- Total Revenues Increased 32% to $144
million -- Net New Orders up 53% -- Record Backlog
Dollar Value of $339 million, up 22% -
The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2017 second quarter.
Second Quarter 2017 Highlights Compared to Second Quarter
2016
- Net income of $1.5 million, or $0.07
per diluted share vs. $2.5 million, or $0.12 per diluted share; Q2
2017 net income included $1.3 million of pretax inventory
impairments, or $0.04 per diluted share after tax
- Total revenues of $144.1 million vs.
$108.9 million, a 32% increase
- Home sales revenue of $96.9 million, a
23% increase
- Net new home orders up 53%
- Backlog dollar value up 22% to $339.4
million, a record quarter-end value
“Building off a strong start to the year, The New Home Company
continued to make solid progress in the second quarter,” said The
New Home Company’s Chief Executive Officer Larry Webb. “The company
outperformed projected revenues and profits for the quarter
generating $0.07 in earnings per diluted share. We continued to see
strong buyer demand in California where net new orders for our
wholly owned business were up significantly with our monthly sales
absorption rate up 74% year-over-year."
Mr. Webb continued, “For a second consecutive quarter, our
backlog dollar value was the highest in our company's history at
$339.4 million, a 22% increase over the prior year. In addition,
the company completed a tack-on offering of $75 million in
aggregate principal of our Senior Unsecured Notes due 2022. The
increase in liquidity allows us to capitalize on growth
opportunities that will allow us to meet homebuyer demand and
deliver favorable returns. We are well-positioned to deliver strong
results in the second half of the year and are on track to broaden
our product portfolio to include more affordable price points. We
anticipate opening nine new communities in the second half of the
year, six of which are expected to be priced at $750,000 or
lower."
Second Quarter 2017 Operating Results
Total revenues for the 2017 second quarter were up 32% to $144.1
million, compared to $108.9 million in the prior year period. Net
income attributable to the Company was $1.5 million, or $0.07 per
diluted share, compared to $2.5 million, or $0.12 per diluted
share, in the prior year period. The 2017 second quarter included a
$1.3 million pretax inventory impairment charge, or $0.04 per
diluted share on an after-tax basis, related to one homebuilding
community. The year-over-year decrease in net income was primarily
attributable to a $3.7 million reduction in joint venture income, a
$1.3 million decrease in joint venture management fees and the
inventory impairment noted above. These decreases were largely
offset by a 32% increase in total revenues, a 160 basis point
improvement in our homebuilding gross margin after impairments (a
290 basis point improvement before impairments*), and a 140 basis
point improvement in our selling, general and administrative
("SG&A") expenses as a percentage of home sales revenue.
Wholly Owned Projects
Home sales revenue for the 2017 second quarter increased 23% to
$96.9 million, compared to $78.8 million in the prior year period.
The increase in home sales revenue was driven primarily by a 49%
increase in deliveries, and was partially offset by a 17% decrease
in the average selling price of homes delivered to $1.5 million.
The decrease in our average selling price was primarily due to a
mix shift as half of the second quarter deliveries were from
communities with average selling prices under $1 million.
Gross margin from homes sales for the 2017 second quarter was
13.6% versus 12.0% in the prior year period. The 2017 second
quarter included a $1.3 million inventory impairment related to one
homebuilding community in Southern California. Excluding inventory
impairments, our gross margin from home sales for the 2017 second
quarter was 14.9%* versus 12.0%* in the prior year period. The 290
basis point improvement in home sales gross margin before
impairments was primarily due to a change in mix, including more
deliveries from our higher margin Crystal Cove communities located
in Newport Coast, CA. Adjusted gross margin from home sales for the
2017 second quarter, which excludes interest in cost of home sales
and inventory impairments, was 16.7%* compared to 13.3%*.
Our SG&A expense ratio as a percentage of home sales revenue
for the 2017 second quarter was 12.4% versus 13.8% in the prior
year period. The 140 basis point improvement in the SG&A rate
was largely attributable to a 23% increase in home sales revenue,
which was driven by a significant increase in new home deliveries
due to growth in our wholly owned operations, and lower G&A
expenses.
Net new home orders for the 2017 second quarter were up 53% to
98 homes, compared to 64 homes in the prior year period. The
Company's monthly sales absorption pace was up significantly during
the 2017 second quarter to 3.3 sales per average selling community
compared to 1.9 in the prior year period. The improvement in the
absorption rate was driven by solid order activity in both Southern
and Northern California, with Northern California more than
doubling its net orders over the prior year period. As a result of
increased sales activity and the timing of opening new communities,
our quarter end selling communities were down 25% from the prior
year, ending the 2017 second quarter with nine active communities
compared to 12 as of the end of the prior year period. This dip in
ending selling communities was consistent with our expectations and
the Company anticipates opening nine new communities in the second
half of 2017.
The dollar value of the Company's wholly owned backlog at the
end of the 2017 second quarter was up 22% year-over-year to $339.4
million and totaled 185 homes, compared to $278.0 million and 125
homes in the prior year period. The increase in backlog dollar
value primarily related to the increase in net new home orders,
which was partially offset by a 17% decline in average selling
price in backlog. The decrease in backlog average selling price is
consistent with the Company's strategy to expand its product
portfolio to include more affordable price points.
Fee Building Projects
Fee building revenue for the 2017 second quarter increased 57%
to $47.2 million primarily due to an increase in fee building
construction activity. Fee building gross margin was $1.3 million,
or 2.7%, compared to $1.7 million, or 5.7%, in the prior year
period. The reduction in fee building gross margin percentage was
primarily due to a decrease in management fees received from joint
ventures, which were $1.2 million during the 2017 second quarter
compared to $2.5 million in the prior year period. The decrease in
management fees from JVs was the result of lower deliveries and
revenues from JV communities as compared to the prior year period,
which is consistent with the Company’s strategic shift to emphasize
wholly owned operations.
Unconsolidated Joint Ventures
(JVs)
The Company’s share of joint venture income for the 2017 second
quarter was $0.2 million, compared to $3.9 million in the prior
year period. The decrease in income for the Company was due to a
reduction in joint venture revenue from a decrease in JV home
deliveries and lot sales, and lower gross margins from JV home
sales due to a delivery mix shift. In addition, the 2016 second
quarter included a $0.5 million income allocation from a joint
venture for a reserve reduction and a $1.1 million gain from the
buyout of a JV partner's interest for less than its carrying value.
The following sets forth supplemental information about the
Company’s JVs. Such information is not included in the Company’s
financial data for GAAP purposes but is provided for informational
purposes.
Total revenue of the JVs for the 2017 second quarter was $35.2
million and a net loss of $0.7 million, compared to total revenue
of $70.1 million and $10.2 million in income in the prior year
period, respectively. Home sales revenue of the JVs was $34.2
million, compared to $47.7 million in the prior year period, while
land sales revenue of the JVs was $0.9 million for the 2017 second
quarter as compared to $22.4 million in the prior year period.
At the end of the 2017 second quarter, the JVs had eight active
selling communities, up from three at the end of the prior year
period. As a result of increased selling communities, net new home
orders from JVs for the 2017 second quarter increased 80% to 54
homes as compared to 30 homes in the prior year period. The dollar
value of homes in backlog from unconsolidated JVs at the end of the
2017 second quarter was $70.9 million from 90 homes, compared to
$72.0 million from 76 homes in the prior year period.
Balance Sheet and Liquidity
On May 4, 2017, the Company completed a tack-on private
placement offering selling an additional $75 million in aggregate
principal amount of its 7.25% Senior Notes due 2022. The Notes were
issued at a premium to yield 6.44%. Together with the notes issued
in the 2017 first quarter, the Company has $325 million in
aggregate principal of Senior Notes due 2022. As of June 30,
2017, the Company had real estate inventories totaling $365.4
million, of which $211.9 million represented work-in-process and
completed homes (including models), $108.0 million in land and land
under development, and $45.5 million in land deposits and
pre-acquisition costs. The Company owned or controlled 1,821 lots
through its wholly owned operations (excluding fee building and
joint venture lots), of which 1,134 lots, or 62%, were controlled
or under option. The Company ended the 2017 second quarter with
$154.0 million in cash and cash equivalents and had no borrowings
outstanding under its $260.0 million revolving credit facility. The
Company ended the 2017 first quarter with $318.1 million in debt
outstanding (net of unamortized discount, premium and debt issuance
costs), a debt-to-capital ratio of 56.2% and a net debt-to-capital
ratio of 39.8%*.
Guidance
The Company updated its full year guidance for 2017 as
follows:
- Home sales revenue of $540 - $570
million
- Fee building revenue of $145 - $165
million
- Income from unconsolidated joint
ventures of $2 - $3 million
- Wholly owned active year-end community
count of 17
- Joint venture active year-end community
count of 9
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 11:00 a.m.
Eastern Time on Thursday, July 27, 2017 to review second quarter
results, discuss recent events and results, and discuss the
Company's full year and certain quarterly guidance for 2017. We
will also conduct a question-and-answer period. The conference call
will be available in the Investors section of the Company’s website
at www.NWHM.com. To listen to the broadcast live, go to the site
approximately 15 minutes prior to the scheduled start time in order
to register, download and install any necessary audio software. To
participate in the telephone conference call, dial 1-877-407-0789
(domestic) or 1-201-689-8562 (international) at least five minutes
prior to the start time. Replays of the conference call will be
available through August 28, 2017 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13665502.
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 coastal 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.
* Homebuilding gross margin before impairments, adjusted
homebuilding gross margin percentage and net debt-to-capital ratio
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."
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 the
timing and success of specific projects, community counts and
openings and our future production, our ability to execute our
strategic growth objectives, gross margins, revenues, projected
results, income, earnings per share and capital spending. Our
forward-looking statements are generally accompanied by words such
as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,”
“anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” 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, volatility and uncertainty in the credit markets and
broader financial markets; our business and investment strategy;
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; shortages of or increased prices
for labor, land or raw materials used in housing construction;
delays in land development or home construction resulting from
adverse weather conditions or other events outside our control;
issues concerning our joint venture partnerships; the cost and
availability of insurance and surety bonds; 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; the degree and nature of competition; our
leverage and debt service obligations; the impact of recent
accounting standards; restrictive covenants relating to our
operations in our current of future financing arrangements;
availability of qualified personnel and our ability to retain our
key personnel; and additional factors discussed under the sections
captioned “Risk Factors” included in our annual report and other
reports filed with the Securities and Exchange Commission. The
Company reserves the right to make such updates from time to time
by press release, periodic report or other method of public
disclosure without the need for specific reference to this press
release. No such update shall be deemed to indicate that other
statements not addressed by such update remain correct or create an
obligation to provide any other updates.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
2017 2016 (Dollars in thousands, except per
share amounts)
Revenues: Home sales $ 96,929 $ 78,836 $
166,335 $ 121,139 Fee building, including management fees from
unconsolidated joint ventures of $1,217, $2,537, $2,431 and $4,712,
respectively 47,181 30,028 102,798 72,965
144,110 108,864 269,133 194,104
Cost of Sales: Home sales 82,488 69,390 142,553 106,060 Home
sales impairments 1,300 — 1,300 — Fee building 45,899 28,317
99,825 69,231 129,687 97,707 243,678 175,291
Gross Margin: Home sales 13,141 9,446 22,482 15,079 Fee
building 1,282 1,711 2,973 3,734 14,423
11,157 25,455 18,813 Selling and marketing expenses (6,376 )
(5,046 ) (11,377 ) (8,522 ) General and administrative expenses
(5,595 ) (5,833 ) (10,685 ) (11,008 ) Equity in net income of
unconsolidated joint ventures 201 3,947 507 3,940 Other income
(expense), net (148 ) (286 ) (35 ) (395 ) Income before income
taxes 2,505 3,939 3,865 2,828 Provision for income taxes (988 )
(1,495 ) (1,512 ) (1,253 ) Net income 1,517 2,444 2,353 1,575 Net
loss attributable to noncontrolling interest — 65 10
120 Net income attributable to The New Home Company
Inc. $ 1,517 $ 2,509 $ 2,363 $ 1,695
Earnings per share attributable to The New Home Company
Inc.: Basic $ 0.07 $ 0.12 $ 0.11 $ 0.08 Diluted $ 0.07 $ 0.12 $
0.11 $ 0.08 Weighted average shares outstanding: Basic 20,869,429
20,709,139 20,819,288 20,654,998 Diluted 20,956,723 20,760,186
20,921,150 20,745,802
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2017 2016
(Dollars in thousands, except per
shareamounts)
(Unaudited)
Assets Cash and cash equivalents $ 153,959 $
30,496 Restricted cash 88 585 Contracts and accounts receivable
18,321 27,833 Due from affiliates 2,062 1,138 Real estate
inventories 365,400 286,928 Investment in and advances to
unconsolidated joint ventures 55,864 50,857 Other assets 23,916
21,299 Total assets $ 619,610 $ 419,136
Liabilities and equity Accounts payable $ 34,215 $ 33,094
Accrued expenses and other liabilities 19,473 23,418 Unsecured
revolving credit facility — 118,000 Senior notes, net 318,121
— Total liabilities 371,809 174,512 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, 20,875,666 and
20,712,166, shares issued and outstanding as of June 30, 2017 and
December 31, 2016, respectively 209 207 Additional paid-in capital
197,983 197,161 Retained earnings 49,518 47,155 Total
stockholders' equity 247,710 244,523 Noncontrolling interest in
subsidiary 91 101 Total equity 247,801 244,624 Total
liabilities and equity $ 619,610 $ 419,136
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
Six Months Ended June 30,
2017 2016 (Dollars in thousands)
Operating
activities: Net income $ 2,353 $ 1,575 Adjustments to reconcile
net income to net cash used in operating activities: Deferred taxes
(54 ) (27 ) Amortization of equity based compensation 1,306 1,742
Excess income tax provision from stock-based compensation — 97
Inventory impairments 1,300 — Distributions of earnings from
unconsolidated joint ventures 1,588 1,095 Equity in net income of
unconsolidated joint ventures (507 ) (3,940 ) Deferred profit from
unconsolidated joint ventures 497 332 Depreciation 236 251
Abandoned project costs 206 329 Net changes in operating assets and
liabilities: Restricted cash 497 104 Contracts and accounts
receivable 9,573 9,164 Due from affiliates (671 ) 88 Real estate
inventories (74,407 ) (164,464 ) Other assets (2,900 ) (5,832 )
Accounts payable 1,160 3,737 Accrued expenses and other liabilities
(11,588 ) (9,711 ) Due to affiliates — (239 ) Net cash used
in operating activities (71,411 ) (165,699 )
Investing
activities: Purchases of property and equipment (95 ) (296 )
Cash assumed from joint venture at consolidation 995 2,009
Contributions and advances to unconsolidated joint ventures (8,517
) (5,656 ) Distributions of capital from unconsolidated joint
ventures 2,948 7,405 Net cash provided by (used in)
investing activities (4,669 ) 3,462
Financing
activities: Borrowings from credit facility 72,000 175,000
Repayments of credit facility (190,000 ) (11,000 ) Proceeds from
senior notes 324,465 — Borrowings from other notes payable — 343
Repayments of other notes payable — (15,636 ) Payment of debt
issuance costs (6,440 ) (1,064 ) Cash distributions to
noncontrolling interest in subsidiary — (725 ) Minimum tax
withholding paid on behalf of employees for stock awards (584 )
(647 ) Excess income tax provision from stock-based compensation —
(97 ) Proceeds from exercise of stock options 102 —
Net cash provided by financing activities 199,543 146,174
Net increase (decrease) in cash and cash equivalents 123,463
(16,063 ) Cash and cash equivalents – beginning of period 30,496
45,874 Cash and cash equivalents – end of period $
153,959 $ 29,811
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries: Three
Months Ended June 30, 2017 2016 %
Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Southern California 27 $ 67,279 $ 2,492 20 $ 54,900 $ 2,745 35 % 23
%
(9)
%
Northern California 37 29,650 801 23 23,936
1,041 61 % 24 %
(23)
%
Total 64 $ 96,929 $ 1,515 43 $ 78,836 $
1,833 49 % 23 %
(17)
%
Six Months Ended June 30, 2017 2016
% Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
(Dollars in thousands) Southern California 49 $ 111,202 $ 2,269 31
$ 84,208 $ 2,716 58 % 32 %
(16)
%
Northern California 69 55,133 799 40 36,931
923 73 % 49 %
(13)
%
Total 118 $ 166,335 $ 1,410 71 $ 121,139
$ 1,706 66 % 37 %
(17)
%
Net New Home Orders:
Three Months Ended June 30, Six Months Ended June
30, 2017 2016
%Change
2017 2016
%Change
Southern California 44 39 13 % 100 66 52 % Northern California 54
25 116 % 124 54 130 % 98 64 53 % 224
120 87 %
Active Communities:
As of June 30, 2017 2016
%Change
Southern California 6 7
(14)
%
Northern California 3 5
(40)
%
9 12
(25)
%
KEY FINANCIAL AND OPERATING DATA
(continued)
(Dollars in thousands)
(Unaudited)
Backlog: As of June 30, 2017
2016 % Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Southern California 99 $ 278,513 $ 2,813 89 $ 249,433 $ 2,803 11 %
12 % — % Northern California 86 60,899 708 36
28,567 794 139 % 113 %
(11)
%
Total 185 $ 339,412 $ 1,835 125 $ 278,000
$ 2,224 48 % 22 %
(17)
%
Lots Owned and Controlled:
June 30,
2017 2016
%Change
Lots Owned Southern California 402 226 78 % Northern California 285
249 14 % Total 687 475 45 % Lots
Controlled (1) Southern California 564 631 (11 )% Northern
California 303 379 (20 )% Arizona 267 — NA Total
1,134 1,010 12 % Lots Owned and Controlled - Wholly
Owned 1,821 1,485 23 % Fee Building (2) 1,043 1,001 4
% Total Lots Owned and Controlled 2,864 2,486 15 %
___________________________
(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 construction services.
Other Financial Data: Six Months
Ended June 30, 2017 2016 Interest
incurred $ 8,437 $ 2,970 Adjusted EBITDA(1) $ 11,265 $ 4,016
Adjusted EBITDA margin percentage (1) 4.2 % 2.1 %
LTM(2) Ended June 30, 2017 2016
Interest incurred $ 12,951 $ 5,766 Adjusted EBITDA(1) $ 50,393 $
37,662 Adjusted EBITDA margin percentage (1) 6.5 % 7.9 % Ratio of
Adjusted EBITDA to total interest incurred (1) 3.9x 6.5x (1)
Adjusted EBITDA, Adjusted EBITDA margin percentage,
and ratio of Adjusted EBITDA to total interest incurred are
non-GAAP measures. Please see "Reconciliation of Non-GAAP Financial
Measures" for a reconciliation of each of these measures to the
appropriate GAAP measure. (2) "LTM" indicates amounts for the
trailing 12 months.
KEY FINANCIAL AND OPERATING DATA -
UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
% Change 2017 2016 %
Change Financial Data - Unconsolidated Joint Ventures:
Home sales revenue $ 34,240 $ 47,698
(28)
%
$ 59,386 $ 85,899
(31)
%
Land sales revenue $ 931 $ 22,406
(96)
%
2,405 26,162
(91)
%
Total revenue $ 35,171 $ 70,104
(50)
%
$ 61,791 $ 112,061
(45)
%
Net income (loss) $ (654 ) $ 10,195
(106)
%
$ (1,518 ) $ 12,336
(112)
%
Operating Data - Unconsolidated Joint Ventures: New
home orders 54 30 80 % 93 76 22 % New homes delivered 33 55
(40)
%
65 100
(35)
%
Average selling price of homes delivered $ 1,038 $ 867 20 % $ 914 $
859 6 % Selling communities at end of period 8 3 167 %
Backlog homes (dollar value) $ 70,941 $ 71,970
(1)
%
Backlog (homes) 90 76 18 % Average sales price of backlog $ 788 $
947
(17)
%
Homebuilding lots owned and controlled 520 610
(15)
%
Land development lots owned and controlled 2,415 2,512
(4)
%
Total lots owned and controlled 2,935 3,122
(6)
%
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(Unaudited)
In this earnings release, we utilize certain non-GAAP financial
measures as defined by the Securities and Exchange Commission. We
present these measures because we believe they, and similar
measures, are useful to management and investors in evaluating the
Company’s operating performance and financing structure. We also
believe these measures facilitate the comparison of our operating
performance and financing structure with other companies in our
industry. Because these measures are not calculated in accordance
with Generally Accepted Accounting Principles (“GAAP”), they may
not be comparable to other similarly titled measures of other
companies and should not be considered in isolation or as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP.
The following table reconciles homebuilding gross margin
percentage as reported and prepared in accordance with GAAP, to the
non-GAAP measures homebuilding gross margin before impairments and
adjusted homebuilding gross margin percentages. 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 June 30,
Six Months Ended June 30, 2017 %
2016 % 2017 %
2016 % (Dollars in thousands) Home sales
revenue $ 96,929 100.0 % $ 78,836 100.0 % $ 166,335 100.0 % $
121,139 100.0 % Cost of home sales 83,788 86.4 % 69,390
88.0 % 143,853 86.5 % 106,060 87.6 %
Homebuilding gross margin 13,141 13.6 % 9,446 12.0 % 22,482 13.5 %
15,079 12.4 % Add: Home sales impairments 1,300 1.3 % —
— % 1,300 0.8 % — — % Homebuilding gross
margin before impairments 14,441 14.9 % 9,446 12.0 % 23,782 14.3 %
15,079 12.4 % Add: Interest in cost of home sales 1,720 1.8
% 1,063 1.3 % 3,271 2.0 % 1,711 1.4 % Adjusted
homebuilding gross margin $ 16,161 16.7 % $ 10,509
13.3 % $ 27,053 16.3 % $ 16,790
13.9
%
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued)(Unaudited)
Adjusted EBITDA, Adjusted EBITDA margin percentage and the ratio
of Adjusted EBITDA to total interest incurred 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 or other
expense, (d) non-cash impairment charges and abandoned project
costs, (e) gain (loss) on extinguishment of debt, (f) depreciation
and amortization, (g) amortization of equity-based compensation and
(h) 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. 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 and level
of impairments. Due to the significance of the GAAP components
excluded, Adjusted EBITDA should not be considered in isolation or
as an alternative to net income, cash flows from operations or any
other performance measure prescribed by GAAP. A reconciliation of
net income (loss) attributable to us to Adjusted EBITDA, Adjusted
EBITDA margin percentage and the ratio of Adjusted EBITDA to total
interest incurred is provided in the following table.
Six Months Ended LTM(1)
Ended June 30, June 30, 2017
2016 2017 2016 (Dollars in thousands)
Net income (loss) $ 2,353 $ 1,575 $ 21,704 $ 18,133 Add: Interest
amortized to cost of sales and other expense 3,271 1,711 6,891
3,827 Provision (benefit) for income taxes 1,512 1,253 13,283
10,761 Depreciation and amortization 236 251 496 492 Amortization
of equity-based compensation 1,306 1,742 3,035 4,391 Cash
distributions of income from unconsolidated joint ventures 1,588
1,095 4,235 12,120 Non-cash impairments and abandonments 1,506 329
5,257 521 Less: Gain from notes payable principal reduction — —
(250 ) — Equity in income of unconsolidated joint ventures (507 )
(3,940 ) (4,258 ) (12,583 ) Adjusted EBITDA $ 11,265 $ 4,016
$ 50,393 $ 37,662 Total Revenue $ 269,133
$ 194,104 $ 769,485 $ 475,707 Adjusted
EBITDA margin percentage 4.2 % 2.1 % 6.5 % 7.9 % Interest incurred
$ 8,437 $ 2,970 $ 12,951 $ 5,766 Ratio
of Adjusted EBITDA to total interest incurred 3.9x 6.5x (1)
"LTM" indicates amounts for the trailing 12 months.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued)(Unaudited)
The following table reconciles the Company’s
ratio of debt-to-capital to the non-GAAP ratio of net
debt-to-capital. We believe that the ratio of net debt-to-capital
is a relevant financial measure for management and investors to
understand the leverage employed in our operations and as an
indicator of the Company’s ability to obtain financing.
June 30, December 31,
2017 2016 (Dollars in thousands) Total debt, net $
318,121 $ 118,000 Equity, exclusive of noncontrolling interest
247,710 244,523 Total capital $ 565,831 $
362,523 Ratio of debt-to-capital(1) 56.2 % 32.5 %
Total debt, net $ 318,121 $ 118,000 Less: cash, cash equivalents
and restricted cash 154,047 31,081 Net debt 164,074
86,919 Equity, exclusive of noncontrolling interest 247,710
244,523 Total capital $ 411,784 $ 331,442
Ratio of net debt-to-capital(2) 39.8 % 26.2 % (1) The
ratio of debt-to-capital is computed as the quotient obtained by
dividing total debt, net by the sum of total debt plus equity,
exclusive of noncontrolling interest. (2) The ratio of net
debt-to-capital is computed as the quotient obtained by dividing
net debt (which is total debt, net less cash to the extent
necessary to reduce the debt balance to zero) by total capital,
exclusive of noncontrolling 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 notes payable, 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. See the table above reconciling this non-GAAP
financial measure to the ratio of debt-to-capital.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005463/en/
The New Home Company Inc.Investor RelationsDrew Mackintosh,
949-382-7838investorrelations@nwhm.com
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