Pure Cycle(US:PCYO)2024-07-10 20:00Housing Market Challenges - The housing market faced significant challenges in Q3 2022, continuing into fiscal 2025, due to rising mortgage rates, inflation, and supply chain disruptions [159]. - The Federal Reserve's actions to combat inflation have led to mortgage rates reaching their highest levels in over 15 years during 2023, impacting the housing market negatively [160]. - The company is actively working with home builder partners to mitigate impacts from macroeconomic factors affecting consumer demand and mortgage availability [160]. Financial Performance - Total revenue for the three months ended May 31, 2024, was $6.879 million, with segment profit of $4.673 million [179]. - For the nine months ended May 31, 2024, total revenue was $11.218 million, with segment profit of $6.276 million [180]. - For the nine months ended May 31, 2024, the company generated net income of $5.0 million, an increase from $3.6 million in the same period of fiscal 2023, driven by significant water sales and increased lot sales revenue [198]. - During the three months ended May 31, 2024, total revenue was $7.6 million, an increase of 11% compared to $6.9 million in the same period of 2023, primarily due to ongoing developments in multiple phases [199]. - Total revenue for the nine months ended May 31, 2024, was $16,187,000, up 44% from $11,218,000 in the same period of 2023 [228]. - Net income for the nine months ended May 31, 2024, was $5,008,000, a 37% increase from $3,643,000 in the same period of 2023 [228]. Development Progress - As of May 31, 2024, Phase 2A of the Sky Ranch development is approximately 98% complete, with $18.4 million received from the sale of 219 lots [166]. - The company plans to expand its single-family rental business to over 200 rental units in the coming years, with 14 homes completed and leased as of May 31, 2024 [161]. - The company has retained 93 lots in Phase 2 for its rental business, with 10 completed and rented as of May 31, 2024 [169]. - As of May 31, 2024, Phase 2B of the Sky Ranch development is approximately 70% complete, with expected finished lot payments totaling $9 million over the next 3 months [221]. - The company anticipates incurring approximately $6 million in construction costs for 17 rental units at Sky Ranch in Phase 2B [211]. Revenue Sources - Lot sales revenue for the three months ended May 31, 2024, was $4.8 million, a 52% increase from $3.2 million in the same period of 2023, attributed to construction progress in Phase 2A, 2B, and 2C [199]. - The company recognized a total of $18.1 million in lot sales revenue since the start of construction on Phase 2A, with expectations to recognize the remaining $0.3 million of revenue for Phase 2A before the end of fiscal 2024 [195]. - Water and wastewater resource revenue for the three months ended May 31, 2024, was $2.5 million, a decrease of 32% from $3.6 million in the same period of 2023 [199]. - Water and wastewater resource revenue increased by 28% to $7,562,000 for the nine months ended May 31, 2024, compared to $5,891,000 in 2023 [228]. - Water deliveries increased by 76% to 1,422 acre-feet for the nine months ended May 31, 2024, compared to the same period in 2023 [228]. Cost and Expenses - The company has accrued liabilities totaling $1.380 million as of May 31, 2024, down from $1.761 million as of August 31, 2023 [176]. - Total assets increased to $140.404 million as of May 31, 2024, compared to $133.216 million as of August 31, 2023 [181]. - The effective tax rate for the company is estimated to be approximately 25% as of May 31, 2024, with potential volatility due to various factors [182]. - Total expenses for the three months ended May 31, 2024, increased by 15% to $1,321,000 compared to $1,150,000 in the same period of 2023 [232]. - Cash used in operating activities for the nine months ended May 31, 2024, was $0.8 million, primarily for normal operations and construction activities [252]. - Cash used in investing activities for the nine months ended May 31, 2024, was $3.9 million, mainly for future phases of Sky Ranch and additional water delivery infrastructure [252]. Market Trends - The average lot price increased by approximately 38%, with the price for a 45-foot lot rising from $75,000 to $103,200 [193]. - Water taps sold decreased by 55% to 20 for the three months ended May 31, 2024, compared to 44 in the same period of 2023 [199]. - Water delivered (acre-feet) decreased by 30% to 394 for the three months ended May 31, 2024, compared to 564 in the same period of 2023 [199]. - Water and wastewater tap fees dropped by 54% to $581,000 from $1,256,000 year-over-year [232].