Business Context and Reporting Period
Company: Consolidated Water Co. Ltd. (CWCO)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: A comprehensive water solutions company operating in the Cayman Islands, The Bahamas, the United States, and the British Virgin Islands. Operations are divided into four segments: Retail Water (exclusive license in Grand Cayman), Bulk Water (supply to government utilities), Services (design, construction, and management of water infrastructure), and Manufacturing (specialized water equipment).
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Revenue | $132.07 million | $133.97 million |
| Gross Profit | $48.38 million (37% margin) | $45.62 million (34% margin) |
| Net Income (Continuing Ops) | $18.63 million | $17.88 million |
| Net Income (Total) | $18.34 million | $28.24 million |
| Diluted EPS (Total) | $1.14 | $1.77 |
| Cash and Cash Equivalents | $123.79 million | $99.35 million |
| Working Capital | $141.9 million | N/A |
| Long-Term Debt | $25,954 | $70,320 |
| Operating Cash Flow | $41.71 million | $36.52 million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 1.4% to $132.07 million, driven by lower revenue in the Services and Bulk segments. The Services segment saw a drop in construction revenue due to the completion of major projects (Liberty Utilities and Red Gate) in 2024.
- Profitability Improvement: Despite lower revenue, Gross Profit increased 6.0% to $48.38 million, and the gross margin expanded from 34% to 37%. This was aided by improved plant efficiency and a higher margin product mix in Manufacturing.
- Discontinued Operations Impact: Total Net Income decreased significantly year-over-year ($18.34M vs $28.24M) primarily because 2024 included a one-time gain of $10.36 million from the settlement of the Mexico Project Development. In 2025, discontinued operations resulted in a net loss of $0.29 million.
- Segment Performance:
- Retail: Revenue increased 5.8% to $33.59 million due to record water sales volume (1.09 billion gallons) driven by low rainfall and increased customer accounts.
- Bulk: Revenue remained relatively flat ($33.48M vs $33.67M) with a slight decrease attributed to lower energy pass-through rates.
- Services: Revenue decreased 9.1% to $46.31 million as large construction contracts concluded.
- Manufacturing: Revenue increased 6.2% to $18.69 million with improved margins.
Guidance, Outlook, Risks, and Contingencies
- Cayman Retail License Negotiations: The company's exclusive retail license in the Cayman Islands is under renegotiation with the regulator (OfReg). While a new concession was granted in February 2025 maintaining current terms temporarily, the regulator seeks to restructure the license, which could significantly reduce operating income and cash flows. Impairment of retail assets is a potential risk.
- Bahamas Liquidity Risk: CW-Bahamas faces substantial delays in collecting accounts receivable from the Water and Sewerage Corporation (WSC). As of December 31, 2025, $20.7 million was due, with 71% delinquent. As of February 28, 2026, the receivable was $22.6 million (75% delinquent). While management believes these are fully collectible based on history, failure to collect could impact liquidity and require credit loss provisions.
- Hawaii Project Delays: The Kalaeloa Desalco project in Oahu, Hawaii, is experiencing permitting delays. While the company expects time extensions, failure to secure them could result in liquidated damages or contract termination. Revenue recognition for this project has been deferred.
- Contract Termination Risk: A significant operations and maintenance customer has indicated it will not extend its contract beyond March 2026, representing approximately $5.5 million in 2025 revenue.
- Dividends: The company declared a quarterly dividend of $0.14 per share in Q4 2025 and Q1 2026. Total dividends declared in 2025 were $0.53 per share.
Investor Verification Checklist
- License Renewal Terms: Monitor the outcome of the Cayman Islands retail license negotiations with OfReg for potential revenue restructuring.
- Bahamas Receivables Collection: Track the collection status of the $22.6 million delinquent receivable from the WSC to assess liquidity risks.
- Hawaii Permitting Status: Verify progress on regulatory approvals for the Kalaeloa Desalco plant to ensure the project remains viable.
- Services Segment Pipeline: Assess the company's ability to replace the revenue from the completed Liberty Utilities and Red Gate construction projects.
- Discontinued Operations Closure: Confirm the final dissolution of the Mexico project subsidiaries (CW-Cooperatief, NSC, AdR) expected by mid-2026.