Global Water Resources, Inc.
Q2 2021 Earnings Call Transcript
Published:
- Operator:
- Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources 2021 Second Quarter Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this call is being recorded on August 6, 2021 at 1
- Heather Krupa:
- Welcome, everyone, and thank you for joining us on today's call. Yesterday, we issued our 2021 second 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 Strategy Officer. Mr. Fleming will summarize the key operational events of the quarter. Mr. Liebman will review the financial results for the quarter and Mr. Krygier will review strategic initiatives and business development for the quarter. Mr. Fleming, Mr. Liebman and Mr. Krygier 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-Q 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 Mr. Ron Fleming.
- Ron Fleming:
- Thank you, Heather. Good morning, everyone, and thank you for joining us today. We are very pleased to report the results for the second quarter of 2021. Before handing the call over to Mike to review financial highlights, I will review a few operational highlights for the quarter. In accordance with our top priority, we continue to perform at an extremely high level on employee safety and regulatory compliance non-recordable incidents. Within the quarter, we experienced no recordable events, injuries or expenses related to employee safety. And as of today, our staff has only experienced 2 minor OSHA recordable incidents in 1436 days. We have incurred only $2500 in nearly 5 years on OSHA recordable related incidents. This results in an extremely low loss ratio and experience modifier or EMOD, which is 0.62 today. As a reminder, an EMOD of 1 is considered to be an industry average. So said another way, we are performing 38% better than the industry average, which results in lower actual costs and worker's insurance costs, and most importantly, a safer work environment. Also having incurred no significant compliance violations in the quarter, it has now been 1951 days since our last significant compliance violation for over 5 years. These impressive track records clearly demonstrate our performance on our top mandate, customer and employee safety. I now want to highlight customer growth. On the organic growth front, total active service connections increased 10.2% as compared to the end of Q2 2020, bringing total connections to 51,314. Development and housing activity remained very strong in Metro Phoenix and our service areas. As a reminder, single-family dwelling permits for Metro Phoenix totaled 28,704 in 2020, and that was up 18% over 2019. According to local real estate consensus, single-family permits increased by another 40% in 2021 through Q2 year-over-year. Local real estate consensus projections also indicate that growth will continue throughout 2021 and 2022. Specific to our larger service area, the City of Maricopa, it has already issued 1150 housing permits through June in 2021, a 183% increase over the same period the prior year. Beyond housing growth in our core existing utilities, as noted in our earnings release, which we also are making excellent progress on the engineering, permitting and construction of new service areas, including the Nikola Motor Corp. project and the surrounding Inland Port Arizona industrial project, amongst other areas within our large service areas. In fact, we began initial service to Nikola Motor Corp. in the quarter. It is important to note that we have accelerated capital investments as required to prudently manage this type of growth, including the new areas requiring service. As such, we've invested $3.1 million on infrastructure projects to support our existing utilities as well as the continued growth. And this brings the year-to-date total capital investments to $6.4 million. Those of you who have been following our company for a while, know this is what we have been preparing for and speaking about as a company really since the beginning. This was the strategy to buy or build utilities in the path of growth along growth corridors. This is, again, accelerating and in short, we are well positioned to benefit from growth throughout the large service areas in Pinal and Maricopa County. Chris Krygier will discuss acquisitions and our in-process rate application later in the call. Putting all these elements together, Global Water is well positioned from an operational, safety, compliance and financial perspective with notable growth in the years to come. I will now turn the call over to Mike for financial highlights.
- Mike Liebman:
- Thanks, Ron. Hello, everyone. Total revenue for the second quarter of 2021 was $10.9 million, which was up $1.1 million or 10.7% compared to Q2 of 2020. This increase is primarily driven by the organic connection growth, increased consumption and our approved rate increase. Operating expenses for Q2 of 2021 were $8.6 million compared to $8.2 million in Q2 of 2020. This is an increase of $440,000 or 5.4%. Notable changes in operating expenses include
- Chris Krygier:
- Thanks, Mike. Hello, everyone. I will briefly highlight 3 items for you before passing the call back to Ron. First, our pending rate case before the Arizona Corporation Commission continues as expected. In the quarter, all written pre-file testimony was completed and the hearing starts next week. The latest rounds of testimony reflect our current position requesting approximately $3 million revenue increase with staff and RUCO 0
- Ron Fleming:
- Thank you, Chris. It is clear we are well positioned with a strong balance sheet and disciplined strategy that continues to accelerate. In fact, from an operational and financial perspective, we have never been stronger, and we have more than ample liquidity and access to capital to be great utility partners for the communities we've the privilege to serve; and to pursue expansion through organic growth, acquisitions and new projects, both big and small. As we handle this high growth, 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 issues in Arizona and potentially beyond. These highlights conclude our prepared remarks. Thank you. We are now available to answer your questions.
- Operator:
- We will now begin the question-and-answer session. There are no questioners from the telephone lines. This concludes the question-and-answer session. I would like to turn the conference back over to the presenters for any closing remarks.
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- Ron Fleming:
- Great. Thank you, operator. We'd just like to thank everyone for participating on the call today and for your ongoing interest in Global Water Resources. Thanks, and we look forward to speaking with you again soon.
- Operator:
- This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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