Pure Cycle(US:PCYO)2026-01-07 21:00Housing Market and Development - The housing market stabilized in 2024, with the Federal Reserve shifting to a balanced approach, maintaining consistent interest rates through the first half of 2025 [99]. - Homebuilders' strategic use of interest rate buydowns has been crucial in driving sales despite higher mortgage interest rates and economic uncertainty [100]. - The Sky Ranch development is zoned for up to 3,200 single-family and multifamily homes, with plans for over two million square feet of retail, commercial, and light industrial space [102]. Sky Ranch Development Phases - The average lot price in Phase 2 of Sky Ranch increased by approximately 53%, from $75,000 to $115,000 for a 45-foot lot [110]. - As of November 30, 2025, Phase 2A of Sky Ranch is 100% complete, with $18.4 million received from the sale of 219 lots [111]. - Phase 2B of Sky Ranch is approximately 98% complete, with $17.3 million received from the sale of 211 lots [112]. - Phase 2C of Sky Ranch is approximately 89% complete, with $17.3 million received from the sale of 228 lots [113]. - Phase 2D of Sky Ranch is approximately 65% complete, with $4.5 million received and an expectation of $14.5 million in remaining payments [114]. - Construction activities for Phase 2E are expected to begin in fiscal 2026, with approximately 159 lots planned for completion in calendar 2026 [116]. Financial Performance - For the three months ended November 30, 2025, net income increased to $4.5 million from $3.9 million in 2024, primarily due to increased land development revenue [120]. - Total revenue for the same period rose by 59% to $9.1 million, driven by a 160% increase in lot sales revenue, which reached $6.0 million [122][130]. - Revenue recognized from lot sales in the three months ended November 30, 2025, was $6.0 million, compared to $2.3 million in the same period of 2024 [115]. - Operating income for the three months ended November 30, 2025, was $4.4 million, a 155% increase compared to the previous year [122]. Cash Flow and Investments - Cash used in operating activities for the three months ended November 30, 2025, was $1.0 million, primarily for construction activities at Sky Ranch and vendor payments [142]. - Cash used in investing activities was $4.7 million, mainly for the construction of single-family rentals and additional water and wastewater infrastructure [142]. - Financing activities provided $1.2 million in cash from financing single-family rentals, marking a significant increase of 1,165% compared to the previous year [140]. - The net change in cash for the three months ended November 30, 2025, was a decrease of $4.5 million, representing a 355% decline from the prior year [140]. - The company anticipates spending up to $10.8 million in the next 12 months for Phase 2 development and expects to receive approximately $17.5 million in milestone payments from builders [137]. - The company anticipates investing up to $2.0 million over the next 12 months to fund the Rangeview District's obligations related to water and infrastructure development [139]. Water and Infrastructure - Water and wastewater tap fees increased by 14% to $1.7 million, reflecting the timing of builders obtaining building permits [122][128]. - Water deliveries decreased by 51% to 147 acre-feet, primarily due to reduced sales to oil and gas operators [126][127]. - The current WISE subscription allows the company to access approximately 3.0 million gallons per day of transmission pipeline capacity and up to 900 acre-feet per year of water [139]. - The company expects to continue spending cash for construction activities at Sky Ranch for the foreseeable future [142]. General and Administrative Expenses - General and administrative expenses slightly increased due to inflation but were offset by a reversal of a legal expense of $0.5 million [125]. Accounting and Reporting - There have been no changes to the company's critical accounting policies during the three months ended November 30, 2025 [143]. - The company’s financial statements for the three months ended November 30, 2025, should be read in conjunction with the audited financial statements in the 2025 Annual Report [143].