Pure Cycle (PCYO) Q1 2025 earnings summary

Executive summary

• Net income for the quarter ended November 30, 2024, was $3.94 million, up 91% year-over-year, with EPS of $0.16, driven by increased oil and gas royalty income and higher lot sales revenue at Sky Ranch.

• Quarterly revenue reached $5.8 million, up 7% year-over-year, with gross profit of $3.67 million and a 64% gross margin.

• Strong performance across all business segments, including water utilities, land development, and single-family rentals, with recurring revenue and asset growth.

• Oil and gas royalty income surged to $2.8 million, driven by six new wells at Sky Ranch.

• Continued progress in Sky Ranch development, with active construction in Phases 2A, 2B, 2C, and 2D.

Financial highlights

• Revenue: $5.8 million for the quarter (+7% YoY); gross profit: $3.67 million; net income: $3.94 million (+91% YoY); EPS: $0.16 (+78% YoY).

• Gross margin: 64% for the quarter; water utilities: 54%; single-family rentals: 64%; land development: 33%.

• Cash and cash equivalents totaled $19.0 million; working capital at $20.3 million as of November 30, 2024.

• Tap fees in the water segment rose 150%–153%, and recurring customer revenues increased 12%.

• Single-family rental income up 14% due to higher rents and new units.

Outlook and guidance

• On pace to meet FY2025 guidance of $31 million in revenue, $20–23 million gross profit, and $0.52 EPS.

• Management expects another record year for revenues and earnings in fiscal 2025, with recurring revenue growth from rentals and water accounts.

• Commercial development at Sky Ranch expected to begin monetization in 2026–2027.

• Anticipates spending up to $26.5 million on Sky Ranch Phase 2 infrastructure in the next 12 months, funded by milestone payments and tap fees.

• Oil and gas royalties expected to remain strong through 2025, with further upside from new wells and fracking through 2030.