Q1 2025 Consolidated Water Co Ltd Earnings Call
[inaudible]
Speaker Change: Good morning. Thank you for joining us today to discuss Consolidated Water Companies First Quarter 2025 Operating and Financial Results.
Speaker Change: Hosting the call today is the Chief Executive Officer of Consolidated Water, Rick McTaggart and the Company's Chief Financial Officer, David Sasnett.
Following their remarks, we'll open the call to your questions.
Speaker Change: At any time, during the call, you may join the Q&A queue by pressing star 1 on your keypad.
Speaker Change: Before we conclude today's call, I'll provide some important cautions regarding the forward looking statements made by management during the call.
Speaker Change: Now, I'd like to turn the call over to Consolidated Water CEO , Rick McTaggart. Sir, please go ahead.
Unknown Executive, Frederick McTaggart
Thank you Mike and good morning everyone.
Speaker Change: Our services segment revenue and operating income declined in the first quarter of 2025 compared to the year earlier due to a completion of two major design build projects in the second quarter last year.
Speaker Change: However, we did see and improve performance in all three other business segments, particularly retail and manufacturing.
Speaker Change: Retail Water Sales and our exclusive utility service area on Grand Cayman reflected much higher sales volumes compared to a year earlier due to population growth and increased business activity within our service area.
Speaker Change: Manufacturing revenues and operating income increased by about 10%, and 44% respectively compared to a year earlier due to higher production activity and a higher margin product mix.
Speaker Change: Revenue and gross profit generated in our Caribbean-based bulk water segment remain consistent year over year, reflecting the long-term stable income generating nature of these businesses.
Speaker Change: Revenue from our services segment declines significantly compared to a year earlier due to completion of the Liberty Utilities and Red Gate 2 design build projects in the second quarter of last year.
Speaker Change: The decline was partially offset by a 9% or $626,000 increase in recurring revenue from our operations and maintenance contracts in the Western U.S.
Speaker Change: This Growth in ONM Revenue in Dollar Terms was about evenly generated by Perk in California and Arizona and REC in Colorado.
On April 28th
Speaker Change: The Honolulu Board of Water Supply, our client on our multi-year seawater desalination project
in Hawaii.
Speaker Change: During the piloting phase is a reasonable match to their existing water supply and further concluded that the desalinated water from the new plant would not cause any detrimental impact to their distribution pipes or customer assets.
Speaker Change: This is a key and significant milestone in the project and paves the way to begin construction once all permits have been obtained.
Speaker Change: This 204 million dollar project, the design, construct, operate, and maintain a 1.7 million gallon per day, seawater desalination plant for the Honolulu Board of Water supply, commenced in 2023.
Speaker Change: in June . We expect to begin the construction of this project early next year once the we and the client have obtained the permits that are required and the client issues are noticed to proceed with the construction.
Speaker Change: On a cautionary note, some of these permits are outside of our control and delays in obtaining them could also delay the construction date.
Speaker Change: The construction phase is expected to generate the largest portion of revenue from this project and be a major growth driver for our services segment in 2026 and 2027.
We expect to submit our 90% design for the project.
Speaker Change: On schedule, early next month for the clients engineer to review.
Speaker Change: The Hawaii Project is a major growth driver for our services segment. It involves a two-year development phase which concludes next month.
Speaker Change: followed by two years of construction. Once completed in commission we have been contracted to operate the plant under a 20-year-own-am agreement plus five year two five year extensions at the option of the client.
Speaker Change: It's important to note that particularly in this environment, now economic environment,
Speaker Change: that 80% approximately 80% of the construction costs for this project will be adjusted for inflation at the start of construction.
Speaker Change: This mechanism is expected to protect our gross margin and overall profitability.
David Sasnett, Unknown Executive, Consolidated Water Co Ltd.
Speaker Change: Now, before getting more into recent developments in our outlook for the year, I would like to turn the call over to our CFO , David Sasnett, who will take us through the financial details for the quarter.
Speaker Change: Thank you, Rick. Good morning, everyone. Our revenue was down 15% from the first quarter of 2024.
Speaker Change: 33.7 million and this decrease was due to a decrease of 7.3 million in the service of statements specifically to construction revenue.
Speaker Change: that related to completion of the two projects Rick mentioned previously.
Speaker Change: The service segment revenue decreased, the partially offset by revenue increases of 786,000 in our retail segment, 70,000 in our bulk segment, and 509,000 in the manufacturing segment. Our retail revenue was up.
Speaker Change: $786,000 due to a 13% increase in the volume of water sold.
Speaker Change: Our bulk segment revenue increased slightly to $8.4 million due to the revenue generated by the commencement May 2024.
Speaker Change: of the Operations and Maintenance Contract for the new Red Gate 2 desalination plan on Grand Cayman, which we've constructed, and the amendment of our company's north-style contract with the Water Authority Cayman, which also became effective in May of 2024.
Speaker Change: As I mentioned earlier, the decrease in the service to segment revenue was due to plant construction, revenue decreasing from 9.2 million in the first quarter of 24, the 2.2 million in the first quarter this year, and once again, this is the result of the two construction projects that were completed in the second quarter of 2024.
Speaker Change: A recurring revenue generated under our O&M contracts totaled 7.7 million in the first quarter of 2025 an increase of 9% over the previous year, both Perk and RAC, our Colorado subsidiary increased their O&M revenue this first quarter from last year.
Speaker Change: Our Manufacturing Segment Revenue increased by $509,000 to $5.8 million for the first quarter of 2020.
2025.
Speaker Change: Gross Profit for the first quarter 25 was $12.3 million, about 37% of total revenue, as compared to $13.9 billion or around 35% of total revenue in the first quarter 24.
Speaker Change: This decrease was partially offset by an increase in gross profit for our retail bulky manufacturing
Speaker Change: Data income from continuing operations attributable to Consolidated Water shareholders for the first quarter of 25 was $4.9 million or $31 cents per diluted share. This compares to data income $6.9 million or $4.3 cents per diluted share the first quarter of $24.
Speaker Change: Including discontinued operations, net income equivalent to Consolidated Water stockholders for the first quarter of 2025 was 4.8 million or 30 cents per diluted chair has compared to net income of 6.5 million or 40 cents per diluted chair the same period last year.
Turning to our balance sheet.
Speaker Change: Cash and Cash Co Ltd grew to $107.9 million as of March 23rd, 2025.
Speaker Change: and a working capital increase to $136.2 million and our stockholders equity now totals $213.3 million.
Our projected liquidity requirements for 2025 include capital expenditures.
Excuse me
Approximately.
Speaker Change: Excuse me, our projected liquidity agreements for 2005 include capital expenditures for existing operations of approximately 9.1 million. This includes 800,000 to be incurred in 2025 for new-based elimination plans to the Bahamas on Cat Island and 1.2 million for the expansion of the Ericsson Manufacturing Facility.
We paid at approximately 1.8 million in dividends in April .
Speaker Change: Our liquidity requirements may also include future quarterly dividends if such dividends are declared by our board. Our Executive Management and Board are currently evaluating how to best utilize our large cash balance to increase your whole value. Such evaluation includes potentially increasing our quarterly dividend.
Speaker Change: This completes our financial service for the year, and I'd like to turn the call back over to Rick.
Thanks, David.
So in the first quarter we announced that our
Holy Own subsidiary Cayman Water Company received a new concession.
from the Cayman Islands Government.
Speaker Change: That concession granted at exclusive rights, continued exclusive rights to produce and supply potable water within its service area on Grand Cayman.
Speaker Change: Due to regulatory changes enacted in 2018, Cayman Waters also required to obtain a new operating license from off-reg the island's utility regulator.
Speaker Change: Late last month, we resumed discussions with off-reg for the new license, which we expect will involve a restructuring of the previous operating terms.
Speaker Change: Until the new license is issued, our existing operating license will remain in effect.
Kamenwater operates three seawater reverse desalination plants.
Speaker Change: that produce 4 million gallons of potable water per day for our service areas growing population and businesses.
Speaker Change: We are in the process of expanding our West Bay seawater desalination plant so it can generate an additional 1 million gallons per day by this summer.
Speaker Change: As David mentioned, our manufacturing revenue increased by 10% to 5.8 million in the quarter.
Speaker Change: This business has stabilized as promised and we believe that we have significantly mitigated revenue and profit variability in this business segment going forward by broadening our product and client base.
Speaker Change: We are currently constructing an additional 17,500 square feet of manufacturing space for and expect a complete construction next month.
Speaker Change: The additional space will allow us to take on more simultaneous projects.
Speaker Change: thereby increasing our throughput capacity. We are now pursuing additional projects that would utilize the greater floor space with this ultimately driving further manufacturing growth.
Speaker Change: REC, our Colorado subsidiary, has provided us a new channel to expand our design build and ONM businesses into the water stress regions of Colorado. We're currently pursuing several ONM and design build opportunities in Colorado.
David Sweeney, John Bair, David Thomas, Frederick
Speaker Change: As I mentioned earlier, our client in Hawaii has agreed that we demonstrated in our pilot test results that we were able to achieve a reasonable match in water quality to their existing natural supplies. This is an important step towards the notice to proceed for construction.
Speaker Change: We and our client are now working diligently to complete the final permitting for the project.
Speaker Change: As we've communicated previously, we are expecting or we are experiencing an expected decline in this year in design, build work compared to 2023 and 2024.
Speaker Change: However, we anticipate design build revenues to improve in the second half of this year as three smaller projects currently under contract or nearing final contract stage are set to begin
Speaker Change: The combined value of these three projects is expected to be approximately $20 million.
Speaker Change: One of these projects is the construction of a wastewater scalping plant.
Speaker Change: which will provide high-quality recycled water to irrigate a golf course in California.
and this is certainly a great fit for perks capabilities.
Speaker Change: While these projects are smaller and scaled than past projects, they reflect continued demand for our products and services in the Western U.S.
Speaker Change: We and our local partners are pursuing a sizable wastewater design build project in the Southern Caribbean, and if our bid is successful we would mark our first international wastewater treatment plant project.
Speaker Change: Similar to the Hawaii Project, this new wastewater opportunity further demonstrates how Perk is being leveraged to grow our business across product lines.
desalination and wastewater as well as into new geographical markets.
Speaker Change: We're also looking further out into 2026 and beyond with the growing pipeline of long-term projects.
Speaker Change: We see the Arizona market in particular providing strong opportunities for future design build activity and our team is actively involved in several early stage discussions.
Speaker Change: We are currently preparing for customized design reports or CDRs for clients.
Speaker Change: and similar to the Liberty Utilities Project in Arizona, we hope that these CDRs ultimately lead to design build contracts for these important wastewater treatment facilities.
[inaudible]
Speaker Change: Looking ahead, we remain confident in our ability to deliver steady long-term growth in revenue and profit to our shareholders.
Speaker Change: Key drivers include Strong Retail Water Sales Growth and Grant Cayman, the stability of long-term recurring revenue from our Caribbean bulk water operations.
Speaker Change: Our design build business and particularly the Hawaii project and other smaller projects currently underway and continued positive momentum in our manufacturing segment.
Speaker Change: Now with that, I'd like to open the call for questions.
Speaker Change: We will now begin the question-and-answer session. To ask a question, you may press star then 100 telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed, you'd like to let's draw your question, please press star in the two. At this time, we'll pause momentarily to assemble our roster.
John Bair, David Thomas, Frederick McTaggart, David Thomas, Frederick McTaggart
David Sasnett, Unknown Executive, Consolidated Water Co Ltd
David Sweeney, John Bair, David Sweeney,
Speaker Change: In your first question comes from Jerry Sweeney with Roth Capital. Please go ahead.
Good morning, Rick and David, thanks for taking my call.
Christegg for Construction and O&M.
Speaker Change: How does the construction, how does the construction revenue sort of flow through, it sounds like two-year build?
Speaker Change: The beginning sort of ramp up and then higher spend and then a quarter or two ramp down, is that the way we should look at it and
Speaker Change: Will you get any revenue over the next quarter or two as you're still working out part of it?
David Sweeney, John Bair, David Sweeney,
Speaker Change: So we had to we had to file that that contract back in 2023 so and that has the full cross schedule in it if you want to.
Speaker Change: Actually, take a look at that. I mean, it's a, it'll give you a very precise cash flow from the project. Yeah, but that doesn't necessarily tell you how to read the jury, you understand how that works, right?
Speaker Change: So out of the $204 million contract, $147 million initially was designated as the design and construction revenue.
Now 27 million of that is
Unknown Executive, Frederick McTaggart
to your design and to your construction period.
Speaker Change: And today we have it recognized, I guess we'll disclose in the next quarter exactly how much revenue.
We've recognized what we haven't described.
Speaker Change: We haven't even recognized 10% of the revenue under the construction contract yet, because the revenue recognition is dependent upon costs incurred from the project.
Speaker Change: Yep, and under the input method what the cost we've incurred is relatively small at this point in time.
Speaker Change: Yeah, the pilot plan testing, the upfront cost for the bonds and for the insurance and things like that, and the development work.
Speaker Change: In the cost of the huge portion of the destruction cost, most of the cost are still incurred. You'll see a tremendous ramping up of revenue as soon as the costs start going into the destruction. And what we're seeing right now, we think the destruction period was going to last about two years.
Speaker Change: Our best guest now is going to start in the first quarter of 2026.
Speaker Change: Hopefully, it will happen soon, but it's dependent upon the permeate.
All right.
Speaker Change: I don't think so. We're gonna try up on the permitting side.
Speaker Change: Who's responsible for the permitting? Is that your subsidiary or is one of the local government and why it's also a part of it or responsible for it?
Well, it's shared again. There's a pretty detailed
Speaker Change: Breakdown of that in the contract we filed. I mean, some of the permits related to archaeological studies on the site and that sort of thing are with the client. Obviously all the building permits and that sort of thing are with us.
Speaker Change: I mean, we're jointly working together on everything. I mean, we have to provide a lot of information for the client to submit for his permitting.
Speaker Change: I mean, there are some contractual responsibilities that are detailed how it but then it's more of a collaborative effort to try to get this all wrapped up.
Speaker Change: We got it. Switching gears to retail, obviously nice uptick and volumes in revenue there. And you mentioned higher population and business activity.
Two things, sir. You're expanding your one facility.
Speaker Change: the West Bay, it's a soldered by a million gallons, but that expansion that you're seeing, I would suspect that
I know you're...
Speaker Change: The Q1 is part of the high season, I guess. But you should see a permanent lift in volumes because of just permanent population growth as well as more businesses, etc. Is that a fair way of looking at it?
David Sweeney, John Bair, David Sweeney,
Speaker Change: Yeah, I mean there's a new hospital in our service area. It was constructed obviously a big water user.
Speaker Change: The Caymana Bay Development, which is right smack in the center of our service area. They can continue to build office buildings and expand schools and retail.
Speaker Change: Yeah, I mean, it's a lot of money going in. There's a lot of investment going in a great camera right now. I mean, we're very happy about it, obviously.
Speaker Change: Yeah, this isn't a seasonal increase, I mean, I think it's the
It's firmly rooted in, you know,
Speaker Change: You know, this is this is pretty solid. So I guess you're you're saying our base water sales have increased here. Yes, what up?
Lower is higher than it used to be [inaudible]
Yeah, for us here. Exactly. Yeah.
You're adding a million gallons, 25% expansion.
Speaker Change: What are you running at utilization today, and maybe do you know how long we'll take to sort of...
Absorbed that I can't believe we have.
Speaker Change: I don't know, do we disclose the sales volumes? I mean, we have, we disclose the growth numbers, but I mean, not at all.
You know, it's there.
Speaker Change: A percentage of production capacity. I mean, we're looking ahead for next year with this expansion because we have to design for peak demand. So we've always had our peak demands in the first three months of the year.
Speaker Change: So I mean, we're looking forward to make sure that we have sufficient capacity and then obviously sufficient storage capacity to meet the future demand.
and then ...
Speaker Change: The three contracts you reference, the 20 million, how long will it take to execute on this project? It sounds like they're a little bit smaller.
and roughly one with a start, potentially start.
Speaker Change: Yeah, I mean, you know, two of them are under contract, the third one.
Speaker Change: We hope we'll be under contract in the next couple of months.
Um...
Their
Speaker Change: He, Realizing Revenue from this project, you're probably the second half of this year in the first part, for sequence of 2026, Gerard.
Speaker Change: Yeah. And it sounds like the overall project pipeline can do.
Speaker Change: I guess re-balling for lack of better work, it was a little slow but you know these projects plus it sounds like you have line of sight to some other opportunities.
Speaker Change: across the board. We don't have a giant project that we can announce, but there's definitely a good pipeline of smaller jobs that we're pursuing or that we have, as I mentioned under contract.
The guy is not be kept, certainly busy [inaudible]
[inaudible]
David Sasnett, Unknown Executive, Consolidated Water Co Ltd
Speaker Change: Again, if you have a question, please press star then one. Your next question comes from John Bair, with a send-walt advisor's LLC. Please go ahead. Thank you.
Thank you. Good morning.
A couple of questions, you uh
Speaker Change: Regarding in your comments you mentioned that some of the permitting was out of your control and I'm just kind of wondering I'm guessing
Speaker Change: Probably environmentally related ones. You did just an answer in Jerry about archaeological permits and so forth. Can you elaborate a little bit more on that?
Speaker Change: One or two or five types of permits that might fall under that that could get hung up.
[inaudible]
Speaker Change: Yeah, I mean, again, you can see them in the in the filed contract. There's like a table and it sets out.
Speaker Change: The client's responsibility. I mean, things related to the site which was provided by the client are typically their responsibility. You know, the building permits, you know, construction permits.
Speaker Change: That sort of thing, you know, we have to get approval from the Department of Health for the water quality studies and that sort of thing. I mean
Speaker Change: Those are typically on us. I mean, you should, if you want a lot of detail, it's there. It's in the in the file contract. Yeah, when it's beyond our control, I guess we should clarify me that it's the client's responsibility to get those permits.
Okay, certain concerns are our responsibility, but I mean...
Speaker Change: I mean it's more the, there's a, I'll tell you John , there's nothing that I'm concerned about about.
Speaker Change: Except for the timing, because some of these agencies move very slow. I mean, I don't think that, you know, I don't feel at this time that there's anything that...
Speaker Change: would be detrimental to the project that's out there. It's just a matter of getting these permits. I mean, some of them take a really long time, particularly the...
Speaker Change: You know, the one that comes to mind is the archaeological permit. I mean, that just let's take a much lower than we expected, much lower than the client expected. Yeah, these are government agencies. There's only so much you can push them.
Speaker Change: Are they under the EPA or what area of the government would they be?
for State Agencies.
Alright.
Speaker Change: And then the other kind of a broad question, and you did tell him what touch on this with your outlook of potential wastewater facility in Barbados and kind of expanding geographically. So I'm wondering if the success with winning the Hawaii contract.
Speaker Change: Could potentially open up other opportunities for you in the Asia-Pacific region, you know, the Phil teams or the Pan or somewhere, you know, in that.
Speaker Change: in that region, of course forgetting about the bodily situation a number of years back, but nonetheless, you know, things have perhaps changed some, so wondering how that might play in.
Speaker Change: Yeah, I mean, first of all, I didn't mention anything in Barbados, I said, I said, I thought,
We have an international project that we're pursuing.
Speaker Change: on the wastewater side, but I didn't, not more made us. Yeah, I didn't. Okay, then I miss, I miss her death and I apologize for that. So okay.
From the standpoint of looking farther east, I mean, I...
Speaker Change: We're not pursuing anything in that region at this time, you know, there's sufficient opportunities, I think, closer to home, but we want to focus on, and, you know, there's actually...
A lot of opportunities in Florida right now that-
Yeah, we potentially could be involved in, I mean, I mean, uh...
The growth of the population here in the state is...
Speaker Change: Our Eric's manufacturing business is nicely positioned to capitalize on that growth and
Speaker Change: We've been making business relationships and partnerships with companies here in Florida that I think will be bearing fruit in the next few years as well
Or that kind of...
Dr. Sweeney, John Bair, David Sweeney, John Bair, David Sweeney, John Bair,
Speaker Change: Someone answers one of my next questions with a general outlook with projects, you know,
Speaker Change: Administration change and policy initiatives and all that kind of thing. Probably sick to death of hearing questions about tariffs, but none the less. Just wondering if that, you know.
Opportunity
Speaker Change: Outlook, a number of bid, a number of projects that are potential bidding opportunities for you. Is that look fairly stable? Is it expanding?
We have just a more more warm color on that.
David Sasnett, Unknown Executive, Consolidated Water Co Ltd
Sounds like you got a lot of stuff going on here [inaudible]
Yeah, there's certainly a lot of opportunities.
The, you know, we have obviously very detailed.
Speaker Change: reviews on a weekly basis of projects that we're pursuing and I sit in on those for the Western United States and I really haven't seen it slowing down. I mean the size of the project.
Speaker Change: has changed, but I mean the number of projects that we're pursuing and potentially could get I think is quite encouraging for me.
Speaker Change: Sounds very good. Thank you very much for taking the call. Good luck looking forward to the progress.
Okay, thanks John . Yep, take care.
Unknown Executive, Frederick McTaggart
Dr. Sweeney, John Bair, David Sweeney, John Bair, David Sweeney, John Bair, David Sweeney,
Speaker Change: Again, if you have a question, please press star then one.
John Bair, David Sasnett, Unknown Executive, Consolidated Water Co Ltd
Speaker Change: Alright, at this time, this concludes our question-and-answer session. I'd like to now turn the call back over to Mr. McTaggart. Sir, please go ahead.
Speaker Change: Thank you, everybody, for joining us today. It's always a pleasure to be able to communicate with the shareholders.
Speaker Change: and I look forward to speaking with you again in August when we announce our Q2 results. Take care.
John Bair, David Thomas, Frederick McTaggart, David Thomas, Frederick McTaggart, David Thomas, Frederick
John Bair, David Sasnett, Unknown Executive, Consolidated Water Co Ltd
Speaker Change: Thank you. Before we conclude today's call, I would like to provide the company's safe harbor statements, that includes cautious discussions regarding forward-looking statements made during today's call.
Speaker Change: The information that we have provided in this conference call includes forward-looking statements within the meaning of the private security's litigation reform act of 1995.
Speaker Change: including but not limited to statements regarding the company's future revenue, future plans, objectives, expectations, and events, assumptions and estimates.
Speaker Change: Forward-looking statements can be identified by the use of words or phrases, usually containing the words believe, estimate, project, intent, expect, should, will, or similar expressions [inaudible]
Speaker Change: Stabments that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts, and projections for its business, and industry and markets related to its business.
Speaker Change: Any forward-looking statement made during this conference call are not guarantees of future performance and involve certain risks, uncertainties, and assumptions which are difficult to predict. Actual outcomes and results may differ materially from what is expected in such forward-looking statements.
Speaker Change: Factors that would cause or contribute to such differences include but are not limited to tourism and weather conditions in the areas we serve, the economic, political, and social conditions of each country in which we conduct or plan to conduct business.
Speaker Change: Our relationships with the government entities and other customers we serve [inaudible]
Speaker Change: Regulatory Matters, including Resolution of the Negotiations for the Renewal of our Retail License on Grand Cayman, our ability to successfully enter new markets and various other risks as detailed in the company's periodic report filings with the Securities and Exchange Commission.
Speaker Change: For more information about risks and uncertainties associated with the company's business
Speaker Change: Please refer to the management's discussion and analysis of financial conditions.
Speaker Change: or results of operations and risk factor sections of the company's SEC filings, including Binat Ltd 2, It's Aino Report on the Form 10K and Quarterly Reports for Form 10Q.
Speaker Change: Any forward-looking statements made during the conference call speak as of today's date.
Speaker Change: The company expressly disclaims any obligation or undertaking to update or revise any forward looking statements made during the conference call to reflect any changes in its expectations.
Speaker Change: with regard there to you or any changes in its events, conditions or circumstances of which any forward looking statement is based, except as required by law.
Speaker Change: Thank you for attending today's presentation. This concludes the conference call. You may now disconnect.
Unknown Executive, Frederick McTaggart
David Sasnett, Unknown Executive, Consolidated Water Co Ltd
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