Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss the results for Consolidated Water's third quarter of 2024. 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 and answer session by pressing the star key followed by the number one. To withdraw your question, please press the star key, followed by the number two. 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 for the instructions in yesterday's press release, which is available in the investor-led Relations section of the company's website. Now, I'd like to turn the call over to Consolidated Water Company's CEO, Rick McTaggart. Sir, please go ahead.

Thank you, David. Good morning, everybody. Thank you for joining us today to discuss our financial and operating results for our third quarter of 2024. As you saw in our press release issued yesterday, We reported revenue of 33.4 million and net income from continuing operations of 5 million or 31 cents per diluted share for this past quarter. These results were consistent with our expectations given the completion of two large design build projects earlier this year. We were pleased to see the continuing trend of increasing retail water sales in our exclusive utility service area on Grand Cayman, which was due to business and population growth on the island. Our bulk segment had relatively consistent revenue compared to last year. However, we saw an increase in gross margin due to the operations and maintenance contract for the new Red Gate II plant for the Water Authority in Grand Cayman. which became effective May 1st of this year. I'll just note, because we guarantee the energy consumption of our plants to our clients in this type of contract, which gives the clients certainty of costs, our margins are typically better early in the contract lifecycle when the equipment, particularly the RO membranes, are new. Looking at services revenues, they declined by about half due to our anticipated reduction in construction revenue related to the conclusion of our Liberty Utilities and Red Gate II construction projects. These projects had a major impact on 2023 revenue, but were completed prior to the start of the third quarter of this year. The decline in construction revenue was partially offset by a $2.5 million increase in O&M revenue, recurring revenue. This increase included $2.1 million from our REC subsidiary in Colorado, which we acquired in October of last year. REC provides us with a new channel for expansion of our design, build, and O&M businesses into water stress regions of Colorado. The balance of the increased recurring revenue resulted from incremental O&M contracts with our PERC water subsidiary. We continue to advance our development activities on the $147 million project to design, construct, operate, and maintain a seawater desalination plant for the Board of Water Supply in Honolulu, Hawaii. Since we announced the project in June of last year, we have been advancing through the piloting, design, and permitting stage. We plan to begin the construction phase late next year, which represents the largest portion of revenue we expect to generate from this project. We continue to gather essential operational data from the seawater desalination and post-treatment pilot systems that will inform the final design and permitting of the full-scale project. At present, we are close to completing the first phase of the pilot testing and are nearing 60% completion of the final design for the project. In all, the Hawaii project is comprised of a two-year development phase followed by a two-year construction phase. And after construction and commissioning, we expect to operate the plan under a 20-year O&M agreement. And there are two additional five-year extensions to that O&M agreement that are exercisable at the client's option. So now before getting 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. David.

Thanks, Rick. Good morning, everyone. Our revenue for the third quarter totaled $33.4 million. This was a 33% decrease from the same quarter of last year, and this decrease is almost entirely due to a $20.6 million decrease in construction revenue, as Perks Project for Liberty Utilities in Arizona and our Red Gate II construction project in Grand Cayman were both completed before the start of the third quarter this year. Our retail revenue increased due to a 4.2% increase in the volume of water sold, and this reflects a 4.8% increase in the number of customer connections in our license area. over the last year. Revenue for the third quarter typically is very solid for us. I would just want to point out to people who follow our company that fourth quarter revenues typically drop a little bit in the retail business because of seasonality. So we expect to do perhaps a little bit better than last year in our fourth quarter retail revenue. But keep in mind that fourth quarter is one of our weaker quarters retail-wise. The increase in bulk segment revenue was due to the commencement of operating and maintenance contracts. for the new Red Gate contract for the War Authority of Cayman and an amendment of our North Sound contract with the War Authority of Cayman. Both the new Red Gate contract and the North Sound contract amendment became effective on May the 1st of this year. Revenue generated under our operations and maintenance contracts totaled 7.5 billion in the third quarter, which represents a 49% increase for the same quarter of 2023. REC contributed 2.1 million the increase and the remainder related to incremental PERC contracts. Our manufacturing segment decreased by 362,000, excuse me, our manufacturing segment revenue decreased by 362,000 to 4.4 million in the third quarter, but despite this slight decline in revenue, our manufacturing gross profit grew by 84%, reaching 1.6 million, with this due to our focus on our part of higher margin products. Our consolidated gross profit for the quarter was $11.6 million, or 34.8% of total revenue, as compared to $16.6 million, or 33% of total revenue for the third quarter of 2023. Net income from continuing operations attributable to our shareholders for the quarter was $5 million, or $0.31 per diluted share. This compares to net income of $8.8 million, or $0.55 per diluted share, the third quarter of last year. We reported a net loss in discontinued operations of $503,000 for the third quarter as compared to a loss of $233,000 for the third quarter of 2023. We anticipate completing the formal dissolution of our Mexico subsidiaries and thus eliminating these losses from our discontinued operations and our overall operations by the end of Q1 of next year. Including discontinued operations, net income attributable to consolidated water shareholders for the quarter was 4.5 million or 28 cents per diluted share. And this compares to net income of 8.6 million or 54 cents per diluted share for last year. Turning to our balance sheet, at the end of the quarter, September 30th, 2024, we had 104.9 million in cash and cash equivalents. Our working capital was 133.9 million Our debt was only approximately $200,000, and our stockholders' equity totaled $209.8 million. In all, we continue to maintain a very healthy level of liquidity and credit capacity and an extremely solid financial condition. Our projected liquidity requirements for the remainder of the year include capital expenditures for existing operations of approximately $3.8 million. This includes approximately $872,000 to be incurred for our new West Bay plant, and approximately $3.1 million for a project in the Bahamas, the Cat Island project. We paid approximately $1.8 million in dividends in October, and our liquidity requirements obviously may also include future quarterly dividends if such dividends are declared by our board. So this completes our financial summary for the quarter. Now I'd like to turn things back over to Rick.