Global Water Resources, Inc. (NASDAQ: GWRS), (TSX: GWR), a
pure-play water resource management company, reported results for
the first quarter ended March 31, 2022. All comparisons are to the
same year-ago period unless otherwise noted. The company will hold
a conference call at 1:00 p.m. Eastern time tomorrow to discuss the
results (see dial-in information below.)
Q1 2022 Financial
Highlights
- Revenues
increased $0.8 million, or 8.3%, to $10.0 million, driven primarily
by organic growth and new connections from the company's
acquisition of Las Quintas Serenas Water Company, Inc. (Las
Quintas) in November 2021 which together reflects the 9.7% increase
in active service connections year-over-year.
- Net
income increased $1.1 million to $0.9 million, or $0.04 per share,
for the first quarter of 2022 compared to the same period a year
ago.
- Adjusted EBITDA
increased $1.6 million, or 45.1%, to $5.2 million for the three
months ended March 31, 2022 compared to $3.6 million for the three
months ended March 31, 2021 (see definition of Adjusted EBITDA, a
non-GAAP term, and its reconciliation to GAAP, below).
- Cash and cash
equivalents totaled $11.1 million at March 31, 2022.
- Declared
three monthly cash dividends of $0.02458 per common share, or
$0.29496 per share on an annualized basis.
Q1 2022 Operational
Highlights
- Total
active service connections increased 9.7% to 55,012 at March 31,
2022 from 50,162 at March 31, 2021.
- Q1
annualized active service connection growth rate was 8.4%.
- Invested $6.2
million in infrastructure projects to support existing utilities
and continued growth.
- In January 2022,
the company acquired the assets of two water utilities: Twin Hawks
Utility, Inc. (Twin Hawks), a water utility with service area in
Pinal County, Arizona; and Rincon Water Company, Inc. (Rincon), a
water utility with service area in Pima County, Arizona. These
acquisitions added a total of 91 connections and approximately 9.1
square miles of service area.
Subsequent Event
On April 14, 2022 the company signed a
definitive agreement to acquire Farmers Water Company, an operator
of a water utility with service area located in Pima County,
Arizona, subject to customary closing conditions and Arizona
Corporation Commission ("ACC") approval. The acquisition, if
completed, would add approximately 3,300 active water service
connections and approximately 21.5 square miles of service
area.
Management Commentary
“In Q1, we saw top-line and bottom-line growth
compared to the same year-ago quarter,” said Global Water Resources
president and CEO, Ron Fleming. “Revenues from water, wastewater
and recycled water services increased, which was driven by organic
growth in connections combined with new connections associated with
the acquisition of Las Quintas last November.
“In August, 2021, the regulatory hearing for our
rate case filing concluded, and our legal brief wrapped up in
October. We are now waiting for the administrative law judge to
issue the recommended opinion and order which the commissioners
will review and vote upon. A final decision is not expected until
the second quarter of 2022; therefore, any phase-in did not begin
as requested on January 1, 2022. Any new phase-in may not begin
until the third quarter of 2022 and may be shorter or longer than
three years as requested, if a revenue increase is approved. Rate
cases are typically lengthy and uncertain processes, so we cannot
make any guarantees in terms of timing or outcome.
“During the quarter we expanded our portfolio of
water utilities in Arizona with the acquisition of Rincon and Twin
Hawks. Additionally, in April, 2022, we signed a definitive
agreement to acquire Farmers Water Company located in Pima County,
Arizona, which is subject to customary closing conditions and ACC
approval. We continue to implement our industry-leading approach to
utility consolidation and operations that promotes investment,
compliance and safety, as well as better water usage practices for
the benefit of all stakeholders.
“Our capital resources of over $21 million,
which includes cash and cash equivalents of $11.1 million as of the
end of the first quarter and unused credit line of $10.0 million,
enables us to be a strong utility partner for the communities where
we have the privilege to serve. It also allows us to pursue growth
through investments in organic expansion, acquisitions and new
projects, both big and small.
“Through the remainder of the year, we expect
top-line and bottom-line improvements to be driven by organic
growth in new connections. We also anticipate future potential
growth from our acquisition strategy, as we continue to pursue
accretive acquisitions with consolidation benefits.”
Q1 2022 Financial Summary
Revenues
Total revenues increased $0.8 million, or 8.3%,
to $10.0 million for the first quarter of 2022 compared to $9.3
million for the same period in 2021. The increase in revenue was
primarily driven by organic growth combined with new connections
associated with the acquisition of Las Quintas which together
reflects the 9.7% increase in active service connections
year-over-year.
Operating Expenses
Operating expenses increased $0.5 million, or
5.5%, to $8.7 million for the first quarter of 2022 compared to
$8.2 million for the same period in 2021. The increase was
primarily attributable to increased general and administrative
expenses associated with increased professional fees, personnel and
related expenses, and depreciation.
Other Expense
Total other expense decreased $1.2 million, or
90.0%, to $0.1 million for the first quarter of 2022 compared to
$1.3 million for the same period in 2021. The $1.2 million
improvement was primarily attributable to the $1.1 million Buckeye
growth premium.
Net Income
Net income increased $1.1 million to $0.9
million, or $0.04 per share, in the first quarter of 2022 compared
to a loss of $0.2 million, or $(0.01) per share, in the same period
in 2021. The $1.1 million increase was primarily attributed to the
increased operating income driven by connection growth as well as
the decrease in total other expense due to the increased Buckeye
growth premium in the quarter ended March 31, 2022 compared to the
three months ended March 31, 2021.
Adjusted EBITDA
Adjusted EBITDA increased $1.6 million, or
45.1%, to $5.2 million in the first quarter of 2022 compared to
$3.6 million in the same period in 2021. The increase was primarily
driven by an increase in revenue from new connections and higher
Buckeye growth premium slightly offset by increased professional
fees associated with acquisitions and personnel fees (see
definition of Adjusted EBITDA, a non-GAAP term, and its
reconciliation to GAAP, below).
Capital Resources
Cash and cash equivalents totaled $11.1 million
at March 31, 2022, as compared to $12.6 million at December 31,
2021. The decrease was primarily due to the company's capital
expenditures as it continued to expand and invest in its
infrastructure. As of March 31, 2022, the company has no notable
near-term cash expenditures, other than the two principal payments
on its debt obligation in the amounts of $1.9 million each due in
June 2022 and December 2022.
Dividend Policy
The company recently declared a monthly cash
dividend of $0.02458 per common share (or $0.29496 per share on an
annualized basis), which will be payable on May 31, 2022 to holders
of record at the close of business on May 17, 2022.
Business Strategy
Global Water's near-term growth strategy
involves increasing service connections, improving operating
efficiencies, and increasing utility rates as approved by the ACC.
The company will also continue to aggregate water and wastewater
utilities, allowing the company and its customers to realize the
benefits of consolidation, regionalization, and environmental
stewardship.
Connection Rates
As of March 31, 2022, active service connections
increased by 4,850, or 9.7%, to 55,012, compared to 50,162 at March
31, 2021. The increase in active service connections was primarily
due to organic growth in the company's service areas combined with
new connections associated with the acquisition of Las Quintas.
Arizona’s Growth Corridor: Positive
Population and Economic Trends
The Metropolitan Phoenix area is steadily
growing due to low-cost housing, excellent weather, large and
growing universities, a diverse employment base, and business
friendly environment. The area's population has increased
throughout 2020 and 2021, and it continues to grow. The Employment
and Population Statistics Department of the State of Arizona
predicts that Phoenix Metro will have a population of 5.7 million
by 2030 and reach 6.5 million by 2040. During the three months
ended March 31, 2022, Arizona’s employment rate increased by 3.7%,
ranking the state in the top twenty nationally for job growth. The
company sees this strong growth outlook as an opportunity to
increase active service connections and grow revenues.
Conference Call
Global Water Resources will hold a conference
call to discuss its first quarter 2022 results tomorrow, followed
by a question-and-answer period.
Date: Thursday, May 5, 2022Time: 1:00 p.m. Eastern time (10:00
a.m. Pacific time)Toll-free dial-in number:
1-855-327-6837International dial-in number:
1-631-891-4304Conference ID: 10018950Webcast (live and replay):
here
The conference call will be webcast live and
available for replay here as well as via a link in the Investors
section of the company’s website at www.gwresources.com.
Please call the conference telephone number five
minutes prior to the start time. An operator will register your
name and organization. If you have any difficulty connecting with
the conference call, please contact CMA at 1-949-432-7566.
A replay of the call will be available after
4:00 p.m. Eastern time on the same day through May 19, 2022.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 10018950
About Global Water
Resources
Global Water Resources, Inc. is a leading water
resource management company that owns and operates 25 systems which
provide water, wastewater, and recycled water services. The
company’s service areas are located primarily in growth corridors
around metropolitan Phoenix. Global Water recycles over 1 billion
gallons of water annually.
The company has been recognized for its highly
effective implementation of Total Water Management (TWM). TWM is an
integrated approach to managing the entire water cycle by owning
and operating water, wastewater, and recycled water utilities
within the same geographic area in order to maximize the beneficial
use of recycled water. TWM includes additional smart water
management programs such as remote metering infrastructure and
other advanced technologies, rate designs, and incentives that
result in real conservation. TWM helps protect water supplies in
water-scarce areas experiencing population growth. To learn more,
visit www.gwresources.com.
Cautionary Statement Regarding Non-GAAP
Measures
This press release contains certain financial
measures that are not recognized measures under accounting
principles generally accepted in the United States of America
(“GAAP”), including EBITDA, and Adjusted EBITDA. EBITDA is defined
for the purposes of this press release as net income (loss) before
interest, income taxes, depreciation, and amortization. Adjusted
EBITDA is defined as EBITDA excluding the gain or loss related to
(i) nonrecurring events; (ii) option expense related to awards made
to the board of directors and management; (iii) restricted stock
expense related to awards made to executive officers; and (iv)
disposal of assets.
Management believes that EBITDA and Adjusted
EBITDA are useful supplemental measures of our operating
performance and provide our investors meaningful measures of
overall corporate performance. EBITDA is also presented because
management believes that it is frequently used by investment
analysts, investors, and other interested parties as a measure of
financial performance. Adjusted EBITDA is also presented because
management believes that it provides our investors a measure of our
recurring core business. However, non-GAAP measures do not have a
standardized meaning prescribed by GAAP, and investors are
cautioned that non-GAAP measures, such as EBITDA and Adjusted
EBITDA, should not be construed as an alternative to net income or
loss or other income statement data (which are determined in
accordance with GAAP) as an indicator of our performance or as a
measure of liquidity and cash flows. Management's method of
calculating EBITDA and Adjusted EBITDA may differ materially from
the method used by other companies and accordingly, may not be
comparable to similarly titled measures used by other companies. A
reconciliation of EBITDA and Adjusted EBITDA to net income (loss),
the most comparable GAAP measure, is included in the schedules
attached to this press release.
Cautionary Note Regarding
Forward-Looking Statements
This press release includes certain
forward-looking statements which reflect the company's expectations
regarding future events. The forward-looking statements involve a
number of assumptions, risks, uncertainties, and other factors that
could cause actual results to differ materially from those
contained in the forward-looking statements. These forward-looking
statements include, but are not limited to, statements concerning
future top-line and bottom-line growth, our strategy, acquisition
plans and our ability to complete additional acquisitions,
including the acquisition of Farmers Water Company and the expected
future benefits, our dividend policy, trends relating to population
growth, active service connections, regulated revenue, the
development of residential and commercial properties within our
service areas, the anticipated impacts from the COVID-19 pandemic
on the company, including to our business operations, results of
operations, cash flows, and financial position, and our future
responses to the COVID-19 pandemic, the outcome and timing of our
rate application and the anticipated timing of any resulting
phase-in of new rates, and other statements that are not historical
facts as well as statements identified by words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks",
"estimates", or the negative of these terms, or other words of
similar meaning. These statements are based on our current beliefs
or expectations and are inherently subject to a number of risks,
uncertainties, and assumptions, most of which are difficult to
predict and many of which are beyond our control. Actual results
may differ materially from these expectations due to changes in
political, economic, business, market, regulatory, and other
factors, including the duration and severity of the COVID-19
pandemic and the actions to contain the virus or treat its impact,
such as the efficacy of vaccines (particularly with respect to
emerging strains of the virus). Factors that may also affect future
results are disclosed under the headings “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our filings with the Securities and
Exchange Commission (the "SEC"), which are available at the SEC's
website at www.sec.gov. This includes, but is not limited to, our
Annual Report on Form 10-K for the year ended December 31, 2021,
our Quarterly Report on Form 10-Q for the quarter ended March 31,
2022, and subsequent filings with the SEC. Additional risks and
uncertainties include, but are not limited to, whether all
conditions precedent in the definitive agreement to acquire Farmers
Water Company will be satisfied, including the receipt of ACC
approval, and other risks to consummation of the acquisition,
including circumstances that could give rise to the termination of
the definitive agreement and the risk that the transaction will not
be consummated without undue delay, cost or expense, or at all.
Accordingly, investors are cautioned not to place undue reliance on
any forward-looking statements, which reflect management’s views as
of the date hereof. We undertake no obligation to publicly update
any forward-looking statement, except as required by law, whether
as a result of new information, future developments or
otherwise.
Company Contact:Michael J. Liebman CFO and
SVPTel (480) 999-5104 mike.liebman@gwresources.com
Investor Relations:Ron Both or Justin LumleyCMA
Investor RelationsTel (949) 432-7566GWRS@cma.team
Media & ESG Contact:Tim RandallCMA Tel
(949) 432-7572GWRS@cma.team
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited, in thousands, except share and
per share amounts)
|
March 31, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
UTILITY PLANT: |
|
|
|
Land |
|
1,456 |
|
|
|
1,338 |
|
Depreciable property, plant and equipment |
|
315,721 |
|
|
|
313,700 |
|
Other |
|
697 |
|
|
|
697 |
|
Construction work-in-process |
|
59,023 |
|
|
|
53,511 |
|
Less accumulated depreciation |
|
(117,088 |
) |
|
|
(113,380 |
) |
Net property, plant and equipment |
|
259,809 |
|
|
|
255,866 |
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
|
11,135 |
|
|
|
12,637 |
|
Accounts receivable — net |
|
1,927 |
|
|
|
1,994 |
|
Customer payments in-transit |
|
323 |
|
|
|
201 |
|
Unbilled revenue |
|
2,584 |
|
|
|
2,510 |
|
Prepaid expenses and other current assets |
|
1,876 |
|
|
|
1,645 |
|
Total current assets |
|
17,845 |
|
|
|
18,987 |
|
OTHER ASSETS: |
|
|
|
Goodwill |
|
5,760 |
|
|
|
5,730 |
|
Intangible assets — net |
|
10,359 |
|
|
|
10,339 |
|
Regulatory asset |
|
2,769 |
|
|
|
2,336 |
|
Restricted cash |
|
806 |
|
|
|
806 |
|
Other noncurrent assets |
|
34 |
|
|
|
10 |
|
Right of Use Asset - Finance Lease |
|
50 |
|
|
|
— |
|
Total other assets |
|
19,778 |
|
|
|
19,221 |
|
TOTAL ASSETS |
|
297,432 |
|
|
|
294,074 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
|
602 |
|
|
|
2,120 |
|
Accrued expenses |
|
10,815 |
|
|
|
9,191 |
|
Customer and meter deposits |
|
1,732 |
|
|
|
1,646 |
|
Long-term debt and capital leases — current portion |
|
3,981 |
|
|
|
3,975 |
|
Total current liabilities |
|
17,130 |
|
|
|
16,932 |
|
NONCURRENT LIABILITIES: |
|
|
|
Long-term debt and capital leases |
|
108,911 |
|
|
|
108,933 |
|
Deferred revenue - ICFA |
|
20,108 |
|
|
|
19,035 |
|
Regulatory liability |
|
7,425 |
|
|
|
7,421 |
|
Advances in aid of construction |
|
85,654 |
|
|
|
84,578 |
|
Contributions in aid of construction — net |
|
21,842 |
|
|
|
21,326 |
|
Deferred income tax liabilities — net |
|
3,420 |
|
|
|
3,269 |
|
Acquisition liability |
|
1,762 |
|
|
|
1,773 |
|
Other noncurrent liabilities |
|
1,490 |
|
|
|
778 |
|
Right of Use Liability - Finance Lease |
|
50 |
|
|
|
— |
|
Total noncurrent liabilities |
|
250,662 |
|
|
|
247,113 |
|
Total liabilities |
|
267,792 |
|
|
|
264,045 |
|
Commitments and
contingencies |
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Common stock, $0.01 par value, 60,000,000 shares authorized;
22,832,263 and 22,832,013 shares issued as of March 31, 2022 and
December 31, 2021, respectively. |
|
228 |
|
|
|
228 |
|
Treasury stock, 182,445 and 182,445 shares at March 31, 2022 and
December 31, 2021, respectively. |
|
(2 |
) |
|
|
(2 |
) |
Paid in capital |
|
29,414 |
|
|
|
29,803 |
|
Retained earnings |
|
— |
|
|
|
— |
|
Total shareholders' equity |
|
29,640 |
|
|
|
30,029 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
297,432 |
|
|
$ |
294,074 |
|
|
|
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited, in thousands, except share
and per share amounts)
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
REVENUES: |
|
|
|
Water services |
$ |
4,348 |
|
|
$ |
3,986 |
|
Wastewater and recycled water services |
|
5,681 |
|
|
|
5,243 |
|
Unregulated revenues |
|
— |
|
|
|
29 |
|
Total revenues |
|
10,029 |
|
|
|
9,258 |
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
Operations and maintenance |
|
2,543 |
|
|
|
2,499 |
|
General and administrative |
|
3,780 |
|
|
|
3,490 |
|
Depreciation and amortization |
|
2,343 |
|
|
|
2,226 |
|
Total operating expenses |
|
8,666 |
|
|
|
8,215 |
|
OPERATING INCOME |
|
1,363 |
|
|
|
1,043 |
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
Interest income |
|
2 |
|
|
|
5 |
|
Interest expense |
|
(1,205 |
) |
|
|
(1,325 |
) |
Other |
|
1,072 |
|
|
|
15 |
|
Total other expense |
|
(131 |
) |
|
|
(1,305 |
) |
|
|
|
|
INCOME (LOSS) BEFORE INCOME
TAXES |
|
1,232 |
|
|
|
(262 |
) |
INCOME TAX BENEFIT (EXPENSE) |
|
(343 |
) |
|
|
45 |
|
NET INCOME (LOSS) |
$ |
889 |
|
|
$ |
(217 |
) |
|
|
|
|
Basic earnings (loss) per common
share |
$ |
0.04 |
|
|
$ |
(0.01 |
) |
Diluted earnings (loss) per
common share |
$ |
0.04 |
|
|
$ |
(0.01 |
) |
Dividends declared per common
share |
$ |
0.07 |
|
|
$ |
0.07 |
|
|
|
|
|
Weighted average number of common
shares used in the determination of: |
|
|
|
Basic |
|
22,649,215 |
|
|
|
22,587,766 |
|
Diluted |
|
22,901,232 |
|
|
|
22,587,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited, in thousands)
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income (loss) |
$ |
889 |
|
|
$ |
(217 |
) |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Deferred compensation |
|
498 |
|
|
|
775 |
|
Depreciation and amortization |
|
2,343 |
|
|
|
2,226 |
|
Amortization of deferred debt issuance costs and discounts |
|
11 |
|
|
|
11 |
|
Other losses |
|
(8 |
) |
|
|
— |
|
Provision for doubtful accounts receivable |
|
26 |
|
|
|
42 |
|
Deferred income tax expense |
|
151 |
|
|
|
(79 |
) |
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
|
41 |
|
|
|
370 |
|
Other current assets |
|
(452 |
) |
|
|
(74 |
) |
Accounts payable and other current liabilities |
|
74 |
|
|
|
798 |
|
Other noncurrent assets |
|
20 |
|
|
|
(50 |
) |
Other noncurrent liabilities |
|
1,778 |
|
|
|
999 |
|
Net cash provided by operating activities |
|
5,371 |
|
|
|
4,801 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Capital expenditures |
|
(6,169 |
) |
|
|
(3,269 |
) |
Cash paid for acquisitions, net of cash acquired |
|
(85 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(6,254 |
) |
|
|
(3,269 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Dividends paid |
|
(1,670 |
) |
|
|
(1,650 |
) |
Advances in aid of construction |
|
1,076 |
|
|
|
987 |
|
Proceeds from stock option exercise |
|
3 |
|
|
|
— |
|
Principal payments under capital lease |
|
(28 |
) |
|
|
(31 |
) |
Net cash (used) provided by financing
activities |
|
(619 |
) |
|
|
(694 |
) |
INCREASE IN CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH |
|
(1,502 |
) |
|
|
838 |
|
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH — Beginning of period |
|
13,443 |
|
|
|
21,305 |
|
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH – End of period |
$ |
11,941 |
|
|
$ |
22,143 |
|
|
Supplemental disclosure of cash flow
information:
|
March 31, 2022 |
|
March 31, 2021 |
Cash and cash equivalents |
$ |
11,135 |
|
$ |
18,209 |
Restricted Cash |
|
806 |
|
|
3,934 |
Total cash, cash equivalents, and restricted cash |
$ |
11,941 |
|
$ |
22,143 |
|
A reconciliation of net income (loss) to EBITDA and Adjusted
EBITDA for the three months ended March 31, 2022 and 2021 is as
follows (in thousands):
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Net Income
(Loss) |
|
$ |
889 |
|
|
$ |
(217 |
) |
Income tax expense (benefit) |
|
|
343 |
|
|
|
(45 |
) |
Interest income |
|
|
(2 |
) |
|
|
(5 |
) |
Interest expense |
|
|
1,206 |
|
|
|
1,325 |
|
Depreciation and
amortization |
|
|
2,343 |
|
|
|
2,226 |
|
EBITDA |
|
|
4,779 |
|
|
|
3,284 |
|
Management option expense |
|
|
45 |
|
|
|
112 |
|
Gain on disposal of assets |
|
|
(8 |
) |
|
|
— |
|
Restricted stock expense |
|
|
344 |
|
|
|
159 |
|
EBITDA adjustments |
|
|
381 |
|
|
|
271 |
|
Adjusted
EBITDA |
|
$ |
5,160 |
|
|
$ |
3,555 |
|
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