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Operator: Good morning. Thank you for joining us today to discuss Consolidated Water Company’s First Quarter 2025 Operating and Financial Results. 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. [Operator Instructions] Before we conclude today’s call, I’ll provide some important cautions regarding the forward-looking statements made by management during the call. I’d 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’d like to turn the call over to Consolidated Water’s CEO, Rick McTaggart. Sir, please go ahead.

Rick McTaggart: Thank you, Mike, and good morning, everyone. Our services segment revenue and operating income declined in the first quarter of 2025 compared to the year earlier due to completion of two major design-build projects in the second quarter of last year. However, we did see improved performance in all three other business segments, particularly retail and manufacturing. Retail water sales in 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. 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.

Revenue and gross profit generated in our Caribbean-based bulk water segment remained consistent year over year, reflecting the long-term, stable, income-generating nature of these businesses. Revenue from our services segment declined 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. 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.. This growth in O&M revenue in dollar terms was about evenly generated by PERC in California and Arizona, and REC in Colorado. On April 28, the Honolulu Board of Water Supply, our client on our multiyear seawater desalination project in Hawaii, approved our pilot test reports and recommendations and concluded that the desalinated water we produced 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.

This is a key and significant milestone in the project and paves the way to begin construction once all permits have been obtained. This $204 million project to 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 in June. We expect to begin the construction of this project early next year once we and the client have obtained the permits that are required and the client issues a notice to proceed with the construction. On a cautionary note, some of these permits are outside of our control and delays in obtaining them could also delay the construction date. 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 on schedule early next month for the client’s engineer to review. The Hawaii project is a major growth driver for our services segment. It involves a two-year development phase which concludes next month followed by two years of construction. Once completed and commissioned, we have been contracted to operate the plant under a 20-year O&M agreement plus two five-year extensions at the option of the client. It’s important to note that particularly in this environment now, economic environment, that 80% — approximately 80% of the construction costs for this project will be adjusted for inflation at the start of construction. This mechanism is expected to protect our growth margin and overall profitability.

Now before getting more into recent developments and 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.

David Sasnett: Thank you, Rick. Good morning, everyone. Our revenue was down 15% from the first quarter of 2024 to $33.7 million and this decrease was due to a decrease of $7.3 million in the services segment, specifically the construction revenue, that related to completion of the two projects Rick mentioned previously. The service segment revenue decrease was 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 $786,000 due to a 13% increase in the volume of water sold. Our bulk segment revenue increased slightly to $8.4 million due to the revenue generated by the commencement in May 2024 of the operations and maintenance contract for the new Red Gate 2 desalination plant on Grand Cayman, which we constructed, and the amendment of our company’s North Sound contract with the Water Authority Cayman, which also became effective in May of 2024.

As I mentioned earlier, the decrease in the services segment revenue was due to plant construction revenue decreasing from $9.2 million in the first quarter of 2024 to $2.2 million the first quarter of this year. And once again, this is the result of two construction projects that were completed in the second quarter of 2024. Our reoccurring 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 PERC and REC, our Colorado subsidiary, increased their O&M revenue this first quarter from last year. Our manufacturing segment revenue increased by $509,000 to $5.8 million for the first quarter of 2025. Gross profit for the first quarter of 2025 was $12.3 million, about 37% of total revenue, as compared to $13.9 million or around 35% of total revenue in the first quarter of ’24.

This decrease was due, as I mentioned earlier, to a decrease in service level gross profit of $2.7 million as a result of decrease in construction revenue. This decrease was partially offset by an increase in gross profit for our retail bulk and manufacturing segments. Net income from continuing operations attributable to consolidated order shareholders for the first quarter of 2025 was $4.9 million or $0.31 per diluted share. This compares to net income of $6.9 million or $0.43 per diluted share the first quarter of ’24. Including discontinued operations, net income attributable to consolidated order stockholders for the first quarter of 2025 was $4.8 million or $0.30 per diluted share, as compared to net income of $6.5 million or $0.40 per diluted share the same period last year.

Now, turning to our balance sheet, cash and cash equivalents grew to $107.9 million as of March 31st, 2025, and our working capital increased to $136.2 million, and our stockholder’s equity now totals $213.3 million. Our projected liquidity requirements for 2025 include capital expenditures — excuse me, of approximately — excuse me, our projected liquidity requirements for 2005 include capital expenditures for existing operations of approximately $9.1 million. This includes $800,000 to be incurred in 2025 for new desalination plants in the Bahamas on Cat Island, and $1.2 million for the expansion of the Erickson’s manufacturing facility. We paid out approximately $1.8 million in dividends in April. 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 shareholder value. Such evaluation includes potentially increasing our quarterly dividends. This concludes our financial summary for the year, and I’d like to turn the call back over to Rick.

Rick McTaggart: Thanks, David. So, in the first quarter, we announced that our wholly-owned subsidiary, Cayman Water Company, received a new concession from the Cayman Islands government. That concession granted it exclusive rights, continued exclusive rights, to produce and supply potable water within its service area on Grand Cayman. Due to regulatory changes enacted in 2018, Cayman Water is also required to obtain a new operating license from OfReg, the island’s utility regulator. Late last month, we resumed discussions with OfReg for the new license, which we expect will involve a restructuring of the previous operating terms. Until the new license is issued, our existing operating license will remain in effect. Cayman Water operates three seawater reverse desalination plants that produce 4 million gallons of potable water per day for our service area’s growing population and businesses.

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. And we’re also planning to construct additional water storage tanks over the next two years. And this is all being driven by the growth we’ve experienced post-COVID on the island. As David mentioned, our manufacturing revenue increased by 10% to $5.8 million in the quarter. 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. We are currently constructing an additional 17,500 square feet of manufacturing space for Aerex and expect a complete construction next month.

Additional space will allow us to take on more simultaneous projects, 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. REC, our Colorado subsidiary, has provided us a new channel to expand our design, build, and O&M businesses into the water-stressed regions of Colorado. We’re currently pursuing several O&M and design-build opportunities in Colorado. 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 a notice to proceed for construction.

We and our client are now working diligently to complete the final permitting for the project. As we’ve communicated previously, we are expecting or we are experiencing an expected decline this year in design-build work compared to 2023 and 2024. 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 construction. The combined value of these three projects is expected to be approximately $20 million. One of these projects is the construction of a wastewater scalping plant, which will provide high-quality recycled water to irrigate a golf course in California. And this is certainly a great fit for PERC’s capabilities.

While these projects are smaller in scale than past projects, they reflect continued demand for our products and services in the western U.S.. We and our local partners are pursuing a sizable wastewater design-build project in the southern Caribbean, and if our bid is successful, would mark our first international wastewater treatment plant project. Similar to the Hawaii project, this new wastewater opportunity further demonstrates how PERC is being leveraged to grow our business across product lines, desalination, and wastewater, as well as into new geographical markets. We’re also looking further out into 2026 and beyond with the growing pipeline of long-term projects. 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.

We are currently preparing four customized design reports, or CDRs, for clients, 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. Looking ahead, we remain confident in our ability to deliver steady long-term growth in revenue and profit to our shareholders. Key drivers include strong retail water sales growth in Grand Cayman, the stability of long-term recurring revenue from our Caribbean bulk water operations, our design-build business, and particularly the Hawaii project and other smaller projects currently underway, and continued positive momentum in our manufacturing segment. Now with that, I’d like to open the call for questions.

Operator: We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

Gerry Sweeney: I’ve got a couple or a few questions, but I’m going to start with Hawaii. Two questions there. $204 million is, I think, the price tag for construction and O&M. How does the construction revenue sort of flow through? It sounds like two year build beginning sort of ramp up, then higher spend and then a quarter two ramp down? Is that the way we should look at it? Will you get any revenue over the next quarter or two as you’re still working on the park?

Rick McTaggart: We had to file that contract back in 2023. So that has the full draw schedule in it. If you want to actually take a look at that, that’ll give you a very precise cash flow from the project.

David Sasnett: Yeah, but that doesn’t necessarily count on revenue, Gerry. You understand how that works, right? So out of the $204 million contract, $147 million initially was designated as the design and construction revenue. Now $27 million of that is fixed. In other words, the revenue is fixed. It can’t be adjusted. But the other $120 million out of the $147 million is subject to an inflation adjustment. So we recognize that $147 million, which will be adjusted over the two-year design and two-year construction period. And to date, we haven’t recognized, I guess we’ll dispose in the next quarter exactly how much revenue we’ve recognized. But we haven’t even recognized 10% of the revenue under the construction contract yet, because the revenue recognition is dependent upon cost incurred for the project.

And under the input method, what the cost we’ve incurred is relatively small at this point in time. The pilot plant testing, the upfront costs for the bonds and for the insurance and things like that, and the development work doesn’t constitute a huge portion of the construction costs, unless those costs are still to be incurred. You’ll see a tremendous ramping up of revenue as soon as the costs start going into the construction. And what we’re seeing right now, we think the construction period is going to last about two years. Our best guess now is it’s going to start in the first quarter of 2026. Hopefully, it will happen sooner, but it’s dependent upon the permitting.

Gerry Sweeney: Two questions. I suspect you’re not going to let me know how much the gross margins on that construction side of the business are.

David Sasnett: No, I’m not.

Rick McTaggart: I can’t do that.

Gerry Sweeney: I don’t think so. We’ve got to try. On the permitting side, who’s responsible for the permitting? Is that your subsidiary or is one of the local government in Hawaii also part of it or responsible for it?

Rick McTaggart: Well, it’s shared. Again, there’s a pretty detailed 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. 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. So, I mean, there are some contractual responsibilities that are detailed out, but then it’s more of a collaborative effort to try to get this all wrapped up.

Gerry Sweeney: Switching gears to retail, obviously, a nice uptick in volumes and revenue there. And you mentioned higher population and business activity. Two things here. You’re expanding your one facility, the West Bay facility by 1 million gallons. But that expansion that you’re seeing, I would suspect that’s — I know you’re — Q1 is part of the high season, I guess. But you should see sort of a permanent lift in volumes because of just permanent population growth as well as more businesses, et cetera. Is that a fair way of looking at it?

Rick McTaggart: Yeah. I mean, there’s a new hospital in our service area that was constructed. Obviously, a big water user. The Caymana Bay development, which is right smack in the center of our service area. And they continue to build office buildings and expand schools. I mean, it’s…

David Sasnett: There’s a lot of investment going into Grand Cayman right now. I mean, we’re very happy about it, obviously.

Rick McTaggart: Yeah. This isn’t a seasonal increase. I mean, I think it’s firmly rooted in population growth in the service area and business growth. I mean, they’re always going to be some seasonal variations, but this is pretty solid.

Gerry Sweeney: I guess you’re saying our base water sales have increased here. More and higher than it used to be.

Rick McTaggart: Yeah. Exactly. Yeah.

Gerry Sweeney: How long will it take that — or you’re adding 1 million gallons, 25% expansion. What are you running at utilization today? And maybe, do you know how long it will take to sort of absorb that?

Rick McTaggart: I don’t know, do we disclose the sales volumes? I mean, we have — we disclosed the growth numbers, but I mean, not as 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. So it starts mid-December and goes through till April. 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.

Gerry Sweeney: And then the three contracts you referenced, the $20 million, how long will it take to execute on this project? They sound like they’re a little bit smaller and roughly when would they start, potentially start?

Rick McTaggart: Yeah, I mean, two of them are under contract. The third one we hope will be under contract in the next couple of months. They’re smaller jobs. I think they’re probably looking at over maybe a 12 month timeframe or something that will be realizing revenues from this project.

David Sasnett: Yeah, probably the second half of this year and the first part, first six months of 2026, Gerry. Be a reasonable timeframe.

Gerry Sweeney: And it sounds like the overall project pipeline is, I guess, rebounding for lack of a better word. It was a little slow, but these projects plus it sounds like you have line of sight to some other opportunities across the board.

Rick McTaggart: Yeah, I mean, we didn’t, we’re not — we don’t have a giant project that we could 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 guys will be kept certainly busy.

Operator: [Operator Instructions] Your next question comes from John Bair with Ascend Wealth Advisors LLC. Please go ahead.

John Bair: Hey, a couple of questions. 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 probably environmentally related ones. You did just an answer in Gerry about archeological permits and so forth. Can you elaborate a little bit more on that? Are there one or two or five types of permits that might fall under that that could get hung up?

Rick McTaggart: Yeah, I mean, again, you can see them in the file contract. There’s like a table and it sets out which permits are our responsibility and which permits are the client’s responsibility. I mean, things related to the site, which was provided by the client are typically their responsibility. The building permits, construction permits, that sort of thing. We have to get approval from the Department of Health for the water quality studies and that sort of thing. Those are typically on us. I mean, you should, if you want a lot of detail, it’s there, it’s in the file contract.

David Sasnett: When it’s beyond our control, I guess we should clarify, I mean, that it’s the client’s responsibility to get those permits. Certain permits are our responsibility, but I mean…

Rick McTaggart: I mean, it’s more the — I’ll tell you, John, there’s nothing that I’m concerned about except for the timing because some of these agencies move very slow. I mean, I don’t think that — I don’t feel at this time that there’s anything that 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 one that comes to mind is the archeological permit. I mean, that just…

David Sasnett: It’s taken much longer than we expected and much longer than the client expected. These are government agencies. There’s only so much you can push them before they…

John Bair: Are they under the EPA or what area of the government would they be?

Rick McTaggart: What state agencies? Hawaii state agencies.

John Bair: And then the other kind of a broad question and you did somewhat 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 could potentially open up other opportunities for you in the Asia Pacific region, the Philippines or Japan or somewhere in that region, of course, we’re getting it back the Bali situation a number of years back, but nonetheless, things that perhaps change some. So wondering how that might play it.

Rick McTaggart: Yeah, I mean first of all, I didn’t mention anything in Barbados. There’s a inner — we have an international project that we’re pursuing on the wastewater side, but I didn’t…

John Bair: Not Barbados.

Rick McTaggart: Yeah.

John Bair: Okay. I misheard that then and I apologize for that.

Rick McTaggart: From the standpoint of looking farther east, I mean, we’re not pursuing anything in that region at this time. There’s sufficient opportunities, I think, closer to home that we want to focus on. And there’s actually a lot of opportunities in Florida right now that we potentially could be involved in. I mean, the growth of population here in the state has facilitated new treatment plants for both water and wastewater. Our Aerex manufacturing business is nicely positioned to capitalize on that growth. And 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.

John Bair: One of my next questions was general outlook with projects domestically, whatever, given recent administration change and policy initiatives and all that kind of thing. Probably sick to death of hearing questions about tariffs, but nonetheless, just wondering if that, opportunity outlook, number of bid, number of projects that are potential bidding opportunities for you. Does that look fairly stable? Is it expanding? Just a more color on that. Sounds like you got a lot of stuff going on here.

Rick McTaggart: Yeah, there’s certainly a lot of opportunities. We have obviously very detailed 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 projects has changed, but I mean, the number of projects that we’re pursuing and potentially could get, I think, is quite encouraging for me.

Operator: [Operator Instructions] 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.

Rick McTaggart: Thank you, everybody for joining us today. It’s always a pleasure to be able to communicate with shareholders, and I look forward to speaking with you again in August when we announce our Q2 results. Take care.

Operator: Thank you. Before we conclude today’s call, I would like to provide the company’s safe harbor statements that includes cautions regarding forward-looking statements made during today’s call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company’s future revenue, future plans, objectives, expectations and events, assumptions and estimates. Forward-looking statements can be identified by use of words or phrases usually containing the words belief, estimate, project, intend, expect, should, will or similar expressions. Statements that are not historical facts are based on the company’s current expectations, beliefs, assumptions, estimates, forecasts and projections for its business and the industry and markets related to its business.

Any forward-looking statements 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. 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; our relationships with the government entities or other customers we serve; regulatory matters, including resolutions 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 filings — report filings with the Securities and Exchange Commission.

For more information about risks and uncertainties associated with the company’s business, please refer to the Management’s Discussion and Analysis of Financial Conditions or Results of Operations and Risk Factors sections of the company’s SEC filings including, but not limited to, its annual report on the Form 10-K and quarterly reports for Form 10-Q. Any forward-looking statements made during the conference call speaks as of today’s date. The company expressly disclaims any obligations or undertakings to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regard thereto or any changes in its events, conditions or circumstances of which forward-looking statements is based, except as required by law.

I would like to remind everyone that this call will be available for replay starting later this evening. Please refer to yesterday’s earnings release for dial-in replay instructions available via the company’s website at cwco.com. Thank you for attending today’s presentation. This concludes the conference call. You may now disconnect.