Consolidated Water Q3 Earnings Call Highlights

Key Points

• Q3 results weakened: Revenue fell 11.9% year over year to $30.9 million, and net income from continuing operations dropped to $2.4 million from $5.6 million. Lower construction, operations and maintenance, and manufacturing revenue outweighed gains in retail and bulk water.
• Growth opportunities are building: The company secured a roughly $39.8 million California water-reuse project and $10.1 million in Florida equipment orders. Management also cited more than $150 million in contracted Hawaii project backlog and additional Florida bids as potential drivers of future growth.
• Consolidated Water ended September with $129.2 million in cash and no debt. Its new 25-year Grand Cayman retail license took effect in August, though lower customer rates reduced quarterly retail gross profit.

Consolidated Water NASDAQ: CWCO reported lower third-quarter revenue and earnings as declines in construction, operations and maintenance, and manufacturing outweighed growth in its retail and bulk water businesses. Management pointed to a new California water reuse contract and a Florida equipment order as potential sources of future growth.

Revenue fell 11.9% from a year earlier to $30.9 million, while net income from continuing operations attributable to shareholders declined to $2.4 million, or $0.15 per diluted share, from $5.6 million, or $0.34 per diluted share, Chief Financial Officer David Sasnett said.

Chief Executive Officer Rick McTaggart said the company made progress on its Grand Cayman retail license, manufacturing orders and major design-build projects despite the revenue decline. He said demand for more resilient water supplies creates opportunities in desalination, water reuse and treatment equipment.

Services and Manufacturing Weigh on Results

Services revenue fell 31.7% to $9.8 million. Sasnett said construction revenue declined 45% to $3.5 million as the number and total value of construction projects decreased. Operations and maintenance revenue fell 21% to $6.1 million, primarily because contracts with three California customers of the company’s PERC subsidiary expired.

Manufacturing revenue decreased 39.7% to $2.8 million, reflecting a lower dollar amount of completed and in-progress contracts. Sasnett said the company continues to expect full-year 2026 manufacturing revenue to be below its 2025 level.

Retail revenue rose 5.7% to $8.2 million, supported by higher energy pass-through charges and an increased rate for a major commercial customer in Grand Cayman. Bulk revenue increased 20.8% to $10.1 million, principally because of higher energy pass-through charges in The Bahamas and, to a lesser extent, contributions from new plants on Cat Island.

Consolidated gross profit fell to $9.8 million, or nearly 32% of revenue, from $12.9 million, or 36.9% of revenue, a year earlier. Including discontinued operations, net income attributable to shareholders was $2.3 million, or $0.14 per diluted share, compared with $5.5 million, or $0.34 per share, in the prior-year quarter.

California and Hawaii Projects

After the quarter ended, Consolidated Water announced an approximately $39.8 million agreement with the City of Pismo Beach, California, to design and build the Central Coast Blue Advanced Water Purification Facility. McTaggart said the project is intended to provide a drought-resistant local water supply and help protect the groundwater basin from seawater intrusion.

Planning and design began in October, construction is anticipated to start in spring 2027, and the overall project is expected to take approximately 24 months, McTaggart said.

In Hawaii, construction of the Kalaeloa Desalination Facility is anticipated to begin in the first half of 2027, subject to remaining permits and approvals. A limited notice to proceed in July authorized approximately $6 million for long-lead equipment procurement.

McTaggart said the project represents more than $150 million in contracted design and construction backlog that has not yet been recognized as revenue. After commissioning, Consolidated Water is contracted to operate and maintain the plant for 20 years, with two additional five-year extension options at the client’s discretion.

Asked about the permitting timeline, McTaggart said the company was awaiting a memorandum of agreement from Hawaii’s State Historic Preservation Division, with other remaining approvals including building and site-clearance permits. He said he hoped for news on the agreement before year-end, but described the first half of 2027 as a reasonable construction-start estimate.

Florida Orders and Cayman License

Consolidated Water received approximately $10.1 million in purchase orders during the quarter from a municipality on Florida’s East Coast for membrane water treatment equipment and cartridge filters. The equipment is scheduled for delivery by November 2027.

McTaggart said the company has also submitted bids for approximately $10 million in manufacturing projects expected to be awarded in the fourth quarter and is tracking about $45 million in Florida municipal projects expected to go out to bid within six months. Those opportunities, along with the existing orders, support management’s outlook for a strong 2027 in manufacturing, he said.

In Grand Cayman, Cayman Water’s new 25-year retail license took effect Aug. 1, preserving its exclusive rights to produce, distribute and sell potable water in its licensed area. The license lowered customer rates while retaining an annual inflation-based adjustment mechanism, subject to regulatory verification and approval.

McTaggart said lower rates reduced quarterly retail gross profit, although retail water sales volume increased approximately 1% year over year. He said tourism supports demand, while rainfall and conservation remain important variables.

Consolidated Water ended September with $129.2 million in cash and cash equivalents, $145.1 million in working capital and no outstanding debt, Sasnett said. McTaggart said the company continues to evaluate acquisitions and partnerships that could expand its market share or diversify its customer base or geographic reach.

About Consolidated Water (NASDAQ:CWCO)

Consolidated Water Co Ltd. NASDAQ: CWCO develops, operates and maintains seawater desalination plants and provides potable water through water utility and infrastructure services. The company's activities include designing and constructing desalination facilities, producing and selling drinking water, and providing related engineering, procurement and construction services.

Founded in 1973 and headquartered in the Cayman Islands, Consolidated Water has historically served communities and commercial customers in the Caribbean, including the Cayman Islands and The Bahamas, as well as customers in the United States.

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