Global Water Resources, Inc.

Management Commentary

“As we recently reported, we had a near record year for capital investments that were critical to complete within 2025,” commented Global Water Resources President and CEO, Ron Fleming. “Although these investments grow rate base 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 continued to adversely impact net income and earnings per share in the first 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 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 largest difference of opinion on the timing of rate recovery as it relates to our historical Southwest Plant issue. The new schedule provides a clearer path to setting appropriate rates for our largest wastewater utility along this timeline. 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.

“The Administrative Law Judge has set hearings to commence in August. After the hearings, the matter is then evaluated by an Administrative Law Judge who writes a Recommend Opinion and Order for the ACC’s consideration. We requested new rates for GW-Santa Cruz to be effective November 1, 2026.

“We plan to announce additional rate case activity for our other utilities in the coming quarters. We believe we can maintain solid revenue and earnings growth in the years to come as we seek to obtain appropriate rate increases combined with our anticipated organic growth.

“In Q1, we continued to generate top-line growth year-over-year. Revenues generated by our water, wastewater and recycled water services increased by 6.7% compared to Q1 2025 primarily as a result of both organic growth in connections, increased consumption and the continued implementation of new rates from prior successful rate cases in several of our smaller systems in Southern Arizona.

“The revenue growth also included a full quarter contribution from our acquisition of seven water systems from Tucson Water, which we completed in July of last year. As part of the acquisition, we adopted Tucson Water’s rates for the acquired water systems, with a previously approved five percent rate increase scheduled for July 2026.

“We also anticipate seeing our organic connection growth being driven by Arizona’s strong economic outlook. The state’s economy is expected to accelerate in 2026, driven by a strong manufacturing sector and population growth. According to Arizona’s Office of Economic Opportunity, employment is expected to rise by 454,000 jobs through 2034—an annual growth rate of 1.2%, which is four times the national average of 0.3%.

“Regarding another important development for Arizona, we are pleased to see the State Route 347 Improvement Project is expected to begin this summer, which includes widening the 15-mile corridor with an additional lane in each direction, and upgrading bridges and intersections to ease congestion. The City of Maricopa recently secured its share of the project’s funding, and preparation work for the project began in April.

“Looking ahead, we remain focused on our ongoing Southern Arizona plan, which focuses on consolidating operations and rates across our customer base—delivering greater efficiency, affordability, and value through regionalization.

“Given Arizona’s positive economic outlook and the strong financial foundation we have laid, we are confident these efforts will provide long-term value for both our customers and shareholders.”