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GWR Global Water Resources Corp. 2012 Second Quarter and Results Event Date/Time: August 9, 2012 ‐ 4:00 p.m. E.T. Length: 64 minutes CORPORATE PARTICIPANTS Brett Higginbotham GWR Global Water Resources Inc. ‐ Finance Controller Trevor Hill GWR Global Water Resources Corp. ‐ President and Chief Executive Officer Cindy Liles GWR Global Water Resources Corp. ‐ Executive Vice President and Chief Financial Officer CONFERENCE CALL PARTICIPANTS Jeremy Hellman Divine Capital Markets ‐ Analyst Ian Tharpe CIBC World Markets‐ Analyst Khurram Malik Jacob Securities ‐ Analyst "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. PRESENTATION Operator Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the GWR Global Water Resources Corp. 2012 Second Quarter and Results conference call. At this time, all participants are in a listen‐only mode. Following the presentation, we will conduct a question‐and‐answer session. 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 today, Thursday, August 9th, 2012 at 4:00 p.m. Eastern Time. I would now like to turn the conference over to Brett Higginbotham, Financial Controller for Global Water Resources Inc. Please go ahead.
Brett Higginbotham ‐ Financial Controller, Global Water Resources Inc. Good afternoon, everyone, and thank you for joining us on today's call. This morning we issued our 2012 second quarter end financial report by press release, and a copy of those results is available on our website at www.gwresources.com. Speaking today are Trevor Hill, President and Chief Executive Officer; and Cindy Liles, Executive Vice President and Chief Financial Officer. Mr. Hill will summarize the key events of the second quarter and provide his insights for the remainder of 2012, "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. followed by Ms. Liles who will review the financial results for the quarter, then both Mr. Hill and Ms. Liles will be available for questions. 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. These forward‐looking statements are not guarantees of future performance, and they are subject to certain risks, which could cause actual performance and financial results to vary materially from those contemplated in the forward‐looking statements. For additional information on these risks, please read the March 29, 2012 GWR Annual Information form under the heading "Risk Factors". Unless otherwise stated, all amounts discussed today are in U.S. dollars. GWR Global Water Resources Corp. was formed in 2010 as a Canadian company, (inaudible) equity investment interest in the U.S.‐based company Global Water Resources Inc. Today we will refer to the U.S. Company as Global Water or the "Company". I'll now turn the call over to Mr. Trevor Hill. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Thanks, Brett. Good afternoon, everyone. I'm reporting to you today from London. We're proud of the progress we made in the second quarter. We concluded debt financing for $25 million in June that improves cash flow for the next 12 months over $11 million and reduces interest and extends amortization out 10 years. Further, "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. and as reported last quarter, we have progressed on the path to receiving the $6 million plus award that we received through an arbitration and we believe those funds will be collected within 2012. The combination of these two events dramatically improved free cash flow and cash positions within 2012 and we remain optimistic that a dividend may be payable from the Company sometime in the relatively near future. Finally, we completed a rate filing for all of our utilities in Q2. Based on this filing we expect a 25 percent increase in top line revenue with the initial phases of this impact occurring as early as Q3 2013. Those are the highlights. I will now turn it over to Cindy to review the second quarter results. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Thank you, Trevor. Since the financial information of the U.S. Company is not consolidated with the Canadian Company, our discussion today refers to the consolidated financial information of the U.S. Company, Global Water. As a reminder, unless otherwise stated, all amounts discussed are in U.S. dollars. Regulated utility revenue increased 11.3 percent or $0.8 million to $8.2 million for the second quarter compared with the same quarter last year. For the six months ended June 30th, 2012 regulated utility revenues increased 10.5 percent or $1.4 million to $15 million compared to the same period last year. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Recurring FATHOM revenue increased 30.7 percent to $558,000 for the second quarter compared with the same quarter last year. And for the six months ended June 30th, 2012 recurring FATHOM revenues increased 42.1 percent to approximately $1.1 million compared with the same period last year. If you add the contract that we announced earlier this year, El Cajon, South Pasadena, Goleta, and Thames Water, these projects will add incremental $906,000 annually on a run rate basis, which represents another 46 percent increase in recurring revenues so far this year. This brings the total to approximately $3 million annually, excluding our own regulated utilities. While recurring FATHOM revenue increased substantially, non‐recurring revenue for the period decreased compared to last year as this segment of revenue for AMI implementations and contractual sales did not take place during the 2012 period as these items are lumpy in nature. We use a non‐GAAP measure EBITDA to analyze operating performance, which is based on operating income, less depreciation, amortization and other non‐recurring items. A reconciliation of these details are included in today's press release. EBITDA for the quarter totaled $3.4 million compared to $3.5 million for the same period last year. EBITDA for the six months ended June 30th, 2012 totaled $5.6 million compared to $6.8 million for the same period last year. The decrease (audio interference) in EBITDA this quarter were primarily due to no FATHOM AMI implementations or contractual sales "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. during 2012. You'll hear from Trevor next regarding AMI adoption and our views on that. Our net loss for the three and six months ended June 30th, 2012 included a $32.8 million non‐recurring charge attributed to a valuation allowance reported against the Company's net deferred tax assets. I'd like to ask you to see Note 7 to the Consolidated Financial Statements for the three months ended June 30th, 2012 they’ll be filed subsequent to this call, and a footnote I believe will be helpful for you. Excluding this non‐cash charge, consolidated net loss totaled $1.4 million and $3.3 million for the three and six months ended June 30th, 2012, respectively, compared with a $0.8 million and one point (inaudible) million for the same period last year. The recording of the valuation allowance was based on GAAP standards prescribed in FASB's accounting standards notification or ASC 740 for income taxes. Where it’s stated, valuation allowances should be established based upon the strict guidelines of the ASC. The ASC (inaudible) to determine whether a deferred tax asset is realizable and significant weight is given to evidence that could be objectively verified. The realization period requires a three‐year cumulative review of book (phon) income or loss adjusted for items that can be objectively verified including previously issued regulatory rate increases and existing FATHOM contracts. With the adjustment, the Company estimates a three‐year cumulative book loss of $900,000. This cumulative book loss then disqualifies the Company from being able to use projections to further "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. evaluate the valuation, such as increased utility rates in the Company's recent rate application and future FATHOM contracts; thus requiring a $32.8 million net deferred tax valuation allowance to be recorded at June 30th, 2012. The deferred tax assets are still preserved for the Company's future tax return and management believes that the deferred tax asset valuation allowance will ultimately reverse through income tax expense when the Company can increase utility rates from the recent rate application filed with ACC and can continue to deliver more FATHOM contracts. This will effectively shelter or shield the Company from paying approximately $32.8 million of future taxes. The valuation allowance has no impact on the Company's cash flows or underlying business models. Further, (inaudible) a valuation allowance resulting from an analysis of historical information, we continue to believe in the long term growth and profitability of the Company. I'll now pass the call back to Trevor. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Thanks, Cindy. So now turning to our regulated business, market conditions in Phoenix continue to improve. Arizona moved into fifth place in the national job growth ratings since June. Home values across Phoenix surged nearly 17 percent year‐over‐year in June. The fastest rate of any metropolitan area nationwide. In our own utilities, we've seen steady organic growth now for some time. In fact, continuous since January of 2009. During the second quarter, we grew organically at an annualized rate of 4 "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. percent; this is up 18 percent from the 3.4 percent we recorded in the same period last year. Active service connections increased by 772 since December 31st, 2011 to 40,503, representing an annual growth rate of approximately 3.9 percent so far this year; 540 of the 772 service connections were from previously inactive or potentially foreclosed homes reconnecting. So what that means is that these homes that were deemed to be foreclosed or empty are now being reoccupied and we're seeing a rapid uptake of those kinds of homes here in our service areas. We've seen a steady improvement of organic growth rate now for more than six quarters at greater than 3 percent and we are now at 6.3 percent vacancy rate from a deepwater line approaching 12 percent at the height of the downturn in February of 2009. So we've cut our foreclosures in half in approximately the last three years. Beyond organic growth, which drives revenue, we have incremental growth in—
as a function of new rates. We began monthly invoicing in January for the last phase or $2 million of our 2010 rate case award, and we’ve completed the filing, as I mentioned earlier, for our 2012 rate case, which was filed at the end of June, first part of July. The requests approximate a 25 percent increase or approximately $8 million of recurring revenue in rates. This increase will be spread over several years which should be fully implemented by 2015; the first effects of which are expected in Q3 of 2013. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. The combination of anticipated organic connection growth and increased rates over the next five years will generate substantial revenue and EBITDA growth in our regulated utilities and materially increase cash flow as a function of the now stable operating costs and stable CAPEX requirements. Remember our maintenance CAPEX, as a function of the fact that our utilities are new and modern, runs at about one tenth the average of the sector. And therefore our CAPEX is expected to remain nominal despite the increase in growth that we've seen in these utilities. And now to FATHOM. The FATHOM product continues to develop momentum in the market. And as we continue to invest in IT the richness of the product also increases. Recently we've had enquiries as to the partial implementation of FATHOM within cities; a means by which municipalities can deploy FATHOM incrementally and in larger and larger applications. We saw this during a recent trip which took us to Australia, Singapore and the United Kingdom. Many utilities are facing increasingly challenging times already dealing with scarcity and financial constraint and now dealing with rapid meter and AMI deployment as well as trying to become more customer‐centric in their operations. The things that banks and retail online shopping sites provide customers are now shaping the expectations of utility customers. There are a few water utilities in the world that deliver this level of online service. FATHOM, which designs the meter‐centric, customer‐centric platform, and as such is highly enabled for online account management and provides the opportunity for channel shift or effectively customers "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. self‐serving and paying their bills online without the need for increasing, ever‐increasing human capital to support those operations. We are very excited about the emerging international opportunities along with other primary channels expansion partners, cities with existing AMI and direct sales. Let's start with direct sales, which is primarily focused on small to midsized utilities in the U.S. market. The pipeline of deals has continued to grow and is up about 50 percent at this time last year. Although the size of the pipeline has not yet generated a predictable implementation revenue stream, the recurring cash flow is steadily growing from this business unit. We have made changes in our direct sales team and shifted efforts to hyper‐focus on the small subset of deals to ensure contracted deals in 2012. The continued decline of the general municipal financial situation, the continued pressure on municipal pension plans and the draught that continues to be prevalent in the news, although unfortunate, are exactly the issues that FATHOM was designed to address in the municipal market. And the positive results achieved by our current client base definitely supports FATHOM's ability to address these issues. While we anticipate the risk adverse nature of the municipal market, based on our performance to date, we have underestimated the small to midsized cities' resistance to large change despite their pain tolerance. However, the draught conditions, the financial stability of these areas and our increasing traction in these markets is moving these municipalities closer to FATHOM each day. That said, the "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. municipal water for AMI remains sluggish across the sector. Now we believe it will continue in this manner for some time due to the simple fact that more granular data by itself does not instantaneously need to increase revenue or reduce cost. And municipalities are finding that even in the presence of the implementation of AMI without a product like FATHOM they're really unable to achieve the results that they had hoped which is slowing (phon) the market and probably would be an opportunity for Global as we see it going forward. We have always known that Global coupled—AMI coupled with customer information system is where the value proposition is the strongest. The water sector adoption rate of AMI remains slow. The manufacturers appear to be under tremendous pressure, and as a result, we are seeing increased tendencies of manufacturers to compete on price. Additionally, many have begun to position automatic meter read, or AMI, such as drive‐by technologies, or AMR, convertible to AMI as the preferred solution to cities. This is a bit of an interesting flip‐flop message that we see sector (phon) technology manufacturers pushing towards cities, i.e., simpling (phon) the product offering to see if they can get the sale; whereas we know that AMI and the granularity of data if used in the correct way is a far superior methodology for the cities. While we see this pressure continue to drive prices down in the AMI related deployment, we see increasing interest in our CIS element of our offering. The partner "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. channel has also benefited from the trimming of the partner list that we have done and focusing on the larger operational and the larger technology partners. There's tremendous momentum being built in these partnerships right now and we expect them to be significantly contributing to our pipeline by the end of 2012 and certainly into 2013. And as an example, by the end of this month the entire sales team of the Ontario Clean Water Agency, one of our partners, will be trained on the FATHOM product and we'll be approaching their utilities with the expanded offering. Earlier in the year we also decided to begin approaching cities with existing AMI installations. And while we identified a few that have been capable of deploying an AMI system and successfully using the system for billing, we identified many more that are struggling to utilize the system they have been deployed to execute even the simplest forms of billing. We expect announcements in this category sometime before the end of this year. We will discuss the Thames Water project later in the call but there are two elements that are critical to understanding our plans to change the rate of adoption of FATHOM into the municipal environment. First, just the opportunity to demonstrate FATHOM to utility is significant as Thames, is helpful for us. The second piece is that because we've been operating FATHOM in the market as long as we have been we are getting some increased traction from an ever growing population of needy (phon) cities. Because FATHOM can be "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. deployed incrementally, there are more cities now that can look at a piece of their business that they're struggling with for the direct implementation of FATHOM as a means of checking effectively to see if the system could be deployed across their entire meter population. In summary, we have adjusted to the slower U.S. market by establishing international FATHOM presence, providing a hyper‐focused program to the direct sales team and ramping the largest operational technology partnerships. And in addition speaking with larger cities about an incremental approach, perhaps starting with their highest value customers that allows them to deploy a new CIS system without the risk of a full full‐scale CIS transition which many cities have been reticent to do. We continue to actively work with Thames Water utility in the U.K. as we press released in May. We entered into an agreement with Thames to develop and implement the data hosting, analytics billing and customer presentment interface for high value customers. This first step accomplished the objectives of both Thames and Global Water and we remain optimistic that there exists an opportunity for an extended partnership with this company. And that concludes our prepared remarks for today. Cindy and I are available for questions and we'll be on the call now. Go ahead. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. QUESTION AND ANSWER Operator And at this time, I would like to advise everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just one moment to compile the Q&A roster. Your first question comes from the line of Jeremy Hellman with Divine Capital Markets. Your line is open. Jeremy Hellman ‐ Analyst, Divine Capital Markets Hi, guys. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Hi, Jeremy. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Hi, Jeremy. Jeremy Hellman ‐ Analyst, Divine Capital Markets Hey. I was wondering if you could maybe compare and contrast the different markets. You know you speak broadly about kind of the landscape with respect to FATHOM and the muni market, but can you maybe kind of get into the layers a little bit in comparing and contrasting the U.S. market relative to what you're seeing with Aqua, "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. relative to what you might be seeing in the U.K. or even Australia? Are you seeing shifting I guess in terms of market acceptance or fondness for the platform? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Sure, yes. Well it's interesting, there are really—we used to say there are two drivers for FATHOM: financial, scarcity and water scarcity and what means for cities to reduce cost and for sure the market leading demand side management tool focused to customers. We know that price signals and peer pressure are the only real ways to change customer behavior and those things are embedded in FATHOM. So demand side management tool driving those drivers. But what we're seeing recently is two emerging drivers in different areas. One of them is grappling (phon) cities all around the world are thinking about putting AMI in, in their current systems don't support it. So many cities around the world, and I'm going to name these, this has nothing to do with our business, but, San Francisco, New York, Toronto, have all put in an AMI system and have not put in the systems yet that fully manage and integrate that data and present it back to customers in real time. And so that is an emerging area that's quite interesting to us. Cities that have, and I mentioned that earlier, cities that have put the data in, or put the AMI in, rather, and want to use the data for very specific reasons but haven't got it fully integrated with customer information or customer presentment yet. And that's an emerging driver. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Fourth area is that utilities are being driven by the regulators to provide better customer service. Almost everywhere. And that's driven by customer expectations are just on the rise. And that means online account access, online payment, manage my own account, text notifications, things that we did very early as you know in FATHOM to meet what we perceive to be an increased—a change of customer sentiment and now we see regulators demanding that in some areas. And so these are pretty strong drivers and when you think about where utilities in the main are on customer service, you know, there’s a significant gap. In the U.S. historically we'd turned people off if they didn't pay. Now, regulators everywhere are asking for a softer, gentler approach with a lot more data available to the customer. So it is a shift. I actually think it's shifting toward us. It's a very material change. Utilities are not used to thinking about customer‐
centric organizations; or asset‐centric, and I think that's going to be hugely beneficial to us. But it's slow coming. Jeremy Hellman ‐ Analyst, Divine Capital Markets As a follow‐up to that, kind of on that last point with where the utilities are trying to put, or the regulators are trying to push the utilities to do this, how much of that is being supported by accommodative rate making? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes. Well, so I'm in the United Kingdom right now and the regulator here has built a matrix around customer service metrics like unwanted calls or repeat calls, "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. basically things that customers are griping about and develops it into a scoring system to not only rank the regulated utilities publicly against each other but to ultimately affect what's known affectionately as K‐factor here in the U.K. which is a co‐efficient that goes to their overarching revenue requirement. So a lower co‐efficient or K‐factor means a lower revenue requirement or what the regulator will give the company in terms of overall revenue. A higher K means a higher revenue requirement. And this is for all, I'm not speaking about any one utility, this is all the utilities in the U.K... And so for the first time I think anywhere in the world we've seen customer service directly tied to revenue given to their—the regulated utility by the regulator based on a empirical methodology, based on actual customer service metrics. So it's pretty compelling. It's pretty closely tied. Jeremy Hellman ‐ Analyst, Divine Capital Markets That's really encouraging, I mean if that really takes route. Can you—what kind of lag time would you think there would be for U.S. for example to use that best practices? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. We've heard it a little bit tangentially and we—it's front and center in our rate filing this time. We basically said to the regulators we're providing best of breed, state‐
of‐the‐art customer self‐serve capabilities and we've even suggested the opportunity to incent utilities on this basis. I think for regulators it also provides a little cover because "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. effectively what we're doing is saying, "Look, there's a requirement to raise rates, everyone knows that. For a variety of reasons power costs are going up, capital deployment, etc., but customers are now being given tools to manage their own behavior and ultimately their exposure to rate increases if they're rate conscious or cash conscious." And this message is very powerful and it's resonating everywhere. So I haven't seen our regulators take a position to say, "Hey, we're going to give you 50 basis points for that, but I think it's coming. Jeremy Hellman ‐ Analyst, Divine Capital Markets Great. All right, I'll step back and give someone else a turn. Thanks. Operator Your next question comes from the line of Ian Tharpe from CIBC. Your line is open. Ian Tharpe ‐ Analyst, CIBC World Markets Thanks. Good afternoon. Hi, Trevor, in London. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Hello, Ian. Ian Tharpe ‐ Analyst, CIBC World Markets Hello. So just following up on the prior questioner's question. And I mean certainly an interesting evolution in the U.K., I think O'Fallon (phon) is pretty progressive and as is that whole market through deregulation, but I mean the first opportunity there "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. is Thames. So I wonder, Trevor, we were given kind of a timeline and phases of development that were going on at the time of your last call, so I wonder if you can give a bit more clarity around the, I guess, first, the presentation you gave in mid June, and then what some of the milestones are in order for you to get into successive phases of the project with Thames? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. It's a great question, Ian. I'm a bit reticent to talk about the Thames deal right now. I can tell you just because it's very—it's a very sensitive area, very big company, huge reputation, excellent company, all I can say is that the first phase of the project which was particularize FATHOM for Thames and get it up and running live, went very well. I've been over here for many weeks and I am very—I remain very optimistic that FATHOM has elements in it that could be very beneficial to Thames, but I really feel uncomfortable commenting beyond that, to be honest, Ian. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. So is there any type of clarity you can give around I guess the next level of deployment out to I guess maybe a more expanded customer base than perhaps is using it now, or anything you can give us for a bit more color there would be—or is there anything to cover? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Yes. To be honest I don't want to say anything at this stage. I would say I wouldn't be over here if I didn't think there was a great opportunity and I hope that there'll be a chance for me to give some color on our activities sometime in the next couple of months, before the next quarter. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. Okay, and then perhaps staying with the U.K. and the theme we just talked about in terms of progress rate making, you're spending lots of time over there and there's a pretty concentrated number of very large utilities in the U.K. that might use the services, so are you seeing that that might be a more appropriate market or a more kind of low hanging fruit within that market for your type of solution than perhaps you're contending within the U.S. right now? So what are the kind of opportunities in the U.K.? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes, I do see that. I think that it's really helpful to have a regulator who's saying, "You shall be a better customer service company," and saying, "By the way, it's going to (inaudible)," They have this very well set out system whereby companies apply every five years for new rates and we're right in the throes of coming up to what's called 'the next amp period' or regulatory period, which will be the second half of this decade. And there's a lot of speculation as to how this K factor will play into that so all the utilities are looking at it. I think the recent draught in the U.K. has put a big scare into people "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. here and I think like a lot of places in the world water was free. In places in Ireland, for example, water is not metered and not charged for, and now under the EU austerity measures Ireland is having to put in meters for every customer, from zero to a million meters by 2014. And they don't have even billing systems. They don't even bill for water. So those—now not the water scarcity is the driver in Ireland but relatively financially constrained, lost meters, lost customer tools, lost systems to support that and a short timeline. It's just something that not a lot of people have done or really, really have gotten their minds around how they would approach it. So I do see the drivers as being very strong here. I think they're multifaceted. This customer focus, this relatively new—the other thing that's common knowledge, and you probably know this, but the other regulator that regulates what utilities do from a water perspective has mandated compulsory metering for all utilities across the U.K., and now they're all putting plans together to put meters in. Most of the water companies here are 25 or 30 percent metered. So rapid movement to metering. In many cases rapid movement to AMI. Also customer focused all at the same time. So becoming these customer‐centric, meter‐centric businesses all concurrently is pretty interesting to us and seems to me like inadvertently, arguably, we built a model that is pretty well positioned for this opportunity. Ian Tharpe ‐ Analyst, CIBC World Markets "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Right. Okay. And I can't help but notice, I mean we went from maybe this time last year talking about kind of the sweet spot for the Company that, you know, the municipalities in the U.S., less than 50,000 end‐to‐end point connection to—I mean a lot of the discussions you're having now are multiple million end point connections, if all is rolled out. So I mean I wonder if you can talk, Trevor, about the evolution and your thinking around what the best end use market are for you? And also, I mean it almost seems like more a consultative role even though they'd be using your software and what are the thoughts around equipping your business to be, you know, Global to really pursue that kind of business? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes, that's a very insightful question. This market making piece, I know for sure that we're on to something, you can see, right. The customers that we put FATHOM in for, love it. So what is being—what is hard with the smaller cities is that it's basically a wholesale turnover of the back office to Global. Now in many cases they've done it, it's been great. But that process is turning out to take time. I still think the midmarket in the U.S. is going to be very rich for us and we're seeing the pipeline growing. And I know that that's a bit of an old story but I literally wouldn't say it if I didn't think that that remained a great market for us. But to complement it because I see now that it's going to take more time and while—and so we took our direct sales guys and we said, "Just give these guys the attention they need because the offering in and of itself is a bit "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. complex until they figure out exactly what it is." Like some people still think, 'oh, they're just selling AMI,' or whatever. They don't realize the scope of what FATHOM can do. In fact, recently the thing we're hearing is it sounds a little bit too good to be true therefore we're skeptical. So you can't win, it seems. But for those cities that's going to—that will generate a nice amount of meters on an increasing basis year‐over‐year. But I wanted to complement that to speed it up and that's why I put pressure about three quarters ago on partners and also started to explore the international piece where the drivers were stronger. And what we're finding in those cases is that in many cases the utilities are capitalized, organized, but don't have the confidence or the knowledge specifically, and I saw this in Australia, particularly, to deploy AMI and get it up and running and feeding information to customers in real time. And so I do see that there's this consultative element that can help them get organized. Even around data. It's amazing. One of the processes, and I talked about it a bit in my opening remarks is that our data tool, which is now an online tool for cleaning data in utilities and geospatially locating meters, is hugely valuable for utilities. We have a couple of contracts with cities that are small for just that, just getting the data cleaned up so they have something to work on, on CIS. So that's an element of FATHOM that we've broken away and splintered out and has its own opportunities. So I do see, Ian, and I guess it's worth talking a little bit about the partners. I've spent a lot of time with Ontario Clean Water agency. It's a very good company, they've "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. got a ton of operating contracts all over. We've spent a lot of time with them recently and I think it's just sort of—almost dawned on them, its like, ,'oh, this is really an operating platform that could really help some of our small utilizes' as opposed to 'oh, it's just a way to put an AMI in.' And so I think the more time we spend with some of the bigger operating partners, and we've got several that we're working with, I think—it's such a revolutionary way to think about back offices for utilities that for us it seemed a bit intuitive. I guess it's just 'cause we've been beat up for as long as we have been in our own utilities. But for many it's such a quantum shift that it's just taking some education time. And that consultative piece you talk about has been really helpful to get utilities to a point where they can say, "Oh yes, I see what we're—I see what this is now." Ian Tharpe ‐ Analyst, CIBC World Markets And maybe you're not far enough along in the process, but do you leverage your way into these relationships a bit more readily if you had say a partnership with a, like a consulting firm like a Capgemini or another type of IT vendor like IBM who's very active in the smart grid for the water space or are those seen as too much of a competitive threat at this point? I'm just trying to think, I mean it's a whole new market, what's going to give you a leg up and frankly give people like me and other people in the community a little bit more comfort around this change in direction and the prospect that you need—still need to win a client. So that's my thought. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes. And I don't think it's a change; I think this is complementary. I mean there's a lot of activity in our direct sales side now. It's exactly what it was; it's still the small cities. On this call I talked a bit more about international and a bit more about the U.K. just 'cause those are things that have come across our radar which are pretty exciting. But I think—and there's a couple of—I think the best kind of partnerships for us in two categories. One is, they're operators of existing utilities. And there's many of those that you could name in the U.S., Severn Trent (phon), Beovia (phon) Aqua, others, and those kinds of existing contracts and relationships with city (phon) and in most cases don't really do billing back office services. So I think that is a category that's very interesting. The second category is technology companies. And you know we have a partnership with Eclair (phon) that's been good, there's a couple of things we're exploring in this area that are very interesting to us and these are guys also who have massive distribution into the new (inaudible) market in the U.S. So these ones fit that category you're speaking of exactly ‐ a leg up, a leveraging point to complement the direct sales and to buffer some of the international expansion opportunity and get this thing growing on those three tacks or tracks concurrently. I think that's going to be a big part of our business in 2013, to be honest. Ian Tharpe ‐ Analyst, CIBC World Markets "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Okay. I'm sorry, I know I'm hogging the park here but just one last question. I mean you alluded to it before and it's a bone of contention every quarter we all talk, but we talked about the pipeline—last quarter I think the number that was given was 50,000 connections, and that you had active RFPs around that number, so I wonder can you give any clarity on decisions, plus or minus on that side, has all this grown, has it shrunk, what are we seeing? And then also, how are you expanding into new markets within the U.S.? I mean you've talked about incremental states in the past, any data points on new markets would be helpful. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Cindy, do you want take that RFP question? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Yes, Trevor, I'd be glad to. HI, Ian. Thank you for the question. Ian Tharpe ‐ Analyst, CIBC World Markets Hi, Cindy. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. You're right, we had—on the last quarter's call we talked about five RFPs basically; that we're representing about 50,000 connections. And I can give you an update on those and I can tell you what we'd done during this next—during the quarter "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. since, basically. Where we sit today we've basically, there's–of the 10 RFPs now for 2012, four on hold—so these are where the cities have purposely put it on hold ‐ and I could give you examples of where they—maybe RFP water and electric together and then they decided to now separate them. So four of the 10 are on hold that we responded to. We're waiting on three responses, and these are since the last quarter. So we responded to (inaudible) the last quarter, short listed for one, waiting to hear on it, the other two have not short listed anyone yet. And then we're also waiting to respond to one as well. The deadline has not approached yet to respond to. To round out the 10, then, there's two that we did not get; one was really one we responded to where our price was higher and the offering really didn't meet what their RFP was for. So since the—we've seen more RFPs since the last call which I think is what we thought would occur. We've been acting and responding to those and I believe we'll hear more, at least the three we're waiting on, fairly soon. And then of the four that are on hold, understand one of them plans to make a decision in September. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. And are they all in and around that 10,000 connection level or are there any of the group that you mentioned that are disproportionately large or small? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Yes, two are. Good question. Two are larger and they're AMI related. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. And where are they in the process? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. One we're waiting to hear for so we've already responded. The other one the deadline isn't until–I want to say September the 6th response on it. Ian Tharpe ‐ Analyst, CIBC World Markets Okay, so that's the coming up one. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Yes. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. And then your—the one that's deciding in September is just kind of a standard size. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. It is. It is. Ian Tharpe ‐ Analyst, CIBC World Markets Okay. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Its standard, it's 29,000 meters but it's really not—it's larger than a standard. Ian Tharpe ‐ Analyst, CIBC World Markets And it's AMI as well? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. It is. Ian Tharpe ‐ Analyst, CIBC World Markets It is. So how many of the 10 are AMI? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Let's narrow down the 10 now to the ones that are on hold and ones we're waiting for. So we're looking at seven, if I'm not mistaken, so of the seven five are AMI. Ian Tharpe ‐ Analyst, CIBC World Markets Okay, helpful. I am going to jump back in queue. Thank you. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Okay, great. Thanks. Operator "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. And again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Khurram Malik with Jacob Securities. Your line is open. Khurram Malik ‐ Analyst, Jacob Securities Hi, good afternoon. I'm just going to piggyback on the last question, with the RFPs and the AMI. The ones, Cindy, that you're looking at in the—for the fall this year in terms of decision‐making, are—is the implementation for those also scheduled for this year provided they stay on track or is this further out? Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Hi, Khurram. For sure one of them have a quick—it's a CIS one, it's a nice sized one that we've been short listed for. We're waiting to hear and they have a turnaround time of wanting to be live this year. And the other two, where one's very large so it would start this year but would run into next year; and the other one would like to be through by the end of this year. Khurram Malik ‐ Analyst, Jacob Securities Okay, great. Most of my questions have been answered, but just jumping back to the theme you've been sort of discussing on this call quite regularly in regards to domestic deployment of FATHOM versus international opportunities. And this may be better for Trevor to answer, or Cindy, feel free to jump in. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. When you're looking at your internal forecast for the FATHOM part of your business and you're developing, has there been sort of change in the last say recent two or three months when you look at revenue mixes starting in 2013, 2014 between international opportunities and domestic opportunities? I'm just trying to get sort of a handle on, you've been getting some decent traction, at least early traction, in the international markets whether it's Europe or what have you, and obviously you guys (inaudible) slow and I guess we can lump Canada with international opportunities. Has that shifted at all in terms of your view? I think on the last call we discussed this and it was sort of indicated that you still remain pretty bullish on near term traction, let's say as of 2013 into the domestic market, but has that sort of shifted at all as we've sort of gone through the last few months? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Khurram, this is Trevor. No, I don't think it's really shifted, to be honest. I think the international is interesting. I think I said at one time that maybe by 2014 or something international could be reflective of about 30 percent of FATHOM activity. I wouldn't change that at this stage. I think most of the deal flow will come from domestic markets and that existing pipeline that is growing and is better qualified than ever and ticking along. Now, there is a possibility that the international stuff could accelerate. There's a couple of deals in Australia and a few other places around that that are fairly "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. sizable and could go more quickly than I expect. But I do think that it's not a change in projection or philosophy at this stage, Khurram. Khurram Malik ‐ Analyst, Jacob Securities Okay. And when you look at the international markets is it principally targeted towards the larger utilities or are you also going after the mid and small sized guys out there as well? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. No. Yes, so that is the difference in that. We're really only looking at the larger multi hundred thousand meter and above activities. It's just too—the market development activity is too expensive to explore anything smaller. And as Ian said there's often a consulting piece it seems that could be tied to these things that allows the opportunity to be paid while you're helping the utilities figure out what they can do. And that's certainly been the case so far in the U.K. and I think that in Australia it'd be the same. So to the extent, and we're really spending a small amount of time and money on the international, but to the extent that we are doing that that's cash flowing (phon) during the investigative basis as well. Khurram Malik ‐ Analyst, Jacob Securities Okay. So then would it be fair to say, you know, if you take Thames Water for example, the amount of meters they have obviously dwarfs several of the targets you're "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. going after in the U.S. market, so the fall on orders from Thames or similar possible customers won't be massive in relation to your domestic pipeline total loss 2014? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. I think that's fair to say, yes. Khurram Malik ‐ Analyst, Jacob Securities Okay, fair enough. You'd also touched a little bit on the, sort of the changes you've been making to your direct sales sort of strategy and channel in the domestic market, could you go a little further into that? Any—you mentioned that the way the product is pitched to the platform (phon), the pitch has to have changed a bit, but is there any other sort of structural changes to the pods (phon) or how you're focusing sort of that channel? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes, what I could tell you is that we were—we started in California and we had two active areas there and then we added Texas, we also added Colorado and made some exploratory calls into Florida as well but—and also into the Pacific Northwest. What we found is that we've got an awful lot of cities now that are very interested and what it takes is this consultative time‐consuming process to walk cities through from, 'wow, that's an opportunity we never heard of' to 'okay, we wanted to do an AMI now, here's a way' to 'okay, let's figure out together how we price it'. Ultimately some of them still want to go to RFP or whatever. But that process of supporting those cities "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. through that process is—can be very rewarding for us and we have enough cities in the deal in our pipeline where that kind of dialogue is going on–on, I don't know, tens of cities right now. More than really all of our sales guys in the field are acting—working on deals that are totally closable in our mind. So I think it's actually a good thing from a market perspective. So the structure there is as opposed to making hundreds and hundreds of calls out we've saturated the markets in those ways; we've got the best of those clients now on our list and we're working with them to close those deals and that takes in many cases 10 visits to these cities. It literally, in this market, to move a deal forward with a city, with a product like FATHOM which is a step function change to their operation, is time intensive. Now the good news is, six or seven of those meetings have already been made. So that's the best way to characterize where we are with the majority of those cities in those key regions. Where the drivers are strong and getting stronger, to be honest, Khurram, California is still a great market, the financial stresses there have continued; West Texas remains in a critical draught condition and we're seeing government type actions toward demand side management measures and conservation measures. And so those markets are strong for us. Khurram Malik ‐ Analyst, Jacob Securities "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Okay. And are you fairly comfortable with the size and the amount of investment dollars you have in your direct sales channel stage? Any possibility of becoming more aggressive in that regard in the near term? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes. I'd like to become more aggressive. I'm just being careful right now. I have high confidence in how we've defined the model right now that we've got this right. We're a bit ahead of the market which is—can cut both ways. FATHOM is very good for many utilities. And remember that some of them—some places in West Texas they have no online capabilities. In some cases they only take cash which is a strange, strange situation. So we are managing our sales effort in the—within the cash flow that Global generates overall. I think we're doing that very prudently. As this model accelerates and we get more deals online and more cash flow generated, it'll give us the opportunity to expand the market. But what I think is going to happen is that these partnership channels will become more intensive and there'll be more requirements to support them with their existing clients. And those will probably happen without a competitive process which is another piece that I'm very excited about. We'll ultimately end up standing up a sell in Global to support the channel partners as they deploy or work with us to serve their existing customers more intensively. So that's where I see continued investment and continued investment in the platform. Every time we go into a new city there are more "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. things that cities are looking to, to deliver and every time we do that because it's cloud it just makes the product that much more rich. Khurram Malik ‐ Analyst, Jacob Securities Right. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Really a stronger sustainable competitive advantage for us. It's the richness of the platform. Khurram Malik ‐ Analyst, Jacob Securities Okay. And in previous quarters as you mentioned, there's a bit of delicate balance when you go into a city for a first timer and pitch the product and since it is such an automated solution it can displace jobs that were previously in existence in certain jurisdictions. Is that still the case or is there circumstances as the market becomes—as markets such as California become more financially constrained, more draught (phon) conditions, or you can be more aggressive and pushing for that where it's less of a concern for you, you know, the whole job situation (phon) thing, and the political ramifications of that? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Well I think that it's a delicate balance as you say and I can tell you that we've been contacted by cities that are at or at the point of bankruptcy as a way of dealing with some of these absolutely critical cash flow requirements in the context of inability "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. to function sort of thing. So cities are coming to the realization still that their old ways of doing business that are not going to support their mandate going forward. In some cases we've seen cities lay off people as a function of FATHOM and in other cases they said, "Fantastic, this gives us a chance to redeploy these guys into higher and better uses." Remembering that water operators are a scarce resource also in the U.S. Like, we're—in Phoenix we see water operators making $60,000, $70,000, $80,000 a year, City of Phoenix is hiring guys from us at high, high rates, so there's a lot of push to drive guys who read meters into hiring more senior operating positions. And so lots of times it's not so much laying people off but the opportunity to put them to hire better uses. So I think that that's another piece of this puzzle that makes it attractive in many ways for cities. Khurram Malik ‐ Analyst, Jacob Securities Okay. Two final quick questions. Now you mentioned the dry conditions in the—
and the positive impact it could have off FATHOM. Is there any sort of impact on your regulated side perhaps with the rate case? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. In which sense, Khurram? Khurram Malik ‐ Analyst, Jacob Securities If there are dry conditions water scarcity means that in theory you may have an easier time getting rate increases. Dry conditions with the way the river flows–
"Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. happened in Arizona, means there’s—there's less water getting to certain areas and you're having more—sort of your total regulated system where you use water becoming more prevalent in places like Arizona with purple (phon) pipe, etc.? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes. So in our Arizona utilities the main advantage of FATHOM is giving customers the opportunity to manage their own behavior and deal with rate increases as they arise. And really that's the regulatory piece of that. Now, our utilities, as you know at build out, become areas that are dependent on recycled water to meet the overarching hundred year shared water supply requirements for the million plus houses that can go in our service territories. But at the moment the aquifers (phon)—we have water rights associated with our designations of shared water supply that support about, call it 450,000 future homes, Khurram, so until we get up into those levels you won't see the full benefit of our total water management plan. You've got to put it in now and you've got to plan for it so you can get that low denominator per house. Like you don't see it when you're at 50,000 connections. Do you see what I mean? Khurram Malik ‐ Analyst, Jacob Securities Yes. Yes. And with respect to the rate case, I mean with scarcity becoming a more common theme out on a going forward basis and as other utilities are having easier time getting higher rates depending on where they're getting the water "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. obviously, is that—would that—is that something that you're seeing in Arizona specifically? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Well I can tell you that we've had some of our existing sitting (phon) regulators (inaudible) to visit FATHOM and they found it to be very interesting from a regulatory perspective. And as you know this is an election year, we've had a few of the candidates for the ACC around to see what FATHOM can do as well and for them it's almost a necessity to improve customer service in these utilities. So I think it will play into the—
into the rate case. I can't tell you exactly how but I certainly do hear—because our regulators are elected in Arizona they have to deal with the direct customer interface and customers upset with whatever utility kinds of calls that are being generated, and so I think our regulators particularly have high sensitivity to customers and I think it should help in that way. Khurram Malik ‐ Analyst, Jacob Securities Great. And then the last question. Number one, where are your mobile phone applications being deployed? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. So the beauty of cloud is that every time we put a new city on the platform, the cities get an immediate benefit of having the mobile applications available to them. So now every one of our cities, and I think there are about 12 different distinct areas where "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. FATHOM's being used including our own, all have access to both iPhone and now android applications on their smartphone. That's an area of continued investment for us. We see that as a big—being a big differentiator. Also, anywhere we go with the FATHOM it means by definition that the mobile apps are live and operational on day one. Khurram Malik ‐ Analyst, Jacob Securities Okay. And are you tracking sort of the early adoption of that with the end consumers? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes, we are. Yes, we are. We've ‐ we're running constant campaigns on both. So we've got campaigns that run internal to Global for morphing customers over to, first to get off getting that paper bill, then to claiming and accessing their online management account. We've seen a steady tick up, hundreds of customers a month converting from paper to wireless and paperless transactions and we've seen a steady increase in mobile usage. It's one of these things where people don't expect to have it and so you have to really tell them about it and—but we have a fair amount of mobile usage now. I think it's a fairly small number but it's something like 5 or 10 percent of all our customers have at least looked at the app and downloaded it and we have some portion who are recurring and using it on a regular basis. Khurram Malik ‐ Analyst, Jacob Securities "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Good, that's what I was getting at, the 5 to 10 percent there. That's a (inaudible) it's fairly new. I'm assuming you'll be disclosing how that sort of develops as we go forward? Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. Yes. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Sure. Khurram Malik ‐ Analyst, Jacob Securities Perfect. Great, thank you. That's all I had. Operator There are no further questions at this time. I'll turn the call back over to the presenters. Trevor Hill ‐ President and Chief Executive Officer, GWR Global Water Resources Corp. All right. Thanks, everyone. Appreciate the continued interest. We still are very excited here at Global. We've got a lot of good things going on both on the regulated side and FATHOM. We appreciate the continued patience of the market as we break barriers in this new area. So look forward to telling you more. We'll be getting out of the summer season and talk to you again at the end of Q3. Thanks, everyone. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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FINAL TRANSCRIPT August 09, 2012 – 4:00 p.m. E.T. GWR Global Water Resources Corp. Cindy Liles ‐ Executive Vice President and Chief Financial Officer, GWR Global Water Resources Corp. Thank you. Operator This concludes today's conference call. You may now disconnect. "Though CNW Group has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. CNW Group will not be
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