Consolidated Water Co. Ltd. Q1 FY2026 earnings call

Overall Financial Results

• Total Q1 2026 gross profit was $10.9 million (36% margin), down from $12.3 million (37% margin) YoY.
• Net income from continuing operations attributable to shareholders was $3.8 million ($0.24 per diluted share), down from $4.9 million ($0.31 per diluted share) YoY. Including discontinued operations, net income was $3.8 million ($0.23 per diluted share) versus $4.8 million ($0.30 per diluted share) YoY.
• The company holds a strong balance sheet with no significant outstanding debt: $126.3 million in cash and cash equivalents, $144.3 million in working capital, and $223.6 million in stockholders' equity as of March 31, 2026. Projected 2026 remaining capital expenditures are ~$8.6 million, and a $2.3 million dividend was paid in April 2026.

Cayman Islands Retail Operations

• Record-breaking Q1 2026 tourism (11.1% YoY growth in stay-over visitors, with March 2026 as the best visitation month in Cayman history) partially offset the rainfall-driven retail volume decline. New hotel inventory (Grand Hyatt opened Q1 2026, ONE GT opening end of Q2 2026) and new airline routes are expected to support continued tourism growth.
• Negotiations for a new retail water utility license with OfReg have become more active but remain ongoing; the current interim concession remains in place. Ongoing redevelopment of low-rise older condominiums into higher-density 10-story buildings continues to drive long-term retail water demand growth.

Bulk Water Segment

• The first of two new desalination plants on Cat Island, The Bahamas began contributing revenue this quarter, with the second plant expected to be commissioned in Q2 2026. The Caribbean bulk business maintains stable, recurring long-term revenue and profit growth.

U.S. Manufacturing & Projects

• Current backlog points to improving manufacturing revenue in the remaining three quarters of 2026, though full year 2026 manufacturing revenue will remain below 2025's record level. Part of 2026 manufacturing capacity is allocated to producing equipment for the Hawaii Kalaeloa desalination project; this manufacturing revenue is eliminated in consolidated financials and will be recognized through the services segment as the project progresses.
• Updated Florida water regulations are driving growing demand for membrane-based reverse osmosis treatment systems for brackish groundwater, creating strong new market opportunity for the manufacturing segment, which is well-positioned via its Fort Pierce, Florida location and industry experience.
• Two previously awarded design-build projects (a $3.9 million Colorado drinking water plant expansion and an $11.7 million Northern California wastewater recycling plant) are progressing well, with over $13 million in remaining revenue expected to be recognized primarily in 2026. The company recently bid a follow-up wastewater project with the same Colorado client and awaits results.

U.S. O&M & Design-Build (PERC Water)

• PERC Water is pursuing multiple O&M and design-build opportunities in California, Arizona, and Colorado. In Arizona, positive feedback on completed Customized Design Reports (CDRs) for Phoenix metro developer projects is expected to lead to new design-build contracts. The company is actively seeking acquisitions to expand PERC's successful design-build model into the Florida market.

Hawaii Desalination Project

• The company continues progressing through the permitting process for the 1.7 million gallon per day Kalaeloa desalination plant, with recent progress on a key required permit. Construction start has been deferred, shifting revenue recognition to future periods; management still anticipates construction will begin in late 2026, with the project driving significant revenue and earnings growth in subsequent periods.

Total consolidated Q1 2026 revenue was $30 million, a 11% decrease year-over-year (YoY).

• Manufacturing: Revenue decreased $4.4 million (76% YoY) to $1.4 million. This represented ~4.7% of total Q1 2026 revenue. The decline was driven by lapping a large 2024 purchase order that boosted Q1 2025 revenue, and lower overall new purchase order volume this quarter.
• Retail: Revenue decreased $834,000 YoY. The 10.2% drop in water sales volume from above-average rainfall on Grand Cayman was partially offset by record tourism growth. This segment contributed a majority of total gross profit, though its absolute contribution declined YoY.
• Bulk: Revenue increased $333,000 YoY, driven by the new Cat Island, Bahamas desalination plant. This segment generated stable, recurring gross profit and operating income growth YoY, representing ~?% of total revenue with a small absolute increase.
• Services: Revenue increased $1.2 million (15% YoY) to $8.9 million, driven by growth in operations and maintenance (O&M) contracts including a new 3-year Southern California municipal contract that will generate $4.5 million total revenue over its term. Construction revenue within this segment remained consistent at $2.1 million Q1 2026. This segment represented ~29.7% of total Q1 2026 revenue.

• Full year 2026 manufacturing segment revenue is expected to be lower than 2025's record annual revenue, despite sequential improvement in the second through fourth quarters from Q1 2026.
• The Hawaii desalination plant construction start is still expected in late 2026, with significant revenue and earnings from the project recognized in future reporting periods after construction begins.
• Management expects growing long-term demand for the company's water treatment, desalination, and reuse solutions driven by increasing global water scarcity, and expects the diversified business model to deliver strong annual results for shareholders.
• No changes to dividend policy were announced; the board will consider future quarterly dividends, and management is evaluating uses for the company's strong cash balance to increase shareholder value, including strategic acquisitions.

• CW-Bahamas has a $23.9 million accounts receivable balance as of March 31, 2026, up from $20.7 million at the end of 2025, with a significant portion of this balance delinquent. While Bahamas government officials have stated an intention to reduce the delinquent balance, the timing and magnitude of any payment reduction remains uncertain.
• Negotiations for a new Grand Cayman retail water utility license are ongoing, with final terms and timing of completion still uncertain.
• The Hawaii desalination project has experienced extended delays in the permitting process, which has shifted revenue recognition to future periods; further delays could push construction start and revenue recognition even later.
• Manufacturing segment revenue is subject to variability due to long lead times for large municipal projects, leading to uneven quarterly revenue recognition.
• Retail segment revenue and volume are exposed to variability from unpredictable rainfall patterns and changes in tourism demand.
• All forward-looking statements are subject to additional risks detailed in the company's SEC filings, including political/regulatory risk in operating jurisdictions, the ability to successfully win and execute new projects, and risks related to strategic acquisitions.

Q: What is causing ongoing delays to the Hawaii desalination project, and are there any unstated issues beyond permitting process delays? / A: Management confirmed the only issue is an extended timeline to secure a single key permit, which is a prerequisite for all other required project permits. There are no outstanding project design changes or objections from regulators, only a slow review process from one government agency, with no other fundamental problems impacting the project.

Q: Is there enough manufacturing capacity to meet growing Florida market demand while also producing equipment for the Hawaii project, and can the manufacturing segment grow long-term? / A: The manufacturing facility expansion was completed to accommodate larger municipal project equipment, after the business shifted away from smaller repetitive products for the nuclear industry. There is sufficient capacity to handle the Hawaii project allocation and support future growth, though revenue will be variable due to the long lead times of large municipal projects. Management expects solid medium-term manufacturing growth driven by strong Florida market demand.

Q: Is Q1 2026 rainfall or Q1 2025 rainfall more representative of baseline Grand Cayman conditions, and is hotel/condo development still driving long-term demand growth? / A: Q1 2026 rainfall is closer to historical baseline, while Q1 2025 saw an extreme 30-year drought that inflated last year's retail revenue. Ongoing real estate development continues to drive demand growth, primarily through redevelopment of low-rise 1970s-1990s condominiums into higher-density 10-story buildings, with this trend expected to continue for the foreseeable future.