Global Water Resources NASDAQ: GWRS reported higher first-quarter revenue but swung to a loss as increased depreciation, operating costs and interest expense weighed on results, management said on the company’s May 14 earnings call.
President and Chief Executive Officer Ron Fleming said the company remains focused on long-term earnings growth, but near-term results continue to reflect the cost of recent investments, including the recommissioning of the Southwest Plant Water Reclamation facility. Fleming said those investments are expected to grow rate base and support future earnings, but they also increased operating expenses, “most notably, depreciation expense.”
“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,” Fleming said.
Revenue Rises, But Expenses Outpace Growth
Chief Financial Officer Mike Liebman said total revenue for the first quarter of 2026 was $13.3 million, up $0.8 million, or 6.7%, from the first quarter of 2025. He attributed the increase primarily to the acquisition of seven water systems from the City of Tucson in July 2025, organic connection growth and higher rates in the company’s GW Farmer utility.
Operating expenses rose to $12.9 million, up $1.7 million, or 15.1%, from $11.2 million in the prior-year quarter. Liebman said depreciation, amortization and accretion expense increased $0.9 million, largely due to additional depreciable fixed assets placed in service last year as part of the 2025 capital improvement plan and related commissioned projects.
Operating and maintenance costs increased by approximately $0.5 million, driven by higher medical expense, increased purchased power tied to newly operational plants and wastewater disposal expenses related to the startup of two new wastewater reclamation facilities. General and administrative costs rose by approximately $0.3 million, also primarily due to rising medical costs.
Other expense totaled $0.9 million in the first quarter, compared with $0.5 million in the same period last year. Liebman said the increase was mainly due to higher interest expense, lower interest income and a decrease in income associated with the company’s Buckeye growth premiums.
Global Water Resources posted a net loss of $0.4 million, or $0.01 per diluted share, compared with net income of $0.6 million, or $0.02 per diluted share, in the first quarter of 2025. Adjusted EBITDA was unchanged at $5.6 million in both periods.
Customer Connections Continue to Grow
Fleming said total active service connections increased 5.7% year over year to 68,885 as of March 31, 2026. Excluding the acquisition of the seven Tucson water systems, the company achieved an annualized 1.9% total active service connection growth rate in 2026.
The company invested $6.3 million in infrastructure improvements in existing utilities during the year to provide safe and reliable service, Fleming said.
Management also discussed trends in the Arizona housing market, which influence customer growth. Fleming said the single-family dwelling unit market ended 2025 with approximately 21,815 building permits issued in the Phoenix metropolitan statistical area. In the first quarter of 2026, the Phoenix MSA recorded 5,204 building permits, down 18.8% from the same period in 2025. The Maricopa market recorded 157 permits, down 16.5% year over year.
Despite the slowdown in new permit activity, Fleming said continued growth in the Phoenix MSA and the city of Maricopa was reflected in the company’s 2.6% year-over-year organic increase in active connections. He said the company views the decline in permits as temporary and believes it remains positioned to benefit from long-term growth in the region, citing job growth, affordability, improving transportation, including State Route 347 widening, and the company’s large Assured Water Supply.
Rate Case Settlement Outlines Path for Santa Cruz Increase
Chief Operating Officer Christopher Krygier reviewed regulatory activity and said the company reached a unanimous settlement in its pending rate reviews, as previously disclosed in an April 29 press release and Form 10-Q.
The 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 through an extension of the existing temporary bill credit. The estimated effective date for the new rates is Nov. 1, 2026.
Krygier said the settlement allows the company to close most of the history related to GW Santa Cruz’s southwest area water assets and shift attention to wastewater assets. The next steps include filing testimony in support of the settlement by the end of May, with a hearing scheduled to begin in August 2026. After the hearing, an administrative law judge will write a recommendation for the Arizona Corporation Commission’s consideration.
As part of the settlement, Global Water Resources agreed to withdraw the GW Palo Verde rate review. Krygier said the company anticipates filing a new rate review request for GW Palo Verde’s wastewater assets in 2027, with new rates estimated to be implemented in 2028. That future request is expected to include the Southwest Plant Water Reclamation facility, incremental capital investments made since 2025 and operating expenses from a 2026 test year.
Management Signals More Rate Filings Ahead
Fleming said the recently announced settlement provides a clearer path to a “notable rate increase” for GW Santa Cruz later this year, while the revised timeline for GW Palo Verde addresses differences of opinion over the timing of rate recovery tied to the Southwest Plant Water Reclamation facility.
He said the company is working to control expenses in 2026 and has reduced the pace of capital investments. Longer term, management said it expects revenue and earnings growth to come from appropriate rate increases and anticipated organic growth.
Krygier said the company is planning multiple rate review filings and expects to provide updates during its next quarterly call in August 2026. Those updates are expected to include timing for future rate review filings for the Farmers Division, Saguaro Division, Ocotillo Division and Santa Cruz Division, among others.
The call’s question-and-answer session concluded without any questions from participants. In closing remarks, Fleming thanked investors for their interest in the company and reiterated management’s focus on growth and serving communities along Arizona’s Sun Corridor.
About Global Water Resources NASDAQ: GWRS
Global Water Resources, Inc NASDAQ: GWRS is a publicly traded holding company based in Scottsdale, Arizona, specializing in the ownership and management of water and wastewater utilities. The company provides critical potable water delivery, wastewater collection and treatment, and reclaimed water services to residential, commercial and industrial customers across select communities in Central and Southern Arizona.
The company operates multiple regulated utility systems, serving communities such as Anthem, Biltmore, Florence and San Tan Valley.
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