and other investments are subject to periodic review and revision to reflect changes in economic conditions and other factors. As a result, the Company may adjust capital expenditures to correspond with any substantial changes in demand for new development in its service areas.
Series B carries a principal balance of $86.3 million and bears an interest rate of 4.58% over a 20-year term, with the principal payment due on June 15, 2036 (the “Series B Notes”). The Series B Notes were interest only for the first five years, with $1.9 million principal payments paid semiannually thereafter beginning December 2021.
Series B carries a principal balance of $72.8 million and bear an interest rate of 4.58% over a 20-year term, with the principal payment due on June 15, 2036 (the “Series B Notes” and collectively with the Series A Notes and the 6.91% Notes, the “Senior Secured Notes”).
Accounting for Rate Regulation Because the Company’s subsidiaries are regulated businesses, the Company is subject to the authoritative guidance for accounting for the effects of certain types of regulation. Application of this guidance requires accounting for certain transactions in accordance with regulations adopted by the ACC.
As the Company’s subsidiaries are businesses regulated by the ACC, the Company is subject to ASC 980 for accounting for the effects of this regulation.
See Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for more information regarding the Company’s rate proceedings.
During review, the ACC could disallow recovery of certain costs, and the Company may be required to write off related regulatory assets that are not specifically recoverable. See Note 3 – “Regulatory Matters” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for more information regarding the Company’s rate proceedings.
During the fourth quarter 2023, the Company notified the ACC of its intention to file a rate case for Farmers during 2024 and for Santa Cruz and Palo Verde in 2025.
In February 2025, the Company notified the ACC of its intention to file a rate case for its GW-Santa Cruz and GW-Palo Verde utilities in 2025. The GW-Santa Cruz and GW-Palo Verde rate case will be based on a test year ending December 31, 2024 with updates for changes in post-test year plant.
Approximately 89.3% of the 61,791 active service connections are serviced by our Global Water - Santa Cruz Water Company, Inc. (“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc. (“Palo Verde”) utilities as of December 31, 2023.
As of December 31, 2024, active service connections increased 2,729, or 4.4%, to 64,520 compared to 61,791 active service connections as of December 31, 2023, primarily due to organic growth in our service areas. Approximately 89.6% of the 64,520 active service connections are serviced by our GW-Santa Cruz and GW-Palo Verde utilities as of December 31, 2024.
Refer to Note 11 — “Debt” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information. As of December 31, 2023, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.
Refer to Note 19 — “Other, Net” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information regarding the Buckeye growth premiums.
As other newer or stricter standards are introduced in the future, they could also increase our operating expenses. We generally expect to recover expenses associated with compliance for environmental and health and safety standards through rate increases, but this recovery may be affected by regulatory lag.
We generally expect to recover expenses associated with compliance for environmental and health and safety standards through rate increases, but this recovery may be affected by “regulatory lag”, that is, the delay between the utility’s test year and the issuance of a rate order approving new rates.
Operating Expenses – The following table summarizes operating expenses for the year ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Operations and maintenance $ 12,669 $ 10,889 General and administrative 16,636 16,130 Depreciation and amortization 11,437 9,890 Total operating expenses $ 40,742 $ 36,909 Operations and Maintenance – Operations and maintenance costs, consisting of personnel costs, production costs (primarily chemicals and purchased electrical power), maintenance costs, and property tax, increased approximately $1.8 million, or 16.3%, to $12.7 million for the year ended December 31, 2023 compared to $10.9 million for the year ended December 31, 2022.
Operating Expenses – The following table summarizes operating expenses for the years ended December 31, 2024 and 2023 (in thousands): Year Ended Favorable (Unfavorable) December 31, 2024 vs. 2023 2024 2023 $ % Personnel costs - operations and maintenance $ 5,014 $ 4,411 $ (603) (13.7) % Utilities, chemicals and repairs 3,927 3,767 (160) (4.2) % Other operations and maintenance expenses 4,785 4,491 (294) (6.5) % Total operations and maintenance expense 13,726 12,669 (1,057) (8.3) % Personnel costs - general and administrative 9,173 8,684 (489) (5.6) % Professional fees 1,687 2,018 331 16.4 % Other general and administrative expenses 6,022 5,934 (88) (1.5) % Total general and administrative expense 16,882 16,636 (246) (1.5) % Depreciation and amortization 12,720 11,437 (1,283) (11.2) % Total operating expenses $ 43,328 $ 40,742 $ (2,586) (6.3) % -45- Table of Contents Operations and Maintenance – Operations and maintenance expenses primarily consist of personnel costs, production costs (primarily chemicals and purchased electrical power), maintenance costs, and property tax.
Contractual Obligations In the course of normal business activities, the Company enters into a variety of contractual obligations and commitments. Some result in direct obligations on the Company’s balance sheet while others are firm commitments or commitments based on uncertainties and undetermined execution times.
Some result in direct obligations on the Company’s balance sheet while others are firm commitments or commitments based on uncertainties and undetermined execution times. Refer to Note 17 — “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional details.
As a result, the Company may adjust capital expenditures to correspond with any substantial changes in demand for housing in service areas. -52- Table of Con tents Cash from Financing Activities The net cash provided by financing activities totaled $0.4 million for the year ended December 31, 2023, a $4.6 million change, as compared to the $5.0 million in cash provided by financing activities for the year ended December 31, 2022.
Currently, the Company anticipates an elevated level of capital expenditures in 2025 relative to 2024. Cash from Financing Activities The net cash provided by financing activities totaled $17.1 million for the year ended December 31, 2024, an $16.7 million increase, as compared to the $0.4 million in cash provided by financing activities for the year ended December 31, 2023.
Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases. The Series A Notes and the Series B Notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25.
The debt securities also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25. Further, the foregoing covenants are subject to various qualifications and limitations as set forth in each of the debt securities’ respective agreements.
As of December 31, 2023, the Company was in compliance with its financial debt covenants relating to the Series A Notes and the Series B Notes.
As of December 31, 2024, the Company was in compliance with its financial debt covenants under the Senior Secured Notes and the Northern Trust Loan Agreement. Contractual Obligations and Off-Balance Sheet Arrangements In the course of normal business activities, the Company enters into a variety of contractual obligations and commitments.
The increase was primarily driven by increased depreciation due to the increase in fixed assets, $0.4 million of which was attributable to depreciation of the Southwest Plant in Maricopa, Arizona. Approximately $0.2 million of the depreciation for the year ended December 31, 2023 was attributable to the Farmers acquisition.
Depreciation and amortization - The increase for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was substantially attributable to a 10.0% increase in depreciable fixed assets.
The increase is primarily attributable to higher consumption driving the need for more chemicals, consumables and supplies, increased prices as a result of inflation, and the Farmers acquisition. -50- Table of Con tents General and Administrative – General and administrative costs include the day-to-day expenses of office operations, personnel costs, legal and other professional fees, insurance, rent, and regulatory fees.
The increase in other operations and maintenance expenses was primarily driven by higher phone, internet and IT services of $0.3 million. General and Administrative – General and administrative expenses primarily consist of the day-to-day expenses of office operations, personnel costs, legal and other professional fees, insurance, rent, and regulatory fees.
The Company is currently reviewing the proposed regulation with our current treatment standards and expects that the regulation, once finalized, will result in changes to or addition of certain treatment processes that will require increased capital expenditures and water treatment and other operating costs.
We are committed to compliance with the NPDWR and are in process of complying with the first requirement of the rule mandating initial monitoring for all of our utilities. The Company expects that compliance with the NPDWR will require increased capital expenditures for PFAS-contaminated water treatment and other operating costs.
This change was primarily driven by a decrease of $12.1 million in proceeds from the sale of stock and a $0.8 million decrease in advances in aid of construction, partially offset by an increase of $6.7 million in other contributions and a $2.3 million increase in line of credit borrowings, net of payments, for the year ended December 31, 2023.
This increase was primarily driven by the $20 million received from the senior secured notes issuance in January 2024 and $2.1 million borrowings under our 2024 WIFA loan in the third quarter of 2024, partially offset by $3.9 million of repayments on the Company’s revolving line of credit in the year ended December 31, 2024.
The Company received net proceeds of approximately $14.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company. Insurance Coverage The Company carries various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards.
Insurance Coverage The Company carries various property, casualty, and financial insurance policies with limits, deductibles, and exclusions consistent with industry standards. However, insurance coverage may not be adequate or available to cover unanticipated losses -48- Table of Contents or claims.

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