Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2024 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

[Operator Instructions] I would like to remind everyone that this call is being recorded on November 7, 2024, at 1:00 p.m. Eastern Time. I would now like to turn the conference over to Joanne Ellsworth, Executive Vice President of Corporate Affairs. Please go ahead..

Thank you. Welcome, everyone. Thank you for joining us on today's call. Yesterday, we issued our 2024 third quarter financial results by press release. A copy of which is available on our website at www.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, and Chris will review strategic initiatives and the Arizona Corporation Commission activity for the quarter. 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 sections Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations included within our latest Form 10-K filed with the SEC. Such filings are available at www.sec.gov.

Certain non-GAAP measures may be included within today's call. For a reconciliation of these measures to the comparable GAAP financial 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..

organic connections, new greenfield utilities, acquisitions and rate cases, you can see how Global Water is going to be able to grow earnings considerably in the years to come as we continue to advance our mission of growing and aggregating water and wastewater utilities so that our customers can realize the benefits of consolidation, regionalization and environmental stewardship in the face of rapid growth, water scarcity, challenging regulations and aging infrastructure.

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

Thanks, Ron. Hello, everyone. Total revenue for the third quarter of 2024 was $14.3 million, which was down $0.2 million or 1.5% compared to Q3 2023.

The decrease in revenue was primarily attributable to ICFA revenue recognized in Q3 2023 that did not recur in Q3 2024 and was partially offset by an increase in wastewater and recycled water services revenue largely as a result of a 5% increase in active wastewater connections.

Regulated revenue, which excludes ICFA revenue, for Q3 2024 was $14.3 million, which was up $0.3 million or 2.2% compared to Q3 2023. This increase was primarily due to the increase in organic connection growth. Operating expenses for Q3 2024 were $10.3 million compared to $10.7 million in Q3 2023.

This is a decrease of approximately $0.4 million or 3.3%. Notable changes in operating expenses included $252,000 decrease in depreciation and amortization, primarily driven by lower amortization of intangible assets related to acquired ICFAs that did not recur in Q3 2024.

This was partially offset by additional depreciation expense tied to our capital expenditure program. And secondly, we had a decrease in operating and maintenance costs by $143,000, which was primarily attributable to a decrease in medical expenses and salary and wages. Now to discuss other income and expense.

Other income for Q3 2024 was $2,000 as compared to other expense of $315,000 in Q3 2023. This improvement was primarily driven by higher income from the Buckeye growth premium. Net income for Q3 2024 was $2.9 million or $0.12 per diluted share as compared to $2.6 million or $0.11 per diluted share in Q3 2023.

And now let's talk about adjusted EBITDA, which adjusts for nonrecurring items such as ICFA revenue as well as noncash items, such as restricted stock expense. Adjusted EBITDA was $8.2 million in Q3 of 2024 compared to $7.6 million in Q3 2023. This is an increase of approximately $600,000 or 7.2%.

This concludes our update on the third quarter 2024 financial results. I'll now pass the call to Chris to review our regulatory activity and strategic initiatives for the quarter..

Thanks, Mike. Hello, everyone. First, an election update. As you may know, here in Arizona, we had three of the five seats on the Arizona Corporation Commission on the ballot.

The results are still preliminary, but as of this morning, the three Republican candidates, current incumbent Commissioner Marquez Peterson, Rachel Walden and Rene Lopez are the top three vote getters. In terms of actual activity at the commission, it has been relatively quiet since the last time we spoke.

First, the Tucson acquisition approval application continues progressing with the ACC Utilities Division staff recommendation to be filed today, and the hearing is scheduled for next week. After the hearing, the administrative law judge will issue a recommended opinion and order for the commission's consideration at a future open meeting date.

We estimate to close the acquisition in the first quarter of 2025. Second, the Global Water Farmers rate case continues on its ACC process. We still estimate that Utilities Division staff will file their initial recommendations in December 2024, and we will provide an update in the future.

As is always the case with our rate cases, we cannot guarantee what action the commission may or may not take. Finally, as you heard Ron mention earlier, we are in a test year for our Global Water Santa Cruz and Global Water Palo Verde utilities, the two largest utilities within the Company.

We continue our customer outreach efforts to educate the community on the investments we are making to ensure we provide safe, reliable service and stay ahead of growth. We anticipate filing the rate case in the first half of 2025. Once the case is filed, it takes approximately one year from the date of sufficiency to receive a commission order.

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

Thank you, Chris. So, this quarter, we continue to achieve meaningful growth despite headwinds. As we execute our growth plan, 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 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] And our first question today will come from Gerry Sweeney with ROTH Capital..

Just one or two questions actually. Great quarter, speaks for itself. But obviously, the political landscape has changed a little bit this week. And expectations are maybe continued reshoring of manufacturing into the U.S., maybe speed that up as well as maybe some semiconductor opportunities, et cetera.

I'm just curious if you had any viewpoints on the political landscape that's changed and impact on the Greater Phoenix area as well as your operations?.

Yes, happy to take that. I agree with your assessment there. What's interesting is as we talk about it, it's available in our investor deck and on our website, the slope of the curve on economic development investment here in Arizona and specific to industrial manufacturing is up and to the right in a pretty significant slope.

And that has been over the last three years really, coming out of COVID and some of the things the prior administration has done. And really a lot of great work here in the State of Arizona as well. And so in some ways, I think this is just going to throw a little bit more fuel on the fire that already exists.

So for us, you're seeing more and more of that push out from the Greater metro-Phoenix area to these new emerging communities and counties for a couple of reasons, and I don't think we've really talked about this.

Not only is it just the land availability piece, but there's two things going on that I think is going to accelerate it coming out of our direction, and really any of these more kind of historically more rural areas. One is the cost of housing. So that's obviously gone up quite a bit here in the Phoenix area and Arizona as a whole.

And these new industries, as we talk to them and participate on economic development boards, they're quite interested in the housing availability and living affordability of the areas for their employees. So we obviously compete really strongly on that because we have some of the lowest affordability numbers in the metro-Phoenix area where we are.

So I think that matters. And the second one is power supply. But in the future, we may talk about this more, but this type of growth, obviously, is not just impacting our water industry but the power industry as well.

And what is difficult is getting the infrastructure into some of these infill sites at the scale that is needed for the type of manufacturing facilities that are going in.

So they're actually being redirected out to these more rural areas because the large power providers, be it APS or SRP or TEP, they actually have better access to run the type of transmission that's needed to these rural areas versus into heavily developed areas.

So we think it's going to just continue to be up and to the right, and in some respects, move more out to the areas that we've been talking about, including our Inland Port project and like the City of Maricopa..

Got it. Helpful. And then just one easy housekeeping question for Mike. Mike, do you know how much the Buckeye premium was this quarter? I'm sorry, it's been a long morning. I can't get everything..

Yes, no problem. It was about just under $920,000, compared to 2023, it was about $730,000. So it was up over $180,000 or 25%. So it's been a pretty good run. And year-to-date, we're at about $2.2 million versus $1.6 million last year. So that's up north of $500,000 or 35%. So the Buckeye premium has been strong.

And again, as Ron mentioned, it's another one of those areas where it's a lot more affordable than metro-Phoenix itself because it's on the outskirts. And so it's been nice and looking forward to seeing that sustained or even continue to grow..

Got it. That's it for me. Congrats on the nice quarter..

[Operator Instructions] I'm seeing no further questions. This will conclude our question-and-answer session. I would like to turn the conference back over to Ron Fleming for any closing remarks..

Yes. Thank you, operator. I'd just like to thank everybody for participating on the call and for your ongoing interest and support of 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 your lines, and have a nice day..