Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss Consolidated Water Co.'s third quarter of 2020 results. Joining us today is the Chief Executive Officer of Consolidated Water Co., Rick McTaggart, and the company's Chief Financial Officer, David Sasnett. Following the 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 during the call. I'd like to remind everyone that today's call is being recorded and will be made available for telecom replay via instructions in yesterday's press release, which is available in the investor relations section of the company's website. Now, I'd like to turn the call over to Consolidated Water Co.'s CEO, Rick McTaggart. Sir, please go ahead.

Thank you, Gary, and good morning, everyone. Thanks for joining us on today's call. I hope everyone is well. Fortunately, consolidated water has not been impacted by the adverse conditions created by the pandemic as much as others. Our team has worked diligently throughout the pandemic to ensure that we are able to continue our operations and pursue additional projects that can strengthen our business. During the third quarter of 2020, we managed to generate substantial revenue growth and return to profitability from Q2. Over the first nine months of the year, we were also profitable, generating nearly $11 million in cash from operations. Our Q3 top-line growth is largely due to the $3.2 million in revenue contributed by our new PERC Water subsidiary. PERC's core business, which provides engineering, construction, and management services for water treatment infrastructure in the United States, has met our expectations so far this year in spite of the pandemic. And so far, we've seen no material impact from the COVID-19 pandemic on its day-to-day operations. The management team at PERC has been focused on increasing its recurring revenue through multi-year operating contracts. And consequently, PERC was awarded four operating contract renewals and two new operating contracts during the first nine months of this year. I'll provide more details about the growth opportunities we see with PERC later in the call. Our retail segment experienced a decline in revenue in Q3 compared to last year, mainly due to the continuing closure of the borders in the Cayman Islands to tourist travel, and this is in response to the pandemic. It was also lower because of much wetter weather conditions in the Cayman Islands during the third quarter. The seaport and airport in the Cayman Islands have been closed to tourists since March, which has reduced visitors and tourism to nil. However, as of the first of October, residents and property owners have been allowed to return to the Cayman Islands, subject to quarantining for 14 days after arrival. This has allowed flights from the United Kingdom and the U.S. to resume on a reduced schedule. To encourage more long-term visitors, the Cayman Islands government recently implemented a Global Citizen Concierge Program whereby tourist visas are granted to individuals and families who wish to reside and work remotely in the islands for up to two years. These developments are very encouraging and can help bring much needed economic activity back to these islands. The Cayman Islands have actually been very successful in keeping the country COVID We are also encouraged by recent positive announcements regarding COVID-19 vaccines and believe that the Cayman Islands are well positioned to quickly rebound from the economic downturn created by the pandemic. once the vaccine is available and regular tourism resumes. While these are all positive developments, we expect that our retail segment will continue to be negatively affected until the United States, which is the principal source of tourists for the Cayman Islands, has recovered from the pandemic. Our bulk water operations in the Cayman Islands and the Bahamas have continued to operate without incident and have been much less affected by the pandemic than our retail business. However, our bulk segment revenue that is generated in the Bahamas and the Cayman Islands declined slightly period over period due to factors unrelated to COVID-19. Bulk water revenue decreased last quarter compared to prior year due to lower energy costs, which reduced the energy pass-through charges to our Bahamian customer. Bulk water gross profit margin was lower due to The COVID-19 pandemic has caused unprecedented complications for the majority of industries and companies, but we believe, nevertheless, that we are well-positioned to execute our growth strategies with a very strong balance sheet with over $38 million in cash to support our ongoing key business development initiatives. Our core operations and mission of providing affordable, quality drinking water through our highly energy efficient desalination plants, as well as wastewater treatment services through advanced water treatment and recycling facilities, continues to be a public health and economic necessity for our customers in the Caribbean and the United States. Now, before I go further, I'd like to turn the call over to our CFO, David Sasnett, who will take us through the financial details of the quarter. I'll then return to provide more detail on our operational activity and our outlook for the remainder of the year. David.

Thanks, Rick, and good morning, everyone. Despite the challenges presented by the current economic environment and the COVID-19 pandemic, our revenue in the third quarter increased 11.2% to $17.7 million compared to $15.9 million in the same period of last year. This increase is largely due to the addition of $3.2 million in revenue from PERC Water, which we acquired in October 2019. We also saw a slight increase in our manufacturing segment revenue of approximately $187,000. The incremental PERC in manufacturing revenue was partially offset by revenue decreases in our retail and bulk segments of $1.3 million and $400,000, respectively. Our retail revenue was lower due to an 18% decrease in the volume of water sold as a result of the temporary cessation of tourism on Grand Cayman in response to the COVID-19 pandemic. As Rick mentioned earlier, the decrease in bulk segment revenue was due to CW Bahamas' lower energy cost that correspondingly decreased the energy pass-through component of CW Bahamas' rates. Our manufacturing revenue increased as a result of a shift in our production mix to higher revenue projects. Gross profit for Q3 totaled $6.2 million, or 35% of total revenue. This represents a decline of 7.4% from the $6.7 million in the same quarter of last year, when it represented 42.2% of total revenue. In the third quarter of 2020, net income from continuing operations attributable to consolidated water shareholders was $1.8 million, or $0.12 per basic and fully diluted share. This compares to $2.3 million, or $0.15 per basic and fully diluted share, the same period of last year. With respect to our balance sheet and financial condition, our accounts receivable balances related to our Bahamas business amounted to $18.4 million as of September 30, 2020, which was essentially the same balance that we had as of December 31, 2019. However, due to payments we received from the Bahamian government in October, as of October 31, 2020, our Bahamas receivables from the Water and Sewage Corporation of the Bahamas had been reduced to approximately $15.1 million. Historically, CW Bahamas has experienced delays in collecting its accounts receivable from the WSC. When these delays have occurred, we've held discussions and meetings with representatives of the Water and Sewage Corporation and the Bahamas government. As a result, payment schedules are developed for WSC's delinquent accounts receivable. All previous delinquent accounts receivable from the WSC were eventually paid in full, and as a result, we have never been required to provide an allowance for doubtful accounts for our Bahamas receivables. We believe the delays we have experienced in collecting CW Bahamas receivables were extended due to the impact of Hurricane Dorian, which devastated the northern Bahamas in September 2019. We also believe the delays are attributable to the economic impact of the COVID-19 pandemic on Bahamas government's revenue sources. As of September 30, 2020, our cash and cash equivalents totaled $38.2 million. Our projected liquidity requirements for the balance of 2020 include capital expenditures for existing operations of about $150,000 and about $1.3 million for dividends payable. Of course, our liquidity requirements may also include future quarterly dividends if such dividends are declared by our board. Our dividend payments amounted to approximately $3.9 million for the nine months ended September 30th, 2020 and approximately $5.1 million for the year ended December 31st, 2019. Now, I would like to turn the call back over to Rick.