Consolidated Water (CWCO) 15 Nov 222022 Q3 Earnings call transcript

Good morning, and thank you for joining us today to discuss Consolidated Water Company's Third Quarter 2022 Results. Hosting the call today is the Chief Executive Officer of Consolidated Water Company, Rick McTaggart; and the company's Chief Financial Officer, David Sasnett.

Following their remarks, we will open the call to your questions. [Operator Instructions] Before we conclude today's call, I'll provide some important cautions regarding the forward-looking statements made by management during the call. I'd like to remind everyone that today's call is being recorded, and it will be made available for telecom replay per the instructions in yesterday's press release, which is available in the Investor Relations section of the company's website.

turn McTaggart. over to Company's Consolidated like Rick CEO, I'd the to call Water Now go please Sir, ahead.

Joe. for joining you, us Thank Good today. morning, everyone. Thanks

we our in saw a reflecting third revenue you in all earnings XXXX, issued As four in of our quarter of XX% segments. revenues our yesterday, increase increases for business the release reported

indicative G&A explanation certain of will performance believe that We G&A net our income. income expect should expenses However, investors G&A call. provide net quarter's what increased later expenses higher in impacted are David flat last the in not of quarter, which quarters. expenses and last upcoming these an

return benefited sold to the of Our revenues from retail water XX% Cayman Islands. volume in increase water due in Cayman of continued tourist the Grand activity a the to

QX. this this the so in for on is we Cayman now segment well the activities in Arizona. quarter This revenue Water fourth recognize underway we previously PERC revenue revenue significant design from of the new Arizona pursuant permitting in on beginning Authority of an will $XX contract The completed the project are is water of we QX, $X.X from contract Also million and Grand this million project the of by we we additional underway recognized and with recognizing signed in preliminary activity Water's resulting contract was increase Cayman significant construction anticipate in increased to construction but the desalination Goodyear, design-build-operate constructing the on with advanced as the plant plant that Our minimal in the revenue QX during on XXXX. and most and progress XX-year project, phase announced design for contract Services and expected the we permitting Islands. progressing now additional treatment

I take through would our to David of year call for the like outlook our details XXXX, over into who financial and Sasnett? Mr. for to major our quarter. these us progress will the the getting the rest into turn Before with the CFO, projects and Sasnett,

issued find of good Thanks, third can the everyone. Rick, earnings Investors it you quarter Yesterday, release website. the in XXXX, of our and section and for our morning, we

revenue due increased up And to XX% the improvement year. a for as volume year well revenue, As increased the the of that revenue increase and million as Rick costs additional third an in also in mentioned, more compared revenue we of $X we retail quarter segment energy this our to our Retail We're in tourist was is last from $XX.X year. quarter, of which increases million $X.X retail revenue, Islands. Services This the higher last a in reflects in as in Cayman reported XX% mix. growth pass-through orders our of segment of third result our sold the segment in component the of increase third in our of $XXX,XXX rate $X.X The revenue. segment energy revenue activity in rates water our million favorable quarter the Bulk million of manufacturing

customers. the of rate increase by much such a higher pay these volume was Water for our properties, per tourist-related As generated and in than sales properties residential Cayman gallon

revenue of quarter, our plant Services maintenance services revenue. increases segment revenue increase operating both in quarter construction CW-Bahamas costs Our our in component was the started and water bulk treatment cost segment the with to out we energy that due segment revenue work would contract expect The due in resulted CW-Bahamas. contract recognize revenue I in of recognized in was -- future for we increased like pass-through from manufacturing activity. to an of small Most even Liberty new on to quarters. slightly the rates. But the we in increase and design was in really increased and amount plant what increase to an increase the The this was revenue Utilities this relative Arizona. attributable project Liberty that energy though to and Utilities revenue PERC's to constructed contract and increase point advanced on Goodyear, energy this These design higher

net change Our relative percentage to the quarter year, to incurred decreased repairs quarter gross quarter of from higher one, from the increased attributable about last our operations or points for We third year three $X.X to million quarter to period the operations share. our of in was maintenance XX% income to This this margin third factors: million and continuing $X.XX these Bahamas This segment Water in per income same last profit expenses as of the year. compared to stockholders of XX.X% up for attributable $XXX,XXX for diluted types X.X decrease basic same XXXX and Number gross to or intermittently. share Consolidated net XXXX quarter $XXX,XXX. Net from revenue operations. last the third for while $X.X income These due of the compares a were mix. $X.XX continuing primary expenses per totaled

this have they can on So results quarter's any as impact significant they in one quarter. a had

note for PERC a that the Islands. metrics this the from that performance were of year-to-date important in years bank arising management the the to recognized higher increased need Bahamas year, the option to created October of to increased bonus salaries loss performance to issued our of in company. options in the revaluation PERC's various year. out expenses income It's we net the our are due with and our transfer to acquired put/call G&A the from the company to fiscal Most in profits last for connection acquisition employee third other improved year for purchase want of pay our we accruals shares factor to categories. subsidiary of also our Cayman accruals And $XXX,XXX related as give decrease raises of call point a financial bonus XX% upon that compared that notably, to some the ago. exercised charges We or I the on financial our based

this For six obtain expectations months upon the XXXX the of Gate Utilities accrued required Once amounts year, and for financial Thus, lower based we year-end Liberty of substantially. Red we also a record relating new of initial contracts, our bonuses this development we bonus professional we business. to first to higher cumulative results our were general, I And at quarter has increased projected business most expenses. G&A results. our in point pursuit that And inflation fees in catch-up to want increased accrual. out expenses incurred of our

$X.XX attributable operations fully basic per diluted $XXX,XXX compares stockholders diluted discontinued includes to of income the or net that income This for Our share $X.XX third fully $XXX,XXX of or share. was net and XXXX. quarter basic per to and

Now balance turning to and our sheet. our financial condition

increase the $XX.X as in from of million reflects XXXX. $XX.X XX, This $XX year, months million almost of and equivalents $X of an of totaled million for nine to first $XX.X equivalents September the due cash increase million and this as cash were which increase from operating a This activities, generated year-to-date. of cash Our million June year. XX this cash was

at our capital working debt million. totaled As XX, totaled $XXX.X have equity September stockholders' still our $XX.X and $XXX,XXX, of only we million,

West This includes plant the As include year $XXX,XXX balance amount construction existing the plant for of Cayman recently water for contract. desalination XX, and $X projected plant awarded and our replacement of million. authority’s the approximately approximately desalination capital on million construction our seawater Bay under our $X.X of requirements operations Grand the expenditures of construction September liquidity for of new the for the

exercised we in option earlier, mentioned to PERC. minority I October, remaining in purchase XX% the our As interest

So our complete this to also will necessary liquidity funds include requirements purchase. the

third-party which approximately based will $X.X in is presently the minority For in October a for this purchase million valuation, paid underway. upon price PERC, year. dividends interest be We

Board. future declared any liquidity credit Scotiabank us to during short-term This a quarter, also dividends line some in obtained Cayman revolving requirements we financing capital assist our $XX with include obtained of working future needs. million with the Islands. And our line Our was and will the by

of borrowings any this date, However, not line. under to the have we utilized

So our quarter. like with summary things to back I'd And over for this financial turn Rick. to completes the that,

projects. about major Thanks, bit segments business David. I'd more like to and talk our a

are we to hotels passengers Grand Looking the And Islands major In -- at resume its lifted their Grand a were entry airlines COVID-XX-related government. positively the has rapid sure operations flights island. easing and tourist tourism by cruise in around island here this activity back restrictions year, lot In Cayman will week our surprised we the by return like to pleasantly in impacted all in of the of thousands to are of here this were Cayman, I of Grand and are retail March and tourism several Cayman. restrictions the the port. water David August, to and of looks this Cayman for full. ships welcome

happening pleased very to we're So what's see here.

are recent We by the of commencement Cayman XXXX Cayman. indications flights return tour Los Grand to beginning historical Angeles on to encouraged of saw more levels the the will month, by Cayman the nonstop At season we this that from Airways. Islands

So more airlift, more tourists expectation. would be the

operations the factors, fourth improvement quarter Given first our retail expect water the for year. of in and these we quarter continued next

travel milestone, Bahamian with materially year, the by September economy. Our not the government. were downturn this expectations in by or bulk the to remain our and another was consistent COVID operations Effective the segment affected this eliminated Bahamas COVID-related restrictions all

mentioned for designed of And I in earlier, Cayman. million quarter water up we on seawater per Red gallons Grand the the plant broke authority. reverse has As this to day produce fourth the osmosis in X.XX to ground water plant portable Gate been

the allows of operating water the approximately of plant this January to note the And bulk in to the authority to the inflation the We this term at project capital $XX at the the total on XXXX and of the year expected and costs actually at for end to sale our year. year again, the this and of expect earned water be by with bid majority cost The million of end revenue by first of end just next months sales about the be contract XX is XX I'll construction over years. generated also adjustments the values. during the revenue generated for for over year revenue remaining of inflation contract adjustment XX.X based

Caribbean to per of year. build, market, activity the a bidding plant resolution been we're million we're Now gallon operate the looking which Grand of for in and the following this of design, seeing in the also end We're Hawaii extended X.X couple awaiting at outlook opportunities has seawater that the some process desal day region. Cayman, beyond in finally Honolulu,

we believe announced designing, Hawaii in projects is building project. us project extensive plants And to So if years. in very successful the enabled proceed similar they we've for that completed This successfully many to that we our experience shortlisted the these in the seawater and types over in sometime January for be comparable the of Caribbean be bidder would to projects expect the and future. operating in project this in with

Now in the been projects looking some California-based the our subsidiary, PERC, Southwest United U.S. operations of working exciting PERC on Water recycling had wastewater at States.

project, by treatment PERC. Western $XX.X expanded construct maintain and some project facilities groundwater is bid, used an very antiquated project of proceeding to California. Liberty lower fourth on on that be design, was scheduled Its recycled We contract an schedule, in which longest-term believe able an Southern The with it XX-year that discussion plant and Also us unique to XXXX. there's PERC XXXX. which expect million wastewater, in PERC's and commission It's they the awarded advanced of of operations our is and delivery project we management And This to a to increased performance, as As in schedule earlier, more business from for continue water of advanced represents, -- in enabled I'll U.S., construct the for market facility support we will cost, we difficult wastewater for contract. project clients deal of and do X delivery build. think, cost services. revenue the June aspects in design, begin the lot a to Under a note our California. and to anticipate about plants product water overall day was was think drought longest and per project this for project unprecedented models is affirmation fully accelerated golf Utilities project mentioned announced world-class this generating And experiencing at treatment important conditions. PERC Delivery this two in operations projects. water we with replenishment contracted completed and all PERC was be irrigation, maintenance growing maintenance ultimately these that could were a We quarter and a design, obtain areas region only asset to operating desal model, the they're delivery because two versus Arizona. October, and for win segment Liberty that We just win schedule, plans a treatment of we model. currently which to million-gallon this plant drinking to even our in have of market operate from commission to PERC’s our a those milestone in beneficially including that design, much Liberty course those May, currently this world. PERC’s in that and as an offerings, do such robust is

at to challenging increased be So back supply we and now economic quarter, have third by looking continued the constraints conditions our that costs. manufacturing. held chain In

However, and this order moving in improvement more saw backlog significant start we has through some the us process. our manufacturing October, allowed of to

over three will XX backlog to anticipate over past $XX be booked months as of the a Our million. revenue order backlog this contracted next We manufacturing record the months. most increased

However, and materials depending we can of equipment. the timing on caution that availability change

in part enter success to as backlog growth industrial due small markets, team integrated new sectors. is who clients of mining no such develop our Our the sales new and and the

quick was you in project, matter. the XXXX. update give to canceled Rosarito The know, like I'd you real as Now a on

We will be relating state's the delay We but the suspended. the the of potentially to discussions, the as reiterate to in California been claim agreed for in during resolve arbitration both with like discussions ongoing the water to I'd solution our of Mexico a course that that government to our as shortages. discussions has project appointment positive their result Baja cancellation not continue we've these active of to arbitrators well addressing acute hope the with parties.

partnership related addition mentioned we this and to continue G&A to some be product In of our opportunities organic offerings to existing base. customer expenses that acquisition and our activities quarter. business David past to would earlier are our growth, potential that businesses, pursue complementary development

a outlook in in of more Caribbean. segment. tourism our the multiyear record we coming growth positive obtained our United $XXX this our support increased in second, manufacturing the could will We are impact business million growth two mining States; in the high by see actively many Cayman bidding services another sector. in project activity and that that and Grand positive United the The factors wastewater already revenue States These our into in more continued major grow include year bigger to equipment recovery than pursuing could area further Services for projects the have continued much bring and operating one continued earnings our manufacturing future opportunities, driving growing the We growth and of rapidly they quarters and quarters. our the earnings providing backlog importantly, on

trends of represent ahead. All growth for and activities greater catalysts these

up Joe, questions. I'd Now, the to like call open for

ROTH And Sweeney first from Instructions] [Operator question come our Gerry Capital. will here with

will have be start than that you looking Let's you finalized? was XX%. PERC. -- I ask range with valuation idea could to the for the when at -- But know if if what is will I any curious better give last

to Well, four-month we transaction. period have basically close a the

signed that agreement we So under we the with them.

the at of end we option So exercised October. the

early that. next we year, complete So should

is sounds cetera. just and in not -- desal Got And number anything recycling, just it about reuse, does it. opportunities, or water good what for you're it. -- PERC. speaking a like projects a What at Could PERC? activity Got little on et very but then the that funnel the elaborate looking funnel bit maybe of you potential, -- like maybe on the

builds, Well, from -- or I the reuse three new of projects we're two to that there's potential mean, about. probably smaller clients talking standpoint client

primarily water drought and for type the build with are the They course be in deal. shortages. properties with golf hard recreational the type that design, a would are West, So -- hit

that in years. we're operating those market. got that. There's in treatment. in for advanced was contracts just very a our that be will has, unique into more operating client it companies we operating we're that that on at, So next large important advanced think, the be is we water of the have think those for primarily plant renewals bid WRD another plants. a have that out It the that in because would it's much We few there And next other year. experience very in contracts there's resume two than up competitors impactful PERC looking There's that any now that starting water these the situations U.S. I treatment

an treatment I So plant, they tomorrow. water today advanced ribbon cutting or their think had

full have So behind right projects time them now, that hands working looking the we're our Gerry, to we with in comes. We're on. when the fill

a to PERC more opportunity how look What's thoughts at was drive lead growth That of the in an to my there -- additional actually is into good capacity? we terms second question heavily invest that? was it? on do in Or to or

Yes, mean ownership an mean, years it's -- absolutely. growth I -- -- three there. substantially. the that I just There's were ongoing really mean we've last we're driven we over no... I process. had their interest we've we

investment, the Chunky just continuous investment.

work there. XX investing investment design, mean, doing I of human not like tens own, do does millions really we're of Consolidated these jobs. and resources we're years. mean, there's type can over people just or XX It's incremental no where build, resources, I that operate dollars

a getting there managing do matter that can growth people the work. So and it's just the it's the of

sorry, -- go ahead the then Got one on David. it. And question

-- the invest there's don't the the business of our and It's mean really have we growing way much opportunity to moment. at restrictions in capital with business. on to that in not like say do we I plants not I desal was going

performance So self-funded which contracts of, I words, we've mean -- no problem constraining assume us most not it's PERC. funding with these taken design-build had and we get the -- other through are in of capital, far. could we so with

at -- are wasn't was No, -- kick plant, I quite assets. from off. an no, the and side. I didn't in large I capital more of investment to Things be looking to at physical I terms starting honest looking human wasn't it

even the maybe your obviously, opportunity. and getting was sure a all requirement lot I year United this States know You're to in we after drawing engineers, wasn't a drought backlog there salespeople building. if more because add desire more of

So that was the on more directional...

Yes. when was of I revenues next think will that increased any the broader mean A in lot things. contract. was of went WRD sort from mean, last we and talked year. inflation the factors. our staff to adjustments bulk about I'll a to up David I Those to -- the some And mean lag PERC, getting of working that in to mean we revenues I year, we're we because went I costs, adjustments. our increased hire start other be -- XX for mention mean of by I just environment contracts there's about an new had -- will related next costs of quarter. over standpoint I those our economic where inflation kicking

help be that will additional those adjustments, contracts costs PERC as some of will well. the to of absorb getting Some and inflation

you. That's important. appreciate I that. Thank

payments. just the Another question, on

see is the is, XX%. last se normal off The volumes opportunity up, were were far and much the cetera. per also where of if any of the et really staffing I How wanted that -- in volumes be we what Cayman? increase idea sure more different, about normal not think to believe, -- it's year? today? And getting we I’m I normal to question understand of if volumes you sort back is hotel normal? how What's are But I just I are had to what may XXX%, is question the

the that year, exactly not a I of from look result we Gerry, took below numbers about a the the the island. closing few what normal year. the fourth XX% but numbers we -- did volumes a for had -- as still at quarter a volumes originally, days of were ago. disclosed yesterday we about -- in XX% yesterday, historical the this of off the were third And for

down not -- been we're And down trend has XX%. going the XX% we're So up. anymore, it's

concerned. indication would are in So pre-pandemic. And is pretty be down I can we to was mentioned tourism it you, see as here that busy to hopefully, far Grand airport, quarter Cayman back flight, had hotel earlier, as flew rooms we're in -- normal getting are Cayman, did that trouble things closer that fourth down a much volumes we to here. the full Rick tell we what I would as an when

going very normal, of We we're see. to think things what So first pretty much back are be to by we quarter encouraged the next with hopefully, year.

from have we John question Bair another with Looks Ascend Advisors. like Wealth

the project what bid delay missed have but... may on Just it, Hawaiian I was? the

us give us not they Yes, -- the why December end They to they extend in the they -- to wanted on of the year. decided to whether asked that have project didn't the they they're back with extension. to until their now still they XX extend bidders the get bid the proceed we pricing haven't the June. going or too asked much client had the pricing But until or information

how other the many project? Okay. on you of sense have are bidding entities any Do

just know in for how to don't nice we actually many We we of bidding including It's waiting bid. had project, to that a last over them the Well, few it. were do. months. and involved a total process. get decide And actually they're of We from going hope what we're questions ourselves number the know we three, a

a [Operator will next question with be Instructions] from follow-up Gerry ROTH Our Sweeney Capital.

inflationary pass-throughs stayed of the that some like pass-through. gross even a of the you question of year. pass-through sort on to there's Rick, did energy dollars at Just some in bulk side, you the mention going when a profit But margins. as end be had

lower. Is the stay may dollars that but the profit percentage an assessment? gross it So same, may look accurate make

margin -- on make pass-through. any yes, the we're would we I don't not meant to guess, because

energy because I increased changes. So the the significantly, of revenues price think,

on our denominator, add energy plants margin very and when efficient number the numerator it since the But minimal on a some the small are Gerry, we the affects you very very pass-through plants. make the margin. Yes. to

what That's out. figured I

Okay.

So revenue. it's the because just of pass-through haven't percentage gross profit changed, the has energy and dollars -- just mostly that

exactly, it yes. That's

Century And our New from will with next Advisors. question come Christine Song

question guys I had activity allocation. mentioned correctly. opportunities, the know on a capital two manufacturing you you had And you're just I I if pursuing mining in heard in wastewater M&A equipment -- the and you the sector, have

So opportunities, increase kind attractive can elaborate also, if well of as kind buying. specifically two also can buybacks these in you on find allocation? thoughts your the what And mining dividends sector you multiples with in on opportunity? guys size for as of terms you And of capital your then

Yes, opportunity. The partnerships. when about is The acquisitions opportunity spoke I and sector mean -- earlier, mining I that I said partnership a sure, Christine.

would of that mainly industry. a be to It would sector entities impact manufacturing partnership mining So our the segment. other provide with equipment fast-growing some to

that or in any investment necessarily particular capital there be situation. wouldn't much there So

it talk the other with acquisitions. The sort don't don't do million, midst But I I about $XX right in with be million, owners. of past. in something mean in mean values of now. acquisition, negotiating the wastewater mean we've I line we the what $XX the we any would done $XX acquisition, we're million

grown that very rapidly. give of existing We our into sub-$XX more a haven't sort million attractive done grow opportunity market a They're to deals anyway. that's service new very us recently offerings

to And our dividends buybacks. and with respect

years us articles XXXX. company program have shareholder a of a our around actually to stock Unfortunately, plan to buyback incorporation several in initiating we our ago buyback stock approval shareholders. and proposed Our for proposed requires

I proposal by allow our to articles to approved authority mend incorporation think it we buybacks. that the XXXX, And not stock that shareholders. to have was us XXXX, of we was proposed

So the not at legally, own our stock we're to back buy allowed moment.

Without shareholder approval.

I valuation We'd more that upon of growth would it approval, we to time them, growth think income than shareholder believe get is to our company's anytime -- that -- a such dividend get we a failed given we as have more think don't and approval policy is doing our amount an our we're again that contemplating the based viewed pay. proxy stock. getting Look, we one company, dividends We have soon. we're of out that

So we'd to business. and like to reserves allocate do our new cash projects existing

our we'd businesses, think accumulate that I like can't of if ideally, to the find out dividends, Directors to we Board projects. -- allocate acquisitions, for But increase probably if our continue we them. I I'm new fully cash, aware will is balances, speak we Board increase. cash will have sure capital our we However, that probably do But but excess

At please ahead. to Mr. this the our turn like over McTaggart. back I'd time, this question-and-answer to session. now call Sir, go concludes

the March Thanks, Joe. I'd and in Thank like in to everybody and you to earnings with company. on you. we when forward Water, I interest thank care. today for Consolidated announce for for our your Take being the again speaking call look fourth quarter full year

company's Private provide conference we includes regarding that and before statements of company's to objectives, future I statements The Securities assumptions statements events, made limited revenue, XXXX, forward-looking forward-looking includes Litigation would like within this today's call. the Harbor call conclude gentlemen, in the the provided Safe Ladies we've information the estimates. and meaning call, cautions regarding plans, today's that statement and including, to, expectations but future not Reform of Act during

differences statements Forward-looking with historical estimate, expressed expressions. project, similar regulatory relationships renewal are words by and from plan assumptions, based license and the Statements in can to use country such the and or and weather words its conditions social expectations, the statements. current our other the of containing markets and we customers such political or projections the the difficult differ retail but related not serve, areas government risks, in be Grand conduct forward-looking our call we beliefs, guarantees made that or estimates, and tourism to identified include, usually will cause each are for conditions of are statements we pandemic, business, that to our to, manufacturing forecasts expect, Factors are particularly should, this conference certain the what facts serve, business. Cayman. phrases involve retail on intend, or which is segments, company's the in limited may of forward-looking during on resolution believe, assumptions, results predict. COVID-XX business would impacts contribute Any its industry including are economic, for of not of which negotiations to and and the future outcomes matters, Actual uncertainties of entities and and conduct not materially on performance the

company's other Exchange Securities ability new successfully the periodic as Commission. Our filings the various risks enter and detailed in to and markets report with

statements call or and refer disclaims expressly about during expectations uncertainties operations report call and SEC the changes the forward-looking as information Form conference or discussion company's statements regard results any undertaking based, revise speaks of any to conditions XX-Q. which analysis Form reports forward-looking any with conditions filings, the its in limited The company law. as to more in thereto the sections today's of associated required change please except company's by but on financial or during XX-K its to, forward-looking of annual made of Factors and is Risk its obligations with update management's events, any business, date. or reflect conference any circumstances to quarterly the or including, for statement Any For made of risks the and not

to dial-in website call and for release Before today's at attending the earnings call. conference you Thank will later today's evening. presentation. www.cwco.com. refer this like company's call, via concludes be Please the this conference to replay starting instructions we end replay now available for available for This would that I yesterday's everyone remind

now may lines. disconnect You your