CWCO Consolidated Water Company Ltd

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 first quarter ended March 31, 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).

First Quarter 2023 Financial Highlights

• Total revenue increased 68% to $32.9 million.
• Retail revenue increased 23% to $7.8 million.
• Bulk revenue increased 22% to $9.0 million.
• Services revenue increased 168% to $12.7 million.
• Manufacturing revenue increased to $3.4 million. 
• Net income from continuing operations attributable to company stockholders was $4.1 million or $0.26 per basic and fully diluted share, up 75% from $2.3 million or $0.15 per basic and 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 $51.1 million as of March 31, 2023, up from $50.7 million as of December 31, 2022.

First Quarter 2023 Operational Highlights

• Volume of water sold in Grand Cayman retail segment increased 20% primarily due to increased tourist activity on Grand Cayman as tourism in 2022 was lower than historical levels due to the lingering impact of the COVID-19 pandemic.
• Acquired remaining 39% interest to become 100% owner of PERC Water, the company’s subsidiary that develops, designs, builds, operates and manages water infrastructure facilities in the Southwestern U.S.
• Recognized $6.4 million in revenue from PERC Water’s progress on the construction of an $82 million advanced water treatment plant in Goodyear, Arizona.
• PERC Water advanced commissioning and startup for The City of Santa Monica Sustainable Water Infrastructure Project, which is to provide a drought resilient water supply to the city from one of the world’s most advanced water treatment facilities. 

Management Commentary

“In Q1, our 68% increase in revenue to $32.9 million was driven by another quarter of strong growth across all of our business segments, with this reflecting a return to normalcy post-pandemic that helped drive increased activity and output across the board,” commented Consolidated Water CEO, Rick McTaggart. “Our retail water revenue growth was due to a 20% increase in the volume of water sold in Grand Cayman. About a quarter of the increase was due to direct water sales to the island’s water authority, with the rest attributed to the continued return of tourist activity.

“Now that the pandemic effects have abated, we expect retail water sales to return to normal seasonal patterns, with sales typically lower during periods of higher rainfall and decreased tourism. Historically, these lower sales periods are from May through early November, while peak sales have historically been from December through April.

“$6.4 million of the increase in our services segment revenue in the quarter was due to the progress our PERC Water subsidiary has made on its construction of an $82 million advanced water treatment plant in Goodyear, Arizona that we announced about a year ago. Progress on the construction continues as planned, and we anticipate recognizing significant additional revenue from this project until construction, commissioning and startup is completed in mid-2024.

“In January, we acquired the remaining 39% interest in our PERC Water subsidiary which focuses on the development, design, building, operations and management of water infrastructure facilities in the Southwestern U.S. After we acquired our initial controlling interest in PERC in 2019, we strengthened its capabilities and resources. This has resulted in greater financial and operational performance that has far exceeded our expectations.

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

“During the quarter, PERC continued the commissioning and startup of the Sustainable Water Infrastructure Project (SWIP) in Santa Monica, California, and it has been contracted to operate the facility for the city over the next two years. Considered one of the most advanced water treatment facilities in the world, it is a great example of how we remain at the forefront of the industry.

“The revenue we recognized from the design and ongoing construction of the Red Gate desalination plant for the Water Authority of the Cayman Islands also contributed to our year-over-year increase in services segment revenue. During the quarter, construction in progress increased by approximately $1.2 million, primarily due to construction activity on Cayman Water’s new West Bay desalination plant which replaces a 30-year-old plant and will supplement the production capacity for our retail water business in Grand Cayman.

“We were pleased to see continued year-over-year growth in our manufacturing segment revenue. During the quarter, we saw some relief from supply chain constraints and challenging economic conditions, allowing us to advance more of our order backlog through the manufacturing and billing process.

“Over the last couple of years, we have diversified our manufacturing base in terms of customer concentration and type of products, and we believe this will continue to provide greater consistency in future results. We have also seen some business return from our historically largest manufacturing customer, which had been suspended last year. In all, we expect improved results for our manufacturing business and see continued growth opportunities.

“Looking ahead, we remain very optimistic about our further growth for numerous reasons, including the continued recovery of tourism in Grand Cayman, our ongoing construction projects underway there and in the U.S., and the increased project bidding activity we are seeing in the U.S. and the Caribbean.

“We also anticipate that the more than $150 million in major multi-year projects that we secured in 2022 will have an increasing positive impact on our earnings in future quarters. We believe our recent activities and successes, and current trends in our markets, represent strong catalysts for continued growth, increasing profitability, and further strengthening of shareholder value.”

First Quarter 2023 Financial Summary

Revenue for the first quarter of 2023 totaled $32.9 million, up 68% compared to $19.6 million in the same year-ago period. The increase was driven by increases of $1.5 million in the retail segment, $1.7 million in the bulk segment, $8.0 million in the services segment and $2.2 million in the manufacturing segment.

Retail revenue increased primarily due to a 20% 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 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, as well as a 9% increase in the volume of water sold.

The increase in services segment revenue was due to an increase in plant design and construction revenue, with most of the revenue increase resulting from PERC Water’s progress on its contract with Liberty Utilities for the construction of a water treatment plant in Goodyear, Arizona. The company recognized approximately $6.4 million in revenue for the Liberty Utilities contract in the first quarter of 2023.

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

Gross profit for the first quarter of 2023 was $10.6 million or 32.1% of total revenue, up 48% from $7.1 million or 36.5% of total revenue for the same year-ago period.

Net income from continuing operations attributable to stockholders for the first quarter of 2023 was $4.1 million or $0.26 per basic and diluted share, compared to net income of $2.3 million or $0.15 per basic and diluted share for the same year-ago period.

Net income attributable to Consolidated Water stockholders for the first quarter of 2023, which includes the results of discontinued operations, was $3.8 million or $0.24 per basic and fully diluted share, up from a net income of $1.7 million or $0.11 per basic and fully diluted share for the same year-ago period.

Cash and cash equivalents totaled $51.1 million as of March 31, 2023, as compared to $50.7 million as of December 31, 2022, with working capital at $70.6 million, debt of $0.3 million, and stockholders’ equity totaling $163.8 million.

First Quarter Segment Results

		Three Months Ended March 31, 2023
		Retail				Bulk			Services			Manufacturing			Total
Revenue		$	7,771,095			$	9,004,373		$	12,721,701		$	3,371,821		$	32,868,990
Cost of revenue			3,550,794				6,243,146			10,044,078			2,471,890			22,309,908
Gross profit			4,220,301				2,761,227			2,677,623			899,931			10,559,082
General and administrative expenses			4,177,107				352,975			1,088,672			417,908			6,036,662
(Loss) gain on asset dispositions and impairments, net			(7,287	)			11,270			—			1,933			5,916
Income from operations		$	35,907			$	2,419,522		$	1,588,951		$	483,956			4,528,336
Other income, net																157,059
Income before income taxes																4,685,395
Provision for income taxes																449,485
Net income from continuing operations																4,235,910
Income from continuing operations attributable to non-controlling interests																163,121
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																4,072,789
Net loss from discontinued operations																(259,163	)
Net income attributable to Consolidated Water Co. Ltd. stockholders															$	3,813,626

		Three Months Ended March 31, 2022
		Retail				Bulk			Services			Manufacturing				Total
Revenue		$	6,313,200			$	7,350,644		$	4,743,820		$	1,150,241			$	19,557,905
Cost of revenue			3,053,740				4,687,119			3,649,180			1,022,102				12,412,141
Gross profit			3,259,460				2,663,525			1,094,640			128,139				7,145,764
General and administrative expenses			3,450,406				310,303			779,974			325,434				4,866,117
Gain on asset dispositions and impairments, net			—				—			12,458			—				12,458
Income (loss) from operations		$	(190,946	)		$	2,353,222		$	327,124		$	(197,295	)			2,292,105
Other income, net																	319,727
Income before income taxes																	2,611,832
Provision for income taxes																	46,273
Net income from continuing operations																	2,565,559
Income attributable to non-controlling interests																	241,430
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders																	2,324,129
Net loss from discontinued operations																	(607,314	)
Net income attributable to Consolidated Water Co. Ltd. stockholders																$	1,716,815

Conference Call

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

Date: Tuesday, May 16, 2023Time: 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: 2665450

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference 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 May 23, 2023, 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: 2665450

About Consolidated Water Co. Ltd.Consolidated Water Co. Ltd. develops and operates advanced water treatment plants and water distribution systems. The company designs, builds and operates seawater desalination facilities in the Cayman Islands, The Bahamas and the British Virgin Islands, and designs, builds and operates water treatment and reuse facilities in the United States. 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 www.cwco.com.

Cautionary Note Regarding Forward-Looking StatementsThis 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 (954) 509-8200Email ContactInvestor Relations ContactRon Both or Grant StudeCMA Investor RelationsTel (949) 432-7566Email ContactMedia & ESG Contact:Tim RandallCMA Media RelationsTel (949) 432-7572Email Contact

CONSOLIDATED WATER CO. LTD.CONDENSED CONSOLIDATED BALANCE SHEETS
			March 31,			December 31,
			2023			2022
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	51,104,268		$	50,711,751
Accounts receivable, net			29,550,063			27,046,182
Inventory			9,087,365			5,727,842
Prepaid expenses and other current assets			5,245,208			5,643,279
Contract assets			6,127,587			2,913,722
Current assets of discontinued operations			369,361			531,480
Total current assets			101,483,852			92,574,256
Property, plant and equipment, net			51,484,484			52,529,545
Construction in progress			4,861,263			3,705,681
Inventory, noncurrent			4,750,701			4,550,987
Investment in OC-BVI			1,292,163			1,545,430
Goodwill			10,425,013			10,425,013
Intangible assets, net			2,682,222			2,818,888
Operating lease right-of-use assets			1,935,737			2,058,384
Other assets			1,567,625			1,669,377
Long-term assets of discontinued operations			21,129,288			21,129,288
Total assets		$	201,612,348		$	193,006,849
LIABILITIES AND EQUITY
Current liabilities
Accounts payable, accrued expenses and other current liabilities		$	9,798,095		$	8,438,315
Accounts payable - related parties			—			403,839
Accrued compensation			2,858,268			2,267,583
Dividends payable			1,410,522			1,375,403
Current maturities of operating leases			538,281			546,851
Current portion of long-term debt			114,964			114,964
Contract liabilities			15,499,160			8,803,921
Deferred revenue			306,256			315,825
Current liabilities of discontinued operations			347,928			389,884
Total current liabilities			30,873,474			22,656,585
Long-term debt, noncurrent			188,899			216,117
Deferred tax liabilities			522,655			560,306
Noncurrent operating leases			1,457,466			1,590,542
Other liabilities			147,067			219,110
Total liabilities			33,189,561			25,242,660
Commitments and contingencies
Equity
Consolidated Water Co. Ltd. stockholders' equity
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 34,383 and 34,383 shares, respectively			20,630			20,630
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,736,041 and 15,322,875 shares, respectively			9,441,625			9,193,725
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued			—			—
Additional paid-in capital			90,648,430			89,205,159
Retained earnings			63,719,310			61,247,699
Total Consolidated Water Co. Ltd. stockholders' equity			163,829,995			159,667,213
Non-controlling interests			4,592,792			8,096,976
Total equity			168,422,787			167,764,189
Total liabilities and equity		$	201,612,348		$	193,006,849

CONSOLIDATED WATER CO. LTD.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months Ended March 31,
		2023				2022
Revenue		$	32,868,990			$	19,557,905
Cost of revenue (including purchases from related parties of $- in 2023 and $839,432 in 2022)			22,309,908				12,412,141
Gross profit			10,559,082				7,145,764
General and administrative expenses (including purchases from related parties of $- in 2023 and $24,231 in 2022)			6,036,662				4,866,117
Gain on asset dispositions and impairments, net			5,916				12,458
Income from operations			4,528,336				2,292,105
Other income (expense):
Interest income			113,644				180,687
Interest expense			(37,844	)			(4,081	)
Profit-sharing income from OC-BVI			14,175				10,125
Equity in the earnings of OC-BVI			35,558				31,766
Net gain on put/call options			—				75,000
Other			31,526				26,230
Other income, net			157,059				319,727
Income before income taxes			4,685,395				2,611,832
Provision for income taxes			449,485				46,273
Net income from continuing operations			4,235,910				2,565,559
Income from continuing operations attributable to non-controlling interests			163,121				241,430
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders			4,072,789				2,324,129
Total loss from discontinued operations			(259,163	)			(607,314	)
Net income attributable to Consolidated Water Co. Ltd. stockholders		$	3,813,626			$	1,716,815
Basic earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders
Continuing operations		$	0.26			$	0.15
Discontinued operations			(0.02	)			(0.04	)
Basic earnings per share		$	0.24			$	0.11
Diluted earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders
Continuing operations		$	0.26			$	0.15
Discontinued operations			(0.02	)			(0.04	)
Diluted earnings per share		$	0.24			$	0.11
Dividends declared per common and redeemable preferred shares		$	0.085			$	0.085
Weighted average number of common shares used in the determination of:
Basic earnings per share			15,723,595				15,285,523
Diluted earnings per share			15,888,028				15,435,691