Pure Cycle(PCYO) - 2025 Q3 - Quarterly Results

Executive Summary & Business Overview Company Overview and Strategic Focus Pure Cycle operates in water, land development, and rentals, prioritizing growth, shareholder returns, and a strong balance sheet, focusing on entry-level lots - Pure Cycle operates in three distinct, complementary business segments: wholesale water and wastewater service provision, land development (master planned communities like Sky Ranch), and single-family home rentals[21] - The company's capital management strategy focuses on growth and shareholder returns, prioritizing investment in development projects, utilizing liquidity for share repurchases, and reserving capital for strategic development and land acquisitions[2] - Pure Cycle differentiates itself in the Denver market through its strong balance sheet, significant cash liquidity, entry-level market segmentation, and just-in-time delivery of finished lots to national homebuilder partners, leading to high return buyer retention[4] Q3 and YTD 2025 Financial Highlights Pure Cycle maintained profitability in Q3 and YTD 2025, with key financial metrics highlighted for both periods Key Financial Metrics | Metric | Three Months Ended May 31, 2025 | Nine Months Ended May 31, 2025 | | :----------------------- | :------------------------------ | :----------------------------- | | Revenues | $5.1 million | $14.9 million | | Pre-tax Income | $3.0 million | $9.3 million | | Net Income | $2.3 million | $7.0 million | | Royalty Income | $1.1 million | $5.9 million | | EBITDA | $3.6 million | $11.3 million | | Cash & Cash Equivalents | $14.4 million (as of May 31, 2025) | N/A | | Water Delivered (acre-feet) | 76 | 443 | Financial Performance Analysis Consolidated Results of Operations Consolidated revenues decreased in Q3 and YTD 2025 due to lower lot sales and commercial water usage, while net income showed mixed results Consolidated Statement of Operations Highlights (in thousands) | Metric (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenues | $5,140 | $7,604 | $14,887 | $16,187 | | Total Cost of Revenues| $1,883 | $2,738 | $6,437 | $6,202 | | Operating Income | $1,334 | $3,068 | $1,726 | $4,456 | | Income before taxes | $2,993 | $3,852 | $9,277 | $6,813 | | Net Income | $2,256 | $2,825 | $7,002 | $5,008 | Revenue Breakdown by Segment Segment revenues varied, with significant increases in water and wastewater tap fees offsetting decreases in lot sales and commercial water usage Revenue by Segment and Source (in thousands) | Revenue Source (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :---------------------------- | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Water & Wastewater Segment | $2,300 | $2,500 | $8,000 | $7,600 | | Land Development Segment | $2,700 | $5,000 | $6,500 | $8,300 | | Single-Family Rental Business | $100 | $100 | $400 | $400 | | Water and Wastewater Tap Fees | $1,700 | $581 | $5,292 | $1,162 | | Lot Sales | $2,526 | $4,795 | $5,981 | $7,906 | - Water and wastewater tap sales increased significantly, with 40 taps sold for $1.7 million in Q3 2025 (vs. 20 taps for $0.6 million in Q3 2024) and 130 taps for $5.3 million YTD 2025 (vs. 35 taps for $1.2 million YTD 2024)[7] - Phase 2 of Sky Ranch is projected to generate over $20 million in water and wastewater tap fee revenue and cash over the next three years[7] Net Income and EBITDA Net income decreased in Q3 2025 but increased YTD, while EBITDA showed a similar trend, reflecting continued profitability Net Income and EBITDA (in thousands) | Metric (in thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $2,256 | $2,825 | $7,002 | $5,008 | | EBITDA | $3,628 | $4,522 | $11,273 | $8,720 | Earnings Per Share (EPS) Basic and diluted EPS decreased in Q3 2025 but increased YTD, aligning with net income trends Earnings Per Share | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.09 | $0.12 | $0.29 | $0.21 | | Diluted EPS | $0.09 | $0.12 | $0.29 | $0.21 | Financial Position (Balance Sheet) Pure Cycle maintained a strong financial position as of May 31, 2025, with increased total assets and equity despite a decrease in current assets Balance Sheet Highlights (in thousands) | Metric (in thousands) | May 31, 2025 (unaudited) | August 31, 2024 (audited) | | :-------------------- | :----------------------- | :------------------------ | | Cash and cash equivalents | $14,392 | $21,946 | | Total Current Assets | $25,205 | $37,695 | | Total Assets | $151,739 | $147,354 | | Total Current Liabilities | $7,153 | $9,349 | | Total Liabilities | $15,064 | $17,652 | | Total Shareholders' Equity | $136,675 | $129,702 | Working Capital and Liquidity The company reported a healthy working capital of $18.1 million and $14.4 million in cash, supporting operations and acquisitions - Working capital (current assets less current liabilities) was $18.1 million as of May 31, 2025[11] - Cash and cash equivalents totaled $14.4 million as of May 31, 2025[3][11] Operational Review Sky Ranch Master Planned Community Development Sky Ranch development is progressing across multiple phases, with Phase 2A complete and subsequent phases nearing or commencing construction through fiscal 2026 - Phase 2A (229 lots) is 100% complete[8] - Phase 2B (211 lots) is approximately 96% complete, with national homebuilder partners having begun construction and nearly 75% of homes either sold or under construction[1][8] - Phase 2C (228 lots) is approximately 68% complete, with final paving underway and anticipated substantial completion by the end of fiscal 2025[1][8] - Phase 2D (218 lots) is approximately 29% complete, with utility work begun and expected completion in the first half of fiscal 2026[1][8] - Phase 2E (146 lots) is in the platting stage, with development expected to begin in fiscal 2026 and lots ready for homebuilders by the end of calendar 2026[1][8] Water and Wastewater Resource Development Operations Water deliveries decreased due to lower oil and gas sales, while water and wastewater tap sales significantly increased, with residential service revenues expected to grow - Water deliveries decreased to 76 acre-feet in Q3 2025 (from 394 acre-feet in Q3 2024) and to 443 acre-feet YTD 2025 (from 1,422 acre-feet YTD 2024), primarily due to a decrease in water sold to oil and gas operations[12] - Water and wastewater tap sales increased to $1.7 million in Q3 2025 (from $0.6 million in Q3 2024) and to $5.3 million YTD 2025 (from $1.2 million in YTD 2024), mainly due to the timing of development activities in Phase 2B[12] - The company anticipates continued growth in residential water and wastewater service revenues as Sky Ranch continues to develop[12] Land Development Operations Lot sales revenue decreased in Q3 and YTD 2025, primarily due to the timing of finished lot deliveries and percentage of completion revenue recognition - Lot sales revenue decreased to $2.5 million in Q3 2025 (from $4.8 million in Q3 2024) and to $6.0 million YTD 2025 (from $7.9 million YTD 2024)[13] - The decrease in lot sales revenue is primarily due to the timing of finished lot deliveries and the use of the percentage of completion method for revenue recognition, which fluctuates with construction activities[13] Single-Family Rentals Operations Single-family rental income remained consistent from 14 homes, with 17 additional homes under contract for fiscal 2026 and plans for significant long-term growth - Rental income remained consistent at $0.1 million for Q3 2025 and $0.4 million for YTD 2025, derived from 14 completed homes[14] - An additional 17 single-family homes are under contract to be built in Phase 2B, expected to be available for rent in fiscal 2026[9][14] - The company expects to have a total of 98 homes in Phases 1 and 2, with the ability to support over 200 homes once Sky Ranch is fully built out, driven by overwhelming demand for rental homes[9] Corporate Information & Outlook Earnings Presentation Details Pure Cycle will host an earnings presentation on July 10, 2025, to discuss financial results and provide an opportunity for questions Q3 2025 Earnings Presentation Information | Detail | Information | | :----- | :---------- | | When | 8:30 AM Eastern (6:30 AM Mountain) on July 10, 2025 | | Event Link | https://www.purecyclewater.com/Q32025 | | Call-in Number | 872-240-8702 (access code: 339 096 271) | | Replay | https://www.purecyclewater.com/investors/news-events/ir calendar | Forward-Looking Statements The report contains forward-looking statements about future activities and financial expectations, subject to inherent uncertainties and risks that could materially alter actual results - Forward-looking statements address future activities, events, or developments, including market positioning, timing of rental unit availability, Sky Ranch development, future tap sales and revenues, home construction timing, market strength, and financial forecasts[23] - Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially, such as home mortgage interest rates, inflation, trade policies, and other factors impacting the housing market[23]