Good morning, thank you for joining us today to discuss Consolidated Water Company's Third Quarter Ending September 30, 2019. Joining us 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'll open the call to your questions. Before we conclude today's call I'll provide some important cautions regarding the forward-looking statements made by our management during the call. I'd like to remind everyone that today's call is being recorded and will be made available for telecom replay via instructions in today's press release, which is available in the Investor Relations of the company's website. Now, I'd like to turn the call over to Consolidated Water Company's CEO, Mr. Rick McTaggart. Sir, please go ahead.

Thank you, Chuck, and good morning, everyone, thanks for joining us today on the call. As you saw from the earnings release, we issued earlier this morning, we advanced our business in a number of areas in Q3. However, our financial performance was not as good as the same quarter last year due to an unusual confluence of factors across our operating segments. Revenue generated by our bulk water segment was lower due to new rates that came into effect earlier this year in Grand Cayman under new long-term operating and maintenance contracts that we won through competitive bidding processes. We believe that our bulk segment revenue and gross profit have now stabilized with the full impact of these new contracts reflected in our Q3 results, while manufacturing revenue was slightly lower in the quarter compared to the same quarter last year, our project backlog has been growing. Therefore, we don't see Q3 as indicative of a trend in our manufacturing segment and we expect to report a year of strong revenue growth and profitability for this segment, as demonstrated by our year-to-date results. For the nine months of the year, we achieved improvement across the board with total revenue, up 7% gross profit up by 9% and net income up by 18% compared to the first nine months of last year. Q3 underscores the importance of further diversifying revenue by adding complementary service and product offerings as well as expanding our geographic presence and customer base. This effort, began with the acquisition of Aerex in 2016. We have since strengthened our executive team and Aerex's capabilities with the addition of a new VP of manufacturing earlier this year who is overseeing the expansion our Aerex operations. We recently acquired 51% of PERC Water Corporation, a water infrastructure provider, which has expanded our product offerings and presence in the US. The synergistic acquisition also provides a platform to expand our core business of designing, constructing and operating desalination plants into water short regions of the US. Before I talk more about this acquisition and other operational highlights, I'd like to turn the call over to David, who will walk you through some of the financial highlights of the quarter.

Thanks, Rick. Good morning, everyone. Hopefully everyone has had a chance to read our press release, which came out earlier this morning. For the third quarter of 2019, our revenue declined 12% to $15.9 million which was driven primarily by decreases of $1.4 million and bulk water sales $711,000 in services revenue and $181,000 in manufacturing revenue. The decrease in bulk water sales was due to the lower rates that came into effect in February for water supplied from the Red Gate and North Sound plants, as well as lower rates that came into effect in July for the North Side Water Works plant under the recently obtained new contracts with the Water Authority Cayman for these facilities. Decrease in services revenue was due to lower fees generated under the comp - on our management services agreement with OC-BVI, and it's important to note that last year's revenues also included $710,000 from a refurbishment project we completed for our affiliate in the British Virgin Islands. Our manufacturing revenue was lower due to slightly fewer active projects. These decreases were partially offset by a marginal increase in retail revenue, which was due to an increase in the volume of water sold by Cayman Water. Our gross profit was $6.7 million for the third quarter compared to $7.1 million in the year ago period with gross margin as a percentage of revenue improving from 39.5% to 42.2%. Net income in the third quarter attributable to stockholders was $1.7 million or $0.11 per basic and diluted share, compared to $4.6 million or $0.30 per basic and diluted share in the year-ago quarter. This decrease was primarily due to last year's quarter including a substantial non-recurring income from a legal settlement that was obtained by our equity investee and the British Virgin Islands. Revenue…

Thank you, David. As we work to expand our product and service offerings and geographic reach our mission remains focused on providing water services to areas in the world where the supply of naturally occurring potable water is scarce's and particularly we're reverse osmosis technology is economically and environmentally feasible. Desalination is increasingly coming into play in many places around the world. Today, nearly 90 million cubic meters of water is being produced daily by more than 18,500 desalination plants in operation around the world. These plants are providing drinking water to more than 300 million people, according to the International Desalination Association and the global water desalination market is showing no signs of slowing, it's expected to see steady expansion growing at a projected CAGR of 9.5%, which means that we will nearly double from current levels to reach $37.6 billion by 2026. Several factors are driving this growth, populations are booming in many water-stressed regions of the world, including parts of the US and especially in the Southwestern states. In addition, drought is occurring in many regions that not long ago had ample supplies. Advancements in technology are also playing a key role making desalination more energy and cost-efficient. Historically, we have focused on seawater desalination projects in the Caribbean region where governmental and private customers long ago embrace the designs, builds, own, operate, project delivery model, but increasingly, the US is providing opportunities for desalination, as well as other types of water projects using this or similar project delivery models, especially in the Southwestern states. This is true of California with the Pacific coastline providing access for extensive desalination opportunities. In fact in California alone, there are 11 desalination plants currently operating with 10 more being proposed. Arizona, which is perpetually short on water and facing a…

[Operator Instructions] And our first question will come from Gerry Sweeney of ROTH Capital. Please go ahead, sir.

On the PERC Water side, is it possible to give us a little bit of maybe insight into either backlog as well as typical project size in margins, things along those lines, so we have a little bit idea of what to expect as you integrate the company?

Gerry, this is David. We disclosed their historical revenues in our 8-K filing. I think we also disclosed it in the press release for PERC Water, other than that, we sort of going to, not disclose anything else that we have actual results to report. So, sorry about that.

No problem. Switching gears a little bit, bulk water side, obviously you did mention that lower fees in the quarter had some impact on the revenue, but any variance in the volumes or was this a pretty sort of standard quarter that we could use for future reference.

Yes, I think it's pretty standard, Gerry. I mean the volume variations don't have much impact on the revenues, most of our bulk sales around fixed fees, so we could probably bump up sales by 10% or 15%, it would have just a small impact on the revenues.

So that should be very steady on a go-forward basis. Anything on the seasonality front or is this more of a very steady on a full-quarter basis.

Steady.

Okay.

Big issue you have seasonalities in our retail segment, Gerry.

And then finally on the Aerex side still - I mean - very solid quarter in terms of the margin profile, that has this in the past to make sure if you'll provide it but, is - what drives the margin currently is it's products specifics or contract specifically and any insight into how we should look at that on a go-forward basis?

I think the historical margins we've generated from the Aerex, so around 30%, Aerex that we're around that.

30% - 31%.

I think this quarter it was up to 37%. We had a couple of very profitable projects that drove the margins up just for this quarter. I mean, I don't see anything that's going to change, Aerex's historical margins and we certainly I don't think we'll be doing 37% of quarter going forward. So I mean, I think they do around 30%, that's our expectations for the business.

[Operator Instructions] Our next question will come from John Bair of Ascend Wealth Advisors. Please go ahead, sir.

I imagine that you've been working closely with the Bahamian authorities regarding the damage in the rebuild efforts after Hurricane Dorian, so I was wondering if you could provide us with any insight as to their expectations on the impact on any tourist travel and how that might affect your revenues as well as the local situation with inhabitant, the locals usage. And secondly, do you foresee that this rebuild effort might cause delays - further delays in normal with collecting on account receivables from them.

Yeah, so from the - your question about the impact certainly in the areas that we have plants, there was no impact by the hurricane, a very little impact, Dorian hit the Northern Islands and our main operations are located on New Providence, which is where NASA is located so a lot of the displaced people from these Northern Island's are in NASA now in various facilities - housing facilities, their temporary housing that sort of thing. I mean I just - it's all over the TV. I mean, Bahamas has been doing a tremendous amount of advertising, indicating that the resorts in New Providence are unaffected by the Hurricane and really trying to get the word out that places like Paradise Island and Baja Mar are hoping for business and there was no damage there. So it was very much limited to Grand Bahama and Abaco Islands, those places are a mass, I mean from the standpoint of - that would impact the Bahamas revenues and budget. I mean, I don't have that information other than what I see in the news and what the Finance Minister has been saying in the paper and that sort of thing, which is available for you to look at.

Okay.

But - our business is running smoothly there, there has been no issues.

That's good to hear. The cash balance that we had on hand at the end of September, is that net of the $4.1 million that was used, due to the PERC field?

No, that's not, we closed that in October 24, I believe.

And then it looks like you have a similar structure with that as you did with the Aerex acquisition, I don't recall the terms there or the timeframe, I guess, not so much the terms. Is there anything upcoming potentially that Aerex's will become 100% subsidiary Consolidated Water?

Well, if you remember, the terms of the Aerex acquisition, we had mutual options. We gave Tom Donnick, the right to put the stock on us after three years, the remaining 49% and we have the right to call the other 49% after three years and that auction period is now in effect. I mean, we went through the three-year period, now either party could pull the trigger. So it's possible that Tom can come to us and ask us to buy the company or the other 49% literally at any time and it's possible for us to do the same thing with him. We just have see how it plays out. I think the purpose of the put call auction is for one day, that's down 100% of the company.

Is that an open ended auction?

Doesn't expire. No, it's always in effect, so you figure at some point, and one of those auctions will be exercised.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. McTaggart for any closing remarks.

Yes, thanks, Chuck. Thanks to everybody for joining us on the call this morning and we look forward to speaking with you again in March for our year-end results. Bye-bye.

Thank you, ladies and gentlemen. Now before we conclude today's call. I would like to provide the company's Safe Harbor statements that include important cautions regarding forward-looking statements made during today's call. The information that we've provided in this conference call 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 can 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, continued acceptance of the company's products and services in the marketplace. Changes in its relationships with the governments of the jurisdictions in which it operates, the outcome of its negotiations with the Cayman government regarding a new retail license agreement. Its ability to complete the project under development in Baja California, Mexico, 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. The collection of its delinquent accounts receivable in the Bahamas, its ability to integrate and profitable operate recently acquired subsidiary PERC Water Corporation and various other risks as detailed in the company's periodic report filings with the Securities and Exchange Commission. For more information about risks and uncertainties associated with the company's business, please refer to the Management's Discussion and Analysis of Financial Conditions and Results of Operations and Risk Factors in 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 Secretary of the company's executive offices or from the Investors SEC Filings page of the company's website. Except as otherwise we hired by law, the company undertakes no obligation to update or revise publicly in any forward-looking statements whether as a result of new information, future events or otherwise. Before we end today's call I would like to remind everyone that this call will be available for replay starting this evening and running through November 19. Please refer to the company's - please refer to today's earnings release for dial-in replay instructions available via the company's website at www.cwco.com. Thank you for joining us today. This concludes the conference call. You may now disconnect.