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Pure Cycle(PCYO) - 2024 Q4 - Earnings Call Transcript
PCYOPure Cycle(PCYO)2024-11-14 17:50
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Financial Data and Key Metrics Changes - The company reported record fourth-quarter results with revenue of 12.5million,drivenbythedeliveryof197lotsinPhase2D[9]−Forthefiscalyear,totalrevenuereached12.5 million, driven by the delivery of 197 lots in Phase 2D [9] - For the fiscal year, total revenue reached 28.7 million, marking another record year [10] - Gross profit was approximately 20million,resultinginagrossmarginofabout6920 million, resulting in a gross margin of about 69% [10] - Net income for the year was 11.6 million, translating to earnings per share of 0.48[10]−Year−over−yearcomparisonsshowsignificantimprovement,particularlyafterachallengingpreviousyearduetorisinginterestrates[11][12]BusinessSegmentDataandKeyMetricsChanges−Thewaterutilitysegmentachievedrecordperformance,withoilandgasoperationsgeneratingover0.48 [10] - Year-over-year comparisons show significant improvement, particularly after a challenging previous year due to rising interest rates [11][12] Business Segment Data and Key Metrics Changes - The water utility segment achieved record performance, with oil and gas operations generating over 5.5 million in revenue [14][15] - The company experienced a 21% compound annual growth rate (CAGR) in utility customers, averaging 1,500perconnectionannually[15]−Inthelanddevelopmentsegment,194finishedlotsweredeliveredinPhase2D,withatotalofabout1,200lotsdevelopedtodate[20][21]−Thesingle−familyrentalsegmentisgrowing,withannualrevenueapproachinghalfamilliondollarsandplanstoexpandto200units[24][25]MarketDataandKeyMetricsChanges−Thecompanyoperatesinawater−constrainedmarket,whichpresentsopportunitiesforgrowth,particularlyinoilandgas[19]−Theaveragetapfeehasincreasedfromaround1,500 per connection annually [15] - In the land development segment, 194 finished lots were delivered in Phase 2D, with a total of about 1,200 lots developed to date [20][21] - The single-family rental segment is growing, with annual revenue approaching half a million dollars and plans to expand to 200 units [24][25] Market Data and Key Metrics Changes - The company operates in a water-constrained market, which presents opportunities for growth, particularly in oil and gas [19] - The average tap fee has increased from around 30,000 to approximately 40,000,reflectingthegrowingdemandforwaterservices[27]−Thecompanyhasonlyutilizedabout540,000, reflecting the growing demand for water services [27] - The company has only utilized about 5% of its utility assets, indicating significant growth potential [17][59] Company Strategy and Development Direction - The company aims to leverage its water utility and land development segments to create a vertically integrated business model [27][28] - Future growth is expected from the expansion of the single-family rental segment, with a focus on maximizing land development opportunities [41][42] - The company is strategically acquiring additional land and water rights to enhance its asset base and operational capacity [69] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in revenue and margins across all segments, particularly in land development and water utility [49][50] - The company anticipates a modest increase in revenues and improved margins for the upcoming year [50] - Management highlighted the importance of maintaining liquidity for strategic acquisitions while balancing stock repurchase programs [78][83] Other Important Information - The company has a strong balance sheet with nearly 57 million in cash and receivables, providing a solid foundation for future growth [47] - Recent refinancing of bonds has resulted in an investment-grade rating, enhancing the company's financial stability [68] - The company is actively pursuing additional land acquisitions to support its growth strategy [69] Q&A Session Summary Question: Interest in datacenters as water consumers - Management acknowledged the potential for datacenters but noted limited traction in discussions, emphasizing existing industrial customers as primary revenue sources [71][74] Question: Stock repurchase program and share count - Management clarified that while shares outstanding have increased, the company is balancing stock repurchases with the need for liquidity for acquisitions [76][78] Question: Potential for borrowing and valuation concerns - Management agreed on the undervaluation of the company and indicated a willingness to leverage for growth while maintaining liquidity for strategic opportunities [78][83]