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Pure Cycle (PCYO)

Participants
Mark Harding President and CEO
Kevin McNeill Chief Financial Officer
Bill Miller Shareholder
Call transcript
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Operator

Greetings. Welcome to the Pure Cycle Corporation Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mark Harding, President and CEO of Pure Cycle. you. Thank

begin. may You

Mark Harding

I quarter to earnings Hilary. to you our third call. would you, welcome like all Thank

For those landing of deck will jump join on accompany you conference -- that have our the I And access, slide website. this deck on have a presentation. the through page, that can to you live you that can

to along progress the click that just the if go and that'll So then page, you flow to landing purecyclewater.com kind allow presentation. you conference with and in of on join

As usual, overview. is be you all I by you're forward-looking new our will kind be I'll the contained not with slide which are states you our but are and a about sure do revenues try the incorporated is we statement, first historical overview cursory familiar that to of provide from. many Safe doing company, with that kind who of you and reference or I'll are those generate we're presentation familiar I'm Harbor know in give forward-looking where this statements brief of what also a of are statements. that statements. of it I'll facts for a company, that. to What

We kind our utilities. that have are unique segments of three business all underpinned on

Colorado, of so a rights of in water water only portfolio company. here we're area DNA own a level, We water Denver is And a at asset. where development and wastewater a resource the unique metropolitan

property water You several with rights asset. can own

connection. based on connections, our If equivalency you connections we can and a reference portfolio, serve we single-family our XX,XXX at look take the about

development and about as are where full in developer we the corridor a rental light well metropolitan we're and spaces. master also more a and contracting will developed only to where able one as the most home arena, our addition but area, that others Denver the segment water in In and on acres in be residential plan we attractive value in commercial with product developing wastewater about the bit activities, of a plan And retail X,XXX are inventory and master I-XX corridors have and we of the little talk the will development we've land we industrial and more leverage that. of actually the equity not some that then maintain also actually build I the single-family side. have recently water into land to to

tremendous So to It about bit website. I a we'll our information. well. as new has more amount that a little talk of of highlight want kind

formatted come our some you're activity. there. contains to able links layers our some us where it update it all the If information of give because activity, a of development and very multimedia to you of different on amount of We certainly new some website, we're and drill current tremendous of of back and the the kind visit some benefit of has video podcasts on down

updates to time on also -- wealth a more company, are familiar get the company those are for it's with that only a the new real that of So not but basis. to those information more act

be to to that able thrilled we're So to you all. present

Let's segment. our talk bit Water little a about Utility

supply. that treat we return reclamation our surface We goes reuse and who to our deliver customers system collect have facility that of that that distribution and through develop we as have they wastewater, that and use run own go water to into mentioned, I us of to wastewater; we water our water we complete then to that, with diversion grave that water water we facilities; and water wells really portfolio the it cradle As a water, we that. rights, the we

as supply that using reusing for industrial our that water We're customers. extinction. as for through well its we're reusing demands supply water and outdoor So irrigation

we we grown of And the Those at fee, opportunity we to for kind are two years. We're bit on this. One-time have what collect resource. over will connection something it. the connection. $XX,XXX fee currently a math which about fees. instruments our per this give that So have of tap precious very you the -- reuse We to refer as little

basis. delivers monthly take the the money then margin a have line to If business. it's your you of our infrastructure that use $X brick-and-mortar water customers XX,XXX that look wastewater and connections a to a on about a all that's the with XX% and We really, revenue half top all at that of billion customer delivers and build about

And of customers. per that's XX% about year-over-year build so another And to to business about margin that's maintain business. a million $XX high-quality connections, operate water connection do make about that us. $X,XXX that year. out At and our We and per of sure the that customers, water continuing deliver we're information bit generates assets, reclamation serving the on water XX,XXX the our to and about and about some of that we're I in a growth and wells then take little facilities. connections. themselves A X,XXX rights look metrics kind we utility close our If customer of at pipe the for have

as area continue Sky we And this kind Ranch of customers down just have of growth at at of the look community of each month we our to the organically and connections, that mentioned what at of Ranch kind Sky XX,XXX I we Taking itself we as have grow to as of up other have then a really assets bulk Wild our what some we X,XXX well So earlier, from shows connections. have. service the Pointe. capacity in

our assets. continue grow We to

If million Wild organically then Ranch at growth the through And of kind XX.X each in QX, just you growing about years up our assets. look water our from and revenue Pointe we're Sky take projects. net those at a and

as development as lots, lots. well detached density some well can single-family product Moving that a that'll residential full XXX X,XXX multifamily we for paired a you range segment, some townhome product as about There'll duplexes, have as be product our mix on higher land us. of where to accommodate and acres of be have

become very So one of Sky plan category master affordable proud the of customers Ranch. the a the out of -- most and have communities Ranch, growing of points Denver one the It we're in fastest we of affordable, for market. price Sky

and working So that to to homebuilder affordable with our happy deliver continue really theme product. customers we're a high-quality housing

also the ideal interstate. We an location have along

that accommodates So development some that. commercial for

on located directly And X south about basis, you up So million then about we another typical of that if that's we're of have X,XXX airport. the a space just connections. feet commercial just of industrial retail square of kind out where convert And there. kind

XXX first gives little of metric got residents We've Just about an We fees. delivered typically you on, some of we've kind the are kind bullet -- phase. points XXX on progress area. out those at than And our XXX more This building there. connection delivered permit that of out phase.

that We've out each about XX really builders it's another as the left, well company our home lots both individual be nearly got sold out. homes So almost yet there. of It as standpoint probably XX or are to sold out exceeded expectations from there.

on X So about they schedule are ahead lots. all those finished delivering years of

collect we out from there. revenues, our about we receive, a the lot more on in public addition revenues lot to have improvements that. revenues. we the $XX.X from million received to still that We, addition revenue we get to create the fee bit And we In that

assessed -- that's there. out are million, the of local have $XX.X bit from of to We by higher XX about X, $XX those we the municipality gotten that million of value due also reimbursables. to and to that reimbursed so filing. then have other $XX future able development about million back, record the a Phase And additional $XX had to little us community acceleration of but the million We've the mills been

deliver homebuilder working Taking Phase really a on very X. in look kind of at of well additional that lots four this phases. XXX broke that all year our in So we're partners. that with of We we subsequent executing and February ground and enjoyed our will

If finished quadrant you themselves up delivering of of nicely out main terms look thoroughfare first kind that. streets of grading of quadrant in these, this but of at very about there, the sort the we're XXX lots, kind they of

all So done. work is of dirt our

have delivering can hope systems year. their And storm home winter We the so utility each and our year, of in and up crews that. water through sewer that continue get be to next with model kind this then working of that they of for the lots on later water, the some the builders to homes there season associated construction selling

of If in And that. that fees. of to $XX you that utility fees that is the million $XX.X of about the again, then lots million about tap reimbursables. take then in XXX all about another a look million, $XX.X And get generate $XX.X we'll was million in water here, at estimated

we're the $XX.X currently lot at. Sky kind for fee those shows drill that the more the our on in specifically terms that reimbursable Let's We really net up it a Ranch. of and getting, million, we here about of of where invested and numbers bit between million, million carved tap we're kind on in $XX.X one. filing also gross about the showing $XX.X sales of are And we reimbursables just which kind And that of the includes experiences little revenue. you down

have we there. still of filing take reimbursables the you in $XX show to metrics again, then net about look that. on that And we a net that, So million at on two the receive

municipality. kind financing how And also it But metric remaining capped remaining on be so and of the of the and on build we the project. the the timing will of forecast out of those lots X,XXX local reimbursables balance the dependent a out

tremendous for So opportunity us.

of this think in we to certain segment a Talk an our of customers. good a about single understanding why good We rental for success segment inventory And homebuilder hold family finished new business. with the have going ultimately, little actually have, of locks the and we're of lots very where we delivery bit that's kind infrastructure. that this

take appreciation market at general, you in a there's look houses. housing of the If a tremendous

time, average home of are these but Sky for probably $XXX,XXX, nearly close Ranch over we've that the got on was increase started XX% Colorado, out around come to project $XXX,XXX the we've in a of had prices single-family to metrics moving really of per home $XXX,XXX period home. kind what some which from So

growth rates. very on weeks growth close from weeks can to May inventory. about of to see get annual homes. inventory competitiveness demand. to supply from moving from of inventory rate come market, kind does of it's to We're kind competitive you of the then meeting We're seeing weeks 'XX of X% And significant the So there. The year-over-year, just not And these May X even 'XX. X the just

market the segment. market housing in starter segment, in our the still robust, So particularly home very market

Denver certainly to able deliver that be can place one until they a that about to and so if to community interested a in, rental rent be things a where find we situated to come find is buy like yet, to a can not we they single-family can home of families they very And that very they're are good nice market the just where buy.

kind So some ourselves master in are where plan of the metrics about of with the we other these metro area. communities positioned

to And in ability that a we location, approved access so think that deliver ideal construction year, with charter this year. the will the delivery next to school under was amenities, we be this for so school transportation, year, our new later that year have

of So single-family throughout open a of the at space, this of some a run schools, rental. community. we'll the have neighborhood Taking trails network parks, whole and look that numbers

would able average accrue type very are we're take month mortgage. it's a And money We money, tight income lending not you but forecasting then about about from institution. a mortgage X.XX our this if on a can't access have It's per $X,XXX to inexpensive at mortgage, mortgage unit. money. get at look Companies to to us, of how a rental

do have also renters that, service not And of we generate only a on so cost that. we our but debt margin covering the on

income it So both our then the sheet does of kind really the balance well it accelerate becomes as accretive recurrable as income. to and statement,

this and in of per us connection, just really cash $XX,XXX instead flow. $XX,XXX flow $XX,XXX total in add, home, cash So that $X,XXX another does per per -- generating free year, maybe

bit equity the that recession a and great really to to looking on land cost the of we'll appreciation of great that. the capitalize forward it's What metrics that. being we're we're that for that So, is Little from community of of carry at collecting vertical value able the on height the creating. us at finance more opportunity some

about $XXX,XXX, how this look us, have finance market So of for of cap, the where assumption that's typical kind a going home. of of $XXX,XXX is value market we'll to cost a of or

of And we that we're asset, at to so each $XXX,XXX estimating on X% year appreciation even X.XX. are that maybe and that X% financing then $XXX,XXX

market the on the going on got vertical cost it. of asset natural a incremental we've So with the appreciation together the arbitrage value of of added

construction. units we've you gives got kind of view So this of under that our a three

For available three Phase X, we lots. did have

have So have September, September, we're there way timeframe. well these those and renters completing completed by to units in in to on hope our October we and

little lots So our to more that to bit for that account. about for a gas. we've be lot out second on will A build hold a to as to look have our them, we in portfolio. and inventory XX looking they're building of more helps and they're that community our touch $XX that $XX products got this then engage homes a and oil. can are Certainly phase build can will will the on contiguous door block And interspersed than partner bit oil the within typical those reserved that few those oil with the of block, of we're little model us continue BTR we a they that and add where they homes -- units next homebuilder homes

do we operators drilling in field. that So the have are

one bit south that's awful a in very bring a rig of these contiguous new -- for our be be is short service an deliver area we've operator little will then a we that rig that kind second wells of So be lot timeframe. they'll This continuously, will area, will operators a field an of portion a where drilling and some which in to water of the got exploring.

the annual a $XXX,XXX amount fracking the are the for and we're about and we water that seeing technology. of creep terms to an generate progression of we of well of using kind technology they're of in because just of enhancements So Currently, field. seeing water, kind per

increase opposed per year to wells pad this we're as from X So wells two seeing per next one XX and being may XX per site year X it site. to anywhere and site, or pad wells that pad

opportunity in our this. an be for to for us. maintain incremental ability continues It's very service that So to terms of

when So, we have a that weakens. enjoy lot that don't when costs fixed but they're there, of

And watch strengthen. continues that oil market progresses years so over how continue to the to as that the and see

we'll of have presentation metrics. were our our X here. in error traditional be find we to had just financial in one going, numbers. very had for just those So our XXth an hour each months our more individual But summery our We of at spreadsheets presentation a kind reimbursables did of to redo so ended, how on hoped we the on

what And the numbers so you'll later out see the those of coming And I'll end presentation. this towards then week slide update week. is do I'll this sometime

ended. So you for got general, But that X $XX about months can have. see in we've those revenue in traditional we the million metrics

up Our income about gross and were million. to margins about net $X $XX million

that to was the So that that and we one the recognize our of areas Phase the the we able had revenue, so were key opportunity reimbursement from add of QX. X, in

here through in of look fee. from metrics We're X. these lot almost Phase $XX.X We the a have some tap you take -- about in if revenues about at million

for left And a the fees got top up currently about us. reimbursables then management million those the to get on more delivered us $XX we've few of a $XX.X the to already of And the will of at that project So then $XX.X we've fee million in improvements. reimbursables reimbursables, $XX.X million get we're and about we got million. tap public

that, that that leadership, and strong you little actual but the they company. about filing very relevant that Board, then summary Board want talk later look this week. kind bit to -- So just of the of to then very, have disciplines Q to overview bring of the gives very a the so And our Directors of for a

So commercial land and then strong financial in just expertise investor law, water development, we've the got relations, development, general. management, shareholder in

more continue their the stewardship. metrics, out. to So bit get then on because to we the stock we're And rely little a word continuing continued about

year-over-year. I post to think quarter-over-quarter, see continuing people our results we that are

in terms only helping price, in significantly, also that's but So not of volume.

to to liquidity the like provide marketplace. to we So continue

So those with prepared my remarks. are that,

down see a questions provide it color. over can some to that and drill turn little moderator me Let I have if our and we

Operator

Mark. your Shareholder. [Operator Thank question from question. Bill Miller, first And you, state Instructions] Please our is

Bill Miller

hi. Mark,

Mark Harding

Hi, Bill.

Bill Miller

news, far land X year by at? next for most I be for seems your hear you're your percentage get Like to you good wondering the that to where to profitable but Because and the for rentals next land have. going the business all get wondering rentals? view, And where about you're to make wonder your I'm apartment a playing going big to how and your you're it house

Mark Harding

mentioned tremendous question. for it's that think I've because We And I as out us a It's we a available. additional have have, acquisitions. of surrounds nets great land That's our ideally consolidated. previously, land is do that we do kind amount of positioned, have

with You're here. not assemblages XX dealing acre

land lot a of have be looking that's that. around a of our of section, or would half We us, opportunities. we're larger that's that even kind section, a for where And really assemblages

a bit else, the lot more they anybody and the actually the of we're darn and to water water We us do because that know table. bringing of they that we the high. than them. bit pretty owners we be than it's are to are also Not say I a analytic more hot we our we're a to to table, And bringing think to But sure acquisitions, of the a want we as is to these market pay have make in what red want expectations works water try overly for the little that well ability as cognizant property benefit little to -- it in truth want have.

value on for market is specific company that. of kind I and about of the value other in create in some we the on going and of that leverage And after I that are equity of some in But a single-family this kind will mind. segments, very that's To really and BTRs doing true that do that the where some us the utilities, big the we're focusing question that rental opportunities lot patient segment. very does provide There's of your we a the companies that the on land right. So targets there. say we're mean, little have both companies.

in actually Home this, If able mortgage have any there the going or them, about in capitalize than that for don't that buying America just the it of of margins Rents you're they're and really inexpensive market, or managed metric portfolios really other talking any are BlackRock on to after the money. being

And so, to do the being the have able land in addition we to on us water. value and that, that the we equity have

us I that gives out we doing water, tremendous gives if and know but that a us weren't So a doing land don't actually the value. compelling it that we be would boy, opportunity. certainly there the

Bill Miller

revenue? recurring So will of years, your business X that the biggest that be in part

Mark Harding

dividends We'll certainly it. give see. the big of Certainly of a think the wait that recurring way can flex revenue segment as compelling projects stock us revenue, redeploy potential, doesn't how of the like component to of such the worth if will that some we you're cash the but to well. that will utility understand some I still the large market us a because be and for component land of residual water have have decades like of into, it's flex that to growth that is some we generates of model a value think into lot that flows the quite going what that things I BTR

Bill Miller

forward to I look Great. it.

Mark Harding

for you. support. continued Thank Thanks your

Operator

this no it questions we [Operator appears have Instructions] at Mark, time. more

now turn will remarks. back closing call over you the for to So I

Mark Harding

You bet.

bet. You

information of of technology out results. for were have a And question, metrics give presentation. to queue extent of with brevity a that the the you details do of that do the standpoint financial to segments, a to you'll later. So the able in kind the there We from each that I on apologize see some you then, ask not quarter-over-quarter the

sure I certainly questions analytics model don't we you have coming keep set so that do on We have to detail, Investor to of So have me information of call. a make you continue your trend to up. lot Day the to leads up that that presentation. want a And us of if give I'll quarterly as kind can you've that. got can so refresh know we that hesitate do rolling for some that it that for, you I an

Investor a So the RSVPs we have nice for very Day.

that reusing horizontals. an reimbursables to XXX% me the factors pricing that into the of because having horizontal recycling tour with then, where welcome So lots reclamation synergies come and the kind to tires. addition of and from joining of time sinks you very highlight And use real it going only our to terms in not of we're reuse -- that a you but gives kind Phase that X, of in water and it so supply, really together of and portfolio then very some our some come of ability a be synergies, of opportunity the see gives these for out of those valuable of water how kind us all in unit to how we week us are proud give kick kind I to next utilities portfolio. infrastructure opportunity coordinates you our that And and see this overall And the the we're of in. it feel does all facility our of and

reach So find you give out through and you we I'd traveling you those not welcome love and and to a yourself certainly Investor if of give holler. me an the Day, it's a area tour.

I again out will speaking and soon. look all forward close that to you that, with with So

Operator

today's concludes This conference.

at lines your time. great disconnect may a Thank have and this day. for your you You participation