What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-09 · 206 added, 269 removed, 487 unchanged (49% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

PROPERTY, PLANT AND EQUIPMENT:

45 unchanged sentences

Common stock, $ 0.01 par value, 60,000,000 shares authorized;

24,498,195 and 24,492,918 shares issued as of March 31, 2024 and December 31, 2023, respectively.

Treasury stock, 322,082 and 317,677 shares at March 31, 2024 and December 31, 2023, respectively.

24,561,035 and 24,492,918 shares issued as of June 30, 2024 and December 31, 2023, respectively.

Treasury stock, 343,625 and 317,677 shares at June 30, 2024 and December 31, 2023, respectively.

Paid in capital 46,671 47,585

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Water services $ 6,668 $ 6,557 $ 11,894 $ 11,396

34 unchanged sentences

BALANCE - March 31, 2023 24,095,139 239 ( 224,093 ) ( 2 ) 44,456 688 45,381

Dividend declared $ 0.07 per share

— — — — ( 55 ) ( 1,739 ) ( 1,794 )

Issuance of Common Stock 230,000 1 — — 2,747 — 2,748

Stock option exercise 152,113 — ( 82,642 ) — — — —

Stock compensation — — — — ( 47 ) — ( 47 )

Net income — — — — — 1,739 1,739

BALANCE - June 30, 2023 24,477,252 240 ( 306,735 ) ( 2 ) 47,101 688 48,027

BALANCE - December 31, 2023 24,492,918 240 ( 317,677 ) ( 2 ) 47,585 797 48,620

4 unchanged sentences

BALANCE - March 31, 2024 24,498,195 240 ( 322,082 ) ( 2 ) 46,655 797 47,690

Dividend declared $ 0.075 per share

— — — — — ( 1,821 ) ( 1,821 )

Stock compensation 62,840 — ( 21,543 ) — 16 — 16

Net income — — — — — 1,730 1,730

BALANCE - June 30, 2024 24,561,035 $ 240 ( 343,625 ) $ ( 2 ) $ 46,671 $ 706 $ 47,615

See accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred compensation 275 286

Depreciation and amortization 5,930 5,360

Right of use amortization 90 113

Amortization of deferred debt issuance costs and discounts 20 11

Loss (Gain) on disposal of fixed assets

Provision for credit losses 14 19

Deferred compensation 595 734

Deferred income tax expense 838 1,090

Allowance for equity funds used during construction ( 444 ) ( 515 )

Provision for credit losses 35 35

Amortization of deferred debt issuance costs and discounts 41 22

Gain on disposal of fixed assets ( 17 ) ( 66 )

Right of use amortization 214 192

Changes in assets and liabilities

12 unchanged sentences

Advances in aid of construction 2,215 420

Payments for taxes related to net shares settlement of equity awards ( 268 ) ( 357 )

Principal payments under finance leases

( 110 ) ( 258 )

Repayments of notes payable ( 1,917 ) ( 1,917 )

Line of credit borrowings — 18,200

3 unchanged sentences

Debt issuance costs paid ( 369 ) —

Proceeds from sale of stock — 2,748

Refunds of developer taxes — ( 5 )

Net cash provided by financing activities 13,573 4,077

4 unchanged sentences

Supplemental disclosure of cash flow information:

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents $ 18,148 $ 2,007

6 unchanged sentences

The condensed consolidated financial statements of Global Water Resources, Inc.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are unaudited.

(the “Company”, “GWRI”, “we”, “us”, or “our”) and related disclosures as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 are unaudited.

The December 31, 2023 condensed consolidated balance sheet data was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.

4 unchanged sentences

In the Company’s opinion, these financial statements include all normal and recurring adjustments necessary for the fair statement of the results for the interim period.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year, due to the seasonality of our business.

The Company prepares its financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).

3 unchanged sentences

Corporate Transactions

Asset Purchase Agreement with City of Tucson

Effective April 25, 2024, Global Water - Ocotillo Water Company, Inc.

(“GW-Ocotillo”), formerly Global Water - 2024 Acquisition A, Inc.

and a wholly owned subsidiary of the Company, entered into an asset purchase agreement with the City of Tucson, pursuant to which GW-Ocotillo will acquire seven public water systems from the City of Tucson serving approximately 2,200 water service connections in an all-cash transaction for a purchase price of $ 8.4 million.

The public water systems are located in and around Pima County.

The transaction remains subject to customary closing conditions and approval by the Arizona Corporation Commission (“ACC”).

The estimated rate base of the seven water systems is approximately $ 7.8 million.

Other Deferred Liability

The Company received $ 6.7 million in contributions to facilitate the construction of infrastructure in certain areas, which is included in other noncurrent liabilities.

As the infrastructure is constructed and placed into service, the corresponding amount will be transferred from the liability into advances in aid of construction during the refund period.

In September 2023, the Company received $ 6.7 million in contributions from the City of Maricopa to facilitate the construction of infrastructure in certain areas, which is included in other noncurrent liabilities on the Company’s condensed consolidated balance sheets.

As the infrastructure is constructed and placed into service, the corresponding amount will be transferred from the liability into advances in aid of construction during the applicable refund period.

Private Placement Offering of 6.91 % Senior Secured Notes

12 unchanged sentences

Terms of the condemnation were agreed upon through a settlement agreement and stipulated final judgment of condemnation wherein the City of Buckeye acquired all the operations and assets of Valencia and assumed operation of the utility upon close.

The City of Buckeye is obligated to pay the Company a growth premium equal to $ 3,000 for each new water meter installed within Valencia’s prior service areas in the City of

Buckeye, for a 20-year period ending December 31, 2034, subject to a maximum payout of $ 45.0 million over the term of the agreement.

The Company received growth premiums of $ 0.8 million and $ 0.4 million for the three months ended March 31, 2024 and 2023, respectively, and has received an aggregate of $ 11.5 million in growth premiums to date.

The growth premiums are included in “Other, net” on the Condensed Consolidated Statements of Operations.

The City of Buckeye is obligated to pay the Company a growth premium equal to $ 3,000 for each new water meter installed within Valencia’s prior service areas in the City of Buckeye, for a 20-year period ending December 31, 2034, subject to a maximum payout of $ 45.0 million over the term of the agreement.

The Company received growth premiums of $ 0.5 million and $ 1.3 million for the three and six months ended June 30, 2024, respectively.

The Company received growth premiums of $ 0.5 million and $ 0.9 million for the three and six months ended June 30, 2023, respectively.

An aggregate of $ 12.0 million in growth premiums have been received to date.

The growth premiums are included in “Other, net” on the Company’s condensed consolidated financial statements of operations.

Significant Accounting Policies

4 unchanged sentences

A reconciliation of the denominator used in basic and diluted EPS calculations is shown in the following table:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In thousands)

12 unchanged sentences

The Company currently operates in one geographic region within the State of Arizona, wherein each operating utility operates within the same regulatory environment.

While the Company reports its revenue, disaggregated by service type, on the face of the Condensed Consolidated Statements of Operations, the Company does not manage the business based on any performance measure at the individual revenue stream level.

While the Company reports its revenue, disaggregated by service type, on the face of its condensed consolidated financial statements of operations, the Company does not manage the business based on any performance measure at the individual

revenue stream level.

The Company does not have any customers that contribute more than 10% to the Company’s revenues or revenue streams.

7 unchanged sentences

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

Company is assessing the timing and impact that adopting this new standard will have on its consolidated financial statements.

The Company is assessing the timing and impact that adopting this new standard will have on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

4 unchanged sentences

REGULATORY DECISION AND RELATED ACCOUNTING AND POLICY CHANGES

The Company’s regulated utilities and certain other balances are subject to regulation by the Arizona Corporation Commission (“ACC”) and meet the requirements for regulatory accounting found within Accounting Standards Codification (“ASC 980”), Regulated Operations .

The Company’s regulated utilities and certain other balances are subject to regulation by the ACC and meet the requirements for regulatory accounting found within Accounting Standards Codification (“ASC 980”), Regulated Operations .

In accordance with ASC 980, rates charged to utility customers are intended to recover the costs of the provision of service plus a reasonable return in the same period.

Changes to the rates are made through formal rate applications with the ACC, which the Company has customarily done.

During the fourth quarter of 2023, the Company notified the ACC of its intention to file a rate case for Global Water-Farmers Water Company, Inc.

(“GW-Farmers”) during 2024.

The GW-Farmers rate case is anticipated to be based on a test year ended December 31, 2023 with updates for changes in post-test year plant.

The Company has begun stakeholder outreach for the rate case.

2024 Farmers Rate Case

On June 27, 2024, Global Water-Farmers Water Company, Inc.

(“GW-Farmers”), one of the Company’s regulated utilities, filed a rate case application with the ACC for increased water rates based on a 2023 test year with updates for changes in post-test year plant through December 31, 2024.

The application requests, among other things, a revenue increase of approximately $ 1.3 million phased-in over two steps and recovery of the acquisition premium related to the Farmers Water Co.

On July 25 , 2024, ACC Utilities Division Staff found the application administratively complete and estimates their testimony regarding the application will be file d on or about December 9 , 2024.

There can be no assurance that the ACC will approve the requested rate increase or the requested recovery of the acquisition premium, and the ACC could take other actions as a result of the rate case.

Further, it is possible that the ACC may determine to decrease future rates.

Acquisition of Seven Systems from City of Tucson

On May 10, 2024, GW-Ocotillo filed an Application at the ACC for approval to acquire seven isolated systems from the City of Tucson.

On June 10, 2024, ACC Utilities Division Staff found the application administratively complete.

2025 Santa Cruz and Palo Verde Rate Case

During the fourth quarter of 2023, the Company notified the ACC of its intention to file a rate case for Global Water-Santa Cruz Water Company, Inc.

3 unchanged sentences

The Company has begun stakeholder outreach for the rate case.

On July 3, 2023, the Company’s GW-Palo Verde and GW-Santa Cruz utilities filed an application with the ACC for approval of an accounting order to defer and record as a regulatory asset the depreciation expense recorded for the Company’s Southwest Plant, plus the carrying cost at the authorized rate of return set in GW-Palo Verde’s and GW-Santa Cruz’s most recent rate order, until the plant is considered for recovery in the next GW-Palo Verde and GW-Santa Cruz rate case.

Southwest Plant Accounting Order and Bill Credit

Cruz’s most recent rate order, until the plant is considered for recovery in the next GW-Palo Verde and GW-Santa Cruz rate case.

The Southwest Plant was substantially constructed prior to 2009 to provide water, wastewater, and recycled water utility services for the area southwest of the City of Maricopa.

1 unchanged sentence

The total cost of the Southwest Plant was approximately $ 38.4 million.

In July 2023, $ 27.5 million of construction costs related to the water production plant and a portion of the wastewater processing plant was placed in service, with the remaining parts of the Southwest Plant to be placed in service once sufficient flows, provided by connection growth, are established.

Since July 2023, construction costs of $ 25.0 million related to the water production plant and a portion of the wastewater processing plant were placed in service, with the remaining parts of the Southwest Plant to be placed in service once sufficient flows, provided by connection growth, are established.

There can be no assurance, however, that the ACC will approve the application as submitted and the ACC could take other actions regarding the application.

In January 2024, the Company discovered that approximately $ 7.8 million of construction costs for the Southwest Plant had been prematurely included as “plant in service” for rate making purposes in 2007 and were reflected in the calculation of customer rates in Rate Decision No.

71878 (September 15, 2010).

Those costs were also included as “plant in service” in Rate Decision No.

74364 (February 26, 2014) and Rate Decision No.

Those costs were also included as “plant in service” in Decision No.

74364 (February 26, 2014) and Decision No.

78644 (July 27, 2022).

The Company disclosed this circumstance to the ACC on March 1, 2024, and on April 25, 2024, GW-Palo Verde filed an application with the ACC requesting a monthly bill credit for customers that would be in place until the conclusion of the next GW-Palo Verde rate case.

If approved as filed, the impact of the bill credit would reduce revenue earned subsequent to the order by approximately $ 570,000 annually.

There can be no assurance, however, that the ACC will approve the application as submitted and the ACC could take other actions regarding the application.

In addition, further action may be taken by the ACC during the next GW-Palo Verde rate case.

On June 27, 2023, seven of the Company’s regulated utilities each filed a rate case application with the ACC for increased water rates based on a 2022 test year.

In addition to a rate increase, the Company requested, among other things, the consolidation of water rates for certain of its utilities, including Global Water-Mirabell Water Company, Inc.

The ACC issued Decision No.

79424 on July 18, 2024 approving the bill credit with an effective date of August 1, 2024, which will reduce revenue earned subsequent to the order by approximately $ 570,000 annually.

The bill credit will be in place until the conclusion of the next GW-Palo Verde rate case, which Decision No.

79424 requires GW-Palo Verde to file no later than December 31, 2025.

The ACC may take further action during the next GW-Palo Verde rate case.

Such action may include requiring the Company to reduce rates further going forward or taking other actions that would be unfavorable to the Company.

79383 - Issued June 20, 2024 - Saguaro Rate Case

On June 20, 2024, the ACC issued Decision No.

79383 relating to each of the rate case applications filed by seven of the Company’s regulated utilities for increased water rates based on a 2022 test year.

79383 approved, among other things, a collective annual revenue increase of approximately $ 351,000 .

The approved rates will be phased-in over five periods with the first increase effective July 1, 2024.

The subsequent four increases will be effective on January 1 of each subsequent year with the majority of the revenue increase phased in by January 1, 2025.

To the extent that the number of active service connections has increased and continues to increase from 2022 levels, the additional revenues may be greater than the amounts set forth.

On the other hand, if active connections decrease or the Company experiences declining usage per customer, the Company may not realize all of the anticipated revenues.

The ACC also approved:

(i) the consolidation of water rates to one single rate for these utilities;

(ii) acquisition premiums relating to the Company’s acquisitions of its Global Water-Mirabell Water Company, Inc.

(“GW-Mirabell”), Global Water-Lyn Lee Water Company, Inc.

2 unchanged sentences

(“GW-Tortolita”), Global Water-Rincon Water Company, Inc.

(“GW-Rincon”), Global Water-Las Quintas Serenas Water Company, Inc.

(“GW-Las Quintas Serenas”), and Global Water-Red Rock Water Company, Inc.

(“GW-Red Rock”), each located in Pima County.

Of the Company’s utilities, these utilities filing rate applications make up approximately 3 % of the Company’s active service connections.

On February 29, 2024, the Company entered into a settlement agreement with the ACC Utilities Division Staff regarding the rate case application, which was presented to an Administrative Law Judge on April 15, 2024.

The Administrative Law Judge issued a Recommended Opinion

and Order (“ROO”) on May 6, 2024, which is scheduled to be heard by the Commission at the June 11, 2024 open meeting.

The ROO recommends approval of the settlement agreement, which includes, among other things, a recommended collective annual revenue increase of approximately $ 351,000 , acquisition premiums for six of the Company’s utilities, a capital structure matching the Company’s previous rate of 55 % equity with a 9.6 % return on equity, consolidation of the seven utilities, and a depreciation expense accounting deferral for GW-Rincon.

There can be no assurance that the ACC will approve the settlement agreement and the ACC could take other actions as a result of the rate case.

Further, it is possible that the ACC may determine to decrease future rates.

There can also be no assurance as to the timing of when an approved rate increase (if any) would go into effect.

On July 27, 2022, the ACC issued Rate Decision No.

78644 relating to the Company’s previous rate case.

Pursuant to Rate Decision No.

78644, the ACC approved, among other things, a collective annual revenue requirement increase of approximately $ 2.2 million (including the acquisition premiums discussed below) based on 2019 test year service connections, and phased-in over approximately two years, as follows:

Incremental Cumulative

August 1, 2022 $ 1,457,462 $ 1,457,462

January 1, 2023 $ 675,814 $ 2,133,277

January 1, 2024 $ 98,585 $ 2,231,861

To the extent that the number of active service connections has increased and continues to increase from 2019 levels, the additional revenues may be greater than the amounts set forth above.

On the other hand, if active connections decrease or the Company experiences declining usage per customer, the Company may not realize all of the anticipated revenues.

Rate Decision No.

(“GW-Rincon”), and Global Water-Las Quintas Serenas Water Company, Inc.

(“GW-Las Quintas Serenas”) utilities, each located in Pima County, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement;

(iii) the Company’s ability to annually adjust rates to flow through certain changes in tax expense, primarily related to income taxes, without the necessity of a rate case proceeding;

(iv) a sustainable water surcharge, which will allow semiannual surcharges to be added to customer bills based on verified costs of new water resources;

(v) a capital structure matching the Company’s previous rate case of 55 % equity with a 9.6 % return on equity;

(vi) a depreciation expense accounting deferral for GW-Rincon.

78644 - Issued July 27, 2022

On July 27, 2022, the ACC issued Decision No.

78644 pursuant to which the ACC approved, among other things, a collective annual revenue requirement increase of approximately $ 2.2 million (including acquisition premiums) based on 2019 test year service connections, and phased-in over approximately two years .

The effective date of the final phase was January 1, 2024.

78644 also addressed the primary impacts of the Federal Tax Cuts and Jobs Act (the “TCJA”) on the Company, which includes the reduction of the federal income tax rate from 35 percent to 21 percent beginning on January 1, 2018.

1 unchanged sentence

For the Company’s regulated entities, substantially all of the change in deferred income taxes is recorded as an offset to either a regulatory asset or liability because the impact of changes in the rates are expected to be recovered from or refunded to customers.

Rate Decision No.

78644 approved an adjustor mechanism for income taxes (as described below) that permits the Company to flow through potential changes to state and federal income tax rates as well as refund or collect funds related to TCJA.

The ACC also approved:

(i) the consolidation of water and/or wastewater rates to create economies of scale that are beneficial to all customers when rates are consolidated;

(ii) acquisition premiums relating to the Company’s acquisitions of its GW-Red Rock and Global Water - Turner Ranches Irrigation, Inc.

(“GW-Turner Ranches”) utilities, which increase the rate base for such utilities and result in an increase in the annual collective revenue requirement included in the table above;

(iii) the Company’s ability to annually adjust rates to flow through certain changes in tax expense, primarily related to income taxes, without the necessity of a rate case proceeding;

(iv) a sustainable water surcharge, which will allow semiannual surcharges to be added to customer bills based on verified costs of new water resources.

Finally, Rate Decision No.

78644 required the Company to work with ACC staff and the Residential Utility Consumer Office to prepare a Private Letter Ruling request to the Internal Revenue Service (“IRS”) to clarify whether the failure to eliminate the deferred taxes attributable to assets condemned in a transaction governed by Section 1033 of the Internal Revenue Code (“IRC”) would violate the normalization provisions of Section 168(i)(9) of the IRC.

The IRS accepted the request and issued its Private Letter Ruling, dated September 22, 2023.

The Private Letter Ruling determined that the deferred taxes attributable to assets condemned in a transaction governed by Section 1033 of the IRC must be eliminated and failure to do so would violate the normalization provisions of Section 168(i)(9) of the IRC.

As required by Rate Decision No.

78644, the Private Letter Ruling was provided to the ACC and no further action will be taken by the ACC.

Certain accounting implications related to Rate Decision No.

78644 were recognized and recorded as of June 30, 2022, and are as follows:

• Reclassification of GW-Red Rock Water, GW-Red Rock Wastewater, and GW-Turner Ranches acquisition premiums of approximately $ 0.8 million in the aggregate from goodwill to regulatory assets to be included in rate base.

The premiums are to be amortized over 25 years.

• Reversal of the 2017 TCJA tax reform regulatory liability of approximately $ 0.8 million, which was recorded as a reduction to income tax expense for approximately $ 0.7 million, and as a reduction to interest expense for approximately $ 0.1 million.

• Write-off of approximately $ 0.3 million in capitalized rate case costs.

Regulatory Assets and Liabilities

6 unchanged sentences

The Company’s regulatory assets and liabilities consist of the following (in thousands):

Recovery Period March 31, 2024 December 31, 2023

Recovery Period June 30, 2024 December 31, 2023

Regulatory Assets

4 unchanged sentences

Acquisition premiums (3)

25 years 1,261 1,269

25 or 50 years

Other regulatory assets 33 4

7 unchanged sentences

(2) Rate Decision No.

(2) Decision No.

78743, issued on October 24, 2022, approved approximately $ 0.5 million in rate case expenses to be recovered through a rate case expense surcharge over a two-year period.

(3) Rate Decision No.

78319, issued on December 3, 2021, approved an acquisition premium to be amortized over 25 years related to the acquisition of the Company’s GW-Rincon utility.

Amortization will begin once the Company receives a decision on its rate case filed in June 2023 that would approve the acquisition premium to be included in customer rates.

The acquisition premium balance as of March 31, 2024 was approximately $ 0.5 million.

Rate Decision No.

79383, issued on June 20, 2024, approved approximately $ 0.1 million in rate case expenses to be recovered through a rate case expense surcharge over a period of up to a two-years .

(3) Decision No.

78319, issued on December 3, 2021, approved an acquisition premium related to the acquisition of the Company’s GW-Rincon utility.

79383 was issued on June 20, 2024 allowing the Company to begin amortization of the acquisition premium through customer rates over 50 years.

The acquisition premium balance as of June 30, 2024 was approximately $ 0.6 million.

78644, issued on July 27, 2022, approved acquisition premiums related to the acquisitions of the Company’s GW-Turner Ranches and GW-Red Rock utilities.

Amortization began in 2022 as the acquisition premiums were included in customer rates as approved in the decision.

The acquisition premium balance as of March 31, 2024 was approximately $ 0.7 million.

Amortization began in 2022 as the acquisition premiums were included in customer rates as approved in the decision and will continue over a 25 -year period.

The acquisition premium balance as of June 30, 2024 was approximately $ 0.7 million.

79383 approved acquisition premiums related to the acquisition of the Company’s GW-Francesca, GW-Las Quintas Serenas, GW-Lyn Lee, GW-Mirabell, and GW-Tortolita utilities.

The acquisition premiums will be amortized through customer rates over 50 years as approved in the decision.

The acquisition premium balance as of June 30, 2024 was approximately $ 1.3 million.

(4) The acquired Infrastructure Coordination and Financing Agreements (“ICFA”) regulatory liability relates to the offset of intangible assets related to ICFA contracts obtained in connection with the GW-Santa Cruz, GW-Palo Verde, and Sonoran Utility Services, LLC (“Sonoran”) acquisitions.

When funds are received related to the acquired ICFA, a portion of these funds reduce the acquired ICFA regulatory liability and partially offset the amortization expense recognition of the related intangible asset.

(5) Rate Decision No.

78644, issued on July 27, 2022, approved an adjustment to update previously approved depreciation rates.

(5) Decision No.

78644 approved an adjustment to update previously approved depreciation rates.

The adjustment was incorporated into rates in accordance with the rate decision.

26 unchanged sentences

Payments for ICFAs are usually received in advance.

Rate Decision No.

74364 requires a hook-up fee (“HUF”) tariff to be established for all ICFAs that come due and are paid subsequent to December 31, 2013, which is a set amount per equivalent dwelling unit determined by the ACC based on the utility and meter size.

Also pursuant to Rate Decision No.

74364 requires a hook-up fee (“HUF”) tariff to be established for all ICFAs that come due and are paid subsequent to December 31, 2013, which is a set amount per equivalent

dwelling unit determined by the ACC based on the utility and meter size.

Also pursuant to Decision No.

74364, as payments are received, 70 % of the payment must be recorded as a HUF liability until the HUF liability is fully funded, with the remaining amount initially recorded to deferred revenue until earned.

The Company is responsible for assuring that the full HUF tariff, which is the set amount determined by the rate decision, is funded in the HUF liability, even if it results in recording

less than 30% of the overall ICFA funds as deferred revenue.

The Company is responsible for assuring that the full HUF tariff, which is the set amount determined by the rate decision, is funded in the HUF liability, even if it results in recording less than 30 % of the overall ICFA funds as deferred revenue.

ICFA revenue is recognized when the Company completes the performance obligations under the agreement.

Following its issuance in February 2014, Rate Decision No.

Following its issuance in February 2014, Decision No.

74364 prohibits the Company from entering into any new ICFAs.

9 unchanged sentences

Revenue Recognized

March 31, 2024 Balance

June 30, 2024 Balance

Deferred Revenue - ICFA

1 unchanged sentence

Disaggregated Revenues

For the three months ended March 31, 2024 and 2023, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended March 31,

For the three and six months ended June 30, 2024 and 2023, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

REGULATED REVENUE

19 unchanged sentences

The Company’s contract assets and liabilities consist of the following (in thousands):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

CONTRACT ASSETS

9 unchanged sentences

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

Contracted revenue expected to be recognized in future periods was approximately $ 19.8 million and $ 19.7 million at March 31, 2024 and December 31, 2023, respectively.

Contracted revenue expected to be recognized in future periods was approximately $ 20.0 million and $ 19.7 million as of June 30, 2024 and December 31, 2023, respectively.

Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred.

Due to the uncertainty of future events, the Company is unable to estimate when to expect recognition of deferred revenue - ICFA.

The Company measures the lease liability at the present value of future lease payments, excluding variable payments based on usage or performance, and calculates the present value using implicit rates.

Leases with an initial term of twelve months or less are not recorded on the balance sheet.

During August 2023, the Company entered into a new ten-year and nine-month office lease agreement with a commencement date of June 1, 2024.

The rent expense will be $ 5,200 for each full calendar month after a period of abated rent, with a 3 % rent escalation commencing in March 2026 and annually thereafter.

Tenant improvement payments are incorporated into the lease at an additional month payment of $ 1,840 with escalations following the same schedule as the base rent.

Rent expense arising from operating leases totaled approximately $ 99,000 and $ 93,000 for the three months ended March 31, 2024 and 2023, respectively.

The right-of-use (“ROU”) asset recorded represents the Company’s right to use an underlying asset for the lease term and ROU lease liability represents the Company’s obligation to make lease payments arising from the lease.

Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

ROU assets at March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024 December 31, 2023

Financing Lease $ 560 $ 561

Operating Lease 1,097 1,180

Total $ 1,657 $ 1,741

Lease liabilities at March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024 December 31, 2023

Financing Lease $ 606 $ 623

Operating Lease 1,238 1,300

Total $ 1,844 $ 1,923

At March 31, 2024, the remaining aggregate annual minimum lease payments are as follows (in thousands):

Finance Lease Obligations Operating Lease Obligations

2024 (remaining period) $ 190 $ 221

Thereafter — —

Subtotal 674 1,316

amount representing interest 68 78

Total $ 606 $ 1,238

Accounts Receivable and Allowance for Credit Losses

Accounts receivable as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Billed receivables $ 2,981 $ 2,967

Less provision for credit losses ( 133 ) ( 122 )

Accounts receivable, net $ 2,848 $ 2,845

The following table summarizes the allowance for credit loss activity for the six months ended June 30, 2024 and the twelve months ended December 31, 2023 (in thousands).

June 30, 2024 December 31, 2023

Beginning of Period $ ( 122 ) $ ( 164 )

Credit Loss Expense ( 35 ) ( 76 )

Write Offs 48 124

Recoveries ( 24 ) ( 6 )

End of Period $ ( 133 ) $ ( 122 )

PROPERTY, PLANT AND EQUIPMENT

Depreciable property, plant and equipment at March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024 December 31, 2023

Depreciable property, plant and equipment as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Equipment $ 61,294 $ 60,536

6 unchanged sentences

Transmission and distribution plant 10 to 50 years

ACCOUNTS RECEIVABLE

Accounts receivable as of March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024 December 31, 2023

Billed receivables $ 2,618 $ 2,967

Less provision for credit losses ( 121 ) ( 122 )

Accounts receivable, net $ 2,497 $ 2,845

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $ 10.8 million at March 31, 2024 and is related to the GW-Turner Ranches, GW-Red Rock, GW-Mirabell, GW-Francesca, GW-Tortolita, GW-Lyn Lee, GW-Las Quintas Serenas, GW-Rincon, Twin Hawks Utility, Inc., and GW-Farmers acquisitions.

The goodwill balance was $ 9.5 million as of June 30, 2024 and is related to the GW-Turner Ranches, GW-Red Rock, GW-Mirabell, GW-Francesca, GW-Tortolita, GW-Lyn Lee, GW-Las Quintas Serenas, GW-Rincon, Twin Hawks Utility, Inc., and GW-Farmers acquisitions.

There were no indicators of impairment identified as a result of the Company’s review of events and circumstances related to its goodwill subsequent to the acquisitions.

As a result of Decision No.

79383 issued by the ACC on June 20, 2024, the Company reclassified $ 1.3 million of goodwill to regulatory assets for certain impacted utilities to establish the approved $ 1.8 million of acquisition premiums net of the $ 0.5 million that was previously recorded for GW-Rincon.

Refer to Note 2 – “Regulatory Decision and Related Accounting and Policy Changes” for additional information.

As of June 30, 2024 and December 31, 2023, the goodwill balance consisted of the following (in thousands):

December 31, 2023 Balance Acquisition Activity Adjustments Subsequent to Acquisition Date June 30, 2024 Balance

Goodwill $ 10,820 $ — $ ( 1,334 ) $ 9,486

Intangible Assets

As of March 31, 2024 and December 31, 2023, intangible assets consisted of the following (in thousands):

March 31, 2024 December 31, 2023

As of June 30, 2024 and December 31, 2023, intangible assets consisted of the following (in thousands):

June 30, 2024 December 31, 2023

Amount Accumulated

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Due to the uncertainty of the timing of when cash will be received under ICFA agreements and contract rights, the Company cannot reliably estimate when the remaining intangible assets’ amortization will be recorded.

There was no amortization recorded for these balances during the three months ended March 31, 2024 and 2023.

There was $ 0.3 million of amortization recorded for these balances during the three and six months ended June 30, 2024.

There was no amortization recorded for these balances during the three and six months ended June 30, 2023.

TRANSACTIONS WITH RELATED PARTIES

The Company provides medical benefits to employees through its participation in a pooled plan sponsored by an affiliate of a significant shareholder and director of the Company.

Medical claims paid to the plan were approximately $ 0.2 million for the three months ended March 31, 2024 and $ 0.1 million for the three months ended March 31, 2023.

Medical claims paid to the plan were approximately $ 0.3 million for the three months ended June 30, 2024 and $ 0.2 million for the three months ended June 30, 2023.

Medical claims paid to the plan were approximately $ 0.5 million for the six months ended June 30, 2024 and $ 0.3 million for the six months ended June 30, 2023.

Refer to Note 1 — “Basis of Presentation, Corporate Transactions, Significant Accounting Policies, and Recent Accounting Pronouncements — Corporate Transactions” (specifically the “Private Placement Offering of Common Stock” section) for additional information regarding other related party disclosures.

ACCRUED EXPENSES

Accrued expenses at March 31, 2024 and December 31, 2023 consist of the following (in thousands):

March 31, 2024 December 31, 2023

Interest $ 2,018 $ 480

Accrued expenses as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023

Property taxes $ 1,292 $ 1,242

Interest 1,168 480

Accrued bonus 706 602

Customer prepayments 693 883

Accrued project liabilities 795 1,001

Dividend payable 606 606

Accrued professional fees 387 39

Accrued purchase orders 356 200

Accrued bonus 333 602

Accrued project liabilities 565 1,001

Other accrued liabilities 2,138 2,315

6 unchanged sentences

• Level 3 - Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that the Company believes market participants would use.

Financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024 December 31, 2023

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

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In addition, as part of the GW-Farmers acquisition, the Company is required to pay the seller a growth premium equal to $ 1,000 (not in thousands) for each new account established in the service area, up to a total aggregate growth premium of $ 3.5 million.

The obligation period of the growth premium commences on

the closing date of the acquisition and ends (i) ten years after the first new account for residential purposes is established on land that is, at the time of the closing date of the acquisition, undeveloped or unplatted and owned by the seller within the service area or (ii) ten years after the date of closing if a new account (as previously described) has not been established.

The obligation period of the growth premium commences on the closing date of the acquisition and ends (i) ten years after the first new account for residential purposes is established on land that is, at the time of the closing date of the acquisition, undeveloped or unplatted and owned by the seller within the service area or (ii) ten years after the date of closing if a new account (as previously described) has not been established.

The fair value of the acquisition liability was calculated using a discounted cash flow technique which utilized unobservable inputs developed using the Company’s estimates and assumptions.

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year of the first meter installation, total new accounts per year, years to complete full build out, and discount rate.

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

March 31, 2024 December 31, 2023

The outstanding balances and maturity dates for short-term (including the current portion of long-term debt) and long-term debt as of June 30, 2024 and December 31, 2023 are as follows (in thousands):

June 30, 2024 December 31, 2023

Short-term Long-term Short-term Long-term

NOTES PAYABLE -

4.38 % Senior Secured Notes, Series A, maturing June 2028

4.38 % Senior Secured Notes, Series A, maturing June 2028 (“Series A Notes”)

$ — 28,750 $ — $ 28,750

4.58 % Senior Secured Notes, Series B, maturing June 2036

4.58 % Senior Secured Notes, Series B, maturing June 2036 (“Series B Notes”)

3,833 70,917 3,833 72,833

6.91 % Senior Secured Notes, maturing January 2034

6.91 % Senior Secured Notes, maturing January 2034 (“6.91% Notes”)

3,833 119,667 3,833 101,583

2 unchanged sentences

Total debt $ 3,882 $ 119,070 $ 3,880 $ 101,341

Debt is measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 as follows (in thousands):

March 31, 2024 December 31, 2023

Debt is measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 as follows (in thousands):

June 30, 2024 December 31, 2023

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

2 unchanged sentences

(1) The fair value of debt was estimated based on interest rates considered available for instruments of similar terms and remaining maturities.

Senior Secured Notes

On June 24, 2016, the Company issued two series of senior secured notes with a total principal balance of $ 115.0 million at a blended interest rate of 4.55 %.

Series A carries a principal balance of $ 28.8 million and bears an interest rate of 4.38 % over a twelve-year term, with the principal payment due on June 15, 2028 (the “Series A Notes”).

Series B carries a principal balance of $ 76.7 million and bears an interest rate of 4.58 % over a 20 -year term, with the principal payment due on June 15, 2036 (the “Series B Notes”).

The Series B Notes were interest only for the first five years , with $ 1.9 million principal payments paid semiannually in June and December thereafter beginning December 2021.

The Series A Notes and the Series B Notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income.

Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases.

The Series A Notes and the Series B Notes also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25 .

However, for the quarter ended June 30, 2021 through the quarter ending March 31, 2024, the debt service ratio drops to 1.20 .

The debt service ratio increases to 1.25 for any fiscal quarter ending during the period from and after June 30, 2024.

As of March 31, 2024, the Company was in compliance with its financial debt covenants relating to the Series A Notes and the Series B Notes.

Additionally, on October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $ 20 million of 6.91 % Senior Secured Notes due on January 3, 2034 (the “ 6.91 % Notes” and collectively with the Series A Notes and the Series B Notes, the “Senior Secured Notes”).

On October 26, 2023, the Company entered into a note purchase agreement for the issuance of an aggregate principal amount of $ 20 million of 6.91 % Senior Secured Notes due on January 3, 2034 (the “ 6.91 % Notes”).

Pursuant to the terms of the 6.91 % Note purchase agreement, the Company issued the 6.91 % Notes on January 3, 2024.

The 6.91 % Notes accrue interest at 6.91 % per annum from the date of issuance, payable semi-annually on January 3 and July 3 of each year, beginning on July 3, 2024, with a balloon payment due on January 3, 2034.

The 6.91 % Notes require the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

Consolidated EBITDA is calculated as net income plus depreciation and amortization, taxes, interest and other non-cash charges net of non-cash income.

Consolidated debt service is calculated as interest expense, principal payments, and dividend or stock repurchases.

The 6.91 % Notes also contain a provision limiting the payment of dividends if the Company falls below a debt service coverage ratio of 1.20 for any fiscal quarter ended on or before June 15, 2024 and 1.25 for any fiscal quarter ended during the period from and after June 16, 2024.

As of March 31, 2024, the Company was in compliance with its financial debt covenants relating to 6.91 % Notes.

The Senior Secured Notes are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions.

The Senior Secured Notes also have certain restrictive covenants that limit, among other things, the Company’s ability to:

create liens and other encumbrances;

incur additional indebtedness;

merge, liquidate or consolidate with another entity;

dispose of or transfer assets;

make distributions or other restricted payments;

engage in certain affiliate transactions;

and change the nature of the business.

As of June 30, 2024, the Company was in compliance with its financial debt covenants relating to the Series A Notes, Series B Notes, and the 6.91 % Notes.

On April 30, 2024, the Company’s GW-Rincon utility entered into a loan agreement with the Water Infrastructure Finance Authority of Arizona (WIFA) for a principal amount of $ 2.4 million to improve the utility’s infrastructure, of which $ 0.7 million is forgivable.

The loan is due on April 1, 2044 and bears an interest rate of 4.911 %.

The loan is funded through one or more draw requests submitted by the Company and the subsequent disbursement of principal by WIFA.

As of June 30, 2024, the Company had received no disbursements of principal under this agreement.

Revolving Credit Line

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This credit facility, which may be used to refinance existing indebtedness, to acquire assets to use in and/or expand the Company’s business, and for general corporate purposes, initially bore an interest rate equal to the London Interbank Offered Rate (LIBOR) plus 2.00 % and had no unused line fee.

The Company and Northern Trust have subsequently amended the credit facility agreement on multiple occasions (as amended, the “Northern Trust Loan Agreement”) to, among other things, (i) extend the scheduled maturity date to July 1, 2025;

The Company and Northern Trust subsequently amended the credit facility agreement on multiple occasions (as amended, the “Northern Trust Loan Agreement”) to, among other things, (i) extend the scheduled maturity date to July 1, 2025;

(ii) increase the maximum principal amount available for borrowing to $ 15.0 million;

1 unchanged sentence

and (iv) add a quarterly facility fee equal to 0.35 % of the average daily unused amount of the revolving line of credit.

The Northern Trust Loan Agreement requires the Company to maintain a debt service coverage ratio of consolidated EBITDA to consolidated debt service of at least 1.10 to 1.00.

The Northern Trust Loan Agreement also contains a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25 .

However, for the quarter ended June 30, 2021 through the quarter ending March 31, 2024, the debt service ratio drops to 1.20 .

Additionally, the Northern Trust Loan Agreement contains certain restrictive covenants that limit, among other things, the Company’s ability to:

create liens and other encumbrances;

incur additional indebtedness;

merge, liquidate or consolidate with another entity;

dispose of or transfer assets;

make distributions or other restricted payments (including dividends);

engage in certain affiliate transactions;

and change the nature of the business.

The foregoing covenants are subject to various qualifications and limitations as set forth in the Northern Trust Loan Agreement.

Pursuant to the Northern Trust Loan Agreement, the revolving credit facility is subject to certain customary events of default after which the revolving credit facility could be declared due and payable if not cured within the grace period or, in certain circumstances, could be declared due and payable immediately.

As of March 31, 2024, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.

As of March 31, 2024, the Company had no outstanding borrowings under this credit line.

On July 1, 2024, the Company and Northern Trust entered into a fifth amendment to the Northern Trust Loan Agreement, which further amended the scheduled maturity date for the revolving line of credit from July 1, 2025 to July 1, 2026.

As of June 30, 2024, the Company had no outstanding borrowings under this credit line.

As of December 31, 2023, the outstanding borrowings on this credit line were approximately $ 2.3 million.

There were approximately $ 16,000 and $ 25,000 unamortized debt issuance costs as of March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024, the remaining aggregate annual maturities of debt obligations are as follows (in thousands):

2024 (remaining period) $ 3,869

Thereafter 73,666

Subtotal 125,635

amount representing unamortized discount and debt issuance costs 776

Total $ 124,859

For the three months ended March 31, 2024, tax expense of $ 0.3 million was recorded on pre-tax income of $ 0.9 million, compared to tax expense of $ 0.9 million recorded on pre-tax income of $ 3.3 million for the three months ended March 31, 2023.

There were approximately $ 12,000 and $ 25,000 unamortized debt issuance costs as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.

For the three months ended June 30, 2024, tax expense of $ 0.6 million was recorded on pre-tax income of $ 2.3 million, compared to tax expense of $ 0.7 million recorded on pre-tax income of $ 2.5 million for the three months ended June 30, 2023.

For the six months ended June 30, 2024, tax expense of $ 0.8 million was recorded on pre-tax income of $ 3.3 million, compared to tax expense of $ 1.6 million recorded on pre-tax income of $ 5.8 million for the six months ended June 30, 2023.

The income tax provision was computed on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items.

The Company’s effective tax rate decreased during the three months ended March 31, 2024 primarily due to a decrease of approximately $ 2.4 million in pre-tax income for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

The Company’s effective tax rate was 24.93 % and 25.25 % as of June 30, 2024 and 2023, respectively.

DEFERRED COMPENSATION AWARDS

10 unchanged sentences

As of August 2021, these options were fully expensed.

As of March 31, 2024, 84,671 options have been exercised and 115,708 options have been forfeited with 264,621 options outstanding.

As of June 30, 2024, 125,750 options have been exercised and 70,425 options have been forfeited with 268,825 options outstanding.

2019 stock option grant

5 unchanged sentences

As of August 2023, these options were fully expensed.

Stock-based compensation expense of $ 43,000 was recorded for the three months ended March 31, 2023.

As of March 31, 2024, 13,257 options have been exercised and 105,757 options have been forfeited with 130,986 options outstanding.

Stock-based compensation expense of $ 29,000 and $ 72,000 was recorded for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, 55,994 options have been exercised and 63,020 options have been forfeited with 130,986 options outstanding.

Restricted stock units

1 unchanged sentence

The units are credited quarterly using the closing price of the Company’s common stock on the applicable record date for the respective quarter.

The following table details total awards granted and the number of units outstanding as of March 31, 2024, along with the amounts paid to holders of the restricted stock units (“RSUs”) for the three months ended March 31, 2024 and 2023 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended March 31,

The following table details total awards granted and the number of units outstanding as of June 30, 2024, along with the amounts paid to holders of the restricted stock units (“RSUs”) for the three and six months ended June 30, 2024 and 2023 (in thousands, except unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

Grant Date Units Granted Units Outstanding 2024 2023 2024 2023

Q1 2020 22,481 — — 24

27,403 — — 28 28 57

3 unchanged sentences

Total 110,993 50,690 $ 87 $ 83 $ 170 $ 137

(1) Pursuant to the Global Water Resources, Inc.

2020 Omnibus Incentive Plan, effective May 7, 2020, long-term incentive awards are no longer granted in the form of PSUs and are granted as RSUs instead.

Stock appreciation rights

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of March 31, 2024 and amounts paid during the three months ended March 31, 2024 and 2023 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended March 31,

The following table details the recipients of the stock appreciation rights (“SARs”) awards, the grant date, units granted, exercise price, outstanding units as of June 30, 2024 and amounts paid during the three and six months ended June 30, 2024 and 2023 (in thousands, except unit and per unit amounts):

Amounts Paid For the Three Months Ended June 30, Amounts Paid For the Six Months Ended June 30,

Recipients Grant Date Units Granted Exercise Price Units Outstanding 2024 2023 2024 2023

8 unchanged sentences

(3) The exercise price was determined to be the fair market value of one share of GWRI stock on the grant date of March 12, 2018.

For the three months ended March 31, 2024, the Company recorded approximately $ 0.1 million of negative compensation expense related to the RSUs and SARs.

No compensation expense was recorded for the three months ended March 31, 2023.

For both the three months ended June 30, 2024 and 2023, the Company recorded approximately $ 0.1 million of compensation expense related to the RSUs and SARs.

For the six months ended June 30, 2024 and 2023, the Company recorded approximately $ 0.2 million and $ 0.1 million, respectively, of compensation expense related to the RSUs and SARs.

These are liability awards, so when the stock price decreases, cumulative compensation expense is reduced, which can lead to negative compensation in a given period.

Based on GWRI’s closing share price on March 28, 2024 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

Based on GWRI’s closing share price on June 28, 2024 (the last trading date of the quarter), deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

2024 (remaining period) $ 164

4 unchanged sentences

RSAs vest over two to three years , beginning on the date of the grant.

assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense.

The following table details the RSA units granted during the three months ended March 31, 2024 and 2023, as well as the compensation expense related to the grant and partial vesting of RSAs for the three months ended March 31, 2024 and 2023 (in thousands, except share amounts):

For The Three Months Ended March 31,

The Company assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense.

No RSAs were granted during the three and six months ended June 30, 2024 or 2023.

The following table details the compensation expense related to the partial vesting of previously granted RSAs for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended June 30, For The Six Months Ended June 30,

2024 2023 2024 2023

Compensation expense

$ 197 $ 255 $ 395 $ 537

SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the three months ended March 31, 2024 and 2023 (in thousands):

For the Three Months Ended March 31,

The following is supplemental cash flow information for the six months ended June 30, 2024 and 2023 (in thousands):

For the Six Months Ended June 30,

Supplemental cash flow information:

Cash paid for interest

Cash paid for interest - net of amounts capitalized

$ 2,290 $ 2,397

Non-cash financing and investing activities:

2 unchanged sentences

Finance lease additions

Acquisition of Farmers Water Company

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona, for a total consideration of $ 7.6 million consisting of $ 6.2 million in cash plus a growth premium estimated at $ 1.4 million.

The acquisition added approximately 3,300 active water service connections and approximately 21.5 square miles of service area in Sahuarita, Arizona and the surrounding unincorporated area of Pima County at the time of acquisition.

The acquisition was accounted for as a business combination under ASC 805, “Business Combinations” and the purchase price was allocated to the acquired utility assets and liabilities based on the acquisition-date fair values.

Fair values are determined in accordance with ASC 820 “Fair Value Measurement,” which allows for the characteristics of the acquired assets and liabilities to be considered, particularly restrictions on the use of the asset and liabilities.

Regulation is considered both a restriction on the use of the assets and liabilities, as it relates to inclusion in rate base, and a fundamental input to measuring the fair value in a business combination.

Substantially all the Company’s operations are subject to the rate-setting authority of the ACC and are accounted for pursuant to accounting guidance for regulated operations.

The rate-setting and cost recovery provisions currently in place for the Company’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base.

As such, the fair value of the Company’s assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying values and does not reflect any net valuation adjustments.

COMMITMENTS AND CONTINGENCIES

The Company has operating and finance leases for vehicles, office equipment, and office space.

Refer to Note 4 – “Leases” in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information.

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co., an operator of a water utility with service area in Pima County, Arizona.

Under the terms of the purchase agreement, the Company is obligated to pay the seller a growth premium equal to $ 1,000 for each new account established in the service area, up to a total aggregate growth premium of $ 3.5 million.

1 unchanged sentence

The assumptions and estimates used in determining the acquisition liability related to the growth premium are consistent with previous acquisitions.

As of March 31, 2024, the remaining liability was $ 1.3 million.

The purchase price allocation of the net assets acquired in the transaction is as follows as of the acquisition date (in thousands):

Net assets acquired:

Accounts receivable 72

Property, plant and equipment 10,386

Construction work-in-progress 126

Intangibles (1)

Other taxes ( 35 )

Other accrued liabilities ( 55 )

Developer deposits ( 22 )

AIAC ( 1,481 )

CIAC ( 7,322 )

Total net assets assumed 1,712

Goodwill 5,863

Total purchase price $ 7,575

(1) Intangibles consist of franchise contract rights and organization costs.

Refer to Note 7 — “Goodwill & Intangible Assets” for additional information regarding the intangibles.

The goodwill reflects the value paid primarily for the long-term potential for connection growth as a result of the Company’s increased scale and diversity, opportunities for synergies, and an improved risk profile.

COMMITMENTS AND CONTINGENCIES

The Company has operating and finance leases for vehicles, office equipment, and office space.

Refer to Note 4 – “Leases” for additional information.

As of June 30, 2024, the remaining liability was $ 1.2 million.

On October 16, 2018, the Company completed the acquisition of GW-Red Rock, an operator of a water and a wastewater utility with service areas in the Pima and Pinal counties of Arizona.

Under the terms of the purchase agreement, the Company is obligated to pay to the seller a growth premium equal to $ 750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date.

As of March 31, 2024, no meters have been installed and no accounts have been established in any of the three growth premium areas.

As of June 30, 2024, no meters have been installed and no accounts have been established in any of the three growth premium areas.

As of June 30, 2024, the remaining liability was $ 0.8 million.

Contingencies

1 unchanged sentence

Management is not aware of any legal proceeding of which the ultimate resolution could materially affect the Company’s financial position, results of operations, or cash flows.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through May 8, 2024, which is the date the financial statements was available to be issued and also the filing date.

There are no other subsequent events that require disclosure, except for the following:

Global Water - 2024 Acquisition A, Inc.

(“GW-Acquisition”), a wholly owned subsidiary of the Company, entered into an asset purchase agreement with the City of Tucson effective April 25, 2024, pursuant to which GW-Acquisition will acquire seven public water systems from the City of Tucson serving approximately 2,200 water service connections in an all-cash transaction for a purchase price of $ 8.4 million.

The public water systems are located in and around Pima County.

The transaction remains subject to customary closing conditions and approval by the ACC.

The estimated rate base of the seven water systems is approximately $ 7.8 million.

On April 30, 2024, the Company’s GW-Rincon utility entered into a loan agreement with the Water Infrastructure Finance Authority of Arizona for a principal amount of $ 2.4 million to improve the utility’s infrastructure, of which $ 0.7 million is forgivable.

The loan is due on April 1, 2044 and bears an interest rate of 4.911 %, with monthly payments beginning on November 1, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements