Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss Consolidated Water Company's third quarter of 2023 results. Hosting the call today is the Chief Executive Officer of Consolidated Water Company, Rick McTaggart, and the company's Chief Financial Officer, David Sassnett. Following their remarks, we'll open the call to your questions. At any time during the call, you may join the question queue by pressing the star key followed by one on your telephone keypad. If you would like to withdraw a question, please press star, then two. and should you need any operator assistance, you may press star then zero. 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 it will be made available for telecom replay per the 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 Company CEO, Rick McTaggart. Sir, please go ahead.

Thanks, Joe. Good morning, everybody. Thank you for joining us today to discuss our results for the third quarter of 2023. Like last quarter, we're reporting record quarterly revenue and earnings. As you saw in our press release yesterday, we reported a nearly 100% increase in revenue to $49.9 million compared to the third quarter last year. Revenue was up in three of our four business segments. Our retail water segment benefited from a 16% increase in the volume of water sold in Grand Cayman, and we attribute this increase to improved tourist activity. Since third quarter of last year, the island was still recovering from the lingering impacts of the pandemic. Our services segment revenue increased by $20.7 million in the third quarter. With much of that increase generated by the progress, our PERC water subsidiary has made on construction of an $82 million advanced water treatment plant in Goodyear, Arizona. We've managed to control our costs on this project much better than anticipated. resulting in improved gross margins for our services segment. Construction on this project is progressing as planned, and we anticipate generating additional revenue from the project until its construction, commissioning, and startup is completed at the end of the second quarter of next year. PERC continued strong operating performance and revenue growth, continued to significantly improve our top and bottom line. Its strong operational presence in the southwestern U.S., a region that urgently needs new freshwater sources due to unprecedented drought conditions, has positioned us for further growth and development in this important segment of our business. In our U.S. desalination business, we commenced work last quarter on-site investigations, engineering, permitting, and public outreach for our contract to design, build, operate, and maintain a 1.7 MGD seawater desalination plant in Oahu, Hawaii. This project includes a two-year development phase, a two-year construction phase, and a 20-year operating phase with two potential five-year operating phase extensions at the client's options. Our footprint continues to expand in the U.S. with the recently announced acquisition of Ramey Environmental Compliance, or REC, by PERC. REC operates and maintains water and wastewater treatment plants and provides technical services to more than 100 clients in the mountain and eastern plains regions of Colorado, and their business is very similar to what PERC does in its O&M business. Now, before discussing more about recent developments and talking about our outlook for the rest of the year, I'd like to turn the call over to our CFO, David Sassnett, who will take us through the financial details for the quarter.

Thanks, Rick, and good morning, everyone. As Rick mentioned, revenue for the third quarter was up to $49.9 million, which is a 99% increase compared to the third quarter of last year. This increase was driven by revenue increases of $900,000 in our retail segment, $20.7 million in our services segment, and $3.3 million in our manufacturing segment. Our retail revenue increased primarily due to a 16% increase in the volume of water we sold during the quarter. This was due to increased tourism on Grand Cayman. The number of tourists arriving by air, those of the tourists that stayed were not using the hotels and increased our water volume. increased significantly in the third quarter of this year as compared to last year as the lingering effects of the pandemic have disappeared and we think tourism is back to normal on Grand Cayman. Retail revenue also increased as a result of higher energy costs that increased the energy passenger component of our water rates. Our bulk revenue decreased slightly primarily due to a decrease in the price of energy paid by CW Bahamas. This decreased the energy pass-through component of CW Bahamas rates. The decrease in bulk segment revenue due to the energy was partially offset by a 6% increase in CW Bahamas volume of water sold. I can say that we're producing about as much water as we can produce in the Bahamas for the Water and Sewage Corporation. Operations there are very favorable to our company. The increase in services segment revenue is due to an increase both in construction revenue and O&M revenue. We recognized approximately $20 million in revenue in the third quarter this year for the construction of the water treatment plant in Goodyear, Arizona for Liberty Utilities. The retail generated under operations and maintenance contracts in our services segment also increased. It totaled $5 million in the third quarter this year Up 48% as compared to 3.4 million in the third quarter of 2022, and this is attributable both to better margins earned on our existing contracts and the addition of new contracts. The increase in our manufacturing segment revenue was due to increased production activity as some of the supply chain and economic issues that affected our manufacturing operations in 2022 have abated. Gross profit for the third quarter of 2023 was 16.6 million. where 33% of total revenue is compared to $6.8 million, or 27% of total revenue for the same quarter of last year. Net income from continuing operations attributable to consolidated water shareholders for the third quarter of 2023 was $8.8 million, or $0.55 per diluted share. This compares to net income of $800,000, or $0.05 per diluted share for the same quarter of last year. Net income attributable to consolidated water shareholders for the third quarter of 2023, which includes the results of discontinued operations, was 8.6 million or 54 cents per fully diluted share. This was up from net income of 300,000 or two cents per basic and fully diluted share for the third quarter of 2022. Now turning to our balance sheet and financial condition. Cash equivalents totaled 48.8 million as of September 30th, 2023. This compares to $47.7 million as of June 30, 2023, with working capital at $83.1 million, debt of just $200,000, and stockholders' equity totaling $178 million. And as of the end of the quarter, our projected liquidity requirements for the remainder of 2023 include capital commitments for our existing operations of approximately $5.1 million, This includes $292,000 that we expect to incur in 2023 to finish the refurbishment and replacement of our West Bay desalination water plant. It also includes about $2.5 million for construction of the new Red Gate desalination plant on Grand Cayman for the Water Authority of Cayman. We had additionally approximately $4.7 million in raw material purchase commitments that were outstanding as of September 30, 2023. We paid approximately $4 million in dividends this year, and our future liquidity requirements may also include any future potential dividends declared by our board. So this completes our financial summary for the quarter. Now I'd like to turn the call back over to Rick. Thanks, David.