Consolidated Water Co Inc 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Consolidated Water reported second quarter 2026 revenue of $32.9 million, a 2% decrease from the prior year quarter, driven by lower manufacturing revenue but offset by growth in retail, bulk, and services segments.
- Retail revenue was $8.7 million, stable despite a 2% decrease in water sales volume, due to a higher rate charged to a major non-potable water customer.
- Bulk revenue increased 20% to $9.9 million, mainly from higher energy pass-through charges and contributions from two new Cat Island desalination plants in the Bahamas.
- Services revenue rose 1% to $11.6 million, with construction revenue increasing by $2.5 million from two water treatment projects in Colorado and California, partially offset by lower O&M revenue due to contract expirations.
- Manufacturing revenue declined 49% to $2.7 million due to fewer new purchase orders, with full-year 2026 manufacturing revenue expected to be below 2025 levels.
- Gross profit was $11.0 million or 33% of revenue, down from $12.8 million or 38% last year, primarily due to lower manufacturing gross profit and a change in revenue mix.
- Net income from continuing operations was $4.0 million or $0.25 per diluted share, compared to $5.2 million or $0.32 per diluted share in the prior year quarter.
- Cash and cash equivalents totaled $132.6 million as of June 30, 2026, with working capital of $144.6 million and stockholders' equity of $225.6 million, and the company has no significant debt.
- The company completed negotiations for a new 25-year retail water utility license in Grand Cayman, effective August 1, 2026, providing long-term regulatory clarity and setting rates that lower the average cost of water per gallon by about 6.5%.
- Tourism in the Cayman Islands increased 11.3% year over year in the first half of 2026, supporting retail water demand despite wetter weather reducing water sales volume.
- The company received purchase orders totaling approximately $10.1 million for municipal water treatment equipment in Florida, its largest municipal membrane equipment and horizontal cartridge filter orders to date.
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Transcript
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Good morning. Thank you for joining us today to discuss Consolidated Water Company's second quarter of 2026 operating and financial results. Hosting the call today is the Chief Executive Officer of Consolidated Water, Rick McTaggart, and the company's Chief Accounting Officer, Douglas Pizzini. Following their remarks, we will open the call to your questions. At any time during the call, you may join the Q&A queue by pressing star then one on your telephone keypad. Before we conclude today's call, I will provide some important cautions regarding the forward-looking statements made by management during the call. I would like to remind everyone that today's call is being recorded, and it will be made available for telecom replay. Please see the instructions in yesterday's press release that has been posted to the investor relations section of the company's website. Now, I would like to turn the call over to Consolidated Water CEO, Rick McTaggart.
Sir, please go ahead. Thanks, Nick.
Good morning, everyone. I appreciate you joining us today. While our consolidated second quarter revenue reflected softness in manufacturing, we were pleased to see growth across our retail, bulk, and services segments, along with some important developments that support our outlook for the balance of this year and into 2027. Retail revenue increased modestly despite wetter weather, which reduced Grand Cayman water sales volume by 2%. The increase in retail revenue is driven by a base water rate increase for a major non-potable water customer, and this was following the May 2026 expiration of its concessionary water purchase agreement. Our bulk revenue increased 20% and bulk gross profit increased 27%, mainly due to higher energy pass-through charges by our Bahamas company. Results also benefited from two new Cat Island desalination plants, which are supplying potable water to the Water and Sewerage Corporation of The Bahamas.
Cost reductions lowered G&A expenses across our retail, bulk, and service segments. In our services segment, those savings were offset by higher cost of revenue due to a greater mix of construction revenue and a lower proportion of higher margin O&M design and consulting revenue in our services segment. Services O&M revenue declined after two contracts expired in Q1 of this year. This decline was partially offset by a new Southern California municipal O&M contract that is expected to generate approximately $4.5 million over three years. In our services segment, construction revenue increased, driven by two previously announced water treatment projects, one in Colorado, which is a $3.9 million drinking water plant expansion, and the second $11.7 million wastewater recycling plant in California. Both projects are scheduled for substantial completion this year.
In July, our Hawaii client issued a limited notice to proceed for our project to design, construct, operate, and maintain a 1.7 million gallon per day seawater desalination plant in Kalaeloa, Hawaii. This limited notice to proceed authorizes us to begin procuring certain long lead materials and equipment for the project with the value of approximately $6 million. Communications and information exchanges with important permitting agencies have recently increased in Hawaii, which supports our expectation that construction on this project will start later this year. Once construction starts, we believe the project will significantly contribute to revenue and earnings growth in future periods. Subsequent to the end of the second quarter, we announced the receipt of purchase orders totaling approximately $10.1 million for municipal water treatment equipment in Florida.
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