10-Q: Cadiz Inc. Reports Second Quarter 2024 Results, Secures Water Supply Agreements
Quarterly Report
Cadiz Inc. announced its financial results for the second quarter of 2024, highlighting progress in securing water supply agreements and ongoing development of its water infrastructure projects.
Summary
- Cadiz Inc. reported a net loss of $8.9 million for the three months ended June 30, 2024, compared to a $7.1 million net loss for the same period in 2023.
- The company's net loss for the six months ended June 30, 2024, was $15.7 million, compared to a $17.8 million net loss for the same period in 2023.
- Revenue for the second quarter of 2024 was $0.5 million, primarily from ATEC sales, alfalfa crop sales, and agricultural leases, compared to $0.8 million in the second quarter of 2023.
- For the six months ended June 30, 2024, revenue totaled $1.6 million, compared to $0.9 million for the same period in 2023.
- The company secured agreements to sell 16,275 acre-feet per year (AFY) of water, representing 65% of the Northern Pipeline's capacity.
- Cadiz is also in discussions to establish a Master Limited Partnership (MLP) to fund capital infrastructure costs for the Water Project.
- The company's cash used in operating activities was $9.9 million for the six months ended June 30, 2024, consistent with the same period in 2023.
- Cash provided by financing activities was $16.0 million for the six months ended June 30, 2024, primarily from long-term debt issuance, compared to $20.0 million in 2023.
Sentiment
Score: 5
Explanation: The document presents a mixed picture. While there is progress in securing water supply agreements and exploring new financing options, the company continues to incur significant losses and relies on external funding. The sentiment is neutral to slightly negative due to the ongoing financial challenges.
Positives
- Cadiz secured agreements for 16,275 AFY of water sales, a significant step towards monetizing their water assets.
- The company is actively exploring a Master Limited Partnership (MLP) which could provide a new avenue for funding infrastructure development.
- Revenue increased to $1.6 million for the first six months of 2024, compared to $0.9 million for the same period in 2023.
- The company has secured a new tranche of senior secured convertible terms loans of $20 million.
Negatives
- Cadiz reported a net loss of $8.9 million for the second quarter of 2024, and $15.7 million for the first six months of 2024.
- The company's operating expenses continue to exceed revenues.
- The company's alfalfa crop harvest is experiencing suppressed market conditions.
- The company relies on debt and equity financing to support its operations.
Risks
- The company's ability to raise additional capital is critical for its future operations and development.
- Limitations on the company's liquidity and ability to raise capital may adversely affect its business.
- The company's future working capital needs depend on the progress of the Water Project and other developments.
- The company's alfalfa crop harvest is experiencing suppressed market conditions which is impacting revenue.
Future Outlook
The company expects to need additional capital to finance working capital needs and capital expenditures. The company may meet future cash requirements through equity or debt placements, or through the sale of assets.
Management Comments
- Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from each financial statement issuance date.
- Management evaluates the Company's liquidity to determine if there is a substantial doubt about the Company's ability to continue as a going concern.
- Management believes that the company's water supply, storage, pipeline conveyance and treatment solutions will provide a significant source of future cash flow for the business and its stockholders.
Industry Context
Cadiz is operating in the water solutions sector, which is experiencing increased demand due to climate change and growing populations in the Southwestern United States. The company's focus on groundwater storage and conveyance aligns with the need for reliable water supplies in drought-prone regions.
Comparison to Industry Standards
- Cadiz's water storage capacity of 1 million acre-feet is comparable to the Metropolitan Water District of Southern California's 1.2 million acre-feet in Lake Mead, highlighting the potential scale of their project.
- The company's agreements to sell 16,275 AFY of water demonstrate progress in commercializing their water assets, which is a key metric for companies in the water resource sector.
- The exploration of a Master Limited Partnership (MLP) is a common strategy for infrastructure projects, similar to those used by pipeline and real estate companies, indicating a strategic approach to financing.
Stakeholder Impact
- Shareholders are impacted by the company's ongoing losses and need for additional financing.
- Employees are impacted by the company's financial performance and the potential for changes in operations.
- Customers are impacted by the company's progress in securing water supply agreements and developing its water infrastructure.
- Creditors are impacted by the company's reliance on debt financing and its ability to repay its obligations.
Next Steps
- The company will continue to pursue the development of its water supply, storage, and conveyance resources.
- Cadiz will continue discussions with parties that could participate in establishing a MLP.
- The company will continue to seek additional financing to support its operations and development.
Key Dates
| Date | Description |
|---|---|
| 2016-02-29 | Date of the Fenner Valley Farms LLC lease agreement. |
| 2019-07-10 | Date of the original approval of the 2019 Equity Incentive Plan. |
| 2020-03-05 | Date of the conversion of convertible senior notes into preferred stock. |
| 2021-06-29 | Date of the Underwriting Agreement for the Depositary Share Offering. |
| 2021-07-01 | Effective date of the Certificate of Designation for the Series A Preferred Stock. |
| 2021-07-02 | Date of the completion of the Depositary Share Offering and the original Credit Agreement. |
| 2022-02-04 | Date of amended employee agreement and grant of performance stock units. |
| 2022-03-31 | Date of amendment to the Fenner Valley Farms LLC lease agreement. |
| 2022-12-31 | Date of the ATEC acquisition. |
| 2023-01-30 | Date of the January 2023 Direct Offering. |
| 2023-02-02 | Date of the First Amendment to Credit Agreement. |
| 2023-08-14 | Date of the Second Amended Credit Agreement. |
| 2024-01-01 | Date of the start of the 26-year right-of-way agreement with the BLM. |
| 2024-03-06 | Date of the Third Amended Credit Agreement. |
| 2024-04-26 | Date of the Amended and Restated Employment Agreement with Susan P. Kennedy. |
| 2024-06-30 | End of the reporting period for the quarterly report. |
| 2024-07-15 | Date of the dividend payment on the Series A Preferred Stock. |
| 2024-08-09 | Date of the outstanding share count. |
| 2024-08-13 | Date of the filing of the quarterly report. |
Keywords
water supply, water storage, water conveyance, water filtration, pipeline, Master Limited Partnership, MLP, Cadiz Water Project, groundwater, debt financing, equity financing, ATEC, alfalfa
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