Consolidated Water Co. Ltd. Q1 FY26 Results

In Q1, consolidated revenue declined due to revenue declines in our manufacturing and retail segments. Manufacturing revenue was lower due to the timing of receipt of new purchase orders for 2026 projects compared to last year. We had received a large purchase order in late 2024 which favorably impacted our first quarter revenue last year. Retail revenue was impacted by much wetter weather conditions this past quarter which reduced the water volume we sold in Grand Cayman by about 10%. However, revenue in our bulk and services segments continued to grow this past quarter, which partially offset the decline in our other two operating segments. Gross profit and operating income in our bulk and services segments also increased, underscoring the stable, recurring nature of our Caribbean-based bulk water business and the momentum in our operations and maintenance (O&M) services. Our bulk segment revenue increase reflects contributions from one of two new desalination plants on Cat Island, The Bahamas, which supply potable water to the Water and Sewerage Corporation of The Bahamas. The second plant is expected to be commissioned in the second quarter of this year. Our services segment revenue increase was mainly due to a 15% increase in revenue from O&M contracts. The O&M revenue increase was partially due to revenue from a new municipal client in southern California under a three-year contract that was awarded to PERC in November last year, which is expected to generate approximately $4.5 million in revenue over the three-year term. While our manufacturing segment revenue decreased compared to Q1 last year, based on current backlog, we expect manufacturing revenue for the rest of this year will improve. However, we also expect that manufacturing revenue for the full 2026 fiscal year will be less than the manufacturing revenue generated in 2025, which was a record year. Some of our production capacity this year will be used to manufacture seawater reverse osmosis units and piping for our Hawaii project. Accounting rules require that this Hawaii-related manufacturing revenue is eliminated in consolidation, although they will eventually be recognized through our services segment as the Hawaii project advances. We are seeing a very active market for our manufacturing segment products and services for the remainder of this year, particularly for municipal water projects in Florida. We believe that our extensive experience manufacturing large-scale membrane-based water treatment systems, as well as our location in Ft. Pierce, Florida, position us well to continue growing that part of our business in the Florida market. We believe this activity will positively impact 2026 and 2027 performance. As we previously announced last year, we were awarded two water treatment plant construction projects, including a $3.9 million drinking water plant expansion in Colorado and an $11.7 million wastewater recycling plant in California. The combined value of these projects totals approximately $15.6 million, and the remaining revenue of more than $13 million attributable to these projects is expected to be realized primarily in 2026. Our construction service segment revenue is anticipated to remain below the record achieved in 2023 until the initiation of construction of a 1.7 million gallon per day seawater desalination plant in Kalaeloa, Hawaii for the Honolulu Board of Water Supply. We continue to focus on the permitting process, respond to regulatory inquiries and coordinate with the Honolulu Board of Water Supply to mitigate project schedule impacts. Although we are still unable to provide a firm construction start date for the project, we made some progress to obtain a key permit for the project and are encouraged by recent meetings with the responsible governmental authority. The deferral of construction activities has shifted anticipated revenue recognition and associated cash flows related to the Hawaii project into future periods. We continue to anticipate that construction of the project will commence later this year and see the construction phase of this major project substantially adding to our revenue and earnings growth in later reporting periods. In 2026 and beyond, we expect our diversified business to continue to deliver strong year-over-year results for shareholders, supported by our Grand Cayman retail operations, stable recurring revenue from our Caribbean bulk water business, and growth opportunities in our U.S. manufacturing, design-build and O&M businesses. With global demand for clean water rising, our strong balance sheet positions us to act quickly on desalination and water infrastructure opportunities in the Caribbean and North America, as well as potential strategic acquisitions or partnerships.”