Core Insights - The article discusses the impact of macroeconomic factors on Pure Cycle Corporation (PCYO), particularly how lower oil prices have led to reduced water demand from oil and gas operators [1] - The housing sector is experiencing a slowdown due to high mortgage rates, which has implications for PCYO's business [1] Group 1: Company Analysis - PCYO's management has noted the effects of external economic conditions on their operations, particularly in relation to oil prices and housing market dynamics [1] - The company operates in a sector that is sensitive to macroeconomic changes, highlighting the importance of understanding broader economic trends for investment decisions [1] Group 2: Investment Strategy - The investment strategy discussed emphasizes a top-down approach, starting with macroeconomic indicators to identify strong economies and sectors likely to perform well [1] - Following the identification of promising sectors, the focus shifts to selecting quality companies with solid momentum and consistent results, which is crucial for investment success [1]

Core Viewpoint - Pure Cycle Corporation has appointed Daniel J. Roller as an independent director, expanding its Board from 7 to 8 members, which aims to enhance the Board's capabilities and strategic direction [1][2] Group 1: Board Appointment - Daniel J. Roller, President of Maran Capital Management, has been appointed to the Board of Directors effective January 14, 2026 [1] - The appointment was made in collaboration with Maran Capital Management, which owns approximately 14.7% of Pure Cycle's common shares [1][2] - A new Strategy and Capital Allocation Committee will be formed, chaired by Mr. Roller, to optimize the company's strategy and capital allocation [1][2] Group 2: Company Overview - Pure Cycle operates as a vertically integrated wholesale water and wastewater service provider, with three distinct business segments that complement each other [4] - The company launched its land development segment in 2017, focusing on developing master-planned communities while providing water and wastewater services [4] - In 2021, Pure Cycle introduced a rental business for single-family homes at Sky Ranch, which generates long-term recurring revenues and supports its land development operations [4] Group 3: Mr. Roller’s Background - Mr. Roller is the Founder, President, and Chief Investment Officer of Maran Capital Management, which focuses on long-term investments in small-cap companies [3] - He has over 20 years of experience in investment research and management, advising on M&A, capital allocation, corporate governance, and strategy [3] - Mr. Roller holds a B.S.E. in Electrical Engineering and Computer Science from Duke University [3]

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Core Insights - Pure Cycle reiterated its fiscal 2026 guidance range of $26 million to $30 million in revenue and $0.43 to $0.52 in earnings per share, with variability in industrial water sales to oil and gas operators being a significant factor [1][7] - The company reported a strong Q1, achieving approximately $9 million in revenue and about $6.2 million in gross profit, which is ahead of internal forecasts [3][4][7] Financial Performance - Pure Cycle achieved about a third of its fiscal-year revenue forecast and approximately 37% of its full-year guidance for net income and earnings per share through the first quarter [2][7] - The water utility business showed recurring growth with a 22% customer compound annual growth rate (CAGR), although industrial water revenue was softer this quarter due to timing issues related to oil and gas activity [5][11] Land Development Progress - The land development segment, particularly Phase 2D, is ahead of schedule, with roads approximately 80% complete, five to six months earlier than planned [6][8][9] - Phase 2E is planned to include about 159 lots, with grading expected to start in the spring [8][9] Water Utility Segment - The water utility segment includes recurring service revenues to residential customers and industrial water deliveries, primarily to oil and gas operators [11] - Despite a strong quarter, the water segment was described as "a little bit softer than normal" due to timing issues with building permits and oil and gas deliveries [12] Future Outlook - Management expects activity in the oil and gas sector to pick up later in the fiscal year, with wells drilled and completed expected to begin fracking soon [13] - The company anticipates that fiscal 2027 will not be a "breakout year," with more significant growth expected post-interchange development and commercial lot sales likely in 2028 and beyond [20] Strategic Initiatives - Pure Cycle is optimistic about strategic land acquisitions and is currently more aggressive in pursuing land than water acquisitions [21] - The company has engaged commercial and industrial brokers to explore potential commercial uses for Sky Ranch, leveraging its water assets and site readiness [19]

Financial Performance - Pure Cycle reported a net income of $4.5 million for the three months ended November 30, 2025, a 16% increase from the same period in 2024[1]. - Earnings per fully diluted common share increased to $0.19, up 19% from $0.16 in the same period in 2024[1]. - Total revenue for the three months ended November 30, 2025, was $9.1 million, representing a 59% increase from $5.8 million in the same period in 2024[4]. - Lot sales revenue increased to $6.0 million for the three months ended November 30, 2025, compared to $2.3 million in the same period in 2024[13]. - The company sold 51 water or wastewater taps for $1.7 million during the three months ended November 30, 2025, compared to 38 taps for $1.5 million in the same period in 2024[7]. Assets and Liabilities - As of November 30, 2025, cash and cash equivalents totaled $17.1 million, with working capital reported at $14.8 million[11]. - Total assets increased to $168,069,000 as of November 30, 2025, up from $162,279,000 on August 31, 2025, representing a growth of approximately 3.4%[18]. - Current assets decreased to $26,263,000 from $31,653,000, a decline of about 17.1%[18]. - The company reported an increase in accounts receivable, net, to $2,502,000, up from $1,330,000, reflecting a growth of approximately 88%[18]. - Total liabilities rose to $20,583,000 from $19,541,000, an increase of about 5.3%[18]. - The accumulated deficit improved to $(28,225,000) from $(32,790,000), indicating a reduction in losses[18]. Business Operations and Development - The company expects to complete Phase 2D of its development in fiscal 2026, with 218 lots currently under construction[10]. - Phase 2 of Sky Ranch is projected to generate over $19.0 million in additional tap fee revenue over the next three years[7]. - The single-family rental business had 19 homes built and rented or available for rent, with plans for an additional 40 homes in Phases 2B and 2C for delivery in fiscal 2026[9]. - The company is investing in improvements, including the construction of a new interchange at I-70 to facilitate further expansion of residential and commercial opportunities at Sky Ranch[5]. - The company operates in three business segments: wholesale water and wastewater services, land development, and single-family home rentals, which contribute to recurring revenues[20]. - The rental of single-family homes at Sky Ranch was launched in 2021, providing long-term recurring revenues and enhancing land development operations[20]. Market Outlook and Risks - The company anticipates future demand for water and wastewater services, as well as home construction by builder customers, which may positively impact revenues[22]. - The company is well-positioned in the market, with expectations for growth in rental units as Sky Ranch develops further[22]. - Forward-looking statements indicate potential risks including home mortgage interest rates and inflation that could affect financial results[22].

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Financial Data and Key Metrics Changes - The company reported a record-setting first quarter with revenues exceeding $9 million and gross profits of approximately $6.2 million, achieving about a third of its fiscal year forecast [6][25] - Net income and earnings per share saw significant increases, with year-to-date results ahead of guidance, achieving about 37% of the full-year guidance [6][25] Business Segment Data and Key Metrics Changes - The company operates in three segments: land development, water utilities, and single-family rentals, all performing well [4] - The land development segment showed strength, particularly in Phase 2D, with completion of Phase 2C and ongoing lot production for Phase 2E [14][15] - The water utility segment experienced strong customer growth with a 22% compound annual growth rate (CAGR) in recurring revenue, although it was softer than normal due to timing issues with building permits and oil and gas deliveries [9][10] Market Data and Key Metrics Changes - The company noted a strong housing market, particularly for entry-level products, with home prices in Sky Ranch appreciating by 30%-40% since their construction [42] - The overall home appreciation in the Denver market is around 4%-5%, with Sky Ranch performing better due to amenities and a mature community [42] Company Strategy and Development Direction - The company aims to continue developing its recurring revenue base while fortifying its balance sheet and investing in business lines [4][24] - There is a focus on expanding operations at Lowry Ranch and exploring commercial development opportunities, particularly with the upcoming interchange project [20][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the potential for significant revenue growth once the interchange is completed and commercial development begins [31][32] - The company is cautious about water acquisitions, preferring strategic opportunities that complement its existing portfolio [35][36] Other Important Information - The company is actively working on a new interchange project that is expected to enhance commercial development opportunities [63][64] - The single-family rental segment continues to grow, with 19 homes completed and all rented, and another 40 units under contract [21][22] Q&A Session Summary Question: What should be the estimated earnings range for fiscal 2027? - Management indicated that fiscal 2027 will be influenced by Phase 2E and the interchange construction, suggesting it will not be a breakout year but will set the stage for future growth [31][32] Question: What are the opportunities for water acquisition? - Management stated that while they are content with their current water portfolio, they remain open to strategic acquisitions that are adjacent to their existing assets [35][36] Question: What is the outlook for land acquisitions? - Management expressed optimism about land acquisition opportunities, noting more active conversations with landowners compared to previous years [37] Question: What is the potential for data centers in the area? - Management highlighted the advantages of Sky Ranch for data centers due to water availability and proximity to power, indicating ongoing discussions with potential users [39][41] Question: What is the current trend in home price appreciation in the Denver market? - Management reported strong appreciation in Sky Ranch, with home prices increasing significantly since construction, outperforming the national average [42]

Financial Data and Key Metrics Changes - The company reported a record-setting first quarter with revenues exceeding $9 million and gross profits of approximately $6.2 million, achieving about a third of its fiscal year forecast [6][25]. - Net income and earnings per share saw significant increases, with year-to-date results ahead of guidance, achieving about 37% of the full-year guidance [6][25]. Business Segment Data and Key Metrics Changes - The land development segment showed strong performance, particularly with the completion of Phase 2C and ongoing work on Phase 2D, which is about 80% complete and ahead of schedule [5][14]. - The water utility segment experienced strong customer growth with a 22% compound annual growth rate (CAGR) in recurring revenue, although it was softer than normal due to timing issues with building permits and oil and gas deliveries [9][10]. - The single-family rental segment has 19 homes completed and rented, with another 40 units under contract, indicating a steady growth in recurring revenues [21][22]. Market Data and Key Metrics Changes - The company operates in a growing area of the Denver metropolitan region, with significant development occurring around the Lowry Ranch, which is expected to enhance the company's asset value [20][61]. - Home prices in the Sky Ranch area have appreciated by 30%-40% since the initial phases, indicating strong demand and market performance despite broader market challenges [42][43]. Company Strategy and Development Direction - The company aims to continue diversifying its activities across land development, water utilities, and single-family rentals, focusing on building a recurring revenue base and fortifying its balance sheet [4][24]. - Future growth is anticipated to come from the completion of the interchange project, which is expected to unlock additional commercial opportunities and enhance overall revenue streams [27][63]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing construction projects and the potential for increased oil and gas revenues as operators begin fracking later in the year [10][11]. - The company is cautious about water acquisitions, preferring strategic opportunities that complement its existing portfolio, while being more aggressive in land acquisitions [35][36]. Other Important Information - The company has a strong balance sheet and continues to invest in its business lines to create shareholder value [4][24]. - The company is exploring opportunities for data centers in the Sky Ranch area, leveraging its water availability to attract high water-use customers [40][41]. Q&A Session Summary Question: What should be the estimated earnings range for fiscal 2027? - Management indicated that fiscal 2027 will be influenced by Phase 2E and the interchange construction, suggesting it may not be a breakout year but will set the stage for future growth [31][32]. Question: What are the opportunities for water acquisition? - Management stated that while they have a strong water portfolio, any acquisitions would need to be strategic and adjacent to existing assets [35][36]. Question: What is the outlook for land acquisitions? - Management expressed optimism about land acquisition opportunities, noting more active conversations with landowners compared to previous years [37]. Question: What is the potential for data centers in the area? - Management highlighted the advantages of Sky Ranch for data centers due to water availability and proximity to infrastructure, indicating ongoing discussions with potential users [40][41]. Question: What is the current trend in home price appreciation in the Denver market? - Management reported strong appreciation in home values in Sky Ranch, with average increases of 30%-40% for earlier phases, driven by demand and community amenities [42][43].

Financial Data and Key Metrics Changes - The company reported a record-setting Q1 with revenues exceeding $9 million and gross profits of approximately $6.2 million, achieving about a third of its fiscal year forecast [6][28] - Net income and earnings per share saw significant increases, attributed to progress on Phase 2D, with year-to-date results ahead of guidance [5][6] Business Segment Data and Key Metrics Changes - The company operates in three segments: land development, water utilities, and single-family rentals, all performing well [4] - The water utility segment experienced strong customer growth with a 22% compound annual growth rate (CAGR) in recurring revenue, although it was softer than normal due to timing issues with building permits and oil and gas deliveries [10][11] - The land development segment showed strength from Phase 2D, with ongoing lot production and completion of Phase 2C [15][16] - The single-family rental segment has 19 homes completed and rented, with another 40 units under contract, aiming to phase in new units to the market [24][25] Market Data and Key Metrics Changes - The company noted strong appreciation in home values within the Sky Ranch area, with some homes appreciating by 30%-40% since their construction [52][56] - The overall housing market is experiencing affordability challenges, but the company is positioned to meet demand with entry-level products [25][56] Company Strategy and Development Direction - The company aims to continue developing its recurring revenue base while fortifying its balance sheet and investing in business lines [4][26] - There is a focus on expanding operations at Lowry Ranch and exploring commercial development opportunities, particularly in relation to the new interchange [22][30][72] - The company is cautious about water acquisitions but is more aggressive in land acquisitions to vertically integrate value [44][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for land acquisitions and the overall growth trajectory of the company, despite a slowing home building market [46][47] - The company anticipates a breakout year post-interchange completion, with significant revenue potential from both residential and commercial lots [35][37][67] Other Important Information - The company is actively exploring data center opportunities, leveraging its water availability to attract high water-use customers [50][88] - The company has a strong water portfolio and is seeing appreciation in tap fees, indicating a robust market for water assets [65] Q&A Session Summary Question: What should be the estimated earnings range for fiscal 2027? - Management indicated that fiscal 2027 will not be a breakout year, with expectations for continued growth primarily after the interchange is completed [35][36] Question: What are the opportunities for water acquisition? - Management stated that they are content with their current water portfolio and will pursue strategic acquisitions that are adjacent to existing assets [44][45] Question: What is the outlook for land acquisitions? - Management expressed optimism about land acquisition opportunities, noting increased interest from landowners [46][47] Question: What is the potential for data centers in the area? - Management highlighted the advantages of Sky Ranch for data centers due to water availability and proximity to power, indicating ongoing discussions with potential users [50][88] Question: What is the current trend in home price appreciation in the Denver market? - Management reported strong appreciation in home values at Sky Ranch, with average increases of 30%-40% for some homes [52][56]

Financial Performance - Q1 2026 net income increased approximately 16% to $46 million, and EPS increased approximately 19% to $019, reflecting higher profitability year over year[19] - As of Q1 2026, approximately 31% of the full-year revenue forecast and 32% of the gross profit forecast have been achieved[26] - As of Q1 2026, approximately 37% of the full-year net income and EPS forecasts have been achieved[30] Water & Wastewater Utilities - Recurring water and wastewater revenue increased approximately 26% from Q1 2024 to Q1 2026[38] - The company estimates its portfolio can serve approximately 60000 connections, generating approximately $23 billion in revenues based on current rates[50] - To date, the company has added around 1695 connections, representing 28% of its overall capacity[50] Land Development - Phase 2C is 89% complete by Q1 2026, with all $173 million revenue payments received[54] - Phase 2D is 65% complete by Q1 2026, with $45 million milestone payments received and $145 million remaining for FY26[55] - Quarter-over-quarter land development revenue increased to $65 million in Q1 2026[57] Single-Family Rentals - Single-family rental revenue increased approximately 20% from Q1 2024 to Q1 2026[85] - The company has completed 19 rental units at Sky Ranch, which are now fully leased[83] - The company has 40 additional homes under contract, with occupancy expected through FY2026[83] Capital Position - As of Q1 '26, the company has $239 million in cash and restricted cash and a $518 million Note Receivable[13] - The company's water rights portfolio supports up to 60000 connections[100]