GWRS - Earnings call transcript Q4 2017 | Global Water Resources, Inc.

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Operator

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc. 2017 Year End Conference Call. At this time, all participants are in listen-only mode.

will question-and-answer we presentation, the conduct session. a Following to that March this Instructions] XXXX I is everyone like would time. Eastern on [Operator call remind being X:XX PM at X, recorded of the now would to Vice Affairs. like turn Corporate I conference Regulatory and to Joanne over Ellsworth, President Please go ahead.

Joanne Ellsworth

www.gwresources.com. today's which Web financial Good press results and on release, for is issued our we a joining you everyone Today at our of available by site on morning, us copy thank call. XXXX year-end

today President Officer. Mr. and Fleming of for available events Speaking Fleming, financial Mike the ended Liebman, Mr. the will the at key results call. questions Officer; Ron Chief Executive the year and December is and the will will year Chief Mr. of end and XX, Liebman be review for Fleming Liebman XXXX. Financial the summarize Mr.

like assumptions other to that include management’s Company’s could undue forward-looking date we results to differ not the forward-looking not remind performance. on materially reliance risks, that hereof and views reflect projections guarantees statements. forward-looking as Before and events. number uncertainties, involve Accordingly, of are cause estimates Such assumptions, a of information statements may current are and statements cautioned those which contained any investors future statements. to from actual in place I’d the of reflect the These forward-looking regarding presented estimates, today statements factors begin, you future expectations, certain

are today’s within measures www.sec.gov. regarding Form at Risk non-GAAP and Analysis maybe filed conditions information our additional may of future and Factor included These Certain included the sections SEC. XX-K of For that Discussion the latest operation within filings with results affect Management’s call. available please results, factors and read financial

Unless tables call turn these of site. Mr. earnings in over today’s on stated, Fleming. the are in I’ll which included a GAAP now all the For dollars. see U.S. our discussed measures is to Web available otherwise amounts measures, release, comparable please financial the reconciliation to

Ron Fleming

you, joining thank everyone Good you Joanne. morning, for Thank and us today.

our year-end consumption revenues increased driven X.X% increased fourth highlights was are The in pleased and We rate active quarter report growth increase results. Full increases. year approved by $XX.X connections, XXXX to and million million. to from $XX.X very include,

$X.XX increased per X.X%. income Total active income the share. revenues end net million XX,XXX impact X.X% the $X.X Net $X.X as Willow, Adjusting to Excluding million of increased or of $X.XX our or And connections for a year. course totaled events, onetime net million XX.X% to the of dividend income increased XX.X% year. million metric, a EBITDA, X% we non-GAAP or also over by margin. per totaled increased Adjusted $X.X the the $XX.X share. with of

supports the reduce level investment All wanted program. progress utilities the and these an early on, our the XXXX. invested we privilege These customers our improvement highlight improvements of have to plan. flow growth additional that importantly, In accelerated increase into investments primary will we Global represent completed related and to cash existing of our the expenditures Moving service capital on our provide facility improvements capital base, and rate XXXX, $XX.X expect our I Water in to we of improvement capital million enhance build revenue, be prudent to capital the communities serve. to in expenses

to further. wanted I Now highlighted organic growth

data year an Metro XXXX. As calendar remained noted of in strong. realized single earlier, we very just X.X% permit Phoenix increase family

this to permits Greater forecasted its of Builders by Maricopa, that we the area, year-over-year, combined, XX,XXX are XXXX wastewater grew Association that of panel the Arizona realized Water permits XXXX. the and Global permits Pinal increase reported XX% in largest County and where and has Homebuilders permits units Central year-over-year in Home service of Chip reports to in XXXX. a after family XXXX. water permitted Blue Arizona was Permits County Central to up City Association in XX,XXX are housing to Maricopa Phoenix increase XX,XXX In XX% For XX% the single and utility nearly

Before performance greater objective. to our want to I financial our in call to again layout turning XXXX detail, review over the primary Mike

our means. Global taking to forward Water disciplined Moving provide and customers growth service to creation and approach continue will through value sustainable to reliable partners primary the meet mandate to while safe, a and following

by We managing will efficiencies work controllable to while creating expenses. top growth, operational line and grow driving recurring EBITDA revenue

XXXX, targeted of necessary. only With capital capital as the we will completion improvement in improvement accelerated the plan make

again policy. accretive We over will consolidation turn XXXX. with pursue we analyze was call I benefits. demonstrated in will look primarily now Mike. finally, This dividend acquisitions to the routinely our And will to

Mike Liebman

included in over of to This Adjusted is Total Ron. X.X% $X.X expense or Notable past to expenses Operating to to the due revenue increased and primarily reductions Decreased XXXX. a $XXX,XXX XXXX. public attributed O&M by primarily offset reduction were compared primarily in years. This party increased $XXX,XXX expense due and million general the to due million changes in in which revenues contract or which to company of comp, you, were and by a $XX.X $X.X administrative which operating growth, related fees, couple rate up or up is expenses. XXXX. X.X% decreased deferred organic capital year board $XXX,XXX, expenses depreciation in by X.X% in million compared decrease to removes compared connection consumption. increased increased XXXX. by for increase personnel million expenses Thank and a were increases and Willow million, compared $XXX,XXX, investments X.X%, to $XX Valley XXXX was $XX.X made was

EBITDA in Water non-recurring events, had this tied our and Turning a due a XXXX. $X.X raising offset to improvement was primarily compared which increases loss efforts XXXX, to in in or reduction million to This with mentioned, completed $X.X million Global improvement XXXX. following. million in or XX.X% the and other previously our reduction by Adjusted $X.X compared tied for expenses up is share primarily expense net our of FATHOM, A $X.X $X.XX in the is expenses of $X.X per $X.X net capital $XXX,XXX to in million million associated adjusts XXXX. which to in benefits. million option million equity XXXX to income is investment tax onetime operating in income $XX.X revenue income income.

highlights is Now compared XX.X% QX million of EBITDA or from to to Increased million million XXXX. to increase. a a to a $X.X $XXX,XXX increase. X.X% X.X%. reflects Reduced or from QX $X.X few decline reflecting $XXX,XXX which a adjusted million which from XXXX from $X.X million Increased million $X.X operating $X.X expenses revenue increase $X.X

includes effective significantly provide XX, XXXX, years President taxation Ron, tax signed eliminates depreciation of reforms. interest as utilities all individuals in provisions utility. December aid TCJA of utility, back as beginning specific provisions, aid corporate business significant call Cuts the for the of for after the in amount of wanted Substantially regulated can changed to an into net turning XXXX the the eliminates provided On on federal water XX%. includes XXXX. from Before reduces changes and entities Act it to I update Amongst regulated public income that It the Jobs deducted. limits Tax Trump contributions known bonus TCJA related the law of the TCJA. provisions be regulated to otherwise to just of to non-taxable, The the provisions XX, and construction, XX% treated are December the construction it the rate and and code to that of tax which internal significant advances taxable TCJA revenue and

the the U.S. of material and have XXX, $X.X regulated financial taxes for XX, for for clarifies of complete have XXXX accounting Commission to is the to Accounting year However, to accounting a a the impact staff for income to this information not estimate issued deduct The anticipated TCJA under to is recognized statements. measurement to deferred staff up ability federal tax decreased re-measurement therefore company income million a if rate has ending yet TCJA, Standards of provides taxes complexity December bulletin not limitation in one and in Exchange reflected XXX is accounting complete impact interest. or XX, effects these and Securities tax made of utilities the not the and Codification December analysis reflecting on has XXXX. company's XXXX applicable which to income accounting. the guidance at reasonable by which which been new certain the in of the year required of period The and the and available The

TCJA. an of the Ron. and The information a partially Regulations on not administrative yet recorded accounting back income the estimated require $X.X has interpretation, of additional certain results. interpretation call items recorded U.S. income yet our million company reflected of tax the records, been deferred or yet analysis future decisions, for it the which The necessary be XXXX interpretation, $X.X the the impact in other evaluation court to pass further concludes the liability offsetting accounting complete determination the treatment. Additionally, has million. a with and detail to under able TCJA analyze to for of items benefit not asset to related reasonable regulatory recording company gather, million prepare impact $X the historical relating of now Treasury an the provisional This the and items effects from these TCJA tax of of I as to developments amounts of to issued of the will update will tax

Ron Fleming

comments wanted residential organic around I on I Q&A as expanding an and Mike. increasing and Frankly, new service call by to with today’s footprint, properties in the commercial brief our acquisition you, large anyway. opportunity service other is there business existing to industrial areas. will a know opportunity, and few beyond making rapidly, in growth our questions Phoenix Thank come in development conclude Metro

beyond opportunity. Additionally, growth our Greenfield strategy growth goes and organic

time to now, a both which Water for have the have Commission. Global Corporation our a resources market we Arizona consolidation, primary priority As is for regulatory on policy some for and refocused communicated we

with we such and actively disclose detailed multiple cannot we prospects. While in deals diligence are early, currently

this there be utilities truly these and that to involved. can all are and committed platform develop believe to beyond. opportunities, small targets, large and stakeholders to we consolidation and expanding that will We are expertise beneficial our Beyond our specific other believe applying year both new

a As industry Arizona. the evidence this growth, expert Director towards here announced and hiring to resource in Resources, as Lenderking week commitment Water and water recognized we this of Jake strong of efficient

a a shareholder has water members. Brett enhance sets answer these The your vote further expert; available to our Coy, Waters questions. I and We our strategy. concludes growth meeting. highlight now and board also to at Mike are skills markets industry prepared market is That shareholder and upcoming announced nominated stand individuals will Huckelbridge, to you. for expertise potential directors of remarks. capital and Thank capability expert, intended Global our the combined Debra pursue who public that new of board aggressively

Operator

Capital. Roth of [Operator Instructions] comes Sweeney Our go question first ahead. Please Gerry from

Gerry Sweeney

quarter. these Congratulations in nice with on on a up, are questions, a or you its where built you diligence more along of couple follow Initial heard it. potential If I is potential Ron, acquisition correctly, up Eagletail out it actual building towards with systems question like candidates. made homes, connections sounds you with will the development acquisitions. it are recent brought out it since the I like you active lines of at

Ron Fleming

I Yes. question yes, think them. will those going it a in I connections Good question, active there vague of that’s say each so Gerry. fairly on I limit I’ll as, Fair to but what enough. is mean say I I answer am

Gerry Sweeney

based? Arizona Okay.

Ron Fleming

Yes.

Gerry Sweeney

Got it.

substantial mean, I of any could... if size you these Okay. have

Ron Fleming

to going not elaborate am that I question. on

Gerry Sweeney

Got fair That’s fine. it. enough. That’s

be acquisition are I which, expecting some highway significant and a since anything maybe the think there of was mean not Eagletail I but I figured speaking Eagletail the then couple work would that on an acquisition of re-routed. on and etcetera, any around quarters was in development topic. the And movements Not we could ago I but that on Okay. ask

Ron Fleming

Sure. Absolutely.

and at Greater municipal point of sanitary have There for only, X Eagletail Company they far centralized County up no is have our a the in active to just there provider county miles sewer water in [indiscernible] this square that water just XX utility or don’t So a of Tonopah. remind system. was to other way immediately abuts Water western connections, Maricopa everyone, they but

we to the what do. into what So that that’s opportunity roll to from in intend it area a regional already perspective creates we have area out plan that and

Well, distance region I So already invested is business contracted are had of but of normal are Bill we XX,XXX we the area Greater Foundation water road in the in generally service utility will buying the and water, utility recycled is master Gerry, that that and time think you a water heard acres where off in waste have in plan water existing I by do announced Melinda provider. to, from of of area. and serve our it, and top Gates a we to same community what out model the we Tonopah, my referring are don’t our the that last

from hasn’t been least the ultimately would since that it disclose not Metro any last the this extent So we there as to quarter made at Phoenix in announcement. a progress whole continues doing But large quite are and point. types. to announcements, recovery that that in At in other perspective this a There growth. expand attracting rapidly, industrial fairly we has of well service area our similar jobs not even been

the these is new continue areas the over will that momentum opportunities that years. and feel that just to to strong we to bring coming So similar

Gerry Sweeney

area. to that sort obviously, Is growth a Okay. support Perfect. I I part? the fair X.X% growth continue on year-over-year. assumption think that continued update. think then, connection in Permits my of was, I appreciate And

Mike Liebman

that’s yes. viewing we We fair That’s Yes. assumption. it, think are a how

Gerry Sweeney

just - questions. little O&M, think was actually a a for slower XX%. I took quarter almost it a then I couple mean seasonally it of And

Just the that a sort assume that we by that hair some driven had CapEx that should and recent above a you number a expect continue done XX%. internally. of that to I of ratio -- Is was or

Mike Liebman

think the significant a operating past, I in Yes. there -- compensation pretty mean expense. impact that rate, deferred discussed on current had the have I we and run is this

would the it for associated the say substantially, I price stock deferred obviously we continues stay the operating to it quarter, with the if that increases at level see a and So to reduction implications where if that. the continue expenses that comp benefit expense would to of But so have stock is, price in would go up. that

result the on depreciation capital to placed side, we tied a go increases investment being to depreciation into of basis continue are as forward a those the there, and service. expect the expense On expenses that

Gerry Sweeney

almost O&M. the and maintenance meant I Operation was sorry, XX% am the I for down about quarter.

Mike Liebman

Yes.

tied related too. that we Yes. basis specifically is Gerry. And Okay. talking to thought the with our we Operations reduction on sustain in O&M general, FATHOM. to go-forward that and maintenance had party I about contract expect were you in a

Gerry Sweeney

tied that am am end. units But also. note the I sorry, I stock I to specified. did figured That’s have from pricing. impact Great my No. sorry. All I had it the should right. I quarter.

appreciate You it. Thank you. execute, guys to really continue I

Operator

from comes ahead. Instructions] Management. at Our [Operator Jung go Trailhead question Asset next Jon Please

Jon Jung

good have see wonder at Trevor if call your appreciate I done, FATHOM and give me work could Global great you I an this you impact quarter. morning on the you that Water. and update what for over is what doing

Ron Fleming

Well, Yes. CEO Hi, Jon. Hill is the Trevor of FATHOM.

will recall, business remain related a on the unit. with with He as But FATHOM's of we there. utilize and remains that we XXXX. we Directors that’s party anything ultimately, sold created you in why that unit fully and platform well Board we largest disclosed in business transaction one sold way is that As that of FATHOM and clients our the

relationships what business specific is relationships, answer could still Trevor as to that I anything it those further are there guess relates I So doing... there. Is

Jon Jung

question Board more minority that relates to, What position Global's valuable if and valuable generating is growing you Yes. own owns minority position. with in growing more that. is do and a is of what that becoming becoming kind My plan and does it that and to a position. is value Global and so, FATHOM

Ron Fleming

question. great a it's Well, it. Got Okay.

couple still we investment. of in. did own that do done FATHOM participate we capital So They not about that of had X.X% a rounds

are There has us. But between So obviously a I a original is private do to they our mean diluted a percentage ownership been company. continue grow. bit. they wall

us, disclose to what continues everything. that they specific the project in. have we But have don’t come had They also You numbers to their that to see of revenue in revenue to have a recurring generally is quite have grow. financial access bit lumpy

large doing lead And recurring so that’s revenue. to the which an longer of typically projects term indicator installation

we [ph] have better they they Yes, to yes, so, to ownership grow, service as And continues means believe And they that continue that the growing. [percent] of value utility. [ph] are [backdrop] our in grow. provide FATHOM we

and look So sold does the we cash that? is reason mean have business. win currently all at really that the or of on Look, the them company we at it's don’t end How the our continue to flow to day Board fronts. a finance I so

in However, real. this XX it spent continue we Having the me, personally. believe speaking approach that years am is, this and in the is is what that industry, is need we believe FATHOM that I exists in the taking industry to

we cash benefit. sits not they fairly but is are be we we of since book our believe an how and the willing about don’t near at Mike, fairly to And that, ultimately far which patient it equity I so I it, flowing are it, kind low. And are think value on know we far. of can But take zero, getting see

Jon Jung

of you done. recent give general any, their of us idea Okay. most Could FATHOM that just value the financing on that has based

Ron Fleming

Yes.

So public, think, and believe I Mike, isn't it? I it's

Mike Liebman

have I article an somewhere. it read

Ron Fleming

for top can don’t don’t Yes. a the of we to I me off It's number I that answer. that recall just recall. difficult public disclose.

Operator

Our Please of Pow go next ahead. Acumen Brian comes Capital. from question

Brian Pow

wanted to look are if the in and just you of that or just we out any sort acceleration for could expecting XXXX, think coming of seasonality same about shall our benefit And of QX trends at year. I connections any as see model. we that just their of Was up difference? seasonality QX sort the for tighten we may sort the

Ron Fleming

seasonality been perspective a pretty it's from mean I consistent. Yes.

other we the assumption. from would year. various in way Obviously, have seasonality tough to saw the to an Could subject last fine the for the one generally implication seen expect speaking us tow in So that precipitation but slightly XXXX, be that’s would or would you quarters. in what be a [indiscernible] the it you have

Brian Pow

CapEx. then on just the Great. And Okay.

comments the your in XXXX. indicated opening in sort that You you just targeted of complete CapEx

again is just do or it? more some half look at should we when you year numbers, then finished like as So how put expect of sort it and be to first the that in and up clean CapEx that after pretty we of

Ron Fleming

perspective, Yes. an investment That’s primarily absolutely I from as it's mean right. complete well.

is team of time an everything are operations QX in to service expecting the side to we I that and is think of kind wanted and do ideal the into there just happen put some things to XXXX. there in

Operator

to any This concludes for Ron like back over Fleming remarks. turn question-and-answer session. to the L. I conference would the closing

Ron Fleming

Thank to for in interest and and your continued those you all I call thank like GWRS forward in you, for again look Thanks, Global Bye. speaking soon. participating we this operator. with would and Water. to

Operator

concludes conference today's This call.

You may have disconnect a you day. your for and pleasant line. Thank participating

Global Water Resources (GWRS) 9 Mar 182017 Q4 Earnings call transcript