The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2020 second quarter.
Second Quarter 2020 Financial Results
- Net orders increased 6% compared to the 2019 second
quarter
- June net orders increased 68% compared to June 2019,
representing the highest monthly net order total in Company
history
- Homes in backlog increased 14% compared to the 2019 second
quarter
- Total revenues of $99.0 million vs. $162.7 million for the 2019
second quarter
- Net loss of $24.3 million, or ($1.32) per diluted share,
including $39.0 million in inventory and joint venture impairments
and $1.1 million in severance charges, compared to net income of
$1.6 million, or $0.08 per diluted share, for the 2019 second
quarter
- Adjusted net loss of $0.7 million*, or ($0.04) per diluted
share, excluding impairments, severance charges and a net deferred
tax asset remeasurement benefit
- Cash flow from operations of $4.7 million and cash and cash
equivalents of $85.6 million
- Debt-to-capital ratio of 60.0% and a net debt-to-capital ratio
of 51.5%*, a 620-basis point improvement from the 2019 second
quarter
- Repurchased 817,300 shares of common stock during the quarter
for $1.5 million, or an average of $1.80 per share
"The New Home Company made solid progress on a number of fronts
in the second quarter of 2020. We generated positive order momentum
as the quarter progressed, made additional improvements to our cost
structure, and improved our balance sheet leverage as compared to
the prior year period," remarked Larry Webb, Executive Chairman of
The New Home Company. "We also took decisive action to address
underperforming assets, which resulted in significant impairments
and a loss for the quarter, but will provide us a better path
forward both from a financial and strategic standpoint. As the
COVID-19 pandemic is still impacting lives around the world, we
continue to prioritize the health and safety of our employees,
trade partners and home buyers. Despite the uncertainty related to
this pandemic, I remain confident in our ability to navigate the
road ahead."
Leonard Miller, President and Chief Executive Officer, stated,
"After experiencing unprecedented uncertainty during the month of
April, our monthly absorption pace improved sequentially each month
with June ending at 3.6 net orders per community for the month, a
33% increase compared to June 2019. These results were driven by
record-low interest rates and pent-up demand for new housing.
Year-over-year orders for April and May decreased 56% and 5%,
respectively, before increasing 68% in June, marking the highest
monthly net order total in our Company’s history. The stronger
demand later in the quarter contributed to a 14% increase in homes
in backlog compared to the 2019 second quarter and positioned us
for a better second half of 2020.”
Mr. Miller continued, “We generated $4.7 million of operating
cash flow, and we ended the quarter with $85.6 million in cash and
no borrowings outstanding on our bank credit facility. We
strengthened our balance sheet by extending the maturity date of
our bank credit facility to September 30, 2021 and repurchased $5.8
million in principal of our senior notes. We also repurchased
817,300 shares of our common stock during the quarter for $1.5
million, or $1.80 per share. Our net debt-to-total capital ratio
was 51.5%, which represented a 620-basis point improvement compared
to the 2019 second quarter.”
Mr. Webb concluded, "Although we incurred substantial
impairments and a loss during the quarter, we were pleased with the
progress we made, including our continued shift to more affordable
price points, right-sizing our cost structure and strengthening our
balance sheet. These positive developments have put our Company on
more solid footing as we address the challenges ahead. While we
have more work to do, the sales success we experienced to end the
quarter, the resetting of certain asset positions, and the
operational improvements we made give us confidence that The New
Home Company is on the right track."
Second Quarter 2020 Operating Results
Total revenues for the 2020 second quarter were $99.0 million
compared to $162.7 million in the prior year period. During the
quarter, the Company realized a $41.2 million pretax loss as
compared to pretax income of $2.6 million in the prior year period.
The 2020 second quarter included $19.0 million in inventory
impairment charges, a $20.0 million joint venture impairment charge
related to a land development joint venture and $1.1 million in
severance charges. Net loss attributable to the Company for the
2020 second quarter was $24.3 million, or ($1.32) per diluted
share, compared to net income of $1.6 million, or $0.08 per diluted
share, in the prior year period. Adjusted net loss for the 2020
second quarter, after excluding impairments, severance charges and
a net deferred tax asset remeasurement benefit was $0.7 million or
($0.04) per diluted share.
Wholly Owned Projects
Home sales revenue for the 2020 second quarter was $77.8 million
compared to $140.5 million in the prior year period. The decrease
in home sales revenue was driven by a 32% decrease in deliveries
and a 19% decrease in average selling price to $755,000 from
$930,000 a year ago. The decrease in deliveries was driven by lower
beginning backlog coupled with a lower backlog conversion rate due
to a slowdown in sales at the beginning of the quarter which led to
fewer homes sold and delivered during the quarter. Our backlog
conversion rate was 59% for the 2020 second quarter as compared to
74% in the year ago period. The decrease in average selling price
was impacted by mix, with a higher concentration of revenue
generated in the Inland Empire and Sacramento regions where average
selling prices are lower than company average.
Gross margin from home sales for the 2020 second quarter was
(9.6%) compared to 12.1% for the prior year period. The decrease
was primarily due to $19.0 million of impairment charges related to
five communities, two of which are close-out communities. Excluding
inventory impairment charges, the Company's gross margin from home
sales was 14.8%* compared to 12.1% in the year ago period. The
270-basis point improvement before impairments was primarily due to
a $2.2 million benefit related to a profit participation true-up on
two closed-out communities in Southern California, and to a lesser
extent, a product mix shift. These items were partially offset by
higher interest costs included in cost of home sales. Adjusted
homebuilding gross margin, which excludes interest in cost of home
sales and impairment charges, was 20.8%* for the 2020 second
quarter as compared to 16.5%* in the prior year period.
The Company's SG&A expense ratio as a percentage of home
sales revenue for the 2020 second quarter was 17.1% compared to
11.1% in the prior year period. The increase in the SG&A rate
was primarily due to lower home sales revenue, and to a lesser
extent, $0.9 million of severance charges included in the 2020
second quarter, and a $0.7 million reduction in G&A expenses
allocated to fee building cost of sales. These items were partially
offset by lower amortization of capitalized model costs and
advertising expenses. Excluding severance charges, the 2020 second
quarter SG&A rate was 15.9%*.
Net new home orders for the 2020 second quarter increased 6%
primarily due to a 14% increase in average selling communities,
which was partially offset by an 8% reduction in the monthly sales
absorption rate of 2.2 for the quarter. The lower absorption rate
was driven by fewer net orders during the months of April and May
due to a temporary drop in demand stemming from stay at home orders
and market volatility resulting from the COVID-19 pandemic, which
was partially offset by a 68% increase in net orders for the month
of June compared to the prior year. Cancellation rate for the 2020
second quarter was 11%, flat with the prior year. We ended the 2020
second quarter with 25 active selling communities, a 25% increase
compared to the prior year.
Homes in backlog at the end of the 2020 second quarter increased
14% to 235 compared to the 2019 second quarter. The dollar value of
homes in backlog was $168.8 million compared to $201.6 million for
the prior year period. The increase in homes in backlog was driven
by higher net orders during the quarter and a lower backlog
conversion rate. The decrease in dollar value of homes in backlog
was driven by the Company’s move to more affordable product which
led to a 26% decrease in the average selling price of homes in
backlog to $718,000 compared to $974,000 at the end of the 2019
second quarter.
Fee Building Projects
Fee building revenue for the 2020 second quarter was $21.2
million, compared to $22.3 million in the prior year period. Fee
building gross margin for the 2020 second quarter was 1.0%, or $0.2
million, compared to 2.3%, or $0.5 million, in the prior year
period. The reduction in fee building gross margin was primarily
due to severance charges of $0.2 million included in fee building
cost of sales related to fee building projects in Irvine, CA.
Unconsolidated Joint Ventures
(JVs)
The Company incurred a $20.0 million joint venture loss for the
2020 second quarter as compared to $0.2 million in income for the
prior year period. The 2020 second quarter loss resulted from a
$20.0 million impairment charge in connection with the Company's
intent to exit a land development joint venture in Sacramento, CA.
The Company determined that the expected financial returns relative
to the future required capital contributions did not outweigh the
market and cost risks for the development. In addition, an exit
from the joint venture would allow the Company to pursue federal
tax loss carryback refund opportunities from the passage of the
Coronavirus Aid, Relief and Economic Security Act ("CARES Act") as
well as preserve capital.
Interest Expense
The Company expensed $1.3 million of interest costs directly to
interest expense during the 2020 second quarter in accordance with
Accounting Standards Codification 835, as its qualified assets were
less than its qualified debt.
Income Taxes
The Company recorded an income tax benefit of $16.9 million for
the 2020 second quarter as compared to a $1.0 million provision in
the prior year period. The Company's effective tax rate for the
2020 second quarter included the benefit associated with net
operating loss carrybacks to years when the Company was subject to
a 35% federal tax rate. The 2020 second quarter also included
discrete items totaling a $1.8 million benefit which primarily
related to the 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 $4.7 million in operating cash flows
during the 2020 second quarter and ended the quarter with $85.6
million in cash and cash equivalents. During the quarter, the
Company extended the maturity date of its revolving credit facility
to September 30, 2021 and reduced the facility size to $60 million.
In addition, the Company repurchased $5.8 million in principal of
its senior notes at a discount. As of the end of the second
quarter, the Company had no borrowings outstanding under its
revolving credit facility and had $295.1 million in net debt
outstanding related to its senior notes which mature on April 1,
2022. In addition, the Company had a debt-to-capital ratio of 60.0%
and a net debt-to-capital ratio of 51.5%*. The Company owned or
controlled 2,239 lots through its wholly owned operations, of which
887 lots, or 40%, were controlled through option contracts.
Stock Repurchase
During the 2020 second quarter, the Company repurchased and
retired 817,300 shares of common stock through open market
purchases and a 10b5-1 plan for $1.5 million, or $1.80 per share.
The repurchases were made under a previously announced stock
repurchase program that had a remaining purchase authorization of
$1.7 million as of the end of the 2020 second quarter.
Guidance
The Company’s current estimate for the 2020 third quarter is as
follows:
- Home sales revenue of $100 - $115 million
- Fee building revenue of $10 - $15 million
- Home sales gross margin of 12.0% to 12.5%
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 Thursday, July 30, 2020 to review second 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 August 30, 2020 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13706411.
* Adjusted net loss, adjusted EPS, selling, general and
administrative costs excluding severance charges as a percentage of
home sales revenue, net debt-to-capital ratio, homebuilding gross
margin before impairments and adjusted homebuilding gross margin
(or homebuilding gross margin excluding impairments and interest in
cost of home sales) are non-GAAP measures. A reconciliation of the
appropriate GAAP measure to each of these measures is included in
the accompanying financial data. See “Reconciliation of Non-GAAP
Financial Measures.”
About The New Home Company
NWHM is a new generation homebuilder focused on the design,
construction and sale of innovative and consumer-driven homes in
major metropolitan areas within select growth markets in California
and Arizona, including Southern California, 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 June
30,
Six Months Ended June
30,
2020
2019
2020
2019
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
77,757
$
140,464
$
173,416
$
239,650
Land sales
10
—
157
—
Fee building, including management
fees
21,193
22,285
57,420
41,947
98,960
162,749
230,993
281,597
Cost of Sales:
Home sales
66,216
123,525
150,938
210,094
Home sales impairments
19,000
—
19,000
—
Land sales
10
—
157
—
Fee building
20,985
21,770
56,482
41,038
106,211
145,295
226,577
251,132
Gross Margin:
Home sales
(7,459
)
16,939
3,478
29,556
Land sales
—
—
—
—
Fee building
208
515
938
909
(7,251
)
17,454
4,416
30,465
Selling and marketing expenses
(6,386
)
(9,683
)
(13,852
)
(18,362
)
General and administrative expenses
(6,892
)
(5,841
)
(12,915
)
(13,232
)
Equity in net income (loss) of
unconsolidated joint ventures
(19,962
)
185
(21,899
)
369
Interest expense
(1,271
)
—
(1,989
)
—
Project abandonment costs
(94
)
(14
)
(14,130
)
(19
)
Gain on early extinguishment of debt
702
552
579
969
Other income (expense), net
(68
)
(88
)
155
(276
)
Pretax income (loss)
(41,222
)
2,565
(59,635
)
(86
)
(Provision) benefit for income taxes
16,929
(974
)
26,866
(310
)
Net income (loss)
(24,293
)
1,591
(32,769
)
(396
)
Net income attributable to non-controlling
interest
—
(19
)
—
(19
)
Net income (loss) attributable to The New
Home Company Inc.
$
(24,293
)
$
1,572
$
(32,769
)
$
(415
)
Earnings (loss) per share attributable to
The New Home Company Inc.:
Basic
$
(1.32
)
$
0.08
$
(1.71
)
$
(0.02
)
Diluted
$
(1.32
)
$
0.08
$
(1.71
)
$
(0.02
)
Weighted average shares outstanding:
Basic
18,341,549
20,070,914
19,146,687
20,028,600
Diluted
18,341,549
20,095,533
19,146,687
20,028,600
CONSOLIDATED BALANCE
SHEETS
June 30,
December 31,
2020
2019
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
85,588
$
79,314
Restricted cash
144
117
Contracts and accounts receivable
7,112
15,982
Due from affiliates
140
238
Real estate inventories
370,949
433,938
Investment in and advances to
unconsolidated joint ventures
12,931
30,217
Deferred tax asset, net
15,866
17,503
Other assets
48,864
25,880
Total assets
$
541,594
$
603,189
Liabilities and equity
Accounts payable
$
16,112
$
25,044
Accrued expenses and other liabilities
33,280
40,554
Senior notes, net
295,124
304,832
Total liabilities
344,516
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, 18,231,954 and 20,096,969, shares issued and
outstanding as of June 30, 2020 and December 31, 2019,
respectively
182
201
Additional paid-in capital
190,969
193,862
Retained earnings
5,815
38,584
Total stockholders' equity
196,966
232,647
Non-controlling interest in subsidiary
112
112
Total equity
197,078
232,759
Total liabilities and equity
$
541,594
$
603,189
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2020
2019
(Dollars in thousands)
Operating activities:
Net loss
$
(32,769
)
$
(396
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred taxes
1,637
—
Amortization of stock-based
compensation
1,110
1,089
Distributions of earnings from
unconsolidated joint ventures
—
279
Inventory impairments
19,000
—
Project abandonment costs
14,130
19
Equity in net (income) loss of
unconsolidated joint ventures
21,899
(369
)
Depreciation and amortization
3,623
5,042
Gain on early extinguishment of debt
(579
)
(969
)
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
8,870
2,152
Due from affiliates
98
975
Real estate inventories
30,579
24,970
Other assets
(31,133
)
(2,240
)
Accounts payable
(8,932
)
(12,762
)
Accrued expenses and other liabilities
(5,510
)
1,102
Net cash provided by operating
activities
22,023
18,892
Investing activities:
Purchases of property and equipment
(143
)
(8
)
Contributions and advances to
unconsolidated joint ventures
(3,847
)
(4,120
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
2,370
4,928
Net cash (used in) provided by investing
activities
(1,620
)
800
Financing activities:
Borrowings from credit facility
—
40,000
Repayments of credit facility
—
(41,500
)
Repurchases of senior notes
(9,825
)
(10,856
)
Proceeds from note payable
7,036
—
Repayment of note payable
(7,036
)
—
Payment of debt issuance costs
(255
)
—
Repurchases of common stock
(3,718
)
(1,042
)
Tax withholding paid on behalf of
employees for stock awards
(304
)
(488
)
Net cash used in financing activities
(14,102
)
(13,886
)
Net increase in cash, cash equivalents and
restricted cash
6,301
5,806
Cash, cash equivalents and restricted cash
– beginning of period
79,431
42,542
Cash, cash equivalents and restricted cash
– end of period
$
85,732
$
48,348
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
Three Months Ended June
30,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
50
$
41,440
$
829
91
$
95,534
$
1,050
(45
)%
(57
)%
(21
)%
Northern California
48
30,156
628
53
37,296
704
(9
)%
(19
)%
(11
)%
Arizona
5
6,161
1,232
7
7,634
1,091
(29
)%
(19
)%
13
%
Total
103
$
77,757
$
755
151
$
140,464
$
930
(32
)%
(45
)%
(19
)%
Six Months Ended June
30,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
118
$
104,457
$
885
152
$
160,127
$
1,053
(22
)%
(35
)%
(16
)%
Northern California
77
50,420
655
81
56,035
692
(5
)%
(10
)%
(5
)%
Arizona
15
18,539
1,236
17
23,488
1,382
(12
)%
(21
)%
(11
)%
Total
210
$
173,416
$
826
250
$
239,650
$
959
(16
)%
(28
)%
(14
)%
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Net New Home Orders:
Southern California
75
90
(17
)%
137
148
(7
)%
Northern California
60
53
13
%
128
98
31
%
Arizona
29
11
164
%
31
20
55
%
Total
164
154
6
%
296
266
11
%
Selling Communities at End of
Period:
Southern California
11
11
—
%
Northern California
10
7
43
%
Arizona
4
2
100
%
Total
25
20
25
%
Average Selling Communities:
Southern California
11
12
(8
)%
11
12
(8
)%
Northern California
11
8
38
%
10
8
25
%
Arizona
3
2
50
%
2
2
—
%
Total
25
22
14
%
23
22
5
%
Monthly Sales Absorption Rate per
Community (1):
Southern California
2.3
2.5
(8
)%
2.1
2.0
5
%
Northern California
1.9
2.3
(17
)%
2.1
2.2
(5
)%
Arizona
3.2
1.8
78
%
2.2
1.7
29
%
Total
2.2
2.4
(8
)%
2.1
2.0
5
%
(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 June 30,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
91
$
74,547
$
819
86
$
92,438
$
1,075
6
%
(19
)%
(24
)%
Northern California
117
81,909
700
85
71,648
843
38
%
14
%
(17
)%
Arizona
27
12,337
457
36
37,503
1,042
(25
)%
(67
)%
(56
)%
Total
235
$
168,793
$
718
207
$
201,589
$
974
14
%
(16
)%
(26
)%
Lots Owned and Controlled:
As of June 30,
2020
2019
% Change
Lots Owned
Southern California
397
581
(32
)%
Northern California
558
729
(23
)%
Arizona
397
294
35
%
Total
1,352
1,604
(16
)%
Lots Controlled (1)
Southern California
415
200
108
%
Northern California
210
503
(58
)%
Arizona
262
477
(45
)%
Total
887
1,180
(25
)%
Lots Owned and Controlled - Wholly
Owned
2,239
2,784
(20
)%
Fee Building Lots (2)
892
1,231
(28
)%
(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
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Interest incurred
$
6,150
$
7,606
$
12,530
$
15,367
Adjusted EBITDA(1)
$
6,394
$
11,071
$
13,375
$
17,946
Adjusted EBITDA margin percentage (1)
6.5
%
6.8
%
5.8
%
6.4
%
LTM(2) Ended June 30,
2020
2019
Interest incurred
$
25,982
$
30,416
Adjusted EBITDA(1)
$
36,859
$
46,536
Adjusted EBITDA margin percentage (1)
6.0
%
6.9
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
1.4x
1.5x
June 30,
December 31,
2020
2019
Ratio of debt-to-capital
60.0
%
56.7
%
Ratio of net debt-to-capital(1)
51.5
%
49.2
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)(3)
8.0x
7.4x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)(3)
5.7x
5.4x
Ratio of cash and inventory to debt
1.5x
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 amortized 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 June
30,
Six Months Ended June
30,
2020
2019
% Change
2020
2019
% Change
Financial Data - Unconsolidated Joint
Ventures:
Home sales revenue
$
26,198
$
50,567
(48
)%
$
45,746
$
88,694
(48
)%
Land sales revenue (1)
4,092
8,511
(52
)%
16,191
12,671
28
%
Total revenues
$
30,290
$
59,078
(49
)%
$
61,937
$
101,365
(39
)%
Net income
$
1,618
$
1,790
(10
)%
$
2,980
$
2,303
29
%
Operating Data - Unconsolidated Joint
Ventures:
New home orders
3
28
(89
)%
15
64
(77
)%
New homes delivered
30
53
(43
)%
50
90
(44
)%
Average selling price of homes
delivered
$
873
$
954
(8
)%
$
915
$
985
(7
)%
Selling communities at end of period
2
6
(67
)%
Backlog homes (dollar value)
$
11,683
$
44,775
(74
)%
Backlog (homes)
14
50
(72
)%
Average sales price of backlog
$
835
$
896
(7
)%
Homebuilding lots owned and controlled
24
121
(80
)%
Land development lots owned and
controlled
1,768
1,924
(8
)%
Total lots owned and controlled
1,792
2,045
(12
)%
(1)
Land sales revenue for the six months
ended June 30, 2020 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 income (loss) attributable to
the Company to the non-GAAP measure of adjusted net income (loss)
attributable to the Company (net income (loss) before inventory
impairments, abandoned project costs, joint venture impairments,
severance charges and noncash deferred tax asset adjustments) and
income (loss) per share and income (loss) per diluted share
attributable to the Company to the non-GAAP measures of adjusted
income (loss) per share and adjusted diluted income (loss) per
share attributable to the Company (income (loss) per share before
inventory impairments, abandoned project costs, joint venture
impairments, 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 items had on earnings.
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
(Dollars in thousands, except per
share amounts)
Net income (loss) attributable to The New
Home Company Inc.
$
(24,293
)
$
1,572
$
(32,769
)
$
(415
)
Inventory impairments, abandoned project
costs, joint venture impairments and severance charges, net of
tax
25,414
—
34,847
1,113
Noncash deferred tax asset
remeasurement
(1,827
)
—
(3,941
)
—
Adjusted net income (loss) attributable to
The New Home Company Inc.
$
(706
)
$
1,572
$
(1,863
)
$
698
Earnings (loss) per share attributable to
The New Home Company Inc.:
Basic
$
(1.32
)
$
0.08
$
(1.71
)
$
(0.02
)
Diluted
$
(1.32
)
$
0.08
$
(1.71
)
$
(0.02
)
Adjusted earnings (loss) per share
attributable to The New Home Company Inc.:
Basic
$
(0.04
)
$
0.08
$
(0.10
)
$
0.03
Diluted
$
(0.04
)
$
0.08
$
(0.10
)
$
0.03
Weighted average shares outstanding:
Basic
18,341,549
20,070,914
19,146,687
20,028,600
Diluted
18,341,549
20,095,533
19,146,687
20,082,018
Inventory impairments
$
19,000
$
—
$
19,000
$
—
Abandoned project costs related to Arizona
luxury condominium community
—
—
14,000
—
Joint venture impairments related to joint
venture exits
20,038
—
22,325
—
Severance charges
1,091
—
1,091
1,788
Less: Related tax benefit
(14,715
)
—
$
(21,569
)
(675
)
Inventory impairments, abandoned project
costs, joint venture impairments and severance charges, net of
tax
$
25,414
$
—
$
34,847
$
1,113
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 2020 second quarter and 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
Six Months Ended
As a Percentage of
June 30,
Home Sales Revenue
June 30,
Home Sales Revenue
2020
2019
2020
2019
2020
2019
2020
2019
(Dollars in thousands)
Selling and marketing expenses
$
6,386
$
9,683
8.2
%
6.9
%
$
13,852
$
18,362
8.0
%
7.7
%
General and administrative expenses
("G&A")
6,892
5,841
8.9
%
4.2
%
12,915
13,232
7.4
%
5.5
%
Total selling, marketing and G&A
("SG&A")
$
13,278
$
15,524
17.1
%
11.1
%
$
26,767
$
31,594
15.4
%
13.2
%
G&A
$
6,892
$
5,841
8.9
%
4.2
%
$
12,915
$
13,232
7.4
%
5.5
%
Less: Severance charges (1)
(873
)
—
(1.2
)%
—
(873
)
(1,788
)
(0.5
)%
(0.8
)%
G&A, excluding severance charges
$
6,019
$
5,841
7.7
%
4.2
%
$
12,042
$
11,444
6.9
%
4.7
%
Selling and marketing expenses
$
6,386
$
9,683
8.2
%
6.9
%
$
13,852
$
18,362
8.0
%
7.7
%
G&A, excluding severance charges
6,019
5,841
7.7
%
4.2
%
12,042
11,444
6.9
%
4.7
%
SG&A, excluding severance charges
$
12,405
$
15,524
15.9
%
11.1
%
$
25,894
$
29,806
14.9
%
12.4
%
(1)
Includes $1.1 million related to
departure of executive officer in the 2019 first quarter.
The following table reconciles homebuilding gross margin
percentage as reported and prepared in accordance with GAAP to the
non-GAAP measures, homebuilding gross margin before impairments,
and adjusted homebuilding gross margin (or homebuilding gross
margin excluding home sales impairment charges and interest in cost
of home sales). We believe this information is meaningful, as it
isolates the impact home sales impairments and leverage have on
homebuilding gross margin and provides investors better comparisons
with our competitors, who adjust gross margins in a similar
fashion.
Three Months Ended June
30,
Six Months Ended June
30,
2020
%
2019
%
2020
%
2019
%
(Dollars in thousands)
Home sales revenue
$
77,757
100.0
%
$
140,464
100.0
%
$
173,416
100.0
%
$
239,650
100.0
%
Cost of home sales
85,216
109.6
%
123,525
87.9
%
169,938
98.0
%
210,094
87.7
%
Homebuilding gross margin
(7,459
)
(9.6
)%
16,939
12.1
%
3,478
2.0
%
29,556
12.3
%
Add: Home sales impairment
19,000
24.4
%
—
—
%
19,000
11.0
%
—
—
%
Homebuilding gross margin before
impairments
11,541
14.8
%
16,939
12.1
%
22,478
13.0
%
29,556
12.3
%
Add: Interest in cost of home sales
4,601
6.0
%
6,301
4.4
%
10,747
6.2
%
11,153
4.7
%
Adjusted homebuilding gross margin
$
16,142
20.8
%
$
23,240
16.5
%
$
33,225
19.2
%
$
40,709
17.0
%
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
The following table reconciles the Company’s ratio of
debt-to-capital to the non-GAAP ratio of net debt-to-capital. We
believe that the ratio of net debt-to-capital is a relevant
financial measure for management and investors to understand the
leverage employed in our operations and as an indicator of the
Company’s ability to obtain financing.
June 30,
December 31,
2020
2019
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
295,124
$
304,832
Equity, exclusive of non-controlling
interest
196,966
232,647
Total capital
$
492,090
$
537,479
Ratio of debt-to-capital(1)
60.0
%
56.7
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
295,124
$
304,832
Less: Cash, cash equivalents and
restricted cash
85,732
79,431
Net debt
209,392
225,401
Equity, exclusive of non-controlling
interest
196,966
232,647
Total capital
$
406,358
$
458,048
Ratio of net debt-to-capital(2)
51.5
%
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 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
Six Months Ended
LTM(1) Ended
June 30,
June 30,
June 30,
December 31,
2020
2019
2020
2019
2020
2019
2019
(Dollars in thousands)
Net income (loss)
$
(24,293
)
$
1,591
$
(32,769
)
$
(396
)
$
(40,374
)
$
(14,090
)
$
(8,001
)
Add:
Interest amortized to cost of sales
excluding impairment charges, and interest expensed (2)
5,872
6,301
12,736
11,153
28,817
23,317
27,234
Provision (benefit) for income taxes
(16,929
)
974
(26,866
)
310
(30,991
)
(4,972
)
(3,815
)
Depreciation and amortization
1,778
2,386
3,623
5,042
7,538
9,027
8,957
Amortization of stock-based
compensation
521
523
1,110
1,089
2,281
2,475
2,260
Cash distributions of income from
unconsolidated joint ventures
—
19
—
279
95
279
374
Severance charges
1,091
—
1,091
1,788
1,091
1,788
1,788
Noncash inventory impairments and
abandonments
19,094
14
33,130
19
43,405
10,182
10,294
Less:
Gain on early extinguishment of debt
(702
)
(552
)
(579
)
(969
)
(774
)
(969
)
(1,164
)
Equity in net (income) loss of
unconsolidated joint ventures
19,962
(185
)
21,899
(369
)
25,771
19,499
3,503
Adjusted EBITDA
$
6,394
$
11,071
$
13,375
$
17,946
$
36,859
$
46,536
$
41,430
Total Revenue
$
98,960
$
162,749
$
230,993
$
281,597
$
618,745
$
670,377
$
669,349
Adjusted EBITDA margin percentage
6.5
%
6.8
%
5.8
%
6.4
%
6.0
%
6.9
%
6.2
%
Interest incurred
$
6,150
$
7,606
$
12,530
$
15,367
$
25,982
$
30,416
$
28,819
Ratio of Adjusted EBITDA to total interest
incurred
1.0x
1.5x
1.1x
1.2x
1.4x
1.5x
1.4x
Total debt at period end
$
295,124
$
375,060
$
304,832
Ratio of debt to Adjusted EBITDA
8.0x
8.1x
7.4x
Total net debt at period end
$
209,392
$
326,712
$
225,401
Ratio of net debt to Adjusted EBITDA
5.7x
7.0x
5.4x
Total cash and inventory
$
456,537
$
590,178
$
513,252
Ratio of cash and inventory to debt
1.5x
1.6x
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/20200730005257/en/
Investor Relations Drew Mackintosh 949-382-7838
investorrelations@nwhm.com
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