2018 Fourth Quarter Financial
Results- Diluted EPS of $(0.80) per share -- Adjusted
EPS of $0.28*, excluding inventory and joint venture impairment
charges -- Backlog units up 25%, dollar value up 28%
-- Deliveries up 35% -- Ending community count up 18%
-
The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2018 fourth quarter and full year.
Fourth Quarter 2018 Financial Results
- Net loss of $16.2 million, or $(0.80)
per diluted share, including $30.0 million of pretax inventory and
joint venture impairment charges
- Adjusted net income of $5.6 million*,
or $0.28* per diluted share, compared to $14.2 million*, or $0.67*
per diluted share, for the 2017 fourth quarter
- Total revenue of $229.7 million; home
sales revenue of $187.3 million
- Deliveries up 35% to 187
- Backlog increased 25% to 191 units with
total dollar value of $207.1 million
- Ending community count up 18%
- Repurchased 379,505 shares of common
stock, or 2% of outstanding shares for $2.8 million
Full Year 2018 Financial Results
- Total revenue of $667.6 million; home
sales revenue of $504.0 million
- Net loss of $14.2 million, or $(0.69)
per diluted share, including $30.0 million of pretax inventory and
joint venture impairment charges
- Adjusted net income of $7.6 million*,
or $0.37* per diluted share, compared to $21.7 million*, or $1.03*
per diluted share, for 2017
- Deliveries up 46% to 498 for the full
year
- Net new home orders up 30%
- Repurchased 1,003,116 shares of common
stock, or 5% of outstanding shares for $8.5 million
The Company reported a net loss of $16.2 million, or $(0.80) per
diluted share for the 2018 fourth quarter. Adjusted net income for
the period was $5.6 million*, or $0.28* per diluted share, after
excluding $10.0 million in pretax inventory impairment charges and
$20.0 million of pretax joint venture impairment charges. The
Company's net income for the 2017 fourth quarter was $10.5 million,
or $0.50 per diluted share. Adjusted net income for the 2017 period
was $14.2 million*, or $0.67* per diluted share, and excluded $3.2
million in income tax charges related to the revaluation of
deferred tax assets and $0.9 million in pretax inventory impairment
charges.
“In 2018, we took another step forward in implementing our
strategy to reach more buyers through more affordably priced
communities as evidenced by a 46% increase in deliveries compared
to 2017 and a 38% reduction in the average selling price of homes
delivered,” said Larry Webb, Chairman and Chief Executive Officer
of The New Home Company. "However, the fourth quarter of 2018
proved to be a challenge as potential buyers in our markets
exercised a high degree of caution during what is already a
seasonally slow period, which resulted in a slower absorption rate.
In addition, we experienced some construction delays at a few
communities, most notably at our multifamily condominium community
in Playa Vista, which negatively impacted our fourth quarter
revenues. While we continue to have confidence in the fundamental
drivers of our business and strategy, we acknowledge the
operational challenges a slowing housing market poses and have
adjusted our outlook accordingly.”
Mr. Webb continued, “As a result of this revised outlook, we
took impairment charges at two higher-priced communities in
Southern California and one land development joint venture in
Northern California. We believe these actions were necessary in
light of the current demand environment and should allow us to turn
through these communities at a more accelerated rate, redeploy
capital within our existing or new markets and generate cash flow
more quickly.”
Mr. Webb concluded. “We continue to be positive about the
long-term outlook for our markets and our company, and we are
taking steps to right-size our business and fortify our balance
sheet. We anticipate that these initiatives will lead to a leaner
cost structure, reduce debt leverage over time and improve
shareholder returns."
Fourth Quarter 2018 Operating Results
Total revenues for the 2018 fourth quarter were $229.7 million,
compared to $324.1 million in the prior year period. Net loss
attributable to the Company was $16.2 million, or $(0.80) per
diluted share, compared to net income of $10.5 million, or $0.50
per diluted share, in the prior year period. The year-over-year
decrease in net income was primarily attributable to a $29.1
million increase in inventory and joint venture impairments, a 33%
decrease in home sales revenue, a 770 basis point decline in home
sales gross margin percentage (270 basis point decline before
impairments*) and a 150 basis point increase in selling, general
and administrative costs as a percentage of home sales revenue.
These decreases were partially offset by a tax benefit for the 2018
fourth quarter.
Wholly Owned Projects
Home sales revenue for the 2018 fourth quarter decreased 33% to
$187.3 million, compared to $279.9 million in the prior year
period. The decrease in home sales revenue was driven largely by a
50% decline in average selling price to $1.0 million, which was
partially offset by a 35% increase in deliveries. Home sales
revenue was also negatively impacted by the delayed closing of
several homes in backlog that were scheduled to be delivered in the
period. The decrease in average selling price was most notable in
Southern California where over half of our deliveries were from
more-affordable communities with base pricing of $750,000 or below.
In addition, the 2017 fourth quarter average selling price was
heavily influenced by deliveries from two Crystal Cove luxury
communities in Newport Coast, CA where average selling prices
exceeded $6.0 million.
Gross margin from home sales 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.
Homes sales gross margin for the 2017 fourth quarter was 15.8% and
included inventory impairment charges of $0.9 million. Excluding
inventory impairments, our home sales gross margin was 13.5%* for
the 2018 fourth quarter as compared to 16.2%* in the prior year
period. The 270 basis point decline was primarily due to higher
interest costs included in cost of home sales, and to a lesser
extent, a product mix shift and slightly higher incentives.
Additionally, the 2017 fourth quarter also benefited from
an $0.8 million warranty reserve adjustment. Adjusted
homebuilding gross margin for the 2018 fourth quarter, which
excludes interest in cost of home sales and impairments, was 17.7%*
compared to 18.0%* in the year ago period.
Our SG&A expense ratio as a percentage of home sales revenue
for the 2018 fourth quarter was 9.9% versus 8.4% in the prior year
period. The 150 basis point increase in the SG&A rate was
primarily due to lower home sales revenue, higher co-broker
commissions, and higher sales personnel and advertising costs
associated with increased community count. Partially offsetting
these year-over-year increases was decreased capitalized selling
and marketing cost amortization due to the closeout of higher-end,
luxury communities. G&A costs for the 2018 fourth quarter were
also lower as compared to the prior year period primarily due to
lower compensation-related expenses.
Net new home orders for the 2018 fourth quarter decreased 36% to
69 homes due to a slower monthly sales pace. We believe buyer
hesitancy stemming from higher interest rates and affordability
concerns impacted 2018 fourth quarter demand with the monthly sales
absorption rate dropping to 1.2 sales per community compared to 2.3
for the year ago period. The Company's active selling community
count was up 18% as of the end of the 2018 fourth quarter to 20
communities.
The dollar value of the Company's wholly owned backlog at the
end of the 2018 fourth quarter was $207.1 million and totaled 191
homes compared to $162.3 million and 153 homes in the prior year
period. The increase in backlog dollar value resulted primarily
from the 25% increase in homes in backlog, and to a lesser extent,
a 2% higher average selling price.
Fee Building Projects
Fee building revenue for the 2018 fourth quarter was $42.4
million, compared to $44.2 million in the prior year period.
Management fees from joint ventures and construction management
fees from third parties increased to $1.6 million for the 2018
fourth quarter as compared to $1.2 million for the 2017 fourth
quarter. We generated $1.1 million in fee building gross margin for
the 2018 fourth quarter versus $1.0 million in the prior year
period. The higher fee building margin was largely the result of
increased construction management fees from third parties,
partially offset by a $0.3 million decrease in management fees from
joint ventures.
Unconsolidated Joint Ventures
(JVs)
The Company’s share of joint venture loss for the 2018 fourth
quarter was $19.9 million, down from $0.3 million of income in the
prior year period. Included in the Company's loss was a $20.0
million impairment charge related to our investment in a land
development joint venture in Northern California. The impairment
was primarily the result of lower anticipated land sales revenue as
well as our decision to not incorporate a potential homebuilding
component within the existing land development joint venture at
this time. 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 loss totaled $28.3 million, compared to net
income of $0.6 million in the prior year period. Joint venture home
sales revenue for the 2018 fourth quarter totaled $52.8 million,
compared to $38.1 million in the prior year period, while joint
venture land sales revenue totaled $7.5 million for the 2018 fourth
quarter, compared to $1.7 million in the prior year period.
At the end of both the 2018 and 2017 fourth quarters, our joint
ventures had seven actively selling communities. Net new home
orders from joint ventures for the 2018 fourth quarter decreased
32% to 23 homes. The dollar value of homes in backlog from joint
ventures at the end of the 2018 fourth quarter was $66.9 million
from 76 homes compared to $66.6 million from 80 homes at the end of
the 2017 fourth quarter.
Income Taxes
The Company's effective tax rate was 27.8%, or 27.5%* before
discrete items, as compared to 51.7%, or 37.8%* before discrete
items, in the 2017 fourth quarter. The effective tax rate for the
2017 fourth quarter was impacted by a deferred tax asset charge,
included in discrete items, related to Federal tax rate cuts from
2017's Tax Cuts and Jobs Act. The rate cuts were the primary driver
of the year-over-year decrease in the Company's effective tax rate
before discrete items, partially offset by the loss of certain tax
benefits from production activities that were eliminated as a
result of tax reform.
Full Year 2018 Operating Results
For the full year 2018, the Company reported a net loss of $14.2
million, or $(0.69) per diluted share. Adjusted net income for the
year was $7.6 million*, or $0.37* per diluted share, after
excluding $10.0 million in pretax inventory impairment charges and
$20.0 million of pretax joint venture impairment charges. The
Company's net income for 2017 was $17.2 million, or $0.82 per
diluted share. Adjusted net income for 2017 was $21.7 million*, or
$1.03* per diluted share, and excluded $3.2 million in income tax
charges related to the revaluation of deferred tax assets and $2.2
million in pretax inventory impairment charges.
Total revenues for the year ended December 31, 2018 were $667.6
million compared to $751.2 million for the prior year. Homebuilding
revenue declined to $504.0 million primarily from a 38% decrease in
the average selling price of homes due to a strategic shift to more
affordably priced homes in 2018, partially offset by a 46% increase
in the number of homes delivered during the year. The
year-over-year decrease in net income was primarily attributable to
a $27.8 million increase in inventory and joint venture impairment
charges, a 380 basis point decline in home sales margin (220 basis
point decline before impairments*), an 11% decrease in total
revenues, and a 180 basis point increase in selling, general and
administrative expenses as a percentage of home sales revenue.
These items were partially offset by the income tax benefit for
2018.
Balance Sheet and Liquidity
As of December 31, 2018, the Company had real estate
inventories totaling $566.3 million and owned or controlled 2,812
lots through its wholly owned operations (excluding fee building
and joint venture lots), of which 1,145 lots, or 41%, were
controlled through option contracts. The Company ended the 2018
fourth quarter with $42.3 million in cash and cash equivalents and
$387.6 million in debt, of which $67.5 million was outstanding
under its $200 million revolving credit facility. As of December
31, 2018, the Company had a debt-to-capital ratio of 61.8% and a
net debt-to-capital ratio of 59.0%*.
Stock Repurchase
During the 2018 fourth quarter, the Company repurchased 379,505
shares of common stock for approximately $2.8 million under its
previously announced stock repurchase plan. For the full year 2018,
the Company repurchased and retired 1,003,116 shares totaling $8.5
million, leaving a remaining authorization of $6.5 million as of
December 31, 2018.
Guidance
The Company's current estimate for the 2019 first quarter is as
follows:
- Home sales revenue of $80 - $90
million
- Fee building revenue of $20 - $25
million
- Home sales gross margin of 12.6% -
13.0%
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 Friday, February 15, 2019 to review fourth quarter
and full year results, discuss recent events and results, and
discuss the Company's quarterly guidance for 2019. 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 15, 2019 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13686678.
* Adjusted net income, Adjusted EPS, homebuilding (home sales)
gross margin before impairments, adjusted homebuilding gross margin
(or homebuilding gross margin excluding interest in cost of home
sales and impairments), effective tax rate before discrete items
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.”
About The New Home Company
NWHM is a new generation homebuilder focused on the design,
construction and sale of innovative and consumer-driven homes in
major metropolitan areas within select growth markets in California
and Arizona, including Southern California, the San Francisco Bay
area, metro Sacramento and the greater Phoenix area. The Company is
headquartered in Aliso Viejo, California. For more information
about the Company and its new home developments, please visit the
Company's website at www.NWHM.com.
Forward-Looking Statements
Various statements contained in this press release, including
those that express a belief, anticipation, expectation or
intention, as well as those that are not statements of historical
fact, are forward-looking statements. These forward-looking
statements may include projections and estimates concerning our
revenues, community counts and openings, the timing and success of
specific projects, our ability to execute our strategic growth
objectives, gross margins, other projected results, income,
earnings per share, joint ventures and capital spending. Our
forward-looking statements are generally accompanied by words such
as “estimate,” “should,” “project,” “predict,” “believe,” “expect,”
“intend,” “anticipate,” “potential,” “plan,” “goal,” “will,”
“guidance,” “target,” “forecast,” or other words that convey the
uncertainty of future events or outcomes. The forward-looking
statements in this press release speak only as of the date of this
release, and we disclaim any obligation to update these statements
unless required by law, and we caution you not to rely on them
unduly. We have based these forward-looking statements on our
current expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. The following factors, among
others, may cause our actual results, performance or achievements
to differ materially from any future results, performance or
achievements expressed or implied by these forward-looking
statements: economic changes either nationally or in the markets in
which we operate, including declines in employment, volatility of
mortgage interest rates and inflation; a downturn in the
homebuilding industry; changes in sales conditions, including home
prices, in the markets where we build homes; our significant amount
of debt and the impact of restrictive covenants in our debt
agreements; our ability to repay our debt as it comes due; changes
in our credit rating or outlook; volatility and uncertainty in the
credit markets and broader financial markets; our business and
investment strategy including our plans to sell more affordably
priced homes; availability of land to acquire and our ability to
acquire such land on favorable terms or at all; our liquidity and
availability, terms and deployment of capital; changes in margin;
write-downs; shortages of or increased prices for labor, land or
raw materials used in housing construction; adverse weather
conditions and natural disasters (including wild fires and
mudslides); issues concerning our joint venture partnerships; the
cost and availability of insurance and surety bonds; governmental
regulation, including the impact of "slow growth" or similar
initiatives; changes in, or the failure or inability to comply
with, governmental laws and regulations; the timing of receipt of
regulatory approvals and the opening of projects; delays in the
land entitlement process, development, construction, or the opening
of new home communities; litigation and warranty claims; the degree
and nature of competition; the impact of recent accounting
standards; availability of qualified personnel and our ability to
retain our key personnel; and additional factors discussed under
the sections captioned “Risk Factors” included in our annual report
and other reports filed with the Securities and Exchange
Commission. The Company reserves the right to make such updates
from time to time by press release, periodic report or other method
of public disclosure without the need for specific reference to
this press release. No such update shall be deemed to indicate that
other statements not addressed by such update remain correct or
create an obligation to provide any other updates.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months EndedDecember
31,
Year Ended December 31, 2018
2017 2018 2017 (Dollars in
thousands, except per share amounts)
Revenues: Home sales $
187,258 $ 279,885 $ 504,029 $ 560,842 Fee building, including
management fees from unconsolidated joint ventures of $874, $1,190,
$3,385 and $4,945, respectively 42,408 44,217 163,537
190,324 229,666 324,102 667,566
751,166
Cost of Sales: Home sales 162,034 234,668
436,530 473,213 Home sales impairments 10,000 900 10,000 2,200 Fee
building 41,275 43,194 159,136 184,827
213,309 278,762 605,666 660,240
Gross Margin: Home sales
15,224 44,317 57,499 85,429 Fee building 1,133 1,023
4,401 5,497 16,357 45,340 61,900 90,926
Selling and marketing expenses (10,754 ) (14,465 ) (36,065 )
(32,702 ) General and administrative expenses (7,784 ) (9,180 )
(25,966 ) (26,330 ) Equity in net income (loss) of unconsolidated
joint ventures (19,902 ) 260 (19,653 ) 866 Other income (expense),
net (293 ) (263 ) (521 ) (229 ) Pretax income (loss) (22,376 )
21,692 (20,305 ) 32,531 (Provision) benefit for income taxes 6,226
(11,222 ) 6,075 (15,390 ) Net income (loss) (16,150 )
10,470 (14,230 ) 17,141 Net loss attributable to non-controlling
interest — 1 14 11 Net income (loss)
attributable to The New Home Company Inc. $ (16,150 ) $ 10,471
$ (14,216 ) $ 17,152 Earnings (loss) per share
attributable to The New Home Company Inc.: Basic $ (0.80 ) $ 0.50 $
(0.69 ) $ 0.82 Diluted $ (0.80 ) $ 0.50 $ (0.69 ) $ 0.82 Weighted
average shares outstanding: Basic 20,247,406 20,876,766 20,703,967
20,849,736 Diluted 20,247,406 21,145,065 20,703,967 20,995,498
CONSOLIDATED BALANCE SHEETS
December 31, December 31, 2018
2017
(Dollars in thousands, except per
shareamounts)
(Unaudited)
Assets Cash and cash equivalents $ 42,273 $
123,546 Restricted cash 269 424 Contracts and accounts receivable
18,265 23,224 Due from affiliates 1,218 1,060 Real estate
inventories 566,290 416,143 Investment in and advances to
unconsolidated joint ventures 34,330 55,824 Other assets 33,452
24,291 Total assets $ 696,097 $ 644,512
Liabilities and equity Accounts payable $ 39,391 $ 23,722
Accrued expenses and other liabilities 29,028 38,054 Unsecured
revolving credit facility 67,500 — Senior notes, net 320,148
318,656 Total liabilities 456,067 380,432 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, 20,058,904 and
20,876,837, shares issued and outstanding as of December 31, 2018
and December 31, 2017, respectively 201 209 Additional paid-in
capital 193,132 199,474 Retained earnings 46,621 64,307
Total stockholders' equity 239,954 263,990 Non-controlling interest
in subsidiary 76 90 Total equity 240,030 264,080
Total liabilities and equity $ 696,097 $ 644,512
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
Year Ended December 31, 2018
2017 (Dollars in thousands)
Operating
activities: Net income (loss) $ (14,230 ) $ 17,141 Adjustments
to reconcile net income (loss) to net cash used in operating
activities: Deferred taxes (7,620 ) (1,073 ) Noncash deferred tax
asset charge — 3,190 Amortization of stock-based compensation 3,090
2,803 Distributions of earnings from unconsolidated joint ventures
715 1,588 Inventory impairments 10,000 2,200 Abandoned project
costs 206 383 Equity in net income (loss) of unconsolidated joint
ventures 19,653 (866 ) Deferred profit from unconsolidated joint
ventures 136 821 Depreciation and amortization 6,631 449 Net
changes in operating assets and liabilities: Contracts and accounts
receivable 4,959 4,670 Due from affiliates (242 ) 18 Real estate
inventories (157,705 ) (114,930 ) Other assets (11,642 ) (5,255 )
Accounts payable 15,669 (9,546 ) Accrued expenses and other
liabilities (9,305 ) 7,544 Net cash used in operating
activities (139,685 ) (90,863 )
Investing activities:
Purchases of property and equipment (246 ) (195 ) Cash assumed from
joint venture at consolidation — 995 Contributions and advances to
unconsolidated joint ventures (15,066 ) (27,479 ) Distributions of
capital and repayment of advances from unconsolidated joint
ventures 15,436 15,577 Interest collected on advances to
unconsolidated joint ventures 178 552 Net cash
provided by (used in) investing activities 302 (10,550 )
Financing activities: Borrowings from credit facility
150,000 88,000 Repayments of credit facility (82,500 ) (206,000 )
Proceeds from senior notes — 324,465 Repayments of other notes
payable — (4,110 ) Payment of debt issuance costs — (7,565 )
Repurchases of common stock (8,563 ) — Tax withholding paid on
behalf of employees for stock awards (982 ) (590 ) Proceeds from
exercise of stock options — 102 Net cash provided by
financing activities 57,955 194,302 Net (decrease)
increase in cash, cash equivalents and restricted cash (81,428 )
92,889 Cash, cash equivalents and restricted cash – beginning of
period 123,970 31,081 Cash, cash equivalents and
restricted cash – end of period $ 42,542 $ 123,970
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries: Three Months
Ended December 31, 2018 2017 % Change
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Southern California 102 $ 113,283 $ 1,111 86 $ 242,955 $ 2,825 19 %
(53 )% (61 )% Northern California 85 73,975 870 53
36,930 697 60 % 100 % 25 % Total 187 $ 187,258
$ 1,001 139 $ 279,885 $ 2,014 35 % (33 )% (50
)%
Year Ended December 31, 2018 2017
% Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Southern California 282 $ 317,373 $ 1,125 174 $ 433,651 $ 2,492 62
% (27 )% (55 )% Northern California 216 186,656 864
167 127,191 762 29 % 47 % 13 % Total 498 $
504,029 $ 1,012 341 $ 560,842 $ 1,645 46 % (10
)% (38 )%
Three Months Ended
December 31, Year Ended December 31, 2018
2017
%Change
2018 2017
%Change
Net New Home Orders: Southern California 53 54 (2 )% 301 197
53 % Northern California 13 53 (75 )% 202 215 (6 )% Arizona 3 — NA
33 — NA 69 107 (36 )% 536 412 30 %
Selling Communities at
End of Period: Southern California 13 10 30 % Northern
California 5 7 (29 )% Arizona 2 — NA 20 17 18 %
Average
Selling Communities: Southern California 13 9 44 % 12 7 71 %
Northern California 5 7 (29 )% 6 6 — % Arizona 2 — NA 2 — NA 20 16
25 % 20 13 54 %
Monthly Sales Absorption Rate per
Community (1): Southern California 1.4 2.1 (33 )%
2.2 2.3 (4 )% Northern California 0.9 2.5 (64 )% 2.7 3.1 (13 )%
Arizona 0.5 NA NA 1.7 NA NA Total 1.2 2.3 (48 )% 2.3 2.7 (15 )%
Backlog: As of December 31,
2018 2017 % Change
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Southern California 90 $ 111,024 $ 1,234 71 $ 93,955 $ 1,323 27 %
18 % (7 )% Northern California 68 59,847 880 82 68,295 833 (17 )%
(12 )% 6 % Arizona 33 36,200 1,097 — —
— NA NA NA Total 191 $ 207,071 $ 1,084 153 $
162,250 $ 1,060 25 % 28 % 2 % (1) Monthly
sales absorption represents the number of net new home orders
divided by the number of average selling communities for the
period.
Lots
Owned and Controlled: As of December 31, 2018
2017
%Change
Lots Owned Southern California 626 563 11 % Northern California 742
318 133 % Arizona 299 65 360 % Total 1,667 946
76 % Lots Controlled (1) Southern California 205 278 (26 )%
Northern California 451 1,031 (56 )% Arizona 489 497
(2 )% Total 1,145 1,806 (37 )% Lots Owned and
Controlled - Wholly Owned 2,812 2,752 2 % Fee Building (2) 806
920 (12 )% Total Lots Owned and Controlled 3,618
3,672 (1 )% (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:
Three Months Ended December
31,
Year EndedDecember 31,
2018 2017 2018
2017 Interest incurred $ 7,779 $ 6,761 $ 28,377 $ 21,978
Adjusted EBITDA(1) $ 19,565 $ 28,632 $ 39,898 $ 50,145 Adjusted
EBITDA margin percentage (1) 8.5 % 8.8 % 6.0 % 6.7 %
LTM(2) Ended December
31,
2018 2017 Interest incurred $ 28,377 $ 21,978
Adjusted EBITDA(1) $ 39,898 $ 50,145 Adjusted EBITDA margin
percentage (1) 6.0 % 6.7 % Ratio of Adjusted EBITDA to total
interest incurred(1) 1.4 x
2.3
x
December 31, 2018 2017 Ratio of
debt-to-capital 61.8 % 54.7 % Ratio of net debt-to-capital(1) 59.0
% 42.4 % Ratio of debt to LTM(2) Adjusted EBITDA(1)
9.7
x
6.4 x Ratio of net debt to LTM(2) Adjusted EBITDA(1)
8.6
x
3.9
x
Ratio of cash and inventory to debt
1.6
x
1.7 x (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, 2018 2017
% Change 2018 2017
% Change Financial Data - Unconsolidated Joint
Ventures: Home sales revenue $ 52,811 $ 38,069 39 % $ 138,892 $
142,697 (3 )% Land sales revenue 7,453 1,698 339 %
42,731 4,750 800 % Total revenue $ 60,264 $
39,767 52 % $ 181,623 $ 147,447 23 % Net
income (loss) $ (28,253 ) $ 563 NM $ (27,904 ) $ (529 ) NM
Operating Data - Unconsolidated Joint Ventures: New
home orders 23 34 (32 )% 142 170 (16 )% New homes delivered 54 34
59 % 146 149 (2 )% Average selling price of homes delivered $ 978 $
1,120 (13 )% $ 951 $ 958 (1 )% Selling communities at end of
period 7 7 — % Backlog homes (dollar value) $ 66,892 $ 66,636 — %
Backlog (homes) 76 80 (5 )% Average sales price of backlog $ 880 $
833 6 % Homebuilding lots owned and controlled 211 341 (38
)% Land development lots owned and controlled 1,879 2,323
(19 )% Total lots owned and controlled 2,090 2,664
(22 )%
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(Unaudited)
In this earnings release, we utilize certain non-GAAP financial
measures as defined by the Securities and Exchange Commission. We
present these measures because we believe they, and similar
measures, are useful to management and investors in evaluating the
Company’s operating performance and financing structure. We also
believe these measures facilitate the comparison of our operating
performance and financing structure with other companies in our
industry. Because these measures are not calculated in accordance
with Generally Accepted Accounting Principles (“GAAP”), they may
not be comparable to other similarly titled measures of other
companies and should not be considered in isolation or as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP.
The following table reconciles net income (loss) attributable to
the Company to the non-GAAP measure of adjusted net income
attributable to the Company (net income before home sales and joint
venture impairment and noncash deferred tax asset charges) and
earnings (loss) per share and earnings (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 home sales
and joint venture impairment and noncash deferred tax asset
charges). We believe removing the impact of impairments and
deferred tax asset adjustments is relevant to provide investors
with an understanding of the impact these noncash items had on
earnings.
Three Months EndedDecember
31,
Year Ended December 31, 2018
2017 2018 2017 (Dollars in
thousands, except per share amounts) Net income (loss) attributable
to The New Home Company Inc. $ (16,150 ) $ 10,471 $ (14,216 ) $
17,152 Home sales and joint venture impairments (tax effected)
21,750 560 21,810 1,366 Noncash deferred tax asset charge —
3,190 — 3,190 Adjusted
net income attributable to The New Home Company Inc. $ 5,600
$ 14,221 $ 7,594 $ 21,708 Earnings
(loss) per share attributable to The New Home Company Inc.: Basic $
(0.80 ) $ 0.50 $ (0.69 ) $ 0.82 Diluted $ (0.80 ) $ 0.50 $ (0.69 )
$ 0.82 Adjusted earnings per share attributable to The New
Home Company Inc.: Basic $ 0.28 $ 0.68 $ 0.37 $ 1.04 Diluted $ 0.28
$ 0.67 $ 0.37 $ 1.03 Weighted average shares outstanding:
Basic 20,247,406 20,876,766 20,703,967 20,849,736 Diluted
20,326,250 21,145,065 20,804,859 20,995,498 Home sales and
joint venture impairments $ 30,000 $ 900 $ 30,000 $ 2,200 Effective
tax rate for The New Home Company Inc. before discrete items(1)
27.5 % 37.8 % 27.3 % 37.9 % Tax benefit from home sales and joint
venture impairments $ (8,250 ) $ (340 ) $ (8,190 ) $ (834 ) Home
sales and joint venture impairments (tax effected) $ 21,750
$ 560 $ 21,810 $ 1,366 Loss per share
attributable to The New Home Company Inc. related to home sales and
joint venture impairments: Basic $1.07 $0.03 $1.05 $0.07 Diluted
$1.07 $0.03 $1.05 $0.07
(1)
Refer to table below for reconciliation of the effective tax rate
before discrete items.
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 excluding interest in
cost of home sales and adjusted homebuilding gross margin. 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, 2018 %
2017 % 2018
% 2017
% (Dollars in thousands) Home sales revenue $
187,258 100.0 % $ 279,885 100.0 % $ 504,029 100.0 % $
560,842 100.0 % Cost of home sales 172,034 91.9 %
235,568 84.2 % 446,530 88.6 % 475,413 84.8 %
Homebuilding gross margin 15,224 8.1 % 44,317 15.8 % 57,499 11.4 %
85,429 15.2 % Add: Homes sales impairments 10,000 5.4 % 900
0.3 % 10,000 2.0 % 2,200 0.4 % Homebuilding
gross margin before impairments 25,224 13.5 % 45,217 16.2 % 67,499
13.4 % 87,629 15.6 % Add: Interest in cost of home sales 7,868
4.2 % 5,302 1.8 % 18,678 3.7 % 11,021
2.0 % Adjusted homebuilding gross margin $ 33,092
17.7 % $ 50,519 18.0 % $ 86,177 17.1 % $ 98,650
17.6 %
The following table reconciles the Company’s effective tax rate
calculated in accordance with GAAP to the non-GAAP measure,
effective tax rate before discrete items. The Tax Cuts and Jobs Act
enacted in December 2017 cut Federal corporate income tax rates
effective for 2018, and we believe removing the impact of the
discrete items is relevant to provide investors with an
understanding of the impact the tax cuts had on earnings.
Three Months EndedDecember
31,
Year Ended December 31, 2018
2017 2018 2017
(Dollars in thousands) Effective tax rate for The New Home
Company Inc.: Pretax income (loss) $ (22,376 ) $ 21,692 $ (20,305 )
$ 32,531 (Provision) benefit for income taxes $ 6,226 $ (11,222 ) $
6,075 $ (15,390 ) Effective tax rate (1) 27.8 % 51.7 % 29.9 % 47.3
% Effective tax rate for The New Home Company Inc. before
discrete items: (Provision) benefit for income taxes $ 6,226 $
(11,222 ) $ 6,075 $ (15,390 ) Adjustment for discrete items (69 )
3,029 (523 ) 3,068 (Provision) benefit for income
taxes before discrete items $ 6,157 $ (8,193 ) $ 5,552
$ (12,322 ) Effective tax rate for The New Home Company Inc.
before discrete items(1) 27.5 % 37.8 % 27.3 % 37.9 % (1)
Effective tax rate is computed by dividing the (provision)
benefit for income taxes by pretax income (loss).
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)
noncash impairment charges and abandoned project costs, (e)
depreciation and amortization, (f) amortization of stock-based
compensation and (g) 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 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 (loss), cash flows from operations
or any other performance measure prescribed by GAAP. A
reconciliation of net income (loss) to Adjusted EBITDA, and the
calculations of Adjusted EBITDA margin percentage, the ratio of
Adjusted EBITDA to total interest incurred, the ratio of debt to
Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are
provided in the following table.
Three Months Ended
LTM(1) Ended December 31, December
31, 2018 2017 2018
2017 (Dollars in thousands) Net income (loss) $
(16,150 ) $ 10,470 $ (14,230 ) $ 17,141 Add: Interest amortized to
cost of sales and equity in net income (loss) of unconsolidated
joint ventures 9,016 5,333 19,908 11,057 (Benefit) provision for
income taxes (6,226 ) 11,222 (6,075 ) 15,390 Depreciation and
amortization 2,134 105 6,631 449 Amortization of stock-based
compensation 764 717 3,090 2,803 Cash distributions of income from
unconsolidated joint ventures — — 715 1,588 Noncash inventory
impairments and abandonments 10,125 1,045 10,206 2,583 Less: Equity
in net (income) loss of unconsolidated joint ventures 19,902
(260 ) 19,653 (866 ) Adjusted EBITDA $ 19,565 $
28,632 $ 39,898 $ 50,145 Total Revenue $
229,666 $ 324,102 $ 667,566 $ 751,166 Adjusted EBITDA margin
percentage 8.5 % 8.8 % 6.0 % 6.7 % Interest incurred $ 7,779 $
6,761 $ 28,377 $ 21,978 Ratio of Adjusted EBITDA to total interest
incurred 1.4 x 2.3 x Total debt at period end $ 387,648 $ 318,656
Ratio of debt to Adjusted EBITDA 9.7 x 6.4 x Total net debt at
period end $ 345,106 $ 194,686 Ratio of net debt to Adjusted EBITDA
8.6 x 3.9 x Total cash and inventory $ 608,563 $ 539,689 Ratio of
cash and inventory to debt 1.6x 1.7 x (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.
December 31, 2018
2017 (Dollars in thousands) Total debt, net $ 387,648
$ 318,656 Equity, exclusive of non-controlling interest 239,954
263,990 Total capital $ 627,602 $ 582,646
Ratio of debt-to-capital(1) 61.8 % 54.7 % Total debt,
net $ 387,648 $ 318,656 Less: cash, cash equivalents and restricted
cash 42,542 123,970 Net debt 345,106 194,686 Equity,
exclusive of non-controlling interest 239,954 263,990
Total capital $ 585,060 $ 458,676 Ratio of net
debt-to-capital(2) 59.0 % 42.4 % (1) The ratio of
debt-to-capital is computed as the quotient obtained by dividing
total debt, net by total capital (the sum of total debt, net 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 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190215005104/en/
Investor Relations | Drew Mackintosh | 949-382-7838 |
investorrelations@nwhm.com
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