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REVENUES, FEES AND OTHER INCOME ITEMS | 6 Months Ended
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Feb. 29, 2024
REVENUES, FEES AND OTHER INCOME ITEMS |
REVENUES, FEES AND OTHER INCOME ITEMS | NOTE 3 – REVENUES, FEES AND OTHER INCOME ITEMS Water and wastewater tap fees, metered water usage and wastewater treatment fees, lot sales, and rents collected from single family homes The Company’s revenue is primarily generated from sales of water and wastewater taps, metered water and wastewater usage, the sale of lots to homebuilders, and rent collected from its single family homes. Detailed descriptions of the policies related to revenue recognition are included in Note 2 to the 2023 Annual Report. The following describes significant components of revenue for the three and six months ended February 29, 2024 and February 28, 2023. Water and wastewater tap fees – During the three months ended February 29, 2024 and February 28, 2023, the Company sold a total of 0 and 35 water taps generating $0 and $0.8 million in tap fee revenues. During the three months ended February 29, 2024 and February 28, 2023, the Company sold a total of 0 and 32 wastewater taps generating $0 and $0.2 million in tap fee revenues. During the six months ended February 29, 2024 and February 28, 2023, the Company sold a total of 15 and 39 water taps generating $0.5 million and $1.0 million in tap fee revenues. During the six months ended February 29, 2024 and February 28, 2023, the Company sold a total of 15 and 36 wastewater taps generating $0.1 million and $0.2 million in tap fee revenues. The water taps were all sold at Sky Ranch and Wild Pointe, and the wastewater taps were all sold at Sky Ranch. Metered water and wastewater usage fees – During the three months ended February 29, 2024 and February 28, 2023, the Company sold a total of 404 and 33 acre-feet of water generating $1.7 million and $0.2 million in metered water and wastewater treatment fees revenue. During the six months ended February 29, 2024 and February 28, 2023, the Company sold a total of 1,028 and 242 acre-feet of water generating $4.1 million and $0.8 million in metered water and wastewater treatment fees revenue. The Company provides water and wastewater services to customers, for which the customers are charged monthly usage fees. Water usage fees are assessed to customers based on actual metered usage each month plus a base monthly service fee assessed per single family equivalent (SFE) unit served. One SFE is a customer, whether residential, commercial or industrial, that imparts a demand on the Company’s water or wastewater systems similar to the demand of a family of four persons living in a single-family house on a standard-sized lot. Water usage pricing is based on a tiered pricing structure, and certain usage revenues are subject to royalties as described in the 2023 Annual Report. The Company also sells water for industrial uses, mainly to oil and gas companies for use in the drilling and hydrologic fracking processes. Sale of finished lots – For the three months ended February 29, 2024 and February 28, 2023, the Company recognized $1.2 million and $1.4 million of lot sale revenue, which was recognized using the percent-of-completion method for the Company’s land development activities at the Sky Ranch Master Planned Community. For the six months ended February 29, 2024 and February 28, 2023, the Company recognized $3.1 million and $1.9 million of lot sale revenue, which was recognized using the percent-of-completion method for the Company’s land development activities at the Sky Ranch Master Planned Community. As of February 29, 2024, the first development phase (509 lots) is complete and the second development phase (874 lots) is being developed in four subphases, referred to as Phase 2A (229 lots), Phase 2B (211 lots), Phase 2C (228 lots) and Phase 2D (206 lots). As of February 29, 2024, Phase 2A is approximately 96% complete and Phase 2B is approximately 52% complete. Phase 2A is substantially completed with some landscaping items remaining, and Phase 2B is expected to be complete by the end of Pure Cycle’s fiscal 2024. Phase 2C construction has begun but has not met revenue recognition criteria as of February 29, 2024. Project management services – During each of the three-month periods ended February 29, 2024 and February 28, 2023, the Company recognized less than $0.1 million and $0.1 million of project management revenue from the Sky Ranch CAB, a related party, for managing the Sky Ranch development project. During each of the six-month periods ended February 29, 2024 and February 28, 2023, the Company recognized $0.1 million of project management revenue from the Sky Ranch CAB, a related party, for managing the Sky Ranch development project. Single-family rental revenue In November 2021, Pure Cycle began constructing and renting single-family homes on lots it retained at Sky Ranch. Pure Cycle began recognizing lease income related to these rental units in November 2021. Pure Cycle generally rents its single-family properties under non-cancelable one year lease agreements. As of February 29, 2024, Pure Cycle has 14 single-family detached homes rented under separate lease agreements. For the three months ended February 29, 2024 and February 28, 2023, the Company recognized $0.1 million and less than $0.1 million of rental property revenues. For the six months ended February 29, 2024 and February 28, 2023, the Company recognized $0.2 million and less than $0.1 million of rental property revenues. Pure Cycle will begin construction on 17 additional rental homes in Phase 2B, all of which the Company believes will be available for rent in fiscal 2025. As of February 29, 2024, the Company had reserved 83 lots in Phases 2B, 2C and 2D of Sky Ranch for future rental units. When combined with the 14 units already built and rented, these additions will bring the total single-family rentals to 97. The Company expects to take approximately three more years to build and rent all these units. Based on these projections, the Company believes this could become a reportable operating segment in the future once its operations become material. Special facility projects and other revenue Pure Cycle receives fees from customers including municipalities and area water providers for contract operations services. These fees are recognized as earned, typically monthly, plus charges for additional work performed. Additionally, the Company performs certain construction activities at Sky Ranch. The activities performed include construction and maintenance services. The revenue for both types of services are invoiced and recognized as special facility projects revenue. For the three months ended February 29, 2024 and February 28, 2023, the Company recognized $0.1 million and $0.2 million of special facility projects and other revenue, an immaterial amount of which is from work performed for the Sky Ranch CAB, a related party. For the six months ended February 29, 2024 and February 28, 2023, the Company recognized $0.4 million and $0.3 million of special facility projects and other revenue, an immaterial amount of which is from work performed for the Sky Ranch CAB, a related party. Deferred revenue Changes and balances of the Company’s deferred revenue accounts by segment are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended February 29, 2024
(In thousands) | ​ | Water and Wastewater Resource Development | ​ | Land Development | ​ | Total
Balance at November 30, 2023 | ​ | $ | 50 | ​ | $ | 3,791 | ​ | $ | 3,841
Revenue recognized | ​ | ​ | (19) | ​ | ​ | (1,215) | ​ | ​ | (1,234)
Revenue deferred | ​ | ​ | - | ​ | ​ | 29 | ​ | ​ | 29
Balance at February 29, 2024 | ​ | $ | 31 | ​ | $ | 2,605 | ​ | $ | 2,636
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended February 28, 2023
​ | ​ | Water and Wastewater Resource Development | ​ | Land Development | ​ | Total
Balance at November 30, 2022 | ​ | $ | 552 | ​ | $ | 3,889 | ​ | $ | 4,441
Revenue recognized | ​ | ​ | (19) | ​ | ​ | (1,492) | ​ | ​ | (1,511)
Revenue deferred | ​ | ​ | - | ​ | ​ | 1,076 | ​ | ​ | 1,076
Balance at February 28, 2023 | ​ | $ | 533 | ​ | $ | 3,473 | ​ | $ | 4,006
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended February 29, 2024
(In thousands) | ​ | Water and Wastewater Resource Development | ​ | Land Development | ​ | Total
Balance at August 31, 2023 | ​ | $ | 69 | ​ | $ | 1,661 | ​ | $ | 1,730
Revenue recognized | ​ | ​ | (146) | ​ | ​ | (3,178) | ​ | ​ | (3,324)
Revenue deferred | ​ | ​ | 108 | ​ | ​ | 4,122 | ​ | ​ | 4,230
Balance at February 29, 2024 | ​ | $ | 31 | ​ | $ | 2,605 | ​ | $ | 2,636
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Six Months Ended February 28, 2023
(In thousands) | ​ | Water and Wastewater Resource Development | ​ | Land Development | ​ | Total
Balance at August 31, 2022 | ​ | $ | 570 | ​ | $ | 4,275 | ​ | $ | 4,845
Revenue recognized | ​ | ​ | (37) | ​ | ​ | (2,029) | ​ | ​ | (2,066)
Revenue deferred | ​ | ​ | - | ​ | ​ | 1,227 | ​ | ​ | 1,227
Balance at February 28, 2023 | ​ | $ | 533 | ​ | $ | 3,473 | ​ | $ | 4,006
​ The Company receives deposits or pre-payments from oil and gas operators to reserve water for use in future well drilling and fracking operations. When the operators use the water, the Company recognizes the revenue for these payments in the metered water usage from the commercial customers’ line on the statement of income. The Company recognizes lot sales over time as construction activities progress and not necessarily when payment is received. For example, the Company may receive milestone payments before revenue can be recognized (i.e., prior to the Company completing cumulative progress which faithfully represents the transfer of goods and services to the customer) which results in the Company recording deferred revenue. The Company recognizes this revenue into income as construction activities progress, measured based on costs incurred compared to total estimated costs of the project, which management believes is a faithful representation of the transfer of goods and services to the customer. Revenue allocated to remaining performance obligations such as described above represents contracted revenue that has not yet been recognized, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.

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