Q2 2024 Pure Cycle Corp Earnings Call Transcript
Key Points
- Pure Cycle Corp (PCYO) reported a strong quarter with $8.5 million in revenue, indicating a return to growth trends seen in 2021 and 2022.
- The company's gross margins remain impressive, exceeding 50% across all three business segments: water utilities, land development, and single-family rentals.
- Pure Cycle Corp (PCYO) has a robust balance sheet with high liquidity, including over $50 million worth of liquidity between cash and notes receivable, and very modest debt.
- The company's single-family rental segment is showing success with 100% occupancy in Q2 and a high renewal rate, indicating strong demand for the units.
- Pure Cycle Corp (PCYO) has significant untapped capacity, with the ability to provide water and wastewater service to approximately 60,000 single-family connections, of which only 1,300 are currently connected.
- There was a 90-day pause in starting Phase 2b of land development due to aggressive interest rate increases towards the end of 2022, which could indicate sensitivity to market conditions.
- The tap fees segment was lighter in Q2, which is attributed to seasonality, but it also shows reliance on certain times of the year for higher revenue generation.
- Despite the company's strong performance, the market valuation does not seem to reflect the company's growth and asset value, as discussed by investors during the Q&A session.
- The company's water and wastewater segment revenues are heavily dependent on the oil and gas industry, which could pose risks if the industry faces downturns.
- There is a perception of slow progress in land development and water asset utilization, with only a small percentage of the company's capacity being used, which may raise concerns about the pace of growth and capital allocation.
Good morning, everyone, and welcome to the Pure Cycle Corporation Q2 2024 earnings call. (Operator Instructions) Please note this conference is being recorded.
I will now turn the conference over to your host, Mr. Mark Harding, President and CEO of Pure Cycle. Here you go.
Thank you, Jenny. Good morning, everyone, and welcome to our six months ended February 29. 2024 earnings call. We do have a deck for this, if you can go to our website at purecyclewater.com and click on the Investor tab and then there'll be a link there that will direct you to the deck for this. I can walk through this, and I'll try and note the transition of the slides as we move through the presentation.
Let me start out with our first slide, which will be our forward-looking statement, which indicates that, I'm sure all of you are familiar with it that statements that are not historical facts contained or incorporated by reference in this presentation are forward-looking statements.
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