Good morning. Thank you for joining us today to discuss Consolidated Water Company’s Third Quarter 2021 Results. Hosting the call today are 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. [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 will be made available for telecom replay via instructions in yesterday’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, Rick McTaggart. Sir, please go ahead.

Thank you, Kate, good morning, everyone. Thanks for joining us on today’s call. I hope everybody is well. During the third quarter, the continued cessation of tourism on Grand Cayman due to COVID-19 resulted in our retail segment revenue growing at only about 5% compared to the same year ago quarter about 1% higher volume. And these numbers are still well below historical levels because of border closures in Grand Cayman. However, our bulk water segment revenue increased 13% to 6.9 million performing better than anticipated. It also increased for the first nine months of 2021 up 8% to 19.8 million. In the third quarter, our manufacturing segment revenue which is generated by our Aerex subsidiary decreased as a result of reduced orders from a major customer. This was expected from last year, which is why early last year we began strengthening our manufacturing sales team at Aerex and focused them on new market sectors to diversify our product mix and customer base. As a result, all of our manufacturing revenue that was recognized in this past quarter was from new customers and/or products. And in the first nine months of the year, we generated manufacturing revenue of 3.2 million from new customers and products. Our services revenue increased 6% to 10.5 million in the first nine months of the year, which accounted for 21% of our overall revenue compared to 17% in the same year ago period. This was driven by growth in our PERC water subsidiary. Now before I go further, I'd like to turn the call over to our CFO, David Sasnett, who will take us through the financial details for the quarter.

Thanks, Rick. Good morning, everyone. Thanks for joining us today. As Rick mentioned, we continue to face significant challenges as a result of the current environment as do many companies. But despite these challenges, we've maintained our strong financial foundation as we pursued new opportunities and we've continued to pay dividends. Yesterday we issued our quarterly press release which is available on the Investor Relations section of our website. We reported that revenue totaled 16.4 million in the third quarter, a decrease of 7% from the same quarter of last year. The decline reflects decreases of 141,000 in services segment revenue, and 2.2 million in manufacturing segment revenue. These decreases were partially offset by revenue increases of 254,000 in our retail segment and 807,000 in our bulk segment. Our retail revenue increased due to a 1% increase 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 as a result of the continuing cessation of tourism on Grand Cayman, which is due to the border restrictions initiated in March 2020 in response to the COVID-19 pandemic. The increase in bulk segment revenue was attributable to an increase in energy costs for Consolidated Water Bahamas, which increased the energy pass through component or CW Bahamas rates. The decrease in services revenue was due to decline in plant construction revenue of $525,000 which was partially offset by an increase to $385,000 in revenue from operating and maintenance contracts attribute both to new customers. The decrease in manufacturing revenue in the third quarter of 2021 was due to the loss of orders from Aerex former largest customer. We had not yet been successful in replacing this lost revenue. In late July, this customer…

Thank you, David. Like many companies are manufacturing segment has been adversely affected by supply chain challenges, including materials shortages, price increases and logistical delays, which have directly impacted our manufacturing processes. And in some cases, our clients have delayed delivery of our products to next year due to similar issues impacting their business. This has pushed out to next year certain orders we had expected to complete in this last half of 2021 and as a result, we expect revenue from our manufacturing segment for the second half of 2021 to be about equal to its revenue for the first half of this year. It's important to know that we haven't lost any orders and in some cases we anticipate being able to negotiate pricing adjustments on projects due to these delays. We continue to book new orders and build manufacturing backlogs. We've refocused our sales efforts on the municipal water market, which has been very active this past year and is expected to benefit significantly from the recently passed federal infrastructure bill. We are actively building our municipality relationships and sales channels and rekindling relationships with consulting engineers that advise these municipalities. We see this further supporting revenue diversification and reduce customer dependence and concentration. It's important to recognize that municipal jobs have a longer lead time and delivery time, which are usually and they're more complicated in terms of what the client and their engineers require as deliverables. So project revenue recognition on this type of project, which is a custom project will likely be stretched out over a longer period of time, compared to the types of standardized products we historically produced for our former largest customer. This means our manufacturing backlog won't be processed all at once, or over just two quarters and is more…

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Gerry Sweeney of ROTH Capital. Please go ahead.

I wanted to start with the retail segment, obviously, it's great news that the Caymans is opening up. Do you have any sense of how well prepared the tourism industry is for this opening up? We tell staff to ready to go or will that be a little bit of a headwind for a period of time?

Well, I mean, I don't have any sort of detailed information, Gerry. But I mean, I think it's going to take at least a few months to ramp up the business again, there. I mean, my understanding is that some of the airlines are not resuming regular service until February. They were set to resume in October and the government canceled the reopening previously, but this one seems to be on schedule. So you're not going to have full airlift capacity probably until February next year but it's a good start return.

Yes. Without a doubt, right. It's at least open, we're going to get the ball rolling. And then, the Hawaiian seawater desalination -- desal project. Just curious, is that a private project or is that a municipal funded opportunity?

No. That's a municipal project Gerry. That used to be able to find something out about that, if you look around, that's a really nice project. We have a great team together for that. And we're hoping to be competitive on that. It's not being bid until early next year.

Okay. And then on the Georgetown, Cayman Islands, one, I don't know if you would want to answer this or can't answer it. But is there an option since you have a few plants there in the Caymans? Is there even a chance to sort of have a competitive advantage in terms of -- I don't believe the right term is bundling, but you do have some manpower stationed on the islands access to equipment, et cetera that could be I don't know, cross shared between projects? Is that a potential or we overthinking that a little bit in terms of creating the best-in-class bid?

Yes. I mean, as I mentioned, in the script there, our local presence gives us a number of advantages, and I guess bundling if that's what you want to call it is every one of them, we share resources across the six plants now that we have there. So seven plant is not going to be a major addition in fixed costs and that sort of thing. I think we do have an advantage from that perspective.

Got it. Then switching gears to Aerex, it sounds like the refocusing on sales and marketing is shifting to the municipal side. It's starting to bear I think some fruit but I'm just curious as to, I mean, the margin profile on that municipal work, it sounds like it is different, it's probably even percentage of accounting driven to a degree. Is that in the same profile as that large customer or is it lower margin profile type work?

Well, I mean, once it's a different margin, for sure, the municipal work is much more competitive. And initially the work that we did for this other customer was very competitive. And we've managed to improve processes and that sort of thing. So the margin is different. Once we start really recognizing some revenues from these projects as they flow through the shop, then I think you get a better sense of that, because it's almost all municipal work that we're doing now. But a lot of this stuff is, as I mentioned is being held up, because of delays with the customers and delays with material deliveries and that sort of thing. So because, David, he explains the accounting better than me. But once we start manufacturing this, we will start booking the revenues –

Yes, the certain milestones. Correct.

Gerry, the margins on this municipal stuff, we were making very high margins on the other stuff. And as a result, I think going forward, you'll see some margin adjustment. But as Rick mentioned earlier, our margins have been adversely impacted because the utilization of plant overheads been very low. We continue to absorb those costs because it's pretty hard to replace your workforce, you can't terminate people, then all of a sudden, when production increases, you go back and hire them up, it doesn't work that way. But as we continue to grow the business and you see a greater percentage of Aerex's manufacturing capacity utilized, the impact of that fixed operating cost, fix factory overhead becomes less and less than the gross profit percentage. So you'll see an improvement in gross margin just from the greater utilization of the plant itself.

No, I can recognize it, 1.1 million of revenue manufacturing versus like, 3.8 last June, completely understand that overheads fixed and the incremental margins. I was just curious as maybe even the delta between municipal margins and the other customers, so we would have an idea.

No, I don't think we can give you that number, Gerry, because some of this municipal work, it varies in market and some of the has very good market on it. So, it's just a matter of the product mix. It's not, we're happy to be in this market, we think it's going to be a very good market for us expect margins in it.

I completely understand. And one more question on Aerex's manufacturing, and what is your maybe theoretical capacity with that facility? And have you ever sort of maxed it out? And I know, I can't necessarily ask what kind of revenue could a facility do -- capacity, because there's going to be different pricing, especially in today's environment, but just trying to figure out potentially how much revenue that facility could do, if you -- the sales channel --

I can tell you, Gerry, the prior purchasing Aerex, they had years where they did 19 million revenue. I believe, somewhere around that 17, 18 to 19 million, that plant has that potential. And it's -- we also have ability to expand the plant for some reason, we got major orders that would push us beyond the existing capacity. I mean, we have land available there, which we purchased for the express purpose of expanding production capacity, should the demand warranted in the future. So we're well placed but Aerex has the potential to do with its existing capacity. Given the product mix, I mean, that's always a big determinant. I mean, $20 million in revenue is not beyond their reach. With the right mix of orders, given the existing capacity.

[Operator Instructions] There are no other questions at this time. This concludes our question-and-answer session. I'd like to turn the call back over to Mr. McTaggart. Please go ahead sir.

I'd like to thank everybody again for joining today and hope everybody has a very nice holiday season. And we look forward to talking to you again in March when we release our year-end report. Thank you.

Thank you. Ladies and gentlemen, before we conclude today's call, I would like to provide the company’s Safe Harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding the company's future revenue, future plans, objectives, expectations and events, assumptions and estimates. Forward-looking statements can be identified by the use of words or phrases, usually containing the words believe, estimate, project, intend, expect, should, will or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts and projections for its business and the industry and markets related to its business. Any forward-looking statement made during this conference call are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such 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 government of the jurisdictions in which it operates. The outcome of its negotiations with the Cayman government regarding a new Retail License Agreement, the collection of its delinquent accounts receivable in the Bahamas. The possible adverse impact of the COVID-19 virus on the company's business 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 discussion and analysis of financial conditions or results of operations and risk factors sections of the company's SEC filings including but not limited to its Annual Report on the Form 10-K and quarterly reports for Form 10-Q. Any forward-looking statements made during the conference call, speak as of today's date. The company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regard there to or any changes in its event conditions or circumstances of which any forward-looking statement is based except as required by law. Before we end today's conference call, I would like to remind everyone that this call will be available for replay starting later this evening. Please refer to yesterday's earnings release for dial-in and replay instructions available via the company's website at www.cwco.com. Thank you for attending today's presentation. This concludes the conference call. You may now disconnect.