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Consolidated Water Reports Q2 2021 Results

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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