PURE CYCLE CORP (PCYO)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered total revenue of $4.00M (+25% YoY) and diluted EPS of $0.03 (vs $0.00 YoY), driven by $2.1M in water/wastewater tap fees and $1.9M in oil & gas royalty income .
• Gross profit was $1.53M with a 38% gross margin; EBITDA rose to $1.80M (vs $0.78M YoY), underscoring resilient profitability in a seasonally slow winter quarter .
• Management maintained FY2025 guidance for EPS ($0.52) and net income ($12.55M), while revenue guidance was effectively unchanged (Q1: ~$30.98M vs Q2: ~$30.85M); Phase 2 tap fee outlook was raised to “> $20M” (from ~$18M) .
• Near-term catalysts: Phase 2C finished lot deliveries by fiscal year-end 2025, accelerated Phase 2D timeline (calendar 2025), and CDOT 1601 interchange permit targeted by year-end with bond financing EOY 2025/early 2026 .

What Went Well and What Went Wrong

What Went Well

• “We have a record number of lots under construction and have made substantial progress through the winter months towards delivering these lots” — CEO Mark Harding (seasonal resilience; sustained lot activity) .
• Tap fee momentum: 52 taps sold ($2.1M) vs 0 taps in prior-year Q2; YTD taps 90 ($3.6M) vs 15 ($0.6M) in the prior-year period .
• Portfolio diversification: $1.9M in oil & gas royalty income and strong water/wastewater infrastructure margins supported profitability in a seasonally slow quarter, per CFO commentary .

What Went Wrong

• Water deliveries fell to 64 AF (vs 404 AF YoY) due to lower sales to oil & gas operations (variable, non-recurring), partially offset by higher tap sales .
• Operating income was a loss of $(1.33)M for the quarter, reflecting higher G&A and development cost timing, although net income remained positive ($0.81M) on other income streams .
• Land development lot sales were $1.14M (vs $1.22M YoY), impacted by cost-to-complete changes and simultaneous multi-phase construction; management reiterated timing-driven fluctuation .

Financial Results

Values marked with an asterisk were retrieved from S&P Global and consensus was unavailable for PCYO this quarter.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO (seasonality and progress): “Second quarter is a seasonally slow quarter due to our Colorado winters... we have a record number of lots under construction and have made substantial progress through the winter months” — Mark Harding .
• CFO (portfolio strength): “Our earnings showcased the strength of our oil and gas royalty portfolio... and the strength of our water and wastewater infrastructure through our tap sales” — Marc Spezialy .
• CEO (interchange timeline): “We’re about ready to submit the 1601 to CDOT... forecasting clearance on a permit for construction by the end of this year; bonds end of this year/first part of 2026” — Mark Harding .
• CEO (strategic focus): “We’re longer on the water side than the land side and really want to be more aggressive on the land side” — Mark Harding .

Q&A Highlights

• Interchange pathway: Permit (CDOT 1601) submission imminent; expected clearance by YE 2025; financing via bonds planned EOY 2025/early 2026; no disruption due to existing interchange .
• Demand & pricing: Entry-level price point remains a key advantage; buyers acclimated to current rate environment; strong spec building by partners observed .
• Land vs. water priority: Land acquisitions prioritized over water (company has capacity for ~60,000 connections), to leverage water inventory .
• SFR timing: Strong rental demand; timing gap due to permitting/code changes; 17 homes in Phase 2B to begin construction with backlog to follow .
• Community assets: High school groundbreaking planned later this year; K-9 bridge and eventual K-12 capacity (~1,700 students) support long-term absorption .

Estimates Context

• Wall Street consensus (S&P Global) for PCYO was unavailable for Q2 2025; no consensus EPS or revenue estimates were provided.*
• Actuals: Revenue $4.00M and diluted EPS $0.03. Expect sell-side models (where applicable) to adjust for tap fee timing, increased royalty income, and higher G&A tied to multi-phase development .

*Values retrieved from S&P Global.

Key Takeaways for Investors

• Tap fee momentum and royalty income are offsetting seasonality; expect stronger revenue cadence into spring/summer as construction normalizes and Phase 2C lot deliveries approach .
• Guidance intact for FY2025 EPS and net income; Phase 2 tap fee outlook raised to >$20M over ~3 years, improving cash generation visibility .
• Interchange progress (CDOT 1601) provides a tangible catalyst for commercial monetization and traffic capacity, supporting future absorption and margins .
• Land acquisition priority underscores a strategy to leverage ample water inventory (capacity ~60,000 connections) — potential upside as market opportunities emerge .
• Watch O&G variability: near-term water deliveries to O&G can pressure quarterly revenue, but high-margin royalties and tap fees support earnings resilience .
• Balance sheet strength (working capital ~$19.8M; cash ~$16.8M) and ongoing buybacks create optionality for both development pacing and opportunistic acquisitions .
• Trading lens: Near-term catalysts include Phase 2C completion by fiscal YE 2025 and interchange permit milestones; timing-related surprises (taps/lot deliveries) can drive quarter-to-quarter volatility and headlines .