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PURE CYCLE CORP (PCYO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $5.14M, down 32% year over year (Q3 2024: $7.60M) as lot sales timing shifted into Q4; gross margin was 63%, and diluted EPS was $0.09 .
  • Net income was $2.26M, supported by $1.14M in oil & gas royalty income and strong water/wastewater tap fees; operating income was $1.33M as mix favored high-margin items .
  • Management reiterated FY25 guidance (Revenue ~$30.85M, Gross Profit ~$23.74M, EPS ~$0.52, Net Income ~$12.54M), with Phase 2C lot deliveries by fiscal year-end; guidance effectively maintained versus Q2 .
  • Catalysts: substantial Phase 2C deliveries in Q4, continued royalty flow from 2024 wells, and permitting catch-up enabling acceleration of single-family rentals (SFR) in FY26 .

What Went Well and What Went Wrong

What Went Well

  • Strong high-margin items: water/wastewater tap fees of $1.70M and oil & gas royalty income of $1.14M in Q3, supporting EPS despite lower land revenues .
  • Management positioning and cost discipline: Q3 gross margin of 63% and EBITDA of $3.63M; CFO and CEO highlighted “just-in-time” finished lot delivery model as a differentiator for national builders in volatile markets .
  • Balance sheet strength: cash & equivalents at $14.39M; working capital of $18.1M, providing flexibility for Q4 deliveries and opportunistic capital allocation (including share repurchases) .

What Went Wrong

  • Land development revenue fell to $2.53M from $4.80M YoY, primarily due to timing of finished lot deliveries (largely shifting to Q4 as Phase 2C completes) .
  • Water deliveries dropped to 76 acre-feet from 394 YoY, reflecting lower non-recurring industrial sales to oil & gas operations; management notes this variability is expected and residential utility growth should offset over time .
  • Operating expense pressure: General & administrative expenses rose to $1.80M from $1.65M YoY; permitting changes in Arapahoe County slowed SFR ramp until masters were approved, pushing more rental unit growth into FY26 .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD)$7,604,000 $3,995,000 $5,140,000
Gross Profit ($USD)$4,866,000 $1,527,000 $3,257,000
Operating Income ($USD)$3,068,000 $(1,327,000) $1,334,000
Net Income ($USD)$2,825,000 $809,000 $2,256,000
Diluted EPS ($USD)$0.12 $0.03 $0.09
Gross Margin %64.0% 38.2% (derived from )63.4%
EBIT Margin %40.3% (3,068/7,604) (33.2%) ((1,327)/3,995) 26.0% (1,334/5,140)
Net Income Margin %37.2% (2,825/7,604) 20.3% (809/3,995) 43.9% (2,256/5,140)
EBITDA ($USD)$4,522,000 $1,802,000 $3,628,000

Segment and revenue mix

Revenue Component ($USD)Q3 2024Q3 2025
Municipal water usage$145,000 $148,000
Commercial water usage$1,432,000 $149,000
Wastewater treatment fees$85,000 $102,000
Water & wastewater tap fees$581,000 $1,700,000
Lot sales$4,795,000 $2,526,000
Project management fees$221,000 $138,000
Single-family rentals$123,000 $131,000
Special facility projects & other$222,000 $246,000
Total Revenues$7,604,000 $5,140,000

Key performance indicators (KPIs)

KPIQ3 2024Q3 2025
Water deliveries (acre-feet)394 76
Taps sold (water/wastewater)20 40
Oil & gas royalty income ($USD)$392,000 $1,140,000
Cash & cash equivalents ($USD)—$14,392,000
Working capital ($USD)—$18,100,000
Diluted shares outstanding24,143,039 24,143,534

Versus estimates

  • Wall Street consensus EPS and revenue estimates were unavailable for PCYO; S&P Global data returned actuals only for Q3 2025 and FY 2025, indicating limited analyst coverage (values retrieved from S&P Global).*

Guidance Changes

MetricPeriodPrevious Guidance (Q2)Current Guidance (Q3)Change
RevenueFY 2025~$30.85M ~$30.85M Maintained
Gross ProfitFY 2025~$23.74M ~$23.74M Maintained
Net IncomeFY 2025~$12.55M ~$12.54M Maintained (rounding)
EPSFY 2025~$0.52 ~$0.52 Maintained
Phase 2C finished lotsFY 2025By fiscal year-end By fiscal year-end Maintained
SFR ramp timelineFY 2026Moderate additions Larger ramp post permitting approvals Clarified timing
Dividend policyOngoingUnder board evaluation; “sooner rather than later” contingent on recurring revenue coverage Same Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Nov FY start)Q2 2025 (Winter quarter)Q3 2025 (Spring quarter)Trend
Entry-level price point & finished-lot modelEmphasized as core advantage; strong builder absorption Reinforced with 3 subphases under construction; seasonality noted Reiterated; segmentation supports sales in volatile macro Consistent positive
Oil & gas royaltiesBig upside from six new wells; royalties spiked Strong royalty income continued Quarterly royalty income $1.14M Sustained benefit
Industrial water sales to O&GForecast softer FY25; stronger 2026–2030 with ~180–200 wells Permitting year; normalized in FY26 Softer deliveries YoY; strategy intact Temporary dip, medium-term uptrend
I‑70 interchange & commercial build-outPlanning underway Permit submission; potential clearance by year-end; bonds in late 2025/early 2026 Final permitting stages; timing anchored to rooftops and interchange Progressing
SFR execution & permittingPortfolio framework and bank relationships 17 units contracted; permitting delays slowed starts Masters approval catching up; bigger ramp in FY26 Improving setup
Lowry Ranch service areaStrategic water position; long runway O&G permitting focused there Development encroachment around service area highlighted Increasing strategic relevance
Capital allocation & buybacksProgrammatic repurchases Continued but balanced with growth opportunities Ongoing; lighter in Q3 to preserve cash for operations Opportunistic, disciplined

Management Commentary

  • “We believe that with market volatility and weakening consumer confidence, our strong balance sheet, significant cash liquidity, entry level market segmentation and our just in time delivery of finished lots to our homebuilder partners continues to differentiate us...” — Mark Harding, CEO .
  • “Our earnings continue to showcase the strength and diversity of our portfolio of assets through royalty income and our water and wastewater infrastructure with high margins in water and wastewater tap sales.” — Marc Spezialy, CFO .
  • “Tap fees are very strong this year... and should return to normal industrial levels in 2026.” — CEO, Q3 call .
  • “Permitting changes extended SFR timelines; with masters now approved, we expect acceleration into FY26.” — CEO, Q3 call .

Q&A Highlights

  • Reservoirs and WISE network: Management noted long-range reservoir and shared infrastructure opportunities within South Metro WISE partnerships to support full build-out capability (~60,000 SFEs) .
  • Water rights permitting: Box Elder Creek new water right efforts ongoing after initial setback; negotiations underway with counterparties for a workable exchange structure .
  • Dividend policy: Board continues to monitor recurring revenue coverage, targeting dividend consideration “sooner rather than later” as utility/SFR bases scale .
  • Q2 (context): Detailed discussion on I‑70 interchange timeline (permit clearance targeted by year-end; construction in 2026) and prioritization of land acquisitions over water given ample water inventory .

Estimates Context

  • S&P Global consensus for EPS, revenue, and target price was unavailable for PCYO, consistent with limited analyst coverage; tool returned actuals for Q3 2025 and FY 2025 only (values retrieved from S&P Global).*

Key Takeaways for Investors

  • Mix shift supports margins: Despite lower land revenue timing, high-margin tap fees and royalties produced 63% gross margin and $0.09 diluted EPS in Q3 .
  • Q4 delivery setup: Phase 2C completion and closings are slated by fiscal year-end, positioning for stronger Q4 revenue recognition .
  • Medium-term utility growth: Residential utility accounts and tap fees continue to expand, while industrial water sales should normalize in FY26 as Lowry permitting translates into drilling activity .
  • SFR acceleration in FY26: Permitting masters now largely resolved; expect more rental units to enter construction/lease-up cycles, enhancing recurring cash flow .
  • Strategic optionality: Strong liquidity ($14.39M cash) and working capital ($18.1M) enable both execution of current phases and opportunistic land acquisition strategy .
  • Guidance intact: FY25 guidance maintained across revenue, gross profit, EPS, and net income; Phase 2C delivery commitment reiterated .
  • Watch catalysts: Interchange permit progress and initial commercial steps (tied to rooftops) can unlock monetization of high-value land assets near I‑70 .