Pure Cycle Corporation Q3 FY2025 earnings call

Financials

• Quarterly revenues: $5 million, gross profit: $3.2 million, net income: over $2 million, EPS: ~$0.09 per share. Year-to-date net income: ~$7 million, EPS: ~$0.29 per share.

Water Segment

• Total water assets: ~$65 million, split into $32 million water rights portfolio, $24 million water and wastewater systems, $9 million wastewater systems. Can serve up to ~60,000 single-family equivalents. Sky Ranch development and Lowry Ranch service area have growth potential.

Land Development Segment

• Cradle-to-grave development from raw land to finished lots for homebuilders. Phase 2C lots to be delivered by end of fiscal year. Phase 2D in progress. High school groundbreaking for K-12 campus, expected to be online for 2026-2027 school year.

Single-Family Rentals Segment

• Delayed by Arapahoe County building code updates, but expected to see more traction in Q1 2026 and beyond. Target to have ~100 units after Phase 2.

Quarterly revenues were $5 million. Gross profit was approximately $3.2 million with a 63% margin. The mineral estate contributed over $1 million in the quarter and nearly $6 million year-to-date. The land development segment had $5 million in revenue this quarter, affected by weighted deliveries of lots for D.R. Horton. The single-family rentals segment was slower due to delayed building permit processes in Arapahoe County, but expected to see more traction in 2026.

Financial

• Fiscal year guidance: revenues ~$31 million, gross profit ~$23.7 million. Fourth quarter to catch up on deliveries of remaining lots.### Segment Progress
• Land development: Phase 2C lots to be delivered by August of current year. Phase 2D continuing. Single-family rentals: expected more traction in Q1 2026 and beyond. Water: continue to grow water rights portfolio via tuck-in acquisitions.

Risks

• Building permit delays: Arapahoe County building code updates caused single-family rentals permit process to take up to 6 months instead of 2 weeks.### Market Volatility
• Residential market cyclicality affecting lot deliveries and sales speed. Water rights development facing complex regulations and approvals.

Q: Pure Cycle has a couple of reservoir sites. And is anything going on with them? Has any development started on them?

A: No, not really. They are components of the water utility. Acquired water rights in Weld County to develop in concert with surface reservoirs, with partnerships with South Metro Water Supply Authority for shared infrastructure. Long-range assets for developing up to 60,000 residential unit capacity.

Q: On Slide 20, where you said it was at least looking at the map as I saw it, the lower left-hand corner, and you said this is a new parcel that is now being developed. Where will the water be gotten obtained for that? Where is the owner going to paying water?

A: Great question. That particular property was annexed to the city of Aurora over 20 years ago. They'll get their water from the city of Aurora. It surrounds the Lowry property and is a nice project, not entry-level homes but exciting.

Q: In the 10-K that was filed, I noticed the footnote that there's something over 1,000 acre feet of water that I guess is you're trying to have permitted, and it was turned down, but you're negotiating with people. What's there? How much water is involved? And when do you think that might be resolved?

A: We were applying for a new water right to take more water from Box Elder Creek. It was a complicated exchange and we didn't prevail. We had other claims in suspension and are working with opposing groups to find a resolution. It's a work in progress.