Conference Transcript - PCYO 2026-09-29

Robert Bloom, Analyst — Managing Partner, Lithium Partners

All right. Hello, everyone. Thank you for continuing to join us throughout the day here at the Lithium Partners Fall 2026 Investor Conference. Again, my name is Robert Bloom, Managing Partner here at Lithium. Up next, Mark Harding, Chief Executive Officer of PureCycle Corporation, will take us through the company's slide presentation. As a reminder, PureCycle trades under the ticker symbol PCYO on the NASDAQ. Mark, thanks so much for participation today. The floor is all yours.

Mark Harding, CEO

Thank you very much, Robert, and welcome, everyone. I'd like to give you an overview of Pure Cycle Corporation and really introduce you to the company for those of you who are new to the story and maybe update those of you who are familiar with the company. So I'll kick us off by obviously talking about forward-looking statements, statements that are not historical facts or incorporated in this presentation are forward-looking statements. I think most of you are familiar with the forward-looking statements. I really want to lead off with just an outstanding management team that I get to work with. These are dedicated professionals that really differentiate themselves in their industry expertise. And it's my pleasure to work with them in really guiding the development of our assets and kind of managing the 40-ish employees that currently work to monetize our assets. together with one of the best boards of directors. I'm sure a lot of you hear CEOs talk about their boards of directors, but I've got just an outstanding board that really punches above our weight in terms of industry expertise, whether that's from housing and land development, SEC, corporate governance, commercial expertise, audit expertise with KPMG partners, water rights expertise, municipal bond expertise, operational expertise amongst the team. They're great oversights, and they really give me a tremendous amount of guidance in what we're doing in operating the company. Just an investment snapshot. We're one company that really has a terrific asset base, and we've had 28 straight quarters of profitability as we've been developing these assets. We continue to grow and build our revenue base. We're in kind of two primary segments, a land development segment, where we're a developer of a master plan communities here in the Denver area, and then also a water utility, where we are able to provide water and wastewater services to largely the companies or the properties that we own, as well as our franchise service area that we have here. And we're one of the companies that really generates substantial revenue. So we fund our development from in-house capital. So we're not really in a position of diluting shareholder accounts and are in a position to be able to buy back shares and continue to return shareholder capital that way. Now, let me talk first about the water utility segment. That's kind of the DNA level of the company. We have water both for domestic needs, which is basically your potable water and wastewater that we deliver to residential homes. We sell a lot of industrial water to oil and gas customers. And that's really for fracking purposes. We have a large Niobrara oil and gas play right on top of where our water sources originates. And then we have continued customer growth, which really is a welded customer, right? That's a very sticky customer for us that continues to build in terms of driving that monthly revenue and recurring revenue segments for the utility business. This is just a snapshot on kind of the customer growth. So we've got over a 22% KGAR growth in our customers. And then this is kind of a year-to-date summary. This is a Q3 summary of how our utility revenues compare year over year. And what you see is just strong growth in there. This really illustrates two types, three types of revenues for us. The monthly recurring water and wastewater revenue, the oil and gas segment revenue, and then also revenue from connection charges. I'll talk a little bit about sort of that oil and gas segment. We do sell probably about five times as much water to our oil and gas customers as we do to our domestic customers, which really generates very high margin revenue for us. It's a raw water basis. We don't have sort of that finishing water quality treatment cost is so attributable to that. and really variable demand. It kind of depends on the number of wells they have permitted. The field that we're developing is really de-risked. So we just have a kind of a field development schedule here. And so what you see is year-over-year performance here. And, you know, this is through the nine months of our fiscal year 2026. We have an August 31st close, so it's a little bit of an awkward year-end close. So we have closed the year-end. And we'll report those year-end numbers sometime in November, but likely to see very strong performance out of this segment for fiscal 2026. One of the more interesting things about kind of our revenues is kind of the portfolio that we have. We own or control about 30,000 acre-feet of water. And what that does is it allows us to provide water service to over 60,000 single-family equivalents. And that's our unit of metric. And when you take a look at how our annual production is performing year over year, what it is that we have developed in our supply capacity and what we're selling to our customers, we're using a very, very small portion of that portfolio, roughly close to 2% of the portfolio, which shows you kind of the real pedal capacity that the company has and our ability to continue to generate substantial growth in this segment and for the company overall. Let's move on to kind of the land development. As I mentioned, we are a master plan developer. So we have a parcel of property that is in the best part of the Denver metropolitan area for a growth core. You can think about Denver as we live on an ocean. We cannot grow west into the mountain area. So 100 percent of the growth of the Denver area is out along the eastern corridor. And that happens to be where we find ourselves in our land development segment. We're kind of continuing through phase development. We have about a thousand homes vertical and occupied for homeowners in that area. We've delivered about twelve hundred total homes. And this is kind of an update is to that our last phase to see and phase to deep. Both of these have been completed and delivered through year end. And then we have just a new project, the new phase coming online, which is a smaller phase than most of our previous segments. And that really does allow us to respond to the market segment as housing continues to ebb and flow in that area. And then we'll be providing that guidance into fiscal 2027 with our year-end update so that you can tune in and get that update in November. A little bit about kind of year-to-date revenues in the land development segment. Really strong earnings here as well, about $12 million a year to date through our Q3, which was May 31st. And that was driven largely by sub-phases that we had in Phase 2, B, and C. You can get a better perspective of that on our website. We have a great website with a ton of information. But this is kind of highlighting some of those segments and how we've developed and performed over the last three years. Phase 2A had about 230 lots. And that's really what we try to do is we try to deliver somewhere between 200 and 250 lots each year for our home builder customers so that they're not taking a huge inventory of lots where they have to sit in them. And then we also are monetizing those assets as we deliver them. Again, continuing with the delivery of those. And then this also shows the next phase in progress and under construction. So it gives you a bit of the metrics on what the total lot revenues are and then concurring TAP fees or the connection fees that we get. And then we also have another segment, which is our single family rental segment. So you'll see a little bit about that in that. How we do our land development segment, we use that kind of a flow fund deal where our home builders will pay us to improve those lands, where we get paid really a third of that purchase price at the plant, which gets them that ownership of that land interest. And then we're developing that infrastructure, whether that's developing the wet infrastructure, which is the water, wastewater and stormwater systems. Then we get that second payment. And then ultimately, we finish those lots with the roads, curbs and gutters. And that last payment is really the company's margin in that transaction. So we're really trying to pace that with our home builder customers. One of the things we're proud of is that we've got a tremendous charter school on the property. So this is a grand opening of our high school this year, which we started. So we've got now a full K-12 entitlement on the property. This gives you a bit of a perspective. This pink area in that match is our service area where it kind of shows you we're in that high growth corridor of the Denver metropolitan area. The dashed black line at the top is Interstate 70. The blue area in there is kind of the Sky Ranch property. And what this is illustrating is kind of the pressure that the Denver metropolitan area is growing out in our service area. And our service area is really our greatest asset, providing water and wastewater to all of this area as that grows out there. And it kind of shows you how the Denver area is grown out to surround three borders of the property. Single family rentals. I'll just quickly fly through some of these. This is a really nascent new segment for us. We've really updated our growth strategy since the beginning of the year. The Trump administration came out with some very high aspirations to restrict institutional ownership of single-family rentals. As it's settled out, I think that there were some exemptions about, you know, where you're building homes in this, and that's exactly what we're doing. We wouldn't be in this segment if we weren't actually developing the lots, being the water provider and partnering with our home builders to do that. But what we've done is grow a portfolio from really nothing two years ago to about 60 homes now. We've got that cap to right about 70 homes. So we'll complete that last 10 homes this year. And then we're really looking to pause that segment, take a look at how that segment's returning shareholder capital, what that return on investment is, and then make a stronger determination as to what to do with that segment. You know, whether we leave the segment as it is, whether we grow the segment or whether we divest that segment. And that would really be a function that we communicate to shareholders as we consider that performance. This is a bit of the performance metrics in there. And the nice thing about it is we have latent equity value as we build the homes from the start, because we're rolling forward the value that we have in the property and the tap fees. A little bit more on that, kind of the growth of corridor, really capping that out at about that 72 home basis. Kappa allocation, really taking a look at our strong balance sheet. You know, we have almost no debt. The only debt that we have is really the vertical cost of the single family rentals. But taking a look at our assets and our water, land and single family rental portfolio, I think the important thing here is really the liquidity, right? The company has and is able to fund its operations from cash. We have a very strong receivable, over $60 million coming from reimbursements from doing the public improvements on the master plan community that we have. And then just the recurring revenue, both from the utility, the rental income, and then a diversified revenue mix that we have with that. And so as we kind of get through this, we have a ton of information on our website. This slide deck will continue through a number of other slides that really transition into sort of the physical performance through Q3, which will show you where our guidance was, where we're coming in, and then that will transition to our year-end presentation. So with that, I'll kind of pause there and then invite you all, you know, if you have an opportunity, reach out to Robert to set up a one-on-one. Better yet, if you're out in Denver, give me a growl and we'll give you a tour. So with that, I'll turn it back to you, Robert.

Robert Bloom, Analyst — Managing Partner, Lithium Partners

Fantastic. Mark, thank you so much for your participation. Thanks, everyone, for watching, as Mark just indicated. If you'd like to schedule a meeting with Pure Cycle here, either at the conference or in the weeks to come, send me an email. That's bloom at lithampartners.com. To learn more about Litham, make sure to visit our website, follow us on LinkedIn, and subscribe on YouTube to stay connected on future events such as the webcast presentation here with Mark. So we hope you all enjoy the rest of the conference today. Have a great day. And, Mark, thanks so much for your participation.