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CW

Consolidated Water Co. Ltd. (CWCO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue declined 15% to $33.7M as services construction revenue fell post the completion of two major projects; retail (+9%), bulk (+1%), and manufacturing (+10%) each grew, and gross margin improved to 36.5% from 35.0% YoY .
  • Diluted EPS was $0.30 (total) and $0.31 (continuing ops); both revenue and EPS were above S&P Global consensus ($32.3M and $0.19), driven by stronger retail volumes and higher-margin manufacturing mix; EBITDA outperformed estimates as well ($6.27M actual vs $4.8M estimate)* .
  • Services O&M revenue rose 9% to $7.7M, partially offsetting the expected drop in construction revenue ($2.2M vs $9.2M YoY), and management reiterated H2 2025 design/build ramp with three projects totaling ~$20M .
  • Strategic catalysts: Hawaii desalination project advanced with pilot approval; construction expected to begin early next year pending permits; Cayman retail concession renewed with license talks ongoing; management evaluating potential dividend increase .
  • Balance sheet remains strong (cash $107.9M; minimal debt), supporting capex ($9.1M in 2025) and growth investments across Cayman capacity, Aerex manufacturing expansion, and U.S. O&M footprint .

What Went Well and What Went Wrong

What Went Well

  • Retail water volumes in Grand Cayman rose 13% YoY, lifting retail revenue to $9.4M; management emphasized this reflects structural population and business growth rather than seasonality .
  • Manufacturing segment revenue increased 10% to $5.8M, with operating income up ~44% on higher production and favorable product mix; added 17,500 sq ft capacity to further stabilize growth .
  • Services O&M revenue grew 9% to $7.7M, evenly driven by PERC (CA/AZ) and REC (CO), demonstrating successful scaling of recurring revenue businesses .

What Went Wrong

  • Services construction revenue dropped to $2.2M from $9.2M YoY due to completion of Liberty Utilities and Red Gate II projects; segment gross profit fell by $2.7M .
  • Bahamas bulk energy pass-through revenue declined, partially offsetting Cayman contract amendments and Red Gate II O&M start; bulk revenue’s modest growth masked mixed regional dynamics .
  • Permitting delays in Hawaii (not under company control) may push construction start to early 2026; archeological permits cited as particularly slow-moving, creating timing uncertainty for services revenue ramp .

Financial Results

MetricQ1 2024Q3 2024Q1 2025 ActualQ1 2025 ConsensusVariance vs Consensus
Revenue ($USD Millions)$39.689 $33.391 $33.715 $32.300*+$1.415*
Diluted EPS (Total, $USD)$0.40 $0.28 $0.30 $0.19*+$0.11*
Gross Profit Margin (%)35.0% 34.8% 36.5% N/AN/A
Net Income from Continuing Ops to Stockholders ($USD Millions)$6.941 $4.957 $4.924 N/AN/A

Values retrieved from S&P Global for consensus/variance*.

Segment revenue breakdown (YoY):

SegmentQ1 2024 Revenue ($USD Millions)Q1 2025 Revenue ($USD Millions)YoY Change
Retail$8.625 $9.411 +9%
Bulk$8.342 $8.412 +1%
Services (Total)$17.418 $10.078 -42%
Manufacturing$5.305 $5.814 +10%
Total$39.689 $33.715 -15%

KPI highlights:

KPIQ1 2024Q1 2025Notes
Services O&M Revenue ($USD Millions)$7.099 $7.725 +9% YoY
Services Construction Revenue ($USD Millions)$9.204 $2.218 Decline due to project completions
Cayman Retail Water Volume Growth (%)+—+13% Structural demand growth
Cash & Equivalents ($USD Millions)—$107.9 As of Mar 31, 2025
Working Capital ($USD Millions)—$136.2 As of Mar 31, 2025
Dividends Declared per Share ($USD)$0.095 $0.11 Quarterly

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Hawaii desalination construction startEarly next year (permitting-dependent)Early next year, dependent on permits Early next year, dependent on permits; pilot approval achieved Maintained (milestone achieved)
Design/build services outlookH2 2025, ~12-month executionConstruction revenue below 2023 until Hawaii; pipeline under review Three smaller projects (~$20M) to start H2 2025; ~12-month realization Raised specificity (timing/value)
2025 Capex (existing ops)FY 2025~$10.3M (FY24 call) ~$9.1M (FY25 update) Lowered
Dividend policyOngoing$0.11/share (raised in 2024) Evaluating potential increase; ~$1.8M paid in April Potential increase under review
Cayman retail concession/licenseOngoingConcession pending, license renewal expected Concession granted; license negotiations resumed; old license remains in effect Progressed (regulatory milestone)

Earnings Call Themes & Trends

TopicQ3 2024 (Nov 2024)Q4 2024 (Mar 2025)Q1 2025 (May 2025)Trend
Hawaii project status & timingAdvancing pilot/design; construction late next year Delays not caused by CWCO; construction early next year; inflation protection ~80% Pilot approved; construction early next year pending permits; ~80% cost inflation-adjusted Positive milestones; timing risk persists
Services revenue mixConstruction down; O&M up 49% in Q3; REC drives O&M Construction revenue below 2023 until Hawaii starts O&M +9% YoY; three smaller DB projects (~$20M) in H2 Mix shifting to recurring O&M; DB pipeline rebuilding
Retail (Cayman) growth+4.2% volume; customer growth Record volumes; capacity expansion planned +13% volume; 1MGD West Bay expansion by summer Strong structural demand
Manufacturing marginsGross profit up 84% Q3 on mix/efficiency Stabilized margins, expansion space underway Op income +~44%; 17,500 sq ft added Sustained margin improvement
Regulatory/licensing (Cayman)—Concession forthcoming; license talks to begin Concession granted; license negotiations resumed De-risked concession; license next
Macro/inflation protection—~80% construction cost inflation-protected ~80% construction cost inflation-protected; permits gating Margin protection affirmed

Management Commentary

  • “Our retail, bulk and manufacturing business segments generated meaningful growth and profitability during the first quarter… Our Services segment revenue was comparatively lower… due to the completion of two major design-build projects” — CEO Rick McTaggart .
  • “Manufacturing segment revenue increased 10% and its operating income increased by about 44% due to higher production activity and a favorable shift in product mix to higher margin products” — CEO .
  • “We recently achieved a major milestone for our $204 million… seawater desalination plant in Hawaii… approved our pilot test reports… paving the way to begin construction once all permits have been obtained” — CEO .
  • “Our projected liquidity requirements for 2025 include capital expenditures… approximately $9.1 million… We paid out approximately $1.8 million in dividends in April… evaluating how to best utilize our large cash balance… potentially increasing our quarterly dividend” — CFO David Sasnett .
  • “Retail water sales… increased 13%… This isn’t a seasonal increase… firmly rooted in population growth… and business growth” — CEO/CFO Q&A .

Q&A Highlights

  • Hawaii build timing and revenue ramp: Management expects construction to begin early 2026 if permitting timelines slip; revenue recognition will ramp with construction costs; ~80% of construction cost adjusted for inflation to protect margins .
  • Permitting responsibilities: Shared between CWCO and client; archeological permit delays at Hawaii state agencies are the main timing risk, not project viability .
  • Retail growth sustainability: Growth driven by permanent population/business additions (hospital, Cayman Bay development), not just high season; capacity expansion timed for peak demand .
  • Smaller design/build projects: Three projects (~$20M) expected to start in H2 2025, with ~12-month revenue realization into early 2026 .
  • Pipeline: While no giant project imminently, a constructive pipeline of smaller jobs and multiple CDRs in Arizona/Caribbean supports medium-term services activity .

Estimates Context

  • Q1 2025 actuals vs S&P Global consensus: revenue $33.7M vs $32.3M (+$1.4M beat); diluted EPS $0.30 vs $0.19 (+$0.11 beat); EBITDA $6.27M vs $4.8M (+$1.47M beat)*. Management attributes outperformance to strong Cayman retail, improved manufacturing mix/margins, and steady O&M growth .
  • Near-term implication: With permitting gating Hawaii’s construction ramp, consensus for 2025 may need to factor H2 design/build starts (~$20M) and continued O&M and manufacturing execution; recurring O&M growth and Cayman demand reduce earnings volatility ahead of the Hawaii construction phase .

Values retrieved from S&P Global*.

MetricQ1 2025 ActualQ1 2025 ConsensusBeat/(Miss)
Revenue ($USD Millions)$33.715 $32.300*+$1.415*
Diluted EPS (Total, $USD)$0.30 $0.19*+$0.11*
EBITDA ($USD Millions)$6.274*$4.800*+$1.474*

Values retrieved from S&P Global for consensus and EBITDA actual*.

Key Takeaways for Investors

  • Mix shift to recurring O&M and strong Cayman retail demand cushions earnings while construction revenue troughs; manufacturing margins add upside .
  • Hawaii pilot approval de-risks technical fit; permitting pace is the primary timing variable for the major services revenue ramp (construction expected early next year) .
  • H2 2025 design/build activity (~$20M) provides interim catalysts ahead of Hawaii construction; watch for contract execution timing .
  • Balance sheet optionality (cash $107.9M, minimal debt) supports capex ($9.1M in 2025), Cayman capacity, Aerex expansion, and potential dividend increase consideration .
  • Estimate adjustments likely modestly upward for 2025 on O&M/manufacturing execution and H2 design/build starts; permitting headlines will drive sentiment near term .
  • Regulatory advancement in Cayman (concession granted; license process underway) reduces operating uncertainty; expect continued retail growth .
  • Stock narrative: defensiveness via recurring O&M and retail growth, with medium-term upside linked to Hawaii construction mobilization and services pipeline conversion .