Elliot Knight asked for clarification on the exact size of the Lowry property, noting conflicting figures of 24,000, 26,000, and 27,000 acres.

Mark Harding clarified that the total footprint of Lowry is around 27,000 acres, but Pure Cycle's exclusive service rights cover 24,000 acres. The remaining 3,000 acres were added after their exclusive service agreement and are not obligated to receive service from Pure Cycle. “Now it's -- so the total footprint of Lowry is around 27,000 acres. Our exclusive service rights to it are 24,000.”

An analyst asked if the expenditures for the I-70 interchange project are reimbursable.

Mark Harding confirmed that the expenditures are expected to be reimbursable. The company has reserved bonding capacity from mill levies and impact fees, with an estimated project cost of $40 million. They anticipate not having to advance company funds, or if so, only a relatively light amount that would be reimbursable. “We have an estimated cost of the interchange being in that $40 million range, and we have a preliminary indication that our bonding capacity would match that.”

An analyst inquired about the $59 million receivable balance and the company's strategy for using the bond market to manage it.

Mark Harding explained that the receivable balance represents advanced funds for development, which will be repaid through bond proceeds. He detailed plans for refinancing 2022 bonds in 2027 (repaying $8-10 million) and issuing new bonds for Phase 3 in 2028 (repaying $25-28 million), expecting the balance to significantly lower over the next two years. “So what that world of the story is, it accrues as you start up to that time number, right? And I'd say $60 million is pretty sizable in the grand scheme of things. And that really does show you a deposit of shareholder value in there that really is going to start coming back over the next 3 years.”

PCYO

Pure Cycle (PCYO) Q3 FY26 earnings call: guidance and Q&A

Earnings call· May 2026 (Q3 FY26)· Utilities· Jul 9, 2026

Source: earnings call transcript

Executive summary

Pure Cycle Q3 FY26 – Strong Water Sales and Accelerated Lot Deliveries Drive Profitability

Pure Cycle reported solid Q3 FY26 results, driven by strong industrial water sales and accelerated land development, leading to robust revenue and gross profit. The company is strategically pacing lot deliveries to align with housing absorption, while also adjusting its single-family rental expansion due to market and regulatory considerations. Management remains focused on monetizing its valuable water and land assets, anticipating increased share repurchases as liquidity builds.

Highlights

Reported $8.2 million in revenue and $4.3 million in gross profits, achieving a 52% gross margin.
Industrial water sales were stronger than expected compared to last year, with expectations to finish the year strong.
Tap fees were stronger year-to-date and are expected to finish strong due to several phases coming online in 2026.
Delivered approximately 430 lots in the last 18 months, with Q3 lot deliveries almost 70% better than last year.
The single-family rental segment is experiencing tremendous demand, with almost all completed homes leased and some leased before delivery.

Concerns

The housing market is not as strong as 2024, with consumer confidence issues impacting lot absorption.
Single-family rental expansion was scaled back from a target of 100 units to the high 60s/low 70s due to regulatory climate uncertainty and the need to define return on investment.
The company's stock has been flat for the last five years despite management's perception of significant underlying asset value.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year fiscal guidance	Gross revenues between $20 million and $32 million, earnings per share in the $0.50 range, plus or minus high materiality	FY26	High
I-70 Interchange Permit Issuance	Early next year medium materiality	Early 2027 · FY27	Medium
I-70 Interchange Construction Start	Late 2027 medium materiality	Late 2027 · FY27	Medium
Commercial Revenue Contribution	Similar amount of revenues from commercial that almost has that doubling effect of our revenues high materiality	Post-interchange completion	High
Tap Fee Increase	Step increase medium materiality	2027 · FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Water Segment Total water revenues were strengthened by better-than-expected industrial water sales. Tap fees are also showing continued strength due to several phases coming online in 2026. Industrial water sales: strengthened compared to last yearTap fees: stronger year-to-date and expected to finish strong	—	—	—	—
Land Development Segment The company delivered approximately 430 lots in the last 18 months. Q3 lot deliveries were almost 70% better than last year, moderated by a mild winter. Phase II E, a smaller phase, is expected to deliver 159-160 lots. Lots delivered (last 18 months): 430Phase II E lots: 159-160	—	almost 70% better	—	—
Single-Family Rental Segment Approximately 40 homes are completed, with another 30 under contract for delivery through calendar year 2026, bringing the total to around 70 units. The segment is experiencing tremendous demand, with most homes leased, some even before delivery. Homes completed: ~40Homes under contract: ~30Total units expected (calendar year 2026): ~70	—	—	—	—

Orderbook & backlog

Single-Family Rental Homes Under Contract 30 Q3 FY26

These homes are under contract and expected to deliver through calendar year 2026, contributing to a total of approximately 70 completed units.

Phase 2 Lot Deliveries Upcoming Q3 FY26

Phase 2, the next development phase, is currently undergoing grading activity and is expected to deliver lots for summer 2027.

Capital programs

I-70 Interchange Project permitting process $40 million

Funding: bonding capacity of the mill levies as well as some impact fees that the County is looking to adopt

Benefit:open up the commercial and really stack into the revenue side, potentially doubling revenues

Estimated cost in the $40 million range. Preliminary indication that bonding capacity would match this, expecting not to have to advance company funds. Permit expected early next year.

Risks & headwinds

Housing Market Headwinds Current

Housing market not as strong as 2024; consumer confidence issue within most of the homebuyers

Mitigation:Pacing finished lot work to match housing absorption.

Regulatory Uncertainty for Single-Family Rentals Ongoing

Scaled back expansion from 100 units to high 60s/low 70s

Mitigation:Reduced expansion to understand regulatory climate and define return on investment; noted that regulatory concerns have 'settled down a little bit'.

Stock Underperformance Past 5 years

Stock has been flat for the last 5 years

Mitigation:Company plans to be more aggressive with share repurchases as liquidity builds to return value to shareholders.

Q&A highlights

Elliot Knight inquired about the previously guided $650-$675 million asset value and confirmed if the company still holds approximately 30,000 acre-feet of undeveloped water after Sky Ranch's full development.

Mark Harding explained the math behind the Sky Ranch valuation, projecting $500 million from lot sales and $200 million from tap fees, highlighting the earning power of legacy assets. He confirmed the company has a strong 30,000 acre-feet of undeveloped water and 60,000 connections capacity, which has been diversified through recent acquisitions.

“That shows about $2.5 billion worth of water revenue. And then we get that $1,500, $1,700 per connection per year, and that's about $100 million year-over-year revenue.”

asked by Elliot Knight · answered by Mark Harding

2 min read 6 chapters

Detailed narrative

Water Rights and Industrial Sales Strength

Pure Cycle capitalizes on its unique ownership of water rights in Colorado, providing potable water to retail customers and raw water for industrial uses, primarily in oil and gas. The company's industrial water sales strengthened significantly compared to last year, driven by increased drilling activity from operators who had accumulated permits.

This segment is expected to remain strong for several years due to the size of the oil and gas field and the efficiency of the company's supply framework, which offers high-margin business.

Strategic Land Development and Lot Deliveries

The company's land development segment focuses on increasing land value through water availability in the Denver area. Pure Cycle delivered approximately 430 lots in the last 18 months, with Q3 lot deliveries up almost 70% year-over-year. The strategy involves pacing finished lot work to match housing absorption, utilizing a 'flow fund' contract model where homebuilders make payments at different development stages.

Phase II E, comprising 159-160 lots, is currently in progress, with Phase 2 expected to deliver by summer 2027.

Single-Family Rental Segment Adjustment

Pure Cycle has adjusted its single-family rental expansion plan, scaling back the target from 100 units to the high 60s/low 70s. This pivot was influenced by regulatory climate uncertainty regarding institutional home ownership and the need to clearly define the return on investment for the segment.

Despite the scaled-back target, the segment is experiencing tremendous demand, with nearly 40 homes completed and another 30 under contract, many leased before delivery, providing a stable recurring revenue stream with tax advantages.

Monetizing Legacy Assets and Shareholder Value

The company emphasizes the significant earning power of its legacy water and land assets, which are carried at a very low cost basis on the balance sheet. For example, Sky Ranch, valued at $5 million on the balance sheet, is projected to generate $500 million from lot sales and $200 million from tap fees.

Management believes the company is undervalued and plans to be more aggressive with share repurchases as liquidity continues to build, aiming to return value to shareholders.

I-70 Interchange Project Progress

Pure Cycle is actively working with governmental partners on the I-70 interchange project, which has an estimated cost of $40 million. The company expects the permit to be issued early next year, with construction starting in late 2027. This project is anticipated to open significant commercial development opportunities, potentially doubling the company's revenues by layering in commercial revenue similar to its current residential lot sales.

Lowry Property and Service Area

The company's exclusive service rights cover 24,000 acres of the Lowry property, which has a total footprint of 27,000 acres. This area is strategically located on the path of development in the Denver Metro area, where growth is primarily to the east.

The Lowry property represents a significant future opportunity for the company to expand its water service and development activities, leveraging its existing infrastructure and water rights.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.