What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-05 compared with 2024-03-07 · 672 added, 588 removed, 400 unchanged (76% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as o f December 31, 2023 an d 2022

Consolidated Statements of Operations for the Years ende d December 31, 2023 and 2022

Consolidated Statements of Shareholders’ Equity for the Years ende d December 31, 2023 a nd 2022

Consolidated Statements of Cash Flows for the Years ended December 31, 2023 a nd 2022

Notes to Consolidated Financial Statements

Table of Con tents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS

REGULATORY MATTERS

REVENUE RECOGNITION

EARNINGS PER SHARE

UTILITY PLANT

TAXES, PREPAID EXPENSES AND OTHER CURRENT ASSETS

GOODWILL AND INTANGIBLE ASSETS

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

SHARE-BASED COMPENSATION

TRANSACTIONS WITH RELATED PARTIES

COMMITMENTS AND CONTINGENCIES

BUSINESS SEGMENT INFORMATION

SUPPLEMENTAL CASH FLOW INFORMATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM [PCAOB ID:

To the shareholders and the Board of Directors of Global Water Resources, Inc.

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Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation.

Accounting for the economics effects of rate regulation has a pervasive effect on the financial statements.

Accounting for the economic effects of rate regulation has a pervasive effect on the financial statements.

The ACC establishes rates designed to permit the recovery of the cost of service and a return on investment.

Decisions to be made by the ACC in the future will impact the accounting for regulated operations, including decisions about the amount of

Table of Con tents

allowable costs and return on invested capital included in rates and any refunds that may be required.

Decisions to be made by the ACC in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required.

While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the ACC will not approve (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

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We evaluated the external information and compared such information to management’s regulatory asset and liability balances for completeness.

• We obtained supporting documentation from management, as appropriate, regarding the likelihood of recovery in future rates or of a future reduction in rates not yet addressed in a regulatory order.

• We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

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GLOBAL WATER RESOURCES, INC.

CONSOLIDATED BALANCE SHEET

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31, 2024 December 31, 2023

PROPERTY, PLANT AND EQUIPMENT:

Land $ 2,674 $ 1,480

Depreciable property, plant and equipment 414,170 344,043

Construction work-in-progress 48,147 66,039

Other 697 697

UTILITY PLANT:

Utility plant $ 512,993 $ 465,688

Less accumulated depreciation ( 153,614 ) ( 142,367 )

Net property, plant and equipment 323,321 287,737

Net utility plant 359,379 323,321

CURRENT ASSETS:

Cash and cash equivalents 9,047 3,087

Accounts receivable, net 2,845 2,139

Customer payments in-transit 543 462

Accounts receivable, net of allowance for credit losses of $ 163 and $ 122 , respectively

Unbilled revenue 3,109 2,755

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TOTAL ASSETS $ 405,137 $ 361,095

LIABILITIES AND SHAREHOLDERS’ EQUITY

CAPITALIZATION AND LIABILITIES

CAPITALIZATION

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

24,570,994 and 24,492,918 shares issued as of December 31, 2024 and December 31, 2023, respectively.

Treasury stock, 344,978 and 317,677 shares at December 31, 2024 and December 31, 2023, respectively.

Additional paid-in capital 47,366 47,585

Retained earnings — 797

Total shareholders’ equity

47,604 48,620

Long-term debt, net 118,518 101,341

Total Capitalization 166,122 149,961

CURRENT LIABILITIES:

Accounts payable 2,051 1,027

Accrued expenses 7,129 8,056

Customer and meter deposits 1,609 1,628

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Leases, current portion 871 553

Accrued expenses and other current liabilities 13,801 7,129

Total current liabilities 22,258 14,217

NONCURRENT LIABILITIES:

OTHER LIABILITIES:

Line of credit — 2,315

Long-term debt 101,341 104,945

Long-term lease liabilities 1,450 1,370

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Deferred income tax liabilities, net 9,698 8,284

Acquisition liabilities 3,048 1,773

Other noncurrent liabilities 15,405 14,864

Total noncurrent liabilities 298,258 262,443

Total liabilities 312,475 278,692

Total other liabilities 216,757 196,917

Commitments and contingencies (Refer to Note 17)

SHAREHOLDERS’ EQUITY:

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

24,492,918 and 24,095,139 shares issued as of December 31, 2023 and December 31, 2022, respectively.

Treasury stock, 317,677 and 224,093 shares at December 31, 2023 and December 31, 2022, respectively.

Paid in capital 47,585 44,157

Retained earnings 797 —

Total shareholders’ equity 48,620 44,394

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 361,095 $ 323,086

TOTAL CAPITALIZATION AND LIABILITIES $ 405,137 $ 361,095

See accompanying notes to the consolidated financial statements

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(in thousands, except share and per share amounts)

Year Ended December 31,

Water services $ 24,860 $ 20,885

Wastewater and recycled water services 25,382 23,843

Unregulated revenues 2,786 —

Total revenues 53,028 44,728

Water service $ 26,064 $ 24,860

Wastewater and recycled water service 26,628 25,382

Unregulated revenue — 2,786

Total revenue 52,692 53,028

OPERATING EXPENSES:

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Interest expense ( 6,098 ) ( 4,882 )

Allowance for equity funds used during construction 981 723

Other, net 3,650 3,398

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(in thousands, except share and per share amounts)

Common Stock Shares Common Stock Treasury Stock Shares Treasury Stock Paid-in Capital Retained Earnings Total Equity

Common Stock Shares Common Stock Treasury Stock Shares Treasury Stock Additional Paid-in Capital Retained Earnings Total Equity

BALANCE - December 31, 2022 24,095,139 $ 239 ( 224,093 ) $ ( 2 ) $ 44,157 $ — $ 44,394

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Issuance of common stock 230,000 1 — — 2,727 — 2,728

Treasury stock — — ( 41,648 ) — 304 — 304

Stock option exercise 167,779 — ( 93,584 ) — 239 — 239

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— — — — ( 712 ) ( 6,586 ) ( 7,298 )

Issuance of Common Stock 230,000 1 — — 2,727 — 2,728

Stock option exercise 5,277 — ( 4,405 ) — 198 — 198

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(in thousands)

Year Ended December 31,

Years Ended December 31,

Cash Flows from Operating Activities:

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

Deferred compensation 1,325 1,529

Depreciation and amortization 12,720 11,437

Right of use amortization 324 182

Amortization of deferred debt issuance costs and discounts 44 44

(Gain) Loss on disposal of fixed assets ( 63 ) 4

Provision for credit losses 68 103

Share-based compensation 1,029 1,325

Deferred income tax expense 1,473 2,394

(Gain) loss on disposal of fixed assets 309 ( 63 )

Right of use amortization 384 324

Other adjustments ( 767 ) 112

Changes in assets and liabilities

Accounts receivable ( 702 ) ( 248 )

Other current assets ( 292 ) 210

Accounts receivable and other current assets ( 1,986 ) ( 994 )

Accounts payable and other current liabilities ( 915 ) ( 635 )

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Dividends paid ( 7,298 ) ( 7,185 )

Advances in aid of construction 1,510 2,344

Advances and contributions in aid of construction 10,627 1,510

Refunds of advances for construction ( 1,355 ) ( 1,171 )

Proceeds from stock option exercise 9 3

Payments for taxes related to net shares settlement of equity awards ( 265 ) ( 373 )

Principal payments under finance lease ( 273 ) ( 525 )

Line of credit borrowings, net 2,315 —

Repayments of notes payable ( 3,923 ) ( 3,833 )

Line of credit borrowings — 2,315

Line of credit repayments ( 2,315 ) —

Loan borrowings 22,357 260

Loan repayments ( 29 ) 259

Repayments of bond ( 3,833 ) ( 3,833 )

Debt issuance costs paid ( 418 ) —

Proceeds from sale of stock — 2,748

Payments of offering costs for sale of stock ( 20 ) —

Other contributions — 6,700

Other financing activities ( 51 ) ( 40 )

Net cash provided by financing activities 17,086 406

INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 2,799 ) ( 5,881 )

Increase (Decrease) in cash, cash equivalents, and restricted cash 6,393 ( 2,799 )

Cash, cash equivalents, and restricted cash — Beginning of period 4,763 7,562

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Notes to the Consolidated Financial Statements

DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, CORPORATE TRANSACTIONS, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS

DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS

Description of Business

Global Water Resources, Inc.

(the “Company”, “GWRI”, “we”, “us”, or “our”) is a water resource management company that owns, operates, and manages twenty-nine water, wastewater, and recycled water systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.

Serving more than 82,000 people in approximately 32,000 homes within the Company’s 408 square miles of certificated service areas as of December 31, 2023, the Company provides water and wastewater utility services under the regulatory authority of the Arizona Corporation Commission (“ACC”).

Approximately 89.3 % of the active service connections are customers of the Company’s Global Water - Santa Cruz Water Company, Inc.

(“Santa Cruz”) and Global Water - Palo Verde Utilities Company, Inc.

(“Palo Verde”) utilities, which are located within a single service area.

GWRI is a water resource management company that owns, operates, and manages thirty-two water, wastewater, and recycled water systems in strategically located communities, principally in metropolitan Phoenix and Tucson, Arizona.

Serving more than 111,000 people in approximately 36,000 homes within the Company’s 409 square miles of ACC-designated service areas as of December 31, 2024, the Company provides water and wastewater utility service under the regulatory authority of the ACC.

Approximately 89.6 % of the active service connections are customers of the Company’s GW-Santa Cruz and GW-Palo Verde utilities, which are located within a single service area.

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its subsidiaries.

All significant intercompany account balances and transactions have been eliminated in consolidation.

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

The Company’s consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its subsidiaries.

All intercompany account balances and transactions have been eliminated in consolidation.

The Company prepares its financial statements in accordance with the rules and regulations of the SEC.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.

Actual results could differ from those estimates.

Corporate Transactions

Private Placement Offering of 6.91 % 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.

Pursuant to the terms of the note purchase agreement, the Company issued the notes on January 3, 2024.

Private Placement Offering of Common Stock

On June 8, 2023, the Company entered into a securities purchase agreement for the issuance and sale by the Company of an aggregate of 230,000 shares of the Company’s common stock at a purchase price of $ 12.07 per share in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder.

The Company received gross proceeds of approximately $ 2.8 million from the offering.

One of the Company’s directors purchased an aggregate of 30,000 shares of common stock in the offering at the purchase price.

Public Offering of Common Stock

On August 1, 2022, the Company completed a public offering of 1,150,000 shares of common stock at a public offering price of $ 13.50 per share, which included 150,000 shares issued and sold to the underwriter following the exercise in full of its option to purchase additional shares of common stock.

The Company received net proceeds of approximately $ 14.9 million from the offering after deducting underwriting discounts and commissions and offering expenses paid by the Company.

Certain of the Company’s directors and/or their affiliates purchased an aggregate of 652,000 shares of common stock at the public offering price.

Farmers Acquisition

On February 1, 2023, the Company acquired all of the equity of Farmers Water Co.

(“Farmers”), an operator of a water utility with service area in Pima County, Arizona.

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 the acquisition.

Stipulated Condemnation of the Operations and Assets of Valencia Water Company, Inc.

On July 14, 2015, the Company closed the stipulated condemnation to transfer the operations and assets of Valencia Water Company, Inc.

(“Valencia”) to the City of Buckeye.

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 $ 2.4 million and $ 2.5 million for the years ended December 31, 2023 and 2022, respectively, and has received an aggregate of $ 10.7 million in growth premiums to date.

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

Certain amounts from prior periods have been reclassified to conform to the current year presentation.

The reclassification had no impact on the Company’s s results of operation, financial position or cash flows.

Significant Accounting Policies

The Company’s regulated utilities and certain other balances are subject to regulation by the ACC and are therefore subject to Accounting Standards Codification Topic 980, Regulated Operations (“ASC 980”) (See Note 2 – “Regulatory Decision and Related Accounting and Policy Changes”).

Property, Plant and Equipment

Property, plant, and equipment is stated at cost less accumulated depreciation provided on a straight-line basis (See Note 5 – “Property, Plant and Equipment”).

Depreciation rates for asset classes of utility property, plant, and equipment are established by the ACC.

The cost of additions, including betterments and replacements of units of utility fixed assets are charged to utility property, plant, and equipment.

When units of utility property are replaced, renewed, or retired, their cost plus removal or disposal costs, less salvage proceeds, is charged to accumulated depreciation.

For non-utility property, plant, and equipment, depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets.

Cost and accumulated depreciation for non-utility property, plant, and equipment retired or disposed of are removed from the accounts and any resulting gain or loss is included in earnings.

Regulatory Assets and Liabilities

Rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and it is probable that such rates can be billed and collected.

Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the Consolidated Balance Sheets and are later recognized in income as the related amounts are included in customer rates and recovered from or refunded to customers.

The Company’s regulated utilities and certain other balances are subject to regulation by the ACC and are therefore subject to ASC Topic 980, Regulated Operations (“ASC 980”).

The Company continually evaluates whether or not our operations are within the scope of ASC 980 and rate regulations.

As part of that analysis, the Company evaluates probability of recovery for its regulatory assets.

In management’s opinion, the Company’s regulated subsidiaries will be subject to regulatory accounting for the foreseeable future.

Regulatory assets are amortized over the future periods that the costs are expected to be recovered.

Final determination of whether a regulatory asset can be recovered is decided by the ACC in regulatory proceedings.

If the Company determines that a portion of the regulatory assets is not recoverable in customer rates, the Company would be required to recognize the loss of the assets disallowed.

If costs expected to be incurred in the future are currently being recovered through rates, the Company records those expected future costs as regulatory liabilities.

For further discussion of regulatory assets and liabilities, see Note 3 – “Regulatory Matters.”

Utility Plant

Utility plant is stated at cost less accumulated depreciation provided on a straight-line basis (See Note 6 – “Utility Plant”).

Depreciation rates for asset classes of utility plant are established by the ACC.

The cost of additions, including betterments and replacements of units of utility fixed assets are charged to utility plant.

When units of utility property are replaced, renewed, or retired, their disposal costs, less salvage proceeds, is charged to accumulated depreciation.

Depreciation of utility plant is computed based on the estimated useful lives as follows:

Equipment 3 to 30 years

Office buildings and other structures 30 years

Transmission and distribution plant 10 to 50 years

In addition to third party costs, direct personnel costs and indirect construction overhead costs may be capitalized.

Interest incurred during the construction period is also capitalized as a component of the cost of the constructed assets, which represents the cost of debt and equity associated with construction activity.

AFUDC incurred during the construction period is also capitalized as a component of the cost of the constructed assets, which represents the cost of debt and equity associated with construction activity.

Expenditures for maintenance and repairs are charged to expense.

Revenue Recognition—Water Services

Water services revenues are recorded when service is rendered or water is delivered to customers.

Revenue Recognition—Water Service

Water service revenue is recorded when service is rendered or water is delivered to customers.

However, in addition to the monthly basic service charge, the determination and billing of water sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month.

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Water connection fees are the fees associated with the application process to set up a customer to receive utility service on an existing water meter.

These fees are approved by the ACC through the regulatory process and are set based on the costs incurred to establish services including the application process, billing setup, initial meter reading, and service transfer.

These fees are approved by the ACC through the regulatory process and are set based on the costs incurred to establish service including the application process, billing setup, initial meter reading, and service transfer.

Because the amounts charged for water connection fees are set by the ACC and not negotiated in conjunction with the pricing of ongoing water service, the connection fees represent the culmination of a separate earnings process and are recognized when the service is provided.

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Certain fees for meters are regulated by the ACC and are refundable to the end customer over a period of time.

Refundable meter installation fees are recorded as a liability upon receipt.

Revenue Recognition—Wastewater and Recycled Water Services

Wastewater and recycled water services revenues are generally recognized when service is rendered.

Wastewater services are billed at a fixed monthly amount per connection, and recycled water services are billed monthly based on volumetric fees.

Revenue Recognition—Unregulated Revenues

Unregulated revenues represent those revenues that are not subject to the ratemaking process of the ACC.

Unregulated revenues are limited to revenues resulting from certain infrastructure coordination and financing agreement arrangements (“ICFAs”).

Refundable meter installation fees are recorded as an AIAC liability upon receipt.

Revenue Recognition—Wastewater and Recycled Water Service

Wastewater and recycled water service revenue is generally recognized when service is rendered.

Wastewater service is billed at a fixed monthly amount per connection, and recycled water service is billed monthly based on volumetric fees.

Revenue Recognition—Unregulated Revenue

Unregulated revenue represent revenue that is not subject to the ratemaking process of the ACC.

Unregulated revenue is limited to revenue resulting from certain ICFAs.

Refer to Note 4 – “Revenue Recognition - Unregulated Revenue” for additional information.

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The allowance for credit losses is recorded as bad debt expense and is classified as general and administrative expense.

The allowance for credit losses is determined considering the age of the receivable balance, type of customer (e.g., residential or commercial), payment history, as well as specific identification of any known or expected collectability issues (see Note 6 – “Accounts Receivable”).

ICFAs are agreements with developers and homebuilders where the Company, which owns the operating utilities, provides service to plan, coordinate and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.

Service provided within these agreements include coordination of construction service for water and wastewater treatment facilities as well as financing, arranging and coordinating the provision of utility service.

In return, the developers and homebuilders pay the Company an agreed-upon amount per dwelling unit for the land legally described in the agreement or a portion thereof.

Under ICFA agreements, the Company has a contractual obligation

to ensure physical capacity exists through its regulated utilities for the provision of water and wastewater utility service to the land when needed.

This obligation persists regardless of connection growth.

Fees for this service are typically a negotiated amount per equivalent dwelling unit for the land legally described in the agreement, or a portion thereof.

Payments are generally due in installments, with a portion due upon signing of the agreement, a portion due upon completion of certain milestones, and the final payment due upon final plat approval or sale of the subdivision.

The payments are non-refundable.

The agreements are generally recorded against the land with the appropriate recorder’s office and must be assumed in the event of a sale or transfer of the land.

The regional planning and coordination of the infrastructure in the various service areas has been an important part of the Company’s business model.

Payments for ICFAs are usually received in advance.

The ACC requires a HUF tariff to be established for all ICFAs that come due and are paid to the Company, which is a set amount per equivalent dwelling unit determined by the ACC based on the utility and meter size.

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.

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

The ACC prohibits the Company from entering into any new ICFAs.

The Company accounts for the portion of ICFA funds allocated to the HUF liability as a CIAC once the associated utility plant is placed in service.

However, in accordance with the ACC directives, the CIAC is not deducted from rate base until the HUF funds are expended for utility plant.

Such funds are restricted and segregated in a separate bank account and used for plant.

For facilities required under a HUF or ICFA, the utilities must first use the HUF moneys received, after which, it may use debt or equity financing for the remainder of construction.

As these arrangements are with developers and not with the end water or wastewater customer, revenue recognition coincides with the completion of the Company’s performance obligations under the agreement with the developer and its regulated utilities’ ability to provide fitted capacity for water and wastewater service.

The Company exercises judgment when estimating the number of equivalent dwelling units that its regulated utilities have capacity to serve.

The Company believes that service provided within these agreements is not distinct in the context of the contract because it is highly interdependent with its regulated utilities’ ability to provide fitted capacity for water and wastewater service.

The Company concluded that the goods and service provided under ICFA contracts constitute a single performance obligation.

Cash and Cash Equivalents

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Restricted Cash

Restricted cash represents cash deposited relating to hook-up fees (“HUF”) tariffs and asset retirement obligations.

Restricted cash represents cash deposited relating to HUF tariffs, to be used towards future infrastructure costs, as well as funds set aside to settle asset retirement obligations.

The following table summarizes the restricted cash balance as of December 31, 2024 and 2023 (in thousands):

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HUF funds $ 870 $ 822

Certificate of deposits 854 840

Certificates of deposit 1,239 854

$ 2,109 $ 1,676

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The use of a valuation allowance as a substitute for derecognition of tax positions is prohibited, and to the extent that uncertain tax positions exist, expanded disclosures are provided.

Basic and Diluted Earnings per Common Share

Basic earnings per share (“EPS”) in each period of this report were calculated by dividing net income by the weighted-average number of shares during those periods.

Diluted EPS includes additional weighted-average common stock equivalents (options and restricted stock awards), if dilutive.

Unless otherwise noted, the term “Earnings Per Share” refers to Basic EPS.

A reconciliation of the denominator used in Basic and Diluted EPS calculations is show in the following

Year Ended December 31,

(In thousands) 2023 2022

Basic weighted average common shares outstanding 24,045 23,173

Effect of dilutive securities:

Option grants

Restricted stock awards

Total dilutive securities 85 159

Diluted weighted average common shares outstanding 24,130 23,332

Anti-dilutive shares excluded from earnings per diluted shares (1) 91 185

(1) Shares were excluded from the dilutive-effect calculation because the outstanding awards’ exercise prices were greater than the average market price of the Company’s common stock.

Refer to Note 13 – “Deferred Compensation Awards” for additional information regarding the option and restricted stock grants.

Goodwill represents the excess purchase price over the fair value of net tangible and identifiable intangible assets acquired through acquisitions.

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Intangible assets with indefinite lives are not amortized but are tested for impairment annually, or more often if certain circumstances indicate a possible impairment may exist.

Amortized intangible assets consist primarily of acquired ICFA contract rights.

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

Amortized intangible assets consist primarily of acquired ICFA and Sonoran contract rights.

Refer to Note 3 – “Regulatory Matters” for additional information about ICFAs.

Impairment of Long-Lived Assets

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These costs are netted against long-term debt and amortized as interest expense using the effective interest method over the term of the respective debt.

Amortization of debt issuance costs and discounts totaled approximately $ 0.04 million for both the years ended December 31, 2023 and 2022.

Advances in Aid of Construction (“AIAC”) and Contributions in Aid of Construction (“CIAC”)

Amortization of debt issuance costs and discounts were less than $ 0.1 million for both the years ended December 31, 2024 and 2023.

AIAC and CIAC

The Company has various agreements with developers, whereby funds, water line extensions, or wastewater line extensions are provided to the Company by the developers and are considered refundable AIAC.

These AIAC are non-interest-bearing and are subject to refund to the developers through annual payments that are computed as a percentage of the total annual gross revenue earned from customers connected to utility services constructed under the agreement over a specified period.

These AIAC are non-interest-bearing and are subject to refund to the developers through annual payments that are computed as a percentage of the total annual gross revenue earned from customers connected to utility service constructed under the agreement over a specified period (generally 22 years).

The refundable AIAC have a carrying value of $ 127.9 million and $ 111.5 million as of December 31, 2024 and 2023, respectively.

Upon the expiration of the agreements’ refunding period, the remaining balance of the AIAC becomes nonrefundable and at that time is considered CIAC.

CIAC are amortized as a reduction of depreciation expense over the estimated remaining life of the related utility plant.

Additionally, the Company accounts for its HUF tariffs as a CIAC once the associated utility plant is placed in service.

Non-cash transfers from HUF to CIAC were $ 3.9 million for the year ended December 31, 2024.

CIAC are amortized as a reduction of depreciation expense over the estimated remaining life of the related

utility plant.

For rate-making purposes, utility plant funded by AIAC or CIAC are excluded from rate base.

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Fair Value of Financial Instruments

ASC 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).

The hierarchy consists of three levels, as follows:

• Level 1 - Quoted market prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are either directly or indirectly observable.

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

The carrying values of cash equivalents, accounts receivables, and accounts payable approximate fair value due to the short-term maturities of these instruments.

See Note 10 – “Debt” for information as to the fair value of long-term debt.

The refundable AIAC have a carrying value of $ 111.5 million and $ 93.7 million as of December 31, 2023 and 2022, respectively.

Portions of these non-interest-bearing instruments are payable annually through 2048 and amounts not paid by the contract expiration dates become nonrefundable.

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However, the fair value of these amounts would be less than their carrying value due to the non-interest-bearing feature.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing operating performance.

In consideration of ASC 280— Segment Reporting the Company notes it is not organized around specific products and services, geographic regions, or regulatory environments.

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 its 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.

Additionally, the Company notes that the CODM uses consolidated financial information to evaluate the Company’s performance, which is the same basis on which he communicates the Company’s results and performance to the Board of Directors.

It is upon this consolidated basis from which he bases all significant decisions regarding the allocation of the Company’s resources on a consolidated level.

Based on the information described above and in accordance with the applicable literature, management has concluded that the Company is currently organized and operated as one operating and reportable segment.

Business Combinations

Business combinations are accounted for as a business combination under ASC Topic 805, Business Combinations, and the purchase price is allocated to the acquired utility assets and liabilities based on the acquisition-date fair values.

Fair values are determined in accordance with ASC Topic 820, Fair Value Measurement (“ASC 820”), 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 revenue 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.

Governmental Funding & Assistance

Occasionally, the Company participates in various U.S.

federal, state and local programs under which governmental funding is received to offset certain specified costs of the Company associated with water conservation efforts, the provision of utility service or facilities in designated locations (such as unserved or underserved rural areas), and the replacement and upgrading of outdated equipment with advanced metering infrastructure.

In certain instances, our receipt of awarded governmental funds may be conditioned on the Company meeting specified progress and inspection milestones during construction of associated utility infrastructure projects.

Certain programs are subject to audits of compliance with program commitments and, subject to the outcomes of those assessments, the Company may be required to reimburse the government entity for cash previously received, or, in some cases, pay a penalty.

The Company evaluates each program and establishes a liability under the principles of ASC 450 if it is probable support payments will be recaptured or a penalty will be imposed.

In April 2024, the Company’s Global Water - Rincon Water Company, Inc.

utility (now part of GW-Saguaro) entered into a loan agreement with WIFA to improve the utility’s infrastructure, including enhancements to the fluoride treatment system and other projects.

A portion of the loan is forgivable, which the Company accounts for as CIAC.

Refer to Note 10 - “Debt,” for additional information.

In December 2023, the Company’s GW-Farmers utility was awarded a $ 1.6 million grant from WIFA to replace manual read meters with advanced metering infrastructure smart meters.

Disbursement of the award occurs through one or more reimbursement requests submitted by the Company for costs incurred and activities performed between July 6, 2022 and June 30.

Award payments are accounted for as CIAC.

For the year ended December 31, 2024, the Company received $ 0.9 million in award disbursements.

The Company received no award disbursements in 2023.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which changed the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables.

The new model required recognition based upon an estimation of expected credit losses rather than recognition of losses based on the probability of occurrence.

The Company is a public business entity that qualifies as a smaller reporting company, and therefore ASU 2016-13 was effective for annual reporting periods beginning after December 15, 2022.

The Company adopted the standard utilizing the modified retrospective method for its trade receivables and unbilled revenue on January 1, 2023.

Based on the composition of the Company’s trade receivables and unbilled revenue, and expected future credit losses, the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740).

ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.

The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods.

The Company adopted ASU 2019-12 during the first quarter of 2021 prospectively and the adoption did not have a material impact to the Company’s Consolidated Financial Statements.

In October of 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

In a business combination, an acquirer generally recognizes assets acquired and liabilities assumed, including contract assets and contract liabilities, at their respective fair value on the acquisition date.

ASU 2021-08 requires that in a business combination, an acquirer should recognize and measure contract assets acquired and contract liabilities assumed in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

The guidance provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts with customers in a business combination.

The guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

ASU 2021-08 should be applied prospectively for acquisitions occurring on or after the effective date of the amendments, and early adoption is permitted.

The Company adopted ASU 2021-08 on January 1, 2023 prospectively and the adoption did not have a material impact to the Company’s Consolidated Financial Statements.

Future Adoption of Accounting Standards

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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

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

The Company is currently evaluating the impacts this amendment will have on its income tax disclosures and intends to adopt the pronouncement for its Annual Report on Form 10-K for the year ending December 31, 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) .

This pronouncement requires disaggregated disclosure of income statement expenses for public business entities.

In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-30):

Clarifying the Effective Date , which clarified the effective date of this standard.

This standard requires disclosure in tabular format of disaggregation of relevant expense captions presented on the income statement by certain natural expense categories with certain related qualitative disclosures within the notes to the financial statements.

The ASU does not change the expense captions an entity presents on the income statement.

The standard is effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

The Company is currently evaluating the impacts this amendment will have on its required disclosures.

Recently Adopted Accounting Pronouncements

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

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ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

REGULATORY DECISION AND RELATED ACCOUNTING AND POLICY CHANGES

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 2023, the Company notified the ACC of its intention to file a rate case for Farmers during 2024 and for Santa Cruz and Palo Verde in 2025.

On July 3, 2023, the Company’s Palo Verde and 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 Palo Verde’s and Santa Cruz’s most recent rate order, until the plant is considered for recovery in the utilities’ next 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.

Due to the unprecedented collapse of the housing market during the Great Recession, the nearly completed plant remained idle for well over a decade.

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

In July 2023, $ 27.5 million 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.

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.

78644 (July 27, 2022).

The Company disclosed this circumstance to the ACC on March 1, 2024.

Although to date the ACC has not taken any action, the ACC could require the Company to reduce rates going forward or take other actions that would be unfavorable to the Company.

The final outcome and resolution of this matter cannot be predicted and the results, while not reasonably estimable at this time, could be material to the Company and its financial condition.

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.

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

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

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

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

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

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

(“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 will be considered by an Administrative Law Judge and the ACC for approval.

The agreement includes, among other things, a recommended 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 an accounting deferral for 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.

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.

The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

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 Red Rock and 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, as documented in Decision No.

Certain accounting implications related to Rate Decision No.

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

• Reclassification of Red Rock Water, Red Rock Wastewater, and 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.

The Company adopted this pronouncement and the related disclosures for the year ended December 31, 2024 and revised its segment reporting disclosures in Note 18 — “Business Segment Information” on a retrospective basis.

Asset Purchase Agreement with City of Tucson

Effective April 25, 2024, GW-Ocotillo, a wholly owned subsidiary of the Company, entered into an asset purchase agreement with the City of Tucson, pursuant to which GW-Ocotillo agreed to acquire seven isolated 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 isolated public water systems are located in and around Pima County.

The Company expects to complete the acquisition in the first half of 2025, subject to customary closing conditions.

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

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.

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.

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 described above) has not been established.

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

As of December 31, 2024, the remaining liability was $ 1.2 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

Utility plant (excluding CWIP)

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 8 — “Goodwill and 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.

REGULATORY MATTERS

Regulatory Assets and Liabilities

Regulatory assets and liabilities are the result of operating in a regulated environment in which the ACC establishes rates that are designed to permit the recovery of the cost of service and a return on investment.

The Company capitalizes and records regulatory assets for costs that would otherwise be charged to expense if it is probable that the incurred costs will be recovered in future rates.

Regulatory assets are amortized over the future periods that the costs are expected to be recovered.

Final determination of whether a regulatory asset can be recovered is decided by the ACC in regulatory proceedings.

If the Company determines that a portion of the regulatory assets is not recoverable in customer rates, the Company would be required to recognize the loss of the assets disallowed.

If costs expected to be incurred in the future are currently being recovered through rates, the Company records those expected future costs as regulatory liabilities.

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

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Regulatory Assets

Income taxes recoverable through future rates (1)

Various $ 1,404 $ 1,482

Rate case expense surcharge (2)

2 years 221 467

Acquisition premiums (3)

25 years 1,269 1,220

Other regulatory assets 4 —

Acquisition premiums 25 or 50 years

$ 2,589 $ 1,269

Income taxes recoverable through future rates Various 1,326 1,404

Other regulatory assets Various 117 225

Total regulatory assets $ 4,032 $ 2,898

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Total regulatory liabilities $ 5,386 $ 6,076

Acquisition Premiums

In Decision No.

79383 (June 20, 2024), the ACC authorized acquisition premiums for the following entities:

GW- Francesca Water Company, Inc., GW- Las Quintas Serenas Water Company, Inc., GW- Lyn Lee Water Company, Inc., GW-Mirabell Water Company, Inc., GW-Rincon Water Company, Inc., and GW- Tortolita Water Company, Inc..

These entities were consolidated to form GW-Saguaro.

The acquisition premiums approved for GW-Saguaro totaled approximately $ 1.8 million at the time of the decision.

79383 also approved a 50 -year amortization period for recovery of the acquisition premiums beginning July 2024.

78644, issued on July 27, 2022, approved acquisition premiums related to the acquisitions of the Company’s GW-Turner utility as well as those of Global Water – Red Rock Water Company, Inc.

(now part of GW-Santa Cruz and GW-Palo

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 relating to these utilities as of December 31, 2024 was approximately $ 0.7 million.

Income Taxes Recoverable/Payable Through Future Rates

The TCJA required the Company to re-measure all existing deferred income tax assets and liabilities to reflect the reduction in the federal tax rate.

(2) Rate 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 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 December 31, 2023 was approximately $ 0.5 million.

Rate Decision No.

78644, issued on July 27, 2022, approved acquisition premiums related to the acquisitions of the Company’s Turner Ranches and 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 December 31, 2023 was approximately $ 0.8 million.

(4) The acquired ICFA regulatory liability relates to the offset of intangible assets related to ICFA contracts obtained in connection with the Santa Cruz, 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.

Acquired ICFAs

The ICFA regulatory liability, established in compliance with a 2014 settlement agreement with the ACC, relates to the offset of intangible assets related to ICFA contracts obtained in connection with the GW-Santa Cruz, GW-Palo Verde, and Sonoran acquisitions.

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

The regulatory liability is classified as long term due to the long term nature of these arrangements and the uncertainty of the timing of receipt of funds to be received against the acquired ICFA intangible asset.

78644 approved an adjustment to update previously approved depreciation rates.

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

Recent ACC Rulings and Activity

2024 GW-Farmers Rate Case

On June 27, 2024, GW-Farmers 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 an acquisition premium related to the Farmers Water Co.

On January 10, 2025, GW-Farmers filed with the ACC a unanimous settlement agreement between GW-Farmers, RUCO and the Utilities Division Staff of the ACC.

Among other elements, the unanimous settlement agreement calls for an increase in GW-Farmers’ annual revenue requirement of $ 1.1 million and a return on equity of 9.6 %, with rates to be phased-in over three periods, starting with 50 % of the increase effective on May 1, 2025, with subsequent 25 % portions of the increase effective November 1, 2025 and May 1, 2026.

In addition to the rate increase, the agreement proposes a deferral of the recovery of an acquisition premium of approximately $ 3 million related to the Company’s acquisition of GW-Farmers, to be recovered in a future rate case.

The unanimous settlement agreement is under advisement with the ALJ, and the Company anticipates a decision in the first half of 2025.

Acquisition of Seven Systems from City of Tucson

In Decision No.

79679 on January 22, 2025, the ACC approved GW-Ocotillo’s Application for a CC&N to provide water service to seven isolated public water systems currently receiving service from the City of Tucson.

The Company expects to complete the acquisition of the seven isolated public water systems from the City of Tucson in the first half of 2025, subject to customary closing conditions.

2025 GW-Santa Cruz and GW-Palo Verde Rate Case

In February 2025, the Company notified the ACC of its intention to file a rate case for its GW-Santa Cruz and GW-Palo Verde utilities in 2025.

The GW-Santa Cruz and GW-Palo Verde rate case will be based on a test year ending December 31, 2024 with updates for changes in post-test year plant.

The Company has begun stakeholder outreach for the rate case.

Southwest Plant Accounting Order and Bill Credit

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.

The Southwest Plant was substantially constructed prior to 2009 to provide water, wastewater, and recycled water service for the area southwest of

the City of Maricopa.

Due to the unprecedented collapse of the housing market during the Great Recession, the nearly completed plant remained idle for well over a decade.

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

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.

71878 (September 15, 2010).

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.

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 - GW-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.

The ACC also approved:

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

(ii) acquisition premiums relating to the Company’s acquisitions of its GW-Mirabell, GW-Lyn Lee, GW-Francesca, GW-Tortolita, GW - Rincon, and GW-Las Quintas 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 (now part of GW-Saguaro).

REVENUE RECOGNITION

Regulated Revenue

The Company’s operating revenues are primarily attributable to regulated services based upon tariff rates approved by the ACC.

Regulated service revenues consist of amounts billed to customers based on approved fixed monthly fees and consumption fees, as well as unbilled revenues estimated from the last meter reading date to the end of the accounting period utilizing historical customer data recorded as accrued revenue.

Operating revenue is substantially derived from contracts with customers to provide regulated water, wastewater, and recycled water service based upon tariff rates approved by the ACC.

The Company’s customers are the recipients of its utility service, and the tariff rates represent a contract with those customers, both of which meet their respective definitions under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) and create enforceable rights and obligations .

Regulated service revenue consists of amounts billed to customers based on approved fixed monthly fees and consumption based fees, as well as unbilled revenue, which is estimated revenue from the last meter reading date to the end of the accounting period utilizing historical customer data recorded.

The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month.

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The Company has the right to invoice for the volume of consumption, service charge, and other authorized charges.

The Company satisfies its performance obligation to provide water, wastewater, and recycled water services over time as the services are rendered.

Regulated services may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company’s collections from customers, which generally require payment within 15 days of billing.

The Company satisfies its performance obligation to provide water, wastewater, and recycled water service over time as service is rendered.

Regulated water and wastewater service may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company’s collections from customers, which generally require payment within 15 days of billing.

The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay.

Total revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales taxes.

Total revenue does not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales taxes.

Unregulated Revenue

Unregulated revenues represent those revenues that are not subject to the ratemaking process of the ACC.

For the year ended December 31, 2023, unregulated revenues primarily related to the revenues recognized on a portion of ICFA funds received.

ICFAs are agreements with developers and homebuilders where the Company, which owns the operating utilities, provides services to plan, coordinate, and finance the water and wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or homebuilder.

Services provided within these agreements include coordination of construction services for water and wastewater treatment facilities as well as financing, arranging, and coordinating the provision of utility services.

In return, the developers and homebuilders pay the Company an agreed-upon amount per dwelling unit for the land legally described in the agreement, or a portion thereof.

Under ICFA agreements, the Company has a

contractual obligation to ensure physical capacity exists through its regulated utilities for the provision of water and wastewater utility service to the land when needed.

This obligation persists regardless of connection growth.

Fees for these services are typically a negotiated amount per equivalent dwelling unit for the land legally described in the agreement, or a portion thereof.

The payments are non-refundable.

The agreements are generally recorded against the land with the appropriate recorder’s office and must be assumed in the event of a sale or transfer of the land.

The regional planning and coordination of the infrastructure in the various service areas has been an important part of the Company’s business model.

Payments for ICFAs are usually received in advance.

Rate Decision No.

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

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

The Company accounts for the portion of ICFA funds allocated to the HUF liability as a contribution in aid of construction (“CIAC”).

However, in accordance with the ACC directives, the CIAC is not deducted from rate base until the HUF funds are expended for utility plant.

Such funds are restricted and segregated in a separate bank account and used for plant.

For facilities required under a HUF or ICFA, the utilities must first use the HUF moneys received, after which, it may use debt or equity financing for the remainder of construction.

The Company exercises judgment when estimating the number of equivalent dwelling units that its regulated utilities have capacity to serve.

The Company believes that services provided within these agreements are not distinct in the context of the contract because they are highly interdependent with its regulated utilities’ ability to provide fitted capacity for water and wastewater services.

The Company concluded that the goods and services provided under ICFA contracts constitute a single performance obligation.

Unregulated revenue represents revenue that is not subject to the ratemaking process of the ACC and is primarily related to the revenue recognized on a portion of ICFA funds received.

Under the terms of ASC 606, each ICFA is a contract, and the counterparty (typically a developer or homebuilder) to the ICFA is the Company’s customer.

Revenue is recognized when (1) the Company has planned, coordinated, and financed the infrastructure as specified in the ICFA contract;

(2) the Company has sufficient capacity in place within the infrastructure to provide water/wastewater services to the developer, and (3) based on the totality of the circumstances regarding the entitlement and development of the land, it is more likely than not that the landowner will move forward with construction of residential, commercial, or industrial development within the next twenty-four months.

December 31, 2023 Balance Payments Allocated to Deferred Revenue

3 unchanged sentences

$ 19,656 $ 1,861 $ — $ 21,517

December 31, 2021 Balance

Payments Allocated to Deferred Revenue

December 31, 2022 Balance Payments Allocated to Deferred Revenue

Revenue Recognized

2 unchanged sentences

$ 20,974 $ 1,468 $ ( 2,786 ) $ 19,656

Disaggregated Revenues

For the years ended December 31, 2023 and 2022, disaggregated revenues from contracts with customers by major source and customer class are as follows (in thousands):

Year Ended December 31,

Disaggregated Revenue

For the years ended December 31, 2024 and 2023, disaggregated revenue from contracts with customers by major source and customer class are as follows (in thousands):

REGULATED REVENUE

Water Services

Water Service

Residential $ 18,612 $ 17,541

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Commercial 1,551 1,540

Multi-family 320 —

Construction 1,140 1,388

Other water revenues 908 877

Total water revenues 24,860 20,885

Wastewater and recycled water services

Other water revenue 1,109 908

Total water revenue 26,064 24,860

Wastewater and recycled water service

Residential 23,404 22,423

Commercial 1,195 1,243

Recycled water revenues 1,365 1,242

Other wastewater revenues 351 367

Total wastewater and recycled water revenues 25,382 23,843

Multi-family 174 —

Recycled water revenue 1,500 1,365

Other wastewater revenue 355 351

Total wastewater and recycled water revenue 26,628 25,382

TOTAL REGULATED REVENUE 52,692 50,242

UNREGULATED REVENUE

ICFA revenues 2,786 —

ICFA revenue — 2,786

TOTAL UNREGULATED REVENUE — 2,786

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CONTRACT ASSETS

Accounts receivable

Water services $ 1,588 $ 1,179

Wastewater and recycled water services 1,379 1,124

Accounts receivable, net $ 3,233 $ 3,388

Total contract assets $ 3,233 $ 3,388

$ 2,967 $ 2,303

CONTRACT LIABILITIES

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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 $ 19.7 million and $ 21.0 million at December 31, 2023 and December 31, 2022, 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 the year ended December 31, 2023, the Company entered into five new finance leases for vehicles with either 48 month terms, all of which include a purchase option, and one new office equipment lease with a 60 month term.

During the year ended December 31, 2022, the Company entered into nine new finance leases for vehicles with either 48 or 60 month terms, all of which include a purchase option, and an office equipment lease with a 60 month term.

During August 2021, 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 escalating rent commencing in March 2026 and annual escalations 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.

In December 2021, the Company entered into a new five-year corporate office lease agreement with a commencement date of May 1, 2022.

The new monthly rent expense increased to $ 23,750 for each full calendar month commencing on May 1, 2022 through April 30, 2025 and will increase to $ 41,572 for each calendar month commencing on May 1, 2025 through April 30, 2027.

On March 1, 2022 the Company amended the terms of the lease to incorporate construction of tenant improvements.

Rent expense arising from operating leases totaled approximately $ 394,000 and $ 319,000 for the years ended December 31, 2023 and 2022, 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 December 31, 2023 and December 31, 2022 consist of the following (in thousands):

Accounts Receivable and Allowance for Credit Losses

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

December 31, 2024 December 31, 2023

Financing Lease $ 561 $ 405

Operating Lease 1,180 1,486

Total $ 1,741 $ 1,891

Lease liabilities at December 31, 2023 and December 31, 2022 consist of the following (in thousands):

Billed receivables $ 3,396 $ 3,510

Less provision for credit losses ( 163 ) ( 122 )

Accounts receivable, net $ 3,233 $ 3,388

The following table summarizes the allowance for credit loss activity for the years ended December 31, 2024 and 2023 (in thousands):

December 31, 2024 December 31, 2023

Financing Lease $ 623 $ 597

Operating Lease 1,300 1,524

Total $ 1,923 $ 2,121

At December 31, 2023, the remaining aggregate annual minimum lease payments are as follows (in thousands):

Finance Lease Obligations Operating Lease Obligations

2024 $ 242 $ 294

Thereafter — —

Subtotal 691 1,390

amount representing interest ( 68 ) ( 90 )

Total $ 623 $ 1,300

PROPERTY, PLANT AND EQUIPMENT

Depreciable property, plant and equipment at December 31, 2023 and December 31, 2022 consist of the following (in thousands):

Beginning of Period $ ( 122 ) $ ( 164 )

Credit Loss Expense ( 103 ) ( 76 )

Write Offs 90 124

Recoveries ( 28 ) ( 6 )

End of Period $ ( 163 ) $ ( 122 )

EARNINGS PER SHARE

Basic earnings per share (“EPS”) in each period of this report were calculated by dividing net income by the weighted-average number of shares during those periods.

Diluted EPS includes additional weighted-average common stock equivalents (options and restricted stock awards), if dilutive.

A reconciliation of the denominator used in Basic and Diluted EPS calculations is show in the following table:

(In thousands) 2024 2023

Basic weighted average common shares outstanding 24,205 24,045

Effect of dilutive securities:

Option grants 78 75

Restricted stock awards 20 10

Total dilutive securities 98 85

Diluted weighted average common shares outstanding 24,303 24,130

Anti-dilutive shares excluded from earnings per diluted shares (1)

(1) Shares were excluded from the dilutive-effect calculation because the outstanding awards’ exercise prices were greater than the average market price of the Company’s common stock.

Refer to Note 15 – “Share-based Compensation” for additional information regarding the option and restricted stock grants.

UTILITY PLANT

Utility plant as of December 31, 2024 and 2023 consist of the following (in thousands):

December 31, 2024 December 31, 2023

Transmission and distribution plant $ 321,075 $ 290,247

Equipment 67,917 60,536

Office buildings and other structures 67,313 64,084

Transmission and distribution plant 289,550 234,218

Total property, plant and equipment $ 414,170 $ 344,043

Depreciation of property, plant and equipment is computed based on the estimated useful lives as follows:

Equipment 3 to 30 years

Office buildings and other structures 30 years

Transmission and distribution plant 10 to 50 years

ACCOUNTS RECEIVABLE

Accounts receivable as of December 31, 2023 and December 31, 2022 consist of the following (in thousands):

Construction work-in-progress 54,388 48,147

Land 2,300 2,674

Total utility plant $ 512,993 $ 465,688

Depreciation expense related to depreciable property was $ 12.0 million and $ 10.9 million for the years ended December 31, 2024 and 2023, respectively.

TAXES, PREPAID EXPENSES AND OTHER CURRENT ASSETS

Taxes, prepaid expenses and other current assets as of December 31, 2024 and 2023 consist of the following (in thousands):

December 31, 2024 December 31, 2023

Billed receivables $ 2,967 $ 2,303

Less provision for credit losses ( 122 ) ( 164 )

Accounts receivable, net $ 2,845 $ 2,139

The following table summarizes the allowance for credit loss activity as of and for the years ended December 31, 2023 and 2022 (in thousands).

Balance at Beginning of Period Additions Charged to Expense Charged to Other Accounts Write-offs Balance at End of Period

Allowance for credit losses:

Year Ended December 31, 2023 $ ( 164 ) $ ( 76 ) $ ( 6 ) $ 124 $ ( 122 )

Year Ended December 31, 2022 $ ( 132 ) $ ( 99 ) $ ( 8 ) $ 75 $ ( 164 )

ICFA receivable $ 1,871 $ —

Buckeye growth premiums receivable 738 807

Prepaid expense 648 782

Prepaid insurance 533 454

Other current assets 290 451

Taxes, prepaid expenses and other current assets $ 4,080 $ 2,494

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $ 10.8 million at December 31, 2023 and is related to the Turner, Red Rock, Mirabell, Francesca, Tortolita, Lyn Lee, Las Quintas Serenas, Rincon, Twin Hawks, and Farmers acquisitions.

As of June 30, 2022, the Company reclassified approximately $ 0.8 million of goodwill to regulatory assets related to Red Rock Water, Red Rock Wastewater, and Turner Ranches acquisition premiums as a result of Rate Decision No.

78644 (refer to Note 2 - “Regulatory Decision and Related Accounting and Policy Changes” for additional information).

The Farmers acquisition contributed approximately $ 6.0 million to the change in the goodwill balance (refer to Note 15 - “Acquisitions” for additional information).

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.

The Company recorded no goodwill impairment in 2023 and 2022.

As of December 31, 2023 and December 31, 2022, the goodwill balance consisted of the following (in thousands):

December 31, 2022 Balance Acquisition Activity December 31, 2023 Balance

Goodwill $ 4,957 $ 5,863 $ 10,820

The Company’s goodwill is related to historical acquisitions.

As of December 31, 2024, 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 Global Water - Rincon Water Company, Inc (now part of GW-Saguaro).

Refer to Note 3 – “Regulatory Matters” for additional information.

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

Beginning balance $ 10,820 $ 4,957

Acquisition activity — 5,863

Adjustments ( 1,334 ) —

Ending balance $ 9,486 $ 10,820

Intangible Assets

As of December 31, 2023 and December 31, 2022, intangible assets consisted of the following (in thousands):

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

December 31, 2024 December 31, 2023

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CP Water Certificate of Convenience & Necessity service area $ 1,532 $ — $ 1,532 $ 1,532 $ — $ 1,532

Intangible trademark 13 13 13 13

Franchise contract rights 657 — 657 139 — 139

Organizational costs 163 163 87 87

Other Intangible Assets 176 — 176 176 — 176

Total indefinite lived intangible assets 2,365 — 2,365 1,847 — 1,847

4 unchanged sentences

Total intangible assets $ 27,749 $ ( 19,322 ) $ 8,427 $ 27,231 $ ( 18,390 ) $ 8,841

A Certificate of Convenience & Necessity (“CC&N”) is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same services within the specified area.

The CP Water CC&N intangible asset was acquired through the acquisition of CP Water Company in 2006.

A CC&N is a permit issued by the ACC allowing a public service corporation to serve a specified area, and preventing other public service corporations from offering the same water and wastewater service within the specified area.

The CP Water CC&N intangible asset was acquired through the acquisition of CP Water in 2006.

This CC&N permit has no outstanding conditions that would require renewal.

Franchise contract rights and organizational costs relate to the 2018 acquisition of Red Rock and the 2023 acquisition of Farmers.

Franchise contract rights are agreements with Pima and Pinal counties for Red Rock and Pima county for Farmers that allow the Company to place infrastructure in public right-of-way and permits expected to be renewable indefinitely.

Franchise contract rights relate to the 2018 acquisition of Global Water Red Rock Water Company, Inc.

(now part of GW-Saguaro) and the 2023 acquisition of GW-Farmers.

Franchise contract rights are agreements with Pima and Pinal counties for GW-Saguaro and Pima county and the Town of Sahuarita for GW-Farmers that allow the Company to place infrastructure in public right-of-way and permits expected to be renewable indefinitely.

The organizational costs represent fees paid to federal or state governments for the privilege of incorporation and expenditures incident to organizing the corporation and preparing it to conduct business.

Acquired ICFAs and Sonoran contract rights relate to acquired rights under certain ICFAs through the 2004 acquisition of Santa Cruz and Palo Verde and the 2005 acquisition of Sonoran assets, respectively.

The Acquired ICFAs and Sonoran contract rights are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements.

Acquired ICFAs and Sonoran contract rights relate to acquired rights under certain ICFAs through the 2004 acquisition of GW-Santa Cruz and GW-Palo Verde and the 2005 acquisition of Sonoran assets, respectively, which are amortized when cash is received in proportion to the amount of total cash expected to be received under the underlying agreements.

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.

Amortization in the amount of $ 1.4 million and $ 0.2 million was recorded for these balances for the years ended December 31, 2023 and 2022, respectively.

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 $ 1.0 million for the year ended December 31, 2023 and $ 0.9 million for the year ended December 31, 2022.

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

ACCRUED EXPENSES

Accrued expenses at December 31, 2023 and December 31, 2022 consist of the following (in thousands):

December 31, 2023 December 31, 2022

Property taxes $ 1,242 $ 1,195

Accrued project liabilities 1,001 1,585

Customer prepayments 883 588

Asset retirement obligations 697 697

Dividend payable 606 593

Accrued Bonus 602 557

Interest 480 483

Deferred compensation 239 818

Accrued purchase orders 200 515

Other accrued liabilities 1,179 1,025

Total accrued expenses $ 7,129 $ 8,056

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurement , establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs).

The hierarchy consists of three levels, as follows:

• Level 1 - Quoted market prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are either directly or indirectly observable.

• 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 December 31, 2023 and December 31, 2022 were as follows (in thousands):

December 31, 2023 December 31, 2022

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

Asset/Liability Type:

HUF Funds - restricted cash (1)

$ 822 $ — $ — $ 822 $ 161 $ — $ — $ 161

Demand Deposit (2)

1 — — 1 50 — — 50

Certificate of Deposit - Restricted (1)

— 854 — 854 — 840 — 840

Acquisition Liability (3)

— — 2,113 2,113 — — 838 838

Total $ 823 $ 854 $ 2,113 $ 3,790 $ 211 $ 840 $ 838 $ 1,889

(1) HUF Funds - restricted cash and Certificate of Deposit - Restricted are presented on the Restricted cash line item of the Company’s consolidated balance sheets and are valued at amortized cost, which approximates fair value.

The increase was primarily driven by additional funds received in growth areas of several utilities.

(2) Demand Deposit is presented on the Cash and cash equivalents line item of the Company’s consolidated balance sheets and is valued at amortized cost, which approximates fair value.

(3) As part of the Red Rock acquisition, the Company is required to pay to the seller a growth premium equal to $ 750 (not in thousands) 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.

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.

Significant inputs used in the fair value calculation are as follows:

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

In addition, as part of the 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 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.

Significant inputs used in the fair value calculation are as follows:

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

There was $ 0.9 million and $ 1.4 million of amortization recorded for these balances during the years ended December 31, 2024 and 2023, respectively.

Private Placement Offering of Common Stock

The Company received gross proceeds of approximately $ 2.8 million from the offering.

One of the Company’s directors purchased an aggregate of 30,000 shares of common stock in the offering at the purchase price.

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

1 unchanged sentence

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

BONDS AND NOTES PAYABLE -

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

NOTES PAYABLE

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 69,000 3,833 72,833

6.91 % Senior Secured Notes, maturing January 2034

(“6.91% Notes”)

4.911 % WIFA Note, maturing April 2044

(“4.911% WIFA Note”)

3,875 119,148 3,833 101,583

2 unchanged sentences

Total debt $ 3,926 $ 118,518 $ 3,880 $ 101,341

Debt is measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022 as follows (in thousands):

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

December 31, 2024 December 31, 2023

3 unchanged sentences

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

On April 30, 2024, the Company’s Global Water - Rincon Water Company, Inc.

utility (now part of GW-Saguaro) entered into a loan agreement with WIFA for the 4.911 % WIFA Note with a principal amount of $ 2.4 million to improve the utility’s infrastructure, of which $ 0.7 million is forgivable.

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

Funding occurs through one or more draw requests submitted by the Company and the subsequent disbursement of principal by WIFA.

As of December 31, 2024, the Company has received approximately $ 2.1 million in disbursements under this agreement.

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 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 during the period from and after June 30, 2024.

As of December 31, 2023, 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 $ 20,000,000 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”).

The Series A Notes carry a principal balance of $ 28.8 million and bear an interest rate of 4.38 % over a twelve-year term, with the principal payment due on June 15, 2028.

The Series B Notes carry a principal balance of $ 72.8 million and bear an interest rate of 4.58 % over a 20 -year term, with the principal payment due on June 15, 2036.

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.

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”).

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 will 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.

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.

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:

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 Company maintains a revolving credit facility with The Northern Trust Company, an Illinois banking corporation (“Northern Trust”), pursuant to a loan agreement entered into between the parties (as amended, the “Northern Trust Loan Agreement”).

This Revolver, 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, has been amended as recently as July 1, 2024 to, among other things, extend the scheduled maturity date to July 1, 2026.

Pursuant to the Northern Trust Loan Agreement, the maximum principal amount available for borrowing under the Revolver is $ 15.0 million with amounts outstanding bearing interest, payable monthly, at a rate equal to the Secured Overnight Financing Rate (SOFR) plus 2.00 %.

Additionally, the Company pays a quarterly facility fee equal to 0.35 % of the average daily unused amount of the Revolver.

As of December 31, 2024, the Company had no outstanding borrowings under the Revolver.

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

There were less than $ 0.1 million of unamortized debt issuance costs as of both December 31, 2024 and 2023.

Debt Covenants

The Company’s Senior Secured Notes and Revolver (collectively, the “debt securities”) are collateralized by a security interest in the Company’s equity interest in its subsidiaries, including all payments representing profits and qualifying distributions.

The debt securities also have certain restrictive covenants that limit, among other things, the Company’s ability to:

create liens and other encumbrances;

5 unchanged sentences

and change the nature of the business.

Revolving Credit Line

On April 30, 2020, the Company entered into an agreement with The Northern Trust Company, and Illinois banking corporation (“Northern Trust”), which was initially for a two-year revolving line of credit up to $ 10.0 million with a maturity date of April 30, 2022.

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;

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

(iii) replaced the LIBOR interest rate provisions with provisions based on the Secured Overnight Financing Rate (SOFR);

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 December 31, 2023, the Company was in compliance with its financial debt covenants under the Northern Trust Loan Agreement.

As of December 31, 2023 and December 31, 2022, the outstanding borrowings on this credit line were approximately $ 2.3 million and $ 0 , respectively.

There were approximately $ 25,000 and $ 9,812 unamortized debt issuance costs as of December 31, 2023 and December 31, 2022, respectively.

The Company’s Senior Secured Notes and Revolver (collectively, the “debt securities”) 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.

The debt securities also contain a provision limiting the payment of dividends if the Company falls below a debt service ratio of 1.25 .

Further, the foregoing covenants are subject to various qualifications and limitations as set forth in each of the debt securities’ respective agreements.

The debt securities are subject to certain customary events of default after which they 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 December 31, 2024, the Company was in compliance with its financial debt covenants under the Senior Secured Notes and the Northern Trust Loan Agreement.

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

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Total $ 122,444

The Company utilizes the asset and liability method of accounting for income taxes.

Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2023 and December 31, 2022, the Company did not have any valuation allowances or unrecognized tax benefits.

The income tax expense for the years ended December 31, 2023 and 2022 is comprised of the following (in thousands):

Federal State Total

Current income tax expense (benefit) $ 478 $ — $ 478

Deferred income tax expense (benefit) $ 1,965 $ 429 $ 2,394

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of December 31, 2024 and 2023 consist of the following (in thousands):

December 31, 2024 December 31, 2023

Accrued project liabilities $ 5,858 $ 858

Other taxes 1,648 1,438

AIAC refunds, current portion 1,431 —

Interest 1,180 480

Accrued payroll 991 767

Dividend payable 614 606

Customer prepayments 556 883

Accrued license fees 353 343

Liability for share-based compensation arrangements 190 239

Other accrued liabilities 980 1,515

Total accrued expenses $ 13,801 $ 7,129

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

For the years ended December 31, 2024, the Company entered into twenty new vehicle finance leases with 48 -month terms and an aggregate total of approximate $ 0.8 million, all of which include a purchase option, and one new office lease with a 129 -month term that is classified as an operating lease.

For the year ended December 31, 2023, the Company entered into five new vehicle finance leases with 48 -month terms and an aggregate total of approximately $ 0.2 million, all of which include a purchase option, and one new office equipment lease with a 60 -month term for approximately $ 21,000 .

Rent expense arising from operating leases totaled approximately $ 403,000 and $ 394,000 for the years ended December 31, 2024 and 2023, respectively.

The ROU assets 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 remaining lease payments.

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

December 31, 2024 December 31, 2023

Finance leases $ 1,141 $ 561

Operating leases 1,016 1,180

Total $ 2,157 $ 1,741

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

December 31, 2024 December 31, 2023

Finance leases $ 1,136 $ 623

Operating leases 1,185 1,300

Total $ 2,321 $ 1,923

Lease costs for the years ended December 31, 2024 and 2023 were as follows (in thousands):

December 31, 2024 December 31, 2023

Finance lease cost

Amortization of right-of-use assets $ 198 $ 84

Interest on lease liabilities 44 19

Total finance lease cost 242 103

Operating leases 377 374

Total lease cost $ 619 $ 477

On the consolidated statements of operations, amortization of right-of-use assets is included in Depreciation and amortization, interest on finance lease liabilities is included in Interest expense and operating leases are included in both Operations and maintenance and General and administrative expenses, depending on the primary use of the leased asset.

Other pertinent information related to leases was as follows:

December 31, 2024 December 31, 2023

Weighted average remaining lease term (years)

Finance leases 3.1 3.2

Operating leases 3.1 5.1

Weighted average discount rate

Finance leases 4.5 % 5.7 %

Operating leases 4.0 % 3.5 %

At December 31, 2024, the maturity analysis of lease liabilities is as follows (in thousands):

Finance Lease Obligations Operating Lease Obligations

2025 $ 424 $ 238

Thereafter — 131

Subtotal 1,227 1,233

Amount representing interest 91 48

Total $ 1,136 $ 1,185

Fair Value of Financial Instruments

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

December 31, 2024 December 31, 2023

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

HUF funds - restricted cash

$ 870 $ — $ — $ 870 $ 822 $ — $ — $ 822

Certificates of deposit - restricted

1,239 — — 1,239 — 854 — 854

Demand deposit

— — — — 1 — — 1

$ 2,109 $ — $ — $ 2,109 $ 823 $ 854 $ — $ 1,677

Contingent consideration

$ — $ — $ 1,942 $ 1,942 $ — $ — $ 2,113 $ 2,113

Total $ — $ — $ 1,942 $ 1,942 $ — $ — $ 2,113 $ 2,113

HUF Funds - restricted cash and Certificates of deposit - restricted are presented on the Restricted cash line item of the Company’s consolidated balance sheets and are valued at amortized cost, which approximates fair value.

As part of the Global Water - Red Rock Water Company, Inc.

(now part of GW-Saguaro) acquisition, the Company is required to pay to the seller a growth premium equal to $ 750 (not in thousands) for each new account established within 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.

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

Significant inputs used in the fair value calculation are as follows:

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

The estimated fair value of the remaining liability was $ 0.7 million and $ 0.8 million as of December 31, 2024 and 2023, respectively.

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

Significant inputs used in the fair value calculation are as follows:

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

The estimated fair value of the remaining liability was $ 1.2 million and $ 1.3 million as of December 31, 2024 and 2023, respectively.

Contingent consideration is included within Other noncurrent liabilities on the consolidated balance sheets.

Refer to Note 17 — “Commitments and Contingencies” for additional information about contingent consideration.

Judgment and the use of estimates are required in developing the provision for income taxes and reporting of tax-related assets and liabilities.

The interpretation of tax laws and associated regulations involves uncertainty as taxing authorities may interpret the laws differently.

Income Tax Expense

Federal State Total

Current income tax expense (benefit) $ ( 1,551 ) $ ( 252 ) $ ( 1,803 )

Deferred income tax expense (benefit) 2,265 472 $ 2,737

The components of income tax expense for the years ended December 31, 2024 and 2023 were as follows (in thousands):

Current income tax expense

Total current

Deferred income tax expense

Federal 1,294 1,965

State 179 429

Total deferred

Income tax expense $ 2,073 $ 2,872

Statutory Rate Reconciliation

The following table represents a reconciliation of income tax expense at the statutory federal income tax rate to the actual income tax expense from continuing operations:

Book income before taxes $ 7,862 $ 10,854

Computed federal tax expense (benefit) at statutory rate 1,651 21.0 % 2,274 21.0 %

State income taxes - net of federal tax benefit 318 4.0 % 429 4.0 %

Tax regulatory asset amortization 37 0.5 % 37 0.3 %

Installment interest 26 0.3 % 39 0.4 %

Equity compensation 25 0.3 % 98 0.9 %

Other differences 16 0.3 % ( 5 ) ( 0.1 ) %

Income tax expense $ 2,073 26.4 % $ 2,872 26.5 %

Components of Net Deferred Income Tax Liability

The following table summarizes the Company’s temporary differences between book and tax accounting that give rise to the deferred tax assets and deferred tax liabilities, as of December 31, 2024 and 2023 (in thousands):

1 unchanged sentence

Deferred tax assets

Taxable meter deposits $ — $ 7

Net operating loss carry forwards $ — $ 1,451

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ICFA intangible asset ( 452 ) ( 522 )

Property, plant and equipment ( 17,398 ) ( 17,936 )

Utility plant

( 17,983 ) ( 17,398 )

Gain on condemnation of Valencia ( 184 ) ( 201 )

2 unchanged sentences

Net deferred tax liability $ ( 9,698 ) $ ( 8,284 )

As of December 31, 2023, the Company has approximately $ 4.4 million remaining net operating loss (“NOL”) carry forwards.

The Company had a regulatory asset of $ 1.4 million and $ 3.2 million at December 31, 2023 and December 31, 2022, respectively, related to the 2017 Federal Tax Cuts and Jobs Act (the "TCJA") signed into law on December 22, 2017.

The regulatory liability of $ 0.8 million at December 31, 2021 was reversed as of June 30, 2022 due to Rate Decision No.

The reversal was recorded as a reduction to income tax expense for approximately $ 0.7 million, and a reduction to interest expense for approximately $ 0.1 million.

Refer to Note 2 - "Regulatory Decision and Related Accounting Policy and Changes."

The effective tax rates for the years ended December 31, 2023 and 2022 were 26.5 % and 14.3 %, respectively.

The effective tax rate for the year ended December 31, 2023 was higher than the federal statutory rate of 21 % primarily driven by the 2017 TCJA reversal of approximately $ 0.7 million for the year ended 2022.

DEFERRED COMPENSATION AWARDS

Stock-based compensation

Stock-based compensation related to option awards is measured based on the fair value of the award.

The fair value of stock option awards is determined using a Black-Scholes option-pricing model.

The Company recognizes compensation expense associated with the options over the vesting period.

As of December 31, 2024, the Company has no remaining net operating loss carry forwards and no uncertain tax positions.

SHARE-BASED COMPENSATION

2017 stock option grant

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The options were granted with an exercise price of $ 9.40 , the market price of the Company’s common shares on the NASDAQ Global Market at the close of business on August 10, 2017.

The options vested over a four-year period, with 25 % having vested in August 2018, 25 % having vested in August 2019, 25 % having vested in August 2020, and 25 % having vested in August 2021.

The options have a 10 -year life.

The Company expensed the $ 1.1 million fair value of the stock option grant ratably over the four-year vesting period.

The options are fully vested and expire 10 years from the grant date.

As of August 2021, these options were fully expensed.

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The options were granted with an exercise price of $ 11.26 , the market price of the Company’s common shares on the NASDAQ Global Market at the close of business on August 13, 2019.

The options vest over a four-year period, with 25 % having vested in August 2020, 25 % having vested in August 2021, 25 % having vested in August 2022, and 25 % vesting in August 2023.

The options have a 10-year life.

The Company will expense the $ 0.8 million fair value of the stock option grant ratably over the four-year vesting period.

Stock-based compensation expense of $ 92,000 and $ 174,000 was recorded for the year ended December 31, 2023 and 2022, respectively.

The options are fully vested and expire 10 years from the grant date.

As of August 2023, these options were fully expensed.

Stock-based compensation expense of $ 92,000 was recorded for the year ended December 31, 2023.

As of December 31, 2024, 55,994 options have been exercised and 63,770 options have been forfeited with 130,236 options outstanding.

2 unchanged sentences

Options Outstanding at December 31, 2023 426 $ 10.10 4.4 $ 1,270.1

Options Vested at December 31, 2021 420 $ 9.84 6.2 $ 3,050.9

Exercised ( 2 ) $ 9.61

Options Outstanding at December 31, 2022 518 $ 10.12 5.4 $ 1,638.4

Options Vested at December 31, 2022 468 $ 10.00 5.3 $ 1,537.6

Exercised ( 41 ) $ 9.47

Forfeited ( 27 ) 11.18

1 unchanged sentence

Options Vested at December 31, 2024 399 $ 10.01 3.6 $ 595.8

Phantom stock units/Restricted stock units

Restricted stock units are granted in the first quarter based on the prior year’s performance and vest over a three-year period.

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 December 31, 2023, along with the amounts paid to holders of the phantom stock units (“PSUs”) and/or restricted stock units (“RSUs”) for the

years ended December 31, 2023 and 2022 (in thousands, except unit amounts):

Amounts Paid For the Year Ended December 31,

Phantom stock units and Restricted stock units

Restricted stock units (“RSUs”) are granted in the first quarter based on the prior year’s performance and vest over a three-year period.

The units vest ratably each month and the vested units are cash-settled quarterly based on the closing price of the Company’s common stock for the respective quarter.

The following table details total units granted and outstanding as of December 31, 2024, along with the amounts paid to holders of the phantom stock units (“PSUs”) and/or RSUs for the years ended December 31, 2024 and 2023 (in thousands, except unit amounts):

Grant Date Units Granted Units Outstanding 2024 2023

22,481 — $ — $ 24

Q1 2021 27,403 — — 106

Q1 2022 22,262 — 87 88

27,403 2,133 106 132

22,262 8,890 88 79

30,366 21,824 86 —

Q1 2023 30,366 9,481 117 86

Q1 2024 32,093 20,183 125 —

Total 134,605 29,664 $ 329 $ 304

1 unchanged sentence

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.

The non-vested RSUs have a non-forfeitable right to dividend equivalents, with immaterial amounts paid in the years ended December 31, 2024 and 2023.

The following table is a summary of the RSU award transactions for the year ended December 31, 2024 (in shares, except per unit amounts):

Restricted Stock Units Weighted Average Award Date Fair Value per Unit ($)

Non-vested at December 31, 2023 32,847 $ 12.35

Granted 32,093 13.06

Forfeited ( 901 ) 13.03

Vested ( 34,375 ) 12.30

Non-vested at December 31, 2024 29,664 $ 12.33

As these are liability awards, fluctuations in the Company’s stock price can lead to similar fluctuations in cumulative compensation expense (i.e., increases in stock price lead to additional compensation expense and decreases in stock price lead to reductions in compensation expense) in a given period.

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

Restricted Stock Units

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 December 31, 2023 and amounts paid during the years ended December 31, 2023 and 2022 (in thousands, except unit and per unit amounts):

Amounts Paid For the Year Ended December 31,

Recipients Grant Date Units Granted Exercise Price Units Outstanding 2023 2022

Members of Management (1)(2)

Q1 2015 299,000 $ 4.26 12,500 $ 399 $ 62

Members of Management (1)(3)

Q3 2017 103,000 $ 9.40 — 33 —

Members of Management (1)(4)

Q1 2018 33,000 $ 8.99 8,250 — —

Stock appreciation rights (“SARs”) were granted to certain members of management and are fully vested.

The following table details the grant date, units granted, exercise price, outstanding units as of December 31, 2024 and amounts paid during the years ended December 31, 2024 and 2023 (in thousands, except unit and per unit amounts):

Grant Date Units Granted Exercise Price Units Outstanding 2024 2023

299,000 $ 4.26 — $ 90 $ 399

103,000 $ 9.40 — — 33

33,000 $ 8.99 8,250 — —

Total 435,000 8,250 $ 90 $ 432

(1) The SARs vest ratably over 16 quarters from the grant date.

(1) The exercise price was determined to be the fair market value of one share of GWR Global Water Resources Corp.

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(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 year ended December 31, 2023, the Company recorded approximately $ 0.2 million of negative compensation expense related to the PSUs/RSUs and SARs.

No negative compensation was recorded for the year ended December 31, 2022 .

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 December 29, 2023 (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):

Restricted stock awards

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The Company 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 year ended December 31, 2023 and 2022 as well as the compensation expense related to the grant and partial vesting of RSAs for the years ended December 31, 2023 and 2022 (in thousands, except unit amounts):

For the Year Ended December 31,

The following table details the compensation expense related to the grant and partial vesting of previously granted RSAs for the years ended December 31, 2024 and 2023 (in thousands):

Compensation expense $ 562 $ 972

The following table is a summary of the restricted stock award transactions for the year ended December 31, 2024 (in shares, except per unit amounts):

Restricted Stock Awards Weighted Average Award Date Fair Value per Unit ($)

Non-vested at December 31, 2023 98,350 $ 12.35

Granted 17,000 11.91

Forfeited ( 5,468 ) 16.25

Vested ( 59,047 ) 17.73

Non-vested at December 31, 2024 50,835 $ 14.04

Non-employee director awards

Non-employee director compensation is awarded on a quarterly basis, with one-half of the compensation awarded in the form of RSAs granted under the Global Water Resources, Inc.

2020 Omnibus Incentive Plan, effective May 7, 2020.

The following table details the non-employee director compensation expense related to the grant and vesting of RSAs for the years ended December 31, 2024 and 2023 (in thousands):

Non-employee director compensation expense $ 205 $ —

The following table is a summary of the non-employee director restricted stock award transactions for the year ended December 31, 2024 (in shares, except per unit amounts):

Restricted Stock Awards Weighted Average Award Date Fair Value per Unit ($)

Non-vested at December 31, 2023 — $ —

Granted 14,076 12.27

Forfeited — —

Vested ( 14,076 ) 12.27

Non-vested at December 31, 2024 — $ —

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 $ 1.6 million for the year ended December 31, 2024 and $ 1.0 million for the year ended December 31, 2023.

Additionally, one of the Company’s directors purchased an aggregate of 30,000 shares of common stock at the purchase price of a private placement offering in 2023.

Refer to Note 9 — “Equity,” for additional information.

COMMITMENTS AND CONTINGENCIES

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

Refer to Note 12 – “Leases” 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 for each new account established within the specified growth premium areas.

As of December 31, 2024, the obligation period of the growth premium has not yet started.

The estimated fair value of the remaining liability was $ 1.2 million and $ 1.3 million as of December 31, 2024 and 2023, respectively, and is included in Other noncurrent liabilities on the consolidated balance sheets.

Refer to Note 2 — “Acquisitions” for additional information about the Farmers growth premium obligation.

As part of the Global Water -Red Rock Water Company, Inc.

(now part of GW-Saguaro) acquisition, the Company is obligated to pay to the seller a growth premium for each new account established within specified growth premium areas.

During the year ended December 31, 2024, the Company revised the fair value of the estimated liability of the contingent consideration based on modified building plans from the landowners in the growth premium areas, which resulted in a net $ 0.1 million gain on remeasurement, which is included in Other, net on the consolidated statements of operations for the years ended December 31, 2024.

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

The carrying value of the remaining liability was $ 0.7 million and $ 0.8 million as of December 31, 2024 and 2023, respectively, and is included in Other noncurrent liabilities on the consolidated balance sheets.

Refer to Note 13 — “Fair Value” for additional information about contingent consideration.

The Company has previously received certain ICFA advances related to its CP Water utility, which the Company is obligated to repay in the form of specified future ICFA fee reductions when those ICFA fees are due.

The liability was $ 0.9 million as of both December 31, 2024 and 2023 and is included in Accrued Expenses and Other Current Liabilities on the consolidated balance sheets.

The Company has certain contractual obligations requiring payments at specified periods.

The obligations include AIAC refunds, long-term debt, lease obligations and The following table summarizes the Company’s contractual cash obligations as of December 31, 2024 (in thousands):

Payments Due By Period

Total 2025 2026 2027 2028 2029 Thereafter

AIAC refunds (1)

$ 127,898 $ 1,431 $ 1,431 $ 1,431 $ 1,431 $ 1,431 $ 120,743

The following table summarizes the RSA transactions for the year ended December 31, 2023:

December 31, 2022 Balance Forfeited Vested Granted December 31, 2023 Balance

Nonvested Number of RSAs 192,468 24,835 91,783 22,500 98,350

Weighted Average Fair Value $ 15.57 12.22 10.83 10.78 $ 12.35

Long term debt 123,208 3,930 3,936 3,942 32,657 3,889 74,854

Interest payments on long-term debt (2)

44,793 5,933 5,758 5,582 4,777 3,972 18,771

Finance leases (3)

1,227 424 378 282 143 — —

Operating leases (4)

1,733 494 564 234 69 71 301

Total $ 298,859 $ 12,212 $ 12,067 $ 11,471 $ 39,077 $ 9,363 $ 214,669

(1) The Company pays annual refunds on AIAC over a specific period of time based on operating revenue generated from developer-installed infrastructure.

The refund amounts are considered an investment in infrastructure and eligible for inclusion in future rate base.

The refund amounts and timing are dependent upon several variables, including new customer connections, customer consumption levels and future rate increases, which are difficult to accurately estimate.

Portions of these refund amounts are payable annually over the next two decades, and amounts not paid by the contract expiration dates become nonrefundable and are transferred to CIAC.

(2) Interest on the long-term debt is based on the fixed rates of the Company’s Series A Notes, Series B Notes and 6.91 % Senior Secured Notes.

(3) Finance lease payments are inclusive of interest payments totaling $ 0.1 million.

(4) Operating lease payments are inclusive of interest payments totaling less than $ 0.1 million.

The Company has entered into various purchase and service agreements whereby it is contractually obligated to make certain minimum payments in future periods.

This includes purchase obligations for plant equipment, typically for water and wastewater treatment, with long lead times that require payments made over time.

Contingencies

From time to time, in the ordinary course of business, the Company may be subject to pending or threatened lawsuits in which claims for monetary damages are asserted.

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.

BUSINESS SEGMENT INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluate regularly by the CODM in deciding how to allocate resources and in assessing operating performance.

At December 31, 2024, the Company is organized and operated as one operating and reportable segment as the Company is not organized around specific products and services, geographic regions, or regulatory environments.

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

Operating revenue is substantially derived from contracts with customers to provide regulated water, wastewater, and recycled water service based upon tariff rates approved by the ACC.

Refer to Note 4 — “Revenue Recognition” for additional information on the Company’s sources of revenue, and refer to the consolidated financial statements for measures of profit and loss, total assets, and capital expenditures of the Company.

The Company’s CODM is the Chief Executive Officer.

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

The CODM uses consolidated financial information, as outlined below, to evaluate performance against budget and peers and to make all significant decisions regarding the allocation of the Company’s resources, and communicate results and performance to the Company’s board of directors.

The CODM regularly reviews the results of the Company based on GAAP net income as well as non-GAAP measures, EBITDA and Adjusted EBITDA.

The Company defines EBITDA as net income before interest, income taxes, depreciation, and amortization and Adjusted EBITDA as EBITDA excluding the gain or loss related to (i) nonrecurring events;

(ii) option expense related to awards made to management;

(iii) restricted stock expense related to awards made to employees and the board of directors;

(iv) disposal of assets;

and (v) ICFA revenue recognition, as applicable.

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.

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 it provides our investors an additional measure of our recurring core business.

A reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended December 31, 2024 and 2023 is as follows (in thousands):

Net Income 5,789 7,982

Income tax expense 2,073 2,872

Interest income ( 946 ) ( 52 )

Interest expense 6,098 4,882

Depreciation and amortization 12,720 11,437

EBITDA 25,734 27,121

ICFA revenue — ( 2,786 )

Management option expense — 92

Loss (gain) on disposal of fixed assets 308 ( 63 )

Restricted stock expense 767 972

Acquisition gain resulting from regulatory decision ( 37 ) —

Gain on adjustment of contingent consideration liability ( 119 ) —

EBITDA adjustments 919 ( 1,785 )

Adjusted EBITDA 26,653 25,336

The CODM reviews the following significant expense categories:

Segment revenue 52,692 53,028

Segment expenses

Personnel costs - operations and maintenance 5,014 4,411

Utilities, chemicals and repairs 3,927 3,767

Other operations and maintenance expenses 4,785 4,491

Personnel costs - general and administrative 9,173 8,684

Professional fees 1,687 2,018

Other general and administrative expenses 6,022 5,934

Depreciation and amortization 12,720 11,437

Total operating expenses 43,328 40,742

Operating income 9,364 12,286

Other Income (Expense)

Buckeye growth premiums 2,916 2,424

Other segment income and expenses ( 4,418 ) ( 3,856 )

Total other expense ( 1,502 ) ( 1,432 )

Income tax expense ( 2,073 ) ( 2,872 )

Net Income 5,789 7,982

Other operations and maintenance and other general and administrative expenses include contract services, business development, board compensation, rent, insurance and taxes other than income taxes.

Other segment income expenses include interest income, interest expense, AFUDC, and gains and losses on disposal of assets.

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

Other, net for the year ended December 31, 2024 and 2023 consists of the following (in thousands):

Buckeye growth premiums $ 2,916 $ 2,424

Allowance for equity funds used during construction 892 981

Gain/(Loss) on Disposal of Assets ( 309 ) 63

Other 151 ( 70 )

Total Other, net $ 3,650 $ 3,398

Stipulated Condemnation of the Operations and Assets of Valencia

The Company received growth premiums of $ 2.9 million and $ 2.4 million for the years ended December 31, 2024 and 2023, respectively.

An aggregate of $ 13.7 million in growth premiums have been received to date.

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

SUPPLEMENTAL CASH FLOW INFORMATION

The following is supplemental cash flow information for the year ended December 31, 2023 and 2022 (in thousands):

For the Year Ended December 31,

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

Supplemental cash flow information:

Cash paid for interest - net of amounts capitalized $ 5,176 $ 4,686

$ 4,686 $ 1,450

Cash paid for income taxes 107 706

$ 706 $ 1,589

Non-cash financing and investing activities:

Capital expenditures included in accounts payable and accrued liabilities $ 7,201 $ 1,747

Utility Plant constructed by developers and conveyed 10,829 16,031

Business acquisition through issuance of contingent consideration payable — 1,330

Finance lease additions 818 240

Acquisition of Farmers Water Company

On February 1, 2023, the Company acquired all of the equity of Farmers, 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 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.

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.

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

As of December 31, 2023, the remaining liability was $ 1.3 million.

The purchase price allocation of the net assets acquired in the transaction is as follows (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.

While the Company uses the best available estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, such estimates are inherently uncertain and subject to refinement.

Events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

As a result, during the one-year measurement period from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Any adjustments subsequent to the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, will be recorded in the Company’s Consolidated Statements of Operations.

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.

On October 16, 2018, the Company completed the acquisition of 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 December 31, 2023, no meters have been installed and no accounts have been established in any of the three growth premium areas.

Contingencies

From time to time, in the ordinary course of business, the Company may be subject to pending or threatened lawsuits in which claims for monetary damages are asserted.

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.

Operating lease additions 136 18

Operating cash flows used for finance leases 44 19

Operating cash flows used for operating leases 264 241

Financing cash flows for finance leases 273 232

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data