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Pure Cycle (PCYO)

Participants
Mark Harding President and Chief Executive Officer
Bill Smith William Smith and Co.
Bill Cunningham Private Investor
Call transcript
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Operator

Good day, ladies and gentlemen. And welcome to the Pure Cycle's Fourth Quarter 2017 Earnings Call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your hosts, President and CEO of Pure Cycle Corporation, Mark Harding. Sir, the floor is yours.

Mark Harding

fiscal very morning I’d welcome to our quarter you a to you thank earnings fourth good XXXX welcome you and you, much, like and extend to presentation. Thank end year all, and

you For the on to over all that the that deck new to able be homepage. to have, presentation get is the website of going have can website, on been on who our you see not that our our we website,

that, open note on that presentation, the If as and click you through up I'll try the slides can of transition the I work presentation.

So looking that slide, our are statements with that then will this Securities incorporated Safe presence facts by historical in that or the Reform contained meaning Noting we XXXX. our Private Act of not by from begin forward Harbor Litigation are favorite reference statement. presentation

do an I'd intro, give new that, you what for So the of like to you those quick with just are overview itself. company who to for a company, of the is

We developed and that along mineral the we bit into revenues, corridor wastewater royalty customers. wells and we customers, where large wholesale the are we gas oil customers different of gamut retail XX generate more of residential provide of then presentation. own to and master services revenue customers land, get and customers, Interstate my oil We mineral and royalty interest, a some industry also number type developed And – a own about from provider. property XXX water and water. wastewater gas providing extending I'll We water royalty to royalty through from We we fully-entitled the to a in revenue – supply detail frac planned, commercial some industrial our are and wholesale estate. own a that amount of water for little acres

portfolio connection wastewater business water the a company. water. we obtain of tap businesses residents next our own types fees, service about And which XX,XXX-acre and feet two of our water taken had our homebuilders. of by a we area fees, commercial Within are XX,XXX large We We utility of and here, So or the are about water through that onetime paid water. worth we upfront are X within own connections homeowners then We portfolio, vertically-integrated from to to. ability which revenues. through fees, typically have water. them provide slide, We usage revenue Slide provide

for then fees at tap per $X,XXX annually, Our tap. sewer our typically into translate tap, currently year. our And are usage connection water a revenues $X,XXX $XX,XXX for per about

very a moving Moving we're X. I bit to to to so talk announced diligence the Ranch morning with that Sky due project. forward slide, our Slide project. homebuilders, we Sky with the have little want We our completed next about be Ranch this excited

Metropolitan We ideally Interstate component really, have miles about south of XXX XX within growth of directly Denver and located, it's on Denver the or east ENB, of acres, area area. which it's is it's Airport largest largest the the downtown, International XX corridor,

to that that at take company, the the out in utility you and we and at connections of built of If water terms of Ranch zoned look side the are play for development be look the this a this itself, will here. project will, land Sky how is, to number planned both we

retail feet of of detached interstate. which types really commercial along and homes, about mix X,XXX will and is be about single-family X.X which a million multifamily homes, going be the frontage homes, square have homes property, to of attached We between the

this revenue, fees that $XXX fee million about then for on you and current combined revenue tap this equivalents. revenue single-family tap million million about year-over-year in have us. based our fee in $X.X and X,XXX So that represents out, represents close about built $XX then tap represents once to And

But the to the The is where the our south Denver next to occurring beginning the close a property. are you the We're to centers this what's introduction is, located about area. of miles in geographically, lot our a of the employees. we the important at of gives to four bit of as a of lot the of probably Moving XX,XXX note slide, located of airport. we directly an right employs airport employment sort area. corridor, really along to have metropolitan this We're proximity in interchange interstate next

two us, for large We should have open employees. very the later And we the Gaylord about miles have about scheduled It's of from hotel employ towards our the and – fulfillment year about employees. just that'll next really which which for our it's a another have is that X,XXX this interchange. new opening which center, Hotel, it's built, is interchange property, is being X,XXX new west Amazon and

going only really, the in not area. lies on point, have interest And of commercial opportunities. some a we of residential high activity of the development of So this focal lot a for really but where concentration

next take good that is of look really, a at the it what slide, we're doing. to what Moving phase you'll this first

will Our interchange. a of bit first phase be the little south

is builders. three to So the depiction highlights a that, right home per that really have area of space, this the that we

particular phase Taylor lots three with builders all this have and how KB project. a their at is concurrently really, first this Richmond, deliver total the break Morrison. of ground. in we'll The about Taking customers number for look lots area. XXX And will working lots have We to

area, the and moving to develop, to going we interstate to it's have trying is to first construction We – wastewater lots going this dark along improvements infrastructure of Slide we're next going which drainage that right will area, and entry There's be we're alignment, Monaghan The which both that what have particular this of really to the is section to we to for water road, that. going come some is be is cost, that and facilities. the Road, X, the It some project. illustrate will will really from number a down make. called going is an this through estimated what brown be green area

Our wastewater area that master development orange facilities be plan have. which entire there, be site located the will in we for that the will

So being first to with build we're actually that lots. concurrently our able

grading, and facilities, storage gutters. overlock water roads, curves Some

So look at first delivery when have will we about this we of about which the million. investment, some XXX $XX lots, be

to work things the will that have of to a flows One note this. is, sort about on cash

progress So this cash us remitting payments we as of complete certain include infrastructure. flows to some will builders'

those begin with and the of are And and lots. to we've we so make those then milestones investments will to plat. installation to really those cash water can some completed be flows able company's cash milestones the finished then distribution So also of then deliver, include able wet we collection to title for plats, finished The flows utilities, we to use have of And be they cash be ultimately, proceeds together which able able delivery the once take and resources the to have deliver when deliver, sewer some to a start of finished and systems. to the deeded finished some systems and then lots. be to to continue

at chickens demand next for area. Moving a this level this now. of we're before got We've got are found of a project the builders first within phase. to high not second we our the lots look We've they counting phase page, in the while taking hatch,

of want some – look the is maintain of to of continue So first We work the focus our some lots second our at, going begin we a to and entitlements our planning for take while to phase. delivery phase. to on we're want design

what that the and going that. illustrating And really detached look Slide parks some be, some illustrates phase is attached school and mix So segments. next of going schematic sites, really of this some a to are particular slide, single-family, to of of this additional in some this two kind opportunities is what like. and is things like This residential another retail, single-family, some commercial, is multifamily, open-space X,

So bit equivalents, was of that more open-space first as many detached, as single-family water, of may where some wastewater our well. and concentration just being single-family, X,XXX first strictly facilities commercial phase drainage had larger phase, as include with this facilities phase, little a the our together phase really and the in

XX, interstate. area the commercial be tremendous this some components, one is right really a the the of isn't here commercial areas by an isn't the so going of component's developers. There's to up some of few along the very Next that slide, commercial that illustration because that opportunity of is large for us – controlled

for provide be of pad to number that a options owning their build-to-suit in that to of product So and their are side the improvements. the on own develop interested developers we and able owning opportunity have

different look types see here. to we of So of lot developments a

multiple groceries, some those also have box type can type some as types light create we opportunities food on employment be capitalize our some of that stores, we'll where industrial to of retail, for opportunities stores, fast really, living well. going users, community on are some Some space residents here,

to a than activity different this more oil that drilled robust We've a three and I gas year. operators. and have Next, wells we talk activity. We're bit about little want oil gas year, had pleased this dozen among

the more area. bit interests leasehold has a in this seen So for competition year little

for So we area, have continues in separate each to operators these of water usage three this wells expand.

is barrels to that that these about to type we water that has back particular well, a that about for per are a they the And million being actually, I month some improvements million record for water of well per for single using. deliveries going XXX,XXX will to new to stimulation which how a to a demand XX nearly this well, million dating is frac XXXX, optimizing about per gallons then see What grew drilling, lot be million well. made to design in well five the technology XX was of So with do or the gallons gallons operators of think XX grew were well. And are gallons occurring. for that

these for guidance and different some and their the even of and going opportunity process bit that XXXX. of in for year-end, have tremendous a we're still occurring think that And operators as setting Mostly, good see us so that have us at forward pretty are demands, to operators it's been for very lot more a various carrying well. has that the maybe a XXXX. for to their we how increased budgets good into But I least of interesting and water amongst see you of amount activity certainly,

on delighted to a next So and attractive for And to soon get you XX, square we with a us. be number area, little bit as of they be of the this in now. different gas up with can There's of the formations a we'd with per really in why. that very miles kind oil operators number about as illustrates that. that But that more opportunity we different XXX get dynamics square slide, a been of guidance leased share access that, continues have mile, possible

frac of we So are with on of our water of exceeding each of stimulation end amount the now experimenting the because new the are water deliveries deliveries operators their top designs. that in range

acquisitions. one to highlight the to slide, of want next our on Moving I recent

So our we've of our of almost had that's a going full acquisition, expectations. Wild Pointe expectations, exceeding for ahead year our operations

revenues, usage we in XXX,XXX in about XXXX collected So XXX,XXX tap fees. about and fees

company's So operate looking Pointe, it's that had continue to have we similar provide for we and acquisition, us ahead modeling are criterias we value. to can good the opportunities, to bit little opportunities our a we enhanced be. nets nice acquisition of system, where other and meet it out Wild system and good estimated for Very a maintain, return for what to

be opportunity is might them as these that to as provider combine of bringing we're leverage our where well, be well. with their water resources, to new an opportunities supply not Some water system then them only a existing will able significant be an to short, us opportunity making together to improvements for which and water looking water but for

Moving the talk want project. I bit WISE slide, our next little to on a to about

the we our have completed deliveries. to So system, and water WISE interconnect are taking

where years, the to take water be defer and and then have to also exchange project, into really, assets monetize investments investment, ability able over our we able able additional and supply last water to project to deliveries the not to deliveries this and water water WISE being to had that begins And So had to that customers. initiation to year made providers we're the that that additional transfer are to the partners capital deliveries, capitalize only for water facilities we our deliver deliver of the on be that among our to water three of various customers. water within the but some and able would otherwise have that for expand

Moving highlights the on just really to for Slide some year. income XX, of of the

$X.X of is various can year you fiscal kind million, areas. that highlight and the So into about

water frac, pretty couple municipal of of for about and have because really a we you're to that's number since little going $XXX,XXX see some the revenues, our year-end. wells, We Talking a in fiscal only water of fracked wells revenue that revenues. so QX robust bit about our

We revenues illustrated water for have wholesale and services. year-over-year our wastewater

a about up We're very to then number, connections have showing, the acquisition. we at in some revenue, and the primary a as attributable on also to of XXXX beginning the Pointe increase – in also blank side, and first Oil of which gas we're not Sky customers. And the royalties. that's relates a Wild see a of royalties. to tap is development for So fee for tap apologize, number years, have other we but for it fee expect Pointe, I XX% our revenue that attributable to our I Ranch other there time Wild some and

put to a was there's income website, those that I couple doing for be primarily and some that that slide. didn't royalties range. a operator And XXXX $XXX,XXX the update balance in the that so XXXX, deliveries. that $XXX,XXX about there apologize royalties but slight of periodic mixed, the then no, decrease slide, maintenance – down, the We and attributable we months from going was our on are there. can't our that's We'll to statement. think it's those wells the on had sheet wells incorrect are taking our the – back I have I

can all balance a the at So in income statement you disseminate detailed level. sheet the more

on really of it's that exciting for do we Certainly, see and made. facilities can't and look wastewater if So what that and on an really, forward community the lots construction serve to us, Ranch progress Sky I'd up questions, starting water development deliver some project, some the I and floor to like to is beginning additional open being color for it bring to year and to our provide to been able we've well. as as and

some see turn with back to up So going to that, operator the to questions. we open it over if can it I'm and

Operator

open Thank state from you. Ladies Instructions] Bill now for gentlemen, and from Smith Sir, our please questions. your [Operator the question. Smith Co. floor comes question William is first And and

Bill Smith

all on accomplishments there, Thank they very are you, Mark, congratulations your of good.

Mark Harding

Thanks, Bill.

Bill Smith

about Ranch builders How on or on area? bit Sky selling in a terms Lowry, say, like looks your, like Slide little some Horton monthly same a in talk it other yearly I you was and on or Can demand what a, of they’re think the the surrounding that basis basis, X X. on of many homes

Mark Harding

question. a great That’s

that numbers areas. the some they’ve very some well and slide Richmond, that kind I that And neighboring have penetration, of in some outline kind so, of give really give given the doing of on on you X, because Slide a us, there broad to is of illustrates and I community. anecdotal they that you guess, can – been

close doing XX to that month area. to they’ve a in I XX been homes that something think

that stuff is seasonal. of be Some to going

penetration they more continue submarket. deliver to bit this April through to that well out going can to from of but a very run to they inventory October timeframe, maybe, start over of they’ve So the lots we which are they see bode lots, there, They’re demand seen. little I some when for accustomed to is so particular think starting what

in not broken I to They lots availability, have submarkets have number sure this There total points. the Metropolitan part where what in ground be So to area. that homebuilder a fastest-growing it as but that’s of going have, one couple have that think to I in worth area. years’ price seems some be inventory think activity this of they think lots the is lot Sidonia that the we they a I well. existing in with of that have, and another just think excited they’re lot I we area, But other in the has do I’m the occurring that’s area the of

so County, a to the of City the we’re of able not being will product prices the that excited then hopefully, structure sized builders activity, bit because about and Arrapo of be in of I type which think higher delivery very jurisdictions terms in ours, particular lots just of be themselves. the cost in Aurora, of of do point City price some the than Aurora compared similar to lots but competitive for only delivered being are home these our little developing

Bill Smith

Right.

for so homes? largest have of And XXX – are first the this partners they the you the three participant in that Richmond,

Mark Harding

Yes, lots. Taylor KB balance think Morrison have of XXX to the fairly then and lots. closely I yes. split remaining They about close And the

Bill Smith

And the remind again, Great. me the do to to And be? you just think the lots? is what going price of what’s price

Mark Harding

we are on It about depending footage varies can some average, the lots of on a XX some feet, the lots the front $XX,XXX So lot, of frontage of of feet. at size model the of – the out XX lot, this a are lot.

are some depending of the individual the on $XX,XXX, lot. between So and $XX,XXX size

Bill Smith

And Okay. one just other thing.

Aurora possible reservoir update on the the discussions sale On your Reservoir, on any to the Aurora? there of

Mark Harding

for others. some a to Range. has It’s have where not. City that additional Lowry that, opportunities on do interest the expressed we’re do to assets we monetize as have No, looking transaction

us, we participate, outright, with what on of interest that seeing it, combination sell either number for of to any structures. it of are just jointly So like and working look might for number and it different that, a that sell expressed or groups develop have opportunities

Bill Smith

acquisitions for then, does possible pipeline what the Wild And Right. Pointe, like acquisitions? other other like look

Mark Harding

to talking maybe I as XX in we’re water a that less X,XXX area, kind right of groups Metropolitan the as different three have and probably different XX% XX many oftentimes, serve I really, providers we the now. there to of them think, – connections. than are subset, reference there There’s So

small are small small owned, or be owned that these or So either fractionated, just districts even utilities municipally all by water small are continue to developers. world a still

And of so looking those we’re that targets are for. the kind

small so other areas acquisition Point system. are and systems Wilde where corridor us more opportunity the have And the resources water districts. influence see well, to than as kind concentrate resources in they’re and areas, we these of there’s expertise then surrounding some of operating for that an us the to our to leverage to We of some some and to attractive on additional want if bring I-XX

too have but we out to we nets about those, get can’t – detailed opportunities. are So for certainly do our

Bill Smith

Mark. Thanks, Okay.

Mark Harding

got You it.

Operator

Thank you. Cunningham And Investor]. state please your our next from [Private Bill question comes question. Sir,

Bill Cunningham

Hi, Mark. Congratulations on great getting done. That’s news. due the diligence

Mark Harding

Thanks, Yes. Bill.

Bill Cunningham

is, has do expect I with with to any second accounting have construction? will One the there this, you work be when two And physical to on to the see start questions. quarter those actually home Or this there the that due reported, to any will revenue deposits that along be down further or lines now done? you’ve going diligence be line? the anything Are got happening? is do

Mark Harding

will first, like terms let – in one I and diligence, due second things of me that. the deposits so take

So deposits. yes, additional there diligence are

funds into happened. builders then certain two is, just put the have funds close then happens the for what the we escrow, diligence at which so placing have those and additional period, they’re things So And responsible up of agreement. the had signing completed,

platted seen those Then going that lots. we components once So now to we the deliver are be next funds have deposited. are

deliveries a the include XX, And we of before so lot the platted XX lot lot another physical platted days infrastructure. the maybe be and deliveries it complete really, should

lines every every So lot, every your to platted have easement, lot fence, every before you’ve can every all sidewalk, you defined. get park, got a road,

individual engineering can into And you final the of and ton all has get the city comments. lots, parcels so open parks been goes of you common areas, of and amount drainage of information been going there’s imagine, those back the then compiling, a reviewing space that when and together and have the with on And that’s that our delivery plats. engineers forth and and the tremendous XXX a

where at XX-day take look period And finished maybe have so, we’ll a that basis. let’s on XX- in that that, lots to

doing been that the need period at drainage this During that profile, taking and of also improvements earthwork. the grading profile, some the made things a one the to we’ve is look of of time, the be

to challenging the what And is, lot we that a Colorado. like of do have in when done you over in weather conditions we so particular to earthwork winter, market like here have do being this

thought So still the that some of work can winter. done be

be we hope that couple gotten through improvements a after and and get county were then our comments plan, back, permit. we’ve grading the more with processed to drainage cleared the our grading So a plan we can

weather And January that be those we so case, on we for spring to in making in to delivering time sometime initial be in ground summer, can working and us lots – frame, or then hope rolling breaking the homebuilders. XXX-lot seasons start better February pad available the the Colorado, this to the the if we into that’s finished spaces be here the then work can so on that into lots and

Bill Cunningham

Okay. or And as will far of does deposits, deposit services? as on that go as strictly as for count any revenue the collecting future a books

Mark Harding

we would at or to the only will money it released actually, is – time milestone such that as of deliveries. only book us Yes, one that

Bill Cunningham

have actually, parcel Is Okay. for do question noticed or for commercial actually where Depot. one you. that? I just one something Depot labeled on the Home have with property, example, And an Home you you that there’s more

Mark Harding

that’s of operator, that box the real quite realtor the to out. – type Didn’t Yes, box get clearly illustrative to to operator. – our be store retail as

Bill Cunningham

Okay.

good. Thanks very Okay, very much.

Mark Harding

at time. there You to be bet. appear [Operator questions this Operator And further no Instructions]

Mark Harding

Okay.

be down Conference Sky want LD look this and do Los water this providing couple in what be Micro do Certainly, for opportunities and on oil for headed us, December in Dallas our to continued X, of Couple and we’re Angeles. I our so presenting we’ll our Dallas then a IDEAS partners the again, that Ranch, conference tomorrow, afternoon, has you confidence thank is all at we continued and I’m been that for forward have successes conferences only exciting at. we’ll in that this. very presenting your gas at for then it announcements. at to So to not to adding in from of doing. year the a actually

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those L.A. we that for So a questions in the little and before opportunities Dallas, please and or have you detail us. progressing bit hello, yourselves by how say answer you find stop in you see of we’re and can’t I’d give and to love have we any more if about might

bid will I that, you for your continued very farewell, all with and support. much thank So you

Operator

teleconference. thank for your Thank you today’s does you. conclude We This participation.

have disconnect time, may lines your day. You a great and at this