• Q4 Revenue: $12.5 million, driven by Phase 2D lot deliveries.
• Annual Revenue: $28.7 million, a record year.
• Gross Profit: Approximately $20 million with nearly 70% gross margin.
• Net Income: $11.6 million, equating to $0.48 per share.
• Water Utility Revenue: Over $5.5 million, with a 21% CAGR in utility customers.
• Single-Family Rental Revenue: Annual revenue reaching $500,000 with 14 units completed.
• Cash and Note Receivables: Nearly $57 million, indicating strong liquidity.
• Lot Sales Revenue: Total lot sales to date close to $80 million.
• Phase 2D Lot Pricing: Approximately $125,000 per lot, showing a 50% increase from Phase 1.

• Warning! GuruFocus has detected 7 Warning Signs with PCYO.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pure Cycle Corp (NASDAQ:PCYO) reported record fourth quarter results, generating $12.5 million in Q4, driven by the delivery of Phase 2D lots.
• The company achieved a record annual revenue of $28.7 million and a gross profit of $20 million, with a gross margin close to 70%.
• Net income for the year was $11.6 million, translating to $0.48 per share, showcasing strong financial performance.
• The water utility segment had a record year, with significant contributions from oil and gas opportunities, and a 21% growth rate in utility customers.
• Pure Cycle Corp (NASDAQ:PCYO) continues to expand its single-family rental segment, with plans to grow from 14 to 100 homes, demonstrating strong margins and recurring revenue potential.

Negative Points

• Despite strong financial performance, the company's share price has not reflected its underlying progress, indicating a potential disconnect with market perception.
• There is a concern about the increase in shares outstanding despite the company's stock repurchase program, raising questions about its effectiveness.
• The company faces challenges in attracting large water customers like datacenters, despite having significant water capacity.
• Interest rates have risen significantly, which could impact the carrying costs for land and potentially affect future land acquisitions or developments.
• The company is still only utilizing 5% of its utility assets, indicating underutilization of its existing resources.

Q & A Highlights

Q: One of the growing water consumers are datacenters. Have you had any interest from them, and could a datacenter operate on non-potable water? A: We have reached out to datacenter operators, highlighting our significant water capacity. While we haven't had much traction yet, water is a key consideration for datacenters. We are open to exploring these opportunities, but currently, our industrial customers, like oil and gas, are our primary large water consumers.

Q: Despite announcing a share repurchase program, the number of shares outstanding has increased. Can you explain this? A: We are committed to the share repurchase program and believe our stock is undervalued. However, we balance this with maintaining liquidity for strategic acquisitions and capital-intensive projects at Sky Ranch. We aim to be more aggressive with repurchases while ensuring we can capitalize on acquisition opportunities.

Q: Are there any plans to develop datacenters or solar farms on your land, given your water and land resources? A: We have considered these opportunities, especially given our water and land resources. While we are not looking to develop datacenters ourselves, we are open to partnerships that could leverage our resources. Our land and water assets are well-suited for such developments.

Q: How does the current interest rate environment affect your land acquisition strategy? A: Higher interest rates increase the carrying costs for landowners, which may motivate them to sell. We maintain liquidity to act on strategic acquisitions quickly, as demonstrated by our recent farm acquisition. We aim to be a ready and disciplined buyer.

Q: What is the outlook for commercial development at Sky Ranch, and how does the interchange redevelopment fit into this? A: The interchange redevelopment will enhance commercial value. We currently have about 700 residents, and commercial development typically follows once we reach around 1,500 residents. We are confident that commercial development will progress in the next three to five years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.