Consolidated Water's 2025 Q3 Earnings Call: Contradictions on Hawaii Permits, Arizona CDR Growth, and Manufacturing Expansion Impact

Date of Call: November 11, 2025

Financials Results

• Revenue: $35.1M, up 5% YOY (from $33.4M in Q3 2024)
• EPS: $0.34 per diluted share (continuing operations), up from $0.31 in Q3 2024
• Gross Margin: 37% of revenue ($12.9M), compared to 35% ($11.6M) in Q3 2024

Guidance:

• Hawaii Kalaoa desalination construction expected to commence early next year pending final archaeological and remaining administrative permits.
• Two U.S. construction awards(~$15.6M combined) expected to generate revenue primarily in 2026.
• Completed 17,500 sq ft manufacturing expansion to increase throughput, enable simultaneous projects and boost gross-profit dollars.
• Projected 2025 capex ~ $4.5M (incl. ~$1.3M Bahamas, $266k Aerex equipment).
• Strong cash position to fund organic growth, potential acquisitions and future dividends as declared.

Business Commentary:

• Revenue and Earnings Growth:
• Consolidated Water reported revenue of $35.1 million for Q3 2025, up 5% from the previous year, with a notable increase in retail services and manufacturing segments.

• Growth was driven by higher demand for water due to drier weather conditions and improved operational efficiency in the manufacturing segment.

• Manufacturing Segment Performance:

• The manufacturing segment saw a 7% increase in revenue to $4.7 million, resulting in a 3% rise in gross profit margin.

• This was due to the production of higher-margin specialized products for nuclear power and municipal water customers, and the completion of a new manufacturing facility expansion.

• Hawaii Project and Revenue Outlook:

• Design work for the 1.7 million gallon per day seawater desalination plant in Hawaii is 100% complete, with construction expected to start in early 2026.

• The project is anticipated to significantly contribute to revenue and earnings growth in 2026 and 2027.

• New Construction Projects and Subsequent Revenue:

• The company secured 2 additional water treatment plant construction projects, with a combined value of approximately $15.6 million, expected to be realized primarily in 2026.
• These projects include a drinking water plant expansion in Colorado and a wastewater recycling plant in California, reflecting growth in the services segment.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted revenue and EPS increases (revenue up 5% YOY; EPS $0.34 vs $0.31 prior year), described completed manufacturing expansion and new U.S. awards, and said the company is "very optimistic about our continued growth" with a "strong balance sheet and ample liquidity."

Q&A:

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): It sounds like the archaeological permit is coming through soon — is there anything we should be thinking about on that front or are the remaining admin permits largely perfunctory?
  Response: The archaeological permit is the critical, discretionary permit that must be obtained first; subsequent permits are more administrative.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): Assuming permits come through, is ~1–1.5 quarters a reasonable ramp to full construction cadence and then proceeding through 2026–2027?
  Response: Construction will follow a typical ramp (site clearing, materials ordering) and spend profile per the contract progress‑payment schedule, with mid‑project being the heaviest spend period.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): On Arizona CDR activity — is this due to pickup in state activity or increased customer outreach/positioning?
  Response: Activity is driven by sustained developer demand plus strong, entrenched sales efforts; the CDR product gives cost and schedule certainty that appeals to developers.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): Does the Lochbuie/REC project provide references that help expansion into Colorado design‑build opportunities?
  Response: Yes — acquiring REC and completing the Lochbuie project established design‑build credibility and references to pursue more Colorado work.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): How much opportunity does the 17,500 sq ft manufacturing expansion unlock — more space, better flow, capacity for multiple projects?
  Response: The expansion materially improves workflow by separating fabrication and assembly, enabling simultaneous projects and larger unit assembly, increasing capacity and throughput.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC, Research Division): On margins — with more municipal work and the facility expansion, should we expect a step‑up in margins?
  Response: Q3 showed ~2ppt gross‑margin improvement (35%→37%); the expansion should increase gross‑profit dollars, but margins will fluctuate with product mix.

Contradiction Point 1

Hawaii Project Permitting Process

It involves the timeline and complexity of obtaining necessary permits for a significant project, which could impact construction schedules and company operations.

Are there any key permits or administrative steps we should be aware of regarding Hawaii's progress? - Gerard Sweeney(ROTH Capital Partners, LLC, Research Division)

2025Q3: The archeological permit is crucial as it involves more discretion than other administrative permits. The other permits are mainly building-related and are expected to be less challenging than the archeological permit. - Frederick McTaggart(CEO)

What are the remaining permitting issues for the Hawaii project? - Unidentified Participant(Western Standard)

2025Q2: The critical permitting issue is the archeological permit, with studies underway. Additionally, design approval for the water supply is needed, which could take time. - Frederick McTaggart(CEO)

Contradiction Point 2

Arizona CDR Activity Driver

It involves the reason behind an increase in CDR activity in Arizona, which could have implications for sales and revenue projections.

Is the CDR increase due to increased activity in Arizona or additional customer outreach/positioning strategies? - Gerard Sweeney(ROTH Capital Partners, LLC, Research Division)

2025Q3: The increase in CDR activity in Arizona is primarily due to the strong relationships built by the sales and marketing team with developers. These relationships have enabled the company to offer a product that provides developers with cost certainty and schedule guarantees. - Frederick McTaggart(CEO)

Are you seeing increased interest or bidding opportunities from U.S. manufacturing reshoring? - John H. Bair(Ascend Wealth Advisors)

2025Q2: We are experiencing an increase in design build engineering business in Arizona, primarily due to reshoring and a desire for local control of projects. - Frederick McTaggart(CEO)

Contradiction Point 3

Manufacturing Expansion Impact

It involves differing expectations for the impact of the manufacturing expansion, which could influence revenue growth and operational efficiency forecasts.

Manufacturing added 17,500 feet. How much opportunity does this represent? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: The new space is more of an assembly area, which will significantly improve the flow of work. It will enable the construction of larger units and enhance overall efficiency, contributing to more growth opportunities. - Frederick McTaggart(CEO)

Can you provide details on the timeline and start dates for the $20 million projects? - Gerry Sweeney (ROTH Capital)

2025Q1: Rick McTaggart: Two projects are already under contract, with the third expected to be contracted in the next couple of months. The projects will start generating revenue in the second half of this year and early 2026. - Rick McTaggart(CEO)

Contradiction Point 4

Hawaii Permitting Progress

It involves the progress and timeline of obtaining necessary permits for the Hawaii project, which impacts construction timelines and project execution.

With Hawaii's building permits approving soon and subsequent administrative permits, are there any key considerations? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: The archeological permit is crucial as it involves more discretion than other administrative permits. The other permits are mainly building-related and are expected to be less challenging than the archeological permit. - Frederick McTaggart(CEO)

Can you provide an update on the Hawaii utility-scale desalination plant, including the permitting process and any local opposition? - Analyst(unknown)

2024Q4: We have obtained or are in advanced stages of obtaining local building permits for our utility-scale desalination plant in Hawaii. - Rick McTaggart(CEO)