Pure Cycle (NasdaqCM:PCYO) Q1 2026 Earnings Call January 08, 2026 08:30 AM ET Company ParticipantsJoakim Persson - Circles Asset ManagementMark W. Harding - President and CEOConference Call ParticipantsNone - Analyst 2None - Analyst 1None - Analyst 3None - Analyst 4OperatorGood morning, everyone, and welcome to Pure Cycle Corporation's first quarter 2026 earnings call. We've had a great start to the year, and we're excited to share with you guys our results for the first quarter. A couple of housekeeping no ...

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 Data and Key Metrics Changes - Quarterly revenues reached $5 million, with gross profits of approximately $3.2 million, reflecting a gross margin of about 63% [7] - Net income for the quarter was over $2 million, translating to earnings per share of $0.09, while year-to-date net income stood at $7 million, or $0.29 per share [9][15] - Revenue trends showed a slight decline from previous quarters, primarily due to weighted deliveries of lots, particularly from the largest homebuilder, D.R. Horton [9][10] Business Line Data and Key Metrics Changes - The water utility segment is driven by annual customer growth and strong tap fees, with a noted decrease in industrial customer demand due to permitting issues [16][17] - The oil and gas segment is expected to normalize in fiscal 2026 after a weaker performance in 2025 due to permitting concentration [19][20] - The land development segment is on track to deliver all lots for Phase 2C in the fourth quarter, with ongoing activities in Phase 2D [21][22] Market Data and Key Metrics Changes - The company operates in a low inventory environment for entry-level homes in the Denver area, which is beneficial for its market positioning [55] - The housing market faces headwinds from consumer confidence and affordability issues, but the company remains one of the few entry-level master plan communities available [53][54] Company Strategy and Development Direction - The company focuses on maintaining liquidity to invest in business segments and capitalize on market opportunities, particularly in land acquisition and water rights [52][53] - The strategic emphasis is on delivering finished lots in real-time to meet builder demands, thereby enhancing partnerships with homebuilders [39][40] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of consumer confidence in the housing market and noted that mortgage rates are less of a headwind than in previous years [54][55] - The company anticipates strong growth in the single-family rental segment over the next 18 months, with plans to reach close to 100 units [51][52] Other Important Information - The company has a robust balance sheet with high liquidity, allowing it to navigate volatile markets effectively [52] - A groundbreaking for a new high school project was announced, which is expected to enhance community appeal and support home sales [44][45] Q&A Session Summary Question: Is there any development on the reservoir sites? - Management indicated that while there are no immediate developments, there are ongoing discussions regarding water rights and potential partnerships for future projects [69][70] Question: Where will the water for the new parcel development be sourced? - The water will be sourced from the city of Aurora, as the property has been annexed to the city for over twenty years [71][72] Question: What is the status of the water rights application mentioned in the 10-K filing? - Management explained that the application for new water rights was complicated and did not prevail, but they are working on finding a resolution with opposing groups [74][75]

Summary of Invitation Homes Conference Call Company Overview - **Company**: Invitation Homes - **Industry**: Residential Real Estate, specifically focused on single-family rentals Key Points and Arguments Market Performance - **Occupancy Rates**: Currently at low 97% with blended rates in the low 4% range, indicating a strong position heading into peak leasing season [3][6][20] - **Renewals**: Strong renewal business, accounting for 75% of leases, with rates above 4% [4][6] - **New Leases**: Steady performance, although some markets like Dallas, Tampa, and Phoenix are facing challenges due to new supply [4][5] Supply Dynamics - **Supply Pressure**: Deliveries in the Build-to-Rent (BTR) segment are dramatically slowing, which is expected to alleviate supply pressure in the coming quarters [6][7] - **Market Competition**: Competitive environment with some markets remaining flat year-over-year, while others like Denver and Southern California show strength [5][6] Customer Demographics - **Customer Segments**: Three main customer types identified: those renting by choice, those in transition, and those renting out of necessity due to credit issues [12][13][14] - **Affordability**: Renting is approximately $1,100 more affordable than buying in all markets, making it an attractive option for families [15][16] Operational Efficiency - **Days to Re-Resident**: Currently tracking in line with pre-pandemic levels, with a focus on reducing the time to lease homes [21][22] - **Revenue Management**: Utilizes data and technology to optimize pricing and occupancy, with a focus on maintaining a balance between occupancy and rental rates [25][26] Strategic Initiatives - **Developer Lending Program**: A new initiative aimed at providing capital to builders, with a focus on projects that align with Invitation Homes' long-term acquisition strategy [44][46][49] - **Third-Party Management**: Successfully managing 20,000 homes, creating efficiencies and expanding into new markets [58][59] Financial Outlook - **Acquisition Strategy**: Plans to fund growth through asset dispositions and excess operating cash flow, with a focus on capital-light growth [60][61] - **Market Conditions**: Anticipates 3% to 5% rent growth in a normalized market, with stable expense growth expected [38][39] Long-Term Vision - **Customer Retention**: Average length of stay is over 38 months, indicating strong customer loyalty [33] - **Market Positioning**: Focus on acquiring homes in areas with existing operations to leverage local market knowledge [40][41] Additional Important Insights - **Shadow Supply**: Rising home inventory levels are not significantly impacting Invitation Homes, as the company focuses on the rental market where ownership costs are rising [30][31] - **Market Trends**: The company is optimistic about the long-term outlook, citing historical trends where rent growth follows home price appreciation [36][37] This summary encapsulates the key insights and strategic directions discussed during the Invitation Homes conference call, highlighting the company's strong market position and proactive strategies in the residential rental sector.

Financial Data and Key Metrics Changes - The company reported approximately $4 million in revenue for Q2, with a gross margin of about 38%, primarily driven by royalty income from mineral royalties [8][10] - Year-to-date revenue reached approximately $10 million, with a gross profit margin exceeding 50% and continued growth in earnings per share [9][15] - The company is on track to meet its fiscal 2025 guidance of around $31 million in revenue, with Q2 typically being the softest quarter due to seasonal factors [12][15] Business Line Data and Key Metrics Changes - The water utility segment performed well, driven by the receipt of TAPIs as new phases of development opened, with strong demand from home builders [17][20] - The land development segment has seen significant activity, with three phases under construction and a robust market for entry-level homes [28][31] - The single-family rental segment maintained high occupancy rates, with 14 homes completed and strong demand anticipated as new units come online [32][35] Market Data and Key Metrics Changes - The Denver real estate market is experiencing a push for affordability, with builders adapting to the current interest rate environment, which has stabilized consumer sentiment [98][100] - Demand for homes in the I-70 corridor remains strong, with builders actively constructing homes and expressing confidence in the market [101][102] Company Strategy and Development Direction - The company aims to continue investing in land and water assets, with a focus on land acquisition as a higher priority than additional water rights [91][140] - The development of the Sky Ranch community is a key focus, with plans for commercial opportunities and infrastructure improvements, including a new interchange [68][135] - The company is positioned to capitalize on market opportunities created by uncertainty, leveraging its existing assets for growth [44][90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging markets, highlighting a strong liquidity position with over $20 million available [60][64] - The outlook for the next three to five years includes steady customer growth and increased tap sales, with a full build-out of Sky Ranch projected over seven years [66][70] Other Important Information - The company has a strong partnership with National Heritage Academy for a K-12 school, which is seen as a valuable asset for the community [150][152] - The company is exploring opportunities for affordable housing in collaboration with the state of Colorado, which owns significant land in the area [158][161] Q&A Session Summary Question: Status of I-70 interchange and potential acquisitions - The CEO indicated that the permit for the I-70 interchange is expected to be submitted soon, with construction anticipated to start by late 2025 [85][86] - Regarding acquisitions, the CEO noted that while there is interest from sellers, personal circumstances often dictate their willingness to sell [88][90] Question: Update on demand in the Denver real estate market - Management confirmed strong demand for homes, particularly in the entry-level segment, and noted that builders are actively constructing homes [96][100] Question: Prioritization of land acquisition over water rights - The CEO clarified that land acquisition is prioritized due to the need for additional land to utilize existing water rights effectively [140][141] Question: Status of the local school - The CEO provided an update on the K-12 school, highlighting plans for a high school to be built by 2026, which will serve the community well [150][152] Question: Opportunities for affordable housing - The CEO mentioned that while the company is not adjacent to federal land, there are opportunities to partner with the state of Colorado for affordable housing initiatives [158][161]