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Pure Cycle (PCYO)

Participants
Mark Harding President and CEO
Dirk Lashnits Vice President, Land Development
Kevin McNeill CFO
Elliot Knight Knight Advisors
Bill Cunningham Private Investor
Geoffrey Scott Scott Asset Management
Tucker Andersen Above All Advisors
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Pure Cycle Corporation Second Quarter 2022 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mark Harding, President and CEO. Sir, the floor is yours.

Mark Harding

Thank you. morning. Good to year to XXXX like of second you fiscal our earnings welcome I’d our all quarter And call. website. We this do our presentation, to which you have can find a deck on

on actually through able of if you you on in to the voices you call as front So, all a view to and things could some presentation, a there tell today there join -- voice icon the folks will bench to within that. got that folks We’ve slides will and my -- make that me company. very to is here a some walk to that that go purecyclewater.com lot, says page Investors right today deep click like direct call on but you the with the page, bring the earnings you little in the an in be hear of talented the happen. kind I’d you I’ll organization so other bit whole. the and join, if what the tangible With do more give very a to

of the activities be a our Lashnits. tremendous amount President development update major part development partners experience activities, got some land the over some in you’ll homebuilders, are he’s Ranch. And direct as so, Land Development And experience Sky of hearing land on of Vice the of Dirk from to of activities, XX them with years of

to new provide the the on rental CFO, land who of company. water of the single-family those you it. giving hearing he’ll an overview of kind You’ll What do update a to business be are -- give the our of you from for and results and just aspects McNeill, is development of be and company, high-level also I’d like Kevin financial you

really accomplishments how and of color give that highlights company are For on with assets familiar the really the legacy company, significant generate areas tremendous those of to our really as you to these who and some the you performing starting value. shareholder are more is some

will our first slide, the that, hopefully. presentation, start move with So I to

Okay.

So, our read room. the the out get slide, lawyers of I’ll to this first

statement facts, our or harbor incorporated that are presentation not this this So, that forward-looking referenced in is statements statements. safe contained historical or are

I think you all statements. familiar forward-looking are with

in So kind segments. we of business operate with really three that,

This ever more our We’re water land take for we this two than value in portfolio. in have And been. XXX true tremendous you segments, acres acres it has assets our when a land remaining XXX then assets, about out started in with that reporting business investments really about originally are and at but today be portfolio these of land. We look could stakeholders, have of not in housing. and assets also driving

into the actually back we reuse water rights water water market have water delivering home assets recently, include to tremendous And that entered to water-short water single-family develop supply. more that our and a that assets deliver our We continue amount of water in that from are then treat, that transmit, that a to collect we’ve includes area. customers, rental and treat It to homebuilders. we lots on that customers, developing

streams. portfolio, lots value also so that those We are to to asset can and year our to revenue there keeping deliver we able on income we some get and continue rental on these grow of continue our that homes for ourselves multiple grow how being maintain

appreciate to more here of there’s is scarcity we a for let me on them have model a been that, little acquiring having particularly bit continued as We to opposed were business And water about value. segment. that, that. that talk a real in the increase out function of much that early held of We’ve short west. our assets. own attention lot water much developing selling region, water with in value buying these value our in XX water -- So, a they and And we’re of something, to than utility years, with

irrigating So combined what a capital wastewater called that tap the is or all we large a get Those on fees, They different that which that through are distribution system. are state-of-the-art They’re do water the that the using taking They reclamation reuse cradle-to-grave we treat We fee. water in takes approach, for that. demand. the get We it connection two fee tap back supply We a house. facility, $XX,XXX. for water treatment, and outside We water a develop and supply. get that fee then collection fees irrigation that about through for wells, the use house. a Customers it. to instruments customer. water we it the upfront fee water a are use a

and distributing demand purposes. So, irrigation also for our industrial within back -- to that for we’ve our gas water got I’m out and irrigation or distribution oil not, we’re dual community set that’s where sorry, systems water

continue value. to grow So, our assets in

into that infrastructure. investing We’re

to our have their pipeline, ability to facilities year generate assets be to network add make Customer and expanding And where the water pipeline service that grow. ongoing to capabilities to and going water community water of water continues to we investments, just both, facilities, and service customers revenues. to value finished that’s growth sure transmission treatment We’re the to reclamation whole raw water each wells, service storage, to and value whether this wastewater of that’s add continues our Company. a facilities, our storage storage

within that outside customers both, service as area. as have area growing we our So, our well are service

and area. at the later area. to we’ll about service to on at edge the X,XXX bit well connections our metropolitan that continues opportunities then the that’s our both our monthly, have as as And Wild about through connections, Denver service a talk close grow XXX service on the Lowry large Pointe little very that getting Ranch Ranch the really about some of areas we are So, connections, Sky

other customers. to on Moving

to shale which play, the addition has side improvements sales water domestic of is and grow. hit have very Colorado provide water continuing do our doing record to water deposit year in oil interest the for gas users, deliveries our oil to seen business, we And has in oil for this favorable this gas concerns. and So, industrial a us year.

$XX continue asset. in we’re likely remains excited gas meet to oil So, that $XX with a certainly range, for continue trend concerns very develop continuing as -- and demand, that to And to to strong to enhances prices. positive the that oil oil opportunity the upper see

the area little a talk service large bit Let’s about we that have.

And a Company asset one is we contiguous in to attractive area, have property very the which public is is this next that system. an XX,XXX-acre the for in service trust that’s things the the of education One of largest owned area state of to urbanized country. parcels

a manages a So, that of -- it’s property. -- shot the We’ve the got where fiduciary service itself public where K-XX for assets an This really gives owned three really Colorado. grown state as of you our by has to borders to which public positions education area is Denver Colorado Board, roughly their State illustration Land the growth in the really of out three kind service the of that metropolitan area.

Land is property. property. The attractive what of like State do with would they it’s reviewing to So, a Board parcel very the

how what take multigenerational not at have taking their and also also assets space and look a generates for over of a can income a look time, but and it manage very how that system. multifaceted, I think mindset how for then the it, open public at only have and generate revenue for it consistent they opportunities education recreation might they

very a growth. as the piece highly is attractive see, well property, and positioned you can it So, future of for economic

I’ll and an Dirk the on He’ll advance I So, over I’d ahead give update that, the think floor go to land. with turn you like slide. to Lashnits.

Dirk Lashnits

for decades. been Stapleton. We the market Colorado I’m Good [Ph] of as Sky here in Cycle have on Highlands considered Lashnits, Range, been last Front of worked morning, site since in of And may about of for around, XXX-acre projects area. doing Ranch a Land Ranch mentioned, development couple Pure large pretty onset And lot I’ve the the heard the Development. Vice or as of Sky a you the is big five at overall development Ranch. everyone. years, President Mark I’ve the at Dirk here I’m

So, of the the acres of Ranch, development, really of is vertical X,XXX this slide back, tying here, our Sky developing kind integration XXX of residential on assets. lots our kind water

customers. We’re new developing our water

parcel that the equates located commercial the of has saw to to SFE previous And slide, about the the Ranch. of available. roughly, water, of east-west town. Sky the metro saw So, frontage you corridor, those that great the through right. X,XXX lot of a basically house. in XX,XXX also on And SFEs out about on X so side assets, X And it large SFEs I-XX an on how and about would XX,XXX Sky major our this average feet then, a has also Ranch project XX-minute water translates All equals Denver, is the drive -- of thoroughfare we our area. acre east usage be some

all on XXX of of So, screen first is the sold is off, them. We’ve picture XXX lots. transferred our This phase.

tenants those those retained our Morrison X are are rented and screen on best completed we’re were that’s for out, sold X then the builder Richmond. lot. we’ve and here, and XXX completing have of been And lots have fourth process our segment. Taylor in have We shown then, that of to are of KB, and and doing partners the build-to-rent

water They’re And of water. couple houses. taps. sold here are in So, next months. Those XXX the phase occupied of our we should taps. be And bought using our They built our XXX out XXX of this we customers. current

year million to our on We’ve offering books numbers, future for those or are project ago. these in in in. includes deal. we’ve come terms management revenues $XX.X The that on from done $XX.X of a was the received That us favorable a million That reimbursables. bond two taxes of receivables, fees. also pretty got costs those put Some

District, the screen, public to-date. to District. drone the of footage to used of west for $XX.X reimbursable slipped That’s that’s video, million our fees million a previous. back Cycle So, of The our functions the builders. which lots out. the as the But the our Water kind site to sale of infrastructure then is build the screen, that build are little $XX.X bottom Pure has Metro lot from moneys that project is that the reimbursable. rest working ties project of as manager Rangeview here to at east the in revenue the in the This also through from our And to tap

for a You end the this to phase. that foundations of see houses built. lot last corner street. That’s on the our That’s the street Richmond it area. the be to some right moves as that last covered of there, along is And BTR there,

rentals our So, that four second go We’ll phase. will the on be to this in neighborhood.

lots. phase previously. the So, we XXX first of the lots XXX is roughly mentioned out This X,XXX of phase

all of And then are this different builders, segments X, lines So, this the on Home. we Horton, new X represents that’s Lennar colors see from four those a partner. colors map. from carryover can KB Those builders, DR Each different -- one product the builder and and Phase have we introducing you other Challenger.

four subdivided quadrants. The into different second phase is

The is of phases in highlighted sub there. first yellow one those

So, construction, area in currently that’s that’s the there. lots XXX under

expecting of model We’ve to spring. homes. over start of construction We’re deliver this lots a actually those those to turned the few

started starting were some in site we’re then you’d see from you sub on and If KB model the have Homes drive the home today, streets this phase. vertical install three other foundations, to and to builders out

into we’ll been last Right have screen. There’s working installed. of this. and click drone bottom some streets footage our of switched screen again, here, new that go the kind from on So, from

screen, is On the the our that site. bottom of school

amenity and community going We neighborhood. turn is coming the future into in have be here center charter a a center school recreation and to this -- quarter the for and then

construction in underway there. So,

commercial. properties would million see. map And top out numbers school where were this as $XX second infrastructure is the continue there commercial million the a to and in just develop in that on lot bring line. will up has you That north, and is then there. of then to site for X is, of rooftops our million parcel line on of in development tap The be million this total then Let’s costs the come $XX start foot the that to sales, fees shown. square that’s reimbursable if it And district phase the cost public phase, more through the on million, of $XX couple page, $XX.X

I over think to I’m to it to the now going get turn Kevin numbers. into

Kevin McNeill

Thanks, Dirk.

of couple CFO, for a So, yes, Kevin McNeill, been years back have now.

these are how complete means of that the way milestone and roads slide we wet payments, here right along builders we certain get of as the Sky phases all the under that’s Ranch and up shows like So, paid which with Three utilities, contracts have develop. things, streets the we that.

really summarizes in phases. what the So, this four doing we’re

second four breakdown in As revenue noted, the distinct a of in those this lot at broken the that they revenue, how and phase may phases really time. phases We Dirk by we’re a tap through. one them revenue, the separate market. up four is here and But -- the into shows coming reimbursable developing roll overlap

phase second nicely. The is progressing

done in XX% about phase. We’re first this sub

And of what will XXX where which, current down stuff, is lots keeping complete to sold the this slide. in were show as single-family like we total, slide do pieces said XXX at these on last next was in the those about sub we’re I our as they now, noted, take they phase, for in homebuilders, division. XX So rental Dirk

So, then they takes one wet which complete, which take be milestone coming which the up are which and builders the that lots, And Horton payments. -- the fourth DR utilities. third builder, is is finished finished will will lots builder, under the be three are then two lots. platted takedowns first is And which

They buy because it, obviously for a pay stage. payments. did one have they’ll premium to their all more that development time. So, lots at we make risk don’t milestone a the during little They take

in building got phase, you we can front-loaded bottom we products standard, what types what really lot a graph this paired the homes. just And the builders different at those are the we because and then different the lot are so have and more the summarized the slide, all homes detached than see got and townhomes homes

a this So summary gives the of what builders good there. you different out are hopefully building

Mark Harding

we we cover single-family the it one we’re value I value a the horizontal creating on a was talk are we, look options bit this back rental one land took that work. and of bit, some assets the as to little market. of have. little add developer, doing what is And the for us how a we to to And by of the might that take continue at a about the in community things can

overall lot that And a and curbs, the the gutters, then lot of parks, at doing the trails, to adding to what really We’re looking that’s amenities landscaping, amenitizing a streets, but the also the of there. the is we’re product. value out it

grow of the things we one so, we well build continue was opportunity value as that as thought an as that for that us to And asset the continue to potential. value, is there the to income

that entering fact us. took a that look compelling homes market. big dynamics starting by can the rental so land where of into value well. because of the water entered well very the single-family to they’re like of equity market. we’re just have integrate get vertically have lot carrying players those are as so, we they And that we as looking really, build and They’re And lots well the as it we at on a it this as in there. forward for market There’s a buy that then itself They’re the the that out utilities. But lot to buying

are this And a out. single-family on so, company how in parcel the asked it, lot market we a bringing home that I has that a that the and we’re familiar we how market, you the we’re lot can on when tremendous have business. of value new accelerate building know with

cost really so gotten customers, with we are that into on to that be what vertical itself rate development but and all and returns financing company we’ve curves delivering pays also the of what for have to for that so that our the then gutters roads, trying -- we’re of full fully that that. that looking We’re we’re go very able of to at attractive for using XXX% investment the to each do and we’re homebuilder retaining the what out horizontal we’re of pace phase we

the value just a we’re market that to the first end see mortgage because market. tremendous within out the going we in in to leverage And we about two top equity them able already We seeing up, to of vertical. that the have. rented money oftentimes, the value of We’re incremental that homes ourselves be loan using XX% cost weeks at put three the on

also have we because of we that’s So, to that. renting And site, only have certainly on to areas are there an demand bought there advantage that have to able a they’re that whether have tremendous just the rental a the for development because folks outside help private some for those. We also maintain of we out homes efficient that we think in the don’t are able There’s of markets. lot and helpful landscaping folks privately community. construction maintaining homes us be with they’re in that team the properties capable on very activity, have

not that So, segment. forma. making of opportunity segment we homes the on look time, growing about while a how we’re about the and sure keeping math rental three it we’re at really same that We that have Taking us. overextending -- right some like presents on our first ourselves, are up that for and we like pro this, generates that that at the capitalizing

for average getting We’re on each of about three $X,XXX the homes.

expense the $XX,XXX a that, almost $XX,XXX in about annual interest taxes And revenue generating of some us and gives So, look then on us. that that. at when service the $XX,XXX, that’s debt margin on the on to sort of you operations take and a

but market, free this a X% flow also and the asset appreciation we’re that. of seeing the or in X% home to So about get only cash value we’re not overall appreciating, generating

Kind phases. X first out about is great for this an illustration opportunity of excited rolling for monetizing to Very They how this efficient and it’s all us. a very building were right together, of So, those. us.

we’re We’re -- but contracting, contracting not those. we’re actually building actually well, not

have a these on us, tremendous that we’re job for the and able Valeant, to we So in [ph] and three, did get called on group first built budget these time up partner they really homebuilder a -- three.

bit have them it, we next of -- how be you We -- of call our And kind can for of our efficient gives those. a did of this out about you there homes of the the XX, contract and are this little under so and We how costs ahead delivering them are. with gives we cost some side, and financing kind of landscaping working view do on to that our that have our $XXX,XXX. we’re a go had fourth about what on capitalized team for of in a exterior value appraisal the these market view but

in them the mid-XXXs. testament of really we So appreciation that’s the kind whole. the a see of of as the value out a community to And

going continue to turn we be for financial to this to Kevin. ended. excited details back I’m So, a He’ll months segment. about bit about little six performance this talk very the the over the on

Kevin McNeill

right. Mark. Thanks, All

stuff, the numbers. fun for Now the

X years to the metrics So, same everybody operating the with looks where income just four months and we’re at, XXXX, we’re net that the an -- just at show X of top ended X idea of you the prior operating looking for periods, revenue, give obviously, trending. XX, the graphs And of February compared income. is what

in we phase. and homes really of lots second the the look and first quarter If where that’s the of revenue, started XXXX, obviously, most at the selling XXXX, taps you the

why that there. big jump that’s in So,

Sky about revenues the Last decline. were If same a year you this think years started that last -- looks had they and the slight it that we getting collectible Metro look last over were before. weren’t in recognized like growing. last some there’s at We prior management they didn’t determined until based recognized year, $X.X that project at But just on million year year, collectible. management time from District project recorded we year, Ranch the quarter-over-quarter, the fees we

about was million. $X.X that So,

board. which talk last revenue, over We had just X or management bit come that that of a factor right I’ll million little quarter is further because on slightly by numbers. project increased down million, if actually fee. has really the Operating $X last slide. remained year’s So, mark. a which This out terms consistent tremendous you in $X impacted year a around about by of water was income year that Again, Phase

year, and going amazing same it last one. that increased And it -- did looks on net the something So, an were was they tax like we big about it public were $XX has is but then think really couldn’t year public flexible way as didn’t is in houses Last we the management for had basis million we and reimbursables we when income test what job again, last that, this project year, is the fees. they’re thing next values the improvements or prove we a and -- until flexible year recognized were up. growing,

so, were we to million year of last able $XX improvements. And about recognize public

year out that shows a fact. factor a of year and as again, So It matter growth, of this slight consistent. last is pretty

and a were assets. bottom, three of on. the of reporting grow continues wastewater that more at segments Water terms Looking little in detail the to we

We have grown.

just the which a business. general -- for investment out in consistent. demand typo, XXX to that, about remained point margins is XXX some at thing and during to that point -- this prices and to obviously of that the for showed a and which was operators is oil and our lot second from plus and slides of Ranch water One continuing is gross in about water a gas this Land area. that, will rights so that Dirk process, year, their go, with the systems chunk we I that spoke gallons in oil in service great obviously, development, a just I’ll deliver drilling testament and gas not Sky and the million did increase One quarter. our not water out Big some is go, XX% continues earlier

pay as under all X into the move continuing non-cancelable we soon. Mark We’re and for are on all they X second the talked that progress rented, slot got hope one-year are our the all fairly and terms very rentals, about, next happy. seem monthly. Single-family phase They to development

the fourth foundation being constructed, constructed We the now, have one is done.

probably that next come at as same -- We line one XXXX. expect on the October, next November about they to time did, year of

top just our of fiscal So next show, completed the X sort slide year. is last

you So, Again, year we’re project a with fees spend time the on year-over-year. I being at won’t last where impact had that shows It and recognized. tremendous much management improvement them. to P&L public

where at the our where is and priorities a really Looking capital time this bottom, spend of focus, is five this the and for years. we next allocation, lot we’re to looking at our year

and operating to you business if adds our on rentals, manner. them, cohesive the at water, water land try look development and the those continue segments, executing continue We well. obviously, in development all So, and adds standalone, water as the X to them operate a land, to land single-family the of focus don’t to wastewater single-family on those,

questions So, about fairly growth, we The there’s see all other. consistently one those always then this. which over growing next each with

a last couple segments this of happened and And remain in any we or the deals new return. it for and any focused to seeking shareholder future have water or priority on be of then, We our three. land all it It’s obviously, or to don’t of water deals, other, doesn’t do we as the We land the years. can constantly add three. We’re deals. year the can high one --

helps job on who’s water reporting. really company, we’re and think big a We ESG what then, do some get focused our how us could use help we One We on could at we but do identify an hired of help report which that it. what doing focusing to with we’re some going how environmental this we of revenue, we with things on return. rentals social doing. of And and standpoints the shareholder the an kind as tremendous better single-family year, we a from reporting obviously ESG feel we and is on specialist recurring

be that focus year. will So, a this

the Looking at balance consolidated sheet.

obviously after -- we market close. last this, night out that XX-Q Form filed went So our

as website as it well access able our you’ll the So, on SEC.

I lot more a was spend night So, went a won’t that There press time. of some release with last details.

land build cash of has see family, we pay infrastructure, is $XX we which us Metro pay District that the million as $X majority a Sky the to obviously Ranch will million, back. it, can from You Obviously, dropped development. for

have the in two So, we do receivables, term current. long and

year we had tax We that current to made public current are Continuing when from recovered funding $XX.X expecting our next will But tax Big help dropped tax was $X.X get assets in that the we you to some back. months can chunk that some million -- see our down, liabilities the pay some of revenues will when the and guess, was a from some recognition We income few of million. tax payments -- in. get I X the well, negative, obviously, bill of improvement nice some that. last that paid be bonding payments.

call million, is is you lot project, usage based that have the in that did which if -- tremendous see stock cash. grant we water do $X can necessarily for then, metered we exercised year months The we of grow, a some not that that, the method next three where in productive. revenue Annual I about have pretty was through, our the see can up options water continues think when you the at three with the bigger to statement, away January obviously, we million runs down you year, can I the which amount that commercial lot through reimbursement. so see management quarters one current sales ended beyond frac Board column of our the pointed increased, And you XXXX, complete down in the $X.X Directors can you sold, the about revenue our fee $XX income. customer is that of some and items, to we of look out get the net which last section, But see -- project of the is and that So, at We did million normal where Shareholders on as percentage along Meeting. what equity completion in income have recognize that we that’s

So, obviously about we that there’s can questions that later. answer and

You share Really, because this million last -- but well the can per see around obviously. year, our $X.XX two $X.XX, trending impact earnings for bottom. per that again, completed somewhat we it’s share. it $XX share, are of per consistent earnings the in quarters on fairly looks at the wonky, months And we’re a of had three that pretty big year

slide. Next

Bart doing the and other resigned from involved you’ll I business So, don’t those Directors. know for for was water this off to Board in long-term few notice and things, traveling, are shareholders, think. and who want doesn’t with He’s our he about Obviously, more is he entirely. us leadership XX one Epker why retired been Board I but years, has replaced. of a years, name the stay

Abel year shareholders. he by the long-term our elected a been number and So, tremendous a Obviously, us to join for asset. Wanda we was agreed Board. She’s a of to legal was January. added counsel this in years She graciously

months and throughout -- or long well. So, the showing obviously, with the stock how the some tenure last the has the and look we few as to us chart, year welcome Wanda or Stock so. volume her forward last of performed

up wraps for will to to that think back answers. and I open it over up turn and it we then Kate our so, And presentation questions

Mark Harding

me Before let I accent of do that, Kate, a me couple of let kind and things. really close

you to times, that accumulated this? want is also because assets, that the are customers years going sticky say, we’re most which income at a when rental. to be the doing take of how water, stock, sticky kind inflationary the land, can and to bills execution really you base? with And you are have it mean, here. well you assets. one good would have water to the at this And because of a look one I hard seeing get often as of generate One things is that asset you somebody company probably going continued they these legacy How this see to you And we’ve positioned of in is of is play ago. it’s a are they assets water, really assets. and hard sure that new make and to this you’re performance then times, of asset number single-family very you to the thing we continue things that pay your get And that look can

segments. those each got so, of like we segments. each growth We’ve those in And tremendous of

we’re as so, are talking to to deliver continuing be the this together with is things And we’ve we’re was one year with of last that our reimbursables pleased what performance. that bit homeowners some start to about activities. recoverability of how recognition able And shareholder we the homes revenue reimbursables really fees development to of pleased recognition that the get so as Kevin the have see with of kind pattern that that we property of and continue and of about assessed little got our saw that built the paying. there, we are the a started you results, values, taxes add through

are homebuilders. deliver The lots, in tremendous capitalize doing that is lots the these we’re value. So of only that’s to on homebuilder and lots a doing They’re not home is but well how the our value well. opportunity And each getting customers not they’re they’re delivering tremendous company so a pleased to key thing doing for appreciation of well. us these the we on only their very our

is well. We’re doing doing well. The community

is very this with national homebuilders partnership executing well. so, And really together of us

behind keep executes on great and sure making We going folks within doing. with and and team the us the stays company Kevin focused Dirk us rest organization what the day-to-day of have and it’s the that that a

you’ve we’ll on Kate. and some if back doing. some of it drill got So, And to specifics we’re down try the can with of questions, what we that, turn over

Operator

at is Advisors. first Knight Our Elliot from Instructions] question Knight today coming [Operator

Elliot Knight

rates the Would do That’s here much a you the give outlook in is Pure you of on an about the bit reservoir is, how sites little being Thanks. controls? talk Inflation protect and for cap are status to monthly for What question And process? of rates, from increases the is what’s the the inflation? one. two Cycle question would news. us set two fees you against update think

Mark Harding

Okay. Sure.

charges two kind sets So, have water, we rates and for of there. and of charges

have permit. of very Those building they’re the by are at homebuilders. are the the charges. which They’re capital fees, are We large time And connection paid sheets. which tap paid fee,

the of big are capital of these ahead chunk us this. You part take for that’s that on a And able we’ve the about that look pays assets at a nice our $XX,XXX, system. to really been developing stay infrastructure

do do made we’re So, have how if investment And is been look at debt. has we a without of lot it to that able able to you because so or do any keep why and well about we into invest the in our that are what two fees do average not we be system of providers. And we by an Tap us water debt. of And -- governed been systems Colorado. those have to water set setting tap for fees. really We’ve to we area, In with our State be agreement have are those those service those mechanisms surrounding very-disciplined that. incrementally. delivering

delivering where in at fees It’s of imagine, ago. And might as the are Colorado take their providers customer out tap developing here And been years typically and you all and reflected water has developing water to their of we to those has and farther fees. supplies. in state the incremental the So, a be look the that’s and cost water for bringing developed. And closed that going to in development developed water been reach tap farther each of base.

of we at translate Ranch, those when look we be cost as well. entities, And so, really take in to charges the that to a comparable supplies. look incremental set developing does at market that we rates and the those When into our water Sky really competitive

the rates, typical those of our want to with really water provide And less of rates sure make are look for for because City the our Ranch the Aurora homebuilders of our much the that at we’re nearest in the at and to they’re as customers. Aurora, governed The building thing. advantage that City competitive differential. compared same customers, We of a Sky cost continue we are Aurora in competitor, also to doing than significant building value of City Sky Ranch monthly are line, to building homebuilder by providers Aurora. slightly our the are City seeing in So, that as well

see -- monthly So pressure the incremental see track the or we rate. in is keep the you’ll you’ll really cost rate in supplies. ascribed much more -- than be see that’s the the scarcity to And going tap What those per of water you’ll that. fees rate of value, developing the to

So, more see more you’ll rate the fee cost in just that. as bit and of monthly while rates, the the you a leverage look pricing see advantages the the pricing you probably or because at -- inflationary increases rates higher in doing the might tap incremental of

values. do we question home it? how at was What look Your second was

Elliot Knight

The reservoirs.

Mark Harding

reservoirs. right. the An on That’s The reservoirs. update

spring, us two the that in get very a on is And itself. the when is embedded is do significant we precipitation the in not these the versus it assets available period reservoirs. it of in. get challenge us it, a melt. demand Nature six-week of are for managing the So, within not demand those we job ahead And quickly, water in all water supply we us really only that right? supply when to our have utility value far over basis, Colorado here great very get annual unique get we does much an we But spring comes long. And do in Mother storing for because the winter very

these store inside look baseball are very needs bit at of unique getting we how talk non-jurisdictional you for to line call the and And able two being the that a are what That’s time reservoirs about built. an so, reservoirs. that is And a reservoirs opportunity. those permitting

other providers say, on providers able point -- to quality which there’s have area. of on, to the not interest our well the at those with that portion neighboring with a participate continue developing the on other with water scale can nothing as tangibly explore neighboring water water of treatment WISE water those the working other and in system, our partners supplies systems to providers the would supply conjunction is and and we the assets are what partners Denver have Metro we our systems there’s as water be that all South and we to We from to work continue regional in and I as developments, than those. I elements

significant So, be continues it a asset us. for to

We that continue regional we’re explore to our for only purposes, but not for own to going use purposes. how

Elliot Knight

Okay.

this year? tap fee do up the going though, to back you Going fees see tap

Mark Harding

we looking built be -- a couple around They X.X%, up. We of that there. we’ve increase incrementally notice a ago, They’ll in had at a will tap I think customers. we’re do our go in think so probably -- year -- I fee

followed seen don’t higher water look do providers we to But keep to what we’ve year-over-year. increase. flat a we I level we very increases this continue those to that have our in think increase increasing kind so of surrounding that. large appreciation growth to is We by that want

Operator

[Operator Instructions] Cunningham Our Bill with next question today from Seeking is coming Alpha.

Bill Cunningham

write but Alpha. I yes, a for I’m Seeking private do investor, occasionally So

Phase somebody might So, have there I by not -- case, But recognized, okay. any But description were and if and is done me wrong, might to XXX% about has where kind is if Phase to that up. basically in be going been quarter you’re not perfect. X number, been is be a X away correct this blown just what not your that In think almost looking they’re earnings of I’m at now it. trough ramp the

don’t where So, GAAP numbers now. right really reflect fully you are the

Mark Harding

do year-round. We in get a prohibits and months. difficult have of construct We We That’s for we is Colorado lots concrete do we to a seasonality think that development winter generating in fair highlight things land the us the is of do lot pavement very number some outdoor have weather kind of down the some in through business. important of statement. And one But the in the revenues develop. delivering I it’s that to a of company. options have do in that that And activity.

and of up we got done in sort aerial roads now. and alleyways all winter both were utilities the time a drone getting that fortuitous of -- you And saw footage spring deliveries. of we’ve X, of so, number the the Phase dirt as the And coming of in kind in to very work the frame, the right of all

So still on we’re activity. to pace lots. you’re all that tremendous XXX feel deliver going We to see

numbers lot going So, lot look more they phase take a that to in that are do roll when those you roll delivery. how in, towards finished at with

contracts. of types two have We

payment see have some in of our of our our cash see us of we’re the builders and incremental might delivery really to a to you’re contract invest it that with then with three quarter-over-quarter, flow going one year-over-year, And bit optimizes you more process. able construction continued But finished in builders, how the We lot stuff. that and growth.

the opportunities, So working the the in revenue ourselves a were and positioning of yes, we deliveries lot summer. for winter had we lot spring from while months through finished gas and and great oil

QX. So, see you QX and in that acceleration will

Bill Cunningham

even of from that. even to sales bigger Well, revenue you’ve a lot with your show number the finishing I Yes. now, lots, couple slide were quarter, low know of kind your projections last quarters of away, going showing you as even be from a were the and got current for you relatively that a which is were kind

-- be is this this but... So, shouldn’t to surprise a anyone,

Mark Harding

No, very predictable.

making delivering the really, of that. the things we company, can sure flexibility efficiencies And the the cash to position doing ability have on the capitalize and that lines that of great line a give this one and is us that invest we the those have liquidity in of the right. execution is that of -- important we You’re the part business

bit months spring see so deliveries. the And investment more little we that’s returns bit summer and then in roll little winter you a and a the more why as into

Bill Cunningham

been And later. CPI I were listening believe. to rather would have being to was of longer-term like the your than monetize your in some they’re we not to Even then year’s lot you of who’s they that some yet know And last call, like also, they’re also anybody of assets extent guess Pure monetized. immediately. But also, sold, investors sooner knows them would I value, I of long-term or Cycle I investor monetize as short-term investors you you have the number conference the them a to been not think X-plus-percent. a monetized increasing

land yet. you got that monetized You’ve haven’t assets

haven’t I though increasing great even You’ve you monetized. hedge, basically haven’t year. got the And water you think every they’re monetized rights inflation the map,

Mark Harding

we this are have assets you these value. is The at the a challenge, value at that when take look tremendous book recorded do that

it’s balance the we’ve you And show company asset, is you accumulated say, they a recognize the is the print returns a was going how because so, see when when until it have well, generate kind us on year-over-year because those folks, that cost that the up what would to basis and sheet we that revenue. hard sale, these just that or relatively those this you the a that to is predictability asset, off times, to for when that of sell on assets. of and lot time that actually modest we develop continue we and posting can’t of makes an returns, of question basis do see then, a great quarter-over-quarter that But that

Bill Cunningham

you X, the happening really with what go haven’t mentioned that. about being and there? much can Phase models And You in status what’s finally, built through is the

Mark Harding

Yes.

of I’d So, roads KB some builders, of model aggressive the finished. construction. builders there field permits out have prior home do we’ve the getting got where three can most four they was say, being to the each

were three there for And a they foundations we builders. got home model do for so, out have that up being started the KB. other We’ve

housing get get to the get we want for they’re the here we as in Denver. most the market And -- many strength a can model as want that’s look, permits We them. fast really, of I in homes of as think testament a building to builders, can thing looking we at as just production.

you basis. hard compare a not there’s to -- you an And to grow, And values of and entry-level press the home a is here to report when to home in $XXX,XXX to average getting entry-level home. an that continues the to market. and in it’s of product $XXX,XXX, that the ideally can the price kind we’re continuing while because see have home for Denver appreciation say value that average we develop are close of for the these expensive. We thing like we that continue product that lot really is positioned me But it’s

to And and get and of now got looking everything -- that, they permits access up can as homebuilders pull they it’s and just to and roads really, our stops the really many as our So processing. each we’ve completed fast fire are really all access can. out we’re that as that

So I their only permit each in, know their of them got to get production in. also model but permits not starting home have

know which mention amount will brings July. is Day all Xth that of of probably activity, to July. that to see let wanted to Investor we be just another going you’re the me have you after to will I So, this a an thing It tremendous

to the or It of an And for activity that you join opportunity really components only us development fits how market the but gives rental. we’re of single-family tangible so. with into the a look tremendous fits send executing, going together, together next a with this not the in amount of here can see you us, month So, also for site. you’re how on how view to out of land the fit each the water if together the

Bill Cunningham

And have Investor informative. Mark. I always Great. you, extremely of they’re attended Days, your Thank most

any to has should. anybody So, who go, inclination

Mark Harding

appreciate very helpful tires. that. I kick are. They the Yes. to It’s

Operator

Scott Scott coming at Our Geoffrey today Asset question is from Management. next

Geoffrey Scott

three outlook interest rates. last forward. rates months? the And bond for and purchasers or increased has to how Two question sales? timing Okay. second impact your how is you And future questions. you future expecting the in haven’t And may builder visits are activity over and rise to the any it? builder at with rise potential activity possibilities One, What all about commercial the rates by at talked in commercial going the all the the and has slowdown changed do interest in then Thanks. interest

Mark Harding

questions. Great

me see housing. it. second a and let rates. take sensitive market, is it’s a of rising That sensitive component first. rate interest one to very We Interest rate do the So, mortgage

we’re positioning Not than starter also cost basis this, asset of most because our competitors Aurora. is entry-level that the market in it in think flexibility. a that the substantially of at buyer in terms our home I positioning only City but the less gives our our of us and what great is,

building community. Sky our our And Ranch many for closest in master and away community, than a cheaper. which of us, $XX,XXX plan they’re from is next building Sky at that product same same home they’re they’re building building model that’s homebuilders that that or So, Ranch mile at are the of quarter less homes a $XX,XXX,

there, to so, them. buyers And advantaged we’re are what as where affordable those so you going product gravitate to that lot of likely for because is we’re really to it’s opposed more dynamic competitively our developments when have see in our a development to other or

you’re the in where that those If are sensitive. rate super, $XXX,XXX, sensitivity super market is interest homes middle

the opposed environment. rates to And buyer, as cost. same slightly buyer capacity increase they’re even that so, an going interest higher a entry-level move-up find or overall buyer to a rate Interest in do

infrastructure through this and for this is And And doing delivering is horizontal recoverability our we that. are in We delivering capacity we’re the that, reimbursed and the large portion so, us really seeing in work? the developing costs bonding our of increased are. by But reimbursables. advantage of actual us how a cost get

the by do market, what we higher homes. but offset Now, assessed see going in rates the interest values to we’re seeing bond as in be higher that’s

home a in so, seeing values. few may I And the rate, think X%, but X%, we what I the think increase see, points X% interest increases we have basis we’re in

the what on a market increase so than capacity the in debt rates more bit municipal that seeing we’re of is an the bonds. for offsets And interest

opportunities, commercial to out commercial of the to operators. On continue reach we a number

proximity we’ve like the in those that the issues, a where And our commercial industrial Colorado about I the tremendous of kind and that’s can sort in property where are light really sales opportunities aside for the some they they portion assess really airport be put bring past, got a to tax of is think There get you most incentive that. like centers, attractive the might users we and distribution state. the a as of our going we’ve to interchange -- area value. set be up side, talked

that pay residential the nearly commercial does. And the tax X the property assessment so, properties times

interchange store continues continue of still to our bit on our on the to and side. enhance retail We’ve the capacity commercial going that make that for the consistent. aligns network to is the the bonding that’s transportation so, we to that work stuff got on kind early, are. sure plan master that to the commercial but box and A make work that CDOT a lot how with sure of be opportunities And with

commercial, light transition And and elements you elements, X industrial use that multifamily, commercial residential. that commercial, between to being a have X so there’s retail, and we the then the of really fourth be multifamily and

all say so, those X inch would probably and of commercial. continue and before retail I occur And industrial will to forward. light multifamily

Operator

Our Greg next private investor. Sterling, question is coming from a

Unidentified Analyst

wondering -- this Most of water for into my of been have calls questions for answered, I going have next? sales year outlook about your been fracking the was balance just and but

Mark Harding

had demand in question. half first year. the Good of the robust Certainly a

in second kind probably the are half field operators, an and at operators we’ve a year, is got know being really oil X As that. plus or on of in advantage X rig look working availability. we this the and of certainly take $XX I permits

XX can more get of they We’ve all this And elements so, got be next it’s function to up those going together. the days. in of -- how quickly coming a fracs

I fracs well. got they’re because increasing in pad as we’ve And interesting the another think their designs fracs. are actually X well

play, fine-tune iteration design the frac to on of shale frac So, as continue and each more develop they oil they to the per works they’re that. using water how continue

ticking we of hard lot up. of that. -- hesitate in that so, give kind And a I guidance say see It’s to to

going revenue to roll and strength next continued permits is function frac the those all the permitted year on think, in a And not wells and the Sky of up, we see to to you Ranch, be have, record Sky good. areas then the year into going a revenue very of XX We fiscal heads market. look of itself. both around we permits do see and You’re in are that around only being Ranch I give but how

that will probably that’s not is estate late but in drilled generate royalty this. have likely revenue for We ‘XX, get see oil scheduled. will enough nice only we’ll opportunity. that So, those highlight revenue And they’re we I that in don’t often us. that a generate ‘XX, -- mineral early for do us, And frac when think, on but not

other southeast part We Sky of we the have Ranch have then state. and minerals the minerals states at in

monetize So, we of the continue to correlate price that for as asset And look to with well. that oil. we

terms bit rig more count of to that, like get a -- that we’ll can of certainly guidance pass as in and things you little So, we along you.

Operator

Our question [Operator from Andersen with next coming Tucker All Instructions] is Above Advisors.

Tucker Andersen

Good good Elliot apologize. privilege, to friends with I call. you. to I I if from moment a take of Knight, a can few personal should from work of minutes now hear And I forever, the missed hear too, coworkers.

really in on But what development of shortages. you go tell me for to them just So, shortages any subs of listen I I’m the refrigerators involves there both, something I’ll back ask, and And inflation my question one work builders can’t the week. are you because stuff likely week issues and and going covered replay. more and and they builders? And to who they’re had doing supply if next else know of have delay of or the can’t deliveries a get lot terms Because labor they your like labor or that. either chain are get affecting your to

And so, you’re area? I’m in seeing of just sort Denver curious the what about

Mark Harding

been the And I -- only but delivering that our builder major it also is homebuilders, our question. managed has that’s think not amongst national BTRs. issue local the an well Great fairly

labor and the the I their they efficiencies based where to think on they’re pool the another, project from permit most and doing can contractors or one to flex national built. ability that folks get line have they and their

So, coming our the in that we’ve and these flexibility homes to down segment, got we one and delivery impact manage were to have pike, some on And we that that of some of that our listen, issues, our inventory the stuff not do of are office. out really we want the supply BTR at saying, chain working and things seen is that the builder have here. doing with we

doesn’t, we’ve green And if that here early, make the have chain them stuff supply And it. of light by that the labor so want space planning preorder we we constrained got the ability and can we’ve we’re to ahead make to some sure kind sure warehouse that given warehouse that it of manage we issues inventory And go either to that deliver in great, fore in or not shortage if some and stuff. that to those that. really some issues to comes there’s

reimbursable, cost talked side, direct of On will recovery the increases we talking inflationary little a that. little that on we our about but do bit that’s infrastructure. we this that that. But do We bit because that horizontal real about think on a see delivering a earlier, get some some

that’s margins, that’s going So, unique. not our impact and to pretty

do that’s recoverable we of that impact costing builders doesn’t be will a our that position to really us but that have back relationship to we inflation that, some a deliver in increase either. on able to because impact our that that costs that actual know get We’re and we

more That property component going a them over be gets to margins too. longer We basis. their And to along. not they’re is are see that we’re along. having important so, it, mechanism, And taxes pass that that recovery having along but protecting not passed term pass through to we’re a which to that’s XX-year

Operator

from question today next private coming investor. is Bennett, a Greg Our

Unidentified Analyst

questions. business? the business through something gas gas, Sky and in oil the do you deals on How two who it a you on oil you doing oil had own? gas those this about somebody or One, knows you structure I are Ranch, doing you are mentioned those that and Are with and your partnership wells? or

Mark Harding

leased Neither. out. We that really

acquired Ranch, got a leased XXX to XXX which back, Sky got it the got was, with our out which And lease but of assigned. out that that it got -- the own Conoco, original boy, we’ve we minerals, to interest. to then we gas and assigned assigned, leased goes was which Anadarko, originally oil a acres So, originally we a the acres and

And a of they so, estate public more -- and I’m about and specific were just the be. about while it’s those when to is going resource, where we did a they now we a that, have in develop we But XX% master one careful and we’re were that just by leases go public Civitas, We and things a combination just of owned community. And gas recently. mineral knowing very that oil interest. number we -- of plan company gross which owner, a a get on sites were called is new those royalty that companies we the a very

to against located area that there’s strong some compared have in make residential them conflict sure between development a and the we So, residential that where gas buffers not development. areas the has be and would to an oil that

Unidentified Analyst

it homeowners, from that disclosed no the And take happen, homeowners? I that that so homeowners, new the it’s that there’s the can pushback

Mark Harding

setbacks is. that areas because the buffer substantial It of of space open we the It incorporated interest. And are gas a oil kind is. lot and

Unidentified Analyst

be private that since that The is administration water that the pushing or federally leases? back you’re property is gas, oil on selling and for Biden federal to on seems property, leased on

Mark Harding

state all the all area, oil private. XX,XXX is the There our for we well. most those by interest, owned is private the areas Yes. have Colorado. that But rights have as acres State private as This service some leased They property. on interest of service part, it’s our

Unidentified Analyst

Okay.

you’re XXXX final company that this correct? I taxpaying exchanges think now. is a for property Is my question.

Mark Harding

are. We

Unidentified Analyst

the structure way a rental there property to you through and done evergreen those maintain a those Is exchange that properties development could create XXXX commercial be the you maybe properties? income that from then on

Mark Harding

at We looking that. are

the Denver company his our a the has, have the we where We that in commercial, looking don’t on can we invest Board is can for opportunities value the commercial in some stay Board’s stay us one largest allow bit some we those well well vertical affords are the deal construction bringing of developers more and to that. choosing on deal properties may have name But, the sales some but the we’re just side vertical of the transaction staying us of give of little opportunity on as we only our are of number our who Jeff operator, because management side optimize can be management we career associated chase that an developing it as really liquidity area that us commercial land looking prevailing sales. residential it, by they residential years commercial in here and unit. that opportunity got tax commercial The Land land thinking a not gentleman you of for at when a an help I’ll because spent a line of commercial to the both there in. not can longer, side that that for we’re some as sooner. or us managing very looking it do bring of and in form at you’ve got significant to with structures line commercial with value the appropriate in side transactions can and on that to talent directive on it, of very as Sheets, the on from advantage land increase We’ve opportunities. the that strategies then at sooner of If

Unidentified Analyst

for leases, do then company, would and the tax to vertical a would you be ground the do something the just income? lease happens property is commercial that no gain evergreen ground there where Colorado would are and in that somebody So,

Mark Harding

at. right. That’s Yes. That’s exactly looking what we’re

Unidentified Analyst

a certain might grocery think? do commercial might out come might population, At what about, commercial tenant point you -- do whatever, what think you that there. need year I the When guess, -- for store the that you or when a

Mark Harding

question. Good

for Kroger. with through conversations the conversations is They what the they a would have -- as of footprint they’re We like player the -- Soopers it had market that. they structure sort for, size what operate the be as what Have national with brand. size dominant they looking a about to or grocer pull. of had be number And local here. Kings, here well, looking all they’d looking used King for demographics be with where to well store on number them The of

little be in can and early a that store they And just on this larger so of that a like then be pull bit that. they’d in to later some They area. so capitalize

we’re but and couple out, the think I industrial trying then a opportunities have of on balance out to what we grocer component. still of So, light retail type years probably still is the

the dental blends a we services services, and We’ve urgent make for and got We got with that certainly We care can maybe the pad casual of all medical create have of facilities. we access sites We’ve kind lot space there. to some interstate where together. the get that of sure itself that for fast the want it.

so, a want that that market there. And we And we have continuing to a share play. kind good all of sure is make really of do really

mainline the Union bit creates rolls more side. both sides If has challenge a the you there’s a best opportunities. spatially, developing on on you really Pacific’s And the create site, of north see through which the side the that there, kind They the the look Typically, potential just north that more right? it, is interstate the interstate of challenged there. it, -- commercial of when side those have bit system got at south of bifurcates the little which

So, on competitive interstate play we advantage the commercial at that. that very our and see there the like we much

Unidentified Analyst

Is change to the the on to state interstate exchange off does to exchange get the property? or the the property, your -- completely done on have and to

Mark Harding

interchange. There will need to be improvements to the

that that for building those timing of got will as we’ve how in capacity been and about all the residential fund commercial some permits building impact county the of with permits well stuff. working that the And over lay fees those, CDOT so, the we’ve then both, help as the of

Operator

We no queue in further at questions this time. the have

Mark Harding

kind for on give on you of Terrific. and of Dirk opportunity executing hear from all the talent this. that Well, organization kind to the Kevin by of just some and the the close really weighing really true me thing thanking let in are within this results

year. the the So, the call out finishing as of some to the have close the of but quarter an of balance very were on even information better results we’re looking up impressive, was,

of like summer, in able season, here opportunities. winter a horrible The even you isn’t of for and in here, Colorado And to continue you have It’s our of a though you summer get all know for oil in I fronts the beautiful out place. making how Colorado see the So, really a the operations, broken and gas really on our we’re that of I managing look reclamation the side, and our do aspect the water we’ll delivery oil and a if kind development come the recreational is best summer and our on folks our you’ll of single-family progress business, our to and chance continuing then charter reuse see lot to really phase, have on tour state-of-the-art of gas encourage and raw delivery systems water be rental. that. the to second school water out we’re to visit chance ground water facility, the

our of all really continue these shareholders. to to So, do value tremendous add

We we’re which continues to to price, that significantly that all results could that continue to agree we it correlation into public, of to be that well. I mindful the market direct as be communicate to quarter-over-quarter, so that also that to year-over-year, the post continue think would how to the and translate has a so better, share going

answer Thanks on give happy to hopefully all the me I’d to that, in much. call. you questions, specifics. get any the certainly will a didn’t all of if summer. a you see And drill chance with down be So, we very

Operator

conclude Ladies today’s does event. you. this and Thank gentlemen,

and time, this wonderful for We a your at you disconnect have thank day. participation. may You