PR Newswire | Nov 16, 2020 08:00PM EST

11/16 19:00 CST

Consolidated Water Reports Q3 2020 ResultsRevenue up 11.2% to $17.7 Million; Net Income from Continuing Operations of $1.8 Million or $0.12 per Share GEORGE TOWN, Cayman Islands, Nov. 16, 2020

GEORGE TOWN, Cayman Islands, Nov. 16, 2020 /PRNewswire/ --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 nine months ended September 30, 2020. Quarterly and nine-month comparisons are to the year-ago period unless otherwise noted.

Financial Highlights

* Revenue in the third quarter of 2020 increased 11.2% to $17.7 million. * Revenue for the first nine months of 2020 increased 12.3% to $57.5 million. * Net income from continuing operations attributable to Consolidated Water stockholders for the third quarter of 2020 was $1.8 million or $0.12 per basic and fully diluted share, as compared to $2.3 million or $0.15 per basic and fully diluted share in the year-ago quarter. * For the first nine months of 2020, net income from continuing operations attributable to Consolidated Water stockholders was $7.6 million or $0.50 per fully diluted share, down from $8.6 million or $0.57 per fully diluted share in the same year-ago period. * Cash and cash equivalents totaled $38.2 million as of September 30, 2020, as compared to $35.0 million as of June 30, 2020. * Paid $1.3 million in dividends in Q3 2020.

Management Commentary

"During the third quarter of 2020, Consolidated Water generated substantial revenue growth and returned to profitability from Q2," said company president and CEO, Rick McTaggart. "Over the first nine months of the year, we were also profitable, generating nearly $11 million in cash from operations.

"Fortunately, we have not been as impacted by the adverse conditions created by the COVID-19 pandemic as much as others. Our teams have worked diligently throughout the pandemic to ensure that we are able to continue our operations and pursue additional projects that can strengthen our business.

"Our Q3 topline growth is largely due to the $3.2 million in revenue contributed by our new PERC Water subsidiary, which provides design, engineering, construction and management services for water treatment infrastructure in the U.S. PERC's performance has met our expectations so far this year in spite of the pandemic, and we've seen no material impact on its day-to-day operations.

"The management team at PERC has been focused on increasing its recurring revenue through multi-year operating contracts and consequently, PERC was awarded four operating contract renewals and two new operating contracts during the first nine months of the year. We are especially encouraged by the prospects in this area of our business, as PERC continues to actively pursue various potential new projects and contracts. Several of these could have a substantial positive impact on its results of operations should it ultimately be successful in securing these opportunities.

"The addition of PERC has also been highly complementary to our existing business and overall mission, supporting our pursuit of water reuse projects and other emerging opportunities with a comprehensive suite of solutions for improving water infrastructure. PERC provides a solid platform upon which to expand to North America our core business of designing, constructing and operating desalination plants.

"During the third quarter, our retail segment experienced a decline in revenue compared to last year, mainly due to the continuing closure of the borders in the Cayman Islands to tourist travel in response to the pandemic, as well as to the much wetter weather conditions in the Cayman Islands during the third quarter.

"The seaport and airport in the Cayman Islands have been closed to tourists since March, which has reduced visitors and tourism to virtually nil. However, as of the first of October, residents and property owners have been allowed to return to the Cayman Islands subject to quarantining for 14 days after arrival. This has allowed flights from the UK and the USA to resume on a reduced schedule.

"To encourage more long-term visitors, the Cayman Islands government recently implemented a 'Global Citizen Concierge' program, whereby tourist visas are granted to individuals and families who wish to reside and work remotely on the islands for up to two years. The Cayman Islands have actually been very successful in keeping the country COVID-free and mitigating pandemic-related damage to its economy, and this is one of their strong selling points for this new program.

"These developments can help bring much needed economic activity back to the islands. We are also encouraged by recent announcements regarding COVID-19 vaccines and believe the Cayman Islands are well positioned to quickly rebound from the economic downturn created by the pandemic once a vaccine is available and regular tourism resumes. While these are all positive developments, we expect our retail segment will continue to be negatively affected until primarily the United States has recovered from the pandemic.

"Our bulk water operations in the Cayman Islands and the Bahamas have continued to operate without incident and have been much less affected by the pandemic than our retail business. However, our bulk segment revenue that is generated in the Bahamas and the Cayman Islands declined slightly period-over-period largely due to lower energy costs which reduced the energy pass-through charges to our Bahamian customer. Bulk water gross profit margin was lower due to higher scheduled maintenance costs for our Bahamas operations.

"While we grew services revenues, our net income from services was largely affected by the amortization expense from the acquisition. Without the amortization, services generated approximately $750,000 in net income in the third quarter.

"The pandemic has caused unprecedented complications across all industries and companies, and does not appear to be getting any closer to ending. However, we have gone through two full quarters of lock downs with the various companies that we operate, and we think our business has stabilized in the current environment.

"While the sales in our retail business remain lower than normal, our other businesses are operating status quo or are improving. Our a very strong balance sheet with $38 million in cash enables us to continue to execute on our growth strategies and further the key business development initiatives we've been working on.

"Looking ahead, we believe our solid financial condition and ample liquidity provides us with the solid foundation necessary for dealing with the challenges of the current economic environment. Our core operations and mission of providing affordable quality drinking water through our highly-efficient desalination plants, as well as wastewater treatment services through advanced water treatment and recycling facilities, continues to be a public health and economic necessity for our customers in the Caribbean and U.S.

"We are well-positioned to take advantage of opportunities that may arise to address these needs and expand or enhance our operations, especially as conditions eventually improve. The strong growth drivers inherent in our markets will continue to persist over the long-term regardless of the pandemic, and this bodes well for Consolidated Water as we work to enhance shareholder value over the months and years to come."

Q3 2020 Financial Summary

Revenue increased 11.2% to $17.7 million from $15.9 million in the third quarter of 2019, which was driven by increases of $3.3 million in the services segment and $0.2 million in the manufacturing segment. The increases were partially offset by decreases of $1.3 million in the retail segment and $0.4 million in the bulk segment.

The increase in services revenue was due to the addition of $3.2 million in revenue from PERC Water which was acquired by the company in late October 2019.

The increase in manufacturing revenue was due to a shift in the production mix to higher revenue projects.

The decrease in retail revenue was due to an 18% decrease in the volume of water sold. This sales volume decrease is due to the temporary cessation of tourism on Grand Cayman resulting from the closing of all Cayman Islands airports and seaports in March 2020 in response to the COVID-19 pandemic.

The decrease in bulk segment revenue is attributable to a decrease in CW-Bahamas' revenue of approximately $431,000 for 2020 due to lower energy costs, which correspondingly decreased the energy pass-through component of CW-Bahamas' rates.

Gross profit for the third quarter of 2020 was $6.2 million or 35.2% of total revenue, down 7.4% from $6.7 million or 42.2% of total revenue in the same year-ago quarter.

Net income from continued operations attributable to Consolidated Water stockholders for the third quarter of 2020 was $1.8 million or $0.12 per basic and fully diluted share, as compared to $2.3 million or $0.15 per basic and fully diluted share in the third quarter of 2019.

First nine months 2020 Financial Summary

Total revenue for the first nine months of 2020 was $57.5 million, up 12.3% compared to $51.2 million in the same year-ago period. The increase was primarily driven by an increase of $9.7 million in the services segment and an increase of $0.5 million in the manufacturing segment. The increase in total revenue was partially offset by decreases of $2.1 million in the bulk segment and $1.7 million in the retail segment.

The increase in services revenue was due to the addition of $9.6 million in revenue from PERC Water which was acquired by the company in late October 2019.

Retail revenue decreased due to an 8% decrease in the volume of water sold. This sales volume decrease is due to the temporary cessation of tourism on Grand Cayman resulting from the closing of all Cayman Islands airports and seaports in March 2020 in response to the COVID-19 pandemic.

The decrease in bulk revenue was due to a decline in revenue in OC-Cayman of approximately $1.3 million for the third quarter as a result of the two new contracts under lower rates with the Water Authority-Cayman for water supplied from the Red Gate and North Sound plants, which commenced in February 2019, and the North Side Water Works plant, which commenced in July 2019. CW-Bahamas' revenue dropped approximately $879,000 for 2020 due to lower energy costs, which correspondingly decreased the energy pass-through component of its rates.

The increase in manufacturing revenue was due to a shift in the production mix of higher revenue projects.

Gross profit for the first nine months of 2020 was $22.0 million or 38.2% of total revenue, up 3.5% from $21.2 million or 41.5% of total revenue in the same year-ago period.

Net income from continuing operations attributable to Consolidated Water stockholders for the first nine months of 2020 was $7.6 million or $0.50 per fully diluted share, down from $8.6 million or $0.57 per fully diluted share in the same year-ago period.

Third Quarter Segment Results



Three Months Ended September 30, 2020

Retail Bulk Services ManufacturingTotal

Revenue $4,993,069$6,061,475$3,351,935$3,259,778 $17,666,257

Cost of revenue 2,586,901 4,400,717 2,513,272 1,949,731 11,450,621

Gross profit 2,406,168 1,660,758 838,663 1,310,047 6,215,636

General and administrative expenses 3,367,802 382,662 728,829 330,723 4,810,016

Loss on asset dispositions and impairments, - - (984) - (984) net

Income (loss) from operations $(961,634)$1,278,096$108,850 $979,324 1,404,636

Other income, net 245,492

Income before income taxes 1,650,128

Benefit from income taxes (263,165)

Net income from continuing operations 1,913,293

Income from continuing operations 101,137 attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co. Ltd. 1,812,156 stockholders

Net loss from discontinued operations (377,321)

Net income attributable to Consolidated $1,434,835 Water Co. Ltd. stockholders



Three Months Ended September 30, 2019

Retail Bulk ServicesManufacturingTotal

Revenue $6,271,220$6,449,757$95,980$3,072,282 $15,889,239

Cost of revenue 2,945,586 4,269,739 31,601 1,933,333 9,180,259

Gross profit 3,325,634 2,180,018 64,379 1,138,949 6,708,980

General and administrative expenses 3,497,320 294,189 549 487,914 4,279,972

Gain on asset dispositions and impairments, 6,518 500 - - 7,018 net

Income (loss) from operations $(165,168)$1,886,329$63,830$651,035 2,436,026

Other income, net 216,896

Income before income taxes 2,652,922

Benefit from income taxes (40,075)

Net income from continuing operations 2,692,997

Income attributable to non-controlling interests 433,235

Net income from continuing operations attributable to Consolidated Water Co. Ltd. 2,259,762 stockholders

Net loss from discontinued operations (532,710)

Net income attributable to Consolidated Water $1,727,052 Co. Ltd. stockholders

First Nine Months Segment Results



Nine Months Ended September 30, 2020

Retail Bulk Services ManufacturingTotal

Revenue $18,216,797$18,368,156$9,942,748$10,951,524 $57,479,225

Cost of revenue 8,343,018 12,906,606 7,418,305 6,852,196 35,520,125

Gross profit 9,873,779 5,461,550 2,524,443 4,099,328 21,959,100

General and administrative expenses 10,008,423 935,808 2,112,869 1,005,838 14,062,938

Gain on asset dispositions and - 200 3,801 - 4,001 impairments, net

Income (loss) from operations $(134,644) $4,525,942 $415,375 $3,093,490 7,900,163

Other income, net 533,710

Income before income taxes 8,433,873

Provision for income taxes 147,186

Net income from continuing operations 8,286,687

Income from continuing operations attributable to non-controlling 642,289 interests

Net income from continuing operations attributable to Consolidated Water 7,644,398 Co. Ltd. stockholders

Net loss from discontinued operations (4,448,798)

Net income attributable to Consolidated Water Co. Ltd. $3,195,600 stockholders



Nine Months Ended September 30, 2019

Retail Bulk Services ManufacturingTotal

Revenue $19,941,395$20,502,121$287,349$10,452,158 $51,183,023

Cost of revenue 8,753,948 13,992,452 198,614 7,013,977 29,958,991

Gross profit 11,187,447 6,509,669 88,735 3,438,181 21,224,032

General and administrative expenses 10,020,019 900,572 2,865 1,466,091 12,389,547

Gain on asset dispositions and impairments, 401,088 47,000 - - 448,088 net

Income from operations $1,568,516 $5,656,097 $85,870 $1,972,090 9,282,573

Other income, net 518,031

Income before income taxes 9,800,604

Provision for income taxes 73,117

Net income from continuing operations 9,727,487

Income from continuing operations 1,172,039 attributable to non-controlling interests

Net income from continuing operations attributable to Consolidated Water Co. Ltd. 8,555,448 stockholders

Net income from discontinued operations 1,834,297

Net income attributable to Consolidated $10,389,745Water Co. Ltd. stockholders

ConferenceCall

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

Date: Tuesday, November 17, 2020Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)Toll-free dial-in number: 1-844-875-6913International dial-in number: 1-412-317-6709Conference ID: 10149638

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 November 24, 2020, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

Toll-free replay number: 1-877-344-7529International replay number: 1-412-317-0088Replay ID: 10149638

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.

CautionaryNote 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 future financial performance of its subsidiary that manufactures water treatment-related systems and products and provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production; (v) the collection of its delinquent accounts receivable in the Bahamas; (vi) its ability to integrate and profitably operate recently acquired subsidiary PERC Water Corporation; (vii) the possible adverse impact of the COVID-19 virus on the company's business; and (viii) various other risks, as detailed in the company's periodic report filings with the Securities and Exchange Commission ("SEC"). For more information about risks and uncertainties associated with the company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the company's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company's Secretary at the company's executive offices or at the "Investors - SEC Filings" page of the company's website at http://ir.cwco.com/docs. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:David W. SasnettExecutive Vice President and CFOTel (954) 509-8200dsasnett@cwco.com

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

CONSOLIDATED WATER CO. LTD. CONDENSED CONSOLIDATED BALANCE SHEETS



September 30, December 31,

2020 2019

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents $38,179,414 $42,071,083

Accounts receivable, net 24,411,328 23,229,689

Inventory 3,770,351 3,287,555

Prepaid expenses and other current assets 2,967,605 1,559,448

Costs and estimated earnings in excess of 1,188,875 1,675,781 billings

Current assets of discontinued operations 1,052,091 1,619,056

Total current assets 71,569,664 73,442,612

Property, plant and equipment, net 59,056,778 61,238,752

Construction in progress 473,507 1,335,597

Inventory, noncurrent 4,657,418 4,404,378

Investment in OC-BVI 1,698,214 1,903,602

Goodwill 13,325,013 13,325,013

Intangible assets, net 4,360,833 5,040,000

Operating lease right-of-use assets 1,414,736 1,811,516

Other assets 1,916,123 2,120,708

Long-term assets of discontinued operations 21,995,648 27,669,966

Total assets $180,467,934 $192,292,144



LIABILITIES AND EQUITY

Current liabilities

Accounts payable, accrued expenses and other$3,083,762 $3,560,971 current liabilities

Accrued compensation 1,835,594 1,821,395

Dividends payable 1,298,311 1,292,187

Current maturities of operating leases 545,364 688,540

Current portion of long-term debt 42,211 17,753

Billings in excess of costs and estimated 818,765 614,386 earnings

Current liabilities of discontinued 98,891 178,382 operations

Total current liabilities 7,722,898 8,173,614

Long-term debt, noncurrent 136,106 61,146

Deferred tax liabilities 1,364,393 1,529,035

Noncurrent operating leases 1,071,831 1,156,543

Net liability arising from put/call options 706,000 664,000

Other liabilities 75,000 75,000

Long-term liabilities of discontinued 8,842 2,679,932 operations

Total liabilities 11,085,070 14,339,270

Commitments and contingencies

Equity

Consolidated Water Co. Ltd. stockholders' equity

Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares; issued and 19,835 20,251 outstanding 33,059 and 33,751 shares, respectively

Class A common stock, $0.60 par value. Authorized 24,655,000 shares; issued and 9,073,230 9,029,765 outstanding 15,122,049 and 15,049,608 shares, respectively

Class B common stock, $0.60 par value. - - Authorized 145,000 shares; none issued

Additional paid-in capital 86,590,057 88,356,509

Retained earnings 65,683,955 66,352,733

Total Consolidated Water Co. Ltd. 161,367,077 163,759,258 stockholders' equity

Non-controlling interests 8,015,787 14,193,616

Total equity 169,382,864 177,952,874

Total liabilities and equity $180,467,934 $192,292,144

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



Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Total revenue $17,666,257$15,889,239$57,479,225 $51,183,023

Total cost of revenue 11,450,621 9,180,259 35,520,125 29,958,991

Gross profit 6,215,636 6,708,980 21,959,100 21,224,032

General and administrative expenses 4,810,016 4,279,972 14,062,938 12,389,547

Gain (loss) on asset dispositions and impairments, net (984) 7,018 4,001 448,088

Income from operations 1,404,636 2,436,026 7,900,163 9,282,573



Other income (expense):

Interest income 164,761 154,175 411,020 444,827

Interest expense (2,069) (19) (7,413) (19)

Profit-sharing income from OC-BVI 6,075 2,025 30,375 10,125

Equity in the earnings of OC-BVI 22,411 38,174 82,387 26,686

Net unrealized gain (loss) on put/call options 39,000 - (42,000) (24,000)

Other 15,314 22,541 59,341 60,412

Other income, net 245,492 216,896 533,710 518,031

Income before income taxes 1,650,128 2,652,922 8,433,873 9,800,604

Provision (benefit) for income taxes (263,165) (40,075) 147,186 73,117

Net income from continuing operations 1,913,293 2,692,997 8,286,687 9,727,487

Income from continuing operations attributable to 101,137 433,235 642,289 1,172,039 non-controlling interests

Net income from continuing operations attributable to 1,812,156 2,259,762 7,644,398 8,555,448 Consolidated Water Co. Ltd. stockholders

Gain on sale of discontinued operations - - - 3,621,170

Net loss from discontinued operations (377,321) (532,710) (4,448,798) (1,786,873)

Total income (loss) from discontinued operations (377,321) (532,710) (4,448,798) 1,834,297

Net income attributable to Consolidated Water Co. Ltd. $1,434,835 $1,727,052 $3,195,600 $10,389,745 stockholders



Basic earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders

Continuing operations $0.12 $0.15 $0.51 $0.57

Discontinued operations (0.03) (0.04) (0.30) 0.12

Basic earnings per share $0.09 $0.11 $0.21 $0.69



Diluted earnings (loss) per common share attributable to Consolidated Water Co. Ltd. common stockholders

Continuing operations $0.12 $0.15 $0.50 $0.57

Discontinued operations (0.03) (0.04) (0.29) 0.12

Diluted earnings per share $0.09 $0.11 $0.21 $0.69



Dividends declared per common and redeemable preferred shares $0.085 $0.085 $0.26 $0.26



Weighted average number of common shares used in the determination of:

Basic earnings per share 15,120,983 15,026,710 15,116,681 15,022,489

Diluted earnings per share 15,273,529 15,138,094 15,270,494 15,132,843

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SOURCE Consolidated Water Co. Ltd.