Consolidated Water Co. Ltd.

Good morning, everyone. Thank you for joining us today to discuss the results for Consolidated Water's second quarter, 2024. Hosting the call today is the Chief Executive Officer of Consolidated Water Company, Bruce McFarland, and the company's Chief Financial Officer, David Bachman. Following 9 of March, we will open the call to questions. At any time during the call, you may join the question queue by pressing star and 1 on your telephone keypad. To withdraw your questions, you may press star and 2. 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 per the instructions in REST 3A's press release, which is available in the Investor Relations section of the company's website. Now I'd like to turn the floor over to Consolidated Water Company's CEO, Rick McHagger. So, please go ahead.

Thank you, Jamie, and good morning, everyone. Thank you for joining us today to discuss our financial and operating results for the second quarter of 2024. As you saw in our release issued yesterday, we reported revenue of $32.5 million for the quarter. Our retail segment Revenue benefited from a 10% increase in the volume of water sold to customers in our exclusive utility service area on Grand Cayman, resulting from continued resident population growth and lower rainfall amounts during the quarter. This increased our retail revenue by 8% to $8.2 million for the quarter. Our bulk and manufacturing segments both had relatively consistent revenues compared with last year. Our services segment was down by about half due to the anticipated reduction in construction related new as the Grand Cayman and Arizona design build projects were completed earlier this year. Our construction of the $81 million water treatment plant in Goodyear, was substantially completed in the first quarter. We are currently finishing up minor site works and punch list items and expect final completion of this design-build contract by the end of the third quarter. Also during the second quarter, we completed the construction and commissioning of the new 2.6 million gallon per day Red Gate desalination plant in Grand Cayman for the Water Authority of the Cayman Islands. In May, we began operating this facility under a 10-year operations and maintenance agreement, which will fall revenues from that will fall within our bulk segment. 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 in Honolulu, Hawaii. which was announced in June 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. Such efforts now in development have included ongoing site investigations, design, procurement, installation, and operation of the piloting systems for the seawater desalination and post treatment systems permitting activities and public outreach initiatives. The installation and commissioning of the pilot plant was completed on schedule and is now gathering essential operational data that will inform the final design and permitting of the full scale project. The completion of the Hawaii project encompasses the current two year development phase, which started last year. followed by a two-year construction phase. And then after construction and commissioning is completed, we will operate the plant under a 20-year operations and maintenance contract, which also has two five-year extensions, which are exercisable at the client's discretion. For the reduction in construction-related revenue in the second quarter, was partially offset by an increase in the revenue generated from O&M contracts by both PERC and REC in Colorado. We acquired REC last October to provide a new channel for growth in water stress regions of Colorado, and we've been pleased with REC's integration into our company and the new opportunities we see developing in the Colorado market. 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 their growth over time. During the quarter, we also settled our dispute with Mexico that arose as a result of the cancellation of the agreement for our desalination project in Playa de Rosarito, Mexico. That was canceled in 2020. We sold the project land and project documentation to the Mexican government as part of the settlement for net proceeds of approximately 32 million US dollars plus 20 million Mexican pesos. Now before getting more into recent developments and 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. In the second quarter of this year, revenues totaled $32.5 million, which is a decrease of 27% from the $44.2 million in revenue reported for the same quarter last year. This overall decrease in revenue is almost entirely due to a $16.5 million decrease in construction revenue attributable to PERC's project for Liberty Utilities in Arizona and the completion of the Red Gate project in Grand Cayman, as Rick has mentioned earlier. Retail revenue increased primarily due to a 10% increase in the volume of water sold The volume of orders sold for the retail segment was up due to a 5.5% increase in the number of customer accounts in our license area as compared to the second quarter of last year. And the retail revenue was also up due to significantly less rainfall on Grand Canyon in April and May of this year as compared to the same months of last year. Our marginal decrease in bulk segment revenue was attributable to lower energy costs, which decreased the energy pass-through component of our Bahamas operations bulk rates. And the decrease in services revenue, as we mentioned earlier, was attributable to a decrease in construction revenue. It's important to note that revenue generated under our operations and maintenance contracts totaled $7.1 million in the second quarter of 2024, an increase of 75% from the second quarter of last year. Revenue from REC, which we acquired in October of last year, constituted $1.9 of the increase, with the remainder of the increase related to new PERC contracts. Our manufacturing segment was consistent with last year, with revenue at $3.9 million as compared to $4.1 million in the second quarter of 23. Our gross profit for the second quarter of this year was $11.6 million, or 36% of total revenue, which was down from the $15.5 million, or 35% of total revenue, in the second quarter of last year due to the overall decrease in revenue. Net income from continuing operations attributable to our shareholders for the second quarter of this year was $4.2 million, or 26 cents per diluted share, compared to net income of $7.5 million, or 47 cents per diluted share, the second quarter of 23. We reported income from discontinued operations this quarter of $11.6 million. This resulted from the $12.1 million gain that we recorded on the sale of the project land and the project documentation. in connection with our settlement of the arbitration with the Mexico government. Including discontinued operations, our net income attributable to consolidated water stockholders for the second quarter of this year was $15.9 million or $0.99 per diluted share, which was up from the net income of $7.3 million or $0.46 per diluted share that we reported in the second quarter of last year. Now turning to the balance sheet, our cash and cash equivalents totaled 96.7 million as of June 30th, 2024. Our working capital was 131.2 million and our stockholders' equity was 206.7 million. Our substantial increase in cash and working capital since December 31st, 2023, reflects the 32 million in U.S. dollars and 20 million pesos that we received for the Mexico settlement. We have enhanced and continue to maintain very healthy levels of liquidity and credit capacity and in extremely solid financial condition. Our projected liquidity requirements for the balance of this year include capital expenditures for existing operations of approximately $7.1 million, which includes approximately $2.5 million to be incurred for our new West Bay plant and the addition of additional capacity there, and approximately $3.9 million to be incurred for other projects. We paid approximately $1.6 million in dividends in July 24, and our liquidity requirements may also include future quarterly dividends if such dividends are declared by our board. This completes our financial summary for the quarter. Now I'd like to turn the call back over to Rick.