Global Water Resources, Inc. (GWRS) Bundle
Understanding Global Water Resources, Inc. (GWRS) Revenue Streams
Understanding Global Water Resources, Inc.’s Revenue Streams
The revenue analysis for Global Water Resources, Inc. (GWRS) reveals a detailed breakdown of its primary revenue sources, year-over-year growth, and contributions from various business segments for the nine months ended September 30, 2024.
Breakdown of Primary Revenue Sources
The following table summarizes the revenue sources for the nine months ended September 30, 2024 and 2023:
| Revenue Source | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Water Service | $19,387 | $18,916 |
| Wastewater and Recycled Water Service | $20,054 | $18,958 |
| Unregulated Revenues | $0 | $2,786 |
| Total Revenues | $39,441 | $40,660 |
Year-over-Year Revenue Growth Rate
Total revenues decreased by approximately $1.3 million, or 3.0%, to $39.4 million for the nine months ended September 30, 2024, compared to $40.7 million for the same period in 2023. This decrease was primarily due to the recognition of $2.8 million in ICFA related revenue during the prior period that did not recur in 2024, partially offset by a $1.6 million increase in regulated revenue primarily from organic connection growth.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contributions of various business segments to overall revenue are as follows:
| Business Segment | Revenue Contribution (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Water Service | $19,387 | 49.2% |
| Wastewater and Recycled Water Service | $20,054 | 50.8% |
| Unregulated Revenues | $0 | 0% |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, water service revenue increased by $0.5 million, or 2.5%, to $19.4 million compared to $18.9 million for the same period in 2023. This increase was driven by:
- Basic service charge revenue, which rose by $0.6 million, or 6.7%, totaling $10.2 million.
- A 4.4% increase in active water connections, reaching 35,464 as of September 30, 2024.
In contrast, water service revenue based on consumption decreased by $0.1 million to $8.8 million due to lower consumption of higher-rate water usage, particularly for construction and irrigation.
Wastewater and recycled water service revenue increased by $1.1 million, or 5.8%, totaling $20.1 million for the nine months ended September 30, 2024. This was driven by:
- Higher wastewater service revenue of $1.0 million resulting from a 5.0% increase in active wastewater connections.
- Recycled water service revenue remaining steady at $1.1 million, with a volume increase of 40.2% to 882 million gallons.
Overall, the revenue analysis highlights the importance of regulated services in the company's revenue structure, with significant contributions from both water and wastewater services.
A Deep Dive into Global Water Resources, Inc. (GWRS) Profitability
A Deep Dive into Global Water Resources, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Revenues | $39,441 | $40,660 |
| Operating Expenses | $31,393 | $30,036 |
| Gross Profit | $8,048 | $10,624 |
| Gross Profit Margin | 20.4% | 26.1% |
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024 was:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Income | $8,048 | $10,624 |
| Operating Profit Margin | 20.4% | 26.1% |
Net Profit Margin: The net profit margin is calculated as follows:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Income | $5,346 | $6,839 |
| Net Profit Margin | 13.5% | 16.8% |
Trends in Profitability Over Time
Analyzing the trends in profitability, the following observations were noted:
| Period | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| 2024 (Nine Months) | 20.4% | 20.4% | 13.5% |
| 2023 (Nine Months) | 26.1% | 26.1% | 16.8% |
Comparison of Profitability Ratios with Industry Averages
The following table summarizes the profitability ratios compared to industry averages:
| Ratio | GWRS (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 20.4% | 25.0% |
| Operating Profit Margin | 20.4% | 22.0% |
| Net Profit Margin | 13.5% | 15.0% |
Analysis of Operational Efficiency
Operational efficiency is reflected in cost management and gross margin trends:
| Metric | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Total Operating Expenses | $31,393 | $30,036 |
| Operations and Maintenance Expenses | $10,213 | $9,557 |
| General and Administrative Expenses | $12,317 | $11,934 |
| Depreciation and Amortization | $8,863 | $8,545 |
The overall increase in operating expenses reflects rising costs associated with operations and maintenance, which increased by approximately 6.9% year-over-year.
Debt vs. Equity: How Global Water Resources, Inc. (GWRS) Finances Its Growth
Debt vs. Equity: How Global Water Resources, Inc. Finances Its Growth
As of September 30, 2024, the outstanding balances and maturity dates for the company's debt reflect a structured approach to financing, with both short-term and long-term obligations totaling $124.4 million.
| Debt Type | Short-Term Debt (in $ thousands) | Long-Term Debt (in $ thousands) | Maturity Date |
|---|---|---|---|
| 4.38% Senior Secured Notes, Series A | $0 | $28,750 | June 2028 |
| 4.58% Senior Secured Notes, Series B | $3,833 | $70,917 | June 2036 |
| 6.91% Senior Secured Notes | $0 | $20,000 | January 2034 |
| 4.911% WIFA Note | $49 | $1,399 | April 2044 |
| Total Debt | $3,931 | $120,427 |
The debt-to-equity ratio as of September 30, 2024, stands at approximately 2.55, indicating that the company relies significantly on debt to finance its operations compared to equity. This ratio is notably higher than the industry average of around 1.5, reflecting a more aggressive leveraging strategy.
Recent financing activities include the issuance of $20 million in Senior Secured Notes on January 3, 2024, which carries an interest rate of 6.91% and matures in January 2034. The company has also secured a $2.4 million loan from the Water Infrastructure Finance Authority (WIFA) on April 30, 2024, aimed at improving utility infrastructure.
As of September 30, 2024, the company maintains a strong credit profile, having complied with all financial debt covenants related to its various debt instruments. The ability to balance between debt and equity financing is demonstrated by a strategic approach to capital management, ensuring that operational needs and growth objectives are met without compromising financial stability.
The company has utilized its capital resources effectively, with cash flows from financing activities reaching approximately $20.7 million for the nine months ended September 30, 2024, a significant increase from $2.3 million in the same period of 2023.
In conclusion, the company's financial structure reflects a calculated use of debt to support growth while maintaining compliance with regulatory requirements and financial covenants. This approach provides a solid foundation for future expansion and operational efficiency.
Assessing Global Water Resources, Inc. (GWRS) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $28,100 | $17,292 | 1.63 |
Quick Ratio: The quick ratio, which excludes inventory, is calculated as:
| Quick Assets (in thousands) | Current Liabilities (in thousands) | Quick Ratio |
|---|---|---|
| $28,100 - (inventory not applicable) | $17,292 | 1.63 |
Working Capital Trends: Working capital as of September 30, 2024, is:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|
| $28,100 | $17,292 | $10,808 |
Cash Flow Overview:
- Operating Cash Flow: Net cash provided by operating activities for the nine months ended September 30, 2024, totaled $15,796 thousand, a decrease from $22,662 thousand in 2023.
- Investing Cash Flow: Net cash used in investing activities for the same period was ($19,171) thousand, compared to ($24,824) thousand in 2023.
- Financing Cash Flow: Net cash provided by financing activities was $20,700 thousand for the nine months ended September 30, 2024, up from $2,300 thousand in 2023.
Liquidity Concerns: The company has a revolving line of credit available up to $15 million. As of September 30, 2024, there were no outstanding borrowings under this credit line.
Debt Obligations: The total debt as of September 30, 2024, is:
| Type of Debt | Amount (in thousands) |
|---|---|
| 4.38% Senior Secured Notes, Series A | $28,750 |
| 4.58% Senior Secured Notes, Series B | $70,917 |
| 6.91% Senior Secured Notes | $20,000 |
| 4.911% WIFA Note | $1,399 |
| Total Debt | $121,066 |
Debt Service Coverage Ratio: The company maintains a debt service coverage ratio of at least 1.10 to 1.00 as required by its financial covenants.
Is Global Water Resources, Inc. (GWRS) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a common measure to assess if a stock is overvalued or undervalued relative to its earnings. As of September 30, 2024, the diluted earnings per share (EPS) was $0.22. If the current stock price is $6.60, the P/E ratio would be:
P/E Ratio = Stock Price / EPS = $6.60 / $0.22 = 30.00
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the book value per share was calculated as follows:
Book Value = Total Equity / Total Shares = $48,841,000 / 24,565,955 = $1.99
P/B Ratio = Stock Price / Book Value = $6.60 / $1.99 = 3.32
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another valuation metric. The enterprise value (EV) is calculated as follows:
EV = Market Cap + Total Debt - Cash
Assuming total debt is $121,066,000 and cash is negligible, with a market cap calculated using the stock price:
Market Cap = Stock Price Total Shares = $6.60 24,565,955 = $162,000,000
EV = $162,000,000 + $121,066,000 = $283,066,000
For the nine months ended September 30, 2024, EBITDA was approximately $15,000,000.
EV/EBITDA = EV / EBITDA = $283,066,000 / $15,000,000 = 18.87
Stock Price Trends
Over the last 12 months, the stock has fluctuated as follows:
- 12 months ago: $5.50
- 6 months ago: $6.00
- Current price: $6.60
This indicates a growth of approximately 20% over the past year.
Dividend Yield and Payout Ratios
The dividend declared per share for 2024 was $0.08. The dividend yield can be calculated as:
Dividend Yield = Annual Dividend / Stock Price = $0.08 / $6.60 = 1.21%
The payout ratio based on the EPS of $0.22 is:
Payout Ratio = Dividend / EPS = $0.08 / $0.22 = 36.36%
Analyst Consensus
According to the latest analyst reports, the consensus rating for the stock is:
- Buy: 4 analysts
- Hold: 2 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 30.00 |
| P/B Ratio | 3.32 |
| EV/EBITDA | 18.87 |
| Stock Price 12 Months Ago | $5.50 |
| Current Stock Price | $6.60 |
| Dividend Yield | 1.21% |
| Payout Ratio | 36.36% |
| Analyst Consensus | Buy |
Key Risks Facing Global Water Resources, Inc. (GWRS)
Key Risks Facing Global Water Resources, Inc.
Understanding the risk factors that could impact the financial health of the company is crucial for investors. Below are the internal and external risks identified for the company as of 2024.
Internal Operational Risks
Operational risks include the challenges associated with maintaining and upgrading infrastructure. As of September 30, 2024, the company reported total operating expenses of $31.4 million for the nine months ended, up from $30.0 million in 2023. This increase of approximately 4.5% is primarily due to rising operational and maintenance costs.
| Operating Expenses Categories | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operations and maintenance | $10,213 | $9,557 |
| General and administrative | $12,317 | $11,934 |
| Depreciation and amortization | $8,863 | $8,545 |
| Total Operating Expenses | $31,393 | $30,036 |
Financial Risks
The company faces significant financial risks, including debt management. As of September 30, 2024, the total debt was reported at $124.4 million, with short-term debt of $3.9 million and long-term debt of $120.5 million. The company has to maintain a debt service coverage ratio of at least 1.10 to 1.00 as per the terms of its senior secured notes.
| Debt Structure | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) |
|---|---|---|
| Short-term debt | $3,931 | $3,880 |
| Long-term debt | $120,427 | $101,341 |
| Total Debt | $124,358 | $105,221 |
Regulatory Risks
Regulatory changes are another significant risk factor. The company operates in a rate-regulated environment, which means any new investment recovery may be limited and subject to regulatory lag. This can delay revenue recognition and impact cash flows. As of September 30, 2024, the company’s net cash provided by operating activities totaled approximately $15.8 million, down from $22.7 million in the same period of 2023.
Market Risks
Market conditions, including competition and economic factors, pose additional risks. The total revenues for the nine months ended September 30, 2024, decreased by 3.0% to $39.4 million compared to $40.7 million in 2023. This decline was primarily attributed to the recognition of $2.8 million in infrastructure coordination and financing agreement (ICFA) related revenue in the previous year which did not recur.
| Revenue Breakdown | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Water service | $19,387 | $18,916 |
| Wastewater and recycled water service | $20,054 | $18,958 |
| Unregulated revenues | $0 | $2,786 |
| Total Revenues | $39,441 | $40,660 |
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including prudent capital investments, maintaining compliance with debt covenants, and monitoring regulatory changes closely. The company has also increased its revolving line of credit to $15.0 million to improve liquidity and cash flow management.
Future Growth Prospects for Global Water Resources, Inc. (GWRS)
Future Growth Prospects for Global Water Resources, Inc.
Analysis of Key Growth Drivers
Growth opportunities for the company are driven by several factors:
- Product Innovations: The company has focused on enhancing its water treatment technologies, which has led to improved efficiency in water delivery and wastewater processing.
- Market Expansions: Active water connections increased by 4.4% to 35,464 as of September 30, 2024, from 33,976 as of September 30, 2023, primarily due to organic growth in service areas.
- Acquisitions: The company made a significant acquisition in February 2023, acquiring GW-Farmers for approximately $6.2 million.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for the upcoming periods are optimistic, with estimated revenues of $39.4 million for the nine months ended September 30, 2024, compared to $40.7 million in the same period of 2023, indicating a decrease of approximately 3.0%.
The company anticipates a recovery in revenues, driven by increased water service revenue, which rose by 2.5% to $19.4 million.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has entered into a loan agreement with WIFA for a principal amount of $2.4 million, aimed at improving utility infrastructure, with $0.7 million being forgivable. This initiative is expected to enhance service delivery and operational efficiency.
Competitive Advantages That Position the Company for Growth
The company benefits from a robust regulatory framework that supports its operational model, allowing for stable pricing structures and predictable revenue streams. Additionally, the recent rate increase from the Saguaro Rate Case, effective August 1, 2024, is expected to bolster revenue.
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $39.4 million | $40.7 million | -3.0% |
| Water Service Revenue | $19.4 million | $18.9 million | +2.5% |
| Wastewater Revenue | $20.1 million | $19.0 million | +5.8% |
| Active Water Connections | 35,464 | 33,976 | +4.4% |
Continued investment in infrastructure and strategic partnerships will likely enhance the company's capacity to serve a growing customer base, ensuring sustained growth in the coming years. The company remains committed to its Total Water Management model, which integrates various aspects of water service and management, positioning it favorably for future opportunities.
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Resources:
- Global Water Resources, Inc. (GWRS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Global Water Resources, Inc. (GWRS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Global Water Resources, Inc. (GWRS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.