Global Water Resources, Inc.

Greetings, ladies and gentlemen. Thank you for standing by. Welcome to the Global Water Resources, Inc., 2026 second quarter conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. The company will take questions from covering sell-side analysts and institutional investors. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, Please press star zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on August 13, 2026 at 1 p.m. Eastern Time. I would now like to turn the conference over to Kyle Upchurch, Controller. Please go ahead.

Thank you, operator, and welcome, everyone. Thank you for joining us on today's call. Yesterday, we issued our 2026 Second Quarter Financial Results by Press Release, a copy of which is available on our website at GWResources.com. Speaking today is Ron Fleming, President and Chief Executive Officer, Mike Liebman, Chief Financial Officer, and Chris Krygier, Chief Operating Officer. Ron will summarize key operational events, Mike will review the financial results for the second quarter, and Chris will review Arizona Corporation Commission activity. Ron, Mike and Chris will be available for questions at the end of the call. Before we begin, I would like to remind you that certain information presented today may include forward-looking statements. Such statements reflect the company's current expectations, estimates, projections and assumptions regarding future events. These forward-looking statements involve a number of assumptions, and other stakeholders. For additional information regarding factors that may affect future results, Please read the risk factors and MD&A sections of our periodic SEC filings. Additionally, certain non-GAAP measures may be included within today's call. For reconciliation of those measures to the comparable GAAP measures, please see the tables included in yesterday's earnings release, which is available on our website. I'll now turn the call over to Ron.

Thank you, Kyle. Good morning, everyone, and thank you for joining us today. First, before jumping to our normal operating highlights, I would like to emphasize our focus on earnings growth. While many key metrics our business have experienced strong growth over the last five years, our goal is to also achieve long-term earnings growth. We are committed to this objective, which we believe will allow us to enhance shareholder value. As we reported previously, in 2025, we had a near-record year for capital investments that were critical to complete. This included the investment necessary to recommission our Southwest Plant Water Reclamation Facility, which was originally constructed 20 years ago but was mothballed during the Great Recession. Although these investments grow rate-based considerably and ensure we can provide safe and reliable service to our customers and communities we have the privilege to serve, These investments increased certain operating expenses and, most notably, depreciation expense. Such expenses continue to adversely impact net income and earnings per share in the second quarter of 2026. This is an unfortunate yet necessary part of the historical test year environment here in Arizona. Additionally, certain company expenses, such as medical, continue to grow at an unprecedented pace. As I have been saying for many quarters now, We need new rates to keep up with all the investment and inflation that we have experienced in our utilities. To this end, while it represents a diversion from our original rate application, the recently announced rate case settlement provides a clearer path to a notable rate increase for our largest water utility, GW Santa Cruz, later this year. For GW Palo Verde, while delayed, the delay deals with the primary difference of opinion on the timing of rate recovery as it relates to that historical Southwest plant issue. Thus, the new schedule provides a clearer path to setting appropriate rates for our largest wastewater utility in 2028. Together, this will allow us to better realize recovery of inflationary expenses and return on and return of our plant investments, including the Southwest plant, resulting in years of meaningful earnings growth ahead. Chris will discuss the rate case further and our plan to rate case activity for other utilities later on the call. In the meantime, 2026 is about working hard to control G&A expenses, which we achieved in Q2. In the years to come, we believe we can maintain solid revenue and earnings growth as we seek to obtain appropriate rate increases combined with our anticipated organic growth. Now I will provide a few operational highlights. Total active service connections increased 5.8% to 69,429 as of June 30, 2026 from the 12 months prior. In 2026, we achieved an annualized 2.6% total active service connection growth rate, excluding the acquisition of the seven Tucson water systems. Specifically, we invested $6.6 million into infrastructure improvements and existing utilities in the second quarter of 2026 to provide safe and reliable service. Now I want to discuss organic customer growth and what is going on in our core utilities further. The single family dwelling unit market ended 2025 with approximately 21,815 building permits issued in the Phoenix greater metro statistical area. In the second quarter of 2026, this market realized 5,653 building permits, representing a 4.7% decrease compared to the same period in 2025. Meanwhile, the Maricopa market realized 185 building permits, representing a 5.7% increase from the same period in 2025. While new permit activity across the Phoenix MSA has slowed in 2026, and particularly in the city of Maricopa, is reflected in the company's 2.7% year-over-year organic increase in active connections, we believe the decline in permits is temporary as we remain well-positioned to benefit from the anticipated long-term growth of the Phoenix MSA and our specific area drivers, including job growth, affordability, and Proving Transportation, including State Route 347 widening and our large assured water supply.