Global Water Resources, Inc. Stock

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2026 Third Quarter Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on November 5, 2026, at 1:00 p.m. Eastern Time.

I would now like to turn the conference over to Kyle Upchurch, Vice President and Controller. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us on today's call. On Tuesday, November 3, we issued our 2026 third quarter financial results by press release, a copy of which is available on our website at gwresources.com.

Speaking today is Ron Fleming, President and Chief Executive Officer; Mike Liebman, Chief Financial Officer; and Chris Krygier, Chief Operating Officer. Ron will summarize the key operational events of the quarter. Mike will review the financial results for the third quarter, and Chris will review Arizona Corporation Commission activity. Ron, Mike and Chris will be available for questions at the end of the call.

This call may include forward-looking statements, including statements regarding our business, operations and financial performance. Such forward-looking statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties as discussed in this week's earnings release and in greater detail in our most recently filed periodic reports and subsequent filings with the SEC. Actual results could differ materially from those expressed or implied in any forward-looking statements and we undertake no obligation to update any forward-looking statement.

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

I will now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. First, before jumping to normal operating highlights, I would like to emphasize our focus on earnings growth, which has been under pressure for the last few years. While many key metrics of our business have experienced strong growth over the last 5 years, our goal is to also achieve long-term earnings growth. We are committed to this objective, which we believe will allow us to enhance shareholder value.

As we reported previously, in 2025, we had a near record year for capital investments that were critical to complete. This included the investment necessary to recommission our Southwest Plant Water Reclamation Facility, which was originally constructed 20 years ago, but was mothballed during the Great Recession. Although these investments grow rate base considerably and ensure we can provide safe and reliable service to our customers and communities that we have the privilege to serve, these investments increased certain operating expenses and, most notably, depreciation expense. Such expenses continue to adversely impact net income and earnings per share in the third quarter of 2026.

This is an unfortunate yet necessary part of the historical test year environment here in Arizona. Additionally, certain company expenses such as medical and liability insurance continue to grow at an unprecedented pace. As I've been saying for many quarters now, we need new rates to keep up with all the investment and inflation that we have experienced in our utilities. To this end, as you saw in the press release filed yesterday, we concluded a rate review settlement for a notable rate increase for our largest water utility, GW-Santa Cruz, achieving unanimous approval. Chris will remind everyone on the specifics of this order.

That said, GW-Santa Cruz is only one step in a 2-step process that is critical for said earnings growth, with the other being our largest wastewater utility, GW-Palo Verde, which was delayed primarily due to the difference of opinion on the timing of rate recovery as it relates to the historical Southwest Plant issue. The new schedule provides a clearer path to setting appropriate rates in 2028.

Together, this will allow us to better realize recovery of inflationary expenses and return on and return of our plant investments, including the Southwest Plant, resulting in years of meaningful earnings growth ahead. Chris will discuss all rate review activity for our utilities later on the call. In the meantime, 2026 is about working hard to control G&A expenses, which have remained flat year-over-year. In the years to come, we believe we can maintain solid revenue and earnings growth as we seek to obtain appropriate increases combined with our anticipated organic growth.

Now I'll provide a few operational highlights. Total active service connections increased 2.4% to 69,797 as of the end of the quarter from the 12 months prior. We invested $6.9 million into infrastructure improvements in existing utilities in the third quarter of 2026 to provide safe and reliable service. I want to discuss organic customer growth and what is going on in our core utilities further. The single-family dwelling unit market ended 2025 with approximately 21,815 building permits issued in the Phoenix Greater Metro statistical area. For the 9 months ended September 30, 2026, this market realized 15,337 building permits, representing a 10% decrease compared to the same period in 2025.

Meanwhile, in the Maricopa market, we realized 516 building permits, representing a 2.1% decrease from the same period in 2025. However, notably, October building permits are now in, and this puts Maricopa permits nearly 2% ahead of 2025. While the pace of new connection and permit activity has slowed recently, ongoing development throughout the Phoenix MSA, particularly in the City of Maricopa, continues to support organic growth as reflected in the company's 2.4% year-over-year increase in active connections.

We believe the decline in growth is temporarily due to the spike in interest rates in Q3 and as we remain well positioned to benefit from the anticipated long-term growth of the Phoenix MSA and our specific area drivers, including job growth, affordability, improving transportation, including State Route 347 widening and large Assured Water Supply.

I will now turn the call over to Mike for financial highlights.

Thanks, Ron. Hello, everyone. Total revenue for the third quarter of 2026 was $16.3 million, which was up $0.8 million or 5% compared to Q3 2025. Total revenue for the year-to-date period increased $5.1 million or 12.2% to $47.4 million. The revenue increase for the quarter-to-date period was driven by increased connections, increased consumption and higher rates in our GW-Farmers and GW-Ocotillo utilities.

Additionally, revenue for the year-to-date period was aided by unregulated revenue recognition of $2.1 million related to infrastructure coordination and financing agreements, also known as ICFAs, as well as 6 additional months of revenue generated by the 7 water systems acquired from the Tucson Water in July 2025. A more fulsome explanation of ICFAs can be found in our most recent Form 10-K filing. However, as a reminder, ICFAs are agreements we entered into with developers and homebuilders whereby Global Water provides services to plan, coordinate and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.

During the second quarter of 2026, our GW-Hassayampa utility put its first wastewater plant into service, allowing us to recognize deferred revenue as we met all of our contractual obligations under the related ICFA agreement.

Regulated revenue, which excludes ICFA revenue for Q3 2026, was $16.3 million which was up $0.8 million or 5% compared to Q3 2025. Regulated revenue for the year-to-date period increased $3 million or 7.2% to $45.2 million. Operating expenses for Q3 2026 increased approximately $1.3 million or 10.4% to $13.9 million compared to $12.6 million in Q3 2025. Operating expenses for the year-to-date period increased approximately $4.6 million or 13.1% to $40.1 million compared to the same period in '25.

Notable changes in operating expenses included depreciation, amortization and accretion increased $1.1 million for Q3 and $3.1 million for the year-to-date period. The increase in both periods was substantially attributable to the additional depreciable utility plant placed in service last year as a result of our 2025 and 2026 capital improvement plans and the commissioning of related projects.

Operations and maintenance costs increased approximately $0.4 million for Q3 and $1.5 million for the year-to-date period. The increase in both periods was primarily driven by higher utilities, chemicals and repairs expense tied to newly operational plant from our 2025 capital improvement plan and rising medical expenses. The increase in the year-to-date period was additionally driven by a loss on the disposal of utility plant and 6 additional months of operating costs associated with the 7 water systems acquired from Tucson Water in July 2025.

G&A costs decreased modestly to $4.8 million in Q3 2026 from $4.9 million in Q3 2025. G&A costs for the year-to-date period also remained relatively flat at $13.5 million in both periods. Until new rates become effective, keeping G&A costs as flat as possible is a top priority, which we have been able to deliver on through the first 9 months of 2026.

Now to discuss other expense. Other expense for Q3 2026 was $1 million compared to $0.6 million in Q3 2025. Other expense for the year-to-date period was $2.7 million compared to $1.4 million in the same prior year period. The increase in both periods is primarily attributable to higher net interest expense and a decrease in income associated with our Buckeye growth premium.

Net income for Q3 2026 was $1 million or $0.03 per diluted share as compared to net income of $1.7 million or $0.06 per diluted share in Q3 2025. Net income for the year-to-date period was $3.4 million or $0.12 per diluted share as compared to net income of $3.9 million or $0.15 per diluted share in the prior year period. The decrease in both periods was primarily driven by higher depreciation and net interest expense.

Adjusted EBITDA, which adjusts for certain nonrecurring and noncash items, such as onetime storm-related expenses, ICFA revenue, the loss on disposal of utility plant and restricted stock expense, adjusted EBITDA for Q3 2026 remained largely consistent with Q3 2025 at $7.8 million. Adjusted EBITDA for the year-to-date period was $21.4 million compared to $20.4 million in the prior year period, an increase of $1 million or 5%. The increase was primarily driven by higher regulated revenue, partially offset by increased operations and maintenance expense.

Lastly, during the quarter, we were able to add $20 million of additional liquidity through a $10 million private placement common stock and a $10 million increase to our line of credit, which went from $20 million to $30 million of availability. The line of credit was unused as of the end of the quarter.

This concludes our update on the third quarter 2026 financial results. I'll now pass the call to Chris to review our regulatory activity for the quarter.

Thank you, Mike, and hello, everyone. As you saw in our press release issued yesterday, we reached an important milestone in the Global Water Santa Cruz rate review with the commissioners unanimously approving the Administrative Law Judge's Recommended Opinion and Order and the new rates are effective December 1, 2026, with anticipated new annual revenue of $2.3 million which we anticipate will be offset by a $0.4 million rate reduction related to Global Water Palo Verde for a net overall increase of $1.9 million. This case represents the next milestone in our path to increase earnings growth, reduce regulatory lag and enhance overall financial results.

Amongst other highlights, this approval materially resolved the history on the Southwest Plant water assets, which has been an issue of over 20 years in the making. This order also reflects Global Water Santa Cruz's rate base that is now 50% higher than the last approved rate decision. With this approval, we now focus on the next milestone, our 4 rate review filings planned for the first half of 2027. The filings include requesting new rates for Global Water Palo Verde, Farmers, Ocotillo and Saguaro District. All 4 of those applications contemplated a 2026 test year with a 2027 post test year implying estimated new rates in 2028.

The main objective of the Global Water Palo Verde application will be to successfully resolve all elements of the Southwest Plant wastewater asset rate recovery and the main objectives of the Global Water Farmers, Ocotillo and Saguaro District will be to consolidate 3 sets of rates into 1 and recover costs related to the acquisition and transformation of these utilities. We look forward to providing more detail on these filings in the upcoming quarters.

This concludes the update on regulatory activity for the quarter. I'll now pass the call back to Ron.

Thank you, Chris. Despite the headwinds, our work continues. What we do and how we do it matters to our communities. We truly believe expanding our Total Water Management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved. We appreciate your investment in and support of us as we grow Global Water to address important utility, water resource and economic development matters along the Arizona Sun corridor, allowing our communities to thrive.

These highlights conclude our prepared remarks. Thank you. We are now available to answer any questions.

[Operator Instructions] The first question comes from Gerry Sweeney with Roth Capital.

I think you guys discussed a little bit of -- I mean some of the impact of depreciation and some of the regulatory lag that's going on. But just I wanted to square something up in my model. I think you reported $0.03 this year versus $0.07 last year, but my math is there's a little over $1 million of depreciation increase. So that -- if you were able to recapture that depreciation increase in the rates going forward that kind of squares up like $0.03, $0.035, so you would be on par -- this year would have been on par with last year. Is that kind of the way I should be looking at it?

Yes. That's the right way to think about it, Gerry. I mean the depreciation, obviously, we've invested but haven't gotten the rate recovery. So as you start to see the revenue increase that shows the recovery of those depreciation expense that will true up.

Yes, I'd like to add to that. You've got that going on, and then you've got the now delay on Palo Verde. But I think it's important everybody thinks about it like this. All of those Palo Verde investments are on and operating. So it's not just depreciation expense. We are incurring the operating expenses associated with entire new facilities. The delay is unfortunate, but if we would have kept the same time line and just got an outcome on the Palo Verde rate case like we did on Santa Cruz and you just could see the rate increase that we believe ultimately is going to be warranted for operating costs that exist today, the model would look totally different. So it's a time delay for sure, but it is on the come.

And Palo Verde has more assets rate base than Santa Cruz. Is that correct?

Yes, that's right.

It is. And just to be clear, it is our largest wastewater utility. And these wastewater utilities, certainly because also what we do on the recycled water side, they are our largest, most costly, most complex utilities. So having that one out is why you're seeing what you're seeing in the numbers.

Got it. Absolutely makes sense. I appreciate that. Well, switching gears back to Maricopa, obviously, you talked about permits and connections, et cetera. But maybe just a quick update of what's going on economically in the region, especially maybe even some of the adjacent areas that looking at semiconductor investment, things like that. My sense is the Phoenix region continues to grow at an exceptionally fast pace and potentially housing may be going at a slower pace. So at some point, something's got to give. But I'm just curious of maybe some anecdotal views from your perspective on that front.

Yes. Happy to address that. It is kind of interesting the tailwinds and the headwinds and how they're coming together here in the Metro Phoenix area. On the tailwinds perspective, you're exactly right. I mean, we all know about the TSMC stuff. We've been talking about it forever, but someone should come out here and drive past that project and look at what we're actually talking about. It is unbelievable what's going on out there and projects that are going to also be built adjacent to it.

The announcements just don't stop. And I even forget how much total investment is now predicted for that area, but it's on a scale that's really hard to imagine. And that continues to bleed over to all parts of the Phoenix Metro area, not just where TSMC is. Of course, you have all the other activity from the existing chip manufacturer there, including Intel.

But what's interesting is I do think everybody decided to take a pause a little bit on the housing side when Q3 interest rates peaked back to 7.5%, and that's understandable. But what you're seeing is still population and job growth. And so the way it ties into our company, which I think is what's happening then across all the communities is all of the multifamily housing that has been also very, very strong across all of Metro Phoenix for the last 5 years, including in our area, the occupancy rates are just going up. And so we built a few dozen multifamily projects over the last 5 years in Maricopa. And in some respect, it would have seemed like it was a little bit too much.

There's quite a bit of capacity. While we're seeing nice revenue growth in that line item, multifamily because housing slowed a little bit. So it's got to go one place or the other. You just don't see it in the permit numbers. You don't see it in the new connection numbers because it's not a new meter for home, but we are still seeing it in the population growth numbers and in the revenue numbers.

So it will be interesting to see how that continues to play out in the years to come. But it's -- we're still growing. And that is, in fact, why our capital investment, even though we've cut it back this year, quite a bit from last year. It's the right thing to do in the face of everything that we're talking about here. But we can't cut it off completely because we are growing, right? And that's a good problem to have.

[Operator Instructions] The next question comes from Adam Kelsey with Titan Partners.

Great. With respect to your stated goal of reigniting earnings growth, you mentioned there's a focus on reducing regulatory lag. I was hoping you could expand a little more on how you are thinking about reducing that lag? And what are those steps that would -- that you would take?

Adam, this is Chris. Thanks for the question. So right now, as we're working hard on the next 4 filings, we're looking at a number of tools for that, including potentially for the Pima County utilities, that's Farmers, Ocotillo and the Saguaro district looking at formula rates that would give us the opportunity to potentially true up rates every year. So we're looking at that for the smaller utilities.

And then for Palo Verde, we're in the process of assessing kind of all the tools that exist today in Arizona. And if those make sense or if there's maybe some new tools we should be considering. So ultimately, no matter the tool, the element we're looking to true up is to reduce the lag by either including the CapEx rates faster or reflect the increased operating expenses we're incurring.

Very helpful. And then with the upcoming rate cases in '27, what additional rate base or revenue opportunities do these proceedings represent?

Yes. So we haven't quantified or provided that detail at this time. I anticipate in the next quarterly call, we'll have more specifics on that.

[Operator Instructions] The next question comes from Zach Liggett with Desmond Liggett Wealth Advisors.

Last question is one I had as well. I guess we'll wait for the next quarter. And I appreciate the response to the regulatory lag question. I was wondering if like infrastructure replacement surcharge mechanisms or like PFAS surcharge mechanisms are possibilities in that toolkit. That's my first question.

And then the second question is, one of your larger peers, I think, does a really nice job in laying out 5-year objectives for rate base growth, CapEx, dividend per share growth, earnings per share growth. I don't think you guys have ever done that in the years that we've been investing with you. I'm curious if that is something you would consider just to give investors some visibility on your internal objectives and to maybe hold you accountable to some numbers.

Zach, this is Chris again. I'll take kind of Part 1, and then I'll ask Mike, our CFO, to take Part 2. So on part one, you talked about like PFAS surcharges or mechanisms. Those are tools that we are looking at. So those are possibilities in the universe. Each utility is going to be a little bit different than what tools might make sense there. But the short answer is yes, those are options under consideration.

And then I'll hand over to Mike for the second question.

Yes. Thanks, Zach. And we've obviously seen the same thing. There's a lot of guidance out there. We don't do it. We've kind of tossed it back and forth, but we've opted on the side of not doing it. Very concentrated here in Arizona and being regulated, that's a big reason of why we are -- we don't really provide the guidance.

I'm going to sum up the answer to all those questions, but just another point here. I mean I know we're talking a lot about the Southwest Plant. And even though we just cleaned up the water side of that with the Santa Cruz rate case, the Palo Verde, which was mentioned earlier, is a lot bigger number. So you really do have to think about this historical 20-year issue that now even with the delay, we have visibility to. The delay was intentional to clear a disagreement with our regulator on timing. That hurdle has been cleared. So we're full speed ahead. It's our highest priority over the next 18 to 24 months.

Then separate. We invested $70 million last year. And that's what we had to do to keep up with growth that we were dealing with. So when you put those 2 together, we have -- you can look at it on our balance sheet, right? But we have a very high number of high dollar value of CWIP, that's not in rates today. So this company going forward, our highest priorities will be processing rate cases, successful rate cases as quickly as possible to reduce regulatory lag and get a return on all those investments. That's just the strategy.

The growth rates, some of these other things are obviously something we focused on a lot in the past because it's unusual to have a utility like ours growing at 5% to 7% organically, right? That's 5x the national average. And that's what we've had to keep up with. That slowed a little bit. The good news of that is it lets us slow investment a little bit and catch up, and that is our goal. And I just want to make it very clear.

All right. At this time, this concludes our question-and-answer session. I would like now to turn the call back over to Mr. Fleming. Sir, please go ahead.

All right. Thank you, operator. I'd like to thank everyone for participating in the call and for your interest in Global Water Resources. Thanks, and we look forward to speaking with you again.

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

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2026 Second Quarter Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on August 13, 2026 at 1:00 p.m. Eastern Time.

I would now like to turn the conference over to Kyle Upchurch, Controller. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us on today's call. Yesterday, we issued our 2026 second quarter financial results by press release, a copy of which is available on our website at gwresources.com. Speaking today is Ron Fleming, President and Chief Executive Officer; Mike Liebman, Chief Financial Officer; and Chris Krygier, Chief Operating Officer. Ron will summarize key operational events, Mike will review the financial results for the second quarter, and Chris will review Arizona Corporation Commission activities.

Ron, Mike, and Chris will be available for questions at the end of the call. Before we begin, I would like to remind you that certain information presented today may include forward-looking statements. Such statements reflect the company's current expectations, estimates, projections, and assumptions regarding future events. These forward-looking statements involve a number of assumptions, risks, uncertainties, estimates, and other factors that could cause actual results to differ materially from those contained in the forward-looking statements.

Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements, which reflect management's views as of the date hereof and are not guarantees of future performance. For additional information regarding factors that may affect future results, please read the risk factors and MD&A sections of our periodic SEC filings. Additionally, certain non-GAAP measures may be included within today's call. For reconciliation of those measures to the comparable GAAP measures, please see the tables included in yesterday's earnings release, which is available on our website.

I'll now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. First, before jumping to our normal operating highlights, I would like to emphasize our focus on earnings growth. While many key metrics of our business have experienced -- excuse me, we've experienced strong growth over the last five years, our goal is to also achieve long-term earnings growth. We are committed to this objective, which we believe will allow us to enhance shareholder value.

As we reported previously in 2025, we had a near-record year for capital investments that were critical to complete. This included the investment necessary to recommission our Southwest Plant Water Reclamation Facility, which was originally constructed 20 years ago but was mothballed during the Great Recession. Although these investments grow rate base considerably and ensure we can provide safe and reliable service to our customers and communities we have the privilege to serve, these investments increase certain operating expenses and, most notably, depreciation expense.

Such expenses continue to adversely impact net income and earnings per share in the second quarter of 2026. This is an unfortunate yet necessary part of the historical test year environment here in Arizona. Additionally, certain company expenses, such as medical, continue to grow at an unprecedented pace. As I have been saying for many quarters now, we need new rates to keep up with all the investment and inflation that we have experienced in our utilities.

To this end, while it represents a diversion from our original rate application, the recently announced rate case settlement provides a clearer path to a notable rate increase for our largest water utility, GW-Santa Cruz, later this year. For GW-Palo Verde, while delayed, the delay deals with the primary difference of opinion on the timing of rate recovery as it relates to that historical Southwest Plant issue. Thus, the new schedule provides a clearer path to setting appropriate rates for our largest wastewater utility in 2028.

Together, this will allow us to better realize recovery of inflationary expenses and return on and return of our plant investments, including the Southwest Plant, resulting in years of meaningful earnings growth ahead. Chris will discuss the rate case further and our planned rate case activity for other utilities later on the call. In the meantime, 2026 is about working hard to control G&A expenses, which we achieved in Q2. In the years to come, we believe we can maintain solid revenue and earnings growth as we seek to obtain appropriate rate increases combined with our anticipated organic growth. Now, I will provide a few operational highlights.

Total active service connections increased 5.8% to 69,429 as of June 30, 2026, from the 12 months prior. In 2026, we achieved an annualized 2.6% total active service connection growth rate, excluding the acquisition of the seven Tucson Water systems. Specifically, we invested $6.6 million into infrastructure improvements in existing utilities in the second quarter of 2026 to provide safe and reliable service. Now, I want to discuss organic customer growth and what is going on in our core utilities further.

The single-family dwelling unit market ended 2025 with approximately 21,815 building permits issued in the Phoenix Greater Metro statistical area. In the second quarter of 2026, this market realized 5,653 building permits, representing a 4.7% decrease compared to the same period in 2025. Meanwhile, the Maricopa market realized 185 building permits, representing a 5.7% increase from the same period in 2025.

While new permit activity across the Phoenix MSA has slowed in 2026 and particularly in the city of Maricopa is reflected in the company's 2.7% year-over-year organic increase in active connections. We believe the decline in permits is temporary, as we remain well-positioned to benefit from the anticipated long-term growth of the Phoenix MSA and our specific area drivers, including job growth, affordability, and improving transportation, including State Route 347 widening, and our large assured water supply.

I will now turn the call over to Mike for financial highlights.

Thanks, Ron. Hello, everyone. Total revenue for the second quarter of 2026 was $17.8 million, which was up $3.5 million, or 24.8%, compared to Q2 2025. Total revenue for the year-to-date period increased $4.4 million, or 16.3%, to $31.1 million. The revenue increase in both periods was primarily attributable to unregulated revenue recognition of $2.1 million related to infrastructure coordination and financing agreements, also known as ICFAs, the acquisition of seven water systems from Tucson Water in July 2025, organic connection growth, increased consumption, and higher rates.

A more fulsome explanation of ICFAs can be found in our most recent Form 10-K filing. However, just for some background, ICFAs are agreements we entered into with developers and homebuilders whereby Global Water provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder. During the quarter, our GW-Hassayampa utility put its first wastewater plant into service, allowing us to recognize deferred revenue as we met all of our contractual obligations under the related ICFA agreement.

Now turning to regulated revenue, which excludes ICFA revenue, for Q2 was $15.7 million, which was up $1.4 million, or 9.9%, compared to Q2 '25. Regulated revenue for the year-to-date period increased $2.2 million, or 8.4%, to $28.9 million. Operating expenses for Q2 2026 increased approximately $1.7 million, or 14.1%, to $13.3 million compared to $11.6 million in Q2 2025. Operating expenses for the year-to-date period increased approximately $3.3 million, or 14.6%, to $26.2 million compared to the same period in 2025.

Notable changes in operating expenses included depreciation, amortization, and accretion increased $1.1 million for Q2 and $2 million for the year-to-date period. The increase in both periods was substantially attributable to the additional depreciable utility plant placed in service last year as a result of our 2025 capital improvement plan and the commissioning of related projects. Operations and maintenance costs increased approximately $0.6 million for Q2 and $1.1 million for the year-to-date period.

The increase in both expense periods was primarily driven by: one, rising medical expenses; two, higher purchased power tied to newly operational plant and increased consumption; and three, a loss on the disposal of utility plants. G&A costs remained relatively flat at $4.3 million in Q2 '26 compared to $4.4 million in Q2 '25. G&A costs for the year-to-date period increased $0.2 million to $8.8 million.

Now to discuss other expense. Other expense for Q2 '26 was $0.8 million compared to $0.4 million in Q2 '25. Other expense for the year-to-date period was $1.6 million compared to $0.9 million in the same prior year period. The increase in both periods is primarily attributable to higher interest expense and lower interest income. Net income for Q2 of '26 was $2.7 million, or $0.10 per diluted share, as compared to net income of $1.6 million, or $0.06 per diluted share, in Q2 '25.

Net income for the year-to-date period was $2.4 million, or $0.08 per diluted share, as compared to net income of $2.2 million, or $0.08 per diluted share, in the prior year period. Adjusted EBITDA adjusts for certain items such as the recognition of deferred ICFA revenue, the loss on disposal of utility plant, and restricted stock expense. Adjusted EBITDA for Q2 of '26 was $7.9 million compared to $6.9 million in Q2 of '25, an increase of $1 million, or 15%.

Adjusted EBITDA for the year-to-date period was $13.5 million compared to $12.6 million in the prior year period, an increase of $0.9 million, or 8%. Lastly, in light of recent events, I would like to share that Global Water Resources and its family of utility companies was not impacted by the recent cyberattacks against water and wastewater infrastructure across the United States. This concludes our update on the second quarter of 2026 financial results.

I'll now pass the call to Chris to review our regulatory activity for the quarter.

Thank you, Mike, and hello, everyone. We continue making progress in our GW-Santa Cruz rate review. As you saw in our press release, we concluded the hearing on the settlement agreement on August 3, 2026, and the case is now pending a recommended opinion and order from the administrative law judge. Once the recommendation is issued, it will appear at a Commission open meeting, which we estimate will happen later this year. Recall that the unanimous settlement agreement contemplates net increased revenues of approximately $1.9 million effective November 1, 2026.

Turning to future rate filings, we have already started working on the rate reviews for four utilities which we anticipate filing in the first half of 2027, including GW-Palo Verde and our three Pima County utilities, GW-Saguaro, GW-Farmers, and GW-Ocotillo. All four of those applications contemplate a 2026 test year with a 2027 post-test year implying estimated new rates in 2028.

In addition, we have started preliminary planning for our next GW-Santa Cruz rate review, tentatively scheduled to utilize a test year of 2027 to file in 2028 for estimated new rates in 2029. In all of these cases, we are notifying community stakeholders and the Arizona Corporation Commission staff on the importance of the investments being made and customer benefits. This concludes the update on regulatory activity for the quarter.

I'll now pass the call back to Ron.

Thank you, Chris. Despite the headwinds, our work continues and growth is strong. What we do and how we do what we do matters to our communities. We truly believe that expanding our total water management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved. We appreciate your investment in and support of us as we grow Global Water to address important utility, water resource, and economic development matters along the Arizona Sun Corridor, allowing our communities to thrive.

These highlights conclude our prepared remarks. Thank you. We are now available to answer questions.

[Operator Instructions] The first question comes from Brandon Rogers with ROTH Capital.

Hello, this is Brandon Rogers on for Gerry Sweeney. So first for me, so there's considerable development going on in the Phoenix metro area, like namely Intel, TSMC, as well as the State Route 347 improvement project. How do you see this development potentially impacting the region and Global Water as a whole?

Yes, Brandon. Hey, this is Mike. Happy to answer that question. So I think, as we've seen permits have kind of steadied out or flattened out, and we're starting to see a slight upward trajectory as Ron mentioned, in Q2 of this year. And so, with the acceleration of that 347 State Route and Intel and the likes that you mentioned, we are optimistic that that's going to continue to grow from where we're at right now.

Additionally, we'll point out that the Arizona Commerce Authority in FY '26, which ended in June, they just put a report out last month where it was the biggest economic development year yet. So there was about 26,000 projected new jobs coming, and there was an investment of more than $109 billion in the community statewide. So those are both single-year records. So that's a pretty significant development, not to mention the prior six years was about another $170 billion. So it's a pretty massive one year, and we're pretty excited to see the prospects of what comes from that.

Thanks. I appreciate that color. Then another one I have is, your G&A was down slightly year-over-year as you continue bringing costs down. What should we think about as the run rate for G&A for the remainder of the year?

Yes, that's a great question, Brandon. It's Mike again. I'll take a first stab at that, and Ron, feel free to chime in. But I think, look, that's something that we've actively been working on this year, and we've done a pretty good job, and our plan is to continue that run rate. So to the extent that we can keep those as flat as possible, that's the goal. And so that's our plan.

And then just one more from me. Given the company's significant 2025 capital investments, what is the 2026, '27 capital expenditure outlook?

So this is Mike again, Brandon. We don't really give guidance, but what we have said is, you know, '25, because it was part of a post-test year, we made pretty significant investments, that '27 would definitely be lower than that, kind of somewhere around what the normal norms have been. That's kind of the direction we give, but we don't really give guidance, so that's about as much color as I can give you on that.

[Operator Instructions] The next question comes from Andrew McLaren with Viking Capital. Please go ahead.

The first question I have is just in terms of the acquisition pipeline, how is that looking today versus like in, say, the last three to five years?

Yes, thanks, Andrew. This is Chris. So, it's something that's always on our radar. Obviously, we had a pretty significant program over the past five years. We've really been, right now, focused on integrating those acquisitions, filing for the necessary reviews, and that's been our focus, and then recovering the capital investments that we've been making in those utilities along with the rest of the company, as you've heard earlier. So that's been our primary focus in the past coming up.

Okay. And then I just have one more. In terms of, if additional capital is required, how are you evaluating equity versus potential debt at current share prices?

Yes, this is Mike. It's a great question. And obviously, we try to have a pretty smooth capital structure at 50-50 equity debt. That's the approach that we take going into it. Depending on the situation where we're at, where the stock price is, where the capital markets are, where the debt rates are, it all comes into the equation, because we're obviously being mindful of the dilutive nature of equity capital to our shareholders. So we try to find that balance. But we start at that 50-50.

[Operator Instructions] The next question comes from Varyk Kutnick with Divyde Capital Partners.

So maybe give me a little color on what you're seeing on the ground from developers right now, permits, absorption, new communities. I guess I kind of want to get some timeline on the leading indicators, second-order effects, and where that starts to flow through to you guys.

Yes, hey, Varyk, happy to take that. This is Ron. So, as Mike kind of mentioned, and it was in some of the numbers we talked about earlier, it's been slow year-over-year for a while, but it kind of bottomed out a bit in 2025 and early '26 in the high 2% range. And I'm talking about the single-family permits. But it did increase a little bit in our major territory here in 2026. And I can just tell you over the last three months, our actual organic growth rate ticked back up to 3.2%, so north of 3%, which we hadn't seen in a few years.

So interestingly, despite the macro stuff, and we could spend all day debating that stuff in our specific areas, we think it's primarily just because of that economic development boom that continues in Phoenix and the fact that our areas have the best affordability in really the Metro Phoenix market. We did fine through kind of all of that headwind. So we think it's going to continue to pick up. Our development services team is as active as ever.

But the other thing I really want to focus everybody on is, we're also converting these communities more from single-family homes to large multifamily apartment complexes, etc. So we've seen more activity on that front than we ever have over the last two years. And that continues as well. And that's why kind of for the first time in our 20-ish year history, top-line revenue growth diverts a little bit from meter connection growth. And it's because these big projects are coming in, but also these communities are filling in very nicely with commercial property as well.

So again, regulated year-over-year revenue growth was 9.9%. Obviously, we acquired the Tucson systems and there's some other things going in there, but kind of have all of that data put together, it'll show like we're in a pretty good spot. We think it's -- growth is going to actually accelerate. And the last point I'll make on that, which we've talked about, issued press releases on, and someone brought it up earlier, is to have this type of economic development, this type of growth, the other key piece other than water, which we take care of here in Arizona, is transportation.

And I don't think I can say enough how important we think this 347 highway widening is to our biggest service area. Look, they're basically turning a highway into a freeway, 15 miles direct access to the Phoenix market, and yet our homes are 20%, 30% less than what it costs to be on the other side of that freeway system. So all things are kind of coming together, we think, pretty well, and so that's how good we feel about it. And that's all before all the rate cases that Chris walked you through earlier.

Right, so I mean, again, timing here. If a large employer announces a project, the second-order effects happen first, right? Household formation, multifamily, widening of the highway. How long before you see things actually showing up in your numbers? What is that cycle like?

Yes, I think you're starting to see it based on the large overall market economic development numbers that we've been talking about for two years now. But what's interesting is, as Mike mentioned, that's been accelerating, so there's more investment. So I think it goes like this, to answer your question specifically. The announcement's made, these type of projects don't let grass grow. They make the announcement because they are ready to go.

They build on an aggressive timeline, two-ish years. They're employing people a year out so they employ you when you're ready to turn the facility on. I think the economic development, horizontal piece that goes along with it from a housing perspective is usually about breaking ground to getting finished lots ready about 18 months. The developers know what's going on. They're doing that in parallel with the big projects.

So, I mean, it's really kind of a two to three-year cycle. I just think we're just now experiencing all the major stuff that's been announced and going on over the last two to three years. And over the next two to three years, it's going to accelerate because the numbers are going up.

At this time, this concludes our question-and-answer session. I'd like to now turn the call back over to Mr. Fleming. Sir, please go ahead.

All right. Thank you, operator. I just want to thank everybody for participating on the call today and for your ongoing interest in Global Water. Thanks, and we look forward to speaking with you again.

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

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2026 First Quarter Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on May 14, 2026 at 1:00 p.m. Eastern Time.

I would now like to turn the conference over to Kyle Upchurch, Controller. Please go ahead.

Thank you, operator, and welcome, everybody. Thank you for joining us on today's call. Yesterday, we issued our 2026 first quarter financial results by press release, a copy of which is available on our website at gwresources.com.

Speaking today is Ron Fleming, President and Chief Executive Officer; Mike Liebman, Chief Financial Officer; and Chris Krygier, Chief Operating Officer. Ron will summarize the key operational events of the quarter, Mike will review the financial results for the first quarter and Chris will review Arizona Corporation Commission activity. Ron, Mike and Chris will be available for questions at the end of the call.

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

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

I will now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. First, before jumping to normal operating highlights, I'd like to emphasize our focus on earnings growth. While most elements of our business have experienced growth, our goal is to achieve long-term earnings growth, and we are committed to this objective, which we believe will allow us to enhance shareholder value.

As we reported last quarter as part of our year-end reporting for 2025, we had a near-record year for capital investments that were critical to complete. This included the investment necessary to recommission our Southwest Plant water reclamation facility, which was originally constructed 20 years ago and was mothballed during the Great Recession. Although these investments grow rate base considerably and thus become drivers of future earnings growth, these investments increased certain operating expenses and most notably, depreciation expense. Such expenses continue to adversely impact net income and earnings per share in the first quarter of 2026.

This is an unfortunate yet necessary part of the historical test year environment here in Arizona as you must make the investments, incur the expenses and then pursue rate recovery. As I've been saying for many quarters now, we need new rates to keep up with all the investment and inflation that we have experienced in our utilities. To this end, while it represents a diversion from our original rate application, the recently announced rate case settlement provides a clearer path to a notable rate increase for our largest water utility, GW-Santa Cruz later this year.

For GW-Palo Verde, while delayed, the delay deals with the primary difference of opinion on the timing of rate recovery as it relates to our historical Southwest Plant water reclamation facility issue. Thus, the new schedule provides a clearer path to setting appropriate rates for our largest wastewater utility along this new time line.

Together, this will allow us to better realize recovery of inflationary expenses and return on and return of our plant investments, including the Southwest Plant, resulting in years of meaningful earnings growth ahead. Chris will discuss the rate case further later on the call, but I will add that we plan to announce additional rate case activity for our other utilities in the coming quarters.

In the meantime, 2026 is about working hard to control expenses, and we have reduced the pace of our capital investments. In the years to come, we believe we can maintain solid revenue and earnings growth as we seek to obtain appropriate rate increases combined with our anticipated strong organic growth.

Now I will provide a few operational highlights. Total active service connections increased 5.7% to 68,885 as of March 31, 2026, from the 12 months prior. In 2026, we achieved an annualized 1.9% total active service connection growth rate, excluding the acquisition of the 7 Tucson Water systems. Specifically, we have invested $6.3 million into infrastructure improvements in existing utilities in 2026 to provide safe and reliable service.

Now I want to discuss organic customer growth and what is going on in our core utilities further. The single-family dwelling unit market ended 2025 with approximately 21,815 building permits issued in the Phoenix Greater Metro Statistical area. In the first quarter of 2026, this market realized 5,204 building permits, representing an 18.8% decrease compared to the same period in 2025. Meanwhile, the Maricopa market realized 157 building permits, representing a 16.5% decrease from the same period in 2025.

While new permit activity has slowed in 2026, continued growth in the Phoenix MSA, particularly in the City of Maricopa is reflected in the company's 2.6% year-over-year organic increase in active connections. We believe the decline in permits is temporary as we remain well positioned to benefit from the anticipated long-term growth of the Phoenix MSA and our specific area drivers, including job growth, affordability, improving transportation, including State Route 347 widening and our large assured water supply.

I will now turn the call over to Mike for financial highlights.

Thanks, Ron. Hello, everyone. Total revenue for the first quarter of 2026 was $13.3 million, which was up $0.8 million or 6.7% compared to Q1 2025. The increase in revenue was primarily attributable to the acquisition of 7 water systems from the City of Tucson in July 2025, organic connection growth and higher rates in our GW-Farmers utility.

Operating expenses for Q1 2026 increased approximately $1.7 million or 15.1% to $12.9 million compared to $11.2 million in Q1 2025. Notable changes in operating expenses included depreciation, amortization and accretion expense increased $0.9 million for Q1. The increase was substantially attributable to the additional depreciable fixed assets placed in service last year as a result of our 2025 capital improvement plan and the commissioning of related projects.

Operating and maintenance costs increased approximately $0.5 million. The increase was primarily driven by rising medical expense, higher purchased power associated with newly operational plant and wastewater disposal expenses related to the start-up of 2 new wastewater reclamation facilities. G&A costs increased by approximately $0.3 million, primarily driven by rising medical costs.

Now to discuss other expense. Other expense for Q1 2026 was $0.9 million compared to $0.5 million in Q1 2025. The increase in expense is primarily attributable to higher interest expense, lower interest income and a decrease in income associated with our Buckeye growth premiums.

Net loss for Q1 2026 was $0.4 million or $0.01 per diluted share as compared to net income of $0.6 million or $0.02 per diluted share in Q1 2025.

Lastly, I'll discuss adjusted EBITDA, which adjusts for certain noncash items such as restricted stock expense. Adjusted EBITDA remained consistent at $5.6 million in the first quarter of both 2026 and 2025.

This concludes our update on the first quarter 2026 financial results. I'll now pass the call to Chris to review our regulatory activity for the quarter.

Thank you, Mike, and hello, everyone. As you heard Ron mention earlier and saw in our April 29, 2026 press release and 10-Q, we reached a settlement in our pending rate reviews. The unanimous settlement contemplates a water revenue increase of approximately $2.3 million for GW-Santa Cruz and a wastewater revenue decrease of $0.4 million for GW-Palo Verde as an extension of the existing temporary bill credit. The estimated effective date of these new rates is November 1, 2026.

The settlement allows us to close most of the history related to GW-Santa Cruz's Southwest area water assets and turn our attention to the wastewater assets. The next steps in the process include filing testimony in support of the settlement by the end of this month with the hearing commencing in August 2026. After that, the administrative law judge writes a recommendation for the commission's consideration.

Planning ahead, we will continue our focus on securing appropriate rates for our investments made. As part of the settlement agreement, we agreed to withdraw the GW-Palo Verde rate review. We anticipate filing a new rate review request for GW-Palo Verde's wastewater assets in 2027 with new rates estimated to be implemented in 2028. This upcoming rate review request is anticipated to include the Southwest Plant water reclamation facility that you heard about earlier, incremental capital investment made since 2025 and reflect operating expenses of a 2026 test year.

As Ron mentioned earlier, we are laser-focused on recovering rates to capital investments made across our utilities. We are in the planning stages for multiple rate review filings for our utilities and expect to provide you updates at our next quarterly update in August 2026. Those updates are expected to include the timing of our next rate review filings for our Farmers division, Saguaro division, Ocotillo division and Santa Cruz division amongst others.

This concludes the update on regulatory activity for the quarter. I'll now pass the call back to Ron.

Thank you, Chris. Despite the headwinds, our work continues. What we do and how we do what we do matters to our communities. We truly believe that expanding our Total Water Management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved.

That said, I understand that shareholders are a vital stakeholder, and our goal is to achieve long-term earnings growth, which we believe will allow us to enhance shareholder value. This is our focus. We appreciate your investment in and support of us as we grow Global Water to continue to address important utility, water resource and economic development matters along the Arizona Sun Corridor, allowing our communities to thrive.

So these highlights conclude our prepared remarks. Thank you. We are now available to answer any questions.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Ron Fleming for any closing remarks.

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

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

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2025 Year-end Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on March 5, 2026, at 1:00 p.m. Eastern Time.

I would now like to turn the conference over to Kyle Upchurch, Controller. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us on today's call. Yesterday, we issued our 2025 year-end financial results by press release, a copy of which is available on our website at gwresources.com. Speaking today, we have Ron Fleming, President and Chief Executive Officer; Mike Liebman, Chief Financial Officer; and Chris Krygier, Chief Operating Officer. Ron will summarize the key operational events of the year. Mike will review the financial results for year-end, and Chris will review Arizona Corporation Commission activity. Ron, Mike and Chris will be available for questions at the end of today's call.

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

For additional information regarding factors that may affect future results, please read the Risk Factors and MD&A sections of our periodic SEC filings. Additionally, certain non-GAAP measures may be included within today's call. For a reconciliation of those measures to the comparable GAAP measures, please see the tables included in yesterday's earnings release, which is available on our website.

I will now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. We are pleased to report the results for year-end 2025. First, before jumping to normal operating highlights, I would like to get straight to the main points on 2025. This year included many large and successful initiatives that will materially grow rate base. In fact, including 2024 and 2025, the test year and post test year for our Santa Cruz Water Company and Palo Verde Utilities Company rate case, we have increased the collective rate baseable assets of our company by $70 million or 59%.

With respect to these initiatives, we've had a near record year for capital investments that were critical to complete within 2025. These investments span everything from recommissioning the previously mothballed water reclamation facility in Pinal County, south of the City of Maricopa, which is part of the system we refer to as our Southwest plant to our capital improvements to stay in front of our fast-growing communities and the acquisition of the City of Tucson water systems. All of these investments inure to long-term value creation and also benefit customers and communities we have the privilege to serve. However, these investments increased expenses across the board, including much larger depreciation and a onetime asset write-off related to the Southwest plant, which all impact income and earnings per share. This regulatory lag is an unfortunate part of the historical test year environment here in Arizona, but it is necessary to make investments upfront and seek recovery thereafter.

Additionally, certain company expenses such as medical costs continue to grow at an unprecedented pace. As I've been saying for many quarters now, we need new rates to keep up with all the investment and inflation that has occurred in our utilities. Chris will discuss these rate cases and our regulatory activity later in the call.

In the meantime, I want to make it clear. 2026 is about working hard to control expenses, and we have reduced the pace of capital investments. Now as a reminder of many other positive announcements from 2025 that underpin our goal of long-term value creation and our ability to deliver total returns to our shareholders in the years and decades to come.

First, we announced that the Arizona Governor signed meaningful water legislation known as Ag-to-Urban, which became law in 2025. We believe this will result in many benefits that will be applicable for Global Water in our service areas, improving offer for sustainability while creating a new groundwater supply to support additional growth. Based on Global Water's established service areas created through buying and building utilities in the path of growth, our regional areas coincide with land that has considerable historical farming operations just outside densely populated Metro Phoenix. Thus, we believe the new law will drive even more growth to our service areas.

Second, full funding of the highway 347 expansion connecting Interstate 10 and metro Phoenix to the City of Maricopa and the entire western part of Pinal County was approved in 2025. As the stakeholders had already begun engineering on certain long-term elements of the 13-mile road widening project, it is estimated that the construction will begin in summer 2026. This project should go a long way to ensure that the City of Maricopa continue to be one of the fastest-growing communities in the country, and it meets -- helps meet our population projections of growing nearly 90% by 2040. As evidence to the potential of this population projection, on July 1, 2025, the U.S. Census Bureau released its population projections from 2024 data. And the City of Maricopa was once again in the top 10 of the fastest-growing large municipalities in the country, coming in at #6. Even more telling was that population growth in 2024 was even stronger than 2023 as the city realized 7.4% growth compared to 7.1%.

Below, I will discuss connection growth rates and permit growth rates that have begun to slow, but it is important to keep this population growth that I just discussed in mind, as it is now more closely correlates with consumption and revenue growth based on the amount of multifamily housing and commercial growth that is occurring. Finally, if you think about everything just mentioned from rate base accumulation to water and transportation that are the 2 fundamental elements of economic development, you can see that even more than ever, we have the foundation of sustainable growth for the years and decades to come.

Now I'll provide a few operational highlights. Total active service connections increased 6.3% to 68,577 at December 31, 2025, from the 12 months prior. In 2025, we achieved a 3.2% total active service connection growth rate, excluding the recent acquisition of the 7 Tucson water systems. And specifically, we invested $67.3 million into infrastructure improvements in existing utilities to provide safe and reliable service. The majority of our investments in 2025 were post-test year projects in Santa Cruz Water Company and Palo Verde Utilities Company, our 2 largest utilities located in Pinal County and are included in our already filed 2024 test year rate application.

Now I want to discuss organic customer growth and what is going on in our core utilities even further. The single-family dwelling unit market ended 2024 with approximately 27,156 building permits issued in the Phoenix greater metro area. In 2025, this market realized 21,815 building permits, and this did represent a nearly 20% decrease in 2024. In 2025, the Maricopa market realized 600 building permits, representing a 39% decrease from the same period in 2024. The 2025 permit data showing a bit of a pullback from the prior year is not surprising considering the uncertainty in the market today. While new permit activity has slowed in '25, growth in the Phoenix MSA, particularly in the City of Maricopa, is reflected in the company's 3.2% year-over-year organic increase in active connections. We believe the decline in permits is temporary, especially considering that mortgage rates continue to drop, and we remain well positioned to benefit from the anticipated long-term growth of the Phoenix MSA.

I will now turn the call over to Mike for financial highlights.

Thanks, Ron. Hello, everyone. Total revenue for 2025 was $55.8 million, which was up $3.1 million or 5.8% compared to 2024. The increase in revenue was primarily attributable to the City of Tucson acquisition in July 2025, organic growth in active water and wastewater connections and, higher rates in our Farmers and Sororal utilities compared to 2024.

Operating expenses for 2025 increased approximately $5.3 million or 12.2% to $48.6 million compared to $43.3 million in 2024. Notable changes in operating expenses included depreciation, amortization and accretion expense increased $2.3 million for the year, the increase was substantially attributable to the additional depreciable fixed assets placed in service this year as a result of our increased capital investments and the commissioning of related projects, which are part of our current rate case. Operating and maintenance costs increased approximately $2 million for the year. The increase was primarily driven by 3 things: first, personnel costs as a result of the Tucson acquisition, medical expenses and filling a previously vacant position; second, utilities, chemicals and repairs due to higher purchased power, chemical costs and water treatment expense associated with increased consumption and newly operational plant; and third, higher contract services.

G&A costs increased by approximately $1 million in 2025, primarily driven by higher medical costs, increased professional fees, largely from legal expenses associated with the Nikola bankruptcy, higher IT spending, increased insurance premiums and elevated municipal licensing fees tied to revenue growth.

Now to discuss other expense. Other expense for 2025 was $3.2 million compared to $1.5 million in 2024. The increase in expense is primarily attributable to a loss on asset disposals of $1.3 million related to the recommissioning of our Southwest plant and lower income associated with our Buckeye growth premiums. Net income for 2025 was $3 million or $0.11 per diluted share as compared to $5.8 million or $0.24 per diluted share in '24. Adjusted net income, a non-GAAP measure, was $3.9 million or $0.14 per diluted share in '25 as compared to $6.3 million or $0.26 per diluted share in '24.

Lastly, I'll discuss adjusted EBITDA, which adjusts for certain nonrecurring items such as onetime storm-related expenses and noncash items such as restricted stock expense and the loss on asset disposals for our Southwest plant. For 2025, adjusted EBITDA decreased 0.7% to $26.5 million from $26.7 million in the prior year. This concludes our update on the year-end 2025 financial results.

I'll now pass the call to Chris to review our regulatory activity for the year.

Thank you, Mike, and hello, everyone. We accomplished a number of constructive developments on the regulatory agenda this year. First, in January 2025, we secured ACC approval to acquire the 7 public water utility systems from the City of Tucson, which we closed in July 2025. Second, in April 2025, the Arizona Corporation Commission approved approximately $1.1 million of new revenues for our Global Water Farmers utility. Finally, we continue progressing on our Global Water Santa Cruz and Global Water Palo Verde rate reviews. As Ron mentioned, we are squarely focused on securing rate relief for our significant capital investments and rising expenses.

Since we last spoke in November, we filed testimony supporting a proposed revenue increase of approximately $4.3 million. Since that filing, the parties and the administrative law judge revised the case schedule to include additional ACC staff testimony being filed on April 15, 2026, and the hearing is now scheduled to begin in August of 2026. We are continuing to dialogue with our regulatory stakeholders on the case, and we will keep you apprised of additional updates on future calls. This concludes the update on regulatory activity for the year.

I'll now pass the call back to Ron.

Thank you, Chris. To close today, I just wanted to express how proud I am of our team. We took on a lot in 2025 and successfully executed on many fronts. But while these efforts have prepared us for 2026 and beyond, we still have more work to do. And despite many headwinds, we will continue to execute our growth plan and remain at the forefront of the water management industry, advancing our mission of achieving efficiency and consolidation.

We truly believe that expanding our total water management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved. We appreciate your investment in and support of us as we grow Global Water to address important utility, water resource and economic development matters along the Arizona Sun Corridor, allowing our communities to thrive. These highlights conclude our prepared remarks. Thank you.

We are now available to answer any questions.

[Operator Instructions] The first question comes from Zach Liggett from Desmond Liggett Wealth.

I just had two. First of all, on the rate case, just given how kind of frustrating this has been, I'm curious if you guys have done an analysis and have looked at things that are within your control that you can do differently on future rate cases. So that's my first question.

And then the second question is just related to AI, if there's any use cases you guys have identified that you can apply to the business and try to squeeze out some more operating efficiencies.

Yes. Zach, it's Ron Fleming here. I'll go ahead and start on the rate case question, and then Chris and Mike, feel free to jump in. I just want to make it clear that to use your word, it's been a frustrating process. The primary element of this rate case is very unique, and it is the recommissioning of that Southwest plant assets. And for those of you that are new investors to the company, we invested in a new utility territory just South of the City of Maricopa prior to the Great Recession. So really in the years 2005, 2006, 2007. Ultimately, when 2008 hit, no customers showed up. And so we weren't able to actually fully commission and bring those utilities online and move them in the rates, which is clearly your normal process. Lots of things happened during the Great Recession, as I'm sure you can imagine that took a long time to work through.

But most recently, growth did return there, kind of back in 2001. We started working with the developers there again. Growth has jumped from the City of Maricopa to this area, and it's growing actually pretty nicely now. But we had to recommission those assets and move them into rates. And so to be fair to the commission, this is a unique situation that's not often dealt with. And we certainly don't plan on replicating the situation again in future kind of normal business operations or rate cases.

Yes, Zach, this is Chris Krygier. What I would add to that is I absolutely agree on the uniqueness. I've been in the regulatory space for a long time in my career, and this is definitely one of the most unique situations that we've had to work through. But I'd tell you, big picture, you're always looking and taking lessons learned from every rate case, and we have continued to do that. But I'd also say we follow the pretty traditional playbook with a unique issue like this, meaning we've been talking to our regulatory stakeholders for a long time about it. We've been talking to our communities about it. And so really -- and talking to customers about it. So we'll continue all of those, but it is a unique issue, but we will get it there.

Yes. And then happy to speak a little bit on the AI question as well. Ultimately, funny enough, we just got a presentation from our Vice President of IT and Security yesterday on it. And ultimately, there's going to be lots of use cases in our industry. The most obvious one that people benefit from right off the jump is in your call center, and your ability to provide better service to your customers and also, obviously, on our end, make it more efficient. So that's something we've started to implement at a level. But to take it outside of the call center and across our utility operations, because we're obviously very highly regulated and very highly automated, there's lots of security issues that we want to have in place before pushing it too far out into the organization. So those conversations are being had. We're not going faster, primarily because of the security considerations that we need to have in place.

Makes sense. I appreciate the color there. And just a quick follow-up on the -- back on the rate case. If we get to the end of the year and it just doesn't go as you guys hope, do you have the ability to accelerate like a refiling and take another crack at it? Or like how does that process work?

Yes. Zach, we're -- this is Chris again. We are looking at all of those options and giving thought as to what that would look like. We don't have anything to announce at the moment, but I'd say we're evaluating all of those options and what would be the best court if we needed to pursue that.

Yes. Thank you. And I'll make one more point on the top of that. It kind of builds off my comment earlier in my planned remarks about having moved $70 million of rate baseable assets into service. That means it is into service, so providing customers. So it is a matter in our view of when, not if, and we'll have that determined through this rate case on the win. So thank you.

Seeing no further questions, I would like to turn the conference back over to Ron Fleming for any closing remarks.

All right. Thank you, operator. Again, I just want to thank everybody for participating on the call and for your interest in Global Water Resources. We appreciate it and look forward to speaking with you again.

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

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2025 Third Quarter Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded on November 13, 2025 at 1:00 p.m. Eastern Time.

I would now like to turn the conference over to Kyle Upchurch, Controller. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us on today's call. Yesterday, we issued our 2025, third quarter financial results by press release, a copy of which is available on our website at gwresources.com.

Speaking today, is Ron Fleming, President and Chief Executive Officer; Mike Liebman, Chief Financial Officer; and Chris Krygier, Chief Operating Officer. Ron will summarize the key operational events of the quarter Mike will review financial results for the third quarter, and Chris will review strategic initiatives in Arizona Corporation Commission activity. Ron, Mike and Chris will be available for questions at the end of the call.

Before we begin, I would like to remind you that certain information presented today may include forward-looking statements. Such statements reflect the company's current expectations, estimates, projections and assumptions regarding future events.

These forward-looking statements involve a number of assumptions, risks, uncertainties, estimates and other factors that could cause actual results to differ materially from those contained in the forward-looking statements.

Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements, which reflect management's views as of the date hereof and are not guarantees of future performance. For additional information regarding factors that may affect future results, please read the Risk Factors and MD&A sections of our periodic SEC filings.

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

I'll now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. We are very pleased to report the results for the third quarter of 2025. First, before jumping to normal operating highlights, I'd like to start by attempting to capture the significance of numerous recent announcements that underpin our goal of long-term value creation and our ability to deliver strong total returns to our shareholders in the years and decades to come.

In July, we closed the Tucson acquisition, which consisted of 7 separate public water systems, adding approximately 2,200 connections and approximately $7.7 million in rate base. At a multiple of only 1.05x that rate base. This is beyond an attractive price that is immediately accretive from a share price perspective, considering our peer group trades by our estimates between 1.5x to 2x rate base.

We expect the systems to generate around $1.5 million in annual revenue until such time we can consolidate these systems into the rest of our Saguaro rate division and ensure all of our utilities in Pima County are captured in a regional rate plan, earning their full authorized rate of return.

Second, we recently announced that the Arizona Governor has signed meaningful water legislation known as Ag-to-Urban, which became law in the quarter. And we believe will result in many benefits that will be applicable for Global Water in our service areas, improving offer for sustainability, while creating a new ground water supply to support additional growth.

Based on Global Water's established service areas, created through buying and building utilities on the path of growth. Our regional areas coincide with land that has considerable historic farming operations, just outside densely populated metro Phoenix. Thus, we believe the new law will drive even more growth to our service areas.

Third, as announced in the quarter, full funding of the Highway 347 expansion connecting Interstate 10 and Metro Phoenix to the City of Maricopa was approved. As the stakeholders had already begun engineering on certain long-term elements of the 13-mile road widening project, it is estimated that the construction will begin as soon as fiscal year 2026.

This project will go a long way to ensure the City of Maricopa will continue to be one of the fastest-growing communities in the country and meet its population projections of growing nearly 90% by 2040. As evidence to this potential of the population projection on July 1, the U.S. Census Bureau released its population projections from 2024. In the city of Maricopa was once again in the top 10 of the fastest-growing large municipalities in the country coming in at #6.

Even more telling was that population growth in 2024 was stronger than 2023. As the city realized 7.4% growth compared to 7.1% growth in the year prior. Below, I will discuss connection growth rates and permit growth rates that have begun to slow. But it is important to keep population growth in mind as this more closely correlates with consumption and revenue growth based on the amount of multifamily housing and commercial growth that is occurring.

Beyond these long-term wins, we are also executing our capital investment and rate case strategies to drive near-term earnings growth. Obviously, the initial staff report was unexpected and thus, we issued the related 8-K informing our shareholders as such, but the case has a long way to go, and we still expect a fair outcome in mid-2026. Chris will provide more details on the rate case later on the call.

And finally, if you think about everything just mentioned from rate base accumulation to new rates to water and transportation that are 2 fundamental elements of economic development, you can see even more than ever, we have the foundation of sustainable growth for years and decades to come.

Now I'll provide a few operational highlights. Total active service connections increased 6.6% to 68,130 as of September 30, 2025, from the 12 months prior. In Q3, we achieved an annualized 3.3% total active service connection growth rate, excluding the recent acquisition of the 7 Tucson Water Systems.

Year-to-date, we've invested $49.6 million into infrastructure improvements in existing utilities to provide safe and reliable service. The majority of our planned investments in 2025 relate to the post-test year projects in the Santa Cruz Water Company and Palo Verde Utility Company. Our 2 largest utilities located in Pinal County, for inclusion in our already followed 2024 test year rate application.

Now I want to discuss organic customer growth and what is going on in our core utilities further. The single-family drawing unit market ended 2024 with approximately 27,156 building permits issued in the Phoenix greater metropolitan statistical area. For Q3 2025, this market realized 4,724 building permits, representing a 29% decrease from Q3 of the prior year.

For Q3 2025 in the Maricopa market, it realized 164 building permits, representing a 20% decrease from the same period in 2024. So the 2025 permit continues to show a bit of a pullback from prior year, which is not surprising considering the uncertainty around tariffs and other macroeconomic drivers. We believe this is temporary and as these things continue to cool, there were very strong drivers for our normal growth rate to continue or even pick up.

As I mentioned in our last earnings release, yes, by inflation and other cost drivers have caught up with us and are impacting our earnings growth. However, it's important to recognize that 2024 was a test year for our largest utilities, whose last test year was 5 years ago in 2019.

We need new rates to address the cost increases over that time period and the significant investments we have made. Based on adjustments made to our current rate case application and rebuttal testimony, we now have an additional $4.3 million annual rate increase proposed under consideration at the ACC.

I will now turn the call over to Mike for financial highlights.

Thanks, Ron. Hello, everyone. Total revenue for the third quarter of 2025 was $15.5 million, which was up $1.2 million or 8.4% compared to Q3 2024. Total revenue for the year-to-date period increased $2.8 million or 7% to $42.2 million. The increase in revenue for both periods was primarily attributable to the acquisition of 7 water systems from the city of Tucson in July 2025, organic growth in active water and wastewater connections and higher rates and our GW Farmers and GW Saguaro utilities compared to the same period last year.

Operating expenses for Q3 2025 were $12.6 million compared to $10.3 million in Q3 of 2024. This is an increase of approximately $2.3 million or 21.9%. Operating expenses for the year-to-date period increased approximately $4 million or 12.8% to $35.4 million compared to the same period in 2024. Notable changes in operating expenses included personnel costs increased by approximately $707,000 for Q3 and $971,000 for the year-to-date period.

Both increases were primarily attributable to hiring additional employees for the newly acquired water systems, filling previously vacant positions and increased medical costs.

Other O&M and G&A costs increased by approximately $711,000 for Q3 and $1.2 million for the year-to-date period. Both increases were primarily due to a storm event with heavy short duration precipitation as well as higher professional fees and increased costs with various service providers.

In addition, year-to-date costs were higher related to municipality licensing type agreements. Depreciation and amortization increased $622,000 for Q3 and $1.3 million for the year-to-date period. Both increases were substantially attributable to the additional depreciable fixed assets placed in service this year as a result of our increased capital investments and the commissioning of related projects.

Now to discuss other income and expense. Other expense for Q3 2025 was $0.6 million compared to an immaterial other income in Q3 2024. Other expense for the year-to-date period was $1.4 million compared to $0.8 million for the same period in 2024. The increase in expense for both periods is primarily attributable to a decrease in interest income and lower income associated with Buckeye growth premiums.

Net income for Q3 2025 was $1.7 million or $0.06 per diluted share as compared to $2.9 million or $0.12 per diluted share in Q3 2024. Net income for the year-to-date period was $3.9 million or $0.15 per diluted share as compared to $5.3 million or $0.22 per diluted share for the same period in 2024.

Lastly, I'll discuss adjusted EBITDA, which adjusts for nonrecurring and noncash items such as onetime storm-related expenses and restricted stock expense. Adjusted EBITDA was $7.8 million in Q3 2025 compared to $8.2 million in Q3 2024. This is a decrease of $0.4 million or 5%. Year-to-date, adjusted EBITDA remained consistent at approximately $20.4 million.

This concludes our update on the third quarter 2025 financial results. I'll now pass the call to Chris to review our regulatory activity and strategic initiatives for the quarter.

Thank you, Mike, and hello, everyone. First, as you heard earlier, in the quarter, we closed the Tucson acquisition. This deal has been years in the making and is finally across the finish line. We are now focused on the full integration activities.

Moving on to the rate case front. As you have seen in our earnings release, 10-Q and other filings, we continue progressing on the Global Water Santa Cruz and Global Water Palo Verde rate cases. To provide some context, if this were a baseball game, I would describe us as in the middle innings of the process.

Steps to come over the next few months include 2 more rounds of formal [ rebuttal ] testimony, a hearing before an administrative law drudge, legal briefs and then awaiting the judge's recommendations. Once the judge issues the recommendations after hearing the case, the commissioners consider that recommendation at an open meeting. We still expect to finish the rate case in mid-2026.

As a refresher on our filing, our current rates are based on a 2019 test year and this rate case is a 2024 test year, meaning this is the first rate case for these utilities that captures the historic inflation we experienced. And this is the first rate case that reflects the significant capital program the utilities undertook in the last 5 years.

Even with those challenges, we are currently supporting a reasonable proposed net revenue increase of $4.3 million, which results in a median bill increase of less than 10% to the typical residential water and wastewater customer. We believe the facts of the case will result in a fair outcome, and we will continue to provide updates on future calls.

This concludes the update on acquisitions and regulatory activity for the quarter. I'll now pass the call back to Ron.

Thank you, Chris. To close today, I just wanted to express how proud I am of our team. We took on a lot this year, and there is still more to come. Despite many headwinds, we will continue to execute our growth plan, and we intend to remain at the forefront of the water management industry and advance our mission of achieving efficiency and consolidation. We truly believe that expanding our Total Water Management platform and applying our expertise throughout our regional service areas and to new utilities will be beneficial to all stakeholders involved.

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

[Operator Instructions] The first question comes from Gerry Sweeney with ROTH Capital.

Ron, Mike and Chris. I'm going to start with a quick question on the rate case. You say you -- I think you anticipate still being completed by mid-2026. If memory serves correct, I think we were looking at completed and maybe some of the rates going into effect July 1. Is that still potentially the case as when you say that the case completed by July 1 or mid-2026?

Gerry, this is Mike. Yes. We -- that timing puts us to where we expect the rates to change by the middle of the year. So July 1 in the back half of the year with the new rates in place.

Got it. I just want to make sure on that front. And then moving over to ag-to-urban. That's interesting. Obviously, there's a lot of water issues outside of your operating area. I know you have some really good aquifer and sourcing of water. But how would this whole program worked for you of some of that land around your operating areas from the farmland. Would you purchase those rights? Or would they lease the rights? Or is this more about driving economic development because there is additional water in the region.

Yes. Absolutely, Gerry. This is Ron. I will take that one. And you're right, there's a lot going on and always -- really always has been with water in Arizona. The 7 basin states in Mexico continue to reward for the federal government to determine what the new plan on the Colorado River will look like. But as you mentioned, the good news for us is we don't really rely upon that.

In these new emerging areas that we serve, which is kind of the basis of the business plan all the way back over 20 years ago. These are kind of those new areas outside the densely populated metro Phoenix region. And historically, there has been a lot of agricultural activity in these areas. So we really are converting farms to rooftops.

And the good news is that rooftops use about 1/4 or even less of the amount of water to build the kind of master planned communities that they do in this area, as compared to farms. And then in our model, our total water management model, we even stretched that water supply further. So the way that it practically works is it's kind of good news to your question. We don't have to buy it. We don't lease it.

The land owner has the right to pump water under certain Arizona regulations historic groundwater pumping to pump those rights for farming activities. So the reason we were able to work with a lot of stakeholders and get the law put in place, as you see it as a net offer for benefit. So it's kind of a win-win-win because the farming goes away and then we just convert a portion of those historic groundwater pumping rights to a new municipal water supply.

So it's basically they're pumping 5-acre foot per acre for farming we're going to convert in Pinal County, 1 acre foot to that new water supply or 1.5 acre feet in Maricopa County. So it's good for everybody, but it's also very economical -- the most economical water supply because we're just converting, but already exists there at really no cost.

And then it underpins your ability to use that supply for more houses and businesses. So just based on the strength of that law, but where we are specifically as a company, it's very beneficial to us.

Got it. And the 347 corridor expansion, that's a pretty big deal because I think doesn't that reduce commute times improve transportation and just potentially drive more people towards Maricopa with, generally speaking, is probably more housing affordability. Is that what we should be thinking about on that front?

Yes, absolutely. I would say more than generally speaking, it's -- it is what is going to happen. So you've got to think about it this way. When we bought those utilities just over 20 years ago, there was 2,000 people in the city.

And we're talking about some of the census data earlier on this call, but we all know the census data lags. And so right now, the city's own metrics have the city at 85,000 people. So that has happened off of this kind of 2 lane each direction highway, but it definitely resulted in a lot more traffic congestion and that's ultimately why those stakeholders were able to get the federal government, the local stakeholders, state government to fund this project through like 12 different funding mechanisms.

They were able to bring it all together because the need is real and there. So just to add up a full another lane in each direction, most importantly, at overpasses to some of the complicated intersections that currently just have 4-way lights that keeps the traffic moving. And it really is going to create a freeway of like access into the City of Maricopa. It's going to allow us to keep booming. So we're pretty excited about it.

[Operator Instructions] The next question comes from Matvey Tayts with Freedom Finance.

So my question is also about this regulations. So like the proposal by ACC, like 50% below what you proposed. Are there any kind of -- where this huge difference comes from? Why it's so big. So can you just elaborate a little bit on this?

Yes, this is Chris. So part of it is what I'll call we're kind of still in the process. So we have a lot of, what's called, post-test year plant. And the way the commission works with that is they don't include it in their calculations until they see the projects completed, the invoices in and they've had a chance to review the invoices. So that's part of it.

And then obviously, they're still back and forth asking for additional information related to other investments of our Southwest area and other projects. And so that's why when we say we're in the middle innings, we're kind of still in the middle of the process working with the parties on it.

Okay. And just an additional question. So in previous reports, you mentioned this number like $212.5 million for the expected rate base. And I couldn't find it in the new quarterly report. So is it correct that I missed this number or it's mentioned somewhere or you decided to be a little bit less strict in your numbers expectations?

Yes. This is Mike. That number that we gave you, it's -- and you can find it in the investor presentation on our website. And so it's there and it talks about our 2024 number plus an expected post-test year plan number that we have. And so that number has actually -- it's come down a little bit from that $212 million, but materially -- that's still correct. And that's a number -- we just don't report that stuff in our quarterly financials.

So let me just check 1 thing. So in your recent quarterly report, there is no -- this number, right?

That's right.

This concludes our question-and-answer session. I would like to turn the conference back over to Ron Fleming for any closing remarks.

All right. Thank you, operator. I just want to thank everybody for participating on the call and for your ongoing interest in Global Water. I appreciate it and look forward to speaking with you again.

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