Pure Cycle (NASDAQ:PCYO) used its first-quarter fiscal 2026 earnings call to highlight what management described as a strong start to the year, driven primarily by accelerated land development progress at its Sky Ranch community. President and CEO Mark Harding said favorable weather conditions—typically a challenge in the first quarter—helped the company move construction work ahead of schedule and contribute to what he called a “record-setting” first quarter for the company, given normal seasonality.
First-quarter performance and guidance progress
Harding said the company delivered “a little over $9 million” in revenue and about $6.2 million in gross profits during the quarter. He attributed the increases in net income and earnings per share to continued progress on Phase 2D of Sky Ranch, where Pure Cycle recognizes land development revenue under a percent-completion methodology.
Pure Cycle reiterated its fiscal 2026 guidance range of $26 million to $30 million in revenue and $0.43 to $0.52 in earnings per share. In the Q&A, Harding and his team said the breadth of the guidance range is largely driven by variability in industrial water sales to oil and gas operators, which management characterized as high-margin but timing-dependent.
Land development: Phase 2D ahead of schedule, Phase 2E planned
Harding said the land development segment produced the bulk of the quarter’s strength as the company advanced work in Phase 2D. He said Pure Cycle completed Phase 2C at the end of fiscal 2025 and is now “a little bit more than midway” through Phase 2D. Favorable weather allowed the company to place curbs and even asphalt during November and December, which he said is “really unheard of” for the area.
According to Harding, roads in Phase 2D are about 80% complete, putting the company five to six months ahead of schedule. He said Pure Cycle kept contractors engaged on-site to capitalize on the unusually cooperative conditions.
The company also discussed the next sub-phase, Phase 2E, expected to include about 159 lots. Harding said the company was able to expand and amend its interchange access permit with the Colorado Department of Transportation (CDOT), adding flexibility and enabling additional lots beyond the original Phase 2 plan. Management said grading for Phase 2E is expected to start in the spring timeframe.
Harding also emphasized homebuilding momentum at Sky Ranch, pointing to continued demand for what he described as an “entry-level product.” He said about 85% of Phase 2B is built out, and that builders are already starting homes in Phase 2D even before all finished lots are delivered, because utilities and access infrastructure are in place for portions of the phase.
In a notable portfolio shift, Harding said the number of homebuilders working in the community has expanded to seven national homebuilders, up from a prior portfolio of four, as builders manage inventory levels amid broader market slowing elsewhere.
Water and wastewater: recurring growth, near-term softness tied to timing
Pure Cycle’s water utility segment includes recurring service revenues to residential customers and industrial water deliveries, primarily to oil and gas operators. Harding said customer growth in recurring revenue remains strong, citing a 22% customer CAGR.
Despite the overall strong quarter, Harding described the water segment as “a little bit softer than normal,” attributing it to timing issues tied to building permits and a gap in oil and gas deliveries. He said oil and gas customers were focused on building a portfolio of well permits and constructing multi-well pad sites, which can lead to significant quarter-to-quarter variability.
Management said activity is expected to pick up later in the fiscal year. Harding noted wells have been drilled and completed and are expected to begin fracking later in the month, continuing through much of the year. In response to investor questions, Harding said the company can see a range of roughly 20 to 35 wells that could drive the variability in industrial water revenue.
The company also discussed capacity, noting it used about 3% of its overall water portfolio during the quarter. Harding said Pure Cycle can produce roughly 2,800 acre-feet annually and used about 150 acre-feet in the period, reflecting the uneven nature of industrial demand.
On pricing, management said tap fees—water and wastewater connections—have increased about 6% to 7% per year over the last three to four years, reaching “north of around $42,000” per connection. Harding also cited market transactions for water rights, noting a prior acquisition around four to five years ago at about $9,700 per acre-foot, while “most recent transactions” were said to be north of $20,000 per acre-foot.
Rentals, the interchange, and commercial opportunities
Pure Cycle updated investors on its single-family rental segment, stating it has 19 homes completed and fully rented. Harding said the company has another 40 units under contract and intends to bring them online in a measured cadence of about four to five units per month beginning in May, with the goal of supporting leasing demand amid affordability constraints.
Harding also discussed the company’s share buyback program, describing it as part of balancing liquidity needs for investment against what he said management believes is an undervaluation of the company’s trading price.
A major longer-term theme remained the planned replacement of Sky Ranch’s interstate interchange, which management described as critical for unlocking Phase 3 and commercial development. Harding said the company expects to finalize permits with the county and CDOT in the first half of the year, with bonding later in the year, bidding toward year-end, and construction targeted for 2027. He estimated construction could take roughly six to nine months and suggested a potential completion around the beginning of calendar 2028.
Harding said commercial development is dependent on the new interchange and described commercial parcels as key to higher-value land and assessed value that supports public improvement reimbursables. He noted the company’s receivable related to public improvement reimbursables is “currently around $50 million.”
In discussing potential commercial uses, management said it has engaged commercial and industrial brokers active in data centers, including Cushman, and believes Sky Ranch’s combination of site readiness, power accessibility, and Pure Cycle’s “high availability of water” could be a differentiator. Harding said the company is evaluating locations that would buffer data center uses from residential areas, and that water service terms could differ from residential service due to quality requirements and potential raw-water options.
Outlook: 2027 expected to resemble recent years, with “breakout” later
Asked about fiscal 2027 earnings, Harding said he does not expect a “breakout year” in 2027, with results expected to look similar to recent years as Phase 2E progresses and interchange-related work advances. He said the company views a more significant step-up as tied to post-interchange development and commercial lot sales, which management referenced as more likely in the 2028 timeframe and beyond, when Pure Cycle expects it can sell residential and commercial lots concurrently.
Management also reiterated interest in strategic land acquisitions, with Harding saying he is “more optimistic” about opportunities with landowners than in prior periods. On water acquisitions, he said the company’s current water portfolio is strong and that any additional water rights purchases would need to be strategic—adjacent and synergistic—while noting the company is currently more aggressive on potential land acquisitions than water acquisitions.
About Pure Cycle (NASDAQ:PCYO)
Pure Cycle Corporation (NASDAQ:PCYO) is a Colorado-based utility and real estate development company focused on water resource management and land development along the Front Range. The company’s core operations involve the acquisition, treatment and distribution of potable water, as well as the collection and treatment of wastewater, serving suburban and rural communities in the Denver metropolitan area. Pure Cycle holds substantial water rights and operates distribution and treatment facilities under a regulated utility model, providing essential services to residential and commercial customers.
In addition to its water utility business, Pure Cycle engages in real estate development, leveraging its water assets to create fully serviced residential communities.
