Pure Cycle(US:PCYO)2023-07-13 15:13Financial Data and Key Metrics Changes - The net income for the nine months ended this year was $4.1 million compared to $3.6 million last year, indicating consistent performance [51] - Cash at the end of the quarter was $26 million, with a diversified banking strategy to mitigate risks [52] - The company reported a significant increase in tap fees from $30,000 to $38,000, reflecting the appreciation of water rights [82][84] Business Segment Data and Key Metrics Changes - The water utility segment saw a strong year with water sales to oil and gas operators reaching almost 263 million gallons [58] - The land development segment is progressing with two phases (2A and 2B) running concurrently, contributing to consistent revenue recognition [60][64] - The single-family rental segment is expanding, with plans for 69 rental homes across various product types, indicating strong demand [26][47] Market Data and Key Metrics Changes - The Denver housing market remains robust, particularly for entry-level homes, with less than 4% of housing products meeting the $400,000 price target [20][44] - There is a noted decline in sales of existing homes due to mortgage lock-in effects, impacting move-up buyers [45] - Traffic at Sky Ranch is consistent, contrasting with national trends of weakening traffic due to rising interest rates [46] Company Strategy and Development Direction - The company is focused on vertical integration, combining land development with water utility services to enhance asset value [108] - The development of the Sky Ranch community is a key strategic initiative, with plans for educational facilities and commercial opportunities [38][14] - The company aims to capitalize on the growing demand for affordable housing in the Denver area, particularly in the entry-level market [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market's normalization despite rising interest rates, indicating a recalibration among buyers [21] - The company is committed to maintaining a sustainable growth pace in the Sky Ranch community, despite market challenges [59] - Management highlighted the long-term value of water rights and the potential for continued revenue generation from water and sewer services [73] Other Important Information - The company is preparing for an Investor Day and has plans for presentations at upcoming conferences [99] - The school at Sky Ranch is set to open with over 400 students, enhancing community value [22] Q&A Session Summary Question: What is the book value of water rights after completing Sky Ranch? - Management indicated that approximately 12% of the total portfolio will be in service, with ongoing revenue from water and sewer services [73][74] Question: How has the market strength affected builders' decisions regarding lot sales? - Management noted that builders are not selling lots back due to strong presales and market conditions, which have improved despite rising interest rates [83][90] Question: What is the spread in rents between detached and townhome products? - The current rent spread is between $2,800 and $3,100, with variations based on the type of unit [81]