Consolidated Water Co. Ltd. (NASDAQ:CWCO) Q4 2024 Earnings Conference Call March 18, 2025 11:00 AM ET Company Participants Rick McTaggart - CEO David Sasnett - CFO Operator Good morning. Thank you for joining us today to discuss the results for Consolidated Water's 2024 Full Year Operating and Financial 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 t ...

Financial Performance - Consolidated Water Co. Ltd. (CWCO) reported full-year 2024 earnings per share (EPS) of $1.12, missing the Zacks Consensus Estimate of $1.29 by 13.2% and down 42% from $1.93 in the previous year [1] - Total revenues for 2024 were $134 million, a decrease of 25.6% from $180.2 million in 2023, and also missed the Zacks Consensus Estimate of $138.92 million by 3.5% [2] Segmental Performance - Retail revenues increased to $31.7 million, up 4.9% from $30.2 million in the previous year, driven by a 4.5% increase in the volume of water sold [3] - Bulk revenues decreased to $33.7 million, down 2.6% from $34.6 million, although this decline was partially offset by new revenues from the Red Gate desalination plant and an amendment to the North Sound contract [4] - Manufacturing revenues totaled $17.6 million, a slight increase of 0.6% from $17.5 million, while services revenues fell significantly to $50.9 million from $98 million, primarily due to a drop in plant construction revenue [5] Expense and Income Analysis - General and administrative expenses rose nearly 11.3% to $27.5 million, while net income from continuing operations was $18.5 million, down from $31.2 million in the previous year [6] Cash and Debt Position - As of December 31, 2024, cash and cash equivalents were $104.9 million, up from $99.4 million at the end of 2023, with working capital at $132.8 million [7] - Total long-term debt decreased to $0.07 million from $0.19 million at the end of 2023, indicating improved financial stability [7] Market Position - Consolidated Water currently holds a Zacks Rank 3 (Hold), reflecting a neutral outlook in the market [8]

Revenue Performance - Total revenue for 2024 declined 26% to $134 million, down from $180.2 million in 2023, primarily due to a $47 million decrease in the services segment[5]. - Total revenue for the year ended December 31, 2024, was $133,966,633, a decrease of 25.6% compared to $180,211,233 in 2023[24]. - Total revenue for 2024 was $133,966,633, a decrease of 25.7% compared to $180,211,233 in 2023[41]. - Retail revenue increased to $31,741,343 in 2024 from $30,158,051 in 2023, representing a growth of 5.2%[27]. - Services revenue significantly decreased to $50,956,489 in 2024 from $97,966,650 in 2023, a decline of 48%[27]. - Revenue from the Cayman Islands was $37,137,424 in 2024, down from $41,728,340 in 2023, a decrease of 11.5%[26]. Profitability - Net income from continuing operations attributable to stockholders was $17.9 million or $1.12 per diluted share, compared to $30.7 million or $1.93 per diluted share in 2023[21]. - Gross profit for 2024 was $45,624,448, down from $61,927,105 in 2023, reflecting a gross margin of approximately 34%[24]. - Net income attributable to Consolidated Water Co. Ltd. stockholders for 2024 was $28,237,554, compared to $30,672,135 in 2023, indicating a decline of 7.5%[24][25]. - Basic earnings per share for 2024 was $1.78, compared to $1.88 in 2023, indicating a decrease of 5.3%[41]. Operational Highlights - Operations and maintenance (O&M) recurring revenue increased 51% to $29.3 million, with $6.1 million contributed by the newly acquired REC subsidiary[5]. - The company reported a significant increase in operations and maintenance revenue to $29,307,405 in 2024 from $19,368,365 in 2023, a growth of 51%[27]. - Manufacturing revenue increased by 1% to $17.6 million, reflecting stable performance in the segment[5]. Cash and Assets - Cash and cash equivalents totaled $99.4 million, with working capital of $132.8 million as of December 31, 2024[22]. - Total assets increased to $243,313,181 in 2024 from $218,437,592 in 2023, representing an increase of 11.3%[39]. - Total current assets rose to $157,788,165 in 2024, up from $112,714,375 in 2023, a significant increase of 39.9%[39]. - Cash and cash equivalents significantly increased to $99,350,121 in 2024 from $42,621,898 in 2023, a growth of 133.2%[39]. Dividends and Shareholder Returns - The company increased its quarterly dividend by 15.8% to $0.11 per share starting in Q4 2024[6]. - The company declared dividends of $0.41 per share in 2024, up from $0.36 in 2023[41]. Future Outlook - The company expects construction revenue to remain below 2023 levels until the commencement of the desalination project in Hawaii, anticipated to significantly boost revenue and earnings in 2026 and 2027[17]. - The construction phase of the $204 million desalination plant project in Hawaii is expected to begin early next year, generating significant future revenue[11]. - The company recently entered the U.S. desalination market with a contract for a seawater desalination plant in Hawaii, indicating strategic market expansion[32]. - The Annual General Meeting of Shareholders is scheduled for May 27, 2025, to discuss future strategies and performance[28]. - The company will host a conference call on March 18, 2025, to discuss these results and future outlook[29]. Expansion Plans - The company is expanding its West Bay plant to meet growing water needs and plans to add manufacturing space for Aerex[16].

Core Viewpoint - Consolidated Water Co. Ltd. reported a significant decline in total revenue for 2024, primarily due to the completion of major construction projects, while maintaining a focus on growth in retail and recurring revenue segments [1][15]. Financial Highlights - Total revenue for 2024 was $134 million, a decrease of 26% from $180.2 million in 2023 [15][24]. - Net income from continuing operations attributable to stockholders was $17.9 million, or $1.12 per diluted share, down from $30.7 million, or $1.93 per diluted share in 2023 [19][36]. - Cash and cash equivalents stood at $99.4 million, with working capital of $132.8 million as of December 31, 2024 [20]. Operational Highlights - Retail revenue increased by 5% to $31.7 million, driven by a record volume of water sold, totaling 1.01 billion gallons, reflecting a 4.5% increase in sales volume [16][24]. - Bulk revenue decreased by 3% to $33.7 million, while manufacturing revenue increased by 1% to $17.6 million [15][24]. - Services revenue saw a significant decline of 48% to $51 million, primarily due to a $60 million drop in construction revenue [15][24]. Dividend Increase - In August 2024, the company raised its quarterly dividend by 15.8% to $0.11 per share, effective from the fourth quarter of 2024 [4]. Management Commentary - The CEO noted that revenue and operating income from continuing operations met expectations, particularly following the completion of two major design-build projects early in the year [5]. - The company experienced improved profitability in retail and manufacturing segments, attributed to population growth and increased business activity in Grand Cayman [6]. Future Outlook - The company anticipates that construction revenue will remain below 2023 levels until the commencement of the desalination project in Hawaii, expected to significantly contribute to revenue and earnings growth in 2026 and 2027 [15][10]. - Consolidated Water is optimistic about future growth driven by increasing water sales in Grand Cayman and stable recurring revenue from its Caribbean-based bulk water business [13][14].

Production Capacity - The current aggregate production capacity of the two retail plants at Abel Castillo Water Works is 3.0 million gallons per day, while the West Bay plant has a capacity of 1.0 million gallons per day[48]. - The North Sound, Red Gate, and North Side Water Works plants have production capacities of approximately 1.6 million, 2.6 million, and 2.4 million gallons of water per day, respectively[57]. - The Windsor plant in The Bahamas has a capacity of 2.8 million gallons per day, with a minimum delivery requirement of 16.8 million gallons per week[60]. - The Blue Hills plant, the largest facility in The Bahamas, has a capacity of 12.0 million gallons per day, requiring a minimum delivery of 63.0 million gallons per week[61]. - OC-BVI is required to supply up to 600,000 gallons per day to the BVI government under a water supply agreement expiring in March 2031[73]. Revenue Breakdown - For fiscal years 2024, 2023, and 2022, bulk water operations accounted for approximately 25%, 19%, and 35% of consolidated revenue, respectively[55]. - Services operations accounted for approximately 38%, 54%, and 31% of consolidated revenue for fiscal years 2024, 2023, and 2022, respectively[64]. - Manufacturing operations represented approximately 13%, 10%, and 7% of consolidated revenue for fiscal years 2024, 2023, and 2022, respectively[68]. - Total revenue for the year ended December 31, 2024, was $133,966,633, a decrease of 25.7% compared to $180,211,233 in 2023[404]. - Retail revenue increased to $31,741,343 in 2024 from $30,158,051 in 2023, reflecting a growth of 5.2%[404]. - Services revenue significantly decreased to $50,956,489 in 2024 from $97,966,650 in 2023, a decline of 48.0%[405]. - Manufacturing revenue remained relatively stable at $17,595,414 in 2024 compared to $17,491,474 in 2023, showing a slight increase of 0.6%[404]. Financial Performance - Revenue for the year ended December 31, 2024, was $133.97 million, a decrease of 25.7% compared to $180.21 million in 2023[359]. - Gross profit decreased to $45.62 million in 2024 from $61.93 million in 2023, representing a decline of 26.3%[359]. - Net income attributable to Consolidated Water Co. Ltd. stockholders was $28.24 million in 2024, slightly down from $29.59 million in 2023, a decrease of 4.6%[359]. - Basic earnings per share for continuing operations was $1.13 in 2024, down from $1.95 in 2023, a decline of 42.1%[359]. - Net income from continuing operations attributable to Consolidated Water Co. Ltd. stockholders for 2024 is $17,882,370, a decrease of 41.8% from $30,672,135 in 2023[460]. - Net income from discontinued operations for 2024 is $10,355,184, a significant recovery from a loss of $1,086,744 in 2023[460]. Assets and Liabilities - Total assets increased to $243.31 million in 2024 from $218.44 million in 2023, representing an increase of approximately 11.4%[357]. - Total current assets increased to $157.79 million in 2024, compared to $112.71 million in 2023, reflecting a growth of approximately 40%[357]. - Total liabilities increased to $28.00 million in 2024 from $26.61 million in 2023, a rise of about 5.2%[357]. - The total current liabilities increased slightly to $24.94 million in 2024 from $23.90 million in 2023, an increase of about 4.4%[357]. - The allowance for credit losses increased to $821,422 in 2024 from $583,401 in 2023, reflecting a provision for credit losses of $442,828[422]. Employee and Operational Insights - The company employs a total of 307 persons across various locations, with 226 in the United States and 62 in the Cayman Islands[114]. - The company has experienced low employee turnover, indicating a stable workforce and good employee relations[112]. - The company operates under strict environmental regulations, ensuring compliance with World Health Organization guidelines for drinking water quality[107]. Acquisitions and Investments - The company acquired a 100% ownership interest in REC, a Colorado company, effective October 1, 2023[67]. - The company acquired REC in October 2023, expanding its operations and maintenance and consulting services in Colorado[413]. - The company purchased a 100% ownership interest in REC for $1,108,390, with intangible assets having useful lives of up to 15 years[445]. Tax and Regulatory Environment - The Cayman Islands government has no taxes on profits, income, or capital gains, which benefits the company's operations[89]. - The company has been advised that it will not receive any duty concessions in new retail water licenses signed with the Cayman Islands government[91]. - The provision for income taxes was $2,218,514 in 2024, down from $6,750,014 in 2023[455]. - The effective tax rate for 2024 was 10.73%, compared to 17.77% in 2023[456]. Future Outlook - The company expects to earn approximately $44.2 million in revenue from unsatisfied performance obligations during the year ending December 31, 2025, and $107.1 million thereafter[426]. - The company is pursuing a project in Oahu, Hawaii, to design and construct a seawater reverse osmosis desalination plant with a capacity of 1.7 million gallons per day[369].

Core Insights - Utilities stocks are considered a safe investment during market volatility due to consistent demand for essential services [1] - As recession fears rise in early 2025, utilities stocks, particularly the Utilities Select Sector SPDR ETF, have outperformed the S&P 500 [2] - Analysts suggest that certain utilities firms are positioned for potential growth, making them attractive for defensive investors [3] California Water Service Group (CWT) - CWT reported over 30% year-over-year growth in operating revenue, exceeding $1 billion, with diluted EPS tripling [4] - The company invested $471 million in infrastructure to address climate-related challenges and increased demand [4] - Revenue growth was attributed to higher rates and consumption, resulting in profit margins soaring to 18% [5] Consolidated Water Co. (CWCO) - CWCO shares have declined about 7% over the past year, attributed to disappointing third-quarter earnings [7] - Recent completion of major construction projects and increased water sales in Grand Cayman may signal potential recovery [8] - The company received a new concession for exclusive rights to produce potable water in Grand Cayman, which could enhance future performance [8] Vistra Corp. (VST) - VST experienced a significant share price increase of 79% over the last 12 months, despite a recent sell-off [11] - The company's interest in nuclear power aligns with growing demand from data centers and AI companies [12] - Analysts are optimistic about VST, with a consensus price target suggesting nearly 44% upside potential [13]

Company Performance - Consolidated Water (CWCO) closed at $27.26, reflecting a +0.96% change from the previous day, underperforming the S&P 500's daily gain of 1.12% [1] - Over the past month, CWCO shares gained 1.35%, trailing the Utilities sector's gain of 1.79% and outperforming the S&P 500's loss of 4.13% [1] Upcoming Earnings - The upcoming earnings release for Consolidated Water is scheduled for March 17, 2025, which is anticipated to attract significant investor interest [2] - Recent changes to analyst estimates for the company indicate evolving short-term business trends, with positive revisions suggesting optimism about the business outlook [2] Analyst Ratings and Valuation - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently rates Consolidated Water at 3 (Hold) [4] - The Forward P/E ratio for Consolidated Water is 19.29, which is a discount compared to the industry average of 19.71 [5] - The PEG ratio for CWCO stands at 2.41, while the average PEG ratio for the Utility - Water Supply industry is 2.58 [5] Industry Overview - The Utility - Water Supply industry holds a Zacks Industry Rank of 88, placing it in the top 36% of over 250 industries [6] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [6]

Core Viewpoint - Consolidated Water Co. Ltd. (CWCO) is positioned as a strong investment option in the utility sector due to its advanced water purification technology and promising growth opportunities [1] Growth Projections & Surprise History - The Zacks Consensus Estimate for 2025 earnings per share (EPS) has increased by 0.7% over the past 90 days to $1.40 [2] - The Zacks Consensus Estimate for 2025 sales is projected at $149.90 million, reflecting a year-over-year increase of 7.9% [2] - CWCO's long-term earnings growth rate is estimated at 8%, with an average earnings surprise of 2% over the past four quarters [2] Return on Equity - CWCO's return on equity (ROE) stands at 12.98%, surpassing the sector average of 9.86%, indicating more effective utilization of funds compared to peers [3] Debt Position & Liquidity - The company's total debt to capital ratio is 0.11%, significantly lower than the industry average of 47.49% [4] - CWCO's current ratio is 7.66, well above the industry's average of 0.9, demonstrating strong capability to meet short-term liabilities [4] Dividend History - CWCO has consistently paid dividends since 1997, with a current quarterly dividend of 11 cents per share, leading to an annualized dividend of 44 cents per share, a 15.8% increase from the previous 34 cents [5] - The current dividend yield is 1.63%, outperforming the Zacks S&P 500 composite's yield of 1.24% [5] Stock Price Performance - Over the past three months, CWCO has achieved a return of 5.1%, compared to the industry's average growth of 3.3% [6]

Core Viewpoint - Consolidated Water Co. Ltd. will hold a conference call on March 18, 2025, to discuss its financial results for the year ended December 31, 2024 [1][2]. Company Overview - Consolidated Water Co. Ltd. is a leading designer, builder, and operator of advanced water supply and treatment plants, focusing on seawater desalination and water treatment facilities [3][4]. - The company operates in the Cayman Islands, The Bahamas, and the British Virgin Islands, and has recently entered the U.S. desalination market with a project in Hawaii [3]. Conference Call Details - The conference call is scheduled for March 18, 2025, at 11:00 a.m. Eastern time, with a toll-free dial-in number of 1-844-875-6913 and an international number of 1-412-317-6709 [2]. - A replay of the call will be available after 1:00 p.m. Eastern time on the same day through March 25, 2025 [3].

Core Viewpoint - Consolidated Water Co. Ltd. will hold a conference call on March 18, 2025, to discuss its financial results for the year ended December 31, 2024 [1][2]. Company Overview - Consolidated Water Co. Ltd. is a leading designer, builder, and operator of advanced water supply and treatment plants, focusing on seawater desalination and water treatment facilities [3][4]. - The company operates in the Cayman Islands, The Bahamas, and the British Virgin Islands, and has recently entered the U.S. desalination market with a project in Hawaii [3]. Conference Call Details - The conference call is scheduled for March 18, 2025, at 11:00 a.m. Eastern time, with a toll-free dial-in number of 1-844-875-6913 and an international number of 1-412-317-6709 [2]. - A replay of the call will be available after 1:00 p.m. Eastern time on the same day through March 25, 2025 [3].