What Global Water Resources (GWRS) Said on Its Q3 Earnings Call

Key Points

• Q3 earnings fell despite revenue growth: Revenue rose 5% to $16.3 million, but net income declined to $1 million, or $0.03 per share, as operating expenses climbed 10.4% and infrastructure-related depreciation increased. Adjusted EBITDA was nearly flat at $7.8 million.
• Rate increases are central to the company’s recovery plan: New Santa Cruz rates taking effect Dec. 1, 2026, are expected to add $2.3 million in annual revenue, partly offset by a $0.4 million reduction elsewhere. Global Water plans four more rate applications in 2027, with new rates estimated for 2028.
• Active service connections grew 2.4% year over year to 69,797, while the company invested $6.9 million in infrastructure. It also added $20 million in liquidity through a stock placement and a larger credit line, which remained unused at quarter-end.

Global Water Resources NASDAQ: GWRS reported lower third-quarter earnings despite higher revenue, as depreciation and operating costs tied to infrastructure investments outpaced growth in customer connections and rates.

The Arizona water utility reported net income of $1 million, or $0.03 per diluted share, for the third quarter of 2026, down from $1.7 million, or $0.06 per diluted share, a year earlier. Revenue rose 5% to $16.3 million.

President and CEO Ron Fleming said the company is focused on restoring earnings growth after a period of significant capital spending, including work to recommission its Southwest Plant Water Reclamation Facility. The investments increased depreciation and other expenses before the company could recover those costs through customer rates.

“We need new rates to keep up with all the investment and inflation that we have experienced in our utilities,” Fleming said on the earnings call.

Expenses rise faster than revenue

Third-quarter operating expenses increased 10.4% to $13.9 million from $12.6 million a year earlier. Depreciation, amortization and accretion rose $1.1 million, largely because additional utility infrastructure was placed in service, CFO Mike Liebman said.

Operations and maintenance costs rose approximately $0.4 million in the quarter, primarily because of higher utility, chemical and repair expenses associated with newly operational facilities, as well as rising medical costs. General and administrative expenses decreased modestly to $4.8 million from $4.9 million.

Other expense increased to $1 million from $0.6 million, primarily reflecting higher net interest expense and lower income associated with Buckeye growth premiums. Adjusted EBITDA was largely unchanged at $7.8 million.

For the first nine months of 2026, revenue increased 12.2% to $47.4 million, while net income declined to $3.4 million, or $0.12 per diluted share, from $3.9 million, or $0.15 per diluted share. Year-to-date adjusted EBITDA rose 5% to $21.4 million.

Liebman said year-to-date revenue benefited from $2.1 million recognized under infrastructure coordination and financing agreements, as well as six additional months of revenue from seven water systems acquired from Tucson Water in July 2025.

Rate cases central to earnings strategy

COO Chris Krygier said Arizona regulators unanimously approved a rate review order for Global Water-Santa Cruz, the company’s largest water utility. The new rates take effect Dec. 1, 2026, and are expected to generate $2.3 million in additional annual revenue. The company anticipates that a $0.4 million rate reduction related to Global Water-Palo Verde will offset part of that increase, for a net annual increase of $1.9 million.

Krygier said the Santa Cruz order materially resolved issues concerning the Southwest Plant’s water assets and reflects a rate base 50% higher than in the previous approved rate decision.

The company plans to file four additional rate applications in the first half of 2027 for Palo Verde, Farmers, Ocotillo and Saguaro District. The applications contemplate a 2026 test year and a 2027 post-test year, with new rates estimated for 2028.

For Palo Verde, the company’s largest wastewater utility, the main objective is to resolve rate recovery for the Southwest Plant’s wastewater assets. Fleming said the case was delayed because of a disagreement over the timing of recovery. He added that the utility is already incurring depreciation and operating costs for facilities that are in service.

For the other three utilities, Global Water wants to consolidate three sets of rates into one and recover costs associated with their acquisition and transformation. Krygier said the company has not yet quantified the potential rate base or revenue opportunities from the cases.

To reduce regulatory lag, Krygier said the company is considering tools including formula rates for the smaller Pima County utilities that could potentially allow annual rate adjustments. He also said surcharge mechanisms are among the options under consideration. Liebman said the company has opted not to provide financial guidance, citing its Arizona concentration and regulated business.

Connection growth and liquidity

Active service connections increased 2.4% year over year to 69,797 at the end of the quarter. Global Water invested $6.9 million in infrastructure improvements at existing utilities during the period.

Fleming said single-family building permits in the Phoenix metropolitan area fell 10% in the first nine months of 2026 from the same period a year earlier. Permits in the Maricopa market fell 2.1% over that period, though October figures put Maricopa nearly 2% ahead of 2025, he said.

Fleming attributed the recent slowdown in part to higher interest rates. He said increased occupancy in multifamily housing was supporting revenue even where it did not produce new meter connections.

During the quarter, the company added $20 million in liquidity through a $10 million private placement of common stock and a $10 million increase in its credit line, bringing the line’s availability to $30 million. The line was unused at quarter-end, Liebman said.

About Global Water Resources (NASDAQ:GWRS)

Global Water Resources, Inc NASDAQ: GWRS is a water resource management company that owns and operates regulated water, wastewater and recycled water utilities in Arizona. The company provides essential services to residential, commercial and industrial customers, including the delivery of potable water, collection and treatment of wastewater, and the production and distribution of recycled water.

Global Water Resources serves communities primarily in the Phoenix metropolitan area and other growing areas of central and southern Arizona.

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