Q2 2020 Earnings Call

Greetings and welcome to the pure cycle Corporation, 2022nd quarter, and six month financial conference. At this time all participants are they listen only mode. Brief question answer session will follow the formal presentation. If anyone should require operator assistance during a costly well.

Press Star Zero on your telephone keypad, and it's now my pleasure to introduce your speaker marketing. Thank you Mr. hurting you may begin.

Thank you and I'd like to welcome you all to our second quarter call.

Some housekeeping measures, we do have a slide deck for this so if you want to log into our website.

It was should be on that front landing page. It I'll just say a second quarter presentation, you don't see it there than even sort of fiber to the investor section and they'll be a link there as well so that allow you to follow along with the presentation in the prepared remarks.

I'm going to back forgiveness for those of you who are new to the company.

Probably just a jump into sort of the quarter and without giving kind of the overview typical overview of the company. We've got some excellent resources on our website. If your news a company I want to get a little bit more color about sort of how we do things in how we got to where we are there's a couple of podcast on there that will give you that a present.

And.

With that let me go ahead and start.

The call here in the first thing I need to do as.

Well I said it was gonna go through the presentation quickly I got to get through at least the second Flybridge just to get the lawyers on the room, saying that this is our safe Harbor statement. Then really these are our forward, leading a statement that intended to be policy or direction or guidance to our investors.

So with that I'm going to I'm going to rolled school you guys down to slide six and really start by giving you all an update into our land development segment and give you kind of an update of the activity that we've had [noise].

As you all know.

We got a a very a large master plan community located in the I 70 corridor here in the Denver Metropolitan area. We've embarked on our first phase of that which includes a little over 500 lots. We have three national home builders that are under contract for all of our homes.

All a lot on that we have the Richmond America Taylor Morrison Kb and all three of them are very active in building homes out there a we have Oh EUR 506 lots I think we've delivered about 380 of the 506 lots. So there's really just two more take downs.

I think Richmond has taken down all of their lots Taylor Morrison has one more take down requirement one more take down of lots, which will be about 49 lots and then I think kb has another 50 lots and they're gonna be plus or minus or maybe a little bit more than 50 lives I think they've got.

Maybe two more ticked down a schedules. The then the real the nice thing about our project here is all three of our builders have accelerated or take downs from their original contract schedules, mostly due to really good success. At this project has had we've had a great entry into the market, mostly because of our price point our price point.

He is an entry level price points, our home starts in sort of the.

Kinda that Threed 43 50 range.

That's the side is that May sound to that's a starter home in the Denver market.

But we have a real mix of.

Homeowners out there we have had our first a sort of shareholder or a homeowner community meeting and got a chance to meet with a number of those folks we have about seven little more than 70 people occupying houses out there and are the first the first a community meeting was that a huge success I think.

We had more than 42 homes represented families from 42 homes represented I will I would throw shout out there to Kb, who gave us a one of their model homes for the meeting place there and they gave us some some.

I think the snack on their sort of give them a shout out.

Thank them for that but.

The project is going Great. In addition to the the actual occupied homes, we probably got I'd say 120, 130 homes under construction. So I'd say, we're right close to 200 homes, either built or under construction.

We've got.

Pull that back about 180 or building permits issued so can't get started on a home until you've actually got a building permit.

We have a paid tapped needs. So in addition to selling lots as many of you know we are water utility and we keep track of that metric as well.

We've got about 217, [noise] water and wastewater caps.

Purchase from our homebuilders.

And then you know how this is likely to to roll out for the rest of the.

First phase.

Will deliver the remaining hundred 27 lots through calendar year end. So there's a of those three or four more closings those are staggered throughout the rest of the year. So you'll see announcements as we get those close all likely send out a press release for each of those announcements celebrity let everybody know how those are progressing through.

Moved to the next slide slide seven data Kinda give you a both a visual as well as a numerical representation of the progress since Q1. So you can see we are having a tremendous starts I know, we're really just getting into the building season. So we got a number of a new homes I'd say a that.

70 residents as we were describing and I think home builders are averaging about six a six homes per month per builder. So that absorption has been very exciting over the winter, we'll see how that continues to progress in this new environment that we're in and we'll talk a little bit more about that later in the presentation.

Moving to slide eight flight it will really kind of give you have you have the rest of the project a thousand is about 935 acres in total. So this first tired and 55 acres is really just the first entering into that and as you can see I want to highlight really the next residential can.

Pulling it out that the next phase incorporates 480 acres and there's much more than just the residential component we have a large commercial component, which is gonna be up along the interstate so we have about a half a mile of frontage along the Interstate and we have our own interchange that's existing right at the exit to the property.

But we're going to focus in on kind of the next residential component of that and we have a very broad product mix in our next a residential component. If you flip to the next phase out of Kinda give you kind of a land plan to lay out and really the mix is gonna be more than we have kinda in our first days we.

Just had two product mix, it's a 45 foot and a 50 foot locker nodes are pretty homogeneous it did allow the builders to be able to.

Take a a wide variety of homes on those.

But it was still a pretty typical standalone detached single family House in the next phase, we will have a little bit more density on the per acre on that we'll have some smaller lots.

32 foot single family 4500, Fiftys like the first phase will have some paired product out there, which means less them Duplexes and then some townhome product where it will have clusters and so rapidly does speak to a much larger a customer base I'm much more diversified product offering amongst a number of bill.

Others that we're looking at.

We'll likely a phase this and so this will be our second phase, but we'll probably have for micro phases. Here as you can kind of see we've set that up where you can see each phase is.

Somewhere in the 230 to 260 lot deliveries and so it allows us to be able to manage our construction costs. So we don't get too far out over our skis and we want to make sure that you know builders are absorbing and paying for all those full cost of developing those lots before we move onto the next increment.

I think we did a very good job of officially delivering the first 500 lots in our first phase and so we don't want to we don't want to stray too far away from that model because I think that was very good not only for our builders. So that they didn't have to inventory too much as well as the company. So we didnt have to inventory too much in terms of the development costs. So we can do a lot.

Out of those land like the Earth work, maybe we carved out up into.

Two phases, but we can carve up the utilities in the roads curves and gutters into four phases. So that we're much more real time and delivering though so that's I know important to our shareholders because they want to make sure that you know we're using our capital wisely we're not.

Putting too much into a a work in progress or whip on that a without having our builders kinda, they're with us payment progresses I think our contracts are gonna look very similar in the second phase as they looked in the first phase where we're gonna get.

Maybe a third a third of third delivery schedule, where we'll get paid a portion of the lot of top the finished lot cost.

As we plan to property and then a progress payment as we deliver what utilities and then a final progress payment as we deliver the final lot final finished lots.

I think it's probably going to be a little bit stronger I I would like to be able to disclose that price into I think we know or have pretty good idea about that but until we get our contracts finalized with each car builders I'm going to keep that in our pocket and will we'll we'll look forward to giving you that guidance as that becomes available to us.

Let's move onto page 10, So page 10, as you know, we also supply water and wastewater services and one of the biggest activities that we have in the water segment is supplying water to the oil and gas industry, when the oil and gas industry existed.

They seem to have taken a hiatus a this year just mostly due to the price of oil. We did have some repositioning of the assets in the field. So our largest operator conoco Phillips had sold.

Their position in this field to a group called the private company called Chris Stonepeak resources.

You can you can Google them and find out a little bit more about them, but they're they're almost exclusively owned by a Canadian pension funds. So they operate a little bit differently, then maybe a public or E. M. P company.

They really do have a long term focus I've been very impressed with their management and their leadership.

In front of this transition how they have a cat how they've handled the transition you know the communication channels that we have with them about how they look to take a look at the field and then also what's going on in the current market you know with oil in the mid Twentys now, which is you know there's a significant improvement than it was maybe six or seven.

10 days ago, but looking at oil in the low twentys.

It certainly push it puts a lot of pressure on E. N P company's ability to really invest into a field right now and so I think most of their.

Activity is on hold for 2020 in terms of new exploration I wanted the things that they did have a carryover from conoco Phillips is they have.

13 wells that conoco had drilled.

And completed on the drilling side, but they hadnt a frac those wells. So if you look at some of the low hanging fruit and they look at this is to say you know based on what will make a sort of a month to month assessment based on the price of oil as to how we want to pick up and and the timing of completing those wells. So that they can get those in production and really.

A very modest investment to bring on production or at least complete those wells and hold those leases by production. So.

There's a little bit of opportunity for us to have some activity on that but I don't have a lot of guidance on that because they don't have a lot of guidance just yet.

Moving to the next slide Slide 11, let me give you some of the financial metrics our water assets. So our assets are going up a can continue to go up from year end of last year as well as do our cash and investments. So you always want to own companies that have increasing assets as close to increase.

In cash position that usually means that they're making money and you know this is a one of those areas, where we find ourselves in a very unique position.

Where were were very strong and very highly appreciating asset base and a very strong and not making very much money, but a lot of liquidity within the company.

I'm sorry, let me take that that could be misinterpreted, we are making a lot of money our cash it's not making a lot of money right now.

Let me role to the next slide Slide 12 that gives you kind of the metrics on the piano operating revenues or you know that's the six month the number of $14 million.

Over what was last year. So we're a little bit ahead of where we were this month. This this time last year, a and then a growth in income from continuing operations on the share basis or 25 cents a share and then you know profitability. If you take a look at the net income after tax a you know we are we.

I've used up all our tax credits. So now I end up having to send some of those dollars to help support that two trillion dollar.

Benefit package that a Washington is sent out but we are now you know happy to be reporting you know very very good margin after tax profit.

On page 13 will give you kind of a breakdown on where that money is coming from so if you look at a the land development segment a little over.

10 $10.8 million on lot sales.

The taffy revenue is about $2.8 million so were.

Getting a good good or monetization of the equity value that we haven't a water system.

What has fallen off is obviously a fracking water revenue so very nominal revenue for this fiscal year in the fracking revenue, we really haven't had a single frac in this in this fiscal year.

That that revenue that you see there that $57000 is sort of incidental water that would go into a a pad site for Oh, you know any construction activity in the pad site waterfront them compaction or number of things like that and then you know we also have some oil and gas or minerals as.

And what you see is kind of a substantial tick up in our oil and gas royalties and that was because conoco had drilled and completed.

Another four well pad site on.

Some of our land and if you if you remember we have two sections, where we carry forward a net mineral interest on that this is in the smaller portion of that we have one eighth pooling and where these four wells are and then in the other pooling interest we have three eight said that so this is even into smaller well pooling.

So it gives you kind of an impact on the fact that you know this is a very oil rich field and but for the price of oil being in the twentys. It would be being developed on a pretty aggressive basis and so there will be cycles in that this too will end in terms of or the the pricing or that we have currently.

In the oil sector.

And you know we will continue to be able to monetize that in terms of our mineral the state as well as the opportunity to share our water assets and sell water for fracking revenue.

Our next slide balance sheet impact so that gives you kind of a.

Period over period balance sheet impact.

And then on the slide 15 sort of the piano a one of the non-GAAP measures there that I think a good to keep track of is our sort of our EBITDA. Our non-GAAP EBITDA. There. So you got 8.7 million for the six months ending so when you look at sort of trending on how does the company doing with its assets.

You know your your investment to into a these assets over the.

Those many years has really started to really benefit our shareholders and really provide value to that.

So with that [noise].

But do you want to spend a little bit of time talking about sort of our unique or.

The world that were in sort of today and talk about some of our response to the to the virus impacts water and wastewater our central services. So we're one of those exempt industries in our employees are exempt so our day to day operations are pretty much a pretty normal I would say our field.

Crude.

Using.

Our field crews are pretty I'd say standard a you know we have the the typical folks that are going to be in and out of.

You know a flu season, we are very particular about you know if somebody gets sick, we want them to stay home. We give them you know the company as a employee centric company, we have very generous a P.D.O. policy. So we want to make sure that one day take care of their health, but then they also make sure that we take care of all of our coworkers health as well but.

That said you know we do have to be on site, we do have to make sure that the water keep slowing and wastewater keeps being processed.

Our our office personnel, probably 80, 20 mix, where we have 80% of the people still committing to the office, we tried to stick to our offices and maintain our distances from each other just just to have best practices and make sure that you know we have continued healthy professionals here, but we do have some folks that.

Have the type of job responsibility, where they can come you from home and they do do a very fishing job and are very a.

Very productive being able to do that some of our engineers and.

Accounting staff can do some of that stopped remotely.

Our builders.

Can you to complete the houses that they have under contract. They have said that there they're walk throughs. A you know the on site traffic is down substantially and that's really primarily because Colorado like I think most states in the U.S., our on sort of a stay at home period, where you know.

Other than essential activities, there, there's sort of discouraging that essential activities that said the construction industry itself is classified as essential so while they may not have a lot of construction. They do have a lot of contracts on a lot of homes that are in the pipeline and there is there continues to be at.

A lot of activity on site. So those homes that had started construction or that they have contracts for they continue to start new starts they continue to complete those homes because their specific delivery timelines on that and we have to support that so our field crews are out there setting meters, making sure.

We have inspections on on water and sewer lines and all that up at that activity.

What else I I think I did mentioned the oil and gas activity. You know that has been deferred for 2020, but again there are 13 wells that are sort of that low hanging fruit and we'll see how they are new our new partner looks to capitalize on being able to invest.

In those new a new activities and at or I'm, sorry, those existing wells to frac, those and bring those things on to market.

If you take a look at our phase two we are in conversation.

With as many as seven different builders, we don't think we have room for all seven builders, but we have.

We've sort of put it in front of seven national Homebuilders and all seven want to be in the project and we're trying to balance out each individual builder with what their product specialties are so some build their specialize on paired products. Some builders have townhome product some builders have alley load product and some builders don't.

So we want to figure out and really find a market segmentation for each of the builders are to be able to get down to have some some value proposition of doing what they do well segment out the different types of Oh players that we have on the side and really looking to finalize.

Those agreements within the next 90 days or our opportunity would be to be able to be under construction and be in the ground sometime late this year, you know I would say I keep saying September October, but because of wherever out with daughter current market conditions I'm I'm looking for maybe November December timeframe.

We'll see how this continues on but still being in a position where we can deliver lots for.

You know that sometime in 2021 timeframe and then you know they can start constructing on some of their model homes and that'd be really opportunistic by selling some of what their product itself. So some of the builders that we haven't our first phase habit strong interest in being in our second phase as well as some new builders. So.

Looking at how that traffic is going to go through the winter of 21 as well. So they can continue to build through the seasons on that.

So with that what I'd like to do it turn it back over to the moderator maybe open it up to some questions. I know you all probably got a lot of questions about you know.

How how we're handling all of the activity and sort of what this a current market conditions might impact on the company so with that I'll turn it back over.

Thank you at this time, we will now be conducting our question answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation Tony will indicate that your line is in the question Q and they also press star too if you would like to remove your question from the Q for anyone using speaker equipment that maybe.

Necessary for you to pick up your handset before pressing the star keys, one moment, please while we pull for questions.

Our first question comes from Elliott Night of Night Advisors, Sir you May now ask your question.

Hi, Mark.

Elliott how are you.

Well. Thank you very much you haven't said anything on the call about the commercial.

Got 160 acres there to a highlight there could you tell us what's your plans are there and what the timetable what timetable do you anticipate thank you.

Oh, great question so.

While I well I'm very excited about the residential component of that and that's kind of where a lot of my attention has been occupied just solidifying those contracts with the builders you're right. We have a very large commercial component to this property and commercial usually lags a residential development I would say.

Yeah.

You know we've gotten that a significant we more interest excuse me significantly more interest this year than last year on our commercial piece, but not really to the point, where we have found the right opportunity yet a lot of the interest.

I'd say.

70% of the the calls and the serious calls on that have been people that want to put it under contract and then they want to market to somebody who's actually going to develop and yes, we have the flexibility to be able to go from you know our position to a direct user rather than having an intermediate intermediary and they're not.

That we're gonna be building it or not that we think that that we have for significant value independent of somebody that would say I you know I want to five five acres and then I want to bring a deal to Walmart or to Kroger certainly those are the opportunity to do that and if they have that type of structure.

That's that's where we are interested.

Where we looked at commercial where it has opportunities for both retail and commercial so you'll have a lot of employment base it'll have a lot of you know.

Product offerings, where you can get you know you'll have the typical walmarts targets, a big box stores home depots.

The fast casuals on the restaurant side sort of a mixed use of really all different types of retail and commercial uses out there and so we're looking at kind of the right model and and each time, we kind of configure our land plan. We're looking at some of the demographics that we have on that and what those demographics can bring to.

Two.

The type of retail or commercial player. That's there, but I would say that still if I if I scale this on saying.

On a one to 10, where I've got people building and 10 would be I've got people building or commercial installations out there and one being somebody made a call to us on I'd say, we're at the three four range on that so I think we're still pretty early on that I would expect that to.

Pick up probably in the next 18 months as we get closer to the 500 homes that are under a better occupied and we get a lot more traffic out at Sky Ranch, where they can kind of monitor rooftops and census counts out there for.

You know getting a getting a you know lifetime or getting a fitness center out they're getting a bookstore out there. So we look at it as we'd like to we'd like to hold that a little bit longer than maybe most developers would so that we are participating more in the end value up that not necessarily building devalue lineup.

Participating more on the in value by just being patient with it.

Sure there now how far do they have to drive to a supermarket through a home depot two or theater.

So it'll be it's almost triangulated and it's almost about 10 miles.

In three different directions, it'd be 10 miles to the west I call. It eight miles to the west 10 miles to the south and 11 miles to the east to find those types of installation. So we're very well located on that and the and really there's not much opportune.

Unity.

On land other than ours, because they don't have the interchange that would give you that accessibility and that that kind of the transportation network to the site itself.

Which makes our commercial all the more attractive it does and then it has a several things I mean, one you do you do benefit a lot in the value of commercial real estate and you know we also benefit from the value of a commercial water user out of that so we see value not only in the land we see value in taps.

We see value and selling water, but then there's a tremendous value here in Colorado for Reimbursables and I know I've talked about that in the past, but when you take a look at how Colorado is incentivize our commercial real estate generates four times the equivalent a V that a residential.

Avi.

Pass and so it does allow us to really capitalize on our full reimbursables and we did do a bond offering that I talked about that about last call, which really encompassed about 35% of the the reimbursables that we accrued for the first phase, but that was value weighing all of that residential solar.

When you look at it.

We'll have we should have surplus revenue when you add in the commercial components. So that will become a very important component for us to help realize and help monetize some of those accrued reimbursables.

Thank you.

You bet stay safe.

Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Our next question comes from Bill Miller with J.M. Hartwell, Sir you May proceed with your.

Questions.

Mark high.

Hi, Bill.

Things sound it sounds like going really well she worked out three years I'd say.

I want to know how what percentage of your revenue at that time will be recurring and not be tap sales or land sales or whatever but what.

What percentage will be recurring at that point.

So what I would say you know that really drills down into kind of the.

ER water connections. The monthly you know month over month year over year connections that we have into the system today, we stand somewhere around.

[noise] pretty close to 500 water connection and then I think maybe 180 sewer connections and the reason we've got a disconnect between the water and sewer connections that we have a lot of irrigation connection. So we have more a water that doesn't create sewers and then.

Water that isn't a house, creating sewer those will catch up as we get more of the single family residents, but we'll still have more water connections. Then we'll have stewart connections, but within three years I think were built out on at least the first phase or the 500. So you know, adding if he would that would probably add another.

400 connections so will more than I would say just in the first phase of Sky ranch will more than double or the size and the connections that we have there we continue to do well and our acquisition done at while point. So that continues to build out so year over year I think were up almost.

70% from when we bought that in terms of the number connections that are adding we're getting close to build out on the residential component of that there's still a little bit of pedal left in that on the commercial side. So that will continue to build out will add more connections.

So if that gives you kind of a an indication we could be in the thousand to 1200 range on that and then continuing to grow and what we what we'll likely see bill and I know we've talked about this but we'll likely see you know will have multiple phases going on at Sky Ranch and then as.

Other properties that we don't necessarily owned but that we extend our utilities to continue to add and grow to the system that really builds into sort of the capacity of our water portfolio and so we want to have multiple projects going on at the same time that add capacity to our system and that and so.

That's where you're going to see if you look at our capacity of our portfolio, serving 60000 connections and we're serving 500 today you know we will have a bell curve on that well where that will continue to grow slower on the front end then you get up to some very high numbers for a number of years and then have a trail off as we get to.

Some of the build out scenarios on our portfolio, but you know to get out 60000 connection you know that's still probably 30 years out, but I think we still look very good in the short run.

Are there any other easy pickings on the acquisition front.

Oh I was hoping somebody would ask me what am I going to do with all our cash.

I certainly isn't it.

Yes. It is honestly and you know and I know you know it we've talked about this in the past in terms of our philosophical view of how we manage our cash and you know if I'm at three and a half million dollars a year in my overhead and I've got 25 $30 million or cash that's a little bit long on the cash side to be sitting on.

The balance sheet and I'm you know.

It's a high quality problem and I'm not going to make any money investing that T bills right now I've got to give money up and that 70 bill on the short stuff. So.

No we're looking to be opportunistic here a we're looking for acquisitions that may have otherwise not been available to us or added pricing that might be a little bit more advantageous much like when we acquired Sky Ranch, you know I'm looking for land interest that don't have water to them, where we can pick that land. It just up I'm looking for you know water systems that.

Or kind of be stressed and this market condition and you know may need somebody to come in and help make some improvements to them that have the liquidity to make some improvements in them. So the acquisition costs are going to be a little bit more favorable for us.

And you know opportunities, where we can extend infrastructure to areas that give us more connections and more customer. So yeah. I know that's been my mantra that you know we've got our nets out there, but this is an opportunity where when you get that this kind of stress into the system that those usually present good opportunities and so we'll take a look.

It does we still want to be disciplined about our metrics and you know take a look at a weather right whether I get excited about it or not I think by boards very very disciplined and very.

Acclimated to throttling back some of my enthusiasm at times, but you know, they're also looking for opportunities and to to maybe risk on with some of that stuff and be opportunistic with this current condition, we'll see.

Well, yes. There is every time to be aggressive about the whole thing aren't we approaching that at the moment.

Right.

I I I tend to indicate I tend to agree with you on that I think the proof being the putting to see what happens and and how how this this current market condition impacts businesses property owners entrepreneurs you know the whole nine yards are going to its going to have a very significant trickle down effect.

And you just got to know that the liquidity will get a premium today and so that's having a very healthy balance sheet. We have a very solid liquid balance sheet that weekend, we can pounce on deals and so you know other people's problems and you know some.

You know so it's not necessarily a win lose relationship because current market conditions are what they are you know what I would say that you know when we acquired Sky Ranch, we were in the very similar situation and having the access that we had then and having sort of a longer time horizon to be able to.

Make sure that we can get those assets and not impact to the shareholder value and really use those assets to create more shareholder value by adding water to it and increasing the value that way and then adding a infrastructure on the utility sides, where we acquired some utilities in the past as well all of those are great.

Opportunities for us.

Well you know your record the Super of not only the Sky ranch, but with the acreage you brought down on the Arkansas River. So I hope the borders and thing.

I hope the board isn't being.

I've trial on your or constraint on your activity now now.

And when you should have somebody devoted to looking at these things if not you do you have somebody else who is the assignment is to go out and scouts of these opportunities.

Oh, well what do you just gave me another loss softball, there. So that gives me an opportunity to introduce a Kevin Mcneil, who is a we welcome back to the company was our controller about a decade ago, but.

But he's got to be our new CFO and that's exactly discharges to you know get out there and start combing the the landscape and and see what opportunities are gonna be available to us and put some metrics to it and see if we can't generates an action. There. So that you know it's exactly great time for.

Sure Kevin to come back to us on that or you know a lot of activity and there's going to be plenty of deals that are that we can come through so you know, while well I think I still love a little bit a game and I. Appreciate your kind words, there I might give you my wife, so number so that you can give me a sluggish there.

But it does get yeah, I mean, we really we are taking it very seriously and we are stacking up to be able to be aggressive on that.

Great I'm glad to hear that because you'll get paid all somebody for recurring revenues.

Are you.

You are very astute on that and never felt the point that up and.

Well I'm pointing out the obvious is a scale I have.

[laughter].

Well, thanks are kicking in and stay healthy.

Your two alright, great jobs.

Thank you. Our next question comes from Bill Cunningham, Sir you May proceed.

Hi, Mark I'm I had question on.

You know, what's going on with the actual contracts being signed my <unk>. Most recent article on seeking alpha talked about.

You know what Richmond Americans reporting its great that they report real time, what's happening with contract signings.

And I've been monitor money carefully recently, because I expected to see potentially cancellations because that's what I've seen all along with their website is you'll see you know.

Something reported as sold because the contracts been signed and then it goes out because of you know assuming you know maybe the purchaser doesn't you know qualify or something else goes on.

So there's lot of changing there. So I was I've been looking at the site. The last couple of weeks and expecting to see cancellations with everything going on in the market and instead, there's been zero cancellations and there's actually been a number of new contracts signed in the past week, So I'm kind of curious as to what.

Your general spin is not just with pure cycle and Sky ranch, but what you're seeing with the market overall and housing and how some of this may want to look at the real estate market in general the next few months or couple of years.

A great question, one that it's probably I can only give you anecdotal comments on but.

So I guess I, if I reference anything and this will be kind of a first hand experience.

You know Kevin coming back you know he moved back he relocated back from.

From Austin, Texas, and you know, we typically don't like to welcome Texans in here, but at least they have the tip of the right voting pattern.

But anyway, he come back and and he really wanted to buy a house in Sky Ranch and so you know as he was moving back he went out and met with all three builders and so they listen I want to buy house and they said great. You know were nine months out there, but I need a housekeeping in March and they said well.

Good luck you can't get one.

And not only did you find that experience here, but in kinda surrounding area and so one of the things that we know is that there's there is strong demand at Sky ranch their strong demand in the Iseventy corridor and so you look at where we're at we're in the right location and I think we're in there.

Right price point in that and so I I firmly believe that we will continue to see that same pace of contract I know that there you know their traffic is gonna be down just because everybody's staying at home, but I know a bunch of people are sitting around the kitchen table talking about you know what this house is too small.

You know the kids are home and everybody sit around there. They are climbing alone has gone I want something else.

So I think you're going to find some pent up demand and some people are going to you know I.

I think our governor extended it to another couple of weeks, but.

Even even even outside that these people have showings you know there's still out there on site. They still have showing they still have people that you know havent need and and I really believe you're going to see a rush of people coming out putting the stuff under contract and then everybody's going to be beat me up saying you know why didn't you get that second price.

Correct online sooner.

So I think it's going to be a high quality problem for us we want to we want to be very we want to be very reacting to it we want to be able to.

Invest some of that that liquidity position, we have into some acquisition opportunities as well as be able to invest into some of our next phase lots.

You know I try and time those contracts. So we we play on the houses money and then we take our equity in the back end, but Ah I think that structure will still serve us well and give us some strong.

You know.

Rope to go out there and last so some of these deals.

Yeah. It was truly surprising to see no cancellations and new contracts are being signed in the last few weeks totally separate question I also noticed you've still got some revenue coming in from your oil and gas activities.

And although the whole fracking industry. It's a you know its a.

Unprofitable industry at this point every dollar of revenue basically you get in is just income you're not dealing with costs against it so although revenue was down.

You're generating a certain amount of income from it it's not it's never going to generate a loss for you and I think that's right around where you know conscious very important but very important distinction and there's there's it's a it's a it's all variable cost to US right. So I don't have a lot of fixed costs that are outside that so I.

I can dial that up I can dial that down and you're right. If I'm not getting any revenue and you know I'm not incurring the cost attributable to that.

That is a very attractive segment for us.

Okay. Thank you mark that.

Question stay healthy.

Thank you.

Mr. Hurting it looks like we have no further questions. At this time would you like to make any closing remarks I would think.

So again I want to thank all of you offer your continued loyalty and your continued support you know we're we're very proud of.

Being in this position and really it's.

If they did it's really a discipline of you know you guys having patients the company having patients. The board you know sticking to it's it's it's.

Metrics management sticking to their metrics and being able to rightsize the company and and grow the company and acquire valuable assets. We will continue to do that you know, we're very thankful of having you know our liquidity in our highly appreciating assets in times like these and we will come.

You need to try and make good decisions on your behalf.

And you know what will be the foreshadow anything coming up.

I'm, assuming that we returned to a bit more normal I'd like to have another investor day for you all to come out again over the summer. When you know you can see a ton of things going on much more activity on the site. So as we get a little bit closer into that maybe over into July timeframe.

Send out a little save the date and reaching and welcome you all that have been following the company. If you haven't had a chance to come out and those of you who are new to the company have a chance to kick the tires because there is nothing quite like seeing it and are getting your arms around for a real tangible view of what we do so Ah. Thank you.

And with that I'll sign off and I'll look forward, if anybody who had a question that couldn't get through that had a technical challenge don't hesitate to give me holler.

Thanks.

Thank you at this time. This concludes todays teleconference. You may now disconnect. Your lines. Thank you for your participation.