Pure Cycle Announces Financial Results For the Three Months Ended November 30, 2023
Pure Cycle Corporation (PCYO) announced its financial results for the three months ended November 30, 2023, revealing significant revenue growth and a substantial increase in net income. The company reported revenues of $5.4 million, driving pre-tax income of $2.8 million and net income of $2.1 million. Pure Cycle continues to develop its Sky Ranch Master Planned Community and recognized an increase in lot sale revenue of 270% compared to the same period in 2022. The company also saw over a 300% increase in water and wastewater revenue for the three months ended November 30, 2023, compared to 2022. Pure Cycle's diversified revenue streams and strong market demand position the company well for future growth.
Positive
Revenues of $5.4 million for the three months ended November 30, 2023
Pre-tax income of $2.8 million and net income of $2.1 million
270% increase in lot sale revenue compared to the same period in 2022
Over 300% increase in water and wastewater revenue for the three months ended November 30, 2023, compared to 2022
Strong demand for affordable homes in the Denver market
Working capital of $20.4 million as of November 30, 2023
The reported financial results by Pure Cycle Corporation indicate a substantial increase in net income, from $159,000 in Q1 2023 to $2.1 million in Q1 2024. This growth is particularly noteworthy as it reflects the company's eighteenth consecutive quarter of profitability, which is a strong indicator of financial stability and operational efficiency. The significant rise in lot sale revenue, up by 270% and the over 300% increase in water and wastewater revenue, largely driven by oil and gas water sales, are key contributors to this performance.
From a financial perspective, the improvement in EBITDA from $832,000 to $3.4 million is also remarkable. EBITDA is a widely used profitability metric that excludes the effects of financing and accounting decisions, providing a clearer picture of operational performance. The company's diversified revenue streams and the strategic development of the Sky Ranch Master Planned Community have positioned it well to capitalize on market demand for affordable housing in the Denver area. Additionally, the increase in commercial water sales due to heightened oil and gas drilling operations in the service area enhances the company's revenue prospects.
Investors might view the reported working capital of $20.4 million and cash reserves of $22.0 million as indicators of strong liquidity and financial health. The financial results suggest that Pure Cycle has the resources to continue investing in its growth initiatives and to manage potential market fluctuations.
Examining the market context, the reported increase in demand for affordable housing in the Denver market is a reflection of broader trends in the real estate sector, where entry-level homes are often in short supply. Pure Cycle's focus on this segment through its Sky Ranch development is strategically aligned with market needs. The company's ability to deliver 623 acre-feet of water in a single quarter demonstrates not only the successful expansion of its water resource development but also the increasing demand for such resources in the region.
The significant increase in oil and gas water sales is indicative of the cyclical nature of the energy sector and its current upswing. However, investors should be aware that this segment can be volatile, with revenues heavily influenced by commodity prices and regulatory environments. Pure Cycle's operational summary suggests that they are effectively leveraging this uptick in the energy sector while continuing to diversify their revenue streams to mitigate potential risks associated with any single market segment.
It is also worth noting the company's entry into the single-family rental business, which represents a strategic move to capitalize on the robust demand for rental properties. This diversification could provide a steady stream of long-term recurring revenue, further stabilizing the company's financial position and potentially making it more resilient to market shifts in other segments.
The development progress at the Sky Ranch Master Planned Community is a critical factor in Pure Cycle's business strategy. The completion of 95% of Phase 2A and the anticipation of substantial completion of all 211 Phase 2B lots within the next year suggest an aggressive development timeline that is keeping pace with market demand. This is a positive sign for investors, as it indicates that the company is not only growing its asset base but also actively converting these assets into revenue-generating properties.
The company's management of lot deliveries to match market demand reflects a responsive strategy to market conditions, which is essential in the real estate development industry. The ability to adapt to changing market dynamics can help mitigate risks associated with overproduction or inventory glut. Furthermore, the expectation of exceeding $20.0 million in additional water and wastewater tap fee revenue from Phase 2 of Sky Ranch over the next 3-5 years provides a clear revenue forecast that can be factored into investment considerations.
While the current performance is strong, investors and stakeholders should also consider the long-term sustainability of this growth, especially in the context of the real estate cycle and potential economic headwinds that could impact the housing market.
01/12/2024 - 04:00 PM
DENVER, CO / ACCESSWIRE / January 12, 2024 / Pure Cycle Corporation (NASDAQ Capital Market:PCYO) announced its financial results for the three months ended November 30, 2023. Pure Cycle posted $2.1 million of net income for the three months ended November 30, 2023, which marks our eighteenth consecutive fiscal quarter with positive net income. Pure Cycle continues to develop its Sky Ranch Master Planned Community and for the three months ended November 30, 2023, recognized an increase in lot sale revenue of 270% compared to same period 2022 as a result of multiple on-going Phases of development. We also recognized over a 300% increase in water and wastewater revenue for the three months ended November 30, 2023, compared to 2022, due to an increase in oil and gas water sales.
Q1 2024 Highlights
Revenues of $5.4 million , which drove pre-tax income of $2.8 million ; Net income of $2.1 million ; EBITDA of $3.4 million (see table below for reconciliation of net income to EBITDA); Cash totaled $21.8 million ; For the three months ended November 30, 2023, we delivered 623 acre-feet of water. Net Income to EBITDA Reconciliation
We continue our profitability as shown in the table below:
Three Months Ended (In thousands)
November 30, 2023 November 30, 2022 Net Income
$ 2,065 $ 159 Add back:
Interest expense, net
108 50 Taxes
737 130 Depreciation / amortization
510 493 EBITDA
$ 3,420 $ 832
Fully diluted earnings per share
$ 0.09 $ 0.01
"Our Sky Ranch community continues to demonstrate solid growth with entry level homes and our great location directly off Interstate 70," commented Mr. Harding, CEO of Pure Cycle. "We together with our homebuilder partners continue to balance our lot deliveries to match market demand, and we continue to see strong demand for affordable homes in the Denver market. With lot inventories and existing home sales well below historic levels Sky Ranch continues to out-perform other master planned communities in Denver. Also contributing was a record quarter for O&G water demand with a continued strong outlook for 2024," continued Mr. Harding.
Q1 2024 Financial Summary
Revenue $5.4 million and $1.3 million with $3.3 million and $0.8 million being generated in our water and wastewater resource development segment, $2.0 million and $0.5 million generated by our land development segment, and $0.1 million and less than $0.1 million reported in our single-family rental business.
For the three months ended November 30, 2023, and 2022, we sold 15 and 4 water and wastewater taps for $0.6 million and $0.2 million . We have sold 723 water and wastewater taps at Sky Ranch in Phases 1 and 2A. Based on current prices and engineering estimates, we believe Phase 2 of Sky Ranch will exceed $20.0 million in additional water and wastewater tap fee revenue and cash over the next 3-5 years.
For the three months ended November 30, 2023, we received certain milestone payments from our Lot Delivery Agreement from home builders, which accounted for $2.9 million in milestone payments for Phase 2B. We expect to be substantially complete with the delivery of all 211 Phase 2B lots during calendar 2024. We are approximately 95% completed, with some landscape construction activities to complete in Phase 2A.
As of November 30, 2023, the single-family rental business had 14 homes built and rented in Sky Ranch and 17 additional homes forecasted for construction in Phase 2B. As noted in the prior quarters, due to the overwhelming demand for rental homes at Sky Ranch, we expect to have a total of 91 homes in Phase 2 with the ability to add more than 200 homes as Sky Ranch builds out.
"With our diversified revenue streams, we were well positioned to take advantage of current market conditions to maximize revenue in the first quarter," commented Marc Spezialy, CFO of Pure Cycle. "We are currently developing on multiple Phases within our Sky Ranch Master Planned Community, due to continued strong demand. We also experienced a significant increase in oil and gas drilling operations in our service area resulting in a substantial increase in commercial water sales," concluded Mr. Spezialy.
Working Capital $20.4 million as of November 30, 2023, with $22.0 million of cash and cash equivalents.
Q1 2024 Operational Summary
Water and Wastewater Resource Development
Land Development
Single Family Rentals
Earnings Call Information
Pure Cycle will host a conference call on Tuesday January 16, 2024, at 8:30AM Eastern (6:30AM Mountain) to discuss the financial results and answer questions. Call details are presented below. We will post a detailed slide presentation on our website, which will provide an overview of Pure Cycle and present summary financial results and can be accessed at www.purecyclewater.com .
When: 8:30AM Eastern (6:30AM Mountain) on Tuesday January 16, 2024https://www.webcaster4.com/Webcast/Page/2247/49672
Other Important Information
The table below presents our consolidated results of operations for the three months ended November 30, 2023 and 2022 (unaudited):
Three Months Ended (In thousands, except share information)
November 30, 2023 November 30, 2022 Revenues:
Metered water usage from:
Municipal customers
$ 202 $ 121 Commercial customers
2,132 392 Wastewater treatment fees
86 63 Water and wastewater tap fees
581 150 Lot sales
1,896 513 Project management fees
100 8 Single-family rentals
109 25 Special facility projects and other
280 68 Total revenues
5,386 1,340
Expenses:
Water service operations
553 479 Wastewater service operations
159 138 Land development construction costs
688 143 Project management costs
79 72 Single-family rental costs
57 10 Depletion and depreciation
362 378 Other
146 106 Total cost of revenues
2,044 1,326
General and administrative expenses
1,438 1,388 Depreciation
148 115 Operating (loss) income
1,756 (1,489 )
Other income (expense):
Interest income - related party
724 247 Interest income - Investments
308 228 Oil and gas royalty income, net
34 116 Oil and gas lease income, net
18 19 Other, net
70 1,218 Interest expense, net
(108 ) (50 ) Income from operations before income taxes
2,802 289 Income tax expense
737 130 Net income
$ 2,065 $ 159
Earnings per common share - basic and diluted
Basic
$ 0.09 $ 0.01 Diluted
$ 0.09 $ 0.01 Weighted average common shares outstanding:
Basic
24,078,544 23,985,788 Diluted
24,153,662 24,087,893
The following table presents our consolidated financial position as of November 30, 2023 (unaudited) and August 31, 2023 (audited):
(In thousands, except shares)
November 30, 2023 August 31, 2023 ASSETS:
(unaudited) Current assets:
Cash and cash equivalents
$ 21,784 $ 26,012 Short term investments
167 - Trade accounts receivable, net
4,778 1,092 Land under development
2,164 1,726 Income taxes receivable
- 551 Prepaid expenses and other assets
249 346 Total current assets
29,142 29,727 Restricted cash
2,880 2,475 Investments in water and water systems, net
57,698 57,798 Construction in progress
5,865 5,457 Single-family rental units
5,227 4,490 Land and mineral rights:
Held for development
4,871 4,652 Held for investment purposes
451 451 Other assets
1,234 1,359 Notes receivable - related parties, including accrued interest
Reimbursable public improvements and project management fees
28,270 24,999 Other
1,481 1,451 Operating leases - right of use assets
210 357 Total assets
$ 137,329 $ 133,216
LIABILITIES:
Current liabilities:
Accounts payable
$ 2,783 $ 1,960 Accrued liabilities
1,015 1,761 Accrued liabilities - related parties
906 1,021 Income taxes payable
200 - Deferred lot sale revenues
3,791 1,661 Deferred water sales revenues
50 69 Debt, current portion
34 31 Total current liabilities
8,779 6,503 Debt, less current portion
6,874 6,885 Deferred tax liability, net
1,352 1,352 Lease obligations - operating leases, less current portion
142 242 Total liabilities
17,147 14,982 Commitments and contingencies
SHAREHOLDERS' EQUITY:
Series B preferred shares: par value $0.00 1 per share, 25 million authorized; $432,513)
- - Common shares: par value 1/3 of $.01 per share, 40.0 million authorized;
80 80 Additional paid-in capital
174,770 174,689 Accumulated deficit
(54,668 ) (56,535 ) Total shareholders' equity
120,182 118,234 Total liabilities and shareholders' equity
$ 137,329 $ 133,216
Company Information
Pure Cycle continues to grow and strengthen its operations, grow its balance sheet, and drive recurring revenues. We operate in three distinct business segments, each of which complements the other. At our core, we are an innovative and vertically integrated wholesale water and wastewater service provider. In 2017, we launched our land development segment which develops master planned communities on land we own and to which we provide water and wastewater services. In 2021, we launched our newest line of business, the rental of single-family homes located at Sky Ranch, which provides long-term recurring revenues, furthers our land development operations, and adds more customers to our water resource segment.
Additional information, including our recent press releases and SEC filings, is available at www.purecyclewater.com , or you may contact our President, Mark W. Harding, or our CFO, Marc Spezialy, at 303-292-3456 or info@purecyclewater.com .
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are all statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect or anticipate will or may occur in the future, such as statements about the following: our positioning to continue to grow through this market cycle; the completion and delivery of our rental units; timing of development at Sky Ranch; future tap sales and revenues; future home sales by our home builder customers; the affordability of our products; the strength of the Sky Ranch market; forecasts about our fiscal 2024 sales of water to oil and gas operators; our sales of lots; and our expected financial results. The words "anticipate," "likely," "may," "should," "could," "will," "believe," "estimate," "expect," "plan," "intend" and similar expressions are intended to identify forward-looking statements. Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially. Factors that could cause actual results to differ from projected results include, without limitation: home mortgage interest rates, inflation, and other factors impacting the housing market and home sales; the risk factors discussed in Part I, Item 1A of our most recent Annual Report on Form 10-K for the fiscal year ended August 31, 2023; and those factors discussed from time to time in our press releases, public statement and documents filed or furnished with the U.S. Securities and Exchange Commission. Except as required by law, we disclaim any obligation to update publicly any forward-looking statements, whether because of new information, future events or otherwise.
SOURCE: Pure Cycle Corporation
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What were the revenues for Pure Cycle for the three months ended November 30, 2023?
Pure Cycle reported revenues of $5.4 million for the three months ended November 30, 2023.
What was the net income for Pure Cycle for the three months ended November 30, 2023?
The net income for Pure Cycle for the three months ended November 30, 2023, was $2.1 million.
What was the increase in lot sale revenue for Pure Cycle compared to the same period in 2022?
Pure Cycle recognized an increase in lot sale revenue of 270% compared to the same period in 2022.
What was the increase in water and wastewater revenue for Pure Cycle for the three months ended November 30, 2023, compared to 2022?
There was over a 300% increase in water and wastewater revenue for Pure Cycle for the three months ended November 30, 2023, compared to 2022.
What was the working capital reported by Pure Cycle as of November 30, 2023?
Pure Cycle reported working capital of $20.4 million as of November 30, 2023.
