Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss Consolidated Water's results for the second quarter ended June 30, 2020. Joining us today is Chief Executive Officer of Consolidated Water, Mr. Rick McTaggart, and Company's Chief Financial Officer, Mr. David Sasnett. Following their remarks, we'll open the call to your questions. Before we conclude today's call, I'll provide some important cautions regarding the forward-looking statements made by management in the call. I'd like to remind everyone that today's call is being recorded and will be made available for telecom replay by instructions in last Friday's press release, which is available in the investor relations section of the company's website. I'd like to turn the call over to Consolidated Water CEO, Mr. Rick McTaggart.

Please go ahead, sir. Thank you, Nick, and good morning, everyone. Thanks for joining us on today's call. During the second quarter, our core water production and distribution and manufacturing operations remained stable and profitable, although at reduced production levels due to the impact of the COVID-19 pandemic. This allowed our financial condition and liquidity to remain strong, with cash balances totaling $35 million. In Q2, our services segment revenue was up by more than $3.3 million, Due to the contribution from PERC Water, our new majority-owned subsidiary that we acquired in the fourth quarter of last year, PERC performed better than we expected in the first half of this year given the current market conditions created by the pandemic. During the quarter, PERC was awarded two new contracts and secured four contract renewals for operating and maintaining advanced water treatment plants in California. We continue to see attractive opportunities for PERC in a very active market. PERC's management team is extremely talented and motivated, and when we were presented with the opportunity in early August to increase our ownership in PERC, we seized it and boosted our ownership from 51% to 61%. I'll provide additional information on PERC's growth opportunities later after David discusses our financial results. As has been the case with most businesses, the COVID-19 pandemic adversely impacted all of our segments to varying degrees during the quarter. The volume of water spilled by our retail segment and consequently retail revenue dropped by approximately 16% last quarter compared to the previous year's quarter. due to the temporary cessation of tourism in the Cayman Islands resulting from the government actions to close the country in order to mitigate the spread of the COVID-19 pandemic. Although the Bahamas tourism industry and economy has been severely hurt by the COVID-19 pandemic, our water production volumes remain stable in the Bahamas because our plants primarily serve the general population. The bulk segment revenue generated in the Bahamas and the Cayman Islands declined in the second quarter compared to last year for non-COVID-related reasons, which David will explain. Even though COVID-19 has impacted our business, looking beyond the pandemic, our products and services remain public health and economic imperatives for the communities we serve. Customers still need turnkey and affordable sources of drinking water from our desalination plants, and wastewater still must be treated to the highest standards for environmentally responsible disposal or reuse. Consolidated water remains well positioned financially, technically, and operationally to address the needs of the communities we serve or will serve in the future. Before I go further, I'd like to turn the call over to David, our CFO, who will take us through the financial details for the quarter. Afterwards, I'll return to talk a little more about our operational activity and outlook for the remainder of the year. David.

Thanks, Rick. Good morning, everyone. As Rick mentioned, our second quarter was impacted significantly by our recently canceled Mexico project and by the COVID-19 pandemic. Rick will discuss the recent development in Mexico in just a moment. With respect to the remainder of our results, our revenue in the second quarter increased 4% to $19.1 million compared to last year, solely due to the addition of $3.4 million in revenue from PERC. The income of PERC revenue was partially offset by revenue decreases of $1 million in the retail segment, $1.1 million in our bulk segment, and $511,000 in the manufacturing segment. Our retail revenue declined because of a 16% decrease in the volume of water sold due to the lack of tourism on Grand Cayman that resulted from the closing of all Cayman Islands airports and seaports in March 2020 in response to the COVID-19 pandemic. The decrease in bulk water revenue was primarily due to lower energy costs in the Bahamas, which correspondedly decreased the energy pass-through component by rates. Our bulk revenue also decreased due to the lower rate that came into effect in July 2019 for the Northside Water Works Plant under our new contract for this plant where the Water Authority came in. The decrease in manufacturing revenue was due to a lower number of active projects. Our gross profit for Q2 was $7.3 billion or 38.3% of total revenue. down 3% from $7.6 million or 41.3% of total revenue in the same quarter last year. In the second quarter of 2020, net loss attributable to consolidated water shareholders was $1.1 million or $0.07 per basic and fully diluted share. This compares to net income of $2.5 million or $0.16 per basic and fully diluted share in the same period last year. The decrease in our net income was principally due to the $3 million impairment loss that we reported for the rights-to-ways we had acquired for the Mexico project. Turning to our balance sheet, our accounts receivable balances related to our Bahamas business amounted to $19.9 million as of June 30, 2020 and paid to $18.4 million as of December 31, 2019. We believe the Bahamas government's ability to pay in a timely manner has been impacted by COVID-19. However, we're continuing to work with the Bahamian government to collect these receivables. Historically, our Bahamas subsidiary has experienced delays in collecting its accounts receivables from the water and sewage corporation in the Bahamas. When these delays occur, we hold discussions and meetings with representatives of the Bahamas government. As a result, payment schedules are developed for delinquent accounts receivable. All previous to delinquent accounts receivable from the Bahamas were eventually paid in full. Based upon this payment history, we have never, ever been required to provide an allowance for doubtful accounts for any of our accounts receivables for our business in the Bahamas, despite the periodic accumulation of significant delinquent balances. As of June 30, 2020, we had not provided an allowance for doubtful accounts for our accounts receivable business in the Bahamas. And it's important to note that the Bahamas government made a payment of $4 million on these receivables in the month of July. In June 30, 2020, our cash and cash equivalents totaled $35 million. Our projected liquidity requirements for the balance of 2020 include capital expenditures for existing operations of about $1 million, and about $1.3 million for dividends payable. And it's important to recognize that we spent $900,000 in August to acquire the additional 10% ownership in PERC. We believe our cash position and available funds provide us with the sufficient liquidity we need to meet things as we go forward. This wraps up my brief discussion of our financial results for the quarter. Now I'd like to turn the call back over to Rick.