Global Water Resources, Inc. — 2021 Form 10-K
Business context and reporting period. Annual report for the fiscal year ended December 31, 2021; it does not provide standalone fourth-quarter results. The company owns and operates regulated water, wastewater and recycled-water utilities, principally in metropolitan Phoenix, Arizona. It reported 53,882 active service connections, up 10.2% year over year; approximately 90.9% were served by its Santa Cruz and Palo Verde utilities.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $41.9 million | $38.6 million | +8.5% |
| Operating income | $7.0 million | $7.3 million | -4.9% |
| Operating margin | 16.6% | 19.0% | Down 2.4 percentage points |
| Net income | $3.6 million | $1.1 million | Up $2.5 million |
| Net margin | 8.6% | 2.9% | Up 5.7 percentage points |
| Diluted EPS | $0.16 | $0.05 | — |
| Cash from operations | $20.4 million | $14.6 million | Up $5.8 million |
| Capital expenditures | $18.3 million | $9.1 million | Up $9.1 million |
| Cash and cash equivalents | $12.6 million | $18.0 million | Down $5.4 million |
| Total indebtedness | $113.1 million | $113.1 million | Approximately flat |
Operating expenses rose 11.6% to $34.9 million, faster than revenue. General and administrative expense increased 19.1% to $15.1 million. Interest expense was $5.2 million. The company had $3.8 million of current debt and capital-lease obligations and a $10.0 million revolving credit facility with no borrowings at year-end. It reported compliance with debt covenants. Dividends declared were $0.29 per share for 2021; management intended to continue monthly dividends, subject to board discretion, legal requirements and debt covenants.
Material changes and notable items
- Revenue growth reflected rate increases and customer growth, partly offset by lower water and recycled-water consumption associated with higher precipitation.
- Net income benefited from a $1.5 million gain on sale of a communications tower, a $1.2 million increase in Buckeye growth premiums, and $0.7 million of recognized ICFA revenue. These items helped lift net income even as operating income declined.
- Operating cash flow increased, while investing cash use rose to $20.3 million, chiefly because capital spending increased. Financing cash flow was negative $7.9 million, including $6.6 million of dividends and $1.9 million of debt repayments.
- The November 2021 acquisition of Las Quintas added more than 1,100 connections. In January 2022, Twin Hawks and Rincon acquisitions added a further 91 connections in aggregate.
Outlook, risks and contingencies
Management described continued population and development growth in the Phoenix area as a potential source of organic customer growth, and said existing lots and infrastructure positioned the company to benefit. The filing gives no specific consolidated earnings or revenue guidance.
A rate case filed for 12 utilities sought a collective revenue requirement increase, later updated by the company to approximately $3.0 million. An ACC decision was expected in the second quarter of 2022; approval, amount and timing were uncertain. The company also sought consolidation of certain water and wastewater rates.
Key risks include dependence on ACC rate decisions and regulatory cost recovery; reliance primarily on groundwater in a drought-prone region; concentration in Arizona and in the Maricopa service area; weather-sensitive consumption; development-dependent customer growth and ICFA payments; rising operating and construction costs; and potential supply-chain, cyber, environmental and water-quality events. Management said COVID-19 had not materially affected 2021 results, cash flows or financial position, but uncertainties remained. No legal proceeding was identified as expected to have a material effect. The independent auditor issued an unqualified opinion; management concluded disclosure controls and internal control over financial reporting were effective, with no auditor attestation required for the company’s filer status.
Important facts for investors to verify
- Check the ACC’s eventual decision on the pending rate case, including approved revenue increases, rate consolidation and implementation timing.
- Assess whether customer and connection growth can support revenue amid groundwater constraints, drought risk and lower consumption.
- Review the sustainability of margins and earnings excluding the tower-sale gain, Buckeye growth premiums and ICFA revenue.
- Monitor capital spending, operating cash conversion, scheduled principal payments and covenant limits on dividends.
- Confirm the integration and financial contribution of Las Quintas and the subsequent Twin Hawks and Rincon acquisitions.