- Diluted EPS of $0.21 per Share --
Homebuilding Gross Margin up 80 bps to 16.3% -- Net New
Orders up 27% -- Backlog Dollar Value of $331 million, up
14% -
The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2017 third quarter.
Third Quarter 2017 Highlights Compared to Third Quarter
2016
- Net income of $4.3 million, or $0.21
per diluted share vs. $5.5 million, or $0.27 per diluted share
- Total revenues of $157.9 million vs.
$177.9 million
- Wholly owned deliveries up 40%
- Homebuilding gross margin 16.3% vs.
15.5%, up 80 basis points; excluding interest in cost of sales, up
190 basis points to 18.4%*
- Net new home orders up 27%
- Backlog dollar value up 14% to $330.6
million
“I am very pleased with our third quarter operating results and
the progress we made during the quarter towards meeting our
full-year financial and operational goals," said The New Home
Company’s Chief Executive Officer Larry Webb. "Continued buyer
demand in California drove a solid monthly sales absorption rate of
2.5 sales per community, which produced a 27% increase in net new
home orders as compared to the prior year and a 14% year-over-year
increase in the dollar value of our backlog. In addition, our
homebuilding gross margin improved 80 basis points over the prior
year, and was up 190 basis points before interest costs."
Mr. Webb continued, “The Company continues to execute on its
strategy to broaden its product portfolio and expects to open five
new communities during the fourth quarter with anticipated base
pricing below $750,000, which should provide the Company with a
solid community count to start fiscal 2018. Given the positive
economic conditions surrounding the housing submarkets in which we
operate, coupled with the solid foundation that our team has built,
we believe that we are set-up for a strong finish to the year and
are well positioned for 2018."
Third Quarter 2017 Operating Results
Total revenues for the 2017 third quarter were $157.9 million,
compared to $177.9 million in the prior year period. Net income
attributable to the Company was $4.3 million, or $0.21 per diluted
share, compared to $5.5 million, or $0.27 per diluted share, in the
prior year period. The year-over-year decrease in net income was
primarily attributable to an 8% decline in home sales revenue, a
120 basis point increase in selling and marketing expenses as a
percentage of home sales revenues, and decreases in fee building
revenues and joint venture income. These items were partially
offset by an 80 basis point improvement in homebuilding gross
margin to 16.3%.
Wholly Owned Projects
Home sales revenue for the 2017 third quarter decreased 8% to
$114.6 million, compared to $125.1 million in the prior year
period. The decrease in home sales revenue was driven primarily by
a 35% decrease in the average selling price of homes delivered to
$1.4 million, which was partially offset by a 40% increase in
deliveries. The decrease in average selling price was primarily due
to a product mix shift, including a higher proportion of deliveries
from our Northern California operations, where the average selling
price was $781,000. Additionally, Southern California's 2017 third
quarter average selling price decreased 31% to $2.0 million due to
contributions from communities with lower price points, consistent
with the Company's strategic broadening of its product
portfolio.
Gross margin from home sales for the 2017 third quarter was
16.3% versus 15.5% in the prior year period. The 80 basis point
improvement in home sales gross margin was primarily due to a
change in mix, including more volume from higher-margin communities
located in Santa Clara in the Bay Area and in Crystal Cove in
Newport Coast, CA. Adjusted gross margin from home sales for the
2017 third quarter, which excludes interest in cost of home sales
and inventory impairments, was 18.4%* compared to 16.5%* in the
prior year period.
Our SG&A expense ratio as a percentage of home sales revenue
for the 2017 third quarter was 11.6% versus 10.0% in the prior year
period. The increase in the SG&A rate was primarily
attributable to higher selling and marketing costs, driven by an
increase in spend related to the ramp up of new communities, higher
co-broker commissions and model operating costs, and to a lesser
extent, lower home sales revenue.
Net new home orders for the 2017 third quarter were up 27% to 81
homes, compared to 64 homes in the prior year period. The Company's
monthly sales absorption pace was up 47% during the 2017 third
quarter to 2.5 sales per average selling community, compared to 1.7
in the prior year period. The improvement in the absorption rate
was driven by solid order activity in both Southern and Northern
California. As a result of increased sales activity and the timing
of opening new communities, our quarter end selling communities
were down 8% from the prior year, ending the 2017 third quarter
with 12 active communities compared to 13 at the end of the prior
year period. This slight decline was consistent with our
expectations, and the Company anticipates opening five new
communities in the 2017 fourth quarter.
The dollar value of the Company's wholly owned backlog at the
end of the 2017 third quarter was up 14% year-over-year to $330.6
million and totaled 182 homes, compared to $290.2 million and 129
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 19% 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 third quarter decreased 18% to
$43.3 million, compared to $52.8 million in the prior year period.
The decrease was primarily due to a decrease in fee building
construction activity. Our fee building gross margin was $1.5
million, or 3.5%, compared to $1.9 million, or 3.7%, in the prior
year period. Management fees from joint ventures were $1.3 million
during the 2017 third quarter compared to $1.5 million in the prior
year period.
Unconsolidated Joint Ventures
(JVs)
The Company’s share of joint venture income for the 2017 third
quarter was $0.1 million, compared to $0.5 million in the prior
year period. This decrease was due to lower joint venture net
income due to a decrease in joint venture lot sales and lower gross
margins from joint venture home sales. The decrease in joint
venture gross margins was due to increased deliveries in the 2017
third quarter from four lower-margin Sacramento communities. In the
2016 third quarter, joint venture gross margins were higher due to
higher-margin deliveries from our Orchard Park project in the Bay
Area, which delivered its last home in the 2017 first quarter. The
following sets forth supplemental information about the Company’s
joint ventures. Such information is not included in the Company’s
financial data for GAAP purposes but is provided for informational
purposes.
Joint venture net income totaled $0.4 million, compared to $2.4
million in the prior year period. Joint venture home sales revenues
totaled $45.2 million, compared to $19.7 million in the prior year
period, while joint venture land sales revenues totaled $0.6
million for the 2017 third quarter, compared to $14.8 million in
the prior year period.
At the end of both the 2017 and 2016 third quarter, our joint
ventures had eight active selling communities. Net new home orders
from joint ventures for the 2017 third quarter increased 23% to 43
homes as compared to 35 homes in the prior year period. The dollar
value of homes in backlog from unconsolidated joint ventures at the
end of the 2017 third quarter was $69.8 million from 83 homes,
compared to $85.3 million from 88 homes in the prior year
period.
Balance Sheet and Liquidity
As of September 30, 2017, the Company had real estate
inventories totaling $478.5 million, of which $362.1 million
represented work-in-process and completed homes (including models),
$75.2 million in land and land under development, and $41.3 million
in land deposits and pre-acquisition costs. The Company owned or
controlled 2,203 lots through its wholly owned operations
(excluding fee building and joint venture lots), of which 1,356
lots, or 62%, were controlled or under option. The Company ended
the 2017 third quarter with $62.4 million in cash and cash
equivalents and had no borrowings outstanding under its $200.0
million revolving credit facility. The Company ended the 2017 third
quarter with $318.5 million in debt outstanding (net of unamortized
discount, premium and debt issuance costs), a debt-to-capital ratio
of 55.7%, and a net debt-to-capital ratio of 50.3%*.
Guidance
For the 2017 fourth quarter, the Company estimates the
following:
- Home sales revenue of $260 - $280
million
- Fee building revenue of $20 - $30
million
- Income from unconsolidated joint
ventures of $1 - $1.5 million
For the full year 2017, the Company anticipates the
following:
- Home sales revenue of $540 - $560
million
- Fee building revenue of $165 - $175
million
- Income from unconsolidated joint
ventures of $2 million
- Wholly owned active year-end community
count of 17
- Joint venture active year-end community
count of 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 Friday, October 27, 2017 to review third 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 November 27, 2017 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13671776.
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.
* 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
September 30,
Nine Months Ended
September 30,
2017 2016 2017
2016 (Dollars in thousands, except per share
amounts)
Revenues: Home sales $ 114,622 $ 125,142 $ 280,957
$ 246,281 Fee building, including management fees from
unconsolidated joint ventures of $1,324, $1,539, $3,755 and $6,251,
respectively 43,309 52,761 146,107 125,726
157,931 177,903 427,064 372,007
Cost of Sales: Home sales 95,992 105,799 238,545 211,859
Home sales impairments — — 1,300 — Fee building 41,808
50,832 141,633 120,063 137,800 156,631 381,478
331,922
Gross Margin: Home sales 18,630 19,343 41,112 34,422
Fee building 1,501 1,929 4,474 5,663
20,131 21,272 45,586 40,085 Selling and marketing expenses
(6,860 ) (6,055 ) (18,237 ) (14,577 ) General and administrative
expenses (6,465 ) (6,468 ) (17,150 ) (17,476 ) Equity in net income
of unconsolidated joint ventures 99 488 606 4,428 Other income
(expense), net 69 (195 ) 34 (590 ) Income before
income taxes 6,974 9,042 10,839 11,870 Provision for income taxes
(2,656 ) (3,465 ) (4,168 ) (4,718 ) Net income 4,318 5,577 6,671
7,152 Net (income) loss attributable to noncontrolling interest —
(30 ) 10 90 Net income attributable to The New
Home Company Inc. $ 4,318 $ 5,547 $ 6,681 $
7,242 Earnings per share attributable to The New Home
Company Inc.: Basic $ 0.21 $ 0.27 $ 0.32 $ 0.35 Diluted $ 0.21 $
0.27 $ 0.32 $ 0.35 Weighted average shares outstanding: Basic
20,876,315 20,711,952 20,839,507 20,675,233 Diluted 20,999,673
20,797,731 20,949,499 20,764,480
CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2017
2016 (Dollars in thousands, except per share amounts)
(Unaudited)
Assets Cash and cash equivalents $ 62,443 $
30,496 Restricted cash 213 585 Contracts and accounts receivable
14,446 27,833 Due from affiliates 554 1,138 Real estate inventories
478,541 286,928 Investment in and advances to unconsolidated joint
ventures 56,814 50,857 Other assets 25,096 21,299 Total
assets $ 638,107 $ 419,136
Liabilities and
equity Accounts payable $ 36,078 $ 33,094 Accrued expenses and
other liabilities 30,684 23,418 Unsecured revolving credit facility
— 118,000 Senior notes, net 318,452 — Total liabilities
385,214 174,512 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, 20,876,623 and 20,712,166, shares issued and
outstanding as of September 30, 2017 and December 31, 2016,
respectively 209 207 Additional paid-in capital 198,757 197,161
Retained earnings 53,836 47,155 Total stockholders' equity
252,802 244,523 Noncontrolling interest in subsidiary 91 101
Total equity 252,893 244,624 Total liabilities and equity $
638,107 $ 419,136
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
Nine Months Ended September 30, 2017
2016 (Dollars in
thousands)
Operating activities: Net income $ 6,671 $ 7,152
Adjustments to reconcile net income to net cash used in operating
activities: Deferred taxes (54 ) 1,181 Amortization of equity based
compensation 2,086 2,602 Excess income tax provision from
stock-based compensation — 97 Inventory impairments 1,300 —
Distributions of earnings from unconsolidated joint ventures 1,588
1,931 Equity in net income of unconsolidated joint ventures (606 )
(4,428 ) Deferred profit from unconsolidated joint ventures 560 541
Depreciation 344 381 Abandoned project costs 238 498 Net changes in
operating assets and liabilities: Restricted cash 372 11 Contracts
and accounts receivable 13,448 2,717 Due from affiliates 504 91
Real estate inventories (179,607 ) (159,778 ) Other assets (3,766 )
(4,894 ) Accounts payable 2,859 11,927 Accrued expenses and other
liabilities (6,257 ) (6,430 ) Due to affiliates — (293 ) Net
cash used in operating activities (160,320 ) (146,694 )
Investing activities: Purchases of property and equipment
(145 ) (379 ) Cash assumed from joint venture at consolidation 995
2,009 Contributions and advances to unconsolidated joint ventures
(21,296 ) (7,707 ) Distributions of capital and repayment of
advances to unconsolidated joint ventures 13,650 13,977 Interest
collected on advances to unconsolidated joint ventures 468 —
Net cash provided by (used in) investing activities (6,328 )
7,900
Financing activities: Borrowings from credit
facility 72,000 193,000 Repayments of credit facility (190,000 )
(38,000 ) Proceeds from senior notes 324,465 — Borrowings from
other notes payable — 343 Repayments of other notes payable —
(15,636 ) Payment of debt issuance costs (7,382 ) (1,064 ) Cash
distributions to noncontrolling interest in subsidiary — (725 )
Minimum tax withholding paid on behalf of employees for stock
awards (590 ) (647 ) Excess income tax provision from stock-based
compensation — (97 ) Proceeds from exercise of stock options 102
— Net cash provided by financing activities 198,595
137,174 Net increase (decrease) in cash and cash
equivalents 31,947 (1,620 ) Cash and cash equivalents – beginning
of period 30,496 45,874 Cash and cash equivalents –
end of period $ 62,443 $ 44,254
KEY FINANCIAL AND OPERATING DATA(Dollars
in thousands)(Unaudited)
New Home Deliveries:
Three
Months Ended September 30, 2017 2016 %
Change Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California 39 $ 79,494 $ 2,038 36 $ 105,789 $ 2,939 8 %
(25 )% (31 )% Northern California 45 35,128 781 24
19,353 806 88 % 82 % (3 )% Total 84 $ 114,622
$ 1,365 60 $ 125,142 $ 2,086 40 % (8 )% (35 )%
Nine Months Ended September 30, 2017
2016 % Change Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California 88 $ 190,696 $ 2,167 67 $ 189,996 $ 2,836 31 %
— % (24 )% Northern California 114 90,261 792 64
56,285 879 78 % 60 % (10 )% Total 202 $
280,957 $ 1,391 131 $ 246,281 $ 1,880 54 % 14
% (26 )%
Net New Home Orders:
Three Months Ended September 30,
Nine Months Ended September 30, 2017
2016 % Change
2017 2016
% Change Southern California 43 39 10 % 143 105 36 %
Northern California 38 25 52 % 162 79
105 % 81 64 27 % 305 184 66 %
Active Communities: As of September 30,
2017 2016 % Change Southern California 7 8 (13
)% Northern California 5 5 — % 12 13 (8
)%
Backlog: As of September
30, 2017 2016
% Change Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California 103 $ 274,037 $ 2,661 92 $ 262,224 $ 2,850 12 %
5 % (7 )% Northern California 79 56,602 716 37
27,971 756 114 % 102 % (5 )% Total 182 $ 330,639
$ 1,817 129 $ 290,195 $ 2,250 41 % 14 % (19 )%
Lots Owned and Controlled:
September 30, 2017
2016 % Change Lots
Owned Southern California 579 287 102 % Northern California 268
339 (21 )% Total 847 626 35 %
Lots Controlled(1)
Southern California 348 693 (50 )% Northern California 669 265 152
% Arizona 339 — NA Total 1,356 958 42 %
Lots Owned and Controlled - Wholly Owned 2,203 1,584 39 %
Fee Building(2)
815 981 (17 )% Total Lots Owned and Controlled 3,018
2,565 18 % (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: Nine Months Ended
September 30, 2017
2016 Interest incurred $ 15,217 $ 5,243 Adjusted EBITDA(1) $
21,508 $ 15,871 Adjusted EBITDA margin percentage (1) 5.0 % 4.3 %
LTM(2) Ended September 30, 2017
2016 Interest incurred $ 17,458 $ 6,670 Adjusted EBITDA(1) $
48,781 $ 41,766 Adjusted EBITDA margin percentage (1) 6.5 % 7.4 %
Ratio of Adjusted EBITDA to total interest incurred (1) 2.8x 6.3x
September 30, December 31, 2017
2016 Ratio of debt-to-capital 55.7 % 32.5 % Ratio of net
debt-to-capital(1) 50.3 % 26.2 % Ratio of debt to LTM(2) Adjusted
EBITDA(1) 6.5x 2.7x (1) Adjusted EBITDA,
Adjusted EBITDA margin percentage, ratio of Adjusted EBITDA to
total interest incurred, ratio of net debt-to-capital, and ratio of
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, 2017 2016
% Change 2017
2016 % Change
Financial Data - Unconsolidated Joint Ventures: Home sales
revenue $ 45,242 $ 19,659 130 % $ 104,628 $ 105,558 (1 )% Land
sales revenue $ 647 $ 14,805 (96 )% 3,052
40,967 (93 )% Total revenue $ 45,889 $ 34,464
33 % $ 107,680 $ 146,525 (27 )% Net income (loss) $
426 $ 2,417 (82 )% $ (1,092 ) $ 16,378 (107 )%
Operating Data - Unconsolidated Joint Ventures: New
home orders 43 35 23 % 136 111 23 % New homes delivered 50 23 117 %
115 123 (7 )% Average selling price of homes delivered $ 905 $ 855
6 % $ 910 $ 858 6 % Selling communities at end of period 8 8
— % Backlog homes (dollar value) $ 69,834 $ 85,317 (18 )% Backlog
(homes) 83 88 (6 )% Average sales price of backlog $ 841 $ 970 (13
)% Homebuilding lots owned and controlled 398 661 (40 )%
Land development lots owned and controlled 2,415 2,415
— % Total lots owned and controlled 2,813 3,076
(9 )%
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 September 30,
Nine Months Ended September 30, 2017
% 2016
% 2017
% 2016
% (Dollars in thousands) Home sales revenue $ 114,622 100.0
% $ 125,142 100.0 % $ 280,957 100.0 % $ 246,281 100.0 % Cost of
home sales 95,992 83.7 % 105,799 84.5 % 239,845
85.4 % 211,859 86.0 % Homebuilding gross margin
18,630 16.3 % 19,343 15.5 % 41,112 14.6 % 34,422 14.0 % Add: Home
sales impairments — — % — — % 1,300 0.5 % —
— % Homebuilding gross margin before impairments 18,630 16.3
% 19,343 15.5 % 42,412 15.1 % 34,422 14.0 % Add: Interest in cost
of home sales 2,448 2.1 % 1,306 1.0 % 5,719
2.0 % 3,017 1.2 % Adjusted homebuilding gross margin $
21,078 18.4 % $ 20,649 16.5 % $ 48,131 17.1 %
$ 37,439 15.2 %
Adjusted EBITDA, Adjusted EBITDA margin percentage, the ratio of
Adjusted EBITDA to total interest incurred, and the ratio of 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 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. The ratio of debt to
Adjusted EBITDA is calculated by dividing debt at the period end 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 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 to Adjusted
EBITDA, Adjusted EBITDA margin percentage, the ratio of Adjusted
EBITDA to total interest incurred, and the ratio of debt to
Adjusted EBITDA is provided in the following table.
Nine Months Ended
LTM(1) Ended
Twelve
Months Ended
September 30, September 30, December 31,
2017 2016 2017
2016 2016 (Dollars in thousands) Net
income $ 6,671 $ 7,152 $ 20,445 $ 19,365 $ 20,926 Add: Interest
amortized to cost of sales and other expense 5,719 3,017 8,033
4,698 5,331 Provision for income taxes 4,168 4,718 12,474 11,976
13,024 Depreciation and amortization 344 381 474 505 511
Amortization of equity-based compensation 2,086 2,602 2,955 3,761
3,471 Cash distributions of income from unconsolidated joint
ventures 1,588 1,931 3,399 9,894 3,742 Non-cash impairments and
abandonments 1,538 498 5,120 582 4,080 Less: Gain from notes
payable principal reduction — — (250 ) — (250 ) Equity in income of
unconsolidated joint ventures (606 ) (4,428 ) (3,869 ) (9,015 )
(7,691 ) Adjusted EBITDA $ 21,508 $ 15,871 $ 48,781
$ 41,766 $ 43,144 Total Revenue $ 427,064 $
372,007 $ 749,513 $ 566,633 $ 694,456 Adjusted EBITDA margin
percentage 5.0 % 4.3 % 6.5 % 7.4 % 6.2 % Interest incurred $ 15,217
$ 5,243 $ 17,458 $ 6,670 $ 7,484 Ratio of Adjusted EBITDA to total
interest incurred 2.8x 6.3x 5.8x Total debt at period end 318,452
233,924 118,000 Ratio of debt to LTM(1) Adjusted EBITDA 6.5x 5.6x
2.7x (1) "LTM" indicates amounts for the
trailing 12 months.
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,
2017 2016 (Dollars in thousands) Total debt, net $
318,452 $ 118,000 Equity, exclusive of noncontrolling interest
252,802 244,523 Total capital $ 571,254 $
362,523 Ratio of debt-to-capital(1) 55.7 % 32.5 %
Total debt, net $ 318,452 $ 118,000 Less: cash, cash equivalents
and restricted cash 62,656 31,081 Net debt 255,796
86,919 Equity, exclusive of noncontrolling interest 252,802
244,523 Total capital $ 508,598 $ 331,442
Ratio of net debt-to-capital(2) 50.3 % 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/20171027005141/en/
The New Home Company Inc.Investor RelationsDrew Mackintosh,
949-382-7838investorrelations@nwhm.com
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