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Investors / Press Release

The New Home Company Reports 2019 Second Quarter Results

Company Release - 7/30/2019 6:00 AM ET

ALISO VIEJO, Calif.--(BUSINESS WIRE)-- The New Home Company Inc. (NYSE: NWHM) today announced results for the 2019 second quarter.

Second Quarter 2019 Financial Results

  • Net income of $1.6 million, or $0.08 per diluted share, compared to $0.1 million, or $0.01 per diluted share, for the 2018 second quarter
  • Home sales revenue up 20% to $140.5 million; deliveries up 56%
  • Total revenues of $162.7 million vs. $155.6 million
  • Backlog dollar value of $201.6 million
  • Repurchased $7.0 million of the Company's 7.25% Senior Notes due 2022; debt-to-capital ratio of 61.1% and a net debt-to-capital ratio of 57.7%*, a sequential decrease of 240 basis points
  • Generated $31.1 million in cash flow from operations

"I am very pleased with our second quarter results which included both top and bottom-line growth while making significant progress towards reducing our leverage and strengthening our balance sheet," said Larry Webb, Chairman and Chief Executive Officer of The New Home Company. "Home sales revenue increased 20% year-over-year from 56% more home deliveries, and our pretax income was up meaningfully over the prior year. In addition, we repurchased $7.0 million of senior notes during the quarter which, when combined with a net $18 million pay down of our revolving credit facility, resulted in a 240 basis point sequential decrease in our net debt-to-capital ratio to 57.7%*."

Mr. Webb continued, "We experienced solid sequential improvement in our sales absorption pace across all markets, with the 2019 second quarter monthly absorption rate of 2.4 sales per community up 41% over the 2019 first quarter, resulting in a 38% sequential increase in net new orders. We also continued to recognize benefits from our strategic repositioning to more affordable product as sales from these communities represented a higher proportion of our 2019 second quarter net new orders, as well as a higher sales absorption pace than our companywide average."

Mr. Webb concluded, "We remain committed to the initiatives established earlier this year to maintain a lower cost structure, strengthen our balance sheet and generate long-term value for our shareholders. I am proud of the progress we've made to date and we will continue to focus on these initiatives to further position the Company for long-term success."

Second Quarter 2019 Operating Results

Total revenues for the 2019 second quarter were $162.7 million compared to $155.6 million in the prior year period. Net income attributable to the Company for the 2019 second quarter was $1.6 million, or $0.08 per diluted share, compared to $0.1 million, or $0.01 per diluted share, in the prior year period. The year-over-year increase in net income was primarily attributable to a 20% increase in homebuilding revenue, a 200 basis point improvement in our SG&A rate, a $0.3 million increase in joint venture income and a $0.6 million gain on early extinguishment of debt. These items were partially offset by a 50 basis point decline in home sales gross margins and a lower fee building gross margin due to lower fee construction activity.

Wholly Owned Projects

Home sales revenue for the 2019 second quarter increased 20% to $140.5 million, compared to $117.5 million in the prior year period. The increase in home sales revenues was driven by a 56% increase in deliveries, partially offset by a 23% decrease in average selling price to $930,000 from $1.2 million a year ago. The lower year-over-year average selling price was impacted by mix, particularly in Southern California where the 2018 second quarter included deliveries from several higher-priced, closed-out communities in Orange County.

Gross margin from home sales for the 2019 second quarter was 12.1% as compared to 12.6% in the prior year period. The 50 basis point decrease was primarily due to higher interest costs and incentives, which were partially offset by a product mix shift. Adjusted homebuilding gross margin, which excludes interest in cost of home sales, was 16.5%* for the 2019 second quarter, compared to 15.8%* in the prior year period.

Our SG&A expense ratio as a percentage of home sales revenue for the 2019 second quarter was 11.1% versus 13.1% in the prior year period. The 200 basis point decrease in the SG&A rate was primarily due to improved leverage from higher home sales revenue, reduced marketing and advertising spend as compared to last year and to a lesser extent, lower personnel expenses. These decreases were partially offset by higher amortization of capitalized selling and marketing costs.

Net new home orders for the 2019 second quarter decreased 21% to 154 homes due to a slower monthly sales absorption rate, partially offset by an increase in average selling communities. The monthly sales absorption rate for the Company was 2.4 for the 2019 second quarter compared to 3.2 for the prior year period. Due to community closeouts late in the 2019 second quarter, we ended both the 2019 and 2018 second quarters with 20 active communities.

The dollar value of the Company's wholly owned backlog at the end of the 2019 second quarter was $201.6 million and totaled 207 homes compared to $290.9 million and 307 homes in the prior year period. The decrease in backlog units and value was driven by a higher backlog conversion rate for the 2019 second quarter coupled with a 25% decline in the monthly sales absorption rate. Our backlog conversion rate was 74% and 46%, respectively, for the 2019 and 2018 second quarters. The increase in the 2019 conversion rate resulted from the Company's move to more affordably priced product, which generally has quicker build cycles, as well as the Company's success in selling and delivering a higher number of spec homes.

Fee Building Projects

Fee building revenue for the 2019 second quarter was $22.3 million, compared to $38.1 million in the prior year period. The decrease in fee revenues was largely due to less construction activity in Irvine, California due to lower demand levels in that submarket. Additionally, management fees from joint ventures and construction management fees from third parties, which are included in fee building revenue, decreased to $1.1 million for the 2019 second quarter as compared to $1.4 million for the 2018 second quarter. The lower fee building revenue and decrease in management fees resulted in a fee building gross margin of $0.5 million for the 2019 second quarter versus $1.1 million in the prior year period.

Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture income for the 2019 second quarter was $0.2 million as compared to a loss of $0.1 million in the prior year period, with the majority of the income generated from the Company's Mountain Shadows luxury community in Paradise Valley, Arizona. At the end of 2019 and 2018 second quarters, our joint ventures had six and seven actively selling communities, respectively.

Balance Sheet and Liquidity

As of June 30, 2019, the Company had real estate inventories totaling $542.0 million and owned or controlled 2,784 lots through its wholly owned operations (excluding fee building and joint venture lots), of which 1,180 lots, or 42%, were controlled through option contracts. The Company ended the 2019 second quarter with $48.2 million in cash and cash equivalents and $375.1 million in debt, of which $66.0 million was outstanding under its revolving credit facility. At June 30, 2019, the Company had a debt-to-capital ratio of 61.1% and a net debt-to-capital ratio of 57.7%*.

Repurchase of Senior Notes

During the 2019 second quarter, the Company repurchased and retired approximately $7.0 million of its 7.25% Senior Notes due 2022 for a cash payment of approximately $6.3 million, which resulted in a $0.6 million pretax gain on the early extinguishment of debt.

Guidance

The Company's current estimate for the 2019 third quarter is as follows:

  • Home sales revenue of $100 - $120 million
  • Fee building revenue of $10 - $15 million
  • Home sales gross margin of 12.0% - 12.5%

The Company's current estimate for full year guidance for 2019 is as follows:

  • Home sales revenue of $480 - $510 million
  • Fee building revenue of $65 - $75 million
  • Home sales gross margin of 12.0% - 12.5%

Conference Call Details

The Company will host a conference call and webcast for investors and other interested parties beginning at 11:00 a.m. Eastern Time on Tuesday, July 30, 2019 to review second quarter results, discuss recent events and results, and discuss the Company's quarterly guidance for 2019. We will also conduct a question-and-answer period. The conference call will be available in the Investors section of the Company’s website at www.NWHM.com. To listen to the broadcast live, go to the site approximately 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, dial 1-877-407-0789 (domestic) or 1-201-689-8562 (international) at least five minutes prior to the start time. Replays of the conference call will be available through August 30, 2019 and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the pass code 13692270.

* Net debt-to-capital ratio and adjusted homebuilding gross margin (or homebuilding gross margin excluding interest in cost of home sales) are non-GAAP measures. A reconciliation of the appropriate GAAP measure to each of these measures is included in the accompanying financial data. See “Reconciliation of Non-GAAP Financial Measures.”

About The New Home Company

NWHM is a new generation homebuilder focused on the design, construction and sale of innovative and consumer-driven homes in major metropolitan areas within select growth markets in California and Arizona, including Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The Company is headquartered in Aliso Viejo, California. For more information about the Company and its new home developments, please visit the Company's website at www.NWHM.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, anticipation, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning our revenues, community counts and openings, the timing and success of specific projects, our ability to execute our strategic growth objectives, gross margins, other projected results, income, earnings per share, joint ventures and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “should,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” “target,” “forecast,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation; a downturn in the homebuilding industry; changes in sales conditions, including home prices, in the markets where we build homes; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; volatility and uncertainty in the credit markets and broader financial markets; our business and investment strategy including our plans to sell more affordably priced homes; availability of land to acquire and our ability to acquire such land on favorable terms or at all; our liquidity and availability, terms and deployment of capital; changes in margin; write-downs; shortages of or increased prices for labor, land or raw materials used in housing construction; adverse weather conditions and natural disasters (including wild fires and mudslides); our concentration in California; issues concerning our joint venture partnerships; the cost and availability of insurance and surety bonds; governmental regulation, including the impact of "slow growth" or similar initiatives; changes in, or the failure or inability to comply with, governmental laws and regulations; the timing of receipt of regulatory approvals and the opening of projects; delays in the land entitlement process, development, construction, or the opening of new home communities; litigation and warranty claims; the degree and nature of competition; the impact of recent accounting standards; availability of qualified personnel and our ability to retain our key personnel; and additional factors discussed under the sections captioned “Risk Factors” included in our annual report and other reports filed with the Securities and Exchange Commission. The Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(Dollars in thousands, except per share amounts)

Revenues:

 

 

 

 

 

 

 

Home sales

$

140,464

 

 

$

117,460

 

 

$

239,650

 

 

$

196,897

 

Fee building, including management fees

 

22,285

 

 

 

38,095

 

 

 

41,947

 

 

 

81,889

 

 

 

162,749

 

 

 

155,555

 

 

 

281,597

 

 

 

278,786

 

Cost of Sales:

 

 

 

 

 

 

 

Home sales

 

123,525

 

 

 

102,678

 

 

 

210,094

 

 

 

172,372

 

Fee building

 

21,770

 

 

 

37,038

 

 

 

41,038

 

 

 

79,737

 

 

 

145,295

 

 

 

139,716

 

 

 

251,132

 

 

 

252,109

 

Gross Margin:

 

 

 

 

 

 

 

Home sales

 

16,939

 

 

 

14,782

 

 

 

29,556

 

 

 

24,525

 

Fee building

 

515

 

 

 

1,057

 

 

 

909

 

 

 

2,152

 

 

 

17,454

 

 

 

15,839

 

 

 

30,465

 

 

 

26,677

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

(9,683

)

 

 

(9,466

)

 

 

(18,362

)

 

 

(16,105

)

General and administrative expenses

 

(5,841

)

 

 

(5,979

)

 

 

(13,232

)

 

 

(11,998

)

Equity in net income (loss) of unconsolidated joint ventures

 

185

 

 

 

(120

)

 

 

369

 

 

 

215

 

Gain on early extinguishment of debt

 

552

 

 

 

 

 

969

 

 

 

Other income (expense), net

 

(102

)

 

 

(92

)

 

 

(295

)

 

 

(118

)

Pretax income (loss)

 

2,565

 

 

 

182

 

 

 

(86

)

 

 

(1,329

)

(Provision) benefit for income taxes

 

(974

)

 

 

(67

)

 

 

(310

)

 

 

793

 

Net income (loss)

 

1,591

 

 

 

115

 

 

 

(396

)

 

 

(536

)

Net income (loss) attributable to non-controlling interest

 

(19

)

 

 

 

 

(19

)

 

 

11

 

Net income (loss) attributable to The New Home Company Inc.

$

1,572

 

 

$

115

 

 

$

(415

)

 

$

(525

)

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to The New Home Company Inc.:

 

 

 

 

 

 

 

Basic

$

0.08

 

 

$

0.01

 

 

$

(0.02

)

 

$

(0.03

)

Diluted

$

0.08

 

 

$

0.01

 

 

$

(0.02

)

 

$

(0.03

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

20,070,914

 

 

 

20,958,991

 

 

 

20,028,600

 

 

 

20,942,601

 

Diluted

 

20,095,533

 

 

 

21,024,769

 

 

 

20,028,600

 

 

 

20,942,601

 

CONSOLIDATED BALANCE SHEETS

 

 

June 30,

 

December 31,

 

2019

 

2018

 

(Dollars in thousands, except per share
amounts)

 

(Unaudited)

 

 

Assets

 

 

 

Cash and cash equivalents

$

48,224

 

$

42,273

Restricted cash

 

124

 

 

269

Contracts and accounts receivable

 

16,113

 

 

18,265

Due from affiliates

 

218

 

 

1,218

Real estate inventories

 

541,954

 

 

566,290

Investment in and advances to unconsolidated joint ventures

 

33,637

 

 

34,330

Other assets

 

32,987

 

 

33,452

Total assets

$

673,257

 

$

696,097

 

 

 

 

Liabilities and equity

 

 

 

Accounts payable

$

26,629

 

$

39,391

Accrued expenses and other liabilities

 

32,375

 

 

29,028

Unsecured revolving credit facility

 

66,000

 

 

67,500

Senior notes, net

 

309,060

 

 

320,148

Total liabilities

 

434,064

 

 

456,067

Equity:

 

 

 

Stockholders' equity:

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares outstanding

 

Common stock, $0.01 par value, 500,000,000 shares authorized, 20,096,969 and
20,058,904, shares issued and outstanding as of June 30, 2019 and December 31,
2018, respectively

 

201

 

 

201

Additional paid-in capital

 

192,691

 

 

193,132

Retained earnings

 

46,206

 

 

46,621

Total stockholders' equity

 

239,098

 

 

239,954

Non-controlling interest in subsidiary

 

95

 

 

76

Total equity

 

239,193

 

 

240,030

Total liabilities and equity

$

673,257

 

$

696,097

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

 

Six Months Ended

 

June 30,

 

2019

 

2018

 

(Dollars in thousands)

Operating activities:

 

 

 

Net loss

$

 

(396

)

 

$

 

(536

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Deferred taxes

 

 

 

(1,481

)

Amortization of stock-based compensation

 

1,089

 

 

 

1,704

 

Distributions of earnings from unconsolidated joint ventures

 

279

 

 

 

715

 

Abandoned project costs

 

19

 

 

 

43

 

Equity in net income of unconsolidated joint ventures

 

(369

)

 

 

(215

)

Deferred profit from unconsolidated joint ventures

 

 

 

136

 

Depreciation and amortization

 

5,042

 

 

 

2,646

 

Gain on early extinguishment of debt

 

(969

)

 

 

Net changes in operating assets and liabilities:

 

 

 

Contracts and accounts receivable

 

2,152

 

 

 

2,854

 

Due from affiliates

 

975

 

 

 

788

 

Real estate inventories

 

24,970

 

 

 

(53,108

)

Other assets

 

(2,240

)

 

 

(6,095

)

Accounts payable

 

(12,762

)

 

 

5,256

 

Accrued expenses and other liabilities

 

1,102

 

 

 

(14,217

)

Net cash provided by (used in) operating activities

 

18,892

 

 

 

(61,510

)

Investing activities:

 

 

 

Purchases of property and equipment

 

(8

)

 

 

(184

)

Contributions and advances to unconsolidated joint ventures

 

(4,120

)

 

 

(8,954

)

Distributions of capital and repayment of advances from unconsolidated
joint ventures

 

4,928

 

 

 

5,874

 

Interest collected on advances to unconsolidated joint ventures

 

 

 

178

 

Net cash provided by (used in) investing activities

 

800

 

 

 

(3,086

)

Financing activities:

 

 

 

Borrowings from credit facility

 

40,000

 

 

 

35,000

 

Repayments of credit facility

 

(41,500

)

 

 

Repurchases of common stock

 

(1,042

)

 

 

(2,072

)

Repurchases of senior notes

 

(10,856

)

 

 

Tax withholding paid on behalf of employees for stock awards

 

(488

)

 

 

(977

)

Net cash (used in) provided by financing activities

 

(13,886

)

 

 

31,951

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

5,806

 

 

 

(32,645

)

Cash, cash equivalents and restricted cash – beginning of period

 

42,542

 

 

 

123,970

 

Cash, cash equivalents and restricted cash – end of period

$

 

48,348

 

 

$

 

91,325

 

KEY FINANCIAL AND OPERATING DATA
(Dollars in thousands)
(Unaudited)

 

New Home Deliveries:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2019

 

2018

 

 

% Change

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

Southern California

91

 

$

95,534

 

 

$

1,050

 

61

 

$

87,278

 

$

1,431

 

49

%

 

9

%

 

(27

)%

Northern California

53

 

 

37,296

 

 

 

704

 

36

 

 

30,182

 

 

838

 

47

%

 

24

%

 

(16

)%

Arizona

7

 

 

7,634

 

 

 

1,091

 

 

 

NA

 

NA

 

NA

 

NA

Total

151

 

$

140,464

 

 

$

930

 

97

 

$

117,460

 

$

1,211

 

56

%

 

20

%

 

(23

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2019

 

2018

 

% Change

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

Southern California

152

 

$

160,127

 

$

1,053

 

105

 

$

131,858

 

$

1,256

 

45

%

 

21

%

 

(16

)%

Northern California

81

 

 

56,035

 

 

692

 

76

 

 

65,039

 

 

856

 

7

%

 

(14

)%

 

(19

)%

Arizona

17

 

 

23,488

 

 

1,382

 

 

 

NA

 

NA

 

NA

 

NA

Total

250

 

$

239,650

 

$

959

 

181

 

$

196,897

 

$

1,088

 

38

%

 

22

%

 

(12

)%

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

%
Change

 

2019

 

2018

 

%
Change

Net New Home Orders:

 

 

 

 

 

 

 

 

 

 

Southern California

90

 

104

 

(13

)%

 

148

 

173

 

(14

)%

Northern California

53

 

77

 

(31

)%

 

98

 

147

 

(33

)%

Arizona

11

 

13

 

(15

)%

 

20

 

15

 

33

%

 

154

 

194

 

(21

)%

 

266

 

335

 

(21

)%

 

 

 

 

 

 

 

 

 

 

 

 

Selling Communities at End of Period:

 

 

 

 

Southern California

 

 

 

 

 

 

11

 

11

 

%

Northern California

 

 

 

 

 

 

7

 

7

 

%

Arizona

 

 

 

 

 

 

2

 

2

 

%

 

 

 

 

 

 

 

20

 

20

 

%

 

 

 

 

 

 

 

 

 

 

 

 

Average Selling Communities:

 

 

 

 

 

 

 

 

 

 

 

Southern California

12

 

11

 

9

%

 

12

 

11

 

9

%

Northern California

8

 

7

 

14

%

 

8

 

7

 

14

%

Arizona

2

 

2

 

%

 

2

 

1

 

100

%

 

22

 

20

 

10

%

 

22

 

19

 

16

%

 

 

 

 

 

 

 

 

 

 

 

 

Monthly Sales Absorption Rate per Community (1):

 

 

 

 

 

 

 

 

 

 

 

Southern California

2.5

 

3.1

 

(19

)%

 

2.0

 

2.7

 

(26

)%

Northern California

2.3

 

3.7

 

(38

)%

 

2.2

 

3.6

 

(39

)%

Arizona

1.8

 

2.2

 

(18

)%

 

1.7

 

2.1

 

(19

)%

Total

2.4

 

3.2

 

(25

)%

 

2.0

 

3.0

 

(33

)%

(1) Monthly sales absorption represents the number of net new home orders divided by the number of average selling communities for the period.

 

Backlog:

As of June 30,

 

2019

 

2018

 

% Change

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

 

Homes

 

Dollar
Value

 

Average
Price

Southern California

86

 

$

92,438

 

 

$

1,075

 

139

 

$

141,718

 

 

$

1,020

 

(38

)%

 

(35

)%

 

5

%

Northern California

85

 

 

71,648

 

 

 

843

 

153

 

 

131,859

 

 

 

862

 

(44

)%

 

(46

)%

 

(2

)%

Arizona

36

 

 

37,503

 

 

 

1,042

 

15

 

 

17,354

 

 

 

1,157

 

140

%

 

116

%

 

(10

)%

Total

207

 

$

201,589

 

 

$

974

 

307

 

$

290,931

 

 

$

948

 

(33

)%

 

(31

)%

 

3

%

Lots Owned and Controlled:

As of June 30,

 

2019

2018

%
Change

Lots Owned

 

 

 

Southern California

581

505

15

%

Northern California

729

314

132

%

Arizona

294

299

(2

)%

Total

1,604

1,118

43

%

Lots Controlled (1)

 

 

 

Southern California

200

807

(75

)%

Northern California

503

959

(48

)%

Arizona

477

343

39

%

Total

1,180

2,109

(44

)%

Lots Owned and Controlled - Wholly Owned

2,784

3,227

(14

)%

Fee Building (2)

1,231

1,078

14

%

Total Lots Owned and Controlled

4,015

4,305

(7

)%

(1) Includes lots that we control under purchase and sale agreements or option agreements subject to customary conditions and have not yet closed. There can be no assurance that such acquisitions will occur.

(2) Lots owned by third party property owners for which we perform general contracting or construction management services.

 

Other Financial Data:

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

Interest incurred

$

7,606

 

 

$

6,612

 

 

$

15,367

 

 

$

13,328

 

Adjusted EBITDA(1)

$

11,119

 

 

$

6,564

 

 

$

18,025

 

 

$

10,127

 

Adjusted EBITDA margin percentage (1)

 

6.8

%

 

 

4.2

%

 

 

6.4

%

 

 

3.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

LTM(2) Ended June 30,

 

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

Interest incurred

 

 

 

 

$

30,416

 

 

$

26,869

 

Adjusted EBITDA(1)

 

 

 

 

$

47,796

 

 

$

49,007

 

Adjusted EBITDA margin percentage (1)

 

 

 

 

 

7.1

%

 

 

6.4

%

Ratio of Adjusted EBITDA to total interest incurred(1)

 

 

 

 

 

1.6

x

 

 

1.8

 

x

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

2019

 

2018

Ratio of debt-to-capital

 

 

 

 

 

61.1

%

 

 

61.8

%

Ratio of net debt-to-capital(1)

 

 

 

 

 

57.7

%

 

 

59.0

%

Ratio of debt to LTM(2) Adjusted EBITDA(1)

 

 

 

 

 

7.8

x

 

 

9.7

x

Ratio of net debt to LTM(2) Adjusted EBITDA(1)

 

 

 

 

 

6.8

x

 

 

8.6

x

Ratio of cash and inventory to debt

 

 

 

 

 

1.6

x

 

 

1.6

x

(1) Adjusted EBITDA, Adjusted EBITDA margin percentage, ratio of Adjusted EBITDA to total interest incurred, ratio of net debt-to-capital, ratio of debt to LTM Adjusted EBITDA and ratio of net debt to LTM Adjusted EBITDA are non-GAAP measures. Please see "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of each of these measures to the appropriate GAAP measure.

(2) "LTM" indicates amounts for the trailing 12 months.

 

KEY FINANCIAL AND OPERATING DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

% Change

 

2019

 

2018

 

% Change

Financial Data - Unconsolidated Joint Ventures:

 

 

 

 

 

 

 

 

 

 

 

Home sales revenue

$

50,567

 

 

$

29,938

 

 

69

%

 

$

88,694

 

 

$

61,178

 

 

45

%

Land sales revenue

 

8,511

 

 

 

3,941

 

 

116

%

 

 

12,671

 

 

 

4,714

 

 

169

%

Total revenues

$

59,078

 

 

$

33,879

 

 

74

%

 

$

101,365

 

 

$

65,892

 

 

54

%

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

1,790

 

 

$

(286

)

 

726

%

 

$

2,303

 

 

$

518

 

 

345

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating Data - Unconsolidated Joint Ventures:

 

 

 

 

 

 

 

 

 

 

 

New home orders

 

28

 

 

 

42

 

 

(33

)%

 

 

64

 

 

 

78

 

 

(18

)%

New homes delivered

 

53

 

 

 

36

 

 

47

%

 

 

90

 

 

 

68

 

 

32

%

Average selling price of homes delivered

$

954

 

 

$

832

 

 

15

%

 

$

985

 

 

$

900

 

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

Selling communities at end of period

 

 

6

 

 

 

7

 

 

(14

)%

Backlog homes (dollar value)

 

$

44,775

 

 

$

70,851

 

 

(37

)%

Backlog (homes)

 

 

50

 

 

 

90

 

 

(44

)%

Average sales price of backlog

 

$

896

 

 

$

787

 

 

14

%

 

 

 

 

 

 

 

 

 

 

 

 

Homebuilding lots owned and controlled

 

 

121

 

 

 

273

 

 

(56

)%

Land development lots owned and controlled

 

 

1,924

 

 

 

2,305

 

 

(17

)%

Total lots owned and controlled

 

 

 

 

 

 

 

2,045

 

 

 

2,578

 

 

(21

)%

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

In this earnings release, we utilize certain non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they, and similar measures, are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following table reconciles homebuilding gross margin percentage as reported and prepared in accordance with GAAP to the non-GAAP measure, adjusted homebuilding gross margin (or homebuilding gross margin excluding interest in cost of home sales). We believe this information is meaningful, as it isolates the impact leverage has on homebuilding gross margin and provides investors better comparisons with our competitors, who adjust gross margins in a similar fashion.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

%

 

2018

 

%

 

2019

 

%

 

2018

 

%

 

(Dollars in thousands)

Home sales revenue

$

140,464

 

 

100.0

%

 

$

117,460

 

 

100.0

%

 

$

239,650

 

 

100.0

%

 

$

196,897

 

 

100.0

%

Cost of home sales

 

123,525

 

 

87.9

%

 

 

102,678

 

 

87.4

%

 

 

210,094

 

 

87.7

%

 

 

172,372

 

 

87.5

%

Homebuilding gross margin

 

16,939

 

 

12.1

%

 

 

14,782

 

 

12.6

%

 

 

29,556

 

 

12.3

%

 

 

24,525

 

 

12.5

%

Add: Interest in cost of home sales

 

6,301

 

 

4.4

%

 

 

3,750

 

 

3.2

%

 

 

11,153

 

 

4.7

%

 

 

6,514

 

 

3.3

%

Adjusted homebuilding gross margin

$

23,240

 

 

16.5

%

 

$

18,532

 

 

15.8

%

 

$

40,709

 

 

17.0

%

 

$

31,039

 

 

15.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-capital. We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

 

June 30,

 

December 31,

 

2019

 

2018

 

(Dollars in thousands)

Total debt, net of unamortized discount, premium and debt issuance costs

$

375,060

 

 

$

387,648

 

Equity, exclusive of non-controlling interest

 

239,098

 

 

 

239,954

 

Total capital

$

614,158

 

 

$

627,602

 

Ratio of debt-to-capital(1)

 

61.1

%

 

 

61.8

%

 

 

 

 

Total debt, net of unamortized discount, premium and debt issuance costs

$

375,060

 

 

$

387,648

 

Less: Cash, cash equivalents and restricted cash

 

48,348

 

 

 

42,542

 

Net debt

 

326,712

 

 

 

345,106

 

Equity, exclusive of non-controlling interest

 

239,098

 

 

 

239,954

 

Total capital

$

565,810

 

 

$

585,060

 

Ratio of net debt-to-capital(2)

 

57.7

%

 

 

59.0

%

(1) The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt, net of unamortized discount, premium and debt issuance costs by total capital (the sum of total debt, net of unamortized discount, premium and debt issuance costs plus equity, exclusive of non-controlling interest).

(2) The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is total debt, net of unamortized discount, premium and debt issuance costs less cash, cash equivalents and restricted cash to the extent necessary to reduce the debt balance to zero) by total capital, exclusive of non-controlling interest. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. We believe that by deducting our cash from our debt, we provide a measure of our indebtedness that takes into account our cash liquidity. We believe this provides useful information as the ratio of debt-to-capital does not take into account our liquidity and we believe that the ratio net of cash provides supplemental information by which our financial position may be considered. Investors may also find this to be helpful when comparing our leverage to the leverage of our competitors that present similar information.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)

Adjusted EBITDA, Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, the ratio of debt to Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are non-GAAP measures. Adjusted EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) interest expense, (c) amortization of previously capitalized interest included in cost of sales and equity in net income (loss) of unconsolidated joint ventures, (d) severance charges (e) noncash impairment charges and abandoned project costs, (f) gain on early extinguishment of debt (g) depreciation and amortization, (h) amortization of stock-based compensation and (i) income (loss) from unconsolidated joint ventures. Adjusted EBITDA margin percentage is calculated by dividing Adjusted EBITDA by total revenue for a given period. The ratio of Adjusted EBITDA to total interest incurred is calculated by dividing Adjusted EBITDA by total interest incurred for a given period. The ratio of debt to Adjusted EBITDA is calculated by dividing debt at the period end by Adjusted EBITDA for a given period. The ratio of net debt to Adjusted EBITDA is calculated by dividing debt at the period end less cash, cash equivalents and restricted cash by Adjusted EBITDA for a given period. Other companies may calculate Adjusted EBITDA differently. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, interest costs, tax position, level of impairments and other non-recurring items. Due to the significance of the GAAP components excluded, Adjusted EBITDA should not be considered in isolation or as an alternative to net income (loss), cash flows from operations or any other performance measure prescribed by GAAP. A reconciliation of net income (loss) to Adjusted EBITDA, and the calculations of Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, the ratio of debt to Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are provided in the following table.

 

Three Months Ended

 

Six Months Ended

 

LTM(1) Ended

 

June 30,

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

 

2019

 

2018

 

(Dollars in thousands)

Net income (loss)

$

1,591

 

 

$

115

 

 

$

(396

)

 

$

(536

)

 

$

(14,090

)

 

$

14,252

 

Add:

 

 

 

 

 

 

 

 

 

 

 

Interest amortized to cost of sales and equity in net income (loss) of unconsolidated joint ventures

 

6,349

 

 

 

3,768

 

 

 

11,232

 

 

 

6,563

 

 

 

24,577

 

 

 

14,349

 

Provision (benefit) for income taxes

 

974

 

 

 

67

 

 

 

310

 

 

 

(793

)

 

 

(4,972

)

 

 

13,085

 

Depreciation and amortization

 

2,386

 

 

 

1,624

 

 

 

5,042

 

 

 

2,646

 

 

 

9,027

 

 

 

2,859

 

Amortization of stock-based compensation

 

523

 

 

 

862

 

 

 

1,089

 

 

 

1,704

 

 

 

2,475

 

 

 

3,201

 

Cash distributions of income from unconsolidated joint ventures

 

19

 

 

 

 

 

279

 

 

 

715

 

 

 

279

 

 

 

715

 

Severance charges

 

 

 

 

 

1,788

 

 

 

 

 

1,788

 

 

 

Noncash inventory impairments and abandonments

 

14

 

 

 

8

 

 

 

19

 

 

 

43

 

 

 

10,182

 

 

 

1,120

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Gain on early extinguishment of debt

 

(552

)

 

 

 

 

(969

)

 

 

 

 

(969

)

 

 

Equity in net (income) loss of unconsolidated joint ventures

 

(185

)

 

 

120

 

 

 

(369

)

 

 

(215

)

 

 

19,499

 

 

 

(574

)

Adjusted EBITDA

$

11,119

 

 

$

6,564

 

 

$

18,025

 

 

$

10,127

 

 

$

47,796

 

 

$

49,007

 

Total Revenue

$

162,749

 

 

$

155,555

 

 

$

281,597

 

 

$

278,786

 

 

$

670,377

 

 

$

760,819

 

Adjusted EBITDA margin percentage

 

6.8

%

 

 

4.2

%

 

 

6.4

%

 

 

3.6

%

 

 

7.1

%

 

 

6.4

%

Interest incurred

$

7,606

 

 

$

6,612

 

 

$

15,367

 

 

$

13,328

 

 

$

30,416

 

 

$

26,869

 

Ratio of Adjusted EBITDA to total interest incurred

 

 

 

 

 

 

 

 

 

1.6

x

 

 

1.8

x

Total debt at period end

 

 

 

 

 

 

 

 

$

375,060

 

 

$

354,402

 

Ratio of debt to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

7.8

x

 

 

7.2

x

Total net debt at period end

 

 

 

 

 

 

 

 

$

326,712

 

 

$

263,077

 

Ratio of net debt to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

6.8

x

 

 

5.4

x

Total cash and inventory

 

 

 

 

 

 

 

 

$

590,178

 

 

$

560,496

 

Ratio of cash and inventory to debt

 

 

 

 

 

 

 

 

1.6x

 

 

1.6

x

(1) "LTM" indicates amounts for the trailing 12 months.

Investor Relations
Drew Mackintosh
949-382-7838
investorrelations@nwhm.com

Source: The New Home Company Inc.

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