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
)
Adjusted earnings per share attributable
to The New Home Company Inc.:
Basic
$
0.15
$
0.28
$
0.16
$
0.37
Diluted
$
0.15
$
0.28
$
0.16
$
0.37
Weighted average shares outstanding for
adjusted earnings per share:
Basic
20,096,969
20,247,406
20,063,148
20,703,967
Diluted
20,202,291
20,326,250
20,120,450
20,804,859
Inventory and joint venture
impairments
$
10,100
$
30,000
$
13,700
$
30,000
Loss on land sales
—
—
1,505
—
Less: Related tax benefit
(4,020
)
(8,250
)
(3,892
)
(8,190
)
Inventory and joint venture impairments
and loss on land sales, net of tax
$
6,080
$
21,750
$
11,313
$
21,810
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 December
31,
Year Ended December
31,
2019
%
2018
%
2019
%
2018
%
(Dollars in thousands)
Home sales revenue
$
173,921
100.0
%
$
187,258
100.0
%
$
532,352
100.0
%
$
504,029
100.0
%
Cost of home sales
160,300
92.2
%
172,034
91.9
%
477,857
89.8
%
446,530
88.6
%
Homebuilding gross margin
13,621
7.8
%
15,224
8.1
%
54,495
10.2
%
57,499
11.4
%
Add: Home sales impairment
6,600
3.8
%
10,000
5.4
%
8,300
1.6
%
10,000
2.0
%
Homebuilding gross margin before
impairments
20,221
11.6
%
25,224
13.5
%
62,795
11.8
%
67,499
13.4
%
Add: Interest in cost of home sales
8,984
5.2
%
7,868
4.2
%
26,304
4.9
%
18,678
3.7
%
Adjusted homebuilding gross margin
$
29,205
16.8
%
$
33,092
17.7
%
$
89,099
16.7
%
$
86,177
17.1
%
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.
December 31,
December 31,
2019
2018
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
304,832
$
387,648
Equity, exclusive of non-controlling
interest
232,647
239,954
Total capital
$
537,479
$
627,602
Ratio of debt-to-capital(1)
56.7
%
61.8
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
304,832
$
387,648
Less: Cash, cash equivalents and
restricted cash
79,431
42,542
Net debt
225,401
345,106
Equity, exclusive of non-controlling
interest
232,647
239,954
Total capital
$
458,048
$
585,060
Ratio of net debt-to-capital(2)
49.2
%
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 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
LTM(1) Ended
December 31,
December 31,
2019
2018
2019
2018
(Dollars in thousands)
Net loss
$
(2,999
)
$
(16,150
)
$
(8,001
)
$
(14,230
)
Add:
Interest amortized to cost of sales and
equity in net loss of unconsolidated joint ventures
9,005
9,016
28,275
19,908
Benefit for income taxes
(3,953
)
(6,226
)
(3,815
)
(6,075
)
Depreciation and amortization
1,949
2,134
8,957
6,631
Amortization of stock-based
compensation
599
764
2,260
3,090
Cash distributions of income from
unconsolidated joint ventures
55
—
374
715
Severance charges
—
—
1,788
—
Noncash inventory impairments and
abandonments
6,665
10,125
10,294
10,206
Less:
Gain on early extinguishment of debt
(195
)
—
(1,164
)
—
Equity in net loss of unconsolidated joint
ventures
3,809
19,902
3,503
19,653
Adjusted EBITDA
$
14,935
$
19,565
$
42,471
$
39,898
Total Revenue
$
222,136
$
229,666
$
669,349
$
667,566
Adjusted EBITDA margin percentage
6.7
%
8.5
%
6.3
%
6.0
%
Interest incurred
$
6,474
$
7,779
$
28,819
$
28,377
Ratio of Adjusted EBITDA to total interest
incurred
2.3x
2.5x
1.5x
1.4x
Total debt at period end
$
304,832
$
387,648
Ratio of debt to Adjusted EBITDA
7.2x
9.7x
Total net debt at period end
$
225,401
$
345,106
Ratio of net debt to Adjusted EBITDA
5.3x
8.6x
Total cash and inventory
$
513,252
$
608,563
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/20200213005661/en/
Investor Relations | Drew Mackintosh | 949-382-7838 |
investorrelations@nwhm.com
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