Global Water Resources, Inc. (NASDAQ: GWRS), (TSX: GWR), a
pure-play water resource management company, reported results for
the first quarter ended March 31, 2021. 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 2021 Financial
Highlights
- Revenues increased 12.5% to $9.3
million, driven by organic connection growth, increased
consumption, and increased rates.
- Cash and cash equivalents totaled $18.2 million at March 31,
2021.
- Declared three monthly cash
dividends of $0.02434 per common share, or $0.29208 per share on an
annualized basis.
Q1 2021 Operational
Highlights
- Total active service connections
increased 8.5% to 50,162 at March 31, 2021 from 46,227 at March 31,
2020.
- Entered into a master utility
agreement with Nikola Corporation to provide water and wastewater
services to its new manufacturing plant in Coolidge, Arizona,
adjacent to Inland Port Arizona.
- Signed agreements to acquire two
small water utility companies, Twin Hawks Utility and Rincon Water
Company. The company filed for regulatory approval of these
acquisitions in April and anticipates a decision in the second half
of the year.
- Distributed over $0.1 million in the
company's recently expanded customer assistance program for those
who had difficulty paying their utility bills due to COVID-19.
Management Commentary
“Just over one year into the global pandemic,
Global Water continues to perform very well, including and most
importantly our track record relating to environmental compliance,
and the health, safety, and satisfaction of our customers and
employees,” stated Global Water Resources president and CEO, Ron
Fleming. “In Q1, total revenues were $9.3 million, up 12.5% versus
the same year-ago quarter. The increase was driven by greater water
consumption, organic growth in connections, and increased
rates.
“During the quarter, we continued to ramp up capital investments
as required to manage the growth indicated and for new service
areas. We also started the infrastructure design and engineering
efforts for Inland Port Arizona, a 2,700 acre or 3.4 square mile
property located in the City of Coolidge. We believe the project
will help us expand our current service areas and establish new
service areas.
“In January, we announced a master utility agreement to serve a
Nikola manufacturing facility that is located next to Inland Port
Arizona. Construction of the plant is underway and we are working
on the first stages of implementing a water and wastewater solution
for the site. While we do not anticipate Nikola's initial usage
demand to be material, we are encouraged by the related long-term
growth prospects of the larger Inland Port Arizona area.
“We remain well positioned with a strong balance sheet and
disciplined strategy. Given our cash and cash equivalents of $18.2
million and unused credit line of $10 million, we believe this
allows us to be a great utility partner for the communities we have
the privilege to serve, as well as to pursue expansion through
organic growth, acquisitions, and new projects both big and
small.
“We continue to evaluate potential acquisitions of water and
wastewater utilities across the State of Arizona, from the very
small to very large. We remain confident about our near-term
opportunities, and plan to make additional ‘tuck-in’ acquisitions
this year.
“Coming up in August, we have a regulatory hearing regarding our
rate case filing. Any new rates established by the filing would be
effective for most of our utilities through and up to a three-year
phase-in period starting in January of next year. Rate cases are
typically a lengthy process, and there can be no guarantees as to
the timing or outcome.
“We anticipate continued growth across all areas of our business
supported by ongoing population and job growth throughout
metro-Phoenix and our other service areas. We plan to remain at the
forefront of the water management industry, as we advance our
mission of achieving efficiency and consolidation for the benefit
of our shareholders and the communities we serve.”
Q1 2021 Financial Summary
Revenues
Total revenues in the first quarter of 2021
increased $1.0 million, or 12.5%, to $9.3 million compared to $8.2
million in the same period in 2020. This increase was primarily
driven by an increase of 8.5% in active service connections
combined with an increase in usage and rates.
Operating Expenses
Operating expenses increased $1.8 million, or
27.7%, to $8.2 million in the first quarter of 2021 compared to
$6.4 million in the same period in 2020. The increase was primarily
attributed to increased general and administrative expenses
associated with increased deferred compensation which is directly
tied to the increase in the company's stock price. Further
contributing to the expense increase in the first quarter of 2021
was the significant reduction to deferred compensation in the first
quarter of 2020 as a result of the pandemic and its negative impact
to the company's stock price.
Other Expense
Total other expense increased $0.1 million to
$1.3 million in the first quarter of 2021, compared to $1.2 million
in the first quarter of 2020. The increase in other expense was
primarily attributed to reduced interest income received in the
first quarter of 2021.
Net Income (Loss)
Net loss totaled $0.2 million, or $(0.01) per
share, in the first quarter of 2021, compared to net income of $0.4
million, or $0.02 per share, in the same period in 2020. The
decrease was primarily attributed to the decrease in operating
income, which was primarily driven by the increases in operations
and maintenance and general and administrative expenses, partially
offset by increases in water, wastewater, and recycled water
services revenue.
Adjusted EBITDA
Adjusted EBITDA decreased $0.5 million, or
12.7%, to $3.6 million in the first quarter of 2021, compared to
$4.1 million for the same period in 2020. The decrease was due to
increased operating expenses, which was partially offset by an
increase in revenue from organic connection growth, increased
consumption, and higher rates (see definition of Adjusted EBITDA, a
non-GAAP term, and its reconciliation to GAAP, below).
Capital Resources Cash and cash
equivalents totaled $18.2 million at March 31, 2021, as compared to
$18.0 million at December 31, 2020. The increase was primarily due
to cash generated from operating activities. As of March 31, 2021,
the company has no notable near-term cash expenditures, other than
the first principal payment on its debt obligation in the amount of
$1.9 million due in December 2021.
Subsequent to the end of the first quarter of
2021, the company extended the maturity date for its three-year
revolving $10 million credit line from April 30, 2022 to April 30,
2024. The full amount under this credit line remains available
to-date.
Dividend Policy The company
recently declared a monthly cash dividend of $0.02434 per common
share (or $0.29208 per share on an annualized basis), which will be
payable on May 28, 2021 to holders of record at the close of
business on May 14, 2021.
Business StrategyGlobal Water's
near-term growth strategy involves increasing service connections,
improving operating efficiencies, and increasing utility rates as
approved by the Arizona Corporation Commission. 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, 2021, active service connections increased by 3,935, or 8.5%,
to 50,162, compared to 46,227 at March 31, 2020. The increase in
active service connections was primarily due to growth in the
company's service areas. As of March 31, 2021, the vacancy rate was
0.5%.
Arizona’s Growth Corridor: Positive
Population 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 2019 and 2020, 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. The company sees this strong
growth outlook as an opportunity to increase active service
connections and grow revenues.
Conference CallGlobal Water
Resources will hold a conference call to discuss its first quarter
2021 results tomorrow, followed by a question and answer
period.
Date: Thursday, May 6, 2021Time: 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: 10013969
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 20, 2021.
Toll-free replay number: 1-844-512-2921International replay
number: 1-412-317-6671Replay ID: 10013969
About Global Water
Resources
Global Water Resources, Inc. is a leading water
resource management company that owns and operates 16 utilities
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 nearly 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 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; and (iii) restricted
stock expense related to awards made to executive officers.
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 exclusive of our capital structure
and the method and timing of certain expenditures. 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 this measure provides our
investors measures 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, 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 net income growth, our strategy, acquisition plans and our
ability to complete additional acquisitions, 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
success of our rate application and the 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). Accordingly, investors are
cautioned not to place undue reliance on any forward-looking
statements, which reflect management’s views as of the date hereof.
Factors that may 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, 2020, our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2021, and subsequent filings with the SEC.
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 SVP and
CFOTel (480) 999-5104 mike.liebman@gwresources.com
Investor Relations:Ron Both or Grant StudeCMA
Investor Relations Tel (949) 432-7566GWRS@cma.team
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited, in thousands, except share and
per share amounts)
|
March 31, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
PROPERTY, PLANT AND
EQUIPMENT: |
|
|
|
Property, plant and equipment |
$ |
345,897 |
|
|
|
$ |
340,193 |
|
|
Less accumulated depreciation |
(103,624 |
) |
|
|
(101,302 |
) |
|
Net property, plant and equipment |
242,273 |
|
|
|
238,891 |
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
18,209 |
|
|
|
18,033 |
|
|
Accounts receivable — net |
1,735 |
|
|
|
2,147 |
|
|
Customer payments in-transit |
155 |
|
|
|
306 |
|
|
Unbilled revenue |
2,499 |
|
|
|
2,304 |
|
|
Prepaid expenses and other current assets |
694 |
|
|
|
665 |
|
|
Total current assets |
23,292 |
|
|
|
23,455 |
|
|
OTHER ASSETS: |
|
|
|
Goodwill |
4,591 |
|
|
|
4,600 |
|
|
Intangible assets — net |
11,185 |
|
|
|
11,185 |
|
|
Regulatory asset |
2,086 |
|
|
|
2,036 |
|
|
Restricted cash |
3,934 |
|
|
|
3,272 |
|
|
Other noncurrent assets |
9 |
|
|
|
— |
|
|
Total other assets |
21,805 |
|
|
|
21,102 |
|
|
TOTAL ASSETS |
287,370 |
|
|
|
283,448 |
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
533 |
|
|
|
531 |
|
|
Accrued expenses |
10,131 |
|
|
|
8,261 |
|
|
Deferred revenue |
2 |
|
|
|
4 |
|
|
Customer and meter deposits |
1,564 |
|
|
|
1,558 |
|
|
Long-term debt and capital leases — current portion |
2,032 |
|
|
|
2,035 |
|
|
Total current liabilities |
14,262 |
|
|
|
12,389 |
|
|
NONCURRENT LIABILITIES: |
|
|
|
Long-term debt and capital leases |
112,641 |
|
|
|
112,659 |
|
|
Deferred revenue - ICFA |
18,121 |
|
|
|
17,843 |
|
|
Regulatory liability |
8,002 |
|
|
|
7,986 |
|
|
Advances in aid of construction |
80,025 |
|
|
|
76,384 |
|
|
Contributions in aid of construction — net |
14,488 |
|
|
|
14,632 |
|
|
Deferred income tax liabilities — net |
3,574 |
|
|
|
3,652 |
|
|
Acquisition liability |
1,773 |
|
|
|
1,773 |
|
|
Other noncurrent liabilities |
3,892 |
|
|
|
3,942 |
|
|
Total noncurrent liabilities |
242,516 |
|
|
|
238,871 |
|
|
Total liabilities |
256,778 |
|
|
|
251,260 |
|
|
Commitments and
contingencies |
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Common stock, $0.01 par value, 60,000,000 shares authorized;
22,691,105 and 22,690,477 shares issued as of March 31, 2021 and
December 31, 2020, respectively. |
227 |
|
|
|
227 |
|
|
Treasury stock, 103,109 and 102,711 shares at March 31, 2021 and
December 31, 2020, respectively. |
(1 |
) |
|
|
(1 |
) |
|
Paid in capital |
30,366 |
|
|
|
31,962 |
|
|
Retained earnings |
— |
|
|
|
— |
|
|
Total shareholders' equity |
30,592 |
|
|
|
32,188 |
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
287,370 |
|
|
|
$ |
283,448 |
|
|
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited, in thousands, except share
and per share amounts)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
REVENUES: |
|
|
|
Water services |
$ |
3,986 |
|
|
|
$ |
3,388 |
|
|
Wastewater and recycled water services |
5,243 |
|
|
|
4,823 |
|
|
Unregulated revenues |
29 |
|
|
|
19 |
|
|
Total revenues |
9,258 |
|
|
|
8,230 |
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
Operations and maintenance |
2,499 |
|
|
|
2,232 |
|
|
General and administrative |
3,490 |
|
|
|
2,088 |
|
|
Depreciation and amortization |
2,226 |
|
|
|
2,113 |
|
|
Total operating expenses |
8,215 |
|
|
|
6,433 |
|
|
OPERATING INCOME |
1,043 |
|
|
|
1,797 |
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
Interest income |
5 |
|
|
|
52 |
|
|
Interest expense |
(1,325 |
) |
|
|
(1,338 |
) |
|
Other |
15 |
|
|
|
49 |
|
|
Total other expense |
(1,305 |
) |
|
|
(1,237 |
) |
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME
TAXES |
(262 |
) |
|
|
560 |
|
|
INCOME TAX BENEFIT (EXPENSE) |
45 |
|
|
|
(206 |
) |
|
NET INCOME (LOSS) |
$ |
(217 |
) |
|
|
$ |
354 |
|
|
|
|
|
|
Basic earnings (loss) per common
share |
$ |
(0.01 |
) |
|
|
$ |
0.02 |
|
|
Diluted earnings (loss) per
common share |
$ |
(0.01 |
) |
|
|
$ |
0.02 |
|
|
Dividends declared per common
share |
$ |
0.07 |
|
|
|
$ |
0.07 |
|
|
|
|
|
|
Weighted average number of common
shares used in the determination of: |
|
|
|
Basic |
22,587,766 |
|
|
|
22,333,425 |
|
|
Diluted |
22,587,766 |
|
|
|
22,391,930 |
|
|
GLOBAL WATER RESOURCES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited, in thousands)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income (loss) |
$ |
(217 |
) |
|
|
$ |
354 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
Deferred compensation |
775 |
|
|
|
(582 |
) |
|
Depreciation and amortization |
2,226 |
|
|
|
2,113 |
|
|
Amortization of deferred debt issuance costs and discounts |
11 |
|
|
|
14 |
|
|
Other (gains) and losses |
— |
|
|
|
2 |
|
|
Provision for doubtful accounts receivable |
42 |
|
|
|
40 |
|
|
Deferred income tax (benefit) expense |
(79 |
) |
|
|
210 |
|
|
Changes in assets and liabilities |
|
|
|
Accounts receivable |
370 |
|
|
|
(111 |
) |
|
Other current assets |
(74 |
) |
|
|
21 |
|
|
Accounts payable and other current liabilities |
798 |
|
|
|
587 |
|
|
Other noncurrent assets |
(50 |
) |
|
|
20 |
|
|
Other noncurrent liabilities |
999 |
|
|
|
502 |
|
|
Net cash provided by operating activities |
4,801 |
|
|
|
3,170 |
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Capital expenditures |
(3,269 |
) |
|
|
(3,525 |
) |
|
Other cash flows from investing activities |
— |
|
|
|
(9 |
) |
|
Net cash used in investing activities |
(3,269 |
) |
|
|
(3,534 |
) |
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Dividends paid |
(1,650 |
) |
|
|
(1,629 |
) |
|
Advances in aid of construction |
987 |
|
|
|
280 |
|
|
Principal payments under capital lease |
(31 |
) |
|
|
(26 |
) |
|
Loan repayments |
— |
|
|
|
(17 |
) |
|
Proceeds from sale of stock |
— |
|
|
|
11,739 |
|
|
Debt issuance costs paid |
— |
|
|
|
— |
|
|
Payments of offering costs for sale of stock |
— |
|
|
|
(218 |
) |
|
Net cash (used) provided by financing activities |
(694 |
) |
|
|
10,129 |
|
|
INCREASE IN CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH |
838 |
|
|
|
9,765 |
|
|
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH — Beginning of period |
21,305 |
|
|
|
9,095 |
|
|
CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH – End of period |
$ |
22,143 |
|
|
|
$ |
18,860 |
|
|
Supplemental disclosure of cash flow
information:
|
March 31, 2021 |
|
March 31, 2020 |
Cash and cash equivalents |
$ |
18,209 |
|
|
$ |
17,137 |
|
Restricted Cash |
3,934 |
|
|
1,723 |
|
Total cash, cash equivalents, and restricted cash |
$ |
22,143 |
|
|
$ |
18,860 |
|
A reconciliation of net income to EBITDA and Adjusted EBITDA for
the three months ended March 31, 2021 and 2020 is as follows (in
thousands):
|
|
Three Months Ended March 31, |
|
|
2021 |
|
2020 |
Net Income
(Loss) |
|
$ |
(217 |
) |
|
|
$ |
354 |
|
|
Income tax benefit (expense) |
|
(45 |
) |
|
|
206 |
|
|
Interest income |
|
(5 |
) |
|
|
(52 |
) |
|
Interest expense |
|
1,325 |
|
|
|
1,338 |
|
|
Depreciation and
amortization |
|
2,226 |
|
|
|
2,113 |
|
|
EBITDA |
|
3,284 |
|
|
|
3,959 |
|
|
Management option expense |
|
112 |
|
|
|
115 |
|
|
Restricted stock expense |
|
159 |
|
|
|
— |
|
|
EBITDA adjustments |
|
271 |
|
|
|
115 |
|
|
Adjusted
EBITDA |
|
$ |
3,555 |
|
|
|
$ |
4,074 |
|
|
GWR Global Water Resources (TSX:GWR)
Historical Stock Chart
From Mar 2024 to Apr 2024
GWR Global Water Resources (TSX:GWR)
Historical Stock Chart
From Apr 2023 to Apr 2024