Consolidated Water's Q3 2025 Earnings Call: Contradictions Emerge in Hawaii Project Timeline, Permit Status, Arizona Sales Strategy, and Revenue Recognition

Date of Call: November 11, 2025

Financials Results

• Revenue: $35.1M, up 5% YOY (vs $33.4M in Q3 2024)
• EPS: $0.34 per diluted share (continuing operations), up from $0.31 in Q3 2024; including discontinued operations $0.34 vs $0.28 prior year
• Gross Margin: 37% of revenue, compared to 35% in Q3 2024

Guidance:

• Hawaii Kalaoa desalination project: construction expected to commence early next year pending remaining permits (concentrate-well permit received; archeological permit under final review).
• Two newly awarded U.S. construction projects(~$15.6M combined) — revenue to be recognized primarily in 2026.
• Manufacturing facility expansion completed (17,500 sq ft) to increase throughput, enable larger/multiple builds and support revenue growth.
• Projected remaining 2025 capital expenditures ~ $4.5M (including ~$1.3M for Bahamas project and $266k for Aerex equipment).
• Strong liquidity ($123.6M cash) and no significant debt; may continue dividends as declared.

Business Commentary:

* Revenue Growth and Segment Performance: - Consolidated Water Co. Ltd. reported total revenue of $35.1 million for Q3 2025, up 5% from the previous year. - Growth was driven by increases in retail services, manufacturing, and services segment revenues.

• Water Sales and Demand:
• Retail water sales on Grand Cayman increased due to a 6% rise in water volume, driven by economic strength and drier weather conditions.

• Higher demand led to a rise in both sales and water volumes sold.

• Bulk Segment Profitability:

• Bulk segment revenue decreased by $373,000 to $8.4 million due to lower fuel-related charges.
• Despite the decline in revenue, the segment achieved higher profitability through cost reduction and enhanced efficiency.

• Manufacturing Segment Expansion:
• Manufacturing segment revenue increased by $305,000 or 7% to $4.7 million, supported by increased production activity.

• The completion of a new manufacturing facility expansion is expected to further enhance efficiency and throughput.

• Construction Projects and New Contracts:

• The services segment saw revenue growth due to new construction projects and recurring O&M contracts.
• The company secured two new water treatment plant construction projects worth approximately $15.6 million.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a “notable increase in overall revenue and earnings per share,” reported strengthened gross margin (37% vs 35% prior year), described completed manufacturing expansion to boost throughput, and stated “We are very optimistic about our continued growth,” citing strong balance sheet and multiple near-term project catalysts.

Q&A:

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): I want to start with Hawaii. It sounds like the architectural permit is coming through soon. And then separately, there's a couple of admin permits after that. I don't want to use the -- well, I'm going to use the word perfunctory, but those admin permits sort of just a perfunctory addition to what's going on and there's easily come through? Or is there anything we should be thinking about on that front?
  Response: The archaeological permit is the critical remaining approval with more discretion; the other permits are more administrative/building-related and less uncertain.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): Administrative is probably a better word. And then assuming these come through, I would assume maybe 1 quarter, 1.5 quarters to ramp up the full sort of construction cadence and then proceeds through '26, '27, then sort of a wind down over a quarter or two. Is that sort of a correct cadence for the build-out?
  Response: Yes — project timing will follow the contract progress-payment schedule: a ramp-up into a mid‑project spending peak and then typical completion cadence; nothing unique expected.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): Arizona, the CDR increase, is this a function of just activity picking up in the state? Or are you doing some more, I don't know, customer outreach positioning, et cetera?
  Response: The CDR uptick reflects strong developer activity in Arizona combined with effective local sales efforts; the CDR product gives developers cost and schedule certainty which drives demand.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): So I mean, the REC, you have a project that -- you have some reference or project references, and that could help on the expansion into Colorado as well?
  Response: Yes — the Lochbuie REC project provides references and credibility that help establish and grow our Colorado design‑build business.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): One more question, then I'll jump back in queue. I don' want to dial in there. Manufacturing obviously added 17,500 feet. How much opportunity does that open up? Obviously, it's more space, more -- you can build more, et cetera. But you also mentioned it allows you to do multiple projects at one time. So I'm not sure if it's -- it unlocks two things. One, more space for more projects, but also improves just overall flow of work through the facility, even generating additional growth opportunities or capacity opportunities.
  Response: The new 17,500 sq ft provides dedicated assembly space separate from fabrication, significantly improving workflow, enabling larger units and simultaneous projects, and increasing throughput.

• Question from Gerard Sweeney (ROTH Capital Partners, LLC): Then on the margin front, obviously, the nuclear work is higher end. How should we think of margins with even some of the municipal work coming through and the expansion in the facility? Can we see a step-up in margins from the flow-through work, more municipal work and just -- kind of preemptive thinking.
  Response: Q3 delivered ~3 percentage points of gross margin improvement; the expansion should raise gross‑profit dollars and revenue, but margins will vary with product mix — investment is justified by expected higher gross‑profit dollars.

Contradiction Point 1

Hawaii Project Timeline and Permit Status

It involves differing statements about the timeline and permit status for the Hawaii project, which could impact expectations for project initiation and progress.

Is the build-out timeline correct, with a 1- to 1.5-quarter ramp-up, ongoing through 2026 and 2027, followed by a slowdown over the next one to two quarters? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: The archeological permit is crucial because it requires discretion. Other permits are mainly building-related and more administrative. The middle of the project is where we'll spend the most money, and it's a typical construction project. - Frederick McTaggart(CEO)

What are the plans for incremental O&M revenue growth? - Unidentified Participant (Western Standard)

2025Q2: The critical permit issues are an archaeological permit and final approval for the water supply. The design is nearly complete, and submission for final approval is anticipated shortly. - Frederick McTaggart(CEO)

Contradiction Point 2

Arizona Market Activity and Sales Strategy

It involves differing explanations for the increase in sales and activity in Arizona, which could impact expectations for sales growth and market strategy.

How does the additional 17,500 sq. ft. manufacturing capacity unlock growth opportunities through expanded project space and improved operational efficiency? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: It's largely due to our sales team's understanding of projects in Arizona. Developers prefer our CDR product for cost certainty and guaranteed schedules. REC's design build capability had to be established, now it's gaining momentum. - Frederick McTaggart(CEO), David Sasnett(CFO)

Could you outline market opportunities by region (Caribbean vs. U.S.), pipeline progress for PERC and REC, and the current market outlook? - Gerard J. Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q2: On the wastewater side, there is continued interest in design build jobs for wastewater treatment plants, with opportunities ranging from $10 million to $30 million in size, primarily in the Phoenix area. - Frederick W. McTaggart(CEO)

Contradiction Point 3

Project Timeline and Revenue Recognition

It involves the expected timeline for project execution and revenue recognition, which directly impacts financial forecasts and investor expectations.

Is the expected timeline for the construction ramp-up of 1-1.5 quarters, followed by 2026-2027 progression and a 1-2 quarter wind-down? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: The typical construction project has its spending peak in the middle. The ramp-up includes site clearing and material ordering. - Frederick McTaggart(CEO)

How will construction revenue for the Hawaii project be recognized, and will there be revenue during permit processing? - Gerry Sweeney (ROTH Capital)

2025Q1: The contract filed in 2023 details the revenue flow. The project has a two-year design and construction phase. To date, less than 10% of the revenue has been recognized due to project cost milestones. The construction phase is expected to start in Q1 2026, dependent on permitting. - Rick McTaggart(CEO)

Contradiction Point 4

Permitting Responsibilities and Challenges

It highlights differing perspectives on the responsibilities and challenges related to the permitting process for the Hawaii project, which could impact project timelines and costs.

Is the architectural permit for Hawaii expected to be approved soon, and are the subsequent administrative permits merely procedural and straightforward to obtain, or are there any potential issues to consider? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: The archeological permit is crucial because it requires discretion. Other permits are mainly building-related and more administrative. - Frederick McTaggart(CEO)

Can you explain the permitting issues and if they are environmentally related? - John Bair (Ascend Wealth Advisors LLC)

2025Q1: Permitting responsibilities are shared between Consolidated Water and the client. Some permits are the client's responsibility, while others, like building permits and water quality approvals, are Consolidated Water's responsibility. - Rick McTaggart(CEO)

Contradiction Point 5

Hawaii Seawater Desalination Project Timeline

It directly impacts expectations regarding the start and completion timeline of a major project, which could influence company revenue and project progress.

Is the architectural permit expected to be approved soon? Are the subsequent administrative permits merely procedural or are there potential issues to consider? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q3: We're in the middle of the permitting phase, and we expect to have the architectural permit soon, followed by some administrative permits. - Frederick McTaggart(CEO)

What are the main features of the Hawaii seawater desalination project? - Questioner's Name (Company Name)

2024Q4: Construction is expected to begin in early 2026. - Rick McTaggart(CEO)