The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2019 third quarter.
Third Quarter 2019 Financial Results
- $39.7 million of cash flow from operations and $48.0 million of
debt reduction during the quarter
- Debt-to-capital ratio of 58.2% and a net debt-to-capital ratio
of 54.9%*, a 280 basis point sequential improvement from the second
quarter
- Total revenues of $165.6 million, including $24.6 million of
land sales revenue
- Home sales revenue of $118.8 million vs. $119.9 million for the
2018 third quarter
- SG&A ratio of 11.1%, a 170 basis point improvement as
compared to the 2018 third quarter
- Pretax loss of $4.8 million, including a $1.5 million loss on
land sales and $3.6 million of inventory impairment charges, vs.
pretax income of $3.4 million for the 2018 third quarter
- Net loss of $4.6 million, or ($0.23) per diluted share,
compared to net income of $2.5 million, or $0.12 per diluted share,
for the 2018 third quarter
- Adjusted net income of $0.2 million*, or $0.01 per diluted
share*, excluding impairment charges and loss on land sales
“During the third quarter, we continued to make progress in our
efforts to generate cash flow, deleverage our balance sheet and
improve our SG&A efficiency,” said Larry Webb, Executive
Chairman of The New Home Company. “Cash flow from operations during
the quarter totaled $39.7 million and contributed to a $48.0
million repayment of debt, resulting in a net debt-to-capital ratio
of 54.9%*, a 280 basis point improvement from the second quarter of
2019. Additionally, our SG&A ratio decreased 170 basis points
from the prior year quarter thanks to lower selling and marketing
expenses and a more streamlined cost structure.”
Mr. Webb continued, “We expect to make further improvements to
our liquidity and debt leverage ratios in the fourth quarter,
thanks in part to a $16.6 million land transaction that closed
earlier this week. In addition, we anticipate our homebuilding
gross margins will start to improve on a sequential basis. With our
leverage ratios trending lower and our gross margins trending
higher, we feel we are in a position to enter 2020 with
momentum.”
Leonard Miller, President and Chief Executive Officer said “Home
sales revenue for the 2019 third quarter of $118.8 million was
essentially flat with the 2018 third quarter. However, for the 2019
year-to-date period, home sales revenue and home deliveries were up
13% and 20%, respectively, over the comparable 2018 period. The
Company’s 2019 third quarter monthly sales absorption rate was 2.0,
driven primarily by our more affordable communities which had a
monthly sales absorption rate of 3.3 during the third quarter. We
continue to see the benefits of transitioning to lower price
points, and this more affordable product represents the majority of
the lots in our pipeline for upcoming community openings.”
Third Quarter 2019 Operating Results
Total revenues for the 2019 third quarter were $165.6 million as
compared to $159.1 million in the prior year period. During the
quarter, the Company realized a $4.8 million pretax loss as
compared to pretax income of $3.4 million in the prior year period.
The 2019 third quarter included $3.6 million of inventory
impairments, $1.9 million of which related to a future land sale,
and a $1.5 million loss on land sales that closed during the third
quarter. Net loss attributable to the Company for the 2019 third
quarter was $4.6 million, or ($0.23) per diluted share, compared to
net income of $2.5 million, or $0.12 per diluted share, in the
prior year period. Adjusted net income for the 2019 third quarter,
after excluding $3.6 million in pretax inventory impairment charges
and a $1.5 million pretax loss on land sales, was $0.2 million*, or
$0.01* per diluted share.
Wholly Owned Projects
Home sales revenue for the 2019 third quarter was fairly flat
with the prior year at $118.8 million compared to $119.9 million in
the year ago period. The slight decrease in home sales revenues was
driven by 5% fewer deliveries, partially offset by a 4% increase in
average selling price to $958,000 from $922,000 a year ago. The
higher year-over-year average selling price was impacted by mix,
particularly with the addition Arizona deliveries in 2019 where the
average selling price exceeded $1 million for the third
quarter.
Gross margin from home sales for the 2019 third quarter, which
included $1.7 million in inventory impairment charges, was 9.5% as
compared to 14.8% for the prior year period. The housing inventory
impairment related to one community in Southern California that
required more incentives than originally anticipated. Excluding
home sales impairments, our home sales gross margin was 11.0%* for
the 2019 third quarter as compared to 14.8% in the prior year
period. The 380 basis point decline was primarily due to higher
incentives and interest costs, and a product mix shift. Adjusted
homebuilding gross margin, which excludes home sales impairment
charges and interest in cost of home sales, was 16.2%* for the 2019
third quarter versus 18.4%* in the prior year period.
The Company's SG&A expense ratio as a percentage of home
sales revenue for the 2019 third quarter was 11.1% as compared to
12.8% in the prior year period. The 170 basis point improvement in
the SG&A rate was driven by reduced personnel expenses, more
efficient marketing and advertising spend, and lower co-broker
commissions as compared to prior year. These decreases were
partially offset by a reduction in the amount of G&A expenses
allocated to fee building cost of sales due to lower fee building
activity and joint venture management fees.
Net new home orders for the 2019 third quarter decreased 6% due
to a slower monthly sales absorption rate, slightly offset by an
increase in average selling communities. The monthly sales
absorption rate for the Company was 2.0 for the 2019 third quarter
compared to 2.2 for the prior year period. On a combined basis, our
California absorption rate was flat as compared to the prior year,
while our Arizona division was down largely due to a lack of
inventory at our nearly sold-out Belmont community in Gilbert. We
ended the 2019 third quarter with 22 active communities, up from 20
at the end of the 2018 third quarter.
The dollar value of the Company's wholly owned backlog at the
end of the 2019 third quarter was $185.8 million and totaled 207
homes compared to $310.8 million and 309 homes for the prior year
period. The decrease in backlog units and dollar value was driven
primarily by a lower beginning backlog coupled with a higher
backlog conversion rate for the 2019 third quarter. Our backlog
conversion rate was 60% for the 2019 third quarter as compared to
42% 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 also impacted, to a
lesser extent, by an 11% decrease in average selling price as the
Company continues its transition to more affordable product.
Land Sales
During the 2019 third quarter, the Company sold two land parcels
in Northern California. The land sales generated $24.6 million in
revenue for the 2019 third quarter compared to no land sale revenue
for the 2018 third quarter. In connection with these land sales,
the Company recorded a $1.5 million loss. In addition, the Company
sold a third parcel of land in Northern California in October of
2019 for which we recorded a $1.9 million impairment charge in the
2019 third quarter. Proceeds from this third land sale totaled
$16.6 million.
Fee Building Projects
Fee building revenue for the 2019 third quarter was $22.3
million, compared to $39.2 million in the prior year period. The
decrease in fee revenues 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 $1.0
million for the 2019 third quarter as compared to $1.7 million for
the 2018 third 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 $0.6
million for the 2019 third 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 third
quarter was $63,000 as compared to $34,000 in income for the prior
year period. At the end of 2019 and 2018 third quarters, our joint
ventures had four and seven actively selling communities,
respectively.
Balance Sheet and Liquidity
As of September 30, 2019, the Company had real estate
inventories totaling $506.3 million and owned or controlled 2,928
lots through its wholly owned operations (excluding fee building
and joint venture lots), of which 1,449 lots, or 49% were
controlled through option contracts. The Company generated $39.7
million in operating cash flows during the 2019 third quarter and
ended the quarter with $40.9 million in cash and cash equivalents
and $327.4 million in debt, of which $18.0 million was outstanding
under its $130 million revolving credit facility. At September 30,
2019, the Company had a debt-to-capital ratio of 58.2% and a net
debt-to-capital ratio of 54.9%*.
Guidance
The Company's current estimate for the 2019 fourth quarter is as
follows:
- Home sales revenue of $140 - $160 million
- Fee building revenue of $20 - $30 million
- Home sales gross margin of 12.0% - 12.3%
The Company's current estimate for full year guidance for 2019
is as follows:
- Home sales revenue of $500 - $520 million
- Fee building revenue of $85 - $95 million
- Home sales gross margin of 11.5% - 11.7%
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 12:00 p.m.
Eastern Time on Thursday, October 31, 2019 to review third quarter
results, discuss recent events and results, and discuss the
Company's quarterly and certain full year guidance for 2019 and
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 November 30, 2019 and can
be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the pass code 13695063.
* Adjusted net income, adjusted EPS, net debt-to-capital ratio,
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, 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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
118,781
$
119,874
$
358,431
$
316,771
Land sales
24,573
—
24,573
—
Fee building, including management
fees
22,262
39,240
64,209
121,129
165,616
159,114
447,213
437,900
Cost of Sales:
Home sales
105,763
102,124
315,857
274,496
Home sales impairment
1,700
—
1,700
—
Land sales
26,078
—
26,078
—
Land sales impairment
1,900
—
1,900
—
Fee building
21,615
38,124
62,653
117,861
157,056
140,248
408,188
392,357
Gross Margin:
Home sales
11,318
17,750
40,874
42,275
Land sales
(3,405
)
—
(3,405
)
—
Fee building
647
1,116
1,556
3,268
8,560
18,866
39,025
45,543
Selling and marketing expenses
(7,828
)
(9,206
)
(26,190
)
(25,311
)
General and administrative expenses
(5,361
)
(6,184
)
(18,593
)
(18,182
)
Equity in net income (loss) of
unconsolidated joint ventures
(63
)
34
306
249
Gain on early extinguishment of debt
—
—
969
—
Other income (expense), net
(86
)
(110
)
(381
)
(228
)
Pretax income (loss)
(4,778
)
3,400
(4,864
)
2,071
(Provision) benefit for income taxes
172
(944
)
(138
)
(151
)
Net income (loss)
(4,606
)
2,456
(5,002
)
1,920
Net (income) loss attributable to
non-controlling interest
(18
)
3
(37
)
14
Net income (loss) attributable to The New
Home Company Inc.
$
(4,624
)
$
2,459
$
(5,039
)
$
1,934
Earnings (loss) per share attributable to
The New Home Company Inc.:
Basic
$
(0.23
)
$
0.12
$
(0.25
)
$
0.09
Diluted
$
(0.23
)
$
0.12
$
(0.25
)
$
0.09
Weighted average shares outstanding:
Basic
20,096,969
20,693,473
20,051,751
20,859,402
Diluted
20,096,969
20,762,441
20,051,751
20,970,050
CONSOLIDATED BALANCE
SHEETS
September 30,
December 31,
2019
2018
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
40,892
$
42,273
Restricted cash
119
269
Contracts and accounts receivable
12,551
18,265
Due from affiliates
390
1,218
Real estate inventories
506,298
566,290
Investment in and advances to
unconsolidated joint ventures
32,566
34,330
Other assets
31,071
33,452
Total assets
$
623,887
$
696,097
Liabilities and equity
Accounts payable
$
23,559
$
39,391
Accrued expenses and other liabilities
37,748
29,028
Unsecured revolving credit facility
18,000
67,500
Senior notes, net
309,421
320,148
Total liabilities
388,728
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 September 30, 2019 and December 31, 2018,
respectively
201
201
Additional paid-in capital
193,263
193,132
Retained earnings
41,582
46,621
Total stockholders' equity
235,046
239,954
Non-controlling interest in subsidiary
113
76
Total equity
235,159
240,030
Total liabilities and equity
$
623,887
$
696,097
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2019
2018
(Dollars in thousands)
Operating activities:
Net income (loss)
$
(5,002
)
$
1,920
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Deferred taxes
—
(1,481
)
Amortization of stock-based
compensation
1,661
2,326
Distributions of earnings from
unconsolidated joint ventures
319
715
Inventory impairments
3,600
—
Abandoned project costs
29
81
Equity in net income of unconsolidated
joint ventures
(306
)
(249
)
Deferred profit from unconsolidated joint
ventures
—
136
Depreciation and amortization
7,008
4,497
Gain on early extinguishment of debt
(969
)
—
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
5,714
2,367
Due from affiliates
790
(247
)
Real estate inventories
62,953
(138,632
)
Other assets
(2,390
)
(8,324
)
Accounts payable
(15,832
)
14,959
Accrued expenses and other liabilities
1,016
(14,036
)
Net cash provided by (used in) operating
activities
58,591
(135,968
)
Investing activities:
Purchases of property and equipment
(26
)
(215
)
Contributions and advances to
unconsolidated joint ventures
(5,083
)
(12,670
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
6,873
14,316
Interest collected on advances to
unconsolidated joint ventures
—
178
Net cash provided by investing
activities
1,764
1,609
Financing activities:
Borrowings from credit facility
40,000
115,000
Repayments of credit facility
(89,500
)
(53,000
)
Repurchases of senior notes
(10,856
)
—
Repurchases of common stock
(1,042
)
(5,764
)
Tax withholding paid on behalf of
employees for stock awards
(488
)
(982
)
Net cash (used in) provided by financing
activities
(61,886
)
55,254
Net decrease in cash, cash equivalents and
restricted cash
(1,531
)
(79,105
)
Cash, cash equivalents and restricted cash
– beginning of period
42,542
123,970
Cash, cash equivalents and restricted cash
– end of period
$
41,011
$
44,865
KEY FINANCIAL AND OPERATING
DATA (Dollars in thousands) (Unaudited)
New Home Deliveries:
Three Months Ended September
30,
2019
2018
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
66
$
63,533
$
963
75
$
72,232
$
963
(12
)%
(12
)%
—
%
Northern California
45
40,146
892
55
47,642
866
(18
)%
(16
)%
3
%
Arizona
13
15,102
1,162
—
—
NA
NA
NA
NA
Total
124
$
118,781
$
958
130
$
119,874
$
922
(5
)%
(1
)%
4
%
Nine Months Ended September
30,
2019
2018
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
218
$
223,660
$
1,026
180
$
204,090
$
1,134
21
%
10
%
(10
)%
Northern California
126
96,181
763
131
112,681
860
(4
)%
(15
)%
(11
)%
Arizona
30
38,590
1,286
—
—
NA
NA
NA
NA
Total
374
$
358,431
$
958
311
$
316,771
$
1,019
20
%
13
%
(6
)%
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
% Change
2019
2018
% Change
Net New Home Orders:
Southern California
68
75
(9
)%
216
248
(13
)%
Northern California
52
42
24
%
150
189
(21
)%
Arizona
4
15
(73
)%
24
30
(20
)%
124
132
(6
)%
390
467
(16
)%
Selling Communities at End of
Period:
Southern California
11
13
(15
)%
Northern California
9
5
80
%
Arizona
2
2
—
%
22
20
10
%
Average Selling Communities:
Southern California
11
12
(8
)%
12
11
9
%
Northern California
8
6
33
%
8
7
14
%
Arizona
2
2
—
%
2
1
100
%
21
20
5
%
22
19
16
%
Monthly Sales Absorption Rate per
Community (1):
Southern California
2.1
2.0
5
%
2.0
2.5
(20
)%
Northern California
2.3
2.3
—
%
2.2
3.2
(31
)%
Arizona
0.7
2.5
(72
)%
1.3
2.3
(43
)%
Total
2.0
2.2
(9
)%
2.0
2.7
(26
)%
(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 September 30,
2019
2018
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
88
$
91,538
$
1,040
139
$
155,054
$
1,115
(37
)%
(41
)%
(7
)%
Northern California
92
64,889
705
140
123,912
885
(34
)%
(48
)%
(20
)%
Arizona
27
29,351
1,087
30
31,856
1,062
(10
)%
(8
)%
2
%
Total
207
$
185,778
$
897
309
$
310,822
$
1,006
(33
)%
(40
)%
(11
)%
Lots Owned and Controlled:
As of September 30,
2019
2018
% Change
Lots Owned
Southern California
537
545
(1
)%
Northern California
661
699
(5
)%
Arizona
281
299
(6
)%
Total
1,479
1,543
(4
)%
Lots Controlled (1)
Southern California
482
292
65
%
Northern California
490
579
(15
)%
Arizona
477
489
(2
)%
Total
1,449
1,360
7
%
Lots Owned and Controlled - Wholly
Owned
2,928
2,903
1
%
Fee Building Lots (2)
1,173
959
22
%
(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
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
Interest incurred
$
6,978
$
7,270
$
22,345
$
20,598
Adjusted EBITDA(1)
$
9,511
$
10,206
$
27,536
$
20,333
Adjusted EBITDA margin percentage (1)
5.7
%
6.4
%
6.2
%
4.6
%
LTM(2) Ended September
30,
2019
2018
Interest incurred
$
30,124
$
27,359
Adjusted EBITDA(1)
$
47,101
$
48,970
Adjusted EBITDA margin percentage (1)
7.0
%
6.4
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
1.6x
1.8x
September 30,
December 31,
2019
2018
Ratio of debt-to-capital
58.2
%
61.8
%
Ratio of net debt-to-capital(1)
54.9
%
59.0
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)
7.0x
9.7x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)
6.1x
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 September
30,
Nine Months Ended September
30,
2019
2018
% Change
2019
2018
% Change
Financial Data - Unconsolidated Joint
Ventures:
Home sales revenue
$
22,155
$
24,903
(11
)%
$
110,849
$
86,081
29
%
Land sales revenue
13,654
30,564
(55
)%
26,325
35,278
(25
)%
Total revenues
$
35,809
$
55,467
(35
)%
$
137,174
$
121,359
13
%
Net income (loss)
$
(262
)
$
(169
)
(55
)%
$
2,041
$
349
485
%
Operating Data - Unconsolidated Joint
Ventures:
New home orders
23
41
(44
)%
87
119
(27
)%
New homes delivered
26
24
8
%
116
92
26
%
Average selling price of homes
delivered
$
852
$
1,038
(18
)%
$
956
$
936
2
%
Selling communities at end of period
4
7
(43
)%
Backlog homes (dollar value)
$
44,351
$
93,278
(52
)%
Backlog (homes)
47
107
(56
)%
Average sales price of backlog
$
944
$
872
8
%
Homebuilding lots owned and controlled
95
249
(62
)%
Land development lots owned and
controlled
1,846
1,913
(4
)%
Total lots owned and controlled
1,941
2,162
(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 income (loss) attributable to
the Company to the non-GAAP measure of adjusted net income (loss)
attributable to the Company (net income (loss) before inventory
impairments and loss on land sales) and earnings (loss) per share
and earnings (loss) per diluted share attributable to the Company
to the non-GAAP measures of adjusted earnings (loss) per share and
adjusted diluted earnings (loss) per share attributable to the
Company (earnings (loss) per share before inventory 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
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
(Dollars in thousands, except per
share amounts)
Net income (loss) attributable to The New
Home Company Inc.
$
(4,624
)
$
2,459
$
(5,039
)
$
1,934
Inventory impairments and loss on land
sales, net of tax
4,866
—
4,835
—
Adjusted net income (loss) attributable to
The New Home Company Inc.
$
242
$
2,459
$
(204
)
$
1,934
Earnings (loss) per share attributable to
The New Home Company Inc.:
Basic
$
(0.23
)
$
0.12
$
(0.25
)
$
0.09
Diluted
$
(0.23
)
$
0.12
$
(0.25
)
$
0.09
Adjusted earnings (loss) per share
attributable to The New Home Company Inc.:
Basic
$
0.01
$
0.12
$
(0.01
)
$
0.09
Diluted
$
0.01
$
0.12
$
(0.01
)
$
0.09
Weighted average shares outstanding for
adjusted earnings (loss) per share:
Basic
20,096,969
20,693,473
20,051,751
20,859,402
Diluted
20,110,395
20,762,441
20,051,751
20,970,050
Inventory impairments
$
3,600
$
—
$
3,600
$
—
Loss on land sales
1,505
—
1,505
—
Less: Related tax benefit
(239
)
—
(270
)
—
Inventory impairments and loss on land
sales, net of tax
$
4,866
$
—
$
4,835
$
—
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
The following table reconciles homebuilding gross margin
percentage as reported and prepared in accordance with GAAP to the
non-GAAP measures, homebuilding gross margin before impairments,
and adjusted homebuilding gross margin (or homebuilding gross
margin excluding home sales impairment charges and interest in cost
of home sales). We believe this information is meaningful, as it
isolates the impact home sales impairments and leverage have on
homebuilding gross margin and provides investors better comparisons
with our competitors, who adjust gross margins in a similar
fashion.
Three Months Ended September
30,
Nine Months Ended September
30,
2019
%
2018
%
2019
%
2018
%
(Dollars in thousands)
Home sales revenue
$
118,781
100.0
%
$
119,874
100.0
%
$
358,431
100.0
%
$
316,771
100.0
%
Cost of home sales
107,463
90.5
%
102,124
85.2
%
317,557
88.6
%
274,496
86.7
%
Homebuilding gross margin
11,318
9.5
%
17,750
14.8
%
40,874
11.4
%
42,275
13.3
%
Add: Home sales impairment
1,700
1.5
%
—
—
%
1,700
0.5
%
—
—
%
Homebuilding gross margin before
impairments
13,018
11.0
%
17,750
14.8
%
42,574
11.9
%
42,275
13.3
%
Add: Interest in cost of home sales
6,167
5.2
%
4,296
3.6
%
17,320
4.8
%
10,810
3.5
%
Adjusted homebuilding gross margin
$
19,185
16.2
%
$
22,046
18.4
%
$
59,894
16.7
%
$
53,085
16.8
%
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.
September 30,
December 31,
2019
2018
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
327,421
$
387,648
Equity, exclusive of non-controlling
interest
235,046
239,954
Total capital
$
562,467
$
627,602
Ratio of debt-to-capital(1)
58.2
%
61.8
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
327,421
$
387,648
Less: Cash, cash equivalents and
restricted cash
41,011
42,542
Net debt
286,410
345,106
Equity, exclusive of non-controlling
interest
235,046
239,954
Total capital
$
521,456
$
585,060
Ratio of net debt-to-capital(2)
54.9
%
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
Nine Months Ended
LTM(1) Ended
September 30,
September 30,
September 30,
2019
2018
2019
2018
2019
2018
(Dollars in thousands)
Net income (loss)
$
(4,606
)
$
2,456
$
(5,002
)
$
1,920
$
(21,152
)
$
12,390
Add:
Interest amortized to cost of sales and
equity in net income (loss) of unconsolidated joint ventures
8,038
4,329
19,270
10,892
28,286
16,230
Provision (benefit) for income taxes
(172
)
944
138
151
(6,088
)
11,373
Depreciation and amortization
1,966
1,851
7,008
4,497
9,142
4,602
Amortization of stock-based
compensation
572
622
1,661
2,326
2,425
3,043
Cash distributions of income from
unconsolidated joint ventures
40
—
319
715
319
715
Severance charges
—
—
1,788
—
1,788
—
Noncash inventory impairments and
abandonments
3,610
38
3,629
81
13,754
1,126
Less:
Gain on early extinguishment of debt
—
—
(969
)
—
(969
)
—
Equity in net (income) loss of
unconsolidated joint ventures
63
(34
)
(306
)
(249
)
19,596
(509
)
Adjusted EBITDA
$
9,511
$
10,206
$
27,536
$
20,333
$
47,101
$
48,970
Total Revenue
$
165,616
$
159,114
$
447,213
$
437,900
$
676,879
$
762,002
Adjusted EBITDA margin percentage
5.7
%
6.4
%
6.2
%
4.6
%
7.0
%
6.4
%
Interest incurred
$
6,978
$
7,270
$
22,345
$
20,598
$
30,124
$
27,359
Ratio of Adjusted EBITDA to total interest
incurred
1.4x
1.4x
1.2x
1.0x
1.6x
1.8x
Total debt at period end
$
327,421
$
381,775
Ratio of debt to Adjusted EBITDA
7.0x
7.8x
Total net debt at period end
$
286,410
$
336,910
Ratio of net debt to Adjusted EBITDA
6.1x
6.9x
Total cash and inventory
$
547,190
$
606,385
Ratio of cash and inventory to debt
1.7x
1.6x
(1)
"LTM" indicates amounts for the trailing
12 months.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191031005170/en/
The New Home Company Inc. Investor Relations Drew Mackintosh,
949-382-7838 investorrelations@nwhm.com
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