The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2020 first quarter.
- Cash flow from operations of $17.3 million and cash and cash
equivalents of $87.9 million
- Debt-to-capital ratio of 57.5% and a net debt-to-capital ratio
of 48.8%*, a 40 basis point sequential improvement from the fourth
quarter and a 1,130 basis point improvement from the 2019 first
quarter
- Net orders up 18% on a monthly absorption rate of 2.0 vs. 1.7
for the 2019 first quarter
- Total revenues of $132.0 million vs. $118.8 million for the
2019 first quarter
- Home sales revenue of $95.7 million vs. $99.2 million for the
2019 first quarter
- Net loss of $8.5 million, or ($0.42) per diluted share,
including $16.3 million of project abandonment and joint venture
exit charges, compared to a net loss of $2.0 million, or ($0.10)
per diluted share, for the 2019 first quarter
- Adjusted net loss of $1.1 million*, or ($0.05) per diluted
share*, excluding impairment charges and a net deferred tax asset
remeasurement benefit, compared to an adjusted net loss of $0.8
million*, or ($0.04) per diluted share*, for the 2019 first
quarter
- Repurchased 2,011,183 shares since the beginning of the year
through May 7, 2020 for $3.6 million, or $1.78 per share, which
represented 10% of outstanding shares as of the beginning of the
year
First Quarter 2020 Financial Results
"These are unprecedented times for our nation and our industry,"
remarked Larry Webb, Executive Chairman of The New Home Company.
"While we are finding ways to continue our operations in the midst
of this pandemic, our first order of business remains the health
and safety of our employees, trade partners and home buyers. We
have been vigilant in our response to the virus’ outbreak and have
implemented policies and practices that adhere to the guidelines
issued by the CDC and government and public health agencies to
combat its spread. Although the road ahead is uncertain, I remain
confident in the resiliency of our industry and the talented people
of our organization to adjust to this new reality.”
Leonard Miller, President and Chief Executive Officer, stated,
"While The New Home Company experienced a successful start to the
year, demand trends softened during March as we began to experience
the negative impact stemming from the COVID-19 pandemic.
Year-over-year orders for January and February increased 32% and
82%, respectively, before declining 28% in March. This order
softness carried into April, as shelter-in-place mandates and
concerns over the virus weighed on our sales efforts. Fortunately,
due in part to homebuilding being recognized as an “essential
business” in most of the markets in which we operate, we were able
to deliver a number of homes in backlog during the quarter,
allowing us to exceed our stated home sales revenue guidance and
generate $17.3 million in operating cash flow.”
Mr. Miller continued, “We ended the quarter with approximately
$88 million in cash and cash equivalents, no borrowings outstanding
on our bank credit facility and a net debt-to-total capital ratio
of 48.8%. We have taken steps to preserve capital by implementing
additional cost cutting measures, curtailing the acquisition and
development of land, and renegotiating lot takedown arrangements.
We have also made the strategic decision to walk away from some
projects altogether, which resulted in one-time charges of
approximately $16.3 million during the quarter, but will unburden
us from substantial future capital outlays and should provide us
with tax refunds resulting from NOL carrybacks. We believe these
actions are in the company’s best interest in light of current
market conditions and recent tax law changes.”
Mr. Miller concluded, "While there are several issues
surrounding our industry that remain in flux and no one knows how
long this period of uncertainty will last or how it will evolve, I
remain confident that The New Home Company is doing the things
within our control to successfully navigate through these
challenges. We have been decisive in our response to the virus,
both from a safety perspective and a business perspective, and I
believe that our actions this quarter have put us in a good
position to overcome the challenges ahead."
First Quarter 2020 Operating Results
Total revenues for the 2020 first quarter were $132.0 million as
compared to $118.8 million in the prior year period. During the
quarter, the Company realized an $18.4 million pretax loss as
compared to a pretax loss of $2.7 million in the prior year period.
The 2020 first quarter included a $14.0 million noncash project
abandonment charge and a $2.3 million impairment charge related to
the anticipated sale of its membership interest in a land
development joint venture in Southern California that is expected
to be finalized during the second quarter. Net loss attributable to
the Company for the 2020 first quarter was $8.5 million, or ($0.42)
per diluted share, compared to a net loss of $2.0 million, or
($0.10) per diluted share, in the prior year period. Adjusted net
loss for the 2020 first quarter, after excluding project
abandonment costs, a joint venture impairment charge and a $2.1
million income tax benefit related to the revaluation of the
Company's deferred tax assets, was $1.1 million*, or ($0.05)* per
diluted share, compared to an adjusted net loss of $0.8 million*,
or $(0.04)* per diluted share for the 2019 first quarter after
excluding severance charges.
Wholly Owned Projects
Home sales revenue for the 2020 first quarter decreased 4% to
$95.7 million compared to $99.2 million in the prior year period.
The decrease in home sales revenue was driven largely by an 11%
decrease in average selling price to $894,000 from $1,002,000 a
year ago, and was partially offset by an 8% increase in deliveries.
The lower year-over-year average selling price was impacted by mix,
with Southern California delivering a higher mix of more affordable
and first move-up homes during the 2020 first quarter compared to
the prior year and fewer deliveries from our higher-priced Icon
community in Scottsdale, Arizona.
Gross margin from home sales for the 2020 first quarter was
11.4% compared to 12.7% for the prior year period. The 130 basis
point decrease was primarily due to higher interest costs and, to a
lesser extent, higher incentives, which were partially offset by a
product mix shift. Adjusted homebuilding gross margin, which
excludes interest in cost of home sales, was 17.9%* for the 2020
first quarter as compared to 17.6%* in the prior year period.
The Company's SG&A expense ratio as a percentage of home
sales revenue for the 2020 first quarter was 14.1% compared to
16.2% in the prior year period. The 210 basis point improvement in
the SG&A rate was primarily due to $1.8 million of severance
charges included in the 2019 first quarter as well as lower
amortization of capitalized selling and marketing costs. Excluding
2019 first quarter severance charges, the SG&A rate improved 30
basis points to 14.1% as compared to 14.4%* in the prior year
period. The year-over-year decrease in the SG&A rate was
partially offset by a $0.5 million reduction in G&A expenses
allocated to fee building cost of sales for the 2020 first quarter
as compared to the prior year period.
Net new home orders for the 2020 first quarter increased 18%
primarily due to improved monthly sales absorption rates during the
first two months of the quarter, and to a lesser extent, a slight
increase in average selling communities. The monthly sales
absorption rate was also up 18% to 2.0 for the 2020 first quarter
as compared to 1.7 for the prior year period. Absorption rates were
solid during the first two months of the 2020 first quarter, but
were adversely impacted by the COVID-19 pandemic in the second half
of March, where our monthly net orders decreased 28% for the month
of March as compared to the prior year. We ended the 2020 first
quarter with 22 active selling communities, flat with the prior
year.
The dollar value of the Company's wholly owned backlog at the
end of the 2020 first quarter was $130.2 million and totaled 174
homes as compared to $212.6 million and 204 homes for the prior
year period. The decrease in backlog units and dollar value was
driven largely by a lower beginning backlog and a higher backlog
conversion rate for the 2020 first quarter. Our backlog conversion
rate was 72% for the 2020 first quarter as compared to 52% in the
year ago period. The higher conversion rate in 2020 resulted
primarily from the Company's shift to more affordably priced
product, which generally has quicker build cycles and shorter
backlog periods. The decline in backlog dollar value was also
impacted by a 28% decrease in average selling price as the Company
continues its transition to more affordable product.
Fee Building Projects
Fee building revenue for the 2020 first quarter was $36.2
million, compared to $19.7 million in the prior year period. The
increase in fee revenues was largely due to increased construction
activity in Irvine, California. Additionally, management fees from
joint ventures and construction management fees from third parties,
which are included in fee building revenue, decreased to $0.5
million for the 2020 first quarter as compared to $1.3 million for
the 2019 first quarter. The higher fee building revenue and a
reduction in allocated G&A expenses, offset partially by the
decrease in management fees, resulted in a fee building gross
margin of $0.7 million for the 2020 first quarter compared to $0.4
million in the prior year period.
Unconsolidated Joint Ventures
(JVs)
The Company’s joint venture loss for the 2020 first quarter was
$1.9 million as compared to $0.2 million in income for the prior
year period. Included in the Company's allocated losses for the
2020 first quarter was a $2.3 million impairment recorded in
connection with an agreement in principle to sell its membership
interest in a land development joint venture in Southern California
to its partner that is expected to close around the end of the 2020
second quarter.
Interest Expense
The Company expensed $718,000 of interest costs directly to
interest expense during the 2020 first quarter in accordance with
Accounting Standards Codification 835, as its qualified assets were
less than its qualified debt.
Project Abandonment Costs
During the 2020 first quarter, the Company terminated its option
agreement for a luxury condominium project in Scottsdale, Arizona
due to lower demand levels experienced at this community,
substantial investment required to build out the remainder of the
project and the opportunity to recognize a tax benefit from net
operating loss carrybacks. As a result of this strategic decision
to forgo developing the balance of the property, we recorded a
noncash project abandonment charge of $14.0 million related to the
capitalized costs associated with the portion of the project that
was abandoned.
Income Taxes
The Company recorded an income tax benefit of $9.9 million for
the 2020 first quarter as compared to $0.7 million in the prior
year period. The 2020 first quarter included discrete items
totaling an $8.1 million benefit, $5.8 million of which related to
the $14.0 million noncash project abandonment charge recorded
during the quarter, and a $2.1 million benefit related to the
Coronavirus Aid, Relief and Economic Security Act ("CARES Act")
that allows companies to carry back net operating losses generated
in 2018 through 2020 for five years. The remeasurement of deferred
tax assets originally valued at a 21% federal statutory tax rate
are now available to be carried back to tax years with a 35%
federal statutory rate.
Balance Sheet and Liquidity
The Company generated $17.3 million in operating cash flows
during the 2020 first quarter and ended the quarter with $87.9
million in cash and cash equivalents. The Company had no borrowings
outstanding under its revolving credit facility as of March 31,
2020 and had $300.5 million in net debt outstanding related to its
senior notes which mature on April 1, 2022. At March 31, 2020, the
Company had a debt-to-capital ratio of 57.5% and a net
debt-to-capital ratio of 48.8%*. As of March 31, 2020, the Company
owned or controlled 2,463 lots through its wholly owned operations
(excluding fee building and joint venture lots), of which 1,053
lots, or 43% were controlled through option contracts.
Stock Repurchase
During the 2020 first quarter, the Company repurchased and
retired 1,233,883 shares of common stock through open market
purchases, a privately negotiated transaction, and a 10b5-1 plan
for $2.2 million, or $1.80 per share. Subsequent to quarter end
through May 7th, the Company repurchased an additional 777,300
shares through its 10b5-1 plan for $1.4 million, which when
combined with first quarter repurchases represented a total of
2,011,183 shares for $3.6 million, or approximately 10% of our
outstanding shares since the beginning of the year. The repurchases
were made under a previously announced stock repurchase program
that had a remaining purchase authorization of $1.8 million as of
May 7, 2020.
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 10:00 a.m.
Eastern Time on Friday, May 8, 2020 to review first quarter results
and discuss recent events, forward-looking statements, and factors
that may affect the Company's future results. 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 June 8, 2020 and can be accessed by dialing 1-844-512-2921
(domestic) or 1-412-317-6671 (international) and entering the pass
code 13702549.
* Adjusted net loss, adjusted EPS, general and administrative
costs excluding severance charges as a percentage of home sales
revenue, selling, general and administrative costs excluding
severance charges as a percentage of home sales revenue, net
debt-to-capital ratio and adjusted homebuilding gross margin (or
homebuilding gross margin excluding interest in cost of home sales)
are non-GAAP measures. A reconciliation of the appropriate GAAP
measure to each of these measures is included in the accompanying
financial data. See “Reconciliation of Non-GAAP Financial
Measures.”
About The New Home Company
NWHM is a new generation homebuilder focused on the design,
construction and sale of innovative and consumer-driven homes in
major metropolitan areas within select growth markets in California
and Arizona, including Southern California, the San Francisco Bay
area, metro Sacramento and the greater Phoenix area. The Company is
headquartered in Aliso Viejo, California. For more information
about the Company and its new home developments, please visit the
Company's website at www.NWHM.com.
Forward-Looking Statements
Various statements contained in this press release, including
those that express a belief, anticipation, expectation or
intention, as well as those that are not statements of historical
fact, are forward-looking statements. Such statements include the
statements regarding current business conditions and potential
adverse impacts of the COVID-19 pandemic. 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: a pandemic, epidemic, or outbreak of infectious disease
or similar threat, and the response to such event by government
agencies and authorities, adverse impacts due to the COVID-19
pandemic, including a recession in the U.S., which could include,
among other things, a significant decrease in demand for our homes
or consumer confidence generally with respect to purchasing a home,
the impact of legislation designed to provide economic relief from
a recession, the inability of employees to work and of customers to
visit our communities due to government movement restrictions or
illness, disruptions in our supply chain, our inability to access
capital markets due to lack of liquidity in the economy resulting
from the responses to the COVID-19 pandemic, inconsistencies in the
classification of homebuilding as an essential business,
recognition of charges which may be material for inventory
impairments or land option contract abandonments; economic changes
either nationally or in the markets in which we operate, including
declines in employment, volatility of mortgage interest rates and
inflation; a downturn in the homebuilding industry; changes in
sales conditions, including home prices, in the markets where we
build homes; our significant amount of debt and the impact of
restrictive covenants in our debt agreements; our ability to repay
our debt as it comes due; changes in our credit rating or outlook;
volatility and uncertainty in the credit markets and broader
financial markets; our business and investment strategy including
our plans to sell more affordably priced homes; availability of
land to acquire and our ability to acquire such land on favorable
terms or at all; our liquidity and availability, terms and
deployment of capital; changes in margin; write-downs; shortages of
or increased prices for labor, land or raw materials used in
housing construction; adverse weather conditions and natural
disasters (including wild fires and mudslides); our concentration
in California; issues concerning our joint venture partnerships;
the cost and availability of insurance and surety bonds;
governmental regulation, including the impact of "slow growth" or
similar initiatives; changes in, or the failure or inability to
comply with, governmental laws and regulations; the timing of
receipt of regulatory approvals and the opening of projects; delays
in the land entitlement process, development, construction, or the
opening of new home communities; litigation and warranty claims;
the degree and nature of competition; the impact of recent
accounting standards; availability of qualified personnel and our
ability to retain our key personnel; and information technology
failures and data security breaches, including issues involving
increased reliance on technology due to critical business functions
being done remotely because of COVID-19; 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 March
31,
2020
2019
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
95,659
$
99,186
Land sales
147
—
Fee building, including management
fees
36,227
19,662
132,033
118,848
Cost of Sales:
Home sales
84,722
86,569
Land sales
147
—
Fee building
35,497
19,268
120,366
105,837
Gross Margin:
Home sales
10,937
12,617
Land sales
—
—
Fee building
730
394
11,667
13,011
Selling and marketing expenses
(7,466
)
(8,679
)
General and administrative expenses
(6,023
)
(7,391
)
Equity in net income (loss) of
unconsolidated joint ventures
(1,937
)
184
Interest expense
(718
)
—
Project abandonment costs
(14,036
)
(5
)
Gain (loss) on early extinguishment of
debt
(123
)
417
Other income (expense), net
223
(188
)
Pretax loss
(18,413
)
(2,651
)
Benefit for income taxes
9,937
664
Net loss
(8,476
)
(1,987
)
Net loss attributable to non-controlling
interest
—
—
Net loss attributable to The New Home
Company Inc.
$
(8,476
)
$
(1,987
)
Loss per share attributable to The New
Home Company Inc.:
Basic
$
(0.42
)
$
(0.10
)
Diluted
$
(0.42
)
$
(0.10
)
Weighted average shares outstanding:
Basic
19,951,825
19,986,394
Diluted
19,951,825
19,986,394
CONSOLIDATED BALANCE
SHEETS
March 31,
December 31,
2020
2019
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
87,863
$
79,314
Restricted cash
424
117
Contracts and accounts receivable
15,637
15,982
Due from affiliates
108
238
Real estate inventories
398,973
433,938
Investment in and advances to
unconsolidated joint ventures
29,237
30,217
Deferred tax asset, net
16,589
17,503
Other assets
31,105
25,880
Total assets
$
579,936
$
603,189
Liabilities and equity
Accounts payable
$
21,038
$
25,044
Accrued expenses and other liabilities
36,083
40,554
Senior notes, net
300,479
304,832
Total liabilities
357,600
370,430
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, 18,957,165 and 20,096,969, shares issued and
outstanding as of March 31, 2020 and December 31, 2019,
respectively
190
201
Additional paid-in capital
191,926
193,862
Retained earnings
30,108
38,584
Total stockholders' equity
222,224
232,647
Non-controlling interest in subsidiary
112
112
Total equity
222,336
232,759
Total liabilities and equity
$
579,936
$
603,189
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2020
2019
(Dollars in thousands)
Operating activities:
Net loss
$
(8,476
)
$
(1,987
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Deferred taxes
914
—
Amortization of stock-based
compensation
589
566
Distributions of earnings from
unconsolidated joint ventures
—
260
Project abandonment costs
14,036
5
Equity in net (income) loss of
unconsolidated joint ventures
1,937
(184
)
Depreciation and amortization
1,845
2,656
(Gain) loss on early extinguishment of
debt
123
(417
)
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
345
1,806
Due from affiliates
130
524
Real estate inventories
27,130
9,676
Other assets
(11,804
)
(2,343
)
Accounts payable
(4,006
)
(18,753
)
Accrued expenses and other liabilities
(5,462
)
(4,041
)
Net cash provided by (used in) operating
activities
17,301
(12,232
)
Investing activities:
Purchases of property and equipment
(125
)
(5
)
Contributions and advances to
unconsolidated joint ventures
(2,057
)
(1,335
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
1,100
2,562
Net cash (used in) provided by investing
activities
(1,082
)
1,222
Financing activities:
Borrowings from credit facility
—
30,000
Repayments of credit facility
—
(13,500
)
Repurchases of senior notes
(4,827
)
(4,512
)
Repurchases of common stock
(2,233
)
(1,042
)
Tax withholding paid on behalf of
employees for stock awards
(303
)
(488
)
Net cash (used in) provided by financing
activities
(7,363
)
10,458
Net increase (decrease) in cash, cash
equivalents and restricted cash
8,856
(552
)
Cash, cash equivalents and restricted cash
– beginning of period
79,431
42,542
Cash, cash equivalents and restricted cash
– end of period
$
88,287
$
41,990
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
Three Months Ended March
31,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
68
$
63,017
$
927
61
$
64,593
$
1,059
11
%
(2
)%
(12
)%
Northern California
29
20,264
699
28
18,739
669
4
%
8
%
4
%
Arizona
10
12,378
1,238
10
15,854
1,585
—
%
(22
)%
(22
)%
Total
107
$
95,659
$
894
99
$
99,186
$
1,002
8
%
(4
)%
(11
)%
Three Months Ended March
31,
2020
2019
% Change
Net New Home Orders:
Southern California
62
58
7
%
Northern California
68
45
51
%
Arizona
2
9
(78
)%
132
112
18
%
Selling Communities at End of
Period:
Southern California
11
12
(8
)%
Northern California
10
8
25
%
Arizona
1
2
(50
)%
22
22
—
%
Average Selling Communities:
Southern California
11
12
(8
)%
Northern California
10
7
43
%
Arizona
2
2
—
%
22
21
5
%
Monthly Sales Absorption Rate per
Community(1):
Southern California
1.9
1.6
19
%
Northern California
2.3
2.0
15
%
Arizona
0.4
1.5
(73
)%
Total
2.0
1.7
18
%
(1)
Monthly sales absorption represents the
number of net new home orders divided by the number of average
selling communities for the period.
Backlog:
As of March 31,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
66
$
53,934
$
817
87
$
109,284
$
1,256
(24
)%
(51
)%
(35
)%
Northern California
105
71,082
677
85
72,290
850
24
%
(2
)%
(20
)%
Arizona
3
5,141
1,714
32
30,991
968
(91
)%
(83
)%
77
%
Total
174
$
130,157
$
748
204
$
212,565
$
1,042
(15
)%
(39
)%
(28
)%
Lots Owned and Controlled:
As of March 31,
2020
2019
% Change
Lots Owned
Southern California
437
626
(30
)%
Northern California
588
726
(19
)%
Arizona
385
301
28
%
Total
1,410
1,653
(15
)%
Lots Controlled(1)
Southern California
426
174
145
%
Northern California
348
439
(21
)%
Arizona
279
477
(42
)%
Total
1,053
1,090
(3
)%
Lots Owned and Controlled - Wholly
Owned
2,463
2,743
(10
)%
Fee Building Lots(2)
1,070
1,266
(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 general contracting or construction management
services.
Other Financial Data:
Three Months Ended
March 31,
2020
2019
Interest incurred
$
6,380
$
7,761
Adjusted EBITDA(1)
$
6,981
$
6,875
Adjusted EBITDA margin percentage(1)
5.3
%
5.8
%
LTM(2) Ended March 31,
2020
2019
Interest incurred
$
27,438
$
29,422
Adjusted EBITDA(1)
$
41,536
$
42,011
Adjusted EBITDA margin percentage(1)
6.1
%
6.3
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
1.5x
1.4x
March 31,
December 31,
2020
2019
Ratio of debt-to-capital
57.5
%
56.7
%
Ratio of net debt-to-capital(1)
48.8
%
49.2
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)(3)
7.2x
7.4x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)(3)
5.1x
5.4x
Ratio of cash and inventory to debt
1.6x
1.7x
____________________________
(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.
(3)
Due to an inadvertent oversight
in prior year periods, interest amortzed to certain inventory
impairment charges and to equity in net income (loss) of
unconsolidated joint ventures was duplicated in the Adjusted EBITDA
calculation. Ratios for the prior period have been
corrected.
KEY FINANCIAL AND OPERATING
DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
Three Months Ended March
31,
2020
2019
% Change
Financial Data - Unconsolidated Joint
Ventures:
Home sales revenue
$
19,548
$
38,127
(49
)%
Land sales revenue(1)
12,099
4,160
191
%
Total revenues
$
31,647
$
42,287
(25
)%
Net income
$
1,362
$
513
165
%
Operating Data - Unconsolidated Joint
Ventures:
New home orders
12
36
(67
)%
New homes delivered
20
37
(46
)%
Average selling price of homes
delivered
$
977
$
1,030
(5
)%
Selling communities at end of period
3
6
(50
)%
Backlog homes (dollar value)
$
35,075
$
70,949
(51
)%
Backlog (homes)
41
75
(45
)%
Average sales price of backlog
$
855
$
946
(10
)%
Homebuilding lots owned and controlled
54
174
(69
)%
Land development lots owned and
controlled
1,772
1,995
(11
)%
Total lots owned and controlled
1,826
2,169
(16
)%
(1)
Land sales revenue for the 2020 first
quarter includes $7.0 million of revenues related to the sales of a
mixed use building sold by a homebuilding joint venture.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (Unaudited)
In this earnings release, we utilize certain non-GAAP financial
measures as defined by the Securities and Exchange Commission. We
present these measures because we believe they, and similar
measures, are useful to management and investors in evaluating the
Company’s operating performance and financing structure. We also
believe these measures facilitate the comparison of our operating
performance and financing structure with other companies in our
industry. Because these measures are not calculated in accordance
with Generally Accepted Accounting Principles (“GAAP”), they may
not be comparable to other similarly titled measures of other
companies and should not be considered in isolation or as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP.
The following table reconciles net loss attributable to the
Company to the non-GAAP measure of adjusted net loss attributable
to the Company (net loss before abandoned project costs, joint
venture impairment, severance charges and noncash deferred tax
asset adjustments) and loss per share and loss per diluted share
attributable to the Company to the non-GAAP measures of adjusted
loss per share and adjusted diluted loss per share attributable to
the Company (loss per share before abandoned project costs, joint
venture impairment, severance charges and noncash deferred tax
asset adjustments). We believe removing the impact of these items
is relevant to provide investors with an understanding of the
impact these noncash items had on earnings.
Three Months Ended March
31,
2020
2019
(Dollars in thousands, except per
share amounts)
Net loss attributable to The New Home
Company Inc.
$
(8,476
)
$
(1,987
)
Abandoned project costs, joint venture
impairment and severance charges, net of tax
9,505
1,157
Noncash deferred tax asset
remeasurement
(2,114
)
—
Adjusted net loss attributable to The New
Home Company Inc.
$
(1,085
)
$
(830
)
Loss per share attributable to The New
Home Company Inc.:
Basic
$
(0.42
)
$
(0.10
)
Diluted
$
(0.42
)
$
(0.10
)
Adjusted loss per share attributable to
The New Home Company Inc.:
Basic
$
(0.05
)
$
(0.04
)
Diluted
$
(0.05
)
$
(0.04
)
Weighted average shares outstanding:
Basic
19,951,825
19,986,394
Diluted
19,951,825
19,986,394
Abandoned projects costs related to
Arizona luxury condominium community
$
14,000
$
—
Joint venture impairment related to joint
venture exit
2,287
—
Severance charges
—
1,788
Less: Related tax benefit
(6,782
)
(631
)
Abandoned project costs, joint venture
impairment and severance charges, net of tax
$
9,505
$
1,157
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
The following table reconciles the Company’s SG&A rate as a
percentage of home sales revenue calculated in accordance with GAAP
to the non-GAAP measure, SG&A rate excluding severance charges.
During the 2019 first quarter, the company incurred severance
charges related to right-sizing its operations by reducing
headcount. We believe removing the impact of these charges from our
SG&A rate is relevant to provide investors with a better
comparison to rates that do not include these charges.
Three Months Ended
As a Percentage of
March 31,
Home Sales Revenue
2020
2019
2020
2019
(Dollars in thousands)
Selling and marketing expenses
$
7,466
$
8,679
7.8
%
8.8
%
General and administrative expenses
("G&A")
6,023
7,391
6.3
%
7.4
%
Total selling, marketing and G&A
("SG&A")
$
13,489
$
16,070
14.1
%
16.2
%
G&A
$
6,023
$
7,391
6.3
%
7.4
%
Less: Severance charges(1)
—
(1,788
)
—
%
(1.8
)%
G&A, excluding severance charges
$
6,023
$
5,603
6.3
%
5.6
%
Selling and marketing expenses
$
7,466
$
8,679
7.8
%
8.8
%
G&A, excluding severance charges
6,023
5,603
6.3
%
5.6
%
SG&A, excluding severance charges
$
13,489
$
14,282
14.1
%
14.4
%
(1)
Includes $1.1 million related to departure
of executive officer.
The following table reconciles homebuilding gross margin
percentage as reported and prepared in accordance with GAAP to the
non-GAAP measure, adjusted homebuilding gross margin (or
homebuilding gross margin excluding interest in cost of home
sales). We believe this information is meaningful, as it isolates
the impact leverage has on homebuilding gross margin and provides
investors better comparisons with our competitors, who adjust gross
margins in a similar fashion.
Three Months Ended March
31,
2020
%
2019
%
(Dollars in thousands)
Home sales revenue
$
95,659
100.0
%
$
99,186
100.0
%
Cost of home sales
84,722
88.6
%
86,569
87.3
%
Homebuilding gross margin
10,937
11.4
%
12,617
12.7
%
Add: Interest in cost of home sales
6,146
6.5
%
4,852
4.9
%
Adjusted homebuilding gross margin
$
17,083
17.9
%
$
17,469
17.6
%
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.
March 31,
December 31,
2020
2019
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
300,479
$
304,832
Equity, exclusive of non-controlling
interest
222,224
232,647
Total capital
$
522,703
$
537,479
Ratio of debt-to-capital(1)
57.5
%
56.7
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
300,479
$
304,832
Less: Cash, cash equivalents and
restricted cash
88,287
79,431
Net debt
212,192
225,401
Equity, exclusive of non-controlling
interest
222,224
232,647
Total capital
$
434,416
$
458,048
Ratio of net debt-to-capital(2)
48.8
%
49.2
%
(1)
The ratio of debt-to-capital is computed
as the quotient obtained by dividing total debt, net of unamortized
discount, premium and debt issuance costs by total capital (the sum
of total debt, net of unamortized discount, premium and debt
issuance costs plus equity, exclusive of non-controlling
interest).
(2)
The ratio of net debt-to-capital is
computed as the quotient obtained by dividing net debt (which is
total debt, net of unamortized discount, premium and debt issuance
costs less cash, cash equivalents and restricted cash to the extent
necessary to reduce the debt balance to zero) by total capital,
exclusive of non-controlling interest. The most directly comparable
GAAP financial measure is the ratio of debt-to-capital. We believe
the ratio of net debt-to-capital is a relevant financial measure
for investors to understand the leverage employed in our operations
and as an indicator of our ability to obtain financing. We believe
that by deducting our cash from our debt, we provide a measure of
our indebtedness that takes into account our cash liquidity. We
believe this provides useful information as the ratio of
debt-to-capital does not take into account our liquidity and we
believe that the ratio net of cash provides supplemental
information by which our financial position may be considered.
Investors may also find this to be helpful when comparing our
leverage to the leverage of our competitors that present similar
information.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
Adjusted EBITDA, Adjusted EBITDA margin percentage, the ratio of
Adjusted EBITDA to total interest incurred, the ratio of debt to
Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are
non-GAAP measures. Adjusted EBITDA means net income (loss) (plus
cash distributions of income from unconsolidated joint ventures)
before (a) income taxes, (b) interest expense, (c) amortization of
previously capitalized interest included in cost of sales
(excluding amounts included in impairment charges), (d) severance
charges (e) noncash impairment charges and abandoned project costs,
(f) gain on early extinguishment of debt (g) depreciation and
amortization, (h) amortization of stock-based compensation and (i)
income (loss) from unconsolidated joint ventures. Adjusted EBITDA
margin percentage is calculated by dividing Adjusted EBITDA by
total revenue for a given period. The ratio of Adjusted EBITDA to
total interest incurred is calculated by dividing Adjusted EBITDA
by total interest incurred for a given period. The ratio of debt to
Adjusted EBITDA is calculated by dividing debt at the period end by
Adjusted EBITDA for a given period. The ratio of net debt to
Adjusted EBITDA is calculated by dividing debt at the period end
less cash, cash equivalents and restricted cash by Adjusted EBITDA
for a given period. Other companies may calculate Adjusted EBITDA
differently. Management believes that Adjusted EBITDA assists
investors in understanding and comparing the operating
characteristics of homebuilding activities by eliminating many of
the differences in companies' respective capitalization, interest
costs, tax position, level of impairments and other non-recurring
items. Due to the significance of the GAAP components excluded,
Adjusted EBITDA should not be considered in isolation or as an
alternative to net income (loss), cash flows from operations or any
other performance measure prescribed by GAAP. A reconciliation of
net loss to Adjusted EBITDA, and the calculations of Adjusted
EBITDA margin percentage, the ratio of Adjusted EBITDA to total
interest incurred, the ratio of debt to Adjusted EBITDA, and the
ratio of net debt to Adjusted EBITDA are provided in the following
table.
Three Months Ended
LTM(1) Ended
March 31,
March 31,
December 31,
2020
2019
2020
2019
2019
(Dollars in thousands)
Net loss
$
(8,476
)
$
(1,987
)
$
(14,490
)
$
(15,566
)
$
(8,001
)
Add:
Interest amortized to cost of sales
(excluding amounts included in impairment charges) and interest
expensed(2)
6,864
4,852
29,246
20,766
27,234
Benefit for income taxes
(9,937
)
(664
)
(13,088
)
(5,879
)
(3,815
)
Depreciation and amortization
1,845
2,656
8,146
8,265
8,957
Amortization of stock-based
compensation
589
566
2,283
2,814
2,260
Cash distributions of income from
unconsolidated joint ventures
—
260
114
260
374
Severance charges
—
1,788
—
1,788
1,788
Noncash inventory impairments and
abandonments
14,036
5
24,325
10,176
10,294
Less:
(Gain) loss on early extinguishment of
debt
123
(417
)
(624
)
(417
)
(1,164
)
Equity in net (income) loss of
unconsolidated joint ventures
1,937
(184
)
5,624
19,804
3,503
Adjusted EBITDA
$
6,981
$
6,875
$
41,536
$
42,011
$
41,430
Total Revenue
$
132,033
$
118,848
$
682,534
$
663,183
$
669,349
Adjusted EBITDA margin percentage
5.3
%
5.8
%
6.1
%
6.3
%
6.2
%
Interest incurred
$
6,380
$
7,761
$
27,438
$
29,422
$
28,819
Ratio of Adjusted EBITDA to total interest
incurred
1.1x
0.9x
1.5x
1.4x
1.4x
Total debt at period end
$
300,479
$
399,591
$
304,832
Ratio of debt to Adjusted EBITDA
7.2x
9.5x
7.4x
Total net debt at period end
$
212,192
$
357,601
$
225,401
Ratio of net debt to Adjusted EBITDA
5.1x
8.5x
5.4x
Total cash and inventory
$
486,836
$
604,986
$
513,252
Ratio of cash and inventory to debt
1.6x
1.5x
1.7x
(1)
"LTM" indicates amounts for the trailing
12 months.
(2)
Due to an inadvertent oversight in prior
year periods, interest amortized to certain inventory impairment
charges and to equity in net income (loss) of unconsolidated joint
ventures was duplicated in the adjusted EBITDA calculation. The
prior period has been restated to correct this duplication.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200508005120/en/
Investor Relations | Drew Mackintosh | 949-382-7838 |
investorrelations@nwhm.com
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