Pure Cycle(US:PCYO)2025-01-08 21:00Housing Market - The housing market stabilized in 2024 with consistent interest rates, but 30-year fixed mortgage rates remain at their highest level in over 15 years [99]. - The ongoing impact of the Federal Reserve's monetary policy is expected to create headwinds for the housing market in 2025 and beyond [101]. Sky Ranch Development - Sky Ranch is zoned for up to 3,200 single-family and multifamily homes, with a total of approximately 5,000 residential and equivalent units planned at build-out [107]. - The average lot prices in Phase 2 of Sky Ranch increased by approximately 38%, with the price for a 45-foot lot rising from $75,000 to $103,200 [110]. - As of November 30, 2024, Phase 2A of Sky Ranch is nearly 100% complete, with $18.4 million received from the sale of 219 lots [111]. - Phase 2B of Sky Ranch is approximately 97% complete, with $17.3 million received from the sale of 211 lots [112]. - The company has received $25.0 million in water and wastewater tap fees from homebuilders since the start of development at Sky Ranch [117]. - The company expects to recognize the majority of the remaining $13.7 million of revenue from Phase 2C before the end of fiscal 2025 [115]. - The company plans to expand its single-family rental business, with a goal of more than 200 rental homes at Sky Ranch over the next several years [102]. - The company has contracted to construct 17 rental units in Phase 2B, with estimated construction costs of approximately $6 million [134]. Financial Performance - For the three months ended November 30, 2024, net income increased to $3.9 million from $2.1 million, a 91% increase, primarily due to higher oil and gas royalty income [120]. - Total revenue for the same period rose to $5.75 million, a 7% increase from $5.39 million, driven by a 22% increase in lot sales revenue [122]. - Lot sales revenue reached $2.32 million, up from $1.90 million, reflecting ongoing development in Phase 2A, 2B, and 2C [129]. - Water and wastewater resource revenue decreased by 7% to $3.06 million, primarily due to a 52% drop in commercial water usage [127]. - The total costs of revenue increased to $2.09 million, a 2% rise compared to the previous year, aligning with revenue growth [122]. - Operating income for the three months ended November 30, 2024, was $1.72 million, slightly down by 2% from $1.76 million [122]. - As of November 30, 2024, working capital was $20.3 million, including $19.0 million in cash and cash equivalents, indicating sufficient liquidity for operations [132]. Accounting Policies - The accounting policies and estimates used for the interim consolidated financial statements for the three months ended November 30, 2024, remain consistent with those described in the 2024 Annual Report [137]. - There have been no changes to the critical accounting policies during the three months ended November 30, 2024 [137]. - Certain disclosures typically included in annual financial statements have been condensed or omitted in the interim financial statements as per SEC regulations [137].