Greetings, ladies and gentlemen, and thank you for standing by. Welcome to the Global Water Resources, Inc. 2023 first 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. 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 May 3rd, 2023, at 1:00 P.M. Eastern Time. I would now like to turn the conference over to Joanne Ellsworth, Executive Vice President, Corporate Affairs. Please go ahead.
Welcome, everyone, thank you for joining us on today's call. Yesterday, we issued our 2023 first quarter financial results by press release, a copy of which is available on our website at www.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 the key operational events of the quarter, Mike will review the financial results for the first quarter, and Chris will review strategic initiatives and Arizona Corporation Commission activity for the quarter. 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, risks, uncertainties, estimates, and other factors that could cause actual results to differ materially from those contained in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements, which reflect management's views as of the date hereof and are not guarantees of future performance. For additional information regarding factors that may affect future results, please read the sections Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations included within our latest Form 10-Q filed with the SEC. Such filings are available at www.sec.gov. Certain non-GAAP measures may be included within today's call. For a reconciliation of these measures to the comparable GAAP financial measures, please see the tables included in yesterday's earnings release, which is available on our website. I will now turn the call over to Ron.
Thank you, Joanne. Good morning, everyone, and thank you for joining us today. We are very pleased to report the results for the first quarter of 2023. In short, 2023 is off to a great start and will be another incredible year for Global Water as we continue to advance our mission of growing and aggregating Water and Wastewater utilities so that our customers can realize the benefits of consolidation, regionalization, and environmental stewardship in the face of water scarcity, challenging regulations, and aging infrastructure. Total active service connections increased 8.7% to 59,809 at March 31, 2023, up from 55,012 from the 12 months prior. Included in these numbers is the acquisition of Farmers Water Company that closed in February of 2023.
The acquisition added a total of 3,335 active water service connections and approximately 21.5 sq mi of Certificate of Convenience and Necessity service area in the town of Sahuarita and the surrounding unincorporated area of Pima County. This acquisition has increased Global Water's total active water service connections in Pima County to nearly 5,000. We invested $6.5 million into infrastructure improvements in existing utilities to provide safe, reliable service and focused on increasing revenues, reducing expenses, and building rate base. Finally, with safety and compliance being our top mandate, we are very proud of our ongoing safety and compliance records. For the quarter, we had significant compliance events and no preventable OSHA reportable events, continuing our streaks from 2022 and prior.
In fact, this means we have now surpassed six years and three months without a significant compliance event and have now gone over 1,040 days since our last preventable OSHA reportable event. I want to pause, highlight, and thank the team here at Global Water whose exceptional performance allows me to provide such wonderful updates for our company. Now I want to discuss organic customer growth and what is going on in our core utilities. Despite the local and national slowdown, development and housing activity does continue in Metro Phoenix and in our service areas. In 2022, Metro Phoenix did experience a 23% reduction in single family home building permits over the same period in 2021. This was still nearly 25,000 single-family building permits.
In Maricopa, our largest utilities, we also saw a slowdown, but the city still issued 1,157 permits in 2022. Year to date through April, we have seen 259 permits in Maricopa, which is more than the 245 permits we saw the entire last six months of last year. We're seeing an uptick from last year's numbers. With that said on housing, the booming economy and net in-migration that Arizona continues to realize requires more and more places for people to live, work, and play. That is why large-scale multi-family housing, commercial, and recreational projects continue to accelerate at an extremely high pace in Metro Phoenix and in our service areas, with a record number of multi-family units being constructed in the city of Maricopa.
Additionally, the industrial manufacturing boom also continues, with 2022 being the single best year for Arizona all time from an industrial economic development investment perspective. Because of this, we continue to make excellent progress on the engineering, permitting, and construction of new service areas, including the Inland Port Arizona, where Nikola Corporation facility is being expanded and where Procter & Gamble recently acquired land. Based on all of these trends, we believe that in the years to come, we will continue to see considerable large-scale commercial, multifamily housing, and industrial growth, in addition to the return of strong organic housing growth. Putting all these elements together, Global Water remains well-positioned. I will now turn the call over to Mike for financial highlights.
Thanks, Ron. Hello, everyone. Total revenue for the first quarter of 2023 was $13.1 million, which is up $3.1 million or 30.9% compared to Q1 of 2022. This increase is primarily driven by the recognition of revenue under infrastructure coordination and financing agreements, also known as ICFAs. A more fulsome explanation of ICFAs can be found in our quarterly and annual filings. However, just for some background, ICFAs are agreements we entered into with developers and home builders whereby Global Water provides services to plan, coordinate, and finance the Water and Wastewater infrastructure that would otherwise be required to be performed or subcontracted by the developer or home builder.
We expanded the capacity for our wastewater plant in the city of Maricopa during the quarter, which allowed us to recognize deferred revenue as we met all of our contractual obligations under certain ICFA agreements. Water and Wastewater revenue, which excludes ICFA revenue for Q1 of 2023 increased $0.8 million or 8.3% compared to Q1 2022. This increase was driven by the increased rates approved in our last rate case, organic connection growth, and the acquisition of Farmers Water Company. Operating expenses for Q1 of 2023 were $9.4 million compared to $8.7 million in Q1 2022. This is an increase of $0.7 million or 7.9%.
Notable changes in operating expenses included $312,000 increase in depreciation and amortization expense tied to our capital expenditure program and the acquisition of Farmers. Operating and maintenance costs increased by $246,000, which was primarily associated with increased personnel costs combined with increased expenses as the company continues to grow and manage inflation. G&A expense also increased by approximately $128,000. Now to discuss other expense. Other expense for Q1 of 2023 was $446,000 compared to $131,000 in Q1 2022. The $315,000 increase was primarily due to the lower income associated with the Buckeye growth premium, partially offset by lower interest expense due to higher capitalized interest costs.
Turning to net income, Global Water had net income of $2.5 million in Q1 2023. This was a $1.6 million or 177% increase compared to Q1 of 2022 and equated to $0.10 per diluted share. To talk about adjusted EBITDA, which adjusts for non-recurring items such as ICFA revenue, as well as non-cash items such as restricted stock expense. Adjusted EBITDA was $4.9 million in Q1 of 2023, a decrease of $292,000 or 5.7% compared to Q1 of 2022, and can be directly tied to the reduced income from the Buckeye growth premium payments, which were $648,000 less in Q1 of 2023 compared to Q1 of 2022. As in the past, I'd like to briefly touch on inflation.
While we have been able to manage expenses quite well given the inflation situation, we do expect to see some increases in future periods, primarily related to personnel costs. Additionally, as you would expect, we have experienced an increase in capital costs as a direct result of inflation. This concludes our update on the first quarter of 2023 financial results. I'll now pass the call to Chris to review our strategic initiatives and Arizona Corporation Commission activity for the quarter.
Thanks, Mike. Hello, everyone. Just a few brief updates. On the acquisition and growth front, we don't have any specific acquisitions to announce at this time. We continue exploring a number of different opportunities that may be good strategic fits for our company.
On the Arizona Corporation Commission front, we are in the early stages of planning several regulatory filings designed to support our ability to continue ensuring safe, reliable service to our customers. We will provide more detail in future calls. With that, I'll now pass the call back to Ron.
Thank you, Chris. As we are still experiencing rapid growth while also handling challenging times on the macroeconomic front, Global Water continues to focus on year-over-year improvements across the company that will benefit long-term value creation. As we execute our growth plan, we intend to remain at the forefront of the water management industry and advance our mission of achieving efficiency and consolidation. We truly believe that expanding our Total Water Management platform and applying our expertise throughout our regional service areas into new utilities will be beneficial to all stakeholders involved. We appreciate your investment in and support of us as we grow Global Water to address important utility, water resource, and economic development issues in Arizona and potentially beyond. These highlights conclude our prepared remarks. Thank you. We are now available to answer your questions.
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Gerry Sweeney with Roth Capital. Please go ahead.
Hey, good afternoon, Ron, Mike, and Chris. Thanks for taking my call.
Good morning, Gerry.
Good afternoon.
A couple quick questions. Maybe starting with Farmers. 3,300 connections. I think it's been in the portfolio about two months. Maybe you could talk about the integration. It is a little bit larger of a acquisition than some of the smaller tuck-ins that you've made. Maybe just one, integration, then two, maybe some of the build-out or investment opportunities you see over the course of maybe 12 to 24 months. You want to continue to expand that, or lay the foundation for more expansion in that area.
Yeah. Gerry, this is Chris. Be happy to tackle that. First I'll focus on the integration piece. You'll recall from the last few years, we've actually acquired a number of utilities in Pima County, and kind of our approach on that was very thoughtful, where we started with a lot of smaller utilities and kind of got the process with the team, lessons learned, and improved at each go-around. We're really seeing the benefits of that pay off here in Farmers. Really a lot of the credit goes to the operations team, customer service, billing that are kind of the front line of everything. We've been able to integrate the employees, attend one large community events, make a couple of presentations to council and really kind of do what we do. That's, that's really exciting. I'd say it's going well.
We're happy with the progress. Always more to do, but happy with where it's going. Transitioning to the second part of your question regarding investment opportunities and expansion there. We have already started the work on starting to expand out our initial diligence on the CapEx program needed and start to think about the next steps in getting that implemented. It's something we're actively talking about right now and kind of kicking off the really detailed planning discussions to basically implement what we're really good at and bring it to the community down there. I would say no major specifics on the investment thesis from dollars and cents, but it's something we're actively talking about right now and thinking about how we'll best bring it to the community.
Got it. Thanks. Switching gears and it's putting on the development theme, Inland Port Arizona. I think we've talked a little bit about it in the past. Just curious of the development timeline that's gonna take place there. I think Nikola and Procter & Gamble, I think are committed to the... Well, I think Nikola is there, and I think Procter & Gamble is building. But just curious as to when does that sort of get to the size that maybe starts impacting or we start seeing it a little bit in revenue, et cetera.
Yeah. Hey, Gerry, this is Ron. I'll go ahead and take that one. Before talking specifically about those two projects that you mentioned, just wanna step back and talk a little bit more broadly. I think people understand this. They see what's going on in Arizona. They see all the headlines. But since the last time we talked, even a new few data points came out that I think just supports this growth thesis that we've been talking about better than anything we can say. That's new numbers came out on the amount of capital being invested in Arizona from purely an industrial perspective. That there's an organization here called the Arizona Commerce Authority, which is really part of the governor's office that helps attract these large-scale projects.
They released those numbers, and according to them, there was $49.7 billion of capital invested in Arizona from 2020-2022. That's like a 500%+ increase over the prior three years. It's this slope of the curve is not only going up, it's like a hockey stick. There's really no evidence that that's slowing down despite some of the macro, you know, economic issues. Lots of industrial large scale projects. Boiling it down to IPAZ, which again is at that 2,000-acre plus mega industrial port, they're calling it. The first two projects going into that, be Nikola already in place. We're already serving them today. They are doing a small expansion right now, and then P&G.
P&G, you know, I'm just gonna talk about publicly available information that they've that they themselves have announced. You know, they bought 500 or 430 acres, and their phase one project is a $500 million investment. Right now, their current plan is to have their phase 1 open by mid-2025. That's the timeline that answers your question.
Sure.
Again, I think the other part of it all is that's their phase 1 and not ultimate build-out, which we believe will ultimately be significant based on the size of the property they acquired. And we're talking to a host of other industrial customers that now that that site's really taken off, that wanna co-locate near, you know, companies like P&G and Nikola and be part of the bigger industrial and semiconductor manufacturing boom that's going on here. It's keeping us super active. It's exciting. Yes, two years out from it being meaningful in our financials, but I think in the five to 10 years to come, it's gonna be meaningful. I'll leave it at that.
Got it. Not sure if you can answer this question, let's just say Nikola was up and running, phase one of Procter & Gamble is up and running, and I believe you have like a 30-acre facility or outline of a 30-acre water facility at IPAZ. If those two facilities were up and running, do you know how much of your capacity they would utilize? You know, obviously trying to back into this, trying to see what kind of numbers or qualitative impact it could have.
Yeah. You know, it's difficult to give you information on that 'cause it's a bit early, and we only wanna talk about what they publicly talk about. Again, there's this phasing element, and it depends on like what products they actually manufacture there and a few other things. It's too early. It is not information that we can provide you, Gerry. You know, apologize for that. From a capacity perspective, let's just remember we were brought in to really do what we do, which is build a brand new integrated state-of-the-art utility from the ground up for this industrial thing. And that's as far as...
Yeah, they when we permit this type of new utility from the ground up, the capacity is really for the region is on a lot larger scale than what we're talking about, not just for these projects.
Mm-hmm.
for really the entire Inland Port. From a water resource perspective, from a what's called a 208 permit perspective, from the infrastructure itself and that property we bought that you referenced, it's actually a 42 acre site that's big enough to, you know, really build Water and Wastewater facilities that could be north of 12 million gallons a day, which is growth well beyond what we're talking about here. All the foundational long-term permitting and planning is put in place to turn these new utilities into something substantial over time, and these first projects are really just a scratch from what it's going to be.
Got it. That's it for me. I appreciate it, and thanks for the detail.
Thank you.
Great. Thanks, Gerry.
As a reminder, to ask a question, you may press star then one. At this time, this concludes our question and answer session. I'd now like to turn the call over to Mr. Fleming. Sir, please go ahead.
Thank you, operator. I'd like to thank everybody for participating on the call today and for your ongoing interest in Global Water. Thanks. I look forward to talking to you again next quarter.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a great rest of your day.