Consolidated Water Reports Second Quarter 2024 Operating Results

Consolidated Water Co. Ltd. (NASDAQ Global Select Market: CWCO), a leading designer, builder and operator of advanced water supply and treatment plants, reported results for the second quarter ended June 30, 2024. All comparisons are to the same prior year period unless otherwise noted.

Consolidated Water will hold a conference call at 11:00 a.m. Eastern time tomorrow to discuss the results (see dial-in information below).

Second Quarter 2024 Financial Key Points

• Total revenue declined 27% to $32.5 million.
• Retail revenue increased 8% to $8.2 million on higher sales volumes.
• Bulk revenue was relatively consistent at $8.4 million.
• Manufacturing revenue was relatively consistent at $3.9 million.
• Services revenue declined by 51% (or approximately $12.2 million) to $11.9 million due to a $16.5 million decline in construction revenue that was partially offset by an approximately $3 million increase in recurring operations and maintenance revenue.
• Net income from continuing operations attributable to company stockholders totaled $4.2 million or $0.26 per diluted share, compared to $7.5 million or $0.47 per diluted share in the second quarter of 2023.
• Net income including discontinued operations attributable to company stockholders totaled $15.9 million or $0.99 per diluted share, compared to $7.3 million or $0.46 per diluted share in the second quarter of 2023.
• Cash and cash equivalents totaled $96.7 million and working capital was $131.2 million as of June 30, 2024.

Second Quarter 2024 Operational Key Points

• Volume of retail water sold in the company’s utility service area in Grand Cayman increased 10% compared with the same period in 2023.
• Completed the construction and commissioning of the new 2.6 million gallon per day Red Gate desalination plant for the Water Authority of the Cayman Islands. Began operating the facility under a 10-year operations and maintenance agreement.
• Continued piloting, design and permitting of a $147 million project to design, construct, operate and maintain a seawater desalination plant for the Board of Water Supply of Honolulu, Hawaii.
• Recognized $1.9 million in operations and maintenance revenue from REC which Consolidated Water acquired in October 2023 to provide a new channel for expansion in water-stressed regions of Colorado.
• Settled a dispute with Mexico involving the discontinued desalination project in Playas de Rosarito, Mexico and recognized a gain of $12.1 million from the sale of the project land and project documentation.
• Received Notice to Proceed under a new 15-year agreement with the Water and Sewerage Corporation of the Bahamas to design, build, own, operate and finance two seawater desalination plants on Cat Island in the Bahamas.

Management Commentary

“Our second quarter results were fairly positive, especially considering the inherent variability in our service segment revenue and earnings due to the timing of our large design-build projects in Grand Cayman, Arizona and Hawaii,” stated company CEO, Rick McTaggart. “Our services revenue was down by about half due to the anticipated reduction in construction-related revenue as the Grand Cayman and Arizona projects were completed earlier this year.

“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 of Honolulu in Hawaii that we announced in June of 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.

“The completion of the Hawaii project plant encompasses the current two-year development phase followed by a two-year construction phase. After construction and commissioning, we will operate the plant under a 20-year operations and maintenance agreement which has two additional 5-year extensions exercisable at the client’s discretion.

“The reduction in construction-related revenue in the second quarter was partially offset by an increase in the revenue generated from operations and maintenance contracts by both PERC and REC. We acquired REC last October to provide a new channel for growth in the water-stressed regions of Colorado, and we’ve been pleased with REC’s integration into our company and the new opportunities we see developing in Colorado. 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 REC’s growth over time.

“Looking ahead to the remainder of the year and beyond, we remain very excited about our prospects. Many positive factors—including the consistent strong water sales growth in Grand Cayman, the long-term recurring revenues from our Caribbean-based bulk water and U.S.-based O&M businesses, stabilized manufacturing revenue and earnings, and the anticipated revenue and earnings from our $147 million design-build-operate project in Hawaii—altogether provide a very solid base for the company in the coming years.

“Supported by our exceptionally strong balance sheet, we will continue to invest in new long-term projects such as two desalination plants on Cat Island in the Bahamas, as well as new infrastructure to serve the growing water needs of our utility customer in the Cayman Islands. We see these projects ultimately enhancing revenue growth.

“The market for design-build projects is also showing no sign of slowing. While we are currently in a period between two large projects, we believe our efficient and aesthetically pleasing plant designs, our cost-efficient project delivery models and our significant industry experience will help us secure new projects.

“In fact, we recently signed master design-build service agreements with two major national clients for a number of projects they are contemplating. We anticipate this will positively impact revenue and earnings in future periods. Combined with strong industry tailwinds, we anticipate that all of these factors will drive our long-term growth, enhance profitability, and further strengthen shareholder value.”

Second Quarter 2024 Financial Summary

Revenue totaled $32.5 million, declining 27% from $44.2 million in the second quarter of 2023. The decrease was primarily due to decreases of $35,000 in the bulk segment, $12.2 million in the services segment and $161,000 in the manufacturing segment. The decreases were partially offset by an increase of $609,000 in the retail segment.

Retail revenue increased primarily due to a 10% increase in the volume of water sold. The volume of water sold increased due to a 5.5% increase in the number of customer accounts in the company’s license area from June 30, 2023 to June 30, 2024. The increase was also due to significantly less rainfall on Grand Cayman in April and May of 2024 as compared to the same months a year ago.

The marginal decrease in bulk segment revenue was due to lower energy costs, which decreased the energy pass-through component of the company’s bulk water rates.

The decrease in services segment revenue was primarily due to plant construction revenue decreasing from $19.8 million in 2023 to $3.3 million in 2024 as the result of two construction projects nearing completion during the quarter. Revenue generated under operations and maintenance contracts totaled $7.1 million in the second quarter of 2024, an increase of 75% from the second quarter of 2023. Newly acquired REC contributed $1.9 million of the increase, with the remainder related to PERC contracts.

Manufacturing segment revenue was relatively consistent at $3.9 million as compared to $4.1 million in the second quarter of 2023.

Gross profit for the second quarter of 2024 was $11.6 million (36% of total revenue), as compared to $15.5 million (35% of total revenue) in the second quarter of 2023.

Net income from continuing operations attributable to Consolidated Water stockholders for the second quarter of 2024 was $4.2 million or $0.26 per diluted share, compared to net income of $7.5 million or $0.47 per diluted share in the second quarter of 2023.

Including discontinued operations, net income attributable to Consolidated Water stockholders for the second quarter of 2024 was $15.9 million or $0.99 per diluted share, up from net income of $7.3 million or $0.46 per diluted share in the second quarter of 2023. The increase was primarily due to the gain on sale of the land and documentation related to a discontinued project in Mexico totaling $12.1 million in the second quarter of 2024.

Cash and cash equivalents totaled $96.7 million as of June 30, 2024, with working capital of $131.2 million, debt of $0.3 million, and stockholders’ equity of $206.7 million.

First Half 2024 Financial Summary

Revenue for the first half of 2024 was $72.2 million, down 6% compared to $77.1 million in the same year-ago period. The decrease was primarily driven by decreases of $0.7 million in the bulk segment and $7.5 million in the services segment. The decreases were partially offset by increases of $1.5 million in the retail segment and $1.8 million in the manufacturing segment.

Retail revenue increased primarily due to an 8% increase in the volume of water sold. The volume of water sold increased due to a 5.5% increase in the number of customer accounts in the company’s license area from June 30, 2023 to June 30, 2024.

The retail revenue increased also as a result of significantly less rainfall on Grand Cayman in April and May of 2024 as compared to the same months a year ago.

The decrease in bulk segment revenue was due to a decrease in energy costs for CW-Bahamas, which decreased the energy pass-through component of CW-Bahamas’ rates.

The decrease in services segment revenue was due to a $16.5 million decrease in plant construction revenue. Revenue generated under operations and maintenance contracts totaled $14.2 million in the first half of 2024, up 83% as compared to $7.7 million in the same year-ago period.

The increase in manufacturing segment revenue was due to increased production activity.

Gross profit for the first half of 2024 was $25.5 million (35% of total revenue), down 2% from $26.0 million (34% of total revenue) in the same year-ago period.

Net income from continuing operations attributable to stockholders for the first half of 2024 was $11.2 million or $0.70 per diluted share, compared to net income of $11.6 million or $0.73 per diluted share for the first half of 2023.

Including discontinued operations, net income attributable to Consolidated Water stockholders for the first half of 2024 was $22.3 million or $1.40 per fully diluted share, up from net income of $11.1 million or $0.70 per fully diluted share in the same period of 2023. The increase was primarily due to a gain on sale of land and project documentation of $12.1 million in the second quarter of 2024.

Second Quarter Segment Results

		Three Months Ended June 30, 2024
		Retail				Bulk				Services				Manufacturing				Total
Revenue		$	8,181,884			$	8,447,958			$	11,922,469			$	3,926,847			$	32,479,158
Cost of revenue			3,670,133				6,097,460				8,458,537				2,632,814				20,858,944
Gross profit			4,511,751				2,350,498				3,463,932				1,294,033				11,620,214
General and administrative expenses			4,378,816				363,268				1,196,624				667,586				6,606,294
Gain (loss) on asset dispositions and impairments, net			(6,130	)			—				3,000				—				(3,130	)
Income from operations		$	126,805			$	1,987,230			$	2,270,308			$	626,447				5,010,790
Other income, net																			418,426
Income before income taxes																			5,429,216
Provision for income taxes																			1,063,933
Net income from continuing operations																			4,365,283
Income from continuing operations attributable to non-controlling interests																			122,872
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																			4,242,411
Net income from discontinued operations																			11,607,846
Net income attributable to Consolidated Water Co. Ltd. stockholders																		$	15,850,257

		Three Months Ended June 30, 2023
		Retail				Bulk				Services				Manufacturing				Total
Revenue		$	7,573,329			$	8,482,495			$	24,093,963			$	4,087,476			$	44,237,263
Cost of revenue			3,433,132				5,931,735				16,248,141				3,160,706				28,773,714
Gross profit			4,140,197				2,550,760				7,845,822				926,770				15,463,549
General and administrative expenses			4,265,535				379,900				904,560				434,920				5,984,915
Gain on asset dispositions and impairments, net			—				1,000				—				—				1,000
Income from operations		$	(125,338	)		$	2,171,860			$	6,941,262			$	491,850				9,479,634
Other income, net																			129,131
Income before income taxes																			9,608,765
Provision for income taxes																			1,940,067
Net income from continuing operations																			7,668,698
Income attributable to non-controlling interests																			137,226
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																			7,531,472
Net loss from discontinued operations																			(207,701	)
Net income attributable to Consolidated Water Co. Ltd. stockholders																		$	7,323,771

First Half Segment Results

		Six Months Ended June 30, 2024
		Retail				Bulk				Services				Manufacturing				Total
Revenue		$	16,806,822			$	16,790,052			$	29,340,080			$	9,231,594			$	72,168,548
Cost of revenue			7,221,477				11,662,718				21,127,476				6,658,640				46,670,311
Gross profit			9,585,345				5,127,334				8,212,604				2,572,954				25,498,237
General and administrative expenses			8,483,148				707,409				2,794,478				1,185,288				13,170,323
Gain (loss) on asset dispositions and impairments, net			(6,130	)			—				3,000				—				(3,130	)
Income from operations		$	1,096,067			$	4,419,925			$	5,421,126			$	1,387,666				12,324,784
Other income, net																			836,610
Income before income taxes																			13,161,394
Provision for income taxes																			1,685,629
Net income from continuing operations																			11,475,765
Income from continuing operations attributable to non-controlling interests																			291,940
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																			11,183,825
Net income from discontinued operations																			11,140,780
Net income attributable to Consolidated Water Co. Ltd. stockholders																		$	22,324,605

		Six Months Ended June 30, 2023
		Retail				Bulk				Services				Manufacturing				Total
Revenue		$	15,344,424			$	17,486,868			$	36,815,664			$	7,459,297			$	77,106,253
Cost of revenue			6,983,926				12,174,881				26,292,219				5,632,596				51,083,622
Gross profit			8,360,498				5,311,987				10,523,445				1,826,701				26,022,631
General and administrative expenses			8,442,642				732,875				1,993,232				852,828				12,021,577
Gain (loss) on asset dispositions and impairments, net			(7,287	)			12,270				—				1,933				6,916
Income (loss) from operations		$	(89,431	)		$	4,591,382			$	8,530,213			$	975,806				14,007,970
Other income, net																			286,190
Income before income taxes																			14,294,160
Provision for income taxes																			2,389,552
Net income from continuing operations																			11,904,608
Income from continuing operations attributable to non-controlling interests																			300,347
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																			11,604,261
Net loss from discontinued operations																			(466,864	)
Net income attributable to Consolidated Water Co. Ltd. stockholders																		$	11,137,397

Conference Call

Consolidated Water management will host a conference call tomorrow to discuss these results, which will include a question-and-answer period.

Date: Thursday, August 15, 2024Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)Toll-free dial-in number: 1-844-875-6913International dial-in number: 1-412-317-6709Conference ID: 3791392

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you require any assistance connecting with the call, please contact CMA at 1-949-432-7566.

A replay of the call will be available after 1:00 p.m. Eastern time on the same day through August 22, 2024, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

Toll-free replay number: 1-877-344-7529International replay number: 1-412-317-0088Replay ID: 3791392

About Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company designs, constructs and operates seawater desalination facilities in the Cayman Islands, The Bahamas and the British Virgin Islands, and designs, constructs and operates water treatment and reuse facilities in the United States. The company recently entered the U.S. desalination market with a contract to design, construct, operate and maintain a seawater desalination plant in Hawaii.

The company also manufactures and services a wide range of products and provides design, engineering, management, operating and other services applicable to commercial and municipal water production, supply and treatment, and industrial water and wastewater treatment. For more information, visit cwco.com.

Cautionary Note Regarding Forward-Looking Statements

This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "intend", "expect", "should", "will" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to (i) continued acceptance of the company's products and services in the marketplace; (ii) changes in its relationships with the governments of the jurisdictions in which it operates; (iii) the outcome of its negotiations with the Cayman government regarding a new retail license agreement; (iv) the collection of its delinquent accounts receivable in the Bahamas; and (v) various other risks, as detailed in the company's periodic report filings with the Securities and Exchange Commission (“SEC”). For more information about risks and uncertainties associated with the company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the company’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company’s Secretary at the company’s executive offices or at the “Investors – SEC Filings” page of the company’s website at http://ir.cwco.com/docs. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:David W. SasnettExecutive Vice President and CFOTel [phone]Email Contact

Investor & Media Relations Contact:Ron Both or Grant StudeCMA Investor & Media RelationsTel [phone]Email Contact

CONSOLIDATED WATER CO. LTD.CONDENSED CONSOLIDATED BALANCE SHEETS
			June 30,				December 31,
			2024				2023
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	96,670,206			$	42,621,898
Accounts receivable, net			39,664,848				38,226,891
Inventory			4,561,374				6,044,642
Prepaid expenses and other current assets			2,945,174				4,056,370
Contract assets			5,413,780				21,553,057
Current assets of discontinued operations			1,503,473				211,517
Total current assets			150,758,855				112,714,375
Property, plant and equipment, net			54,368,951				55,882,521
Construction in progress			1,245,998				495,471
Inventory, noncurrent			4,999,102				5,045,771
Investment in OC-BVI			1,311,271				1,412,158
Goodwill			12,861,404				12,861,404
Intangible assets, net			3,025,000				3,353,185
Operating lease right-of-use assets			3,532,430				2,135,446
Other assets			3,058,949				3,407,973
Long-term assets of discontinued operations			—				21,129,288
Total assets		$	235,161,960			$	218,437,592
LIABILITIES AND EQUITY
Current liabilities
Accounts payable, accrued expenses and other current liabilities		$	8,100,744			$	11,604,369
Accrued compensation			2,759,353				3,160,030
Dividends payable			1,559,669				1,572,655
Current maturities of operating leases			618,705				456,865
Current portion of long-term debt			170,867				192,034
Contract liabilities			5,710,398				6,237,011
Deferred revenue			217,618				317,017
Current liabilities of discontinued operations			393,237				364,665
Total current liabilities			19,530,591				23,904,646
Long-term debt, noncurrent			115,033				191,190
Deferred tax liabilities			383,075				530,780
Noncurrent operating leases			2,949,303				1,827,302
Other liabilities			153,000				153,000
Deferred revenue			29,459				—
Total liabilities			23,160,461				26,606,918
Commitments and contingencies
Equity
Consolidated Water Co. Ltd. stockholders' equity
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 49,057 and 44,297 shares, respectively			29,434				26,578
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,829,572 and 15,771,545 shares, respectively			9,497,743				9,462,927
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued			—				—
Additional paid-in capital			92,723,287				92,188,887
Retained earnings			104,455,633				85,148,820
Total Consolidated Water Co. Ltd. stockholders' equity			206,706,097				186,827,212
Non-controlling interests			5,295,402				5,003,462
Total equity			212,001,499				191,830,674
Total liabilities and equity		$	235,161,960			$	218,437,592

CONSOLIDATED WATER CO. LTD.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Revenue		$	32,479,158			$	44,237,263			$	72,168,548			$	77,106,253
Cost of revenue			20,858,944				28,773,714				46,670,311				51,083,622
Gross profit			11,620,214				15,463,549				25,498,237				26,022,631
General and administrative expenses			6,606,294				5,984,915				13,170,323				12,021,577
Gain (loss) on asset dispositions and impairments, net			(3,130	)			1,000				(3,130	)			6,916
Income from operations			5,010,790				9,479,634				12,324,784				14,007,970
Other income (expense):
Interest income			380,854				86,137				714,996				199,781
Interest expense			(33,438	)			(36,247	)			(66,939	)			(74,091	)
Profit-sharing income from OC-BVI			12,150				12,150				32,400				26,325
Equity in the earnings of OC-BVI			36,647				35,272				93,963				70,830
Other			22,213				31,819				62,190				63,345
Other income, net			418,426				129,131				836,610				286,190
Income before income taxes			5,429,216				9,608,765				13,161,394				14,294,160
Provision for income taxes			1,063,933				1,940,067				1,685,629				2,389,552
Net income from continuing operations			4,365,283				7,668,698				11,475,765				11,904,608
Income from continuing operations attributable to non-controlling interests			122,872				137,226				291,940				300,347
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders			4,242,411				7,531,472				11,183,825				11,604,261
Net income (loss) from discontinued operations			11,607,846				(207,701	)			11,140,780				(466,864	)
Net income attributable to Consolidated Water Co. Ltd. stockholders		$	15,850,257			$	7,323,771			$	22,324,605			$	11,137,397
Basic earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders
Continuing operations		$	0.27			$	0.48			$	0.71			$	0.74
Discontinued operations			0.73				(0.01	)			0.70				(0.03	)
Basic earnings per share		$	1.00			$	0.47			$	1.41			$	0.71
Diluted earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders
Continuing operations		$	0.26			$	0.47			$	0.70			$	0.73
Discontinued operations			0.73				(0.01	)			0.70				(0.03	)
Diluted earnings per share		$	0.99			$	0.46			$	1.40			$	0.70
Dividends declared per common and redeemable preferred shares		$	0.095			$	0.085			$	0.19			$	0.17
Weighted average number of common shares used in the determination of:
Basic earnings per share			15,829,120				15,736,041				15,829,024				15,729,852
Diluted earnings per share			15,983,671				15,907,440				15,984,154				15,899,923