Consolidated Water Reports Second Quarter 2024 Operating Results

GEORGE TOWN, Cayman Islands, Aug. 14, 2024 (GLOBE NEWSWIRE) — Consolidated Water Co. Ltd. (NASDAQ Global Select Market: CWCO), a leading designer, builder and operator of advanced water supply and treatment plants, reported results for the second quarter ended June 30, 2024. All comparisons are to the same prior year period unless otherwise noted.

Consolidated Water will hold a conference call at 11:00 a.m. Eastern time tomorrow to discuss the results (see dial-in information below).

Second Quarter 2024 Financial Key Points

  • Total revenue declined 27% to $32.5 million.
  • Retail revenue increased 8% to $8.2 million on higher sales volumes.
  • Bulk revenue was relatively consistent at $8.4 million.
  • Manufacturing revenue was relatively consistent at $3.9 million.
  • Services revenue declined by 51% (or approximately $12.2 million) to $11.9 million due to a $16.5 million decline in construction revenue that was partially offset by an approximately $3 million increase in recurring operations and maintenance revenue.
  • Net income from continuing operations attributable to company stockholders totaled $4.2 million or $0.26 per diluted share, compared to $7.5 million or $0.47 per diluted share in the second quarter of 2023.
  • Net income including discontinued operations attributable to company stockholders totaled $15.9 million or $0.99 per diluted share, compared to $7.3 million or $0.46 per diluted share in the second quarter of 2023.
  • Cash and cash equivalents totaled $96.7 million and working capital was $131.2 million as of June 30, 2024.

Second Quarter 2024 Operational Key Points

  • Volume of retail water sold in the company’s utility service area in Grand Cayman increased 10% compared with the same period in 2023.
  • Completed the construction and commissioning of the new 2.6 million gallon per day Red Gate desalination plant for the Water Authority of the Cayman Islands. Began operating the facility under a 10-year operations and maintenance agreement.
  • Continued piloting, design and permitting of a $147 million project to design, construct, operate and maintain a seawater desalination plant for the Board of Water Supply of Honolulu, Hawaii.
  • Recognized $1.9 million in operations and maintenance revenue from REC which Consolidated Water acquired in October 2023 to provide a new channel for expansion in water-stressed regions of Colorado.
  • Settled a dispute with Mexico involving the discontinued desalination project in Playas de Rosarito, Mexico and recognized a gain of $12.1 million from the sale of the project land and project documentation.
  • Received Notice to Proceed under a new 15-year agreement with the Water and Sewerage Corporation of the Bahamas to design, build, own, operate and finance two seawater desalination plants on Cat Island in the Bahamas.

Management Commentary

“Our second quarter results were fairly positive, especially considering the inherent variability in our service segment revenue and earnings due to the timing of our large design-build projects in Grand Cayman, Arizona and Hawaii,” stated company CEO, Rick McTaggart. “Our services revenue was down by about half due to the anticipated reduction in construction-related revenue as the Grand Cayman and Arizona projects were completed earlier this year.

“Meanwhile, development activities continue to ramp up on the $147 million project to design, construct, operate and maintain a seawater desalination plant for the Board of Water Supply of Honolulu in Hawaii that we announced in June of last year. We are currently in the piloting, design and permitting stage, which we expect will lead into the full construction stage late next year.

“The completion of the Hawaii project plant encompasses the current two-year development phase followed by a two-year construction phase. After construction and commissioning, we will operate the plant under a 20-year operations and maintenance agreement which has two additional 5-year extensions exercisable at the client’s discretion.

“The reduction in construction-related revenue in the second quarter was partially offset by an increase in the revenue generated from operations and maintenance contracts by both PERC and REC. We acquired REC last October to provide a new channel for growth in the water-stressed regions of Colorado, and we’ve been pleased with REC’s integration into our company and the new opportunities we see developing in Colorado. Similar to our acquisition of PERC, we anticipate that our greater financial and management resources will enable REC to pursue larger projects that will accelerate REC’s growth over time.

“Looking ahead to the remainder of the year and beyond, we remain very excited about our prospects. Many positive factors—including the consistent strong water sales growth in Grand Cayman, the long-term recurring revenues from our Caribbean-based bulk water and U.S.-based O&M businesses, stabilized manufacturing revenue and earnings, and the anticipated revenue and earnings from our $147 million design-build-operate project in Hawaii—altogether provide a very solid base for the company in the coming years.

“Supported by our exceptionally strong balance sheet, we will continue to invest in new long-term projects such as two desalination plants on Cat Island in the Bahamas, as well as new infrastructure to serve the growing water needs of our utility customer in the Cayman Islands. We see these projects ultimately enhancing revenue growth.

“The market for design-build projects is also showing no sign of slowing. While we are currently in a period between two large projects, we believe our efficient and aesthetically pleasing plant designs, our cost-efficient project delivery models and our significant industry experience will help us secure new projects.

“In fact, we recently signed master design-build service agreements with two major national clients for a number of projects they are contemplating. We anticipate this will positively impact revenue and earnings in future periods. Combined with strong industry tailwinds, we anticipate that all of these factors will drive our long-term growth, enhance profitability, and further strengthen shareholder value.”

Second Quarter 2024 Financial Summary

Revenue totaled $32.5 million, declining 27% from $44.2 million in the second quarter of 2023. The decrease was primarily due to decreases of $35,000 in the bulk segment, $12.2 million in the services segment and $161,000 in the manufacturing segment. The decreases were partially offset by an increase of $609,000 in the retail segment.

Retail revenue increased primarily due to a 10% increase in the volume of water sold. The volume of water sold increased due to a 5.5% increase in the number of customer accounts in the company’s license area from June 30, 2023 to June 30, 2024. The increase was also due to significantly less rainfall on Grand Cayman in April and May of 2024 as compared to the same months a year ago.

The marginal decrease in bulk segment revenue was due to lower energy costs, which decreased the energy pass-through component of the company’s bulk water rates.

The decrease in services segment revenue was primarily due to plant construction revenue decreasing from $19.8 million in 2023 to $3.3 million in 2024 as the result of two construction projects nearing completion during the quarter. Revenue generated under operations and maintenance contracts totaled $7.1 million in the second quarter of 2024, an increase of 75% from the second quarter of 2023. Newly acquired REC contributed $1.9 million of the increase, with the remainder related to PERC contracts.

Manufacturing segment revenue was relatively consistent at $3.9 million as compared to $4.1 million in the second quarter of 2023.

Gross profit for the second quarter of 2024 was $11.6 million (36% of total revenue), as compared to $15.5 million (35% of total revenue) in the second quarter of 2023.

Net income from continuing operations attributable to Consolidated Water stockholders for the second quarter of 2024 was $4.2 million or $0.26 per diluted share, compared to net income of $7.5 million or $0.47 per diluted share in the second quarter of 2023.

Including discontinued operations, net income attributable to Consolidated Water stockholders for the second quarter of 2024 was $15.9 million or $0.99 per diluted share, up from net income of $7.3 million or $0.46 per diluted share in the second quarter of 2023. The increase was primarily due to the gain on sale of the land and documentation related to a discontinued project in Mexico totaling $12.1 million in the second quarter of 2024.

Cash and cash equivalents totaled $96.7 million as of June 30, 2024, with working capital of $131.2 million, debt of $0.3 million, and stockholders’ equity of $206.7 million.

First Half 2024 Financial Summary

Revenue for the first half of 2024 was $72.2 million, down 6% compared to $77.1 million in the same year-ago period. The decrease was primarily driven by decreases of $0.7 million in the bulk segment and $7.5 million in the services segment. The decreases were partially offset by increases of $1.5 million in the retail segment and $1.8 million in the manufacturing segment.

Retail revenue increased primarily due to an 8% increase in the volume of water sold. The volume of water sold increased due to a 5.5% increase in the number of customer accounts in the company’s license area from June 30, 2023 to June 30, 2024.

The retail revenue increased also as a result of significantly less rainfall on Grand Cayman in April and May of 2024 as compared to the same months a year ago.

The decrease in bulk segment revenue was due to a decrease in energy costs for CW-Bahamas, which decreased the energy pass-through component of CW-Bahamas’ rates.

The decrease in services segment revenue was due to a $16.5 million decrease in plant construction revenue. Revenue generated under operations and maintenance contracts totaled $14.2 million in the first half of 2024, up 83% as compared to $7.7 million in the same year-ago period.

The increase in manufacturing segment revenue was due to increased production activity.

Gross profit for the first half of 2024 was $25.5 million (35% of total revenue), down 2% from $26.0 million (34% of total revenue) in the same year-ago period.

Net income from continuing operations attributable to stockholders for the first half of 2024 was $11.2 million or $0.70 per diluted share, compared to net income of $11.6 million or $0.73 per diluted share for the first half of 2023.

Including discontinued operations, net income attributable to Consolidated Water stockholders for the first half of 2024 was $22.3 million or $1.40 per fully diluted share, up from net income of $11.1 million or $0.70 per fully diluted share in the same period of 2023. The increase was primarily due to a gain on sale of land and project documentation of $12.1 million in the second quarter of 2024.

Second Quarter Segment Results

    Three Months Ended June 30, 2024
    Retail   Bulk   Services   Manufacturing   Total
Revenue   $ 8,181,884     $ 8,447,958     $ 11,922,469     $ 3,926,847     $ 32,479,158  
Cost of revenue     3,670,133       6,097,460       8,458,537       2,632,814       20,858,944  
Gross profit     4,511,751       2,350,498       3,463,932       1,294,033       11,620,214  
General and administrative expenses     4,378,816       363,268       1,196,624       667,586       6,606,294  
Gain (loss) on asset dispositions and impairments, net     (6,130 )           3,000             (3,130 )
Income from operations   $ 126,805     $ 1,987,230     $ 2,270,308     $ 626,447       5,010,790  
Other income, net                                   418,426  
Income before income taxes                                   5,429,216  
Provision for income taxes                                   1,063,933  
Net income from continuing operations                                   4,365,283  
Income from continuing operations attributable to non-controlling interests                                   122,872  
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                                   4,242,411  
Net income from discontinued operations                                   11,607,846  
Net income attributable to Consolidated Water Co. Ltd. stockholders                                 $ 15,850,257  
    Three Months Ended June 30, 2023
    Retail   Bulk   Services   Manufacturing   Total
Revenue   $ 7,573,329     $ 8,482,495     $ 24,093,963     $ 4,087,476     $ 44,237,263  
Cost of revenue     3,433,132       5,931,735       16,248,141       3,160,706       28,773,714  
Gross profit     4,140,197       2,550,760       7,845,822       926,770       15,463,549  
General and administrative expenses     4,265,535       379,900       904,560       434,920       5,984,915  
Gain on asset dispositions and impairments, net           1,000                   1,000  
Income from operations   $ (125,338 )   $ 2,171,860     $ 6,941,262     $ 491,850       9,479,634  
Other income, net                                   129,131  
Income before income taxes                                   9,608,765  
Provision for income taxes                                   1,940,067  
Net income from continuing operations                                   7,668,698  
Income attributable to non-controlling interests                                   137,226  
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                                   7,531,472  
Net loss from discontinued operations                                   (207,701 )
Net income attributable to Consolidated Water Co. Ltd. stockholders                                 $ 7,323,771  
 

First Half Segment Results

    Six Months Ended June 30, 2024
    Retail   Bulk   Services   Manufacturing   Total
Revenue   $ 16,806,822     $ 16,790,052     $ 29,340,080     $ 9,231,594     $ 72,168,548  
Cost of revenue     7,221,477       11,662,718       21,127,476       6,658,640       46,670,311  
Gross profit     9,585,345       5,127,334       8,212,604       2,572,954       25,498,237  
General and administrative expenses     8,483,148       707,409       2,794,478       1,185,288       13,170,323  
Gain (loss) on asset dispositions and impairments, net     (6,130 )           3,000             (3,130 )
Income from operations   $ 1,096,067     $ 4,419,925     $ 5,421,126     $ 1,387,666       12,324,784  
Other income, net                                   836,610  
Income before income taxes                                   13,161,394  
Provision for income taxes                                   1,685,629  
Net income from continuing operations                                   11,475,765  
Income from continuing operations attributable to non-controlling interests                                   291,940  
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                                   11,183,825  
Net income from discontinued operations                                   11,140,780  
Net income attributable to Consolidated Water Co. Ltd. stockholders                                 $ 22,324,605  
    Six Months Ended June 30, 2023
    Retail   Bulk   Services   Manufacturing   Total
Revenue   $ 15,344,424     $ 17,486,868     $ 36,815,664     $ 7,459,297     $ 77,106,253  
Cost of revenue     6,983,926       12,174,881       26,292,219       5,632,596       51,083,622  
Gross profit     8,360,498       5,311,987       10,523,445       1,826,701       26,022,631  
General and administrative expenses     8,442,642       732,875       1,993,232       852,828       12,021,577  
Gain (loss) on asset dispositions and impairments, net     (7,287 )     12,270             1,933       6,916  
Income (loss) from operations   $ (89,431 )   $ 4,591,382     $ 8,530,213     $ 975,806       14,007,970  
Other income, net                                   286,190  
Income before income taxes                                   14,294,160  
Provision for income taxes                                   2,389,552  
Net income from continuing operations                                   11,904,608  
Income from continuing operations attributable to non-controlling interests                                   300,347  
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                                   11,604,261  
Net loss from discontinued operations                                   (466,864 )
Net income attributable to Consolidated Water Co. Ltd. stockholders                                 $ 11,137,397  
                                       

Conference Call

Consolidated Water management will host a conference call tomorrow to discuss these results, which will include a question-and-answer period.

Date: Thursday, August 15, 2024
Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)
Toll-free dial-in number: 1-844-875-6913
International dial-in number: 1-412-317-6709
Conference ID: 3791392

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you require any assistance connecting with the call, please contact CMA at 1-949-432-7566.

A replay of the call will be available after 1:00 p.m. Eastern time on the same day through August 22, 2024, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

Toll-free replay number: 1-877-344-7529
International replay number: 1-412-317-0088
Replay ID: 3791392

About Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company designs, constructs and operates seawater desalination facilities in the Cayman Islands, The Bahamas and the British Virgin Islands, and designs, constructs and operates water treatment and reuse facilities in the United States. The company recently entered the U.S. desalination market with a contract to design, construct, operate and maintain a seawater desalination plant in Hawaii.

The company also manufactures and services a wide range of products and provides design, engineering, management, operating and other services applicable to commercial and municipal water production, supply and treatment, and industrial water and wastewater treatment. For more information, visit cwco.com.

Cautionary Note Regarding Forward-Looking Statements

This press release includes statements that may constitute “forward-looking” statements, usually containing the words “believe”, “estimate”, “project”, “intend”, “expect”, “should”, “will” or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to (i) continued acceptance of the company’s products and services in the marketplace; (ii) changes in its relationships with the governments of the jurisdictions in which it operates; (iii) the outcome of its negotiations with the Cayman government regarding a new retail license agreement; (iv) the collection of its delinquent accounts receivable in the Bahamas; and (v) various other risks, as detailed in the company’s periodic report filings with the Securities and Exchange Commission (“SEC”). For more information about risks and uncertainties associated with the company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the company’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company’s Secretary at the company’s executive offices or at the “Investors – SEC Filings” page of the company’s website at http://ir.cwco.com/docs. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:
David W. Sasnett
Executive Vice President and CFO
Tel (954) 509-8200
Email Contact

Investor & Media Relations Contact:
Ron Both or Grant Stude
CMA Investor & Media Relations
Tel (949) 432-7566
Email Contact

CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
      June 30,        December 31,   
      2024       2023  
    (Unaudited)          
ASSETS                
Current assets                
Cash and cash equivalents   $ 96,670,206     $ 42,621,898  
Accounts receivable, net     39,664,848       38,226,891  
Inventory     4,561,374       6,044,642  
Prepaid expenses and other current assets     2,945,174       4,056,370  
Contract assets     5,413,780       21,553,057  
Current assets of discontinued operations     1,503,473       211,517  
Total current assets     150,758,855       112,714,375  
Property, plant and equipment, net     54,368,951       55,882,521  
Construction in progress     1,245,998       495,471  
Inventory, noncurrent     4,999,102       5,045,771  
Investment in OC-BVI     1,311,271       1,412,158  
Goodwill     12,861,404       12,861,404  
Intangible assets, net     3,025,000       3,353,185  
Operating lease right-of-use assets     3,532,430       2,135,446  
Other assets     3,058,949       3,407,973  
Long-term assets of discontinued operations           21,129,288  
Total assets   $ 235,161,960     $ 218,437,592  
                 
LIABILITIES AND EQUITY                
Current liabilities                
Accounts payable, accrued expenses and other current liabilities   $ 8,100,744     $ 11,604,369  
Accrued compensation     2,759,353       3,160,030  
Dividends payable     1,559,669       1,572,655  
Current maturities of operating leases     618,705       456,865  
Current portion of long-term debt     170,867       192,034  
Contract liabilities     5,710,398       6,237,011  
Deferred revenue     217,618       317,017  
Current liabilities of discontinued operations     393,237       364,665  
Total current liabilities     19,530,591       23,904,646  
Long-term debt, noncurrent     115,033       191,190  
Deferred tax liabilities     383,075       530,780  
Noncurrent operating leases     2,949,303       1,827,302  
Other liabilities     153,000       153,000  
Deferred revenue     29,459        
Total liabilities     23,160,461       26,606,918  
Commitments and contingencies                
Equity                
Consolidated Water Co. Ltd. stockholders’ equity                
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 49,057 and 44,297 shares, respectively     29,434       26,578  
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,829,572 and 15,771,545 shares, respectively     9,497,743       9,462,927  
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued            
Additional paid-in capital     92,723,287       92,188,887  
Retained earnings     104,455,633       85,148,820  
Total Consolidated Water Co. Ltd. stockholders’ equity     206,706,097       186,827,212  
Non-controlling interests     5,295,402       5,003,462  
Total equity     212,001,499       191,830,674  
Total liabilities and equity   $ 235,161,960     $ 218,437,592  
CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
                         
    Three Months Ended June 30,    Six Months Ended June 30, 
    2024     2023     2024     2023  
Revenue   $ 32,479,158     $ 44,237,263     $ 72,168,548     $ 77,106,253  
Cost of revenue     20,858,944       28,773,714       46,670,311       51,083,622  
Gross profit     11,620,214       15,463,549       25,498,237       26,022,631  
General and administrative expenses     6,606,294       5,984,915       13,170,323       12,021,577  
Gain (loss) on asset dispositions and impairments, net     (3,130 )     1,000       (3,130 )     6,916  
Income from operations     5,010,790       9,479,634       12,324,784       14,007,970  
                         
Other income (expense):                        
Interest income     380,854       86,137       714,996       199,781  
Interest expense     (33,438 )     (36,247 )     (66,939 )     (74,091 )
Profit-sharing income from OC-BVI     12,150       12,150       32,400       26,325  
Equity in the earnings of OC-BVI     36,647       35,272       93,963       70,830  
Other     22,213       31,819       62,190       63,345  
Other income, net     418,426       129,131       836,610       286,190  
Income before income taxes     5,429,216       9,608,765       13,161,394       14,294,160  
Provision for income taxes     1,063,933       1,940,067       1,685,629       2,389,552  
Net income from continuing operations     4,365,283       7,668,698       11,475,765       11,904,608  
Income from continuing operations attributable to non-controlling interests     122,872       137,226       291,940       300,347  
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders     4,242,411       7,531,472       11,183,825       11,604,261  
Net income (loss) from discontinued operations     11,607,846       (207,701 )     11,140,780       (466,864 )
Net income attributable to Consolidated Water Co. Ltd. stockholders   $ 15,850,257     $ 7,323,771     $ 22,324,605     $ 11,137,397  
                         
Basic earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders                        
Continuing operations   $ 0.27     $ 0.48     $ 0.71     $ 0.74  
Discontinued operations     0.73       (0.01 )     0.70       (0.03 )
Basic earnings per share   $ 1.00     $ 0.47     $ 1.41     $ 0.71  
                         
Diluted earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders                        
Continuing operations   $ 0.26     $ 0.47     $ 0.70     $ 0.73  
Discontinued operations     0.73       (0.01 )     0.70       (0.03 )
Diluted earnings per share   $ 0.99     $ 0.46     $ 1.40     $ 0.70  
                         
Dividends declared per common and redeemable preferred shares   $ 0.095     $ 0.085     $ 0.19     $ 0.17  
                         
Weighted average number of common shares used in the determination of:                        
Basic earnings per share     15,829,120       15,736,041       15,829,024       15,729,852  
Diluted earnings per share     15,983,671       15,907,440       15,984,154       15,899,923  


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