News

Consolidated Water Co. Ltd. (NASDAQ Global Select Market: CWCO), a leading developer and operator of advanced water supply and treatment plants, reported results for the second quarter ended June 30, 2023. All comparisons are to the same prior year period unless otherwise noted.

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

Second Quarter 2023 Financial Highlights

· Total revenue increased 110% to $44.2 million.

· Retail revenue increased 16% to $7.6 million.

· Services revenue increased 377% to $24.1 million, with recurring services revenue generated from operation and maintenance contracts up 11% to $3.9 million.

· Manufacturing revenue increased to $4.1 million.

· Net income from continuing operations attributable to company stockholders was $7.5 million or $0.47 per diluted share, up 178% from $2.7 million or $0.18 per diluted share in the same year-ago period.

· Paid quarterly cash dividend of $0.085 per share ($0.34 on an annualized basis).

· Cash and cash equivalents totaled $47.7 million as of June 30, 2023.

Second Quarter 2023 Operational Highlights

· Signed $204 million contract to design, build, operate and maintain a seawater desalination plant in Hawaii.

· Volume of water sold in Grand Cayman retail segment increased 14% primarily due to increased tourist activity on Grand Cayman, with tourism in 2022 was lower than historical levels due to the lingering impact of the COVID-19 pandemic.

· Recognized $17.6 million in revenue from PERC Water’s progress on the construction of a $82 million advanced water treatment plant in Goodyear, Arizona. The construction is on track for completion next year.

Management Commentary

“I’m truly gratified and excited to mark the company’s 50^th anniversary this month by reporting record quarterly and six-month financial results,” commented Consolidated Water CEO, Rick McTaggart. “In Q2, our revenue increased by 110% to $44.2 million, reflecting another strong period of growth across all four of our business segments. Our retail water segment benefited from a 14% increase in the volume of water sold in Grand Cayman, which we attribute to improved tourist activity over last year when tourism was lower than historical levels due to the lingering impact of the pandemic.

“Our services revenue grew by $19 million, mostly due to the progress our PERC Water subsidiary has made on the construction of an $82 million advanced water treatment plant in Goodyear, Arizona that we announced in May of last year. Construction is progressing as planned, and we anticipate generating significant additional revenue from this project until the plant’s anticipated commissioning and startup in mid-2024.

“PERC’s continued strong operating performance, revenue growth and synergies with other areas of our business have significantly improved our overall top and bottom line. Its strong operational presence in the Southwestern U.S. — a region that urgently needs new fresh water sources due to unprecedented drought conditions — has positioned us for further growth and development in this important segment of our business.

“In our Caribbean seawater desalination business, the revenue we recognized from the design and construction of the 2.6 million gallon per day Red Gate desalination plant for the Water Authority of the Cayman Islands also contributed to the year-over-year increase in services revenue. Construction remains on track and is expected to be completed in early 2024.

“Our new Cayman Water 1 million gallon per day West Bay desalination plant is replacing a 30-year-old plant and supplements production capacity for our retail water business in Grand Cayman. The plant is expected to go online next month in time to meet the higher retail water demand we typically experience from mid-December through April in Grand Cayman.

“In July, we entered the U.S. desalination market for the first time with a $204 million contract to design, build, operate and maintain a seawater desalination plant in Hawaii. We believe winning this contract was due to our proven ability in designing, building and operating some of the world’s most energy-efficient seawater desalination plants, as well as the exceptional project track record that our team was able to demonstrate to our new client, the Board of Water Supply of Honolulu. We also believe this entrance into the U.S. desalination plant market positions us well for the additional opportunities we are pursuing in the Western U.S.

“We will be commemorating our 50^th year of operating with the ringing of the Nasdaq opening bell on Monday. From our humble beginnings, Consolidated Water has pursued a mission to provide state-of-the-art water services to areas of the world where the supply of potable water is scarce. Our dedicated team of engineers, builders and operators have long recognized that fresh water is the most precious resource in the world.  Today, we produce more than 25 million gallons of potable water daily from our 11 seawater desalination plants in the Caribbean, and operate 27 water and wastewater treatment facilities in the Western U.S.

“We remain very optimistic about our further growth for numerous reasons. This includes the recovery of tourism in Grand Cayman and our ongoing construction projects underway there and in the U.S., as well as the increased project bidding activity we are seeing in the U.S.  We also anticipate that the more than $350 million in major multi-year projects that we secured over the last 18 months will have an increasing positive impact on our earnings in future quarters. 

“We believe these activities and achievements, combined with the current positive trends in our markets, represent strong drivers for continued growth, increased profitability, and further strengthening of shareholder value.”

 

Second Quarter 2023 Financial Summary

Revenue for the second quarter of 2023 totaled $44.2 million, up 110% compared to $21.1 million in the same year-ago period. The increase was driven by increases of $1.0 million in the retail segment, $59,000 in the bulk segment, $19.0 million in the services segment and $3.0 million in the manufacturing segment.

Retail revenue increased primarily due to a 14% increase in the volume of water sold, as well as the result of higher energy costs that increased the energy pass-through component of the company’s water rates and a more favorable rate mix.

The increase in services segment revenue was due to an increase in plant design and construction revenue. The company recognized approximately $17.6 million in revenue in the second quarter of 2023 for the construction of a water treatment plant in Goodyear, Arizona. Revenue generated under operations and maintenance contracts totaled $3.9 million in the second quarter of 2023, up 11% as compared to $3.5 million in the same year-ago period.

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

Gross profit for the second quarter of 2023 was $15.5 million or 35.0% of total revenue, up 107% from $7.5 million or 35.5% of total revenue for the same year-ago period.

Net income from continuing operations attributable to stockholders for the second quarter of 2023 was $7.5 million or $0.47 per diluted share, compared to net income of $2.7 million or $0.18 per diluted share for the same year-ago period.

Net income attributable to Consolidated Water stockholders for the second quarter of 2023, which includes the results of discontinued operations, was $7.3 million or $0.46 per fully diluted share, up from a net income of $2.3 million or $0.15 per basic and fully diluted share for the same year-ago period.

Cash and cash equivalents totaled $47.7 million as of June 30, 2023, as compared to $51.1 million as of March 31, 2023, with working capital at $75.5 million, debt of $0.3 million, and stockholders’ equity totaling $170.3 million.

First Half 2023 Financial Summary

Revenue for the first half of 2023 was $77.1 million, up 90% compared to $40.6 million in the same year-ago period. The increase was primarily driven by increases of $2.5 million in the retail segment, $1.7 million in the bulk segment, $27.0 million in the services segment and $5.2 million in the manufacturing segment. 

Retail revenue increased primarily due to a 17% increase in the volume of water sold. The volume of water sold in the Cayman Water license area increased by 15% and the remaining 2% increase in the volume of water sold was due to water sales made by Cayman Water directly to the WAC in January and February of 2023.

The retail revenue increased also as a result of higher energy costs that increased the energy pass-through component of the company’s retail water rates, as well as a more favorable rate mix.

The increase in bulk segment revenue was due to an increase in energy costs for CW-Bahamas, which increased the energy pass-through component of CW-Bahamas’ rates and, to a lesser extent, an increase of 9% in the volume of water sold by CW-Bahamas.

The increase in services segment revenue was due to an increase in plant design and construction revenue. The company recognized approximately $24.1 million in revenue for the construction of a water treatment plant in Goodyear, Arizona in the first half of 2023. Revenue generated under operations and maintenance contracts totaled $7.5 million in the first half of 2023, up 5% as compared to $7.1 million in the same year-ago period.

The increase in manufacturing segment revenue was due to higher project activity.

Gross profit for the first half of 2023 was $26.0 million or 33.7% of total revenue, up 78% from $14.6 million or 36.0% of total revenue in the same year-ago period.

Net income from continuing operations attributable to stockholders for the first half of 2023 was $11.6 million or $0.73 per diluted share, compared to net income of $5.0 million or $0.33 per diluted share in the same year-ago period.

Net income attributable to Consolidated Water stockholders for the half of 2023, which includes the results of discontinued operations, was $11.1 million or $0.70 per fully diluted share, up from net income of $4.0 million or $0.26 per fully diluted share in the same year-ago period.