Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss the results for Consolidated Water's 2024 full-year operating and financial results. Hosting the call today is the Chief Executive Officer of Consolidated Water Company, Rick McTaggart, and the company's Chief Financial Officer, David Sassman. Following their remarks, we'll open the call to your questions. At any time during the call, you may join the Q&A queue by pressing star, then 1 on your 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's CEO, Rick McTaggart. Sir, please go ahead.

Thank you, Nick. Good morning, everyone. Our revenue and operating income in 2024 from continuing operations were consistent with our expectations, given that two of our major design-build projects were completed early in the year. We also saw improvement in profitability across our retail and manufacturing segments, which we expected. The strong retail water sales in our exclusive utility service area on Grand Cayman reflected a record volume of water sold to a record number of customers. This growth was primarily due to the ongoing growth in population and business activity on the island. Our bulk segment revenue and gross profits was relatively consistent from the previous year. While revenues from our Bahamas business declined due to reduced energy pass-through charges to our clients, which also reduced our costs, revenue from our new operations and maintenance contract for the Water Authority's newly constructed Red Gate 2 plant went into effect in May, partially offsetting the Bahamas' decline. The service's revenue for the year declined by 48% due to the completion in the second quarter of last year of our Liberty Utilities and Red Gate 2 construction projects. Construction revenues from these large projects had a major impact on our 2023 revenue. The decline in construction revenue and services was partially offset by a substantial increase in recurring revenue from our operations and maintenance contracts. Most of this increase was generated by our new REC subsidiary in Colorado, which has provided us with a new channel to expand our business, including our design-build business, into water-stressed regions of Colorado. O&M contracts managed by our PERC water subsidiary also contributed meaningfully to the increase. Our multi-year seawater desalination project underway in Hawaii continued to advance through the development stage. This $204 million project to design, construct, operate, and maintain a 1.7 million gallon per day seawater desalination plant for the Honolulu Board of Water Supply commenced in June of 2023 and has been steadily advancing through the pilot, design, and permitting stage. Due to delays to the project not caused by us, we now expect to begin construction of this project early next year. The construction phase will generate the largest portion of revenue from the project and is expected to favorably impact our revenue and earnings in 2026 and 2027. We completed the pilot testing for the Hawaii project and as prepared and submitted the required enhanced pilot testing report, to the client for review. The client must determine before the end of April whether or not we demonstrated in our piloting that we were able to achieve a reasonable water quality match to their existing natural water supplies. Positive determination is a very important milestone in the development phase of the project as it will enable us to advance closer to the commencement of construction. We also reached the 60% design point for the project late last year and have submitted our design report to the client's engineers for review and comment. In all, the Hawaii project is comprised of a two-year development phase, which we are currently in, followed by a two-year construction phase, and then after construction and commissioning, we will operate the plant under a 20-year O&M agreement with the opportunity to obtain two five-year extensions and appliance options. It's also important to note that about 80% of the plant's construction costs is subject to adjustments for inflation from the date the contract was executed until the date construction begins. This will help preserve our gross margin and profitability against continued high rates of inflation. Now, before getting more into recent developments and our outlook for the year, I would like to turn the call over to our CFO, David Krasnick, who will take us through the financial details for last year.

Thank you, Rick, and good morning, everyone. Our revenue totaled $134 million in 2024 as compared to $180 million in 2023. As Rick mentioned earlier, this decrease is attributable to a decrease in the service segment revenue of $47 million arising from the completion in 2024, both of PERC's construction contract with Liberty Utilities for their new wastewater facility in Arizona and OSHA Conversions' construction contract with the Water Authority Payment for their new Red Gate plant. Our retail revenue increased from worth $1.6 million to $31.7 million for the year due to a 4.5% increase in the volume of water sold. We believe this greater volume of water sold reflects a 4.3% increase in the number of customer accounts we experience during the year. Our bulk segment revenue declined slightly from $34.6 million in 2023 to $33.7 million in 2024 as lower energy prices for CW Bahamas decreased the energy pass-through component of CW Bahamas rates. As I mentioned earlier, the decrease in services revenue was due to plant construction revenue, which decreased from $77.3 million in 23 to $17.6 million in 24, and that's strictly due to the completion of the two contracts I mentioned earlier. Recurring revenue under our O&M contracts for the services segment totaled $29.3 million in 24, which represents an increase of 51% over the previous year of 2023. Our new REC subsidiary, which we acquired in October 2023, contributed $6.1 million of the increase, with a balance generated by PERC, its new contract they signed. Our manufacturing segment revenue increased slightly to $17.6 million for the year. Gross profit in 2024 totaled $45.6 million, or 30%. of total revenue, excuse me, 34% of total revenue compared to $61.9 million, or 34% of total revenue in 2023. Net income from continuing operations attributable to solidated work shareholders in 2024 was $17.9 million, or $1.12 per diluted share. This compares to net income of $30.7 million, or $1.93 per diluted share in 2023. including discontinued operations, net income attributable to consolidated water shareholders in 2024 was $28.2 million, or $1.77 per deleted share, as compared to net income of $29.6 million, or $1.86 per deleted share for 2023. Now turning to our balance sheet and liquidity, our tax equivalents increased by $57 million in the year to a total of $99.4 million, This reflects primarily 36.5 million of cash generated from operations. Our working capital was up 44 million to 132.8 million at the end of the year, and our stockholders' equity was 210 million, and as we talked earlier, we have practically no debt on our balance sheet. Our projected liquidity requirements for 2025 include capital expenditures for existing operations of approximately 10.3 million, This includes $926,000 to be incurred in 2025 for our new West Bay plant and $1.8 million for the expansion of Eric's manufacturing facility. We paid out approximately $6.3 million in dividends to our common and preferred shareholders this year. Our liquidity requirements may also include future quarterly dividends if such dividends are declared by our board. And this completes our financial summary. With that, I'll turn the call back over to Rex.