PURE CYCLE CORP Q2 FY2025 earnings call

• Financial performance: Q2 had $4M revenue, 38% gross margin; YTD $9.7M revenue, over 50% gross margin, growing EPS. • Segments: Water Utilities had tap fees from new phases, oil and gas deliveries softer but royalties strong; Land Development had three phases under construction, 2b with homes for sale, 2c/2d in various stages; Single-Family Rentals had 14 completed homes, high occupancy but gap due to permits. • Balance sheet: Over $20M liquidity, cash and investments at $17M, restricted cash for county performance. • Outlook: Short-term outlook includes Sky Ranch development to 2,500 units, consistent tap sales; long-term includes build-out of Sky Ranch, potential commercial joint ventures, and single-family rentals growth. • School partnership: National Heritage Academy K-12 campus with K-9 operational, planning high school for 2026-2027, capacity for 1,700 kids.

The company had Q2 revenue of about $4 million, with a 38% gross margin. Water Utilities segment saw revenue from tap fees as new phases were developed, though oil and gas deliveries were softer. Land Development had three phases under construction, with Phase 2b having homes for sale and phases 2c, 2d in various stages. Single-Family Rentals had 14 completed homes with high occupancy but a gap due to permit and code issues. Year-to-date revenue was $9.7 million, gross profit with over 50% gross margin, and growing earnings per share. Water Utilities segment contributed through tap fees, Land Development had ongoing lot construction, and Single-Family Rentals had recurring revenue potential.

• Fiscal '25 guidance around $30-31 million, on track to meet with Q3/Q4 being high-growth. • Short-term outlook: Sky Ranch development to 2,500 units, consistent tap sales increasing recurring revenue. • Long-term: Build-out of Sky Ranch over 7 years, potential commercial joint ventures, and steady lot sales with increasing lot margins. • Single-family rentals: Aim to grow to over 200 homes through Sky Ranch build-out.

• Seasonal slowdown in land development, particularly in Colorado winter months. • Timing issues with permits and building codes affecting single-family rental lot deliveries. • Regulatory and approval risks for I-70 interchange construction and commercial development.

Q: When will the I-70 interchange be completed?

A: Expect to submit 1601 permit to CDOT by end of year, with construction starting end of 2023/early 2024.

Q: How is demand in the Denver real estate market?

A: Price point advantage holding up, builders confident with homes for sale, interest rates trending softer aiding affordability.

Q: What's the status of single-family rentals?

A: Strong demand but gap due to permits and code updates; 17 units in Phase 2b to come online now.

Q: Priority of land acquisitions?

A: Land acquisition is higher priority than additional water rights as land development is faster to utilize water capacity.

Q: Status of the school partnership?

A: National Heritage Academy K-12 campus with K-8 operational, planning high school for 2026-2027, capacity for 1,700 kids, well-received by community.