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The New Home Company Reports 2019 Fourth Quarter and Full Year Results

Company Release - 2/13/2020 4:05 PM ET

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

Fourth Quarter 2019 Financial Results

  • $62.7 million of cash flow from operations resulting in $22.6 million of net debt reduction and a $38.4 increase in cash during the quarter
  • Debt-to-capital ratio of 56.7% and a net debt-to-capital ratio of 49.2%*, a 570 basis point sequential improvement from the third quarter
  • Net orders up 106%, monthly absorption rate increased 83% to 2.2 compared to 1.2 for the 2018 fourth quarter
  • Total revenues of $222.1 million, including $17.1 million of land sales revenue
  • Home sales revenue of $173.9 million vs. $187.3 million for the 2018 fourth quarter
  • Net loss of $3.0 million, or ($0.15) per diluted share, including $10.1 million of pretax inventory and joint venture impairment charges
  • Adjusted net income of $3.1 million*, or $0.15 per diluted share*, excluding impairment charges

Full Year 2019 Financial Results

  • $121.3 million of cash flow from operations and $82.8 million of net debt reduction during the year
  • Net debt-to-capital ratio down 980 basis points from the end of 2018 to 49.2%*
  • Total revenues of $669.3 million, including $41.7 million of land sales revenue
  • Home sales revenue of $532.4 million, up 6% from $504.0 million for 2018
  • Home deliveries increased 15%
  • SG&A ratio of 11.7%, down 60 basis points from 2018
  • Net loss of $8.0 million, or $(0.40) per diluted share, including $15.2 million of pretax inventory and joint venture impairment charges and loss on land sales
  • Adjusted net income of $3.3 million*, or $0.16 per diluted share*, excluding impairment charges and loss on land sales

"2019 was a pivotal year for our Company as we committed early in the year to generating cash flow, deleveraging our balance sheet, and improving SG&A efficiency to address a weaker housing market to start the year," remarked Larry Webb, Executive Chairman of The New Home Company. "By the end of 2019, we had generated $121 million in operating cash flow, reduced our net debt by approximately $83 million, and established a more streamlined cost structure which included right-sizing our operations by reducing headcount, along with improved selling, marketing and administrative expense leverage. At the end of 2019, our net debt-to-capital ratio was 49.2%*, a 980 basis point year-over-year improvement."

Leonard Miller, President and Chief Executive Officer stated, "Buyer demand steadily improved throughout the year with our monthly net new orders up for the final five months of 2019. The 2019 fourth quarter was particularly strong with our monthly sales pace up 83% resulting in a 106% increase in net new orders over the prior year period. Demand was strongest at our more affordable, entry level communities where monthly absorption increased to 3.3 for the 2019 fourth quarter, further underscoring the benefit of our ongoing strategy to diversify our product portfolio and expand our customer base. Additionally, our backlog conversion rate improved to 97% for the 2019 fourth quarter from 61% for the 2018 fourth quarter as we continued to capitalize on the shorter build cycles and quicker conversion of spec homes that our more affordable product provided resulting in higher inventory turns and a 7% increase in new home deliveries for the 2019 fourth quarter."

Mr. Miller concluded, "The improvements we made during 2019 to our financial leverage ratios, our product diversification and our cost structure, coupled with a favorable fundamental backdrop for our industry, give us optimism for our Company's prospects as we enter the new year."

Fourth Quarter 2019 Operating Results

Total revenues for the 2019 fourth quarter were $222.1 million, compared to $229.7 million in the prior year period. Net loss attributable to the Company was $3.0 million, or $(0.15) per diluted share, compared to a net loss of $16.2 million, or $(0.80) per diluted share, in the prior year period. The 2019 fourth quarter results included a net tax benefit of $1.2 million related to federal energy tax credits that were extended during the quarter for homes delivered during 2018 and 2019. Adjusted net income for the 2019 fourth quarter was $3.1 million*, or $0.15* per diluted share, after excluding a $6.6 million pretax inventory impairment charge and a $3.5 million pretax joint venture impairment charge. Adjusted net income for the 2018 fourth quarter was $5.6 million*, or $0.28* per diluted share, and excluded $10.0 million in pretax inventory impairment charges and a $20.0 million pretax joint venture impairment charge.

Wholly Owned Projects

Home sales revenue for the 2019 fourth quarter was down 7% from the 2018 fourth quarter at $173.9 million compared to $187.3 million in the year ago period. The decrease in home sales revenue was driven by a 13% decline in average selling price to $870,000 from $1.0 million for the 2018 fourth quarter, which was partially offset by a 7% increase in home deliveries. The lower year-over-year average selling price was impacted by mix, particularly in Northern California where 2019 fourth quarter average home price was down 20% due to a shift from higher-priced Bay Area communities to more affordable communities within the Sacramento region, which was partially offset by the addition of Arizona deliveries where the average selling price exceeded $1.0 million.

Gross margin from home sales for the 2019 fourth quarter was 7.8% and included $6.6 million in inventory impairment charges related to one luxury condominium community in Scottsdale, AZ. Home sales gross margin for the 2018 fourth quarter was 8.1% and included $10.0 million in inventory impairment charges related to two higher-priced communities in Southern California. Excluding home sales impairments, our home sales gross margin was 11.6%* for the 2019 fourth quarter as compared to 13.5%* for the prior year period. The 190 basis point decline was primarily due to increased incentives and higher interest costs. Adjusted homebuilding gross margin, which excludes home sales impairment charges and interest in cost of home sales, was 16.8%* for the 2019 fourth quarter versus 17.7%* in the prior year period.

The Company's SG&A expense ratio as a percentage of home sales revenue for the 2019 fourth quarter was flat with the 2018 fourth quarter at 9.9% despite a 7% decrease in home sales revenue. SG&A expenses were down year-over-year due to reduced personnel expenses, more efficient marketing and advertising spend, and lower co-broker commissions as compared to the prior year period. These decreases were partially offset by a $0.7 million reduction in the amount of G&A expenses allocated to fee building cost of sales in the 2019 fourth quarter due to lower fee building activity and joint venture management fees.

Net new home orders for the 2019 fourth quarter increased 106% primarily due to improved monthly sales absorption rates, and to a lesser extent, a slight increase in average selling communities. The monthly sales absorption rate for the Company was up 83% to 2.2 for the 2019 fourth quarter compared to 1.2 for the prior year period. We ended the 2019 fourth quarter with 21 active communities, up from 20 at the end of the 2018 fourth quarter.

The dollar value of the Company's wholly owned backlog at the end of the 2019 fourth quarter was $125.8 million and totaled 149 homes compared to $207.1 million and 191 homes for the prior year period. The decrease in backlog units was driven primarily by a lower beginning backlog coupled with a higher backlog conversion rate for the 2019 fourth quarter, partially offset by a 106% increase in net new orders. Our backlog conversion rate was 97% for the 2019 fourth quarter as compared to 61% in the year ago period. 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. The decline in backlog dollar value was due to fewer units in ending backlog as well as a 22% decrease in average selling price as the Company continues its transition to more affordable product.

Land Sales

During the 2019 fourth quarter, the Company sold a land parcel in Northern California and recorded land sales revenue of $17.1 million compared to no land sales revenue for the 2018 fourth quarter.

Fee Building Projects

Fee building revenue for the 2019 fourth quarter was $31.1 million, compared to $42.4 million in the prior year period. The decrease in fee building revenue was largely due to less construction activity in Irvine, California. Additionally, management fees from joint ventures and construction management fees from third parties, which are included in fee building revenue, decreased to $0.5 million for the 2019 fourth quarter as compared to $1.6 million for the 2018 fourth quarter. The lower fee building revenue and decrease in management fees, offset partially by a reduction in allocated G&A expenses, resulted in a fee building gross margin of $0.5 million for the 2019 fourth quarter versus $1.1 million in the prior year period.

Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture loss for the 2019 fourth quarter was $3.8 million as compared to a $19.9 million loss for the prior year period. Included in the Company's allocated losses were $3.5 million and $20.0 million in impairment charges for the 2019 fourth quarter and 2018 fourth quarter, respectively. The 2019 impairment related to our investment in a land development joint venture in Southern California, and the 2018 impairment related to our investment in a land development joint venture in Northern California.

Full Year 2019 Operating Results

Total revenues for the year ended December 31, 2019 were $669.3 million compared to $667.6 million for the prior year. Homebuilding revenue increased to $532.4 million primarily from a 15% increase in deliveries, partially offset by an 8% decrease in the average selling price of homes as the strategic shift to more affordably priced homes continued throughout 2019.

For the full year 2019, the Company reported a net loss of $8.0 million, or $(0.40) per diluted share. Adjusted net income for the year was $3.3 million*, or $0.16* per diluted share, after excluding $10.2 million in pretax inventory impairment charges, a $3.5 million pretax joint venture impairment charge, and $1.5 million in land sales losses. The Company's net loss for 2018 was $14.2 million, or $(0.69) per diluted share. Adjusted net income for 2018 was $7.6 million*, or $0.37* per diluted share, and excluded $10.0 million in pretax inventory impairment charges and a $20.0 million pretax joint venture impairment charge. The year-over-year decrease in net loss was primarily attributable to a $16.5 million decrease in joint venture impairment charges, a 6% increase in home sales revenue, and a 60 basis point improvement in SG&A expenses as percentage of home sales revenue. These increases were partially offset by a 120 basis point decline in home sales gross margin (160 basis point decline before impairments*), a 42% decrease in fee building revenue, and a reduction in income tax benefit.

Balance Sheet and Liquidity

The Company generated $62.7 million in operating cash flows during the 2019 fourth quarter and ended the quarter with $79.3 million in cash and cash equivalents, and $304.8 million in debt. At December 31, 2019, the Company had a debt-to-capital ratio of 56.7% and a net debt-to-capital ratio of 49.2%*. As of December 31, 2019, the Company owned or controlled 2,701 lots through its wholly owned operations (excluding fee building and joint venture lots), of which 1,123 lots, or 42%, were controlled through option contracts.

Guidance

The Company's current estimate for the 2020 first quarter is as follows:

  • Home sales revenue of $75 - $90 million
  • Fee building revenue of $20 - $30 million
  • Home sales gross margin of 11.8% - 12.1%

Conference Call Details

The Company will host a conference call and webcast for investors and other interested parties beginning at 5:00 p.m. Eastern Time on Thursday, February 13, 2020 to review fourth quarter and full year results, discuss recent events and results, and discuss the Company's quarterly guidance for 2020. 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 March 14, 2020 and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the pass code 13698213.

* Net debt-to-capital ratio, adjusted net income, adjusted EPS, home sales gross margin excluding impairment charges (homebuilding gross margin before impairments) and adjusted homebuilding gross margin (or homebuilding gross margin excluding impairments and 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, metro Sacramento, the San Francisco Bay area 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,” “indicate,” 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 and impairments; 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; a cybersecurity or business interruption event; 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 December 31,

 

 

Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands, except per share amounts)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

$

173,921

 

 

$

187,258

 

 

$

532,352

 

 

$

504,029

 

Land sales

 

 

17,091

 

 

 

 

 

 

41,664

 

 

 

 

Fee building, including management fees

 

 

31,124

 

 

 

42,408

 

 

 

95,333

 

 

 

163,537

 

 

 

 

222,136

 

 

 

229,666

 

 

 

669,349

 

 

 

667,566

 

Cost of Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

 

153,700

 

 

 

162,034

 

 

 

469,557

 

 

 

436,530

 

Home sales impairment

 

 

6,600

 

 

 

10,000

 

 

 

8,300

 

 

 

10,000

 

Land sales

 

 

17,091

 

 

 

 

 

 

43,169

 

 

 

 

Land sales impairment

 

 

 

 

 

 

 

 

1,900

 

 

 

 

Fee building

 

 

30,628

 

 

 

41,275

 

 

 

93,281

 

 

 

159,136

 

 

 

 

208,019

 

 

 

213,309

 

 

 

616,207

 

 

 

605,666

 

Gross Margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

 

13,621

 

 

 

15,224

 

 

 

54,495

 

 

 

57,499

 

Land sales

 

 

 

 

 

 

 

 

(3,405

)

 

 

 

Fee building

 

 

496

 

 

 

1,133

 

 

 

2,052

 

 

 

4,401

 

 

 

 

14,117

 

 

 

16,357

 

 

 

53,142

 

 

 

61,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing expenses

 

 

(10,167

)

 

 

(10,754

)

 

 

(36,357

)

 

 

(36,065

)

General and administrative expenses

 

 

(7,130

)

 

 

(7,784

)

 

 

(25,723

)

 

 

(25,966

)

Equity in net loss of unconsolidated joint ventures

 

 

(3,809

)

 

 

(19,902

)

 

 

(3,503

)

 

 

(19,653

)

Gain on early extinguishment of debt

 

 

195

 

 

 

 

 

 

1,164

 

 

 

 

Other income (expense), net

 

 

(158

)

 

 

(293

)

 

 

(539

)

 

 

(521

)

Pretax loss

 

 

(6,952

)

 

 

(22,376

)

 

 

(11,816

)

 

 

(20,305

)

Benefit for income taxes

 

 

3,953

 

 

 

6,226

 

 

 

3,815

 

 

 

6,075

 

Net loss

 

 

(2,999

)

 

 

(16,150

)

 

 

(8,001

)

 

 

(14,230

)

Net (income) loss attributable to non-controlling interest

 

 

1

 

 

 

 

 

 

(36

)

 

 

14

 

Net loss attributable to The New Home Company Inc.

 

$

(2,998

)

 

$

(16,150

)

 

$

(8,037

)

 

$

(14,216

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share attributable to The New Home Company Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.15

)

 

$

(0.80

)

 

$

(0.40

)

 

$

(0.69

)

Diluted

 

$

(0.15

)

 

$

(0.80

)

 

$

(0.40

)

 

$

(0.69

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

20,096,969

 

 

 

20,247,406

 

 

 

20,063,148

 

 

 

20,703,967

 

Diluted

 

 

20,096,969

 

 

 

20,247,406

 

 

 

20,063,148

 

 

 

20,703,967

 

CONSOLIDATED BALANCE SHEETS

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands, except per share amounts)

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

79,314

 

 

$

42,273

 

Restricted cash

 

 

117

 

 

 

269

 

Contracts and accounts receivable

 

 

15,982

 

 

 

18,265

 

Due from affiliates

 

 

238

 

 

 

1,218

 

Real estate inventories

 

 

433,938

 

 

 

566,290

 

Investment in and advances to unconsolidated joint ventures

 

 

30,217

 

 

 

34,330

 

Other assets

 

 

43,383

 

 

 

33,452

 

Total assets

 

$

603,189

 

 

$

696,097

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,044

 

 

$

39,391

 

Accrued expenses and other liabilities

 

 

40,554

 

 

 

29,028

 

Unsecured revolving credit facility

 

 

 

 

 

67,500

 

Senior notes, net

 

 

304,832

 

 

 

320,148

 

Total liabilities

 

 

370,430

 

 

 

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 December 31, 2019 and December 31, 2018, respectively

 

 

201

 

 

 

201

 

Additional paid-in capital

 

 

193,862

 

 

 

193,132

 

Retained earnings

 

 

38,584

 

 

 

46,621

 

Total stockholders' equity

 

 

232,647

 

 

 

239,954

 

Non-controlling interest in subsidiary

 

 

112

 

 

 

76

 

Total equity

 

 

232,759

 

 

 

240,030

 

Total liabilities and equity

 

$

603,189

 

 

$

696,097

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Year Ended

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands)

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(8,001

)

 

$

(14,230

)

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

 

 

 

 

 

 

 

 

Deferred taxes

 

 

(3,566

)

 

 

(7,620

)

Amortization of stock-based compensation

 

 

2,260

 

 

 

3,090

 

Distributions of earnings from unconsolidated joint ventures

 

 

374

 

 

 

715

 

Inventory impairments

 

 

10,200

 

 

 

10,000

 

Abandoned project costs

 

 

94

 

 

 

206

 

Equity in net loss of unconsolidated joint ventures

 

 

3,503

 

 

 

19,653

 

Deferred profit from unconsolidated joint ventures

 

 

 

 

 

136

 

Depreciation and amortization

 

 

8,957

 

 

 

6,631

 

Gain on early extinguishment of debt

 

 

(1,164

)

 

 

 

Net changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Contracts and accounts receivable

 

 

2,283

 

 

 

4,959

 

Due from affiliates

 

 

930

 

 

 

(242

)

Real estate inventories

 

 

123,239

 

 

 

(157,705

)

Other assets

 

 

(2,326

)

 

 

(11,642

)

Accounts payable

 

 

(14,347

)

 

 

15,669

 

Accrued expenses and other liabilities

 

 

(1,178

)

 

 

(9,305

)

Net cash provided by (used in) operating activities

 

 

121,258

 

 

 

(139,685

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(41

)

 

 

(246

)

Contributions and advances to unconsolidated joint ventures

 

 

(8,826

)

 

 

(15,066

)

Distributions of capital and repayment of advances from unconsolidated joint ventures

 

 

9,133

 

 

 

15,436

 

Interest collected on advances to unconsolidated joint ventures

 

 

 

 

 

178

 

Net cash provided by investing activities

 

 

266

 

 

 

302

 

Financing activities:

 

 

 

 

 

 

 

 

Borrowings from credit facility

 

 

50,000

 

 

 

150,000

 

Repayments of credit facility

 

 

(117,500

)

 

 

(82,500

)

Repurchases of senior notes

 

 

(15,605

)

 

 

 

Repurchases of common stock

 

 

(1,042

)

 

 

(8,563

)

Tax withholding paid on behalf of employees for stock awards

 

 

(488

)

 

 

(982

)

Net cash (used in) provided by financing activities

 

 

(84,635

)

 

 

57,955

 

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

 

 

36,889

 

 

 

(81,428

)

Cash, cash equivalents and restricted cash – beginning of period

 

 

42,542

 

 

 

123,970

 

Cash, cash equivalents and restricted cash – end of period

 

$

79,431

 

 

$

42,542

 

KEY FINANCIAL AND OPERATING DATA

(Dollars in thousands)

(Unaudited)

New Home Deliveries:

 

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

Southern California

 

 

88

 

 

$

88,750

 

 

$

1,009

 

 

 

102

 

 

$

113,283

 

 

$

1,111

 

 

 

(14

)%

 

 

(22

)%

 

 

(9

)%

Northern California

 

 

91

 

 

 

63,651

 

 

 

699

 

 

 

85

 

 

 

73,975

 

 

 

870

 

 

 

7

%

 

 

(14

)%

 

 

(20

)%

Arizona

 

 

21

 

 

 

21,520

 

 

 

1,025

 

 

 

 

 

 

 

 

 

 

 

 

NA

 

 

 

NA

 

 

 

NA

 

Total

 

 

200

 

 

$

173,921

 

 

$

870

 

 

 

187

 

 

$

187,258

 

 

$

1,001

 

 

 

7

%

 

 

(7

)%

 

 

(13

)%

 

Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

Southern California

 

 

306

 

 

$

312,410

 

 

$

1,021

 

 

 

282

 

 

$

317,373

 

 

$

1,125

 

 

 

9

%

 

 

(2

)%

 

 

(9

)%

Northern California

 

 

217

 

 

 

159,832

 

 

 

737

 

 

 

216

 

 

 

186,656

 

 

 

864

 

 

 

0

%

 

 

(14

)%

 

 

(15

)%

Arizona

 

 

51

 

 

 

60,110

 

 

 

1,179

 

 

 

 

 

 

 

 

 

 

 

 

NA

 

 

 

NA

 

 

 

NA

 

Total

 

 

574

 

 

$

532,352

 

 

$

927

 

 

 

498

 

 

$

504,029

 

 

$

1,012

 

 

 

15

%

 

 

6

%

 

 

(8

)%

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

 

2019

 

 

2018

 

 

% Change

 

Net New Home Orders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

72

 

 

 

53

 

 

 

36

%

 

 

288

 

 

 

301

 

 

 

(4

)%

Northern California

 

 

65

 

 

 

13

 

 

 

400

%

 

 

215

 

 

 

202

 

 

 

6

%

Arizona

 

 

5

 

 

 

3

 

 

 

67

%

 

 

29

 

 

 

33

 

 

 

(12

)%

 

 

 

142

 

 

 

69

 

 

 

106

%

 

 

532

 

 

 

536

 

 

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling Communities at End of Period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

13

 

 

 

(23

)%

Northern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

5

 

 

 

80

%

Arizona

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

 

 

20

 

 

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Selling Communities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

10

 

 

 

13

 

 

 

(23

)%

 

 

11

 

 

 

12

 

 

 

(8

)%

Northern California

 

 

9

 

 

 

5

 

 

 

80

%

 

 

8

 

 

 

6

 

 

 

33

%

Arizona

 

 

2

 

 

 

2

 

 

 

%

 

 

2

 

 

 

2

 

 

 

%

 

 

 

21

 

 

 

20

 

 

 

5

%

 

 

21

 

 

 

20

 

 

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monthly Sales Absorption Rate per Community (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

2.3

 

 

 

1.4

 

 

 

64

%

 

 

2.1

 

 

 

2.2

 

 

 

(5

)%

Northern California

 

 

2.4

 

 

 

0.9

 

 

 

167

%

 

 

2.3

 

 

 

2.7

 

 

 

(15

)%

Arizona

 

 

0.8

 

 

 

0.5

 

 

 

60

%

 

 

1.2

 

 

 

1.7

 

 

 

(29

)%

Total

 

 

2.2

 

 

 

1.2

 

 

 

83

%

 

 

2.1

 

 

 

2.3

 

 

 

(9

)%

 

(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 December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

 

Homes

 

 

Dollar Value

 

 

Average Price

 

Southern California

 

 

72

 

 

$

69,263

 

 

$

962

 

 

 

90

 

 

$

111,024

 

 

$

1,234

 

 

 

(20

)%

 

 

(38

)%

 

 

(22

)%

Northern California

 

 

66

 

 

 

41,973

 

 

 

636

 

 

 

68

 

 

 

59,847

 

 

 

880

 

 

 

(3

)%

 

 

(30

)%

 

 

(28

)%

Arizona

 

 

11

 

 

 

14,567

 

 

 

1,324

 

 

 

33

 

 

 

36,200

 

 

 

1,097

 

 

 

(67

)%

 

 

(60

)%

 

 

21

%

Total

 

 

149

 

 

$

125,803

 

 

$

844

 

 

 

191

 

 

$

207,071

 

 

$

1,084

 

 

 

(22

)%

 

 

(39

)%

 

 

(22

)%

Lots Owned and Controlled:

 

As of December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

Lots Owned

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

501

 

 

 

626

 

 

 

(20

)%

Northern California

 

 

682

 

 

 

742

 

 

 

(8

)%

Arizona

 

 

395

 

 

 

299

 

 

 

32

%

Total

 

 

1,578

 

 

 

1,667

 

 

 

(5

)%

Lots Controlled (1)

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

430

 

 

 

205

 

 

 

110

%

Northern California

 

 

378

 

 

 

451

 

 

 

(16

)%

Arizona

 

 

315

 

 

 

489

 

 

 

(36

)%

Total

 

 

1,123

 

 

 

1,145

 

 

 

(2

)%

Lots Owned and Controlled

 

 

2,701

 

 

 

2,812

 

 

 

(4

)%

Fee Building Lots(2)

 

 

1,135

 

 

 

806

 

 

 

41

%

________________________

(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

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest incurred

 

$

6,474

 

 

$

7,779

 

 

$

28,819

 

 

$

28,377

 

Adjusted EBITDA(1)

 

$

14,935

 

 

$

19,565

 

 

$

42,471

 

 

$

39,898

 

Adjusted EBITDA margin percentage (1)

 

 

6.7

%

 

 

8.5

%

 

 

6.3

%

 

 

6.0

%

 

 

LTM(2) Ended December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Interest incurred

 

$

28,819

 

 

$

28,377

 

Adjusted EBITDA(1)

 

$

42,471

 

 

$

39,898

 

Adjusted EBITDA margin percentage (1)

 

 

6.3

%

 

 

6.0

%

Ratio of Adjusted EBITDA to total interest incurred(1)

 

1.5x

 

 

1.4x

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Ratio of debt-to-capital

 

 

56.7

%

 

 

61.8

%

Ratio of net debt-to-capital(1)

 

 

49.2

%

 

 

59.0

%

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

 

7.2x

 

 

9.7x

 

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

 

5.3x

 

 

8.6x

 

Ratio of cash and inventory to debt

 

1.7x

 

 

1.6x

 

_____________________________

(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 December 31,

 

 

Year Ended December 31,

 

 

 

2019

 

 

2018

 

 

% Change

 

 

2019

 

 

2018

 

 

% Change

 

Financial Data - Unconsolidated Joint Ventures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales revenue

 

$

18,732

 

 

$

52,811

 

 

 

(65

)%

 

$

129,581

 

 

$

138,892

 

 

 

(7

)%

Land sales revenue

 

 

8,132

 

 

 

7,453

 

 

 

9

%

 

 

34,457

 

 

 

42,731

 

 

 

(19

)%

Total revenues

 

$

26,864

 

 

$

60,264

 

 

 

(55

)%

 

$

164,038

 

 

$

181,623

 

 

 

(10

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(68,956

)

 

$

(28,253

)

 

 

(144

)%

 

$

(66,915

)

 

$

(27,904

)

 

 

(140

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Data - Unconsolidated Joint Ventures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New home orders

 

 

23

 

 

 

23

 

 

 

0

%

 

 

110

 

 

 

142

 

 

 

(23

)%

New homes delivered

 

 

21

 

 

 

54

 

 

 

(61

)%

 

 

137

 

 

 

146

 

 

 

(6

)%

Average selling price of homes delivered

 

$

892

 

 

$

978

 

 

 

(9

)%

 

$

946

 

 

$

951

 

 

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling communities at end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

7

 

 

 

(43

)%

Backlog homes (dollar value)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

42,652

 

 

$

66,892

 

 

 

(36

)%

Backlog (homes)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

76

 

 

 

(36

)%

Average sales price of backlog

 

 

 

 

 

 

 

 

 

 

 

 

 

$

870

 

 

$

880

 

 

 

(1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Homebuilding lots owned and controlled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74

 

 

 

211

 

 

 

(65

)%

Land development lots owned and controlled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,798

 

 

 

1,879

 

 

 

(4

)%

Total lots owned and controlled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,872

 

 

 

2,090

 

 

 

(10

)%

 

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 net loss attributable to the Company to the non-GAAP measure of adjusted net income attributable to the Company (net income before inventory and joint venture impairments and loss on land sales) and loss per share and loss per diluted share attributable to the Company to the non-GAAP measures of adjusted earnings per share and adjusted diluted earnings per share attributable to the Company (earnings per share before inventory and joint venture impairments and loss on land sales). We believe removing the impact of impairments and loss on land sales is relevant to provide investors with an understanding of the impact these noncash items had on earnings.

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands, except per share amounts)

 

Net loss attributable to The New Home Company Inc.

 

$

(2,998

)

 

$

(16,150

)

 

$

(8,037

)

 

$

(14,216

)

Inventory and joint venture impairments and loss on land sales, net of tax

 

 

6,080

 

 

 

21,750

 

 

 

11,313

 

 

 

21,810

 

Adjusted net income attributable to The New Home Company Inc.

 

$

3,082

 

 

$

5,600

 

 

$

3,276

 

 

$

7,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share attributable to The New Home Company Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.15

)

 

$

(0.80

)

 

$

(0.40

)

 

$

(0.69

)

Diluted

 

$

(0.15

)

 

$

(0.80

)

 

$

(0.40

)

 

$

(0.69

)