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Consolidated Water Reports Q2 2021 Results

GEORGE TOWN, Cayman Islands, Aug. 16, 2021 (GLOBE NEWSWIRE) -- 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 three and six months ended June 30, 2021. Quarterly and first-half comparisons are to the same year-ago 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).

Financial and Operational Highlights

  • Revenue in the second quarter totaled $16.7 million, declining 13%.
  • Services revenue in the second quarter up 8.3% to $3.8 million and bulk revenue up 14.4% to $6.7 million, while retail revenue declined by 5% to $5.7 million and manufacturing down by 85% to $552,000.
  • In the first half of 2021, revenue totaled $33.8 million, which included bulk revenue up 5.3% to $13.0 million and services revenue up 10.8% to $7.3 million.
  • Continued diversification of manufacturing segment products and customer base to offset reduced orders from a major customer. All manufacturing revenue in the first half of the year was generated by new customers and/or products.
  • As of June 30, 2021, cash and cash equivalents totaled $41.2 million, working capital was $68.8 million, debt was $0.2 million, with stockholders’ equity at $165.8 million.
  • Paid $1.3 million in dividends in Q2 2021.

Management Commentary

“Our lower revenue for the second quarter reflects the impact of the global pandemic on our retail segment and reduced orders from a major customer in our manufacturing segment,” commented Consolidated Water CEO, Rick McTaggart. “This was partially offset by improved performance of our bulk water and services segments.

“Our services revenue increased 8% to $3.8 million, which accounted for 23% of our overall revenue compared to 18% in the same year-ago quarter. This was driven by growth in our PERC Water subsidiary.

“Based in southern California, PERC designs, constructs, operates and maintains municipal water treatment and reuse facilities. PERC has been seeing an increase in bidding requests for new design/build projects as well as operating contracts. Its prospective customers in California and Arizona are seeking cost-effective solutions to their wastewater treatment and potable water challenges, particularly those being caused by the unprecedented drought in the region.

“PERC is currently awaiting decisions on recent bids for design/build projects and operating contracts valued at more than $55 million. These projects could also represent recurring annual revenue of more than $2 million in ongoing operating and maintenance agreements.

“In the first quarter of 2020, we increased resources in our manufacturing sales team at our Aerex subsidiary to focus on other market sectors in order to diversify our product, customer and revenue base. This turned out to be especially timely, given the unexpected suspension of orders by Aerex’s largest customer in October. As the result of this investment in diversification, we were able to offset its impact considerably. In fact, we generated manufacturing revenue of $2.2 million from new customers and/or products in the first half of this year, which was equal to the revenue generated for all of last year from customers other than Aerex’s former major customer.

“Manufacturing bidding activity has also increased significantly over the last few months. We presently have a contracted project backlog in our manufacturing segment of about $9 million from new customers and/or products. This has begun to increase our revenues in the second half of this year, and we see it carrying into 2022.

“So, while we’ve had many unexpected challenges over the past year, in all, we believe we’ve taken the right steps to overcome them, and our prospects for growth are very encouraging. We expect improved financial results in the second half of this year as compared to the first six months due to these successful efforts. We also anticipate that the eventual reopening of tourism to our operating area in Grand Cayman will help with the recovery of our retail water segment.

“Given the strong industry tailwinds, which appear strengthened by major increases in federal infrastructure spending recently passed in the U.S., we will continue to focus on those opportunities that will provide increasing value for our shareholders.

“Our strong balance sheet and liquidity position us to ride out the adverse economic impacts of the pandemic, while enabling us to fund our growth initiatives. We believe we are well on track to emerge from these challenging times stronger than ever.”

Q2 2021 Financial Summary

Revenue for the second quarter of 2021 declined by 12.5% to $16.7 million from $19.1 million in the second quarter of 2020. The decline reflects decreases of $292,000 in retail segment revenue and $3.2 million in manufacturing segment revenue. The decrease in revenue for these segments was partially offset by an increase of $846,000 in bulk segment revenue and $287,000 in services segment revenue.

Retail revenue declined due to a 2% decrease in the volume of water sold by Cayman Water. The sales volumes for both 2021 and 2020 are significantly below the historical volumes for the retail segment prior to 2020 due to the continuing cessation of tourism on Grand Cayman resulting from border restrictions initiated in March 2020 in response to the COVID-19 pandemic.

The decrease in manufacturing revenue in the second quarter of 2021 was due to a decrease in orders from Aerex’s largest customer, which informed Aerex in October 2020 that it was suspending its purchases of a specialized product until 2022 due to inventory management related factors. The company anticipates that orders from this customer will resume in 2022 at much lower volumes than in the past, although the resumption in such orders cannot be assured.

The increase in bulk segment revenue was due to higher energy costs, which correspondingly increased the energy pass-through component of CW-Bahamas’ rates. The increase in bulk segment revenue was also due to a 9% increase in CW-Bahamas’ volume of water sold.

The increase in services revenue was due to an increase of approximately $926,000 in revenue from operating and maintenance contracts attributable to new contracts, which more than offset a decline in plant construction revenue of approximately $672,000.

Gross profit decreased 17.0% to $6.1 million in the second quarter of 2021 from $7.3 million in the same year-ago quarter, with gross profit as a percentage of revenue decreasing from 38% to 36% primarily as a result of the decline in revenue for the retail segment.

Net loss from continuing operations attributable to stockholders was $1.5 million or $(0.10) per basic and diluted share, compared to net income of $2.6 million or $0.17 per basic and diluted share in the second quarter of 2020.

Net loss attributable to Consolidated Water stockholders in the second quarter of 2021, which includes the results of discontinued operations, was $1.7 million or $(0.11) per basic and fully diluted share, as compared to $1.1 million or $(0.07) per basic and fully diluted share in the second quarter of 2020. Excluding the impairment loss recorded for the company’s manufacturing segment of $2.9 million, the company’s net income attributable to Consolidated Water was $1.2 million or $0.08 per basic and fully diluted share.

Cash and cash equivalents totaled $41.2 million as of June 30, 2021, as compared to $42.8 million as of March 31, 2021.

First Half 2021 Financial Summary

Revenue for the first half of 2021 was $33.8 million, down 15.1% compared to $39.8 million in the same year-ago period. The decrease was primarily driven by decreases of $1.8 million in the retail segment and $5.5 million in the manufacturing segment. The decrease in total revenue was partially offset by increases of $651,000 in the bulk segment and $713,000 in the services segment.

Retail revenue decreased due to the volume of water sold, which decreased by 12%. This sales volume decrease is due to the continuing cessation of tourism on Grand Cayman resulting from border restrictions initiated in March 2020 in response to the COVID-19 pandemic.

The decrease in manufacturing segment revenue was due to the loss of orders from Aerex’s largest customer.

The increase in services segment revenue was due to an increase of approximately $2.3 million in revenue from operating and maintenance contracts attributable to new contracts, which more than offset a decline in plant construction revenue of approximately $1.6 million.

The increase in bulk segment revenue was due to higher energy costs, which correspondingly increased the energy pass-through component of CW-Bahamas’ rates. The increase in bulk segment revenue was also due to an increase of 7% in the volume of water sold by CW-Bahamas.

Gross profit for the first half of 2021 was $12.2 million or 36% of total revenue, down 23% from $15.7 million or 40% of total revenue in the same year-ago period.

Net loss from continuing operations attributable to stockholders for the first half of 2021 was $212,000 or $(0.01) per basic and diluted share, compared to net income of $5.8 million or $0.38 per diluted share in the same year-ago period.

Net loss attributable to Consolidated Water stockholders for the half of 2021, which includes the results of discontinued operations, was $676,000 or $(0.04) per fully diluted share, down from net income of $1.8 million or $0.12 per fully diluted share in the same year-ago period. Excluding the impairment loss recorded for the company’s manufacturing segment of $2.9 million, the company’s net income attributable to Consolidated Water was $2.2 million or $0.15 per basic and fully diluted share.


Second Quarter Segment Results

  Three Months Ended June 30, 2021
  Retail Bulk Services Manufacturing Total
Revenue $5,674,790  $6,711,971  $3,763,239  $551,524  $16,701,524 
Cost of revenue  2,781,909   4,386,794   2,878,409   589,559   10,636,671 
Gross profit (loss)  2,892,881   2,325,177   884,830   (38,035)  6,064,853 
General and administrative expenses  3,318,473   303,856   671,585   430,390   4,724,304 
Gain (loss) on asset dispositions and impairments, net  3,360         (2,900,000)  (2,896,640)
Income (loss) from operations $(422,232) $2,021,321  $213,245  $(3,368,425)  (1,556,091)
Other income, net                233,114 
Loss before income taxes                (1,322,977)
Benefit from income taxes                (6,845)
Net loss from continuing operations                (1,316,132)
Income from continuing operations attributable to non-controlling interests                197,138 
Net loss from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                (1,513,270)
Net loss from discontinued operations                (151,379)
Net loss attributable to Consolidated Water Co. Ltd. stockholders               $(1,664,649)


  Three Months Ended June 30, 2020
  Retail Bulk Services Manufacturing Total
Revenue $5,966,296  $5,866,397  $3,476,000  $3,778,554  $19,087,247 
Cost of revenue  2,769,497   3,941,309   2,631,513   2,441,785   11,784,104 
Gross profit  3,196,799   1,925,088   844,487   1,336,769   7,303,143 
General and administrative expenses  3,266,782   261,100   711,350   318,381   4,557,613 
Gain on asset dispositions and impairments, net        5,205      5,205 
Income (loss) from operations $(69,983) $1,663,988  $138,342  $1,018,388   2,750,735 
Other income, net                 260,957 
Income before income taxes                 3,011,692 
Provision for income taxes                 204,268 
Net income from continuing operations                 2,807,424 
Income attributable to non-controlling interests                 180,154 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                 2,627,270 
Net loss from discontinued operations                 (3,755,112)
Net loss attributable to Consolidated Water Co. Ltd. stockholders                $(1,127,842)


First Half 2021 Segment Results

  Six Months Ended June 30, 2021
  Retail Bulk Services Manufacturing Total
Revenue $11,386,095  $12,957,941  $7,304,085  $2,156,720  $33,804,841 
Cost of revenue  5,489,903   8,541,947   5,600,337   1,981,291   21,613,478 
Gross profit  5,896,192   4,415,994   1,703,748   175,429   12,191,363 
General and administrative expenses  6,689,483   681,359   1,393,605   724,343   9,488,790 
Gain (loss) on asset dispositions and impairments, net  (246,640)  1,500   (433)  (2,900,000)  (3,145,573)
Income (loss) from operations $(1,039,931) $3,736,135  $309,710  $(3,448,914)  (443,000)
Other income, net               547,722 
Income before income taxes               104,722 
Benefit from income taxes               (9,505)
Net income from continuing operations               114,227 
Income from continuing operations attributable to non-controlling interests               325,931 
Net loss from continuing operations attributable to Consolidated Water Co. Ltd. stockholders               (211,704)
Net loss from discontinued operations               (464,173)
Net loss attributable to Consolidated Water Co. Ltd. stockholders              $(675,877)


  Six Months Ended June 30, 2020
  Retail Bulk Services Manufacturing Total
Revenue $13,223,728  $12,306,681  $6,590,813  $7,691,746  $39,812,968 
Cost of revenue  5,756,117   8,505,889   4,905,033   4,902,465   24,069,504 
Gross profit  7,467,611   3,800,792   1,685,780   2,789,281   15,743,464 
General and administrative expenses  6,640,621   553,146   1,384,040   675,115   9,252,922 
Gain on asset dispositions and impairments, net     200   4,785      4,985 
Income from operations $826,990  $3,247,846  $306,525  $2,114,166   6,495,527 
Other income, net                  288,218 
Income before income taxes                  6,783,745 
Provision for income taxes                  410,351 
Net income from continuing operations                  6,373,394 
Income from continuing operations attributable to non-controlling interests                  541,152 
Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders                  5,832,242 
Net loss from discontinued operations                  (4,071,477)
Net income attributable to Consolidated Water Co. Ltd. stockholders                 $1,760,765 


Conference Call

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

Date: Tuesday, August 17, 2021
Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)
Toll-free dial-in number: 1-844-875-6913
International dial-in number: 1-412-317-6709
Conference ID: 10159283

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 August 24, 2021, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

Toll-free replay number: 1-877-344-7529
International replay number: 1-412-317-0088
Replay ID: 10159283

About Consolidated Water Co. Ltd.
Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company operates water production facilities in the Cayman Islands, The Bahamas and the British Virgin Islands and operates water treatment 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 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; (v) the possible adverse impact of the COVID-19 virus on the company’s business; and (vi) 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. Sasnett
Executive Vice President and CFO
Tel (954) 509-8200
dsasnett@cwco.com

Investor Relations Contact
Ron Both, CMA
Tel (949) 432-7566
CWCO@cma.team


CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS

  June 30,
 December 31,
  2021
 2020
  (Unaudited)    
ASSETS        
Current assets        
Cash and cash equivalents $41,210,143  $43,794,150 
Accounts receivable, net  26,119,130   21,483,976 
Inventory  2,500,070   3,214,178 
Prepaid expenses and other current assets  3,375,644   2,412,282 
Contract assets  415,633   516,521 
Current assets of discontinued operations  1,480,101   1,511,099 
Total current assets  75,100,721   72,932,206 
Property, plant and equipment, net  54,704,193   57,687,984 
Construction in progress  681,317   440,384 
Inventory, noncurrent  4,432,645   4,506,842 
Investment in OC-BVI  1,674,277   2,092,146 
Goodwill  10,425,013   13,325,013 
Intangible assets, net  3,756,666   4,148,333 
Operating lease right-of-use assets  2,963,075   1,329,561 
Other assets  1,842,420   1,926,594 
Long-term assets of discontinued operations  21,130,307   21,166,489 
Total assets $176,710,634  $179,555,552 
         
LIABILITIES AND EQUITY        
Current liabilities        
Accounts payable, accrued expenses and other current liabilities $2,654,942  $2,856,127 
Accounts payable - related parties  278,739   200,558 
Accrued compensation  1,402,148   1,434,106 
Dividends payable  1,301,025   1,300,022 
Current maturities of operating leases  555,591   455,788 
Current portion of long-term debt  54,698   42,211 
Contract liabilities  14,581   461,870 
Current liabilities of discontinued operations  69,602   188,434 
Total current liabilities  6,331,326   6,939,116 
Long-term debt, noncurrent  148,876   126,338 
Deferred tax liabilities  1,332,998   1,440,809 
Noncurrent operating leases  2,464,960   982,076 
Net liability arising from put/call options  528,000   690,000 
Other liabilities  141,000   362,165 
Long-term liabilities of discontinued operations     2,499 
Total liabilities  10,947,160   10,543,003 
Commitments and contingencies        
Equity        
Consolidated Water Co. Ltd. stockholders' equity        
Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and outstanding 37,349 and 31,068 shares, respectively  22,409   18,641 
Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and outstanding 15,202,371 and 15,143,683 shares, respectively  9,121,423   9,086,210 
Class B common stock, $0.60 par value. Authorized 145,000 shares; none issued      
Additional paid-in capital  87,196,150   86,893,486 
Retained earnings  61,643,938   64,910,709 
Total Consolidated Water Co. Ltd. stockholders' equity  157,983,920   160,909,046 
Non-controlling interests  7,779,554   8,103,503 
Total equity  165,763,474   169,012,549 
Total liabilities and equity $176,710,634  $179,555,552 


CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2021 2020 2021 2020
Revenue $16,701,524  $19,087,247  $33,804,841  $39,812,968 
Cost of revenue (including purchases from related parties of $129,401 and $371,201 for the three months ended, and $285,383 and $864,664 for the six months ended, June 30, 2021 and 2020, respectively)  10,636,671   11,784,104   21,613,478   24,069,504 
Gross profit  6,064,853   7,303,143   12,191,363   15,743,464 
General and administrative expenses (including purchases from related parties of $24,299 and $0 for the three months ended, and $28,728 and $0 for the six months ended, June 30, 2021 and 2020, respectively)  4,724,304   4,557,613   9,488,790   9,252,922 
Gain (loss) on asset dispositions and impairments, net  (2,896,640)  5,205   (3,145,573)  4,985 
Income (loss) from operations  (1,556,091)  2,750,735   (443,000)  6,495,527 
             
Other income (expense):            
Interest income  174,645   109,818   335,009   246,259 
Interest expense  (2,638)  (2,818)  (5,498)  (5,344)
Profit-sharing income from OC-BVI  4,050   14,175   10,125   24,300 
Equity in the earnings of OC-BVI  10,726   34,095   26,506   59,976 
Net unrealized gain (loss) on put/call options  31,000   80,000   162,000   (81,000)
Other  15,331   25,687   19,580   44,027 
Other income, net  233,114   260,957   547,722   288,218 
Income (loss) before income taxes  (1,322,977)  3,011,692   104,722   6,783,745 
Provision (benefit) for income taxes  (6,845)  204,268   (9,505)  410,351 
Net income (loss) from continuing operations  (1,316,132)  2,807,424   114,227   6,373,394 
Income from continuing operations attributable to non-controlling interests  197,138   180,154   325,931   541,152 
Net income (loss) from continuing operations attributable to Consolidated Water Co. Ltd. stockholders  (1,513,270)  2,627,270   (211,704)  5,832,242 
Total loss from discontinued operations  (151,379)  (3,755,112)  (464,173)  (4,071,477)
Net income (loss) attributable to Consolidated Water Co. Ltd. stockholders $(1,664,649) $(1,127,842) $(675,877) $1,760,765 
             
Basic earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders            
Continuing operations $(0.10) $0.17  $(0.01) $0.39 
Discontinued operations  (0.01)  (0.24)  (0.03)  (0.27)
Basic earnings (loss) per share $(0.11) $(0.07) $(0.04) $0.12 
             
Diluted earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders            
Continuing operations $(0.10) $0.17  $(0.01) $0.38 
Discontinued operations  (0.01)  (0.24)  (0.03)  (0.26)
Diluted earnings (loss) per share $(0.11) $(0.07) $(0.04) $0.12 
             
Dividends declared per common and redeemable preferred shares $0.085  $0.085  $0.17  $0.17 
             
Weighted average number of common shares used in the determination of:            
Basic earnings per share  15,201,682   15,114,506   15,201,571   15,114,506 
Diluted earnings per share  15,201,682   15,269,334   15,201,571   15,269,175 

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