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PURE CYCLE CORP (PCYO)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 revenue was $11.20M, net income $6.11M, and diluted EPS $0.25; EBITDA was $8.92M, supported by Phase 2C lot deliveries and higher tap fees and royalty income .
  • Year-over-year, Q4 EPS fell to $0.25 from $0.27 and EBITDA decreased to $8.92M from $9.45M, reflecting timing of finished lot deliveries and cost pressures; management emphasized recurring water/wastewater and rental income strength as offsets .
  • Management introduced FY26 guidance ranges: revenue $26–$30M and EPS $0.43–$0.52, with upside tied to Phase 2D/2E timing and industrial water sales; commercial interchange expected to materially expand land development in 2028 .
  • No Wall Street consensus was available via S&P Global for EPS or revenue, so a formal beat/miss determination is not possible; investors should watch oil & gas royalties, tap sales cadence, and Phase 2D delivery milestones as near-term stock catalysts .

What Went Well and What Went Wrong

What Went Well

  • Completed delivery of finished lots in Phase 2C; builders began construction, and utility work progressed with road work for Phase 2D, setting up 2026 deliveries .
  • Diversified earnings mix: recurring water/wastewater and single-family rental revenues provided stability; year-end net income exceeded internal forecast due to stronger oil & gas royalty income from six wells coming online in 2025 .
  • “Our land development business model of delivering finished lots in annual increments…continues to differentiate us,” said CEO Mark Harding, highlighting steady absorption through housing headwinds .

What Went Wrong

  • Housing affordability and market headwinds pushed some lot revenue recognition into FY26, contributing to Q4 YoY EBITDA and EPS declines .
  • Increased cost of revenue driven by tariffs/inflation pressured margins, partly offset by lower G&A and higher royalty tailwind .
  • Industrial water deliveries declined in FY25 versus FY24 (639 acre-feet vs. 1,818 acre-feet) due to reduced drilling activity; management expects stronger demand ahead as permits progress .

Financial Results

Quarterly Performance vs Prior Quarters

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$3.995 $5.140 $11.200
Net Income ($USD Millions)$0.809 $2.256 $6.108
Diluted EPS ($USD)$0.03 $0.09 $0.25
EBITDA ($USD Millions)$1.802 $3.628 $8.920
Gross Profit ($USD Millions)$1.527 $3.257 $7.580

Q4 Year-over-Year Comparison

MetricQ4 2024Q4 2025
Revenue ($USD Millions)$12.560 $11.200
Gross Profit ($USD Millions)$9.774 $7.580
Net Income ($USD Millions)$6.605 $6.108
Diluted EPS ($USD)$0.27 $0.25
EBITDA ($USD Millions)$9.451 $8.920

Segment Breakdown (FY 2025 vs FY 2024)

SegmentFY 2024 ($USD Thousands)FY 2025 ($USD Thousands)YoY Change
Water & Wastewater Activities$7,283 $2,997 -$4,286
Water/Wastewater Tap Fees$3,384 $7,337 +$3,953
Total Water & Wastewater$10,667 $10,334 -$333
Lot Sales$15,998 $13,691 -$2,307
Project Management Fees$707 $781 +$74
Special Facility Projects & Other$894 $785 -$109
Total Land Development$17,599 $15,257 -$2,342
Single-Family Rentals$481 $496 +$15
Total Revenues$28,747 $26,087 -$2,660

KPIs

KPIFY 2024FY 2025
Water Deliveries (acre‑feet)1,818 639
Residential Water/Wastewater Deliveries (acre‑feet)306 347
Taps Sold (#)73 182
Average Tap Price~$38,000 ~$40,000
SFR Homes Built & Rented (Sky Ranch)14 14
SFR Occupancy (Portfolio)n/a~97% (management, call)

Margin Metrics (Reference)

MetricQ2 2025Q3 2025Q4 2025
Gross Margin %38% 63% n/a (gross profit disclosed)
EBITDA Margin %n/an/an/a

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2026n/a$26–$30M New
EPSFY 2026n/a$0.43–$0.52 New
Phase 2D CompletionFY 2026n/aSubstantially complete by FY26 New
Phase 2E CompletionFY 2027n/aExpected complete by FY27 New
SFR UnitsFY 2026n/a5 townhomes added in Q1 FY26; under contract for ~40 units New
Industrial Water SalesFY 2026n/aExpect increase with Lowry Ranch permits and drilling activity New

Earnings Call Themes & Trends

TopicQ2 2025 (Q-2)Q3 2025 (Q-1)Q4 2025 (Current)Trend
Housing Affordability & HeadwindsWinter seasonality; progressing Phase 2C/2D; entry-level positioning Lot sales timing impacted; percent-of-completion drives fluctuations Affordability headwinds; timing pushed revenue into FY26; entry-level focus remains resilient Mixed; managing cadence
Oil & Gas RoyaltiesStrong royalty income YTD; wells completed in 2024 producing Royalty tailwind continues; $1.1M in Q3 EPS beat vs internal forecast on stronger royalties; 6–7 wells online Positive tailwind
Industrial Water SalesDeliveries down YoY due to lower drilling activity Soft deliveries; expect ramp with Lowry Ranch permits Expect significant increase in 2026 as drilling advances Improving outlook
Single-Family Rentals (SFR)14 units; 17 homes under contract in 2B 14 units; steady rent; additional units pacing through FY26 ~97% occupancy; 5 townhomes delivered in Q1 FY26; ~40 more under contract Scaling
Phase 2C/2D Execution2C utility/road work; 2D grading 2C deliveries expected by YE FY25; 2D 29% complete 2C delivered; 2D ~43% complete; FY26 substantial completion Advancing
Cost Inflation/TariffsNoted cost impacts Cost escalation in materials/labor Higher COR due to tariffs/inflation; offset by lower G&A Pressure moderating
Commercial Interchange (2028)Long-term planning Projected step-change in land dev with interchange Permitting near final; bond in 2026, build 2027; 2028 commercialization doubles land rev; commercial lots ~2x resi value Major future catalyst
Land AcquisitionsLiquidity reserved; targeted sandbox Continuing to evaluate Active conversations; prefer assets where PCYO adds water value; Aurora is only meaningful alternative provider Opportunistic

Management Commentary

  • “Our land development business model of delivering finished lots in annual increments…provides a reliable, predictable model for housing…through weaker periods,” said CEO Mark Harding .
  • “FY2025 net income exceeded forecast by ~$0.6M, driven by recurring utilities and higher oil & gas royalties, despite lower land activity,” management presentation noted .
  • CFO Marc Spezialy: “Despite a decrease in lot delivery revenue our earnings growth showcased the strength of our underlying assets from royalty income… and water/wastewater tap sales” .
  • On commercial interchange: permitting close to final; financing via metro district; plan to bond in 2026, construct in 2027, and materially expand commercial lot deliveries in 2028 .

Q&A Highlights

  • Housing affordability: Entry-level positioning supports resiliency; builders continue building with incentive packages; Denver affordability remains challenging, but Sky Ranch price point is competitive .
  • Land acquisitions: Preference for parcels where PCYO adds water utility value; Aurora is the only major alternative provider; unincorporated structure supports lower delivered home costs vs city annexation .
  • Margin mix and EPS: 2025 EPS higher than forecast on near-100% margin royalties; 2026 EPS lower despite revenue growth due to mix vs 2025 royalty strength .
  • Interchange competition: Adjacent developers will share costs pro rata; PCYO timing advantage, reimbursement expected as others come online .

Estimates Context

  • S&P Global consensus coverage for PCYO’s Q4 2025 was not available for EPS or revenue; “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and estimate counts returned no values, preventing a beat/miss assessment. Values retrieved from S&P Global.*
  • Implication: Absent formal consensus, investors should anchor expectations to management’s FY26 ranges and monitor intra-quarter indicators (lot delivery milestones, tap fees, industrial water sales cadence) .

Key Takeaways for Investors

  • Revenue timing remains the primary driver of quarterly volatility; recurring utility and rental income mitigate cycle risk while royalties add upside when drilling activity is strong .
  • Phase 2D execution and Phase 2E entitlements underpin FY26 revenue/EPS ranges; delivery pacing aligned to builder absorption is a central risk management lever .
  • Watch industrial water and royalties: permitting/drilling at Lowry Ranch sets up 2026 volume recovery; this segment’s near-100% incremental margins materially influence EPS mix .
  • Commercial interchange is a 2028 catalyst to more than double land development revenue, with commercial lot values ~2x residential—a multi-year valuation driver .
  • Balance sheet optionality: $21.9M cash and a 6% CAB receivable provide liquidity for development and opportunistic land purchases; continued share repurchases reflect perceived undervaluation .
  • Near term, expect steadier recurring revenue growth and continued tap sales; medium term, commercialization and SFR scaling (to >100 homes) broaden recurring base and support multiple expansion .
* Values retrieved from S&P Global.