Growth Catalysts

• Raised collective rate baseable assets by $70 million (+59%) when combining 2024 and 2025 test/post-test years for Santa Cruz Water Company and Palo Verde Utilities Company rate cases
• Recommissioned previously mothballed water reclamation facility in Pinal County (South of City of Maricopa) as part of the Southwest plant
• Infrastructure investments in existing utilities: $67.3 million into improvements to provide safe/reliable service
• Customer growth: total active service connections +6.3% to 68,577 at Dec 31, 2025 (and +3.2% organic growth excluding the acquired 7 Tucson water systems)

Business Development

• Arizona Corporation Commission approval secured in Jan 2025 to acquire 7 City of Tucson public water utility systems; closed July 2025
• Highway 347 expansion (I-10 to City of Maricopa / western Pinal County) full funding approved in 2025; construction estimated to begin summer 2026

Financial Highlights

• Revenue: $55.8M for 2025, +$3.1M (+5.8%) vs. 2024; drivers included City of Tucson acquisition, organic growth in connections, and higher rates in Farmers and Sororal utilities
• Operating expenses: $48.6M in 2025, +$5.3M (+12.2%) vs. $43.3M in 2024
• Depreciation/amortization/accretion increased by $2.3M (substantially from additional depreciable fixed assets placed in service due to increased capital investment and current rate case projects)
• Operating costs increased ~+$2.0M driven by personnel (Tucson acquisition, medical, filling a vacant position), utilities/chemicals/repairs (higher purchased power, chemical costs, water treatment expense tied to increased consumption and newly operational plant), and higher contract services
• G&A increased ~+$1.0M driven by medical costs, professional fees (legal expenses tied to Nikola bankruptcy), higher IT spending, higher insurance premiums, and elevated municipal licensing fees tied to revenue growth
• Other expense: $3.2M vs $1.5M in 2024 (includes ~$1.3M loss on asset disposals from recommissioning the Southwest plant and lower income associated with Buckeye growth premiums)
• Net income: $3.0M or $0.11 diluted EPS in 2025 vs $5.8M or $0.24 diluted EPS in 2024
• Adjusted net income (non-GAAP): $3.9M or $0.14 diluted EPS in 2025 vs $6.3M or $0.26 diluted EPS in 2024
• Adjusted EBITDA: $26.5M, down 0.7% vs $26.7M prior year

Capital Funding

Strategy & Ops

• 2026 focus: control expenses and reduced pace of capital investments (per CEO)
• AI/automation: initial implementation begun for call center efficiency; broader rollout across utility operations constrained by security considerations (company explicitly stated it is not going faster due to security needs)

Market Outlook

• Regulatory timeline shift for Santa Cruz / Palo Verde-related rate reviews: additional ACC staff testimony filed Apr 15, 2026; hearing now scheduled to begin Aug 2026
• Permit/connectivity dynamics: management noted connection/permitting growth has begun to slow (no explicit numeric guidance given beyond historical permit declines)

Risks & Headwinds

• Rate case frustration driven by unique recommissioning of Southwest plant assets (assets became rate-baseable after no customers materialized post-2008 during Great Recession; management said this situation is unique and not planned to be replicated)
• Expense inflation: medical costs described as growing at an “unprecedented pace”
• Depreciation and one-time asset write-off related to the Southwest plant pressured income and EPS
• Organic growth sensitivity to market permits: single-family building permits and Maricopa market permits declined in 2025 (single-family permits 21,815 vs ~27,156 in 2024; Maricopa permits 600 with -39% YoY), creating near-term demand uncertainty
• AI rollout operational hurdle: security considerations (company stated it needs security in place before expanding AI beyond call center)