Q2 2024 Consolidated Water Co Ltd Earnings Call - Q&A
Good morning, everyone and thank you for joining us today to discuss the results for consolidated water's second quarter of 2024.
Operator: Good morning, everyone. Thank you for joining us today to discuss the results for Consolidated Water's second quarter of 2024.
Speaker Change: Hosting the call today is the Chief Executive Officer of consolidated water company.
Operator: Hosting the call today is the Chief Executive Officer of Consolidated Water Company, Frederick McTaggart, and the company's Chief Financial Officer, David Sasnett. Following the remarks, we will open the call to questions. At any time during the call, you may join the question queue by pressing star and 1 on your telephone keypad. To withdraw your questions, you may press star and two.
David Sasnett: And the company's Chief Financial Officer, David Sasnett.
Speaker Change: Following their remarks, we'll open the call to questions.
Speaker Change: At any time during the call you made you on the question to you by pressing Star then one on your telephone keypad.
Speaker Change: Withdraw your question you May press Star.
Speaker Change: Two.
Speaker Change: Yeah.
Speaker Change: Before we conclude today's call I'll provide some important cautions regarding the forward looking statements made by management during the call.
Operator: Before we conclude today's call, I'll provide some important cautions regarding the forward-looking statements made by management during the call.
Operator: I'd like to remind everyone that today's call is being recorded and will be made available for a telecom replay per the instructions in yesterday's press release, which is available in the investor relations section of the company's website.
Speaker Change: I'd like to remind everyone that today's call is being recorded won't be made available for telecom. They play pardon me instructions in yesterday's press release, which is available on the Investor Relations section of the company's website.
Speaker Change: Now I'd like to turn the floor over to consolidated water Company E. L F.
Operator: Now I'd like to turn the floor over to Consolidated Water Company's CEO, Rick McTaggart. Sir, please go ahead.
Speaker Change: Sir Please go ahead.
Frederick McTaggart: Thank you, Jamie, and good morning, everyone. Thank you for joining us today to discuss our financial and operating results for the second quarter of 2024. As you saw in our release issued yesterday, we reported revenue of $32.5 million for the quarter. Our retail segment revenue benefited from a 10% increase in the volume of water sold to customers in our exclusive utility service area on Grand Cayman, resulting from continued resident population growth and lower rainfall amounts during the quarter. This increased our retail revenue by 8% to $8.2 million for the quarter. Our bulk and manufacturing segments both had relatively consistent revenues compared with last year.
Speaker Change: Thank you Jamie and good morning, everyone. Thank you for joining us today to discuss our financial and operating results for the second quarter of 2024.
Speaker Change: As you saw in our release issued yesterday, we reported revenue of $32 5 million for the quarter.
Speaker Change: Our retail segment.
Speaker Change: Revenue benefited from a 10% increase in the volume of water sold to customers and our exclusive utility service area on Grand Cayman, resulting from continued resident population growth and lower rainfall amounts during the quarter.
Speaker Change: This increased our retail revenue by 8% to $8 2 million for the quarter.
Speaker Change: Our bulk and manufacturing segments, both had relatively consistent revenues.
Speaker Change: Paired with last year.
Speaker Change: Our services segment was down by about half due to the anticipated reduction in construction related revenue as the Grand Cayman in Arizona design build projects were completed earlier this year.
Frederick McTaggart: Our services segment was down by about half due to the anticipated reduction in construction-related revenue as the Grand Cayman and Arizona design-build projects were completed earlier this year. Our construction of the $81 million water treatment plant in Goodyear, Arizona was substantially completed in the first quarter. We are currently finishing up minor site works and punch list items and expect final completion of this design-build contract by the end of the third quarter. Also during the second quarter, we completed the construction and commissioning of the new 2.6 million gallon per day Red Gate desalination plant in Grand Cayman for the Water Authority of the Cayman Islands.
Speaker Change: Our construction of the $81 million water treatment plant in Goodyear, Arizona was substantially completed in the first quarter.
Speaker Change: We are currently finishing a minor site works and punch list items and expect final completion of this design build contract by the end of the third quarter.
Speaker Change: Also during the second quarter, we completed the construction and commissioning of the new $2 6 million gallon per day Red Gate desalination plant in Grand Cayman for the water Authority Cayman Islands.
Frederick McTaggart: In May, we began operating this facility under a 10-year operations and maintenance agreement, which revenues from that will fall within our bulk sector. 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 in Honolulu, Hawaii, which was announced in June last year. We're currently in the piloting, design, and permitting stage, which we expect will lead into the full construction stage late next year. Such efforts now in development have included ongoing site investigations, design, procurement, installation and operation of the piloting systems for the seawater desalination and post-treatment systems. Permit Activities and Public Outreach Initiatives.
Speaker Change: In May we began operating this facility under a 10 year operations and maintenance agreement, which will fall revenues from that will fall within our bulk segment.
Speaker Change: Meanwhile, development activities continued to ramp up on the $147 million project to design construct operate and maintain a seawater desalination plant.
Speaker Change: The board of water supply in Honolulu, Hawaii, which was announced in June last year.
Speaker Change: We are currently in the piloting design and permitting stage, which we expect will lead into the full construction stage late next year.
Speaker Change: Such efforts now in development have included ongoing site investigations design procurement installation and operation of the piloting systems for the seawater desalination.
Speaker Change: And post treatment systems.
Speaker Change: Permitting activities and public outreach initiatives.
Frederick McTaggart: The installation and commissioning of the pilot plant was completed on schedule and is now gathering essential operational data that will inform the final design and permitting of the full-scale project. The completion of the Hawaii project encompasses the current two-year development phase, which started last year. followed by a two-year construction phase. And then after construction and commissioning is completed, we will operate the plant under a 20-year operations and maintenance contract, which also has two five-year extensions, which are 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 O&M contracts by both PERC and REC in Colorado.
Speaker Change: The installation and commissioning of the pilot plant was completed on schedule and is now gathering essential operational data that will inform the final design and permitting of the full scale project.
Speaker Change: The completion of the Hawaii project encompasses that.
Speaker Change: The current two year development phase, which started last year.
Speaker Change: Followed by a two year construction phase and then after construction and commissioning is completed we will operate the plant under a 20 year operations and maintenance contract, which also has two five year extensions, which are <unk>.
Speaker Change: Exercisable at the clients discretion.
Speaker Change: So the reduction in construction related revenue in the second quarter.
Speaker Change: It was partially offset by an increase in the revenue generated from O&M contracts by both PERC and RBC in Colorado.
Speaker Change: We acquired <unk> last October to provide a new channel for growth in water stressed regions of Colorado, and we've been pleased with our <unk> integration into our company and the new opportunities, we see developing in the Colorado market.
Frederick McTaggart: We acquired REC last October to provide a new channel for growth in 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 the Colorado market. 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 their growth over time.
Speaker Change: Similar to our acquisition of PERC, we anticipate that our greater financial and management resources.
Speaker Change: Well enable our EC to pursue larger projects that will accelerate their growth over time.
Speaker Change: Okay.
Frederick McTaggart: During the quarter, we also settled our dispute with Mexico that arose as a result of the cancellation of the agreement for our desalination project in Playa de Rosarito, Mexico. That was canceled. 2020. We sold the project land and project documentation to the Mexican government as part of the settlement for net proceeds of approximately 32 million U.S. dollars plus 20 million Mexican pesos.
Speaker Change: But during the quarter. We also settled our dispute with Mexico that arose as a result of the cancellation.
Of the agreement.
Speaker Change: The our desalination project in Pliers day Rosarito Mexico.
Speaker Change: And that was canceled.
Speaker Change: In 2020.
Speaker Change: We sold the project land and project documentation.
Speaker Change: The Mexican government.
Speaker Change: Part of this settlement for net proceeds of approximately 32 million U S dollars, plus 20 million Mexican pesos.
David Sasnett: Now before getting more into recent developments and our outlook for the rest of the year, I'd like to turn the call over to our CFO, David Sasnett, who will take us through the financial details for the quarter. Thanks Rick and good morning everyone.
Speaker Change: Now before.
Speaker Change: Getting more into recent developments and our outlook for the rest of the year.
Speaker Change: I'd like to turn the call over to our CFO, David Sasnett, who will take us through the financial details for the quarter.
David Sasnett: Thanks, Rick and good morning, everyone.
David Sasnett: In the second quarter of this year, revenues totaled $32.5 million, which is a decrease of 27% from the $44.2 million in revenue we reported for the same quarter of last year. This overall decrease in revenue is almost entirely due to a $16.5 million decrease in construction revenue.
David Sasnett: In the second quarter.
David Sasnett: This year revenues totaled $32 5 million, which is a decrease of 27% from.
Speaker Change: From the $44 2 million in revenue reported we reported for the same quarter of last year.
Speaker Change: This overall decrease in revenue was almost entirely due to a $16 $5 million decrease in construction revenue.
David Sasnett: Accreditable Perks Project for Liberty Utilities in Arizona. and the completion of the Red Gate Project in Grand Cayman as Rick has mentioned earlier. Retail revenue increased primarily due to a 10% increase in the volume of water sold. The volume of water sold for the retail segment was up due to a 5.5% increase in the number of customer accounts in our license area. as compared to the second quarter of last year. And the retail revenue was also up due to significantly less rainfall on Grand Cayman in April and May of this year as compared to the same months of last year.
Speaker Change: A crazy little Perks project for lithium.
Speaker Change: Liberty utilities in Arizona.
Speaker Change: And the completion of the Red Gate project in Grand Cayman as Rick has mentioned earlier.
Speaker Change: Retail revenue increased primarily due to a 10% increase in the volume of water sold.
Speaker Change: The volume of water sold for the retail segment was up due to a five 5% increase in the number of customer accounts in our license area.
Speaker Change: As compared to the second quarter of last year.
Speaker Change: The retail revenue was also up due to significantly less rainfall on Grand Cayman in April and May of this year as compared to the same months of last year.
Speaker Change: Our marginal decrease in bulk segment revenue was attributable to lower energy costs, which decreased the energy pass through component of our Bahamas operations bulk rates.
David Sasnett: Our marginal decrease in bulk segment revenue was attributable to lower energy costs, which decreased the energy pass-through component of our Bahamas operations bulk rate. And the decrease in services revenue, as we mentioned earlier, was attributable to a decrease in construction revenue.
Speaker Change: And the decrease in services revenue.
Speaker Change: As we mentioned earlier was attributable to a decrease in construction revenue.
David Sasnett: It's important to note that revenue generated under our operations and maintenance contracts totaled $7.1 million in the second quarter of 2024, an increase of 75% from the second quarter of last year. Revenue from REC, which we acquired in October of last year, constituted $1.9 of the increase, with the remainder of the increase related to new PERC contracts. Our manufacturing segment was consistent with last year, with revenue at $3.9 million as compared to $4.1 million in the second quarter of 2023. Our gross profit for the second quarter of this year was $11.6 million, or 36% of total revenue, which was down from the $15.5 million, or 35% of total revenue, in the second quarter of last year.
Speaker Change: It is important to note that revenue generated under our operations and maintenance contracts totaled $7 1 million in the second quarter of 2024, an increase of 75% from the second quarter of last year revenue from RAC, which we acquired in October of last year.
Speaker Change: Constituted one none of the increase with the remainder of the increase related to new contracts.
Speaker Change: Our manufacturing segment was consistent with last year with revenue at $3 9 million as compared to $4 1 million in the second quarter of 'twenty three.
Speaker Change: Our gross profit for the second quarter of this year was $11 6 million or 36% of total revenue.
Speaker Change: Which was down from the $15 5 million.
Speaker Change: Over 35% of total revenue in the second quarter of last year did the overall increase the decrease in revenue.
David Sasnett: Did the overall increase decrease in revenue? Net income from continuing operations attributable to our shareholders for the second quarter of this year 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. We reported income from discontinued operations this quarter of $11.6 million. This resulted from the $12.1 billion gain that we recorded on the sale of the project land and the project documentation in connection with our settlement for the arbitration with the Mexico government. Including discontinued operations, our net income to consolidated water stockholders for the second quarter of this year was $15.9 million, or $0.99 per diluted share, which was up from the net income of $7.3 million, or $0.46 per diluted share that we reported in the second quarter of last year.
Speaker Change: Net income from continuing operations attributable to our shareholders for the second quarter of this year was $4 2 million.
Speaker Change: We're 26 cents per diluted share.
Speaker Change: Compared to net income of $7 5 million or 47 cents per diluted share in the second quarter of 23.
Speaker Change: We reported income from discontinued operations this quarter of 11 6 million.
Speaker Change: This resulted from the $12 $1 billion gain.
Speaker Change: Recorded on the sale of the project and the project documentation in connection with our settlement with the arbitration with the Mexico government.
Speaker Change: Including discontinued operations, our net income attributable to consolidated water stockholders for the second quarter of this year was $15 9 million or 99 cents per diluted share, which was up from the net income of $7 3 million or <unk> 46 cents per diluted share that we reported in the second quarter of last year.
David Sasnett: Now turning to the ballot sheet, our cash and cash equivalents totaled $96.7 million as of June 30, 2024. Our working capital was $131.2 million and our stockholders' equity was $206.7 million. are substantial increase in cash and working capital since December 31st, 2023. reflects the $32 million in U.S. dollars and $20 million pesos that we received from the Mexico settlement. We have enhanced and continue to maintain very healthy levels of liquidity and credit capacity and in extremely solid financial conditions. Our projected liquidity requirements for the balance of this year include capital expenditures for existing operations of approximately $7.1 million.
Speaker Change: Now turning to the balance sheet, our cash and cash equivalents totaled $96 7 million as of June 32024.
Speaker Change: Our working capital was $131 2 million and our stockholders' equity was $206 7 million.
Speaker Change: Our substantial increase in cash and working capital since December.
Speaker Change: December 31 2023.
Speaker Change: It reflects the 32 million in U S dollars and 20 million pesos that we received from the Mexico settlement.
Speaker Change: We have enhanced and continue to maintain very healthy levels of liquidity and credit capacity.
Speaker Change: And an extremely solid financial condition.
Speaker Change: Our projected liquidity requirements for the balance of this year include capital expenditures for existing operations of approximately $7 1 million.
David Sasnett: which includes approximately $2.5 million to be incurred for our new West Bay plant and the addition of additional capacity there, and approximately $3.9 million to be incurred for other projects. We paid approximately $1.6 million in dividends in July 24, and our liquidity requirements may also include future quarterly dividends, as such dividends are declared by our board.
Which includes approximately $2 5 million to be incurred for our new West Bay plant.
Speaker Change: And the addition of the additional capacity there and approximately $3 9 million to be incurred for other projects.
Speaker Change: We paid approximately $1 $6 million in dividends in July 24, and our liquidity requirements May also include future quarterly dividends as such dividends are declared by our board.
Speaker Change: This completes our financial summary for the quarter now I'd like to turn the call back over to Rick.
David Sasnett: So this completes our financial summary for the quarter.
Frederick McTaggart: Now I'd like to turn the call back over to Rick.
Rick: Thank you David.
Frederick McTaggart: Thank you, David. We believe our second quarter results were fairly positive, despite the variability in service segment revenues and earnings caused by the timing of our large design-build projects in Arizona and Hawaii. As mentioned earlier, the Liberty Project in Arizona was completed ahead of schedule in the first quarter of this year, and our Hawaii project is expected to start construction late next year. revenues from our retail segment and services O&M business. increased meaningfully this past quarter and have helped to offset the reduced design build revenue. Our growth strategy continues to be to pursue opportunities in the most water-stressed regions of the United States and the Caribbean, offering a diversified suite of products and services, such as our super-efficient desalination solutions.
Rick: We believe our second quarter results were fairly positive. Despite the variability in service segment revenues and earnings caused by the timing of our large design build projects in Arizona and Hawaii.
Rick: As mentioned earlier the Liberty project in Arizona was completed ahead of schedule in the first quarter of this year and our Hawaii project is expected to start construction late next year.
Rick: Revenues from our retail segment and services O&M business.
Increased meaningfully this past quarter and have helped to offset the reduced design build revenues.
Rick: Our growth strategy continues to be to pursue opportunities in the most water stressed regions of the United States and the Caribbean offering a diversified suite of products and services such as our Super efficient desalination solutions.
Frederick McTaggart: Efficient and Visually Appealing Wastewater Treatment Plants. world-class operation and maintenance expertise and cost-effective project delivery model. all of which we believe set us apart from our competitors. As David mentioned, we plan to incur $2.5 million in capital expenditures this year to expand our new West Bay desalination plant to meet the growing demand for water by our customers in our exclusive utility service area in Grand Cayman. The first phase of this new desalination plant was completed less than 12 months ago, and due to increasing retail water demand, we are already doubling the production capacity of this plant, which is also the most energy-efficient plant we have ever designed and built.
Rick: <unk> and visually appealing wastewater treatment plants.
Rick: World class operation and maintenance expertise.
Rick: And cost effective project delivery models.
Rick: All of which we believe set us apart from our competitors.
Speaker Change: As David.
Speaker Change: Mentioned, we plan to incurred $2 5 million in capital expenditures this year to expand our new West Bay desalination plant to meet the growing demand for water by our customers and our exclusive utility service area in Grand Cayman.
David Sasnett: The first phase of this new desalination plant was completed less than 12 months ago and due to increasing retail water demand. We are already doubling the production capacity of this plant, which is also the most energy efficient plant we've ever designed and built.
Rick: Yeah.
Frederick McTaggart: In the Bahamas, we received a binding letter of acceptance notice to commence 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. This will be our first project for the WSC and the family island. of the Bahamas, which have historically been served by our competitors. We are very excited about this opportunity and hope to use this project as a stepping stone to grow our Bahamas business beyond currently Nassau. Our newest business in Colorado, REC, contributed $1.9 million in recurring revenue last quarter and is performing as anticipated.
Speaker Change: In the Bahamas, we received a binding letter of acceptance notice to commence under a new 15 year agreement with the water and Sewerage Corporation in the Bahamas to design build own operate and finance to.
Seawater desalination plant on Cat Island in the Bahamas.
Speaker Change: This will be our first project for the WMC and the family Islands.
Speaker Change: Of the Bahamas, which have historically been served by our competitors.
Speaker Change: We are very excited about this opportunity and hope to use this project as a stepping stone to grow our Bahamas business beyond currently Nassau.
Speaker Change: Our newest business in Colorado RSV.
Speaker Change: We did $1 9 million in recurring revenue last quarter and is performing as anticipated.
Frederick McTaggart: Our business development team is working very closely with the REC team to pursue important projects in the Colorado market with the greater financial and technical resources that Consolidated Water brings to the table. as mentioned in previous quarters. We are seeing interesting opportunities with potential industrial water treatment and lithium mining customers that require specialized high-pressure reverse osmosis equipment to concentrate source water, whether to extract the minerals in that source water or significantly reduce the volume of contaminated source water. Consequently, we formed a joint venture with two other industry experts in June of last year to pursue this business.
Speaker Change: Our business development team is working very closely with the <unk> team to pursue important projects in the Colorado market with the greater financial and technical resources that.
Speaker Change: Consolidated water brings to the table.
Speaker Change: As mentioned in previous quarters.
Speaker Change: We are seeing interesting opportunities with potential industrial water treatment and lithium mining customers.
Speaker Change: That requires specialized high pressure reverse osmosis equipment to concentrate sourced water whether to extract minerals and that source water or significantly reduce the volume of contaminated source water.
Speaker Change: Consequently, we formed a joint venture with two other industry experts in June of last year to pursue this business.
Frederick McTaggart: If we successfully develop this equipment business, it could significantly increase revenues and earnings in the coming years and further diversify the products and services we offer to non-municipal markets.
Speaker Change: If we successfully develop this equipment business it could significantly increase revenues and earnings in the coming years and further diversify the products and services, we offer to non municipal markets.
Speaker Change: Looking ahead for the remainder of the year and beyond.
Frederick McTaggart: Looking ahead for the remainder of the year and beyond, we're very excited about Consolidated Water's future. Consistent, strong water sales growth in Grand Cayman, long-term recurring revenues from our Caribbean-based bulk water business and U.S.-based O&M business, Stabilized Manufacturing Revenues and Earnings that we saw this quarter and expected revenues and earnings from our $147 million Design, Build, Operate project in Hawaii all together provide a very solid base for the company in coming years. Supported by our exceptionally strong balance sheet, we will continue to invest in new long-term projects such as the desalination plants on Cat Island in the Bahamas, as well as new infrastructure to serve the growing water needs of our utility customers in the Cayman Islands that will ultimately drive future revenue growth.
Speaker Change: Very excited about consolidated water's future consistent strong water sales growth in Grand Cayman long term recurring revenues from our Caribbean based bulk water business.
Speaker Change: And U S based O&M business.
Speaker Change: Stabilized manufacturing revenues and earnings that we saw this quarter.
Speaker Change: And expected revenues and earnings from our 147 million dollar design build operate project in Hawaii altogether provide a very solid base for the company in coming years.
Speaker Change: Supported by our exceptionally strong balance sheet, we will continue to invest in new long term projects such as the desalination plant on Cat Island in the Bahamas.
Speaker Change: As well as new infrastructure to serve the growing water needs of our utility customers in the Cayman Islands.
Speaker Change: That will ultimately drive future revenue growth.
Speaker Change: Our strong balance sheet also gives us the ability to capitalize quickly on any potential acquisition targets that we may identify.
Frederick McTaggart: Our strong balance sheet also gives us the ability to capitalize quickly on any potential acquisition targets that we may identify. In addition, the market for design-build projects shows no signs of slowing, and although we are currently in a period between two large projects, we believe that our efficient and aesthetically pleasing plant designs, our cost-efficient project delivery models, and our significant industry experience will help us obtain new projects. We recently signed master design build service agreements with two major national clients for a number of projects that they are contemplating, which we believe will positively impact revenue and earnings in future periods.
In addition, the market for design build projects shows no signs of slowing and although we are currently in a period between two large projects, we believe that our efficient and aesthetically pleasing plant designs are cost efficient project delivery models and our significant industry experience will help us.
Speaker Change: <unk> new projects.
Speaker Change: We recently signed Master design build service agreements with two major national clients for a number of projects that they are contemplating and which we believe will positively impact revenue and earnings in future periods.
Speaker Change: Along with the strong tailwind from the positive market conditions and our industry. We anticipate these factors will continue to drive our long term growth enhanced profitability and further strengthen shareholder value.
Frederick McTaggart: Along with the strong tailwinds from the positive market conditions in our industry, we anticipate these factors will continue to drive our long-term growth, enhance profitability, and further strengthen shareholder value.
Speaker Change: And now Jamie I'd like to open up the call for questions.
Operator: Now, Jamie, I'd like to open up the call for questions. Ladies and gentlemen, at this time we'll begin the question and answer session. Once again, in order to ask a question, please press star and one to withdraw your questions. You may press star and two If you are using a speaker phone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue.
Speaker Change: Ladies and gentlemen at this time, we will begin the question and answer session.
Jamie: Once again in order to ask a question. Please press star one.
Jamie: That's all your questions you May press star two.
Speaker Change: If you are using a speakerphone, we do ask that you. Please.
Speaker Change: Please pickup your handset prior to pressing the keys to ensure the best sound quality.
Speaker Change: Once again that.
Speaker Change: It is star then one to join the question queue.
Speaker Change: Our first question today comes from Gerry Sweeney from Roth Capital. Please go ahead with your question.
Gerard Sweeney: Our first question today comes from Jerry Sweeney from Rock Capital.
Gerard Sweeney: Please go ahead with your question.
Gerard Sweeney: Good morning, Rick and David. Thanks for taking my call. Rick, I was wondering if you could give us a little bit more detail maybe on the pipeline on the project. So obviously, you know, water... Projects, there's a lot percolating out. A lot of money is just starting to hit the front end of engineering companies with projects. behind it, behind that money, 12 to 18 months. I'm just curious. maybe a little bit of quality. Well, I mean, the. You know, hard pipeline stuff, obviously, the Hawaii project that you're well aware of. You know, the Cat Island project.
Speaker Change: Good morning, Rick and David Thanks for taking my call.
Speaker Change: Hey.
Rick: Good morning.
Speaker Change: But I was wondering if you can give us a little bit more detail maybe on the pipeline projects obviously water.
Speaker Change: Projects, there's a lot of percolating out there.
Speaker Change: Those dollars come through our channel checks suggest that.
Speaker Change: A lot of miles just starting with the front end engineering companies with projects coming behind it behind that money 12 to 18 months I'm, just curious as to what Youre seeing out there.
Yeah, a little bit of a qualitative description.
Speaker Change: Pipeline.
Well I mean the.
Hard pipeline stuff obviously.
Speaker Change: Hawaii project that.
Speaker Change: You are well aware of.
Speaker Change: The Cat Island project.
Gerard Sweeney: And these are, this is non-U.S. obviously, I know you're interested. of the U.S. market. The Cat Island Project really, I think, is... I wouldn't say a game changer, but it's definitely a catalyst to to help us to expand our desalination business beyond just one island in the Bahamas. I mean, there. Obviously very impressed with what we've done for Nassau. You know, now they've, uh... They've recognized, you know, what we can do for some of the other islands there in the Bahamas. And there's quite a number of islands that are having water issues at the present time.
Speaker Change: And these are this is non U S. Obviously I know you're interested in.
Speaker Change: The rest of the market.
Speaker Change: Yes.
CAD Island project really I think is.
Speaker Change: I wouldn't say a game changer, but it's definitely a catalyst.
Speaker Change: To help us to expand our our desalination business beyond just one island in the Bahamas.
Speaker Change: Obviously very impressed with what we've done for NASA.
Speaker Change: Nowadays.
Speaker Change: They recognized what we can do for some of the other islands there.
Speaker Change: The Bahamas, and Theres quite a bit.
Speaker Change: A number of islands that are having water issues at the present time, if you have if.
Gerard Sweeney: If you ever, you know, if you check the press. pretty much in the press daily in the Bahamas. So we're excited about that. project that's going to run through this year and probably part of next year on the construction. and then we go into a 15-year operating agreement with them. Other things that we're seeing, I mean, there's I mentioned these master service agreements. I mean, there's some smaller projects that, you know, Water Treatment Projects, Wastewater Treatment Projects that we're discussing with these clients. Nothing that we can speak about in detail at this point. that at least one of these will impact.
Speaker Change: If you check the press, it's pretty much in the press daily in the Bahamas.
Speaker Change: So we're excited about that.
Speaker Change: I mean, that's a project that's going to run through this year and probably part of next year on the construction.
Speaker Change: And then.
Speaker Change: I'll go into a 15 year operating agreement with them.
Speaker Change: Other things that we're seeing I mean, there's I mentioned these master service agreements I mean, there is some smaller projects that.
Speaker Change: Yeah.
Speaker Change: Water treatment projects wastewater treatment projects that we're discussing with these clients.
Speaker Change: Nothing that we can speak about in detail at this point, but.
It's possible that they.
Speaker Change: At least one of these will impact.
Speaker Change: Our revenues this year.
Gerard Sweeney: our revenues this year. We're seeing. In certain markets, there's a Because of the lack of fresh water and identifiable new natural sources. And we're seeing less pricing sensitivity, I think, to new drinking water sources. So, I mean, that's in very specific markets, Jerry. So, I think in the Texas market, you're starting to see that. So, you know, that's good because desalination is not a cheap alternative. When you don't have anything else, I mean, people are starting to recognize that. That's what you got to fall back on. So we are seeing less price sensitivity in some markets.
Speaker Change: We are seeing.
Speaker Change: In certain markets there is a.
Speaker Change: Because of the lack of freshwater.
Speaker Change: Identifiable new natural sources.
Speaker Change: I mean, we're seeing less pricing sensitivity I think too.
Speaker Change: The new drinking water sources.
Jerry: That's in very specific markets Jerry so.
Jerry: I think in the Texas market, you're starting to see that so.
Jerry: You know that.
Jerry: That's good because desalination is not a cheap alternative but when.
Jerry: When you don't have anything else I mean people are starting to recognize that.
Jerry: Okay.
Jerry: Yeah.
Jerry: Where you guys fall back on so.
Speaker Change: We are seeing less price sensitivity.
Speaker Change: In some markets.
Speaker Change: Hi.
Gerard Sweeney: A couple, yeah, sorry. That's all I've got for you right now, Jerry. Jerry, we're... No.
Speaker Change: Oh, yes, sorry.
Speaker Change: That's all I got for you right now sure.
Speaker Change: Yes.
Frederick McTaggart: There are a lot of projects that we're pursuing that haven't actually gone to the point where we would submit a formal proposal yet. Right. We're in preliminary discussions with the client to understand their needs. And when we do, all those things seem to come in bunches for us. So there's a lot of conversations underway in the marketplace, but we don't have firm projects yet. The customer hasn't decided exactly what they want and when they want it.
Speaker Change: There are a lot of projects that we're pursuing that hasn't actually gone to the point, where we would submit a formal proposal yet right, whereas the preliminary discussions with our clients to understand their needs.
Speaker Change: And when we do all these things seem to come in bunches for us. So there's a lot of conversations on its way in the marketplace, but we don't have firm projects yet.
Speaker Change: Decided exactly what they want and when they want it.
Frederick McTaggart: Is it fair to say that there's more conversations this year on potential projects? I think it's similar, you know, it's definitely not. David Sasnett, John Bair, David Thomas, Frederick McTaggart, David Sasnett, Consolidated Water Co Ltd And, you know, we're talking to people. that, for example, were going down the road of a sort of traditional design bid build. Project Delivery Model and we've been able to get a lot of traction. with our CDRs, Customized Design Report. and our Not Take C pricing on these design-build projects. I mean, what we try to do there is disrupt. Some of these traditional project delivery model projects and offer an alternative to the client.
Speaker Change: Is it fair to say that you're more conversations this year on potential projects. This time last year.
Speaker Change: Yeah, I think it's similar.
Speaker Change: Uh huh.
Speaker Change: It's definitely not.
Speaker Change: Abating at all but there's a lot of clients that need help.
Speaker Change: And.
Speaker Change: We're talking to people there.
Speaker Change: Net.
Speaker Change: For example.
Speaker Change: Going down the road of sort of traditional design bid build.
Speaker Change: <unk> delivery model.
Speaker Change: We've been able to get a lot of traction.
Speaker Change: With our Cdr's customized design reports.
Speaker Change: Or not.
Speaker Change: Not to exceed pricing on on these design build projects so.
Speaker Change: I mean, what we tried to do there is disrupt.
Speaker Change: Some of these traditional.
Speaker Change: Project delivery model projects and offer an alternative to the client.
Frederick McTaggart: And in some cases, you know, we have a lot of interest. So, as David mentioned, we're talking to people. You know, I mean, we're not going to. I mean, we don't have anything specific to disclose other than what I talked about. But our, I'll say this Jerry, our sales department remains very active. They have a lot to do. Yeah, that's essentially what I scanned that. I mean, it feels like there's a lot of activity out there. We do see a lot of projects and we do know they're taking a little bit longer to get through the bid process.
In some cases.
Speaker Change: We have a lot of interest so as David mentioned, we're talking to people and as you know.
Speaker Change: I mean, we're not going to.
Speaker Change: I mean.
Speaker Change: We don't have anything specific to disclose other than what I talked about earlier, but I'll say this year yard sales department, we've answered very active they have a lot to do these days.
Speaker Change: Yes, that's essentially what I was getting at I mean, it sounds like there's a lot of activity out there.
Speaker Change: We do see a lot of projects and we do not where they're taking a little bit longer to get through that.
Speaker Change: Bid processor.
Speaker Change: Two.
Frederick McTaggart: to act. challenge. It's taken longer to get I'd just like to say there's a lot of Your call.
Speaker Change: It's taken longer to get to the big processors.
Speaker Change: I can say that a lot of activity out there.
Speaker Change: Yes.
Frederick McTaggart: on the Cat Island. What's the size of the... Salt Plants. And we should we think of that more as a stepping stone for Are they larger or Consolidated Water Co Ltd Well, they're much smaller than what we're doing in Nassau. I mean, right now we have is it like 14, 15 million gallons per day of production capacity just on Nassau, which is the most populated island. These plants are a lot smaller, talking about islands that have populations of typically less than 5,000 people, but they're more challenging because they're remote, so the price of water is is typically higher than what we charge in NASCAR.
Speaker Change: On the Cat Island side.
Speaker Change: What's the size of those detailed plans.
Should we think of that more as a stepping stone for.
Speaker Change: Are they larger or should we look at that as a stepping stone so you're going to do.
Speaker Change: A bunch of smaller.
Speaker Change: Plant in the outlying islands.
Speaker Change: Well they are much smaller than what we're doing in Nassau I mean, right now we have.
Speaker Change: What is it like 14 15 million gallons per day of production capacity.
Speaker Change: Nassau, which is the most populated island. These plants are lot smaller youre talking about the islands that populations are typically less than 5000 people.
But.
Speaker Change: There are more challenging because their remote so the price of waters.
Speaker Change: Hi are typically higher.
George: George <unk>.
Frederick McTaggart: I think you're going to see some meaningful revenues from these projects over time, certainly from the Cat Island project. Yeah, you know, we think we have a really good relationship with the Bahamian government. So we're hopeful that we can Help them meet what's going to be a growing need for water in the Bahamas, not just in Nassau, but elsewhere in the country. REC said 1.9 million in recurring revenue in a quarter. I think you mentioned PERC, but I didn't catch it. It's not, I can follow up. So the increase was. 75% year-over-year. So what we said was the revenue generated under O&M totaled $7.1 million for the second quarter, $1.9 of that.
Speaker Change: I think youre going to see some meaningful revenues from these projects.
Speaker Change: Over time, certainly from the cat on the project.
Speaker Change: Yeah Yeah.
Speaker Change: We have a really good relationship with the Bahamian government. So we're hopeful that we can.
Speaker Change: Help them meet that's going to be a growing need for water in the Bahamas, not just in Nassau, but elsewhere in the country.
Speaker Change: Got you and then.
Speaker Change: One or two more quick follow ups.
Speaker Change: Our ECS had $1 9 billion of recurring revenue in the quarter I think you mentioned.
Speaker Change: I didn't catch it.
Speaker Change: Airport could you.
Speaker Change: Do you have that number.
Speaker Change: If not I can follow up with you.
Speaker Change: So the increase was.
David Matt, 75% year over year right.
Speaker Change: Yeah. So what we said was.
Speaker Change: Revenue generated under O&M.
Speaker Change: Total to $7 1 million for the second quarter.
Speaker Change: One nine of that.
David Sasnett: was the REC increased, and then you just have to look at... You just have to look at last year's segment. Well, our O&M revenue was $14.2 million for the first half of this year. Jerry, compared to $7.7 million for the first half of last year. And if you look in the 10-Q, and I don't have it in front of me, we detail exactly how much the O&M revenue was for both the first quarter and second quarter and the increase from last Okay. Well, as a matter of fact, I have here a million. Yeah, if 1.9 million was right, I'd just subtract it.
Was the RUC increase and then you just look at.
Speaker Change: You just have to look at last year's segment.
Speaker Change: I think thats in there.
Speaker Change: Well I'll, let him revenue was $14 2 million for the first half of this year.
Speaker Change: Gary compared to seven 7 million for the first half of last year and if you look in the 10-Q and I don't have it in front of me, we detailed exactly how much the O&M revenue was for both the first quarter and second quarter and the increase from last year.
Speaker Change: Okay, well matter of fact, I havent here.
Speaker Change: Yes, it's one point anonymous racket that subtracted inflation that should be yeah. So you know as we just mentioned our O&M revenue for the second quarter was $7 1 million.
David Sasnett: So, as we just mentioned, our O&M revenue for the second quarter was $7.1 million, which is up 75% in total. for the same quarter of last year. And out of that, you know, we didn't have REC for the second quarter of last year. So 1.9 million of the 75% increase. Related to REC so I could you know we could do the math real quick here but you could do it real quick on your on your couch. I was history major. I said I was a history major, don't trust my math.
Speaker Change: Which is up 75% in total.
Speaker Change: In the same quarter of last year.
Speaker Change: And out of that you know we didn't have RAC for the second quarter of last year to $159 million of the 75% increase.
Speaker Change: It's related to RSA socket, we can do the math real quick here, but you can sure.
Speaker Change: Just real quick on your on your kind of I was amazing.
Speaker Change: Okay.
Speaker Change: I thought it was a history major Suntrust My math.
Speaker Change: [laughter], probably shouldn't say that on a conference call, but the last question. Obviously very you know with the Mexico settlement lots of cash on our balance sheet.
David Sasnett: I probably shouldn't say that on conference call, but last question, obviously very, you know, with the Mexico settlement, lots of cash on the balance. And I get that this is probably a board decision, but I'm curious if there's been any discussion. Cap Lo Obviously looking at acquisitions. Dividends, buybacks, I don't know if that sheet can buy. But just curious. Yeah, I mean. I could pretty much tell you that buying back shares would not be considered just because of our challenges with our articles. You know, obviously looking at the dividend rate and that sort of thing.
Speaker Change: And I get that this is probably a board decision, but just curious if those are all discussions on sort of capital allocation.
Speaker Change: Obviously, you're looking at acquisitions.
Speaker Change: You know dividend buybacks I'm not actually buyback shares.
Speaker Change: But just curious.
Speaker Change: I can pretty much tell you that buying back shares.
Speaker Change: Would not be considered just because of the challenges with our articles.
Speaker Change: Yes.
Speaker Change: Obviously looking at the dividend rate and that sort of thing.
And it's really.
Gerard Sweeney: and it's really. up to the board. I mean, we're meeting again next week, so I'm sure it'll be Got it. Okay. I appreciate you getting that. I'll jump back. Thank you.
Speaker Change: Up to the board I mean, we're meeting again next week, so I'm sure it will be discussed.
Speaker Change: Got it okay.
Speaker Change: I'll jump back in line.
Speaker Change: Okay. Thank you.
Speaker Change: Once again, if you would like to ask a question. Please press star and one to withdraw. Your question you May Press Star and two again that is star and then wanted to join the question queue.
Operator: Once again, if you would like to ask a question, please press star and 1. To withdraw your questions, you may press star and 2. Again, that is star and then 1 to join the question queue. And once again, that is star and then one to join the question queue.
Speaker Change: And once again that is star and then wanted to join the question queue.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Operator: And ladies and gentlemen, at this time...
Speaker Change: And ladies and gentlemen at this time.
Operator: We'll conclude our question and answer session.
Speaker Change: We will conclude our question and answer session I'd like to turn the floor back over to Mr. Mctaggart. Sir. Please go ahead.
Frederick McTaggart: I'd like to turn the floor back over to Mr. McTaggart. Sir, please go ahead. Thanks, Jamie. I just wanted to thank everybody again for joining on the call.
Mr. Mctaggart: Thanks, Jamie just wanted to thank everybody again for joining on the call.
Operator: I look forward to talking with you again in November when we release our third quarter results. I hope everybody has a great rest of the summer. Thanks. Thank you.
Speaker Change: I look forward to talking with you again in November when we.
Speaker Change: We released our third quarter results and I hope everybody has a.
Speaker Change: Agree rest of the summer.
Speaker Change: Yeah.
Speaker Change: Yeah.
Thank you.
Operator: Before we conclude today's call, I would like to provide the company's Safe Harbor Statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the company's future revenue, future plans, objectives, expectations, and events, assumptions, and estimates. Forward-looking statements can be identified by the use of words or phrases usually containing the words believe, estimate, project, intend, expect, should, will, or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts, and projections for its business and the industry and markets related to it.
Speaker Change: Before we conclude today's call I would like to provide the company's safe Harbor statement that includes cautions regarding forward looking statements made during today's call.
Speaker Change: The information that we have provided in this conference call includes forward looking statements within the middle of the private Securities Litigation Reform Act.
<unk> five <unk>.
Speaker Change: Including but not limited to statements regarding the company's future revenues future plans objectives expectations and events assumptions.
Speaker Change: Assumptions and estimates.
Speaker Change: Forward looking statements can be identified by the use of words or phrases usually April quoting the words believe estimate project.
Speaker Change: <unk> expect should will or similar expressions.
Speaker Change: Statements that are not historical facts are based on the company's current expectations beliefs assumptions estimates.
Speaker Change: <unk> forecast and projections for its business and the industry and markets related to its business.
Speaker Change: Any forward looking statements made during this conference call are not guarantees of future performance and involve certain risks uncertainties and assumptions, which are difficult to predict.
Operator: Any forward-looking statement made during this conference call are not guarantees of future performance and involve certain risks, uncertainties, and assumptions which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, tourism and weather conditions in the areas we serve. The economic, political, and social conditions of each country in which we conduct or plan to conduct business Our relationships with the government entities and other customers we serve. Regulatory matters including resolution of the negotiations for the renewal of our retail license on Grand Cayman.
Speaker Change: Actual outcomes and results may differ materially from what is expressed in such forward looking statements.
Speaker Change: Factors that would cause or contribute to such differences include but are not limited to.
Speaker Change: Tourism and weather conditions in the areas we serve.
The economic political and social conditions of each country in which we conduct or plan to conduct business.
Speaker Change: Our ships with the government entities and other customers we serve.
Speaker Change: Regulatory matters, including resolution of the negotiations for the renewal.
Speaker Change: Retail license on Grand Cayman.
Operator: our ability to successfully enter new markets and various other risks as detailed in the company's periodic report filings with the Securities and Exchange Commission.
Speaker Change: Our ability to successfully enter new markets and.
Various other risks as detailed in the company's periodic report filings with Securities and Exchange Commission.
Speaker Change: For more information about risks and uncertainties associated with the company's business.
Operator: For more information about risks and uncertainties associated with the company's business, please refer to the Management's Discussion and Analysis of Financial Conditions or Results of Operations and Risk Factors section of the company's SEC filings, including, but not limited to, annual report on the Form 10-K and quarterly reports from Form 10-Q. Any forward-looking statements made during the conference call speaks as of today's date. The company expressly disclaims any obligations or undertaking to update or revise any forward-looking statements. made during the conference call to reflect any changes in its expectations with regard thereto, or any changes in its events, conditions, or circumstances, of which any forward-looking statement is based, except as required by law.
Speaker Change: First in the management's discussion and analysis of financial conditions results of operations and risk factors section the company's SEC filings included including but not limited to the annual report on the Form 10-K and quarterly reports on Form 10-Q.
Speaker Change: Any forward looking statements made during the conference call speaks as of today's date.
Speaker Change: <unk> expressly disclaims any obligation or undertaking to update or revise any forward looking statements made during the conference call to reflect any changes in its expectations with regard.
Speaker Change: Or any changes to that.
Speaker Change: Conditions or circumstances of which any forward looking statement is based except as required by law.
Operator: I would like to remind everyone that this call will be available for replay, so I'd be happy to respond. Please refer to yesterday's earnings release for dial-in replay instructions available via the company's website at www.consolidatedwaterco.com.
Speaker Change: I would like to remind everyone that this call will be available for replay starting later this evening.
Speaker Change: Please refer to yesterday's earnings release for dial in replay instructions available via the company's website at Www dot.
Speaker Change: W O dot com.
Operator: We thank you for attending today's presentation, this concludes the conference call, you may now disconnect your line.
Speaker Change: Thank you for attending today's presentation.
Speaker Change: The conference call you May now disconnect your lines.